Category Archives: Law Society Regulation

How legal services are regulated

The Bencher from Amazon?

[Published first on slaw.ca]

 

For generations, Canadian lawyers have been regulated themselves. Law Societies, with elected lawyer benchers and, more recently, with appointed lay benchers, have governed the legal profession. We refer to this as professional self-regulation.

It is increasingly recognized that legal needs are not fully satisfied by lawyers. Some legal needs are satisfied by others. Some legal needs are not satisfied at all. It is now understood that access to justice is an important and difficult policy challenge. In Ontario, section 4.2(2) of the Law Society Act now expressly states that the Law Society has “a duty to act so as to facilitate access to justice for the people of Ontario”.

As legal needs can be satisfied by new types of professionals or in new ways (technology for example), the question of the role of the Law Society arises. If a Law Society becomes the self-regulator of more than one professions, the nature of the Law Society changes. If a Law Society becomes the regulator of legal services generally, the nature of the Law Society further changes.

The point of this column is to suggest that thinking about new ways of providing legal services should include thinking about the implications on the existing regulation. This is not to suggest that nothing should change but rather that there may be more than one way to change and that the implications should be considered.

The Law Society of Ontario regulates two professions

Ten years ago, the Law Society of Ontario[1] became the regulator of Ontario paralegals. This was accomplished by significant amendments to the Ontario Law Society Act.

Previously, the Law Society only regulated lawyers. It was the self-regulator of one profession. Lawyers elected 40 benchers to Convocation[2]. The provincial government appointed eight non-lawyer benchers to Convocation. Only lawyers were permitted to “practice law”. The Court of Appeal for Ontario had concluded many years earlier that paralegal agents were not engaged in the unauthorized practice of law[3].

How paralegal regulation was introduced in Ontario

The 2006 amendments to the Law Society Act don’t actually mention paralegals. Rather a new concept was introduced into the Act: “providing legal services”. The “providing legal services” concept is very broadly defined in section 1(5) of the Act such that a person provides “legal services” if “the person engages in conduct that involves the application of legal principles and legal judgment with regard to the circumstances or objectives of a person”.

Having very broadly defined the provision of “legal services”, the Act prohibits the provision of legal services without a license, subject to certain exclusions. Two types of licenses are contemplated namely licenses to practice law and licenses to provide legal services.

The result (at least so far) is two types of licensees, lawyer licensees and paralegal licensees. Lawyer licensees can practice law. Paralegal licensees can provide legal services within the scope of their licenses – and their licenses only permit them to act as advocates in tribunals and in some courts in certain circumstances.

The 2006 amendments also provided for the election of benchers who provide legal services. Currently, five paralegal benchers are elected to Convocation.

The changing nature of the Law Society

There are two main points to be drawn from this legislative history. The first is that the consequence of having the Law Society become the regulator of paralegals was that the Law Society became the self-regulator of two professions. Lawyers and paralegals are now elected to regulate lawyers and paralegals. Lawyers and paralegals sit on hearing panels to assess the professional conduct of lawyers and paralegals.

This approach was not inevitable. A separate self-regulator could have been established to regulate paralegals. Some contended for this. England and Wales provides an example of separate regulators. There are separate regulators for solicitors, barristers, legal executives, licensed conveyancers, patent and trademark attorneys, costs lawyers and notaries. These “front-line” regulators are supervised by the Legal Services Board[4]. In Canada, the regulation of doctors, nurses and other health care professionals provides another example. There are separate regulators for different health care professions rather than a regulator of different types of health care professionals.

That the nature of the Law Society of Ontario was changed by the addition of a new profession to its regulatory ambit is significant and may not be obvious to many. If new legal professions become regulated by the Law Society, the nature of the Law Society will further evolve.

The changing scope of the monopoly

In order to regulate paralegals, it was necessary to determine what activities required regulation. While the permitted scope of practice of Ontario paralegals is advocacy, the definition of legal services (and hence the regulated space) was much broader as described above.

In other words, amendments to the Law Society Act carved out a very broad regulatory space while the Law Society authorized licensed paralegal activity only in a portion of that space.

The legislative decision to carve out a broad regulatory space was presumably designed to sweep all unregulated paralegals into regulation without quibbles about what was and what was not regulated. However, the result appears to be to have prohibited unregulated service provision in areas where neither lawyers nor regulated paralegals provide services.

Again, this was not the only possible choice. Again, we see a different approach in England (and Wales). The English approach is to define certain legal activities as being “reserved” (subject to exemptions) with the remaining legal activities being “unreserved”. The reserved legal activities are the exercise of a right of audience, the conduct of litigation, reserved instrument activities, probate activities, notarial activities and the administration of oaths[5].

The English approach allows licensed and unlicensed persons and entities to provide unreserved legal activities but, subject to exemptions, only licensed persons and entities to provide reserved legal activities.

The policy choice underlying the amendments to the Law Society Act in 2006 substantially extended the Ontario “reserved” space in order to ensure that paralegal agents were brought into regulation. The effect was to extend the regulatory space beyond where lawyers and paralegal agents provide legal services.

So what?

There has been increasing discussion about the ability of technology to provide legal services where legal services are not now being provided. The economic models of professional services and of technological services are quite different. Professionals have limited time to service clients and the cost of their time does not decrease. On the other hand, technology can service many people once built and the cost of serving one further person commonly drops as more people are served.

There are lots of issues to work through around technological provision of legal services. This column is not intended to do that work. The point of this column is a narrower one, namely that the decision to allow technology to deliver legal services has important implications for legal services regulation.

Potential effects of and approaches to allowing technological provision of legal services

Let’s assume that it is the correct policy choice to allow technology to deliver legal services directly where lawyers and paralegals do not now provide cost-effective services.

One way to do this would be to license technology providers by creating a new class of licensees. The Law Society Act allows this. But would it make sense to have a Society with elected lawyers and elected paralegals be the regulator of these new providers? Paralegals would rightly have objected to regulation only by elected lawyers and nurses would not accept regulation only by elected doctors. Neither would make sense in the public interest.

If self-regulation is to be maintained, wouldn’t the logical consequence of regulating technological providers be to have their elected representatives on the board. Said more plainly, if Amazon provided technologically based legal services, should there be a bencher from, or elected by, Amazon? This would of course change the nature of the Law Society by adding new types providers to the Convocation table, benchers who are not professionals in the traditional sense of the word.

But this is not the only possible approach. Another is to take the English approach (or the Canadian approach for health professions such as doctors and nurses) and to have different regulators for different types of providers. There could be a separate regulator of technological providers.

An a third approach would be to adopt the English approach to reserved and unreserved activities and to reduce the scope of the regulatory sphere so as to allow technology to deliver legal services outside of the reserved space subject only to general consumer regulation.

To be clear, I do not contend for any conclusion in this column but rather seek to highlight that the decision to move beyond legal service delivery by one established profession has its complexities. Those complexities can be managed in different ways and that complexity exists is not a sufficient reason to avoid change in the public interest. But there are things to think about.

The options

In February 2018 LawPro Magazine addressed the Top Legal Disruptions asking “How the profession should respond to major disruptions”. As the article said:

At the most basic level, there are just three options for dealing with alternative legal service providers. They are:

  1. prosecute them for the unauthorized practice of law;
  2. ignore them; or
  3. bring them into the legal services tent.

The point of this column is that the “bring them into the legal services tent” option requires some serious thought about the nature and the design of the tent.

_________________________________

[1] Then called the Law Society of Upper Canada

[2] Elected lawyer benchers could become life benchers and thereby continue to participate as benchers. Treasurers could continue to participate as benchers.

[3] Regina v. Lawrie and Pointts Ltd.(1987), 59 OR (2d) 161 (OCA)

[4] These regulators are not self-regulators. Their boards are not elected by the professions that they regulate but rather are appointed by government..

[5] Section 12 and Schedule 2 of the Legal Services Act 2007.

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Too many new lawyers? Build a wall?

[Originally published on slaw.ca]

Over the last few years, there has been much debate about how to deal with the significant increase in the numbers of Canadian and foreign law school graduates seeking licensing in Ontario. While the number of articling positions has significantly increased, the number of applicants has increased even more quickly. The Law Practice Program (LPP) was established several years ago as an additional pathway to address this shortfall and to pilot a new approach to experiential training.

With a recent proposal to terminate the LPP facing substantial opposition, the Law Society of Upper Canada is now developing “long-term recommendations for an appropriate, sustainable Law Society licensing process”[i].

In this column, I hope to make three points. The first is that the question of an appropriate licensing process is far from new. It is unlikely that easy and obvious answers will be found. The second is that history shows that prediction is very difficult, especially about the future[ii]. We have far too much confidence that we can predict the supply of and demand for lawyers.

The third point is that there is more than a little self-interest involved in a self-regulating profession seeking to regulate the number of lawyers. Even if we could do so with accurate predictions and with actual authority, there is reason to question whether the public interest is pursued in limiting numbers in response to economic anxiety within the profession.

I also hope to provide some historical information which may be useful in thinking about these issues.

45 years ago – Articling and the “Problem of Numbers”

In 1972, Bert J. MacKinnon[iii], as he then was, presented the Report of the Special Committee on Legal Education to Convocation of the Law Society of Upper Canada. The Special Committee Report described the then context saying:

Increasingly in recent years, the Law Society of Upper Canada became concerned about a number of problems related to legal education. In particular, it was felt that the time required to qualify for the Bar (up to 9 years) was too long. Also, the last full scale investigation of legal education in Ontario had taken place in 1955-57. Since then, there has been radical changes in the nature of law, the profession itself, the law schools and the number of students requesting admission to the law schools. Consequently, a further review of the problems became necessary.

The reference to a “full scale investigation of legal education” in 1955-57 is significant. That is when the current approach to legal education was established with a required minimum of two years undergraduate education followed by three years of law school, then the Bar Admission Program and then articling.

As of 1972, the Bar Admission Program was an eighteen month program following law school. According to the Special Committee Report, the time required to qualify for the Bar was thought to be too long. There was also a concern about the number of students seeking to become lawyers. Forty-five years later, the issues aren’t all that different.

As described the Special Report, the existing schools at Osgoode Hall and U of T became approved law schools in the late 1950s, Queens and Ottawa opened law schools in 1957, Western opened in 1958 and Windsor opened 1968. It took forty-five years for the next law school to open at Lakehead University in 2013.

The Special Committee Report summarized the then current problems as follows (i) Length of Process of Legal Education, (ii) Separation of Legal Education into Distinct Elements, (iii) The Problem of Numbers, and (iv) Financing Legal Education. One could see recent debates about legal education and licensing in these same terms which is instructive. Some problems may be somewhat inexorable with new balances needing to be found from time to time.

My main reason for looking at the Special Committee Report is its discussion of “The Problem of Numbers”. This is a discussion which doesn’t go away. In the late 1960s when William Howland[iv] was Treasurer, Convocation debated whether to restrict the number of lawyers called to the bar. It did so again in 1983[v] when the Special Committee on Numbers of Lawyers reported the majority view that “in the present circumstances more lawyers are engaged in private practice than are needed to provide proper legal services to the public”. I have little doubt that the issue of “numbers” has and will emerge from time to time over the generations.

