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Broken Trust – Assessments to Uncover Frauds by Lawyers

Canadian Fraud Lawyer

On May 5, 2014, the Toronto Star reporters Kenyon Wallace, Rachel Mendleson and Dale Brazao published an article entitled “Broken Trust” – see http://projects.thestar.com/broken-trust/case-files.html. They state that their Toronto Star investigation found the Law Society of Upper Canada often fails to report the crimes of its members to police.

How The Star Did It

The Star article states that they analyzed every discipline case of lawyers sanctioned by the Law Society of Upper Canada between 2003 and 2013. They characterized offences using appropriate criminal terms, including theft (described by the law society as “misappropriation” or “misapplication”), fraud, forgery and breach of trust as worthy of a criminal investigation. There were 236 cases that fit this description.

The Star states that collectively they found these lawyers were responsible for misusing client funds by stealing, defrauding, failing to account, overdrawing, and improperly dispersing, among other law society classifications, to the tune of $61,457,642.

To find out if these lawyers ever faced criminal charges or served jail time, the Star article states that they scoured court decisions, law society disciplinary records and media reports. We also consulted the Ministry of the Attorney General and several police forces. The Star states that the law society would not say if it keeps track of the number of lawyers who have faced criminal charges in relation to their practices. The Toronto Star states that they found criminal charges for 41 lawyers disciplined by the law society, which is fewer than one in five of the 236 cases they reviewed. Of those 41 cases involving criminal charges, the Star states they cross related jail sentences for 12 of the cases.

The Assessment Process

 The Toronto Star article conspicuously does not mention any research into the assessment process. Often an assessment is a viable way to determine if there is evidence on which to support a tort claim of negligence or more serious conduct concerns involving a lawyer. This blog provides a brief explanation of the process.

Overview of Assessments

An assessment process is not supposed to be an adversarial proceeding, and has been described as inquisitorial; that is, and inquiry by the Court into the reasonableness of a lawyer[s accounts. If a client seeks an assessment of his or her lawyer’s account, or if the lawyer brings an assessment application to get an order for the client to pay his or her account, the lawyer must give evidence to prove his or her account. The client is not required to testify, but may do so if he or she wishes. The client may cross examine the lawyer on his or her evidence to prove the accounts at issue.

Assessments are not presided over by judges. Rather, assessments are presided over by Assessment Officers; that is lawyers or members of the public who have been given a special designation similar to that of a Justice of the Peace. The formality of assessments is somewhat less rigid than the formal process than before a judge.

Assessment officers typical make findings and draft reports indicating that a solicitor’s accounts fall into one of four categories:

  1. patently excessive;
  2. excessive;
  3. excessive, but not obviously so; and,
  4. patently reasonable.

Upon issuing their report, the solicitor or client may register the Assessment Officer’s report in the Courts before a judge to formalize the finding as an order.

Unlike an action, a client seeking to assess the accounts does not have the legal onus of proving the account is excessive. Rather, the onus is on the lawyer to justify his or her accounts are reasonable. In proving their accounts, lawyers may include evidence on the terms and scope of the retainer, together with the services provided, and evidence on how the services confirmed to the retainer. Lawyers typically have complete records of the services, whereas the client is unaware of the specifics of what was done. If the matter proceeds to a full hearing, any relevant documents may be put to the lawyer on cross examination. Each lawyer mentioned in the account may be required to testify to prove a law firm’s accounts.

Assessments are intended to take the perspective of the client, not the lawyer. The Courts have been clear that lawyers are not to frustrate the assessment process. In other words, assessments are to protect the administration of justice, and accordingly lawyers should facilitate the process.

Limitation Periods

The Solicitors’ Act provides a limitation period requiring an assessment be requested within 30 days of receiving the account. This is interpreted as 30 days from the final account, being when the matter is over or the retainer agreement terminated, unless the retainer agreement specifically states otherwise. The Courts have over rules retainer agreements however, and held that it would not be rational or realistic to require clients to request an assessment after each interim account in some circumstances. In such cases, the limitation period runs from the date of the final account, even if the interim accounts have been paid.

