President and Vice-Presidents

Richard C. Gibbs, QCPresidentHoward R. Berge, QCFirst Vice-PresidentWilliam M. Everett, QCSecond Vice-President

Elected Benchers

Ralston S. Alexander, QCRobert D. Diebolt, QCIan Donaldson, QCAnna K. Fung, QCDavid W. Gibbons, QCRobert W. Gourlay, QC John J.L. Hunter, QCGerald J. Kambeitz, QC Peter J. Keighley, QCRobert W. McDiarmid, QCMargaret Ostrowski, QCG. Glen Ridgway, QCPatricia L. Schmit, QCWilliam J. Sullivan, QCGrant C. TaylorG. Ronald Toews, QCRussell S. Tretiak, QCRoss D. TunnicliffeGordon Turriff, QCJames D. Vilvang, QCAnne K. WallaceDavid A. Zacks, QC

Lay Benchers

Jaynie W. ClarkMichael J. FalkinsAnn HowardPatrick KellyValerie J. MacLeanMarjorie MartinPatrick NagleAnita OlsenJune PrestonDr. Maelor Vallance

Life Benchers

R. Paul Beckmann, QCP. Michael Bolton, QCRobert W. Bonner, QCDarrell T.B. Braidwood, QCHon. Mr. Justice Thomas R. BraidwoodCecil O.D. Branson, QCTrudi L. Brown, QCHon. Mr. Justice Grant D. BurnyeatHon. A. Brian B. Carrothers, QCHon. Mr. Justice Bruce I. CohenRobert M. Dick, QCUjjal Dosanjh, QCLeonard T. Doust, QCHon. Jack L.T. Edwards, QCHon. Dr. James J. Gow, QCArthur M. Harper, QCHon. David B. Hinds, QCJohn M. Hogg, QCH. Allan Hope, QC

Ann HowardHon. Henry E. Hutcheon, QCRobert T.C. Johnston, QCPeter Leask, QCGerald J. Lecovin, QCHon. Hugh P. Legg, QCHon. Charles C. Locke, QCJames M. MacIntyre, QCRichard S. Margetts, QCMarjorie MartinHon. Allan D. McEachernHon. Meredith M. McFarlane, QCHon. Lloyd G. McKenzie, QCBrian W.F. McLoughlin, QCColin D. McQuarrie, QCHon. Kenneth E. MeredithHon. Peter J. Millward, QCDennis J. Mitchell, QCKaren F. Nordlinger, QCRichard C.C. Peck, QCHarry Rankin, QCEmily M. Reid, QCNorman Severide, QCJane S. Shackell, QCDonald A. Silversides, QCGary L.F. Somers, QCHon. Madam Justice Mary F. SouthinMarvin R.V. Storrow, QCBenjamin B. Trevino, QCWilliam M. Trotter, QCAlan E. Vanderburgh, QCBrian J. Wallace, QCKarl F. Warner, QCWarren T. Wilson, QC

Annual Report 2002

Year in reviewPresident’s report . . . . . . . . . . . . 2

2002 highlights . . . . . . . . . . . . . . 3

Profile of the profession . . . . . . 8

Credentials . . . . . . . . . . . . . . . . . 8

Ethics . . . . . . . . . . . . . . . . . . . . . 11

Practice advice . . . . . . . . . . . . . 12

Professional conduct anddiscipline . . . . . . . . . . . . . . . . . . 13

Practice standards . . . . . . . . . . 16

Equity and diversity . . . . . . . . 16

Unauthorized practice . . . . . . . 17

Special Compensation Fund . . 17

Lawyers Insurance Fund . . . . 19

Finances . . . . . . . . . . . . . . . . . . . 20

Financial statementsAuditor’s report . . . . . . . . . . . . 22

General Fund . . . . . . . . . . . . . . 23

Special Compensation Fund . . 27

Lawyers Insurance Fund . . . . 30

Committees2002 committees and taskforces . . . . . . . . . . . . . . . . . . . . . . 34

Appointments2002 appointments to outsidebodies . . . . . . . . . . . . . . . . . . . . . 36

Benchers

The Benchers, December, 2002

(Front row) Peter J. Keighley, QC, First Vice-President Howard R. Berge, QC,President Richard C. Gibbs, QC, Second Vice-President William M. Everett, QC,Margaret Ostrowski, QC

(Second row) Valerie J. MacLean, G. Glen Ridgway, QC, Gerald J. Kambeitz, QC,Anna K. Fung, QC, Anne K. Wallace, David W. Gibbons, QC, Russell S. Tretiak,QC

(Third row) David A. Zacks, QC, Ralston S. Alexander, QC, G. Ronald Toews, QC,Patricia L. Schmit, QC, June Preston, Robert W. McDiarmid, QC

(Fourth row) James D. Vilvang, QC, Ian Donaldson, QC, Dr. Maelor Vallance,Patrick Nagle

(Back row) Patrick Kelly, Grant C. Taylor, Ross D. Tunnicliffe, Michael J. Falkins,Robert W. Gourlay, QC, Gordon Turriff, QC

(Not pictured) Robert D. Diebolt, QC, John J.L. Hunter, QC, William J. Sullivan,QC

Contents

2

President’s report

Reflectionsby Richard C. Gibbs, QC

The Strategic Plan had a special pro-vision requiring that the President in2002 primarily spend his time ad-dressing the problem of CanadaGeese fouling the 9th floor patio at theLaw Society building. I thought thatkitting the Canada Geese out withDepends would satisfactorily ad-dress the issue, but it rendered themaerodynamically compromised andthey plummeted to earth like stones.We’d fetch them back and get thebarbie fired up: pluck ‘em, de-gravel‘em, and Bob’s your uncle — “De-fenestrated Goose à la Law Society”— until the pedestrians down belowcried fowl.

The Benchers, for their part, got onwith more mainstream matters. Theychallenged themselves to producereasons in discipline and credentialscases promptly — most are nowavailable within 60 days. TheBenchers revised the admission pro-gram in 2002, adopting new articlingguidelines and preparing to bring theProfessional Legal Training Coursein-house in 2003.

The Benchers responded aggres-sively to the revelation of extensivebreaches of undertakings by Mr. Mar-tin Wirick by reviewing standardconveyancing practices and workingout systemic deficiencies. Law Soci-ety staff made Herculean efforts toinvestigate Wirick breaches and tobring claims before the Special Com-pensation Fund Committee swiftly toensure that Wirick’s victims sufferedas little as possible.

The membership censured the Attor-ney General over legal aid cut-backs.

And then there were the lawsuits.Early in 2002 the provincial govern-ment announced that, as a cost-cut-ting measure, it was closing 24 of the68 courthouses in the province. Thisbypassing of the judiciary could not,

in the assessment of the Benchers, gounchallenged. We sued and pursuedthe litigation aggressively. Talks tookplace. A memorandum of under-standing and a protocol between theMinistry of Attorney General andProvincial Court judiciary, both datedApril 19, 2002, resulted from thosetalks. Agreement for the establish-ment of certain circuit courts wasreached.

The federal government proclaimedsome of the Proceeds of Crime (MoneyLaundering) Act, which imposedreporting obligations on lawyers, inlate 2001 and it vexed us through2002. Originally conceived to dealwith bikers making millions from thedrug trade, in a fit of opportunismshortly after the September 11

outrages, the federal governmentre-labelled it as anti-terrorism legisla-tion. The government envisionedlawyers peeping at client keyholesand reporting their observations toOttawa. What could the Benchers dobut sue?

The injunction obtained by the LawSociety of British Columbia and bythe Federation of Law Societies ofCanada was, I believe, the first of itskind — it entailed an interim exemp-tion for BC lawyers from the applica-tion of the proceeds of crimelegislation. The British Columbiatemplate was replicated across Can-ada. With a hearing of a litigation onthe merits fast approaching, the

The moment that makes it all worthwhile. President Richard C. Gibbs, QC welcomes a newlawyer to the profession at a call ceremony at the Vancouver Law Courts on September 27. TheBenchers tackled many challenges in 2002, some that called on the Law Society to uphold theindependence of the judiciary and the profession. These were causes that Mr. Gibbs, for hispart, embraced with passion, conviction and unfailing wit.

continued on page 21

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Year in review

provincial and territorial law societ-ies) to exempt all lawyers across Can-ada from Part I of the Proceeds of Crime(Money Laundering) and Terrorist Fi-nancing Act, including the recordingand reporting provisions, until theFederation’s constitutional challengeis heard in BC Supreme Court and theCourt makes a decision on the merits.Consent orders reflecting this exemp-tion from the legislation were enteredin courts across Canada in June. Thecase is set to proceed in 2004.

Supreme Court of Canadaupholds protection ofprivilege in law officesearchesIn September the Supreme Court ofCanada struck down section 488.1 ofthe Criminal Code as unconstitutionalon the basis that the section inade-quately protected solicitor-clientprivilege in police searches of lawoffices, resulting in unreasonablesearch and seizure that infringed sec-tion 8 of the Charter of Rights and can-not be justified under section 1 of theCharter: Lavallee, Rackel & Heintz v.Canada (Attorney General); White,Ottenheimer & Baker v. Canada (Attor-ney General); R. v. Fink 2002 SCC 61.

The Federation of Law Societies ofCanada was an intervener on behalfof Canadian law societies.

The issue before the Supreme Courtof Canada in Lavallee was whethersection 488.1 of the Criminal Code,which set out a procedure determin-ing a claim of solicitor-client privilegein relation to documents seized froma law office under a warrant, in-fringed section 8 of the Charter. Sec-tion 488.1 required that material besealed at the time of the search, thatthe lawyer make application withinstrict timelines for a determination ofwhether the material is intended to beprotected by privilege and that theCrown be permitted to examine thematerial in order to assist in a

2002 highlightsLawyers exempt fromreporting clients underproceeds of crime lawProtecting the independence of law-yers and the privilege and confidenti-ality of their clients were priorities forthe Law Society in 2002, on severalfronts.

Following the Society’s launch of aconstitutional challenge of federalproceeds of crime legislation in 2001,the BC Supreme Court granted BClawyers interim relief from the re-quirement to report suspicious trans-actions and large cash transactions tothe federal agency FINTRAC. Ingranting this order, Madam JusticeAllen described the legislation as “an

unprecedented intrusion into the tra-ditional solicitor-client relationship”:Federation of Law Societies of Canada v.Attorney General of Canada; The LawSociety of British Columbia v. AttorneyGeneral of Canada, 2001 BCSC 1593.

For the profession, an important prin-ciple was at stake. Forcing lawyers toreport a client to the state violates theclient’s fundamental right to solici-tor-client privilege and confidential-ity, which the Law Society hasresisted as unconstitutional.

When court after court across Canadafollowed BC’s lead in granting in-terim relief, the federal governmentstepped back. By mid-May, 2002 theAttorney General of Canada reachedan agreement with the Federation ofLaw Societies of Canada (on behalf of

Benchers look on as candidates for call and admission are presented to the court. The responsi-bilities of the Benchers in setting and upholding standards for the admission, practice andconduct of lawyers are fundamental to our system of justice. The legal profession is independ-ent from the state, not for the benefit of lawyers, but for the benefit of their clients whose rightsmay come in conflict with the state. When lawyers speak out for the independence of the pro-fession, they do so in defence of the right of all people to obtain independent legal advice andrepresentation.

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Year in review

determination of the existence ofprivilege, with the permission of thecourt.

The Court found that section 488.1more than minimally impaired solici-tor-client privilege and amounted toan unreasonable search and seizure,contrary to section 8 of the Charter. Itsconstitutional failings could resultfrom a number of factors: a lawyer’sabsence or inaction in claiming privi-lege; the naming of clients; the factthat notice is not given directly to theclient; the fact that privilege must beclaimed within strict time limits; alack of discretion on the part of thejudge determining the existence ofsolicitor-client privilege and the pos-sibility of the Attorney General’sgaining access to the material prior tothat judicial determination.

The Court found that solicitor-clientprivilege is a principle of fundamen-tal justice and a civil right of supremeimportance in Canadian law. Giventhat privilege must remain as close toabsolute as possible to retain its rele-vance, there must be stringent normsto ensure its protection. To pass Char-ter scrutiny, the procedure set out in s.488.1 must minimally impair solici-tor-client privilege.

The Court articulated general princi-ples to govern the searches of lawoffices as a matter of common lawpending any new legislation.

Securities Commission andlawyer independenceEarly in the year the BC SecuritiesCommission proposed new authorityto exclude professionals, includinglawyers, from practice before it if theconduct of those professionals relat-ing to trading in securities was soegregious or grossly incompetent asto be contrary to the public interest.The Law Society strongly opposedthe Commission having the power torestrict or prohibit the practice of law-yers before it — matters of discipline

that properly fall to the Society.

While backing off that initiative, theCommission issued a new paper inSeptember, proposing that it have au-thority to prohibit a professional frompractising before it if the professionalhas intentionally contravened the se-curities legislation, or has intention-ally assisted others to do so.

In the Law Society’s view, that pro-posal remains beyond the scope of thepowers and penalties afforded to theCommission by the Securities Act.With respect to lawyers, such regula-tory authority falls to the Law Societyunder the Legal Profession Act. Thelanguage of the proposed legislationis also very broad. It could allow theCommission to impose professionalsanctions on a lawyer based on per-sonal conduct outside the practice oflaw, such as in the lawyer’s capacityas a director of a public company.

As lawyers are required to protect in-formation that is subject to solici-tor-client privilege, they would beprohibited from disclosing such in-formation to the Commission, even ifit were necessary to defend them-selves against a charge that they have“aided or abetted the contraventionof the Securities Act or Regulations.”(By contrast, such privilege is main-tained in proceedings under the LegalProfession Act.)

One of the most compelling reasonsagainst the proposal is that it wouldbe detrimental to the public interestby compromising the independenceof the legal profession in BC. Makinga lawyer subject to potential disci-pline by an administrative tribunalbefore which the lawyer appears onbehalf of a client would wrongly in-terfere with the vigorous pursuit ofthe client’s interests. Clients must beentitled to have their cases placed

An interlude at the 2002 Annual General Meeting affords an opportunity for colleagues tocatch up. The AGM is the forum for conducting the annual business of the Society, includingsetting the practice fee for the following year, and for the discussion of member resolutions. In2002 there was lively debate over inclusion of a CBA equivalent fee as a component of thepractice fee.

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Year in review

before a tribunal in the best way pos-sible, by counsel of their choice, pro-vided that counsel is a Law Societymember in good standing. In essence,the issue is that an agent of the stateought not to determine whether alawyer can practise in a given area oflaw. In order to protect the independ-ence of lawyers from the state, thatdetermination must be made by abody independent of the state.

The Law Society has pointed to itsstatutory responsibility to govern theconduct of all lawyers, maintain acomplaints and discipline processand impose a range of penalties formisconduct, conduct unbecoming orbreach of the Act or Rules, including,in appropriate cases, the power tosuspend or disbar a lawyer frompractice.

