Managing custodianships in-house — for efficiency and cost-reduction

filesTo realize greater regulatory efficiency, the Benchers have approved a plan to restructure the Law Society’s custodianship program, beginning in 2006. The key change is that the Law Society will have staff lawyers seek court appointment as custodians of a lawyer’s practice when that is required, rather than retain outside lawyers.

Section 50(1) of the Legal Profession Act permits the Law Society to apply for a BC Supreme Court order appointing a practising lawyer as the custodian of another lawyer’s practice. The custodian takes control of all or part of the property of the practice and arranges for the temporary conduct of the practice or its winding up, depending on the terms of the order. The court makes an order appointing a custodian of a lawyer’s practice if sufficient grounds exist — such as following a lawyer’s disbarment or suspension, death, incapacity by reason of illness or the neglect or abandonment of a practice.

When a less formal option appears workable, a lawyer in need of assistance may arrange for another lawyer to serve as a locum.

This is not always possible. About two-thirds of custodianships arise from discipline matters, and these situations generally call for formal custodianships. Discipline-related custodianships can be complex and costly. This is particularly true if the Law Society is also conducting a forensic audit and investigation of the lawyer’s practice at the time.

At present, the Law Society asks the court to appoint outside lawyers to serve as custodians. Lawyers who accept an appointment deliver a valuable service to clients of the firm, to the Law Society and to the profession as a whole.

The Society has faced an increase in the number of custodianships in recent years. Over the past 10 years, there were 86 custodianship appointments, an average of 7.8 per year. In the past five years, the average increased to 9.6 appointments per year. Between 2000 and 2004 the average cost of discipline-related custodianships rose sharply, compared to the previous five-year period, as did associated audit and investigation costs.

To reduce these costs and stabilize them in future, to better manage custodianship procedures and to provide linkage internally between the custodianship, audit and investigation functions, the Society will begin in-house delivery of the program later this year.