I Read The News Today Oh Boy
The British Columbia Law Society Hearing Panel accepted some and rejected other allegations of misconduct in an attorney’s representation of individuals and entities
The allegations in the Citation arise in connection with retainers between the Respondent’s firm and two individuals, YZ and ZZ, and two numbered companies, which we will identify as Company 1 and Company 2, between August 2015 and August 2018.
The attorney had been contacted by a reporter concerning an article that raised issues about his clients. He was instructed by one of the clients to decline comment but
In mid-February 2018, the newspaper published the article. The Respondent read it on or about the same day it was published. A copy of the article, taken from the newspaper’s website, was tendered into evidence at the hearing of the Citation, for the purpose of establishing what the article reported. The Panel received the article into evidence on that basis, and not for the truth of the allegations it made against ZZ, YZ and others.
Generally speaking, the article reported that ZZ, YZ and others had acted as private lenders to wealthy Chinese newcomers or tourists who had bought property in Canada and wished to use it to borrow large amounts of money for gambling or other extravagant purposes. The article reported that the lenders charged high rates of interest and secured their loans against their clients’ realty, to ensure a means of recovery, if the properties went into foreclosure. The article theorized that this unregulated, private lending could be inflating sale prices in the Vancouver area, as borrowers sought to pay the exorbitant interest rates charged by the lenders. It also reported that it was suspected that the proceeds of some of the private loans were being used by Canadian-based drug-trafficking rings to buy fentanyl in China for sale in Canada.
ZZ and YZ were referred to by name in the article. The article reported that ZZ and YZ had “posed as builders, claiming they did so-called ‘construction’ and ‘renovations’, none of which were done, let alone by them.” The article cited, as an example, the Vancouver House, which ZZ and YZ had claimed on the builder’s lien they had built for $2 million. The article reported, “In fact, it had been built three years earlier by a registered builder.”
At the hearing of the Citation, the Respondent described his reaction to the reporter’s email and the newspaper article as one of “shock”; he did not want to act for the clients anymore and wanted to “fire” them. The Respondent testified that the communication from the reporter and the published newspaper article also caused him to lose “faith” that there had been a construction project at the Condominium. Nonetheless, the Respondent waited to terminate the retainer because ZZ was abroad and the Respondent wanted to ensure that the Notice of Intention to Withdraw in the foreclosure proceedings concerning the Condominium – which were then still unresolved – was delivered by personal service.
He withdrew shortly thereafter.
The Law Society initiated an investigation into the veracity of statements in court
The Respondent did not appropriately discharge his duty of candour in the applications heard in January and March 2017. He was, instead, selective in what he disclosed to the court. With respect to information regarding DT’s whereabouts, the Respondent deliberately chose to shield the court from information that the Respondent thought was dubious, and instead positively asserted that it appeared that DT had left the country. That is, because the Respondent seriously doubted that DT had met with an associate of the Respondent’s clients in Richmond in late November 2016 (and signed documents at that meeting), the Respondent did not disclose to the court information about DT’s possible presence in British Columbia. In both court applications, however, the question of whether DT was in British Columbia was a material fact.
In the application heard on January 4, 2017, the Respondent sought an order to serve amended pleadings by alternative means. The question of whether DT was within the jurisdiction and could be contacted in person was obviously material to this aspect of the relief sought.
Whether the plaintiffs had a means of contacting one of the defendants was also material to the question of whether the application heard on March 14, 2017 should have proceeded as a without-notice application at all. It requires little imagination to foresee that the court may have requested submissions on whether to proceed on a without-notice application on March 14, 2017, if Justice Walker had been advised of the alleged contact with DT in November 2016.
In addition, the location and accessibility of one of the defendants was material to the exchange between the court and counsel on March 14, 2017 regarding the method by which the Order was to be served.
The Respondent’s omission was misleading to the court because it left the court with the impression that there was no question as to whether DT might be located in British Columbia; in both January and March 2017, the Respondent said that both DT and HX “appear to have left the country.” That the court accepted this evidence may be inferred from the terms for service imposed by the court in January and March 2017. In both instances, the court ordered alternative service on both defendants.
