THE LAW SOCIETY OF ALBERTA HEARING COMMITTEE REPORT

Transcription

1 THE LAW SOCIETY OF ALBERTA HEARING COMMITTEE REPORT IN THE MATTER OF THE LEGAL PROFESSION ACT, R.S.A. 2000, c. L-8 AND IN THE MATTER OF A HEARING REGARDING THE CONDUCT OF BRIAN SEKIYA, A MEMBER OF THE LAW SOCIETY OF ALBERTA INTRODUCTION 1. A Hearing Cmmittee (the "Cmmittee") f the Law Sciety f Alberta ("LSA") cnvened at the Law Sciety Offices, in Calgary, n December 17, 2012 t cnsider the cnduct f Brian A. Sekiya. 2. The Cmmittee was cmprised f Anne L. Kirker, Q.C., Rse Carter, Q.C., and Larry Ackerl, Q.C. The LSA was represented by Mr. Brian Giffrd. Mr. Sekiya was represented by Mr. Patrick Peacck, Q.C. A curt reprter was present t transcribe the prceedings. JURISDICTION 3. Jurisdictin was established thrugh the intrductin (by cnsent) f the fllwing Exhibits (1 thrugh 4): Exhibit 1 - Letter f Appintment f the Hearing Cmmittee dated Nvember 21, Exhibit 2 - Ntice t Slicitr dated August 10, 2012 with acknwledgement f service. Exhibit 3 - Ntice t Attend dated August 10, 2012 with acknwledgment f service. Exhibit 4 - Certificate f Status dated August 10, 2012 certifying that Mr. Sekiya is an active member f the Law Sciety f Alberta. 4. In additin, a letter dated Nvember 26, 2012 was entered as Exhibit 5 cnfirming that pursuant t Rule 96(2)(a) and (b) f the LSA ("Rules"), a Private Hearing Ntice had been served n tw individuals as identified in the letter. The Cmmittee was advised that n request fr a private hearing had been requested. EXHIBITS 5. The fllwing additinal Exhibits (6 thrugh 21) were als entered int the recrd during the curse f the prceedings with the cnsent f the parties: Exhibit 6 - Memrandum f Cmplaint Frm submitted by M.S., January 22, 2012, enclsing: Tab 1 - Reslutins f the Directrs f # Alberta Ltd., June 15, 2007 (signed) Tab 2 - Transcript f Recrding, April 3, 2008 (see Exhibit 16 belw) Tab 3 - Reslutins f the Directrs f # Alberta Ltd., June 15, 2007 (unsigned) Tab 4 - Letter frm Jhn H. Wilsn t Brian A. Sekiya, July 3, 2008 Tab 5 - Letter frm Brian A. Sekiya t Jhn H. Wilsn, July 9, 2008 Tab 6 - Trust Statement, undated Prepared fr Public Distributin June 19, 2013 Page 1 f 7

2 Exhibit 7 - Letter frm Brian Sekiya t LSA, March 15, 2010 Exhibit 8 - Letter Requesting Respnse t Brian Sekiya, April 6, 2010 Exhibit 9 - Letter f Respnse frm Brian Sekiya, May 14, 2010 Tab 1 - Particulars f Share Transfers f #2 Alberta Ltd., undated Exhibit 10 - Letter frm M.S. t LSA, July 8, 2010 Exhibit 11 - Letter Requesting Respnse t Brian Sekiya, March 17, 2011 Exhibit 12 - Letter frm Brian Sekiya t LSA, March 31, 2011 Exhibit 13 - Letter frm LSA t Brian Sekiya, April 5, 2011 Exhibit 14 - Letter f Respnse frm Brian Sekiya, May 3, 2011 Tab 1 - Reslutins f the Directrs f # Alberta Ltd., June 15, 2007 (unsigned) Exhibit 15 - Letter frm M.S. t LSA, June 18, 2011 Tab 1 - Letter frm Brian Sekiya t LSA, May 3, 2011 Tab 2 - Transcript frm the Recrding, April 3, 2008 Tab 3 - ICO s Un-audited Financials infrmatin, July 2, 2008 Tab 4 - # Alberta Ltd. Ntice f Special Meeting f Sharehlder, March 31, 2010 Exhibit 16 - CD f recrding labelled Meeting with Brian Sekiya, April 3, '08, Brian's ffice Exhibit 17 ICO Update, July 16, 2008 Exhibit 18 - Fur page string cmmencing with an April 21, frm C.L. t M.S. et al Exhibit 19 - Bundle f Dcuments including: frm Brian Sekiya t G.A. et al, September 20, 2007; Wilsn Laycraft invice dated June 27, 2008 addressed t C.L., M.S., G.A. and S.C.; ICO Update, July 16, 2008; Tw page Reprt t Sharehlders; Nte dated April 3, 2008 re meeting in Brian Sekiya s ffice; Letter dated July 17, 2008 frm Mr. Wilsn t C.L. and M.S.; frm M.S. t Mr. Wilsn dated September 25, 2009; Draft Statement f Claim. Exhibit 20 - Bundle f s beginning with the sent by Brian Sekiya t C.L. et al, June 12, 2007 Exhibit 21 - Reslutins f the Directrs f # Alberta Ltd. and Share Certificates CITATIONS 6. Mr. Sekiya faced tw citatins: (a) It was alleged that he disbursed funds withut instructins t d s and that such cnduct was deserving f sanctin. Prepared fr Public Distributin June 19, 2013 Page 2 f 7

