The trust account contained $847,000 in client funds for three separate real estate closings scheduled between October and December 2018. The lawyer managing those accounts had filed for personal bankruptcy six weeks earlier and had not told any of them.

The Supreme Court of British Columbia ruled in late 2025 that this silence constituted more than a lapse in judgment. It was reprehensible conduct, the kind that triggers special costs, a penalty that typically recovers 70% to 90% of the successful party's actual legal fees. Special costs are reserved for cases where the losing party's behavior crosses into bad faith, and the court found that threshold met here.

The disclosure rule most lawyers know but some ignore

Under Rule 3-51 of the Law Society of BC, practicing lawyers must notify the Executive Director in writing if they become insolvent or if a judgment is entered against them that they cannot satisfy. The rule exists because insolvency creates an immediate conflict of interest when a lawyer holds client funds. A client handing over money for a property closing needs certainty that the professional on the other end is both bonded and solvent. If the lawyer's own creditors could potentially reach into that trust account, or if the lawyer is under financial pressure that might cloud their judgment, the client has a right to know before the funds move.

The lawyer in this case did not make that disclosure. He continued acting as trustee and advisor while his personal financial situation deteriorated. The clients learned of his bankruptcy only after the transactions had already been structured around his involvement.

Why the court framed silence as deception

Fiduciary duty operates on the principle of uberrima fides, utmost good faith. In that relationship, omission carries the same weight as a direct misstatement. The court's reasoning in this case was that by accepting trust funds without disclosing insolvency, the lawyer allowed the clients to believe something material about his professional standing that was no longer true.

The BC real estate market experienced subdued transaction volumes in 2018, with average detached home prices in Greater Vancouver climbing past $1.6 million. A delayed or collapsed closing in that environment could mean losing a locked-in purchase price, forfeiting a deposit, or triggering breach-of-contract damages. Clients needed to know whether the person managing the largest financial transaction of their lives was in a position to do so without divided loyalties.

The harm was in the concealment itself. By accepting trust funds without disclosing his insolvency, the lawyer allowed the clients to believe something material about his professional standing that was no longer true. Whether or not the client funds themselves went missing was immaterial to the breach.

The penalty that survives resignation

By the time the costs ruling was issued, the lawyer had already left the profession. That departure did not shield him from the court's jurisdiction over conduct that occurred while he was practicing. Special costs followed him as a judgment debt.

For the clients who brought the action, the award was both symbolic and practical. Symbolic because it marked the conduct as worse than ordinary negligence. Practical because it recovered most of what they spent forcing the issue to a hearing. Whether they can actually collect from someone who was insolvent in 2018 and has since left the bar is another question. The Law Society's mandatory professional liability insurance through the Lawyers Indemnity Fund covers claims up to the policy limit, but coverage depends on whether the claim arose from insured activities and whether the lawyer was in good standing at the relevant time. An insolvent lawyer who failed to self-report may have triggered exclusions.

The case sends a clear message: quitting does not erase accountability. The profession's regulatory structure treats silence about financial instability as a betrayal of the trust that makes the entire transactional system work.