By 1972, there had been 15 years of experience with law schools being the entry point for legal education and licensing. During these years, the number of law schools had dramatically increased. There must have been a sense of rapid change and concern about what might to come. As of 1972, the Special Committee Report noted:

Until the mid ’60s, the capacity of the Ontario law schools expanded at the same rate as did the other university faculties. However, in the late ’60s, their capacity began to level off while the numbers of graduates with first degrees continued to increase. The present capacity of the six Ontario law schools in their first year classes is between 1,000 and 1,100 but the total number of applicants in 1972 exceeded 3,000 at the very least.

Sitting in 1972, the immediate future looked like about 1,000 or so new lawyers annually with about three times as many people wanting to get into law school as there were spaces for them. One can only speculate what might have been thought in 1972 about the situation thirty years later.

15 years ago – Looking back and looking forward

As it turns out, 2002 looked astonishingly like 1972[vi]. There were still six Ontario law schools. The capacity of their first year classes was essentially unchanged at 1,176 students. The number of applicants for law school admission in Ontario was essentially unchanged at 3,457 applicants. The number of foreign trained licensing candidates was less than 100.

I doubt that anyone in 1972 would have thought that the significant changes over the prior 15 years would be followed by 30 years of very little change. And if one reflected in 2002, what would the next 15 years have looked like? Given the primacy of recent experience, I expect that a seer would have expected little change. Of course, that would have been wrong.

The last 15 years, new lawyers and licensing

By 2016, a new Ontario law school had been opened (Lakehead) and plans for another had been announced (Ryerson). The number of applicants for Ontario law schools had increased by 817 or nearly 25% to 4,502. The capacity of the Ontario first year classes had grown by 373 or nearly over 30% to 1,549[vii].

More significantly, the number of law school graduates from outside Canada seeking licensing has increased even more. From 2002 to 2014, the number of certificates issued by the NCA[viii] for all of Canada had increased from 120 to 779. Nearly three-quarters of this increase[ix] was from graduates of American, Australian and English law schools. Canadians going to foreign law schools represented a substantial portion of this increase.

Over the last 15 years, the demand for law school admission has significantly increased as has law school tuition. In Canada, Australia, England and the United States[x], law schools responded to this opportunity.

The result has been a significant increase in the number of Ontario licensing candidates. While the number of articling positions has increased significantly, the increase has not been sufficient to meet the increased demand. To address this difference, the Law Society established the Law Practice Program (LPP). In 2016, approximately 2,200 lawyers were called to the Bar with approximately 220 coming from the LPP[xi]. There are approximately 1,900 articling positions which is obviously a substantial increase from 2002.

As matters stand, those who are qualified and wish to become lawyers in Ontario are able to do so. There is of course a cost to the LPP. But the alternative would seem to be a barrier to licensing.

As might be expected, these significant recent changes have caused alarm. Coupled with the slowed economy since the financial crisis of 2008, discussion has turned again to “The Problem of Numbers”. As usual, the expectation is that the new normal is the future. While that might be true, it would be right to be sceptical about our ability to project the future and to be concerned about measures taken to respond to current insecurities.

Looking beyond new lawyers – past growth in the legal profession

Looking just at those becoming and wanting to become lawyers can be misleading. While “entry” numbers are important, there are more than 50,000 licensed lawyers in Ontario (as of 2014)[xii]. Of these, over 23,000 were practicing and insured and nearly 13,500 were practicing and exempt from insurance. This means that there were some 38,500 Ontario lawyers in private practice, in-house and government in 2014. A few hundred additional new lawyers annually is significant and no doubt feels even more significant. But the increase should be understood in context.

How did we get to where we are. Records from the Great Library provide some useful historic information. According to Law Society Committee records, there were 14,747 lawyers in private practice in 1989 and 4,275 lawyers in education, government and other areas[xiii] . Ten years later, the Law Society reported 16,942 lawyers in private practice, 2,906 in government and 4,778 in education, in-house, not-for-profit and other.

Overall, the number of practising lawyers increased by 561 lawyers[xiv] or 2.3% annually during the 1990s. This compares with an increase of 700 lawyers or 2.7% annually during the following 15 years from 1998 to 2013.

To summarize, there were approximately 19,000 practicing lawyers in 1989. By 1998, there were approximately 24,000 practising lawyers. By 2014, there were approximately 32,500 practising lawyers. The net annual increase of practising lawyers was nearly 600 lawyers in the 1990s and averaged 700 lawyers in the following 15 years. The rate of increase has grown from 2.3% to 2.7% annually.

Private practice vs in-house practice

But this overall perspective can be deceptive. During the first 10 year period from 1989 to 1998[xv], the number of private practice lawyers increased by a total of only 14.9% while the number of practising lawyers in other categories increased by 79.7%. During this period, in-house law departments rapidly increased[xvi]. The number of private practice lawyers increased by 220 lawyers or 1.4% annually while the number of practising lawyers not in private practice increased by 341 lawyers or 6.0% annually.

Looking at the next 15 years[xvii], there were 17,032 insured practicing lawyers in Ontario in 1999 while there were 5,067 practising lawyers exempt from insurance. This latter category included lawyers who were in-house and in education. I expect that most were in-house lawyers and will refer to them that way for simplicity.

By 2014, the number of private practice lawyers in Ontario had increased over 15 years by approximately 400 lawyers annually (i.e. 2.1%) from 17,032 to 23,057. The number of in-house lawyers had increased by approximately 300 lawyers annually (i.e. 4.3%) from 5,067 to 9,549. It may not have been intuitively obvious that over 40% of the net increase in practicing lawyers over the last 15 years has been outside of private practice.

Comparing the 10 years starting in 1989 and the subsequent 15 year period starting in 1998, the number of private practice lawyers increased more rapidly in the later 15 year period at 2.1% annually compared to 1.4% during the earlier 10 year period. On the other hand, the in-house etc. group grew more slowly in the latter period at 4.3% annually compared to 6.0%. Nevertheless, the number of in-house lawyers continued to grow more rapidly than private practice and a decline from the earlier very rapid growth of in-house lawyers was likely inevitable. Reflecting on the growth of in-house law departments, the greater rates of growth of the numbers of in-house should be no surprise.

Looking more closely at private practice

We know that there was significant growth in large firms in the 1980s and 1990s and that there has appears to have been diminished growth in large firms since the 2008 financial crisis. Unfortunately, we have no good information looking at these differences prior to 1998. But, there is information from the FLSC archive by firm size since 1998[xviii].

Over the 15 years from 1998 to 2013[xix], the number of lawyers in private practice in firms of more than 50 lawyers appears to have increased by 112 lawyers annually (i.e. 2.9%). Looking at the 5 years since 2008, the annual increase appears to be essentially unchanged at 110 lawyers annually for a lower annual percentage of 2.5%.

During the same 15 years, the number of sole practitioners increased by 114 lawyers annually (i.e. 1.6%) and the number of lawyers in firms of 2 to 10 lawyers increased by 151 lawyers annually (i.e. 2.6%). But in the 5 years since 2008, the number of sole practitioners has increased by 193 lawyers annually (i.e. 2.7%) while the number of lawyers in firms of 2 to 10 lawyers has increased by 207 lawyers annually (i.e. 3.2%).

Combining these “soles” and “smalls”, the increase is 400 lawyers annually (i.e. 3.0%) for the last 5 years of the period compared to 266 lawyers annually (i.e. 2.1%) for the entire 15 year period.

So what is the implication of this information. It seems clear that the experience in the “sole and small” sector has been quite different than in large firms and in-house. The “sole and small” sector was comprised of roughly 15,100 lawyers as of 2013. Over the 5 years ending 2013, some 400 net lawyers annually (up from 266 lawyers annually over 15 years) or 3.0% annually (up from 2.1%) were added to “sole and small” sector.

This increase is very likely the product of increased law school admissions, increased NCA numbers and somewhat diminished large firm growth. No doubt the addition of nearly 150 net more lawyers annually compared to a decade ago is causing competitive stresses.

Putting this change in broader context, it is useful to understand that the “soles and smalls” generally serve individuals. As such, the available work is likely correlated with number of people in the province. In 1998, there were approximately 1,030 Ontarians[xx] per lawyer in sole or small firm practice. By 2013, there appears to be approximately 900 Ontarians per “sole and small”. It follows that there will be greater competition for work in this sector. This analysis also suggests that there will be proportionately more inexperienced lawyers in this sector than there were which is a source of concern especially where practice in isolation is relatively common.

But none of this demonstrates that there are too many lawyers for the available work. There is no basis by which to judge how many is too many or too few especially given the substantial evidence of unmet legal needs. It may be that the increased number of lawyers will simply increase competition for limited work – or it may be that innovation will result in new services being provided to Ontarians – or there may be some combination of both.

Looking beyond new lawyers – projected future supply and demand

The analysis to this point has been historic. One point that can, and should, be taken from this historical review is that trends have changed and that the recent past has often looked quite different than the near future turned out to be. It is all too easy to assume that recent trends will continue when that is not necessarily true. For example, the number of applicants for law schools in the United States grew over many years – and has dropped dramatically in recent years[xxi]. Unlike in Canada, law schools are closing in the United States as demand falls in response to decreased opportunities.

Looking to the future, the Higher Education Quality Council of Ontario recently commissioned a study from Prism Economics and Analysis (the “Prism Report”) projecting the labour market for teachers, lawyers, physicians, nurses, architects and engineers. The headline conclusion for lawyers was “Based on the Lawyers Supply-Demand projection model developed in this research, it is estimated that over the 10-year period until 2025, there will be 1.6 new licensed lawyers for every new practicing position”.

The essential assumption made in the Prism Report is that there will be a significant decline in the number of new practising lawyer positions over the next 10 years while the number of law school graduates and new licensed lawyers will increase slightly. The result is a projected significant difference between supply and demand. This imbalance between supply and demand presumes a significant decrease in demand and no corresponding effect on supply.

On the demand side, the Prism Report assesses two components of demand; expansion demand (the increase in the demand for legal services) and replacement demand (the need to replace lawyers who leave practice because of voluntary withdrawal, retirement or death). As to replacement demand, the Report projects an increasing retirement rate and mortality rate with the “greying of the bar”. The Report notes the tendency of lawyers to retire later in life than the population generally and later than other professions. The Report does not address whether this trend toward late retirement will be true for in-house lawyers although the number of potential retirements from in-house practice may not be significant over the next decade given relatively low numbers in in-house practice in the 1980s.

More significantly, the Report projects a significant decline in expansion demand based on unreferenced projections of “slowing economic growth combined with increased globalization, the adoption of new technologies and rising competition”. As a result, the Report forecasts expansionary demand of some 320 lawyers annually over the next ten year down from a current estimate in the range of 700 to 1,100 lawyers.

It should be clearly understood that the most important variable in the Prism Report is the projected expansionary demand. The ability to make this sort of macroeconomic projection is highly suspect. Looking back at long term general economic forecasts and long forecasts for the demand for doctors, nurses and teachers shows that these sorts of forecasts are rarely right. While the Prism Report may be right that we are about to enter an unprecedented period of significant decline in expansionary demand, it is appropriate to be highly sceptical about the reliability of that prediction. If the expansionary demand since the financial crisis of 2008 is instead assumed, the conclusion of the Report would be quite different.

Figure 2-1 from the Report shows the annual historic and projected change in supply and demand for new lawyers from 2005 to 2025 with the first ten years being actual and the second ten years being projected. Notably, the number of new practising positions is just slightly less than the number of new licensed lawyers during the first ten years. A radical change is projected during the next ten years based on macroeconomic assumptions[xxii].