3 (b) It was alleged that he accepted instructins frm ne client t the determine f anther while in a cnflict f interest r ptential cnflict f interest and that such cnduct was deserving f sanctin. PRELIMINARY MATTERS 7. After Exhibits 1 thrugh 5 were entered t establish the jurisdictin f the Cmmittee, the Chair intrduced the three Cmmittee Members and inquired f bth cunsel whether the parties had any bjectin t the cmpsitin f the Cmmittee. There was n bjectin. 8. The Chair als inquired whether Mr. Sekiya wished t make a Private Hearing applicatin. He did nt. The Chair therefre directed that the hearing prceed in public. THE EVIDENCE 9. The tw citatins arse frm a cmplaint made by M.S. in January, M.S. was, at the time, the Vice President and ne f nly tw remaining directrs f # Alberta Ltd. 2, an investment cmpany referred t thrughut the hearing, and in these reasns, as ICO. M.S. himself held 50 shares in ICO having invested $50, ICO was incrprated in r arund January, 2006, by R.C. fr the purpse f raising mney t cmplete the develpment f a patent fr cmmercial purpses. 4 #3 Alberta Ltd. (referred t as P Cmpany ) wned the patent. 5 P Cmpany had fur sharehlders. Three were privately held family cmpanies wned by L.L., R.C. and M.G., respectively. 6 The furth sharehlder was ICO, being the vehicle thrugh which friends and family f the ther sharehlders culd invest in the venture t take the patent t market. 11. The Bard f Directrs f P Cmpany included R.C., L.L., C.L. and V.D When ICO was first incrprated, R.C. was the funding sharehlder and directr. As ther individuals invested they became sharehlders and sme became directrs and fficers f the cmpany Mr. Sekiya was retained by R.C. t set up P Cmpany and ICO. After ICO was incrprated, Mr. Sekiya's invlvement with ICO was limited t the issuance f Share Certificates t investrs which he did n R.C. s instructin and therwise as apprved by the Bard f Directrs f ICO. 9 He was nt invlved in giving advice in cnnectin with any management functin By June, 2007, the fllwing individuals had becme the directrs f ICO: G.A., S.C., D.M., M.S. and C.L An ICO Update dated July 16, 2008, indicates that sharehlders f ICO invested $1,295, Of the $1,295,000 invested, ver $1,000,000 was directed either directly, r thrugh ne f the 1 Exhibit 6 2 Transcript f Prceedings, page 13, lines Transcript f Prceedings, page 14, lines Transcript f Prceedings, page 99, lines Transcript f Prceedings, page 19, lines Transcript f Prceedings, page 19, line 25 - page 20, line 1 and page 98, lines Exhibit 19, Reprt t Sharehlders 8 Transcript f Prceedings, page 102, line 26 page 103, line 7 9 Transcript f Prceedings, page 99, lines 1-12; page 104, lines Transcript f Prceedings, page 99, lines Transcript f Prceedings 12 Exhibit 17, ICO Update Prepared fr Public Distributin June 19, 2013 Page 3 f 7

