Self represented parties and sharp practice by counsel. Should we be thinking differently?

War is the means by which nation states have sometimes resolved their differences. Litigation is the means by which people in our society sometimes resolve their differences. In both cases, there is value in prescribing the rules of engagement.

As wars between sovereign states have become less common and wars between sovereign states and insurgencies have become more the norm, the traditional rules of war seem to have become less relevant. This is presumably because rules that work to govern combat between traditional armies don’t effectively address asymmetric disputes where conventional militaries face off against “guerrillas”, “terrorists” or “freedom fighters” (the language depending on perspective and context).

Of course litigation is not and should not be conducted like a war.

My point is that necessary rules of engagement can be based on principles that no longer apply in some circumstances. Our professional conduct rules may face a similar challenge as the rules of war as the conduct rules appear to be premised on the assumption that all parties are represented by counsel and are comparably resourced.

Perhaps more importantly, life is not mostly about rules. Social norms are often more important than rules both between nations and within societies. We know from recent events that destabilizing important social norms is corrosive and threatening. But the reverse is also true. Making clear what is fair and acceptable is valuable. If we are going to deal properly with access to justice and SRLs, we need to be clear that treating people properly and not taking advantage of their vulnerability matters.

The 2nd National-Self Represented Litigants Project Dialogue

I recently attended the 2nd National-Self Represented Litigants Project Dialogue (the “Dialogue”) at the University of Windsor. In attendance were self-represented litigants, lawyers, judges and academics. This conference was held five years after the first SRL Dialogue which addressed the research undertaken by Professor Julie Macfarlane about self-represented litigants (SRLs).

One of the topics raised by SRLs at the Dialogue was sharp practice by counsel. These SRLs made clear that they consider that they were commonly being dealt with unfairly by opposing counsel. One lawyer at the Dialogue suggested that this was because the conduct rules were written by lawyers for lawyers.

I disagreed saying that it seemed to me that our approach to legal ethics was premised on the assumption that all participants in the adversarial process are represented by professional advocates – and that our approach can be problematic where that assumption does not apply.

Legal ethics in the adversarial system where parties are not evenly matched

In litigation

Essential to Canadian legal ethics is that advocates will resolutely advance their client’s interests subject to ethical obligations intended to ensure that the administration of justice works properly. For example, ethical rules require that counsel not “deliberately refrain from informing a tribunal of any binding authority that the lawyer considers to be directly on point and that has not been mentioned by another party” and not “make suggestions to a witness recklessly or knowing them to be false”[1].

Adversarial systems, by their nature, work best where the protagonists are similarly resourced. An independent adjudicator is best able to reach a fair decision where competition between adversaries ensures that all relevant evidence and arguments are tested. Where parties are very differently resourced, the adversarial process works less well. This is the stuff of movies where a human David takes on a corporate Goliath in court. Davids win in movies but not so much in real life.

The David and Goliath problem can exist where David is represented by counsel. Even having experienced counsel does not necessarily overcome having insufficient resources to conduct investigations, retain experts and prepare for trial. The unfortunate reality is that some Goliaths conduct strategic wars of attrition. Even where that does not occur, being out-gunned is problematic in an adversarial system.

A David and Goliath problem can arise where a represented party engages with another party who can’t afford counsel. This appears to be most common in family law proceedings. While it is of course commonly the case that neither party is represented, it is common for one family law litigant be represented while their opposing party is not. This also occurs in other civil litigation between individuals and in civil litigation between individuals and business.

It was striking to hear from SRLs attending the Dialogue of their perception was that they commonly experience sharp practice in dealing with the advocates on the other side. Of course, this is anecdotal information. It may be that SRLs who experience sharp practice are more motivated to become engaged and to report their experiences. It may be that there is another side to the story. It may be that SRLs may consider some conduct to be sharp practice which actually is not. But it makes sense to think that SRLs are more vulnerable to sharp practice and the stories told seemed to me to reflect real problems.

If we accept that SRLs are more vulnerable to sharp practice and that some advocates seek to advance their clients’ interests by taking unfair advantage of their greater expertise and client resources, the question arises whether ethical rules premised on representation adequately protect the administration of justice where the adverse party is self-represented.

Probably more importantly, if the administration of justice is going to work properly where SRLs are involved, it is important that counsel take care to act properly.

Demand Letters

A similar issue arises where lawyers make demands for payment for relatively small amounts on behalf of well-resourced clients against parties who are unlikely to seek representation. Amy Salyzyn wrote about this several years ago in her column Bully Lawyers & Shoplifting Civil Recovery Letters: Who’s Going to Stop Them? and in her journal article Zealous Advocacy or Exploitative Shakedown?: The Ethics of Shoplifting Civil Recovery Letters. The Toronto Star has recently addressed this issue in an article which quotes Alice Woolley saying that “There’s an exploitation of power here”.

A problem arises where the amount in issue, say a few hundred dollars, is not enough to merit the cost and trouble of seeking legal advice and the demand for payment is either without legal merit or of dubious merit. The problem is compounded where there is no real prospect that the claimant will commence proceedings and have the merits of the claim fairly adjudicated. While many recipients of such demands will ignore them, some will pay on demand out of fear or ignorance.

Where the recipient of a dubious demand letter seeks legal counsel, the recipient can elect to pay or not pay on an informed basis. Where a demand is adjudicated, a dubious demand can be dealt with on the merits and, where appropriate, costs can be awarded against the claimant.

But where large numbers of dubious or improper demands are sent where legal representation is unlikely, there is a problem where payments are made out of ignorance or fear. It is not a sufficient answer to say that the courts will adjudicate such demands where proceedings will not be brought and adjudication will not occur. Economics underlie the problem. There is an incentive for a claimant to send a volume of demands if the cost of each demand is low and some demands are satisfied. There is little if any incentive for a claimant to actually commence litigation against any one potential defendant. It makes little practical sense for any recipient to engage legal counsel for a few hundred dollars to decide whether or not to pay a claim for a few hundred dollars.

Our adversarial system and our approach to legal ethics operate effectively where parties are represented by counsel and have reasonably comparable resources. But for Davids facing Goliaths, whether in litigation or before litigation, there can be problems.

The Conduct Rules and self-represented parties

Rule 5.1 of the Model Code (The Lawyer as Advocate) does not address dealing with represented and self-represented adverse parties any differently[2]. The requirements of Rules 5.1-1 and 5.1-2 simply do not address acting against self-represented parties[3].

Under Rule 7.2 (Responsibility to Lawyers and Others), Rule 7.2-9 provides that:

When a lawyer deals on a client’s behalf with an unrepresented person, the lawyer must:

(a) urge the unrepresented person to obtain independent legal representation;

(b) take care to see that the unrepresented person is not proceeding under the impression that his or her interests will be protected by the lawyer; and

(c) make it clear to the unrepresented person that the lawyer is acting exclusively in the interests of the client.

Rule 7.2-9(a) is of little value in addressing imbalance where a person is self-represented because the person cannot afford representation or because the cost of representation is disproportionate to the matters in issue. Where a person can’t afford representation, it is of no value to urge them to obtain representation. Beyond this, the rule simply ensures that SRL understand the role of opposing counsel.

That said, it is not entirely obvious how the conduct rules ought to be modified where one party is represented by counsel and the other is not. It is difficult to conceive of conduct rules that provide for constrained representation in an adversarial process when our entire ethical approach is premised on undivided loyalty.

What to do?

At a deeper level, the problem is less the conduct rules that the advocate must follow and more the use of the adversarial system to resolve disputes where some of the adversaries do not have sufficient resources for the adversarial system to work properly. And particularly in the family law context, it is seems more than odd to think that an adversarial approach is constructive where relationships must continue through custody and support and where emotion rather than reason is so often in play. It is the very adversarial system, rather than the conduct required of counsel therein, that appears to be the problem.

But assuming the adversarial system, we should question whether reform is appropriate to address the fact that the adversarial system and the conduct rules are built on the assumption that all parties are represented by counsel.

As to modified conduct rules, I’m not aware of any proposals that could effectively make the administration of justice work more effectively in this context[4]. I doubt that it would be useful to vaguely require counsel not to take “unfair advantage” if that means doing something other than acting in accordance with the existing rules. And if the existing rules should be modified in context, advocates should be told what that the modifications really mean[5].

Perhaps the answer is not so much the conduct rules themselves but rather their application. Where both parties are represented by counsel, the advocate knows that breach of the conduct rules may well be identified by opposing counsel. There is greater disincentive to breach. And some breaches will be less likely to have an adverse effect on the administration of justice where there is effective adversarial competition.

If this is so then three points seem to me to emerge. The first is that there could be value in commentary in the conduct rules to the effect that a lawyer or paralegal is required to take special care to fully comply with the conduct rules where the adverse party is an SRL[6].

This might help set stronger social norms which could be valuable.

The second and third relate to the concurrent jurisdiction of the courts and the law societies in addressing the conduct of advocates[7]. As Chief Justice McLachlin said for the Court in Canadian National Railway Co. v. McKercher LLP, 2013 SCC 39 at paras. 13 and 15:

… The courts’ purpose in exercising their supervisory powers over lawyers has traditionally been to protect clients from prejudice and to preserve the repute of the administration of justice, not to discipline or punish lawyers.

… The purpose of law society regulation is to establish general rules applicable to all members to ensure ethical conduct, protect the public and discipline lawyers who breach the rules — in short, the good governance of the profession.

Notably, not all sharp practice in litigation will engage the jurisdiction of the court over proper administration of justice. For example, where litigation does not follow a dubious demand letter, the court will have no jurisdiction. Even if improper conduct does engage the jurisdiction of the court, a judge may conclude that it is better not to “to criticize or complain about an advocate’s uncivil conduct in court” given “the simple reality that refraining from such action in a given case may permit the proceeding to advance more efficiently”[8].

Similarly, the law societies do not necessarily investigate and prosecute all professional misconduct. Give the volume of conduct investigated, relatively few conduct proceedings are commenced. Law societies are understandably reticent to adjudicate the propriety of legal claims. Law societies tend to defer investigation and prosecution of alleged misconduct in a proceeding until after the proceeding is completed to better ensure that complaints are not used as tactical weapons in proceedings and to avoid interfering with the administration of justice.

For an SRL who is uncertain about the process and see themselves as outsiders, this may contribute to a greater lack of confidence about the process itself. It may seem like protection of the advocate by the system. This may also result in fewer disincentives against improper practice. Those who are prepared to operate close to, or over, the line may be more prepared do so.

Assuming the adversarial system, the question is whether courts and law societies should be more willing to address alleged sharp practice where the opposing party is an SRL. There seem to be credible reasons to think so. There may be procedural mechanisms, just as an ombudsperson in the courts, who could assist. The risk on the other hand is that complaints could compromise the litigation process, whether intentionally or because the SRL is not well positioned to assess impropriety, thereby making an already inefficient and expensive process more so.

As is so often the case, the ultimate answer requires thoughtful balancing. But it does appear that the current balance may not best ensure the proper administration of justice[9].

_______________________

[1] Rule 5.1-2 of the Model Code of Professional Conduct

[2] The Commentary addresses dealing with unrepresented complainants in criminal and quasi-criminal proceedings which is a different matter

[3] Commentary 6 to Rule 5.1-1 contains an interesting but enigmatic reference to situations where the adversarial system does not operate effectively: “When opposing interests are not represented, for example, in without notice or uncontested matters or in other situations in which the full proof and argument inherent in the adversarial system cannot be achieved, the lawyer must take particular care to be accurate, candid and comprehensive in presenting the client’s case so as to ensure that the tribunal is not misled.” (Emphasis added)

[4] But I haven’t gone looking either.

[5] Alice Woolley has argued in Slaw that asking a prosecutor to “do justice” doesn’t really provide genuine guidance to a prosecutor who is to act as a strong advocate within the adversarial process.

[6] That said, I wonder if the implication of such guidance might be that full compliance with the conduct rules is not otherwise required.

[7] Groia v. Law Society of Upper Canada, 2018 SCC 27 at para. 55

[8] Groia v. The Law Society of Upper Canada, 2016 ONCA 471 at para. 108

[9] As always, this column reflects my personal views. It is written to raise rather than resolve the issues discussed.

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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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Preliminary thoughts on Green, Groia and Trinity Western

(First published on slaw.ca)

In the last thirty years, Law Societies have been parties before the Supreme Court of Canada in thirteen cases according to CanLII[i] [ii]. Four of these cases have been decided in the last fifteen months[iii]. While others will delve more deeply into this recent jurisprudence, it is interesting to take a preliminary look at the way that the Court has understood the role, responsibility and jurisdiction of the Law Societies. It is noteworthy that the court has been divided in each of these four cases.

In Green v. LSM [iv], the Court upheld mandatory suspension for failure to comply with the CPD requirements of the Law Society of Manitoba. In Groia v. LSUC[v], the Court set aside a finding of professional misconduct for alleged in-court incivility in the context of criminal law defence. In TWU v. LSUC and in LSBC v. TWU[vi], the Court upheld decisions not to accredit Trinity Western University as a law school.

Green v. Law Society of Manitoba

The issue in Green v. LSM was the imposition of mandatory CPD together with mandatory administrative suspension for non-compliance. As a matter of administrative law, the Court addressed the standard of review of Law Society rule making. Justice Wagner, as he then was, wrote for the majority. He said that Dunsmuir[vii] applied because it applies to “all exercises of public authority” and to “those who exercise statutory powers”. In concluding that deference was required in considering Law Society rules, Justice Wagner stated that “In the case at bar, the legislature specifically gave the Law Society a broad discretion to regulate the legal profession on the basis of a number of policy considerations related to the public interest. The Act empowers the benchers of the Law Society to make rules of general application to the profession, and in doing so, the benchers act in a legislative capacity.”[viii]

In his reasonableness analysis, Justice Wagner looked to the Law Society’s statutory mandate. He said at para. 29 that “the Act contains an expansive purpose clause that obligates the Law Society to act in the public interest” and that “[t]he meaning of ‘public interest’ in the context of the Act is for the Law Society to determine”. On the CPD requirement itself, Justice Wagner observed at para. 59 that “The educational standards in respect of CPD, as defined by the Rules, do not relate solely to the competence of lawyers. … these standards also protect the public interest by enhancing the integrity and professional responsibility of lawyers, and by promoting public confidence in the profession”.

Justices Abella and Côté dissented but not on standard of review. They would not have upheld the rule because it provided for mandatory administrative suspension for non-compliance irrespective of the circumstances and without discretionary authority to relieve against unfair application. Justice Abella’s analysis of the role of the law societies is of interest. As she put it at para. 80:

Law Societies therefore represent — and are dedicated to protecting — the core values of the profession. They also represent — and are dedicated to protecting — the public’s confidence that those values will guide the lawyers who serve them. While the primary goal of the Law Society is the protection of the public interest, it cannot do so without also protecting the ability of its members to practise law professionally. …

In Justice Abella’s opinion, mandatory suspension for non-compliance irrespective of the circumstances compromised public confidence in the lawyer’s professionalism. Justice Wagner, for the majority, was not prepared to accept the premise of Justice Abella’s conclusion as Mr. Green had generally attacked the rule itself and that “In framing his challenge to the Rules in this way, Mr. Green wrongly assumes that the Law Society will not take its duty of procedural fairness seriously and provide for an appropriate procedure that is responsive to the particular facts and the reasonable expectations of the parties.”[ix] [cite]

What is of interest generally is that the Court in Green concluded that the Law Society is a public authority exercising a broad legislative discretion to regulate the legal profession in the public interest. The majority and the minority agreed that the role of the Law Society requires focus on public confidence in the legal profession as well as on the competence and conduct of individual lawyers.

Groia v. Law Society of Upper Canada

In Groia v. LSUC, the Court considered an adjudicative decision rather than a conduct rule. The Court again addressed standard of review with both the majority and the dissenters concluding that deference was required. In their concurring reasons Justices Côté and Brown would have applied correctness review, but agreed with the majority that the Law Society’s decision could not stand. The live issue between the majority and concurring judges was whether deference was appropriate in respect of in-court conduct given the fundamental principle of judicial independence.

For the majority, Justice Moldaver wrote at para. 54 that “Crucial to the principle of judicial independence is the presiding judge’s power to control his or her courtroom. However, I do not see a deferential standard of review as threatening that power.” At para. 55, he wrote that “Courts and law societies enjoy concurrent jurisdiction to regulate and enforce standards of courtroom behaviour. A trial judge is free to control the conduct in his or her courtroom irrespective of the degree of deference accorded to a law society’s disciplinary decision by a different court.” Justice Côté, with whom Justice Brown agreed, concluded that para. 169 that “correctness review is required to ensure proper respect for the judiciary’s constitutionally guaranteed place in our democracy”.

As to the reasonableness of the finding of professional misconduct, Justice Moldaver for the majority held at para. 88 that “it is not professional misconduct to challenge opposing counsel’s integrity based on a sincerely held but incorrect legal position so long as the challenge has a sufficient factual foundation, such that if the legal position were correct, the challenge would be warranted”. Justice Moldaver observed at para. 89 that “Many legal principles we now consider foundational were once controversial ideas that were fearlessly raised by lawyers. Such innovative advocacy ought to be encouraged — not stymied by the threat of being labelled, after the fact, as “unreasonable”.

Justice Moldaver advanced two reasons why legal error should not be the basis for of a finding unreasonable allegation of prosecutorial misconduct. The first at para. 90, which is resonant with Justice Abella’s dissent in Green v. LSM, is that “a finding of professional misconduct against a lawyer can itself be damaging to that lawyer’s reputation. Branding a lawyer as uncivil for nothing more than advancing good faith allegations of impropriety that stem from a sincerely held legal mistake is a highly excessive and unwarranted response.”[x]

The second reason at para. 91 is that:

… Prosecutorial abuse of process is extraordinarily serious. It impairs trial fairness and compromises the integrity of the justice system: Defence lawyers play an integral role in preventing these dire consequences and holding other justice system participants accountable by raising reasonable allegations. Finding a lawyer guilty of professional misconduct on the basis of incivility for making an abuse of process argument that is based on a sincerely held but mistaken legal position discourages lawyers from raising these allegations, frustrating the duty of resolute advocacy and the client’s right to make full answer and defence.

The second reason is also resonant with Justice Abella’s dissent in Green where she wrote that the Law Society must “[protect] the ability of its members to practise law professionally”. Justice Moldaver’s second reason emphasizes the importance of the duty of resolute advocacy and the right of an accused client to make full answer and defence which are of course essential to professional legal practice.

For present purposes, the significance of Groia v. LSUC appears to be that the law societies and the courts do have concurrent jurisdiction to regulate and enforce in-court conduct but that it is necessary that law society decisions not unreasonably stigmatize lawyer conduct and fully take into account the lawyer’s role in the administration of justice.

Trinity Western

The LSBC v. TWU and TWU v. LSUC decisions both address the decision not to accredit Trinity Western University for lawyer licensing purposes. The decision is unlike Green v. LSM in that law society rule-making was not in issue. The decision is unlike Groia v. LSUC in that a disciplinary adjudicative decision was not in issue.

The TWU cases are significant because they address the proper purposes of law society regulation and because the cases are different than Green and Groia in that the accreditation decision affected the Charter-protected freedom of religion of evangelical Christians rather than the legal system, accused persons and lawyers.

It is helpful to start with the dissenting reasons of Justices Côté[xi] and Brown in LSBC v. TWU which conclude at para. 273 that:

A careful reading of the LPA leads us to conclude that the only proper purpose of an approval decision by the LSBC is to ensure that individual licensing applicants are fit for licensing. Given the absence of any concerns relating to the fitness of prospective TWU graduates, the only defensible exercise of the LSBC’s statutory discretion for a proper purpose in this case would have been for it to approve TWU’s proposed law school.

In para. 66 of their minority reasons in TWU v. LSUC, Justices Côté and Brown conclude that “In light of the LSUC’s mandate, it is crystal clear that the provisions in By-Law 4 relating to the accreditation of law schools are meant only to ensure that individual applicants are fit for licensing” (emphasis in the original).

There being no claim that graduates of TWU would not be fit for licensing, this conclusion would have been dispositive if accepted by the majority.

Before considering the majority reasons, it is useful to set out some of the relevant legislative provisions. In the Legal Profession Act[xii] (the “BC LPA”)of British Columbia, section 3 provides that:

It is the object and duty of the society to uphold and protect the public interest in the administration of justice by

(a) preserving and protecting the rights and freedoms of all persons,

(b) ensuring the independence, integrity, honour and competence of lawyers,

(c) establishing standards and programs for the education, professional responsibility and competence of lawyers and of applicants for call and admission,

(d) regulating the practice of law, and

(e) supporting and assisting lawyers, articled students and lawyers of other jurisdictions who are permitted to practise law in British Columbia in fulfilling their duties in the practice of law.

