Conflicted Regulation in the Public Interest
Fiduciary law deals strictly with conflicts of interest. A fiduciary is not permitted to have an interest that conflicts with the duties owed to their beneficiary unless the conflict and all material facts have been disclosed and consent is obtained Sharbern Holding Inc. v. Vancouver Airport Centre Ltd., 2011 SCC 23. Where a fiduciary benefits without consent, the fiduciary is ordinarily required to disgorge the benefit whether or not the beneficiary’s interests have been compromised. Strother v. 3464920 Canada Inc., 2007 SCC 24
The Rules of Professional Conduct are no less strict. It is professional misconduct for a lawyer or paralegal to act where their self-interest conflicts with their duties to their client without proper consent. Some conflicts are not waivable. Transactions with clients are strictly regulated even where the lawyer or paralegal does not act on the transaction[1].
It is ironic that client conflicts are treated so seriously while the inherent conflict in self-regulation is mostly ignored. Commonly, this conflict is not really recognized or understood. Some think that the public interest is virtually invariably the same as the interest of the legal professions. Pressures from stakeholders and the realities of elections affect how elected benchers perceive issues and their roles.
Examples of conflicting self-interest in regulation
There are many examples which illustrate this inherent conflict. Describing a few helps make the point. In June, a proposal was made to Convocation in Ontario to allow charities and not-for-profits to hire lawyers and paralegals to provide legal services to the public. The idea was to attempt to address unmet legal needs by permitting those who currently serve people with other social, health and economic needs to add legal services to their offerings. Unlike the many proposals put to Convocation, this proposal provoked an immediate demand from legal stakeholders for time to consider and address the proposal, no doubt reflecting recent ABS debates. The proposal was deferred.
While I’m quite hopeful that lawyers will see the merits of this “civil society” proposal with fuller information and time to reflect, there is a long history of the private bar reacting defensively to other ways of providing legal services. In his book The Law Society of Upper Canada and Ontario’s Lawyers, 1797-1997, Christopher Moore details the early days of legal clinics in the 1970s. As Moore describes, the intent of these “storefront clinics” reflected the belief that legal assistance had to be delivered to poor communities through community networks and agencies which integrated legal advice with other kinds of assistance offered from accessible storefront ‘clinics.’ In 1971, Osgoode Hall Law School, with support from the Ford Foundation and the Canadian government, opened the Parkdale legal clinic. The following quotation from Moore’s book describes the reaction:
‘We were against this, we were violently opposed to this,’ recalled Gibson Gray, a future treasurer then on the legal aid committee. `They were … taking work on at the clinic … rather than having the work done by lawyers, traditional lawyers.’ That summer, there were rumours that the Law Society might seek an injunction against the law school’s storefront clinic, and benchers urged the professional conduct and unauthorized practice committees to investigate. …
… The Law Society’s irritation moved it to consider reclaiming the name `Osgoode Hall’ from the law school, but clinical legal aid (the phrase which soon replaced ‘poverty law’) proved irresistible. The Law Society, able neither to prevent nor to control their emergence, soon acknowledged that clinics were no real threat to private law practice, for they usually served a different clientele and often did counselling and community organizing work that extended well beyond legal practice. …
The reaction by the private bar to student legal clinics in the 1970s and to new practice structures in the 2010s[2] illustrates that self-interest has material effected consideration of new forms of legal service delivery. This is not to say that legitimate issues were not raised. In the 1970s, the way that student legal aid was brought forward was a challenge to the Law Society’s regulatory authority. Accordingly to Moore, “Arguing that supervising law students working in a storefront legal clinic was part of the law school’s educational mandate, Dean Gerald LeDain took the position that seeking permission from (or even informing) the Law Society was unnecessary”. Similarly, there are reasons to think carefully about allowing new forms of for-profit legal services[3]. But just as it is no answer to a disgorgement claim to say that no harm was suffered, it is no answer to concerns about the integrity of self-regulation to say that protectionism often leads to examination of legitimate issues.
Recent revisions to the advertising and referral fee rules provide another example. Over recent years, the traditional personal injury bar has faced significant new competition for clients. Significant investments were made in brand advertising. Referral fee-based business models capitalized on and fueled the advertising. Traditional ways of attracting clients were disrupted. The reaction of the traditional personal injury bar was to seek regulatory intervention. This is not at all to say that public and consumer interests were not engaged by these changed advertising and referral fee practices. They clearly were. And the traditional personal injury bar was no doubt motivated in part by concerns about the interests of injured people. But the fact is that these issues are, in part, reflective of competitive pressures between different parts of the private bar. The Law Society is currently considering contingent fee arrangements which are commonly acknowledged to require reform. The personal injury bar has a significant self-interest in contingent fee regulation. It is fundamentally important that the Law Society deal with these issues in the public interest and in the interest of injured people recognizing that access to justice, procedural and substantive, is what must drive deliberations about contingent fee arrangements.[4]
The recent Family Legal Services Review report by Justice Annemarie E. Bonkalo raises another cogent example. Lawyers and paralegals have been regulated together by the Law Society since 2007. Lawyer benchers and paralegal benchers are elected by their respective professions. While there are tensions within Convocation, I think that it is generally thought that this regulatory approach has worked well. Common perspectives on and approaches to appropriate professional conduct makes practical sense as does integrated professional conduct investigation and discipline. There are obvious synergies in licensing and ongoing professional competence. However, lawyers and paralegals compete for clients in some areas of practice. The extent of the permitted paralegal scope of practice engages the self-interest of both paralegals and lawyers.
