October 05, 2011

Summary of the Testimony of J. Rob Collins - Center for Professional Responsibility

Summary of the Testimony of J. Rob Collins

Before the Multidisciplinary Practice Commission

J. Rob Collins of Blake, Cassels & Graydon in Toronto, spoke to the Commission on behalf of the Law Society of Upper Canada (he is not on the Law Society, the provincial lawyer regulator created by statute that consists of 40 Benchers who are lawyers and some nonlawyers appointed by the government). Mr. Collins is on the Law Society Task Force on multidisciplinary practice as well as the International Bar Association Committee on MDPs. He also is primary outside counsel in Canada to one of the Big Five and provides legal services to the others especially regarding limited liability issues. Multi-discipline Partnerships is one of three issues being addressed by the "Futures" Task Force of the Law Society. In Toronto Ernst & Young established about 18 months ago a captive law firm that has increased from 3 lawyers to 30, and, in Mr. Collins’ view, is likely to number 100 lawyers by the year 2000 without a merger. Mr. Collins’ belief is that the practice of law by the Big Five accounting firms has occurred and will happen, and that one of the big law firms and the Big Five accounting firms in Canada will merge in the near future. He said ‘branding’ (the best known law firm in the world is not as well known as the worst-known of the Big Five) and capital are the reason why global law firms can’t compete with global accounting firms.

The Law Society looked at the New South Wales model that reflected the 1994 law change allowing a nonlawyer partner provided the partnership remain in the effective control of lawyers, but concluded that the model continued some of the risks of a ‘true’ MDP. Three concerns or rules in Canada inhibit a ‘true’ MDP model: 1) one cannot ‘brand’ a law firm as a firm name must consist of a bar admittee, either now or in the past, 2) fees cannot be shared with a nonlawyer, and 3) only lawyers can be partners in a law firm. The Law Society proposed, as a model in the public interest, a partnership between lawyers and nonlawyers where the partnership offers legal services only and is effectively controlled by lawyers. In concluding that a ‘true’ MDP does not exist, the Law Society ducked the captive law firm issue and did not specifically address the Big Five. Nor did its recommendation deal with ‘branding’, fee sharing (statutory change), how effective lawyer control is to be maintained or a definition of the practice of law in Canada. Mr. Collins used Ernst & Young as an example to show that the big accounting firms are practicing law as they have everything they need now. That is, all the partners of the captive firm are lawyers, the linkage to the captive law firm is by management services agreement so fees are not shared, and the firm calls itself ‘Donahue & Partners’, with a tag line at the bottom of all documentation stating that it is ‘a member of Ernst & Young Ltd.’. The big fear of the Big Five in the U.S. (and they are deliberately not coming to the U.S. at this time) is the Securities and Exchange Commission (not the law regulators). They need to preserve their audit capability. Regarding the privilege of the client, Mr. Collins commented that, pursuant to the law of agency, if my partner knows something I know it too. The best answer of the Big Five on this issue is to maintain that they get client waiver of privilege, with referral for a second opinion, at the beginning of the engagement. Mr. Collins believes that clients won’t see that privilege is important until the client gets into a problem. As an example of problems existing where nonlawyers practice law, he said that, in Canada, actuaries, including the actuarial arms of the Big Five, customarily wrote pensions and other employee benefit plans until the era of rampant inflation and downsizing hit and the pension plans created massive surpluses. The companies found they could not retrieve the surplus; there was litigation and today lawyers are more involved in drafting benefit plans.

Asked whether there is a great demand for MDPs, he answered in the negative and said that accounting firms are creating the demand. Finding the Law Society of Upper Canada’s approach too conservative, the Federation of Law Societies of Canada has started its own study and plans on issuing a report by February 1999. The study underlying the Law Society of Upper Canada’s MDP Report was conducted by Professor Kent Roach (then of the law faculty of the University of Toronto and now Dean of the University of Saskatchewan College of Law) and Professor Edward Iacobucci (University of Toronto faculty of law) who have a Law and Economics/University of Chicago/’laissez faire’ orientation. Mr. Collins acknowledged that the independence issues have not been resolved in the Ontario report and that it intended to regulate nonlawyers by regulating lawyers. Chartered accountants (comparable to the U.S. CPA) and certified general accountants have been at odds and only chartered accountants can be partners in accounting firms and perform audits on public companies. Accountants view ‘independence’ differently from lawyers as accountants basically think it means not having a financial interest in a client whereas lawyers speak of being independent of competing interests (and historically, being independent of the state). Foreign lawyers can only practice foreign law in Canada. Unauthorized practice prosecutions are handled at the provincial level. Customs matters such as export-import taxes are handled mostly by accounting firms and Canadian accounting firms are getting more involved with mediation and alternate dispute resolution.