February 18, 2013

Reporting judgments to the Law Society

February 18, 2013

Law Society Rule 3-43.1 provides a non-exhaustive list of instances in which a lawyer will be considered to have failed to meet a minimum standard of financial responsibility. One instance is when a lawyer against whom a monetary judgment is entered has not satisfied it within seven days after entry.

In this situation, Rule 3-44 requires that the lawyer must immediately notify the Executive Director in writing of: 1) the circumstances of the judgment, including whether or not the judgment creditor is a client or former client of the lawyer; and 2) the lawyer’s proposal for satisfying the judgment.

What is a monetary judgment? As defined in Rule 3-44(2), a monetary judgment includes:

• an order nisi of foreclosure;
• any certificate, final order or other requirement under a statute that requires payment of money to any party ( including certificates filed in federal court regarding unpaid GST or income taxes);
• a garnishment order under the Income Tax Act (Canada) if a lawyer is the tax debtor; and
• a judgment of any kind against a multi-disciplinary practice in which the lawyer has an ownership interest.

If a lawyer does not report the judgment or fails to deliver a satisfactory proposal about how the judgment will be satisfied, the matter may be referred to the Discipline Committee for disciplinary action.

When does the duty to report arise? The rule states a lawyer must report to the Executive Director if the judgment is not satisfied within seven days of entry. In cases involving a default order or unopposed order, the duty arises on the later of seven days after entry or seven days after the lawyer receives notice of the entered order.

It is important to note that, if a judgment has been paid outside of this seven-day time frame , even if only by  a day or two later, a lawyer is still required to report it. In Law Society of BC v. Lessing, 2012 LSBC 19, the hearing panel found that a failure to report judgments was professional misconduct and commented at paragraph 60: “In order to protect the public, the Law Society must be made aware of any unsatisfied monetary judgment and be provided with information about it and the lawyer’s proposed course of action for dealing with it.”

Even if a lawyer intends to apply to set aside a judgment, there is still an obligation to report its existence to the Executive Director (Rule 3-44(3); Lessing, paragraph 59). Further, even if a lawyer considers a certificate defective, the duty to report remains, as it is not up to the lawyer to determine the validity of a certificate before complying with the rules.

Any entered court order requiring that a specific sum of money be paid by a lawyer generally gives rise to the obligation to report pursuant to Rule 3-44 if the amount due is not paid by the lawyer within seven days of the date of entry. However, where the money is required to be paid in installments or on a date in the future, the obligation to report arises on the later of either seven days after the date of entry or the date of default in payment. If an order involves payment of costs by a lawyer, it must be reported when the amount of the costs is determined and the proceeding has concluded, unless fixed costs are made payable forthwith. All certificates filed in court for amounts owed by lawyers in respect of GST, income tax, HST or PST are considered judgments and therefore must be reported if not paid within seven days of entry.