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Thursday Thinkpiece: Salyzyn on the Judicial Regulation of Lawyers in Canada

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The Judicial Regulation of Lawyers in Canada

Amy Salyzyn
Dalhousie Law Journal, 2014, Forthcoming

Excerpt: Introduction and Part IV

[Footnotes omitted. They can be found in the original via the link above]

Introduction

This article traces developments in lawyer regulation in Canada over the last forty years, with a focus on the judicial regulation of lawyers. The role that judges play in regulating Canadian lawyers has not, to date, been the subject of extended and detailed scholarly analysis. This is a gap that needs to be filled. In the absence of a systematic analysis of judicial regulation in Canada, we lack a complete picture of the current regulatory landscape governing this country’s legal profession and how it came to be. Having this more complete picture in hand is essential in considering the best way forward in regulating Canadian lawyers.

The question of whether Canadian lawyers ought to be trusted to govern themselves has been repeatedly raised by the public, policy-makers and the academy over the past several decades. The legal profession has responded on a number of fronts, adopting what has been characterized as a “regime of defensive self-regulation.”1 The analysis in this article complements and complicates this account by arguing that, alongside the profession’s efforts at defensive self-regulation, there has been a steady stream of aggressive judicial regulation. The central argument of this article is two-fold: first, that courts have come to occupy an increasingly active role as regulators of the Canadian legal profession in the past several decades; and, second, that the measures taken by the courts have resulted in a regulatory regime more attentive to the public interest. In advancing these arguments, this article seeks not only to present a more accurate picture of the current status of lawyer regulation in Canada but also to provide a better foundation from which to discuss future reforms.

Much of the current attention given to how the Canadian legal profession is regulated is a result of moves away from lawyer self-regulation in other common law jurisdictions. Reforms in these jurisdictions—most notably, Australia and England and Wales—have prompted self-reflection in Canada and raised a number of important questions. Why haven’t we seen similar changes in Canada? Should Canada head in the same direction as other countries? The account that this article provides of the emergence of aggressive judicial regulation helps to direct our consideration of these questions in several important respects. First, it clearly and methodically demonstrates that the profession’s claim to self-regulation is highly attenuated. As will be explored in detail below, judges have powerfully inserted themselves in all of the areas considered to be constitutive of self-regulation and have done so in a manner that has advanced the public interest. This observation seriously undermines any sort of blanket claim that the public interest requires Canadian lawyers to have independence from external control.

Second, the analysis here also calls into question the assumption advanced via the “lawyer-judge bias” theory that judges, by virtue of being former lawyers, are inherently deficient regulators of lawyers who will inevitably favour the interests of their former colleagues at every turn.2 To the contrary, a close and careful look at judicial regulation reveals that measures taken by Canadian courts have repeatedly promoted the public interest over the interests of the profession. This suggests that any discussion of regulatory reform should not focus exclusively on a binary weighting of governmental control versus professional self-control but also include the judiciary as a major and helpful regulatory player.

This article proceeds in four parts. Part I covers off some preliminary issues, outlining in more detail the nature of the “lawyer-judge bias” theory that has been advanced and discussing how several key concepts—namely self-regulation, judicial regulation, and public interest—are defined and used in this article. Part II briefly touches on the political background for the judicial regulatory measures discussed, with particular attention to a series of governmental inquiries beginning in the 1970s that served to sharpen public scrutiny of the legal profession. Parts III and IV form the heart of the article and make the case that a regime of aggressive judicial regulation has emerged alongside the profession’s defensive efforts.

Part III focuses on developments in judicial regulation of the practice of law and, in particular, regulation relating to the post-entry competence of lawyers. Beginning in the late 1970s, courts established themselves as aggressive co-regulators in this area through their administration of civil actions in negligence. In a series of decisions, courts rejected exceptional treatment for lawyers in relation to negligence claims. The scope of liability faced by lawyers in negligence was also expanded in certain areas.

Part IV takes up the judicial regulation of the business of law and canvasses measures taken in relation to (1) entry restrictions, (2) post-entry limits on competition (in particular, in the areas of advertising, fees, and unauthorized practice of law) and, (3) post-entry conduct rules (specifically relating to conflicts of interest and lawyer withdrawals from the record). In each of these areas, courts have taken measures that have favoured the public interest over the self-interest of the profession and, in some cases, directly rejected contemporaneous standards adopted by the legal profession itself.

