Estates & Wills & Trusts

Ruling a caution for lawyers with clients from one family

A recent decision that found a lawyer liable for negligence and breach of fiduciary duty after representing both parties in a family share purchase transaction is a cautionary tale for counsel who have ongoing legal relationships with families, Toronto trusts and estates lawyer Ian Hull tells Lawyers Weekly.

As the article notes, Roth Estate v. Juschka, [2016] ONCA 92 centred around a 1992 transaction that lawyer Allan Brock helped arrange for a father, his daughter and son-in-law, to transfer the father’s shares in a grocery store to his daughter and her husband.

Brock drew up the legal documents, including a share-purchase agreement, consulting agreements and a promissory note, perceiving the transaction to be essentially a gift of shares from a father to his daughter and son-in-law.

However, Lawyers Weekly notes, the Ontario Court of Appeal unanimously found that the lawyer misunderstood the financial transaction, failed to recognize the potential conflict of interests between the parties, and didn’t recommend independent legal advice.

He was ordered to pay $200,000 in damages and found liable for negligence and breach of fiduciary duty.

Hull, co-founding partner of Hull & Hull, says this decision serves as a caution for lawyers who may be “lulled into” problematic situations by ongoing legal relationships with groups of family members.

“The practical reality is that lots of lawyers do act as sort of the family lawyer and they have this collective group of clients.”

Even if a lawyer does all the work in setting up a transaction, Hull says in the article, the final step has to involve ensuring that everyone around the table receives the necessary independent legal advice (ILA).

“It’s incumbent on lawyers to have that difficult conversation on the ILA, but it can be managed really effectively because it can be done at the end,” he says.

“It just helps everyone around the table if you get a second set of eyes on a transaction with this type of complexity.”

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