Trustee Services: LSO

The Law Society of Ontario (LSO) provides trustee services for protection, preservation, distribution and allocation of professional property of lawyers who are members of LSO, including:

• Client funds

• Client files

• Client property

The trustee services become particularly relevant to lawyers on cessation of practice.

Trustee Services of LSO maintains a database of the location of the files of lawyers who have ceased to practice. Thus, the person in need of these documents can be directed to the appropriate custodian of these closed files.

Mr. Daniel J. Abraham, Manager, Trustee Services at LSO, succinctly sums up the situations where trustee services are required as “the Ds” and describes it as:

When the lawyer or paralegal licensee is

• Dead

• Diseased

• Deranged

• Demented

• Disappeared

• Departed

• Disbarred

Trustee Services of LSO can be also contacted for:

• advice on transfer of files when a lawyer is contemplating retirement from legal practice; or
• if a lawyer is in possession of the files of another member who is no longer practising; or
• if one is looking for the files/Wills of a lawyer who is no longer in practice.

Trustee services are of two types:

1. Information Services

LSO’s role in providing Information Services encompasses the following:

• Assisting in winding up or transfer of law practice: This assistance is not only available to lawyers but is also available to estate trustees (“estate trustee” means an executor, administrator or administrator with the will[i]), associates and office staff, family members of the concerned lawyer and the successor of such law practice.
• Transfer of law practice: Assisting closing of the licensee’s[ii] trust account when legal practice has been transferred to another licensee (single cheque by estate trustee).
• Acquisition of documents: Acquisition of wills, indexing and storing files, et al, by way of Authorization and Direction of the licensee or the holder of power of attorney granted by the licensee.

2. Formal Trusteeship

The Trusteeship application is required to be filed before the Superior Court of Ontario: Freezing Orders and Trusteeship Orders[iii]

Sections 49.45 to 49.52 of the Law Society Act of Ontario describe Trusteeship and Freezing orders and apply to property that is or should be in the possession or control of a licensee in connection with:

(a) the professional business of the licensee;

(b) the business or affairs of a client or former client of the licensee;

(c) an estate for which the licensee is or was executor, administrator or administrator with the will annexed;

(d) a trust of which the licensee is or was a trustee;

(e) a power of attorney under which the licensee is or was the attorney; or

(f) a guardianship under which the licensee is or was the guardian.

The licensee can approach the court pursuant to s. 49.51 of the Law Society Act to vary or discharge the order appointing LSUC as the trustee.

The impugned order in Law Society of Upper Canada v. Fuerst Estate[iv] is instructional as to the content of a trusteeship order. ONCA upheld the order appointing the LSUC as trustee of a deceased lawyer, Fay Fuerst’s professional material under ss. 49.45, 49.47 and 49.52 of the Law Society Act. ONCA upheld the trusteeship order appointing LSUC as trustee of 35 boxes of client material and six computers from the professional legal practice. The order permitted LSUC to examine the contents of the boxes and computers, provide information to clients where appropriate, and destroy material to protect confidential client information (provided the last activity occurred at least 10 years prior to the destruction). The order also allowed the LSUC to "determine the proper disposition of the boxes and computers" and ONCA found it as a reasonable offshoot of the appointment order.

The grounds[v] on which the order of trusteeship can be made provided the property is in possession or control of a licensee, are:

(a) the licensee's license has been revoked;

(b) the licensee's license is under suspension or the manner in which the licensee may practice law or provide legal services has been restricted;

(c) the licensee has died or has disappeared;

(d) the licensee has neglected or abandoned his or her professional business without making adequate provision for the protection of clients' interests;

(e) there are reasonable grounds for believing that the licensee has or may have dealt improperly with property that may be subject to an order under section 49.46 or 49.47 or with any other property; or

(f) there are reasonable grounds for believing that other circumstances exist in respect of the licensee or the licensee's professional business that make an order under section 49.46 or 49.47 necessary for the protection of the public.

In Law Society of Upper Canada v. Isaac[vi], ONSC upheld the validity of the order appointing the LSUC as trustee to take possession of all files and other documents that were in the possession of the respondent at his law practice for the purpose of preserving the property and/or winding up the professional business of the respondent. The court also found that LSUC was well within its rights to shred files which has been inactive for 10 or more years.

The nature of the trusteeship order was further elaborated by ONCA in Law Society of Upper Canada v. Kelly[vii]. The impugned trusteeship order was made under s. 49.47(2) of the Law Society Act, directing payment of the unallocated funds into the compensation fund. The Law Society, as trustee, in this case applied for directions "affecting the property" under s. 49.48 and sought an order for distribution of the property. ONCA found that s.51(2) of the Law Society Act identifies certain monies which must be paid into the compensation fund but not exhaustively. Sections 59.6 through 59.14 provide a mechanism by which lawyers may apply to have unclaimed trust funds paid into the account, thereby relieving the lawyer of associated fiduciary duties. ONCA thus found the order within the description of distribution of property under s.49.47(2)[viii].

Mr. Abrahams, however stresses that the Trustee Services do not:

• Act for clients;

• Collect receivables;

• Pay debts; and

• Hire employees of the practice.

He, further, strongly advises the licensees to:

• Make succession plan for the disposition of their practices and inform family and colleagues about it.
• Make a will (maybe a secondary will) with express provision for the disposition of the practice, including a direction to appoint a lawyer signatory on the trust account.
• Appoint an estate trustee – ideally another lawyer.
• Give someone a Power of Attorney that survives incapacity.
• Work with other lawyers in their practice area to establish a mutual support network.
• Ensure files are organized and stored (including long-term storage of closed files).
• Make appropriate provision for wills and powers of attorney that the licensee has prepared, to ensure that these are easily accessible to clients, their heirs and family members.

 

Mr. Daniel J Abraham can be contacted at dabraham@lsuc.on.ca. Further information about Trustees Services can be found on the LSO website at https://www.lsuc.on.ca/For-Paralegals/Manage-Your-Practice/Lifecycle/Closing-Your-Practice/Trustee-Services/