In the Law Society Act[xiii] (the “ON LSA”) of Ontario, section 4.2 provide that:

4.2 In carrying out its functions, duties and powers under this Act, the Society shall have regard to the following principles:

1. The Society has a duty to maintain and advance the cause of justice and the rule of law.
2. The Society has a duty to act so as to facilitate access to justice for the people of Ontario.
3. The Society has a duty to protect the public interest.
4. The Society has a duty to act in a timely, open and efficient manner.
5. Standards of learning, professional competence and professional conduct for licensees and restrictions on who may provide particular legal services should be proportionate to the significance of the regulatory objectives sought to be realized.

Statutory objectives

In their majority decision, Justices Abella, Moldaver, Karakatsanis, Wagner, Gascon took a broad view of the proper purposes in accreditation.

In paras. 31 and 32 of LSBC v. TWU, the majority expressed their view that “the LPA requires the Benchers to consider the overarching objective of protecting the public interest in determining the requirements for admission to the profession, including whether to approve a particular law school” and that “The legal profession in British Columbia, as in other Canadian jurisdictions, has been granted the privilege of self-regulation. In exchange, the profession must exercise this privilege in the public interest”. Their reasons in paras. 14 et seq in TWU v. LSUC are to the same effect.

Notably, the majority in LSBC v. TWU commenced, at paras. 36, with the proposition from Green v. LSM at para. 24 that the law societies should be afforded “considerable latitude” in their “interpretation of the ‘public interest’ in the context of [their] enabling statute”. The majority then noted in para. 37 the delegation by the legislature of aspects of professional regulation to the Law Society which has “primary responsibility for the development of structures, processes, and policies for regulation”. According to the majority “[t]his delegation recognizes the body’s particular expertise and sensitivity to the conditions of practice. This delegation also maintains the independence of the bar; a hallmark of a free and democratic society.”[xiv] This recognition by the majority of delegated self-regulation as maintaining the independence of the bar is of interest in light of Canada (Attorney General) v. Federation of Law Societies of Canada, [2015] 1 SCR 401, 2015 SCC 7 at para. 86 in which Justice Cromwell concluded that he did not “find it necessary or desirable in this appeal to address the extent, if at all, to which self-regulation of the legal profession is a principle of fundamental justice”.

The majority summarized their conclusion on proper purpose at para. 40 of LSBC v. TWU as follows:

In our view, it was reasonable for the LSBC to conclude that promoting equality by ensuring equal access to the legal profession, supporting diversity within the bar, and preventing harm to LGBTQ law students were valid means by which the LSBC could pursue its overarching statutory duty: upholding and maintaining the public interest in the administration of justice, which necessarily includes upholding a positive public perception of the legal profession. …

In TWU v. LSUC, the majority said at para. 20 that:

In our view, the LSUC was entitled to conclude that equal access to the legal profession, diversity within the bar, and preventing harm to LGBTQ law students were all within the scope of its duty to uphold the public interest in the accreditation context, which necessarily includes upholding a positive public perception of the legal profession.

There are several purposes found to be proper by the majority. The first is ensuring equal access to the profession. The second is supporting diversity within the profession. The third is preventing harm to LGBTQ law students. The fourth is upholding a positive public perception of the legal profession.

The majority found support for the appropriateness of these purposes in the respective statutes in both the BC and the Ontario cases. In BC, the support was found in the statutory object and duty under the BC LPA to uphold and protect the public interest in the administration of justice by preserving and protecting the rights and freedoms of all persons and ensuring the competence of lawyers. In Ontario, support was found in the statutory duties to maintain and advance the cause of justice and the rule of law, to act so as to facilitate access to justice for the people of Ontario and to protect the public interest, all in carrying out its functions, duties and powers under the ON LSA.

The Chief Justice, in her concurring reasons, agreed that (i) maintaining equal access and diversity in the legal profession and (ii) preventing significant harm to LGBTQ people who might attend TWU’s proposed law school were statutory objectives. In his concurring reasons, Justice Rowe agreed with the majority and with the Chief Justice that “it was within the statutory mandate of the [law society] to consider the effect of the Covenant on prospective law students as part of its accreditation decision” as the Law Society “has a broad mandate to regulate the legal profession in the public interest”. His view was that the Law Society was “justified in considering the impact of the Covenant on prospective applicants to the proposed law school and, more generally, in considering the role of law schools as the first point of entry to the legal profession.”

In summary, I think it notable that the majority considered that s. 3 of the BC LPA and s. 4.1 of the ON LSA contained broad statutory purposes which could properly be considered in the accreditation decision. The majority applied these provisions in an expansive way considering the public interest, equality rights of law students, the effect of non-merit based admission policies on competence in the profession and the importance of diversity in access to and administration of justice.

Charter Values

A significant difference between the majority and the dissenters was the use of Charter values in the determination of proper regulatory objectives. As the dissenters put it in para. 270 of their reasons in LSBC v TWU, “[e]ven accepting, for the sake of argument, that it is beyond dispute that administrative bodies other than human rights tribunals may consider fundamental shared values, such as equality, when making decisions within their sphere of authority” (Majority Reasons, at para. 46), it is the LSBC’s enabling statute, and not “shared values”, which delimits the LSBC’s sphere of authority.” (Emphasis added)

In contrast, the majority held at para. 41 that:

Indeed, the LSBC, as a public actor, has an overarching interest in protecting the values of equality and human rights in carrying out its functions. As Abella J. wrote in Loyola, at para. 47, “shared values — equality, human rights and democracy — are values the state always has a legitimate interest in promoting and protecting”.

The Chief Justice accepted at para. 140 that “As the collective face of a profession bound to respect the law and the values that underpin it, [the Law Society] is entitled to refuse to condone practices that treat certain groups as less worthy than others”.

Doré and Loyola

Unlike more typical administrative law cases, the TWU cases are not just about whether the law societies acted for improper purposes. For the dissenters, the analysis could of ended there but did not.

For the majority, the Chief Justice, and Justice Rowe, it was necessary to consider whether Charter rights and freedoms were infringed by the refusal to accredit TWU and, if so, to consider whether such infringement was permissible.

The analysis of these issues in the four separate reasons in the two appeals is beyond the scope of this column because the intent of this review is to reflect on law society regulation generally rather than where Charter rights and freedoms are infringed by law society regulation.

So what do we learn from these four cases?

Green, Groia and the TWU cases conclude that a deferential standard applies in judicial review of law society rule-making (Green and Groia) and in judicial review of application of the rules in disciplinary (Groia) and non-disciplinary contexts (TWU).

While not new, Green and the TWU cases make it clear that the law societies have the delegated responsibility to regulate in the public interest. The law societies have significant scope in their determination of the public interest. The legislation which delegates responsibility to the law societies significantly informs the determination of the public interest. While the language is different from province to province, the effect of the legislative language is much the same.[xv]

Green and the TWU cases show that the law societies are entitled to consider specific competence, competence generally, diversity in the profession, non-discrimination in access to the profession, the administration of justice, public confidence in the legal profession and in the administration of justice and must consider the Charter and other rights and freedoms of persons affected by law society decisions.

The TWU cases show that the law societies are generally entitled to consider public interest implications in broader policy decisions and in narrower fact-specific decisions such as law school accreditation.

Groia shows, and Green suggests, that the courts will not defer to administrative or disciplinary rules that are seen as stigmatizes conduct that is not seen as worthy of sanction. The law society must be concerned about public confidence in the professional as well as in in the profession. The dissent in Green was on the basis that the mandatory suspension applied irrespective of the context. The majority did not accept that the rule was to this effect but did not challenge the idea that a rule providing for suspension in any and all circumstances would be unreasonable. The majority in Groia held that it was unreasonable to apply a disciplinary sanction to a good faith, but legally mistaken, position taken on behalf of an accused person.

Green, Groia and the TWU cases show that care must be taken by law societies to reflect on the impacts of their decisions on the professionals that they regulate, the clients served by those professionals, the public, the administration of and access to justice, and the Charter rights and freedoms of all persons.

 

The Chief Justice’s concurring reasons in LSBC v. TWU are her final contribution as a judge of the Supreme Court of Canada. I recommend her reasons to readers as a fitting final contribution.

While the Chief Justice accepted that general competence and diversity within the profession are proper objectives, she did not find them weighty in the particular case. Presumably, her view was affected by the fact that accrediting TWU would allow for additional candidates for licensing, especially from a religious minority, rather than excluding existing candidates.

At the same time, the Chief Justice noted the importance of religious freedom in this case as follows at paras. 129 and 130:

With respect, I cannot agree that the impact of the decision on the freedom of religion of members of the TWU community is “of minor significance”. The decision places a burden on the TWU community’s freedom of religion: (1) by interfering with a religious practice (a learning environment that conforms to its members’ beliefs); (2) by restricting their right to express their beliefs through that practice; and (3) by restricting their ability to associate as required by their beliefs.

These are not minor matters. Canada has a tradition dating back at least four centuries of religious schools which are established to allow people to study at institutions that reflect their faith and their practices. To say, as the majority does at para. 87, that the infringement is of minor significance because it “only prevents prospective students from studying law in their optimal religious learning environment” (emphasis in original), is to deny this lengthy and passionately held tradition. The majority seems to characterize the religious practice at issue in this case narrowly as “studying in a religious environment” (para. 67). In my view, the religious right at issue in this case is broader than that. It is not about merely studying in a religious environment — it is about studying in a religious environment where all members of the community have agreed, through the Covenant, to live in a certain way.

While honouring the freedom of religion, the Chief Justice nevertheless concluded at para. 146 that:

On the other hand, there is great force in the LSBC’s contention that it cannot condone a practice that discriminates by imposing burdens on LGBTQ people on the basis of sexual orientation, with negative consequences for the LGBTQ community, diversity and the enhancement of equality in the profession. It was faced with an either-or decision on which compromise was impossible — either allow the mandatory Covenant in TWU’s proposal to stand, and thereby condone unequal treatment of LGBTQ people, or deny accreditation and limit TWU’s religious practices. In the end, after much struggle, the LSBC concluded that the imperative of refusing to condone discrimination and unequal treatment on the basis of sexual orientation outweighed TWU’s claims to freedom of religion.

In a case like Multani, the claimant was vindicated because the school board could not show that it would be unable to ensure its mandate of public safety. In Loyola, we found that the limitation at issue did nothing to advance the ministerial objectives of instilling understanding and respect for other religions. This case is very different. The LSBC cannot abide by its duty to combat discrimination and accredit TWU at the same time.

I think it fitting that the last contribution of the Chief Justice as a judge of the Supreme Court of Canada was a full-throated affirmation of the constitutional rights and freedoms of all those affected by her decision and a willingness to make a difficult choice that recognized and affirmed their autonomy and dignity.

________________________________

[i] Andrews v. Law Society of British Columbia, [1989] 1 SCR 143, Black v. Law Society of Alberta, [1989] 1 SCR 591, Pearlman v. Manitoba Law Society Judicial Committee, [1991] 2 SCR 869. Law Society of British Columbia v. Mangat, [2001] 3 SCR 113, 2001 SCC 67, Edwards v. Law Society of Upper Canada, [2001] 3 SCR 562, 2001 SCC 80, Krieger v. Law Society of Alberta, [2002] 3 SCR 372, 2002 SCC 65, Law Society of New Brunswick v. Ryan, [2003] 1 SCR 247, 2003 SCC 20, Finney v. Barreau du Québec, [2004] 2 SCR 17, 2004 SCC 36, Doré v. Barreau du Québec, [2012] 1 SCR 395, 2012 SCC 12 , Green v. Law Society of Manitoba, [2017] 1 SCR 360, 2017 SCC 20, Groia v. Law Society of Upper Canada, 2018 SCC 27, Law Society of British Columbia v. Trinity Western University, 2018 SCC 32, Trinity Western University v. Law Society of Upper Canada, 2018 SCC 33

CCH Canadian Ltd. v. Law Society of Upper Canada, [2004] 1 SCR 339, 2004 SCC 13 is excluded from the count as it is about copyright rather than regulation of the legal profession.

[ii] As an articling student and as an associate, I worked on Black v. Law Society of Alberta. Decades later, I have been a Law Society bencher during the recent cases. Time passes amazingly quickly.

[iii] Green v. Law Society of Manitoba, supra., Groia v. Law Society of Upper Canada, supra., Law Society of British Columbia v. Trinity Western University, supra., Trinity Western University v. Law Society of Upper Canada, supra.

[iv] Green v. Law Society of Manitoba, supra.

[v] Groia v. Law Society of Upper Canada, supra. Full disclosure, I was a member of the Appeal Panel whose decision was set aside on appeal. I am advised by my friend and colleague Alice Woolley not to comment on this case. Out of respect, fear and affection, I having taken Alice’s advice and have attempted merely to describe relevant aspects of it.

[vi] Law Society of British Columbia v. Trinity Western University, supra. Trinity Western University v. Law Society of Upper Canada, supra.

[vii] Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190

[viii] Green, paras. 19 and 22

[ix] Green, para. 55

[x] Justice Moldaver notable also observed at para. 93 that “When a lawyer alleges prosecutorial misconduct based on a legal mistake, law societies are perfectly entitled to look to the reasonableness of the mistake when assessing whether it is sincerely held, and hence, whether the allegations were made in good faith. Looking to the reasonableness of a mistake is a well-established tool to help assess its sincerity. … The more egregious the legal mistake, the less likely it will have been sincerely held, making it less likely the allegation will have been made in good faith. And if the law society concludes that the allegation was not made in good faith, the second question — whether there was a reasonable basis for the allegation — falls away.

[xi] Justice Côté’s positions in Green, Groia and TWU and Justice Brown’s position in Groia and TWU appear to suggest that they may take a more narrow, perhaps sceptical, view of law society regulation than do other members of the Court. Justice Abella’s position in Green and Groia suggests that she is particularly concerned about stigmatization of individual legal reputations.

[xii] Legal Profession Act, SBC 1998, c 9 as amended

[xiii] Law Society Act, RSO 1990, c L.8 as amended

[xiv] LSBC v. TWU, para 37

[xv] Section 3 of the BC LPA provides that “It is the object and duty of the society to uphold and protect the public interest in the administration of justice by (a) preserving and protecting the rights and freedoms of all persons, (b) ensuring the independence, integrity, honour and competence of lawyers, (c) establishing standards and programs for the education, professional responsibility and competence of lawyers and of applicants for call and admission, (d) regulating the practice of law, and (e) supporting and assisting lawyers, articled students and lawyers of other jurisdictions who are permitted to practise law in British Columbia in fulfilling their duties in the practice of law.”

Section 3(1) of the Manitoba Legal Profession Act provides that the purpose of the Law Society is uphold and protect the public interest in the delivery of legal services with competence, integrity and independence.

Section 4.2 of the ON LSA, requires the Law Society to have regard to the following principles in carrying out its functions, duties and powers: a duty to maintain and advance the cause of justice and the rule of law, a duty to act so as to facilitate access to justice for the people of Ontario and a duty to protect the public interest.

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The Never-Ending Debate: What should be required in order to become a lawyer?

(First published on slaw.ca)

The qualifications required of new Ontario lawyers has been the subject of virtually continuous debate for generations. Starting in the late 1950s, being called to the bar required (i) a law school degree, (ii) practical training through the bar admissions course and (iii) an articling apprenticeship. The bar admissions course came to an end in the 2000s. A law practice program (the LLP) has recently been added as an alternative to articling. The qualifications debate continues with the focus now being whether articling and/or the LLP should continue and, if so, in what form. The central question today is what, other than licensing examinations and graduation from law school, should be required before the call to the bar.

The intent of this column is to provide context for current debate by focusing on the competence mandate of the Law Society and by laying out some of the relevant history and principles that may be useful in thinking about all of this.

My ultimate point is that this is a debate that will never end – because there are no perfect choices and the proponents of one option can always demonstrate frailties in the other options being considered. While it is tempting to press for radical change, it is very difficult to have confidence that the change will actually be an improvement. Keeping focused on the competence mandate, it seems to me the best approach is practical incremental change primarily designed to ensure that new lawyers are competent to serve the people of Ontario and taking care to see that candidates for licensing are treated properly.

A brief history of a relatively long time

Until 1957, the Law Society ran legal education and training in Ontario. After much controversy, an agreement was reached in 1957 whereby university law school education became a requirement. The articling apprenticeship continued. A bar admission course was established. According to the historian Christopher Moore, the establishment of the bar admission course “satisfied the benchers’ continuing requirement for practical training. It also pleased the universities by allowing them to narrow their focus to the purely academic teaching they preferred”[1].

For the next four decades, being called to the bar in Ontario required an academic LLB/JD, practical bar admission course training and exposure to the realities of practice through articling.

In the never-ending debate, the future of articling arose soon after the late 1950s reforms. In 1972, a recommendation was made to Convocation for the abolition of articling[2]. This recommendation was rejected and has again been rejected again on several occasions over the years.

By the late 2000s, the bar admission course had been entirely discontinued and two licensing examinations had been established, but articling continued.

With the substantial increase of candidates and insufficient growth in articling positions over the last 15 years, the LPP was added as an alternative to articling several years ago.

Whether the LPP and/or articling will continue and in what form continues to be debated.

The Mandate of the Law Society – why do we care about qualification to practice?

People who are served by professionals ordinarily need professional assistance because they do not have the expertise to serve themselves. They cannot assess whether someone else is professionally competent to serve them nor whether they have been properly served. This is the central reason that professional regulation exists.

Like all professional regulators, the Law Society has two central mandates; ensuring that members of the legal professions are competent and ensuring that members conduct themselves properly. These mandates are made clear in section 4.1 of the Law Society Act which provides that it is a function of the Law Society to ensure that:

all persons who practise law in Ontario or provide legal services in Ontario meet standards of learning, professional competence and professional conduct that are appropriate for the legal services they provide

The professional conduct mandate is pursued by establishing Rules of Professional Conduct, by dealing with professional misconduct by investigation and discipline and by promoting proper professional conduct by practice audits and reviews. Much attention has been spent in recent years on the conduct mandate recognizing that proper conduct is better attained by proactive measures rather than just by reactive disciplinary measures and by the recognition that the law firm policies, procedures and practices ae very important in achieving proper individual conduct.

The professional competence mandate may be thought of as having two aspects. The first is licensing, ensuring that entry-level competence is attained. The second is competence in practice, ensuring that competence is maintained and that specific competence is achieved for specific areas of professional work. Like the conduct mandate, there are a number of ways that the Law Society fulfils and can fulfil the competence mandate.

The Competence Mandate

The Law Society of Ontario has spent much time and effort reflecting on its competence mandate. Its 1994 Role Statement recognized the obligation to govern the profession in the public interest to ensure that the people of Ontario are served by lawyers who meet high standards of learning and competence.

In the late 1990s, the Law Society established two Competence Task Forces. The First Competence Task Force established a working definition of the competent lawyer[3] which is now reflected in the definition of a “competent lawyer” in Rule 3.1 of the Model Code of Professional Conduct and across Canada. As defined in the Model Code, a “competent lawyer” is “a lawyer who has and applies relevant knowledge, skills and attributes in a manner appropriate to each matter undertaken on behalf of a client and the nature and terms of the lawyer’s engagement”. The Model Code provides further particulars in its definition.

The Report of the Second Competence Task Force[4] proposed implementation of what it described as the “competence blueprint” which included focus on both pre-call and post-call learning. As the report said:

The post-call efforts of the profession to maintain and enhance its competence span a broad range of approaches, but virtually all of them engage education, whether it be through experiential learning, continuing legal education, self-study, or the pursuit of advice and mentoring. Pre-call learning is the foundation upon which a career long commitment to learning is constructed.

The bar admission course

Between the reports of the First and Second Competence Task Force, Convocation received and considered the Bar Admission Reform Report[5] which was expressly grounded in the Competence Mandate and the work of the Competence Task Force.

The Bar Admission Reform Report noted that the Bar Admission Course began in 1959 and that its then current form was mandated by Convocation in 1988 approving the “Spence Report”. Following graduation from law school, prospective lawyers undertook a three phase pre-call training program. The first phase was a one-month workshop-based practice skills program addressing professional responsibility and practice management, interviewing, legal research, legal writing and drafting, alternative dispute resolution and advocacy. The second phase was the articling year. The third phase was a three and one-half month seminar program focused on substantive and procedural law, lawyering skills, and how to complete transactions with written examinations. Attendance was originally mandatory but was merely “strongly encouraged” by 1998.

On delivery of the Bar Admission Reform Report, Convocation reaffirmed that there should continue to be “an effective and comprehensive bar admission education and training program” and that articling should be maintained.

