Of Labels and Letterhead

What’s a lawyer good for?

This isn’t a new question: the role and value of the legal profession has long been a subject of discussion. It does seem, however, that this question is now being raised with increasing frequency in a variety of forums. As technology continues to advance, important questions continue to be raised about what tasks still require the input of specially trained (and often expensive) legal professionals. Growing concern with access to justice has inspired similar types of questions. As Malcolm Mercer has argued in his recent Slaw column: “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.”

To say that the legal profession is facing an identity crisis may be a tad hyperbolic. It does seem reasonable, however, to suggest that lawyers are now facing a practice and regulatory environment in which their value or “value-added” is not taken for granted, as it largely has been in years past.

This reality makes the recent allegations emerging in the British press about shenanigans with lawyer letterhead particularly depressing. A July 4, 2014 Guardian article reports the following:

Britain’s high-street banks are routinely issuing legal demands from what appear to be independent firms of solicitors designed to make struggling borrowers pay up. Yet the firms are not regulated by the legal profession’s watchdog, and are simply names used by banks’ in-house lawyers.

Royal Bank of Scotland and its NatWest arm have been using Green & Co Solicitors in Telford; Lloyds Bank uses SCM Solicitors in Hove, East Sussex, and, until January this year, HSBC used DG Solicitors in Edgbaston, Birmingham.

But a search of the register run by the Solicitors Regulation Authority (SRA) reveals that none exist as an entity supervised by the regulator.

The practice is legal because the letters are signed by a lawyer who is individually regulated by the SRA. Yet they give the impression to borrowers that their case has been escalated to a third party, using legal language such as “We are instructed by our client” and “We are likely to be instructed to commence court proceedings”. The letter heading is near-identical, too, to that of an independent firm of solicitors, and typically uses a different address from that of the bank concerned.

These allegations follow on the heels of revelations that a British payday lender named Wonga had, as also reported in the Guardian, “sent letters to customers in arrears under the names Chainey D’Amato & Shannon and Barker & Lowe Legal Recoveries – leading customers to believe that their outstanding debt had been passed to a law firm or another third party.” The problem in the case of Wonga was that the named law firms did not exist – they were fake law firms. Ultimately, Wonga was ordered to pay more than £2.6 million in compensation after the regulator found that this scheme constituted “unfair and misleading debt collection practices.”

In a blog post discussing the involvement of solicitors in pseudonymous law firms like those alleged to be used by the banks, Richard Moorhead has observed, among other things, that “there is a substantial risk that the solicitors who signed or were involved in the production of the letters have breached their obligation to act with integrity” and that “there is a question over whether Outcome 11.1 (rule 11.1 in effect) has been breached that is solicitors must not, take unfair advantage of third parties [the debtors] in their professional capacity.”

Although I am not aware of any similar types of practice by banks in Canada, the types of concerns that Moorhead raises in his blog have been raised with respect to the involvement of Canadian lawyers in sending civil recovery letters to shoplifters on behalf of retailers. Alice Woolley has written thoughtfully about the questionable claims often contained in these letters and the important ethical questions raised by the practice of some “lawyers sending out demand letters based on spurious claims in the hope of extracting funds because of the fear and ignorance of those who receive them” (see, e.g., here, here and here). In reaction to the Wonga revelations, Adam Dodek posed the following question via email: “Which is worse: a company threatening creditors with fake law firms or a lawyer threatening parents of shoplifters with a cause of action that doesn’t exist?”

Back to the question that started this blog—What’s a lawyer good for?—it does strike me that the all of the cases noted above suggest one particular answer: intimidation. I don’t have any particular insight into the motivations of the directing minds at Wonga or the British banks or the retailers that send out demand letters. One might reasonably speculate, however, that the reason that they chose to send out their demands on lawyers’ letterhead (or fake lawyers’ letterhead in the case of Wonga) is that the mere suggestion that lawyers are involved in the matter creates generates more pressure, if not fear, on the recipient of the letter. The involvement of lawyers in these cases (which presumably involve form letters) wouldn’t seem to involve the application of any type of special legal skill. Instead, the value of this involvement seems to reside in the deployment of a special legal label. It’s the letterhead that seems to be the value-added.

And, even more problematically, the value residing in this letterhead seems to be connected to its ability to mislead. After reviewing the behaviour of the English banks, the SRA concluded in a recently issued Warning Notice:

We consider that, through a range of approaches, attempts are being made to mislead third parties (invariably individual debtors) that their case has been referred by the organisation owed money to an independent law firm to pursue the debt, notably the “naming” of in-house legal teams in the style of independent law firms.

To the extent that shoplifting civil recovery letters advance spurious claims, the fact that a lawyer is used to send these letters can be seen as an attempt to mislead members of the public. In speaking about a shoplifting civil recovery letter that had been sent by a lawyer acting for a retailer to the parent of a teenager, Justice Jewers stated in a 1996 Manitoba Court of Queen’s Bench decision (B. (D.C.) v. Arkin (1996), 138 D.L.R. (4th) 309):

…the plaintiff received a letter from a lawyer who should know something about the law and who was making an apparently serious threat of legal action if the claim was not paid. And she paid. She would not have done so if she had not believed that there was something to it.

In this belief, the plaintiff was mistaken….[The lawyer for the retailer] was not called as a witness at the trial and so we do not have the benefit of what his opinion of the claim was. But I assume that as a competent and responsible lawyer, he knew or ought to have known that the claim had no prospect whatsoever of succeeding in court and that it would be futile to pursue it.

To be sure, only a very small number of lawyers are engaged in the practices discussed in this column. Indeed, I haven’t seen anything that suggests that the scheme used by Wonga involved any lawyers at all. Given the challenges that the legal profession now faces, however, we all ought to be concerned with these practices. The label of
“lawyer” is only meaningful to the extent that the practices behind it advance the proper functioning of our legal system. Those who profit off of using their labels in order to mislead others undermine the trust and confidence of the public to the detriment of us all.

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