⚖️ Client confidence

To: Hearsay Readers

There’s been a lot of talk about policing off-the-job conduct lately. Where do we draw the line when it comes to free expression? When is it appropriate to discipline someone for statements they make in their personal capacity?

Well, agree with it or not, the Ohio Supreme Court has taken a stand — lawyers can’t defecate in Pringles cans and leave them in public for unsuspecting victims to find. Yesterday, the Court handed a defence attorney a one-year suspension for failing to control his “bizarre impulses”. He’ll only have to serve half the suspension, so long as he stays out of trouble.

— Dylan Gibbs

TODAY’S DOCKET

  • Legal profession: Injunction against rules forcing lawyers to share information

  • Round up: Online news deal, suspension for sexual misconduct, and the fire-starting Airbnb guest shielded from litigation

LEGAL PROFESSION

Federation of Law Societies gets injunction against new disclosure rules

Two lawyers exchanging documents

Lawyers sometimes need to report their clients’ transactions to the CRA. In June, the federal government greatly expanded those obligations and ramped up the penalties for lawyers who don’t comply. Do the new rules violate the Charter by conscripting lawyers against their clients?

The Federation of Law Societies is challenging the rules in court and recently secured an initial victory — British Columbia’s Supreme Court granted an injunction that exempts lawyers from the rules until the Federation’s constitutional challenge can be resolved.

Extensive reporting: Under the new rules, taxpayers and their advisors (including lawyers) need to report any transaction that is mainly intended to create a tax benefit and has a hallmark of tax avoidance. The hallmarks include conduct like paying a tax advisor a chunk of your tax savings, or agreeing to cover the advisor’s legal fees if the CRA drags everyone into court. The government can also specify specific types of unsavoury transactions, and those need to be disclosed too.

The disclosure isn’t just a one-line FYI, either — lawyers need to disclose the details of the transaction, why it’s being reported, and how much the lawyer is being paid for their work. Lawyers who don’t report face fines of up to $100,000 and imprisonment.

Lawyers excluded: The Court said the rules pose significant harm to lawyer-client relationships. And exempting lawyers pending trial isn’t going to cause much harm to the public interest — the disclosure rules also apply to non-legal advisors and taxpayers, so a narrow exception for lawyers won’t gut what the government is trying to accomplish.

Déjà vu: The Federation secured an injunction against similar rules related to money laundering in the early 2000s. But the government repealed those disclosure requirements, so the courts never made a final ruling on their validity. We’ll see if the government sticks to its guns this time around.

HEARSAY ROUNDUP

Canadiana

🧑‍💻 Canada agreed to settle the Online News Act beef, meaning Google will keep posting links to Canadian news. For the privilege of driving valuable traffic to Canadian news sites, Google will pay about $100 million each year to a collective of Canadian media companies. It’s not exactly clear how the funds will be divided, or whether CBC gets a share, but regulations coming soon will answer those questions. Meta has already removed Canadian news from Facebook and Instagram. Even after the Google deal, Meta said it won’t be revisiting that decision unless Canada repeals the Online News Act altogether.

🤢 A law firm partner received a three-month suspension for sexually touching and harassing a firm employee. The reprehensible conduct started when the woman was a law clerk and continued after she joined the firm as a lawyer.

🔥 The insurance company for an apartment building can’t sue an Airbnb guest who accidentally started a fire in one of the building’s units. Legislation in BC says the insurance of a strata corporation (like a condo) covers anyone “who normally occupies” the property. The apartment building in this case had bylaws permitting short-term rentals, so the BC Supreme Court concluded Airbnb guests are normal and expected occupants. An insurance company can’t sue the people it insures, so the fire-starting Airbnb guest is off the hook — and the insurer needs to eat the loss.

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