These self-interests are obviously engaged by the Bonkalo Report. Lawyer benchers have been the target of organized communications from the family law bar, all framed in the public interest. Lawyer stakeholder groups are making forceful submissions against expansion of the paralegal scope of practice. I would be surprised if paralegal benchers are not receiving similar communications from paralegals. Paralegal stakeholder groups are naturally advocating for expanded scope of practice. To be clear, most benchers seek to rise above self-interest and to genuinely address the public interest in effective and fair resolution of family breakups. But my observation is that it is hard both for paralegals and lawyers to do this without their judgments being affected by self-interest. This is not surprising. Fiduciary law and professional conduct rules exist because we understand human nature and the cognitive biases that of us have.
These are but three examples of conflicting self-interest in self-regulation. Other examples are not difficult to find.
The need to act in the public interest and to reform governance
The point of this column is two-fold. The first is that each of these examples is live. It is important that the Law Society, the legal professions and stakeholder groups recognize how these issues need to be addressed. Just because self-interest is engaged doesn’t mean that legitimate issues are not raised. But professionalism and the integrity of self-regulation requires disciplined focus on the public interest and the interest of those we serve. If we do not regulate ourselves properly, we can expect that someone else will.
The second is that we should think hard whether our approach to governance effectively addresses conflicting self-interest and assures proper self-regulation. In Ontario, a Governance Task Force is currently charged to review of and make recommendations respecting the Law Society of Upper Canada’s governance structure. This question of how to address regulatory self-interest should be addressed by the task force,
A modest regulatory innovation might be to use public benchers as a formal check on self-interest. There are eight public benchers appointed to Convocation in Ontario. In meetings with over fifty voting members, these public members have an important role but a limited voice. Even without increasing the number of appointed members, these “lay” benchers could be formally responsible as a committee to consider and publicly report to Convocation on matters where regulatory self-interest is significantly engaged. Simply requiring that the public interest be addressed by public members should have a salutary effect.
Manitoba provides a recent example of significant governance change[5]. Manitoba has 23 benchers. There are 12 elected benchers, a bare majority. Six lay benchers are independently appointed. Four lawyer benchers are appointed by the other benchers applying criteria required to be established “such as the need for representation by region, demographics, type of law practice, or professional, leadership or management skill”. The Dean of the law school and an articling student are benchers as well.
In 2014, the Canadian Bar Association Futures Report recommended at pp. 50-51 that:
The governing bodies of law societies should be made up of elected lawyers, as well as a significant number of appointed lawyers and non-lawyers. The appointed governors should be selected by an independent appointment process designed to fill gaps in experience, skills and diversity.
There are no doubt other ways that governance reform could usefully address the problems of self-interest in self-regulation. Thoughts and suggestions by way of comment to this column would be helpful.
To every action (and sometimes even to an inaction), there is a reaction
It is easy and lazy to be apocalyptic including about the prospect of losing self-regulation in Canada. There is an ongoing risk of that but, at least for now, no real pressure for change. But failing to properly undertake responsibility in the public interest can result in loss of authority.
In his book, Moore provides an example. The resistance to the legal clinic model by the practising bar and the Law Society in the 1970s was followed by the appointment by the Ontario government of Justice John Osler “to investigate the delivery of legal services to disadvantaged groups, including aboriginal communities and isolated regions. Osler’s report laid the groundwork for a permanent network of Ontario legal clinics”. As Moore further notes “Osler also recommended that legal aid be transferred entirely from the Law Society to a publicly appointed board which might be more open than the lawyers to other innovations in delivery of legal services”.
Moore ends his discussion of this history noting that Law Society leaders subsequently acknowledged “in their way, that the Law Society alone no longer set the agenda on legal aid and much else affecting the profession. The principle of self-government endured, but authority over the legal was becoming permanently subdivided”.
I have previously written that unmet legal needs are a significant challenge to self-regulation.[6] This is not new as Moore describes. Failing to address legal needs not effectively addressed by the private bar resulted in loss of Law Society responsibility in the 1970s. Failing to do the same 40 years later risks similar loss. Given the extent and significance of unmet legal needs in family law, a protectionist response to the Bonkalo Report likely results in loss of authority over who may provide legal services in family law matters. This is not to say that Justice Bonkalo’s recommendations should necessarily be accepted. The point is that the self-interest of lawyers or paralegals is the wrong perspective from which to address the question.
The same can be said about contingent fee arrangements. The personal injury bar is vitally concerned with contingent fee arrangements. Ontario benchers will no doubt want to reflect carefully on what is said by personal injury lawyers in the current consultation. Their expertise and experience requires that benchers listen carefully. But their understandable self-interest requires independent consideration of recommendations for reform in the public interest. Again, failure to do by the Law Society so will likely result in loss of responsibility and authority.
Doing the smart thing and the right thing
It is clear that self-regulation can be lost all at once or bit by bit. For those who consider self-regulation to be essential to independence of the bar, the need for governance mechanisms and policy decisions to ensure that the public interest is advanced should be powerful. The same should be true for those who merely see value in self-regulation[7]. On an issue by issue basis, members of the private bar and their representatives should recognize that protectionist instincts that result in self-interested regulatory decisions can be counter-productive in the longer run. And in any event, those who have accepted responsibility in the public interest rather than the interest of their profession should of course act accordingly.
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[1] Rules of Professional Conduct, Section 3.4, Paralegal Rules of Conduct, Rule 3.04
[2] See Alice Woolley’s slaw.ca column Bencher Elections – the Challenge to Self-Regulation’s Legitimacy
[4] Contingent Fees, Portfolio Risk and Competition – Calls for Reform
[5] Sections 6 and 7 of The Legal Profession Act, C.C.S.M. c. L107
[6] Unmet Legal Needs – The-challenge to legal practice and to self-regulation
In my article entitled “The Consumption of Lawyer Independence” (2010) 17 Int’l Jo. of the Legal Prof. 283, at pp. 296-298, I suggested that we should regard lawyer independence as a public trust and that we should meld non-governmental oversight and the public trust as the way to deal with lawyer regulators who breach their fiduciary duty to regulate in the public interest.
