B.C. lawyer fined $5K over Kelowna real estate sale
A B.C. lawyer has been fined $5,000 after he allowed a client to pay $46,000 in cash into his trust account as part of a Kelowna real estate deal.
According to a Dec. 21, 2022, Law Society of B.C. decision, lawyer Dr. Dongong Huang allowed his unnamed client to pay the money in cash into his trust account because it was quicker than a cheque or electronic transfer which the bank would hold for five business days.
Huang's move breaches the Law Society rules which only allow clients to pay a maximum of $7,500 cash to a lawyer for one matter.
The Law Society says the rule is in place to decrease the prospects of "intentional or inadvertent participation" in money laundering.
The decision says the client was buying an apartment in Kelowna but hadn't managed to get a mortgage so was borrowing money from friends and family.
Huang, who works out of the Lower Mainland, had previously had difficulties with the bank's policy of holding money for five business days and clients then missing deadlines.
In this instance, there wasn't enough time to complete the sale, so Huang arranged to meet the client at his bank and the client paid the $46,000 in cash into his trust account. The money was going to complete the purchase of the apartment for the client.
"Dr. Huang obtained information about the source of the cash and satisfied himself there were no signs of illegality," the decision reads.
A few days later the money was used to buy the apartment and the deal went through.
Huang then recorded the cash transaction in his 2021 annual trust report to the Law Society.
The Law Society then began its investigation.
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In his defence, Huang says the apartment sale couldn't have gone through if the cash wasn't used because there wasn't enough time.
Huang said the client gave the cash directly to the bank clerk and he didn't touch it.
The lawyer argued he only made $1,300 in fees for the condo sale and a $5,000 fine was excessive.
He argued he was just trying to help his client and there was no damage done to the client, the Law Society, the legal profession, or anyone else.
However, the Law Society didn't agree and said Huang had broken the no-cash-over-$7,500 rule.
"I accept that as a result of the client’s circumstances and the timing of the client’s delivery of the cash, the transaction could not be completed as agreed. However, such circumstances cannot justify a breach of (the no-cash) rule," the decision reads. "Where timing of payment in a transaction is critical, arrangements should be made sufficiently in advance of the requisite deadline. The fact that the client could not arrange to have funds available in time does not authorize or require a lawyer to breach the rules."
Huang disputed the fine but the Law Society dismissed it.
"The consequences of not accepting the cash may have been unfortunate for Dr. Huang’s client, and Dr. Huang’s actions do appear to have benefitted the client, but those factors still do not permit Dr. Huang to breach the Law Society rules," the decision reads.
Ultimately, the Law Society upheld its $5,000 and gave Huang until the end of January to pay.
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