IV. Regulating the business of law: entry, competition, conduct

In addition to making their mark regulating the practice of law and, in particular, post-entry competence, the courts have also taken a number of significant measures in the last several decades with respect to regulating the business of law. This Part examines judicial measures in three areas: entry restrictions, post-entry limits on competition, and post-entry conduct rules.

1. Entry restrictions

As noted in Part II, one potential abuse of self-governing powers is the imposition of unnecessary entry restrictions. Rules restricting entry to a profession are, of course, not inherently problematic. Requiring a certain level or type of education before being allowed to practice law, for example, is one way to ensure that those providing legal services to the public have the appropriate training to do so. Entry restrictions can, however, also operate to more nefarious discriminatory and anti-competitive ends. Indeed, the two types of entry restrictions that are the subject of this section—citizenship requirements and constraints on inter-provincial firms—were found by courts to be, respectively, discriminatory and motivated by concerns to limit competition. Over the legal profession’s objections, courts declared the restrictions constitutionally invalid and stepped into a core regulatory area with considerable force and impact.

In general, provincial and territorial law societies regulate admission to the practice of law by prescribing entrance requirements and evaluating whether applicants have met these requirements. The courts have no direct authority over this regulatory area, although they are empowered to judicially review the validity of decisions made by the law societies in individual cases. With the introduction of the Charter of Rights and Freedoms in 1982, however, the courts were given a new tool to directly review the validity of admission requirements. Two significant decisions by the Supreme Court of Canada shortly after the introduction of the Charter—Andrews v. Law Society of British Columbia and Black v. Law Society of Alberta— resulted in the invalidation of certain entry restrictions. These decisions, together with various legislative and policy reforms that followed, ushered in a significantly liberalized regime with respect to the admission of foreign professionals to practice and the interprovincial mobility of lawyers.

a. Citizenship and residency requirements

In Andrews, the Supreme Court of Canada struck down the requirement that applicants to British Columbia’s legal profession be Canadian citizens. At the time, “Canadian citizenship was virtually a universal requirement for admittance to any of the provincial law societies” and law societies were strong advocates of the limiting entry to the profession to Canadian citizens. On several occasions previous to Andrews, the courts had considered citizenship requirements for admission to law practice and, despite raising questions as to the justifiability of such requirements, had declined to find them invalid. These cases were heard before the equality provisions of the Charter were in force, however, which ultimately formed the basis for the Supreme Court’s finding in Andrews that the British Columbia citizenship requirement was invalid.

In Andrews, the Law Society of British Columbia—which was a party to the action—had vigourously defended the citizenship requirement, arguing, inter alia, that the “vital role” role lawyers play in governmental processes and in the administration of justice justified the rule. In the background, however, lurked less lofty motivations. When viewed in the context of the long history of other nationality requirements imposed in Canada in relation to voting, landholding, and employment, it is difficult to deny that xenophobia and anti-immigrant sentiments played a role in the origination of citizenship requirements for legal professionals. The citizenship requirements may also be viewed as a protectionist measure from a competition standpoint. Speaking about the citizenship requirement in Manitoba in 1977, Jack London observed that it could “be seen as an attempt to limit the numbers of persons entering the legal profession and hence to provide a kind of import restriction in the numbers practicing law in the community. The monopoly is maintained in many ways, this being one.” In rejecting the citizenship requirement in Andrews, the Supreme Court of Canada overruled the Canadian legal profession’s self-serving view of who should be allowed to be a lawyer.

