Law Times

February 27, 2017

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Law Times • February 27, 2017 Page 3 Convocation decides after working group split LSUC to implement cap on referral fees BY ALEX ROBINSON Law Times N ew rules approved by the Law Society of Up- per Canada to further regulate advertising and referral fees are a good step in repairing any damage that may have been done by mislead- ing advertisements to the pub- lic's confidence in the legal pro- fession, some lawyers say. Convocation — the govern- ing body of the law society — decided to implement a cap on referral fees between lawyers at its February meeting. The recommendation was f loated as an option in a long- anticipated report on how the law society should further regu- late advertising and referral fees in the legal profession in order to clamp down on misleading ad- vertisements, particularly in the personal injury bar. Adam Wagman, president of the Ontario Trial Lawyers As- sociation, says a 10-per-cent cap on referral feels would provide the appropriate balance between compensating lawyers who need to refer cases to others and elim- inating high fees. "We think that as long as referral fees are disclosed and they're transparent to the client and that they are set at a reason- able level, then the public is in- formed and well served," Wag- man said, before Convocation voted on the recommendations. The working group examin- ing the issue has found that clients of some personal injury firms do not always know about the exis- tence of referral fees or that they are being referred to another law- yer, even though the law society's current rules require lawyers to disclose such information. Convocation voted to adopt the cap limiting how much law- yers could pay each other for re- ferrals, rather than an outright ban of referral fees. "The working group thought that there were two plausible choices that Convocation should make," says Bencher Malcolm Mercer, who is chairman of the Advertising and Fee Arrange- ments Issues Working Group Report. "And when there was not consensus within the working group as to which of the two an- swers was the right one, the bet- ter course was to put it to Con- vocation." The working group found that some referral fees have crept up to more than 20 per cent. Some who gave feedback to the working group have advocated for a 10-per-cent cap on all refer- ral fees, while others have asked for a 30-per-cent level. The working group has now been tasked with coming up with an appropriate amount for the cap, as well as addition- al measures to ensure greater transparency. Mercer says these measures could include a requirement of a formal written agreement be- tween the referrer and the client. Another transparency measure could be a requirement that lawyers make it clear in their ad- vertisements when some of the work will be referred out to other lawyers or firms, he says. Mercer says the working group has not made a decision on what the cap would be, but he expects it would be "in the lower range." David Sterns, president of the Ontario Bar Association, says 30 per cent would be too high. "That can create an entire in- dustry around referrals and that is not something that is in the interest of the profession or the public," he says. "Lowering the permitted amount would deter referral op- erations — ones that would exist primarily for the purposes of re- ferring work to others. And that we don't think is something that the profession should condone." Convocation also approved additions to its rules on adver- tising, which already included requirements that lawyers ad- vertise in a way that is accurate, not misleading and is in the best interest of the public. The new rules will also re- quire licensees to identify wheth- er they are a paralegal or a law- yer in their advertisements. The law society will also amend the Rules of Professional Conduct to "guide licensees as to the ap- propriate use of awards and hon- ours, and to protect the public from misleading use of awards and honours when necessary." Licensees will also be banned from advertising work that they are not permitted to do or do not intend to do. The working group f lagged the issue in its interim report that said some firms have adver- tised legal services that were re- ferred out without any intention of doing that work. The proposed changes also include a ban on second-opinion advertising, which entices a po- tential client that already has a lawyer to retain the advertiser instead. Other rule changes include a ban on lawyers referring to third- party awards and rankings in their ads that are "not bona fide or are likely to be misleading, confusing or deceptive." Sterns says that the report provides more clarity to the rules surrounding advertising. "It brings greater fairness to the profession," he says. "There will always be people who will push the boundar- ies and I think it was high time for the law society to say exactly where those boundaries are." The working group's interim report from the summer also tackled issues concerning ad- vertising in the real estate bar as well as contingency fees, but the committee has not finished its work in those areas. LT NEWS David Sterns says lawyers should not receive referral fees of 30 per cent, and 'lowering the permitted amount would deter referral operations.' 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