Complaints, Lawyer Discipline and Public Hearings

Summary of a decision on facts and determination

Peter Darren Steven Hart

Called to the bar: May 20, 1994

Hearing date: July 29 to30, 2020

Panel: Lindsay R. LeBlanc, chair, Thelma Siglos and Thomas L. Spraggs

Decision issued: October 28, 2020 (2020 LSBC 51)

Counsel: Alison Kirby for the Law Society; J.M. Peter Firestone for Peter Darren Steven Hart

Facts

In 2013, while acting for clients in an estate planning matter, Peter Darren Steven Hart improperly withdrew $4,000 by way of a trust cheque payable to a lending company owned and control by Hart, when neither Hart nor the lending company were entitled to the funds. Hart admitted there was no trust instrument appointing him as trustee; he did not obtain authorization to make investments on behalf of his clients, beyond holding the funds in a separate interest-bearing trust account; he did not inform his clients about the loan to the lending company; he did not inform his clients about his interest in the lending company; and he did not provide his clients with an accounting regarding the funds.

In four other estate matters from 2012 to 2014, Hart caused his lending company to borrow or receive totals of $200,000, $60,000, $265,000 and $6,000 from various clients and then loaned those funds to his law firm. He provided legal services to the clients when he or his firm had a financial interest in the subject matter of the legal services by preparing promissory notes and assignments in favour of the clients, as security for the loans made by the clients to the lending company.

In three of those estate matters, Hart acted in a conflict of interest when he failed to honour the promissory notes and assignments by failing, upon receipt, to apply the settlement proceeds or monies paid on law firm files to the debt owed to his clients or to assign replacement security.

In all cases, the funds transferred were secured by promissory notes with the security being fees on the contingency files of Hart’ s law firm. Interest was paid at a rate of 15 per cent with 10 per cent going back to the client files and five per cent going to Hart’ s company.

This series of transactions spanned a number of years, was complex and required Hart to set up the system to facilitate the transfers. The efforts were deliberate. Hart did not advise his clients or the estate beneficiaries of the loans, nor did he seek independent advice regarding an assessment of the risk of the loans. The loans were done out of complete self-interest.

Further, Hart failed to notify the Executive Director in writing of the circumstances of two unsatisfied monetary judgments against him and his proposal for satisfying the judgments, contrary to the Law Society Rules.

Determination

The panel determined that Hart’ s conduct in improperly withdrawing $4,000 in trust funds amounted to misappropriation. Hart agreed that it was a mistake to withdraw the funds from trust and that he acted in a conflict of interest, but he denied that it was a deliberate act to transfer the funds. However, the panel found that Hart withdrew the trust funds and used them not only to fund his business operations but also to personally profit, without informing the clients or obtaining their consent. At no time did he consider the best interests of his clients, making it a serious misuse of trust funds.

The panel also determined that Hart committed professional misconduct in relation to 10 allegations. Hart admitted that he acted in a conflict of interest when he failed to see the conflict in the loan process. The evidence showed that Hart’ s law firm was borrowing from its clients, and the fact that a lending company was in the middle of the transaction did not make an otherwise impermissible act permissible. Rather, it demonstrated an attempt to evade the rules and constituted a breach of the fiduciary duty owed to Hart’ s clients.

The panel further determined that, by failing to report unsatisfied judgments to the Executive Director, Hart committed a breach of the Law Society Rules.  

2020 LSBC 51 Decision on Facts and Determination