To summarize, lawyers called to the bar in Ontario in the 1990s had three years of law school, twelve months of articling and four and one-half months of substantive, procedural and skills training for a total of over 16 months of post-law school legal training.

In late 2003, Convocation received the Report of the Task Force on the Continuum of Legal Education[6] which recommended continuation of articling for ten months but major changes to the bar admission program. Rather than substantive, procedural and skills training and assessment, a five week skills and professional responsibility program and assessment and two licencing examinations were approved. These licensing examinations continue as the Barrister and the Solicitor Examinations. In effect, the choice was made to test for substantive and procedural competence rather that to teach in those areas presumably on the basis either than law schools provided sufficient practical education and/or that students could learn enough on their own.

In 2007, Convocation established a Licensing and Accreditation Task Force which reported in January of 2008. In its consultation report[7], it was noted that the five week Skills and Professional Responsibility Program was reduced to a four week program in 2007 as a result of perceived repetitiveness within the learning modules. Ultimately, Convocation accepted the Task Force recommendation[8] that the Skills and Professional Responsibility Program be replaced with a pre-call five day pre-call professional responsibility and practice requirement integrated with articling and 24 hour of continuing professional development in the first two years after being called to the bar.

Since 2008, the five day professional responsibility and practice requirement has fallen away. Candidates are now required to pass the two licensing examinations and either to article or attend the LPP. The pre-call training in Ontario has been reduced from four and one-half months to five weeks to four weeks to five days and is now eliminated. The Barristers and the Solicitors Examinations remain.

To summarize, lawyers now called to the bar in Ontario have three years of law school, ten months of articling or the LPP and must pass the Barristers and the Solicitors Examinations.

The articling debate

There have long been debates “on the value of articling as a component of professional legal education and recommendations for change”[9]. As long ago as 1972, abolishing articling was proposed[10]. In 2008, the Licensing and Accreditation Task Force consulted the profession on this and other topics. As the Task Force reported in its Final Report:

Respondents overwhelmingly rejected the abolition of articling. They emphasized that a competent profession requires practical training before call to the bar. Articling should not be characterized as a barrier, but rather as a core component of the licensing process.

The nature of the articling debate changed by the late 2000s. Previously, the debate was mostly about the utility and variability of the articling experience. What caused the change was that the number of licensing candidates in Ontario has increased significantly over the last 15 years or so while the number of articling positions has not kept pace.

The substantial increase in the number licensing candidates

In 1972, the annual capacity of the Ontario law schools was in the range of 1,000 to 1,100 students[11]. By 2000, the number of first year law students admitted to Ontario law schools was essentially unchanged at 1,103 students[12]. For more than 25 years, the capacity of the principal gateway to the legal profession in Ontario was unchanged. That this was so is somewhat surprising given the increased population of Ontario and the resulting increase in supply and demand. Something had to give and it did. At the same time, something else happened, namely increased immigration and the acceptance that qualified immigrants had to be treated fairly in professional licensing[13].

From 2000 to 2010, the annual capacity of Ontario law schools increased by over 300 to in excess of 1,400 students. By 2015, the annual law school capacity was nearly 1,550 students[14]. After decades of essentially no change, the annual capacity of the Ontario law schools has increased by 40% over the last fifteen years.

During the same fifteen year period, a new source of licensing applicants opened up. In 2000, only approximately 100 Ontario licensing applicants came through the National Committee on Accreditation (NCA) having attended law school outside of Canada. By 2010, there were nearly 400 NCA candidates. There are now some 650 NCA candidates annually of whom approximately half are Canadians who obtained their law degrees outside of Canada.

Putting this information together, the last 15 years has seen a total increase from approximately 1,000 candidates annually to approximately 2,200 annually[15]. Approximately 45% of this increase is from increased Ontario law school capacity, approximately 25% is from foreign-trained Canadians and approximately 25% is from foreign-trained immigrants. That some 70% of this significant increase is from Canadians shows a significant demand for law school education that was not previously met. This is consistent with pent-up demand after the unchanged Ontario law school capacity over the prior 25 years.

The slower increase in the number of articling positions and the LPP response

Unfortunately, the increased numbers of candidates seeking articles in the late 2000s coincided with the 2008 economic crisis and its aftermath. During this period, larger firms cut back the number of articling positions. This didn’t help.

In any event, while the number of articling positions has substantially increased (to approximately 1,950 by 2016), there has been a gap for some time between the number of licensing candidates and the number of articling positions. It is also the case that, likely given the intense competition for articling positions, some of the increased number of articling positions are less attractive and even exploitative positions, including poorly or unpaid positions.

It was this gap between the supply of and demand for articling positions that was the impetus for the 2012 Articling Task Force which recommended the establishment of the Law Practice Program (LPP) as an alternative to articling. This recommendation was one of the three available responses. The first was to do nothing and accept that the number of articling positions practically limited the number of new lawyers each year. The second was to add a new pathway to licensing, namely the LPP. The third (which was the minority position) was to abolish articling in favour of a limited version of the LPP.

How to think about all of this

It is clear that the establishment of a second licensing pathway (the LPP) didn’t end the never-ending licensing debates. The LPP was only established as a pilot project. Perhaps inevitably when there was a prospect of ending the LPP, there was substantial opposition with a resulting Law Society decision to deliberate more generally on approaches to licensing.

While, as of the writing of this column, there are no proposals on the table, it is reasonably predictable that some or all of essentially the same alternatives will yet again be considered. One option is to continue articling and the LPP with or without reform. Another option is to eliminate the LPP in favour of articling as the only pathway. A third option is to eliminate articling in favour of the LPP in current or different form. A fourth option is to eliminate both articling and the LPP.

The point of this column is to reflect on what is, or should be, in issue in considering the various alternatives.

The competence mandate and fairness to candidates

There are, broadly speaking, two proper perspectives from which to consider these issues. The first perspective is that of the clients to be served by the lawyers that we license. This is the point of the competence mandate described at the outset. Ensuring that those licensed to practice law are competent to practice law is fundamental to professional regulation. Losing track of the competence mandate is unacceptable even if tempting.

The second perspective is that of the licensing candidates[16]. There are two aspects to this perspective. The first is that of candidates generally. For example, all candidates naturally prefer not to pay for licensing requirements especially after enduring expensive law school fees. The second is that there are differences between licensing candidates i.e. the second perspective is heterogeneous. These candidates’ perspective may be thought of as being about fairness; fairness to candidates generally, fairness as between candidates and fairness to specific candidates.

Like all hard problems, proper policy decision-making here isn’t about choosing between the two perspectives. Rather, both perspectives must be considered. However, it is important to recognize generally speaking that the point of licensing is to ensure competence and that the licensing requirement inherently places burdens on prospective licensees. How much burden is properly borne and how that burden should be shared are important questions.

The competence mandate

It seems to me that thinking clearly about the competence mandate requires reflection on the evolution of the licensing process over the last two decades. This evolution is essentially from a four and one-half month bar admission course in which substantive and procedural law and lawyering skills were taught and assessed to the current Barrister and Solicitor Examinations i.e. from teaching to just testing. While it is likely true that law schools generally place greater emphasis on experiential education than they did two decades ago, I’m not aware of good evidence that law schools are now training lawyers to practice law. Indeed, law schools disclaim this responsibility and mission.

For this reason, it seems to me that those arguing for an end to, or substantial reduction of, transitional training (whether through articling or the LPP) should face a heavy burden to demonstrate that proposed changes meet the competence mandate. Said another way, I don’t think it acceptable to have perceived fairness to candidates trump the competence mandate. Indeed, allowing incompetent candidates to enter practice is itself unfair to them.

It would be a terrible irony if the focus on the competence mandate in the 1990s was the precursor to a series of “reforms” the net result of which was to end all transitional training. First ending the bar admission program and then ending articling/the LPP is surely not consistent with the competence mandate.

As between articling and the LPP, it must be acknowledged that neither is perfect. Some articles do not provide proper training. The competence mandate requires that these bad articles not be permitted. We must accept that some articles are better than other articles with the result that the gain from articling is uneven. In contrast, the LPP provides its candidates with a generally consistent experience. The LPP provides both simulated experiences as well as work placements for real life experiences. Unfortunately, we cannot say whether the LPP is generally better at ensuring competence than most articles or whether the reverse is true.

So far as the competence mandate is concerned, there does not appear to be a cogent basis to say that either most articles or the LPP do not provide candidates with sufficient transitional training.

The fairness requirement

The fairness requirement is tricky. For example, fairness underlies the decision to adopt the LPP as a second pathway. It would be unfair to qualified candidates who cannot find articles (because the market doesn’t generate sufficient articling positions) to say that they cannot be licensed. Once licensed, finding work is a different matter. Yet adopting the LPP created a perceived unfairness by creating two classes of candidates. Of course, the alternative of abolishing articling to ensure one common pathway would impose a burden on those who would have articled by taking articling salaries from them and by increasing the total cost of the LPP which is borne by all candidates.

It seems to me that the fairness requirement must be addressed by recognizing that perfect fairness is impossible and that eliminating burdens for some will often impose burdens on others and by focusing on how to practically mitigate unfair burdens. In that spirit, some of the current advantages (the loss of which would be a burden) and the current burdens appear to me to be as follows:

  • articles
    • can provide:
      • valuable real world experience
      • increased prospects for post-call employment
      • a salary, which is particularly important given current law school tuition
    • are less accessible:
      • to students who go to law school in other countries and aren’t part of the “system” during law school
      • to new Canadians who may lack language skills and social capital
      • to racialized candidates
    • can be exploitive in terms of income, experience and sexual harassment
  • the LPP
    • can provide
      • good training, including simulated training
      • work placements which are generally, but not always, paid and which provide real world experience and increased prospects for post-call employment
      • introduction to Canadian culture and society for new Canadians who are not yet fully competitive in the legal labour market
    • does not generate revenue, unlike articles, and accordingly does not pay for itself and does not provide salaries for its candidates

The bottom line

I suspect that the great articling debate that has now spanned nearly five decades has not reached resolution because there is no good answer. Articling is imperfect. There are no clearly better alternatives. Our differing perspectives lead us to different conclusions because there aren’t clear answers.

If this is so, it follows that it would be better if we stopped trying to find big answers and instead started to work toward smaller pragmatic ways of reducing burdens and unfairness.

In doing so, I suggest that we should accept two primacies. The first is our competence mandate. Any proposed change must bear the burden of showing that the clients of newly called lawyers will be competently served. The second is that unfairness must be thoughtfully and effectively addressed. In this regard, we must distinguish between dealing with unfairness that must be addressed (such as exploitative articles and Human Rights Code violations for example) and throwing babies out with bathwater in well-motivated attempts to ensure that everyone is treated in exactly the same way.

_____________________

[1] Christopher Moore, The Law Society of Upper Canada and Ontario’s Lawyers, 1791-1997, pp. 259-260. It was the vice-dean of Osgoode Hall who proposed the establishment of the bar admission course. According to Christopher Moore, “[he] suggested that a post-LLB training program could even out the inequities that plagued the articling process”.

[2] Special Committee on Legal Education Report (aka the MacKinnon Report), 1972

[3] First Competence Task Force – Final Report, November 1997

[4] Second Competence Task Force – Final Report, April 1999

[5] Bar Admission Reform Report, June 1998

[6] Task Force on the Continuum of Legal Education Report, October 2003

[7] Licensing and Accreditation Task Force Consultation Report, January 2008

[8] Licensing and Accreditation Task Force Final Report, September 2008

[9] Articling Reform Sub-Committee Report, October 1990

[10] MacKinnon Report

[11] MacKinnon Report, p. 10

[12] Ontario Universities’ Application Centre www.ouac.on.ca/statistics/law-school-application-statistics/

[13] Fair Access to Regulated Professions Act, 2006, SO 2006, c 31. Section 6 provides that “A regulated profession has a duty to provide registration practices that are transparent, objective, impartial and fair”.

[14] To 2000, most of the increase was from the University of Ottawa (216 students) and Windsor (55 students). From 200 to 2005, most of the increase was from the new law school at Lakehead (60 students), Windsor (43 students) and Queens (25 students). Ontario Universities’ Application Centre supra.

[15] This analysis excludes licensing candidates who attended law schools in other Canadian provinces.

[16] Technically, there is a third (and problematic) perspective which is that of existing lawyers whose self-interest is in the limitation of new licensees/minimizing competition. The “issue of numbers” has always been expressly or implicitly part of the licensing debates.

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What can we learn from the English ABS experience after five years?

(published first on slaw.ca)

After five years of ABS liberalization in England (and Wales), it is worth having a look at what has happened. Surprisingly and significantly, the answer is “not much”.

ABS liberalization in England

A decade ago, Legal Services Act 2007 brought about significant changes to the practice of law in England. These changes included allowing what were called alternative business structures to provide legal services where only lawyers were previously permitted to serve clients. The first alternative business structures were licensed in late 2011.

The essential idea of alternative business structures is that constraining ownership of legal practices constrains competition and innovation. This is not to say that the practice of law is not competitive without non-lawyer ownership. The fact is that there is a large number of legal practices that intensively compete with each other. But the nature of those practices is the same. Highly educated professionals spend time providing services to clients with the assistance of their staff. The practice of law is highly labour intensive and the labour is expensive labour. While these practices compete with each other, they do not have to and are limited in their ability to compete using different ways of providing legal services. From one perspective, law is highly competitive. From another perspective, competition is highly constrained where only practising professionals can provides legal services and own professional practices.

The ABS idea contemplated that allowing non-lawyer ownership would encourage competition and innovation in two ways. Liberalizing access to capital inherently facilitates the provision of services in ways that are less, or are not, labour-intensive. Liberalizing non-lawyer ownership facilitates management of legal practices by non-lawyers who have business expertise and experience. The result was expected to be the entry of new participants into the legal services market. The result was also expected to be the evolution of existing practices because existing practices could have improved access to capital and to non-legal expertise and because existing practices would have to evolve to better compete with new entrants.

The English context

There are important differences between England and Canada that should be kept in mind in considering the English ABS experience. There is a divided bar although solicitors are increasingly permitted to act as advocates. There are eight distinct legal professions[i] with separate front-line regulators, each front-line regulator being under the supervision of the Legal Services Board. There are far more solicitors than all other types of legal professionals combined.

Perhaps most significantly, licensing is not required in England to provide legal services in substantial areas where licensing is required in Canada. In England, only the exercise of a right of audience, the conduct of litigation, reserved instrument activities, probate activities, notarial activities and the administration of oaths are reserved to licensed legal professionals.

The reason that this limited reservation (or limited monopoly) is significant is that being or becoming an ABS isn’t necessary where it is not necessary to be licensed. Accordingly, ABS liberalization and consideration of its results is limited to these reserved areas. ABS liberalization was designed to address what we would see as core areas of legal service.

Bifurcation of the legal services market

Before looking at the English ABS experience, it is also important to distinguish between the consumer and the business legal services markets. It is clear that there has been substantial change in the supply of services to large businesses and other organizations over the last decade. In-house counsel have taken on increased shares of legal work. Alternative legal service providers have emerged to directly supply in-house counsel groups and to provide services through external counsel.

Significantly, it does not appear that this significant evolution requires or is dependent on ABS liberalization as is clear from the fact that much of this evolution has occurred in the United States, which is entirely hostile to non-lawyer ownership and unauthorized legal practice.

In considering the impact of ABS liberalization in England, it is worth keeping in mind that the “big business” demand for legal services is not the same as consumer demand and, more significantly, that the nature of the legal services that are consumed and the way that legal services can be supplied are quite different in these very different markets.

The 2017 Legal Service Board Report

With five years of ABS liberalization in England, it is possible to assess how these intended market impacts have played out so far. With this in mind, the Legal Services Board has released its report Evaluation: ABS and investment in legal services 2011/12-2016/17 (“2017 LSB Report”).

ABSs were first licensed in 2011. By March of last year, 892 ABS licenses had been issued by four licensing authorities[ii] and were in active practice[iii]. To put these nearly 900 ABSs in context, there were just over 10,000 solicitor firms as of the end of 2016[iv] of which 25% were sole proprietorships. It is fair to observe that a significant number of ABSs have been licensed.

According to 2017 LSB Report, the active ABSs are predominantly existing firms that have converted to ABS status. Only one in five of respondent ABSs is a new firm. This means that there are approximately 180 new entrant ABSs and approximately 720 existing practices that have converted to ABS status.

Much has been written about the new entrant ABSs. A significant number have been personal injury consolidators with Slater and Gordon being the most famous new entrant and the most famous failure. Not surprisingly, many new entrants have focused on the more lucrative areas of practice. Not surprisingly, rapid growth and consolidation has been a risky business strategy.

But what about the substantial number of existing practices that have taken on ABS licensing? This is a bit tricky to tease out from the 2017 LSB Report as information some of the reported information is not broken down between new entrants and converted existing practices. But the implications of the reported data is pretty clear.

The focus of the 2017 LSB Report is on the investments made by ABSs and the sources of capital for those investments. It is reported that two-thirds of ABSs have “either have already invested or are planning to do so, since they gained their ABS licence” and that “[t]hese investments have mainly been made to hire more staff, increase marketing activity or to purchase IT. The report sees “this as evidence of the increased scale that allowing non-lawyer ownership was designed to enable”. The report also notes that “[t]here are statistically significant links between higher levels of non-lawyer ownership and the likelihood of having made an investment. Larger organisations are also more likely to have invested in their business.”

These observations are entirely unsurprising. One would expect practices that take on an ABS license to make investments. Larger organizations are naturally more likely to make investments. It would be odd to find that practices with non-lawyer ownership were not making investments.

What is surprising is the source of capital used for investment. According to the report:

The most frequent source of funding for investments was business profits or cash reserves, which were used by 49% of those who had invested in their business. Just over a quarter of investments were solely funded using a loan from a bank, and a quarter were solely funded using the business’ overdraft facility. External sources of equity finance accounted for only a minority of investment funding sources either as the sole or joint source of investment funds, and only 12% of ABS had used any form of external finance.

We know that the usual sources of investment capital for ordinary legal practices are business profits/cash reserves and bank debt. According to the 2017 LSB Report, 88% of ABSs invested using these traditional sources of capital. Only 12% of ABSs used non-traditional sources of capital for investment purposes.

As noted above, only approximately 20% of ABSs are new entrants. As just discussed, only 12% of ABSs has used external finance for investment purposes. Putting these points together, one can only conclude that very few existing practices that have become an ABS have accessed capital that was not previously available to them. It may be that becoming an ABS has been attractive to recruit and to offer incentives to non-lawyer staff. It may be that becoming an ABS has been used to allow family members to participate in ownership. But it appears clear that, so far, access to capital has not been a significant reason to convert to ABS status. As the report puts it “Except perhaps in the personal injury sector, it would appear that bank lending is a substitute for external capital”.

The essential conclusion of the 2017 LSB Report is that there is not yet sufficient competition in the legal services market to require existing practices to innovate:

The low level of external investment seen to date may be a symptom of weak competition in the market overall, as found by the Competition and Markets Authority market study, LSB’s Market Evaluation and the joint SRA LSB research revealing that levels of innovation are not increasing. The dynamics of competition create incentives for suppliers to increase productivity through innovation, which lowers costs and hence prices through time. This is likely to involve taking a different approach to delivering a service, or developing new services completely. In the absence of strong competition, there is insufficient impetus for law firms to take the greater risks (and rewards) involved with using external capital. Until these incentives change we may not see significant growth in the use of external capital by ABS firms.

So what are the implications for Canadians?

What appears to be clear is that not much has happened in England as a result of ABS liberalization. The conclusion of the 2017 LSB Report is essentially that existing practices have not had to innovate because they have not faced strong competition particularly from new entrants. But the report does not address why relatively easy entry into the legal services market and the fact of unreserved areas of practice have not led to increased competition.

It may be that the emergence of new entrants simply takes time. It may also be that existing legal practices are reasonably well suited to the work that they do and that there isn’t substantial profit to be made serving existing reserved legal markets though new forms of practice.

So the implication of the first five years of ABS liberalization in England is that it has not led to much accessing of external capital nor to much innovation. At the same time, it does not appear that ABS liberalization has led to significant problems either. That said, spending substantial regulatory time and effort to enable a significant regulatory change of rather limited impact does not seem like a great use of resources.

Of course, things don’t necessarily stay the same. It is clear that technology continues to advance significantly. There is ample evidence that unlicensed direct-to-consumer legal services are being provided in Canada and that the volumes are likely to increase especially as technology evolves. It seems logically to follow that this will lead to competitive pressure on existing legal practitioners who will require access to external capital to respond effectively. There is a credible argument that limiting access to external capital will handicap existing practices against new entrants.