Malcolm,
I always enjoy reading your thoughts, as they tend to be relatively high-minded – which is to say, looking beyond the end of our noses respecting the profession and its future.
In many respects, I would agree with your commentary, though I have some significant reservations regarding how to best approach our challenges – particularly what is now the “Manitoba Model” – which in some respects is being proposed right now in Alberta to some debate.
My concern is not that “things should stay the same” – particularly when, in many respects, we KNOW for a certainty, the machinery is broken (see the Cromwell and CBA Futures reports).
My concern – also mentioned in the said reports, is the lack of data, and the tendency to replace scientific inquiry with “guessing” based upon either anecdotal evidence, or, worse, “hunches.”
In this respect, your commentary is exactly correct, namely, that we have done precious little to understand the true impact of our inherent conflict in how we govern our profession – namely, that it’s in the interests of lawyers to make more money and in the interests of the public to pay less. We should engage in an examination and discussion of that issue with a clear eye, understanding that public interest and lawyer interest are connected, but also potentially divergent.
But as you also allude to – it is also in the combined interests of the public and the profession not to have lawyers governed by “government.”
Government, left unconstrained, carries a very heavy club and the general public has very little to defend itself with – other than the legal profession itself. For our profession to come under the thumb of government – potentially – is to risk tyranny over the public at large.
Now. Both of these points are, in some respect, “theories” – albeit theories which seem to be backed up by experience and a consideration of history – as you point out regarding past experience with legal clinics, paralegals, etc., and as we have seen with the treatment of Omar Khadr by successive Liberal and Conservative governments in Canada (IMHO).
The problem is not only identifying the issue – which your piece does – but asking whether or not we are engaging in sufficient rational and considered analysis of the relative options in addressing the issue?
Experience dictates that, in most cases, we are not.
Someone comes up with a proposal – which, by its nature, carries a sort of “parental bias” on the part of the maker – usually with modest (if any) discussion about the true weaknesses or questions arising from the proposal. While most often, matters are up for debate – the ability to debate the point is often limited by social pressure to be a “team player” or by limited access to usable data and information.
What we need, I would suggest, is a more Bayesian inquiry respecting review of how we administer our profession. In other words, the proponent of a program or process would posit a theory, provide some suggestion as to a “probability” of correctness, with some basis for the theory and the estimated probability – and then actually test that theory and the correlating potential that the theory is wrong.
So. To consider some items of discussion:
a) The CBA suggests that appointed governors (Benchers) should be selected by an independent appointment process designed to fill gaps in experience, skills and diversity.
This sounds fine, doesn’t it? And it might be an improvement. However, at the same time it removes lawyers further from their regulator by removing the impact of a democratic process to a shadowy “appointment” process.
And what is an “independent” appointment process? And what is the value matrix of “experience, skills and diversity”? And assuming you can extract whether “gender” has more diversity value than “visible minority status” which has more diversity value than “rural practice v. urban”, how do you assure that the matrix does not become, in reality, an new “club” – replacing the past “old boys club” – in other words, a nicely controlled effort to assure consistent “group think”? Consider for a moment the polarization of our political views in Canada. What a “good appointment” seems to be to Stephen Harper is hardly the same as it would be to Justin Trudeau. What makes us confident Law Societies are any less influenced by political considerations? (Will conservative/liberal values be a diversity consideration?)
I’m a bigger fan of “democracy”, even when it’s imperfect, perhaps influenced by some tweaks – that candidates who are women, aboriginal, or from defined geographic areas, or from certain areas of practice perhaps – be given preferential status in an election – but still be subject to an open and transparent election – not appointment.
b) Public Board Member Influence – my experiences as a Bencher in Alberta is that the impact in contribution of public members is substantial – both in policy discussion and in disciplinary matters. And I think your suggestion of a defined contribution relating to “regulatory self-interest” reporting by public members is a good one. My experience, in fact, is that public members often (though not always) express that lawyers are harder on lawyers in disciplinary matters – but I think a defined effort to open up for discussion on a regular basis how we might curb a tendency towards self-interest would be a good thing;
I’m sure there are numerous discussions being put forward in your governance review in Ontario – my hope, however, would be that each and every point would be examined with a keen eye towards the potential benefits and difficulties that may arise from every proposed change and that your administration be specifically tasked to disclose and present the conflicting “theories” to allow for a proper discussion at the board table – and that you also take advantage of the input of your membership at large before confining yourselves to a specific vision of what change should be.
The issue is too important to leave to hunches OR self-interest.
Governments should regard independent self-regulation of the legal profession as an inviolable right; the legal profession should regard it as a fragile privilege.
I have been a bencher of the LSUC for 22 years, the first 16 as a voting member. The lay benchers have always played a crucial role and their contributions are greatly respected and influential. A huge advantage in Ontario is the presence of some ex officio benchers – benchers who no longer have a vote, are no longer beholden to anyone (if that was ever even really a problem), and who offer loads of experience and institutional memory to the process when appropriate.
As with constitutional monarchy mixed with parliamentary democracy (elected House of Commons plus unelected Senate*), the LSUC had stumbled upon the best form of self-regulation: voting elected and lay benchers in ultimate control, with lay benchers helping to make the public interest a live issue at all times, a competent staff, and, importantly, a group of experienced independents. This salutary balance has already been harmed by the short-sighted abolition of any new life benchers, and there are those who want to get rid of the remaining life benchers. Failure to understand what is being lost causes loss.
*The media only report the bad news where the Senate is concerned; they, in fact, do highly beneficial work, even if it is simply speaking truth to power without fear of losing a perk, for which they receive little credit.
