Practice Watch: Limited liability partnerships
by Felicia S. Folk, Practice Advisor
The Ministry of Finance has announced that the Partnership Amendment Act will be proclaimed in effect January 17, 2005. This Act amends the Partnership Act to permit the creation of limited liability partnerships: for more on law firms LLPs.
Production orders: new investigative powers
On September 15, 2004, new Criminal Code provisions came into force, creating new investigative powers that may affect solicitor-client privilege. It appears that the Federation of Law Societies, the provincial law societies and the Canadian Bar Association were not consulted prior to these amendments to the Code.
Section 487.012 of the Criminal Code creates a “production order.” This is an order that a judge can make to compel a person who is not under investigation to produce documents or data relevant to the commission of a crime. Failing to comply with a production order is an offence, punishable by a fine not exceeding $250,000 or imprisonment of not more than six months, or both.
A lawyer could be the subject of a “production order” if a client were being investigated for the commission of an offence. In such a case, the lawyer would, pursuant to Chapter 5, Rule 14 of the Professional Conduct Handbook, be required to claim privilege over any documents that are or may be privileged, unless the client consented to their release. If the client could not be found, the lawyer would prudently claim privilege over any documents or data that the lawyer reasonably believed might be privileged. The privilege is that of the client and not the lawyer.
Section 487.012(4) provides that a production order may contain terms and conditions to protect a privileged communication between a lawyer and a client. Also, a person named in a production order may apply for an exemption from the requirement to produce the information referred to in the order. One of the grounds for making such an exemption order is that the documents, data or information would disclose information that is privileged. Notice of intention to apply for such an exemption order must be made within 30 days of the making of the production order.
Section 487.015 places the onus on any lawyer named in a production order to make the exemption application. If a lawyer fails to obtain an exemption, either through inadvertence or negligence, the client’s right to protect privileged communications with a lawyer is lost. This result, however, seems to contradict the judgment of the Supreme Court of Canada in Lavallee, Rackel & Heintz v. Canada (Attorney General)  3 S.C.R. 209.
If you are named in a production order, your first step should be to determine whether the order requires you to produce documents that are subject to solicitor-client privilege. If a client’s privilege may be at risk, you should, subject to your client’s instructions, apply for an exemption from the requirement to produce that information.
If you have questions about production orders, please contact Michael Lucas (firstname.lastname@example.org), Administrator of Policy and Legal Services, at the Law Society.
Law Society of Upper Canada has new rules on whistle-blowing for lawyers
Ontario lawyers must now comply with new “up-the-ladder” reporting rules in the face of corporate wrongdoing. The Law Society of Upper Canada has become the only regulatory body in Canada to date to impose corporate governance rules for lawyers similar to those now in force in the United States.
In March of 2004, Ontario’s Benchers approved amendments to the Rules of Professional Conduct, making “up-the-ladder” reporting obligatory. A lawyer is now required to report corporate wrongdoing “up the ladder,” if necessary, to the highest authority in the organization. The lawyer must resign representation of the client in the matter if the wrongdoing is not stopped (Rules 2.02, 2.03, 2.09 and Commentaries).
In addition, Ontario’s Law Society has added new commentary to its Rules, on the lawyer’s roles as counsel for and director of an organization, and has revised its rules on equity interests in clients (Rules 2.04, 2.06 and Commentaries). Lawyers in BC who practise interjurisdictionally or with interjurisdictional firms should become familiar with the new Ontario rules.
Mortgage to secure legal fees
In a recent BC Supreme Court decision, a mortgage granted to secure the payment of legal fees was held to be of no force and effect if the lawyer witnessed his own client’s signature on the mortgage. The named mortgagee was the lawyer’s law corporation. Section. 42(1) of the Land Title Act provides, in effect, that the named mortgagee on a mortgage cannot be the same person who witnesses the signature of the mortgagor. There was no question that the mortgage in this case would have run afoul of s. 42(1) if the lawyer were not practising through a law corporation.
The question for the court was whether, in signing the mortgage instrument as a witness to the client’s signature, the lawyer did so in his personal capacity since the mortgagee was not the lawyer personally but rather the law corporation of which he was the majority shareholder and sole director. The court decided that the effect of s. 42(1) could not be avoided by refusing to pierce the corporate veil of the law corporation.
While practising law through a law corporation may affect a lawyer’s relationship to persons who are strangers to the solicitor-client relationship, a lawyer cannot hide behind his law corporation in order to defeat the rights his own clients would otherwise enjoy but for the existence of the corporation.
Whose file is it anyway?
A client who has no outstanding accounts with a lawyer is entitled to the contents of his or her file, subject to some exceptions, such as the lawyer’s own notes.
A recent practice direction issued by Chief Justice Brenner on November 22, 2004:
Re: the Identity of the Counsel or Commissioner before whom Affidavits are sworn
Some concern has been expressed with respect to affidavits that have been filed where it is impossible to identify the commissioner before whom the affidavit has been sworn. When a commissioner applies only his or her signature to the jurat, there is no means of clearly identifying the commissioner should a question arise about the circumstances under which the affidavit was sworn. Many commissioners apply a stamp below their signatures which indicates their name and contact information. This practice is encouraged.
Effective immediately, affidavits prepared for filing in Supreme Court must include the name, legibly typed or written, of the commissioner before whom the affidavit was sworn as part of the jurat in addition to the signature.
Real property transactions
I continue to receive calls from lawyers concerned that other lawyers in their own communities, under pressure from financial institutions, are breaching the real estate conflict rules. These lawyers say they are losing clients as a result of declining to breach the rules. The Ethics Committee has invited lawyers to provide the Committee with information about these concerns. The Ethics Committee, in its request for consultation in the May-June Benchers’ Bulletin, indicated that the Law Society will look at whether further amendments would clarify any ambiguity in the rules and will also consider how to educate financial institutions on lawyers’ obligations under the Handbook.
The Ethics Committee does not have a disciplinary function, and in communicating with that Committee, it is not necessary for you to name any lawyer who may be breaching the conflict rules. I urge you to write to the Committee with your concerns by letter to Jack Olsen, Staff Lawyer – Ethics, at the Law Society.