Notary handed suspended jail term for misappropriating clients' funds

A disgraced notary has been handed a suspended jail sentence for misappropriating funds given to him by clients to settle taxes due when they bought two garages.

Pierre Falzon, 64, was acquitted of a raft of other misappropriation charges, however, after the court established that the charges were settled.

Falzon was accused of misappropriation after several clients told police he had failed to publish their property transfer contracts or transfer their tax payments to authorities. In other cases it was claimed that contracts and tax settlements were not made on time.

The former notary was accused of committing a crime he was duty bound to prevent.

Cash, but no contracts

In January 2010, Falzon published a final deed of sale when a company sold property. But while the buyers had paid Falzon stamp duty and capital gains to the tune of €17,850, the contract was only registered in 2015 and only €5,250 in stamp duties were paid.

In another instance, the same company bought property in Qormi. The contract was published in January 2010, but the taxes owed were only paid in June 2011 while the contract was registered in November of the same year.

Meanwhile, a cheque was issued in favour of Falzon, which he cashed the next day.

Similar cases were reported; a couple bought two garages in Swieqi, paying €850 in stamp duties to Falzon as well as €2,280 in capital gains tax. The two cheques were issued in February 2010, when the final deed of sale was published, and cashed the following day.

But Falzon failed to register the contract until November of the following year. Until February 2016, the contract had still not been registered.

One man bought a garage for €8,500 in Birkirkara through a contract published by Falzon in April 2010. The stamp duty amounted to €425.

But after a year, the contract had still not been registered, and the buyer filed a police report in April 2011. The contract remained unregistered until 2016, the date when a representative of the Commissioner for Inland Revenue testified.

Two women who inherited funds from a relative in January 2009 made several inheritance tax payments to the notary. However, it emerged that only a portion of the tax funds were transferred to the tax department.

The failure to transfer all the funds led to a situation where some of the properties they had inherited were not registered in their name. The women reported Falzon to police in March 2011.

In another case, a couple bought a property in September 2010. The stamp duty was erroneously paid twice to the notary. They realised that they had committed an error within two days and informed Falzon.

But Falzon only refunded the money a year later after the couple reported him to the police.

Year abroad

Testifying in the case, Falzon confirmed he published the contracts brought as evidence by the prosecution.

He also confirmed he had received money intended for taxes except in the case of the man who bought the garage in Birkirkara; in that case, Falzon claimed that the buyer did not pay him, so he did not register the contract.

In the case of the couple buying the two garages in Swieqi, Falzon admitted the contract was not duly registered but claimed he had not been aware of it. When he found out the contract had not been registered, he could not access his money since it had been seized due to an attachment order and garnishee orders issued against him.

He also testified that since he had garnishee orders against him from a previous court case, he had set up a company to deposit money clients gave him to pay the taxes due.

He insisted he always deposited clients' funds.

Falzon testified that between 2009 and 2011 he spent a year abroad, but said he paid some Lm350,000 (Maltese Lira) in stamp duty in July 2011 when registering those contracts which he did not do before travelling abroad.

'Negligent'

The court observed that Falzon’s failure to register and pay the taxes within the time period set by law did not necessarily mean that he misappropriated the funds he had been entrusted with. That behaviour, however, violated the obligations imposed on him to make payments on time. 

“The fact that he did not register the acts and pay the duty owed immediately, and having left Malta for an indefinite period, establishes that he was negligent in the exercise of his profession,” the court said. 

However, these shortcomings did not necessarily amount to misappropriation. 

The court observed that when the contracts were registered and the taxes were settled, this neutralised the evidence that he misappropriated the money. 

Furthermore, the prosecution failed to prove the source of the funds which were eventually used to pay taxes.  

In the absence of conclusive evidence that Falzon misappropriated funds given to him by clients, he could not be found guilty of misappropriation.

The court observed that Falzon was away since his wife was unwell. Upon his return, he sought to address those shortcomings.

Lack of evidence

The court also observed that the prosecution failed to bring evidence showing that payment had been made to the accused in connection with the deed and stamp duty for the garage in Birkirkara.

In that particular case, Falzon always categorically denied receiving any money, which was why the contract remained unregistered. 

However, the court found Falzon guilty in the case relating to the couple who bought two garages in Swieqi, with funds paid by the couple deposited in a bank account belonging to Falzon’s wife. 

It could not be established that Falzon had control over his wife’s account, which meant he had benefited from the money entrusted to him, the court said.  

The court therefore found Falzon guilty of misappropriation aggravated by him being a notary. The property transfer was never registered despite the buyer having paid the price and the taxes due.

Sentencing

The court took into consideration the prejudice that Falzon’s clients suffered, a probation officer reporting showing Falzon never missed an appointment and adhered to her orders. It also emerged that Falzon came from a stable family that continued to support him. He also recognised the need to reimburse his victims. 

The court found Falzon guilty of misappropriation of €850 but ruled that effective imprisonment would not be suitable in this case. 

He was therefore handed a one-year prison term suspended for three years. and ordered to pay the couple in question €850. He was also disqualified from obtaining a notarial warrant.    

The court also made observations on the way the criminal proceedings were conducted against Falzon, describing them as a “classic case” of bad administration of justice. 

Magistrate Rachel Montebello presided. Police inspector Rennie Stivala prosecuted. Lawyers Michael Sciriha and Roberto Spiteri assisted the accused.