Law Times

PAGE 4 MARCH 10, 2014 • LAW TIMES www.lawtimesnews.com he Law Society of Up- per Canada will re- vamp its 61-year-old compensation fund guidelines in the wake of recent cases that have examined who can access the money and how much claimants can receive. Convocation approved a mo- tion on Feb. 27 to simplify its compensation guidelines, the oldest document of its kind in North America. But although the changes will make the fund's rules easier to understand, "the new guidelines will not change the manner in which the law so- ciety deals with claims for com- pensation from the fund," a law society report noted. Currently, the law society will give up to $150,000 to cli- ents who have suff ered losses as a result of dishonest service by Ontario's lawyers and para- legals. Although the revamped gui deline will not increase that limit, "Convocation will, from time to time, determine the maximum amount payable by the fund," according to the re- port. During the discussion, Bencher Jack Braithwaite sug- gested revisiting the $150,000 maximum payment in light of a "particular licensee" involved in a case that has le clients with losses far greater than $150,000. e $150,000 cap is an in- crease from a maximum pay- ment of $100,000 that still ap- plies to claims predating 2008. Another bencher, Bradley Wright, recommended getting rid of the $150,000 cap entirely. If the law society is going to tax its members for the benefi t of the fund, the money should "make people whole," he said, adding that the vast majority of claims fall below the cap. Removing the cap won't have a signifi cant impact on how the law society compensates injured members of the public, Wright suggested, because the process is already based on discretion. e issue of how the law so- ciety's compensation fund works was at the heart of a recent Divi- sional Court case, Tarek El-Hen- nawy v. e Law Society of Upper Canada, a matter involving the cli- ents of a lawyer convicted of fraud. A er the law society dis- barred real estate lawyer Mari- ano Mazzucco for swindling clients and banks out of nearly $10 million, some of his victims were able to collect $1.4 million from the LSUC's compensation fund. But other former clients received a sum that was less than what they had lost. In what's reportedly the fi rst challenge of its kind, the El- Hennawy family sought judicial review a er receiving $200,000 from the law society despite having assigned Mazzucco to hold $930,000 in trust. Hussein El-Hennawy said he had trans- ferred the money to Mazzucco because international transfers through traditional banks had become diffi cult a er the ter- rorist attacks of Sept. 11, 2001. According to the law society, the compensation fund didn't cover the transfer due to an insuffi - cient link to Mazzucco's practice. In a decision dated Jan. 28, the Divisional Court agreed with the law society's fi nding, noting the regulator has discretion over the matter and the compensa- tion fund "is not unlimited." "Convocation's authority to establish these guidelines is de- rived from its absolute discre- tion to make grants from the fund. e guidelines are a way of structuring the exercise of that discretion and providing some consistency. We agree that Con- vocation was entitled to establish these guidelines and required no express statutory authority to do so," the court said. " e guidelines expand on the criteria regarding eligibility for grants from the fund. ey are not inconsistent with the act because the act does not provide that any claimant is entitled to receive a grant if they meet the threshold criteria in s. 51(5). We fi nd that the provisions of the statute and the guidelines are consistent," the court added. For now, Convocation agreed the next appropriate step is to make the guidelines "transpar- ent, straightforward, and fl ex- ible." e existing guidelines on the compensation fund, which date back to 1953, are currently a "mishmash," Bencher Peter Wardle told Convocation. e new guideline will have a preface, a section on who can claim losses, the kind of losses for which the fund may be avail- able, the amount of compensa- tion payable, and losses not eli- gible for compensation. " e compensation fund is a fund of last resort," reads a line in the preface. " e fund will deter- mine, at its discretion, whether all reasonable steps, in the cir- cumstances, have been taken to recover a loss through other means, for example through liti- gation." Unlike the previous guide- line, which had two distinct parts for lawyers and paralegals, the new one is a single docu- ment for all licensees. e guideline says that before handing out compensation, the law society will consider wheth- er claimants have been "careless" in their dealings with the lawyer in question. " e compensation fund will consider the extent to which the claimant was careless or took unreasonable risks. Risk and carelessness on the part of the claimant may reduce or elimi- nate a grant." Among the considerations are whether "it was reasonable for the claimant to trust the lawyer or paralegal concerned without, for example, considering other sources of professional advice (accounting, legal or otherwise)." Losses that don't qualify for compensation include those caused by a lawyer's family members, partners, and associ- ates. e compensation fund is also off the hook if lawyers fail to repay a personal loan or a busi- ness they control has suff ered losses. LT Law society to revamp compensation guidelines NEWS THE MOST COMPLETE DIRECTORY OF ONTARIO LAWYERS, LAW FIRMS, JUDGES AND COURTS With more than 1,400 pages of essential legal references, Ontario Lawyer's Phone Book is your best connection to legal services in Ontario. Subscribers can depend on the credibility, accuracy and currency of this directory year after year. More detail and a wider scope of legal contact information for Ontario than any other source: ȕ 0WFS27,000 lawyers listed ȕ 0WFS9,000 law firms and corporate offices listed ȕ 'BYBOEUFMFQIPOFOVNCFST FNBJMBEESFTTFTPGȮDFMPDBUJPOT BOEQPTUBMDPEFT Includes lists of: ȕ Federal and provincial judges ȕ Federal courts, including a section for federal government departments, boards and commissions ȕ Ontario courts and services, including a section for provincial government ministries, boards and commissions ȕ Small claims courts ȕ Miscellaneous services for lawyers Visit carswell.com or call 1.800.387.5164 for a 30-day no-risk evaluation 1FSGFDUCPVOEȕ1VCMJTIFE December each year On subscription $74 One time purchase $77 L88804-626 Multiple copy discounts available Prices subject to change without notice, to applicable taxes and shipping & handling. 2014 ONTARIO LAWYER'S PHONE BOOK Untitled-3 1 13-12-02 7:29 PM BY YAMRI TADDESE Law Times T The existing guidelines are a 'mishmash,' says Peter Wardle.

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