Focus On

Winds of change gathering over profession, chief justice tells CBA

Thursday, August 27, 2015 @ 8:00 PM | By Cristin Schmitz

The Chief Justice of Canada has put fresh wind in the sails of lawyers pushing to lift the regulatory ban on non-lawyer ownership of law firms, say proponents of alternative business structures (ABS).

“Everywhere we’re seeing rules being liberalized — in the U.K. this is happening, in the United States in state after state, it is happening,” Chief Justice Beverley McLachlin told lawyers attending the Canadian Bar Association’s annual conference here Aug. 14. “The question is not whether the rules governing the legal profession should be liberalized, but how.”

Former CBA president Fred Headon welcomed the chief justice’s address as “a very constructive one for the legal profession, as we see how change might look from her perspective from the bench.”

Headon helmed the CBA’s Legal Futures initiative, which last year recommended law societies change their rules to permit lawyers to practice in ABS that allow law firm ownership, management and investment by people other than lawyers or other regulated legal professionals, as well as fee-sharing and multidisciplinary practice.

Headon, in-house general counsel at Air Canada in Montreal, said the remarks “should encourage us to continue the conversation in a positive way” regarding the question of “how do we protect those core values [of the profession], yet find ways to deliver legal services differently that may better meet the needs of clients.”

The law societies of Alberta and Nova Scotia are among regulators working to liberalize their rules around ABS. Momentum has stalled in Ontario since most Law Society of Upper Canada benchers pledged during a spring election to take a cautious approach, in response to lobbying by personal injury practitioners represented by the Ontario Trial Lawyers Association (OTLA).

Permitting publicly traded law firms — the form of ABS the OTLA opposes most vehemently — is off the table “for now” in Ontario, but other forms of non-lawyer ownership that could benefit the public and lawyers remain under discussion, confirmed bencher Susan McGrath, the Iroquois Falls sole practitioner who co-chairs the LSUC’s ABS working group.

“We’re looking at taking appropriate steps, but not leaps,” she told The Lawyers Weekly.

The OTLA’s argument that publicly listed law firms are prone to conflicts of interest which undermine the public interest gained traction recently due to the fraud investigation into the business and accounting practices of Quindell, the leading publicly listed personal injury ABS in the U.K. Quindell’s operating assets have been purchased by Australia’s Slater and Gordon, the world’s largest publicly traded law firm.

McGrath, a former CBA and Ontario Bar Association president, emphasized that many forms of ABS short of listing law firms on stock exchanges — for example, minority ownership by non-lawyers — could “provide value to lawyers and could be of real benefit to them.”

She said the working group also appreciates that the implementation of ABS in the U.K. and Australia has resulted in a reduction in the number of law firms in some lucrative practice areas, such as personal injury.

“Consolidation is not necessarily a great benefit, and it may be a detriment, so we need to study that carefully,” she said.

The law society’s ABS working group will table a new report at an upcoming fall convocation in September or October discussing ideas for short-term regulatory reform.

“It will be more general about what direction we’re moving in and what we’re going to continue to study, as opposed to specific options,” McGrath said. She doesn’t anticipate regulatory reform before late next year or 2017, following more consultation and discussion with LSUC members.

“It’s a long-term process. It’s not something that we just want to jump into because one of the problems is: if you go too far to start with, you can’t pull back. We want to be very careful about what steps we do take.”

However, the chief justice has given the general cause of ABS a boost, McGrath said.

“It’s clear to me that she says that the profession has to change, or social pressures will overtake the profession and we will no longer have the power to deliver the services that we now deliver, because they’ll be delivered in alternative ways. So unless we actually change and learn to deliver in alternate ways and harness the use of technology so we can do things faster and more efficiently and at a lower cost, then we may out-price ourselves in the market.”

In her remarks to the CBA, Chief Justice McLachlin encapsulated the profession’s dilemma with humour.

“Question: How many lawyers does it take to change a light bulb? Answer: What’s ‘change’?

“Question: How many psychiatrists does it take to change a light bulb? Answer: One. But the light bulb has to want to change.

“The question is not whether the change will come, but what form it will take,” Chief Justice McLachlin said. “Will the legal profession become increasingly irrelevant as governments, corporations and ordinary women and men side-step, or find themselves excluded from, traditional legal processes? Or will the legal profession rise to the challenges of our times and find new ways to ensure that justice remains available to everyone?”

She said assumptions underlying how the legal profession does business, including its monopoly delivering legal services only through organizations such as partnerships, no longer prevail.

In the age of the Internet, people are questioning why consumers should be forced to go to expensive lawyers if they can get an answer more easily online or from an electronically available corporation, she said. “Why should they retain lawyers, when integrated professional firms might better meet their needs at a lower cost? Why don’t we resolve simple disputes in simple and effective and inexpensive ways, leaving the full court process — the full Monty — to complex issues that require it? And everywhere we are seeing the rules being liberalized.”

She pointed to the rise of paralegals, as the LSUC looks at expanding their scope of practice and public demand builds to relax laws and regulations governing legal services.

“Whether representing clients in small claims court or traffic court, or guiding them through the procedures of administrative tribunals, paralegals increasingly fill legal needs of those who find lawyers too expensive, but are unable to navigate the legal system without professional assistance,” she noted. “Everywhere, more and more, the profession is accepting that old monopolies are fading and it has to provide new ways of doing business and new ways of ensuring that the public gets good justice. Increasingly calls are heard for law schools to adapt their curricula to these new realities. The question is not whether the rules governing the legal profession should be liberalized, but how.”

The chief justice urged lawyers and judges to see change as an opportunity. Innovative use of technology, and outsourcing some tasks traditionally done by lawyers, are among the changes sparked by the shift to commoditized legal work and the relentless pressure toward “more for less,” she said.

The chief justice rejected the notion that the future lies in cutting back legal services. Instead, she suggested the way forward could lie in finding other ways of delivering services and working for under-served consumers with, for example, legal insurance schemes tied to employment, new ways to deliver basic legal needs like wills and probate, encouraging communities who may distrust the law to avail themselves of it, and providing services to the growing older demographic.

Whether it is individuals buying a house, business managers dealing with complex regulatory regimes, or in-house counsel who need help concluding a business deal, “what they have in common is that they cannot afford legal services when delivered in the traditional way, and they cannot afford the disproportionate cost in many cases of going to court. It’s the legal profession’s challenge to find ways to meet these needs.”

In that context, law firms are increasingly shifting away from the billable hour to working on a fixed-cost basis or on an upper-limit capped basis, as well as value billing, she noted.

“More flexible approaches to billing are coming and we should not view them with anathema but as opportunities.”