Deposits, No Return

The Ontario Law Society Tribunal Hearing Division has ordered an interlocutory suspension of an attorney

 The Law Society is investigating complaints arising out the respondent’s receipt of deposits from 18 purchasers of townhomes to be built by Lynphyl Homes Limited (Lynphyl). The respondent is a director, principal and solicitor of Lynphyl. The respondent received a total of approximately $1,400,000 in  deposits made pursuant to agreements of purchase and sale signed between October 2021 and May 2023 (with the majority signed between October 2021 and January 2022). While he was to hold these funds in trust, the evidence before us suggests that he has not done so.

The Home Construction Regulatory Authority (HCRA), which regulates new home builders and vendors in Ontario, received multiple complaints about these deposits. The complainants alleged that Lynphyl had sold them pre-construction townhomes but failed to commence construction even though several years had passed since the deposits had been paid. The HCRA’s investigation revealed that some of the deposits had not been deposited into the respondent’s trust account, despite the respondent’s assurance to the HCRA that he had deposited all the funds into his trust account. Furthermore, the records the respondent provided to the HCRA were incomplete and did not clearly document the location nor the status of the purchasers’ deposit funds. Based on its investigation, the HCRA issued freeze orders to Lynphyl and to the respondent’s bank on June 18, 2024. The orders froze the respondent’s trust account and another account into which deposits had been paid in amounts equal to the deposits.

The Law Society also investigated the townhouse deposit funds. The respondent’s response to the Law Society was incomplete and inconsistent with what he had advised the HCRA. While the respondent had advised the HCRA that all deposits were in his trust account, he advised the LSO that the deposits had been duly paid to Lynphyl or as directed by it. He did not explain why he was authorized to pay out the deposit funds nor why he had advised HCRA that the deposits were in his trust account if he had already remitted them to Lynphyl. Furthermore, the details of his client trust ledger for Lynphyl disclosed a negative balance for extended periods of time. For example, it was short by over $600,000 between December 3, 2021 and January 18, 2022.

According to the Law Society investigator’s review of the respondent’s trust bank statements, the respondent did not consistently hold sufficient funds in his trust account in relation to the purchasers’ deposits. While the trust account should have had a minimum balance of approximately $1,400,000 from May 23, 2023 (the date of the last signed agreement of purchase and sale) onward, his trust account balance was often well below that amount.

Suspension