The Society investigates all com-plaints received concerning the

conduct of lawyers practising in thesecurities law area, including anycomplaints that come from the Com-mission or from media reports. Theseare in fact few, and it is unnecessary toimpose any other authority over theconduct of lawyers to ensure theirproper regulation in securities prac-tice.

On another front, the Law Society putforward submissions to the provin-cial government on its review of 60administrative justice agencies. TheSociety has supported the initiative,but urged a tribunal-by-tribunal re-view rather than omnibus reformsthat apply to all bodies — to ensure athorough examination of the issues,needs and expertise of each body.

Provincial courthouseclosuresThe BC government’s decision earlyin the year to close provincial

courthouses sparked controversyover the respective roles of govern-ment and the judiciary.

The Attorney General advised theChief Judge of the Provincial Court ofthe closings by letter in January.While the decision affected matters ofjudicial administration (including theassignment of judges, sittings of thecourt, court lists, related matters ofcourtroom allocation and public ac-cess to the Provincial Court), it wasmade without consultation with orthe agreement of the Provincial Courtjudiciary.

In light of concerns of the Chief Judgeand in defence of judicial independ-ence, the Law Society began a courtchallenge of the decision. The pro-ceeding was later adjourned as theAttorney General and Chief Judgeannounced a protocol for consulta-tion on future matters affecting courtadministration. Respecting the cur-rent round of courthouse closures,they also signed a memorandum ofunderstanding to ensure public ac-cess to the courts and achieve cost re-ductions through such measures ascircuit courts and videoconferencingsome pre-trial appearances.

BC lawyers votenon-confidence in AttorneyGeneral

BC’s ongoing legal aid funding crisistranslated into a crisis of confidencein 2002. On May 22, 70% of the 1,140lawyers at a member-requisitionedSpecial General Meeting voted to ex-press a loss of confidence in the Hon.Geoff Plant, QC as Attorney General.

Lawyers at the meeting called on theAttorney General to allocate to theprovision of legal aid all the revenuesfrom the provincial tax on legal ser-vices and from federal contributionsfor legal aid.

In speaking to his motion of non-con-fidence, Victoria lawyer Michael

Lawyers cast ballots at a Special General Meeting in May. The meeting, requisitioned bymembers of the profession, raised the profile of the legal aid funding crisis. Lawyers at themeeting passed a resolution to express a loss of confidence in the Attorney General and to callon the Attorney to allocate to legal aid funding all of the revenues from the provincial tax onlegal services and from federal contributions for legal aid.

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Year in review

Mulligan said that the Attorney Gen-eral is not a mere member of Cabinet,but a minister of justice with an obli-gation to see justice done, and legalaid funding cuts had to be viewed inthat light.

Mr. Mulligan noted that BC is theonly province to collect a tax on law-yers’ accounts, which generated $91.6million the previous year, in additionto the $9 million received from thefederal government for criminal legalaid. He said the Attorney General hadproposed a plan to reduce legal aidfunding to $54 million, while at thesame time the government was in-creasing the provincial tax rate.

The Wirick matterDuring 2002 the Law Society was tocall on all its regulatory resources inthe wake of conduct by Vancouverreal estate lawyer Martin Wirick thathad serious financial consequencesfor the profession and for some mem-bers of the general public and finan-cial institutions.

Mr. Wirick voluntarily resigned hisLaw Society membership on May 23,2002. The Society immediately ob-tained a court order for the appoint-ment of a custodian of his practice onMay 24 and began an audit. The evi-dence at that time was of substantialfinancial and procedural irregulari-ties in his practice, including breachesof undertakings.

Mr. Wirick was cited and a disciplinehearing panel found him guilty ofprofessional misconduct for breach-ing his undertaking to pay out anddischarge mortgages while acting fora developer client. He was ordereddisbarred: see Discipline Case Digest03/05.

Late in the year the Special Compen-sation Fund began consideration ofclaims for compensation on the basisof misappropriation or wrongful con-version of funds by Mr. Wirick. TheBenchers rescinded the rule imposing

an annual limit on claim payments,thereby granting the Special Com-pensation Fund Committee discre-tion to approve claims without therestriction of a pre-determined cap.

For more on the Wirick claims and theSpecial Compensation Fund, see theSpecial Compensation Fund reporton page 17 and the financial state-ments for the Special CompensationFund on pages 27 to 29.

Proposed conveyancingpractice reforms, financialprotections

In June, 2002 the Benchers appointeda Conveyancing Practices Task Force,chaired by Victoria Bencher RalstonS. Alexander, QC, to canvass currentconveyancing practice issues in lightof problems that had arisen in thepractice of Martin Wirick. The TaskForce released two reports during theyear, recommending practice reformsand related financial protections.

The Task Force concluded that, tobetter protect the public and upholdthe integrity of lawyers’ undertak-ings, there was a need to change cer-tain conveyancing practices so as todiminish the opportunity for misuseof trust funds. There was also a needto improve the financial protectionsthat cover all trust transactions.

A vendor’s solicitor in a real estatetransaction, for example, should pro-vide a purchaser’s solicitor with evi-dence that encumbrances on titlehave been repaid.

A recommendation that the Benchershad approved by year-end was togive a financial institution 30 days af-ter a mortgage repayment in which toissue a discharge, and the lawyer re-sponsible for the discharge (typically,the vendor’s lawyer) a further 30days to register the discharge. If a dis-charge is not registered at the Land Ti-tle Office within the cumulative60-day period, the vendor’s lawyer is

required to advise the Law Society ofthe institution’s failure to provide thedischarge. A purchaser’s lawyer isalso required to advise the Law Soci-ety if the vendor’s lawyer does notprovide discharge particulars withinthat same period.

These notifications are intended toprovide the Law Society with infor-mation on the business processes offinancial institutions and practices inthe profession, and on whether cer-tain institutions are not providingmortgage discharges within a partic-ular timeframe. It may also flagsituations that require attention or in-tervention from the Law Society. TheTask Force stressed that no adverseinferences would be drawn against alawyer from a failure to obtain a dis-charge of a repaid mortgage from a fi-nancial institution, in the absence ofevidence of breach of undertaking ordefalcation.

The Task Force also recommendednew innocent party insurance cover-age to compensate the public forlosses that result from lawyer defalca-tion, on a go-forward basis. Fundingof the proposed program could bethrough a blended premium. The firstcomponent of such a premium wouldbe a general assessment paid by allpractising lawyers. The second com-ponent would be a fee payable foreach trust account (or trust ledgerwithin a pooled trust account)opened for a client respecting a spe-cific legal transaction or legal matter— with an exemption for very smalltrust transactions and for the collec-tion and payment of retainers. Thatissue is before the Benchers in 2003.

Meredith receives LawSociety Award

The Hon. Kenneth E. Meredith waspresented with the Law SocietyAward at the Bench & Bar Dinner inNovember, in recognition by theBenchers of his remarkable service as

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Year in review

a member of the Bar and as a Justice ofthe Supreme Court. The Law SocietyAward is given every two years tohonour the lifetime contributions ofthe truly exceptional within the pro-fession and the legal community,based on integrity, professionalachievements, service and reform.

Mr. Meredith’s career has spanned 23years of practice — as a commerciallaw lawyer in Vancouver, 10 years aseditor of the Advocate, eight years as aBencher and more than 20 years as aJustice of the Supreme Court of BC.

His vision and commitment led to theestablishment of a legal aid plan thathas served British Columbians forthree decades and to the establish-ment of the Law Foundation of Brit-ish Columbia, which has played acritical role in funding legal aid, lawlibraries, legal education, legal re-search and law reform in the prov-ince.

ProBonoNet BC links lawyersand the community

The first website of its kind in Can-ada, ProBonoNet BC, was launchedon November 19 at www.probononet.com, offering lawyers across BCthe opportunity to respond directly toneeds for pro bono assistance in theircommunities.

ProBonoNet BC is the cornerstoneproject of Pro Bono Law of BC — anon-profit society founded in 2002 bythe Law Society of BC and the BCBranch of the Canadian Bar Associa-tion, with funding from the LawFoundation of BC. Through itswebsite, Pro Bono Law strives to facil-itate pro bono practice in the provinceby linking BC lawyers with the com-munity groups and pro bono organi-zations that need their services.

This approach to pro bono in BC wasset out in Pro Bono Publico – lawyers

serving the public good in British Colum-bia, a report released in June by thePro Bono Initiative Task Force of theLaw Society and CBA (BC Branch),co-chaired by Peter J. Keighley, QCand Carman Overholt, QC.

Certification favoured forparalegalsDuring the year the Benchers decidedin principle to allow a broader scopeof work for law firm paralegals whobecome certified under a proposedLaw Society certification program. Aspecial Paralegals Task Force recom-mended a certification program, afterstudying different approaches toparalegals.

The Task Force study was spurred bydevelopments in Ontario and otherjurisdictions in which there are asignificant number of unregulatedindependent paralegals in the mar-ketplace. Legislative restrictions onnon-lawyer practice are stronger inBC than in Ontario, and the experi-ence with independent paralegalsdiffers in the two provinces. Still, theTask Force flagged the possibility ofchange ahead in BC.

The public in BC deserves the fullbenefit of paralegals in the delivery oflegal services, but without the risksposed by independent paralegals, theTask Force concluded. The Task Forcerecommended expanding the func-tions of paralegals (beyond what isnow permitted by Chapter 12, Rule 4of the Professional Conduct Handbook)if those paralegals work under the su-pervision of lawyers and if they arecertified by the Law Society. Undersuch a program, certified paralegalscould be encouraged to take on newfunctions, including certain advo-cacy roles, such as debt collectionmatters in Small Claims Court or firstappearances and interim appear-ances on uncontested adjournmentsin criminal matters.

The Benchers authorized the Task

The Hon. Kenneth E. Meredith, accompanied by his wife Barbara and family at the Bench &Bar Dinner in November, accepts from the Benchers the 2002 Law Society Award — pre-sented in recognition of his lifetime contributions as a member of the bar and as a Justice of theBC Supreme Court. Mr. Meredith was instrumental to the introduction of a legal aid plan andestablishment of the Law Foundation in BC.

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Year in review

Force to continue consultations in2003, to explore the legal frameworkfor a certification program as well asthe necessary standards, examina-tions and costs.

National mobility agreementsigned

Canadian law societies ended theyear on a celebratory note — withpresidents from eight provinces gath-ering together at Osgoode Hall in To-ronto for a formal signing of a newnational mobility agreement for Ca-nadian lawyers. The agreement, to beimplemented through new rulespassed by each signatory law societyin 2003, makes it easier for most law-yers to travel and work across Can-ada.

Under the agreement, a Canadianlawyer from one province is allowedto practise in a reciprocating provincefor up to 100 business days in a calen-dar year without obtaining a permit,provided the lawyer meets certaincriteria and does not create an eco-nomic nexus with the province. Totake advantage of the new agree-ment, lawyers must meet certainrequirements, such as having no dis-cipline record and carrying profes-sional liability insurance that iscomparable to that required in theprovince they are visiting. Thecriteria for permanent transfer to an-other province are also changed, suchthat most lawyers would need tocomplete certain reading require-ments specific to that province, butwould not write transfer examina-tions.

All law societies are participating inthe national regime except the LawSociety of New Brunswick, the terri-torial law societies and the Chambredes Notaires du Québec (in light ofthe unique role that notaries playunder Quebec’s civil law system).The Barreau du Québec is a signatory,but its participation must await

certain approvals and accommoda-tions specific to the civil law system.

Benchers

Lay Benchers

Lay Benchers are appointed by theprovincial Cabinet and, like electedlawyer Benchers, are Law Society vol-unteers. They bring a public view-point to all work of the Society, inpolicy discussions before committeesand task forces and at the Benchers ta-ble. They also participate on hearingpanels.

Reappointed a Lay Bencher in 2002was June Preston of Victoria, whowas joined mid-year by new appoint-ees Michael J. Falkins of Victoria,Patrick Kelly of Vancouver, ValerieMacLean of Vancouver, PatrickNagle of Sooke and Dr. MaelorVallance of Vancouver. Marjorie Mar-tin, Ann Howard, Anita Olsen andJaynie Clark overheld as LayBenchers pending the new 2002 ap-pointments. Having served the LawSociety as Lay Benchers for more thana decade, Ms. Martin and Ms.Howard each achieved the status ofLife Bencher.

In 2002 Ms. Olsen and Ms. Prestonsuccessively chaired the Complain-ants’ Review Committee, and LayBenchers participated on the Execu-tive, Complainants’ Review, Creden-tials, Discipline, Equity andDiversity, Futures, Practice Stan-dards, Special Compensation Fund,Technology and Unauthorized Prac-tice Committees and on the LawyerEducation, Disclosure and Privacyand Paralegals Task Forces.

Elected Benchers

William Jackson, Crown Counsel inDawson Creek, was elected as aBencher for Cariboo District for 2003in a November 15, 2002 by-election,replacing Richard Gibbs, QC whoseservice as a Bencher and Presidentcompleted at the end of 2002.

Profile of the professionOf the 367 people called to the BC barin 2002, most were new law schoolgraduates — 188 (51.2%) were gradu-ates from BC law schools, 109 (29.7%)were from other Canadian lawschools and 14 (3.8%) were from for-eign law schools. There were also 56lawyers from other Canadian juris-dictions who transferred to BC (15.3%of all calls): see Lawyers called to the BCbar (2000-2002).

As can be seen from the table Law So-ciety members, there were 8,966 prac-tising lawyers at year-end, 1,230non-practising members and 190 re-tired members. Of lawyers with prac-tising status in BC during the year,two-thirds were in private practice.Women made up 32% of the profes-sion.

Looking at geographic distribution,55.2% of lawyers are located in Van-couver district, 12.3% in Westminster,9.3% in Victoria district, 3.7% inNanaimo district, 3.6% in Okanagan,2.1% in Kamloops district, 2.1% inCariboo, 1.3% in Kootenay and justunder 1% in Prince Rupert district.Another 9% reside out of province,many of whom maintain non-practis-ing membership in BC.

The leading areas of practice, accord-ing to time spent by lawyers, are civillitigation (motor vehicle and allother), corporate-commercial, crimi-nal, family law, real estate and admin-istrative law: see 2002 areas of practice.

CredentialsFor the Law Society admission pro-gram, 2002 was a year of change. TheBenchers approved 28 program re-forms recommended by a specialAdmission Program Task Force,chaired by President Richard Gibbs,QC. The Task Force made its recom-mendations after extensive consulta-tion in the profession. By Fall theSociety had begun plans to introducereforms to articling, the Professional

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Year in review

Legal Training Course (PLTC), exam-inations and skills assessments, gov-ernance of the admission programand post-call competence.

The Admission Program Task Forcefocused on the essential criteria fornewly called lawyers — legal knowl-edge, lawyering and practice skills,professional attitude, experience inthe practice of law and good charac-ter. For the admission program tomeet these criteria, the Task Force rec-ommended that the program retainboth teaching and articling compo-nents, but that PLTC and articlingshould be better integrated and har-monized.

