Principle, not politics

Published on slaw.ca on November 10, 2015

The Law Society of Upper Canada ABS Working Group delivered an interim report to Convocation in September. In reading some of the subsequent comments, I was reminded of Nick Robinson’s thoughtful paper When Lawyers Don’t Get All the Profits. As he said in an interview with Cristin Schmitz:

I’ve been amazed in this debate how much each side kind of talks past each other, dismisses the concerns of the other side, or the point of the other side.

In its interim report, the Working Group reported that it would not further consider non-licensee ownership or control of traditional practices at this time. Rather, four other areas would be examined. It was disappointing to have a leading ABS proponent respond to the interim report saying that the “foul stench of protectionism” explained the report and to have another say, less dramatically, that “the outcome in Ontario points to the triumph of politics over principle”.

While it would be naïve to think that strong views will change as a result, I think it important to say for the record that the ABS Working Group, a diverse group[i], worked hard to genuinely address a complex question. The report was a consensus report supported by all members of the working group. Being thought wrong is fair enough especially on complex issues. But I don’t accept the allegation that our interim report is unprincipled. It is not. On the other hand, it has to be admitted that professional self-interest is not an unreasonable concern. Professional self-regulation on issues where the public interest and professional self-interest can diverge is a challenge to be addressed with care. The public interest must govern.

But to the Interim Report. Why not move forward now to majority or control of traditional practices? My own view is principally premised on observations of the effect of ABS in Australia and in England. The first observation is that minority non-lawyer ownership has been broadly adopted in Australia and is the greatest part of ABS licensing in both Australia and England. There appear to be real advantages seen in minority investment for these practices and little or no expressed concern. The second observation is that the largest effect of majority non-lawyer ownership in both Australia and England has been consolidation in the personal injury sector rather than creation of new enterprises delivering new legal services or delivering legal services differently. Recognizing that personal injury work in Ontario is principally available on the basis of contingent fees, it is unclear to me that injured persons would be better or more economically served by large consolidated firms. And it is difficult to imagine reversing a decision which consolidates an area of practice. Watching and waiting for evidence to develop seems the better course to me. It is also material to me that the current personal injury model in Ontario, based in contingent and referral fees, is raising concerns for many. It seems sensible to work through these concerns before considering significant changes.

In England, there have been more innovative practices using majority ownership than in Australia. This is not surprising given the much larger English market and given the importance of London as a capital centre. But significantly, when thoughtful English analysts were asked for their views of the impact of ABS since 2012 when first permitted, the consistent answer was that it is too early to assess the impact of ABS. Waiting a bit seems sensible to me.

Another perspective comes from innovation research and theory. Ray Worthy Campbell’s work has been important in my thinking. Professor Campbell observes that it is very difficult for existing businesses to do things in a fundamentally different way. Building on the work of Harvard business professor Clayton C. Christensen, this is the idea that sustaining innovation is much more likely than disruptive innovation for most businesses. My belief is that many legal needs are unmet is because the only permitted form of business, professional consultancy in which expensive expert time is applied assessing and solving problems, is inherently too expensive to address many currently unmet legal needs. Putting these thoughts together, it seems very unlikely that traditional professional legal consultancies will evolve into something quite different if majority non-lawyer ownership is permitted. It seems logical to think that permitting majority ownership would lead much more to consolidation of existing practices than to transformation of existing practices into something different. It seems likely to me that new technologies and other genuine innovations are more likely to come from new providers than from existing providers. But encouraging evolution of existing traditional practices to deliver more than they now do seems worth-while.

A third perspective is practical. We do not have the regulatory infrastructure in Ontario to deal appropriately with significant new forms of non-lawyer owned legal service providers. On the other hand, regulating traditional practices with some non-lawyer ownership is more easily accomplished. An incremental regulatory path is attractive from a pragmatic perspective.

These are some of the principal reasons that caused me to conclude that serious examination of majority ownership or control of traditional practices should wait with examination of minority ownership being a better focus for the time being. I should add franchise arrangements to minority ownership as possibly a way of allowing evolution of existing traditional or consultancies “professional consultancies” to achieve advantages of scale such as branding, business and legal expertise and infrastructure.

Another area that appears to merit examination has been labelled ABS+ acknowledging the contribution of Professor David Wiseman to the ABS discussion. The Working Group will examine allowing and encouraging “civil society” organizations to deliver legal services. One version of this is analogous to multidisciplinary practices (MDP) in which non-legal services can be offered by legal practices. The MDP idea is that “one-stop shopping” can be attractive to clients. Flipping this idea recognizes that there are important organizations already serving other needs, whether for particular vulnerable populations, low income people or the middle class, through which legal needs might also be served. People who won’t go to a lawyer or paralegal’s office could access legal services where provided ancillary to other important services. Another version would harness existing organizations who are trusted in their communities permitting them to provide legal services as well as being intermediaries between their communities and legal clinics.

The fourth area for examination is the least well defined. We know that there are substantial areas of unserved legal need. Yet only lawyers and paralegals are permitted to deliver legal services in Ontario. There is no lack of lawyers and paralegals yet legal needs go unserved. Part of the answer may be innovation by traditional practices. Part of the answer may be better access to legal information so that people can better serve themselves. Part of the answer may be civil society organizations delivering legal services differently. Part of the answer may be that it is counterproductive only to permit licensees to deliver legal services – especially where they don’t. But part of the answer may also be that innovative practices, applying significant capital to technological and business innovation, may be needed. The traditional labour-intensive professional consultancy model has its limits and other business models, with different financing, may be of value to meet unmet needs.

As said at the outset, I don’t expect that those with harsh views on either side of the ABS divide will change their thinking because of this column. But I hope some will find elaboration of a less certain perspective to be of value.

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[i] Susan McGrath, Malcolm Mercer, Constance Backhouse, Marion Boyd, Ross Earnshaw, Carol Hartman, Jacqueline Horvat, Brian Lawrie, Jeffrey Lem, Jan Richardson, Alan Silverstein and Peter Wardle

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Filed under ABS and A2J, Law Society Regulation

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