Luk v. Law Society of Manitoba, 2011 MBCA 78

Citation: Luk v. Law Society of Manitoba, 2011 MBCA 78 Date: 20110923 Docket: AI 11-30-07509 IN THE COURT OF APPEAL OF MANITOBA Coram: Mr. Justice Martin H. Freedman Mr. Justice Richard J. Chartier Mr. Justice Marc M. Monnin BETWEEN : EVA YEE-WAH LUK ) S. Green, Q.C. and ) C. J. Phelan, Q.C. Appellant ) for the Appellant ) ) R. H. Kravetsky - and - ) for the Respondent ) ) Appeal heard: THE LAW SOCIETY OF MANITOBA ) September 12, 2011 ) Respondent ) Judgment delivered: ) September 23, 2011 PER CURIAM 1 The appellant was charged with six counts of professional misconduct.

She was found guilty on two of those counts by a panel of the Discipline Committee of the Law Society (the Panel). One count was for failing to serve her clients in a conscientious, diligent and efficient manner, and the other count was for failing to give notice of a potential claim to the Law Society’s Director of Insurance as soon as practicable after becoming aware of the facts giving rise to a potential claim.

She was ordered to pay a $1,500 global fine and to contribute $2,000 in costs. 2 She now appeals the conviction and penalty on the second count of failing to notify the insurer. 3 The mistake giving rise to the potential claim involved the appellant registering certain land in the name of one company owned by clients (with a third party), when it should have been registered in the name of a different company owned by the same clients alone. This mistake was brought to her attention by her clients in February 2007.

She did nothing about it, and then in April, her clients came to see her, and she said she would fix the problem.

She prepared a transfer of land, but did not register it until after she received notice, in January 2008, that the clients had complained to the Law Society. 4 Division 2 of the Rules of the Law Society of Manitoba provides that a member must notify the Law Society of any potential professional liability claim as soon as practicable after becoming aware of the relevant acts or omissions (Rule 5-34), and that the failure to comply with any of the rules in that division “without reasonable excuse may constitute professional misconduct” (Rule 5- 36). 5 The Panel reviewed the facts relating to both counts, and considered the appellant’s testimony and submission.

It noted the appellant’s reasons for not notifying the Law Society of the potential claim. She did not give notice because, in her view, the amount of the potential claim was less than her deductible and she felt she would be able to correct the mistake. As to the delay, she said that she did not have the funds necessary to cover the filing fees of the required transfer of land when the error was brought to her attention. 6 The Panel found the appellant to have breached Rule 5-34, and, in our view, there can be no argument against this finding.

The finding that she breached the rule was explained and was clearly a reasonable finding. The issue, rather, is focussed on Rule 5-36, and whether the appellant had a reasonable excuse for not notifying the Law Society, and if not, whether the Panel reasonably concluded that her conduct constituted professional misconduct. 7 In its reasons dealing with both counts, the Panel said:

The Member says that it never crossed her mind to give notice of the potential claim to the Chief Executive Officer. Even if it did crossher mind, she states that the amount of the claim was less than the deductible so there was no point in giving notice of the potential claimto the Chief Executive Officer. As it turns out, it appears that the total value of the claim was only the amount of the Land TransferTax. This is lucky for the Member, because there was always the possibility of damages being far in excess of the deductible.

For instance, what would have happened had the clients sold their shares in the operating company to third parties on the mistakenassumption that it was the holding company and not the operating company that owned the real estate. Or, what would have happened ifin the meantime a judgment was obtained against the operating company and registered against the title. It really does not matter what the potential damages might have been. What matters, is that there is a Rule in place and all members mustcomply with that Rule.

An individual member does not have the right to pick and choose which Rule he or she is going to follow and,certainly just because a Rule is a “technicality” does not warrant or justify the failure of the Member to comply with that Rule. This [P]anel has come to the conclusion that the Member has not provided a reasonable excuse for her failure to comply with the Rule.