4 existing sharehlders, t R.C. r L.L. wh were apparently managing the patent develpment prject. Mr. Sekiya was nt invlved in the transfer f these funds On r befre June 4, 2007, funds ttalling $28,000 were given t Mr. Sekiya by C.L., wh had fund nine new investrs. Tw f thse investrs gave their subscriptin finds directly t R.C. 14 Mr. Sekiya received cheques frm C.L. fr the ther seven investrs (ne f whm was C.L. himself thrugh a numbered cmpany) as fllws 15 : (a) D.B. - $5,000 (b) M.S.B. - $2,000 (c) S.E. - $2,000 (d) C.E. - $4,000 (e) M.D. - $5,000 (f) R.R. - $5,000 (g) #4 Alberta Ltd. (C.L.) - $5, This $28,000 was depsited int Mr. Sekiya's trust accunt. N specific trust cnditins were cmmunicated t Mr. Sekiya. 18. There was a limit t the number f friends and family wh culd invest in the venture thrugh ICO withut the cmpany ging public. With the additin f the nine new investrs, that limit was ging t be exceeded. ICO culd nt, therefre, issue the shares in the capital f the cmpany which the new investrs sught t purchase. In an dated June 4, 2007 frm D.M., Treasurer f ICO, 16 t Mr. Sekiya she nted that C.L. had warned the new investrs he had brught in that " it may nt g thru..." and that there wuld have t be an adjustment. D.M. asked Mr. Sekiya nt t "prcess what C.L. brught in n Friday" while the sharehlder limit issue was addressed On June 12, 2007, a meeting tk place amng the ICO Bard f Directrs and the P Cmpany Bard f Directrs. Mr. Sekiya was asked t attend t prvide advice n the structural alternatives available Mr. Sekiya explained the issue t C.L. and the ther directrs f ICO and P Cmpany and explained that t issue additinal share certificates, ICO wuld have t take the steps necessary t g public. Alternatively, a secnd investment cmpany culd be established which wuld allw new investrs t make the same investment in the patent develpment venture, albeit thrugh the new investment cmpany Exhibit 17, ICO Update ; Transcript f Prceedings, page 99, line 23 page 100, line Exhibit 6, Tab 1 15 Transcript f Prceedings, page 103, lines 8 12; Exhibit 6, tabs 1 & 3 16 Transcript p. 24, line Exhibit 19, frm D.M. t Brian Sekiya, June 4, Exhibit 20, s between Mr. Sekiya and C.L., G.A. and V.D. dated June 10 and 12, 2007; Transcript f Prceedings, page 106, line 2 - page 107, line Transcript f Prceedings, page 106, line 2 - page 107, line 12 Prepared fr Public Distributin June 19, 2013 Page 4 f 7

5 21. Mr. Sekiya testified that he subsequently received instructin t incrprate ICO 2 which was t wn shares in P Cmpany like ICO did s that all investrs, whether they wned shares in ICO r ICO 2, had r wuld acquire the same interests in P Cmpany M.S. asserted that Mr. Sekiya had n such authrity frm the Bard f Directrs f ICO. Hwever, s which Mr. Sekiya retrieved frm an ld cmputer just a week befre the hearing 21 established that by dated June 24, 2007, the Bard f Directrs f ICO did cnfirm its agreement with the psitining f ICO 2 as the reasnable slutin t the sharehlder limit the prblem. 22 Specifically, Mr. Sekiya was instructed t "mve 157 shares frm ICO t R.C. effective June 25, The shares will be cnsidered payment in lieu f cash fr expenses incurred in the develpment and frward mvement f the cmpany. ICO will retain 55 shares in the cmpany t be sld after the psitining f ICO 2." ICO 2 was therefre incrprated. Shares in ICO were transferred t R.C. himself as payment fr expenses he had incurred. Shares R.C. wned were then used t capitalize ICO 2. As had been the case with ICO, R.C. became the funding sharehlder and directr f ICO Once ICO 2 was incrprated, shares fr C.L.'s nine new investrs were issued ut f that cmpany. 25 The subscriptin funds f $28,000 in trust were transferred within Mr. Sekiya s trust accunt t ICO 2 n June 27, Mr. Sekiya subsequently paid the funds t R.C. n his instructin Unfrtunately, the venture failed. 26. Mr. Jhn Wilsn Q.C. was retained by C.L., M.S., G.A. and S.C. t act n behalf f ICO after the business relatinship with R.C. deterirated. Mr. Wilsn was called as a witness. He cnfirmed that while "there certainly was a fcus n an accunting that was required it was nt frm Mr. Sekiya. It was frm L.L. and R.C." Mr. Wilsn testified that when he was initially retained, it appeared t him that Mr. Sekiya may have been acting in a cnflict interest "if there was ging t be a payment t R.C. r R.C.'s cmpany, fr example, with my clients' trust funds." 29 He suggested that perhaps ICO shuld have been represented by ne party and R.C. represented by smene else. Mr. Wilsn's clients were f the view that the $28,000 transfer t ICO 2 had taken place withut authrizatin. Mr. Wilsn acknwledged, hwever, that he had never seen Mr. Sekiya's file and s didn't knw t what extent he had addressed any cnflict f interest issues r authrity t disburse trust funds in the manner he did. 30 Mr. Wilsn testified that withut having seen smething that wuld justify the mvement f the $28,000 t the trust accunt fr ICO 2, he was f the view the mney ught t be repaid t ICO Transcript f Prceedings, page 107, lines Exhibit 20; Transcript f Prceedings, page 113, lines 1 15; 22 Exhibit 20, frm G.A. t Brian Sekiya, June 24, Exhibit 20, frm G.A. t Brian Sekiya, June 24, Transcript f Prceedings, page 109, lines Exhibit 9, Tab 1, particulars f share transfers f #2 Alberta Ltd. 26 Exhibit 6, Tab 6, Trust Statement 27 Transcript f Prceedings, page 115, lines Transcript f Prceedings, page 89, lines Transcript f Prceedings, page 86, lines Transcript f Prceedings, page 83, lines Transcript f Prceedings, page 84, lines Prepared fr Public Distributin June 19, 2013 Page 5 f 7

