Principle, not politics

Published on slaw.ca on November 10, 2015

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

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

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

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

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

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

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

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

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

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

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

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

___________________________________

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

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Innovate or be innovated

First published on slaw.ca

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Jack Batten on Big Law 40 years ago

1976 Saturday Night

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The Law Society Tribunal and Self-Regulation

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

First published on slaw.ca

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

________________________

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

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

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

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

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

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

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So many lawyers, so many unmet legal needs

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

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So many lawyers

 

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July 7, 2015 · 5:40 pm

Partnership has its limitations

First published on slaw.ca

Perhaps because most law firms are partnerships, we don’t pay much attention to the practical implications of the partnership structure. This is understandable as there isn’t much of an alternative in our existing system at least so far as private practice is concerned.

A law firm partnership is very different than most ordinary businesses. In most businesses, the owners of the business are not involved in the business whether as workers or as managers. In contrast, law firms are owned and managed by people who provide services to customers (often with the assistance of others). In a law firm, the partners are the owners, the managers and the workers.

The combination of ownership, management and service provision in a law firm is particularly significant in that the partners provide the equity capital. In an ordinary business, equity capital is commonly raised through private capital or public capital. In a law firm, labour and capital come from the same source as does management – the partners.

There is another important difference between law firms and most other businesses. In many law firms, it is common for more young lawyers to be hired than will ultimately remain with the firm. Of course, some law firms are simply collections of sole practitioners who share overhead and perhaps an associate who will either join the firm as another sole practitioner once his or her practice is sustainable on its own or will leave the firm.

But in many law firms, a number of associates will be hired only some of whom will become partners. In these law firms, the model is “up or out” with some young lawyers becoming partners and others leaving. In the academic literature, this is sometimes described as the “tournament of lawyers”. Young lawyers compete with each other to stay with the firm. Academics once viewed this as a model applicable just to young lawyers but more recently the “tournament” has been said to continue throughout a partner’s career. Partners are said to continue to compete to continue as partners. While it was once less common, partners who are not seen as sufficiently valuable to the firm are often asked to leave.

This “tournament” is said to be a highly efficient (if perhaps harsh) way of organizing people. Unlike the ordinary business where there is hierarchical management, the lawyers in the “tournament” mostly manage themselves by figuring out what is necessary to win the prize. One of my partners once described this as a pie eating contest where the prize is more pie.

There must be a lot to be said for this structure as it clearly has been successful. One might hypothesize that it would be difficult to organize skeptical independent thinking professionals successfully in a traditional business organization. This structure is economically low cost in terms of management.

Yet the last thirty years have clearly shown that this is not the only effective way of providing legal services. The in-house model, whether business or government, has shown that ordinary business organization can deliver effective and sophisticated legal services. The in-house law department is not owned or capitalized by its lawyers. Hierarchical management is common. The “up or out” tournament model is not used in-house (or at least to the same extent).

There is of course one fundamental difference between the in-house lawyer and the private practice lawyer, namely finding work. The in-house lawyer exists to serve one client. The number and nature of the in-house lawyers is driven by the needs of the employer. For private practice lawyers, part of the tournament is finding and retaining clients for the lawyer and the firm.

So what are the implications of these observations about business structure. One implication may be diversity. It seems clear that in-house law departments do a better job of attracting and retaining women and, it seems, visible and other minorities. While other factors may well also be in play, I suspect that the nature of the “tournament” model is part of the reason. Where early success is determined by attracting work from within the firm (and thereby developing and getting better work) rather than by work allocation based on reasonably objective skill assessment and assessment of potential, there is ample opportunity for unconscious bias and even actual prejudice to have effect. I recently attended a sophisticated in-house group and found the explicit targeting of diversity results to be very interesting with managers being explicitly judged, in part, on meeting targets. In contrast, it would be difficult to identify who to similar incent and judge in a law firm where, mostly, no one is “in charge”. Causing change in private practice is indeed like managing cats given the very limited actual day-to-day management in law firms.

There are other significant issues to consider. In a private practice firm, it is difficult for partners to imagine doing things very differently. Why would a partner potentially render himself or herself redundant? Where a partner is mostly rewarded for their contributions to the firm, what incentive is there to invest time and effort in doing things in a way other than by partner contributions. The limited extent to which law firms are truly managed means that it is difficult for truly innovative decisions to be made (and implemented) rather than to just making the existing way of doing things better.

The combination of ownership with service provision is also important. In most firms, partners take out the profits annually and only keep enough equity capital in the firm as is required to provide infrastructure for existing practices. Partners have little, if any, economic interest in investing in anything that does not pay off in bettering existing practices. A significant long term investment in innovation is not very likely to provide returns for existing partners. Partners naturally prefer to enjoy the fruits of their labour (and capital). In contrast, the owners of a business with an in-house law department can make significant changes and innovations that are in the interest of the business but perhaps not in the interest of individual lawyers.

We see some of these challenges to innovation playing out in what some call “new law” where ownership is separated from those providing legal services. Cognition is a Canadian example in which legal services are being provided differently and attractively to clients. While the individuals who provide legal services are being compensated for their work, the long term enterprise value is enjoyed by the entrepreneurs who own and built the business. Yet it is clearly more difficult to finance a business when equity capital is not permitted from private or public markets and is not contributed by the lawyers doing the work. This limits growth and innovation.

All of this suggests to me that law firms may be particularly resistant to business and social innovation because of their nature. That said, it isn’t clear what to do with this observation if true. There is much about law firms that is clearly good for clients and for the lawyers in those firms. From a regulatory perspective, it is much easier to regulate when the owners, managers and workers are all regulated and subject to sanctions that can affect their future livelihoods.

There seems to me something of a “baby and the bath water problem”. Can we encourage/permit innovation in ways that aren’t too disruptive? I also wonder if the existing model isn’t more powerful than it appears since there is clearly room for business structure innovation despite limited actual innovation. It also seems odd to me that we know so little about the business of law both from theoretic perspectives and from empiric perspectives.

And so this column is more by way of musing and thinking out loud than anything else. As always, but particularly on this topic, comments welcomed!

______________________

[1] Small law firms are quite like other small proprietorships where the owner is actively involved in the business.

[2] Tournament of Lawyers, 1991, Galanter and Palay

[3] The Elastic Tournament: The Second Transformation of the Big Law Firm, 2008, Galanter and Henderson, 60 Stanford Law Review

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Keeping client confidences and acting with commitment

“Lawyers must keep their clients’ confidences and act with commitment to serving and protecting their clients’ legitimate interests. Both of these duties are essential to the due administration of justice.”

Canada (Attorney General) v. Federation of Law Societies of Canada, 2015 SCC 7 at para. 1

This recent decision of the Supreme Court of Canada resolves nearly fifteen years of litigation regarding the lawyer’s role in protecting against anti-money laundering and anti-terrorist financing. This decision is significant to those interested in legal ethics on several points.

Solicitor-client privilege

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (the “Act”) and the regulations thereunder (collectively the “Regime”) require that lawyers collect, record and retain certain client information. The Act authorizes search and seizure of documents in the possession of lawyers. The Court concluded that the Regime to be contrary to section 8 of the Charter for failure to provide sufficient protection to solicitor-client privilege.

A number of significant points were made by the majority. The first is the reiteration from Lavallee[i] at para. 36 that “A law office search power is unreasonable unless it provides a high level of protection for material subject to solicitor-client privilege”. The Court responded to the submission that Lavallee did not dictate the outcome in this case because the search and seizure power in question was not “seeking evidence of criminal wrongdoing” but was rather “in connection with an administrative law regulatory compliance regime” by stating inter alia that:

… the reasonable expectation of privacy in relation to communications subject to solicitor-client privilege is invariably high, regardless of the context. The main driver of that elevated expectation of privacy is the specially protected nature of the solicitor-client relationship, not the context in which the state seeks to intrude into that specially protected zone.

While the Court accepted that “… when a search provision is part of a regulatory scheme, the target’s reasonable expectation of privacy may be reduced”, the Court said at para. 44 that:

The core principle of the [Lavallee] decision is that solicitor-client privilege “must remain as close to absolute as possible if it is to retain relevance”: This means that there must be a “stringent” norm to ensure its protection, such that any legislative provisions that interfere with the privilege more than “absolutely necessary” will be found to be unreasonable: …[ii]

While considered in the context of an Act which “has a predominantly criminal law character” whose “regulatory aspects serve criminal law”, it appears that the Court has more generally diminished or eliminated the relevance of the reason for the search and seizure and has emphasized that what is relevant is that solicitor-client privileged information is not protected in the search and seizure[iii].

Independence of the profession

The majority of the Court of Appeal for British Columbia concluded that on one of the principles of fundamental justice relevant to section 7 of the Charter is “the independence of the Bar”. The majority concluded that the Regime deprives lawyers and clients of their liberty interests in a manner which does not accord a principle of fundamental justice namely the independence of the Bar.

Justice Cromwell, for the majority, differentiated between a broad and a narrow version of independence at para. 77 as follows:

According to the broad version, the independence of the bar means that lawyers “are free from incursions from any source, including from public authorities”: … The narrower, more focused version, is anchored in concern about state interference with the lawyer’s commitment to the client’s cause. This narrower version, as I see it, boils down to the proposition that the state cannot impose duties on lawyers that interfere with their duty of commitment to advancing their clients’ legitimate interests. …

The majority of the Court of Appeal placed “great stress on independence of the bar as it relates to self-regulation of the legal profession”. Justice Cromwell was not prepared to decide whether self-regulation of the profession is a principle of fundamental justice either stating at para. 86 that:

While the Court of Appeal and the Federation place great stress on independence of the bar as it relates to self-regulation of the legal profession, I do 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. As LeBel J. [has] pointed out… self-regulation is certainly the means by which legislatures have chosen in this country to protect the independence of the bar … But we do not have to decide here whether that legislative choice is in any respect constitutionally required. Nor does the appeal require us to consider whether other constitutional protections may exist in relation to the place of lawyers in the administration of justice.

Some will regret that the Court did not find self-regulation to be constitutionally protected thereby avoiding other forms of regulation such as in Australia and England where self-regulation has been lost. While I am a supporter of self-regulation, my view is that this is the better result. Good self-regulation may well be the best approach but other forms of independent regulation would be better than bad self-regulation. If the profession does not regulate well then there should be a risk of loss of self-regulation. And there is no doubt that lawyers are conflicted by their self-interest in some important respects. This conflict is mitigated to some extent by the risk of loss of self-regulation – and loss of self-regulation could be necessary depending on the nature and extent of self-interested self-regulation.

The duty of commitment as a principle of fundamental justice

The majority concluded at para. 103 that the narrow version of independence of the bar is a principle of fundamental justice stating:

In the context of state action engaging s. 7 of the Charter, … (subject to justification) the state cannot impose duties on lawyers that undermine the lawyer’s compliance with that duty, either in fact or in the perception of a reasonable person, fully apprised of all of the relevant circumstances and having thought the matter through. The paradigm case of such interference would be state-imposed duties on lawyers that conflict with or otherwise undermine compliance with the lawyer’s duty of commitment to serving the client’s legitimate interests.

It is on this point that the majority and the minority (the Chief Justice and Justice Moldaver) disagreed. The minority did not accept that commitment was a principle of fundamental justice and were inclined to the view that considering protection of solicitor-client privilege as a principle of fundamental justice provided a better resolution of the section 7 analysis. The minority concluded at para. 119 that:

In our view, this “principle” lacks sufficient certainty to constitute a principle of fundamental justice: …The lawyer’s commitment to the client’s interest will vary with the nature of the retainer between the lawyer and client, as well as with other circumstances. It does not, in our respectful opinion, provide a workable constitutional standard.

In considering whether the duty of commitment is a legal principle, as opposed to an important interest or a policy goal, Justice Cromwell observed at para. 91 that:

… The duty of commitment to the client’s cause has been recognized by the Court as a distinct element of the broader common law duty of loyalty and thus unquestionably is a legal principle:

However, Justice Cromwell took care to emphasize that the scope of the duty of commitment is limited. At para. 93, he provided some examples of the bounds of the duty:

Of course the duty of commitment to the client’s cause must not be confused with being the client’s dupe or accomplice. It does not countenance a lawyer’s involvement in, or facilitation of, a client’s illegal activities. Committed representation does not, for example, permit let alone require a lawyer to assert claims that he or she knows are unfounded or to present evidence that he or she knows to be false or to help the client to commit a crime. The duty is perfectly consistent with the lawyer taking appropriate steps with a view to ensuring that his or her services are not being used for improper ends.

