Friday, January 7, 2022
A Discipline Hearing Panel of the Manitoba Law Society imposed a six-month suspension and costs for misconduct identified in two citations.
Mr. Bauman's representation of L.G. commenced on July 9, 2012 in the context of an Independent Assessment Process (IAP) created to settle claims against the Government of Canada for wrongdoing and harm experienced by Residential School Survivors. L.G. was a member of Opaskawayak Cree Nation, near The Pas, Manitoba who had attended an Indian Residential School in Dauphin, Manitoba. In the course of representing L.G. as a claimant for compensation, Mr. Bauman was paid legal fees by the Government of Canada, in addition to the compensation monies paid to LG.
When L.G. retained Mr. Bauman in 2009, the practise of lawyers arranging for claimants to provide fees from their settlement money to "form filters" was commonplace. Companies acting as "form fillers" would assist claimants in putting together the documentation required for their claim. In this matter, Mr. Bauman had L.G. authorize him to pay Sakastew, a form filing service, the amount of $11 ,250.00, which was payable out of the compensation monies L.G. received. In confirming those instructions, however, Mr. Bauman failed to advise L.G. about the nature of his and his firm's relationship with Sakastew. LG. was unaware of the fact that Mr. Bauman and the law firm loaned Sakastew $150,000.00 in anticipation of repayment from the form filler fees that would be paid to Sakastew from the large number of referrals that would be sent by Sakastew to Mr. Bauman's firm. By September, 2010, it was well-known and known to Mr. Bauman's law firm that the practise of assigning monies to form fillers from compensation monies was being viewed unfavourably by Adjudicators acting in the IAP proceedings. Any suggestion as to the legality and enforceability of such arrangements were put firmly to rest by Justice Schulman in Fontaine v. Canada, 2014 MBQB 1 13.
LG.'s compensation monies were received in trust for L.G. on August 31, 2010. On September 3, 2010, Mr. Bauman drove 140 k.m. from his office in Flin Flon to meet with L.G. and his daughter in The Pas, where he took LG. to the bank to have him deposit his cheque. He then arranged for L.G. to make a bank draft payable to Sakastew for $1 1,250.00 for the form filler fees. Without L.G.'s knowledge or consent, Mr. Bauman endorsed the bank draft payable to Sakastew to himself and deposited it into his personal bank account. He paid Sakastew a portion of the monies (just over $8,000.00) and kept the remaining amount. Again, this was unknown and not authorized or directed by L.G.
Mr. Bauman, along with another business partner, through a numbered company, purchased the Flin Flon Hotel in 1998 with the idea of restoring it to a thriving business. In 2001, a CEDF (Communities Economic Development Fund) loan was obtained in the amount of $400,000.00 for renovations (the "2001 loan"). By 2004, $480,000.00 was due and owing on the loan and no renovations had been completed. Mr. Bauman's business partner withdrew from the project. Despite what some might regard as wishful thinking, Mr. Bauman's optimism for the successful completion of the project remained.
In 2004, Mr. Bauman approached his long-term client, T.S., a business person in Flin Flon for whom Mr. Bauman had done various personal and business-related legal work over the years. Mr. Bauman proposed to T.S. that he invest in the Flin Flon hotel project through a numbered company ("466"). T.S. understood that he was being asked to become a non-active equity participant, taking a minority financial interest. T.S. invested $75,000.00 for which he received a 12.5% interest in the hotel, through shares in 466.
On June 14, 2004, a loan was obtained by 466 from the same lending organization in the amount of $829,632.02 to 466 (the "2004 loan"). Under the Guarantee Agreement, when signed, Mr. Bauman and T.S. jointly and severally guaranteed 466's obligation under the loan, including interest and costs, which guarantee was expressed as joint and several to the full amount of the indebtedness. T.S. signed the Guarantee Agreement without reading it. In doing so, he relied on Mr. Bauman as his counsel. T.S. erroneously believed that his risk was limited to the loss of his $75,000.00 investment and 12.5% of the amount that may be due if the resulting loan fell into arrears. Mr. Bauman failed to inform T.S. of all the relevant circumstances of these transactions, including that he was not acting as his lawyer in relation to his investment in 466 or the 2004 loan, the accurate and true circumstances of the risk/liability T.S. was agreeing to, and the requirement for him to seek/obtain independent legal advice.
Hope didn't spring eternal. The hotel restoration project didn't materialize. No payments were made under the terms of the loan. The lender finally demanded payment from 466 by letter dated April 27, 2010, at which point the amount that had accrued due with interest to March 31, 2010 was $1,296,024.36. Formal demand was made of the guarantors on May 17, 2010 and a Statement of Claim was subsequently filed. Attempts to settle the litigation failed. Judgments issued, including one that was granted against Mr. Bauman in the amount $1,642,505.07, plus costs of $3,500.00 and interest at 7.41% per annum from June 7, 2016.
In a decision that was rendered on July 10, 2019 by Justice Edmond, he determined that Mr. Bauman was acting as the lawyer for T.S. throughout the transactions and was in a conflict of interest when he did so, He further ordered that Mr. Bauman indemnify T.S. to the extent of his loss.
In each of the two Citations, Mr. Bauman's actions were serious breaches of some of the most important professional responsibilities - to act with integrity and avoid conflicts of interest. The conflicts of interest in each case involved preferring his own interests over that of the client, which is certainly an aggravating factor where conflicts are concerned. Mr. Bauman had no prior discipline record at the time and the misconduct occurred in a timeframe of 10-15 years ago, since which time Mr. Bauman has continued in practise. The offending conduct involved specific clients and specific incidents. There was no evidence the conduct amount to a "pattern" of misconduct or represented his general approach to practise. He accepted responsibility for his misdeeds, saving the Society the time and expense of proving the matters. This acceptance of responsibility was also expressed by Mr. Bauman himself when he personally addressed the panel and apologized for his actions. Mr. Bauman delivered a personal apology to L.G. and his repayment to L.G. in 2015 in the amount of $1 1,250.00 was restorative. With respect to the Flin Flon hotel litigation, the amount of debt Mr. Bauman owes is enormous. The indemnification of T.S. through those proceedings will hopefully go a significant way towards restoring T.S. Finally, while no two cases are the same, counsel utilized prior precedents as guidance for where they situated the joint recommendation along the continuum of suspensions previously imposed.
Wikipedia has some information about the town of Flin Flon
The town's name is taken from the lead character in a 1905 paperback novel, The Sunless City by J. E. Preston Muddock. Josiah Flintabbatey Flonatin piloted a submarine into a bottomless lake where he sailed through a hole lined with gold to enter a strange underground world. A copy of the book was allegedly found and read by prospector Tom Creighton.
When Tom Creighton discovered a high-grade exposure of copper, he thought of the book and called it Flin Flon's mine, and the town that developed around the mine adopted the name. Flin Flon shares the distinction of being named after a character in an adventure novel with Tarzana, California and Le Plessis-Robinson, France