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A closed society

SPECIAL REPORT: While other nations are opening up their legal systems, Canada lags behind


 

A closed society

When Saint John lawyer Barry Morrison agreed to take on the Law Society of New Brunswick, he says, “I was effectively suing myself.” Like any practising Canadian lawyer, Morrison is a member of his province’s self-regulating body. Even so, he agreed to represent First Canadian Title Co. in a suit alleging the lawyers’ group deliberately blocked First Canadian from the local land title search business. “For years, the bread and butter of private law firms was property transfers,” Morrison says. “Title insurance effectively replaced the need for a lawyer to do a title search,” offering the service at lower cost to the public. In 2007, Justice Thomas W. Riordon ruled in favour of First Canadian, scolding the law society for attempts to impede the title insurer. “Members of the Law Society are not happy with the encroachment on what has traditionally been the work of lawyers,” the ruling said. (The law society appealed, and a decision from the provincial Court of Appeal is pending. Neither First Canadian nor the Law Society of New Brunswick would comment.)

Across Canada, provincial law societies are charged with defending the public interest and the integrity of the legal profession. They dictate everything from who can be a lawyer, to how professional misconduct is punished. But the interests of the public and the legal profession can sometimes clash. A rising chorus of critics say that leaving regulation in the hands of lawyers has driven up the cost of legal services while Canadians pay the price. The time has come, they say, to break lawyers’ control over their own industry, and let some true competition and oversight take hold.

Morrison may be a member of his law society, but he believes there’s a good argument against allowing any profession—even lawyers—to regulate itself. “The difficulty is being completely objective,” he says. “You may be the most honest person in the world, but there’s a human tendency to let personal interest creep in.”

Imagine being able to buy legal services from the grocery store. The Co-operative Group, one of England’s largest food retailers, doesn’t just sell milk and eggs—it offers will writing, help with property deals, and other forms of legal assistance, too, all services the average Canadian would have to see a lawyer to obtain. “I don’t see why consumers should not be able to get legal services as easily as they can buy a tin of beans,” one British minister said in 2005—a vision that is slowly becoming reality in Britain.

That year, far-reaching reforms were announced in England and Wales. Dubbed “Tesco Law” after that supermarket chain announced it would launch a legal store, the Legal Services Act was designed to make law look more like a business: more efficient, open, and responsive to the public. “Access to justice requires not only that the legal advice given is sound, but also the presence of the business skills necessary to provide a cost-effective service in a consumer-friendly way,” wrote Sir David Clementi in a 2004 report on the British system that became the basis for reform.

In England and Wales, outside companies can now own and run law firms and external investment is allowed, with the aim of encouraging growth and competition. Lawyers can team up with other professionals, offering services in a one-stop shop. According to Paul Paton, vice-chair of the Canadian Bar Association’s national ethics and professional issues committee, Canada’s rules make such practices virtually impossible here.

Long criticized for both representing the profession and regulating it, the Bar Council and Law Society for England and Wales, professional bodies for barristers and solicitors, split their functions in two: each now has one arm that governs the profession, and another that advocates for it. (Canadian lawyers argue that a similar split exists here, as the Canadian Bar Association is the voice of the profession, while law societies regulate it.) More significantly, English lawyers are no longer entirely self-regulated. In addition to forming an independent body to adjudicate complaints against lawyers, the Legal Services Act created the Legal Services Board, which is chaired by a layperson and will oversee all legal professionals in the country. Once it’s up and running next year, the board will monitor front-line regulators like the Bar Council and Law Society.

England’s reforms follow on the heels of similar changes in Australia, where a handful of law firms now trade on the stock market. Australian studies have shown incorporated law firms receive less complaints than traditional partnerships, says John Gray, an associate professor of management at the University of Western Sydney. “In a corporation, you have a board of directors to run [the firm],” he says. “Partners can get back to the business of being a lawyer.” Canadian firms can’t publicly list under the current legal regime, says Iain Scott, chief executive officer of McCarthy Tétrault. Even so, some firms (including his) have assumed a corporate structure of management.

The British changes seem common sense to consumers, but they were hard-fought, and brought with them a host of concerns. Above all, critics warned that the independence of the bar could be put at risk. “There is an inevitable anxiety that bodies like [the Legal Services Board] like to increase their influence,” says Russell Wallman, director of government relations for the Law Society of England and Wales. Lawyers pushed to ensure various safeguards would be in place, he says: the board, for example, is appointed in consultation with the lord chief justice and is “independent of government.” Beyond that, he adds, it must use a light touch. “It’s only if [front-line regulators] are clearly unreasonable that it can intervene.”

