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REGULATION OF PROFESSION - Compensation funds

Monday, July 29, 2019 @ 9:56 AM  


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Appeal by the Law Society of New Brunswick from a judicial review judgment ordering assessment of a compensation claim by the respondent, Canada Law Financing (CLF). CLF extended a $200,000 secured loan to a solicitor for the stated purpose of financing litigation files. Three months later, the solicitor misappropriated the proceeds, using them to cover trust account overdrafts. CLF applied to the Law Society’s Compensation Fund for reimbursement. The Compensation Committee recommended rejection of the claim on the basis that the loan documentation indicated that the relationship between CLF and the solicitor was one of creditor and debtor rather than solicitor and client. The Council accepted the Committee’s recommendation and the claim was rejected. CLF sought judicial review. The application judge found no breach of the duty of procedural fairness. However, the judge ruled that the Law Society’s interpretation of s. 81(2) of the Law Society Act in finding no solicitor and client relationship was unreasonable. The application judge set aside the Law Society’s decision and ordered a new assessment of CLF’s claim. The Law Society appealed. CLF cross-appealed.

HELD: Appeal allowed, and cross-appeal dismissed. The absence of a privative clause, the wide statutory discretion, and the absence of any right of action against the Fund favoured review on a standard of reasonableness rather than correctness. The English version of s. 81(3) of the Law Society Act plainly and unequivocally required a solicitor and client relationship to claim compensation. It was reasonable for the Committee to use the English version of the provision to resolve the matter given the ambiguity in the wording of the French version. The Committee’s conclusion refusing compensation was reasonable. The language used throughout the documentation between CLF and the solicitor was consistent with a creditor and debtor relationship. The solicitor did not use any of the loan monies to benefit clients, and there was no privity of contract between the clients and CLF. The application judge erred in concluding the Committee confused eligibility to make a claim with eligibility to be compensated. The Law Society’s decision was restored.

678107 N.B. Inc. (c.o.b. Canada Law Financing) v. Law Society of New Brunswick, [2019] N.B.J. No. 155, New Brunswick Court of Appeal, J.C.M. Richard, M.E.L. Larlee and K.A. Quigg JJ.A., June 20, 2019. Digest No. TLD-July292019003