Post-Andrews, a number of provinces maintained a requirement that an applicant for admission to practice be either a Canadian citizen or a permanent resident. Such requirements, however, came under attack with the release of the federal Competition Bureau’s 2007 report on the self-regulating professions. The report recommended that the residency and citizenship requirements imposed in certain provinces be eliminated, observing that, “[f]rom a competition standpoint, such restrictions limit the supply of lawyers by imposing an additional requirement that lawyers must meet before becoming members of a law society that has such a restriction.” With this additional push from the Competition Bureau, a number of law societies have more recently removed residency and citizenship requirements previously in place.

b. Inter-provincial practice of law

Shortly after Andrews, the Supreme Court of Canada waded into another aspect of the legal profession’s control over entry. In Black v. Law Society of Alberta, the Court declared invalid two rules enacted by the Law Society of Alberta that aimed to restrict the emergence of interprovincial law firms in the province. At the time, inter-provincial firms were virtually unknown in Canada and the provinces had differing opinions regarding their desirability. The specific rules enacted in Alberta were a direct response to efforts by the Toronto law firm McCarthy and McCarthy to establish an inter-provincial law firm with a branch in Alberta. Before the Supreme Court of Canada, the Law Society of Alberta attempted to justify the rules by arguing that they were necessary to protect the quality of legal services in the province. As the trial judge concluded, however, the worry that inter-provincial firms would increase competition and take work away from Alberta lawyers formed at least part of the motivation for the rules. Writing for the majority of the Supreme Court of Canada, La Forest J found that the rules violated mobility rights guaranteed by the Charter and rejected the Law Society’s contention “that legal services delivered to the public of Alberta would be endangered by interprovincial law firms[.]”

Beginning in the late 1990s, the legal profession also began to address the issue of interprovincial mobility through a series of mobility agreements entered into between provincial and territorial law societies. Included among these measures is the National Mobility Agreement, described on the Federation of Canadian Law Societies, website as “the blueprint for the mobility regime…[that] facilitates temporary and permanent mobility of lawyers between all common law provinces in Canada.” The National Mobility Agreement has eased the requirements for permanently transferring between jurisdictions and also addresses temporary mobility by allowing for lawyers to practice in other signatory jurisdictions for up to 100 days a year without having to obtain a permit (subject to certain restrictions).

The measures adopted by the legal profession to facilitate the movement of legal professionals across provinces and those taken to ease citizenship and residency requirements demonstrate the willingness of Canadian lawyers to evolve under criticism. It bears highlighting, however, that these measures only emerged after an initial period of resistance and judicial decisions made over the forceful objections of provincial law societies. Viewing these reforms in their historical context helps to highlight the role that the judiciary has played in both changing the rules of the game—for example, in eliminating bars on non-citizens in Andrews and interprovincial law firms in Black—and in setting the stage to prompt the legal profession to pursue their own reforms.

2. Post-entry limits on competition

Examples of aggressive judicial regulation can also be found in the area of post-entry limits on
competition. This section examines judicial measures taken with respect to advertising, unauthorized practice, and fees. Once again, measures by the courts may be seen as resulting in a regulatory regime more attentive to the public interest. In this area, further judicial rejection of self-serving rules and positions adopted by law societies can be observed. In several important respects, decisions by the courts have also prompted and enabled further reforms.

a. Advertising

Historically, the Canadian legal profession faced significant, self-imposed restrictions in the area of advertising: close to a total ban was imposed. Officially, this was justified as a matter of maintaining an appropriate level of professionalism; the advertising of services was said to “lower the tone of the lawyer’s high calling[.]” Such restrictions, however, also served to advance the economic interests of lawyers through restricting price competition. For example, a study commissioned by the Competition Bureau concluded that advertising restrictions imposed upon lawyers cost Canadian consumers over $30,000,000 in 1970 alone.

Although the legal profession had started to take small steps to liberalize rules governing advertising in the late 1970s following legislative amendments that brought legal services under the ambit of federal competition law, significant changes only began to take place in the mid-1980s after a series of court challenges. As was the case with citizenship requirements, the courts had demonstrated some initial hesitancy to intervene in this area before the introduction of the Charter. Moreover, even after the Charter, it was not initially clear if and how the new Charter right to freedom of expression would apply to commercial speech and, in several early cases, lower courts were reluctant to find that law society restrictions on lawyer advertising were unconstitutional. Increased judicial attention in addition to continuing interest shown by government regulators, however, encouraged further liberalization on the part of the law societies in the 1980s. In 1990, in Rocket v. Royal College of Dental Surgeons of Ontario, the Supreme Court of Canada ultimately affirmed that the Charter’s freedom of expression protections applied to professional advertising. This ruling made it clear that the legal profession’s rules on advertising would not be able to escape constitutional scrutiny.

