1. Electronic Fund Transfers
JERRY B. UDELL, B.A., LL.B.
Certified as a Specialist in Real Estate Law
by the Law Society of Upper Canada
Telephone:
With assistance from:
Adam Bulkiewicz, (H) B.A., J.D.
Student-at-Law
Telephone:
Updated: Aug 15

2. DISCLAIMER
The opinions expressed within this presentation are the personal opinions of Jerry Udell and in no way reflect the opinions or views of the Law Society of Upper Canada. The Law Society is reviewing the issue and has not yet formed any view of whether or under what conditions these products may be used.

3. Introduction
Electronic fund transfers are coming! The present method of delivering funds to the offices of the purchasers lawyer is archaic!

4. Introduction
The hope is that in the future, electronic fund transfers will help us to progress from the era of the horse-and-buggy – to that of the jet airplane!

5. Introduction
Some service providers are proposing alternate electronic systems to facilitate the transfer of funds
Although a (possible?) improvement over the existing model – they are far from perfect!
In terms of the actual movement of funds they don’t do anything you can’t do with your own electronic banking

6. Introduction
Under the new proposed model, lawyers will be able to release funds (from trust) to a third party service provider who will then release them to the appropriate parties
Ex. pay off mortgages, pay money to the seller, etc.

7. Introduction
With any new system, there may be a very real potential to run into problems
Careful planning and consideration of the various implications of the proposed new model can help us avoid situations like…..

8. Introduction
Lawyers must direct their minds to potential issues that may arise when utilizing electronic fund transfers
Lawyers must not allow the use of any service to compromise their professional responsibilities to a client

9. The Ultimate Question:
How do we utilize electronic fund transfers and uphold LSUC standards to protect both the public and the profession, while maintaining the highest standards of honesty and integrity?

10. Conflict of Interest
Lawyer’s have a professional responsibility to avoid conflicts of interest (Rule 3.4-1)
When subscribing to a particular electronic fund transfer service, lawyers must ensure that nothing within the agreement could give rise to a conflict. For example:
Receiving incentives from the system operators – whether personally or to staff
Exclusivity agreements requiring the lawyer to only utilize one system (even when it may be to the detriment of the client)
Confidentiality agreements which prohibit lawyers from fully disclosing necessary information about the transaction to clients

11. Competence
LSUC Rules require lawyers to apply all relevant knowledge, skills, and attributes when representing a client (Rule 3.1-1)
Lawyers must ensure the use of a system and any associated abilities and/or restrictions do not compromise a lawyers ability to act competently

12. Confidentiality
The general principles of confidentiality and privilege as between a client and his/her lawyer still apply!
Lawyers must ensure that information submitted to any electronic fund transfer service is:
done in accordance with the Rules
not shared with third-parties
does not compromise confidentiality and/or privilege between the client and his/her lawyer.

13. Confidentiality Be aware of disclosure requirements! Consent MUST be:
Some information disclosed may require consent from the client
Consent MUST be:
Informed
Received in writing and/or confirmed in writing after sufficient disclosure

14. Financial Issues
Lawyers must ensure that funds received from clients are secure, and that client’s financial interests are protected
Lawyers must ensure that:
The electronic fund transfer system is secure and has appropriate access controls in place
There is an adequate trail of the movement of the $$ for audit purposes and in cases of dispute
There are safeguards in place to prevent funds from being dispersed without approval from the lawyer
The account where client funds pass through is creditor proof

15. General Considerations
Although far from an inclusive list, lawyers should consider:
Is this REALLY electronic fund transfer - or just a conduit?
You still have to go to the bank or somehow get money to the service provider
You may have to send some of the money to the vendor’s lawyer personally (like cheques made payable to non-institutional lenders)
That is NOT electronic fund transfer

16. General Considerations
Does the client know that you are giving his/her money to someone else?
How will the funds be disbursed?

17. General Considerations
Potential timing issues
What happens if a mortgage is to be paid off and the service provider is late?
Who is responsible for penalties/interest charges?
Does your contract preclude you from suing if the service provider screws up?
i.e. can’t close a deal due to system failure

18. General Considerations
Additional expenses incurred by the client?
Does the client know how much it is costing?
Are the fees to be charged over and above what the client would normally incur?
If so – by how much?
Does the client know?
Does the client know that couriering the money to the vendor or to an electronic fund transfer service provider will cost the same?

19. General Considerations
If there are non-institutional payees, does the client know that only part of the money goes into the system and the rest has to go to the vendor anyway?
How do you enforce an undertaking from the vendor to discharge an institutional mortgage if the vendor isn’t making a discharge payment?

20. General Considerations
How access to the system is controlled?
Do you know who is in control of system info?
The security of the funds in the system
Is the service provider funding stable should there be a theft or default?
Is the provider who you think they are? (i.e. not a shell company).
Is the service provider a deposit taking institution?
How will conflicts be avoided?

21. Things that scare me?
Is the service provider contractually bound to indemnify you and your client?
Are there limitations of liability in favour of the service provider?
Does the Provider require indemnity and save harmless provisions or assurances?
What insurance do you have to stand behind LawPro? i.e. LawPro Insurance is for claims from clients regarding professional services rendered NOT for claims for suppliers under contracts