Ontario lawyer loses licence to practise after misappropriating about $1.8M from three estates

LSO tribunal says lawyer also acted as though wills he drafted didn't exist, misled beneficiaries

Ontario lawyer loses licence to practise after misappropriating about $1.8M from three estates

An Ontario estate lawyer’s licence to practise has been revoked by the Law Society Tribunal after he misappropriated a total of about $1.8 million from three estates, misled beneficiaries and, in two cases, acted as though wills did not exist despite drafting them himself.

After a hearing on January 17, 2022, the tribunal in Law Society of Ontario v. Stroud revoked the lawyer’s licence the same day for professional misconduct and conduct unbecoming a licensee. He had been suspended on an interlocutory basis in June 2017 and was prohibited from acting as an estate trustee based on some of the allegations brought to the January hearing.

“We were satisfied, based on an accepted request to admit, that the lawyer engaged in significant misappropriation from several estates while acting as a solicitor and trustee,” the tribunal wrote in reasons released on August 4.

In addition to misappropriating funds from the three estates, the tribunal said that evidence backs up allegations of swearing false affidavits, borrowing from clients who were not financial institutions, misleading the court and clients, and providing false information to the LSO.

The lawyer, Murray Stroud, was called to the bar in 1975 and had a practice in Pickering, east of Toronto, where he served as a legal adviser and trustee on several estates.

The first misappropriation case concerned the estate of AB, who was Stroud’s friend and provided the lawyer with at least $500,000 over a 10-year period for a horse farm in Florida, the tribunal’s ruling states.

Stroud had drafted a will for AB in 2010, and, after the client’s death in January 2013, he became the estate solicitor. But he proceeded as though there was no will and filed an application for a certificate of appointment as an estate trustee without a will on February 25, 2013.

An affidavit sworn by Stroud stated, “I have made a careful search and inquiry for a will or other testamentary document of the deceased person, but none has been found. I believe that the person did not leave a will or other testamentary document.”

With the application, the lawyer was appointed the estate trustee. Since he acted as though there was no will, Stroud “chose to proceed as though AB’s wife was the sole beneficiary of the estate” when in fact she hadn’t been named a beneficiary in the will.

The tribunal said that between February 2013 and February 2017, the lawyer misappropriated about $1.3 million from the estate. He also failed to notify the named beneficiaries of AB’s will of their status for four years, misled AB’s spouse by presenting false statements regarding the estate, and delayed making distributions and finalizing the estate for an improper purpose.

In the second case, Stroud was the solicitor and trustee for the estate of CD, who was one of his first clients. The lawyer administered the estate, but between November 2012 and August 2013, he made 11 withdrawals totalling more than $366,000.

“The lawyer applied these estate funds toward expenses at (his horse farm in Florida), personal debts owed to another client, and his overdrawn general bank account,” the tribunal’s decision states. “The lawyer did not seek permission from the beneficiaries prior to withdrawing the funds for his own use.”

He also misled the beneficiaries by presenting false statements and delayed making distributions and finalizing the estate for an improper purpose.

The last case involved the EF estates, belonging to a couple whom Stroud had known for about 25 years. Both husband and wife died in January 2016, and he was the solicitor for both estates. Despite obtaining the husband’s 1975 will, Stroud acted as though there was no will and applied for a certificate of appointment as estate trustee without a will on May 27, 2017.

Between February 2016 and December 2016, the lawyer misappropriated about $160,000 from the estates of EF, failed to provide any statements regarding receipts and expenditures to the beneficiaries, and delayed making full distributions for an improper purpose.

The tribunal wrote that Stroud’s actions on the EF file “came to the attention of the beneficiaries when one son received a call from the lawyer around May 2017, after the law society became involved. During that phone call, the lawyer told the son that he had borrowed money from the estate and that he would repay it. The lawyer also told the son that the law society was now involved and that if they contacted him, he should say that he was aware the lawyer had borrowed funds from the estate. The son stated that he would not lie for the lawyer.”

As well as the misappropriation cases, the tribunal noted that between 2012 and 2016, Stroud acted in conflicts of interest by borrowing money from four clients who weren’t regulated lenders and misled the law society by declaring on his annual report for each year that he was not indebted to any clients, when in fact he was.

At the hearing, Stroud’s lawyer, John Dent, told the tribunal that his client didn’t agree with all the allegations in the LSO’s request to admit and chose not to respond, but he understood that there was sufficient evidence and he wanted to bring the matter to an end.

The tribunal noted that Dent also said Stroud “deeply regretted withdrawing funds from these three estates. Mr. Dent asserted that his client never intended to withdraw any funds from the estates without paying them back in full, with interest.”

Stroud had “longstanding relations with each of the deceased, and Mr. Dent stated in his submission that Mr. Stroud would never intentionally do anything to put the estates at risk.”

Dent also said his client had reached settlements with all three estates, although the payment to one had been delayed due to financial circumstances.

The tribunal referred to Law Society of Ontario v. Wilkins, 2021 OLSTA 15, a decision on misappropriation from a lawyer’s trust that its appeal division recently handed down:

“Trust and integrity are central to this responsibility. It is no exaggeration to say that it is fundamentally important that lawyers act honestly. Important aspects of the work of the legal profession, including the work described above, depend on it. … For this reason, professional misconduct involving proven dishonesty typically warrants revocation.”

The tribunal also referred to the Ontario Court of Appeal ruling in Law Society of Upper Canada v. Abbott, 2017 ONCA 525: “Accordingly, we define misappropriation as being the knowing unauthorized use of client property by a lawyer or paralegal for their own purposes, on the basis that the knowledge may be actual knowledge, willful blindness or recklessness.”

John Dent, Stroud’s counsel, and Bernadette Saad, who represented the law society, made a joint submission that the lawyer pay costs to the law society of $20,000. Neither lawyer was available for comment.

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