My point in this review of the Prism Report is not to throw rocks but rather to highlight the inherent fragility of the projection. I fear that the apparent reliability of charts and numbers will add fuel to protectionist fears.

What to make of all of this

It would be great to be able to make wise projections about the supply and demand of lawyers going forward. But, in my view, history shows that doing so is a mug’s game.

Lawyers in 1972 would not have guessed that the number of licensing candidates would remain essentially constant over the next 25 years. The growth of in-house practice and large firms would not have been projected in the late 1970s. Lawyer graduating in the early 1980s would not have predicted that they had become lawyers at such a good time. In 2002, the rapid increase in the number of Canadian and foreign law school graduates coming to Ontario to be licensed was entirely unpredicted. In 2007, the economic crisis of 2008 and its effect on the legal profession (and the economy generally) over the next decade was unpredicted. The rapid decline in US law school applications at the same time as increasing applications by Canadians to domestic and foreign law schools was not predicted either.

The implications are two-fold. The first is that we should not design and implement regulatory policies based on a false belief that we have the competence to “manage” supply and demand (even if we had that authority as a self-regulating profession which we don’t).

The other practical implication is that we should stick to our knitting and address what needs to be addressed. The principal mandates of a self-regulating profession are competence and conduct. The foregoing analysis shows what we already know which is that there are more lawyers going into small and sole practice and that many of these new lawyers are foreign trained. The goal should be proper assessment of qualifications, proper experiential training and practice support to better ensure that those practising in relative isolation have support.

But the implication of an increased number of lawyers is not to build a wall.

____________________________________________

[i] November 9, 2016 Convocation

[ii] Yogi Berra is commonly credited for this expression although the Danish physicist and Nobel Prize winner Niels Bohr appears to have said this before Mr. Berra. http://quoteinvestigator.com/2013/10/20/no-predict/

[iii] The Honourable Justice MacKinnon was appointed to the Court of Appeal in 1974 and then Associate Chief Justice in 1978. He served as Associate Chief Justice until 1987.

[iv] Appointed to the Court of Appeal in 1975 and appointed Chief Justice of Ontario in 1977.

[v] When I articled in 1982/83, the market was pretty grim. Articling hire-backs the previous year were very low. Interest rates had exceeded 20%. The economy was in a recession. No one would have guessed that becoming a lawyer in the 1980s would turn out as well for my generation as it did.

[vi] Ontario Universities’ Application Statistics at https://www.ouac.on.ca/statistics/law-school-application-statistics/

[vii] In descending order, Ottawa added 164 first year spots from 2002 to 2016, Windsor added 77 spots, U of T added 42 spots, Queens added 33 spots, Western added 17 spots and Osgoode was essentially flat.

[viii] National Committee of Accreditation of the Federation of Law Societies

[ix] An increase of 478 certificates was from England (255), Australia (131) and the United States (92). 177 was from other countries. India, Nigeria and Pakistan are the largest sources after Australia, England and the United States

[x] Until the market changed dramatically for lawyers in the United States.

[xi] Approximately 50% of the LPP students are from Canadian law schools.

[xii] Federation of Law Societies Statistics http://flsc.ca/resources/statistics/

[xiii] This were presumably mostly in-house lawyers. It is amusing now to see this group of 2,317 lawyers described as “other”.

[xiv] There are of course both new lawyers and lawyers who leave practice.

[xv] Based on LSUC annual information from the Great Library for 1989 and 1998.

[xvi] During this period, the size of large law firm serving large clients also increased significantly. While the numbers are not available, I expect that the number of lawyers serving individuals and small businesses likely grew even less.

[xvii] The Federation of Law Societies (FLSC) has a useful statistical archive with annual information back to 1998. The 1998 statistics from this archive for Ontario appear to have been done on a different basis than for 1999 and following years. Accordingly, I have used 1999 as a base rather than 1998.

[xviii] Unfortunately (and ironically), the available information is less reliable after 2007. Until 2007, the number of lawyers in private practice equaled the number of the lawyers in firms. In 2008 and following, the number of lawyers in firms exceeded the number of lawyers in private practice which makes no sense. It appears that the reason for this anomaly is that the data started in 2008 to double count lawyers who were in more than one firm. I have assumed that this double counting is randomly distributed by firm size and have restated the numbers so that the number of lawyers in firms is forced to the number of lawyers in private practice. This introduces a source of error into this analysis with the effect of the error being unknown.

[xix] The anomaly in the FLSC archive as between 1999 and 1998 was in the practising-exempt category. The practising-insured category was consistent. As data by firm size is not available for 2014, the 15 year period from 2008 to 2013 is used.

[xx] Based on Statistics Canada data as to the Ontario population

[xxi] The number of LSAT tests administered has dropped from over 170,000 in 2009/10 to nearly 106,000 in 2015/16. The number of Credential Assembly Registrations has dropped from approximately 88,000 in 2009/10 to nearly 52,000 in 2015/16 http://www.lsac.org/lsacresources/data/lsac-volume-summary

[xxii] One wonders how the obviously unexpected election of Donald Trump and the Brexit vote affects the assumption of increased globalization for example.

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Unmet legal needs – the challenge to legal practice and to self regulation

[First published on slaw.ca.]

Regulation of legal services differs in important ways across the common law world. In Canada, self-regulation is generally[1] the approach. Canadian law societies are authorized by provincial legislatures to decide who can practice law and provide legal services[2]. The substantial majority of the governors of the law societies are lawyers elected by lawyers. In Ontario, paralegal benchers are elected by regulated paralegals.

In England and Wales, the Solicitors Regulation Authority and the Bar Standards Board are the regulators. The majority of the governors of these regulators are not solicitors or barristers.

In the United States, the state courts are the regulators[3]. While lawyers have an active role, the courts are the ultimate decision-makers.

The American Bar Association and legal services innovation

The American Bar Association plays an interesting role in the U.S. context. The ABA is not a regulator, rather is “the national representative of the legal profession”. As a voluntary bar association, the ABA is governed by its House of Delegates. The ABA promulgates its Model Code of Professional Responsibility which is the starting point for the rules adopted in most states. The ABA plays an important harmonizing role with respect to legal education and legal ethics.[4]

With this background, it is interesting to consider struggles within the ABA to address the question of innovation in the provision of legal services. The “modern” starting point is probably the ABA Kutak Commission of 1983. The Kutak Commission proposed a rule permitting non-lawyer ownership of law practice entities. The proposal was on the basis that “[a]dherence to the traditional prohibitions has impeded development of new methods of providing legal services”[1]. The proposal was soundly defeated by the lawyers in the House of Delegates. As James Moliterno has put it “The attractive possibility that ordinary Americans might be able to obtain simple legal services quickly and easily was of no matter.”[5]

The next time the ABA addressed this question was during the Ethics 20/20 Commission commenced in late 2011. A discussion draft from the Commission invited comment on limited non-lawyer ownership in law firms[6]. The response from lawyers was little different than in 1983. The Illinois State Bar Association and the Senior Lawyers Division filed a resolution apparently designed to prohibit even discussion of the topic. The 20/20 Commission abandoned further discussion of the topic.

In 2015, William Hubbard, the then President of the ABA, established the ABA Commission on the Future of Legal Services, which was established to “make recommendations on how technology and innovation can help expand the availability of affordable legal services to the poor and middle class”. This approach was notably different that the Kutak Commission and Ethics 20/20 being expressly focused on unserved and underserved legal needs.

After an impressively thorough and thoughtful process, the Final Report of the Commission on the Future of Legal Services is expected to be released in August 2016. The Commission has proposed one resolution to the House of Delegates which was adopted (with a significant amendment).

Specifically, the Commission proposed and the House of Delegates adopted the ABA Model Regulatory Objectives for the Provision of Legal Services as follows:

  1. Protection of the public
  2. Advancement of the administration of justice and the rule of law
  3. Meaningful access to justice and information about the law, legal issues, and the civil and criminal justice systems
  4. Transparency regarding the nature and scope of legal services to be provided, the credentials of those who provide them, and the availability of regulatory protections
  5. Delivery of affordable and accessible legal services
  6. Efficient, competent, and ethical delivery of legal services
  7. Protection of privileged and confidential information
  8. Independence of professional judgment
  9. Accessible civil remedies for negligence and breach of other duties owed, disciplinary sanctions for misconduct, and advancement of appropriate preventive or wellness programs
  10. Diversity and inclusion among legal services providers and freedom from discrimination for those receiving legal services and in the justice system

The resolution urged that:

each state’s highest court, and those of each territory and tribe, be guided by the ABA Model Regulatory Objectives for the Provision of Legal Services when they assess the court’s existing regulatory framework and any other regulations they may choose to develop concerning non-traditional legal service providers.

This resolution was consistent with approach taken in the establishment of the Commission, which was to focus on legal needs and not just providers of legal services. Significantly, the resolution proposed a principled approach by the regulators (the state courts) in assessing existing and proposed regulatory frameworks concerning non-traditional legal service providers.

While the House of Delegates adopted this regulation in February 2016, there was controversy and an amendment to the original proposal namely that:

… nothing contained in this Resolution abrogates in any manner existing ABA policy prohibiting non lawyer ownership of law firms or the core values adopted by the House of Delegates.

During the winter of 2016, the Commission released three Issues Papers one of which was regarding Alternative Business Structures. The comments received were, by now, predictable. Perhaps the most precise was the response of the ABA Family Law Section:

On behalf of the Section of Family Law, we pose the following question: WHAT PART OF “NO!” DO YOU NOT UNDERSTAND? We remain unalterably opposed to these repeated, previously failed efforts to foist ABS upon our profession or our ethics.

When the time for presenting further resolutions by the Commission passed in the spring of 2016, the Commission did not make any proposals. This is not particularly surprising given the nature of the ABA. Some will no doubt see the responses by the House of Delegates as principled. Others will see self-interested protectionism by a voluntary bar.

What seems to me most interesting is that this is an issue that clearly isn’t going away yet the ABA seems unable to come to terms with it. This seems inevitably tied to the reality that market incumbents tend to perceive issues in accordance with their own interests and to protect their own interests.

One conclusion that might be drawn is that non-lawyer investment in law firms is a dead letter in the U.S. because the lawyers in the House of Delegates will never allow it. But I think the better conclusion is that the ABA has ceased to be the practical decision-maker because of its conflicted and ineffective governance in this context.

So, what is the evidence for the later conclusion?

The State courts and legislatures

The first is the decision of the United States Supreme Court in North Carolina Board of Dental Examiners v. Federal Trade Commission in which the Board of Dental Examiners took issue with “non-dentists” whitening teeth. At issue was whether the Board was protected from anti-trust prosecution by state-action immunity. The majority held that:

When a controlling number of the decision makers on a state licensing board are active participants in the occupation the board regulates, the board can invoke state-action immunity only if it is subject to active supervision by the state.

Where the state courts are the decision-makers or actively supervise state bars, this decision appears irrelevant. However, the decision clearly raises the risk of anti-trust prosecution for voluntary bar organizations and reinforces that the state courts are the decision makers with respect to practice of law. Recourse to the courts becomes a choice where self-regulation limits competition.

The second is activity within the state courts (as regulators rather than as adjudicators) to address impediments to access to justice. While focused on access in the litigation context rather than legal services more generally, the state courts are fairly seen as innovators compared to the ABA House of Delegates.

