In a recent decision of the Law Society of Upper Canada Tribunal, a lawyer in a family matter had his client sign a retainer that stated, “in the lawyer’s discretion he could withdraw from acting on her behalf” for reasons including non-payment of the lawyer’s account.
The retainer went on to give the lawyer permission to sign a Notice of Change of Lawyer on behalf of the client, should the lawyer deem it necessary.
As one can expect, the client in the family law action was not able to pay $23,000 at one point when the lawyer expressed concern. The lawyer insisted that his client begin making payments.
Two months later the lawyer required the client to sign two consents to judgment for his costs but there were issues over the client continuing payments. Four months later he threatened that he would remove himself unless he received a definite amount towards the outstanding bills.
As can also be anticipated the lawyer filed a Notice of Change of Lawyer (no longer representing his client). When this was investigated by the Law Society the lawyer relied on the retainer and its wording. He said similar retainer agreements were used by several lawyers in the jurisdiction.
The Law Society Tribunal noted that the indirect result of the retainer and obtaining consents to judgment and serving a notice of change of representation, meant the contract was not covered by the Solicitor’s Act and was outside of the Family Law Court Rules protecting the matrimonial client and the process. No longer would there be an assessment of the amount charged by the lawyer through this retainer – the lawyer could act “at his will”. This does not protect the public.
It should be noted that this matter is still before the tribunal for consideration of a penalty. There is also a possibility as in all tribunal situations that an appeal or review step might be taken.
In a series of articles that I received recently, an issue arose whether an American lawyer was guilty of malpractice in selling a corporation.
The attorney reviewed a sale and payment agreement between the company and its shareholders. The defendant lawyer had a small ownership stake in the company, which he took instead of legal fees.
The lawyer amended the Purchase Agreement, which significantly reduced the previously agreed-upon purchase price.
This case clearly shows a company being sold for much less than an agreed-upon purchase price. A plaintiff shareholder of the company alleged that the lawyer breached his fiduciary duty and duty of loyalty as a shareholder of the company and the lawyer failed to advise the plaintiff and others (the plaintiff was the majority shareholder) about the changes he made. The plaintiff also alleged failure of the lawyer to advise him that the lawyer was acting contrary to the majority shareholders’ interest. The lawyer deprived the plaintiff as shareholder of obtaining greater benefits by altering the purchase price.
I simply cite this incident, which appears clearly to be an act falling below the standard of care. However, this situation would have to be investigated more extensively. As the lawyer is a shareholder, he might have an agency agreement authorizing him to apply legal principles in such a fashion to benefit the company over the major shareholder. What was the agreed distribution of authority between the shareholders and the attorney as a shareholder and lawyer? Also, what was the result of his acts on the economic matter resulting between the Purchase and Sale Agreement between the company and shareholders as a whole? Should the “company” be plaintiff (derivative action)? Did the lawyer also act for the shareholders or only the company on the issue of breach of conflict and fiduciary duty? Obviously at first glance the lawyer has a big problem, but I have cited a number of issues that arise.
Donald Lapowich, Q.C. is a partner at the law firm of Koskie, Minsky in Toronto, where he practices civil litigation, with a particular emphasis on real estate litigation and mediation, acting for builders, real estate agents and lawyers.
