More Likely A Dupe Than A Fraudster

The Tribunal Hearing Division of the Law Society of Upper Canada ordered limitations on an attorney access to trust funds but denied a motion for interlocutory suspension

Mr. Deonarain deposited four certified cheques totalling approximately $1.9 million into his trust account which turned out to be counterfeit. Before it was discovered that these cheques were counterfeit, Mr. Deonarain paid out nearly $1.4 million in certified funds which have not been recovered. As a result, his mixed trust account became overdrawn by approximately $1.35 million.

 The Law Society’s position is that this cheque fraud was possible because Mr. Deonarain was complicit in the fraud or, alternatively, because he failed to take precautions that he ought to have taken to avoid the fraud.

In 2012, Mr. Deonarain was found to have engaged in professional misconduct by failing to be on guard against assisting in dishonesty or fraudulent conduct in respect of nine residential real estate transactions between 2005 and 2008. In the vernacular, Mr. Deonarain allowed himself to be a dupe. The position of the Law Society is that Mr. Deonarain has, at the very least, once again allowed himself to be a dupe of a fraudster.

There is an outstanding investigation involving 50 questionable withdrawals from Mr. Deonarain’s trust account totalling $175,000. In March 2016, the Law Society unsuccessfully sought an interlocutory suspension in connection with this investigation and another investigation which has since been closed. Mr. Deonarain has not responded to certain requests made in respect of these withdrawals.

Mr. Deonarain categorically denies that he was complicit in the fraud. His position is that he is a victim and that, while it may be in retrospect that he should have acted differently, his licence to practise law should not be suspended.

The Division

The Law Society alleges that Mr. Deonarain was complicit in this fraud. Mr. Deonarain emphatically denies this. Our responsibility is not to determine this issue but rather to assess the probabilities. In our view, it is quite unlikely that Mr. Deonarain knowingly participated in a fraud. In any cheque fraud such as this, the lawyer is left with an overdrawn bank account and, subject to any available defence, owing the amount of the bad cheques to the bank. The victims in a cheque fraud are the lawyer, the bank and any other clients with monies in the mixed trust account. It is unlikely that a lawyer would knowingly assist a fraud in which the lawyer himself would be a victim – not impossible, but unlikely. In the face of his vehement denial under oath, which was not effectively challenged in cross-examination, and the inherent illogic of engaging  in a fraud on oneself, we consider the possibility that Mr. Deonarain was complicit in this fraud to be remote.

On the other hand, it appears more likely that Mr. Deonarain failed to be on guard against becoming the tool or dupe of an unscrupulous client. This was not an ordinary real estate transaction where money was paid and title transferred in return. The retainer was, to say the least, unusual. According to Mr. Deonarain, he did not know the client and did little to confirm his identity. He did little other than meet with VM, write three letters, receive three responses, deposit cheques received from VM and immediately give VM certified cheques in return. The documentation of the loan obligations was problematic. Mr. Deonarain did not prepare releases. The retainer made little sense and required little work. The agreed fee was $6,000.

Order

The Licensee shall not handle client funds in a general or trust account.

(Mike Frisch)