The New York State Court provides an example with its New York State Courts Access to Justice Program. The stated mission of the program is:

To ensure access to justice in civil and criminal matters for New Yorkers of all incomes, backgrounds and special needs, by using every resource, including self-help services, pro bono programs, and technological tools, and by securing stable and adequate non-profit and government funding for civil and criminal legal services programs.

The limited reference to “civil and criminal matters” is notable but so too is the reference to using “every resource” including “technological tools”.

The Illinois Supreme Court Access to Justice Commission similarly is charged with “promoting, facilitating and enhancing equal access to justice with an emphasis on access to the Illinois civil courts and administrative agencies for all people, particularly the poor and vulnerable”.

The third is activity from legislature and from competition authorities. The end of self-regulation in England and Wales came in large part[7] from concern that self-regulation was inherently protectionist and was limiting access to legal services by limiting innovation in the provision of legal services. The result was the Solicitors Regulation Authority and the Bar Standards Board.

There is recent evidence of such activity in the United States. A bill has just been adopted in North Carolina which would “exclude from the statutory definition of the practice of law the operation of a website that offers consumers access to interactive software that generates legal documents in response to consumer input”. This bill follows litigation between the North Carolina State Bar and Legal Zoom that was recently settled. At issue was the application of the North Carolina Board of Dental Examiners case to attempts by the North Carolina State Bar to ban Legal Zoom as unauthorized practice.

On June 10, 2016, the Federal Trade Commission and the Ant-Trust Division of the US Department of Justice wrote sharing their views on the North Carolina Bill. As they wrote:

The Division and FTC staff believe that “the practice of law” should mean activities for which specialized legal knowledge and training is demonstrably The Division and FTC staff believe that “the practice of law” should mean activities for which specialized legal knowledge and training is demonstrably necessary to protect consumers and an attorney-client relationship is present. Overbroad scope-of-practice and unauthorized-practice-of-law policies can restrict competition between licensed attorneys and non-attorney providers of legal services, increasing the prices consumers must pay for legal services, and reducing consumers’ choices.

The underlying theory of this bill appears to be to draw a line between traditional legal practice (the practice of law) and new forms of legal service delivery. The intent would appear to be to separate regulation of “the practice of law” from regulation of new ways of providing legal services and thereby to limit the ability of lawyers to inhibit competition.

The strong position of the House of Delegates has been to seek to ensure that the practice of law is not contaminated by other interests. The conundrum is that the practice of law, as currently permitted, does not fully satisfy the legal needs of middle and low income people.

There are two paths through this conundrum. One is to encourage innovation in the practice of law by allowing access to capital and expertise, particularly technological. The other is to allow innovation by “non-lawyers” while keeping the practice of law unchanged.

With the ABA House of Delegates having firmly drawn a line in the sand, it may be that the state bars will become the regulatory innovators permitting change in the way that law is practiced. It may also be that the ambit of “practice of law” will become important with innovation being permitted outside of the “practice of law” as narrowly defined. The later course suggests that the role of the legislatures and competition authorities could increase in importance and that the courts (and the House of Delegates) will be limited to the traditional practice of law.

What are the implications for Canada, if any?

We know that lawyers primarily serve people in criminal law, family law, personal injury, real estate and wills & estates work. Outside of these areas (the so-called 85%), ordinary people don’t use lawyers to address legal problems. Within the traditional areas, approximately two-thirds of family law litigants do not use lawyers.

Self-regulation in Canada is challenged by unserved and underserved legal needs and by new ways of providing legal services. There is no doubt but that protectionist pressures on law societies exist both in election campaigning and by fact that the majority of law society governors are market incumbents. While professional interests and the public interest are aligned in much of what professional self-regulators do, this is not so where policy choices involve competition for the profession. Presumably, the challenge is less where needs are unserved or underserved. In areas of existing professional practice, the challenge is much greater.

North Carolina may be taking a different approach than the usual approach to ABS which is to facilitate new ways of providing legal services without affecting existing legal practices.

This is resonant with English legal services regulation where it is necessary to be “authorized” to provide legal services only in certain “reserved areas”. The legal services regulators do not have authority over unreserved areas except where services are provided by regulated persons. In effect, the North Carolina bill would create an unreserved area by limiting the definition of “practice of law”.

One of the available policy choices for us is to allow new service provision in unserved and underserved needs while leaving existing practices to serve the legal needs that they now serve. Embedded in this policy choice is the question of whether new service providers should be regulated and, if so, by whom. The English experience suggests that ordinary consumer protection law may be sufficient to address unreserved areas. The U.S. experience suggests that self-regulators may be too conflicted to be regulate new market entrants in the public interest.

The same question and challenge was raised in Ontario when paralegal regulation was being considered. Having the Law Society become the self-regulator of lawyers and paralegals was naturally of concern to many paralegals and to policy observers. Would lawyer self-interest compromise paralegal regulation? The answer is mostly that things have worked out pretty well despite early tensions. However, it is also right to observe that human nature is unchanged and both lawyer and paralegal benchers are affected by their professional self-interests. But this tends to get worked through because benchers work together and, on most issues, can collectively get past their self-interest. But this is not so on all issues.

A point of this reflection on paralegal regulation is that a self-regulator that regulates new professions or new ways of providing services thereby must change its nature. The Law Society of Upper Canada became different when it became the regulator of Ontario paralegals. If law societies seek to regulate new forms of providing legal services, it inevitably follows that the nature of law societies will change. This is not necessarily a bad thing given the additional perspectives would result. But for those who see independence of the legal profession (as well as independence of individual lawyers) as of fundamental importance, this prospect will be of concern.

Where does this leave us? It seems to me inevitable and proper that new ways of providing legal services will be allowed in unserved and underserved areas. Whether Canadian law societies are up to the challenge of allowing this is unclear. But if they don’t, someone else will.

If encouraging the evolution of the existing practice of law with new forms of capital and expertise is not in the cards, permitting new entrants is the alternative. The question then will be how new entrants should be regulated and by whom.

For traditionalists, it seems to follow that the preferred approach would be the English approach; to allow new entrants in areas not currently well served and not to seek to have the law societies regulate them. In this way, existing legal practises and self-regulation are protected while innovation is encouraged where it is most needed. While ironic, the answer for those who wish to avoid competition from new entrants may be limited de-regulation.

For those who prefer to see traditional legal practices evolve to address unmet legal needs, there is also some value in this approach. New entrants in underserved areas will challenge those now providing services. This competition will cause evolutionary change for the incumbents. However, limiting access to capital and expertise to incumbents will limit the ability of the incumbents to evolve to face new challenges.

Do we allow new entrants where there are unmet legal needs? It seems to me that if law societies don’t then someone else will. Should law societies seek to regulate new entrants? If they do, they will change as a result, which isn’t necessarily a bad thing – but it is a thing. Should existing legal practices be allowed new resources to evolve? If so, there will be change. Probably not as much change as is feared by many – but again a thing. On the other hand, refusing to permit evolution has its own risks.

Making choices is hard. But, as Chief Justice McLachlin has said, “The question is not whether the rules governing the legal profession should be liberalized, but how”.

__________________________________

[1] In Québec, the Barreau and other professional regulators are supervised by the Office des Professions

[2] In Ontario, the regulated sphere was expanded to include all legal services when paralegal regulation was undertaken in 2006

[3] This is mostly but not completely true. In some states, the state legislature has jurisdiction. As well, other authorities before which lawyers practice assume regulatory authority over those lawyers. The SEC is an example. This may be seen as analogous to the courts regulating rights of audience.

[4] In Canada, the situation is quite different with the Federation of Law Societies playing this harmonizing role.

[5] James E. Moliterno, The American Legal Profession in Crisis: Resistance and Responses to Change, 2013 at p. 165

[6] Stephen Gillers, How to make Rules for Lawyers, the Professional Responsibility of the Legal Profession. (2013), 40 Pepperdine Law Review 365

[7] The other large part was ineffective investigation and discipline of misconduct

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Yet again the question is where were the lawyers?

(First published on slaw.ca)

Jasminka Kalajdzic recently highlighted a New York Times column entitled Panama Papers Show How Lawyers Can Turn a Blind Eye. The column reported that Ramón Fonseca, one of the founders of the Panamanian firm Mossack Fonseca, “told The New York Times that the lawyers did nothing wrong in helping their clients set up shell companies”. Mr. Fonseca was quoted as saying:

We are like a car factory who sells its car to a dealer (a lawyer for example), and he sells it to a lady that hits someone. The factory is not responsible for what is done with the car

The New York Times columnist was highly critical of the American rules of professional conduct in similar contexts. He wrote:

Rather than seeking to keep clients from violating the law, it appears that some lawyers are willing to go right up to the line of legality in their representation. By keeping themselves ignorant about what may be going on, these lawyers have been able to maintain the facade that they are not involved in potentially illegal activities, even though they are often the prime enablers of misconduct. Has the legal profession lost its moral compass? The answer is that the ethical rules governing lawyers do not put much of a barrier in the way of helping clients engage in transactions that would appear questionable but do not violate any specific laws, so it is not clear whether lawyers pushing to the edge of the law are acting improperly.

The columnist noted the ABA Model Rules of Professional Conduct and said that the Model Rule 1.2(d) is seriously flawed in permitting lawyers to keep themselves ignorant in order to be compliant with the rule:

Model Rule of Professional Conduct 1.2(d), issued by the American Bar Association, says that a lawyer should “not counsel a client to engage, or assist a client in conduct that the lawyer knows is criminal or fraudulent.” Note how the rule is premised on the lawyer’s knowledge, and many lawyers are expert at keeping themselves ignorant about exactly what is taking place to maintain plausible deniability. Moreover, that same rule says that “a lawyer may discuss the legal consequences of any proposed course of conduct,” so exploring the limits of the law can be permissible.

Canadian professional conduct rules are quite different than those considered in New York Times column. Rule 3.2-7 of the Federation of Law Societies Model Code is somewhat broader than ABA Model Rule 1.2(d).

When acting for a client, a lawyer must never knowingly assist in or encourage any dishonesty, fraud, crime or illegal conduct, or instruct the client on how to violate the law and avoid punishment.

The Federation Model Rule refers to dishonesty and illegal conduct as well as fraud and crime. Whether dishonest and illegal conduct includes conduct that is not criminal or fraudulent is uncertain. Illegal conduct could include statutory breach ranging from quasi-criminal to breach of codification of private rights and obligations. Indeed, illegal conduct might arguably include civil misconduct. For a discussion in a somewhat similar context, see Dublin v. Montessori Jewish Day School of Toronto (2007), 85 OR (3d) 511 but also Blank v. Canada (Justice), 2015 FC 956.

More importantly, the concept of knowing assistance in the Canadian professional conduct rules has not been limited to actual knowledge. Canadian discipline cases have concluded that knowing assistance includes constructive knowledge as well as actual knowledge. As the Law Society Appeal Panel (as it then was) said in Purewal v. The Law Society of Upper Canada, 2009 ONLSAP 10:

[31] “Willful blindness” and “recklessness” are two states of mind that are tantamount to knowledge. Put another way, they serve as proxies for proving actual knowledge. But their meaning must be correctly understood: Sansregret v. The Queen (1985), 18 C.C.C. (3d) 223 (S.C.C.); Law Society of Upper Canada v. Steven Michael Mucha, 2008 ONLSAP 5. [32] “Willful blindness” means that a licensee actually suspects the dishonest activity, but deliberately refrains from making further inquiries for fear of confirming those suspicions. “Recklessness” means that a licensee is aware of the risk that the activities in which he/she is participating or assisting are dishonest, but continues on despite the risk.