Over the course of the Task Force’sstudy, it became clear that articlingwas a weak link in professional legaleducation. Because the quality of arti-cles varies greatly, for some studentsit is now less significant than PLTC aspreparation for the competent prac-tice of law. This fact flagged the needfor reform.

Under program changes planned for2003, students will obtain experienceduring articles in a range of lawyerskills — set out in an admission pro-gram checklist — and in at least threeareas of practice. Articled studentsand principals will also be required tofile with the Law Society at the start ofarticles an articling education con-tract that incorporates references tothe checklist, a joint mid-term reportand a joint final compliance report. ByMay, 2004 a lawyer wishing to serveas a principal will require at leastseven years of practice experience,rather than four, and will be limited totwo students at a time.

PLTC, for its part, must place greateremphasis on skills, professional re-sponsibility and practice manage-ment, and less on substantive law.

A proposal for a mandatory entranceexamination as a prerequisite toPLTC or articling was dropped. The

2002 areas of practice

0.9%

1.0%

1.5%

1.7%

1.9%

2.0%

2.5%

3.2%

3.4%

3.7%

4.7%

4.8%

6.0%

6.5%

7.7%

8.3%

8.6%

9.3%

10.7%

11.6%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%

Creditors' remedies - defendant

Commercial lending - borrower

Commercial lending - lender

Mediator/arbitrator

Intellectual property

Tax

Creditors' remedies - plaintiff

Real estate - commercial

Securities

Motor vehicle - defendant

Real estate - residential

Wills and estates

Commercial - other

Motor vehicle - plaintiff

Corporate

Civil litigation - plaintiff

Family

Civil litigation - defendant

Administrative

Criminal

Law Society members (as at December 31, 2002)

Practising members 8,966 (86.3%)Non-practising members 1,230 (11.9%)Retired members 190 (1.8%)

Total 10,386

Lawyers called to the BC bar (2000 – 2002)

2000 2001 2002

Called to the BC bar

Recent graduates of BC law schools 198 211 188Recent graduates of other Canadian law schools 101 88 109Graduates of foreign law schools 18 16 14Lawyers transferring from other jurisdictions 67 29 56

Total 384 344 367

Reinstatements 41 30 25

10

Year in review

exam was proposed in 1999 as a wayto test the substantive law knowledgeof students and to cut back on sub-stantive law instruction in PLTC. TheTask Force took account of concernssubsequently raised over an entranceexam, including the narrowing effectit might have on the law school cur-riculum, the delay it might impose onstudents starting the admission pro-gram and the concern that studentsmight go to other provinces.

As part of a greater outreach effort inthe law schools, the Law Society will,however, advise law students thatsuccess in the admission program re-quires they be knowledgeable in coreareas of substantive law, practice andprocedure, as they will be examinedon these with little or no additionalinstruction in PLTC.

Another reform was to allows fromother common law countries withfive years of practice experience toapply for an exemption from parts of

PLTC, as they could already for thearticling term, when coming to BC.As practice across Canada is becom-ing increasingly liberal (see “NationalMobility Agreement signed” on page8), law societies also looked at harmo-nizing admission standards for Cana-dian lawyers on a national scale, aproject taken up first in the westernprovinces by BC’s Western Law Soci-eties Task Force.

A Lawyer Education Task Force,chaired by Cariboo Bencher PatriciaSchmit, QC, was struck mid-year forthe next phase of reforms — to pro-mote the excellence and competenceof lawyers through post-call learningand information support and toprobe the continuing educationneeds of newly called lawyers andsole practitioners.

In the midst of these various initia-tives, the ongoing work of enrolment,education and call to the bar of arti-cled students, the transfer of lawyers

from other provinces and other coun-tries and the reinstatement of formerlawyers was carried out by the Cre-dentials Committee and by staff. In2002 the Committee was chaired byFirst Vice-President Howard Berge,QC and later by Russell S. Tretiak,QC. When the character or fitness ofany applicant for admission, rein-statement or transfer needs to be ad-dressed, the Committee considersthese applications directly or orders aformal credentials hearing. The Com-mittee is also responsible for review-ing applications relating to astudent’s failed standing in PLTCand for considering any matters aris-ing from articles.

New Law Society Rules in 2002 pro-vided that an articled student whoseenrolment is subject to a Bencher re-view cannot be called and admittedbefore the Benchers have issued adecision on the review. Other ruleamendments require a party initiat-ing a Bencher review of a credentialsor discipline decision to set out the is-sues in a Notice of Review. The rulesalso automatically stay the panel’sdecision in the case of call and admis-sion or reinstatement, or on applica-tion in other cases, and allow for apre-review conference, with the pre-siding Bencher empowered to orderexchanges of arguments and authori-ties.

During the year the Credentials Com-mittee flagged for the Benchers a dis-crepancy that appeared to existbetween the Law Society Rules andthe Provincial Court Rules — or theinterpretation of those rules — on thescope of practice for articled stu-dents. Lawyers have noted that someProvincial Court judges do not allowstudents to appear at family law caseconferences, arraignment hearings ortrial confirmation hearings and thatsome registries have not allowedstudents to search family law files.The issues were subsequently raised

Of the 367 people called to the BC bar in 2002, most were recent law school graduates — justover half from BC law schools and almost 30% from other Canadian law schools. Just over15% of new lawyers came to BC on transfer from other provinces or territories.

11

Year in review

with the Chief Judge who broughtthem to the attention of the adminis-trative judges. The Chief Judge alsosubsequently issued a practice direc-tion that, for the purpose of registrysearches under Provincial Court Rule20(10), a party’s lawyer includes anarticled student acting for a party oracting as agent for a party’s lawyer.

One pleasure of welcoming the nextgeneration of lawyers is in honouringtheir academic achievements. Duringthe year the Benchers presented LawSociety gold medals to the top BC lawschool graduates, Benjamin Bergerof UVic and Susanne Elliott of UBC,and awarded the Law Society schol-arship for graduate legal studies toJames Hickling, himself a 2000 goldmedallist for UBC.

EthicsThe Ethics Committee, chaired byRalston S. Alexander, QC and subse-quently by G. Ronald Toews, QC in2002, provides support to theBenchers in setting ethical standardsfor the profession. The Committeedoes this in several respects:

� identifying current professionalresponsibility issues;

� developing policy recommenda-tions and possible changes to theProfessional Conduct Handbook�

� interpreting existing rules for in-dividual lawyers or Law Societycommittees; and

� publishing ethical opinions of in-terest to the profession as a whole.

In March, on the Committee’s recom-mendation, the Benchers amendedLaw Society Rule 3-57 to allow law-yers to transmit a bill, and a letter ac-companying a bill, to a client at theclient’s last known email address.The change reflects the legalrecognition accorded to records inelectronic form under the ElectronicTransactions Act SBC 2001, c. 10.

Lawyers, however, must complywith section 69 of the Legal ProfessionAct, which requires that a lawyer’sbill be signed by or on behalf of thelawyer or accompanied by a signedletter — which may be satisfied by anappropriate electronic signature inaccordance with the Electronic Trans-actions Act.

The Ethics Committee provides opin-ions to lawyers who request assis-tance with ethical issues and mayissue formal opinions.

For many years lawyers have ques-tioned the propriety of joint retainersin divorce actions. In 1989 the EthicsCommittee (then called the Profes-sional Standards Committee) pub-lished an opinion in the Benchers’Bulletin that lawyers should not actfor both spouses in bringing a joint ac-tion for divorce under the DivorceRules because of the potential for dis-agreement to emerge between partiesin family law matters, even after bothspouses have received independentlegal advice. That opinion was con-firmed in 2000.

After concerns expressed by lawyers,the 2002 Committee determined that,in special circumstances, the prohibi-tion need not apply. A lawyer, includ-ing one who has acted as mediator forthe spouses, may act for both spousesin a joint action for divorce, providedall relief sought is by consent andboth parties have received independ-ent legal advice in relation to the mat-ter.

The Ethics Committee also revised anearlier opinion on lawyer participa-tion in a “home closing program” ofFirst Canadian Title after that pro-gram was redesigned. Alawyer couldact for a purchaser, or for a purchaserand a lender (provided that represen-tation is permitted by Appendix 3 ofthe Professional Conduct Handbook) un-der the redesigned program on cer-tain conditions, including that the

Personal assistanceprograms

To encourage lawyers to main-tain wellness and competence,the Law Society funds two in-dependent, confidential per-sonal assistance programs:Interlock and the Lawyers As-sistance Program (LAP).

Interlock offers professionalcounselling and referrals forlawyers and their families on arange of personal or work-re-lated problems, including rela-tionship difficulties and stress— on a self-referral basis. Inter-lock has registered psycholo-gists, social workers, clinicalcounsellors and addiction spe-cialists available in many com-munities in BC. In 2002Interlock provided services to366 new clients (289 lawyers,75 students and two familymembers), with couples andfamily concerns being mostprevalent (38%), followed byworkplace stress (10%).

The Lawyers Assistance Pro-gram relies on a network ofover 200 volunteers, premisedon “lawyers helping lawyers.”LAP takes self-referrals andmay undertake interventionsfor substance abuse and otherproblems. The programhelped 240 new people in 2002,and organized volunteer train-ing retreats, AA retreats, sup-port groups and careerplanning workshops.

12

lawyer not act for First Canadian Titleand does not owe it any of the dutiesthat are owed to a client.

The Committee gave opinions to in-dividual lawyers on matters rangingfrom the separation of business ven-tures from a lawyer’s practice toscreening measures appropriate insome circumstances for new staffjoining a law firm.

The Committee also carried out pol-icy development for the Benchers onthe Professional Conduct Handbook.During the year, the Committeeworked up recommendations forchanges to Chapter 3 to clarify a law-yer’s obligations to a client who lackscapacity to give instructions andchanges to Chapter 7 to allow a law-yer in some circumstances to takeshares in a corporate client in lieu offees.

With a new National Mobility Agree-ment on the horizon, the Ethics Com-mittee explored the potential for aharmonized code of professional con-duct for the western provinces or anational code for all of Canada. TheCommittee told the Benchers that theresponsibility of each law society toset professional standards within itsjurisdiction may preclude a harmo-nized mandatory code for the prov-inces. A model code of conduct mightprove useful, however, and that pro-ject may be looked at further.

Practice adviceThe Law Society Practice Advisor,Practice Management Advisor andEthics Staff Lawyer answer severalthousands of practice enquiries eachyear, with the more significant orcommon enquiries often leading topractice advice articles in theBenchers’ Bulletin and other publica-tions.

The Law Society offers services andresources to assist lawyers to practisecompetently, ethically and in a waythat is financially viable, and to avoid

Year in review

complaints and insurance claims.

There are many facets to this pro-gram, including advice on practiceand professional conduct issues. Avery successful initiative is publica-tion of practice resources on the LawSociety website. In 2002 BC lawyersdownloaded over 16,000 practicechecklists and 8,600 articles on suchfundamentals as “Opening andMaintaining Client Files,” “GettingStarted: Trust Accounting,” “GettingStarted: Opening Your Law Office,”“Winding up a Sole Practice,” “Re-mitting Interest to the Law Founda-tion” and “CDIC reports.”

A highlight of the year was the inau-gural Pacific Legal Technology Con-ference “Technology that Works andPays for Itself” on October 18, orga-nized by Practice Management Advi-sor Dave Bilinsky and presented bythe Law Society, the CBA, BC Branch,

the Trial Lawyers Association of BCand the ABA Law Practice Manage-ment Section. The Conference offereda full day of multi-track educationalsessions by acclaimed speakers whofocused on the practical results oftechnology. Over 300 litigators, solici-tors, office administrators, legalresearchers and IT professionals at-tended.

The Conference showcased legaltechnologies, what they can do forlaw firms and legal departments,how they can be implemented in abusy office or in the course of trial tomaximize benefits and how firms canmanage the legal and ethical side oftechnology. Special features includeda look at the technologies behind thenew “21st Century Courtroom”at theVancouver Law Courts and a fullexhibitors display area for softwarepresentations and hands-on demon-strations.

The Pacific Legal Technology Conference was a new event in 2002. Presented by the Law Soci-ety, together with the Canadian Bar Association (BC Branch), the Trial Lawyers Associationof BC and the ABA Law Practice Management Section, the Conference offered a full day ofeducation on the practical side of technology for lawyers in practice. Over 300 lawyers, officeadministrators, legal researchers and IT staff attended.

13

Professional conduct anddisciplineStaff lawyers and paralegals in theProfessional Conduct Departmentcarry out the initial review and as-sessment of complaints about law-yers — a fundamental part of the LawSociety’s role in enforcing standardsof professional responsibility. Com-plaints are most frequently made byclients, opposing parties or lawyers,but a complaint is defined in the LawSociety Rules to include informationfrom any source that suggests a disci-plinary violation.

In 2002, the Law Society received1,590 complaints and enquiries,slightly more than in 2001 (1,561).

The department’s goal is to completeand close most files within sixmonths, although complex or seriousmatters can take longer to investigateand assess. By year-end, staff com-pleted their review and assessment of1,535 files.

In 2002 the Professional Conduct De-partment continued work on alterna-tive forms of complaint resolution.The intent was to improve efficiency,increase the satisfaction of lawyersand complainants and spend less in-vestigative time on minor matters.This allows for greater focus on themost serious and complex com-plaints, such as those involving themishandling of trust funds.

In 2002 15.1% of complaints were re-solved or reconciled, sometimes withthe assistance of Law Society staff.

Telephone complaint resolution is anapproach often favoured by com-plainants and is considered for suchmatters as unpaid debts, return offiles, general dissatisfaction, simpledelay and rudeness. Another optionopen to lawyers and clients when feesare at issue is a voluntary fee

Year in review

continued on page 15

Type of file 2000 2001 2002

Complaints:Abuse of process 38 30 21 (1.5%)Advertising 28 6 7 (.5%)Breach of Act or rules 31 52 33 (2.4%)Breach of confidentiality 16 15 11 (.8%)Breach of undertaking 55 27 50 (3.6%)Conduct unbecoming 22 14 25 (1.8%)Conflict of interest 79 85 56 (4.1%)Counselling/engaging in unlawful conduct 10 5 5 (.4%)Court: missed limitation/disrespect 14 11 7 (.5%)Criminal/quasi-criminal conduct 11 6 11 (.8%)Delay/inactivity 67 50 64 (4.7%)Discrimination 4 4 4 (.3%)Dissatisfaction with legal service 226 228 253 (18.4%)Error/negligence/incompetence 63 61 55 (4.0%)Failure to communicate/respond 139 112 130 (9.4%)Failure to follow/obtain client instructions 45 19 15 (1.1%)Fees 69 60 63 (4.6%)Miscellaneous/unclassifiable 40 33 64 (4.6%)Misleading/dishonest conduct 77 93 74 (5.4%)Office management/employee supervision 5 14 13 (.9%)Opposing party: direct contact/dissatisfaction 116 162 159 (11.6%)Personal problems affecting practice 3 4 4 (.3%)Rudeness 30 36 32 (2.3%)Sharp practice 42 42 20 (1.5%)Threatening 29 24 25 (1.8%)Trust defalcation 24 30 15 (1.1%)Unpaid creditor/disbursement 81 58 94 (6.8%)Withdrawal from case 13 17 10 (.7%)Withholding file/funds 46 50 56 (4.1%)

Total complaint files opened 1,423 1,348 1,376

Public enquiry files opened* 243 213 214

Total complaints and public enquiries 1,666 1,561 1,590

Files closed 1,733 1,655 1,535

Complaint files by type of conduct alleged

* In addition to complaint files, the Law Society opens files for all written public enquiries aboutlawyer conduct (in which no particular lawyer is identified) or enquiries that do not relate tolawyer competency or conduct, but to some aspect of the legal system. The Professional ConductDepartment staff also routinely offer information by telephone about lawyers in general, the LawSociety and justice system, handling almost 3,700 public calls in 2002.