Although lawyers there had concerns around the reform, they were also pragmatic—after all, it’s not England’s first attempt to crack open the legal services market. Twenty years ago, for example, the government created a new profession of non-lawyers to handle property deals. Prices fell as a result. “Obviously, it would be convenient for us if everybody had to go to a solicitor,” Wallman says. “But the reality is, you don’t have to have the full range of knowledge a solicitor does to perform [conveyancing] effectively.”

In Canada, where low-cost providers of legal services remain scarce, lawyers would apparently take a different view. A 2007 report from the Competition Bureau concluded that many law society restrictions “have the effect of raising costs to consumers.” The most evident of these, it noted, are restrictions around low-cost providers. “Canadian lawyers still have a monopoly on [providing] legal services and legal advice,” says Steve Hynes, director of the London-based Legal Action Group. “That’s a big difference. Here, the monopoly has been chipped away.”

In Canada, the battle lines have been drawn. It’s not just in New Brunswick that lawyers have tangled with title insurers, for instance. For eight years, the Canadian Bar Association banned First Canadian from advertising in its magazine—a stricture that wasn’t lifted until last year, when the CBA implemented a new advertising and sponsorship policy. In B.C., after the Competition Bureau learned some lawyers might be refusing to witness mortgage refinancing documents done by title insurers, it warned them against “forming anti-competitive agreements.”

What’s more, last year, Ontario’s law society assumed regulatory control of the province’s paralegals, a clear conflict of interest, said the Competition Bureau, as lawyers compete with them over some services. Paralegals are now formally banned from working in certain areas, including family law. “It’s devastating for the public, although you do not hear them,” says one Toronto paralegal, adding that many of her clients couldn’t afford to hire a lawyer. Soon they won’t be able to hire her, either—because of the expenses associated with regulation (including insurance and law society membership fees), she’s going out of business.

Law societies don’t just restrict other providers; they do it to their own members, too. Lawyers’ ability to advertise, for example, is limited. As noted in the Competition Bureau report, the Law Society of Newfoundland and Labrador forbids its members from advertising discounted prices. Yukon’s law society prohibits lawyers from using photos, logos or symbols, and restricts the size of lawyer advertisements (their restrictions are currently under review). In several provinces, lawyers can’t advertise their fees compared to other lawyers. Not only do such rules hinder the public’s ability to shop around, “they create less incentive for lawyers to be innovative” in the services they offer, says Chris Busuttil, director of advocacy coordination at the Competition Bureau.

All these restrictions, law societies insist, are in place to protect consumers. Limiting who can provide legal services saves us from shoddy work. Advertising restrictions keep misleading information from confusing the public. And multidisciplinary practices raise conflict of interest issues, as lawyers might be beholden to someone other than the client. Just like government, law societies work in the public interest, says Derry Millar, treasurer of the Law Society of Upper Canada: “We elect politicians to sit in Parliament, and [they] run programs for the public benefit.”

Unlike government, though, a law society’s board of directors isn’t elected by, nor answerable to, the public. Ontario’s law society is governed by 50 “benchers,” 40 of whom are elected lawyers (another eight are government-appointed lay people; two are government-appointed paralegals). To become elected, lawyers must inevitably appeal to their constituency: lawyers. “Even the most cursory review of Bencher’s election campaign statements in Ontario during the 1990s and early 2000s reveals a remarkable commitment to protect lawyer’s interests,” for example, by keeping members’ fees low, wrote W. Wesley Pue, the Nathan T. Nemetz professor in legal history at the University of British Columbia, in a 2006 paper.

Pue argues that Canada is not so different from Australia or England, pre-reform. In those countries, traditional regulators failed to encourage competition or innovation, he notes. The complaints process seemed to disadvantage everyone but lawyers themselves. Perhaps most significantly, legal services were becoming too expensive for all but the wealthy to afford. “In each country, the legal profession has found it difficult to respond to its critics,” he wrote in the paper. “Canadian legal professionals are surprisingly vulnerable to similar criticisms.”

Like it or not, change may be coming. “Canada is now significantly out of step with everyone else on this,” says Alice Woolley, assistant professor at the University of Calgary’s faculty of law. “It may only be a matter of time.”


 

A closed society

  1. “self regulation” whether it is by the financial sector or the legal profession is a contradiction in terms. A better description would be regulation of the lawyers by the lawyers and for the lawyers. It is time that a public function be regulated by representatives of the public who are answerable to the public. In a modern society such organisations not only do not serve the public interest, they are actually a handicap. I know whereof I speak since I work for one of the law societies and have witnessed the abuses and hypocrisy from within.

  2. I agree with "self regulation". But I think there is something missing. Something that could start all of this and fumbling down to nothing.

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