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LAWPRO defends lawyers: ‘Failure to insist on ILA not negligent where transaction clearly benefits client’

August 07, 2014 By: TimLemieux Category: Errors and omissions coverage

LAWPRO defends a wide variety of cases in any given year. In almost 80 per cent of the claims files we handle, there is ultimately no finding of negligence against the lawyer that was the subject of a claim.

Occasionally, our work on a lawyer’s behalf is made easier by having compelling facts on our side. But even where the facts are more balanced, LAWPRO counsel strive to put forward rigorous and well supported defences on the part of our insured − not only to avoid a loss in any particular case, but also in the interest of creating precedents and standards of care that are fair to all lawyers. Here is one of the cases we successfully defended in 2013:

Failure to insist on ILA not negligent where transaction clearly benefits client

In 1992, a father transferred his shares in a business to his daughter and son-in-law, receiving a promissory note in exchange. One lawyer represented all the parties: mother, father, daughter and daughter’s husband, none of whom obtained independent legal advice.

Many years later, the mother sued the daughter and son-in-law on the promissory note, and the couple third-partied the original lawyer, alleging that he should have insisted that they obtain independent legal advice before proceeding with the transaction.

After reviewing the details of the transaction, the court dismissed the claim against the lawyer. Glithero, J. found that the lawyer: 1) had no obligation to insist that the younger couple get independent legal advice; 2) that the younger couple understood the transaction; 3) that the transaction was beneficial to the younger couple; 4) that there was no better advice an independent solicitor could have given to them; and 5) that the lawyer did not cause the couple’s loss.

The court rejected an expert opinion to the contrary because it was based on false assumptions: that the lawyer had failed to inquire into the business background and purpose of the transaction, and that he failed to appropriately explain the transaction to the younger couple.

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