Why Listening To Your Clients Can Get You In Trouble…

One of the most difficult things about being a lawyer (and most other professions, I suppose) is the various ethical challenges that you are presented with over time. 
A recent decision in a foreclosure matter highlights one such occurrence:
In some cases, if a property is foreclosed on the lender can obtain a deficiency judgment.  A deficiency judgment means that if the sale of the property does not result in sufficient funds to cover the debt owing as against the mortgage, that the lender can in some cases have a court judgment in the amount outstanding.  The court provided a direction in its fiat (its written decision) that the lawyer should apply to court to deal with their solicitor client costs (which frequently get awarded in foreclosure files) and to deal with the deficiency.
The lawyer decided to go a different route.  He elected to bring a 2nd statement of claim, note the Defendant in default for failing to respond to the claim, and obtain a default judgment.  This would be faster and cheaper for the client than bringing the application ordered by the court (if the judge/registrar granted the default judgment). However, it would avoid having the court review how the costs and the defiency were calculated, in direct contravention of the fiat. The court had some harsh words for the conduct:

“[11] When this came to my attention I sought an explanation for this procedure. Bank’s counsel indicated that lawyers carrying on an enforcement practice such as his are under constant pressure from clients to get matters done as quickly and cheaply as possible. He said that proceeding by way of new statement of claim, which would very likely result in a default judgment for the deficiency as claimed, met those criteria.
[12] With respect, that is not a satisfactory answer. Clients do not get to dictate whether counsel comply with the general and accepted processes of this court. Clients do notget to dictate whether orders and directions of this court are complied with by counsel. Counsel have a duty to their clients, to be sure, but they are also officers of the court and must conduct themselves with high ethics and integrity throughout. This is so whether parties opposite do not appear, are self-represented, or are represented by counsel. Experienced counsel such as this certainly ought to have carefully considered all aspects of the procedure he employed before embarking upon same.”
The court voided the claim brought, refused the request, and confirmed that no costs were awarded for this aspect of litigation.  The court indicated that it was considering costs to be made against the party or the lawyer for the manner in which it was conducted.
I dislike being critical of the lawyers involved in these decisions for a couple of reasons:
(1) These decisions are made by practicing lawyers in real time – client pressures, life pressures.  Mistakes happen. 
(2) I hope that my peers do not rally to relish in my misfortune if something like this happened to me.
(3) The permanent nature of the decision is a difficult enough reminder.
While it would be a tough day for that lawyer to get that fiat delivered, to the rest of us, it is an opportunity to reflect.  Reflect upon those areas in our own professional practice where we struggle in challenging our clients when they ask us to do things that we are less than comfortable with.
2 replies
  1. Chris Jaglowitz
    Chris Jaglowitz says:

    Good piece, Marc. The aspect worth exploring is whether the courts and our rules committees need to rethink how to break down barriers and eliminate needless delays and costs. If a mortgagee's lawyers want to use a method that results in lower cost (which obviously benefits everyone concerned) then the courts have an obligation to get out of the way and facilitate those processes.

    Admittedly, that's not an easy discussion, and not a short one.

  2. Marc Kelly
    Marc Kelly says:

    Thanks for the comment Chris. I agree with you generally, but not in this specific instance. If this was simply an issue of unnecessary administration, that seems like a simple response.

    While I havent done foreclosure work in sometime, if the process was that cumbersome, there are avenues that the group of the bar could pursue to streamline those steps. But the court was concerned (rightfully in my mind) about supervising a calculation of what the deficiency judgment should be, and the approach taken counsel in this regard appeared to intentionally avoid that supervision. If the only way to make this supervised process less costly is to remove the supervision, then it isn't going to be an efficiency that the court is likely going to consider.

    Thanks for reading!


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