6 28. The Cmmittee did nt hear frm C.L. r frm any f the ther ICO r P Cmpany directrs r frm any ther investrs. DECISION 29. The issues befre the Hearing Cmmittee were whether Mr. Sekiya disbursed the $28,000 t R.C. withut prper instructin t d s, and whether he accepted instructin frm ne client t the detriment f anther while in a cnflict f interest r ptential cnflict f interest. 30. Althugh M.S. and cunsel fr the Law Sciety asserted that Mr. Sekiya received the $28,000 int trust n behalf f ICO and that he was nt authrized t incrprate ICO 2, the evidence prvided by Mr. Sekiya, including the series f s he was able t retrieve just prir t the hearing (Exhibit 20), established that: (a) (b) (c) (d) (e) when Mr. Sekiya received the $28,000 frm C.L. and depsited the subscriptin funds int his firm's trust accunt n June 4, 2007, it was anticipated the investrs wuld receive shares in ICO; because f the sharehlder limit prblem, ICO culd nt issue thse shares; the directrs f ICO and f P Cmpany cnsidered their ptins and instructed Mr. Sekiya t incrprate ICO 2 s that new investrs culd invest in the patent develpment venture purchasing shares in ICO 2; as had been dne with ICO, ICO 2 was incrprated with R.C. as the funding sharehlder and directr; the new investrs received shares in ICO 2 and the subscriptin funds were placed in trust fr ICO 2; (f) Mr. Sekiya received instructin frm R.C. as funding sharehlder and directr f ICO 2 t release the funds which he did. 31. It appears that Mr. Wilsn's clients had nt fully explained t him the sequence f events leading t the decisin t incrprate ICO 2 as an alternate vehicle thrugh which new investrs culd purchase shares, r the fact that ICO was nt in a psitin t issue shares t new investrs and cnsequently, did nt acquire any authrity ver the $28, On the basis f these facts, the Cmmittee was unable t cnclude that Mr. Sekiya was guilty f cnduct deserving f sanctin as alleged. Certainly, he can be faulted fr failing t dcument his file mre effectively and, in particular, fr failing t prduce the series f s which revealed the cnsensus amng all invlved t the incrpratin f ICO 2 until just a week befre the hearing. Had the crrespndence been made available sner, it is pssible the need fr a hearing might have been avided. 33. Mr. Sekiya was authrized t incrprate ICO 2 and he ultimately disbursed that cmpany's mney n the instructin f its funding sharehlder and directr. 34. As t the cnflict f interest, there was n evidence, and indeed, Mr. Sekiya had n indicatin, f any actual cnflict between r amng the parties. While a ptential fr cnflict existed, and Mr. Sekiya acknwledged that he ught t have reminded the parties they shuld cnsider btaining independent legal advice, it is als fair t say that Mr. Sekiya's rle in the business dealings between the parties was limited. Having nt heard evidence frm anyne ther than M.S. and nt fully understanding what infrmed the decisins made by the directrs f ICO and P Cmpany at Prepared fr Public Distributin June 19, 2013 Page 6 f 7

7 the material time, the Cmmittee culd nt cnclude that Mr. Sekiya's versight rises t the level f cnduct deserving f sanctin. 35. Accrdingly, n the ttality f the evidence, the Cmmittee unanimusly cncluded that the citatins shuld be dismissed. DATED at Calgary this 4 th day f June, Anne Kirker QC Bencher and Chair Hearing Cmmittee The Law Sciety f Alberta Larry Ackerl, QC Bencher and Member Hearing Cmmittee The Law Sciety f Alberta Rse Carter, Q.C. Bencher and Member Appeal Panel The Law Sciety f Alberta Prepared fr Public Distributin June 19, 2013 Page 7 f 7