14

Year in review

Disposition of complaints and public enquiries closed in 2002# of files % of all files

Reconciled/resolved1 231 15.1%Minor misconduct 56 3.6%Minor error 45 2.9%Referred to Discipline Committee 149 9.7%Referred to Practice Standards Committee 48 3.1%Misconduct not established after investigation2 678 44.2%Outside Law Society jurisdiction: complainant advised

of possible civil remedies3 328 21.4%

Total 1,535

Note 1: Just over 15% of all complaints werereconciled or resolved between the lawyer andclient, sometimes with Law Society assis-tance, such as through telephone complaintreconciliation. When there was minor miscon-duct or a minor error, this was often acknowl-edged by the lawyer and the acknowledgementconveyed to the client, without need for adiscipline referral. 12.8% of complaints weresufficiently serious to warrant a referral to ei-ther the Discipline or Practice StandardsCommittee.

Note 2: After investigation, the ProfessionalConduct Department may determine that acomplaint is invalid or that there is insuffi-cient evidence to substantiate the allegation.When a complainant finds a staff determina-tion unsatisfactory, he or she may in somecircumstances have the matter reviewed by theComplainants’ Review Committee.

Note 3: The Law Society frequently receivescomplaints that fall outside its jurisdiction,most commonly complaints of dissatisfactionover a lawyer’s fees or services that do notamount to a conduct or competency concernfor the Society. The Society explains thedifference between its regulatory jurisdictionover lawyers and the complainant’s legal op-tions, which may include a fee review before aregistrar.

Actions taken by Discipline Committee2000 2001 2002

Citations 28 33 33Admonishments from Discipline chair 26 17 16Conduct reviews 70 42 33Total 124 92 82

Note: For Practice Standards Committee statistics, see page 16.

Disposition of citations2000 2001 2002

Admissions of guilt (Rule 4-21) 1 6 4Resignations – – –Disbarments – 2 2Suspensions 3 7 4Fines 3 5 7Reprimands 7 5 6Citation rescissions by Discipline Committee* 11 8 5Citation dismissals by hearing panels 1 3 –Total citations completed 26 36 28

* May include matters referred for conduct review.

Disposition of 2002reviews by Complainants’

Review Committee

No further action 75Complaint withdrawn 1Referred to Practice Standards

Committee 2Referred to Discipline

Committee 2

Total 80

Note: A complainant who is dissatisfied withthe staff’s disposition of a complaint may askthe Complainants’ Review Committee, whichis chaired by a Lay Bencher, to reconsider thedisposition. The Committee could find nogrounds for further action on 94% of the 80matters reviewed.

15

Year in review

mediation program.

In 2002 the department referred 48complaints (3.1% of files closed) to thePractice Standards Committee, upfrom the 26 files (1.6%) referred in2001. The department referred 149files (9.7%) to the Discipline Commit-tee for consideration, the same num-ber as in 2001. A referral to theDiscipline Committee may result insuch disciplinary action as a letter tothe lawyer from the Committee chair,a conduct review before a Bencherand another senior practitioner, or acitation for a formal hearing before apanel.

Of the files closed in 2002, 44.2% didnot reveal a conduct or competencyconcern or were unprovable or un-founded. 21.4% were assessed as out-side the Law Society’s jurisdiction.

A complainant who is unhappy with

a staff decision to take no further ac-tion on a complaint can, in some cir-cumstances, request a review beforethe Complainants’ Review Commit-tee, which is chaired by a LayBencher. A review of procedural fair-ness by the office of the provincialOmbudsman is also an option, al-though as a result of recent financialcutbacks the Ombudsman has indi-cated that its power is limited.

The Law Society complaints processis confidential, and the Society re-ports out only to the complainant andlawyer. This ensures the integrity ofan investigation, fairness to the law-yer’s reputation and privacy of thecomplainant. If, however, a com-plaint is already known to the public,such as through media reports, theSociety may comment publicly on thestatus of the complaint.

2002 complaint files by area of practice

Civil litigation (other)

17.4%

Corporate/commercial

8.0%

Creditors' remedies

1.1%

Criminal

7.3%

Family

30.5%

Motor vehicle

10.3%

Multiple/miscellaneous

2.4%

Real estate

9.9%

Wills and estates

7.2%

Administrative

5.9%

When there is enough evidence ofmisconduct to merit a formal disci-pline hearing, the hearing is open tothe public, and both the circum-stances of the misconduct and the re-sults of any discipline action are alsopublic.

During the year, Law Society Rule 5-3(4) was adopted to provide that a per-son is disqualified from appearing ascounsel for any party in a Law Societycredentials or discipline hearing forthree years after serving as a Bencheror as a member of a hearing panel. Itwas previously the Benchers’ policythat Life Benchers should never ap-pear as counsel in hearings and otherformer Benchers should not appearfor three years. It is the Benchers’ pol-icy not to retain former Benchers torepresent the Law Society in internalhearings.

To ensure that Law Society regulationis transparent and efficient and thatlegitimate privacy interests are re-spected, the Law Society’s Disclosureand Privacy Task Force, chaired byPeter J. Keighley, QC, undertook a re-view of Law Society regulatory pro-cesses, beginning with discipline. TheTask Force’s recommendations, ap-proved by the Benchers in principlein the Fall, will allow for publicationof both discipline hearing dates andcitations on the Law Society website,as well as the full text of hearing re-ports.

The Benchers also decided that ahearing panel should be permitted toorder, on its own motion, that all orpart of a hearing be held in camera toprevent disclosure of personal, privi-leged or confidential information andthat such issues further be discussedat pre-hearing conferences.

The rules will also allow for publicaccess to hearing exhibits, at the ex-pense of the person making the re-quest and subject to removal ofprivileged or other specified informa-tion.

16

Practice standardsIn addition to programs that enhanceoverall competence in the profession,the practice problems of individuallawyers are addressed by a PracticeStandards Committee, which in 2002was chaired by Russell S. Tretiak, QCand then by Gerald J. Kambeitz, QC.

The Committee addresses compe-tency issues in two ways:

� by assisting lawyers whose com-petency is in question achievecompetency; and

� by restricting from practice in-competent lawyers who pose adanger to present or future cli-ents.

When a lawyer is referred to the Prac-tice Standards Committee — often bythe Professional Conduct Depart-ment staff or the Discipline Commit-tee as a result of complaints — thelawyer may be asked to participate ina practice review conducted by a vol-unteer practitioner and a Law Society

staff lawyer. New referrals to theCommittee were up in 2002 and thenumber of practice reviews orderedby the Committee rose from 11 in 2001to 21 in 2002.

Through practice reviews and recom-mendations, as well as follow-upmeasures in the program, the focus ison remediation where possible andeconomically feasible for the lawyer.When the practice review and reme-dial studies program began in 1986,efforts often focused on upgradinglawyers with poor legal knowledgeor turning around disorganized prac-tices. The reality today is that, even ifwell-versed in law and procedure,some lawyers face financial difficul-ties, depression or psychiatric prob-lems that can contribute to acrumbling legal practice. Increas-ingly, the Committee seeks to have astruggling lawyer restrict his or herpractice to certain areas, or to workonly under the supervision of anotherlawyer — steps that emphasize the

Year in review

2002 referrals to the Practice Standards Committee

Lawyers referred 29Results of referrals:

Practice review ordered 21Meeting with senior lawyer 2Referred to Discipline Committee 1

Disposition of ongoing files:New practice restrictions 13Practice supervision put in place 1Referred to Discipline Committee 2Matter completed to satisfaction of Practice Standards

Committee (file closed) 22Costs ordered $43,100

The Practice Standards Committee considers referrals from Professional Conduct Departmentstaff, the Discipline Committee or other sources, and takes remedial, rather than disciplinary,action to assist a lawyer who is having difficulty in practice.

lawyer’s individual responsibility tomaintain competence. These ap-proaches have proved successful formany lawyers in stabilizing theirpractices and protecting clients.

To meet the growing need for practicereviews and follow-up, the practicestandards program relies on volun-teers within the profession, both toassist staff on practice reviews and toserve as practice supervisors.

Many lawyers referred to the PracticeStandards Committee recognize theirneed to establish a viable law prac-tice, meet professional responsibili-ties and avoid disciplinaryconsequences. If their problems arevery serious or they are unwilling tomake the necessary changes, a disci-pline referral is still possible. ThePractice Standards Committee playsan important role in overseeing reme-dial measures ordered by a disciplineor credentials panel.

Equity and diversityThe Equity and Diversity Committee,chaired by President Richard Gibbs,QC and later by Anne K. Wallace in2002, assists the Benchers on diversityissues, including multiculturalism,gender equality, disability and sexualorientation.

During the year the Committee con-ferred on Discrimination Ombuds-person, Anne Chopra, the new title ofEquity Ombudsperson, along with abroader educational role, which in-cludes assisting with the integrationof equity and diversity issues inPLTC.

The Committee also laid plansthrough working groups to follow upon several diversity initiatives. In fol-low-up to the 2001 Lawyers with Dis-abilities report, the disability workinggroup secured federal funding togather empirical research on the ob-stacles now facing lawyers with dis-abilities and, through policy forums,to identity ways of eliminating those

17

Year in review

obstacles.

2002 was a year to reflect on genderissues as well. A decade after releaseof Women in the Legal Profession andGender Equality in the Justice System,Law Society studies that documentedwidespread gender bias within the le-gal profession and the justice system,women lawyers continue to leave theprofession in greater numbers thanmen. Although steps have been takento encourage women to remain in theprofession, more work is needed. Theworking group on women in the legalprofession planned new research,such as confidential exit interviewsfor lawyers leaving the profession aswell as meetings of practitioners, lawstudents and articled students.

Finally, the Aboriginal workinggroup outlined steps to implementBenchers’ resolutions to improve theexperience of Aboriginal people inthe profession — from law school, toarticling through to the practice oflaw. The Benchers had earlier ap-proved an admission outreach pro-gram (coordinated with the lawschools and other bodies) to helpmembers of the Aboriginal commu-nity and other historically disadvan-taged groups enter law school and toassist Aboriginal students in findingthe financial resources necessary toattend law school preparatory pro-grams.

Unauthorized practiceBecause of the serious risk to the pub-lic of unqualified people offering le-gal services, the Law Society isresponsible under the Legal ProfessionAct, not only for setting and uphold-ing regulatory standards for lawyers,but for ensuring that unqualified peo-ple do not illegally offer legal servicesor misrepresent themselves as law-yers.

The Society investigates complaintsof unauthorized practice and takesthe steps necessary to stop it. If the

facts bear out a complaint, the Societywill explain the restrictions that ap-ply to law practice and will ask thenon-lawyer to refrain from the activ-ity. Usually this step is sufficient.When it is not, the Society has statu-tory authority to seek a court injunc-tion, which may proceed by consent.

Through the work of the Unautho-rized Practice Committee in 2002,chaired by Gerald J. Kambeitz, QC,the Law Society obtained 26 under-takings and covenants from non-law-yers to refrain from unauthorizedpractice, as well as six consent injunc-tions and five other injunctions.

The Society regularly publicizes allundertakings and court actions to en-sure the community understands thisaspect of the Law Society’s mandate,and also to gain the assistance oflawyers and members of the public inrecognizing new or recurring unau-thorized practice.

The types of unauthorized practiceencountered in 2002 varied — fromindividuals preparing divorce pa-pers, to collection agencies appearingin court on collection actions to for-mer lawyers holding out that theywere lawyers or entitled to practiselaw. One of the more common prob-lems during the year came from smallbusinesses — including certain taxpreparation firms and a notarial prac-tice — offering to prepare corporatedocuments although they lacked thequalifications or authority to do so.

With the advent of new internet filingrequirements for annual reports inthe Corporate Registry, the Commit-tee noted that the principals of com-panies may choose to file reportsdirectly. Those that need assistance oradvice, however, should be alerted tothe importance of professional quali-fications. On the Committee’s recom-mendation, the Corporate Registryadded to its website a caution that, “ifassistance is required in preparingthe annual report, individuals should

consult a lawyer.”

During the year the Committeelaunched into a policy discussion oflay advocates who appear for em-ployers before the Workers Compen-sation Board. The Committee hadconcerns over lay advocates provid-ing services, without adequate regu-latory protections for the public. Thatissue, and the Law Society’s ap-proach to WCB lay advocates, will belooked at further in 2003.

One perennial problem — that of no-taries public offering probate services— was resolved on appeal to the Su-preme Court of Canada. In Octoberthe Court refused to hear an appealby Sparwood notary public MarianGravelle who had been ordered tostop probating wills. The BC Su-preme Court and BC Court of Appealdecisions were accordingly leftstanding, to the effect that BC notariesare not entitled to probate wills or toprepare documents relating to the es-tate of a deceased person under theNotaries Act: Law Society of British Co-lumbia v. Gravelle 2001 BCCA 393.

Special Compensation Fund2002 proved a difficult year for theSpecial Compensation Fund. In thewake of the deplorable actions offormer Vancouver lawyer MartinWirick, the Law Society was called onto demonstrate the profession’s deepcommitment to public protection.

In May, 2002 Mr. Wirick voluntarilyresigned his Law Society of BC mem-bership, noting financial and proce-dural irregularities in his real estatepractice. The Law Society immedi-ately obtained a court order for theappointment of a custodian and un-dertook an audit of his practice. Mr.Wirick was cited and a disciplinehearing panel found him guilty ofprofessional misconduct for breach-ing his undertaking to pay out anddischarge mortgages on propertywhile acting for one of his developer

18

clients. Mr. Wirick was ordered dis-barred on December 16: see DisciplineCase Digest 03/05.

The actions of Mr. Wirick while actingfor the developer client in convey-ancing and mortgage financing trans-actions led to a large number ofclaims against the Special Compensa-tion Fund. The Fund, paid for entirelyby BC lawyers, compensates peoplefor loss suffered through theft by a BClawyer acting in that capacity. Pay-ment from the Fund is discretionaryand determined by the Special Com-pensation Fund Committee.

