Friday, November 24, 2023

The Waltons

The Ontario Law Society Tribunal Hearing Division has revoked an attorney's license based on findings of misconduct outside the practice of law

Mr. Walton and his wife, who at all material times was also a lawyer, were engaged in a commercial real estate development business in their personal capacities. As a couple, they were shareholders in a company referred to as the Walton Company.

The Waltons and Dr. Bernstein would identify a particular property to develop and set up a company on a 50/50 basis. Half the shares would be owned by the Walton Company and the other half would be owned by Dr. Bernstein through corporations he owned and controlled. Dr. Bernstein would contribute half the capital to each company and the Walton Company would contribute the other half of the capital in each company. In all, over 30 companies were constituted and over 30 properties were involved in this real estate development framework.

It was also agreed between Dr. Bernstein and the Waltons that the Waltons, through their company, would provide management services to the subsidiary property development corporations created through the effective partnership of the Waltons and Dr. Bernstein. The expectation was that such management services would be accounted for properly and billed by the Walton Company to the various joint subsidiary companies as appropriate and would be paid by those companies in an honest and transparent manner.

It was agreed among the Waltons and Dr. Bernstein that any profit or funds were not to be extracted from the various joint subsidiary property development companies without the knowledge and consent of both the Waltons and Dr. Bernstein.

Unfortunately for Dr. Bernstein, the business relationship he entered into with the Waltons did not work out in the manner he had hoped for and expected. He was defrauded out of a substantial sum of money, which he attempted to recover through the litigation presided over by Justices Brown and Newbould, referenced above.

The Law Society relies entirely on the facts as found by Justices Brown and Newbould as conclusive proof of the first group of allegations. This tribunal addressed the question of whether Mr. Walton could re-litigate the findings of fact made by Justices Brown and Newbould previously in Law Society of Ontario v. Walton, ONLSTH 135.  In that decision, Mr. Walton’s attempt to do so was denied, based upon the principles of Toronto (City) v. CUPE, Local 792003 SCC 63.

The tribunal accepted the collateral findings as stated by Justice Brown

Based upon Norma Walton’s June 21, 2014 evidence, I can only conclude that when Norma and Ron Walton signed the June 25, 2012 agreement with Dr. Bernstein for the 875/887 Queen Street East project, they fully intended to use the funds advanced by Dr. Bernstein to fund, in part, their own acquisition that day of their 44 Park Lane Circle personal residence. They did not disclose to Dr. Bernstein their intended use of his funds. To the contrary, in the agreement they signed with him on June 25, 2012, they led Dr. Bernstein to believe that the funds he advanced would be used solely for the project at 875/887 Queen Street East and that neither he nor his co-venturers, Norma and Ron Walton, would be able to withdraw their capital from that project until it had been sold. By signing the agreement with Dr. Bernstein on June 25, 2012, and then proceeding immediately to appropriate the funds he advanced to their own use later that day to acquire their mansion at 44 Park Lane Circle, Norma and Ron Walton deceived Dr. Bernstein and unlawfully misappropriated Dr. Bernstein’s funds to their own personal use. In short, the Waltons defrauded Dr. Bernstein.

Sanction

 The gravity of Mr. Walton’s behaviour is far more than sufficient to justify the penalty of revocation of his licence to practise law. The case law is clear. Where misconduct involving serious dishonesty and knowing participation in fraud in relation to a licensee’s activities as a licensee is established, the presumptive penalty is revocation. With respect to misconduct involving serious dishonesty of a licensee in the conduct of their business activities outside the scope of their activities as a licensee, the presumption of the penalty of revocation should also apply.  In the present case, there are no exceptional circumstances which might displace the presumptive penalty of revocation.

A second matter

 with respect to each of the five mortgage commitments, we conclude that Mr. Walton knowingly signed documents which contained false representations and were submitted in support of a loan. On this basis, as was the case in respect our findings regarding the first group of allegations, Mr. Walton’s behaviour is far more than sufficient to justify the penalty of revocation of his licence to practise law. Where misconduct involving serious dishonesty and knowing participation in fraud is established, the presumptive penalty is revocation.  In the present case, as previously mentioned, there are no exceptional circumstances which might displace the presumptive penalty of revocation.

(Mike Frisch)

https://lawprofessors.typepad.com/legal_profession/2023/11/the-ontario-law-society-tribunal-hearing-division-has-revoked-an-attorneys-license-based-on-findings-of-misconduct-outside-th.html

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