Legal profession regulators have a high duty to act in the public interest and, in my long experience, they have consistently done so with one exception and one potential additional exception. The exception is that precious little has been done about the one barrier to access to justice that dwarfs all other real and imagined barriers combined, namely, the ruinous time and cost of litigation. Instead of effective steps to do something about the $40,000 average cost of taking a case to trial (barristers say to me “I can’t afford myself”), serious efforts have instead been made to do something about the $200 cost of a typical will. Really now. In fairness to those unwilling to devote too much time and energy to dealing with the ruinous time and cost of litigation, it is a problem that only the government can solve by streamlining and shortening the litigation process, by replacing most custody and access battles with an almost always automatic 50/50 regime*, and by other methods for which I lack time to discuss here.
*avoidable only by either agreement between the parties or a court order based on the unfitness of the other parent on a high evidentiary threshold (in other words, the system in use in Europe for the last half century)
The potential exception is the effort to bring the worst idea to hit the legal profession in 1,000 years – ABS – into Canada. So far, the efforts have not succeeded. Woe betide the profession and the public if the efforts succeed. ABS, erroneously sold as the only way to achieve the benefits claimed for it, would, once adopted, inevitably over time lead to an anti-competitive consolidation in the marketplace and add onto the current costs of legal services the imperative to generate profits for the remote, extra layer of investing profit seekers. In what Universe does adding another layer of profit-takers result in lowered costs to the public? And spare me the economies of scale argument. Any (mostly and perhaps entirely illusory) profits from economies of scale would be snatched by the investors, not delivered to the consumers.
ABS would also inevitably lead to a loss of independence of the bar as the monied string-pullers demanded ever more control over how the returns to them are going to be generated. There are no walls that could be erected that the money and power of the string-pullers would not eventually breach.
ABS would also inevitably feature the failure of very large entities with all the harms that that would entail. Imagine if McCarthy Tetrault had been owned by any one of AIG, Enron, Worldcom, Societe Generale, Lehmann Brothers, Bear Stearns, Royal Bank of Scotland, Nortel, GMC without the 12 billion dollar taxpayer bailout, Arthur Andersen, and on and on. And never mind the immediate harms only apparent after the collapses. What about the impact on the wholly-owned or controlled law firm during the years leading up to the collapse? What pressures would be on the lawyers to generate revenues to save the rest of the controlling behemoth? Such harms would dwarf the harms of the relatively rare lawyers who misappropriate from trust accounts.
Malcolm argues that practitioner lawyer benchers are inherently conflicted. I have only seen that in the reluctance, of some but not everyone, to tackle the ruinous time and cost of litigation, but they may be forgiven given the reluctance of the government to take effective steps to address the problem. In all other cases (and even to some extent the case of the cost of litigation), the benchers have been laudable in perpetually putting the public interest first and foremost.
Malcolm submits that “It is easy and lazy to be apocalyptic including about the prospect of losing self-regulation in Canada.” He then submits that, unless we allow non-lawyer profiteers to own law firms, we risk losing self-regulation. Actually, if we were to allow that, then we would deserve to lose self-regulation so asinine would the legal regulators be revealed to be.
Malcolm says that it is self-interest that militates against allowing charities to own law firms. Wrong. During the many months, if not years, that the ABS Task Force looked at the issue before rendering their Report in June 2017, they never once contacted the people running entities with long histories of delivering legal services to the less fortunate – the clinic system. The ABS Task Force only began consulting with them when the absurdity of that was noted on Convocation’s record in June. Briefly, an enhanced clinic system would second clinic lawyers to charities (e.g., hospitals), with the financial assistance of the charities who obviously have money to spend on the project, such that the legal services would be delivered to the target clients but without giving up any ownership and independence of the legal profession. And make no mistake – allowing ABS for charities would just be the edge of the wedge.
Further, the Report even identified a problem to overcome, namely, that the charity-owned lawyers would be isolated from the mainstream bar and would need a mentoring bureaucracy. An enhanced clinic system would solve that as the clinic lawyer would come from an experienced clinic environment, would have ready access to the mentors s/he had come to know while working in the clinic, and would return to the clinic after the period of secondment to seed the clinic with their experiences for the benefit of future lawyers to be seconded.
There are always, always, better ways to achieve the goals erroneously claimed as only being achievable by ABS. The ABS Task Force has proven itself uninterested in exploring those better ways. That is why any law society looking at achieving the benefits needs to create a committee with a proper mandate, not a mandate to bring in the worst idea in 1,000 years, but a mandate to achieve the goals by other methods. They exist and are easy to identify and not difficult to implement.
Malcolm says “members of the private bar and their representatives should recognize that protectionist instincts that result in self-interested regulatory decisions can be counter-productive in the longer run. And in any event, those who have accepted responsibility in the public interest rather than the interest of their profession should of course act accordingly.”
Malcolm is a true believer and a man of great integrity. He is, quite simply, one of the best people I know. But, there is no group more self-interested in bringing ABS into Canada than the large firms who would be the target of the generous purchase prices offered by the behemoths who would buy them. Further, a significant number of the potential purchasers are clients of the big firms. To my knowledge, I, a sole practitioner, have no clients worth billions or even hundreds of millions. Because of that conflict, an argument can be made that no bencher from a big firm should have a vote on the issue of ABS. I am not making that argument, at least at this time.
The “protectionist instincts” that I and others have are (1) to protect the independence of the bar (sure to be lost eventually under nonlawyer ownership), (2) to protect the health of the legal marketplace (sure to be badly harmed by the cartelization of ABS (see the 5% commissions charged by the cartel of real estate agencies who still control the vast majority of the realty market, and especially see the ridiculously high costs of dealing with the American title insurance industry where four companies have upwards of 87% of the conveyancing and title insurance market after first decimating the real estate bar with predatory pricing and other unfair business practices)), and (3) to protect the public from those ravages. Those are “protectionist instincts” I am proud of.