In 2002 these challenges were takenup by a dedicated Committee chairedfirst by Robert W. Gourlay, QC andlater by Peter J. Keighley, QC.

The Law Society’s audit and investi-gation of Mr. Wirick’s practice hasproved time-consuming. This was sobecause of overlapping claims relat-ing to various properties he handled,the complexity of the claims and theneed to identify the potential for re-coveries. The Benchers have receiveddetailed updates on the status of out-standing claims, costs and possiblerecoveries since the start of the inves-tigation.

In recognition of the need to maintainpublic confidence, the Benchers re-scinded Law Society Rule 3-33 to re-move the $17.5 million cap onpayments that the Special Compen-sation Fund Committee can autho-rize in a calendar year. This step gavethe Committee discretion to approveclaims without the restriction of apre-determined cap. It was yet an-other affirmation of the unique andenduring commitment of BC lawyersto public protection.

By the end of 2002 the Law Societyhad received 479 claims against theFund, totalling $65 million, that re-lated to Mr. Wirick’s practice. TheSpecial Compensation Fund Com-mittee reviewed 31 of these claims,

Year in review

Special Compensation Fund claims paid (1998 – 2002)

No. of paid No. ofYear $ Paid claims involved lawyers

1998 45,879 5 41999 45,692 2 2

2000 363,022 10 5

2001 1,035,959 10 4

2002 5,326,205 36 8

Over the past five years, the Special Compensation Fund paid out $6,816,757 on 63 claims. Theseclaims were caused by 16 lawyers — out of over 6,800 lawyers in private practice (the claimsagainst several of these lawyers were paid out over the course of more than one year).

totalling $9 million. The Committeeapproved payment of $5 million ofthe claims and denied $4 million,since this latter amount related to du-plicate or overlapping claims in thetransactions under review.

As of April 30, 2003 the total numberof claims relating to Mr. Wirick’spractice had risen to 501, totalling $68million. As of that date, the Commit-tee had reviewed 51 of the claims (in-cluding those reviewed in 2002)totalling $16 million. In its review, itapproved $10 million of the claimsand denied $6 million in duplicate oroverlapping claims.

The Special Compensation Fund car-ried $17.5 million in coverage ($15million in insurance and a $2.5 mil-lion deductible) for the 2002 bond pe-riod. A claim attaches to the bondperiod in which the Society becomesaware of evidence that a lawyer mayhave engaged in a misappropriationor wrongful conversion. All claimsarising from the practice of MartinWirick are attributed to the SpecialCompensation Fund 2002 bond pe-riod. The insurers are accordingly

responsible to pay $15 million of thetotal claim payments approved bythe Special Compensation FundCommittee for that period, after pay-ment by the Law Society of the $2.5million deductible.

The Special Compensation Fund as-sessment was $250 in 2002, which theBenchers resolved to increase to $600in 2003. That increase was needed tocover audit and investigation costs, topay claims and to increase the SpecialCompensation Fund reserves. Whilethe Society has diligently managedthe Special Compensation Fund filesto control custodian, investigationand audit costs, those costs increasedsignificantly in 2002, primarily re-lated to the practice of Mr. Wirick. TheBenchers are exploring various op-tions for financing claim paymentsfrom the 2002 bond period, includingfinancing the claims over a number ofyears.

For more information on the SpecialCompensation Fund, see financialstatements on the Fund on pages 27 to29.

19

Lawyers Insurance FundThrough the Lawyers InsuranceFund (LIF), all BC lawyers in privatepractice are required to carry liabilityinsurance for legal malpractice of upto $1 million per error and $2 millionannually.

The number of reports to LIF

annually has remained consistentover the last five years: see Claim andincident reports 1998 – 2002. Just overone-third of all matters are reportedas actual claims and the balance as in-cidents, or potential claims.

BC lawyers understand their obliga-tion to report all potential claims and

Year in review

to do so early, which has allowed forbetter management of the program.In each of the past five years, the pro-gram closed at least 70% of all reportswithout payment of either defencecosts or settlements. Of reports closedin 2002, no claims developed in 46%,claims were abandoned in 22.9% andclaims were dismissed pre-trial in5.8%. The repair of claims continuesto be a feature of LIF’s proactiveclaims management. Thanks largelyto the efforts of Claims Counsel, in al-most 10% of all reports closed, theproblem was successfully repaired.This approach has significant benefitsboth for lawyers and their clients. LIFrealizes substantial savings fromminimizing or eliminating a potentialloss, and clients are often pleased tomaintain a working relationship withtheir lawyers.

The percentage of insurance reportsreceived from BC lawyers in 2002,broken down by area of practice, areset out in the chart Insurance reports byarea of law – 2002. The leading areaswere plaintiff motor vehicle cases(16.6% of all reports), other plaintiffcivil actions (14.4%), residential realestate matters (10.8%) and commer-cial matters (10.1%).

The leading causes of loss to the pro-gram were the same in 2002 as in 2001— insufficient review by lawyers andpoor client communications, fol-lowed by inadequate office proce-dures and systems, negligent adviceand insufficient preparation.

The satisfaction of lawyers with theprogram remained high according to2002 survey results. 92% of survey re-spondents gave a high approval rat-ing (4 or 5 on a scale of 1 to 5) on thehandling of their claims, 91% on theoutcome of their claims, 97% on thework of Lawyers Insurance FundClaims Counsel and 95% on the ser-vice provided by defence counsel.

Mid-year, lawyers employed bycommunity law offices or by public

400 369 357310 342

684699

675

640633

0

200

400

600

800

1000

1200

1998 1999 2000 2001 2002

Incidents

Claims

Claim and incident reports 1998 – 2002

Insurance reports by area of law – 2002

0.2%

0.6%

0.7%

0.8%

1.0%

1.6%

1.6%

1.7%

1.7%

2.3%

2.8%

3.2%

4.7%

5.3%

6.4%

7.6%

10.1%

10.8%

14.4%

16.6%

5.9%

Mediator / arbitrator

Other

Motor vehicle - defendant

Criminal

Creditors remedies - defendant

Securities

Tax

Intellectual property

Commercial lending - borrower

Administrative

Corporate

Real estate - commercial

Commercial lending - lender

Creditors remedies - plaintiff

Civil litigation - defendant

Wills and estates

Family

Commercial - other

Real estate - residential

Civil litigation - plaintiff

Motor vehicle - plaintiff

20

Year in review

advocacy associations that providefree legal services to the public wereoffered the opportunity to purchaseprofessional liability insurance cov-erage through the Lawyers InsuranceFund. The community law officeshad earlier lost Legal Services Societyfunding and, with it, insurance cover-age for their employed lawyers. TheBenchers wished to offer these law-yers coverage through the LawyersInsurance Fund, recognizing thatrates in the private insurance markethad hardened and that lawyersworking for non-profit legal aid andpublic advocacy groups would havedifficulty finding affordable insur-ance.

The profession as a whole can haveconfidence in the integrity of theLawyers Insurance Fund and in theFund’s sound financial position tocompensate the public for lawyers’errors and omissions and providereasonable protection for lawyersfrom malpractice. For detailed finan-cial information, see the Lawyers In-surance Fund financial statements onpages 30 to 33 and also “Finances,”which follows.

FinancesBC lawyers pay the cost of Law Soci-ety operations through annual as-sessments and other fees. The Societycarries out its duties through threefunds:

� General Fund — the primarysource of funding for Society reg-ulation, programs and services;

� Liability Insurance Fund — afund to provide errors and omis-sions insurance coverage for law-yers for professional services;

� Special Compensation Fund — afund to reimburse those who suf-fer a loss as a result of lawyertheft.

The 2002 audited financial state-ments for these funds are set out on

Building operating costs

0%

Federation of Law Societies

1%

Ethics

1%

Annual Report and meeting

1%

Equity and diversity

1%

Credentials

3%

Juricert Services Inc.

4%

Member Services

4%

Communications

4%

PLTC (gross cost)

10%

Discipline and professional

conduct

15%

Audit and investigation

5%

General office

administration 22%

Member assistance programs

3%

Unauthorized practice 1%

Benchers, legal and

task forces 9%

BC Courthouse Library Society

8%

Policy and planning 3%

Practice standards

and advice 5%

2002 General Fund expenditures

This chart shows gross program expenditures as a percentage of total 2002 General Fund expendi-tures, other than building operations, which are shown on a net basis.

pages 22 to 33 of this report. Thesestatements reflect the presentationand disclosure standards of theCanadian Institute of Chartered Ac-countants respecting not-for-profitorganizations.

All funds are financed and accountedfor separately. The Lawyers Insur-ance Fund and Special CompensationFund both make a proportionate con-tribution to the General Fund for LawSociety facilities, administrative ser-vices and some defined program ex-penses. These expenses are incurredwithin the General Fund budget andrecovered from the other two Funds.

The General Fund provides theresources for regulation of the legalprofession in BC, a primary

responsibility of the Law Society, andreceives a majority of its revenuefrom the annual fee paid by practis-ing lawyers.

The pie chart 2002 General Fund expen-ditures shows the gross program costsof the main Law Society programs asa percentage of the General Fund’s to-tal cost, including the related spaceand staffing costs.

Overall, the programs administeredby the Law Society in 2002 were simi-lar to those in 2001. The GeneralFund’s total expenses, includingJuricert Services Inc., building opera-tions and co-funded program costsincreased by only $86,000 or .6%,whereas total revenues increased bynearly 5%.

21

Year in review

The Law Society had anticipated anincrease in costs in 2002 related to cer-tain programs and, in particular, tothe Society’s constitutional challengeof the Proceeds of Crime (Money Laun-dering) and Terrorist Financing Act.With the Federation of Law Societiesjoining the litigation on behalf of alllaw societies in Canada, and thanks tothe generous pro bono contributionsof the Law Society’s counsel, the liti-gation proved less costly than antici-pated in 2002 and also enjoyed someearly success. As noted in “2002 high-lights,” the federal Attorney Generalagreed to interim consent orders incourts across the country to exemptlawyers from the recording and re-porting requirements of Part 1 of theAct, pending final resolution of the lit-igation. The case is set to proceed inBC Supreme Court in 2004.

As a result of revenues increasing andexpenses remaining under budget,the General Fund recorded a budgetsurplus of $723,000 in 2002, which leftthe Fund with a reserve of nearly $1.4million at year-end.

The Law Society has frequently tack-led the current practice issues that im-

pact on BC lawyers and their clients,such as proceeds of crime legislation,in addition to fulfilling its overall reg-ulatory responsibilities. The Societynevertheless continues to charge apractice fee that compares favourablywith that in other jurisdictions.

The Special Compensation Fund re-serve decreased significantly in 2002.An operating loss of $3.22 million re-sulted in the Fund’s reserve droppingto $4 million. The Wirick matter, de-scribed in the Special CompensationFund section of this report, was themain reason for the year’s deficit.While custodian, audit and investiga-tion expenses were tightly managed,they were nevertheless very high. Pri-marily as a result of the Wirick matter,the year also ended with a significantclaims inventory that will impact onthe Fund’s financial results for sev-eral years as the Special Compensa-tion Fund Committee reviews theclaims for payment. The Benchers areexploring various financing options.

The Lawyers Insurance Fund’s re-serve increased by $4.3 million to$17.1 million in 2002. The financialstrength of this Fund is reflected in

federal government folded, agreed toexemptions for lawyers in all prov-inces, and paid costs.

BC lawyers may be rightly proud ofthe Benchers for an effective litigationremedy. Neither the Canadian BarAssociation nor any other law societyin Canada intended to challenge theProceeds of Crime (Money Laundering)Act in its application to lawyers andits interference with the lawyer-client

relationship. Were it not for the lead-ership of the Benchers of BritishColumbia we lawyers would havebeen clandestinely informing gov-ernment of our clients’ affairs, and ofour suspicions about our clients’ af-fairs, for nearly two years now.

We ran out of writs in about March,2002. Damn good thing, too.

There is a clear unifying theme toBencher activity in 2002. TheBenchers strove mightily to protectthe public interest, with majorinitiatives in discipline, credentialsand Special Compensation Fund

matters — thereby justifying contin-ued public and government confi-dence in a self-regulated legalprofession. At the same time, theBenchers acted decisively to protectthe independence of the judiciary andof the legal profession from govern-ment, important foundations for afree and democratic society.

All in all, it was a fractious, divisiveyear in which traditional relation-ships were disrupted and muchhostility engendered. Important prin-ciples were upheld. The geese, how-ever, remain …

President’s report … from page 2

the stability of insurance assessmentsthat BC lawyers have enjoyed overthe past several years.

All funds of the Society are financiallysound.

22

The Law Society of British Columbia

Financial StatementsFor the year ended December 31, 2002

AUDITORS’ REPORT

GENERAL FUNDSPECIAL COMPENSATION FUND

LAWYERS INSURANCE FUND

To the members ofThe Law Society of British Columbia

We have audited the statements of financial position ofThe Law Society of British Columbia – General Fund,Special Compensation Fund and Lawyers InsuranceFund as at December 31, 2002 and, for each of these Funds,the statements of revenue and expense, changes in netassets and cash flows for the year then ended. Thesefinancial statements are the responsibility of the Funds’management. Our responsibility is to express an opinionon these financial statements based on our audits.

We conducted our audits in accordance with Canadiangenerally accepted auditing standards. Those standardsrequire that we plan and perform an audit to obtain rea-sonable assurance whether the financial statements arefree of material misstatement. An audit includes examin-ing, on a test basis, evidence supporting the amounts and

disclosures in the financial statements. An audit alsoincludes assessing the accounting principles used andsignificant estimates made by management, as well asevaluating the overall financial statement presentation.

In our opinion, these financial statements present fairly, inall material respects, the financial position of the Funds asat December 31, 2002 and the results of their operationsand their cash flows for the year then ended in accordancewith Canadian generally accepted accounting principles.