On the question of whether there is sufficient consensus permitting the conclusion that the duty of commitment is a fundamental principle, Justice Cromwell said at paras. 96 and 97 that:

Clients — and the broader public — must justifiably feel confident that lawyers are committed to serving their clients’ legitimate interests free of other obligations that might interfere with that duty. Otherwise, the lawyer’s ability to do so may be compromised and the trust and confidence necessary for the solicitor-client relationship may be undermined. This duty of commitment to the client’s cause is an enduring principle that is essential to the integrity of the administration of justice. In Neil, the Court underlined the fundamental importance of the duty of loyalty to the administration of justice. The duty of commitment to the client’s cause is an essential component of that broader fiduciary obligation. …

The duty of commitment to the client’s cause is thus not only concerned with justice for individual clients but is also deemed essential to maintaining public confidence in the administration of justice. Public confidence depends not only on fact but also on reasonable perception. It follows that we must be concerned not only with whether the duty is in fact interfered with but also with the perception of a reasonable person, fully apprised of the relevant circumstances and having thought the matter through. The fundamentality of this duty of commitment is supported by many more general and broadly expressed pronouncements about the central importance to the legal system of lawyers being free from government interference in discharging their duties to their clients.

It is particularly noteworthy is that independence from obligations and government interference that might interfere with service of legitimate client interests is seen as important not just to the trust and confidence of individual clients but also to public confidence in the administration of justice.

It is also noteworthy that Justice Cromwell has placed commitment both as a principle essential to the administration of justice and as a fiduciary obligation. This suggests that Neil, McKercher and Federation of Law Societies may be seen as establishing that the lawyer’s duty of loyalty is founded both in fiduciary law and in the law protecting the administration of justice.

In paras. 81, Justice Cromwell notes two types of harm to clients:

The duty of lawyers to avoid conflicting interests is at the heart of both the general legal framework defining the fiduciary duties of lawyers to their clients and of the ethical principles governing lawyers’ professional conduct. This duty aims to avoid two types of risks of harm to clients: the risk of misuse of confidential information and the risk of impairment of the lawyer’s representation of the client …

In paras. 82 and 83, Justice Cromwell discusses the common underlying basis for protection of solicitor-client privilege and commitment stating inter alia that:

The question now is whether another central dimension of the solicitor-client relationship — the lawyer’s duty of commitment to the client’s cause — also requires some measure of constitutional protection against government intrusion. In my view it does, for many of the same reasons that support constitutional protection for solicitor-client privilege. “The law is a complex web of interests, relationships and rules. The integrity of the administration of justice depends upon the unique role of the solicitor who provides legal advice to clients within this complex system”: … These words, written in the context of solicitor-client privilege, are equally apt to describe the centrality to the administration of justice of the lawyer’s duty of commitment to the client’s cause. A client must be able to place “unrestricted and unbounded confidence” in his or her lawyer; that confidence which is at the core of the solicitor-client relationship is a part of the legal system itself, not merely ancillary to it: The lawyer’s duty of commitment to the client’s cause, along with the protection of the client’s confidences, is central to the lawyer’s role in the administration of justice.

Echoing the reasons of Justice Binnie in Neil, Justice Cromwell has placed client confidence in their lawyers as “part of the legal system itself” and not “merely ancillary” to it. The protection of client confidences and commitment to the client’s cause are clearly said both to be central to the lawyer’s role in the administration of justice. These are important statements that will no doubt be repeated in future case law and not just in Charter cases.

The application of section 7 of the Charter

In order for section 7 of the Charter to be engaged, it is necessary that state deprivation of a person’s life, liberty or security be in issue.

Justice Cromwell finds that the liberty interests of the lawyer are engaged by the Regime as “The scheme limits lawyers’ liberty by punishing with imprisonment the failure to comply with its requirements”. Justice Cromwell reasons that “It is not necessary to determine whether the liberty interests of clients are infringed”. The Court of Appeal however also found that the liberty of the client was in issue as a purpose of the Regime is to establish a paper trail for enforcement purposes including criminal law sanction.

The reliance by the majority on the lawyer’s rights is curious. One might think that analysis of the right not to be deprived of liberty except in accordance with the principles of fundamental justice would consider fundamental justice as it relates to the deprivation. It seems a strained interpretation to consider principles of fundamental justice that protect third parties under section 7.

This is perhaps results-driven reasoning. Framing the issue in terms of lawyer liberty establishes a much broader protection than would focus only on client liberty. The lawyer-focused approach protects clients from loss of commitment by the state by means that deprive the lawyer of life, liberty of security of the person (but not where lesser means are used). On the other hand, a client-focused approach only protects against loss of commitment where the client’s life, liberty or security of the person is at risk of deprivation.

Leaving aside the logic of the reasoning, the effect is to establish that the state may not, without proper justification, interfere with the duty of commitment owed to clients by means of loss of loss of life, liberty or security of the lawyer. It seems logical that Charter scrutiny of impaired commitment is a engaged where a client’s loss of life, liberty or security is at risk of deprivation by the state even where commitment is impaired by means not involving the lawyer’s life, liberty or security of the person.

However (and obviously), there is no Charter protection of the duty of commitment where deprivation of the life, liberty or security of neither the lawyer nor the client is in issue.

Still, framing the duty of commitment as a principle of fundamental justice is an important statement of policy that will no doubt inform the common law and statutory interpretation even where Charter rights are not in issue.

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[i] Lavallee, Rackel & Heintz v. Canada (Attorney General), 2002 SCC 61, [2002] 3 S.C.R. 209

[ii] Citations in this and following quotes are omitted.

[iii] Justice Cromwell took care at para. 68 to say “I add this. The issues that would arise in the event of a challenge to professional regulatory schemes are not before us in this case. Different considerations would come into play in relation to regulatory audits of lawyers conducted on behalf of lawyers’ professional governing bodies. The regulatory schemes in which the professional governing bodies operate in Canada serve a different purpose from the Act and Regulations and generally contain much stricter measures to protect solicitor-client privilege.”

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Too much information!

Discussions of legal ethics and protection of information often don’t distinguish between confidential information and privileged information. The seminal case of Macdonald Estate v. Martin[i] provides a good example. As Justice Sopinka put it:

Typically, these cases require two questions to be answered: (1) Did the lawyer receive confidential information attributable to a solicitor and client relationship relevant to the matter at hand? (2) Is there a risk that it will be used to the prejudice of the client?

Of course, not all confidential information received by a lawyer in the context of a solicitor and client relationship is privileged. While confidential communications between lawyer and client for the purposes of obtaining and providing legal assistance are protected by solicitor-client privilege, confidential communications with third parties are generally not.

And when Macdonald Estate was decided, the Canadian courts had not yet clearly delineated between solicitor-client privilege and litigation privilege. We now understand that confidential communications with third parties for the dominant purpose of litigation are generally protected by litigation privilege but not by solicitor-client privilege[ii].

The Canadian law of privilege is also clearer with respect to “common interest” which, in certain circumstances, permits privileged information to be shared on a confidential basis without waiver of privilege. Sharing privileged information between parties in litigation with a common interest is the obvious example but sharing privileged information with a view to completing commercial transactions is another[iii].

The Macdonald Estate principles have been applied in new circumstances over the last two decades. Macdonald Estate itself was a transferring lawyer case in which the “virus” of confidential information came with a transferring lawyer who had previously acted on the other side in ongoing litigation.

The Court of Appeal for Ontario applied the Macdonald Estate principles to acting against former clients in Chapters Inc. v. Davies, Ward & Beck LLP [iv]. In Celanese Canada Inc. v. Murray Demolition Corp.[v], a law firm was disqualified to ensure that privileged information of the opposing party improperly acquired through an Anton Pillar order was not accessed. In Stewart v. Humber River Regional Hospital[vi], the Court of Appeal for Ontario disqualified a law firm that had learned privileged information from the opposing party in litigation as a result of retaining an expert witness previously retained by the other side.

These cases demonstrate that what is in issue is the protection of the administration of justice rather than just the duties owed by lawyers to their clients. In Macdonald Estate, Celanese and Humber River, the law firm was disqualified at the instance of the opposing party and not at the instance of their own client. Justice Goudge made this point clearly in Humber River when he said at paras. 23 and 24:

The starting point is that the courts have an inherent supervisory jurisdiction that extends to the removal of solicitors from the record where their conduct of legal proceedings would adversely affect the administration of justice (MacDonald Estate, at p. 1245 S.C.R.).

Where solicitor-client information comes into the possession of the opposing party, this creates a serious risk to the integrity of the administration of justice. …

While the cases have not yet examined whether the Macdonald Estate principles apply with equal vigour to litigation privileged information as to solicitor-client privileged information, one would think that the same result would apply despite the greater protection applied to solicitor-client information as the integrity of the administration of justice requires that the opposing party not have access to either type of privileged information.

While not yet decided so far as I am aware, I would expect that the Macdonald Estate principles would apply to protect privileged information obtained under the “common interest” exception as well. For example, if a lawyer were to receive privileged information about ongoing litigation in the context of a failed asset purchase, it would seem to follow that the lawyer could not turn around and act for the opposite party in that litigation.

But do the Macdonald Estate principles apply to confidential information that is not privileged? Reviewing Macdonald Estate, Justice Sopinka refers throughout to confidential information rather than to privileged information although he does refer to “confidential information attributable to a solicitor and client relationship”. This phrase is somewhat ambiguous. It would seem to apply to lawyer-client communications. Yet a lawyer receiving non-privileged but confidential information from an opposing party in a transactional matter will have received confidential information as a result of a solicitor and client relationship.

Given the policy analysis in Macdonald Estate, it seems to me that Justice Sopinka was intending to refer to solicitor client privileged information. As he said in discussing the Legal Ethics – Policy Considerations:

… Nothing is more important to the preservation of this relationship than the confidentiality of information passing between a solicitor and his or her client. The legal profession has distinguished itself from other professions by the sanctity with which these communications are treated. The law, too, perhaps unduly, has protected solicitor and client exchanges while denying the same protection to others. This tradition assumes particular importance when a client bares his or her soul in civil or criminal litigation. Clients do this in the justifiable belief that nothing they say will be used against them and to the advantage of the adversary. Loss of this confidence would deliver a serious blow to the integrity of the profession and to the public’s confidence in the administration of justice.

From this, the point of MacDonald Estate can be seen as being to ensure that a client’s privileged information be protected by disqualification against being used against them and that non-privileged confidential information was not intended to be protected. It is also reasonable to conclude that it is only the privilege-holder who is protected under the Macdonald Estate principles.

While this may all seem a bit arcane, the questions of the nature of the information properly protected under MacDonald Estate principles and who is entitled to protection are recently raised in two separate contexts.

The first is the recent amendment of the transferring lawyer rule in the Federation of Law Societies’’ Model Code of Professional Conduct. Model Rule 3.4-17 previously defined confidential information to mean “information that is not generally known to the public obtained from a client”. Practically, this meant solicitor-client privileged information as information obtained from third parties was not included in the definition. This definition is no longer used and Model Rule 3.4-18 is now triggered when either (emphasis added):

(a) It is reasonable to believe the transferring lawyer has confidential information relevant to the new law firm’s matter for its client; or

(b) the new law firm represents a client in a matter that is the same as or related to a matter in which the a former law firm represents or represented its client (“former client”); (ii) the interests of those clients in that matter conflict; and (iii) the transferring lawyer actually possesses relevant information respecting that matter.

While perhaps not intended, the transferring lawyer rule is engaged whenever a transferring lawyer has relevant confidential information, whether privileged or not, whether or not obtained from a client and whether or not obtained in the context of a lawyer-client relationship. The transferring lawyer model rule, as amended, may now have a much broader ambit. While it is seems obviously good to protect confidential information, it is important to recognize that the transferring lawyer rule can result in disqualification of the lawyer in an existing matter. It is startling to think that a client could lose his or her lawyer to protect information that is not privileged and not necessarily learned in the course of any lawyer client relationship.

The second is a recent case in which leave to appeal a disqualification order was recently granted by the Ontario Divisional Court in Performance Diversified Fund v. Flatiron et al[vii]. In Flatiron, an employee consulted a lawyer about employment issues and, in that context, apparently disclosed confidential information about the business of the employer. The law firm was disqualified on the motion of the employer. This raises interesting questions.

If viewed as a matter of the law of confidential information, it is understandable that the court could intervene to protect against the misuse of an employer’s confidential information disclosed by an employee to a third party. But if viewed as a matter of the law of privileged information or the protection of the administration of justice, it is difficult to see why the employer would have right to seek to protect the privilege rights of the employee. Relevant confidential information is ordinarily accessible by discovery in litigation while privileged information is not. The employer’s confidential information did not become privileged by communication by the employee to his lawyer.

