Wednesday, February 15, 2017

Good Faith Error Not Professional Misconduct

The Law Society of Upper Canada Hearing Tribunal Division issued reasons for its finding no professional misconduct

There are few cases in which a finding that a licensee has breached a court order and been found in contempt of court will not lead to a corresponding finding of professional misconduct. This is one of them.

Mr. Carey acted for clients who were subject to a Mareva Order that prohibited any dealing with (including any transfer of) monies or assets. On instructions from his client in 2006, Mr. Carey returned trust funds to his client believing the Order did not apply to his trust account because of his solicitor-client duties. In 2015, the Supreme Court of Canada definitively determined that his solicitor-client duties were no defence to the allegation that he had breached the Mareva Order. It further determined that Mr. Carey’s return of trust funds constituted civil contempt, even though he lacked the intent to disrespect the administration of justice.

The Courts accepted that Mr. Carey made an error in judgment in returning the trust funds. It was an error that other experienced practitioners had made and would have made at the time. Mr. Carey had competing ethical obligations when he made his judgment call. He owed a duty to his client to safeguard trust funds, follow instructions and maintain solicitor-client privilege and confidentiality. He owed a duty to the administration of justice not to shelter his client’s monies from the Mareva Order. He also owed a duty to the administration of justice not to participate in a breach of the Mareva Order. In mistakenly concluding that the Mareva Order did not prohibit returning trust funds to his client, he gave priority to the competing solicitor-client duties.

 The submissions did not indicate any authorities that should have guided Mr. Carey’s decision. Subsequent commentary on the case indicated sympathy for Mr. Carey’s dilemma and a concern that there was no clear statement from the courts as to what actions a lawyer in Mr. Carey’s position should take, in complying with the Order, to also respect his solicitor-client duties.

Mr. Carey’s return of the trust funds to his client in breach of the Mareva Order was an error in judgment that was made in good faith. It sought to recognize his professional obligations, was consistent with the standard of practice at the time, and was made in the absence of guidance to the contrary in the literature. It was a reasonable judgment call that, in the circumstances, did not amount to professional misconduct.

The conduct led to a contempt finding

Mr. Carey’s case has garnered significant public attention. The Supreme Court of Canada decision has been cited 97 times. It has also been the subject of significant case commentary. Mr. Carey conducted a search for commentary on the case and produced 17 articles that he readily found.

One article entitled, Supreme Court Clarifies The Test For Civil Contempt of Court, by Gowling WLG, dated April 1, 2015, lamented the lack of guidance from the Court for a lawyer in Mr. Carey’s position:

Unfortunately, while this decision clarifies the test for civil contempt generally, the Court provides little guidance on what a lawyer should do if he finds himself in a position of conflict such as Mr. Carey apart from leaving the funds in a trust account. There is a suggestion that he might have sought a variation of the order or direction from the court on an ex parte and in camera basis. How that could be done without breaching solicitor-client privilege is not clear. The Court concluded that it did not need to make any final pronouncements on what Mr. Carey should have done, only on what he should not have done which was to give the money back to the client. This leaves a lawyer in a difficult situation when the lawyer believes his obligations to the client conflict with the obligations under a court order – an issue that law societies across the country will need to review.

Other articles noted that the Supreme Court of Canada decision had: clarified or confirmed the civil law on contempt; indicated that solicitors should be considered as potential recipients of Mareva Orders and that the solicitor-client obligations are no defence to directions under the order; questioned whether there was room for “judgment-calls” in circumstances where the lawyer must keep the client’s confidences; served as a caution to banks and other institutions that they should seek legal advice and obtain court permission before releasing monies from an account that was subject to a Mareva Order, and; confirmed that intent to interfere with the administration of justice is not an element of civil contempt.

(Mike Frisch)

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