Although payment of an interim account does not necessarily infer an implied acceptance of its reasonableness, payment of a final account raises a rebuttable presumption of satisfaction. However the special circumstances referred to in the section 11 of the Solicitors’ Act may “either undermine the presumption that the account was accepted as proper or show that the account was excessive or unwarranted.”  To rebut the presumption under Section 11, the client ought to adduce evidence that an amount for fees relating to litigation is “grossly excessive given the nature and complexity of the litigation.” In this line of reasoning, the size of the accounts “can be considered in the whole, as a special circumstance.”

Contracting Out of the Solicitors’ Act 

Lawyers are not permitted to contract out of the Solicitors’ Act. The relevant provisions of the Solicitors’ Act are as follows:

s. 3 Where the retainer of the solicitor is not disputed and there are no special circumstances, an order may be obtained on requisition from a local registrar of the Superior Court of Justice,

(a)  by the client, for the delivery and assessment of the solicitor’s bill;

(b)  by the client, for the assessment of a bill already delivered, within one month from its delivery;

(c)  by the solicitor, for the assessment of a bill already delivered, at any time after the expiration of one month from its delivery, if no order for its assessment has been previously made.

s.4 (1) No such reference shall be directed upon an application made by the party chargeable with such bill after a verdict or judgment has been obtained, or after twelve months from the time such bill was delivered, sent or left as aforesaid, except under special circumstances to be proved to the satisfaction of the court or judge to whom the application for the reference is made.

s.11 The payment of a bill does not preclude the court from referring it for assessment if the special circumstances of the case, in the opinion of the court, appear to require the assessment.

The Nine Factors

The Ontario Court of Appeal has provided nine factors to be considered by an assessment officer in determining whether a solicitor’s accounts are fair and reasonable. These factors are:

  1. the time expended by the solicitor;
  2. the legal complexity of the matters dealt with;
  3. the degree of responsibility assumed by the solicitor;
  4. the monetary value of the matters in issue;
  5. the importance of the matters of the client;
  6. the degree of skill and competence demonstrated by the solicitor;
  7. the results achieved;
  8. the ability of the client to pay; and
  9. the expectation of the client as to the amount of the fee.

No one factor is more important than the other. If the solicitor is unable to meet the test on just one of the factors, the account may be substantially reduced.

In order to prove their accounts, lawyers are required to produce dockets (notes and records to support accounts) to show their accounts are accurate and that notes were made contemporaneous with the work being done. Dockets typically identify the lawyer, rate and time spent on task with a description. The implication of the nine factor test is that clients may cross examine their lawyer on his or her accounts and make inquiries on such issues as:

  1. errors in the dockets;
  2. duplication of hours;
  3. extensive time spent for drafting memoranda, research or telephone calls; and,
  4. taking unnecessary steps which increased costs, or alternatively, not taking certain steps which ultimately increased the costs.

 Assessment officers have been known to expect that experienced counsel:

  • do not docket large block billing but rather break down dockets by task and by time-on-task, and
  • do not charge for substantial time for research unless preapproved by the client as there is an expectation that lawyers know the law generally.

 

Costs of Assessments

As assessments are not an action but a reference, costs do not automatically follow the event. Where accounts are held to be patently excessive, costs to the client should follow. Where accounts are held to be excessive, costs to the client should follow, but perhaps to a lesser extent. Where accounts are held to be excessive but not obviously so, cost orders are often not made. Where accounts are held to be patently reasonable, costs are often awarded to the lawyers – as an incentive for clients not to bring frivolous assessment applications.

Inquiries

We normally are not interested in taking on assessment requests from members of the public unless it is clear that their has been solicitor misconduct or that lawyers involved in fraud cases were not familiar or experienced in conducting fraud litigation and investigations resulting in needlessly spent money by the client.. For further information, please contact us.

 

Norman Groot, LLB, CFE, CFI – March 31, 2014

www.investigationcounsel.com

 

With respect to the Toronto Star article entitled Broken Trust, the contact information for the reporters is:

Kenyon Wallace

Phone: 416-869-4734

Email:

Twitter: @KenyonWallace

Dale Brazao

Phone: 416-869-4433

Email:

Rachel Mendleson

Phone: 416-869-4059

Email:

Twitter: @Rachelmendleson

Disclaimer

Norman Groot

About Norman Groot

Based on my police experience and my experience thereafter as a litigator, I have joined forces with other lawyers with police experience and created the law firm Investigation Counsel Professional Corporation.

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