Lawyers practising in small and large firms should never fail to recognize and heed the demands of the firm’s “silent partner,” the Law Society of Upper Canada.
In an effort to guide a law firm away from the perils that may come from its interactions with its silent partner, this article will touch upon a few key interaction points that lawyers have with the law society and provide a modicum of direction on dealing with each matter.
Why do I refer to the law society as the silent partner? The answer does not rest in the notion that it has equity in the firm or sits at the boardroom table to discuss the firm’s strategies, but can be attributed to the fact that it plays a role in the practices of every law firm.
This partner can either adopt a supportive stance in its interactions with the firm, or take on a role that may lead to the firm’s demise or the cessation of a lawyer’s membership.
The first typical form of interaction that a lawyer has each year with its silent partner is the completion and filing of the member’s annual report (MAR). Where a lawyer is an employee/associate of a large law firm or business enterprise, he or she will not find completing this form a daunting task because major components of the form are either not applicable or significant portions of it are reported on behalf of the firm by another lawyer.
It is my view that the greatest challenge associated with completing the annual form will fall on the small firm practitioner because of the necessity to accurately report on substantive information related to areas of practice and, above all, the reporting on the handling of client trust account money and the accounting system.
This reporting is not always an onerous task. It should never be taken lightly, however, because once the information is in the law society’s possession, it is reviewed in detail to identify possible regulatory concerns.
The review may give rise to a written query seeking additional explanatory information, or it may spawn a spot audit because of indications that trust money is not being handled in a proper manner or that the accounting records are inconsistent with the standards required by the law society.
A lawyer may take the view that there is little significance to filing the form because there was no intent to deceive clients or misappropriate money in relation to the problems reported to the law society on the MAR.
Be careful taking such a view. A lawyer must be mindful that he or she is responsible for the financial records in the law firm and that the problems with trust money and record-keeping will fall on the practitioner’s shoulders.
Many lawyers have found that the information recorded in the MAR was a first step on the well-travelled route to a discipline hearing for not properly maintaining records, failure to maintain sufficient trust account balances, the misapplication of one client’s trust money to the benefit of another client, or misappropriation, to reference just a few possible discipline charges.
Beyond the possibility that the law firm may face a spot audit because of information reported on the MAR, there is also a possibility that it can be selected for a spot audit through the normal selection process, especially if it is a relatively new practice or it has a history of non-compliance.
The spot audit is a form of regulatory interaction that lawyers often initially treat rather passively, paying little regard to potential latent issues in the firm’s files and accounting until the auditor raises a plethora of concerns.
It has always perplexed me why, at this juncture, a lawyer will continue to interact with the law society in response to concerns raised in the audit without the assistance or advice of a professional experienced with law society regulatory matters.
My advice to a law firm is to always take steps prior to the start of the spot audit to ensure that the typical law society “hot button” issues are isolated and addressed before the auditor walks in the door. By taking remedial steps before the audit, you may find yourself with a much more favourable outcome from the spot audit.
In addition, when the auditor raises concerns about several issues, do not fail to recognize that the responding information being provided may be used by the auditor to support a referral to the law society’s investigation department.
Dealing with the law society over a client complaint is also challenging for the lawyer to deal with. Too often, the reaction is to respond to the law society with critical editorial comments about the client and the relationship without giving careful consideration to addressing the substantive issues, providing documentation to support the response and again, doing so without first seeking professional advice about how the response may be interpreted by the law society.
A lawyer should be mindful that complaints are a key basis for the law society to commence an investigation. Any form of complaint inquiry places an obligation on the lawyer to co-operate by producing documentation and explanations to assist with the review. The law society may also expand its investigation into any area it identifies as potentially indicative of professional misconduct.
Travelling the dark halls of a LSUC investigation can have many perils, including the possibility that the law society may apply to the court for an order to freeze bank accounts or to obtain a trusteeship order to take over the entire practice.
Sadly, in my experience, I have been retained by lawyers with poor record keeping practices and trust money problems after the law society truck has left with the computers, records, and client files. Once everything has been removed and taken to Osgoode Hall, there can be little expectation that the law firm can recommence practising in the immediate future.
My advice to lawyers facing an investigation is to retain the advice of a professional experienced with law society matters at the time of the LSUC’s first contact, not when it has made its decision to seek authorization to prosecute or has taken other restrictive measures.
I hope this brief article has resulted in a heightened appreciation of the pitfalls of practising law without regard to the firm’s silent partner. The practice of law is a highly regulated professional business that demands constant attention to its regulatory components because of their potential to short-circuit a lawyer’s career, tarnish his or her reputation, and ultimately adversely affect the future well-being of his or her family.
Having spent 12 years as a manager at the law society, I can confidently say that it can be a helpful organization, but I also know that where the interests of the public and the lawyer compete, the law society’s obligation to the public interest cannot be understated. Disciplinary outcomes can be devastating. Be mindful of your silent partner.
James N. Yakimovich is a former manager of the Law Society of Upper Canada’s investigations department. He is currently a Toronto based practitioner who provides regulatory related services to law firms and self-regulatory bodies. His web site is www.lawyeraudithelp.com.