…By declining to canvass the admittedly convoluted evidence of the dealings between the parties but instead simply exhibiting the amalgamated renovation contract to Ms. Chan’s and YZ’s affidavits, the Respondent gave the court a partial and inaccurate impression of the plaintiffs’ contentions as to the history of the dealings between the parties. This course of action is not consistent with the Respondent’s duty to present accurate, candid and comprehensive evidence to the court on ex parte applications.
As to the charge concerning “client identification” obligations
In our view, the Respondent’s failure to fully comply with Rule 3-100(1)(a) and (b) is a breach of the Rules. On the facts of the case, and especially given the involvement of the Solicitor in each of the three matters in relation to which the Respondent represented the clients, we would not find that the cited client identification failures represent a marked departure from what is expected of a lawyer in British Columbia. That said, we reject the submission that the Respondent’s errors were merely “clerical omissions”. Simply put, the Respondent did not pay sufficient attention to his obligations under Rule 3-100(1)(a) and (b). He was, instead, too casual in addressing his client identification obligations. That casual approach amounts to a “not insignificant” breach of the Rules.
And
In our view, the Respondent committed professional misconduct by filing an action in the name of Company 2 on February 11, 2016 without attending to the source of his authority to do so. The Respondent’s failure to review the company search for Company 2 with sufficient care to notice that the name of the sole director and officer was not ZZ or YZ and his failure to inquire with the Solicitor about the asserted relationship between ZZ, YZ and Company 2, was egregious. It is unacceptable for a lawyer to file a legal action in the name of a company without first confirming the basis for his authority to do so. We find that the Respondent’s conduct in February 2016 was reckless and cavalier. It certainly fell below the standard expected of a lawyer in British Columbia.
The Respondent’s inattention to the basis for his instructions to act for Company 2 had a knock-on effect in respect of the second retainer for Company 2, i.e., the one concerning the Vancouver House. In this case, the Respondent was confronted with a $2 million construction lien – a rather extraordinary lien amount for “unsophisticated” residential builders – and a short deadline to file a Notice of Civil Claim before the limitation period tolled. At the time that this matter came up, it would appear that the Respondent still did not have accurate information about Company 2. There was no suggestion in the evidence that the Respondent was aware in April 2016 that a Notice of Change of Directors for Company 2 had been filed pursuant to s. 127 of the Business Corporations Act on March 17, 2016. The burden of the evidence is that the Respondent filed the builder’s lien action with respect to the Vancouver House on the same basis as he filed the builder’s lien action with respect to the Richmond House: without sufficient understanding of the corporation on behalf of which he was acting and without any proper understanding of the basis for his instructions.
The hearing panel rejected other charges
The Panel also accepts the Respondent’s evidence that he attempted to provide full cooperation to the Law Society throughout the investigation and that he did not intend to frustrate or wilfully not comply with the Law Society’s requests.
In any event of the Respondent’s subjective beliefs, we find that the Respondent did not fail to cooperate in the investigation by failing to comply with a requirement dated June 18, 2018 to produce his complete client files by the time and date set by the Executive Director. Rules 3-5(7)(b) and (11) and rule 7.1-1 of the Code must be read purposively, not formalistically. The purpose of these rules is to require lawyers whose conduct is being investigated by the Law Society to diligently cooperate in the investigation, and to meaningfully respond to requests put by the Law Society.
In a world in which paper and electronic records proliferate, document disclosure can be an error-prone business. It is a reality that counsel can, and do, miss relevant documents in searching hybrid electronic and paper files, only to discover the omissions later. Unintentional omissions in document production do not equate to a culpable failure to cooperate in a Law Society investigation. The Respondent’s failure to capture every document from his hybrid paper and electronic files and deliver them to the Law Society in June 2018 does not amount to a breach of Rules 3-5(7)(b) or (11), nor does it so offend his obligations under rule 7.1-1 of the Code as to amount to professional misconduct.
Admittedly, the “tots legit” email string is in a different category from the documents not disclosed due to oversight. As the Law Society points out, the Respondent considered whether to disclose these emails in June 2018 and decided not to do so. The Panel considers that the Respondent made an error in judgment in withholding these emails from production in June 2018 but it was corrected in the Respondent’s next production to the Law Society. The error in judgment does not rise to the level of a breach of the Rules, nor was it professional misconduct.
The findings do not address the sanction issue. (Mike Frisch)