More than a decade later, with the release of its 2007 report on the self-regulated professions, the Competition Bureau renewed pressure on the legal profession to further relax rules with respect to advertising. In reviewing the issue of lawyer advertising, the Bureau explicitly rejected the submission of the Federation of Law Societies of Canada that the regulations in place were necessary “to ‘protect the public interest and confidence in the legal system’” and took the position that “the restrictions currently in place on advertising go outside of what is necessary to guarantee this, since the public needs only to be protected against advertising that is false or misleading.” Following the release of the Bureau’s report, law societies continued their reforms of advertising rules.

b. Unauthorized practice

Having individuals go through a licensing process before practicing law and monitoring their activities thereafter is a means of protecting the public from incompetent and unscrupulous practitioners. As with other areas of professional control, however, the legal profession’s interest in preventing unauthorized practice has also been influenced by a desire to limit competition. In carving out a set of certain activities for sale by lawyers only, the legal profession protects not only the public but also its monopoly over legal services.

Over the last several decades, the most prominent issue related to the unauthorized practice of law in Canada has been the issue of paralegals providing legal services to the public. Paralegal regulation was thrust into the spotlight in Ontario in 1987 with the Court of Appeal’s decision in R v. Lawrie and Pointts, which involved an appeal of a private prosecution initiated by the Law Society of Upper Canada against a retired police officer who had set up a company to represent persons charged with traffic offences. In the course of concluding that the applicable legislation did not prohibit the practice, Blair J, who wrote for the court, stated: “[i]t has been observed many times that the prohibition against the unauthorized practice of law is not merely to protect qualified lawyers from infringement of their right to practise their profession. Its primary purpose is to protect the public[.]” This was not the result that the Law Society had hoped for. Just prior to the decision in Pointts, the Treasurer of the Law Society of Upper Canada “promised his colleagues that the law society would ‘prosecute the hell’ out of
independent paralegals.” After the decision, the Law Society’s response was more moderate, but still chilly, deciding “that although it had to accept the existence of independent paralegal services, it would take no part in their regulation and would continue to oppose their expansion.” Following her study of paralegals several years later, Paula Pevato observed that there was “substantial evidence…suggest[ing] that the legal profession’s hostility toward paralegals is motivated, to a large degree, by a self-serving desire to maintain a monopoly over the delivery of legal services to the public.”

Although the Ontario government commissioned a report and drafted legislation to address the status of paralegals, no legislative reform occurred until after the Ontario Court of Appeal raised the matter again in 1999 and explicitly chastised the government for failing to take any action to regulate paralegals. Further study followed which ultimately led to legislation, effective 1 May 2007, giving the Law Society of Upper Canada the authority to regulate paralegals.

The issue of non-lawyers providing legal services has also garnered attention at the federal level in recent years in the immigration context. In Law Society (British Columbia) v. Mangat, the Law Society of British Columbia sought to enjoin immigration consultants from acting in relation to immigration proceedings on the basis that this was the unauthorized practice of law. The Supreme Court of Canada rejected the Law Society’s application, finding, among other things, that federal legislation permitting this practice trumped any provincial legislation to the contrary. Following Mangat, the federal government enacted regulations and designated a private corporation to govern immigration consultants. The Law Society of Upper Canada soon challenged these developments on a number of grounds, including that the regulations violated the rule of law because they interfered with the independence of the bar and exceeded the government’s authority. The Federal Court dismissed the application and the dismissal was subsequently upheld on appeal.