And where is my self-interest? I will be retired before any of these ravaging harms could affect me. I have no self-interest in the positions I take on this or any other issues. And I say this about Malcolm’s position. He, too, will be retired before any of this can hurt his career or somehow benefit him personally. He does not stand to gain, and I do not stand to lose. But if the pro-ABS side wins, everyone but a few profit-takers will lose, and if the anti-ABS side wins, the benefits will nevertheless be achieved (once the law societies set up properly mandated committees) and everyone except a few profiteers will win.
Man, I could write a book.
With respect to the “conflict” between allegedly self-interested family lawyers and allegedly self-interested paralegals wanting to do more family law, the answer is not to flood the family law market with thousands more legal service providers all trying to make a living off the miseries of family breakdowns out of the wallets of people whose non-legal expenses have already risen (two homes, etc.). The answer is making the whole separation, custody, access and divorce process less costly. That way, the clients could afford to access the lawyers and would, by definition, get a more educated level of legal assistance. If the family law legal battle cost half of the current average allowing roughly twice as many combatants to afford it, the family lawyers could handle twice as many clients in half the time per client, and would lose no income, and the clients would get the services of lawyers over the services of paralegals.
(By the way, paralegals play a critical role in providing certain legal services, mostly in areas that are, and always will be, uneconomical for lawyers to provide. The best example, of many, of that is traffic tickets. That is why it was right for the LSUC to agree to regulate them. But that does not mean that paralegals should suddenly become lawyers in all but name only in areas that are a lot more complicated than they seem to outsiders.)
It will be said that paralegals in family law would be there to assist those clients who cannot afford lawyers and are showing up in court in unprecedented numbers representing themselves. But that misconceives the problem. The incidence of self-represented litigants has risen in lock-step with the rise in the number of barristers per capita (thanks to law schools no longer failing anyone and bloating up in size). Although it seems counter-intuitive, the two phenomena are related. You would think that more barristers per capita would result in lower costs to the public, but the reality, as the American experience has proven in spades, is that it results in higher costs. With fewer clients per barrister, the pressure is on to extract more money from clients who can afford to pay the higher costs rather than taking on more clients who will pay less. The court system encourages that by making the whole process horrendously time-consuming where, as always, time is money.
Reducing the time needed to resolve disputes will reduce the money it costs to get them resolved. The government can do that. Over the years, it has tried but, demonstrably, has failed. The main reason for that failure is that the government is afraid that eliminating some of the grinding down stages (mandatory mediations, pre-trials, etc.) will result in a need for more (in the government’s view) expensive judges, court rooms, court staff, etc. But that would not happen if the system were designed properly. One way to ensure that there would not be an expensive upsurge in demand for judicial time would be to enhance the role of the exchange of settlement offers, and then to enforce with iron gavels the consequences of not accepting reasonable offers to settle. It would not take long for the profession to get the message and convey it to their clients.
Family law mostly boils down to disputes over kids and cash (disputes over restraining orders against the other spouse are not as prevalent as disputes over kids and cash). Where the kids are concerned, money is no object (for those who have it) because you cannot put a price on the kids. Thus, custody and access fights can become bottomless pits of time, money and such additional miseries as loss of productivity at work, more need for stress and depression related medical care, and less money to spend in the broader economy on, for example, new furniture for the kids’s new bedrooms.
If custody and access are mostly removed from the court system, as in Europe as described in my previous post, then the disputes will be over just the cash. While there will still be some combatants willing, out of revenge perhaps, to fight over the cash until the cash is gone, most people will settle cash disputes far earlier than custody disputes rather than see their cash assets depleted for no purpose.
The government needs to bring in the European virtually automatic 50/50 custody and access system, not bring in thousands more legal services providers.
Like most of these posts, the posts are too short to deal with all the nuances and to address each and every possible criticism or other good suggestions. The government could set up a council to flesh this out. Given that this particular wheel has already been invented and put in place, I am told, in every European country and at least two American states with more moving toward it, it should not take such a council long to come up with a similar system tailored for Ontario.
While I have a less favourable view of ABS etc. than Mr. Mercer (though it seems to be working out okay in England, with the Clementi report that got the ball rolling produced by a non-lawyer), I do appreciate his focus on the disjunction (actual or potential) between lawyers’ and paralegals’ interests, and the public’s interests. I also agree with Mr. Wright that the legal profession should regard it as a fragile privilege, though unfortunately I do not think it consistently does so; I disagree with his view that governments should regard self-regulation as inviolable.
I do hope that, regardless of the result, that the upcoming SCC decision re TWU and LSUC and LSBC clarifies somewhat the scope of and limits of self-regulation, especially when doing so contrary to the government (I’m referring primarily to the BC situation, not the Ontario one, in that respect). That is, it would be nice if the SCC gives some guidance as to whether lawyer self-regulation is more inviolable right or fragile privilege…
David, ABS is frought with problems in the UK. Those of us who subscribe to the Law Society Gazette of England and Wales learn more bad news about it than is reported in Canada. Further, several of the ABS keeners over there have on several occasions willingly and for attribution announced that they hope and plan to use ABS to garner much more market share for themselves and even to “dominate” the market. Maybe that’s good for them, but it is no argument that that is in the public interest; indeed, it is a argument loud and clear that their goals of domination in the market are contrary to the public interest.
ABS came to England when, tellingly, a nonlawyer, an accountant, delivered a report to the Government that the Government wanted him to produce. It was not very different from the Bonkalo mandate on Family Law. Her mandate was written in such a way that, the instant it was revealed, it caused me and many others to predict with complete accuracy that she would recommend that paralegals be allowed to do more family law. There were and are far, far better ways to deal with the crisis in family law, but those methods were outside the terms of her mandate.
Remember also that the harms of ABS would not immediately manifest themselves. But it is a certainty that, over time, the harms would manifest. Harm increases in lurches from plateaus to new plateaus over time. At first, there appears to be no difference. Then the beast belches, rouses itself and eats up another segment of a previously competitive market. It would eat away at our independence in similar fashion.