But it must be admitted that these credible arguments are not yet supported by market evidence in the very significant and competitive English market. The dilemma is that there isn’t cogent current evidence for regulatory reform while our ability to respond nimbly if and when required is doubtful. In resolving this dilemma, my inclination is to watch and wait given the advantage of having the English “experiment” to guide our thinking.

_________________________________

[i] Solicitors, Barristers, Legal Executives, Licensed Conveyancers, Patent Attorneys, Trademark Attorneys, Costs Lawyers and Notaries

[ii] Most of these were issued by the Solicitors Regulation Authority.

[iii] Nearly sixty ABS licensees are not in active practice.

[iv] 84% of English and Welsh lawyers are regulated by the Solicitors Regulation Authority based on data from the 2017/2018 Legal Services Board Business Plan

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The Statement of Principles and Inter-Bubble Communication About Racism

First published on slaw.ca

There has been significant controversy in Ontario over the new Law Society requirement that every licensee “adopt and to abide by a statement of principles acknowledging their obligation to promote equality, diversity and inclusion generally, and in their behaviour towards colleagues, employees, clients and the public”.

The nature of the Statement of Principles controversy

Much of the controversy has focused on concern that the requirement compelled expressions of belief and accordingly raised the issue of freedom of speech. This was not an unreasonable concern for at least two reasons. As Alice Woolley pointed out in her op-ed column published in the National Post, explanatory materials published by the Law Society said that the requirement was for a “personal valuing” of equality, diversity and inclusion. As well, the requirement contained an ambiguity as the word “promote” could be seen to require more than conduct.

Most of those who raised concern about the requirement sought to make clear that they did not take any issue with the policy goals of the requirement and that they accepted that it was fully appropriate that the Law Society advance equality, diversity and inclusion in the professions. Some of those who raised concern did so in terms and with language which suggested that more than free speech was in issue for them. But it is clear that there was a legitimate free speech issue in play and that, not surprisingly for lawyers, freedom of speech mattered.

There was a less common concern also raised which was that the requirement had the effect, or could be seen to have the effect, of adversely affecting proper client representation in matters involving human rights or harassment issues. Fully accepting that adverse effect on proper client representation would be inappropriate, the validity of this concern was much less obvious to me.

Law Society clarification, debate and decision

These concerns were addressed by the release of a Guide which clarified that the statement “need not include any statement of thought, belief or opinion” and that “reference to the obligation to promote equality, diversity and inclusion generally refers to existing legal and professional obligations”. Curiously to me, there continued to be demands for a “conscientious objector” exception to the requirement. While I could understand concern as to whether the Guide was clear enough or authoritative, I continue to be baffled by the concept of conscientious objection to the requirement as clarified. That doesn’t mean that the continued demands were not genuinely made, but I don’t understand them.

Listening to the debate in Convocation, it was clear that the “free speech” issue was not the sole motivation for those supporting the motion seeking a “conscientious objector” exception. For some, the concern seemed to be that the requirement was little more than an irritant for practitioners being a mere “check the box” requirement. Indeed, there was an attempt to amend the motion by those who agreed with this perspective and wanted more to be done rather than less. My view was that the requirement may not be effective for some but that the requirement may be of some help addressing an important problem – and that surely requiring reflection on human rights obligations is no great burden.

A letter to the Middlesex Law Association

After Convocation decided not to adopt a “conscientious objector” exception, there was an interesting series of tweets on Twitter about an six page letter from a London Ontario lawyer published by the Middlesex Law Association. Most were tweets from those appalled by the letter. The letter was taken off the association’s website for a time and then replaced with a limited version of it (although the original is still accessible)[1].

It is not surprising that publication of this letter resulted in strong responses. The writer argues in his letter that (i) the evidence does not support the conclusion that there is systemic racism in the legal professions, (ii) the claim of systemic racism vilifies lawyers and paralegals by labelling them as racist, (iii) the 13 recommendations are a form of unauthorized social engineering, (iv) racism and bullying are just part of life and should be simply be endured and overcome by racialized licensees as others have done before them, (v) the true problem is economic class not race, (vi) white privilege is a ridiculous concept as it relates to white and racialized lawyers and (vii) racialized lawyers who join legal associations based on race or ethnic origin cannot complain that they are not treated equally. In conclusion, the author says that his response to “Diversity, in a Nutshell” is “Who cares about skin colour?” and that he will not draft a Statement of Principles because that is compelled thought and speech and because systemic racism in the legal professions has not been demonstrated.

Alice Woolley has written that she “actually welcome(s) the letter because it reveals the deeper debate, and allows the conversation to be about the real issue”. Proceeding from Alice’s observation, I think that it is worth exploring the perspective and the language used in the letter.

It is useful to recognize that express racism is socially unacceptable in Canada. The social norms of the legal professions do not permit arguments based on claims of racial superiority or inferiority even though some presumably hold those views. These social norms are valuable because they limit offensive behaviour and because social norms can influence cultural values over time. But one of the realities of social norms is that arguments and claims that are inconsistent with established norms are often expressed ways that disguise what is really being said.

The difficulty is in distinguishing between what is sometimes described as “impression management” and genuine attitudes. Examples of “impression management” are obvious. Anti-Semites try to obscure their true views with “evidentiary” denials of the Holocaust. The tropes “I’m not racist but …” and “Some of my best friends are X” are well worn. That racist wolves can dress as liberal sheep is clear.

The “free speech” aspect of the debate over the Statement of Principles illustrated the difficulty in sorting out what is “impression management” and what is true principled disagreement and debate. There was a genuine “free speech” issue to be addressed. Yet it also seemed that some opponents[2] of the Statement of Principles used the free speech argument to avoid saying what they really meant. It is challenging to have genuine good faith debate when one side of a debate legitimately suspects illicit motives on the part of some of the other side and those who are genuinely expressing their views on the other side of the debate fairly consider their views to be disrespected as a result.

The letter to the Middlesex Law Association clearly raises the problem of “impression management”. The core implicit claim is that racialized lawyers and paralegals do not in fact suffer disadvantage in the legal professions and that, if they do, they should suck it up and stop being crybabies. This implicit claim is obscured by a “lawyer-like” analysis of the “evidence” and the claim that the evidence is not persuasive. The writer appears seek to demonstrate “liberal” credentials by asserting that the true problem is economic class rather than racism and by claiming personal “colour-blindness”. As always, it is difficult to know the genuine attitude of the writer. But the letter certainly reads as an exercise in “impression management” in support of a denial that racism exists in the legal professions and, in any event, a denial that racism is worthy of being addressed.

It should not be necessary to have to explicitly say that racism exists, including in the legal professions. It should not be necessary to explicitly say that genuinely addressing racism in the legal professions is necessary. It should not be necessary to explicitly say that white lawyers and paralegals have relative advantages over racialized lawyers and paralegals because racism exists. But it is necessary to do so because “impression management” is a fact of life in discussions about race. The time has come for lawyers and paralegals to clearly acknowledge these truths. The Statement of Principles provides an opportunity to do so and is valuable if only for that reason.

All of this said and meant, I think that there are lessons to be learned from the letter whether one considers the letter to be an illicit exercise in “impression management” or a genuine but misguided attempt to wrestle with difficult issues. The point of the balance of this column is that the Statement of Principles and the other recommendations proceeded on the basis that achieving progress against racism requires cultural change and that achieving cultural change is not possible if one speaks only to those who don’t need to change.

Communication between bubbles

Starting with perspective, the website of the author discloses that he is an older white man in sole practice in London who was called to the bar in 1976. Our society is much changed in the forty plus years that the author has been in practice. The social changes over the decades have not been equally distributed. Toronto, for example, has become particularly diverse as compared to, well, London. Also, it is simply not possible for older white men to truly know the experiences of those who have experienced discrimination or disadvantage on the basis of race, ethnicity or gender. This is not to castigate older white men (of which I am one) but simply to observe that most discrimination is not obvious and is likely not appreciable by those who do not experience it. One of the lessons that I learned as a member of the Law Society working group is that it is important to hear those who are not part of the majority. This is not to say that it is necessary to take everything that is said at face value but it is necessary to listen with an open and sympathetic mind. For those who are prepared to listen, the qualitative evidence of discrimination and disadvantage developed in the working group should be compelling. It should no longer be controversial that we human beings tend to treat those who we consider different than ourselves differently, whether intentionally or unintentionally.[3]

Turning to the language used in the letter, I think that there are important lessons to be learned from the letter if equality, diversity and inclusion are to be better advanced. The author of the letter expresses anger at some of the language used by the Law Society working group. He writes “It is extraordinary to allege that racism is ‘systemic’ in the legal professions in Ontario and an insult to the nonracialized lawyers and paralegals practising in Ontario” and “it is difficult to understand how the Law Society can justify vilifying most of the 58,000 lawyers and paralegals in Ontario by labelling them as racist”. The author also writes “The spectre of “white privilege” is referred to by one of the persons consulted by the Working Group. The concept is ridiculous.”

The author apparently understands that the assertion that there is “systemic racism” in the legal professions to mean that most lawyers and paralegals intentionally discriminate on the basis of race. Similarly, the author apparently understands the claim of “white privilege” is a claim of intentional subjugation of racialized people by white people. Assuming that the author is genuine in these understandings and that he is well intentioned, his reaction is understandable.

But the concept of systemic discrimination (or systemic racism where race is the particular focus) is not about individual intentional discrimination. As the Ontario Human Rights Commission puts it “Racial discrimination can result from individual behaviour as well as because of the unintended and often unconscious consequences of a discriminatory system. This is known as systemic discrimination.”

The phrase “white privilege” is not a legal phrase like “systemic discrimination”. There are no doubt different meanings given to the phrase by different writers and over time. But (as I understand it) the phrase does not necessarily connote intentional impropriety. Rather, “white privilege” is logically the equivalent of “non-white disadvantage”. In a sense, “systemic racism” and “white privilege” address the same thing from different perspectives. Still, it seems easier to accept that others are unfairly disadvantaged than to accept that one is unfairly advantaged.

So one interpretation of the author’s response to assertion of “white privilege” and “systemic racism” is that he is ignorant of what is actually being said – and that it is presumptuous to for him to castigate as he does without spending time to actually understand what is being said. Another interpretation is that the author actually denies that there is disadvantage as a result of race in society rather than just being offended by a wrongly perceived claim of wide spread intentional racism. And of course, these parts of the letter may simply be an exercise in “impression management”.

But it may not be wrong to perceive that there is intended to be some sting in the language of “white privilege” and perhaps even in the language of “systemic racism”. Naturally, those who spend time and thought addressing unfair disadvantage are more likely to have suffered disadvantage themselves or, at least, to be sympathetic to those who have. It would be too much to always expect the language of a Mandela or of a Martin Luther King, or clinical academic language. The unfairness and wrongness of racial discrimination will out in the language used. And no doubt some racism is intentional and the failure to address unintentional racism is itself an ethical failure. Language choices fairly reflect these things. Those like me who are in a position of advantage are not well placed to criticize or to complain.

But the problem is that we are mostly in bubbles. Our perspectives and our language are different in our respective bubbles. This matters because culture change requires that communication between the bubbles. Those who have suffered unfair discrimination need no persuasion nor reminder of that reality. It is those who have advantage from whom assistance is sought. And those who are actually racist will not change. The goal must be to better enlist those who already want to help and to engage with those who have not thought much about these things but are people of good will.

It is not possible to know which category our author is in fact. While it is tempting and may be right to assume the worst, recognizing differing perspective and use of language opens the possibility that we can be too quick to dismiss the possibility that someone prepared to spend time and thought writing about this issue may want to do the right thing but be angered by what feels to be unfair castigation. In any event, it actually doesn’t matter what the right answer is for any specific person. What matters is failing to enlist the support of those whose support is possible.

On that note, I recently attended an educational session that addressed diversity and inclusion. A presentation entitled How microaggressions are like mosquito bites • Same Difference[4] was shown. The presentation is masterful and is well worth listening to. With grace and good humour, it allows the perspective of the disadvantaged to be better appreciated by the advantaged.

Going forward

To return to the Statement of Principles controversy, there seems to be broad consensus that the equality, diversity and inclusion ought to be advanced by the legal professions. No one who I have heard argues that there should be any compelled speech. My view is that the ambiguity has been removed about that. What is now needed is to return to the beginning which was to enlist the help of those who already share the goal and to encourage those who might be persuaded to share the goal to help as well.

_________________________

[1] See the December/January Middlesex Law Association newsletter at page 30. Presumably in an attempt to somewhat distance the Association from contents of the letter, the index to the revised newsletter now lists the letter under “Opinion and Letters to the Editor”.

[2] Particularly the more hyperbolic ones.

[3] Robert Sapolsky has recently published Behave: The Biology of Humans at our Best and Worst. Chapter Eleven entitled “Us versus Them” which is a compelling discussion of “The Strength of Us/Them” and the reality that we humans are programmed to react differently to those with whom we identify and those who we see as “others”.

[4] The term “microaggression” is another term that seems to me to risk loss in inter-bubble translation highlighting as it does malignant intentionality rather than adverse impact. I say this at risk of being thought to demonstrate “white fragility” which is another phrase that bears similar risks.

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Cost disease, the practice of law and access to justice

(First published on slaw.ca)

How is it that we are such a wealthy society yet services that were once available are no longer available (at least at affordable prices)? Many people, but certainly not all, had help in their homes and farms, even full-time help. Doctors used to make house calls. When I was a child, the milkman[1] made deliveries each day. There used to be people who actually answered telephones in businesses.

What we call the “access to justice” problem seems to be similar in nature. We know that the number of self-represented litigants has dramatically increased over the last four decades. Ordinary people can’t afford lawyers. Even lawyers can’t afford lawyers. Yet, it seems that there was a time that people had a family lawyer just like they had a family doctor.

Some of this is pastoral myth. The idea that doctors were once available to all isn’t true as Tommy Douglas addressed in Saskatchewan in the 1950s. The poor didn’t have servants even though domestic help seems to have been more common than it is now. The image of the small town lawyer serving the whole town fails to recognize that there were income differences that must have affected who could afford to pay for a lawyer.

And while the price of legal services is a significant issue, it isn’t the only issue in the “access to justice” problem. There is also much to the idea that our legal system has become more and unnecessarily complex with attendant costs. A system of justice that is too expensive for most to access is a denial of access to justice even if the perfect justice can be obtained by those who can afford it.

While the problem of access to justice has more than one cause (and so must be addressed in more than one way), the cost of lawyers seems increasingly to be part of the problem. But why is that?

Cost Disease

A few weeks ago, I listened to a podcast on economics[2]. There was an interview with Larry Summers[3] who is a highly regarded economist[4]. Stephen Dubner, the interviewer, asked Summers about the cost of government and why it is that the cost of government doesn’t shrink. As Dubner asked:

You talk about us having conquered inflation, but lately you’ve been writing about the reasons why federal government can’t shrink. One of those reasons that I found really interesting — you talked about how changes in structural pricing that disproportionately affect government are huge. You talk about the Consumer Price Index from 1983 versus today and the things that have gotten relatively cheaper and the things that have gotten relatively much more expensive. Can you talk about that for a moment? I assume where that leads to is a conversation about what you economists call cost disease, yes?

Summers responded saying:

This is the phenomenon that was first noticed by the late Princeton economist William Baumol, that’s sometimes referred to Baumol’s Disease or cost disease. It refers to the fact that if workers become much more productive doing some things — and their wage has to be the same in all sectors, then there’s going to be a tendency for the price of the areas in which labor is not becoming productive to rise. That’s why it costs more to go to the theater relative to other things that it did when I was a child. That’s why tuition in colleges has risen. That’s why the cost of mental-health counseling has risen. All kinds of activities where it takes inherently a person one hour to provide a given service and where productivity growth is defeating the point. Productivity growth in education, after all, is a higher ratio of students to teachers — which is exactly the opposite of what we all want for our kids. Those structural changes are going to define our economy.

The cost disease thesis says that relatively unproductive sectors become more costly with productivity increases in other sectors because incomes increase in both productive and unproductive sectors as a result of increased productivity.

A core idea of cost disease is that there is labour mobility over time. In the long run, a sector will not be able to continue to pay people lower incomes if work is available to them elsewhere for higher incomes. Just because one sector is less productive than another sector doesn’t mean the less productive sector will be able to get away with paying its workers lower incomes. The cost disease thesis also reflects the economic view that incomes over time generally rise as productivity generally rises. Of course, there are questions about some of the underpinning of the cost disease thesis.[5]

But even if one does not accept the idea that productivity increases positively affect incomes generally[6], it must be true that sectors that do not become more productive will become relatively more costly unless these relatively unproductive sectors decrease incomes in their sectors.

Cost disease and the practice of law

I was struck by the application of the idea of cost disease to the practice of law. The last four decades have seen amazing productivity increases in other sectors of the economy. Computing capacity and networks have fundamentally changed the productivity of significant sectors of the economy. Before that, mechanization, electrification and industrialization radically changed the productivity of other sectors of the economy.

On the other hand, it also seems pretty clear that lawyer productivity has little changed over the long term. While there have been some productivity changes arising from modern technology, most of that has simply been to reduce overhead as lawyers do their own document processing.

This is particularly true in litigation. The approach to analyzing documentary evidence, interviewing clients and witnesses, discovering adverse parties and trying cases for ordinary people is highly lawyer-intensive without there having been material changes in productivity over the decades[7]. This may be less true in some of the solicitor’s practices where technology has made document production more efficient and where process efficiencies can be adopted in routine aspects of legal work where there is sufficient volume.

Of course, economic theories do not always hold in practice. There can be other factors at work. Market efficiency assumptions may not hold. But actual labour market information seems to show that lawyer incomes have followed incomes generally. A few years ago, I looked at census information over the last forty years or so and found that lawyer incomes generally tracked family incomes over that period. I also understand that research has indicated that lawyer, engineer and doctor incomes track a similar path[8].

Let’s assume for the sake of argument that lawyer incomes do rise and fall with incomes generally for whatever reason. That means that if other sectors have become more productive then the cost of what is produced in those sectors will have declined. Costs in sectors like law where productivity has not improved, or improved as much, will relatively increase.

I was excited by the new (to me) thought that apparent increases in legal costs and resulting diminution in access to justice could be explained in part by increased productivity in other sectors and the limited productivity increases in law. I went looking for further discussion of cost disease and, particularly, its application to the practice of law.

Not surprisingly, I found that this was not a new thought. For those interested in reading more, Professor Gregory W. Bowman posted two blogs on exactly this point over a decade ago in his Law Career Blog[9]. More recently, Emery Lee[10] published a journal article in the University of Miami Law Review entitled “Law Without Lawyers: Access to Civil Justice and the Cost of Legal Services”[11]

In his article, Lee looked at the cost of legal services for the “Big Guy” and the cost for the “Little Guy” i.e. the ordinary person. Lee said at pp. 514 to 515 that “In relation to the Little Guy, the cost disease is his problem. As discussed above, in general, it is not the levels, or amount, of discovery that keep the Little Guy out of court. Most of the Little Guy’s cases are not going to be discovery-heavy, and reforms designed to reduce discovery levels are unlikely to help the Little Guy.” and “The Little Guy has simply been priced out of the market for legal services. Reducing discovery levels is unlikely to solve this problem.”

So what?

As a profession, we have had difficult discussions about innovating our existing business structures. Some argue that we should simply focus on procedural and substantive simplification of the litigation process, that it is only litigation that is a problem and that solicitors’ practices are just fine. Accepting that simplification in litigation is important, my view has long been that the significant areas where people do not use legal services at all (sometimes called the 85%) must be addressed and that the cost of providing services is a major part of the reason for the lack of service in the 85%. Increases in costs arising from increased productivity in other sectors may be part of the reason that the 85% cannot be effectively served without significant productivity changes. This supports the idea that it is important to bring capital and technology to bear because increasingly expensive professional labour is simply too expensive for the task[12].

What is a significant implication for me is that decreased access to justice in the 15% served by lawyers, and particularly in litigation, may be the result of cost disease and the lack of productivity increases in law. Where access to capital is constrained as is true in the practice of law, labour is overwhelmingly the means of production. Where productivity in other sectors improves, the cost of legal work certainly relatively increases. And if labour costs actually rise generally with increased productivity, the absolute cost of legal work will increase as lawyer incomes rise with productivity in other sectors[13].

If “cost disease” is a material reason for the increasing cost of legal services and diminishing access to legal services, it follows that legal costs will continue to relatively increase unless productivity in the legal sector improves. Even without this analytic framework, it is obvious that new ways of providing legal services are already here and that they are less expensive and more easily accessible. This will only increase.