In the cases of Ontario paralegals and federal immigration consultants, the courts opened up the practice of law to non-lawyers in the face of strenuous objection by law societies. In both cases, this set the stage for legislative reform that further entrenched and legitimized non-lawyers providing services to the public that lawyers had wanted to reserve for themselves. Although the legal profession eventually took its own measures—take, for example, the Law Society of Upper Canada’s ultimate embrace of regulating paralegals—this only came after courts and governments already took forceful steps in favour of liberalizing the market for legal services.

c. Fees

In addition to being involved in decisions about who may practice law and how they may promote their practice, courts have also been a powerful force in regulating how much lawyers may charge for their services. Due to various imperfections in the market for legal services— including, for example, informational asymmetry and the monopoly that lawyers exercise over the provision of legal service s—the risk for price inflation and escalation is considered to be high when it comes to lawyers as a collective professional group. One check on this risk has been the long-recognized inherent jurisdiction of Canadian courts to supervise the fees that lawyers charge to clients. In practice, however, the use of this inherent judicial power has been generally supplanted by formal statutory processes that allow clients to have their lawyers’ accounts reviewed by non-judicial assessment officers or court registrars.

In addition to hearing appeals of non-judicial reviews of costs, courts have also taken an active role in rejecting anti-competitive fee practices of lawyers. Set fee schedules, in particular, have been a particular target. Despite lacking any statutory basis, fee schedules that directed lawyers what to charge for certain services were once common in Ontario. In the mid-1980s, the Competition Bureau set its sights on fee schedules put in place by two county law associations in Ontario, the Waterloo Law Association and the Kent County Law Association, that related to residential real estate legal services and involved sanctions for non-adherence. The Waterloo Law Association initially responded to the investigation initiated by the Competition Bureau by seeking, among other things, a declaration from the Ontario Superior Court that the Competition Act did not apply to its activities. Justice Eberle, who heard the matter, ultimately took the position that the application was premature given that no charges had yet been laid under the Competition Act. It was clear, however, that he rejected the proposition that lawyers enjoyed a complete exemption from the operations of the Competition Act:

The fact that governance of the legal profession and of its members is within the provincial legislative domain, under property and civil rights, does not remove lawyers from the reach of a valid criminal law. For example, a lawyer is subject to criminal prosecution if he commits murder or theft, or any other crime. This remains the case even where, as here, the province has delegated governing powers over the legal profession to a provincial law society.

Ultimately, in 1988, both the Waterloo and Kent County law associations consented to the issuance of court orders of prohibition which, among other things, prohibited them from promulgating any schedule of fees for legal services and mandated certain reporting requirements for a five-year period. Although the court orders issued only related to small groups of lawyers in Ontario, these tariff cases stand as yet another example of courts rejecting exceptional treatment for the legal profession and ousting self-serving measures in favour of the public interest.

3. Conduct rules

As seen in the above examples, during the 1970s and 1980s, the courts were active in rejecting various anti-competitive restrictions on entry, advertising, and fees. In the 1990s, judicial review of conduct rules applying to the profession led to important regulatory changes. Most significantly, judges acted to regulate in the areas of conflicts of interest and withdrawal from the record. In both cases, the standards established by the courts placed a greater emphasis on the public interest than the standards contemporaneously favoured by the profession itself.

a. Conflicts of interest

Broadly speaking, conflict of interest rules for lawyers operate to regulate the risk that a lawyer’s representation of a 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.” Conflict of interest rules relate to a lawyer’s ethical duties—for example, the duties of loyalty and confidentiality—but also can engage a lawyer’s economic interests. Simply put, if a lawyer is prevented from acting for a client as a result of a deemed conflict, the lawyer loses the client and all associated fees. In general, Canadian courts adjudicate on conflicts of interest in the course of exercising their inherent jurisdiction over the court’s processes and in administering civil actions for breach of fiduciary duty.

Conflicts of interest gained a new prominence in Canada in the last several decades as a result of a “trilogy” of Supreme Court of Canada decisions. In the first case that “ignited the conflicts revolution in Canada,”Martin v. Gray, the issue was whether the law firm representing the defendant was precluded from continuing to act because an associate who had previously assisted in representing the plaintiff at another firm was now working at the defendant’s firm. In considering whether an impermissible conflict arose, the majority held that courts must aver to the “possibility of real mischief” with respect to the misuse of confidential information by a lawyer against a former client rather than a lower standard that would only require the “probability of real mischief.” Writing for the majority, Sopinka J rejected the proposition that the realities of the modern practice of law—the rise of the large firm, mergers, and the more regular movement of lawyers between firms — should lead to a “slackening” of the conflicts of interests rule.