Slater and Gordon cost their investors more than 600 million dollars. The biggest losers were two large pension investment funds. When that was pointed out to an ABS supporter, he said dismissively, “Growing pains”. Tell that to the pensioners who were depending on their pension fund managers to invest wisely.
And that was just Slater and Gordon. As previously pointed out, what if Slater and Gordon had been owned by Lehmann Brothers or Arthur Andersen? Then what?
Absolutely no case has been shown for putting our independence at very serious risk, for exposing us to the harms of a multi-billion dollar collapse by an ABS owner, and so on. The onus is on the ABS supporters and they cannot meet that onus no matter how hard they try.
It took the legal profession hundreds of years to cement its independence and it is perpetually at risk of losing it. Why should that independence be put at risk for what is, in historical terms, a fad of recent and so far short duration? It would be bad enough to lose it to a government that, very wrongly, failed to regard our independence as inviolable, but it would be ridiculous to throw it away ourselves.
And you are right to agree that lawyers should regard self-regulation as a fragile privilege, but, with respect, you are wrong when you say that governments should not regard it as inviolable. Our independence is so crucial that governments should never encroach upon it. The legal profession is the major bulwark that citizens have against the bottomless power and resources of the state. Do not allow yourself to be lulled into complacency simply because we are living in an historical blink of an eye of, in Canada, relative government restraint. Most other countries in the world are not so blessed. There is no guarantee that we will forever remain so blessed. Canadians are not better people than the people in those other countries. So far, our advantage is a better system brought about mostly by historical accident, good luck and abundant natural resources. We tamper with that system at our peril.
As Churchill and many others have observed throughout history, it is not the enemies from without that are the main problem; it is the enemies from within. Those enemies from within can be either well-meaning and sincere but insufficiently schooled in history and human nature, or they can be, as the Soviets (who themselves knew darn well that communism was a failed ideology that could only be maintained by force) called Western communist sympathizers, “useful idiots”. Most of the ABS supporters I know fall into the former category, but I am aware of some who fall into the latter category.
I repeat: there are no benefits erroneously claimed as possible only through ABS that cannot be achieved without selling our ownership. Therefore, our talents and energies should be devoted achieving those benefits through means other than selling our ownership. Let’s get on with that job.
I appreciate the comments of Mr. Wright re ABS; it may have been unclear, but I have a bias against liberalizing ABS and made the comments I did in an attempt to be fair; so while I’m not exactly happy about problems with it, the additional info you provided supports my preconceptions.
Re inviolability and fragility, to the extent governments treat (or lawyers believe governments will treat) self-regulation as inviolable, lawyers will not treat it as a fragile privilege – and that lack of humility may lead to a loss (or more like a diminution of) the profession’s powers of self-regulation.
Thanks Rob for your comments with which I generally agree. You are right to note the risks of falling in love with one’s own thinking/proposals and not taking a disciplined approach to assessing alternatives. That said, there is a real risk of underestimating the weight of inertia. Causing any change seems exceedingly difficult and there is a risk in setting undue hurdles against change in this context. My intent was mainly to draw attention hoping that debates about change would reflect the centrality of the public interest and the risk of corrupting self-interest. If we could also find systemic ways to force this reflection, that would be helpful I think.
Brad, I think that your posts mostly miss the point that I was making. My column was about conflicting self-interest rather than the merits of any particular issue. The examples that I used raised had the common theme of the self-interest in avoiding competition whether as between lawyers, between lawyers and paralegals or from others. Other than conceding that self-interest may actually affect the thinking of others of whom you are critical, your position is that you have seen no evidence of self-interest and that you have none. The point that you miss is that having an assembly overwhelmingly made up of and elected by the practising bar inevitably means that there is a conflicting self-interest on issues such as described in my column. That doesn’t mean that any particular decision or opinion is right or wrong. But this is a problem especially when denied and when those who are seen as most influential by the decision-makers have the same business interests as the decision-makers. Self-regulation has real advantages but this is a central problem that needs to be recognized and addressed.
David, we are likely on the same page. We both do not want governments regulating the profession, and we both want the legal profession’s regulators to be very mindful of their public interest duty.
And as long as you oppose non-lawyer ownership of the legal profession, you are wise.
Malcolm, nothing is perfect; i.e., everything is flawed, but a flawed regime of self-regulation is immeasurably better than a flawed regime of government regulation.
In my 22 years experience as a bencher, Convocation has consistently and admirably worked to keep possible flaws to the minimum by putting the public interest foremost. Agreeing to regulate paralegals and giving them the cachet and competency boost of belonging to the Law Society is only one of many, many examples of Convocation acting in the public interest. As Justice Stephen Goudge and others have rightly pointed out, it is a false dichotomy to say that the interests of the profession and the interests of the public necessary diverge. They dovetail almost all of the way. A healthy profession is in the public interest. Look at jurisdictions in which a healthy legal profession does not exist. The publics there are far worse off.
Physics and history show that everything defaults to a mean. The instant something is built, it begins to deteriorate. Your house needs regular attention to avoid it eventually caving in. As Churchill said, the price of democracy (a form of government contrary to human nature which prefers, to this day, strong man rule) is eternal vigilance. The deterioration rarely occurs in one swoop. It comes in on little malevolent cat feet, or by a thousand paper cuts, until you wake up one day and realize great value has been lost.
There are many ways to cause a deterioration in a legal profession. One is to lower entry and graduation standards. I kid you not when I say that 58% of the graduates of Ottawa U law school today would either not have gotten in the first place or would have been weeded out by Christmas of first year 35 years ago. When you and I went through university, 10% of the marks handed out were As. Now it’s 38%. Factor in B+ marks to take you to 50% and that makes a B a below-average mark. Leicester will take you with a B, a below-average mark, and no LSAT; i.e., no demonstrated affinity for the kind of thinking that will be useful in a legal career. 40% of their students are from Canada. They return to Canada demanding to be called to the bar, and we call them.