The New York Times column cogently shows why rules of professional conduct permitting turning a blind eye to criminal or fraudulent client conduct would be inappropriate. Purewal and many other discipline cases come to the same conclusion.

The Rules of Professional Conduct in Ontario go further. Rule 3.2-7.1 prohibits negligent facilitation of dishonesty, fraud, crime or illegal conduct. Rule 3.2-7.2, requires lawyers to “make reasonable efforts to ascertain the purpose and objectives of the retainer and to obtain information about the client necessary to fulfill this obligation”. Of course, knowing assistance is a more serious ethical breach than negligent facilitation. But both are contrary to the Rules of Professional Conduct.

So all is well! Canadian Codes and Rules of Professional Conduct do not permit “lawyers to keep themselves ignorant in order to be compliant with the rule”.

But not so fast. How did the Panama Papers case arise? Was it by client complaint? Of course not. Tax haven clients want secrecy. The facts of the Panama Papers were disclosed by unlawful hacking. Assuming unlawful client conduct, why would any client complain about lawyer assistance unless the secret was already out?

Much has been written about the Law Societies’ complaints-driven and reactive approach to regulating professional conduct. As the Panama Papers case (and the GM, Volkswagen, Enron, Watergate and other cases) makes clear, this reactive complaint-driven regulatory approach simply does not work where lawyers facilitate unlawful client conduct. Where client misconduct is somehow found out, the question is often “Where were the lawyers?” Our reactive complaint-driven regulatory approach increases the risk that, time and time again, we will have to ask the same question.

There is a second point that may be made. In Canada, we have robust protection of lawyer-client communications. Canadian solicitor-client privilege is as robust as it can be and more robust than comparable privileges in many (if not all) other countries. As the Supreme Court of Canada has made clear, solicitor-client privilege in Canada is as close to absolute as possible. This heightens the importance of effective Law Society regulation as only Law Societies can hold effectively lawyers to account as they are entitled to examine (and are required to protect) privileged communications.

This leads to a third point. In Canada, there are two exceptions and one exclusion to solicitor-client privilege. The “innocence at stake” and “public safety” exceptions are irrelevant in cases involving client misconduct in the commercial sphere. The “crime-fraud” exclusion may relevant as Alice Woolley discusses in her column Volkswagen Legal Advice and the Criminal Communication Exclusion to Confidentiality and Privilege.

In Descôteaux et al. v. Mierzwinski, [1982] 1 SCR 860, the Supreme Court described the crime-fraud exclusion in terms which would seem to avoid the risk of shielding crimes and frauds facilitated by lawyers:

Communications made in order to facilitate the commission of a crime or fraud will not be confidential either, regardless of whether or not the lawyer is acting in good faith.

However, the exclusion is of limited application in fact as it is necessary that there be prima facie proof of fraud before the crime-fraud exclusion applies. See Laquerre c. Société canadienne d’hypothèques et de logement, 2013 QCCA 95.

If lawyer misconduct only surfaces if and when the clients complain to the Law Society, or when there is otherwise prima facie proof of facilitated crime or fraud, then there is a high degree of protection of client misconduct facilitated by lawyers and a much reduced risk of lawyers being called to account for wrongful facilitation.

While somewhat heretic, this examination suggests that the scope of Canadian solicitor-client privilege may be too broad given its vigour. Solicitor-client privilege is justified by the need for clients to be able to reveal their deepest and darkest secrets in order to obtain effective legal assistance. This is undoubtedly the case where, for example, a lawyer defends an accused person. But it is not so clear that the same robust protection is required, or even appropriate, in the context of a residential real estate transaction, an internal corporate investigation or perhaps even tax planning. Other than where life, liberty and the security of the person are involved, it is not obvious why the nearly absolute version of solicitor-client privilege is genuinely required as opposed to a lesser protection as applies, for example, to protect the adversarial process (litigation privilege) or settlement discussions (settlement privilege).

While Canadian law and legal ethics is not vulnerable to the same attack as made in the New York Times column, it is difficult to have confidence that there is full compliance with our professional conduct rules. There is real incentive to cloak unlawful activity with the nearly absolute protection of solicitor-client privilege. A reactive primarily complaint-driven regulatory process will rarely examine that which the client, protected by a nearly absolute privilege, does not want examined.

I wonder when the next “where were the lawyers” column will be published. Given recent history, it won’t be long. But more importantly, I wonder how many articles will never get to be written.

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Boiling frogs, Privilege and Professional Conduct

[First published on slaw.ca]

Forty years ago, the confidentiality rule now found in the Federation of Law Societies Model Code was first adopted in the CBA Code of Professional Conduct. The confidentiality rule makes passing reference in the commentary to privilege and makes clear that the confidentiality rule must be distinguished from solicitor-client privilege. The Model Code does not expressly require that lawyers uphold solicitor-client and litigation privilege.

I expect that Canadian lawyers would generally accept that proper professional conduct includes upholding solicitor-client and litigation privilege. After forty years, it is appropriate to question whether the Codes and Rules of Professional Conduct ought to say just that and to ensure that the confidentiality rule and privilege work sensibly together [i].

Solicitor-client privilege and litigation privilege are fundamental for Canadian lawyers

Over the last two decades, the Supreme Court of Canada has repeatedly emphasized the importance of solicitor-client privilege. Most recently, Justice Cromwell wrote in Canada (Attorney General) v. Federation of Law Societies of Canada, [2015] 1 SCR 401 that:

[82] … The centrality to the administration of justice of preventing misuse of the client’s confidential information, reflected in solicitor-client privilege, led the Court to conclude that the privilege required constitutional protection in the context of law office searches and seizures: see Lavallee. Solicitor-client privilege is “essential to the effective operation of the legal system”: R. v. Gruenke, [1991] 3 S.C.R. 263, at p. 289. As Major J. put it in R. v. McClure, [2001] 1 S.C.R. 445, at para. 31: “The important relationship between a client and his or her lawyer stretches beyond the parties and is integral to the workings of the legal system itself” (emphasis added [by Cromwell J.]).

Canadian law now recognizes litigation privilege as a privilege separate and apart from solicitor-client privilege. In Blank v. Canada (Minister of Justice), [2006] 2 SCR 319, Justice Fish wrote that:

[27] Litigation privilege, on the other hand, is not directed at, still less, restricted to, communications between solicitor and client. It contemplates, as well, communications between a solicitor and third parties or, in the case of an unrepresented litigant, between the litigant and third parties. Its object is to ensure the efficacy of the adversarial process and not to promote the solicitor-client relationship. And to achieve this purpose, parties to litigation, represented or not, must be left to prepare their contending positions in private, without adversarial interference and without fear of premature disclosure.

Solicitor-client privilege and litigation privilege are undoubtedly of fundamental importance in the work of Canadian lawyers. Solicitor-client privilege protects communications between Canadian lawyers and their clients in support of the lawyer-client relationship and the legal system. Litigation privilege protects our adversarial system of which lawyers are a very important part.

Given the importance of solicitor-client privilege and litigation privilege, few would likely doubt that Canadian lawyers have an ethical obligation to uphold these important privileges. Yet the Model Code and the Law Society Codes and Rules of Professional Conduct (the “conduct rules”) contain no such express requirement.

This is surprising but explicable as a matter of history.

The source of the ethical confidentiality rule

Over forty years ago, the Canadian Bar Association Special Committee on Legal Ethics delivered its Preliminary Report on the Code of Professional Conduct. The Special Committee proposed the following Confidentiality Rule:

The lawyer has a duty to hold in strict confidence all information acquired in the course of the professional relationship concerning the business and affairs of his client, and he should not divulge any such information unless he is expressly or impliedly authorized by his client or required by law to do so.

Despite its age, this Confidentiality Rule should look familiar to Canadian lawyers. The Federation of Law Societies Model Rule 3.3-1 today provides that:

A lawyer at all times must hold in strict confidence all information concerning the business and affairs of a client acquired in the course of the professional relationship and must not divulge any such information unless:

(a) expressly or impliedly authorized by the client;

(b) required by law or a court to do so;

(c) required to deliver the information to the Law Society; or

(d) otherwise permitted by this rule

There is no difference between the Confidentiality Rule adopted by the CBA in the 1970s and Model Rule 3.3-1 which reflects the conduct rules across Canada in 2016.

The 1970s Confidentiality Rule addressed privilege in the commentary indicating that:

This ethical rule must be distinguished from the evidentiary rule of solicitor and client privilege with respect to oral or documentary communications passing between the client and his lawyer. The ethical rule is wider and applies without regard to the nature or source of the information or the fact that others may share the knowledge.

This commentary is effectively repeated in Model Code as follows. The only change in the Model Code commentary is a limited recognition of the significant evolution of solicitor-client privilege in Canadian law since the 1970s.

This rule must be distinguished from the evidentiary rule of lawyer and client privilege, which is also a constitutionally protected right, concerning oral or documentary communications passing between the client and the lawyer. The ethical rule is wider and applies without regard to the nature or source of the information or the fact that others may share the knowledge.

It is perhaps explicable that the 1970s CBA Code did not include an ethical obligation of Canadian lawyers to uphold a mere, albeit important, evidentiary privilege. But the law of privilege has evolved materially since then reflecting fundamental policy objectives of signal importance to Canadian lawyers and our legal system.

Evolution of Canadian law since the 1970s

The modern evolution of solicitor-client privilege can be seen to have started Solosky v. The Queen, [1980] 1 SCR 821. As Justice Dickson, as he then was, wrote:

Recent case law has taken the traditional doctrine of privilege and placed it on a new plane. Privilege is no longer regarded merely as a rule of evidence which acts as a shield to prevent privileged materials from being tendered in evidence in a court room. The courts, unwilling to so restrict the concept, have extended its application well beyond those limits.

In 1982, the Supreme Court again addressed and advanced solicitor-client privilege in Descôteaux et al. v. Mierzwinski, [1982] 1 SCR 860.

The next significant case in the Supreme Court of Canada addressing lawyer-client confidences was MacDonald Estate v. Martin, [1990] 3 SCR 1235. Justice Sopinka, for the majority, established the modern principles for protecting confidential information attributable to a solicitor-client relationship. Significantly, Justice Sopinka invited the “governing bodies” to consider adopting conduct rules for confidentiality screens to displace the presumption that lawyers who practice together will discuss their cases. This was done in the 1990s. The conduct rules now include rules governing transferring lawyers and confidentiality screens.