The implication is significant. If the traditional practice of law becomes relatively more and more expensive over time then fewer legal services will be consumed and the threat from new and less expensive forms of legal service will increase. Legal services regulation will not ultimately hold back this tide, nor should it in my view.

So the question is whether we should continue to restrict the practice of law to traditional practices or should we encourage real innovation in the way that law is practiced so that productivities are achieved.

I used to think that the answer was obviously that increased productivity should be encouraged because of the moral and policy obligation to promote access to justice. While still thinking that is so, I also think that existing legal practices are imperilled by our unwillingness to allow the conditions required for innovation. Cost disease is not just a disease suffered by consumers of legal services. Cost disease is suffered by lawyer and paralegal producers too and the consequences may be more severe if not addressed. Attempting to hold back the tide can work for a while but when the dike fails much can be lost that could have been saved.

Something to think about.

_____________________________

[1] Herb was our milkman and he had a very cool truck. He let me ride with him in his truck on our street when I was a little boy

[2] http://freakonomics.com/

[3] http://freakonomics.com/podcast/larry-summers-economist-everyone-hates-love/

[4] Even if not so much on other topics

[5] It is not so clear that the benefits of productivity increases are generally distributed. Labour market mobility is suspect with income disparities having increased over the last generation. Increases in productivity over the last generation have not resulted in increased real incomes for many people. Some increases in income have been enjoyed in distant economies with local labour markets facing downward pressures.

[6] i.e. that the wealthy disproportionately enjoy the profitability arising from increased profitability

[7] Significant e-discovery advances exist but are mostly irrelevant outside of “big business” disputes and mostly address the significant increase in e-documents in business over the last couple of decades. Litigation for ordinary people has not seen material productivity gains other than legal research, especially CanLii.

[8] Alice Woolley kindly reviewed a draft of this column. She advised that this observation was made in the research underlying Woolley, Alice and Farrow, Trevor C. W., “Addressing Access to Justice Through New Legal Service Providers: Opportunities and Challenges” (2015), 3 Texas A & M Law Review 549

[9] http://law-career.blogspot.ca/2006/07/baumols-cost-disease-and-practice-of.html and http://law-career.blogspot.ca/2006/08/baumols-cost-disease-and-lawyers-part.html

[10] Senior Researcher in the US Federal Judicial Centre

[11] Emery G. Lee III, Law Without Lawyers: Access to Civil Justice and the Cost of Legal Services, 69 U. Miami L. Rev. 499 (2015)

[12] If legal services are only relatively more expensive but not absolutely more expensive, it would still follow that consumption of legal services would decline.

[13] Whether because of increased productivity in other sectors or not, lawyer incomes have followed other incomes.

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Conflicted regulation in the public interest

(first published on slaw.ca)

Fiduciary law deals strictly with conflicts of interest. A fiduciary is not permitted to have an interest that conflicts with the duties owed to their beneficiary unless the conflict and all material facts have been disclosed and consent is obtained Sharbern Holding Inc. v. Vancouver Airport Centre Ltd., 2011 SCC 23. Where a fiduciary benefits without consent, the fiduciary is ordinarily required to disgorge the benefit whether or not the beneficiary’s interests have been compromised. Strother v. 3464920 Canada Inc., 2007 SCC 24

The Rules of Professional Conduct are no less strict. It is professional misconduct for a lawyer or paralegal to act where their self-interest conflicts with their duties to their client without proper consent. Some conflicts are not waivable. Transactions with clients are strictly regulated even where the lawyer or paralegal does not act on the transaction[1].

It is ironic that client conflicts are treated so seriously while the inherent conflict in self-regulation is mostly ignored. Commonly, this conflict is not really recognized or understood. Some think that the public interest is virtually invariably the same as the interest of the legal professions. Pressures from stakeholders and the realities of elections affect how elected benchers perceive issues and their roles.

Examples of conflicting self-interest in regulation

There are many examples which illustrate this inherent conflict. Describing a few helps make the point. In June, a proposal was made to Convocation in Ontario to allow charities and not-for-profits to hire lawyers and paralegals to provide legal services to the public. The idea was to attempt to address unmet legal needs by permitting those who currently serve people with other social, health and economic needs to add legal services to their offerings. Unlike the many proposals put to Convocation, this proposal provoked an immediate demand from legal stakeholders for time to consider and address the proposal, no doubt reflecting recent ABS debates. The proposal was deferred.

While I’m quite hopeful that lawyers will see the merits of this “civil society” proposal with fuller information and time to reflect, there is a long history of the private bar reacting defensively to other ways of providing legal services. In his book The Law Society of Upper Canada and Ontario’s Lawyers, 1797-1997, Christopher Moore details the early days of legal clinics in the 1970s. As Moore describes, the intent of these “storefront clinics” reflected the belief that legal assistance had to be delivered to poor communities through community networks and agencies which integrated legal advice with other kinds of assistance offered from accessible storefront ‘clinics.’ In 1971, Osgoode Hall Law School, with support from the Ford Foundation and the Canadian government, opened the Parkdale legal clinic. The following quotation from Moore’s book describes the reaction:

‘We were against this, we were violently opposed to this,’ recalled Gibson Gray, a future treasurer then on the legal aid committee. `They were … taking work on at the clinic … rather than having the work done by lawyers, traditional lawyers.’ That summer, there were rumours that the Law Society might seek an injunction against the law school’s storefront clinic, and benchers urged the professional conduct and unauthorized practice committees to investigate. …

… The Law Society’s irritation moved it to consider reclaiming the name `Osgoode Hall’ from the law school, but clinical legal aid (the phrase which soon replaced ‘poverty law’) proved irresistible. The Law Society, able neither to prevent nor to control their emergence, soon acknowledged that clinics were no real threat to private law practice, for they usually served a different clientele and often did counselling and community organizing work that extended well beyond legal practice. …

The reaction by the private bar to student legal clinics in the 1970s and to new practice structures in the 2010s[2] illustrates that self-interest has material effected consideration of new forms of legal service delivery. This is not to say that legitimate issues were not raised. In the 1970s, the way that student legal aid was brought forward was a challenge to the Law Society’s regulatory authority. Accordingly to Moore, “Arguing that supervising law students working in a storefront legal clinic was part of the law school’s educational mandate, Dean Gerald LeDain took the position that seeking permission from (or even informing) the Law Society was unnecessary”. Similarly, there are reasons to think carefully about allowing new forms of for-profit legal services[3]. But just as it is no answer to a disgorgement claim to say that no harm was suffered, it is no answer to concerns about the integrity of self-regulation to say that protectionism often leads to examination of legitimate issues.

Recent revisions to the advertising and referral fee rules provide another example. Over recent years, the traditional personal injury bar has faced significant new competition for clients. Significant investments were made in brand advertising. Referral fee-based business models capitalized on and fueled the advertising. Traditional ways of attracting clients were disrupted. The reaction of the traditional personal injury bar was to seek regulatory intervention. This is not at all to say that public and consumer interests were not engaged by these changed advertising and referral fee practices. They clearly were. And the traditional personal injury bar was no doubt motivated in part by concerns about the interests of injured people. But the fact is that these issues are, in part, reflective of competitive pressures between different parts of the private bar. The Law Society is currently considering contingent fee arrangements which are commonly acknowledged to require reform. The personal injury bar has a significant self-interest in contingent fee regulation. It is fundamentally important that the Law Society deal with these issues in the public interest and in the interest of injured people recognizing that access to justice, procedural and substantive, is what must drive deliberations about contingent fee arrangements.[4]

The recent Family Legal Services Review report by Justice Annemarie E. Bonkalo raises another cogent example. Lawyers and paralegals have been regulated together by the Law Society since 2007. Lawyer benchers and paralegal benchers are elected by their respective professions. While there are tensions within Convocation, I think that it is generally thought that this regulatory approach has worked well. Common perspectives on and approaches to appropriate professional conduct makes practical sense as does integrated professional conduct investigation and discipline. There are obvious synergies in licensing and ongoing professional competence. However, lawyers and paralegals compete for clients in some areas of practice. The extent of the permitted paralegal scope of practice engages the self-interest of both paralegals and lawyers.

These self-interests are obviously engaged by the Bonkalo Report. Lawyer benchers have been the target of organized communications from the family law bar, all framed in the public interest. Lawyer stakeholder groups are making forceful submissions against expansion of the paralegal scope of practice. I would be surprised if paralegal benchers are not receiving similar communications from paralegals. Paralegal stakeholder groups are naturally advocating for expanded scope of practice. To be clear, most benchers seek to rise above self-interest and to genuinely address the public interest in effective and fair resolution of family breakups. But my observation is that it is hard both for paralegals and lawyers to do this without their judgments being affected by self-interest. This is not surprising. Fiduciary law and professional conduct rules exist because we understand human nature and the cognitive biases that of us have.

These are but three examples of conflicting self-interest in self-regulation. Other examples are not difficult to find.

The need to act in the public interest and to reform governance

The point of this column is two-fold. The first is that each of these examples is live. It is important that the Law Society, the legal professions and stakeholder groups recognize how these issues need to be addressed. Just because self-interest is engaged doesn’t mean that legitimate issues are not raised. But professionalism and the integrity of self-regulation requires disciplined focus on the public interest and the interest of those we serve. If we do not regulate ourselves properly, we can expect that someone else will.

The second is that we should think hard whether our approach to governance effectively addresses conflicting self-interest and assures proper self-regulation. In Ontario, a Governance Task Force is currently charged to review of and make recommendations respecting the Law Society of Upper Canada’s governance structure. This question of how to address regulatory self-interest should be addressed by the task force,

A modest regulatory innovation might be to use public benchers as a formal check on self-interest. There are eight public benchers appointed to Convocation in Ontario. In meetings with over fifty voting members, these public members have an important role but a limited voice. Even without increasing the number of appointed members, these “lay” benchers could be formally responsible as a committee to consider and publicly report to Convocation on matters where regulatory self-interest is significantly engaged. Simply requiring that the public interest be addressed by public members should have a salutary effect.

Manitoba provides a recent example of significant governance change[5]. Manitoba has 23 benchers. There are 12 elected benchers, a bare majority. Six lay benchers are independently appointed. Four lawyer benchers are appointed by the other benchers applying criteria required to be established “such as the need for representation by region, demographics, type of law practice, or professional, leadership or management skill”. The Dean of the law school and an articling student are benchers as well.

In 2014, the Canadian Bar Association Futures Report recommended at pp. 50-51 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.

There are no doubt other ways that governance reform could usefully address the problems of self-interest in self-regulation. Thoughts and suggestions by way of comment to this column would be helpful.

To every action (and sometimes even to an inaction), there is a reaction

It is easy and lazy to be apocalyptic including about the prospect of losing self-regulation in Canada. There is an ongoing risk of that but, at least for now, no real pressure for change. But failing to properly undertake responsibility in the public interest can result in loss of authority.

In his book, Moore provides an example. The resistance to the legal clinic model by the practising bar and the Law Society in the 1970s was followed by the appointment by the Ontario government of Justice John Osler “to investigate the delivery of legal services to disadvantaged groups, including aboriginal communities and isolated regions. Osler’s report laid the groundwork for a permanent network of Ontario legal clinics”. As Moore further notes “Osler also recommended that legal aid be transferred entirely from the Law Society to a publicly appointed board which might be more open than the lawyers to other innovations in delivery of legal services”.

Moore ends his discussion of this history noting that Law Society leaders subsequently acknowledged “in their way, that the Law Society alone no longer set the agenda on legal aid and much else affecting the profession. The principle of self-government endured, but authority over the legal was becoming permanently subdivided”.

I have previously written that unmet legal needs are a significant challenge to self-regulation.[6] This is not new as Moore describes. Failing to address legal needs not effectively addressed by the private bar resulted in loss of Law Society responsibility in the 1970s. Failing to do the same 40 years later risks similar loss. Given the extent and significance of unmet legal needs in family law, a protectionist response to the Bonkalo Report likely results in loss of authority over who may provide legal services in family law matters. This is not to say that Justice Bonkalo’s recommendations should necessarily be accepted. The point is that the self-interest of lawyers or paralegals is the wrong perspective from which to address the question.

The same can be said about contingent fee arrangements. The personal injury bar is vitally concerned with contingent fee arrangements. Ontario benchers will no doubt want to reflect carefully on what is said by personal injury lawyers in the current consultation. Their expertise and experience requires that benchers listen carefully. But their understandable self-interest requires independent consideration of recommendations for reform in the public interest. Again, failure to do by the Law Society so will likely result in loss of responsibility and authority.

Doing the smart thing and the right thing

It is clear that self-regulation can be lost all at once or bit by bit. For those who consider self-regulation to be essential to independence of the bar, the need for governance mechanisms and policy decisions to ensure that the public interest is advanced should be powerful. The same should be true for those who merely see value in self-regulation[7]. On an issue by issue basis, members of the private bar and their representatives should recognize that protectionist instincts that result in self-interested regulatory decisions can be counter-productive in the longer run. And in any event, those who have accepted responsibility in the public interest rather than the interest of their profession should of course act accordingly.

 

[1] Rules of Professional Conduct, Section 3.4, Paralegal Rules of Conduct, Rule 3.04

[2] See Alice Woolley’s slaw.ca column Bencher Elections – the Challenge to Self-Regulation’s Legitimacy

[3] Principle, not Politics

[4] Contingent Fees, Portfolio Risk and Competition – Calls for Reform

[5] Sections 6 and 7 of The Legal Profession Act, C.C.S.M. c. L107

[6] Unmet Legal Needs – The-challenge to legal practice and to self-regulation

[7] Independence and Self-Regulation

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Contingent Fees, Portfolio Risk and Competition – Calls for reform

(first published on slaw.ca)

In theory, contingent fee pricing is an elegant way of providing access to justice at a fair and reasonable price. In this column, I try to look at both theory and practice and also at prospects for reform.

Time and materials

Let’s start with a different approach to pricing. Legal work can be done on a “time and materials” basis (to use language from another industry), on a fixed fee basis or on a contingent fee basis. These different approaches shift risk between suppliers and consumers of legal services.

Legal work is still largely priced on a “time and materials” basis. While time spent is not the only factor considered when setting price, it is ordinarily the dominant factor.

Fixed Fees

Legal work is increasingly offered on a fixed fee basis. Where available, this is attractive to clients because of the increased certainty that fixed fees offer. Fixed fees can also allow increased competition as clients can more easily shop for a better price.

Where a fixed fee is agreed, the lawyer has the risk that the work may take more time than anticipated. Given that the lawyer likely has an understanding of what is required based on past work and given that the lawyer can make up losses on some fixed fee matters by gains on other fixed fee matters, this risk is mitigated. Where fixed fees are fairly agreed, it would be inappropriate for the client to be charged an increased cost because it turned out that extra time was required and it would be inappropriate for the client to demand a rebate because it turned out that less time was required than was anticipated. Either fixed prices are agreed or not.

But all of this assumes an effective market. For lawyers and clients, there is significant information asymmetry. Clients cannot assess whether a particular fixed price makes sense as clients ordinarily cannot assess the cost of the work to be done and likely outcomes. However, where prices are generally available, clients can “shop” based on price. Where prices are transparent and price shopping is possible, clients need not make their own assessments because a competitive market does so for them.

Contingent Fees

Contingent fees have some similarity to fixed prices. The price of the legal work is fixed as a percentage of the ultimate recovery. However, contingent fees add a further complexity as no fee is charged where there is no recovery.

There are two risks facing clients and lawyers, or paralegals, where personal injury and other disputes are to be resolved. There is the risk of non-recovery where liability is in issue. There is uncertainty as to the amount of the net recovery as both the amount of the recovery and the cost of obtaining recovery are uncertain. Because disputes can be settled at any stage (and are usually resolved by settlement rather than judicial decision), the cost of resolving a dispute is much more uncertain than, for example, the cost of completing a residential real estate transaction.

For the lawyer or paralegal, the risk inherent in contingent fees is mitigated by their expertise in assessing the risk inherent in particular matters and by their “portfolio” of cases. The situation of the client is very different. The client has no ability to assess the viability of their own case. The client has no portfolio through which to manage risk.

Portfolios of risks

While perhaps not obvious, investment by portfolio in the financial world offers the same risk management as having a portfolio of cases in the contingent fee world. A simple example shows the main advantage. Imagine a $1,000 bet based on a single coin toss. Heads you win $1,100. Tails you lose. There is a 50% chance of a complete loss. But imagine the same bet made on a portfolio of ten coin tosses. The probability of a complete loss drops to a little less than one in one-thousand and profit becomes very likely.

In the contingent fee context, a single contingent fee case can be very risky. But where work done in the losing cases can be recouped in the winning cases, risk is better managed. To make a very simple example, if there is a portfolio of cases each of which has a 50% chance of success and each of which requires a fixed amount work and disbursements worth $10,000, charging $20,000 for each case that is successful is a very low risk proposition even though the prospect of payment for any particular case is only 50/50.

Contingent fee work is more complicated than betting on coin tosses. The probability of success varies from case to case. The work and disbursements required in any given case is uncertain and difficult to accurately predict. More becomes known as the matter progresses. The outcome of a case is most uncertain at the outset. Assessing the amount of work to be done is also most uncertain at the outset of the matter. For a lawyer or paralegal, a contingent fee case is like a financial investment but with the added complexity that the amount to be invested is uncertain.

Modern portfolio theory says that risk is reduced by having a portfolio of risks. Before this was well understood, it used to be that trustees were only legally permitted to make certain “safe” investments. The idea was that the “prudent investor” would not make risky investments. However, we now know that a portfolio of higher risk investments can be low risk as a whole. The winners pay for the losers. The risk of having all losers is very much reduced by portfolio investment. Indeed, modern portfolio theory shows that a diverse portfolio of higher risk investments is likely to be more profitable than a portfolio of lower risk investments. But the investor must be able to enjoy the fruits of the winning investments for the portfolio to do its magic.

Contingent fees and markets

Injured people typically cannot afford the cost of the legal services required for their case. Borrowing the money to pay the cost of doing the necessary work is risky unless the case is not. Even assuming that recovery is quite likely, there is uncertainty as to the cost of obtaining recovery. Some cases settle quickly at low cost. Some cases go to trial or appeal. Contingent fees move this risk from the client to the lawyer or paralegal who can better assess the risk and reduce the risk by having a portfolio of cases.

But the contingent fee system will not work fairly in the real world unless there is an effective market in which contingent fees are set. Obviously, clients have limited insight into their cases. Otherwise, they would not need legal experts to assist them. Clients have no insight into the portfolio of cases maintained by their lawyers or paralegals. Where there is information asymmetry and a market which is not truly competitive, the party with superior information will have an advantage in setting prices. This either results in higher prices where the party with superior information is the supplier or by diminished demand from consumers or both.

It seems pretty clear that we do not have an effective market for contingent fees. While the problem of information asymmetry can be addressed by active bidding by informed suppliers for work, there is no good evidence of robust bidding being common. The significant growth of brand advertising appears to show that injured people have difficulty knowing who to approach for legal services. There is, at best, limited market information available to consumers or suppliers as to the costs of obtaining recovery. Unlike commodity products such as tomatoes or motor vehicles, assessing the expected value of a particular matter is not easy and requires information and expertise. We cannot directly assess whether the existing market is competitive as we have no information as to the profitability of the portfolios.

Ensuring fair and reasonable contingent fees

So how do we currently address the prospect of unfair and unreasonable contingent fees? The first way is by regulating the agreement entered into at the outset. The Solicitors Act establishes certain requirements and, in some circumstances, allows the parties to agree on a different approach with judicial approval. The second way is by considering, after the work is done, whether the contingent fee agreement and the contingent fee are fair and reasonable. For those who cannot represent themselves, the court must approve the ultimate fee. For others, the supervision of the court may be invoked by the assessment process.

The recent case of Evans Sweeny Bordin LLP v. Zawadzki, 2015 ONCA 756 considered judicial supervision of contingent fees and started with the proposition that “A contingency fee agreement is enforceable only if it is both fair and reasonable”.

The question of fairness and reasonableness could be considered based only on what was known at the outset of a matter. In theory at least, a contingent fee agreement that fairly and reasonably reflects the risk of non-recovery and of uncertainty in the cost of recovery would not need to be the subject of after the fact examination. Otherwise, the cases that are more lucrative for the lawyer or paralegal would not pay for the less lucrative cases and, as a result, lawyers and paralegals would decline to take on the higher risk or higher cost cases.