As Adam Dodek has observed, the majority reasons in Martin v. Gray may be read as deferential to the legal profession. Justice Sopkina acknowledges, for example, that lawyers are a self-governing profession and the courts should consider an expression of a standard in codes of professional conduct to be, although not binding on the courts, “an important statement of public policy.” He also suggests that the Canadian Bar Association should take the lead in determining whether institutional screening devices “such as Chinese walls and cones of silence” might be effective in shielding against a transferee lawyer “tainting” his or her new law firm and in developing national standards for using such devices.

Notwithstanding the deference shown, the immediate reaction of the Canadian legal profession to Martin v. Gray was intense and the decision “sent shockwaves through the Canadian legal profession[.]” In response to the Court’s invitation, the Canadian Bar Association set up a Task Force that produced a report setting out guidelines to assist in “screening” transferring lawyers to avoid disqualification in cases where the transferring lawyer has received confidential information attributable to a solicitor-client relationship while working at his or her former firm that would put him or her in a position of conflict at the new firm. The recommendations set out in the report were, in general, endorsed by the profession and found their way into governing codes of conduct.

Roughly a decade later, the Supreme Court of Canada decided another major conflict case. In R. v. Neil, the court considered the question of duties owed to concurrent clients, rather than that of duties owed to former clients that was raised in Martin v. Gray. Justice Binnie, writing for a unanimous court, characterized the central issue on appeal as follows: “What are the proper limits of a lawyer’s ‘duty of loyalty’ to a current client in a case where the lawyer did not receive any confidential information that was (or is) relevant to the matter in which he proposes to act against the client’s current interest?” The Court adopted a “bright-line” rule which dictated that

a lawyer may not represent one client whose interests are directly adverse to the immediate interests of another current client — even if the two mandates are unrelated — unless both clients consent after receiving full disclosure (and preferably independent legal advice), and the lawyer reasonably believes that he or she is able to represent each client without adversely affecting the other.

In arriving at this rule, the Court leaned on the notion that strict rules regarding conflicts of interest were necessary to ensure that the public maintained confidence in the legal system. The impact of Neil was even more intense than that of Martin v. Gray: “[i]f Martin v Gray was an earthquake, Neil was treated more like a tsunami threatening Canadian legal practice.”

Several years later, the Supreme Court of Canada once again addressed the issue of a duty of loyalty in 3464920 Canada Inc. v. Strother. In this case, the Court considered the situation of a lawyer (Strother) who had, among other things, obtained a substantial and direct financial interest in a client (Sentinel) in competition with another client (Monarch). The majority decision found that Strother had breached his fiduciary duty to Monarch by accepting a personal interest in Sentinel. As summarized by Binnie J: “Strother could not with equal loyalty serve Monarch and pursue his own financial interest which stood in obvious conflict with Monarch making a quick re-entry into the tax-assisted film financing business.” The minority decision by McLachlin CJ took a different view, beginning from the premise that the duty of loyalty owed to a client must be informed by the content of the contractual retainer. Given the fact that, at the time of Strother’s investment he was under a new retainer with Monarch that provided he was only to provide advice when specifically asked and was free to act for competitors, the minority decision found that “there is no reason to conclude that Strother’s capacity to loyally and zealously perform the very limited duties to Monarch under the 1998 oral retainer would be affected by his taking a personal interest in Sentinel Hill.”

One way to understand the majority and minority decisions in Strother is as a disagreement about whether, in a solicitor-client relationship, fiduciary duties overlay the contractual terms found in the retainer or vice versa. In taking the former view, the majority decision opted to impose a more robust duty of loyalty on Canadian lawyers. As noted by Harvey Morrison, “[i]f there were any hopes that the Supreme Court of Canada would moderate the rigour of the bright line rule in Neil, they were dashed in Strother.” The bright-line test, or the “unrelated matters rule” affirmed in both of these cases gave conflicts of interest rules a broad mandate of application.