My view is that the Macdonald Estate principles properly apply, given their policy basis, to the protection of privileged information at the instance of the privilege-holder. Where privileged information is not at issue and where the rights of a privilege-holder are not put at risk, the administration of justice is not imperilled if the lawyer continues to act – and there is no basis to require that another party be deprived of the lawyer of their choice – who may well be expensive to replace.

This discussion may illustrate what may be seen as a lack of clarity in our thinking around protection of information under the law of lawyers and the Model Code. Some protected information under the Model Code need not even be confidential information (e.g. Model Rule 3.3-1). Some protected information may not need to be privileged (e.g. Model Rule 3.4-18(c)). The Model Code does not distinguish between confidential information and privileged information and is thought by some to imply that privileged information may be used where the law of privilege would not permit its use (e.g. Model Rule 3.3-4(b) and (c)).

It seems to me that our ethical rules and the law could benefit from greater precision so that we protect what is properly protected in support of the administration of justice.

_________________________

[i] Macdonald Estate v. Martin, [1990] 3 SCR 1235

[ii] Blank v. Canada (Minister of Justice), [2006] 2 SCR 319

[iii] General Accident Assurance Company v. Chrusz (1999), 45 OR (3d) 321 (OCA)
Maximum Ventures Inc. v. De Graaf, 2007 BCCA 510

[iv] Chapters Inc. v. Davies, Ward & Beck LLP (2001), 52 OR (3d) 566

[v] Celanese Canada Inc. v. Murray Demolition Corp., [2006] 2 SCR 189

[vi] Stewart v. Humber River Regional Hospital, 2009 ONCA 350

[vii] Performance Diversified Fund v. Flatiron et al, 2014 ONSC 6892

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Access to Justice

ABS and access to justice

Why we must make it easier for lawyers to deliver services more broadly.

Canadians live in a miraculously complex society. Our market economy allows us to produce and consume diverse goods and services. Our democratic governments establish laws which permit economic and social stability. We take all of this for granted and, perhaps understandably, focus on the imperfections rather than being astonished that this complex system works at all. Things are very different in much of the rest of the world.

The significance of law as an underpinning of this complex society cannot be overestimated. Law permits economic relations to be reliably established and investments to be safely made. Law ameliorates market imperfections. Law governs the relations between each of us in our daily lives as well as in our economic relations. Law helps ensure that our governments remain democratic and that those holding state power act within the authority democratically assigned to them. Laws limit the power of government over each and all of us.

Professor Gillian Hadfield says that we live in a “law-thick world”. This legal “thickness” is necessary for our complex system to work yet the legal system is largely incomprehensible for most individuals in society. This is why lawyers exist. Law is important but not easily navigated. Assistance is required. As Justice Major put it for the Supreme Court of Canada in R. v. McClure in the context of solicitor-client privilege:

… The law is a complex web of interests, relationships and rules. The integrity of the administration of justice depends upon the unique role of the solicitor who provides legal advice to clients within this complex system. …

As Professor Alice Woolley has written human dignity, freedom and productive relationships depend on this complex legal system:

… the dignity and freedom that the law promotes is not merely the freedom to be left alone, but is also directed towards “creating conditions in which [citizens] can actualize their values by supporting their creative endeavors and helping them structure their commitments within productive relationships and supportive communities.” The lawyer assists in the creation of those conditions for clients.

If we accept the significance of law to members of our society and that the complexity of our legal system is such that legal assistance is required by most members of society when legal issues are engaged then the moral and public policy importance of access to legal services is obvious.

The essential issue addressed by alternative business structures (ABS) is access to legal services. This issue falls naturally into two aspects namely the areas in which there is no or very limited access and the areas where access is unnecessarily limited.

The intent of ABS is to allow the market to better deliver services by liberalization of existing regulatory constraints. This is not to suggest that there are no other mechanisms to address aspects of the same issues such as increased legal aid and enhanced public legal clinics. But ABS, better legal aid and public legal clinics are not mutually exclusive. Good public policy considers both public and market mechanisms to solve difficult problems. Different parts of complex problems can be addressed by different policy approaches.

To descend from the philosophical heights, what do lawyers actually do for individuals in society? This is an important question in understanding unmet or insufficiently met legal needs. The answer is clear. Lawyers defend individuals in criminal proceedings. Lawyers act for individuals in family law and personal injury matters. Lawyers act in residential real estate transactions and in wills and estates matters. This is confirmed by surveys of what lawyers say they do for individuals and surveys of what individuals say they use lawyers for.

The access issue is not pressing in residential real estate matters or in wills and estates matters where there are material assets involved. Individuals who have significant assets to be transferred by purchase and sale or on death have the resources to obtain legal assistance and the value of what is being transferred justifies the cost of the lawyers’ fees.

The access issue is not pressing in personal injury matters because lawyers in Canada can act on a contingent basis collecting their fees on settlement or success at trial. While there are likely meritorious cases that are not brought because the quantum in issue is insufficient to attract a lawyer acting contingently and while contingent fees may be higher than need be, it is right to observe that access to justice in personal injury matters is much less relevant than in other areas.

While access in criminal law matters is of concern, public, rather than market, solutions are likely of greater significance given the rights involved and the nature of criminal law representation. This is where legal aid and public legal clinics are most important. It is difficult to see, for most individuals involved in criminal proceedings, how market liberalization would have much useful effect.

This leaves family law, which is an obvious access disaster within the range of 70 percent of family law litigants being unrepresented in family law proceedings according to the important work of Professor Julie Macfarlane. This is an area in which it seems likely that facilitating other ways of providing service could help even if the actual proceedings before the court are unlikely to be affected. Allowing family law lawyers to work better together with social workers, psychologists and accountants seems sensible. Some aspects of family law work (financial statements and other court documents) should benefit from technological and process innovations and access to other expertise.

It is no surprise, with this review, that lawyers are sceptical about the access issue and about market liberalization including ABS. Other than in family law, what lawyers mostly see is what lawyers can do despite existing business structure constraints. The main exception is family law where families are forced into legal proceeding because of failed relationships, yet lawyers cannot provide assistance at a cost that makes sense for many families.

But the perspective of individuals is different because individuals know when they don’t go to lawyers even though lawyers have no idea. According to the 2009 Ontario Civil Legal Needs Project, fully one-third of low- and middle-income Ontarians do not seek legal assistance for what they regard as legal problems. According to Pro Bono Law Ontario, large numbers of individuals are provided pro bono assistance by PBLO in non-family law civil litigation. Few of these are personal injury matters. According to a Department of Justice study in 2009, 42.2% of respondents who suffered a personal injury problem consulted someone other than a lawyer about that problem and presumably took proceedings for compensation.

And individuals commonly do not understand which day to day problems are legal problems. According to the 2009 Department of Justice study, legal advice is sought for less than 15% of justiciable problem in Canada.

There is another perspective from which to better understand unmet legal needs. With the advent of the internet and continued development of technology, unregulated legal services are now being delivered by entities such as LegalZoom. In order to avoid prosecution for unauthorized practice of law, these services are essentially do-it-yourself forms. That there is a market for these services strongly suggesting real opportunities for internet-based software-assisted form generation and other assistance.

There is no doubt that there are substantial areas on unmet legal needs. It seems logical to think that market liberalization could permit new ways of servicing these legal needs. Yet it must be conceded that there have not yet been surveys in jurisdictions permitting ABSs addressing whether legal needs have been better addressed after introduction of ABSs. And looking carefully at ABSs in operation in Australia and in England suggests that the largest practical effect of ABSs has been in personal injury. While there is evidence of ABS impact in England in mental health, consumer and social welfare matters, the volume of services delivered in those areas is not yet substantial. While there is evidence both in Australia and England of large consumer legal services firms established as ABSs providing family law services, there is not yet evidence of material positive impact on access issues in family law.

The conundrum faced is that the delivery of legal services is broadly reserved to lawyers (and licensed paralegals in Ontario). Yet what lawyers actually do for individuals is rather limited. There are substantial areas where lawyers do not provide services and, strictly speaking, no one else is allowed to do so either. While market liberalization should expand the legal services that are actually provided, the evidence so far from Australia and England indicates that market liberalization has a greater effect on personal injury work than in areas of greatest unmet or underserved legal needs.

While some will no doubt respond to this conundrum by asserting that nothing should change because change is complicated, one of the options that should be on the table for consideration is limited liberalization while we watch the results of greater liberalization in Australia and England. It may be that those concerned about consolidation in the personal injury sector are right to be concerned. Or it may turn out that, contrary to expectations of personal injury lawyers, large “consumer” firms can provide appropriate services. But there is no good way of sorting out the right answer now and time may tell.

But what doesn’t make sense is simply protecting existing ways of providing legal services when it is clear that there are significant access failures. The better alternative is to make it easier for lawyers to deliver services more broadly. But if that is not acceptable then the alternative must be to allow others to do what lawyers do not do.

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A Different Take on ABS

A Different Take on ABS – Proponents and Opponents Both Miss the Point

The Lawyers Weekly recently included an article by Cristin Schmitz entitled Study sounds note of caution in ABS debate. Ms. Schmitz discusses a thoughtful paper by Nick Robinson who is a research fellow with the Harvard Program on the Legal Profession.

In an interview with Ms. Schmitz, Mr. Robinson said:

“I’ve been amazed in this debate how much each side kind of talks past each other, dismisses the concerns of the other side, or the point of the other side. I am a bit cautious about non-lawyer ownership in the paper, but I can also see in certain situations how it could be beneficial.”

Dueling Arguments

The Robinson paper starts its discussion with what is described as the often “polarizing” claims made by ABS proponents and opponents. Proponents claim that non-lawyer ownership will increase access to legal services while opponents claim that it will undercut professionalism.

The arguments for the proponents are said to be that (i) access to outside capital permits economies of scale, infrastructure and specialization, (ii) non-lawyer ownership is an avenue not just to economic capital but also to “high-value employee with different skills sets”, (iii) outside investment allows consumers better information and quality of service by the development of brands which provide consumer information and an incentive to ensure quality and (iv) a business offering multiple types of services can provide services with greater convenience and efficiency.

The arguments for the opponents are said to be that (i) owners who are not themselves providing legal services are not personally invested in the labour of the enterprise and will accordingly be interested only in profits and not professional ideals and norms, (ii) non-lawyer ownership creates the potential for conflicts between the duties owed to investors and the duties owed to clients and the justice system, (iii) providing non-legal services together with legal services creates greater risk of misuse of confidential client information and unauthorized practice of law.

The paper suggests that, while these dueling perspectives both bring important insights, “the actual impact of non-lawyer ownership is likely to be quite different that either of these traditional accounts suggests” in material ways.

Country Studies

With a view to examining what actually has happened as opposed to the theoretical claims of proponents and opponents, the paper next considers the impact of ABS in Australia, England and the United States.

England

The paper examines two aspects of the English experience namely the effect of ABS on the personal injury and the insurance industry and the relatively limited impact of ABS on family law as opposed to the significant impact of cuts in legal aid.

As for personal injury, the paper notes ABS licensees are disproportionately concentrated in some sectors, particularly personal injury, where ABS firms account for one-third of the personal injury market share by last report. The paper suggests two reasons for this concentration. The first is recent unintended regulatory incentives which have encouraged claims management and insurance firms to invest in law firms. The second is that:

The personal injury market is both historically large and, at least in recent years, disproportionately profitable, making it a clear target for outside investors. Personal injury firms also require capital-intensive upfront costs, particularly in advertising and in creating an organizational infrastructure to screen and process claims.

The paper notes the risk for systemic conflict of interest between insurers and injured persons and the likelihood that economic efficiencies are not likely to much affect access where injured persons generally do not pay for legal services whether because of contingent fees, insurance or other arrangements.

As for family law, the paper notes that the Cooperative, an ABS with a social mission, has not been able to halt the massive increase in unrepresented litigants arising from the legal aid cuts of 2013 despite being one of the largest providers of family law services. The paper does not suggest that the adverse impact of these legal aid cuts has not been mitigated and will not be further mitigated but that the legal aid cuts had the more significant impact at least in the short term.

