Executive Summary: Key Legal and Evidentiary Issues

• Priyan M.B. Samarakoone, a BC lawyer, was assessed a $5,000 administrative penalty by the Law Society of British Columbia for failing to comply with client identity verification rules in connection with a foreclosure transaction in 2020.
   
• The Law Society conceded on judicial review that the transaction at issue — receipt of funds from another lawyer's trust account — was exempt from the verification rules under Rule 3-101(b)(ii), yet continued to press for dismissal of the petition.
   
• At issue on appeal was whether the chambers judge erred in declining to remit the matter to the Law Society, in awarding special costs of $5,000, and in finding the Law Society's process was procedurally unfair.
   
• The Court of Appeal upheld the refusal to remit, finding the Notice of Penalty and the Chair's Decision concerned only the first, exempt transaction, and there could therefore be only one possible outcome.
   
• Special costs were set aside because costs are not generally awarded against a tribunal and disapprobation is expressed through ordinary costs, not special costs; pursuing a meritless position alone is insufficient to justify extraordinary costs.
   
• The procedural fairness ground was left undecided, as the result on reasonableness rendered it unnecessary.

Facts of the case

Priyan M.B. Samarakoone is a sole practitioner called to the BC bar in 2013. After seven years working with Access Pro Bono doing civil duty counsel work, he established EQ Law in 2019, a firm serving clients who have difficulty securing legal representation. He was retained by one such client — a woman who had moved to the United States to escape a persistent threat of spousal abuse — to help her obtain her share of a family home that was in foreclosure. On June 10, 2020, Mr. Samarakoone received approximately $104,000 (specifically, $103,887.50) into his firm's trust account from the trust account of the law firm handling the foreclosure. On August 17, 2020, he disbursed the funds, less his fees, to the client. In verifying the client's identity, Mr. Samarakoone conducted a videoconference, corroborated her identity with her former family lawyer, had her attend a notary in Texas to affirm several affidavits, and obtained a clearance certificate from the Canada Revenue Agency in her name. He was unaware at the time of the requirement to retain an agent in the client's location to verify identity in certain circumstances.

Policy and regulatory provisions at issue

The Law Society is the licensing and regulatory body for lawyers in British Columbia, empowered under the Legal Profession Act, S.B.C. 1998, c. 9. In April 2022, it enacted rules permitting the imposition of administrative penalties for, among other things, violations of client identification and verification rules. Rule 3-102 required lawyers providing legal services in connection with a financial transaction to verify the client's identity in the manner prescribed by the Rules. Rule 3-104 required the retention of an agent to obtain that information if the client was not present in Canada and was not physically present before the lawyer. Rule 3-101(b)(ii), however, exempted from the verification requirement transactions in which a lawyer "receives money paid from the trust account of another lawyer" — precisely the nature of the June 10, 2020 receipt. Rule 4-59(3) required the Executive Director to deliver to the lawyer, at least 30 days before the effective date of an administrative penalty, written notice setting out the reasons for the penalty, including the specific rule breach alleged.

Reasoning and analysis

In July 2022, the Law Society audited Mr. Samarakoone's firm records and identified a concern with client matter 00064. On January 17, 2023, it notified him of the investigation, and on March 13, 2023, issued a Notice of Penalty assessing an administrative penalty of $5,000. Mr. Samarakoone applied for review on April 11, 2023, seeking a reduction on the basis of financial hardship and explaining the steps he had taken to verify the client's identity. In a written decision dated May 29, 2023, the Chair of the Discipline Committee dismissed the application and confirmed the penalty. Mr. Samarakoone then petitioned for judicial review. While the matter was under reserve after a November 2024 hearing, the judge issued a memorandum to the parties raising the potential applicability of Rule 3-101(b)(ii) — an exemption neither party had raised at the initial hearing. At a subsequent hearing, the Law Society conceded the receipt of the foreclosure funds was exempt from the verification rules because the money came from another lawyer's trust account, but took the position that the Notice of Penalty and the Chair's Decision concerned two distinct transactions: the exempt June 10, 2020 receipt, and the August 17, 2020 disbursement to the client, which it said was not exempt and constituted a separate breach.

The chambers judge rejected that characterization. In reasons indexed as Samarakoone v. The Law Society of British Columbia, 2025 BCSC 492, he found that both the Notice and the Decision concerned only the first, exempt transaction, and that the Decision was therefore unreasonable. He declined to remit the matter to the Law Society on the basis that there could be only one possible outcome, consistent with the principle from Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 at paras. 140–142, that remitting a matter is futile where a particular outcome is inevitable. He awarded special costs to Mr. Samarakoone in the amount of $5,000, finding the Law Society deserving of "at least mild judicial rebuke" for basing its investigation and finding of breach on a fundamentally flawed premise and for continuing to press for dismissal after acknowledging the exemption.

On appeal, the Court of Appeal upheld the refusal to remit. Madam Justice Fenlon, writing for the Court, agreed the Notice of Penalty — which expressly identified the June 10, 2020 receipt as the relevant financial transaction — and the Chair's Decision both focused exclusively on the first, exempt transaction. The Court found the second transaction (the disbursement to the client) was not implicitly before the Chair at the time of the Decision, particularly given that the notice provisions under Rule 4-59(3) existed precisely to inform the lawyer of the case to be met. The Law Society's argument that Mr. Samarakoone's review submissions acknowledged both transactions was rejected; the Court read those submissions as describing steps taken to verify the client's identity in support of a reduction in the penalty, not as a binding admission that both transactions were in issue.

On the costs question, the Court of Appeal found the award of special costs warranted appellate intervention. The Court noted that costs are generally not awarded against a tribunal, and that disapprobation of a tribunal's conduct is achieved through an award of ordinary, rather than special, costs. The Court further noted that Mr. Samarakoone had not sought special costs, the Law Society was not afforded an opportunity to make submissions on the issue, and pursuing a meritless position without more does not constitute the kind of conduct — bad faith, disobedience of court processes, incivility, or frivolity — that warrants extraordinary costs. The Court acknowledged the Law Society's conduct was not its "finest hour," but concluded it did not rise to the level of misconduct or abuse of process that would justify special costs against even a private party, let alone a tribunal.

Ruling and overall outcome

The appeal was allowed only to the extent of setting aside the award of costs against the Law Society. The Court upheld the chambers judge's decision to quash the Chair's penalty and decline to remit the matter to the Law Society, leaving Mr. Samarakoone as the successful party on the core issue. The parties agreed that no costs should be awarded in the Court of Appeal, as the Law Society had retained counsel to represent Mr. Samarakoone on the appeal. No monetary award of costs was ultimately ordered in either court.