Vancouver, B.C.May 2, 2003 Chartered Accountants

23

The Law Society of British Columbia — GENERAL FUND

Consolidated Financial StatementsFor the year ended December 31, 2002

CONSOLIDATED STATEMENT OFFINANCIAL POSITION

as at December 31, 2002

2002 2001$ $

Assets

Current assetsCash and cash equivalents 6,858,077 1,052,749Unclaimed trust funds 538,919 464,077Accounts receivable and prepaid expenses 360,289 453,508B.C. Courthouse Library Fund (note 2) 385,824 430,850Due from Lawyers Insurance Fund (note 6) 1,921,772 9,571,315Due from Special Compensation Fund

(note 6) 3,972,084 766,376

14,036,965 12,738,875

Property, plant and equipmentCambie Street property – net (note 3) 12,824,862 13,444,727Other – net (note 3) 1,246,429 1,178,277

28,108,256 27,361,879

Liabilities

Current liabilitiesAccounts payable and accrued liabilities 9,803,500 6,755,923Liability for unclaimed trust funds 538,919 472,382Current portion of building loan payable

(note 5) 500,000 500,000Deferred revenue 6,307,978 8,849,210B.C. Courthouse Library Grant (note 2) 385,824 430,850Deposits 92,306 96,754

17,628,527 17,105,119

Long-term debtBuilding loan payable (note 5) 9,100,000 9,600,000

26,728,527 26,705,119

Net assetsInvested in property, plant and

equipment – net 4,471,290 4,523,003Unrestricted (3,091,561) (3,866,243)

1,379,729 656,760

28,108,256 27,361,879

Approved by

President Chair of Audit Committee

CONSOLIDATED STATEMENT OFCHANGES IN NET ASSETS

2002 2001Invested inproperty,plant and

equipment –net of

associateddebt Unrestricted Total Total

$ $ $ $Net assets – beginning

of year 4,523,003 (3,866,243) 656,760 547,995Net (deficiency) excess of

revenue over expensefor the year (907,162) 1,630,131 722,969 108,765

Repayment of associateddebt 500,000 (500,000) – –

Purchase of property,plant and equipment 355,449 (355,449) – –

Net assets – end of year 4,471,290 (3,091,561) 1,379,729 656,760

24

The Law Society of British Columbia — GENERAL FUND

Consolidated Financial StatementsFor the year ended December 31, 2002

CONSOLIDATED STATEMENT OFREVENUE AND EXPENSE

2002 2001$ $

RevenuePractice fees 9,791,895 9,281,315Enrolment fees 844,230 800,875Application fees 342,320 313,303Fines and penalties 193,008 213,929Interest and other income 588,185 469,729

11,759,638 11,079,151

ExpenseAmortization of other property, plant

and equipment 252,556 337,018Annual report and meeting 139,432 83,444Audit and investigation 629,377 685,235Bencher and other committee meetings 969,213 899,043British Columbia Courthouse Library Society 1,144,000 1,180,000Communications and publications 518,768 528,729Credentials 477,945 546,610Discipline and complaints 2,166,872 2,141,660Equity and diversity 196,562 176,667Ethics 119,478 109,837Federation of Law Societies’ contribution 114,303 87,283General office administration 2,928,188 2,637,653Member information group 516,481 535,462Membership assistance programs 432,460 438,596Non-program legal 267,772 578,489Policy and planning 388,331 339,621Practice advice 555,780 441,041Practice standards 189,641 179,191Professional Legal Training Course 1,480,065 1,396,530Unauthorized practice 199,998 186,355

13,687,222 13,508,464

Costs recovered from Special Compensationand Lawyers Insurance Funds

Co-sponsored program costs (1,727,384) (1,737,887)Administrative (1,448,251) (1,417,878)

10,511,587 10,352,699

Excess of revenue over expensebefore the following 1,248,051 726,452

Juricert expenses (note 1) (502,118) (470,816)

Cambie Street property operatingcosts – net (note 4) (22,964) (146,871)

Net excess of revenue overexpense for the year 722,969 108,765

CONSOLIDATED STATEMENT OFCASH FLOWS

2002 2001$ $

Cash flows from operating activitiesNet excess of revenue over expense for

the year 722,969 108,765Items not affecting cash

Amortization of Cambie Street buildingand tenant improvements 654,606 661,046

Amortization of other property, plantand equipment 252,556 337,018

1,630,131 1,106,829Decrease (increase) in current assets

Unclaimed trust funds (74,842) (47,965)Accounts receivable and prepaid expenses 93,219 (126,083)B.C. Courthouse Library Fund 45,026 350,242Due from Lawyers Insurance Fund 7,649,543 (6,349,462)Due from Special Compensation Fund (3,205,708) (252,769)

Increase (decrease) in current liabilitiesAccounts payable and accrued liabilities 3,047,577 2,878,740Liability for unclaimed trust funds 66,537 56,270Deferred revenue (2,541,232) 3,205,085B.C. Courthouse Library Grant (45,026) (350,242)Deposits (4,448) 84,254

6,660,777 554,899

Cash flows from financing activitiesDecrease in long-term debt – net (500,000) (500,000)

Cash flows from investing activitiesProperty, plant and equipment additions

– net (355,449) (444,720)

Increase (decrease) in cash andcash equivalents 5,805,328 (389,821)

Cash and cash equivalents– beginning of year 1,052,749 1,442,570

Cash and cash equivalents– end of year 6,858,077 1,052,749

Represented byCash 6,858,077 1,052,749Short-term investments – –

6,858,077 1,052,749

25

The Law Society of British Columbia — GENERAL FUND

Consolidated Financial StatementsFor the year ended December 31, 2002

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

1. Nature of operations and basis of presentation

Description of the Fund

The General Fund (the Fund) comprises the assets, liabilities, net as-sets, revenue and expense of the operations of The Law Society ofBritish Columbia (the Society) other than those designated to thestatutory Special Compensation and Lawyers Insurance Funds. TheSociety is a not-for-profit organization and the Fund is considered tobe non-assessable under current income tax legislation.

The Society, as the initial shareholder, incorporated a companycalled Juricert Services Inc. (Juricert) in September 1999 for thepurpose of establishing a process of electronic authentication oflawyers. Juricert commenced initial operations in 2000. As atDecember 31, 2002, the Society remained the sole shareholder ofJuricert.

Basis of presentation

These financial statements include the accounts of the company’swholly owned subsidiary, Juricert.

2. Significant accounting policies

Allocated administrative expenses

Administrative expenses are recovered by the Fund from both theLawyers Insurance and Special Compensation Funds. Recoveriesare based on budgeted amounts derived either on a percentage ofuse or the percentage of the Fund’s staff as compared to the Society’stotal direct program staff.

Allocated rental revenue

The Cambie Street property is treated as a separate cost centre. Allo-cated rental revenue represents rent allocated to each of the Funds.Rental revenue allocated to the Fund has not been eliminated in thepreparation of these financial statements.

Amortization

Amortization is provided on a straight–line basis as follows:

Buildings 212% per annum

Computer hardware 20% per annumComputer software 10-20% per annumFurniture and fixtures 10% per annumLeasehold improvements 10% per annum

Tenant improvements are amortized over the term of the lease towhich they relate. The Society recognizes a full year’s amortizationexpense in the year of acquisition.

B.C. Courthouse Library Fund

The Society administers funds held on behalf of the B.C. CourthouseLibrary. Such funds are held in trust and the use of the funds is notrecorded in the statement of revenue and expense of the Fund.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand depos-its, and short-term, highly liquid investments that are readily con-vertible to known amounts of cash and which are subject to aninsignificant risk of change in value.

Revenue recognition

The Society follows the deferral method of accounting for annualfees. Fees are billed and received in advance on a calendar-year basis.Accordingly, fees for the next fiscal year received prior to December31 have been deferred for financial reporting purposes and will berecognized as revenue in the next calendar year.

All other revenues are recognized when receivable if the amount tobe received can be reasonably estimated and collection is reasonablyassured.

Unclaimed trust funds

The Fund recognizes a liability for unclaimed trust funds on thestatement of financial position. If these funds are claimed, the ownerof the trust fund balance is entitled to the principal balance plusinterest at prime rate minus 2%. Due to the historically low collectionrates on these balances, the Fund does not accrue for any interest ow-ing on the trust fund amounts held and recognizes income earnedfrom the unclaimed trust fund investments in the statement of reve-nue and expense. Unclaimed funds outstanding for more than fiveyears are transferred to the Law Foundation.

Use of estimates

The preparation of financial statements in conformity with Cana-dian generally accepted accounting principles requires managementto make estimates and assumptions which affect the reportedamounts of assets and liabilities and the disclosure of contingent as-sets and liabilities at the date of the financial statements and reve-nues and expenses for the period reported. Actual results coulddiffer from those estimates.

3. Property, plant and equipment – Cambie Streetproperty and other

Cambie Street property

2002 2001Accumulated

Cost amortization Net Net$ $ $ $

Land 4,189,450 – 4,189,450 4,189,450

Buildings 11,277,430 3,018,109 8,259,321 8,537,715

Leasehold improve-ments 3,100,661 2,840,876 259,785 585,578

Tenant improvements 988,113 871,807 116,306 131,984

19,555,654 6,730,792 12,824,862 13,444,727

(continued on page 26)

26

The Law Society of British Columbia — GENERAL FUND

Consolidated Financial StatementsFor the year ended December 31, 2002

3. Property, plant and equipment – Cambie Streetproperty and other (continued)

Other property, plant and equipment

2002 2001Accumulated

Cost amortization Net Net$ $ $ $

Furniture and fixtures 1,673,696 1,284,868 388,828 383,060

Computer hardware 1,118,152 864,342 253,810 235,270

Computer software 1,289,612 685,822 603,790 559,946

Law libraries – atnominal value 1 – 1 1

4,081,461 2,835,032 1,246,429 1,178,277

4. Cambie Street property operating costs – net2002 2001

$ $Rental revenue 437,272 431,926Allocated rental revenue 1,033,229 1,033,277

1,470,501 1,465,203Expense

Amortization 654,606 661,046Insurance 43,380 28,254Net loan interest 305,281 453,370Property management salaries 151,589 146,158Property taxes 275,917 261,238Repairs and maintenance 253,045 232,300Utilities 103,882 119,067Recovery from tenants (294,235) (289,359)

1,493,465 1,612,074

Net operating costs (22,964) (146,871)

5. Building loan payableIn 1992, the Benchers authorized the lending of monies from theLawyers Insurance Fund to fund the capital development of the

Society’s buildings at 839 and 845 Cambie Street, Vancouver, B.C.The loan has no fixed repayment terms and bears interest calculatedmonthly at a rate equal to the stated monthly yield to maturityearned on the Lawyers Insurance Fund bond investment portfolio.It is the intention of the Fund to repay a minimum of $500,000 of theprincipal each year. During 2002, principal of $500,000 (2001 –$500,000) was repaid.

2002 2001% %

Weighted average rate of interest 4.12 5.00

6. Interfund transactionsThe operations of the Fund, the Lawyers Insurance Fund and theSpecial Compensation Fund are controlled by the management ofthe Society. Transactions between the Funds are recorded at fair val-ues at the dates of the transactions.

Amounts due to and from the Lawyers Insurance and Special Com-pensation Funds arise from transactions of an operating nature, andhave no fixed terms of repayment. The amounts due to and from theSpecial Compensation Fund are non-interest bearing.

Monthly interest on the Fund’s net loan position with the LawyersInsurance Fund is paid by the Fund at a rate equal to the statedmonthly bond yield to maturity earned on the Lawyers InsuranceFund investment portfolio. The Fund’s net loan position includesthe Fund’s building loan and other operating balances with theLawyers Insurance Fund. This net loan position fluctuates duringthe year as amounts are transferred between the Fund and the Law-yers Insurance Fund to finance ongoing operations.

During the year, interest paid to the Lawyers Insurance Fund to-talled $305,478 (2001 – $453,370) after deduction of approximately$110,945 (2001 – $77,584) of interest revenue received from Fundcash balances held by the Lawyers Insurance Fund.

Other interfund transactions are disclosed elsewhere in these finan-cial statements.

27

The Law Society of British Columbia — SPECIAL COMPENSATION FUND

Financial StatementsFor the year ended December 31, 2002

STATEMENT OF FINANCIAL POSITIONas at December 31, 2002

2002 2001$ $

Assets

Current assetsCash and cash equivalents 2,332,395 940,534Accrued interest receivable 1,969 63,512Insurance recoverable (note 4) 2,445,622 –

4,779,986 1,004,046

Investments (note 2) 6,898,514 8,923,587

11,678,500 9,927,633

Liabilities

Current liabilitiesAccounts payable and accrued liabilities 20,976 10,000Deferred revenue 3,708,000 1,947,000Due to General Fund (note 3) 3,972,083 766,376

7,701,059 2,723,376

Net assetsUnrestricted net assets 3,977,441 7,204,257

11,678,500 9,927,633

Claims (note 4)

Subsequent event (note 4(b))

Approved by

President Chair of Audit Committee

STATEMENT OF CHANGES IN NET ASSETS

2002 2001$ $

Unrestricted net assets – beginningof year 7,204,257 8,337,090

Deficiency of revenue over expensefor the year (3,226,816) (1,132,833)

Unrestricted net assets – end of year 3,977,441 7,204,257

* * *

STATEMENT OF REVENUE AND EXPENSE

2002 2001$ $

RevenueAnnual assessments 2,266,375 1,797,200Investment and interest income 724,713 598,624

2,991,088 2,395,824

ExpenseAllocated office rent 38,340 38,340Audit 10,000 7,809Claims and costs (note 4) 2,878,379 1,035,958Contribution to costs of General Fund

Administrative 549,809 518,661Co-sponsored program costs 785,771 768,851

Counsel costs 170,013 76,289Custodians’ fees – net of recoveries 494,288 336,880Insurance premium 148,333 146,522Investment brokers’ fee 16,407 16,027Miscellaneous 123,546 74,354Salaries, wages and benefits 538,928 341,634Spot audits and related costs 464,090 167,332

6,217,904 3,528,657

Deficiency of revenue overexpense for the year (3,226,816) (1,132,833)

28

The Law Society of British Columbia — SPECIAL COMPENSATION FUND

Financial StatementsFor the year ended December 31, 2002

NOTES TO FINANCIAL STATEMENTS

1. Significant accounting policies and description ofthe Fund

Description of the Fund

The Special Compensation Fund (the Fund) is maintained by TheLaw Society of British Columbia (the Society) pursuant to section 31of the Legal Profession Act to reimburse persons who sustain apecuniary loss as a result of the misappropriation or wrongfulconversion by a member of the Society of money or other propertyentrusted to or received by the member in his or her capacity as abarrister or solicitor. The Fund is financed by members’ annualassessments, and claims are recorded net of recoveries from theFund’s insurers when they have been approved for payment by theSpecial Compensation Fund Committee as delegated by theBenchers.

The Society is a not-for-profit organization and the Fund is consid-ered to be non-assessable under current income tax legislation.

Allocated administrative expenses

Administrative expenses are recovered by the General Fund of theSociety from the Fund. Recoveries are based on budgeted amountsderived either on a percentage of use or the percentage of the Fund’sstaff as compared to the Society’s total direct program staff.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand depos-its, and short-term, highly liquid investments that are readilyconvertible to known amounts of cash and which are subject to aninsignificant risk of change in value.

Investments

Bonds are carried at amortized cost, providing for the amortizationof the discount or premium on a straight-line basis to maturity.When an investment has experienced a loss in value that is otherthan temporary, the investment is written down to its estimated netrealizable value. Realized gains and losses are included in the deter-mination of excess (deficiency) of revenue over expense for the year.

Revenue recognition

The Society follows the deferral method of accounting for annualassessments. Assessments are billed and received in advance on acalendar-year basis. Accordingly, assessments for the next fiscalyear received prior to December 31 have been deferred for financialreporting purposes and will be recognized as revenue in the nextcalendar year.

All other revenues are recognized when receivable if the amount tobe received can be reasonably estimated and collection is reason-ably assured.

