A Tool Or Dupe

The British Columbia Law Society Tribunal Hearing Division has ordered a six-month suspension of an attorney

Between approximately January 2018 and September 2019, in the course of acting in the matters set out in Schedule “A”, the Respondent provided legal services and used or permitted the use of his firm’s trust account in the instances set out in Schedule “B”, in circumstances where he failed to do the following:

(a)        be on guard against becoming the tool or dupe of an unscrupulous client or other persons;

(b)        make reasonable inquiries about the circumstances, including:

(i)                 the identity of his clients and other parties;

(ii)              the relationships between the parties and certain agents or intermediaries;

(iii)            the legal or beneficial ownership of certain property and business entities;

(iv)            the subject matter and objectives of his retainer;

(v)               the nature and purpose of the transactions;

(vi)            the source of funds received;

(vii)         the purpose of the payment of the funds; and

(viii)        the reason for the funds to go through his firm’s trust account.

Wilfull blindness

The Respondent was wilfully blind to the red flags. His obligation in the circumstances was to make inquiries and yet despite the obvious red flags he deliberately refrained from making those required inquires. The sanction chosen should be one that sends a strong message of general deterrence to the legal profession that wilful blindness towards obvious suspicious activities will not be tolerated. Failing to do so risks losing the public’s confidence in the legal profession and disciplinary process.

In this case, the Panel’s finding of wilful blindness applied to events that occurred over a 20-month period, between January 2018 and September 2019. During this time, the Respondent was not acting for 1 but 13 clients with respect to 11 real estate litigation matters such as foreclosures, specific performance and promissory notes.

(a)        The involvement of notorious alleged fraudster, AB, in all of the Schedule “A” files, even though he was not a client and was not named as a party to the litigation matters or transactions (paras. 375, 378, 386).

(b)        Learning early on in his retainer that AB was the notorious alleged fraudster. The Respondent’s articling student wrote him two memos identifying AB as the notorious alleged fraudster and included a link to a newspaper article addressing AB’s alleged fraud. The articling student also passed along warnings received from opposing counsel that the Respondent’s clients were dangerous people (paras. 376 to 377).

(c)        Learning in or around April or May 2018 that AB was an undischarged bankrupt (para. 379).

(d)        The allegations in court documents about AB, including the S Avenue litigation, the AA Bank litigation and the promissory note litigation, were serious and not trivial (para. 380). Four of the litigation files asserted that the Respondent’s clients were merely agents for AB and that AB was the beneficial owner of the property that was the subject matter of the litigation (para. 380).

(e)        Several corporate records of the Respondent’s numbered company clients showed the corporations were incorporated by AB, with numerous historical changes of directors, sometimes including numerous changes on the same day. The names of the directors changed from AB, AB’s wife and the Respondent’s client, EF. This ought to have been a red flag to the Respondent because, as an undischarged bankrupt, AB was not permitted to be a corporate director, yet was still giving instructions despite not being named as a director anymore (paras. 379, 387).

(f)         Learning early on in his retainer that AB and the Respondent’s client EF were subject to a default judgment order pertaining to a fraudulent cheque kiting scheme against AA Bank (paras. 30, 171 to 179).

(g)        Accepting instructions from AB with respect to the 11 client litigation matters even though there was no indication that the clients were unable or unavailable to communicate and instruct the Respondent directly and failing to confirm AB’s instructions directly with the clients (paras. 382 to 384).

(h)        Receiving hundreds of thousands of dollars from AB despite not knowing what he did for a living and knowing that he was an undischarged bankrupt. These funds were received in the form of various bank drafts, which meant they were not traceable to the source. The funds received from AB were used to pay the Respondent’s fees on the Schedule “A” files even though AB was not a named client. The rest of the funds received into the Respondent’s trust account were disbursed to AB’s associates (paras. 397 to 401).

(i)         Receiving all of the important documentation and information that was needed to represent his clients from AB, without any explanation as to why AB would have access to such information (paras. 354(i), 374).

(j)         Acknowledging potential conflicts of interest in representing both AB and EF but receiving instructions from AB on all of EF’s files and preparing a Response to Civil Claim for AB in the promissory note action despite not representing AB (paras. 354(c), (d), 374).

(k)        Receiving copies of $80,000 and $100,000 bank drafts on two different occasions and then receiving different bank drafts, with no explanation as to why the copies of the earlier versions were not being used, and from an entity with no apparent interest in the Respondent’s files. Further, being asked to disburse those same funds to the Respondent’s purported client MM and Number Company 13 without any explanation as to why they were provided (paras. 354(u), 374, 425-426).

(l)         Receiving consent from his client EF to pay a $250,000 bonus in the Retainer and Contingency Agreement for one of the litigation matters (paras. 354(t), 374).

(m)      Being retained by EF to represent him in the S Avenue litigation matter shortly before trial and only one month before scheduled cross examination (paras. 354(s), 374).

The parties jointly proposed the six-month suspension. (Mike Frisch)