Case involving lawyer who borrowed from client described as 'unseemly'

An Ontario Superior Court judge has found an Oakville lawyer inappropriately borrowed from his client and produced a document in court that was “likely not genuine.”

In Wedlake v. Richey, Justice Douglas Gray granted a part summary judgment against Jeffrey Richey in a dispute with his client, Frances Wedlake, over unpaid debts the lawyer amassed.

Under the Law Society of Upper Canada’s Rules of Professional Conduct, lawyers are not permitted to borrow from a client, unless that client is a relative or financial institution.

“There is no dispute, and indeed Mr. Richey’s counsel acknowledges, that Mr. Richey violated one or more of these rules,” Gray wrote in the decision.

Lee Akazaki, of Gilbertson Davis LLP, says that the prohibition against borrowing exists so that lawyers will not have their ethics compromised by such an agreement.

“Somebody who has so lost his moral compass as a lawyer to have crossed not just one but I think perhaps three red lines that are important to our professional integrity, he should not be practising law,” he says.

In July 2007, Richey and his wife borrowed $75,000, which was secured against their home, from his client Frances Wedlake, a real estate agent, according to the ruling.

Jeffrey then registered a discharge of the mortgage, something Wedlake denies she had any knowledge of until recently.
He then borrowed a further $130,000 from Wedlake in Aug. 2013, the ruling said.

Richey argued that the loans had been defrayed by legal services he had presented her, but Wedlake disputed that such an understanding existed.

In court, Richey submitted an Acknowledgement and Direction document, which was supposedly signed by Wedlake and authorized the discharge of the mortgage.

Wedlake swore she did not sign the document and said while it was demanded in February, Richey did not produce the document until May, when an order of the court required it.

“The Authorization and Direction purporting to authorize Mr. Richey to register a discharge of the mortgage must be viewed with considerable suspicion,” Gray wrote.

“On a balance of probabilities, I am persuaded that the document is not genuine,” he added.

Richey’s lawyer, Fabio Gazzola, argued that the facts of the case are in conflict and that the matter should go to trial.

Gazzola also maintained that while “the arrangement between Ms. Wedlake and Mr. Richey was somewhat unusual,” it could be explained by the “informal, friendly relationship the parties had for many years.”

He also contended that Richey did not send any bills to Wedlake while conducting legal services for her.

Furthermore, Gazzola said it could not be determined whether the Acknowledgement and Direction document was actually a forgery without a trial.

Gray, however, determined summary judgement as appropriate, citing Hyrniak v. Mauldin, a Supreme Court decision that expanded the use of summary judgment.

“He has provided virtually no records, including dockets, to support his position that legal services were provided or that they had any value,” Gray wrote. “There is no reason to think better evidence would be available at trial.”

Gray ruled that Richey did not comply with his fiduciary obligations and that the mortgage discharge was improperly registered.

Richey is also facing disciplinary proceedings at the Law Society of Upper Canada for allegations he engaged in professional misconduct. The hearings for those proceedings began in May, but the law society could not confirm if they were related to Wedlake’s claim.

“In this case, a solicitor borrowed money from his client. With respect to one of the loans, a mortgage on the solicitor’s home was given,” Gray wrote.

“Disputes have now arisen as to whether the loans have been repaid, and whether the mortgage was properly discharged. To describe the dispute as unseemly would be an understatement.”

When reached for comment, Richey said he is looking to appeal the decision.

Wedlake and her lawyer, Robert Watson, refused to comment on the ruling.

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