Use of estimates

The preparation of financial statements in conformity with

STATEMENT OF CASH FLOWS

2002 2001$ $

Cash flows from operating activitiesDeficiency of revenue over expense for the

year (3,226,816) (1,132,833)Item not affecting cash – amortization

of premium on bonds 47,742 55,215

(3,179,074) (1,077,618)Decrease (increase) in current assets

Accrued interest receivable 61,543 11,359Insurance recoverable (2,445,622) –

Increase (decrease) in current liabilitiesAccounts payable and accrued liabilities 10,976 (134,874)Deferred revenue 1,761,000 939,400Due to General Fund 3,205,707 252,769

(585,470) (8,964)

Cash flows from investing activitiesSale of investments – net 1,977,331 338,493

Increase in cash and cashequivalents 1,391,861 329,529

Cash and cash equivalents –beginning of year 940,534 611,005

Cash and cash equivalents – endof year 2,332,395 940,534

Represented byCash 2,332,395 940,534Short-term investments – –

2,332,395 940,534

29

The Law Society of British Columbia — SPECIAL COMPENSATION FUND

Financial StatementsFor the year ended December 31, 2002

Canadian generally accepted accounting principles requires man-agement to make estimates and assumptions which affect the re-ported amounts of assets and liabilities and the disclosure ofcontingent assets and liabilities at the date of the financial state-ments and revenues and expenses for the period reported. Actualresults could differ from those estimates.

2. Investments2002 2001

$ $Investments – at amortized cost (marketvalue: $6,665,587; 2001 – $9,273,613) 6,898,514 8,923,587

Investments consist primarily of domestic government treasurybills, government bonds, and high grade corporate bonds, having amaturity of up to 26 years.

The effective yield to maturity on the total portfolio is 3.00% (2001 –4.16%).

3. Interfund balancesAmounts due to the General Fund are current and non-interestbearing.

4. Special Compensation Fund claims

a) Outstanding claims

Pursuant to section 31(6) of the Legal Profession Act, the payment ofFund claims is at the discretion of the Special Compensation FundCommittee as delegated by the Benchers. No provision has beenmade in these financial statements for claims not resolved by theSpecial Compensation Fund Committee. As at December 31, 2002,743 claims or potential claims (2001 – 272 claims) were known butnot yet determined. These claims amounted to approximately$72,554,565 (2001 – $15,338,585). This increase in claims relates pri-marily to the Wirick case (b). If all claims were approved for pay-ment, $51,164,606 (2001 – $6,059,681) would be payable by the Fundand $21,389,959 (2001 – $9,278,904) by the Fund’s insurers. Theseamounts do not include an estimate for claims attributable to 2002or prior years that have not as yet been filed. In addition, theseamounts include potential duplicate claims with respect to theWirick case.

The Fund has renewed its indemnity bond for January 1, 2003 toApril 30, 2003. The bond provides that total claims attributable tothe period in excess of $2,500,000 are 100% reimbursed by a com-mercial insurer up to a maximum of $15,000,000 for claims againstone lawyer and in total.

The Fund has also renewed its indemnity bond for April 30, 2003 toApril 30, 2004. The bond provides that total claims attributable tothe period in excess of $2,500,000 are 90% reimbursed by a commer-cial insurer up to a maximum of $15,000,000 for claims against onelawyer and in total.

b) Wirick case

In May 2002, the Discipline Committee ordered an audit investiga-tion, pursuant to Rule 4-43, of Martin Keith Wirick’s practice. Sincethen, the Society has continued to investigate the various claims at-tributed to Mr. Wirick’s practice activities. Information continues tobe received from financial institutions and other lenders to assist inthe investigation of claims. At each Benchers’ meeting since May2002, the Benchers have been given a detailed update of the status ofthe outstanding claims, investigation costs and any relevant infor-mation concerning possible recoveries. This will continue until thefile is closed.

As of December 31, 2002Number of claims received 479 statutory declarations

$Amount claimed 65,000,000Amount reviewed (number of claims – 31) 9,000,000Amount denied due to duplication

(number of claims – 13) 4,000,000Total approved for payment 5,000,000Total paid 5,000,000

As of April 30, 2003 (inclusive of December 31,2002 information)

Number of claims received 501 statutory declaration

$Amount claimed 68,000,000Amount reviewed (number of claims – 51) 17,000,000Amount adjourned (number of claims – 4) (1,000,000)Amount denied due to duplication

(number of claims – 17) (6,000,000)Total approved for payment 10,000,000Total paid 8,000,000

The Fund carries insurance of $15,000,000 for each bond period($17,500,000 total coverage with a deductible of $2,500,000). Thebond period is defined as the year in which the Society becomesaware of evidence indicating a member may have been guilty of anact or acts of misappropriation or wrongful conversion. All claimsconcerning Mr. Wirick will fall into the 2002 bond period and as such,the Fund has claims greater than its level of insurance. In 2002, theBenchers agreed to allow the Special Compensation Fund Commit-tee to exceed the $17,500,000 cap they had imposed in the Societyrules.

Of the $68,000,000 total outstanding claims as of April 30, 2003, theinsurers would cover only $15,000,000 of this total amount. In accor-dance with the absolute discretionary nature of the Fund arrange-ments, the claims become a liability only when approved by theSpecial Compensation Fund Committee.

As of April 30, 2003, $10,000,000 has been approved for payment. Ofthis total approved, $8,000,000 has been paid, and the Fund expectsto recover $5,500,000 from its insurers. In addition, the Society ex-pects to recover amounts from the sale of assets recovered as part ofthe investigative process.

30

The Law Society of British Columbia — LAWYERS INSURANCE FUND

Consolidated Financial StatementsFor the year ended December 31, 2002

CONSOLIDATED STATEMENT OFFINANCIAL POSITION

as at December 31, 2002

2002 2001$ $

AssetsCash and cash equivalents 5,855,593 16,594,262Accounts receivable 32,611 55,038Accrued interest receivable 848 481,039Income tax recoverable – 22,700Reinsurers’ share of provision for claims 6,163,000 5,346,000Due from members 1,907,418 1,899,444General Fund building loan (note 4) 9,600,000 10,100,000Investments (note 2) 87,907,705 83,049,864

111,467,175 117,548,347

LiabilitiesAccounts payable and accrued liabilities 568,776 727,141Income taxes payable 9,000 –Deferred revenue 3,783,250 4,416,370Due to General Fund (note 6) 1,921,772 9,571,315Provision for claims (note 5) 81,038,519 82,696,248Provision for ULAE (note 5) 6,997,000 7,325,000

94,318,317 104,736,074

Net assetsUnrestricted net assets 17,148,858 12,812,273

111,467,175 117,548,347

Approved by

President Chair of Audit Committee

CONSOLIDATED STATEMENT OFCHANGES IN NET ASSETS

2002 2001$ $

Unrestricted net assets – beginningof year 12,812,273 11,738,577

Excess of revenue over expense forthe year 4,336,585 1,073,696

Unrestricted net assets – end of year 17,148,858 12,812,273

31

The Law Society of British Columbia — LAWYERS INSURANCE FUND

Consolidated Financial StatementsFor the year ended December 31, 2002

CONSOLIDATED STATEMENTOF CASH FLOWS

2002 2001$ $

Cash flows from operatingactivitiesExcess of revenue over expense for

the year 4,336,585 1,073,696Items not affecting cash

Amortization of premium on bonds 451,021 720,375Realized gain on disposal of

investments (2,924,842) (531,456)

1,862,764 1,262,615Decrease (increase) in assets

Accounts receivable 22,427 (8,837)Accrued interest receivable 480,191 47,967Reinsurers’ share of provision for claims (817,000) 5,159,000Due from members (7,974) 462,757Due to/from General Fund (7,649,543) 6,350,291Income taxes payable (recoverable) 31,700 (8,267)

Increase (decrease) in liabilitiesAccounts payable and accrued liabilities (158,365) 207,623Deferred revenue (633,120) 1,278,771Provision for claims (1,657,729) (2,398,338)Provision for ULAE (328,000) (183,000)

(8,854,649) 12,170,582

Cash flows from investingactivitiesPurchase of investments – net (2,384,020) (5,157,118)Decrease in General Fund building loan 500,000 500,000

(1,884,020) (4,657,118)

(Decrease) increase in cash andcash equivalents (10,738,669) 7,513,464

Cash and cash equivalents– beginning of year 16,594,262 9,080,798

Cash and cash equivalents– end of year 5,855,593 16,594,262

Represented byCash 5,855,593 16,594,262Short-term investments – –

5,855,593 16,594,262

CONSOLIDATED STATEMENT OFREVENUE AND EXPENSE

2002 2001$ $

RevenueAnnual assessments 9,994,181 9,253,981Investment income (note 2) 7,752,366 5,623,492Other income 26,135 26,648

17,772,682 14,904,121

Insurance expenseActuary, consultant and investment

broker fees 221,656 206,973Allocated office rent 87,966 88,049Audit 36,000 22,215Contribution to costs of General Fund

Administrative 900,957 902,585Office 199,131 226,994Premium taxes 9,983 9,119Provision for settlement of claims (note 5) 10,041,000 10,360,000Provision for ULAE (note 5) (328,000) (183,000)Salaries, wages and benefits 1,307,842 1,245,154

12,476,535 12,878,089

Loss prevention expenseContribution to costs of General Fund

Co-sponsored program costs 941,613 969,036

13,418,148 13,847,125

Excess of revenue over expensebefore the following 4,354,534 1,056,996

(Provision for) recovery ofincome taxes (17,949) 16,700

Excess of revenue over expensefor the year 4,336,585 1,073,696

32

The Law Society of British Columbia — LAWYERS INSURANCE FUND

Consolidated Financial StatementsFor the year ended December 31, 2002

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

1. Significant accounting policies and description ofthe FundDescription of the Fund

The Lawyers Insurance Fund (the Fund) is maintained by The LawSociety of British Columbia (the Society) pursuant to section 30 ofthe Legal Profession Act. The Society is a not-for-profit organization,and only the subsidiary LSBC Captive Insurance Company Ltd. (theCaptive) is considered assessable for income tax under current leg-islation.

Allocated administrative expenses

Administrative expenses are recovered by the General Fund of theSociety from the Fund. Recoveries are based on budgeted amountsderived either on percentage of use or the percentage of the Fund’sstaff as compared to the Society’s total direct program staff.

Basis of consolidation

These consolidated financial statements include the accounts of theFund and the Captive, a wholly owned subsidiary.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand depos-its, and short-term, highly liquid investments that are readilyconvertible to known amounts of cash and which are subject to aninsignificant risk of change in value.

Investments

Bonds and treasury bills are carried at amortized cost, providing forthe amortization of the discount or premium on a straight-line basisto maturity. When an investment has experienced a loss in valuethat is other than temporary, the investment is written down to itsestimated net realizable value. Realized gains and losses are in-cluded in the determination of excess (deficiency) of revenue overexpense for the year.

Reinsurance

The Society reflects reinsurance balances on the statement of finan-cial position on a gross basis to indicate the extent of credit riskrelated to reinsurance and its obligations to policy holders, and on anet basis on the statement of revenue and expense to indicate the re-sults of its retention of assessments retained.

Revenue recognition

The Society follows the deferral method of accounting for annualassessments. Assessments are billed and received in advance on acalendar-year basis. Accordingly, assessments for the next fiscalyear received prior to December 31 have been deferred for financialreporting purposes and will be recognized as revenue in the nextcalendar year.

All other revenues are recognized when receivable if the amount tobe received can be reasonably estimated and collection is reason-ably assured.

Use of estimates

The preparation of financial statements in conformity withCanadian generally accepted accounting principles requires

management to make estimates and assumptions which affect thereported amounts of assets and liabilities and the disclosure of con-tingent assets and liabilities at the date of the financial statementsand revenues and expenses for the period reported. Actual resultscould differ from those estimates.

2. Investments2002 2001

$ $Investments – at book value (marketvalue – $85,429,223; 2001 – $85,330,225) 87,907,705 83,049,864

The effective yield to maturity on the total portfolio is 3.11% (2001 –4.33%).

2002 2001$ $

Short-term investments 448,173 11,724,868

BondsFederal – 49,671,263Corporate – 17,165,359Pooled Funds 55,108,814 4,488,374

55,108,814 71,324,996

EquityCanadian Pooled Funds 18,957,710 –U.S. Pooled Funds 6,711,469 –Non-North America Pooled Funds 6,681,539 –

32,350,718 –

87,907,705 83,049,864

2002 2001$ $

Investment incomeCash and treasury bills 74,350 1,022,387Bond interest 2,666,291 4,336,654Amortization of premium on bonds (451,021) (720,375)Net interfund loan interest (note 6) 305,478 453,370Dividends 2,232,426 –Gain on sale of investments 2,924,842 531,456

Net investment income 7,752,366 5,623,492

3. Errors and omissions insurance claimsEffective January 1, 1990, the Fund began underwriting the programby which errors and omissions insurance is provided to members ofthe Society. The Society’s members have coverage as follows:

2002 2001$ $

Deductible – member 5,000 or 10,000 5,000 or 10,000Deductible – the Fund 995,000 or 990,000 995,000 or 990,000

Total coverage peroccurrence 1,000,000 1,000,000

Annual aggregate permember 2,000,000 2,000,000

33

The amount of the member deductible is $5,000 for each initial claimresulting in the payment of damages and $10,000 for each additionalclaim within a three-year period resulting in the payment of dam-ages.

For 1996 and previous years, the Captive entered into reinsurancecontracts under which all risks in excess of the inner aggregateretentions, which are borne by the Captive, were ceded to reinsurers.The policy of ceding reinsurance does not relieve the Captive of pri-mary liability as the originating insurer.

Since January 1, 1997, the Captive has not renewed its annual rein-surance contracts, and therefore all losses on claims since 1997 willbe fully borne by the Captive as primary insurer and reimbursed bythe Society under agreement.

4. General Fund building loanIn 1992, the Benchers authorized the lending of monies from theFund to fund the capital development of the Society’s buildings at839 and 845 Cambie Street, Vancouver, B.C. The loan has no fixedrepayment terms and bears interest calculated monthly at a rateequal to the stated monthly yield to maturity earned on the Fundinvestment portfolio. It is the intention of the General Fund to repaya minimum of $500,000 on the principal each year. During 2002, prin-cipal of $500,000 (2001 – $500,000) was repaid.