Another way to cause deterioration is to allow individual firm advertising as it inevitably lowers the tenor of the profession and the faith the public has in it. Except at the statistical periphery, advertising does not increase the amount of legal services being sought. Advertising does not increase the number of people injured or the number of people choosing to buy a house. No one says, “I think I will go be operated on by medical butcher so that I can hire a PI firm.” No one sees the sign on my door, smacks their forehead, and says, “By golly, I should sell or buy a house today.” All advertising does is try to attract to the advertising firm clients who might otherwise have gone elsewhere. Advertising is attempted client poaching, and it does little more than allow firms who were less successful at attracting clients by dint of their reputation for excellence to attract them at the expense of firms who were more successful at attracting clients by dint of their excellence. Does advertising lower the costs to the public? There is zero evidence of that. Instead, it adds large costs to the overheads of the firms that advertise, and is certainly a upward pressure component in the fees charged. There is already enormous and ferocious competition within the profession. But competition based on competence, decency, professionalism and price sensitivity in that highly competitive marketplace is far better than competition over retaining the cleverest ad agencies or paying for the most effective ad campaigns (posters above urinals?).
Far better and far cheaper would be public service advertising by regulators at the very modest expense of all the individual members. Such ads could point out that, by having excellent wills done by lawyers, a testator can greatly decrease the family’s costs, delays and headaches of dealing with an intestacy or, worse, a badly done home-made or internet will. Such ads could point out the benefits of seeking legal advice following an injury or a firing or prior to signing a contract of any material type. And so on. Then let word of mouth and referrals do the jobs they had been doing so well (and actually still largely do) for over a hundred years.
But the most effective way to harm the profession and by extension the public is to sell our independence to nonlawyers. The harms of that would spread, slowly at first but increasing over time, until the profession would be a shadow of itself. No one should want giant, string-pulling multinational corporations or investment houses screaming for more and more profits owning huge swaths of the legal profession. And who would ever be able to control what that ownership would morph into? What if KPMG bought McCarthy Tetrault, then had the major black eye of the questionable tax planning advice they gave as reported on the Fifth Estate, and then sold their legal division to a company controlled by the Chinese government?
You will say that protections will be put in place. Hogwash I say. There are no protections that would long withstand the power of money. And by long, I mean in the historical context. It would not happen in the first year of allowing ABS, but it would happen. History, analysis, common sense, economics, political science all prove it.
If the talents and resources at our disposal had been devoted to identifying ways to benefit the public through innovation instead of wasting over three and a half years on this ABS nonsense, we would be miles and miles ahead. When are we going to do that? I have pestered three Treasurers in a row (two of whom are on the record as seeing no case to be made for ABS) to set up such a useful and salutary committee but with no luck, so far. Instead, we are still stuck with a committee that plows on with ABS madness even though it is recognized that most of the benchers are sensibly opposed to it. I live in fear that, by some perfect storm of interpersonal seduction, bad analysis, inattention, and temporary lunacy, we will accidentally pass ABS only to wake up later, when it is too late, horrified, if we are honest enough with ourselves to admit error, by what we have done.
And lastly (for now?), I take issue with what I interpret as your contention that those opposed to ABS are self-interestedly opposed to allowing ABS, in the wedge form of charities. That is simply not so. There is at least one very workable means of providing more of the desired legal services to the less-fortunate, namely, through the existing, effective, tried and true infrastructure of the clinics. We need only to enhance the existing structure to achieve the benefits. As the charities obviously have money to devote to the cause, they, presumably, would be willing to cover some or all of the costs, but instead of owning their own law firms, they would purchase the services from the clinics on a fair and cost-effective basis (perhaps for no more than the salary cost of the seconded clinic lawyer), or they could seed the Law Foundation which in turn would fund the clinic enhancements. In any event, enhancing clinics must be explored before taking the irreversible, harmful wedge step of allowing nonlawyers to own law firms and thereby compromising our independence.
Cheers.
Lawyers should not concede that self-regulation is either a right or a privilege. It is a constitutional imperative. This is so because lawyer independence is indisputably an element of the rule of law and independence is illusory if lawyers do not regulate themselves.
The only question that need be asked in respect of ABS’s is: might (not will!) any ABS arrangement interfere with the capacity of any individual lawyer to discharge his or her duty of loyalty towards his or her clients?
Gordon, the answer to your question is: Of course. Inevitably. And increasingly harmfully.
Currently, lawyers have duties, loyalties, obligations and desires to please that they owe to their clients and themselves and, for many, to the management/compensation committees of their firms. To the extent the lawyers’ desires to please (feed) themselves and please their management/compensation committees colour their duties to their clients, we need strong ethical requirements to put the clients’ needs first. Many, probably most, lawyers do. But the billing targets imposed on lawyers in firms large enough to demand or set targets (and such firms can be as small as a sole practice though I have never in my life set a target) do sometimes cause lawyers to put the billing imperative ahead of the client’s interests. That is reality borne of human nature.
In our current environment of only having to please one’s self and or a management committee, there are still difficulties in the profession in ensuring the clients’ needs are always paramount. Adding a layer of mostly remote, demanding, string-pulling profit-seekers cannot help but worsen that environment regardless of how good or bad the current environment is.
ABS has nothing to commend it and it must be resisted with ceaseless ardour by all who care about the health of the legal profession and, by extension, the health of our broader society. The best way to neuter ABS is to make the profession more innovative without selling our ownership. The alternatives are the status quo (which no one is advocating) or caving in to an irreversible blunder. We are a bright and agile profession. Of the three alternatives, let us devote our talents to the first one.
Brad: Again, I’ll stay with the point of my column. The merits and framing of issues that you address are another matter.
