Law Times

Page 2 March 23, 2015 • Law Times www.lawtimesnews.com NEWS Janet E. Minor Candidate for Re-election as Bencher (Toronto) Vote for judgment, experience and progressive change. From the public sector: committed to serving the profession. www.janet4bencher.ca Bencher candidate (Toronto) Current Treasurer Vote for continued leadership: • Consultative • Experienced • Energetic Committed to serving the profession in the public interest. www.janetminor.ca JanetMinor_LT_Mar9_15.indd 1 2015-03-04 11:06 AM An experienced, respected, common sense Toronto solicitor for a balanced convocation Sidney Troister www.sidforbencher.com Untitled-5 1 2015-03-16 2:47 PM Lawyer with sloppy office found not guilty of fraud Judge had doubts whether counsel sought personal gain in mortgage case BY YAMRI TADDESE Law Times Superior Court judge has ac- quitted a former lawyer charged with fraud after finding that while he was "a model case of imprudent lawyering," he had doubts about whether he was seeking personal gain in failing to register second mortgag- es for clients. After hearing the evidence, Justice Ed- ward Morgan said he wasn't sure whether former lawyer Henry Gertner was ex- ploiting his clients or helping them when he failed to register a number of second mortgages for them. The mortgages were to be registered against properties the law- yer or his son had an interest in. "I was unduly charged and the judge's ruling verified that to me," Gertner, a law- yer disbarred by the Law Society of Upper Canada in 2010 for failing to comply with its request for records, tells Law Times. But the judge was nevertheless critical of Gertner. He found the clients, Anna and Karl Wald, may have tacitly approved of the non-registration of their second mortgages after Karl admitted to inten- tionally hiding the interest he had earned on the mortgage investments at issue. "I do not know the answer to this ques- tion," wrote Morgan in his ruling in R. v. Gertner on March 12. "Taking all of the evidence together, I can conclude that the defendant's law- yering was remarkably bad, and that the Walds' conduct was remarkably suspi- cious. But I do not know whether the defendant acted exploitatively toward his clients, or whether the defendants' impru- dent and lazy lawyering coincided with and in effect supported his clients' inter- est." In the end, the judge said he was unsure whether Karl, like William Shakespeare's King Lear, was "a man more sinned against than sinning." "Under the circumstances, I am not able to come to that kind of firm conclu- sion," added Morgan before acquitting Gertner. "On the state of the evidence be- fore me, I simply do not know whether the impugned act of the defendant is one of negligence, or 'is one which a reasonable person would see as dishonest,' . . ." Criminal lawyer Todd White says the matter before Morgan was "a case of clas- sic reasonable doubt." "It's the perfect application of the proof beyond reasonable doubt for the mental element of fraud," he says. "At first blush, the facts appear daunting because the lawyer failed to register mort- gage, he gave some self-dealing, and did poor documentation. But the evidence was also quite clear the lawyers' clients were involved in some shady business as well and may have approved the conduct." When contacted for comment via e- mail, Anna responded: "Thank you for your interest in the case, but at this time we have no interest in discussing it with anyone." In his ruling, Morgan described Gert- ner's law office as something akin to "an unmade bed." Still, the case is an example of the high threshold for a finding of fraud or deceit, says White. "Although a lawyer has a duty to do things perfectly, when the lawyer doesn't do so, it doesn't necessarily mean the law- yer committed fraud," he says. "An unmade bed is bad for lawyering but it doesn't constitute fraud," he adds. In the end, the Walds went to the police to complain about Gertner because they ended up losing their investment funds. Gertner had been the Walds' lawyer for 30 years and over the years, they had become friends, according to Morgan's ruling. After they sold their photocopy supply and repair business for $2.4 mil- lion, the Walds asked Gertner how they should invest their money. Gertner suggested putting it in second mortgages and arranged several the Walds could invest in. They settled on three properties first and continued to receive interest payments on their investment for several years. But these second mortgages, which were against properties Gertner's son was renovating, were never registered on the titles. The Walds then invested in a fourth second mortgage that didn't turn out to be profitable and, in 2005, they were con- templating getting paid out of their invest- ments. At that point, Gertner proposed the Walds amalgamate all of their invest- ments into a single large second mortgage on a property located at 1202 Avenue Rd. in Toronto. Four months after rolling over their investments into 1202 Avenue Rd., the Walds reminded Gertner in writing that they still hadn't received registration doc- uments from him. In response, Gertner sent a draft copy that wasn't yet used to finalize the registration. According to the judge, the document stated explicitly, albeit in fine print, that it was a draft copy. In 2006, when the Gertners wanted to cash in their mortgage to use the funds for an unrelated settlement, another lawyer, Jay Krieger, ran a search of the land titles system and found no registration for it. "In spite of this shocking news, the Walds took no action during the next six months," wrote Morgan. "In fact, from the time that Mr. Krieger advised them that their mortgage was not registered until the end of the calendar year, they continued to receive regular interest payments on the mortgage. They did not even discuss the matter of reg- istration with the defendant until early December 2006, and even then did not seem particularly anxious to have the reg- istration done in any expeditious way." In the end, the Walds agreed in a letter to registration not as a second but a third mortgage on the 1202 Avenue Rd. proper- ty. By then, the ownership of the property had transferred to the lawyer himself. "The Walds' letter, written in a surpris- ingly friendly tone, makes it clear that the Walds were aware of this transfer and seemingly took no issue with it," wrote Morgan. But between 2006 and 2007, the first and second mortgagees had issued a no- tice of sale with respect to defaults under their mortgages. The first two mortgag- ees were paid off as a result of the sale but there was no equity left in the property to cover the Walds' third mortgage. The re- maining equity also fell short of covering a Canada Revenue Agency tax lien against the property. In his decision, Morgan expressed sur- prise at Karl's admission that he intention- ally hid income from the mortgage invest- ments in order to avoid paying tax on it. "Karl's statement in respect of his taxes was startling," he wrote. "I am mindful of the fact, of course, that this is a trial of the Defendant, and not of Karl Wald as witness and complainant. And while it is possible that Karl's admit- ted deception on his tax returns might go to his credibility as a witness, this admis- sion itself has a double edge to it: it may equally speak to his honesty on the wit- ness stand and the truthfulness of his tes- timony." For Gertner, the admission shows the clients weren't "lily-white people." "They acquiesced in the non-registra- tion in order to hide from the [Canada Revenue Agency] and [hide their assets from] their million-dollar lawsuit," he says. LT A ARE YOU RECEIVING CANADIAN LEGAL NEWSWIRE? Keep abreast of essential late-breaking legal news and developments with our electronic newswire. VISIT OUR WEBSITE WWW.CANADIANLAWYERMAG.COM AND LOOK UNDER "LINKS" SIGN UP FOR FREE From the publisher of and Untitled-5 1 14-05-27 1:38 PM

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