Law Times

Law Times • December 7, 2015 Page 5 www.lawtimesnews.com Regulator didn't provide proper Stinchombe disclosure Appeal panel overturns discipline ruling in mortgage fraud BY NEIL ETIENNE Law Times n Ottawa-based lawyer found to have commit- ted real estate fraud by the Law Society of Up- per Canada's discipline tribunal in 2014 has won his appeal. His substantial penalties have been set aside due to inordinate delays in his case and for what his counsel describes as the LSUC not follow- ing its own disclosure policies. Sole practitioner Luigi Savone, a real estate lawyer, had his 2014 findings overturned by the tri- bunal's appeal division and a new hearing ordered to investigate his role in a series of 12 alleged fraud- ulent real estate purchases in the Ottawa Valley from 2000 to 2003. His counsel says on one hand it's a victory for Savone, while on the other, he battled the allega- tions since 2007 and will have to go through the process again. Savone's lawyer Brian Radnoff, a partner at Lerners LLP in To- ronto, says his client was treated unfairly by the law society, as it would not allow production of vendor and lender documents that the defence considered vital, yet still moved for disbarment. "Lawyers in this province would be similarly disturbed to learn that where the law society is trying to disbar a lawyer in this situation, who only acted for the vendors, the law society is refusing to produce the files for the lawyers of the purchasers and the lenders, despite the fact that they're clearly relevant and may well contain ex- culpatory information," he says. "Under their disclosure obliga- tions, which are the Stinchcombe standard, there is no question that they're required to produce those files." For his part, Savone tells Law Times, "I am very pleased about the appeal panel's decision. Un- fortunately, this proceeding, which has been ongoing since 2007 and involves transactions going back to 2000, continues, and the harm to my practice, me, and my family continues because the law society refuses to consider any resolution other than me nev- er being able to practice again." The appeal tribunal, chaired by Christopher Bredt with Robert Armstrong, Janet Leiper, Barbara Murchie, and John Spekkens, wrote: "the hearing panel erred in dismissing the motion for dis- closure of the files of the lawyers who acted for the other parties. In our view, the transaction files are potentially relevant. Subject to claims of solicitor/client privilege, they ought to have been disclosed, if relevant." The March 2015 penalty against him of $100,000 was to cover costs of the LSUC's inves- tigation. Savone also faced losing his licence after the LSUC tribu- nal found the 30-year veteran was wilfully blind to the accommoda- tion of fraud. The hearing panel agreed that the principles in Stinchcombe ap- ply to prosecution of law society conduct applications and did not make a finding that the files "on the other side" of the transactions were clearly irrelevant, according to the appeal ruling. Instead, the hearing panel found that s. 49.12 of the Law Society Act precluded the soci- ety from disclosing the material requested by the defence counsel, because it functions as a statutory privilege provision that can only be defeated by the criminal "in- nocence at stake" exception de- scribed in R. v. McClure. Representatives from the LSUC declined to comment, but corporate litigator Bruce Mc- Meekin says the clarification about s. 49.12 of the act will im- pact future disciplinary hearings. "Not just for mortgage fraud cases but for other disciplinary cases going forward, the law soci- ety can't rely on s. 49.12 to refuse disclosure, so long as there is rel- evance and there is no sustainable claim or privilege," he says. The earlier disciplinary panel ruling by chair Mary Louise Dickson, and rounded out by Ross Earnshaw and Sarah Walk- er, found on a balance of probabil- ities that Savone had engaged in professional misconduct when he assisted in the dishonest conduct of clients in obtaining mortgage proceeds under false pretences. The panel ruled he abdicated his responsibility to review and check that statements of adjustment properly ref lected the 12 transac- tions in question. "Where a staff member pre- pares the statement of adjust- ments, the vendor's and purchas- er's lawyers have an obligation to review it with their respective clients. In his evidence, Savone testified he never reviewed the statements of adjustment with his clients but left this to his clerk, Gerry," the panel wrote in its rul- ing. "This is an admission that he, an experienced practitioner, chronically fell below the accept- ed standard of care and abdicated his responsibility to his client." In its ruling, the LSUC panel determined the statements con- tained clear indications of re- verse engineering and fraudulent entries designed to permit the closing of the transactions on a "no-money-down" basis for the ultimate purchasers. But Radnoff says the society erred in not following its stan- dards for disclosure. "There was no direct evidence he was involved in any fraud, if there even was any fraud, but the law society's position is the only proper punishment is disbar- ment," says Radnoff. "I think that lawyers in this province would be even more disturbed to hear that the law society has expended significant resources and costs prosecuting this lawyer and now there's going to have to be a re-hearing because the society failed to meet its dis- closure obligations, when there's no question they knew exactly what their obligations were." LT NEWS law.utoronto.ca/ExecutiveLLM GPLLM Global Professional Master of Laws [Get a Master of Laws] Because business issues are legal issues. So if you want to get ahead in business, get the degree that gets you there faster. ONE YEAR – PART - TIME – NO THESIS – FOR L AWYERS AND NON - LAWYERS Untitled-8 1 2015-03-02 11:15 AM A His client was treated unfairly when the law society would not allow production of vendor and lender documents, says Brian Radnoff.

• Cover