In saying that “nothing is perfect; i.e., everything is flawed, but a flawed regime of self-regulation is immeasurably better than a flawed regime of government regulation”, you attack a straw man of your own making. My point was that self-regulation needs to be improved (not ended) to address the very real issue of conflicting interests. Refusing to recognize and address this flaw puts self-regulation at risk.
In response to my comment that the self-interest of practitioners in avoiding competition is a conflicting self-interest, you say that “it is a false dichotomy to say that the interests of the profession and the interests of the public necessary (sic) diverge. They dovetail almost all of the way.” It seems to me that the failure to accept that there is a conflicting self-interest is telling and troubling. Res ipsa loquitor.
You yourself raise the issue of conflicting interests. You must see it as a serious matter. Conflict, if it truly results in harm, is a serious matter. If it were trivial, there would no need, I assume, to contemplate a loss of self-regulation. Since you see it as a serious matter, you posit a serious risk that we will lose self-regulation if we don’t – what? Sell ourselves to investment houses (first starting with charities)?? The loss of self-regulation is, therefore, not a straw man of my own making. It is a core piece of your thesis which is that, if we do not allow ABS, we may lose self-regulation. I disagree. We may lose it, but not because of that.
What matters is not whether we doom our profession to the diktats of nonlawyer owners. What matters is whether we deliver excellent legal services cost-effectively to the public. I say a fully independent bar does that far more effectively than cartels ever will. I say a fully independent bar does that far better than a government controlled bureaucracy ever will (and a wholly independent bar is incalculably better for society). I say that there is room for improvement and I have been pushing for many years now for Convocation to get on with the job of making or encouraging those improvements where they are so obviously needed.
The single most important thing we should be doing is bringing down the ruinous time and cost of litigation – the access to justice barrier that dwarfs all others combined. What have we done about that? Our continuing failure to do anything meaningful about the enormous real barrier while wasting out time on non-barriers is where the real danger lies. If we cannot bring ourselves to deal with what is, by far, the major problem, then, you are right, we will put self-regulation at risk. There may be a fear on the part of some that tampering with the litigation system will lead to precipitous drops in lawyer incomes. Not if the improvements to the system are done right. We as a bar could help so many more people if the time it takes to help them were reduced. Perhaps incomes would even rise given the enormous numbers of additional people who could be helped. In any event, it is incumbent upon Convocation, which regulates the delivery of legal services in the public interest, to tackle real problems, not non-problems.
I also object to the idea that those of us sensibly opposed to nonlawyer ownership of law firms are somehow so imbued with conflict that our views are tainted. I say, with respect, that that is nonsense. For one thing, the people the charities wish to assist rarely seek advice from the private bar. Whether we allow charities to own law firms or not will not impact my practice or the practices of everybody I know who opposes ABS by $1.00. So much for a conflict. I say let us help deliver needed legal services to the less fortunate, but let us do it without making the historical and irreversible blunder of allowing the wedge of nonlawyer ownership of law firms. The means exist – the clinics in enhanced form is one great place to start. Let’s work on that. If we do, we accomplish exactly what is hoped to be accomplished without the blunder element.
Next, you will say that I am still conflicted because I see charity ABS as the wedge that will lead to broader ABS that will destroy my practice. I say I will be retired before then, but even if I were not, I am opposed to ABS for all the very cogent reasons I have set forth many times before – the inevitable anti-competitive cartelization following a spasm of loss leadering to kill the independent competition, the inevitable loss of independence and so on. I look at jurisdictions that have allowed the erosion of, or never had, the independence of the bar that we have, and see, uniformly, a badly harmed public. Some jurisdictions have never had a fully independent bar; others have had one until more recently. The longer the lack of independence exists, the worse the harm becomes, not tomorrow maybe, not next week maybe, but within one or at most two generations – an historical blink. Australia and England are in the early days of the fallout of their blunder, but the situations are certain to worsen there over time.
You know me well. You know I have never been motivated by money. You know me as someone who would rather be right than rich. If I were motivated by money, I would have joined the many larger firms over the years that asked me to join them. On the other hand, almost every single supporter of ABS believes that either they will not be harmed by it or they will benefit from it. I do not know any supporters who think that ABS will harm their standards of living.
The greatest conflict of interest in this whole debate is borne by those among the ABS supporters who can’t wait to sell all or significant parts of their firms to the investors. And why do they want to do that? Because they either want the upfront cash for themselves or they want to expand the reach of their firms essentially at the expense of other firms. What do either of those have to do with the best interests of the public? Nothing. Some people support ABS because they were led to believe that it would enhance the scope for income-splitting with their spouses. The mind boggles that anyone would think that these cash-strapped Governments would pass legislation to give lawyers(!) a break on their income taxes. But what does lawyer income-splitting have to do with the public interest? Nothing.
My thinking applies right across the spectrum of the delivery of legal services, but take my main area – real estate – as an example. I live in a ferociously competitive marketplace. Our fees have not gone up against inflation in 40 years. If anything, they have come down. I have to compete with some lawyers who quite gleefully admit that they do not pay any personal attention to the files so busy are they drumming up more clients based on racing to the bottom where quotes are concerned. Fortunately, such lawyers are relatively small in number, but they are there. I also have to compete with literally hundreds and hundreds of lawyers in Ottawa who are doing the work properly. The public is extremely well served at highly competitive prices. Now then, what happens if nonlawyers can own real estate conveyancing firms? The experience in the US, repeated in 49 out of 50 states, tells us. The nonlawyer behemoths advertise like crazy conveyancing rates that no lawyer can compete with, and the behemoths take over. Once the lawyers are gone, the rates soar far above what the lawyers ever charged and, with practically no competition except from other like-minded behemoths whose presidents all belong to the same notional golf club, the standards erode substantially. That’s what the public gets in an ABS world: temporary low prices followed by permanent high prices and reduced standards. That is what I oppose, Malcolm, in conveyancing and all other areas of legal practice. If that is a conflict, then it is one heck of a public-spirited one.