Australia

As for Australia, the focus of the paper is on the consolidation of the personal injury market with three firms now making up nearly one-half of the plaintiffs side of the market. The largest of the three has been publicly traded since 2007. The second largest is not an ABS. The third became a publicly traded ABS in 2013. The paper suggests that this consolidation is likely the result of regulatory factors such as prohibition of contingency fees and restrictions to the type of advertising allowed. The paper notes that the two firms that are now publicly traded were consolidating prior to their access to non-lawyer investment and that the other large firm does not have non-lawyer investment. Nevertheless, the paper suggests that publicly owned firms may have an advantage in acquiring other firms.

The paper draws limited conclusions from the Australian experience about non-lawyer ownership per se. The paper doubts that non-lawyer ownership is necessary for consolidation and closes with the observation that “Non-lawyer ownership may impact the cases these firms select and how they manage them, but, despite some aspersions otherwise, so far in Australia there is no clear evidence that it has led to significant new conflicts of interest”.

The United States

Despite non-lawyer ownership of legal practices being prohibited in the United States, the paper examines Legal Zoom and social security disability representation as close parallels.

The paper suggests that the effect of Legal Zoom is not well documented although access has likely been increased by pressure on prices. However, the paper notes that “a company like Legal Zoom is aimed primarily at small business and the upper middle class. In other words, people with the capacity to know that they have a legal problem and the resources and savviness to be able to seek out its answer and pay for it”. The paper also suggests that Legal Zoom has not increased access by “significantly decreasing the overall number of people without wills”[i].

The paper also considers the provision of social security representation which is permitted to be delivered by non-lawyers. The main point made by the paper seems to be that relationships between these firms and insurers and the social security agency has allowed for new potential conflicts to arise.

Observation

While the paper fairly describes this examination as being the “most extensive empirical investigation to date on the impact of non-lawyer ownership by focusing on its effects on civil legal needs for poor and moderate-income populations”, the actual empirical examination is nevertheless very limited. Recognizing the need of improved collection of data, the paper recommends that:

regulators should attempt to better track the cost of commonly used legal services, the demand for legal services, how these legal services are used, different pathways to resolving a legal issue, and how litigants use the courts. Sector specific studies should also periodically study the functioning of markets for specific legal services such as personal injury, immigration, probate, conveyancing, or family law.

Implications of the Empirical Review

The paper starts its consideration of its empirical review with the following observation:

Those who advocate for more integration by allowing non-lawyer ownership frequently argue this will lower prices and increase access and quality. Those who oppose greater integration worry it will undercut ethical and professional distinctiveness and create new conflicts. The country studies in this article show that while both sets of claims have some merit, they also miss critical components of nonlawyer ownership’s actual impact.

The paper suggests that the following contextual variables are important in the determination of “the actual scale and form that non-lawyer ownership will take”:

  • The nature of the capital and legal services market in the jurisdiction. A smaller market like Australia has seen less non-lawyer ownership than in England where the population is almost three times larger and there is a broader and deeper range of capital investors. The size of the U.S. legal and capital markets has allowed the rise of online legal services despite significant regulatory impediments.
  • The nature of legal services regulation in the jurisdiction. The recent referral fee ban in the UK has led to insurance companies[ii] investing in affiliated personal injury law firms. The Australian contingency fee ban appears to favour larger personal injury firms. The approach to ABS regulation may tend to encourage or discourage ABS formation.
  • The nature of the legal services. Non-lawyer investment appears to be more likely “in lucrative areas of the law that are amenable to economies of scale, where the work can be more easily standardized, and where other costs may be high (such as advertising, administration, or technology)”. Personal injury firms have seen disproportionate investment in Australia and England which may be because “personal injury has historically had large profits, high advertising costs, and a relatively routine and high volume workload of cases that are often handled by nonlawyers and mostly settle”.
  • The nature of the non-lawyer ownership. Ownership can be for-profit or not-for profit. Ownership may be by public listing, private outside investors, worker or consumer ownership, government owned or by a company that provides other goods or services. The nature of the ownership is likely to have an impact on the types of conflicts that develop the stability of the legal services market, professionalism and beneficial effects on access.

The paper observes that the empirical evidence does support the claim that “non-lawyer ownership can, in some circumstances, lead to new innovation in legal services, greater competition, larger economies of scale, and new compensation structures”. However, the paper also suggests that there are reasons to believe that non-lawyer ownership will not lead to significant access gains because (i) those in need of civil legal services often have few resources and, for them, legal aid is the answer, (ii) non-lawyer ownership is likely to be attracted to profitable sectors of the market, (iii) some legal services require the individualized attention of an experienced practitioner who charges high rates and the traditional worker owned partnership model may be the better approach in this context and (iv) there may be reasons other than price causing people not to address civil legal needs.

The paper also observes that, while the opponents of non-lawyer ownership often make claims that are too sweeping, there are genuine professionalism concerns raised by non-lawyer ownership such as (i) the potential for conflicting commercial interests such as insurers investing in personal injury firms, (ii) the potential for regulation to be by-passed such as the avoidance of the UK personal injury referral fee ban by insurer acquisition of legal practices, (iii) the potential for systematization of dubious practices, (iv) the potential for reputational concerns to limit the services provided to unpopular clients or riskier claims.

The paper observes with respect to professionalism challenges that:

… many of the most concerning new professionalism challenges identified in this article did not arise from non-lawyer ownership per se, but rather non-lawyer ownership that involves enterprises that also offer other services, and then only a sub-set of these enterprises. This suggests that jurisdictions adopting non-lawyer ownership should consider banning, or at least more heavily regulating, this type of ownership where the potential for conflict of interest is high, such as insurance companies owning personal injury law firms. When there is merely the potential for conflict or other professionalism concerns regulators should exercise their choice on when and how to intervene in the market. …

The paper notes that there are a number of regulatory policy choices to be made with respect to non-lawyer ownership. The paper encourages the development of more and better data to allow for more plausible claims to be made about the impact of non-lawyer ownership. Significantly, given the difficult judgment calls that are required, the paper calls for decisions to be made by regulators:

drawn from and drawing on a diverse set of opinions, including these two groups, but also consumer organizations, access advocates, other professional groups that deal directly with the public’s legal challenges (like doctors, educators, and accountants), and the academy.

Finally, the paper concludes that:

For policymakers the goal should not be deregulation for its own sake, but rather increasing access to legal services that the public can trust delivered by legal service providers who are part of a larger legal community that sees furthering the public good as a fundamental commitment. Carefully regulated non-lawyer ownership may be a part of achieving this larger goal, but only a part.

Some observations about the paper

In my view, this paper provides important insights for the ABS debate. As I have previously written, there is an unfortunate tendency to see ABS as utopian or dystopian while both the benefits and risks of ABS appear to be less than claimed by the duelists on both sides of the issue. The Robinson paper provides nuanced and thoughtful insight into non-lawyer ownership. It is right to conclude, as Mr, Robinson does, that ABS is no replacement for legal aid. Clearly, there are some legal services for which non-lawyer investment bears little advantage and there are consumers of legal services for whom market-based innovations will be of little import. As the ABS Working Group reported in February 2014, “it would be wrong to suggest that ABSs are a panacea”[iii]. But is wrong to dismiss any proposal on the basis that it is not a silver bullet.

I think that Mr. Robinson rightly observes that, at least at the outset, non-lawyer investment is most likely to focus on particular areas of practice particularly those which are lucrative and where capital can be put to use. Personal injury appears to be one such area. While it is likely right to be sceptical about efforts by existing practitioners to protect lucrative turf, it is also at least questionable whether it would be worth permitting ABS if the practical effect was primarily to partly consolidate the existing personal injury market rather to than expand the legal services that are provided in other areas. We should think hard about the likely impact of ABS in Canada taking into account Mr. Robinson’s insight that different geographic markets and different market sectors likely respond differently to non-lawyer investment.

Finally, Mr. Robinson’s focus on the interests of different investors is important. Mr. Robinson has written cogently about the professionalism concern that insurer-owned personal injury firms create systemic conflicts risks. The same concern can be raised about title insurer, mortgage lender or real estate brokerage ownership of real estate practices. While allowing access to economic and social capital is attractive, it is important to be careful about potentially conflicting interests of the capital providers.

As the title of this article is intended to convey, this “Harvard study” clearly advances this discussion. But it does not end it.

_______________________

[i] John Suh, CEO of Legal Zoom, suggested otherwise on March 6, 2014 at the Harvard Program on the Legal Profession conference entitled Disruptive Innovation in the Market for Legal Services.

[ii] and claims management companies

[iii] Para. 119 of the February 2014 LSUC ABS Working Group Report

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Self Regulation

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

Indepedence and self-regulation

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

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

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

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

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

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

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

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

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

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

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

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

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

Recommendation 11 from the Futures Initiative report is that:

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

As the Report says:

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

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

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

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

__________________________

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

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

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

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

 

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Not Both Ways

You Can’t Have It Both Ways

First published on slaw.ca

Either limit the regulatory monopoly or provide for the efficient and effective delivery of legal services for all legal problems

Access to justice and legal services is a central challenge both for society and for the legal profession. The extent to which members of the public are unserved, under-served or inefficiently served is a difficult issue for lawyers being both a challenge to existing practice and an opportunity for innovation.

As suggested in earlier columns, it seems to me that this access question raises central ethical questions. If there are some legal services which are not provided by lawyers[i], how can the current regulatory restrictions be justified for those services. If there are some legal services that can be effectively and properly be provided in other ways, how can current regulatory prohibitions against other means of legal service delivery be justified.

Broadly speaking, there are three potential supply-side policy responses[ii] that arise when one examines unmet legal needs. The first is now of long-standing. It is clear that a fully trained lawyer is not necessarily required for the effective and proper delivery of all legal services. Whether by expansion of paralegal scope of practice or by introducing new types of paraprofessionals, this is one of the tools to consider. The second is the controversial topic of alternative business structures which is essentially about accessing new resources, financial capital as well as business and technological, to develop new ways of providing legal services beyond the small professional consultancy model. The third is not yet well understood. If we cannot find ways to effectively have regulated lawyers, paralegals or alternative providers deliver legal services in some areas, there can be no justification for prohibiting anyone but licensees from servicing those areas.

There are two different area of demand side perspectives to consider. The first is areas of demand that are currently served by lawyers and paralegals. The second is areas of demand that are currently unserved or underserved. The point of this column is to help better understand the second by reference to a recently released study.

In 2013, the UK Legal Services Research Centre released a report entitled Civil Justice in England and Wales. There are many points of interest but I only propose to highlight a few.

The first is that the study found that many “justiciable” problems are not seen by the public as being “legal” problems. To quote the report:

Just over 10 per cent of problems reported through the 2010 CSJPS were characterised by respondents as “legal‟ (despite all problems involving justiciable issues), with 45 per cent being put down to “bad luck‟ or “part of life‟. Almost a third of respondents had no understanding of their rights at the time they first experienced problems, with a further one fifth having only a partial understanding.

Obviously, if someone does not even understand that a justiciable problem is legal in nature then legal assistance will not be sought. This practical observation is reflected in the further observation that:

Respondents sought advice for their problems from a wide range of advisers. Solicitors were the most commonly used source of advice – although Citizens Advice Bureaux, local councils and the police were also frequently used. Use of the Internet for advice seeking was observed to have increased still further to 24 per cent of problems. This continued the upward trend from 19 per cent in wave 1, 16 per cent in the 2006-9 CSJS, and just 4 per cent in the 2001 CSJS. The manner of conclusion of problems was, unsurprisingly, related to problem resolution strategy. For example, those who obtained advice were more likely to see their problem conclude through a formal process.

While it is perhaps reassuring that solicitors were the most common advisors for legal problems, the explosion of using the internet for advise seeking is noteworthy. But the limited use of legal advice is also significant. For those who sought advice in respect of justiciable issues, 25.9% sought advice from a barrister or solicitor. A broad range of other non-legal advisors also provided assistance.

This UK research helps us better understand similar Canadian research. In 2009, the Federal Department of Justice released The Legal Problems of Everyday Life. This report helps us explore the nature of justiciable problems experienced in Canada. The following chart from The Legal Problems of Everyday Life shows both the nature of justiciable problems and the those that cause problems for the public

Problem Type Number of
Problems Overall
Number of Problems
That Made Daily Life
Difficult
Per Cent
Consumer 1,480 639 43.2%
Employment 1,421 978 68.8%
Debt 1,444 721 49.9%
Social Assistance 49 38 77.6%
Disability Pensions 48 43 89.6%
Housing 95 65 68.4%
Immigration 35 29 82.9%
Discrimination 91 64 70.3%
Police Action 103 59 57.3%
Family: Relationship Breakdown 224 208 85.2%
Other Family Law Problems 68 63 92.6%
Wills and Powers of Attorney 330 228 79.0%
Personal Injury 161 136 88.9%
Hospital Treatment
and Release
86 69 84.1%
Threat of Legal Action 51 29 65.9%
Total 5,655 3,369 59.6%

The Legal Problems of Everyday Life (at p. 56) is the source of the information noted in an earlier column that legal assistance is sought for only 11.7% of justiciable problems.