Nevertheless and as Evans Sweeny Bordin LLP makes clear, fairness is currently addressed after the fact, but as of the date of the contingency fee agreement. and reasonableness is addressed after the fact. For the later reasonableness assessment, the Court of Appeal cited with approval its earlier decision in Henricks-Hunter v. 814888 Ontario Inc. (Phoenix Concert Theatre), 2012 ONCA 496 which set out the following factors to be considered in the test for reasonableness:

(a) the time expended by the solicitor;

(b) the legal complexity of the matter at issue;

(c) the results achieved; and

(d) the risk assumed by the solicitor.

The Court of Appeal in Henricks-Hunter followed Raphael Partners v. Lam (2002), 61 OR (3d) 417 (OCA) which held that:

The factors relevant to an evaluation of the reasonableness of fees charged by a solicitor are well established. They include the time expended by the solicitor, the legal complexity of the matter at issue, the results achieved and the risk assumed by the solicitor. The latter factor includes the risk of non-payment where there is a real risk of an adverse finding on liability in the client’s case.

It is clear that our current approach to contingent fees provides for after-the-fact assessment and does not presume that a competitive market will result in reasonable contingent fees.

Calls for Reform – are caps the answer?

There has been much recent public controversy about contingent fees. There are private members bills calling for a cap on the percentage of recovery that may be charged. There are articles in the media decrying situations where the lawyer recovers more than the client or recovers an unusually high proportion of the recovery. The volume of advertisements on buses, taxis, television, the internet and elsewhere, without reference to price, may suggest that personal injury work is lucrative and worth substantial spending to attract work.

Unfortunately, the prescriptions may not address the disease or its symptoms. Following from the discussion above, where a limit is set on the percentage of the recovery that may be taken as a fee, the logical response may be not to take on riskier cases. Again assuming a competitive market and a diverse portfolio, the higher return winners pay for the higher risk losers. The policy problem is that we simply have no idea of the actual risk of the portfolio as a whole or its elements and we have no basis from which to conclude what percentage is unreasonable representing an uncompetitive market and what limit would fairly protect injured people and what limit would cause some injured people to lose access to justice because their cases will not be taken on. In an uncompetitive market, setting a limit can be tantamount to fixing a tariff as the cap becomes a signal to consumers who have no better information and may foster tacit collusion among firms.

There is another problem as well. For some cases which are vigorously defended, the cost of taking the case to trial is comparable to the amount in issue or even more. For those cases, a lawyer would generally be foolish to take on a case destined for trial if the potential recovery assuming success simply cannot fund the work required. But there are exceptions. A personal injury lawyer needs to be credible with defence counsel and insurers. Showing that cases will be tried if necessary makes settlement of other cases more likely. The threat of trial must be a credible threat to have value.

But it is said that there are areas of practice where the practical effect of limiting the contingent fee to a capped portion of the damages recovery would be that injured people would be denied access to justice. These are areas of practice where the risk and cost of obtaining recovery at trial is not commensurate with the damages award. even though it can be commensurate with the costs award together with a proportion of the damages award. Where there is a significant likelihood that a trial will be required, a lawyer is unlikely to accept a case where there isn’t a prospect of recovery of the lawyer’s risk-adjusted investment.

My point is not to argue in this column that there should or should not be a cap on the percentage fee. My point is that the question is tricky and that a cap may have unintended consequences and may not actually address the genuine issue at hand.

Some further thoughts about reform

As for the current after-the-fact assessment approach, there is value in that approach assuming that it is well done. At least in theory, assessing risk-return is a legitimate check on reasonableness. But there are at least two glaring problems1. The first is that an after-the-fact reasonableness assessment that looks only at the risk/return of the particular case fails to reflect that portfolio risk is less than the risk of any individual case. Absent portfolio information, there is a very real potential that after-the-fact reasonableness assessment is a Potemkin assessment. It looks real but isn’t. On the other hand, after-the-fact reasonableness assessment also fails to reflect the reality that only the “winners” get assessed. Portfolio information addresses this as well.

The second problem is that “successful” plaintiffs can have no idea whether their particular contingent fee is reasonable as they do not have the information that the courts have said is required for that assessment. They do not know the time expended by the solicitor, the legal complexity of the matter at issue, or the risk assumed by the lawyer. All that they know is the result achieved. There is no current obligation to disclose the other requisite information. There is no obligation to recommend an independent opinion or an assessment for cases where these factors suggest unreasonableness. That is not to say that responsible lawyers and paralegals will not take these factors into account in setting their ultimate fees. But a fiduciary cannot be permitted to withhold information that is necessary to hold the fiduciary accountable. The system should empower clients who do not know that they should be unhappy with their fees. It would be better if the system did not cause clients who ought to be happy with their fees to become unhappy. But it is surely unacceptable to hold back relevant information because the information may be misused.

Standing further back, can we make the contingent fee system more transparent and accordingly more competitive with the intent that a fair contingent fee agreement may be more reliably seen to generate a reasonable contingent fee? The answer must surely be yes. But this requires that portfolio information be gathered from lawyers and paralegals and aggregated so that injured people can have a better idea of the contingent pricing offered to them, so that lawyers and paralegals can better compete for work and so that society, through the courts, the government and the Law Society, can genuinely understand the risks and rewards involved in contingent fee work.

It is to be expected that lawyers and paralegals will resist reforms that impose costs on them, limit their returns and create uncertainty as to whether their contracts will be honoured. Cries of “bureaucracy” and “freedom of contract”2 will be heard. But it is necessary that the interests of injured people be kept firmly in mind rather than just the competing voices of advocates and insurers.

But it would be best if creative solutions could be found that maintain access to justice for injured people through contingent fees while better ensuring that substantive justice is obtained – that the amount taken from the compensatory recovery of an injured person is not unreasonable taking into account the risks and costs involved.

1 Noel Semple kindly reviewed a draft of this column and provided a number of helpful comments and suggestions. Noel raises a third glaring problem which is that risk is often not appreciated after the fact. What was reasonably seen to be risky at the outset may well not seem risky when the results are known. The reverse can be true as well.

2 Despite that our current contingent fee system requires after-the-fact assessment for fairness and reasonableness and the relative vulnerability of clients, some still argue that any reform should be on the basis on caveat emptor.

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Greater transparency of the results of investigated complaints?

(First published on slaw.ca)

It is difficult for prospective clients to obtain good information about lawyers and paralegals. The significant growth of brand advertising is cogent evidence of this. Potential clients assume that brand is evidence of quality when that may well not be the case. Substantial sums are paid for brand advertising because it works. Similarly, the advertising of dubious awards and reassuring photographs evidences that lack of genuine information about quality.

Concerns about lack of information

A recent market study in England and Wales by the Competition and Markets Authority said that:

… consumers generally lack the experience and information they need to find their way around the legal services sector and to engage confidently with providers. Consumers find it hard to make informed choices because there is very little transparency about price, service and quality … lack of transparency weakens competition between providers and means that some consumers do not obtain legal advice when they would benefit from it.

A similar conclusion was reached based on Ontario research in the 2010 Report of the Ontario Civil Legal Needs Project:

A significant challenge is to find ways to encourage more people to receive the full benefit of the existing resources available to them. People often can’t find legal help because they don’t know where to look, or because they perceive they won’t be able to afford it.

In a recent column, I wrote about market failure as a consequence of lack of consumer information potentially leading to a race to the bottom as high quality lawyers and paralegals (the “peaches”!) are unable to distinguish themselves from “lemons”.

What might help potential clients?

What can usefully be done about the lack of available information as to quality? There are a number of possibilities. One is to encourage genuine referral services (as opposed to mere brokerage services) and genuine ranking services (whether based on peer, client or other assessments) that assist potential clients in finding appropriate assistance.

Another is to move toward enhanced credentialing or limited licensing as a signal of expertise. Unlike some other professionals, all lawyers have unlimited licenses to practice law yet few, if any, have the competence to practice in all areas of the law. Beyond word of mouth and self-serving advertising, how is a client to figure out who to retain? While licensing tells potential clients that minimum standards of competence have been met and provides some assurance of professional conduct, the mere fact of licensing does not allow potential clients to distinguish between individual licensees.

The Law Society is a source of some useful information beyond the mere fact of licensing. The certified specialist program provides an indication of expertise. Public Law Society Tribunal records provide some information with respect to past professional conduct.

A look at 2016 LSUC complaints information

With the issue of useful information in mind, I read with interest the recent LSUC reports 2016 End-of-Year Report for the Professional Regulation Division and the Analysis of Complaints in Professional Regulation in 2016.

The number of complaints[1] received in the Professional Regulation Division has remained stable in absolute number at slightly less than 5,000 per year despite increasing numbers of lawyers and paralegals. The number of complaints per lawyer and paralegal in private practice is very similar at just over 10% for each type of licensee. The trend is generally downward for both over the last six years.

In 2016, the Intake Department dealt with some 4,400 complaints. 2,152 complaints were sent for investigation. 2,243 complaints were closed in the Intake Department. Of the 2,243 closed complaints, 236 were marked as “resolved” suggesting that there was something to resolve but not something meriting formal investigation. The balance were closed for a number of reasons including the conclusion that no further regulatory action was required, the absence of jurisdiction and the formal (or practical) withdrawal of the complaint.

In 2016, 2,018 new complaints were instructed for investigation[2] and investigations staff closed 2,334 instructed complaints. Perhaps not surprisingly, client service issues are the most common followed by integrity, governance and financial issues. To state the obvious, potential clients are interested in knowing whether they will be well served by professionals with integrity who are prepared to be governed and deal properly with financial matters.

How investigated complaints are ultimately dealt with is interesting. Over the last three years, only between 10% and 15% of investigated complaints have been transferred for prosecution. During the same period, approximately 40% have been closed on the basis that there is no evidence or insufficient evidence warranting regulatory action.

There is a substantial number of investigated complaints where the result is some action short of prosecution. Some are closed with diversion such as a Regulatory Meeting, an Invitation to Attend, a Letter of Advice, a recommendation for a practice or spot audit or by an undertaking from the licensee[3]. In the last three years, some 2% to 4% of investigated complaints have been closed investigations with diversion. A more substantial proportion of investigated complaints (approximately 20% to 30% over the last three years) have been closed with a staff caution or with best practice advice. The bottom line is that approximately one-quarter to one-third of investigated complaints raise regulatory issues and result in a regulatory response short of prosecution.

There are different types of complaints information

To make the obvious point, the Law Society has information about lawyers and paralegals that is not publicly available and which might well provide useful information to prospective clients. But the obvious counterpoint is that some of the same information could be unfairly prejudicial to the licensee if publicly available.

There is a spectrum of regulatory engagement from (i) mere receipt of a complaint to (ii) instruction of a complaint for investigation to (iii) determination after investigation that regulatory action is merited short of prosecution to (iv) prosecution. There was a time when our regulatory process was so lawyer-centric that even prosecutions and findings of professional misconduct were not transparent. That time has passed and the question now arises, given the genuine difficulty faced by potential clients in obtaining information, whether the current balance is the appropriate balance.

Discussion in England and Wales

Greater disclosure by legal services regulators is currently being discussed in England and Wales. The 2016 Interim Legal Services Market Study Report of the Competition and Markets Authority asked[4] “Are there any measures of quality that can readily be collected by regulators or government … on observable trends in quality of legal services?”. The Solicitors Regulation Authority (the SRA) responded saying that there are “a number of other indicators regulators can use, which cumulatively can give an indication of quality” including claims against the compensation fund, insurance claims and complaints data. The SRA also said:

Our Codes contain the minimum requirements for those we regulate, all of which are mandatory. We also require diversity data to be published. We are currently considering what information about SRA regulated individuals or firms we should publish or require firms or individuals to publish, and are planning on releasing a discussion paper by the end of the year subject to decisions being taken by our Board. The areas we are looking at include regulatory action, complaints data, insurance claims data and accreditations.

The Law Society of England and Wales[5] responded to the subsequent SRA discussion paper by raising concerns about accuracy and relevance and suggesting that it was better for law firms to voluntarily provide information in the competitive market. Of course, this approach would mean that negative information about solicitors would not be made available.

Thinking about disclosure

It is to be expected that lawyers and paralegals would be uncomfortable with greater transparency of complaints or claims information. We imagine this from our own perspective and fear disclosure of unfair or misleading information (and even true but embarrassing information). For example, it would be natural for family law lawyers to be concerned about disclosure of complaints from the opposite party given the often dysfunctional nature of family law proceedings.

That said, it is clear that further and better information about lawyers and paralegals is needed. From the client perspective, better transparency is desirable while, of course, protecting confidential and privileged information.

Perhaps the practical answer to concerns about disclosure of unfair or misleading information is careful focus on what should be disclosed. If there is only disclosure about investigated complaints which have led to a regulatory outcome then what would be disclosed would be the result of investigation and evaluation. Fear of disclosure of malicious or unfounded complaints would not be justified.

It might also be worth considering whether there should be disclosure of single or stale matters. It may be that little if any real information is provided if a single matter is disclosed or if a relatively ancient episode continues to be disclosed. Treating stale matters as such is somewhat analogous to the evolving “right to be forgotten” that is of increasing importance in which so much personal information is available and for so long on the internet. As well, it may be worth considering whether contextual information could also be provided, for example the average number of such complaints for licensees generally or, say, family law lawyers specifically.

Up to this point, the discipline process has not been discussed. The main point to be made here is that allowing transparency about some investigated complaints and a formal discipline record are different things. There is no need and no apparent reason for the information available to the public also to be information that is treated as relevant by the Law Society Tribunal in assessing appropriate discipline penalties. There is good reason to limit Tribunal panels to consider only findings of professional misconduct by prior panels.

But the “right to be forgotten” discussion raises a point that some have made about formal discipline histories. To use an extreme example, should there continue to be transparency about a reprimand given 25 years ago absent any subsequent proceedings? Discipline panels routinely conclude that a stale disciplinary history is irrelevant for current purposes. Perhaps it should also irrelevant for the public purposes.

If it is accepted that potential clients have insufficient information to properly assess the quality of lawyers and paralegals (leaving them instead reliant on brand advertising, irrelevant and misleading “awards” and photographs of reassuring faces), then it follows that we should be thinking carefully about whether further information can be disclosed. It also follows that it is proper to think about the utility and the fairness of further disclosure.

It should be recognized that lawyers and paralegals will almost inevitably resist disclosure of complaints information, even investigated complaints leading to regulatory action. But it should also be recognized that there is another perspective that must be considered which, as always, has no advocate.

[1]      Complaints can come from clients, other parties, other lawyers, judges and the Law Society itself. While professional regulatory process is largely reactive, the Law Society itself initiates the complaints where matters come to its attention that may deserve further consideration.

[2]      The Law Society Act provides that the Law Society has certain investigative powers where the conclusion is reached that there is sufficient information indicative of professional misconduct or lack of capacity. In these circumstances, PRD says that a complaint has been instructed for investigation.

[3]      Some of those transferred for prosecution are also closed with diversion.

[4]      This interplay between the competition authority and the legal services regulatory provides an example of a productive interplay in which competition issues are raised while the regulator keeps independence.

[5]      Unlike our law societies, the Law Society of England and Wales is the representative of and advocate for solicitors.

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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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Access to justice needs access to research

First published on slaw.ca

In December, the UK Competition & Markets Authority released its Legal services market study focused on individual consumer and small business experience of purchasing legal services in England and Wales. Not surprisingly, this report (the “CMA Market Study”) found:

Overall, we have found that the legal services sector is not working well for individual consumers and small businesses. These consumers generally lack the experience and information they need to find their way around the legal services sector and to engage confidently with providers. Consumers find it hard to make informed choices because there is very little transparency about price, service and quality.

This finding will be entirely unsurprising to anyone with passing familiarity with the substantial body of work, in Canada and elsewhere, showing unmet legal needs and lack of access to justice and legal services.

Naturally given the mandate of the Competition & Markets Authority, the CMA Market Study comes at these issues from a market perspective. This report looks at whether the market for legal services works effectively and concludes that it does not. The above quotation from this report makes the fundamental point which is that individual consumers and small businesses are not generally sophisticated purchasers of legal services and the providers of legal services provide very little transparency about price, service and quality. Entirely by coincidence, I wrote about this very point in my last column Access to Justice and Market Failure which focused on information asymmetry and market failure. As the CMA Market Study says:

Our market study was prompted by a range of concerns raised by interested parties, including concerns relating to the affordability of legal services, the high proportion of consumers that were not seeking to purchase legal services when they had legal needs (‘unmet demand’) and the possibility that regulation might be dampening competition.

Most of these concerns can be linked to the fact that the legal services sector is characterised by incomplete or asymmetric information. Consumers are often unable to judge quality before (or sometimes even after) they choose to buy a legal service. Information asymmetries can give rise to consumer protection issues, which provides part of the rationale for sector-specific regulation.

If legal services are to continue to be predominantly delivered by the market rather than the state (through legal aid or otherwise), it is important to be clear thinking about the realities of markets. This market study is an important evidence-based contribution to that thinking. But the point of this column is not to focus on the CMA Market Study.

The point that I want to make in this column is to highlight the importance of high quality research to truly addressing problems of access to justice and unmet legal needs. Not an exciting point to be sure but an important one, I think.

 In reading the CMA Market Study, I was reminded of another quite different study. In 2009, the Department of Justice Canada released a report prepared by Ab Currie of its Research and Statistics Division. The report was entitled The Legal Problems of Everyday Life – The Nature, Extent and Consequences of Justiciable Problems Experienced by Canadians. This is a fundamentally important work that looked the everyday experiences of ordinary Canadians. The first paragraphs of this report (the “Justice Canada Report”) are important:

The problems of civil justice, of access to civil justice and of unmet need for service in civil justice are most commonly studied from the point of view of the justice system, mainly with regard to the courts. The large, and reportedly increasing, number of self representing litigants crowding the courts is the issue that currently dominates both public and professional discourse. This is certainly an important problem, one that is as much a problem for the courts, mainly with respect to justice system efficiencies, as it is for the individuals who find themselves adrift without professional assistance in the complex and unfamiliar environment of the civil courts.

However, a wider perspective than one that begins with the courts is required to understand the full breadth of civil justice problems. It is widely accepted that many people with serious civil justice problems do not have access to the courts and thus do not appear as un-represented litigants. It is also part of the growing orthodoxy that many problems could be better resolved using alternative means, without engaging in expensive and lengthy court proceedings.

Two points can be taken from this quotation. The first is that access to justice/unmet legal needs is not just about what happens in the courts. Given our training as lawyers and especially for litigators, it is not surprising that we tend to see these issues as being about courts. To a hammer, everything is a nail.

The second and more important point is that there are a number of different and necessary perspectives from which to understand the extent and causes of unmet legal needs. The Justice Canada Report looked at the unmet legal needs of ordinary people by focusing on the problems of everyday life. The CMA Market Study examines the operation of the market for legal services. Neither report focuses on non-market provision of legal services through legal aid and otherwise or effect of the law and legal institutions on access to justice. This is no criticism – to the contrary. Understanding how a complex system works, does not work and should be reformed requires thoughtful analysis looking at the different component parts of the system separately and together.

Returning to the Justice Canada Report itself, it is significant in several ways. The first is that it is a Canada-wide report. The importance of this cannot be underestimated. We have a real risk of parochial understandings and approaches especially given how much of legal services is within provincial jurisdictions.  The second is that there is significant efficiency and efficacy in doing serious research and analysis at the national level. To state the blindingly obvious, access to justice and unmet legal needs are not only local problems even if some of the solutions must be.

Further, the Justice Canada Report had a significant on subsequent work and understanding. The Ontario Civil Legal Needs Project undertaken as a joint research project of the Law Society of Upper Canada, Legal Aid Ontario, and Pro Bono Ontario  lead to Listening to Ontarians focused on demand for legal services among low and middle-income Ontarians and The Geography of Civil Legal Services in Ontario focused the demographic characteristics of the Ontario population and the distribution of legal services. In 2011,  a colloquium was held at the U of T law school which lead to Middle Income Access to Justice,a collection of essays  about civil justice issues from Canada, Britain, the United States, and Australia. Most recently, the Canadian Forum on Civil Justice has undertaken the Everyday Legal Problems and the Cost of Justice in Canada National Survey which addresses the costs to individuals and to society of addressing and failing to address legal problems. In providing these examples, I don’t want to suggest direct causal lines from one project to another and I’ve not attempted to create a comprehensive listing of important work in this area. The point that I make is that each important piece of research from one perspective enables and betters further research. Understanding that there are unmet civil needs leads, for example, to consideration of the costs of addressing and failing to address legal needs.