Since MacDonald Estate, there has been deep consideration of solicitor-client privilege and litigation privilege in the Supreme Court of Canada as can be seen from the following lengthy (and incomplete) case list:

  • Smith v. Jones, [1999] 1 SCR 455
  • R. v. Campbell, [1999] 1 SCR 565
  • R. v. McClure, [2001] 1 SCR 445
  • R. v. Brown, [2002] 2 SCR 185
  • Lavallee, Rackel & Heintz v. Canada (Attorney General), [2002] 3 SCR 209
  • Maranda v. Richer, [2003] 3 SCR 193
  • Foster Wheeler Power Co. v. Société intermunicipale de gestion et d’élimination des déchets (SIGED) inc., [2004] 1 SCR 456
  • Pritchard v. Ontario (Human Rights Commission), [2004] 1 SCR 809
  • Goodis v. Ontario (Ministry of Correctional Services), [2006] 2 SCR 32
  • Celanese Canada Inc. v. Murray Demolition Corp., [2006] 2 SCR 18
  • Blank v. Canada (Minister of Justice), [2006] 2 SCR 319
  • Canada (Privacy Commissioner) v. Blood Tribe Department of Health, [2008] 2 SCR 574
  • R. v. Cunningham, [2010] 1 SCR 331
  • Ontario (Public Safety and Security) v. Criminal Lawyers’ Association, [2010] 1 SCR 815
  • Attorney General of Canada v. Federation of Law Societies, [2015] 1 SCR 401

Yet while the law of solicitor-client privilege and litigation privilege has significantly evolved, the conduct rules have not changed in response other than to add a transferring lawyer rule[ii]. The confidentiality rule is unchanged over more than 40 years. The conduct rules do not explicitly require lawyers to uphold these privileges.

This is reminiscent of the old story of the frog in the pot of boiling water[iii]. If we were starting out to draft confidentiality rules in 2016, it is difficult to imagine that lawyers would not be required to uphold the privileges that are so fundamental to the work of lawyers and the legal system. While the changes in the law of privilege are very significant, they have developed over a prolonged time. It is understandable that the conduct rules have remained unchanged.

So what?

Readers can be forgiven for asking why any of this matters. Lawyers who abuse privilege can generally be held accountable under the ethical confidentiality rule and also under other more general conduct rules. But there is advantage in clarity so that lawyers are guided by the conduct rules rather than the conduct rules being a trap for the unwary. It is also clear that teaching law students and lawyers about confidentiality under the conduct rules and about legal privilege is difficult and confusing given the current rules. I doubt that many really understand the interplay of these obligations.

There are other advantages to changing the conduct rules to expressly include an obligation to uphold these privileges. The amendment process would necessarily cause apparent inconsistencies between the ethical confidentiality rule and the privileges to be addressed. For example:

  • Solicitor-client privilege does not protect information covered by the crime-fraud exclusion. Does the ethical confidentiality rule cover or exclude that information? Does privilege permit disclosure while the conduct rules prohibit disclosure?
  • The “innocence at stake” exception to solicitor-client privilege is not reflected in the conduct rules. Does the ethical confidentiality rule prohibit use of confidential information where solicitor-client privilege yields to protect life, liberty and security of the person?
  • The conduct rules allow lawyers to use client information to protect themselves from claims by third parties even where the innocence-at-stake exception does not apply. Do the conduct rules permit that which solicitor-client privilege does not? [iv]
  • The conduct rules protect confidential information under the former client rule and the transferring lawyer rule. Does this/should this include information that is not privileged?
  • The law of privilege protects the privileged information of third parties even by disqualifying lawyers who do not act for them[v]. The conduct rules only address confidentiality in terms of client protection. Should the conduct rules expressly address protection of third party privilege?

There may be other issues that would emerge from a careful review of the conduct rules. While the answers to some of the questions just posed seem obvious, the answer to others may be less clear.

But after forty years, the context of the conduct rules has gradually changed over time such that what was appropriate forty years ago may not be appropriate now. It would be hyperbolic to say that the water is now boiling [vi], but we are in quite a different world so far as protection of information in the legal system is concerned. It is worth reconsidering a rule which pre-dates the careers of most of the lawyers now in practice.

________________________________

[i] Privilege being the jurisdiction of the courts, it would be for the law societies to reconcile the confidentiality rule rather than to pretend to the authority to change privilege

[ii] Strictly speaking, the former client rule also changed in response to MacDonald Estate

[iii] Apparently, frogs actually do notice gradual temperature increases and try to escape from the pot. Perhaps lawyers and law societies can react to gradual change as well?

[iv] Gavin Mackenzie, Lawyers and Ethics: Professional Responsibility and Discipline, 4th ed. (Toronto: Carswell, 2006) at 3-15 to 3-17

Adam Dodek, Solicitor-Client Privilege in Canada: Challenges for the 21st Century, (Discussion paper for the CBA, 2011) at pp. 11 and 12

See also Wilder v. Ontario Securities Commission (2001), 53 OR (3d) 519 (OCA) at paras. 33 and 34. Professor Dodek suggests that Sharpe JA may treat the Rules of Professional Conduct as authorizing defensive use of privileged information.

I addressed this question in Professional Conduct Rules and Confidential information versus Solicitor-Client Privilege: Lawyers’ Disputes and the use of Client Information, (2015) 92 Can. B. Rev. 595

[v] Celanese Canada Inc. v. Murray Demolition Corp., [2006] 2 SCR 189 and Stewart v. Humber River Regional Hospital, 2009 ONCA 350

[vi] Or, to mix metaphors, that we are not in Kansas anymore!

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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.

___________________________________

[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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Innovate or be innovated

First published on slaw.ca

When the Chief Justice of Canada highlights global liberalization of legal services regulation, recognizes that our old monopolies are fading, says that the legal profession must embrace new ways of doing business and that the question is not whether our rules should be liberalized but how, even those most resistant to change must take heed.

On August 14, 2015, Chief Justice McLachlin addressed the Canadian Bar Association annual plenary in Calgary . In her remarks entitled The Legal Profession in the 21st Century, the Chief Justice suggested that the legal profession must ask itself three questions:

  • First, where does the profession stand as it enters the second quarter of the 21st century?
  • Second, what are the forces that have led to the challenges the profession is facing?
  • Third, against this background, how can the profession move towards the newer world it seeks?

Not surprisingly, the Chief Justice addressed the first question, in part, as follows:

Statistics support the view that accessing the justice system with the help of a legal professional is increasingly unaffordable to most people. Nearly 12 million Canadians will experience at least one legal problem in a given three-year period, yet few will have the resources to solve them. According to an American study from a few years ago, as much as 70%-90% of legal needs in society go unmet . We all know that unresolved legal problems adversely affect people’s lives and, ultimately, the public purse. Among the hardest hit are the middle class – who earn too much to qualify for legal aid, but frequently not enough to retain a lawyer for a matter of any complexity or length. Additionally, members of poor and vulnerable groups are particularly prone to legal problems, and legal problems tend to lead to problems of other types, such as health issues .

These are important points. Legal problems are common yet most legal needs go unmet. The middle class, the poor and vulnerable groups all suffer unmet legal needs.

On the second question, the Chief Justice focused on the powerful effects of technological change saying that:

… the digital revolution and the modern social and economic forces it has unleashed are creating new modes of delivery of traditional legal services, creating new demands and expectations for meaningful access to justice, and eroding the fundamental assumptions upon which the legal profession of the past was built. This is compelling the legal profession to revise old patterns and approaches – to seek, in Tennyson’s phrase, “a newer world”.

As to the erosion of fundamental assumptions, the Chief Justice said:

Liberalization of the rules that govern the legal profession is rapidly spreading to other jurisdictions, like the U.K. and Canada. Recognizing this, the Canadian Bar Association recently launched a “Legal Futures” probe into the future of the legal profession, to help the Canadian legal profession remain relevant, viable and confident in the face of change. Everywhere, more and more, the profession is accepting that the old monopolies are fading and that the profession must embrace new ways of doing business. And increasingly calls are heard for law schools to adapt their curricula to these new realities. The question is not whether the rules governing the legal profession should be liberalized, but how.

On the question of how can the profession move towards the newer world, the Chief Justice offered the following thoughts:

  • The first step is to accept the idea of change. Lawyers and judges need to stop fearing change. Rather, they must accept that change may be necessary. Change should not be seen as an evil, but rather as the source of new opportunities.
  • [Lawyers] will need to develop strategies to cope with the fact that in the very near future, straightforward, out-of-court work will face brutal competition. They will need to use technology in creative ways. And it may be that they will need to accept that some tasks traditionally performed by lawyers can be out-sourced to non-lawyers.
  • A … source of opportunity for the profession lies in expanding service to sectors that may not have benefited from legal services in the past. Many communities have traditionally been underserved in terms of legal services. Some suggest that the way of the future lies in cutting back legal services. A better way may be to find ways of delivering legal services to people who need them but have traditionally not received them.
  • Lawyers should not forget that those whose legal needs are not being met come in many forms. … These very different clients all have two things in common: They cannot afford legal services when delivered in the traditional way, and they cannot afford the disproportionate cost of pursuing a case in court. The consequences for legal businesses are plain: for businesses to thrive, they will need to find innovative ways to make their legal services more generally affordable.
  • [Another] source of opportunity lies in collaboration with other lawyers and other professionals, in recognition of the fact that clients’ problems are often complex, polyvalent and incapable of solution on uniform cookie-cutter models.

In my recent article So many lawyers, so many unmet legal needs, I addressed the apparent paradox that so many lawyers are looking for work and so many legal needs are unmet and suggested that regulation was part of the reason that the legal services marketplace does not evolve to permit supply to address demand. The Chief Justice’s call for regulatory liberalization and finding new ways of delivering legal services to people who need them but have traditionally not received them is to the same effect.

As the title to this column signals, innovation is needed and is inevitable. For lawyers, the question is whether we will innovate or “be innovated”. The point of this column is to talk about different types of innovation. As a recent discussion with a bencher colleague made clear, what we mean by innovation in this context isn’t always obvious.

Of course, some innovation is big and transformative. One example is artificial intelligence. The Globe and Mail recently reported on Ross, the app which uses IBM’s artificially intelligent Watson computer to do legal research. Scary stuff perhaps but the potential to directly deliver some lower cost legal services is obvious. Another innovation is the use of large business processes to deliver legal services. Some sneer at “commoditization” and reject the idea that lower cost services may be desirable, even necessary, in some contexts.

But some innovation is simpler and not necessarily transformative, at least from the perspective of practising lawyers. For example, we know that there are substantial civil needs in society that are not addressed by lawyers yet the lawyer’s monopoly extends to areas unserved by lawyers. Allowing others to serve these legal needs may not cause an explosion of legal services – but neither will it materially affect the legal practices of those who do not now serve those legal needs.

While it may seem surprising, the areas of legal services reserved to lawyers in England are limited to only six areas of legal activity essentially being appearing before the courts, conducting litigation, transfer of land and certain other property by instrument, probate activities, notarial activities and the administration of oaths. Other than wills writing which is controversially not a reserved activity in England, these six areas are quite consistent with the principal areas of private practice for individuals in Ontario namely criminal law, family law and personal injury (the litigation practices) and real estate and wills/estates (the solicitor practices)

Another example of simple innovation arises from the observation that our current regulatory system only permits practices owned by licensees and legal aid clinics to deliver legal services to the public. There are many organizations in society that are dedicated to serving vulnerable and other communities. It would be innovative, for example, to permit the CNIB to provide relevant paid legal services to the blind and partially sighted Canadians. The value of this approach is demonstrated by the pro bono legal services now delivered by Pro Bono Law Ontario’s Children’s Hospital Projects which provide relevant legal services to sick children and their families where and when needed.