By contrast, 16.5% of those surveyed took no action at all but for a reason, 22.1% sought assistance but not legal assistance and 44.0% handled the problem on their own. Only 5.7% took no action because they felt that the problem wasn’t important enough.

The analysis of the use of non-legal assistance to address justiciable problems is interesting:

Understandably, respondents experiencing problems involving the threat of legal action were least likely to use a non-legal source of assistance, 9.8 per cent …. On the other hand, respondents experiencing a personal injury problem were most likely to consult a non-legal source of assistance, 42.2 per cent of all people experiencing a problem of that type …. Employment, 35.8 per cent …, housing, 33.7 per cent … and problems related to disability benefits, 33.3 per cent … are other areas in which respondents were relatively highly likely to resort to non-legal sources of assistance. It is particularly interesting that 35.8 pre cent … of respondents who experienced a problem related to wills and powers of attorney said they used some form of non-legal assistance. This is a problem area that would seem to be pre-eminently within the legal domain.

It is noteworthy that people with personal injury problems and problems relating to wills and powers of attorney are particularly likely to seek non-legal advice. It is less surprising that employment, housing and disability benefit problems are relatively likely to be addressed with non-legal assistance.

For the 16.5% who did not address their justiciable problem (and did not seek any assistance yet thought their problem important), approximately one-third thought that there was nothing that could be done, approximately 10% were uncertain of their rights and approximately 10% thought that taking action would take too much time.

In 2010, the Ontario Civil Legal Needs Project released its report Listening to Ontarians. This study proceeded on a different basis than the two studies previously mentioned. Rather than examining all justiciable problems (whether or not understood as legal problems), the Ontario Civil Legal Needs Project considered what Ontarians understood to be a “civil legal problem or issue”[iii]. As the report put it:

Our survey indicated that 35 per cent of low and middle-income Ontarians said they had experienced a civil legal problem or issue in the last three years. People mentioned a broad range of problems or issues that caused them or someone in their household to need legal assistance, including problems with a family relationship, wills and powers of attorney, real estate transactions, housing or land, employment, personal injury, money or debt, legal actions, disability-related issues, traffic offences, immigration, and small or personal business issues.

Yet even where a legal problem or issue was recognized as such, approximately 30% did not obtain legal assistance and

One in three respondents among low and middle-class Ontarians said they prefer to resolve their legal needs by themselves with legal advice, but not necessarily with the assistance of a legal professional. Legal advice was sought from a variety of sources, both legal and non-legal. In addition, many civil problems are resolved outside the formal justice system.

What can be taken from all of this is that a very low proportion of justiciable problems are addressed with legal assistance. Non-legal assistance is more common than legal assistance. Justiciable problems are not understood to be legal problems. Even where a problem is understood to be a legal problem, a substantial proportion of the public does not seek legal assistance.

In this context, it is clearly difficult to justify permitting only lawyers (and in Ontario regulated paralegals) to engage “in conduct that involves the application of legal principles and legal judgment with regard to the circumstances or objectives of a person” to quote the Law Society Act (Ontario). If only “legal service providers” are permitted to assist then ways must be found for legal services to be available and desirable. Alternatively, there is no real alternative but to allow others to provide these services.

The choice must ultimately be between limiting, or even ending, the regulatory monopoly and ensuring that services can can actually be delivered within the regulated sphere.

_________________________

[i] and regulated paralegals in Ontario and notaries in British Columbia

[ii] I examine this issue for the purposes of this column without examining two other hard access questions namely (i) the source of payment for legal services (i.e. legal aid or pre-paid legal insurance) and (ii) the extent to which the complexity of the administration of justice is part of the access problem.

[iii] The Quantitative Report by Environics states at p. 15 that in the survey, “respondents were asked to volunteer the kinds of issues and problems that they had experienced for which they had sought legal assistance or for which they thought legal assistance might have been helpful even though they did not avail themselves of such assistance”.

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Fear of Walmart

Professionalism and the “Fear of Walmart”: Would You Like Some Bananas With That Tort?

In 1983, the American Bar Association adopted the ABA Model Rules that are the basis for most of the current codes of conduct in the United States. The drafting body was known as the Kutak Commission. The Kutak Commission proposed a rule permitting, but regulating, non-lawyer ownership of law practice entities. Proposed Model Rule 5.4 would have permitted a lawyer to be “employed by an organization in which a financial interest is held or managerial authority is exercised by a non-lawyer . . . but only if the terms of the relationship provide in writing that”:
  • There is no interference with the lawyer’s independence of professional judgment or with the client-lawyer relationship;
  • Information relating to representation of a client is protected as required by Rule 1.6;
  • The arrangement does not involve advertising or personal contact with prospective clients prohibited by Rule 7.2 or 7.3; and
  • The arrangement does not result in charging a fee that violates Rule 1.5.

The Kutak Commission said over thirty years ago that “[t]he assumed equivalence between [nonlawyer ownership] and interference with the lawyer’s professional judgment is at best tenuous” and “[a]dherence to the traditional prohibitions has impeded development of new methods of providing legal services”[1]. The response to the Kutak Commission’s proposal generated a new phrase, “Fear of Sears”[2]:

One question and its answer derailed any possibility of the MDP and corporate investment proposal during the House of Delegates debate on the package of Kutak Commission proposals; “Does this mean Sears can open a law firm?’” Geoffrey Hazard, Reporter for the Commission said “Yes,” and the debate ended with a resounding defeat of the proposal. The “fear of Sears,” as it has come to be called, conjured images of major retailers selling not only insurance and financial advice through in-store affiliates, but legal services. The attractive possthility that ordinary Americans might he able to obtain simple legal services quickly and easily was of no matter. …

In a striking parallel, the first statement made in Convocation in February 2014 in response to the Report of the ABS Working Group was virtually identical, other than referring to Walmart rather than Sears. “Fear of Walmart” may be the new “Fear of Sears”. A respected life bencher with 50 years in practice said in Convocation[3]:

And then, by the same token, I could put a sign out to say today we’ll do two wills for the price of one. Come to us because we’re selling bananas.

… My view is the moment we permit our profession to go into the Walmarts or the Best Buy stores or any of the big box places, somehow it loses some of our professionalism.

This contrast between “professionalism” and the provision of legal services in a Sears or a Walmart is obviously emotionally evocative. Many lawyers clearly are offended by the very idea. But what exactly is in issue when professionalism is said to be put at risk is not so clear. One academic has said[4]:

… “professionalism” is a feel-good term, but a term without content. We may think we can recognize good professional behavior when we see it, but the terms “professional” and “professionalism” tend to mean what a given speaker wants them to mean. Too often, people who invoke professionalism use it to stop analysis rather than further it. In short, professionalism tends to be a rallying cry, not a concept.

The claim that professionalism would be put at risk were Sears or Walmart to offer legal services could mean a number of different things. The underlying concern could be that:

  • client interests such as protection of “professional values” confidentiality, avoidance of conflicts, independence of legal advice, competent provision of services and zealous representation could be compromised by business interests and culture;
  • properly serving clients requires a “professional environment” on the theory that the trappings of professionalism support client confidence in the services provided;
  • existing legal practices might not effectively compete with a Sears or a Walmart and so allowing such competition threatens “professional self-interest”;
  • allowing a Sears or a Walmart to provide legal services devalues the status and self-worth of lawyers as professionals by not maintaining “professional dignity”; and
  • allowing any legal services to be provided other than by fully independent lawyers will lead to the “collapse of the profession”.

The issue of non-lawyer ownership interests in legal practices is not the only context in which the “idiom of professionalism”[5] has been used in debate about legal ethics over the years. While it would seem strange to us now in Canada, it was once argued that in-house lawyers should not be allowed to give legal advice to their employers because their independence of judgment would be comprised by their employment[6].

When automobile clubs and trade unions offered group legal service plans in order to take advantage of group purchasing power, lawyers attacked those plans as compromising professional independence[7].

For many years, lawyers provided legal services priced on the basis of fee tariffs which were sought to be justified on the basis that price competition would compromise professionalism[8].

Advertising by lawyers was similarly long prohibited[9]. The following passage from a U.S. judgment striking down a categorical ban on advertising by lawyers is instructive. The Court observed that the state bar placed:

particular emphasis on the adverse effects that it feels price advertising will have on the legal profession. The key to professionalism, it is argued, is the sense of pride that involvement in the discipline generates. It is claimed that price advertising will bring about commercialization, which will undermine the attorney’s sense of dignity and self-worth. The hustle of the marketplace will adversely affect the profession’s service orientation, and irreparably damage the delicate balance between the lawyer’s need to earn and his obligation selflessly to serve. Advertising is also said to erode the client’s trust in his attorney: Once the client perceives that the lawyer is motivated by profit, his confidence that the lawyer is acting out of a commitment to the client’s welfare is jeopardized. And advertising is said to tarnish the dignified public image of the profession.

The common thread of these historical examples is that lawyers have sought to avoid bing subject to various market forces on the basis that market exposure compromises “professionalism”. Lawyers have opposed the employment of in-house lawyers, the provision of group and union legal plans, advertising and price-competition all on the basis that professionalism/professional independence would be compromised.

But as can easily be seen, each of these positions is consistent with self-interest disguised as altruism. And in retrospect, the apocalyptic claims made to avoid or reduce market competition have not proven to be correct. The sky has not fallen. Nor has the sky-fallen in other jurisdictions where non-lawyer investment in legal practices has been permitted.

How then to think about the claim that “Walmart law” threatens professionalism? The balance of this column sketches out responses that question[10].

It is important to carefully examine whether “Walmart legal clients” would be at risk of compromised legal services and loss of the “professional values” to which they are entitled such as protection of confidentiality, commitment, candour and competence and freedom from conflicts. I consider this the truly central question. While some simply state, as an article of faith, that the provision of legal services and professional values will inevitably be compromised, this is far from obvious to me. As discussed elsewhere, the actual evidence appears to be to the contrary. No doubt some approaches will carry undue risk. But it seems very unlikely that only the traditional lawyer-owned and controlled practices can possibly provide proper legal services. Being thoughtful about new approaches to legal regulation seems to me to likely be the way to approach the very proper issue of protection of “professional values”. If this is what professionalism is really about then I’m all in favour.

It is difficult to imagine that protecting the “professional environment” is really at issue so far as “Walmart legal clients” are concerned. The point of allowing “Walmart law” is to allow greater consumer choice. There is good evidence that many people with legal problems do not obtain legal services at all let alone in a “professional environment”. Providing new ways of accessing and delivering legal services is intended to address these unserved legal needs. It is difficult, at best, to accept that these potential clients are better off receiving no legal services at all than having to endure a retail environment. And while lawyers may lose some clients, presumably clients will choose the environment that suits them best.

Professional self-interest” of course causes lawyers to fear loss of business to new types of legal service providers. The first response to this concern is it is not a legitimate justification for law society regulation. A second response is that lawyers must not think much of their services if they think that their clients will so easily be lost. A further response is that competition from new types of legal service providers will cause lawyers to innovate in response to new competition. There is also a claim from some that these new types of legal service providers will engage in predatory pricing, drive all lawyers out of the market and then jack up prices. However, there is no evidence for this claim and no economic theory or analysis cited in support.

Fear of loss of “professional dignity” may well underlie, at least in part, the reaction of some lawyers to “Walmart law”. For lawyers who have worked hard to well and ethically serve their clients and develop their professional reputations, the title of “lawyer” is hard earned and jealously protected. But it is difficult to see any substantial basis for the fear of loss of professional status nor that protecting professional status could be a proper reason to continue to prohibit new ways of providing legal services.

As for “collapse of the profession”, there is no evidence for any such claim from the countries where non-lawyer ownership has been permitted. Nor is there any serious explanation for how this might actually occur[11]. Not being certain how things may evolve is no basis for prohibiting all change especially when problems that may arise very likely can be addressed as they arise.

The point of this column is not so much to argue each of these points but rather to highlight that claims of endangered professionalism are quite imprecise. The invocation of professionalism tends “to stop analysis rather than further it, … [it is] a rallying cry, not a concept”.

This is not to suggest that lawyers making such claims necessarily do so disingenuously or as mere advocacy. Rather care is required in discussion so that the true basis of any claim is made clear, the rationale and evidence for the claim is elaborated and as such can be fairly addressed.