2002 2001% %

Weighted average rate of return 4.12 5.00

5. Provision for claims and unallocated lossadjustment expenses (ULAE)The changes in unpaid claims recorded in the consolidated state-ment of financial position as at December 31, 2002 and 2001 and theirimpact on claims for the year are as follows:

2002 2001$ $

Unpaid claims – beginning of year 82,696,248 85,094,586Provision for losses and expenses for

claims occurring in the current year 17,396,000 19,627,000Decrease in estimated losses and

expenses for losses occurring inprior years (7,355,000) (9,267,000)

Unpaid claims liability 92,737,248 95,454,586

Less:Payments on claims incurred in

the current year (511,565) (637,106)Payments on claims incurred in

prior years (12,124,103) (6,769,016)Recoveries on claims 131,940 249,782Change in reinsurers’ share of

provision for claims 817,000 (5,159,000)Change in due from members (12,001) (442,998)

Claims payments – net of recoveries (11,698,729) (12,758,338)

Provisions for claims – end of year 81,038,519 82,696,248

The Law Society of British Columbia — LAWYERS INSURANCE FUND

Consolidated Financial StatementsFor the year ended December 31, 2002

The provision for claims is an actuarially determined estimate of theFund’s portion of settlement costs relating to claims incurred priorto the statement of financial position date. The provision is an esti-mate subject to variability, which arises because all events affectingthe ultimate settlement of claims have not taken place and may nottake place for some time. Variability can be caused by the receipt ofadditional information, changes in judicial interpretation, or signifi-cant changes in severity or frequency of claims from historicaltrends.

The provision for ULAE is an actuarially determined estimate of theSociety’s future costs relating to the administration of claims in-curred up to the statement of financial position date.

The provisions are based on the historical claims experience of theFund and are reviewed annually by an independent actuary usingupdated information. All changes in provision estimates areexpensed in the current period. Although the provisions are be-lieved to be adequate, they are based on estimates, and the final ac-tual loss values may vary significantly from those estimated.

6. Interfund transactionsThe operations of the Fund, the General Fund and the Special Com-pensation Fund are controlled by the management of the Society.Transactions between the Funds are recorded at fair values at thedates of the transactions.

Amounts due to and from the General Fund arise from transactionsof an operating nature and have no fixed terms of repayment.

Monthly interest on the Fund’s net loan position with the GeneralFund is paid to the Fund at a rate equal to the stated monthly yield tomaturity earned on the Fund investment portfolio. The Fund’s netloan position includes the General Fund building loan and otheroperating balances with the General Fund. This net loan positionfluctuates during the year as amounts are transferred between theGeneral Fund and the Fund to finance ongoing operations.

Interest received by the Fund totalled $305,478 (2001 – $453,370)after deduction of approximately $110,945 (2001 – $77,584) of inter-est revenue paid to the General Fund on General Fund cash balancesheld by the Fund during the year.

Other interfund transactions are disclosed elsewhere in these con-solidated financial statements.

7. Regulatory requirementsThe Captive is licensed under the Insurance (Captive Company) Act ofB.C. The regulations of this Act require the Captive to maintain cer-tain minimum reserves. The Captive was in compliance with thoseregulations as at December 31, 2002.

34

Committees*Executive

Benchers: R.C. Gibbs, QC (Chair), H.R.Berge, QC, W.M. Everett, QC, P.J.Keighley, QC, R.S. Alexander, QC, J.Clark, R.W. McDiarmid, QC, J. PrestonStaff: J.G. Matkin, QC, J. Hoskins, D.Newell

Audit

Benchers: P.J. Keighley, QC (Chair, Jan-Oct), R.W. McDiarmid, QC (Chair, Oct-Dec), R.D. Diebolt, QC, R.W. Gourlay,QC, G.C. Taylor, D.A. Zacks, QC, J.S.Shackell, QC (Life Bencher)Non-Benchers: Dirk Sigalet, QC,Richard Stewart, Ted StrocelStaff: J.G. Matkin, QC, N. Stajkowski,A. Whitcombe

Complainants’ Review

Benchers: A. Olsen (Chair, Jan-Aug), J.Preston (Chair, Sept-Dec), P. Nagle, M.Ostrowski, QCNon-Benchers: Peter Gorgopa, JanLindsay, Paul LoveStaff: C. Picard, A. Said, E. van Eck

Credentials

Benchers: H.R. Berge, QC (Chair, Jan-Oct), R.S. Tretiak, QC (Chair, Oct-Dec),R.S. Alexander, QC, J.J.LHunter, QC, A.Olsen, J. Preston, P.L. Schmit, QC, G.R.Toews, QC, G. Turriff, QC, M. Vallance,

G.J. Lecovin, QC (Life Bencher)

Non-Benchers: Hugh Braker, QC,William Ehrcke, QC, John Leathley,Stephen Richards, Peter Warner, QC

Staff: L. Small, M. Lucas

Discipline

Benchers: W.M. Everett, QC (Chair), I.Donaldson, QC, A.K. Fung, QC, D.W.Gibbons, QC, V.J. MacLean, M. Martin,R.W. McDiarmid, QC, P. Nagle, A.K.Wallace, J.S. Shackell, QC (LifeBencher)

Non-Benchers: J.A. Carmichael, QC,Deborah Lovett, QC, Stephen Mulhall,Diane Turner

Staff: J. Whittow, QC, H. Caldwell, M.Currie, J. Dent, T. Follett, J. Gossen, K.Gounden, T. Holmes, G. Keirstead, K.Kim, R. Long, P. Martinuk, G. Myers

Equity and Diversity

Benchers: R.C. Gibbs, QC (Chair, Jan-Oct), A.K. Wallace (Chair, Oct-Dec), P.Kelly, M. Ostrowski, QC, J. Preston, M.Vallance

Non-Benchers: Halldor Bjarnason,Gerry Ferguson, William Jackson, KenKramer, Terence LaLiberté, QC, JasonLee, Kathy Louis, Karen MacMillan,Beverly Nann, Michiko Sakamoto-Senge, Georgina Spilos, MarkStevenson, Tim Timberg, Henry Vlug

Staff: K. Foo

Ethics

Benchers: R.S. Alexander, QC (Chair,Jan-Oct), G.R. Toews, QC (Chair, Oct-Dec), R.D. Diebolt, QC, R.W. Gourlay,QC, M. Ostrowski, QC, G.G. Ridgway,QC, W.J. Sullivan, QC, J.D. Vilvang, QC,D.A. Zacks, QC, W.M. Trotter, QC (LifeBencher)Non-Benchers: Laura Donaldson,Terrence Robertson, QC, John Smith,Anne Stewart, QC, Peter VoithStaff: J. Olsen, J. Hoskins

Futures

Benchers: W.M. Everett, QC (Chair,Jan-Oct), P.J. Keighley, QC (Chair, Oct-Dec), R.S. Alexander, QC, H.R. Berge,QC, A.K. Fung, QC, D.W. Gibbons, QC,R.C. Gibbs, QC, J.J.L. Hunter, QC, V.J.MacLean, R.W. McDiarmid, QC, R.D.Tunnicliffe, G. Turriff, QC, R.S.Margetts, QC (Life Bencher)Non-Benchers: Sabrina Ali, J.A.Carmichael, QC, Stan Lanyon, QC, PatSweeneyStaff: D. Newell

Practice Standards

Benchers: R.S. Tretiak, QC (Chair, Jan-Oct), G.J. Kambeitz, QC (Chair, Oct-Dec), M.J. Falkins, M. Martin, G.C.Taylor, R.D. TunnicliffeNon-Benchers: Rosalyn Manthorpe,Charlotte Olsen, Peter Ramsay, QC,Mark Skwarok

2002 committees and task forces

H.R. Berge, QC,Credentials Chair

J. Preston,Complainants’Review Chair

R.S. Tretiak, QC,Credentials and

Practice StandardsChair

P.J. Keighley, QC,Audit, Futures and

Special CompensationFund Chair

A. Olsen,Complainants’Review Chair

R.W. McDiarmid, QC,Audit Chair

* Note: Committee appointments have traditionally been made for the period January through December. In 2002, however, new committeeappointments were made in October for the balance of 2002 and reaffirmed for 2003. The terms of Committee chairs in 2002 are indicated.

35

2002 committees and task forces

Staff: J. Whittow, QC, J. Morris, D.DeGaust, D. Bilinsky

Special Compensation Fund

Benchers: R.W. Gourlay, QC (Chair,Jan-Oct), P.J. Keighley, QC (Chair,Oct-Dec), M.J. Falkins, P. Kelly, R.W.McDiarmid, QC, P.L. Schmit, QC, R.D.Tunnicliffe, G. Turriff, QC, A.K. Wallace

Non-Benchers: Azim Datoo, QC,David Masuhara, David Renwick, RonSkolrood

Staff: M.A. Cummings, L. Hlus, G.Keirstead

Technology

Benchers: R.S. Alexander, QC (Chair),M.J. Falkins, J.J.L. Hunter, QC, W.J.Sullivan, QC

Non-Benchers: Todd McKendrick,Ross McLarty, Leo Raffin, AlexanderSzibbo

Staff: A. Whitcombe, N. Stajkowski

Unauthorized Practice

Benchers: G.J. Kambeitz, QC (Chair), J.Clark, M.J. Falkins, J.D. Vilvang, QC

Non-Bencher: James Herperger

Staff: C. Wiseman, J. Hoskins

Task Forces

Admission Program

Benchers: R.C. Gibbs, QC (Chair), H.R.Berge, QC, R.D. Diebolt, QC, J.S.Shackell, QC (Life Bencher)

Non-Benchers: Mary Childs, AnneChopra, William Ehrcke, QC, Susan

Sangha, Peter Warner, QCStaff: J.G. Matkin, QC, A. Treleaven, L.Small, L. Burns (CLE), M. Lucas

Alternative Dispute Resolution

Bencher: R.S. Alexander, QCNon-Benchers: Deborah Zutter(Chair), Jerry McHale, QCStaff: J. Hoskins, L. Cooney

Conveyancing Practices

Benchers: R.S. Alexander, QC (Chair),G.J. Kambeitz, QC, D.A. Zacks, QCNon-Benchers: Paul Bradley, KennethJacques, James Mooney, FrancoTrasoliniStaff: J.G. Matkin, QC, M. Lucas, R.Usher

Disclosure and Privacy

Benchers: P.J. Keighley, QC (Chair), V.J.MacLean, J. PrestonNon-Bencher: Maureen BairdStaff: J. Whittow, QC, C. Wiseman, B.Daisley, J. Eamer-Goult, J. Hoskins, D.Palmer

Lawyer Education

Benchers: P.L. Schmit, QC (Chair), R.S.Alexander, QC, H.R. Berge, QC, J.J.L.Hunter, QC, G. Turriff, QC, M. VallanceNon-Benchers: Mary Childs, SusanSangha, Peter Warner, QCStaff: A. Treleaven, M. Lucas

Libraries

Benchers: R.D. Tunnicliffe (Chair),R.W. McDiarmid, QC, P.L. Schmit, QC,R.S. Margetts, QC (Life Bencher)

Non-Benchers: Catherine Best, NeilCampbell, Sylvia TeasdaleStaff: N. Stajkowski, A. Treleaven, A.Whitcombe

Paralegals

Benchers: R.S. Alexander, QC, J. Clark,R.W. Gourlay, QC, P. Kelly, P. Nagle, B.J.Wallace, QC (Life Bencher)Non-Benchers: Jo Ann Carmichael, QC(Chair), Margot SpenceStaff: C. Wiseman, A. Treleaven

Pro Bono Initiative

Benchers: P.J. Keighley, QC (Co- Chair),R.W. McDiarmid, QC, A. OlsenNon-Bencher: Carman Overholt (Co-Chair), Dugald Christie, Mr. Justice IanDonald, Kelly Doyle, KimHart-Wensley, John Pavey, Wes Pue,Judge Margaret Rae, Mr. Justice BryanRalph, John SimpsonStaff: J.G. Matkin, QC, F. Kraemer(CBA), L. Cooney, B. Daisley, C.Ensminger, M. Gushue, C. Nevin (CBA)

Trust Assurance Reform

Benchers: H.R. Berge, QC (Chair), R.W.McDiarmid, QC, W.T. Wilson, QC (LifeBencher)Non-Benchers: Russell Balcome, FionaHunterStaff: N. Stajkowski, M. Lucas, U.Mereigh

Western Law Societies

Benchers: R.C. Gibbs, QC (Chair), H.R.Berge, QC, W.M. Everett, QCStaff: A. Treleaven

W.M. Everett, QC,Discipline andFutures Chair

A.K. Wallace,Equity and Diversity

Chair

G.R. Toews, QC,Ethics Chair

G.J. Kambeitz, QC,Practice Standardsand Unauthorized

Practice Chair

R.S. Alexander, QC,Ethics and

Technology Chair

R.W. Gourlay, QC,Special Compensation

Fund Chair

36

2002 appointments to outside bodies

Board Appointee(s) Board Appointee(s)

BC CourthouseLibrary Society

R.W. McDiarmid, QCP.L. Schmit, QCW.T. Wilson, QC

BC Law Institute James MacIntyre, QCD. Peter Ramsay, QC

BC MedicalServices Foundation

Mark Skorah

Building PermitBoard of Appeal,City of Vancouver

Arlene Henry

CBA, National andProvincial Councils

J.S. Shackell, QCP.J. Keighley, QC

CBA (BC)Benevolent Society

J.S. Shackell, QC

CLE Society Benchers:A.K. Fung, QCW.J. Sullivan, QC

Practitioners:1

James BairdDanielle ByresDavid E. JonesRobert KastingLinda LockeWilliam McNaughtonTimothy SchoberRonald SmithCharles SteinKen Walker

Federal JudicialAppointmentsAdvisory Committee

Jo Ann Carmichael, QC

Federation of LawSocieties

Delegates:H.R. Berge, QCR.C. Gibbs, QC

Federation of LawSocieties (con’t)

Director (B.C. and Yukon):T.L. Brown, QC

Hamber Foundation John LeathleyG.J. Lecovin, QC

Law Foundation Madam Justice Alison BeamesIan CaldwellAndrew CrollBarbara CromartyChristine ElliottVictoria Gray, QCSholto Hebenton, QCPaul LoveMarina Pratchett, QCD. Heather RavenD.A. Silversides, QCPeter Warner, QC

Legal ServicesSociety2

Geoffrey Cowper, QCGrant GrayKenneth LearnTerrence Robertson, QCBarbara Yates, QC

Provincial JudicialCouncil

Peter Wilson, QC

Surrey Foundation Mary-Jane Wilson

UBC Faculty of Law,CurriculumCommittee

Alan Treleaven

UBC Faculty of Law,Faculty Council

D. Peter Ramsay, QC

UVic Faculty of Law,Faculty Council

R.S. Alexander, QC

VancouverInternationalAirport Authority

J. Thomas English, QC

1 appointed jointly with the CBA, B.C. Branch2 appointed after consultation with the CBA, B.C. Branch

Management Board

Executive DirectorJames Matkin, QC

Deputy Executive DirectorJean Whittow, QCDirector, Discipline and Professional Conduct

Brad DaisleyPublic Affairs Manager

Susan Forbes, QCDirector, Lawyers Insurance Fund

Jeffrey G. HoskinsGeneral Counsel

Susan JamesHuman Resources Manager

David NewellCorporate Secretary

Neil StajkowskiChief Financial Officer

Alan TreleavenDirector, Education and Practice

Adam WhitcombeChief Information Officer