The B.C. Court of Appeal upheld the Law Society of B.C.’s finding that the lawyer had committed professional misconduct by failing to disclose a conflict of interest to a client, and held it was within the review panel’s discretion to impose a five month suspension on the lawyer.

Administrative law – Decisions reviewed – Law Societies – Permits and licences – Judicial review – Appeals – Standard of review – Reasonableness – Barristers and solicitors – Conflict of interest – Professional misconduct – Suspension

Strother v. Law Society of British Columbia, [2018] BCJ No 6982, 2018 BCCA 481, British Columbia Court of Appeal, December 27, 2018, JED Savage, GJ Fitch and B Fisher JJA

A tax lawyer, Robert Strother, acted for a client, Monarch Entertainment Corporation (“Monarch”), a company in the business of marketing tax-shelter investments that provide production services to the film industry. After the Income Tax Act, RSC 1985 c.1 (5th Supp.) (the “ITA”) was amended to prevent such tax-shelter investments, Monarch decided to leave the business and commenced winding down its affairs. A former employee of Monarch devised a possible way around the ITA amendments, sought the advice of Mr. Strother, and eventually went into business with Mr. Strother. Mr. Strother did not disclose his interest in the business to Monarch or inform Monarch that the ITA amendments could be circumvented, after giving Monarch advice to the contrary a year earlier.

Mr. Strother’s actions were the subject of lengthy civil litigation. The claim against him was initially dismissed by the trial judge, but the matter was appealed to the B.C. Court of Appeal and then the Supreme Court of Canada, culminating in a five to four decision where the majority held that Mr. Strother had breached his fiduciary duty to Monarch.

Following the civil litigation, the Law Society of British Columbia commenced disciplinary proceedings against Mr. Strother. The Law Society hearing panel held that Mr. Strother committed three breaches of fiduciary duty that constituted professional misconduct and imposed a five month suspension. A review panel of the Law Society upheld two of the hearing panel’s three findings of professional misconduct, namely that Mr. Strother failed to disclose to Monarch that he had a financial interest in a potential competitor and failed to advise Monarch that his previous opinion that there was no way around the ITA amendments should be reconsidered. These acts were held to be a breach of his fiduciary duty to Monarch that amounted to professional misconduct.

On appeal, Mr. Strother argued that the review panel erred in two ways. First, he argued that the breaches of fiduciary duty were not sufficiently marked to warrant a finding of professional misconduct. Second, he argued that the imposition of a five month suspension was an inappropriate punishment. He argued that these decisions could not be correct because the trial judge and the dissenting opinion of the Supreme Court of Canada in the civil litigation matter did not say that he breached his fiduciary duty.

The B.C. Court of Appeal dismissed the appeal, holding that it was open to the hearing panel to conclude that the lawyer’s conduct was motivated by his personal financial interest, rather than an honest but mistaken belief in the scope of his retainer. In light of this finding, it was reasonable for the review panel to find that the lawyer’s conduct constituted a marked departure from the standard expected of lawyers and to impose a five month suspension. The B.C. Court of Appeal also held that the dissenting opinion of the Supreme Court of Canada was not that Mr. Strother had not breached his fiduciary duty; rather, the dissenting view was that the trial judge’s opinion should not be disturbed. The Court of Appeal held that, nonetheless, the dissenting opinion in the civil litigation matter and the conduct of other lawyers at the lawyer’s law firm do not inform the reasonableness of the review panel’s decision.

This case was digested by JoAnne G. Barnum, and first published in the LexisNexis® Harper Grey Administrative Law Netletter and the Harper Grey Administrative Law Newsletter.  If you would like to discuss this case further, please contact JoAnne G. Barnum at jbarnum@harpergrey.com.

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