Law Times

Law Times • march 7, 2011 NEWS PAGE 3 Fears over new LSUC rules for trust accounts Proposal comes as law society debates expanded duty counsel program BY MICHAEL McKIERNAN Law Times I nnocent transactions could fall afoul of tightened rules on the use of trust accounts, some Law Society of Up- per Canada benchers fear. Th e LSUC has moved to restrict law- yers' use of their trust accounts as part of its crackdown on frauds involving li- censees, either as active participants or as dupes conned by dishonest clients, that have cost it millions of dollars. Ontario lawyers are already required to identify and record the names of cli- ents as well as the source of trust funds, but Bencher Carl Fleck, the acting chair- man of the professional regulation com- mittee, said there wasn't enough guid- ance about the purpose of the money and the risks of allowing an account to eff ectively become a "banking service" for the client. "Th ere are some who have been us- ing them for transactions completely unrelated to legal services," Fleck said, noting lawyers are responsible to the owners of funds held in trust whether or not they're providing legal services for them. Amendments to the law society's Rules of Professional Conduct, passed in principle by Convocation at its Feb- ruary meeting, state that a lawyer, when acting for a client, "shall not use his or her trust account for purposes outside the provision of legal services." Th e law- yer must also record the reason for re- ceiving and disbursing money. "Will it stop or prevent fraud or pre- vent people from being used as dupes in fraudulent mortgage transactions? I doubt it," Fleck said. But he believes the amendments will discourage the use of trust accounts to "lend legitimacy to dubious or fraudu- lent investment schemes." Th ey'll also make it easier for the law society to detect fraud and respond more quickly when suspicious schemes come to light, according to Fleck. Bencher Christopher Bredt, however, worried the amendments may aff ect his own anti-piracy practice. He routinely directs trust funds held on behalf of a client to pay anonymous informers who assist in enforcement. "I want to get some sense as to whether I'm going to be off side of the new rule," Bredt said. Bencher Julian Falconer, who also sits on the professional regulation committee, said that in his opinion, Bredt's disbursements didn't constitute legal services and urged lawyers to rein in their use of trust accounts. He used the example of legal clinic lawyers who hold money in trust to help clients pay their rent to suggest they rethink their use of trust accounts even when acting in good faith. "Th at is a perfect example of an innocent ef- fort to help, but it's not the provision of legal services," Falconer said. "Th e spirit of the rule is to get counsel to focus on what the purpose of the trust funds are. If it's not for the purposes of giving legal advice or providing legal services, then there are probably diff erent accounts that could hold it. It wouldn't necessar- ily have to be your trust account." Falconer's position "scared the be- jeepers" out of Susan Elliott, who said it could have serious implications for her estates practice. "We often are hold- ing funds in an estate for payment out to benefi ciaries and we're providing, in my mind, the administrative service of executor in our capacity as solicitor for the executor. Th is could be a mess if we can't use the trust account to bank the money, pay the bills, and pay out the benefi ciaries." Ottawa bencher William Simpson said Falconer's assertions were arguable. At the same time, law society CEO Malcolm Heins stepped in to reassure benchers there would be a broad defi ni- tion of the term "legal services" for the purposes of the rules. It would capture related services such as rent payments, estate administration, and informer payments. "Lawyers do a wide array of activities in the provision of legal services, and I think that's how it must be construed," Heins said. Th e amendments will return to Con- vocation when the committee has de- cided on the precise wording. Meanwhile, the committee is also looking into new ways to help those who end up in regulatory trouble. Dis- cussions have begun about making pro bono duty counsel available to lawyers under investigation by the law society. Th e Advocates' Society and the Criminal Lawyers' Association already provide duty counsel to lawyers at disci- plinary hearings and proceedings man- agement conferences, but all parties are looking at the possibility of extending availability earlier in the process. Beth Symes would like to see an insur- ance scheme for legal fees incurred by lawyers in trouble with the LSUC. "Being the subject of an investiga- tion is a stressful event for lawyers, and counsel can be of assistance to them," reads a report to Convocation that also noted that the majority of lawyers are unrepresented during investigations. According to Alexandra Chyczij, executive director of Th e Advocates' Society, her organization has been run- ning its pro bono program since 1998. Its volunteers "provide services that are typical of duty counsel," she says. "Some examples include assisting with the preparation of an agreed statement of facts, speaking to penalty, and speak- ing to adjournments." Th e program relies on volunteers who provide services without remuner- ation, so the proposal wouldn't involve any extra costs. Chyczij says it's too early to tell how much more work would be involved for volunteers. But Bencher Beth Symes tells Law Times the proposal doesn't go far enough. She says it's particularly impor- tant that lawyers from small fi rms and solo practices who are overrepresented in the disciplinary process get access to good legal advice as early as possible. "I don't think that pro bono is the way to go. Lawyers in trouble with the law society need competent paid legal representation throughout the entire process, not a few hours of pro bono time. Instead, I think we should put in place insurance for legal fees to mount a defence." According to Symes, other profes- sions put lawyers in the shade when it comes to protecting their own mem- bers. Th e Canadian Medical Protective Association pays for lawyers to defend doctors who run into diffi culties with the College of Physicians and Surgeons of Ontario, while the Ontario Nurses' Association provides help through its legal expenses assistance plan. Teachers and police offi cers have similar schemes, Symes says. Th e professional regulation com- mittee will report back to Convocation once it completes discussions with Th e Advocates' Society and the CLA. www.lawtimesnews.com Untitled-2 1 2/25/11 12:54:47 PM

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