The Panel finds that the Member, by failing to report to her clients on the purchase of the real property and to report to the mortgagecompany on the mortgage in a timely manner; and by failing to give notice to the Director of Insurance of the Law Society as soon aspracticable after becoming aware of any acts or omissions that might give rise to a claim; by failing to remedy that error on a timelybasis; and, by failing to discharge the duty that she owed to her clients in a conscientious, diligent and efficient manner committedprofessional misconduct. [emphasis added] 8 The appellant argues that the Panel erred when it found that she had not provided a reasonable excuse for not notifying theinsurer.

Moreover, the appellant argues that the Panel erred in finding that her conduct in failing to notify amounted to professionalmisconduct since that conduct was not disgraceful or dishonourable conduct, and such conduct was necessary to support a finding ofprofessional misconduct. She cites Dunne v. Law Society of Newfoundland (2000), (NL SC), 191 Nfld. & P.E.I.R.129 (S.C. (T.D.)), as her authority.

The Law Society responds that the Panel’s decisions to convict and to impose a fine are reasonable,and that a lawyer may be found to have committed professional misconduct for breach of the rules, even in the absence of disgraceful ordishonourable conduct. 9 A long line of cases has established that the standard by which we are to review the Panel’s misconduct findings and itschoice of penalty is reasonableness. See, e.g., Law Society of New Brunswick v. Ryan, 2003 SCC20http://www.canlii.org/en/ca/scc/doc/2003/2003scc20/2003scc20.html, [2003] 1 S.C.R. 247; Histed v.

Law Society of Manitoba, 2006MBCA 89http://www.canlii.org/en/mb/mbca/doc/2006/2006mbca89/2006mbca89.html, 208 Man.R. (2d) 44; Histed v. Law Society ofManitoba, 2007 MBCA 150, 225 Man.R. (2d) 74; Walsh v. Law Society of Manitoba, 2006 MBCA 154, 212 Man.R. (2d) 5; and Ritchotv. Law Society of Manitoba, 2010 MBCA 13; 251 Man.R. (2d) 121; see also Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R.190. 10 It is clear from the Panel’s reasons that it did consider the excuses put forward by the appellant for failing to notify theinsurer once she knew that there was an error.

The Panel rejected those excuses as not being reasonable. Its decision to do so wasclearly explained and, in our opinion, was a reasonable decision. 11 Rule 5-36 does not state, nor does it mean, that failure to comply without reasonable excuse is automatically professionalmisconduct. Rather, it states that it “may” constitute professional misconduct.

A panel of the Law Society must, therefore, consider therelevant circumstances before deciding that a failure to comply will constitute professional misconduct. 12 After rejecting the excuses advanced by the appellant, the Panel concluded that, in this case, the appellant’s failure to complywith Rule 5-34 constituted professional misconduct. It advanced reasons for its conclusion, although those reasons are intertwined withits reasons for finding her guilty on the first count of failing to serve her clients conscientiously (which is not under appeal).

The fourarticulated reasons (see para. 7 above) are that the appellant failed: (1) to report to her client and to the mortgage company in a timelymanner; (2) to give notice to the Law Society as soon as practicable; (3) to remedy her mistake on a timely basis; and (4) to discharge herduty to her client in a conscientious, diligent and efficient manner. 13 The reasons numbered above as (1), (3) and (4) all support the Panel’s conclusion that the appellant’s failure to notify theLaw Society in a timely manner constitutes professional misconduct.

Reason number (2) is no more than a reiteration of the charge itselfand cannot support the conclusion of guilt on that charge, let alone the finding of professional misconduct.

But the other three reasonsare amply supported in the evidence and are more than sufficient to meet the required standard of reasonableness. 14 Recognizing that the same evidence can support more than one charge, it nevertheless would have been preferable, in ourrespectful view, for the Panel to have dealt with its conclusions on guilt and professional misconduct separately charge-by-charge, and tohave indicated which evidence supported its conclusions on which charge.

