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Conflicts Draw Suspension

By Michael Frisch

The British Columbia Law Society Tribunal Hearing Division has ordered an eight-month suspension for conflicts of interest

The Panel acknowledges that there are and will be instances when determining potential conflicts of interest before agreeing to act as counsel may be difficult, but that cannot be said to apply to the Respondent’s four acts of professional misconduct when acting for both parties in the loan transactions.  In the Panel’s view, the potential and real conflicts of interest with respect to these loan transactions were, objectively, plain and obvious and should have been such to the Respondent before he agreed to act for the clients.  With respect to the three noted instances of the Respondent acting for both lender and borrower when he had an interest in the lender company, one can simply ask the question: “What if the borrower defaulted in its loan obligations?”  The potential conflict was obvious from the outset. 

The Panel found the Respondent committed professional misconduct when he borrowed a significant sum, being $366,545 from a corporate client.  The Respondent’s submission that the loans were forgivable and not repayable was rejected by the Panel. The Panel found the Respondent’s acts were clear contraventions of rule 3.4-31 of the Code because, in part, the lender client was not an entity from which a lawyer may borrow money.  There was no evidence in the facts and determination hearing (the “F & D Hearing”) that the loan was repaid.

The Panel further found the Respondent committed professional misconduct in acting without integrity when he executed a commercial loan renewal agreement on behalf of his corporate client and for an individual guarantor, when the Respondent had no authority or consent from the corporate client or the guarantor to bind either party to the particular commercial obligation.  The principal balance of the loan was $1,015,367.99 at the time the Respondent executed the loan renewal agreement letter binding both borrower client and the individual guarantor.
 
The Panel finds that when viewed together, the six separate acts of professional misconduct are grave and serious.  The conflicts of interest are numerous and evidence a continuous pattern of disregard of the requirements of the Code and the interests of the clients.  In each of the four loan transactions the Respondent received a benefit, acted deceptively for he did not disclose his personal interest in the lender, and put his personal interests before the clients’ interests.  Borrowing money from the client where prohibited was a significant breach of both the rules and the trust of the client.  Executing the loan amending agreement involving a significant sum while simultaneously continuing to bind a separate individual to a concomitant full indemnity personal guarantee of the client borrower’s loan obligations was an egregious act and a flagrant breach of the Respondent’s duty mandated by the Code to carry on practice and discharge his responsibilities to his client and the public with integrity.
 
The Law Society proposed a six-month suspension

Having duly considered all the relevant factors described above, the Panel orders that the Respondent be suspended from the practice of law for eight months commencing on the first day of the first month following the date these reasons are issued or another date as agreed between the parties in writing.

(Mike Frisch)

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Associates