Following the decisions of Neil and Strother, the Canadian Bar Association reacted defensively, establishing another task force that produced a “surprisingly confrontational” report that argued that the bright-line rule set out by the Supreme Court of Canada “is obiter, unreasoned, overly broad and contrary to the public interest.” Equally surprising, perhaps, were the extra-judicial comments from a sitting Supreme Court of Canada justice about the report. In a speech delivered at a conference in Strasbourg, France, Justice Binnie directly confronted the content of the CBA task force report, emphasizing the need to “enhance the public trust” in the legal profession and the important role of more, not less, strict conflicts rules. Indeed, the title of the speech “Sondage après sondage” (Poll after Poll) was a direct reference to a recent speech given by the former president of the Quebec Bar in which he referenced the fact that lawyers find themselves poorly ranked (alongside politicians and used car dealers) in surveys regarding the public confidence in the legal profession. In view of this back and forth and these unusual extra-judicial comments, it might be fairly said, as Adam Dodek has previously, that “[t]he tension between judicial regulation and self-regulation is perhaps most evident in the area of conflicts of interest.”

Most recently, in the 2013 case of Canadian National Railway Co. v. McKercher LLP, Supreme Court of Canada once again considered the issue of lawyer conflicts. This case involved a large firm in Saskatchewan, McKercher LLP (“McKercher”), that had accepted a retainer to act against the Canadian National Railway Company (“CN”) in a class action lawsuit notwithstanding the fact that it was acting for CN on a variety of unrelated matters. CN only learned of McKercher’s involvement in the class action matter once it was served with a statement of claim. In the month before serving the statement of claim and in the days following service, the firm terminated its existing retainers with CN, except for a retainer on one file which CN itself terminated. CN applied for an order removing McKercher as solicitor of record for the plaintiff in the class action against it. Writing for a unanimous court, McLachlin CJC concluded, among other things, that the situation “fell squarely within the scope of the bright line rule” and remitted the matter back to the lower court for redetermination in accordance with the Court’s reasons. In terms of the development of the law of conflicts, the Court in McKercher reaffirmed the bright line rule set out in Neil and clarified its scope.

For the purposes of this article, Chief Justice McLachlin’s comments at paragraph 16 of the decision are perhaps the most interesting wherein she writes:

Both the courts and law societies are involved in resolving issues relating to conflicts of interest — the courts from the perspective of the proper administration of justice, the law societies from the perspective of good governance of the profession: see R. v. Cunningham, 2010 SCC 10, [2010] 1 S.C.R. 331. In exercising their respective powers, each may properly have regard for the other’s views. Yet each must discharge its unique role. Law societies are not prevented from adopting stricter rules than those applied by the courts in their supervisory role. Nor are courts in their supervisory role bound by the letter of law society rules, although “an expression of a professional standard in a code of ethics . . . should be considered an important statement of public policy”: Martin, at p. 1246.

Although the above suggests a co-operative relationship between the courts and the law societies, and distinct roles for each, it fails to acknowledge that both institutions are, in fact, regulating precisely the same area of lawyer conduct (albeit for different ends) and that the judiciary, beginning with Martin v. Gray in 1990, has inserted itself as a regulator in this area in an unprecedented fashion which has led to significant changes in how conflict of interests are regulated not only by the courts but also by law society rules. Moreover, the positions taken by the Court have resulted in greater regulation in this area and, in some cases, been in direct opposition to the positions taken by the legal profession.

b. Withdrawal

In 2010, the Supreme Court of Canada again waded into the area of lawyer conduct in considering the circumstances under which lawyers should be permitted to withdraw from the record. In R v. Cunningham, a unanimous Supreme Court confirmed that courts have the authority to mandate that counsel continue to represent an accused in circumstances where counsel wishes to withdraw because of non-payment of legal fees, although this authority “must be exercised sparingly, and only when necessary to prevent serious harm to the administration of justice.” The decision also confirmed that the authority to refuse an application for withdrawal did not extend to circumstances where withdrawal was sought for an ethical reason: in such cases “the court must grant [the] withdrawal.” Although at the time this case was heard, the majority of provincial and territorial appellate courts held that courts had jurisdiction to prevent defence counsel from withdrawing due to non-payment in fees, there was some division in the case law and differing approaches had been taken in the codes of conduct established by provincial law societies. In clarifying the law, Cunningham generated some bold headlines.

