Benchers take new strides toward recognizing MDPs

B.C. lawyers may soon be able to work in partnership with non-lawyers, as the Benchers have now adopted principles to ensure client confidentiality, privilege, conflicts checking and the professional independence of lawyers in a multidisciplinary practice setting.

The Benchers spent time last year reflecting on the future of the profession and considering whether B.C. lawyers have fair opportunities to compete. They agreed in general terms to look at relaxing the restrictions on fee-splitting so that lawyers could practise with non-lawyers — provided the regulatory scheme properly protects the core values of the legal profession.

In March of this year the Benchers took a liberal approach to a regime for multidisciplinary practice (MDP), giving the MDP Working Group direction in principle. They decided the Law Society should regulate firms engaging in multidisciplinary practice indirectly, through rules that control the lawyer members and not through a separate licensing scheme. Lawyers in MDPs should not be restricted to practising only with other professionals, or offering only legal services or services connected with the practice of law, and ownership of the MDP need not be controlled by lawyers: see the March-April, 2000 Benchers' Bulletin.

The MDP Working Group — comprised of Chair D. Peter Ramsay, Q.C., William Sullivan, Q.C. and Ross Tunnicliffe and assisted by staff lawyers Jack Olsen and Jeff Hoskins — presented further options to the Benchers in July and asked for more specific direction on such issues as client confidentiality, privilege, conflicts and lawyers' professional independence, so as to lay the foundation for new Law Society Rules.

In July, after exploring the range of regulatory approaches, the Benchers agreed that the following principles (set out in italics) should help guide the development of new rules.

Principles for the regulation of lawyers in multidisciplinary practice

Independence of the legal profession

Lawyers will be required to obtain from their non-lawyer partners a written acknowledgment of, and agreement to respect, the professional independence and ethical obligations of lawyers in the MDP.

Confidentiality

Lawyers must guard client confidences from non-lawyers of the MDP (but would be permitted to share those confidences with client consent). Lawyers may use screening devices to guard client confidences from non-lawyer members of the MDP.

The MDP must implement screening measures to prevent the transfer of some client confidences from lawyers to non-lawyer members of the MDP who may have a duty to disclose those confidences.

If the preceding requirement is insufficient to protect confidentiality, clients will be asked to consent to the lawyer disclosing confidential information to a non-lawyer member of the MDP in circumstances where the non-lawyer cannot fulfil a legal or professional obligation unless the information is disclosed. If client consent is not forthcoming, the lawyer must withdraw from the representation.

Privilege

An MDP must notify the client, at the commencement of the retainer, of the implications for solicitor-client privilege of the client's engagement of the MDP.

MDPs must take all reasonable steps, including the implementation of screening measures, to protect privileged information from disclosure to non-lawyer members of the MDP.

The protection of solicitor-client privilege (which applies to all communications between lawyer and client for the purpose of obtaining legal advice) and litigation privilege (which applies to materials created or obtained by the lawyer for the dominant purpose of litigation) is fundamental to the lawyer-client relationship. The requirements for screening measures in an MDP firm are directed at protecting this core value.

The MDP Working Group found it likely that no privilege would ordinarily attach to information communicated by a client to a non-lawyer member of the MDP. Similarly, if a lawyer communicates privileged information to a non- lawyer member of the MDP, the information would ordinarily lose its privileged character. It was the view of the MDP Working Group, however, that if a client approaches a non-lawyer member of the MDP for the primary purpose of obtaining legal advice, or if a lawyer uses the services of a non-lawyer in providing legal advice to the client, the privilege is maintained.

Conflicts of interest

All members of an MDP will be required to adhere to the standards of lawyers in circumstances where legal services are provided to a client or a client has sought legal services, and the MDP will be required to inform clients about how conflicts in the MDP are treated and the implications of that treatment.

Lawyers have a duty not to permit personal interests to interfere with their duties to clients or prefer the interests of one client to another, as set out in Chapter 6 of the Professional Conduct Handbook. Other professions may have similar duties, different duties or none at all.

The Benchers concluded that all members of the MDP should adhere to the standards of lawyers in the delivery of legal services, but not necessarily in the delivery of other services. The difficulty with this approach, as noted by the MDP Working Group, is that the MDP may have provided client services on the basis of one conflict of interest standard, only to have that standard change if the client later requires legal advice. Firms, however, could weigh this possibility in determining whether they wish to uniformly apply lawyers' standards or face the possibility that the client might have to seek legal assistance outside the MDP.

Liability insurance

The existing liability insurance program will be maintained to cover those activities that are legal services, and require other members of the MDP to hold comparable insurance to cover other activities.

The Benchers considered advice from the Director of the Lawyers Insurance Fund to the effect that it was feasible to continue the current program structure by providing coverage (in relation to legal services) within a multidisciplinary practice.

Unauthorized practice

A non-lawyer employee or partner in an MDP must be supervised by a lawyer when doing any work that is the practice of law.

While MDPs provide a unique collaborative approach to the delivery of services, the Benchers have agreed that legal services offered by an MDP must be provided by a lawyer or under lawyer supervision.

Trust Funds

Accounting

Lawyers who participate in MDPs will be required to maintain separate trust accounts and records and conform in all respects to Law Society requirements respecting the handling of trust funds. Non-lawyer members of the MDP acting on non-legal matters would not be required to conform to Law Society requirements, but the MDP would be required to advise prospective clients of any differences in treatment.

Lawyers who receive funds in trust are governed by strict rules about how funds must be safeguarded and recorded and how interest on those funds is treated. Other Law Society rules require the review of trust accounts by an independent accountant, permit the Law Society to audit accounts and require lawyers to report trust fund shortages to the Law Society. Members of other professions or occupations in MDPs may have different rules regarding the handling of trust funds or no rules at all.

Separating trust accounts and records will help ensure compliance with Law Society standards and allow the Law Society to continue to perform its investigative responsibilities, which might otherwise be difficult in an MDP.

Defalcation

A claimant should have access to the Special Compensation Fund only when a lawyer has misappropriated funds. Lawyers are not required to make this limitation clear at the commencement of the retainer.

The Law Society Special Compensation Fund is available to compensate people who have suffered loss as a result of the defalcation of trust funds by a lawyer acting in that capacity. Under the Legal Profession Act, the Fund would not be available for the misappropriation by other persons who might practise in an MDP, and the Benchers are not seeking to extend the scope of coverage.

Marketing

The MDP is free to market non-lawyer services in any way it sees fit. However, when any marketing materials refer to the legal services offered by the MDP, the materials must conform to the Professional Conduct Handbook.

This principle, adopted by the Benchers, ensures that all lawyers meet the requirements of the Law Society rules on marketing legal services, whether or not they practise in an MDP.

Custodianships

The Law Society's custodianship provisions should apply to MDPs.

Lawyers practising in MDPs must obtain the written agreement of their non-lawyer partners to comply with the Law Society's legislation regarding custodianships.

Lawyers practising in MDPs must obtain the written agreement of their non-lawyer partners to adopt and enforce rules and procedures to safeguard the property of clients who receive non-legal services when the provider of those services is no longer willing or able to provide those services.

Practice reviews

Lawyers practising in MDPs will not be required to maintain segregated client files and accounting records (other than trust accounting records), but will be required to obtain the agreement of their non-lawyer partners that non-lawyers in the MDP will cooperate with a Law Society practice review.

The above principles are expected to help guide the development of new draft rules, which the MDP Working Group will bring back to the Benchers for discussion later this year.

For more information on the project, please contact Staff Lawyer – Ethics, Jack Olsen or General Counsel, Jeff Hoskins at the Law Society office.