Merely asserting that new ways of providing legal services are inconsistent with professionalism is to call on emotional and intuitive responses rather than to genuinely advance the discussion. A deeper discussion that genuinely considers the advantages and risks of liberalization is required.


[1] Ted Schneyer, Professionalism as Pathology: The ABA’s Latest Policy Debate on Nonlawyer Ownership of Law Practice Entities, 2013, 40 Fordham Urb. L.J. 75

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

[3] Law Society of Upper Canada, Transcript of Convocation, February 27, 2014, pp. 132 to 133

[4] Thomas D. Morgan, Calling Law a “Profession” Only Confuses Thinking About the Challenges Lawyers Face, 2011, 9 University of St. Thomas Law Journal 542

[5] Ted Schneyer uses this phrase in his article Professionalism as Pathology

[6] Ted Schneyer, Professionalism as Pathology: The ABA’s Latest Policy Debate on Nonlawyer Ownership of Law Practice Entities, 2013, 40 Fordham Urb. L.J. 75 at para. 94 et seq

[7] Stephen Gillers, How to Make Rules for Lawyers: The Professional Responsibility of the Legal Profession, 2013, 40 Pepperdine Law Review 365 at p. 377 et seq

Ted Schneyer, Professionalism as Pathology: The ABA’s Latest Policy Debate on Nonlawyer Ownership of Law Practice Entities, 2013, 40 Fordham Urb. L.J. 75 at para. 96 et seq

[8] Waterloo Law Association et al. v. Attorney-General of Canada, (1986) 58 OR (2d) 275

Stephen Gillers, How to Make Rules for Lawyers: The Professional Responsibility of the Legal Profession, 2013, 40 Pepperdine Law Review 365 at p. 380 et seq

Ted Schneyer, Professionalism as Pathology: The ABA’s Latest Policy Debate on Nonlawyer Ownership of Law Practice Entities, 2013, 40 Fordham Urb. L.J. 75 at para. 99 et seq

[9] Stephen Gillers, How to Make Rules for Lawyers: The Professional Responsibility of the Legal Profession, 2013, 40 Pepperdine Law Review 365 at p. 383 et seq

Ted Schneyer, Professionalism as Pathology: The ABA’s Latest Policy Debate on Nonlawyer Ownership of Law Practice Entities, 2013, 40 Fordham Urb. L.J. 75 at para. 101 et seq

[10] Itis not just the practice of law in a Walmart or a Best Buy that is in issue. Rather “Walmart law” is a useful label for non-traditional provision of legal services. “Walmart fear” is the fear of that change.

[11] Claims have been made that the United States provides an example of problems with non-lawyer ownership of legal practices. This is a peculiar claim as the United States does not allow non-lawyer ownership and has the harshest approach to unauthorized practice. What is true is that some states have entirely deregulated some areas of legal service such as residential real estate. That is quite different than allowing non-lawyer investment in legal practices subject to appropriate rules governing conflicts, competence, committment, candour and the like.

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Reform but not change

Being in Favour of Reform, Just Not Change

To a hammer, everything is a nail

There is an old aphorism that “To a hammer, everything is a nail”. The aphorism reflects the centrality of perspective. Where you stand very much affects what you can (or want to) see.

I think that Professor Julie Macfarlane makes this point in the context of discussions about access to justice. Professor Macfarlane has carefully researched and thoughtfully written about the reality that most family law litigants don’t use lawyers. She speaks about this issue with lawyers yet, as she seems to say, the discussions with lawyers about this topic are, at best, stilted. I suspect that this is because lawyers see the access to justice issue from their professional perspective, are rightly proud of the work that they do for clients and have difficulty processing the access to justice issue from any perspective other than their own.

So the main point of this column is to try to address the A2J question from a different perspective and to use that perspective to look at the solutions offered.

Middle Income Access to Justice

In 2012, Professors Trebilcock, Duggan and Sossin published Middle Income Access to Justice. The book drew on 23 surveys of the public’s experience with justiciable problems undertaken across 13 countries.

The importance of this approach is that it looks at justiciable problems experienced by the public rather than looking at what lawyers do. The punch line is that there is a difference. Lawyers know what lawyers do. Lawyers fairly believe that lawyers do good things. So lawyers don’t see problems. To a hammer, everything is a nail.

The 2009 Ontario Civil Legal Needs Project is examined in the book by Professors Baxter, Trebilcock and Yoon. They examine the data seeking to determine what predicts the decision to seek legal advice. In other words, when do the members of the public go to lawyers for help? The answer is that it is the problem type significantly predicts whether a lawyer is consulted. And there are four problem types that predict the involvement of lawyers namely criminal, family, wills and powers of attorney and real estate. While not significant in a statistical sense, personal injury comes a close fifth on the numbers.

That the public goes to lawyers for criminal, family, wills and powers of attorney, real estate problems and personal injury problems should come as no surprise to lawyers. This is pretty much exactly what lawyers say that they do for individuals. In 2005, the Law Society of Upper Canada Sole Practitioner and Small Firm Task Force reported that lawyers in sole practice and in small firms generally represent individuals (77%) and that these lawyers practice real estate (46%), civil litigation (39%), wills, estates, trusts (35%), corporate and commercial (33%) and family (26%).

What do lawyers do? What legal needs exist?

Given that the public says that it uses lawyers for criminal, family, wills and powers of attorney, real estate problems and personal injury problems and that this is what lawyers say they do, we can have a strong degree of confidence about the nature of the practice of law for individuals.

Solicitors do real estate work, assist with wills, estates and trusts and also do some corporate and commercial work (presumably for small businesses). Litigators do criminal, family and personal injury litigation. Some lawyers of course do solicitors work as well as litigation.

That these are the categories of work done by lawyers makes obvious sense. Members of the public with significant assets use solicitors to help them with real estate transactions and in dealing with inheritances made or received. Members of the public who have trouble with the criminal law, who are in failed family relationships or who seek compensation for significant personal injury use litigators.

But what lawyers don’t see and cannot appreciate is that this amounts to a relatively small portion of the justiciable problems experienced by members of the public. According to the 2009 Ontario Civil Legal Needs Project, the public only seek legal assistance in respect of 11.7% of justiciable events.

Said simply, the public use lawyers for less than 15% of the justiciable events experienced by them. Said another way, what is 100% of lawyers’ practices is less than 15% of the public’s legal needs.

What about the other 85%?

Of the over 85% of justiciable problems that don’t attract legal attention, approximately 60% are consumer problems, money/debt and employment problems. A smallish proportion is in respect of discrimination, housing, hospital treatment/release, welfare benefits, disability benefits, immigration and other matters.

Should we care about the 85% of legal needs that are not addressed by lawyers? For the legal philosopher, the answer must be yes. As Professors Trebilcock, Duggan and Sossin put it “Most conceptions of the rule of law assume equality before the law and hence access to law or the justice system as one of its fundamental predicates”. And as Professor Gillian Hadfield argues, it seems quite wrong that the businesses on the other side of these justiciable events have expert legal assistance while the public does not. For the Law Society, the answer must also be yes given its public interest mandate. For individual solicitors and litigators who are struggling to do a good job and make a decent living, it is not surprising that this 85% is not on their radar.

The next question is why are lawyers used for less than 15% of legal needs? This is not well examined but I think the reason is clear. Lawyers are small business people who sell their time and expertise to help members of the public solve their problems. Taking into account the incomes reasonably required by university-trained highly intelligent professionals and their overheads, the fees for lawyers solving problems are measured in the hundreds of dollars per hour of time spent.

Real estate transactions and issues with inheritances are economically significant enough that the cost of a lawyer is justified. Personal injury claims work economically where the compensation likely attainable is large enough to justify legal fees.

Criminal law and family law are more problematic. Criminal law problems undoubtedly require legal assistance but accused persons often cannot afford the fees. As a society, we (mostly) address the importance of criminal law problems and the inability of those with criminal law problems to pay for legal assistance through legal aid.

Family law is the problem child from the lawyers perspective. The issues are difficult enough to justify legal assistance. People often cannot simply choose to ignore the family law issues whether because custody of children is at issue, support is needed or assets are being divided. Most people don’t use lawyers for family law problems. Not because they don’t want to but rather because they can’t afford to pay what turns out to be a large and unpredictable cost.

As for the remaining 85%, the fees of the legal expert are out of proportion with the size of the problem to be solved and, unlike criminal or family law, the public isn’t forced into the legal system.

What to do about the 85%?

So what to do? We could ignore the 85% and hope that no one notices. This seems to be the current approach.

We could hope that society comes to see these legal needs as being as compelling as health or education and provide legal aid funding. There are two problems with this approach. First, it won’t happen. Second and more important is that it is wrong to require society to pay for solutions the cost of which is disproportionate to the problem addressed. Even people with sufficient resources generally do not use lawyers for these problems because of the cost benefit equation. The business model of the small business lawyer does not provide an efficient way to address the 85% whether privately funded or funded by legal aid.

We could (and in Ontario have) allow regulated paralegals to address a portion of the 85%. While the business model is essentially the same, paralegals charge less and so can efficiently address some of the 85%. Small claims court work is a good example. But the advocacy provided by regulated paralegals solves at best a small part of the 85% puzzle.

There are two remaining choices. Neither will be attractive to practising lawyers. The first is to end the monopoly. If lawyers and regulated paralegals can’t efficiently address over 85% of legal problems then it makes sense simply to get out of the way. It makes no sense to prohibit anyone but a member of the Law Society from doing work that members of the Law Society don’t do.

The alternative choice is to encourage innovation by regulatory liberalization permitting other ways of delivering legal services. Having small businesses spend expert professional time on problems is not the only way to address problems. Technology and business processes can provide lower cost solutions. Larger businesses with scope and scale can deliver services in a way that the small business professional cannot.

My preference is to allow new ways of providing legal services under regulatory supervision. I am uncomfortable with the deregulation alternative. But I don’t see how doing nothing is acceptable.

Returning to the 15% (actually the 11.7%)

Criminal, family, wills and powers of attorney, real estate and personal injury problems make up the 11.7% of justiciable problems for which the public turn to lawyers for assistance. These are problems that lawyers see and seek to solve for their clients.

For criminal law, there is a clear issue of access to justice. But the answer is mostly, if not entirely, proper legal aid to ensure that competent criminal lawyers are engaged to protect fundamental constitution rights.

For real estate transactions, there is no reason to think that access to legal services is an issue. While there are likely efficiencies available through new ways of providing legal services, the issues in real estate law aren’t really about access.

For wills and powers of attorney, the issue is a bit more complicated. For those with property of sufficient value, the current system no doubt works reasonably well in terms of access. As in real estate, services could likely be more efficiently. But, it is also clear that the majority of Canadians do not have a will nor a power of attorney. For the majority of Canadians, wills and powers of attorney are in the 85% not the 15%. But lawyers do not see this as an issue because lawyers ably serve the minority of the public who have sufficient assets in their estate or a sufficient inheritance to justify paying lawyers’ fees.

For personal injury law, the contingent fee substantially addresses the access issue. However, the small business professional model limits the risk that can be taken by personal injury lawyers. With limited capital and limited volume, personal injury lawyers inevitably will tend to take on claims that are most certain to pay off. And it is common that clients are required to fund disbursements which may or may not be affordable.

The greatest access problem in the 15% is in family law. Family law litigants often start off with a lawyer but then try to represent themselves because legal fees are large and unpredictable and the amount of the family assets do not justify the legal fees. Professor Macfarlane’s research indicates that 70% of family law litigants are unrepresented. It seems that many start in the 15% but most end up in the 85%. Family law lawyers do not have the volume of business or the working capital to work on a fixed or predictable fee basis. The hourly rate legal model is unable to reduce price without reducing lawyers incomes. Technology and process innovation are not brought to bear because of lack of investment capital and expertise.

Improving access to justice in family law is complicated. Part of the answer may be allowing paralegals to do some of the advocacy work that is no longer being done by lawyers. Part of the answer may be in reducing the complexity of the process by which family law disputes are resolved. But there is reason to think that allowing evolution of business structures can be part of the solution as well. In Australia, firms which have taken advantage of access to external capital are now providing fixed fee family law services. As well, the well-capitalized Australian firms (e.g. Shine Lawyers, Slater & Gordon) fund disbursements in personal injury matters as well as fees.