In Cunningham, the Court again had the opportunity to discuss the relationship between the judicial regulation of lawyers and the role of self-governing bodies. The Court of Appeal for the Yukon Territory had held that the court had no jurisdiction to refuse a withdrawal for nonpayment of fees, in part, because the legal profession is self-governing and that the provincial and territorial law societies have primary responsibility over lawyer regulation. The Yukon appeals court expressed concern that “the potential for an unseemly conflict would exist if the court took one view of a lawyer’s conduct in withdrawing, and the Law Society took another.” The Supreme Court of Canada considered this issue, but ultimately found that this tension did not preclude the courts from exercising jurisdiction, commenting that

[t]he law societies play an essential role in disciplining lawyers for unprofessional conduct; however, the purpose of the court overseeing withdrawal is not disciplinary. The court’s authority is preventative—to protect the administration of justice and ensure trial fairness. The disciplinary role of the law society is reactive. Both roles are necessary to ensure effective regulation of the profession and protect the process of the court.

Despite the Court’s evocation of complementary roles for the law societies and courts in this area, it is hard to escape the conclusion that the Supreme Court of Canada in R v. Cunningham issued a judicial trump card in the area of lawyer withdrawal. Even where ethics rules promulgated by law societies allow for withdrawal for non-payment of fees, a court has the power to refuse to allow the lawyer to withdraw. Although, as the Court indicated, this power is to be used only “sparingly,” its impact is tremendously significant: a lawyer can be forced to act for a client, for free, against the lawyer’s wishes. In a narrow set of cases, therefore, courts have been given the power to exercise a powerful form of lawyer regulation.

4. Judges and entry restrictions, post-entry limits on competition and conduct rules

In adjudicating disputes in the areas of entry restrictions, post-entry limits on competition, and post-entry conduct rules, the judiciary has repeatedly taken measures to promote the public interest and has often rejected self-serving standards favoured by the legal profession. Although the above account outlines a number of laudable measures taken by the legal profession to, for example, liberalize entry restrictions and rules relating to advertising and unauthorized practice of law, these measures have often only come after considerable resistance and court intervention.

Before these judicial measures can be fairly classified as amounting to a regime of aggressive judicial co-regulation, however, it is again necessary to address several possible objections. First, it may fairly be pointed out that the judicial record in these areas has been mixed. Initial efforts to invalidate citizenship requirements, for example, were rebuffed by the courts. The Supreme Court of Canada also originally upheld the advertising restrictions imposed by the Law Society of British Columbia. Moreover, not all appellate courts have limited efforts by law societies to exclude paralegals or non-Canadian lawyers from providing legal services.

These examples require an acknowledgement that the judicial regulation of lawyers has not always immediately or straightforwardly favoured the public interest at the expense of lawyers’ narrow self-interest. In each of the above areas—entry restrictions, advertising and paralegals—the courts did ultimately inspire, if not dictate, significant change: citizenship requirements were ultimately deemed invalid by the Supreme Court of Canada in Andrews, advertising restrictions were liberalized in the context of a series of post-Charter cases finding freedom of expression protections applied to commercial speech and professional advertising, and paralegal regulation has been reviewed in provinces across Canada following the courts’ attention to the issue. In short, the courts have had a meaningful impact in mitigating abuses of self-regulatory powers: unnecessary entry restrictions and limits on competition have been judicially rejected, leading to reforms which have resulted in a regulatory environment more attentive to the public interest. Moreover, the chronology outlined in this Part suggests that courts have become more and more bold in confronting the profession’s self-serving standards as the decades have progressed.

Second, one might object to the argument that aggressive judicial regulation has occurred in light of the reliance of courts on legislative developments in their regulatory activity: specifically, amendments to federal competition legislation and the introduction of the Canadian Charter of Rights and Freedoms. Except for the developments in conflicts of interest and withdrawal rules, it is difficult to see how the courts would have taken many of the measures described in this Part without these statutory tools. To be sure, this observation reveals the limited nature of judicial regulation. The power of the courts to regulate the legal profession is not “at-large” but arises in relation to common law rights of action, statutory provisions, and the courts’ inherent jurisdiction. The above account does reveal, however, that the courts have used the tools provided to them—however limited—to regulate the legal profession in the public interest. The reforms that have resulted are significant, both collectively and individually.

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