Earlier this year,  White House Legal Aid Interagency Roundtable Civil Legal Aid Research Workshop Report was released (not exactly a consumer-friendly name). Richard Zorza describes this report in his Access to Justice Blog

 Formally titled White House Legal Aid Interagency Roundtable Civil Legal Aid Research Workshop Report, this Report represents a major milestone in one of the [U.S. Department of Justice Office for Access to Justice’s] most important initiatives.  It is no accident that since the Office was created, and particularly since [the Legal Aid Interagency Roundtable] was set up, we have seen an explosion of research interest in access to justice.  Prior recommendations to create research capacity in this field went unheard ever since the 1980’s when this capacity at [Legal Services Corporation was closed down.

Again, the point o f this column is not to examine the substance of this US report which is well described in Richard Zorza’s blog. Rather, the quotation above shows a parallel with the impact of the Research and Statistics Division of the Department of Justice in Abe Currie’s Justice Canada Report. Research capacity matters. Sadly, whether the US research capacity continues must now be uncertain given the recent election. In England and Wales, the CMA Report provides important insight but the ongoing research capacity of the Legal Services Board is important as is the fact that this research is not just from the lawyers’ perspective. This is inherent in the history and mandate of the Legal Services Board as well as a reflection of the impact of the LSB Consumer Panel.

So what is the punch line to all of this. The starting point is that research capacity matters. The next point is that good research leads to more good research and analysis. A virtuous cycle follows. Further, we cannot effectively address serious systemic issues like access to justice and unmet legal needs by intuitive responses that reflect our own limited perspectives. We need solid research and analysis.

What this leads to is to make two final points. The first is to encourage the Department of Justice to continue the good work that is reflected in the Justice Canada Report. While we now have further capacity, there is real value in maintaining  long term research capacity and Department of Justice is a natural place for such capacity given its breadth, depth and resources.

The second comes out of a recent discussion. There are many players in the legal system including attorneys general and their ministries, legal aid providers, the courts, law societies and universities. Each are busy doing their own work and thereby generating information/data about the justice system. While it is understandable, each player sees the value of its own information to itself but will not see the value to others including to researchers. Perhaps the time has come to take an open data approach to information about the legal system with a view to encouraging research and analysis addressing access to justice and unmet legal needs.

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Access to justice and market failure

First published on slaw.ca

Lemonish Lawyers [1]

The problem of access to justice is likely the result of a number of causes. Unnecessary complexity in substantive and procedural law is likely part of the problem. Our adversarial court-based administration of justice is problematic both where powerful actors have disputes with ordinary people and where family disputes require resolution. Ease of access to information through the internet may be both part of the solution and part of the problem.

Market regulation and access to justice

Our approach to legal services regulation plays a role as well. Limiting who can provide legal services restricts how legal services are provided and protects licensed lawyers and paralegals[2] from new forms of competition. Some problems cannot be economically addressed by spending the time of legal experts at costly hourly rates yet innovative new ways of providing legal services are prohibited.

Limiting legal service provision to licensed lawyers has always seemed to me to provide a logical explanation for the puzzling gap between legal services supply and demand. While there are substantial unmet legal needs, lawyers simply can’t survive if they drop their rates to the level that cost-effectively addresses most ordinary legal needs. Ordinary people won’t spend more to solve a problem than the problem is worth. Allowing new ways of obtaining legal services logically addresses this gap. Said another way, the market for legal services is constrained by limiting the supply side thereby causing unmet demand.

I make these points (none of which are new) as context for the balance of this column which suggests that there may other market failures present in the legal services market that impair access to justice. On this view, new ways of understanding and addressing problems of access to justice appear.

Information asymmetry and market failure

In the 1960s, economic theory evolved from its earlier focus “on figuring out the conditions that would allow markets to work perfectly” to a new focus on “what would happen when these conditions fail”[3]. One of the requirements for perfect markets is perfect information. Perfect market models assume that buyers and sellers are perfectly informed and accordingly can effectively see the value to them (“utility” to an economist) of goods and services that are bought and sold.

Of course, it is absurd to think that market participants are perfectly informed. Virtually inevitably, potential sellers know more about their wares than do potential buyers. George Akerlof was awarded the Nobel Prize in economics in 2001 for his research addressing the problems that arise in markets where sellers have material information that buyers do not (i.e. “asymmetric information”).

Akerlof’s research led to publication of his 1970 paper The Market for Lemons: Quality Uncertainty and the Market Mechanism[4]. As an example of a market with asymmetric information, Akerlof examined the used car market. Unlike the new car market where most all cars of a particular type have the same qualities, there are “lemons” and “peaches” in the used car market. Sellers know whether their cars are lemons. Most buyers have no ability to assess the quality of a used car. There is asymmetric information on a fundamental question on which value depends.

If “lemons” are worth $2,000 and “peaches” are worth $10,000, what happens in a market in which buyers can’t tell the difference? The answer is smart buyers won’t pay more than about $2,000 for any used car, buyers who only want a “peach” won’t buy at all and owners of “peaches” won’t be able to sell them for a reasonable price. Asymmetric information similarly can cause a downward quality spiral where producers see no point in providing “peach” quality service because purchasers can’t tell the difference and so will only pay “lemon” prices[5].

This problem of asymmetric information is part of the reason that cars depreciate so much when first purchased and driven off the lot and is part of the reason that “used car salesman” is a term of derision.

The labour market provides another example of market failure based on asymmetric information. Why is it that it is easier to find a job if you have a job and why does it get harder to find a job the longer that one is unemployed? The answer is that prospective employers don’t know whether the prospective employee is a lemon or a peach and rely on limited and often inaccurate information to avoid employing a lemon. Where an employer can’t effectively judge the quality of a prospective employee, employers assume that the currently employed are of higher quality than the unemployed and that the recently unemployed are of higher quality than the longer term unemployed.

But if asymmetric information leads to market failure, how did eBay come to be such a success? Buyers and sellers deal with each other virtually and at a distance. Information asymmetry is a particular problem where buyers and sellers don’t know each other and buyers can’t inspect the products being sold.

The answer appears to be that eBay took great care to provide market signals on which potential buyers could rely. One of eBay’s solutions is the establishment of an “Expert Community” where thousands of eBay members post advice on how to avoid buying a “lemon” or otherwise being taken advantage of. eBay encourages and organizes ratings of buyers and sellers so that confidence is enhanced by information from other market participants and so that taking advantage is deterred. As well, eBay has established one of the largest dispute resolution systems in the world. eBay has effectively reduced information asymmetry and has provided remedies that allow transactions to proceed despite a degree of information asymmetry.

On reading about information asymmetry and eBay in the recently released book The Inner Lives of Markets[6], I was struck by the question of information asymmetry in the practice of law. Clients would not need lawyers if they did not require expert assistance. By definition, unsophisticated clients have difficulty assessing the quality of their legal advisors and the quality of the legal assistance provided to them. Indeed, law is described as a “credence good”. Unlike a great (or lousy) dinner, it is difficult for consumers of legal services to assess the impact of legal services even after they have been provided. Also, unlike a used car, there is no sticker price nor even price negotiation prior to sale.

The market for legal services for ordinary people is fairly characterized as a market with asymmetric information as to the quality of the lawyer, the price of the services on offer and what is reasonably achievable as a result of proffered services. Ordinary consumers are at a very decided information disadvantage compared to the lawyers offering their services.

Professional self-regulation as a way of addressing market failure?

Keeping the problem of information asymmetry in mind, professional self-regulation can be thought of in a different way. Lawyers have ethical obligations of candour which require disclosure of information relevant to their retainer and disclosure of errors and omissions. The Law Society provides assurance of competence by requiring legal training and by testing prior to entry to practice. Further assurance of competence is provided by mandatory errors and omissions insurance and, it is thought, by mandatory continuing professional development. The Law Society provides assurance of proper conduct by establishing codes of professional conduct and by disciplining for professional misconduct.

It is interesting in this context to note that the definition of professional misconduct in Ontario is “conduct in a lawyer’s professional capacity that tends to bring discredit upon the legal profession”. It is also interesting how the discipline case law justifies license revocation in cases involving fraudulent or dishonest conduct. As the Divisional Court recently said in Bishop v. Law Society of Upper Canada, 2014 ONSC 5057 at para. 28:

… [There is a] pressing need to send a consistent message that engaging in fraudulent conduct by a lawyer is a matter that will not be tolerated because of its impact on the profession as a whole.  As was observed by Sir Thomas Bingham M.R. in Bolton, at p. 519:

The reputation of the profession is more important than the fortunes of any individual member.  Membership of a profession brings many benefits, but that is a part of the price.

While we ordinarily think of professional self-regulation in terms of protection of clients and the administration of justice, it is quite plausible to see assurance as to candour, competence, quality of service and professional conduct as addressing information asymmetry. It signals to prospective clients that they can retain lawyers without fear that they are retaining a lemon lawyer.

In the same way, applying fiduciary law to the lawyer-client relationship can be seen as providing assurance in the face of information asymmetry and addressing the fact that law is a credence good. With this thought in mind, Justice Binnie’s statement in Strother[vii] takes on new meaning:

… Monarch was dealing with professional advisors, not used car salesmen or pawnbrokers whom the public may expect to operate on the basis of “didn’t ask, didn’t tell”, and who collectively suffer a corresponding deficit in trust and confidence.  Therein lies one of the differences between a profession and some businesses.

Perhaps the difference between a profession and some businesses is that professions organize their affairs more like eBay (and less like used car salesmen) by reducing information asymmetry by requiring candour and by providing effective remedies where candour is lacking!

To be clear, none of this is problematic. Providing assurances of candour, competence, quality and conduct does protect consumers and does allow clients to more safely retain licensees. But what is a new thought for me is that there is good self-interested reason for professions to provide these assurances because the alternative is reduced demand for professional services because consumers cannot easily differentiate between lemon and peach professionals.

The Access to Justice gap and market failure

As discussed at the outset, it is plausible that the access to justice gap is explicable in part by the choice to limit the provision of legal service to licensees and those directly supervised by licensees. If ordinary people don’t have sufficient information about the quality and cost of prospective lawyers, some will think it better simply to “lump it”, some will access other resources and some represent themselves.

It also plausible that the access to justice gap would be even worse if ordinary people did not have assurance of minimum competence, quality and conduct.

But it would be naïve to think that our minimum professional standards mean that there are no choices to be made between us. We know that is not true and that there are great, good and not-very-good licensed lawyers and paralegals. We know that prospective clients have limited ability to assess who is a good and who is a less good lawyer in general or for a particular problem. Clients have limited ability to assess whether they have received quality or substandard services.

What is interesting is the possibility that the access to justice gap may be, if only in part, explained by market failure arising from continuing information asymmetry despite minimum standards.

Said more simply, being a lemon is a relative thing[7]. While prospective clients have some assurance, prospective clients have limited ability to distinguish between lawyers. As a result, economic theory suggests that rational consumers are forced to assume that no lawyer is better than the minimum standard actually required. While perhaps not lemon standard, this standard is “lemonish”. Where a potential client is not able to sufficiently assess the quality of the professional or of the service provided, the amount that the potential client will be prepared to pay is limited or the potential client may not be willing to retain anyone at all”.

If this analysis is right then the answer may come from eBay. We should be considering how to provide better information and how to better address service problems.

The difficulty with this is that we professionals are conflicted. Where minimum professional standards are established, we all benefit because prospective clients see all of us in a better light. But where distinctions are drawn between us, some will be winners and some will be losers. And where distinctions are made based on imperfect information, some will be losers who ought not to be.

This reaction is seen in discussions about greater transparency in Law Society complaints and investigations. There is immediate unease when it is suggested that prospective clients have access to information about, for example, complaints rather than just about discipline proceedings.

There are other tools that might be considered. One is bringing an end to general practice by limited licensing, thereby requiring and signalling specific expertise.

In writing this column, I don’t claim to know what specific approaches make sense. But it does seem clear that information asymmetry is a “thing” and that it is particularly applicable in the legal services market and that market failure is a consequence of information asymmetry. It also seems clear that we should recognize that addressing information asymmetry through self-regulation will be challenging given the inherent competitive conflict within the professions.

If we are serious about the access to justice gap, we should accept that no one solution will slay the access dragon. Indeed, we have to accept that we cannot predict with confidence what solutions will be effective. But it is time to be creative and to actually attempt solutions.

And addressing the market for lemonish lawyers may be part of that. Better information may allow consumers to retain lawyers who otherwise would not.

And the added (and important advantage) would be that pressure to reduce quality to the lemonish levels would be reduced and those who provide higher quality would have a better prospect of being paid better prices where clients

[1] This column borrows heavily from Fisman and Sullivan: The Inner Lives of Markets: How people shape them and they shape us (2016 Pereus Books Group), https://www.amazon.ca/Inner-Lives-Markets-People-Shape/dp/1610394925

[2] I will refer to lawyers rather than lawyers and paralegals in the balance of this column for ease of reading. But the point is relevant for paralegals as much as for lawyers and perhaps more .

[3] Fisman and Sullivan supra., Chapter 3

[4] Quarterly Journal of Economics, 1970

[5] My thanks to Noel Semple for editing a draft of this column and pointing out the downward-spiral problem which seems highly relevant in some areas of the legal services market.

[6] Fisman and Sullivan supra., Chapter 3

[7] Strother v. 3464920 Canada Inc., [2007] 2 SCR 177 at para. 42

[8] Thanks again to Noel Semple for pointed out the following reference which notes that professional regulation ordinarily sees quality in yes/no terms. Ordinary licensing does not permit consumers to differentiate between licensees. Michael J. Trebilcock, Carolyn J. Tuohy and Alan D. Wolfson, Professional regulation : a staff study of accountancy, architecture, engineering and law in Ontario prepared for the Professional Organization Committee (Toronto: Ministry of the Attorney General, 1979) at pages 78-9: “all standard-setting mechanisms, including licensing, necessarily proceed on the assumption that quality is a discontinuous attribute. A licensing regime assumes that either one satisfies the required licensing conditions and provides a corresponding quality of service, or one does not meet the standards and is not permitted to provide any lesser quality of service on any terms. “

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The Devil’s Advocate

Published first on slaw.ca

Gavin MacKenzie, Amy Salyzyn and I participated in August in the Ethics Debate at the Canadian Bar Association Legal Conference. Amy moderated the debate. Gavin and I were the debaters. The topic was Should lawyers have a monopoly on the provision of legal services? I argued for the proposition. Gavin argued against.

The general topic was broken up into three separate propositions, each of which was separately debated. My role was to support the first two propositions and to argue against the third.

  • There is no good reason to allow anyone other than lawyers to provide legal services.
  • Professional values will be sacrificed if anyone other than lawyers is allowed to provide legal services.
  • The horse is already out of the barn door. The only practical choice is accept that the monopoly is lost.

As can be seen from previous slaw.ca columns, my position as a debater was rather different from my actual views on these topics. This made the debate more fun. Being an advocate is liberating especially in a formal debate where the goal is to try to both persuade and to entertain.

Being a debater – in formal debates and in real life

But debating from a perspective dissonant from my actual perspective made me think both about the substance of my actual views and about the way that we think about what we think.

Alice Woolley wrote a paper entitled The Problem of Disagreement in Legal Ethics Theory that I particularly admire. Alice both describes different competing theories and explains why the differences actually matter. She notes that each theory necessarily claims that it alone is correct. The paper is well worth a read given the centrality of legal ethics to how we should act, and should be required to act, as lawyers. But this is not the point of referring to Alice’s paper here.

In her paper, Alice writes:

Finally, when legal theorists engage in the task of theorizing, they should be aware that time spent arguing with each other is subject to the law of diminishing returns. While such debate undoubtedly helps to clarify the theoretical landscape, it is much less likely to lead to any theorist to changing her mind, and highlighting theoretical differences does not, in and of itself, do much to illuminate the problems of ethical practice.

When reading this passage originally, I was struck by the observation that intelligent people who have thought deeply aren’t persuaded by debating with each other. Rather, existing views are refined and differences highlighted. This rings true. At least three points follow from this. The first is that debates may well not be for the debaters. The second is that one of the fundamental goals of a democratic society is finding practical ways to resolve differences where agreement does not follow from debate. The third is that we humans are surprising resistant to changing our minds despite good reasons and new facts1.

While Alice wrote about intractable philosophical disagreement, disagreement continues for other more problematic reasons. With increased research and writing about cognitive psychology and cognitive biases, we now have a better awareness of the importance of confirmation bias. When we have an opinion on an issue, we do not receive new information neutrally. Rather, we tend to interpret new information as being supportive of our pre-existing opinions. We don’t wrestle with information that is inconsistent with our views. We hear arguments that support our views less well than we hear arguments that challenge what we think.

Indeed, there is research suggesting that new information inconsistent with pre-existing views is not just ignored. New inconsistent information can be perceived as being threatening and give rise to cognitive dissonance. As reported several years ago in the Boston Globe:

Facts don’t necessarily have the power to change our minds. In fact, quite the opposite. In a series of studies in 2005 and 2006, researchers at the University of Michigan found that when misinformed people, particularly political partisans, were exposed to corrected facts in news stories, they rarely changed their minds. In fact, they often became even more strongly set in their beliefs. Facts, they found, were not curing misinformation. Like an underpowered antibiotic, facts could actually make misinformation even stronger.

It is important for all of us to recognize that our opinions suffer these frailties. No matter how strongly we are convinced (and perhaps especially then), we have to work hard at keeping an open mind – to genuinely challenge ourselves.

Lawyers and their perspective

The issue of the lawyer’s monopoly seems to me to particularly raise these challenges. There are underlying philosophical questions. Important facts are uncertain. Disagreement is understandable and proper. But there also seem to be biases in play

To state the obvious, lawyers have a self-interest in avoiding new competition. Natural anxiety about economic well-being creates self-interest bias. Our personal and our professional identities are tied together. We value what we do and we find offensive that which suggests that we are part of the access to justice problem. We value our contributions to the legal system, and to society more generally, and are offended by anything that devalues those contributions. Even perfectly well-intentioned lawyers may well be affected by these biases. And once opinions are set, it is hard to come to a different view.

As a participant in the broader discussions about regulatory liberalization over the last several years, I have views. Because of this, I am at risk of confirmation bias in considering new information. Having written my thoughts down in slaw.ca columns and elsewhere, I’m at risk of explanation bias, the tendency to be tied to one’s previously expressed views.

This will be no surprise to most litigators. Our common experience is that our cases often seem to get better and better as we spend time on them. It is surprising how often we seem to have the better side of the case. It is often hard to be clear about the frailties of our cases.

The CBA Debate

With all of this in mind, it was interesting to be asked to be a debater on a subject with which I have been much involved, but not on the side that I would naturally take.

Substantively, the framing of the three propositions made three points of central importance. What is the reason for proposed change and is it a “good” reason What are professional values and how could they be sacrificed? Is the die already cast?

The process of preparing for the debate reflected the behavioural psychology described above. At first, I found it a challenge to cogently frame arguments against my own beliefs. Over time, my arguments made more sense to me – especially when I was trying to win the debate!

The first proposition raised the question of what actually motivates the broader debate and, more narrowly, how good must a reason be for it to be a “good reason”. I chose not to address the debate from the lawyer’s perspective on the theory that market incumbents naturally want to maintain their monopolies. That said, I’m inclined to think that liberalization would be helpful defensively given the challenges that the future holds. But that is not the main point and is not particularly persuasive to nervous incumbents.

The main point is access to legal services and unmet legal needs. I necessarily conceded that there are substantial unmet legal needs. My argument was that allowing paralegals in Ontario and allowing alternative business structures in Australia and England has not solved the unmet legal needs problem and that a legitimate goal does not justify change if the change does not advance the goal. I argued that our access to justice problems arise from the way that our system is designed rather than who may participate – the problem is “the coliseum not the gladiators”.

The second proposition raised the question of what are “professional values” and how are they put at risk. I argued that our professional values are obvious; serving clients (commitment and independence, confidentiality and candour) and serving the rule of law and the administration of justice. I conceded that lawyers were no more ethical than anyone else but observed that legal ethics are different than ordinary ethics. Lawyers can be better trusted to honour legal ethics being appropriately trained and, most significantly, being at risk of loss of their livelihoods for professional misconduct. I argued that businesses and capital can simply move on after ethical failure while lawyers can’t. And so, professional values are put at risk by liberalization.

The third proposition raised the question of where we really are as a practical matter. While there is much going on, my argument was that there are substantial and important areas currently served by lawyers that merits cautious protection in the interest of the clients and the society that we serve. Conceding that there is change at the margin, I argued that the centre must be held.

Standing back, I think there is some merit in these arguments. The argument for change is not overwhelming. There are risks in change. There is much that is good that should not be discarded.

But as I said in the discussion after the debate was over, this is an issue where the zealots on both sides have something to say but are wrong as well.