A further area of non-transformative innovation is better and expanded service delivery by existing legal practices. A study released in July 2015 by the English Legal Services Board and Solicitors Regulation Authority entitled Innovation in legal services distinguishes between “radical” innovation and other innovation in the following categorization:

  • Service innovation – the provision of new or significantly improved services to clients
  • Radical service innovation – services new to the market and introduced before competitors
  • Innovation in service delivery – significant changes in the way services are delivered to clients
  • Strategic innovation – implemented a new or significantly changed corporate strategy
  • AMT innovation – implemented any advanced management techniques (AMT) such as knowledge management systems, Investors in People, etc
  • Organisational innovation – implemented major changes in organisational structure such as the introduction of team-working or outsourcing of major business functions
  • Marketing innovation – implemented changes in marketing strategies or channels

While we often think that innovation only means fundamental change like Watson/artificial intelligence, many important innovations are evolutionary within existing businesses rather than revolutionary. And of course, innovation is the product of many factors. Competition is one factor and especially competition, or potential competition, from other innovators. Expertise and money are also factors. The consequences of failure and the prospects for success are others. Regulation can constrain innovation by limiting innovative competition and by limiting the human and economic resources available for innovation.

The Innovation in legal services report mentioned above provides evidence of the effect that regulation has on innovation. Steve Brooker, Director of Research for the Legal Services Board, summarized some of this in his presentation to the International Conference of Legal Regulators held in late July in Toronto. As Mr. Brooker noted, the research showed that ABSs are 13-15% more likely to introduce new legal services than other types of regulated solicitor firms and that legislative change and regulatory change are the two most commonly cited drivers of innovation. Mr. Brooker also observed that the research shows greater innovation in the unreserved areas with 43.5% of unregulated providers being owned by non-lawyers, 10% of revenue being generated from innovative products compared to 5% of revenue for solicitors firms and with 2.3% of revenue being spent on branding/marketing compared to 1.6% for solicitors and 0.5% for barristers’ chambers.

We are challenged by the Chief Justice to embrace change. As a matter of professionalism, we should be vitally concerned that the public have access to legal services. Allowing others to provide legal services is part of the answer. Allowing and encouraging innovation from current legal practices to address currently unserved legal needs is another.

Some lawyers resist change because the consequences of change may not be positive. Competition, especially innovative competition, carries the prospect of loss. But trying to ensure that change does not occur is ultimately a pointless exercise. Change will happen. New forms of supply and unserved demand create inexorable pressures. My view is that it is in the interest of the legal profession and in the public interest that innovation happen within the legal profession so that the legal profession does not wither in the face of change. And it is in the interest of the legal profession and in the public interest that others be permitted to do what can properly be done by others.

While attending the CBA annual conference, I had the benefit of attending a presentation by Jonathan Smithers, the new President of the Law Society of England and Wales (the representative body, not the regulator). Jonathan’s background is conveyancing and land law. He heads the residential property team at Cooper Burnett in Kent and was previously Chair of the Conveyancing and Land Law Committee at the Law Society. His presentation centered on the ABS experience in England and Wales. While indicating that it was too early to judge the ultimate effect of ABS liberalization, Jonathan’s view was that ABS is not likely to be the source of transformative change to access to justice nor a source of harm to the public interest or the interests of the solicitors. Rather, Jonathan was confident in the ability of able solicitors to innovate and compete and accepting of the necessity that they must do so. Most significant to me was the message that the simple fact that new innovative entrants are permitted has caused existing solicitor practices to step up their game and innovate. His confidence in English solicitors and his obvious professional and business expertise were impressive.

The Chief Justice is one of many voices calling for innovation. The voice of the Chief Justice is, of course, particularly authoritative but can only be persuasive. It is for our self-regulated profession to decide through our governing bodies what change is appropriate. But as the Chief Justice said, the question is not whether to change. The question is what change is appropriate.

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The Law Society Tribunal and Self-Regulation

Is the World as We Know it Coming to an End?

First published on slaw.ca

Each year, the Law Society of Upper Canada has an awards ceremony at which very worthy lawyers and paralegals are honoured. Hearing about the contributions and professional lives of the award recipients is inspiring and underscores the value of our professions to the society that we serve.

There was a whimsical theme in some of the speeches this year. By way of good-natured self-deprecation, one recipient described receiving the call from the Treasurer telling him that he had been awarded the Law Society Medal. He said that his first reaction on learning that there was a call from the Law Society was to wonder what he had done wrong, certainly not that he was being awarded for having done good. Other recipients identified with this comment. As with most good humour, there was some hard truth underlying these amused words. Being in a self-regulating profession means that we collectively set standards of professional conduct and enforce those standards by discipline. Communications from the Law Society are nervous-making for that reason. Our relationship individually, and collectively, with the Law Society is ambivalent.

The complicated relationships arising from professional self-regulation have been highlighted for me in several recent discussions, both in private and in Convocation.

One discussion was about the upcoming move of the Law Society Tribunal out of Osgoode Hall to its own offices with some benchers objecting. Objections to the move could be seen as being old-fashioned and anachronistic – just as the Law Society is often seen to be by many. Another issue raised in Convocation was about increasing use of appointed non-bencher adjudicators. This could be seen as being concern about loss of authority and importance. In another discussion, a bencher colleague raised the same issue worrying that the nature of discipline adjudication could suffer by the use of those skilled as adjudicators rather than by those elected by, knowledgeable about, and supportive of, the profession.

Some history may help better understanding of what underlies these concerns. For most of the long history of the Law Society, discipline proceedings were not by hearing panels applying the Rules of Professional Conduct. Rather, the benchers in convocation considered whether lawyers had misconducted themselves applying their collective view of what was proper professional conduct. The senior members of the profession, as they were, directly governed a much smaller profession.

The earliest Professional Conduct Handbook that I have found was released in 1964. It was signed by Treasurer John Arnup, as he then was. In a preface, Mr. Arnup wrote that “This handbook contains rulings of the Professional Conduct Committee of Convocation upon some important aspects of professional ethics, as well as certain previously published notices from the Discipline Committee, the Canons of Ethics of the Canadian Bar Association and the Rules of the Law Society respecting accounts”. Mr. Arnup went on to say the “As further rulings and reasons for judgment of the Discipline Committee in matters of general interest are approved by Convocation, they will be printed in the Ontario Reports in a convenient form, so that they may be readily detached and added to this handbook”. Much like the common law, the rules of professional conduct by the 1960s were the rulings and reasons approved by Convocation.

By the late 1970s, the Professional Conduct Handbook had evolved to be a book of rules rather than a collection of rulings and reasons. This was partly a codification of prior rulings but also reflected a more legislative than case-by-case approach to rule-making. This change was likely influenced by the Code of Professional Conduct adopted by the Canadian Bar Association in the early 1970s. Harry Arthurs and Brendan O’Brien were the Ontario members of the Special Committee on Legal Ethics that reported in 1973 as to a proposed new CBA code saying:

The present Canons of Legal Ethics, which were adopted by The Canadian Bar Association in 1920, are sound in substance but are expressed, for the most part, in generalizations with few practical examples given. …

The present Canons have been supplemented, from time to time, by Rulings or Rules of various Governing Bodies which have been published and have received wide distribution. While these have been helpful to the profession, in many instances they deal with isolated subjects and are not co-ordinated.

By the late 1990s, the Professional Conduct Handbook had become the Rules of Professional Conduct in Ontario. After harmonization through the Federation of Law Societies Model Code, the professional conduct rules across the country are now generally known as the Codes of Professional Conduct. What was once the case-specific judgments of the senior members of the bar is now a regulatory code of conduct.

There has also been a significant change in the way that allegations of professional misconduct are adjudicated. As Mr. Arnup’s preface indicates, discipline decisions in Ontario were once made by bencher member of the Discipline Committee subject to the benchers as a whole in Convocation. To the 1990s, Convocation in Ontario sat in what was called Discipline Convocation to receive reports from the Discipline Committee. Convocation would receive the report and recommendation of the Discipline Committee, hear submissions for the Law Society and for the Lawyer and make its decision which might or might not be as recommended by the Discipline Committee. By the end of 1999, discipline decisions in Ontario were no longer by the Discipline Committee and Convocation but rather by hearing panels with a right of appeal to the appeal panel.

There is a third significant change made over the decades. For most of the history of the Law Society, the benchers were elected lawyers[i]. Following the McRuer Inquiry into Civil Rights and informal innovation by the Law Society under the leadership of the great Sydney Robins, the Law Society Act was amended in 1973 so that four (now eight) non-lawyers appointed by government became benchers. The first lay benchers joined Convocation in 1975.[ii] More recently, elected paralegal benchers joined Convocation as a result of the 2006 amendments to the Law Society Act whereby the Law Society came to be the regulator of paralegals as well as lawyers. The composition of Convocation has changed although elected lawyer benchers still predominate.

Amy Salyzyn reported and commented on a significant further change in her post to this column in late 2013 entitled Magic Bullet or Band Aid? LSUC’s “Enhanced Tribunals Model. Starting in September 2013, David A. Wright became the first full-time non-bencher Chair of what is now the Law Society Tribunal[iii]. While less noted, this appointment is paralleled by an increase in the proportion of non-bencher lawyer, paralegal and lay adjudicators appointed to the Law Society Tribunal and other changes[iv].

When one envisages the evolution from discipline by senior lawyers in Convocation reflecting their views and experience as to what was proper conduct to disciplinary adjudication by hearing panels of lawyers, paralegals and lay people, some of whom are benchers, applying regulatory codes of conduct, it is clear that much has changed. Moving the Law Society Tribunal out of Osgoode Hall symbolizes these significant changes. There was a time when Convocation Room was the place where professional discipline was decided by lawyer benchers based on their collective judgment. That time has passed. The role of the elected bencher in discipline is much different than it once was.

There are, of course, sound reasons for this significant evolution. It is difficult to govern one’s affairs based on what the “great and the good” may consider proper after the fact. Decision-making about individual conduct in Convocation by dozens of people based on submissions and speeches has obvious frailties. Elected benchers, even with appointed lay benchers, sitting on hearing panels may not have the experience and skills to provide the best possible adjudication. Recent innovation has been designed to professionalize adjudication of the conduct of lawyers and paralegals in Ontario.

But “so what?” – isn’t this progression all to the good? Aren’t benchers who are concerned about this obviously necessary evolution simply old-fashioned and self-important?

The point of this column is to suggest, as is so often the case, that change is often complicated, with things being potentially lost as well as things being potentially gained.

The potential gain in independent adjudication by experienced skilled adjudicators is evident. It seems clear that better adjudication was needed and that these changes were required. To use Amy Salyzyn’s slaw.ca column title, this is no magic bullet nor is it a mere Band Aid.

The potential cost and the concern expressed by some may reflect the several rationales for self-regulation. One of the important rationales for self-regulation is the importance of independence from the state. If the government regulates the legal professions then defence of accused persons in government prosecutions is put at risk of potential impairment. More broadly, it seems clear that lawyers are important protectors of rights and freedoms and that independence from the state is arguably fundamental feature of a free and democratic society. This broad notion of independence of the bar was recently found by the Court of Appeal for British Columbia[v] to be a principle of fundamental justice, although that was not accepted by the Supreme Court of Canada[vi]. But it seems obvious that distancing adjudication of professional conduct from the Law Society is not inconsistent with this broad notion of independence. Whether by a tribunal with appointments by Convocation or by the Law Society itself, this discipline is independent of the state.