Notwithstanding, the Panel’s reasons are sufficiently clear,and in our opinion meet the Dunsmuir standards as to both reasoning process and outcome. The conviction decision of the Panel issupported by a “line of analysis within the given reasons that could reasonably lead the tribunal from the evidence before it to theconclusion at which it arrived” (Ryan at para. 55). The conviction falls within “a range of possible, acceptable outcomes which [are]

defensible in respect of the facts and law” (Dunsmuir at para. 47). The same can be said about the penalty imposed by the Panel. 15 As indicated, the appellant argues that a finding of professional misconduct necessarily requires a finding that the impugnedconduct was dishonourable or disgraceful (and that her conduct did not rise to that level, and the Panel did not say that it had). We do notagree. That may have been the case in the past, but it is no longer. Dunne, relied on by the appellant, makes that clear.

Rowe J. (as hethen was) explained (at para. 41): The traditional view, that an element of dishonour or disgrace is necessary was stated by Turgeon, J.A., Solicitor, In Re A, (SK CA), [1935] 3 W.W.R. 428 (Sask. C.A.), at 428-9: However reprehensible the solicitor’s conduct may have been, it amounts, after all, to negligence, and nothing else, and that is somethingfor a court of law to deal with upon proper proceedings being taken. It does not come within the accepted meaning of “professionalmisconduct or conduct unbecoming a solicitor” as used in the Legal Profession Act, R.S.S. 1930, c. 166.

The Benchers had therefore noauthority to make the order appealed from. As well, Martin, J.A., wrote: It is not alleged that the solicitor has made default in the payment of moneys received by him in his capacity as a solicitor nor that he hascommitted a breach of any of the provisions of the Act. (p. 431) [T]o constitute misconduct there must be something criminal or fraudulent. Conduct amounting even to gross negligence is notmisconduct.

It must appear that the conduct is dishonourable to the solicitor as a man and dishonourable to his profession. (p. 432) In that case, the solicitor had been disciplined by the Law Society for failing to appear for trial and failing to advise his client of the dateand place of the trial, resulting in dismissal of his client’s claim and an award of costs against the client. 16 Rowe J. referred to the argument of the Law Society of Newfoundland, an argument similar to that advanced here by the LawSociety (at paras. 38-40): Counsel for the Law Society responded as follows: The [Law Society] submits that a solicitor’s actions need not be disgraceful or dishonourable to constitute professional misconduct.

It issubmitted that ethical considerations are generally a feature of substantive criminal charges which apply to the population as a whole. Issues of conflict of interest are purely professional issues and of particular interest to practicing lawyers. Members of the general publicdo not stand before criminal courts charged with breaching conflict of interest guidelines. Rather it is membership in the legal professionthat enables professional disciplinary proceedings to be commenced against individual lawyers for breaching such guidelines.

As authority, counsel for the Law Society relies on the following passages from McKenzie, Lawyers & Ethics: Traditionally, profession misconduct has been defined as “conduct which would reasonably be regarded as disgraceful or dishonourableby solicitors of good repute and competency”. Moral turpitude was an essential component. Mere negligence was not sufficient.

Today in jurisdictions in which the Law Society’s governing statute either defines professional misconduct or authorizes the professionto pass specific rules of professional conduct and the profession does so, this definition must be qualified in two respects. First, it is nowclear that practitioners can be found guilty of professional misconduct for violating regulatory requirements and rules of professionalconduct that impose specific duties, whether or not such violations could be said to be disgraceful or dishonourable.

Lawyers arefrequently reprimanded, for example, for failing to respond promptly to communications from the law society and for failing to filerequired forms and annual reports of public accountants. (p. 26 - 22) ….

Not every breach of the rules of professional conduct is professional misconduct. Conversely, not every act of professional misconductis specifically prohibited by the rules. Fan v. Law Society (British Columbia) (1977), (BC CA), 77 D.L.R. (3d) 97[at 102] (p. 26 - 30). Thus, Ms. Dunne’s counsel argues that Ms. Dunne’s conduct was neither dishonourable nor disgraceful and, therefore, did not constituteprofessional misconduct.

