Friday, 12 February 2016

Dishonest lawyers (Part 1)

There are more lawyers in the province of Ontario than any other province in Canada and yet when lawyers steal from their clients, the victims are eligible for less compensation than almost anywhere else in Canada.

The Law Society of Upper Canada, which regulates the legal profession in Ontario, provides victims of lawyer “dishonesty” up to $150,000 through a victim compensation fund paid for with annual fees from its 40,000 licensees. The law society is not aware of any case in which that cap has been waived. However, an analysis of policies across Canada shows the limit is significantly lower and more rigid than in many other jurisdictions.

There are very few forms of deceit than that which is brought about by dishonest lawyers since lawyers are supposed to be honest to their clients, to the courts and to the general public at large. Dishonest lawyers are often referred to as shysters. 

This article is about a dishonest lawyer who ripped off members of the general public at large. The man I am writing about is Bryan Richard Dale.

This man was called to the bar in 1994 and that prior to law school had completed both an engineering degree and a Master of Business Administration. He set up his own practice after his call to the bar. At that time, he was in significant debt from his education with respect to his tuition fees.  His cash flow at the start of his practice was poor. He attempted to manage the payments; however, over time he owed significant income tax arrears and often fell behind in his payroll payments.

In 2008, Mr. Dale made a proposal to his creditors. The impact of his financial stresses meant that he felt he needed to bring in as much business as he could.  This coincided with an upturn in the real estate market which saw him working relentlessly and accepting files on short notice. He testified that he had a reputation with mortgage brokers that he would take anything on short notice. He felt that he had to direct all of his payments to his outstanding loans and current debts, and this contributed to his work habits.  These habits included delegating work to staff, processing paperwork as fast as possible and not taking time to consider the consequences of his choices.

He later testified at a hearing before the Law Society that over the years he has been able to pay off his creditors and reduce his debt. His only significant debt now is a house with a mortgage. In cross-examination, Mr. Dale testified that in 2007-2008, he was closing up to 50 real estate transactions per month during the busy summer season, with fewer transactions during the winter.  Since that period of time, work had slowed down and he had cut back on his staffing.  The findings of misconduct included his participation in mortgage fraud in five transactions, multiple findings of acting in a conflict of interest, failing to provide information to his lender clients, and failing to serve his clients to the standard of a competent lawyer. The transactions took place over a period of months in 2007-2008, with a number of them involving same-day flips of property. 

 After a contested the disciplinary hearing of the law society, the panel found that Bryan Dale committed professional misconduct by knowingly participating in five fraudulent mortgage transactions and in failing to serve his clients in nine mortgage transactions. There was $1.5 million dollars loaned as a result of the deceit of Mr. Dale’s clients or those connected to them.

The panel rejected Mr. Dale’s evidence at the hearing that he was not aware nor was he wilfully blind or reckless as to the warning features in the fraudulent transactions.  The panel found that the nature of the misconduct and the jurisprudence (other court decisions) concerning what can mitigate from such serious misconduct lead to a conclusion that the appropriate penalty, taking into account all of these circumstances, is revocation of Mr. Dale’s licence to practice law.

Counsel for Mr. Dale, Mr. Wagman meanwhile requested an adjournment of the penalty hearing pending another decision being heard in the Divisional Court of Appeal.  He submitted that his client would enter into an undertaking not to practice real estate law, that counsel be required to monitor the status of the said appeal and advise the panel as to its status. As an alternative, Mr. Wagman offered to make submissions and call evidence on penalty, but asked the panel to considering reserving its decision until the other appeal matter has been decided.

Counsel for the Law Society, Ms. Rutherford, submitted that a long line of cases have found that revocation is the presumptive penalty for mortgage fraud. Ms. Rutherford described it as speculation that leave to appeal would be granted or that the appeal would succeed. The findings of knowing participation in mortgage fraud have been made after a contested hearing and failure to proceed to penalty would undermine public confidence in the Law Society that governs lawyers.
The panel decided that it was in the public interest to proceed with the penalty hearing. It made this decision in part, because the potential impact of the Divisional Court’s decision with respect to another lawyer could not be known at the beginning of the penalty hearing, particularly in the absence of evidence as to the similarities between the issues on penalty in this case and that other case. The panel however did advise counsel that it would remain open to considering at the close of the penalty hearing whether we ought to reserve its decision on penalty pending the decision of the appeal dealing with the other case.