Another rationale for professional self-regulation is effectiveness. Lawyers, doctors and engineers, for example, best understand proper professional practice in their respective domains. Realistically, it would be difficult to see effective professional regulation without the professional expertise of those being regulated. This effectiveness of course must be balanced against the risk of self-interested regulation. There is the risk that lawyers may not set standards as high as they should because colleagues are being judged or because lawyers can imagine themselves in the same situation. For these reasons, for transparency, and for better perspective, the requirement of a lay person on each hearing panel is important.

Some say that appointing tribunal members with adjudication expertise could compromise this effectiveness. Finding adjudicators who have experience and expertise in both legal practice and in adjudication might be a challenge. Whether one speaks of pendulums swinging or the law of unintended consequences, solving one problem can sometimes lead to another. Adding adjudicative expertise might lead to diminution in practice expertise. Adding adjudicators who are not involved in self-regulation, including setting conduct rules, risks loss of regulatory expertise in adjudicative decision-making. But this need not be a question of absolutes but rather should be a matter of balance. Both expertises are needed. While perhaps not be available in each individual adjudicator, the Tribunal as a whole can have the necessary expertise and adjudicator education may assist. In any event, this concern may be an example of our common tendency to reflect back on the good old days that never were and our tendency not to recognize that things have changed. I wonder whether the most senior members of the bar “back in the day” really understood the practices of ordinary lawyers. Perhaps. Also, modern practice is varied and specialized. Is the better answer specialized panels, panels of small firm real estate solicitors, big firm litigators, paralegals and in-house counsel for example, each dedicated to cases from within their sphere? That answer has its own challenges.

Some of the concern about these innovations appears to be about something else. What is said by some is that the establishment of an independent Tribunal is inconsistent with self-regulation. Their assertion is that being elected is important, in and of itself, to discipline adjudication. There seem to be two aspects to this assertion. The first is that elected adjudicators will be better adjudicators by virtue of having been elected. The notion is that those selected by the profession as a whole will be best qualified. The second is that those subject to discipline and those evaluating discipline decisions will better accept the judgments of those elected by the profession.

What seems to be at issue is expertise and legitimacy within the profession. If a correct reading of what underlies this concern, I find this interesting as perhaps reflecting something of a democratic rationale for self-regulation – that those we elect have greater legitimacy and expertise in telling us what to do (and not do). But, I personally do not find this to be particularly compelling. Canadians, rightly I think, are not much impressed with the legitimacy or expertise of elected judges. While there is functional overlap between rule/policy setting and adjudication, the benchers remain responsible for the conduct rules and appointment of the adjudicators. We elected benchers are, I suspect, more impressed with our own importance having been elected than are our colleague electors. And as to the legitimacy of the traditional elected-bencher system, it is not obvious that there is much existing reverence for the results of that approach.

At the risk of ending on a rather unexciting note, my take on all of this is that we find ourselves in a pretty sensible, albeit inevitably imperfect, place. Change always risks loss. Predicted gains are not always achieved There is value in professional pride in tradition and tradition can be founded on good policy values that are not always evident. But it also seems clear that better adjudication has been needed and that the work done over the last decade by Mark Sandler and others has led to better adjudication. We will never get this right. In making changes, we will undershoot and overshoot. We will cause new problems by solving old problems. But taking into account the relevant principles, I think that we are getting it righter.

________________________

[i] Long-term elected benchers became life benchers until recently.

[ii] Ross Gower, The History of Lay Benchers at The Law Society of Upper Canada: Marking 40 years of Public Representation

[iii] Notably, David was formerly the chair of the Human Rights Tribunal of Ontario and is highly regarded for his expertise and leadership. Canadian Lawyer recently included David as a nominee for the 2015 Most Influential lawyers in Canada for his leadership of the Human Rights Tribunal of Ontario and the Law Society Tribunal.

[iv] For further perspectives and information about Law Society Tribunal reform see (i) the 2012 LSUC Tribunal Committee report, (ii) David Wright’s 2014 Advocates Society blog and (iii) the Law Times article Move to non-bencher adjudicators lauded

[v] Federation of Law Societies of Canada v. Canada (Attorney General), 2013 BCCA 147 at paras. 105 to 114

[vi] Canada (Attorney General) v. Federation of Law Societies of Canada, 2015 SCC 7 at para. 80

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So many lawyers, so many unmet legal needs

My article So many lawyers, so many unmet legal needs is now published in the July/August 2015 edition of the ABA Law Practice Magazine

PDF Version of Article

So many lawyers

 

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July 7, 2015 · 5:40 pm

Self Regulation

Independence and Self-Regulation: I’m OK but I’m Not So Sure About You!

Indepedence and self-regulation

It is entirely human to fail to appreciate when one’s judgment is affected by a conflicting personal interest or duty. Our conflicts rules reflect this problem. Where there is a substantial risk of impairment of representation, clients get to decide whether to accept that risk. Where representation will be materially impaired, lawyers cannot act even with client consent.

This concern about conflicting interests is well rooted in behavioural psychology. Dan Ariely, an author and a professor of psychology and behavioural economics[i], writes on this topic[ii].

In his book The Honest Truth about Dishonesty, Professor Ariely describes an experiment in which participants were asked to view and rate sixty paintings. Each participant was paid an honorarium. The wrinkle in the experiment was each participant was told that their honorarium was sponsored by one of two art galleries. Each painting was presented as if it came from one or the other sponsoring gallery. After rating the sixty paintings, each participant was asked whether the sponsor’s logo affected their ratings. The participants universally thought not. Yet they were wrong. There was a substantial effect. And the effect increased with the amount of the honorarium. It is startling that independent judgment could be so easily skewed and that the participant wold not perceive the skewing.

Professor Ariely says that “While we may realize that such conflicts exist and that they influence others, we fail dramatically in perceiving both the extent of their effects and our own susceptibility to them”[iii]. He describes a lecture that he gave to about two thousand members of the American Medical Association during which he asked the physicians whether they felt that their medical judgments were affected by conflicts of interests with their hospital, drug manufacturers, insurance companies, medical device manufacturers or pharmaceutical sales representatives. Not a single physician raised their hand. But nearly ever hand was raised when he asked whether the audience believed that the majority of other physicians in the room were influenced!

In a democratic society that honours the rule of law, independence of legal counsel from the state is particularly important. This is particularly true in criminal and charter cases. But independence matters in many other areas given the omnipresence of government regulation and the power, political and economic, of the state in modern society.

Canadian law society regulation takes this thought of independence to another level. Canadian law societies, unlike the regulators in Australia and England, are independent of the state. Unlike in the United States, Canadian law societies are also independent of the judiciary. In this way, independence of individual lawyers is protected both by limiting potential control of individual counsel by the state or the judiciary and by the independent establishment of codes of conduct and other rules. This independence is achieved by the election of law society benchers by lawyers and, in Ontario, regulated paralegals.

There are advantages to self-regulation other than independence. Legal practitioners are well positioned to identify issues that need to be addressed in regulation, to establish appropriate codes of conduct and to sensibly judge professional conduct. It seems reasonable to think that a self-regulated profession is better attuned to its professional responsibilities.

There is of course a risk that self-regulation can be self-interested regulation rather than regulation in the public interest. It is not so long ago that there was debate about the primacy of the public interest although that issue is well-settled now. But mostly, there is little if any practical dissonance between the public interest and the interest of the profession. For example, the profession easily accepts that its members should be competent to practice and practice ethically.

But there are issues where the public interest and the interest of members of the profession are not entirely aligned, sometimes even opposed. There are also issues where interests of different parts of the profession differ from each other and from the public interest. In previous columns, I have referred to scholarly writing about some historic examples.

There is now a limited safeguard currently in place against self-interested self-regulation. In Canadian law societies, typically twenty percent or so of benchers are non-lawyers. These non-lawyer benchers are chosen by government in some provinces and by other means in other provinces. This is valuable both to assist the law societies in avoiding professional self-interest and by adding to the perspectives and expertise at the table when decisions are being made.

But the substantial majority of benchers are elected by the profession and are themselves regulated by the law society. Of course, there are advantages to elections for benchers. Because benchers are elected, their decisions will likely have greater credibility with their electorate. Elected benchers are more likely to understand the issues facing the profession. But there are problems as well. As in the painting rating experiment described by Professor Ariely, elected regulators will have a sense of loyalty to their electors; partly in gratitude for election, partly because of an interest in re-election and partly because a natural sense of a representative obligation to one’s electors. All of this compounds the potential bias that exists from regulating one’s self.

There is another difficulty with election in that the diversity of the profession is not necessarily reflected in election results nor are the required skills necessarily found in those elected. One common refrain in Ontario comes from solicitors who are concerned that their perspectives (and, tellingly, their interests) are not sufficiently reflected in election results.

The just-released report of the Canadian Bar Association Futures Initiative addresses this issue amongst a number of other important issues relating to legal education, innovation and ethics/regulation[iv].

Recommendation 11 from the Futures Initiative report is that:

The governing bodies of law societies should be made up of elected lawyers, as well as a significant number of appointed lawyers and non-lawyers. The appointed governors should be selected by an independent appointment process designed to fill gaps in experience, skills and diversity.

As the Report says:

Electing 80% of law society directors is problematic because it does not necessarily provide appropriate diversity of expertise, perspective, and lived experience; it can cause overrepresentation of some parts of the profession, and under-representation of others. Election of law society directors tends to result in a board that is older than the profession generally and less demographically diverse. Bringing different perspectives to governance serves the public interest because it grows capacity from under-represented groups within the leadership of law societies. It is also crucial to strengthening diversity and inclusivity in the profession, since the increased presence of diverse groups in the profession cannot alone affect the governing norms, privileges, and access to opportunities within the profession.

Similarly, the election of 80% of law society directors lends some truth to the perception that self-regulation may tend to protect the interests of the profession. Running for election risks creating the false belief among some law society directors that their role is to represent their electors, which may result in election platforms designed to be attractive to that group.

Not surprisingly, elected benchers tend to be supportive of the current approach to selecting benchers. This is presumably in part because there is value to election. But it is probably true that elected benchers, being human, tend to think that a process that selected them must be a good process and that they themselves act entirely in the public interest despite being members of the profession and being elected.

To be facetious, just like the physicians in Professor Ariely’s audience, I have no concern about myself as an elected lawyer bencher but I do wonder about others! Less facetiously, it seems clear that being elected, and the proximity of the next election, affects decision-making at the bencher table particularly where professional self-interest is at stake. It also seems clear that greater diversity of perspective, experience and expertise would be valuable to bencher decision-making.

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[i] Professor Ariely’s laboratory at Duke University is the wonderfully named Center for Advanced Hindsight.

[ii] Predictably Irrational, The Upside of Irrationality, and The Honest Truth about Dishonesty

[iii] In his foreward as editor of The Best American Science and Nature Writing for 2012.

[iv] By way of full disclosure, I partcipated in the Futures Initiative as Lead of the Ethics/Regulatory Team together with a great team comprised of Kris Dangerfield of the Law Society of Manitoba, Lisa C. Fong of Ng Ariss Fong in Vancouver, Tony Kavanagh of Bueti Wasyliw Wiebe in Winnipeg, Harvey L. Morrison, of McInnes Cooper in Halifax, Professor Marie-Claude Rigaud of the Université de Montréal and Professor Alice C. Woolley of the University of Calgary.

 

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