Canadian Lawyer

the firm and its partners are jointlyand-severally liable ��� and it is an absolute liability. But when Halifax lawyer Srinivasen Pillay bilked $1.3 million from the trust account of the law firm McGinty McCleave between March 2000 and February 2005, the Nova Scotia legal community demonstrated an exceptional display of generosity. With the approval of its members, the law society imposed a one-time levee of $750 on each lawyer in the province to cover the bill. ���In that case, although at law the partners might have been liable they would not have provided compensation to the victims because it would have bankrupted them, so we paid all those claims,��� says Pink. Pillay, who was sentenced to four years in prison, was also ordered to pay $1.3 million in restitution to the Nova Scotia Barristers��� Society. In Ontario, the legal landscape is slightly different. Minimum level so-called innocent-party coverage is required for all lawyers practising in association, partnership (including general, multi-disciplinary, and limited liability partnerships), or a law corporation with more than one lawyer. The coverage is designed to protect against the dishonest, fraudulent, criminal, or malicious acts or omissions of present or former partners, associates, employed lawyers, and firm employees. ���But if an employee stole money out of a general account ��� as opposed to a trust account ��� and stole the firm���s money, not the client���s money, in that case no client was aggrieved, no professional services were involved, so certainly there wouldn���t be coverage under the LawPro policy,��� notes Pinnington. At the other end of the spectrum stands B.C. Its trust protection coverage insures all members of the Law Society of B.C. for claims arising from the theft of money or property relating to the member���s practice of law. Trust protection coverage offers an annual aggregate limit, profession-wide, of $17.5 million; each claimant may recover up to $300,000 per claim. ���Where a lawyer does steal, our insurance benefits partners in the firm as well as the victim,��� explains Forbes. ���When we pay the claim, we don���t subrogate the innocent Other law societies such as Manitoba and Nova Scotia are paying close attention. ���We probably need to move into the 21st century in terms of our controls,��� says Finebilt. ���Given what the risk is, people are recognizing over time that they want to invest more because ultimately you pay for the tools or you pay for the loss ��� and it is way cheaper to pay us do ���The circumstances here are horren nts is to for a law firm. The last thing a law firm wa own be sued. It is not imaginable that one of your t nature. partners would put you into a situation of tha They don���t deserve it.��� Neil Stein, Stein & Stein Inc. partners in the firm. We protect all of them through compensation so the members are fully protected.��� But at least one law society is aggressively tackling the issue of misappropriation of funds in a way no other has so far dared to. In a bid to address rising threats to the security of trust funds, in 2011 the Law Society of Alberta introduced a new regulatory structure that turns on its head the widely-held premise that lawyers are entitled to have a trust account. Instead under the new Safety of Trust Property Program, a law firm seeking to open a trust account must get approval from the law society. The firm must designate a specific lawyer who will be responsible for meeting the requirements set out by the regulator, and who will be held accountable for non-compliance. It has broad audit authority and, through an automated audit program, the LSA is now capable of auditing 100 per cent of accounting transactions of any law firm using approved law firm accounting. ���We got scared in Alberta,��� acknowledges Raby, who served as chairman of the Trust Safety Program committee. ���The numbers had been quite small until 2004 and it jumped dramatically to $1.4 million and then the next couple of years were $864,000 and $754,000. That���s when we had a look at our trust safety program.��� for the tools.��� Pink, however, says before proceeding law societies must grapple over the appropriate amount of regulation. ���Trust oversight is one of those areas where it is very risky but also very easy to over regulate,��� points out Pink. Nicolas Plourde does not seem to have such reservations. The batonnier of the Barreau du Qu��bec believes it should be examining ways to bolster regulatory oversight over trust accounts. One model he finds enticing is the French-based Caisses des R��glements P��cuniaires des Avocats, better known under its acronym CARPA. In France, lawyers are not allowed to hold clients��� money, but must pay it into the bar association���s account, under the control of the president of the bar. There are over 100 CARPAs in France, and each is under the political and ethical control of the local bar. CARPA is not itself a bank, but works with banks. ���The increase in number of claims and value of the claims from the Quebec professional liability fund, one of the causes being misappropriation of funds, is worrisome ��� and that is why member premiums will be doubling from $600 to $1,286 this year,��� says Plourde. ���It has led us to question how we can do more to avoid such a situation���. Left unsaid is that fraudulent schemes allegedly perpetrated by lawyers or former lawyers such as Perras would be snared long before they cause real damage. www.CANADIAN L a w ye r m a g . c o m March 2013 37

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