To return to the beginning, it seems that it can be difficult for lawyers to appreciate the access issues that exist in our legal system. This may be because our perspective is inherently limited and we are rightly proud of that which we do. There is also a natural fear of change and, for some, a tendency to exaggerate how well things are going and how badly things could be if the status quo is not maintained. In my view, there is a compelling need for reform to advance access to justice. The scholarly thinking (e.g. Hadfield, Semple) and the actual evidence shows benefit, not harm, from allowing new ways of providing legal services. We actually need to change.

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Utopia, Dystopia and ABS

Utopia, Dystopia and Alternative Business Structures

I’ve spent a lot of time over recent months thinking about alternative business structures and how to think about regulatory liberalization.

Except in very limited circumstances[1], only lawyers[2] can have an ownership interest in a legal practice whether organized as a partnership, a limited partnership or a professional corporation. As a practical matter, only legal and strictly ancillary services can be offered to clients by a legal practice.

Individuals and small businesses are overwhelmingly served by lawyers in sole practice or in small firms. Lawyers sell their time to clients. Time is measured in billable hours. The inexorable arithmetic of the number of hours in the year and the cost of overhead together with the market alternatives of most people who have the capacity to become lawyers results in hourly rates of $150/hour and up.

The current business structure is selling time by the hour in sole and small practice with the financing of the practice by the lawyer out of his or her own resources (or by personal bank borrowings). I think of this as the small professional consultancy structure.

In a recent paper[3], Professors Iacobucci and Trebilcock discussed constraint of law firm business structures using two separate economic concepts. Under the “theory of the firm”, there can be economic advantages for owners (and customers) not to have to go out into the market but instead to obtain related services within the firm. Under the heading “capital structure”, constraining access to capital limits what a business can do because capital is required for business and technological innovation and because owners who can only invest their personal resources are naturally conservative. Few individuals are willing to risk everything on a risky innovative venture.

In another recent paper[4], Professor Ray Worthy Campbell looked at the topic of innovation and scholarly thinking about Disruptive Innovation. The point made is that some innovations are disruptive and that some are sustaining. It is difficult for a successful business to adopt a disruptive innovation. In the 1970s, IBM was Big Blue – the manufacturer of 360 and 370 main frame computers. IBM didn’t and couldn’t bring the personal computer to market. Young entrepreneurs like Bill Gates and Steve Jobs came from their garages not from IBM.

For a lawyer, there are sustaining innovations that are easily adopted; like memory typewriters, word processors, fax machines, desktop/laptop computers, smart phones and the like. These innovations sustain the consultancy and are affordable by small consultants. But other innovations are disruptive of the consultancy and require resources and expertise out of the reach of the small consultant.

Professor Campbell discusses three business paradigms; “solution shops”, “value chains” and “value networks”. He says that lawyers, doctors, detectives, engineers operate “solution shop” businesses. To my way of thinking, there are all consultancies with the size of the consultancy being tied to the economic size of the problem seeking a solution.

A “value chain” transforms inputs into products by a process. Think Ford, GM, Chrysler or Google Translate. A “value network” links customers for collective advantage. Think Ebay, an insurance company or Home Hardware. The point is that the competencies required for these different business types are very different. A professional consultancy is very unlikely to evolve into an essentially different type of business.

So why is any of this interesting or possibly useful? One answer is that there are substantial areas in which legal needs are going unfilled because the legal services are simply too expensive according to the potential client. But the only way to reduce price under the small consultancy model is for lawyers to reduce their incomes. In contrast, value chain businesses can develop business and technological processes to deliver services differently. In the 1970s, I worked part time while a student for H&R Block doing tax returns using pen, paper and a calculator[5]. Now I use Quicken downloaded from the internet. Quicken now is cheaper than I was then – and more competent too! While law is more complicated than tax return preparation, technology already exists to address legal problems and the pace of development is only accelerating.

Another answer is that lawyers practicing alone in small consultancies don’t have access to business and legal infrastructures that would make practice better both for the lawyer and for the client. Many lawyers would rather practice law and not have to run a small business as well. Lawyers operating as smalls and soles tend to reinvent the wheel rather than draw on existing knowledge or on the expertise of others.

A third answer is that legal service innovations are occurring but not involving lawyers because lawyers aren’t allowed to combine their legal practices with the innovators[6]. Regulation of lawyers doesn’t stop innovation. It just dictates where innovation won’t happen.

The reformer sees the possibility for clients to be served who are not now being served at all, for current clients to be served better and for lawyers to be innovators rather than to have innovation done to them.

The risk for the optimistic reformer is utopian thinking. It is unlikely that legal practice will be transformed. There is no doubt real value in small consultancies. Lawyers are, by nature, independent and sceptical. Many are probably well suited to practising on their own. And being an employee in a large enterprise isn’t always great. Some employers are better than others. There are advantages and disadvantages. And disruption means that some firms will be winners and some will be losers.[7]

So what is the issue on the other side. There are essentially two issues. The first is protectionism which is rarely, if ever, expressly stated. Lawyers, like everyone else, fear change that could adversely affect them. This fear of adverse consequences of course gets dressed up as something else; sometimes consciously and sometimes not. The deeper and more important issue is independence, both of the profession and of the individual lawyer as professional advisor/advocate.

The pessimistic conservative fears a dystopia; that allowing any alternative business structures will transform the practice of law. Lawyers will no longer be in charge of their practices or of their profession. The rule of law and our free society will be imperilled. Any change could mean total change.

The dystopian naturally does not see sufficient advantage in reform to justify perceived real risk of devastating change. Any change may lead to this dystopia. The dystopian looks in vain for promises of transformation of access to justice and legal services that could justify such a risk but there can be no such promise.

The truth of the matter is that the advantages of ABS liberalization are probably limited and that the risk of significant harm from ABS liberalization is probably remote and capable of mitigation.

Where I end up is that we should try to be more sensible and less visionary in our approaches and in our justifications. It is not necessary to throw caution to the winds in order to permit greater innovation. We should look hard at specific rules and think clearly about whether there are sensible less restrictive alternatives.

In Ontario, the Law Society Act instructs that the Law Society has duties to (i) maintain and advance the cause of justice and the rule of law, (ii) facilitate access to justice for the people of Ontario and (iii) to protect the public interest. All of these duties are in play in the alternative business structure discussion. The reformers see the prospect for greater access to justice (and legal services). The conservatives fear impairment of the cause of justice and the rule of law. Both seek to advance the public interest. Neither is wrongly motivated.

But there is another relevant instruction in the Law Society Act which states as a principle that:

“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.”

I think that there is much wisdom in this pragmatic non-utopian non-dystopian principle. The issue of ABS regulatory liberalization is best addressed pragmatically and incrementally.

In sensible Canadian fashion, we should be able to renovate the kitchen without destroying the house. Throwing all caution to the wind risks real harm. Being unwilling to reform for fear of revolution fails to achieve attainable advantages but also ultimately risks radical change imposed by others.

 


[1] In BC, family members can own shares in a professional corporation. In Québec, regulated professionals can be partners and shareholders in multi-disciplinary corporation. There are a few, very few, Multi-Disciplinary Practices (MDPs).

[2] and regulated paralegals in Ontario

[3] Edward Iacobucci and Michael Trebilcock, An Economic analysis of Alternative Business Structures for the practice of law, Commissioned by the Law Society of Upper Canada for its ABS Symposium held October 4, 2013

[4] Ray Worthy Campbell, Rethinking regulation and innovation in the U.S. legal services market, 9 NYU Journal of Law & Business 1 (2012)

[5] In 1973, the HP Calculator was a new technological innovation. It was a sustaining innovation for consultancies including tax preparation.

[7] Which doesn’t necessarily mean that the people in the disrupted practices won’t find new and perhaps better opportunities.

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Bright Line Rule

A Bright Line Rule of Limited Scope

A decade ago, the Supreme Court of Canada introduced a new conflicts rule into Canadian law. The rule was fashioned from the ABA Model Rules of Professional Conduct. This new “bright-line rule” generated substantial controversy within the profession. In July, the Supreme Court released its decision in McKercher which both restated and reformulated the “bright line” rule[i].

The “bright-line rule” as first articulated in Neil provided that a lawyer could not act in a matter directly adverse to the immediate interests of a current client without proper consent. The impact of this rule was said to be somewhat limited by the proposition that professional litigants, such as governments and chartered banks, could be taken as “broad-minded” such that their informed consent could be implied. Also, the Court emphasized judicial discretion as to remedy. Not all “bright-line” crossings would have consequences. For example, where a complaint was viewed by the court as tactical, a remedy could be denied.

The policy basis for the “bright-line rule” was reasonably clear. The rule guarded against impairment of client representation. The lawyer-client relationship might be compromised where a lawyer acted in a matter directly adverse to the immediate interests of his or her client. On the other hand, the lawyer might be tempted to “pull punches” so as not to offend the adverse client. The existing “substantial risk” principle might not fully protect against these risks.

However, there were real problems with this rule as formulated. The rule applied in situations where there was no real risk of mischief. Naturally, clients preferred to keep control by making clear that express consent was always required thereby defeating the ability to imply consent. While flexibility in remedy could be helpful where a remedy was sought, remedial flexibility was limited if any assistance in day-to-day conflicts clearance. And some law societies adopted the “bright line” as a conduct rule without any of the remedial flexibility largely on the theory that the law societies must adopt rules set by the court.

In McKercher, CNR submitted that the “bright-line” rule was bright and plain. Disqualification should follow where a lawyer acted in a matter directly adverse to the immediate interests of a current client. The Federation of Law Societies essentially supported CNR’s position saying that this was the intent of the Federation’s Model Rule. McKercher submitted that informed consent should be implied because CNR was the archetypal sophisticated client and that implied consent should not trumped by ex post facto refusal. The Canadian Bar Association submitted that the “bright-line” rule should be seen as presumptive so as not to apply where it could be shown that there was no real risk of mischief.

The Court accepted none of these approaches and instead clarified and materially modified the “bright line” rule. First, the Court made clear that “the bright line rule applies only where the immediate interests of clients are directly adverse in the matters on which the lawyer is acting” and then only where the clients are adverse in legal interest. Mere adversity is not sufficient to engage the rule. Direct adversity to immediate legal interests in the matter is required. The Court observed, “The main area of application of the bright line rule is in civil and criminal proceedings”.

Second, the Court effectively replaced the unworkable concept of implied consent with a limitation to the scope of the rule. The “bright line” rule does not apply in unrelated matters where “it is unreasonable for a client to expect that its law firm will not act against it”. Recognizing that cases where this scope limitation applies will be exceptional, this is a fundamentally important change. The fiction of implied consent is replaced with objective examination of what a reasonable client would expect. The nature of the client is no longer the only issue. For example, the nature of the relationship between the law firm and the client, the terms of the retainer, as well as the types of matters involved, are properly considered.

Third, the Court moved the issue of tactical objections from a factor to be considered as to remedy to a limitation of the scope of the rule. The Court particularly noted that “The possibility of tactical abuse is especially high in the case of institutional clients dealing with large national law firms”.

While the Court clearly rejected the proposition that the “bright line” rule is presumptive, the changes made by the Court to the scope of the rule clearly reduce apparent over-breadth by permitting consideration of essentially the same factors that would be considered if the rule were presumptive. Assessing reasonable expectations permits examination of the nature of the lawyer-client relationship and whether the nature of adverse retainer is such that the existing representation might be compromised. Where there is no real risk of mischief, an objection will presumably be considered to be tactical. In saying that the rule mainly applies in litigation and that the possibility of tactical abuses is especially high where large clients deal with large law firms, the Court appears to be sending clear signals about the intended application of the rule.

I think that what the Court has done is both subtle and significant. Previously, over-breadth in the “bright line” rule was thought tempered by the belief that large clients would be reasonable and that courts could address remaining over-breadth in exercising discretion as to remedy. But conflicts must be cleared day-to-day and overwhelmingly practicing lawyers, not judges, have to decide conflicts. The assumption of broadmindedness on the part of large clients turned out to be wrong. Understandably, no client gives up control that might be used to advantage. As well, large clients faced the invidious proposition that consent might be implied irrespective of the nature of their relationship with the lawyer and the nature and effect of the adverse claim.

The Court in McKercher also addressed the disqualification remedy. The Court reaffirmed that crossing the “bright line” does not automatically mean disqualification. As the Court said at para. 61:

… the courts in the exercise of their supervisory jurisdiction over the administration of justice in the courts have inherent jurisdiction to remove law firms from pending litigation. Disqualification may be required: (1) to avoid the risk of improper use of confidential information; (2) to avoid the risk of impaired representation; and/or (3) to maintain the repute of the administration of justice.