  The panel asked by Mr. Dale’s lawyer to impose a one-year suspension on Mr. Dale. Ultimately, the panel determined that it was in the public interest to make a decision on penalty. The panel found that revocation of Mr. Dale’s licence to practice law in Ontario was the appropriate penalty taking into account the facts, the jurisprudence and counsel’s submissions.  

Me. Wagman had applied for a delay in the hearing pending the decision of the Divisional Court hearing a similar case. Penalty hearings should not be delayed for months, particularly where there has been a finding of knowing participation in mortgage fraud.  The decision of the Divisional Court represents the law in Ontario on the range of penalty for mortgage fraud. There is no suggestion that the decision of the Divisional Court could remove revocation as a possible penalty in mortgage fraud, but only that its presumptive use is expected to be a principle argued on appeal. The panel considered the evidence, case law and submissions that apply to Mr. Dale and determined that given its findings the panel was able to proceed to consider and impose the appropriate penalty.  Its review of the Divisional court decisions did not satisfy the members of the panel that Mr. Dale’s circumstances were so similar to those in that case that his matter would necessarily rise or fall with the outcome of any appeal, if leave was granted to appeal to the Divisional Court.

Where lawyers have been found to have used their skills and practices to aid in fraudulent mortgage schemes and failed to protect their lender clients, the Law Society Tribunal has an “overarching obligation to protect the public and maintain the public’s confidence in the integrity of the profession. 

There is an imperative in such cases to ensure, in Law Society counsel’s words, an “unequivocal message” that the profession will maintain public trust.  Even where lawyers process fraudulent transactions created by others, they are culpable for doing so where they proceed in spite of the known risks or where they close their eyes to the warning signs.  Ignoring conflicts, failing to disclose material information to lenders and failing to act competently are common breaches that take place in mortgage fraud cases. Where there are multiple breaches of the Rules of Professional Conduct arising in multiple transactions, any penalty must reflect the gravity of the misconduct and speak to the profession as a whole.

Although cases of knowing assistance in mortgage fraud generally lead to a penalty of revocation, exceptional circumstances can support lesser penalties.  One such case involved a lawyer who had not practiced since 2008 and was in ill health.  He had contributed greatly to his community during his career and would not be returning to practice hence the financial  penalty costs would be less than usual. 

Counsel for Mr. Dale conceded that the good character letters filed on behalf of Mr. Dale did not meet the threshold to establish “exceptional circumstances that would merit a lesser penalty. The panel agreed that although these are positive letters of good character, they do not include compelling evidence of a psychiatric or psychological nature that establishes why this occurred, why it is unlikely to occur again, and to explain how it was out of character for Mr. Dale.

The evidence of Mr. Dale’s financial situation may explain why he was prepared to take on questionable transactions. He testified that he became known for taking on any transaction, even on short notice.  He had an economic incentive to practice in this way. Although by the time of the hearing, Mr. Dale had managed his way out of unsecured debt and was on a stronger financial footing, we were unable to conclude that this mitigates the available penalty from revocation to something lesser.  Mr. Dale had a number of options available to him and could have worked to reduce his debt without compromising his lender clients on the fraudulent transactions. He had the benefit of education in business, engineering and law, and was an experienced real estate practitioner in an urban setting which offered him opportunities, colleagues and mentorship if he had chosen to reach out for help or advice. In short, financial difficulties do not mitigate participation in fraudulent activity.

The Law Society presented a Bill of Costs which totaled $79,458.75, seeking approximately 80-90% of the total amount based on Mr. Dale’s signing an Agreed Statement of Facts. Counsel for the Law Society factored a change in counsel into the total, by reducing the costs sought by 14 hours of time for potential duplication of effort.  In addition, the time spent by investigation counsel on the file was reduced by 50% because none of the time charged by counsel had been docketed.

The panel had taken into account the fact that revocation will have an impact upon Mr. Dale’s capacity to pay costs.  Finally, the panel had deducted an amount to take into account the fact that new counsel for the Law Society was brought into this case at a stage where additional time may have been expended due to the last minute nature of the change. This was a circumstance beyond Mr. Dale’s control. The panel order subsequently ordered Mr. Dale to pay costs to the Law Society in the amount of $40,000 on or before October 10, 2015.  Commencing immediately after that date, interest would accrue on any unpaid part of those costs at a rate of 3% per annum.   

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