Counsel for the Law Society argues that moral turpitude is not necessary for professional misconduct, butrather, Benchers may find professional misconduct based on failure to adhere to Law Society regulatory requirements. 17 Rowe J. said (at para. 46): Thus, the cases referred to by counsel for Ms.

Dunne and by counsel for the Law Society make clear that traditionally disgrace ordishonour is needed for a finding of professional misconduct, but that it is open to Benchers to find that actions without these elementsalso can constitute professional misconduct. 18 In Dunne, Rowe J. concluded that the Law Society of Newfoundland had failed to set out a proper legal test and to apply thattest to the facts, and he remitted the matter back for rehearing. 19 Dunne has been adopted and applied by appellate courts. See, e.g., Harris v.

Nova Scotia Barristers’ Society et al., 2004NSCA 143, 228 N.S.R. (2d) 153 (at para. 158): Since 1889 the range of what can constitute “professional misconduct” has broadened beyond fraudulent, criminal and dishonourable. This broadening is referred to in Dunne v. Law Society of Newfoundland …. 20 Here, the Law Society referred to a number of authorities to the effect that the Law Society may find professional misconductto have occurred even without dishonourable or disgraceful conduct, in circumstances where rules have been passed authorizing afinding of professional misconduct for breach of the rules.

For example, in Harris, the court said (at paras. 149-50, 152): The last issue is whether the Panel’s decision that Ms. Harris’ actions constitute professional misconduct is unreasonable. Ms. Harrisargues that the Society has not been able to point to another case where breach of the trust account regulations alone, without more suchas defalcation, has been found to be professional misconduct. She argues without such precedent the Panel erred in finding her conductwas professional misconduct. Ms.

Harris’ argument that the Panel cannot find professional misconduct without a precedent that is on all fours with her situation iswithout merit. In any event, while we were not provided with a case where professional misconduct was found on actions similar to those of Ms. Harriswithout more, Ms. Harris provided us with cases where professional misconduct was agreed to or found where the lawyer failed to keepher or his accounts in accordance with the trust account regulations where there was no defalcation or dishonesty, Nova ScotiaBarristers’ Society v.

Tippett-Leary (26 May 1989) (unreported) (Discipline Subcommittee) and Nova Scotia Barristers’ Society v.Elman, [1993] L.S.D.D. No. 175. Failure to comply with the regulations can lead to problems in a busy practice such as thoseencountered in Elman where an audit of the trust account was needed to prove that no client’s funds were taken and those encountered inNova Scotia Barristers’ Society v. Rideout, (1994), 7 The Discipline Digest, p. 2, of unintentionally overdrawing specific trustaccounts. 21 The court also said (at para. 155): It was within the Panel’s competence to determine whether Ms.

Harris’ actions constituted professional misconduct. Subject to ensuringits decision is reasonable, this Court is to defer to the decision of the Panel as to whether Ms. Harris’ actions constitute professionalmisconduct.

22 Gavin MacKenzie, Lawyers & Ethics: Professional Responsibility and Discipline , looseleaf (Toronto: Carswell, 2011) said (see para. 16 above), and we agree, that where the governing statute permits (at p. 26-22): …. … [P]ractitioners can be found guilty of professional misconduct for violating regulatory requirements and rules of professional conduct that impose specific duties, whether or not such violations could be said to be disgraceful or dishonourable. …. 23

Section 65 of The Legal Profession Act , C.C.S.M., c. L107, authorizes the benchers of the Law Society to make rules, inter alia , to prescribe which contraventions of the governing statute or the rules may constitute professional misconduct. The benchers have done that in Rule 5-36, and we agree with the Law Society that lawyers may be found guilty of professional misconduct for failure to notify the Law Society as required under Rule 5-34, even if such violation has no element of dishonourable or disgraceful conduct. 24 In the result, the appeal is dismissed with costs. J.A. J.A. J.A.