According to the Court, disqualification requires consideration of potential mischief (using the language from MacDonald Estate) whether misuse of confidential information, impairment of representation or harm to the administration of justice. Even if the “bright line” rule applies where there is no risk of mischief despite its newly limited scope, it appears clear that disqualification will not be available absent risk of mischief.

While emphasis was not given to the point, the Court elected to consider disqualification as a matter of its supervisory jurisdiction over the administration of justice rather than as a matter of fiduciary law. I think this important because it is a further indication that the “bright line” rule mainly applies to litigation. While fiduciary remedies such as equitable compensation and disgorgement may ultimately be available, it will be an exceedingly rare case where these remedies could be practically available where disqualification was not. Fiduciary remedies will not likely be available absent some real risk of harm.

The Court in McKercher made clear that lawyers had to apply both the “bright line” rule and the “substantial risk”[ii] principle in clearing conflicts involving current clients. But as a practical matter given the reduced scope of the “bright line” rule, it is difficult to see circumstances where the “bright line” would be crossed without the substantial risk principle not also being engaged. It is even more difficult to contemplate disqualification absent substantial risk of mischief.

Neither conception of the “bright line” rule urged on the Court “won” or “lost” in McKercher. Indeed, winning and losing shouldn’t matter on policy issues. But the result is a workable rule that requires lawyers to carefully assess retainers adverse to current clients. The McKercher analysis allows thoughtful assessment of conflicts. But this is no invitation to lawyers to act in litigation against their current clients. To the contrary. And careful thought will continue to be required in transactional and advisory matters as well.

The bottom line for me is that an overbroad rule appears to have been transformed into a workable rule pursuant to which lawyers won’t be disqualified without good reason. I think that this is a good thing for both clients and lawyers.

What remains to be seen is the regulatory response to McKercher. The Federation of Law Societies immediately announced that the Model Code was consistent with McKercher. But the Federation argued in McKercher that the intent of the Model Code was to specifically prohibit retainers directly adverse to the immediate legal interests of current clients. While that proposition is controversial, it is not consistent with the narrowed scope of the rule established in McKercher nor with the judicial approach to disqualification. Perhaps the point is that the Model Code, in its commentary, attempts to describe the law and therefore evolves with the law. I think that is a fair read of the commentary but that remains to be seen.


[i] As noted in a previous column and for transparency, I acted for the Canadian Bar Association as intervener in McKercher. For better or worse, I have a view on all of this!

[ii] The “substantial risk” principle is the traditional fiduciary law sometimes called “ conflict of duty with duty” and “conflict of interest with duty”. The principle is that proper consent is required where a “conflict of interest” exists. A conflict of interest exists where there is “a substantial risk that the lawyer’s representation of the client would be materially and adversely affected by the lawyer’s own interests or by the lawyer’s duties to another current client, a former client, or a third person.”

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A2C Crisis

The Access to Clothing Crisis

Access to Clothing[1] is a complex issue that seems almost impossible to effectively address. Some consider it one of our most pressing issues[2]. The well-off continue to be able to afford appropriate clothing for all occasions. The least fortunate amongst us are able to access free or subsidized clothing to be worn during the most important events in their lives. The middle class cannot afford to purchase clothing at all.

To the great discomfort of businesses, restaurants and hosts and hostesses everywhere, most members of the middle-class have given up wearing purchased clothes entirely. Many people now wear home-made clothing that is barely adequate[3] for most occasions. Public policy analysts refer to this group as the self-clothed. Many other people eschew clothing entirely. These are the unclothed.

The Tailor’s Guild is naturally very concerned, being good professionals, and also being faced with public criticism from the best-robed members of society. Tailors have encouraged their apprentices and journeymen to work in pro-bono clinics as duty-tailors. But there still remain far too many self-clothed and un-clothed.

Naturally, this problem has not gone unnoticed. There has been much discussion amongst the great and the good given the fundamental importance of clothing. One approach has been to focus on the modern trend for clothing that is unnecessarily expensive. There is much merit in this analysis as it is difficult to understand why tuxedos and ball gowns have come to be required in shopping malls and bowling alleys. We may have come to require fancier dress than is actually fit for purpose.

Many tailors do not accept that the self-clothed and un-clothed can be making reasonable choices. Clothing is fundamental. Tailors charge fair rates that reflect their training and expertise and which allow them a reasonable standard of living. To earn a living at the hourly rates that the self-clothed and un-clothed could afford to pay would mean working 60 hours a day. Even increasing leverage by hiring more apprentices and journeyman does not reduce the blended hourly rates sufficiently.

The Tailors’ Society is naturally concerned as well. Effective regulation in the public interest requires ensuring Access to Clothing. But it is also important that professionalism be maintained. The tailor-client relationship is highly important. It is well understood that one’s clothing is a fundamental aspect of one’s identity and that tailoring fit clothing requires the exercise of professional judgment taking into account the particular shape and character of the client.

In order to protect the public, it has been thought best to require that tailors own and control all tailor practices. Who but tailors could be trusted with knowledge of intimate client measurements and preferences? Tailors have, understandably, been prohibited from sharing any of their hourly rate revenue with anyone except other tailors. Perhaps for this reason, most tailors practice in sole practice or with several other tailors[4].

Some have suggested that modern production processes and technology could be used by tailors to produce cheaper “off-the-rack” clothing at a lower cost . While some of the large tailor firms have made progress using project-planning tools and by garment process outsourcing, the tailors serving individuals in sole practice and small firms do not have the experience, expertise or the capital to innovate outside of the hourly rate framework. And those in the business and technology world have little interest in tailoring. They cannot invest in tailoring practices and tailors cannot share fees with them.

But all is well. There is no perceived demand from tailors for new practice structures. The importance of clothing to self-identity makes it absurd to think that proper clothing could be designed and manufactured with the assistance of computers, production lines and the like. How could anyone be able to obtain clothing that sufficiently suited client size, shape, personality and intended social usage except from expert bespoke tailors[5] who spend the time needed to do the job.

Members of the Tailors’ Guild and the Tailors’ Society continue to work closely together to address the Access to Clothing issue. Despite new-fangled names like Target, Gap and Lululemon showing up in other countries, it is difficult to imagine how Access to Clothing could be addressed by such radical approaches.

While lawyers and bespoke tailors obviously have entirely different practices, tailors interested in this issue might consider a thoughtful analysis of the effect of regulation on innovation in legal practice by Ray Worthy Campbell entitled Rethinking Regulation And Innovation in The U.S. Legal Services Market as recently reviewed by Professor Laurel Terry in her blog post Creative Destruction and the Legal Services & Legal Education Markets. Lawyers will be aware of the early innovators that presaged change in the legal services market such as Axiom Law, Contract Express, the Co-operative, CPA Global , Legal Zoom, Quality Solicitors, Riverview Law, Rocket Lawyer, Slater & Gordon, Winn Solicitors.

But, there is no reason to think that the market for clothing could or should change as the market for legal services has changed or that innovation is affected by current regulation of tailors.

We must continue to work together to address the Access to Clothing (A2C) crisis[6].

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[1] Sometimes A2C for those in the know.

[2] Badum, Badum

[3] Ibid.

[4] Some tailors, who design and sew military, religious or other uniforms for corporate clients, establish larger firms of tailors which allows them to specialize. Some tailors spend their time designing and sewing complicated epaulettes. Others design and sew the elegant designs in beautiful cloth. There are relationship tailors and tailors who ensure that the work of the specialist tailors suits overall client requirements. It is a great challenge to plan and manage the work of so many skilled craftspeople.

[5] Similarly, the suggestion of expanded scope of practice for para-tailors to assist the self-clothed and unclothed is easily rejected. The essential issue is not really not Access to Clothing but rather Access to Proper Clothing. It is not reasonable to think that anything less than expert tailoring could be sufficient given the importance of clothing.

[6] The opinions expressed in this article are not the opinions of the Tailors’ Guild, the Tailors’ Society nor necessarily those of the author.

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Candour

I Gotta Tell Ya, It’s Complicated! Candour Owed to Clients

In R. v. Neil, Justice Binnie stated that the duty of candour was an aspect of the duty of loyalty. As Justice Binnie put it, an aspect of the duty of loyalty is

a duty of candour with the client on matters relevant to the retainer

The fiduciary duty of candour was the basis for the earlier decision of the Supreme Court of Canada with respect to physicians in McInerney v. MacDonald,

While not previously said quite so plainly, it has long been clear that fiduciaries owe a duty of candour to their beneficiaries. As the B.C. Court of Appeal said in Ocean City Realty Ltd. v. A & M Holdings Ltd.2 (cited with approval by the Court of Appeal for Ontario in Raso v. Dionigi3):

The obligation of the agent to make full disclosure … includes “everything known to him respecting the subject matter of the contract which would be likely to influence the conduct of his principal” (Canada Permanent Trust Co. v Christie) or, as expressed in 1 Hals., 3rd ed, p. 191, para. 443, everything which “. . would be likely to operate upon the principal’s judgment”. ..

This fiduciary duty is mirrored in the Federation of Law Societies Model Code by Rule 3.2-2 which states:

When advising a client, a lawyer must be honest and candid and must inform the client of all information known to the lawyer that may affect the interests of the client in the matter.

But like many other statements of professional standards that seem obviously true when stated generally, it just isn’t quite that simple in real life.

Let’s start with an easy one. In intellectual property litigation, it is common for confidential information to be disclosed on the basis that the lawyers will have access to the adverse party’s confidential information but their clients will not. This is often, but not always, by court order. Despite the duty of candour, lawyers can withhold this material information to their clients. On one view of this, there is no issue because the client consent is required in the circumstances. But does that mean that the duty of candour can be waived? Is waiver of candour permitted in all circumstances or just in some?

A harder case is inadvertent receipt of privileged information. Here, the lawyer would not have the protected information had things worked out properly. Clearly, the administration of justice requires protection of privileged information4. Does candour require disclosure of what should never have been known? Is client consent required not to disclose?

Law society rules regulate joint retainers requiring that lawyers advise their joint clients that secrets can’t be kept between clients in a joint retainer. If candour can be waived by clients, does this rule apply where clients want secrecy between them for some matters in a joint retainer?

While law society rules are (mostly) about the duties of individual lawyers, fiduciary duties are owed by firms to their clients as well as by individual lawyers. Does the fiduciary duty of candour mean that the firm (i.e. every lawyer in the firm) must disclose everything known by the firm that is material? This is practically impossible of course in a firm of any size. But why isn’t it so nonetheless as a matter of principle? And what about confidentiality screens? If the duty of candour is owed in respect of everything known by the firm, aren’t confidentiality screens per se improper?

One might think that all of this would have been worked out in the jurisprudence somewhere but, if it has been, I can’t find it. So let me sketch out what seem to me to be some of the necessary nuances to the general rule.

First, there are some situations where the administration of justice requires that candour be limited. In these situations, any lawyer would be in the same position. If candour is not limited, justice cannot be done.

Second, it is important to be clear about the nature of the retainer. The duty of candour is limited to matters relevant to the retainer.

Third, candour probably can’t be waived. We know that actual conflicts, as opposed to potential conflicts, can’t be waived. Where representation will be materially impaired by a conflict, the conflict is not waivable. A client can only accept the risk of material impairment. If clients cannot agree to impaired representation for conflicts, the same should be true for candour. It follows that clients must have the information required to effectively instruct counsel and act on advice given by counsel. Further, the client must have the information required to assess whether the fiduciary lawyer has acted properly.

Fourth, it is unclear whether candour is owed by the firm or just by the lawyers involved in the representation. I think that it must be just the lawyers involved if only as a practical matter. Otherwise, every lawyer in a firm would have to understand every retainer of the firm and consider what information is relevant from every other retainer they have had and from any other source.

Fifth, being in the position of accepting a legal obligation of confidentiality (that is not inherent in the retainer as discussed above) is not an excuse for lack of candour but rather a real problem. The House of Lords put this nicely in Hilton v. Barker Booth and Eastwood:

… if a solicitor puts himself in a position of having two irreconcilable duties … it is his own fault.

Food for thought, I hope.

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1 The duty of candour owed to clients is not to be confused with obligation of candour to the court. The scope of and the basis for these obligations are entirely different.

2 Ocean City Realty Ltd. v. A & M Holdings Ltd. (1987), 36 D.L.R. (4th) 94 (B.C.C.A.)

3 Raso v. Dionigi (1993), 12 OR (3d) 580 (O.C.A.)

4 Protection of the administration of justice sometimes requires disqualification of lawyers who inadvertently receive privileged information of the adverse party. But that is outside of the subject of this column.

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