The challenges of unmet legal needs are very real. There is no one magic bullet that will kill the access to justice dragon2. Waiting until we find that one magic bullet means failing to address the problem using the various tools at our disposal. The coliseum is part of the problem as are the gladiators. And there is much to address that isn’t about coliseums at all.

There are advantages in having only licensed lawyers and paralegals. We are indeed easier regulate – given the existing regulator regime which is designed with us in mind. But it is fallacious to claim that modern business is not amenable to regulation. The idea that only lawyers and paralegals can be effectively regulated is nonsense. The reality of the modern regulatory world shows that.

Finally, the idea that the horse is already out the door is another “false binary” – a rhetorical claim that things are all or nothing. There is much that we do that should be honoured. There is much that we don’t do that needs to be done. And there is some of what we do where some new competition would be a good thing.

1 I don’t mean that all disagreements are capable of resolution. Some disagreements are driven by philosophical differences where “right” answers don’t exist. Other differences, especially hard policy choices, arise from factual uncertainty. Sometimes both of these are in play and there are no doubt other legitimate reasons for unresolvable disagreement.

2 The dragon is a canard!

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Debatable: Robo-Advising Could be a Boon for Access to Justice

First published in OBA’s Just Magazine as a debate with Joe Groia

For hundreds of years, lawyers have spent their time and expertise providing valuable assistance to their clients.

Lawyer incomes have remained reasonably stable in real terms over the decades. Statistics Canada reports the median professional income for Ontario lawyers was just over $125,000 in 2014. Over time, lawyer professional incomes have been reasonably well correlated with family incomes. This is not surprising. Intelligent, well-educated, hard-working lawyers have generally maintained their economic position – and lawyer incomes are tied to the ability of clients to pay their fees.

Considering lawyer incomes and overheads and the number of hours that can be billed in a year, it inevitably follows that lawyers charge fees in the hundreds of dollars per hour (whether described that way or not).

For some problems, this works pretty well. Limited lawyer time is required for a residential real estate transaction or a drafting a will. Most people buying or selling real estate or with an estate have the money to pay for the necessary legal work.

For other legal problems, there is a problem. In criminal law, family law and personal injury, the number of required lawyer hours means that many ordinary people can’t afford to pay. Ironically, many lawyers couldn’t afford themselves. This reality plays out differently in different areas. In personal injury law, lawyers are paid out of the ultimate compensation, if any. In family law, most litigants simply don’t use lawyers. In criminal law, legal aid assists the poor. For the middle-class, being an accused can be ruinous. Our justice system is a mostly unaffordable wonder for ordinary people.

What isn’t obvious is how little lawyers actually do for ordinary people. Surveys repeatedly show that lawyer work is generally limited to criminal law, family law, personal injury, real estate and estates law. Studies have shown that over 85% of all “justiciable events” are addressed by ordinary people without legal assistance.

Lawyers don’t offer services if people won’t pay for them and … lots of legal issues can’t be addressed at a cost of hundreds of dollars per hour.

So why would people not go to lawyers when facing a legal issue? The practical answer is that lawyers don’t offer services if people won’t pay for them and that lots of legal issues can’t be addressed at a cost of hundreds of dollars per hour. The result is legal needs that are unserved and underserved by lawyers.

Two other examples are helpful. Like lawyers, investment advisors spend time offering investment advice and transactional assistance. Unlike lawyers, investment advisors commonly charge fees based on the value of the investments involved. This means that investment advisors limit their clientele to those who have sufficient investable assets to pay their fees. So those with insufficient assets leave their money in their bank accounts, buy GICs or perhaps put their money in expensive bank mutual funds.

Tax assistance provides another example. Taxes can be complicated and difficult. For some, accountants prepare taxes. Others have used bookkeepers or tax preparers. But historically, many late April nights have been spent over kitchen tables trying to fill out tax forms.

In 2016, many people now use Quicken TurboTax or comparable products. Instead of teaching tax advisors how to spent their time preparing tax returns, Quicken has created a robo-advisor that can be downloaded and used at home. While the TurboTax software is no doubt expensive to create and maintain, the additional cost of a TurboTax download is relatively negligible. This low “marginal cost” means that the unit price is low. Ordinary people who once spent late nights stressing out over their tax returns now use a robo tax advisor instead.

In 2016, investment assistance is also provided by robo-advisors. The growth in the use of robo-advisors over the past several years is reported to have been significant. What is most interesting is that robo-advisory services are being provided to clients who don’t have sufficient investable assets to merit the interest of a traditional investment advisor. The same “low marginal cost” economics that permit TurboTax to be offered at relatively low prices apply here too.

So what about law? There are parallels between legal advice, tax advice and investment advice. Where provided through the traditional professional advisor, there are unserved needs because the labour-intensive expert model has lower limits to the price at which it can deliver. But where technology and capital are applied, lower priced services can be delivered.

This is not radical imagining. Examples already exist. The most recently, the Manchester Guardian reported “Chatbot lawyer overturns 160,000 parking tickets in London and New York”. While less newsworthy, Neota Logic and Littler Mendelsohn deliver robo compliance advice to Littler’s HR clients. This is not to suggest that a robo-advocate in court is desirable or even plausible. But there are aspects of existing legal services that lend themselves to robo-advisors. An obvious example is family law where complicated court forms and rules could be addressed with robo-assistance. Notably, a Quicken Family Law product was introduced in Texas several years ago only to be challenged by the state bar as unauthorized practice of law.

Of course, it is speculative to say that robo legal advisors can substantially address currently unserved and underserved legal needs. But the fact that this is speculative is because only licensed lawyers and paralegals are now permitted to provide legal services. And the ability to provide software-driven internet-delivered intelligent services is obviously increasing. What is possible today is not what will be possible in the years to come.

For some lawyers, this is scary. Some of what we do may well be more cost-effectively done in new ways. But lawyers don’t come close to fully serving the legal needs that exist in society. There can be no ethical justification for prohibiting that which lawyers don’t actually provide nor, more scarily, what can be effectively provided at lower cost. And there may even be opportunities for lawyers up to new challenges!

Ultimately, we can attempt to prohibit new legal services that lawyers cannot cost effectively provide. We can ignore new providers hoping that nothing goes wrong. Or we can thoughtfully regulate legal services in the public interest including “robo-lawyers”.

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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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Lawyers and Audits – The new Joint Policy Statement effective December 1, 2016

Shareholders, investors, lenders and others have a vital interest in proper financial disclosure by entities in which they have an economic interest. Making sensible business decisions is often difficult. It is impossible without proper information. Audited financial statements play a central role in financial disclosure.

Disclosure is a good thing and a bad thing

Some assets and liabilities are simply reflected in financial statements. Some are not so simple. Contingent assets and liabilities can be tricky. The contingency may or may not arise. Assuming the contingency, the value of the contingent asset or liability is often uncertain. The uncertainties may be such that a value is not fairly included in the balance sheet but a note may be appropriate to alert the reader to the risk. What should be disclosed and how is a matter of importance for auditors who are called upon to opine on financial statements.

Lawyers are commonly involved in significant contingencies. Whether in civil, regulatory or administrative matters, lawyers pursue and defend their clients’ interests. Whether the client will be successful, or not, can be uncertain as may be the quantum. Assessment of the current value of contingencies can be difficult. It is no surprise that clients and auditors look to lawyers to assist in the evaluation of these contingencies.

But there is a complication. These contingencies are determined through an adversarial process. The client is entitled to professional confidentiality and privilege in its dealings with counsel.

On one hand, disclosure is necessary for fair evaluation of the financial situation of the client. On the other hand, disclosure may adversely affect the financial situation of the client by compromising the interests of the client in the adversarial process. Disclosure is a good thing from the one perspective. Admissions against interest are a bad thing from the other. Assistance from lawyers makes for better financial disclosure. But assistance that compromises privilege thereby compromising the client’s interests is a bad thing.

Ironically, perfect disclosure of a client’s financial information may compromise the client’s financial prospects.

A new Joint Policy Statement

In 1978, the Canadian Bar Association and the Canadian Institute of Chartered Accountants released the Joint Policy Statement on Audit Enquiries (1978). That Joint Policy Statement sought to advance two key goals. The first was to practically address the inherent conundrum described above, to maximize financial disclosure while minimizing the adverse financial consequences of doing so. The second was to allow two quite different professions to communicate with each other.

Nearly forty years later,  the Canadian Bar Association and the Auditing and Assurance Standards Board of Chartered Professional Accountants Canada have now replaced the old Joint Policy Statement.

The new Joint Policy Statement is effective for inquiry letters dated December 1, 2016 or later.

What has changed?

In some respects, Joint Policy Statement is unchanged. There is value in established practice. For example, “claims” and “possible claims” are important concepts under the Joint Policy Statements.  Tinkering with the definitions of these important terms is tempting. But the likely consequence would be that some lawyers would continue to use the old definitions and new definitions might contain new difficulties. There is no change to the meaning of “claims” and “possible claims” which remain key definitions.

Another important principle is that lawyers are not to express opinions in audit response letters.   Management evaluates claims and possible claims. Lawyers advise whether the management evaluations are reasonable. This approach reflects that auditors rely on management in the audit process and seeks to protect privilege by not having lawyers express their opinions. This approach is unchanged.

But there are changes. Among the more significant changes is the express inclusion of in‐house counsel, recognizing the expanded role of in‐house counsel in client matters. Another significant change seeks to resolve concerns expressed by the legal profession regarding communication protocols with the auditors, particularly with respect to the timing of inquiries and responses.

A further significant change reflects the emergence of new audit standards in recent years. In 1978, there was just one financial reporting framework. In 2016, financial reporting frameworks include the International Financial Reporting Standards (IFRS), Accounting Standards for Private Enterprises (ASPE), Accounting Standards for Not-for-profit organizations (NFPOs). Rather than seeking to have lawyers learn and apply new and different frameworks, the Joint Policy is written on a framework-neutral basis. Audit inquiries are to be written so that audit responses can be written without reference to the applicable framework. The Joint Policy seeks to allow lawyers to be lawyers and auditors to be auditors and yet to communicate with each other.

Assistance is available

The CBA has provided on-line tools to assist lawyers with the new Joint Policy Statement as follows:

The CBA is also providing a webinar on May 25, 2016 entitled The New JPS: What You Need to Know

 

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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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Candid but unsure

[First published on slaw.ca]

The principal duties owed to clients are well known: commitment, confidentiality, candour and competence.[i] Much has been written and debated about commitment and confidentiality. Their nature and scope are reasonably well understood. Competence and its legal twin negligence are conceptually simple enough, albeit fact-specific.

Candour is another matter. Candour seems straight-forward. Simply be honest with your clients, tell them what you know and all will be well. But this naïve approach is problematic. As is often the case in legal ethics, difficult issues arise because duties can collide. Candour and confidentiality can be irreconcilable duties and confidentiality is pervasive for lawyers. By way of example, a prospective client discloses information that shows that you cannot act because there is a conflict. Confidentiality and solicitor-client privilege require that you keep the information confidential. Candour may require that you disclose the information to your existing client. Through no one’s fault, candour and confidentiality may irreconcilably conflict without any perfect solution being available.

For those in firms, candour is something of a strange beast. Clients retain firms. Firms owe duties of commitment, confidentiality and candour to their clients. Firms are responsible for the quality of the services provided to their clients. But it is practically impossible to require that every firm member disclose all that they know that is relevant regarding every matter for every client of the firm. In a firm of any size, there would be no time to do anything else if everyone was required to consider every retainer in the firm and what they know that is relevant. No one would suggest that candour requires this. Perhaps the obligation is that those involved in the representation must disclose what they know. This is workable. But perhaps the obligation is that there be disclosure of what is known to be known by other lawyers with no obligation to search out the unknown knowns. But there is little clarity available on what the duty of candour actually means for a firm as opposed to an individual.

While candour is a duty for the benefit of our clients, there are circumstances where clients don’t expect and don’t want candour. I recall a number of years ago a very complicated commercial problem in which a number of sophisticated businesses retained highly expert experienced lawyers The lawyers were retained because of their deep knowledge of the clients, the industry, the problem and the law. Separate counsel for each client, whose interests were well aligned, would not have been viable. I have little doubt the lawyers did not share everything that they knew about each client’s predicament with every other client. I have no doubt that this was what the clients wanted and needed. While likely not recognized at the time, this was at least arguably a breach of the joint retainer rule in the Rules of Professional Conduct.

The Court of Appeal for England and Wales recently addressed candour in Goldsmith Williams Solicitors v E.Surv Ltd, [2015] EWCA Civ 1147[ii]. The relevant facts are straight-forward. A solicitor acted for the purchaser of a residential property and for the mortgage lender. The solicitor knew of a recent transaction at a price that cast doubt on whether the fair market value of the property was reflected in the current purchase price. This is relevant information to a mortgage lender as the fair market value of the mortgaged property, which is security for the loan, is material to the risk of the loan.

What was of interest and surprise in Goldsmith Williams was that the Court of Appeal considered the case on the basis of the scope of the retainer between the parties.[iii] As Sir Stanley Burton put it:

Like [the trial judge], I consider that the question whether the Solicitors were under [a duty to disclose] in the present case depends on whether, properly construed, that duty was excluded by, or was inconsistent with, the terms of the Solicitors’ retainer… .

That candour in a joint retainer can be limited by agreement in England should be a surprise for Canadian lawyers. As the Model Code of Professional Conduct provides:

3.4-5 Before a lawyer acts in a matter or transaction for more than one client, the lawyer must advise each of the clients that:

(a) the lawyer has been asked to act for both or all of them;

(b) no information received in connection with the matter from one client can be treated as confidential so far as any of the others are concerned; and

(c) if a conflict develops that cannot be resolved, the lawyer cannot continue to act for both or all of them and may have to withdraw completely.

Model Rule 3.4-5 does not contemplate that clients in a joint retainer can agree that information will be treated as confidential. The reasoning from Goldsmith Williams cited seems inconsistent with our Codes and Rules of Professional Conduct.

There is a distinction made in Goldsmith Williams which might be the basis for a more nuanced approach to the duty of candour. Specifically, reference was made to Mortgage Express Ltd v Bowerman & Partners, [1996] 2 All ER 836 (ECA) in which Millett LJ considered another case of a solicitor acting both for a purchaser and a mortgage lender. Millett LJ said:

… A solicitor who acts for more than one party to a transaction owes a duty of confidentiality to each client, but the existence of this duty does not affect his duty to act in the best interests of the other client. All information supplied by a client to his solicitor is confidential and may be disclosed only with the consent, express or implied, of his client. There is, therefore, an obvious potentiality for conflict between the solicitor’s duty of confidentiality to the buyer and his duty to act in the best interests of the mortgage lender.

No such conflict, however, arose in the present case. It is the duty of a solicitor acting for a purchaser to investigate the vendor’s title on his behalf and to deduce it to the mortgagee’s solicitor. He has the implied authority of his client to communicate all documents of title to the mortgagee’s solicitor. …

Our Codes and Rules of Professional Conduct avoid the conflict to which Millett LJ refers by requiring that confidences not be kept in joint retainers. The English approach appears permit the duty of confidentiality to continue but recognizes that conflicts may arise to be dealt with on that basis. However, Millett LJ goes on to say that there is implied authority to communicate all title documents to both clients in the case at bar.

The distinction may be seen as being between information only relating to client decisions in the matter in which the solicitor is retained and information relating to the legal work of the solicitor. In Goldsmith Williams, the solicitor was not retained to advise as to the value of the security but rather to deal with title. The price and date of the prior transaction was relevant to the value of the security but not to title. This information was relevant to the mortgage lender’s decision-making in the transaction but not to the legal work for which the solicitor was retained.

Building on this distinction, it seems to me that there are at least three categories of information to which the duty of candour applies in Canada. Before reading Goldsmith Williams, I had thought that there were two.

The first category is information about the lawyer-client relationship rather than the subject-matter of the retainer. Canadian National Railway Co. v. McKercher LLP, [2013] 2 SCR 649 provides a convenient example. A lawyer who sues his or her client for another client has a duty of disclosure in that regard whether or not a deemed conflict exists. A client is entitled to fire their lawyer whether or not the lawyer is acting properly and is entitled to disclosure of information that might cause the client to do so. Similarly, clients are entitled to know when their lawyers may be in a conflict of interest or may have been negligent in their work.

The second and third categories are in respect of the subject matter of the retainer. The second category is information about the legal issues and work. Clients are entitled to disclosure of the work done for them, the basis of legal advice given to them and information relevant to their decisions and instructions on legal issues.

The third category is information relevant to the matter in respect of which legal assistance is sought but not to the legal work per se[iv]. The distinction between information relating to the value of the mortgaged property and to title to the mortgaged property illustrates the difference between the second and third category.

Thought of in this way, it is less surprising that a duty of disclosure with respect to information going to the value of mortgage security might be affected by the agreement between the parties. An analogy may be drawn to conflict waivers. Conflicts can be waived but only if the result is not a material adverse effect on client representation. Where a solicitor is not retained to deal with the value of the mortgage security, the solicitor’s representation of the client is not affected by non-disclosure of information going to value even though the client’s interests are affected.

On the other hand, failing to disclose a prior mortgage would obviously materially impair the very work entrusted to the solicitor namely ensuring that the expected mortgage is conveyed to the mortgage lender.

Read with these distinctions in mind, Model Rule 3.4-5 is perhaps somewhat enigmatic. The Model Rule says that “no information received in connection with the matter from one client can be treated as confidential so far as any of the others are concerned”.

This very bald statement can’t mean exactly what is says. It cannot be intended to refer to information that is irrelevant to the joint retainer. But does it refer to information relevant to the client’s decision-making in respect of the joint retainer which is not related to the legal representation and issues?[v]

Separate from the joint retainer rule, our Codes and Rules of Professional Conduct require candour in all matters but, unlike avoiding conflicts, there is no provision for consent otherwise. Does the scope of the candour rule include information relevant to client decision-making but not to the legal representation and issues? If so, can the client agree otherwise.

Reflecting back on the “very complicated commercial problem” with a number of clients with a common problem, I’m now less convinced that there was a problem as it appears that the information in issue related to the clients’ commercial decision-making rather than to the legal representation and issues and the clients would have been appalled to have their commercial information shared. While I’m uncertain about the actual operation of the conduct rules in this context, I’ve less doubt that the clients should have been able to decide for themselves subject to ensuring that legal representation was not compromised as a result.

On the other hand, a presumption that such information should be disclosed absent express consent might be salutary. There are far too many cases where lawyers have withheld information that clients would have expected to have disclosed. This is particularly true in cases of mortgage fraud where lawyers have not disclosed prior property flips, unpaid deposits and doubtful credits . In this context, it is worth underscoring Model Rule 3.4-15 which applies irrespective of the joint retainer rule and the duty of candour:

3.4-15 When a lawyer acts for both the borrower and the lender in a mortgage or loan transaction, the lawyer must disclose to the borrower and the lender, in writing, before the advance or release of the mortgage or loan funds, all material information that is relevant to the transaction.

Our current approach to candour may be an example of over-enthusiastic embrace of well-intentioned principles. Clearly, lawyers must be honest and candid with their clients. But saying no more than that raises its own problems. Clients must be protected by conduct rules but conduct rules should not unnecessarily limit client choices in their own best interests.

 

______________________

[i] One can quibble whether avoidance of conflicts is included in commitment or is a separate duty. Competence is required under the Codes and Rules of Professional Conduct while the obligation at law is not to be negligent.

[ii] Thanks to Harvey Morrison for pointing out the case.

[iii] In Commerce Capital Trust Co. v. Berk (OCA) (1989), 68 OR (2d) 257, Justice McKinlay wrote for the Court “… when a fiduciary relationship exists (as it undoubtedly does in this case, given the solicitor-client relationship), one then looks to the nature of any alleged breach of that fiduciary relationship to determine liability. In this case, the alleged breach was the non-disclosure of the facts which have been outlined above. If the undisclosed facts are “material”, then there can be no “speculation” by the court as to what course the client mortgagee would have taken had full disclosure been made.” It is interesting that Canadian courts have considered candour in this context as a matter of fiduciary obligation while the English courts appear to have considered disclosure as a matter of the duty of care.

[iv] Of course, these are not necessarily water-tight compartments.

[v] To be clear, I do not suggest that the duty of candour does not apply to information that could affect the client’s commercial assessment of the risks of in the matter in which the lawyer is acting. see The Law Society of Upper Canada v Nguyen, 2015 ONSC 7192 . My limited point is that confidentiality may not necessarily be waived with respect of any and all relevant information by Rule 3.4-5. A lawyer who is possessed of information that cannot be disclosed because of a duty of confidentiality and must be disclosed because of a duty of candour cannot continue to act without resolving the conflict in a proper way. Ignoring either duty is not acceptable.

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