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REGULATION OF PROFESSION - Disciplinary procedure - What constitutes misconduct

Monday, January 28, 2019 @ 8:55 AM  

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Appeal by the solicitor from a decision of the Law Society review panel finding the appellant guilty of professional misconduct and confirming his five-month suspension. The appellant was a tax lawyer. One of the firm’s major clients, Monarch Entertainment, was in the business of marketing tax shelter investments that provided production services to the film industry. After the Income Tax Act was amended to prevent such tax shelter investments, Monarch decided to leave the business and commenced winding down its affairs. A former employee of Monarch, D, devised a possible way around the tax amendments and sought the appellant’s advice and eventually went into business with the appellant as a competitor of Monarch. The appellant did not disclose his interest in this business to Monarch or inform Monarch that the tax amendments could be circumvented, after giving it advice to the contrary a year earlier. Lengthy litigation ensued from the appellant’s conduct. The majority of the Supreme Court held that the appellant breached his fiduciary duty to Monarch. The minority of the Supreme Court of Canada and the trial judge found he had breached no professional obligations owing to Monarch. The appellant now argued that the findings of the trial judge and minority of the Supreme Court of Canada precluded a finding of professional misconduct. The review panel found that the appellant’s failure to disclose to Monarch that he had a financial interest in a potential competitor, and his failure to advise Monarch that his previous opinion regarding the tax amendments should be reconsidered, was a breach of his fiduciary duty to Monarch that amounted to professional misconduct. The appellant argued that his breaches of fiduciary duty, which he did not challenge, were not sufficiently marked to warrant a finding of professional misconduct and that the imposition of a five month suspension was an inappropriate punishment.

HELD: Appeal dismissed. Given that the trial judge and the minority of the Supreme Court of Canada made it clear that they were not commenting on the ethical obligations of lawyers, it was not accurate for the appellant to say that they found he did nothing wrong. The minority of the Supreme Court of Canada merely deferred to the factual findings of the trial judge. The Law Society’s findings that the appellant committed professional misconduct by failing to disclose to Monarch his financial interest in a competing business and by failing to advise Monarch about the possible revival of the tax assisted film financing business were reasonable. The appellant had a duty to disclose a conflict of interest to a client, and his personal financial interest in Monarch’s competitor put him personally in conflict with Monarch and blinded him to that conflict. The Review Panel adequately explained why the appellant’s breach of his ethical duties amounted to a marked departure. The appellant’s failure to acknowledge his misconduct was one of several factors the hearing panel considered in determining the appropriate magnitude of discipline to impose. The review panel did not focus entirely on the fact that the appellant had an ongoing financial interest in the competitor and acted only to further that interest. There was no indication that the hearing panel was acting to punish the appellant. The panel found that the appellant’s conduct showed significant disregard of his obligations flowing from the duty of loyalty and concluded that it had a duty to provide a message to the public that the Law Society took seriously the misconduct of its members. The imposition of discipline for professional misconduct was an inherently discretionary exercise. While a five month suspension was on the high end of disciplinary actions, the review panel’s decision to uphold the suspension was reasonable in light of the hearing panel’s findings of fact.

Strother v. Law Society of British Columbia, [2018] B.C.J. No. 6982, British Columbia Court of Appeal, J.E.D. Savage, G.J. Fitch and B. Fisher JJ.A., December 27, 2018. Digest No. TLD-January282019002