Law Times

Law Times • June 12, 2017 Page 15 www.lawtimesnews.com Crackdown on referral fees New rules mean added bureaucracy? BY MICHAEL MCKIERNAN For Law Times S ome personal injury law- yers are worried the Law Society of Upper Cana- da's new referral fee rules have added an unnecessary layer of bureaucracy for boutique firms and their clients. At its April Convocation, the regulator's benchers imposed a sliding scale for referral fees, with a limit of 15 per cent on the first $50,000 in legal fees paid by clients, plus a further five per cent on anything over that amount, up to a hard cap of $25,000. Darcy Merkur, a partner at Toronto boutique Thomson Rogers, says he supports the crackdown on excessive referral fees, but he would have preferred a simpler cap, such as the 10-per- cent f lat rate advocated by the Ontario Trial Lawyers Associa- tion in advance of the LSUC vote. However, his real beef is with the standardized referral agree- ment prepared by the LSUC as part of its move to increase trans- parency in the process, which must be signed in every case by the client and the referring li- censee, as well as by the law so- ciety member taking the referral. "This is going to add an ele- ment of extra work and com- plication that is not welcome," Merkur says. "By implementing these addi- tional hurdles, it may encourage some people to hold on to files which they would have referred out in the past. "That's contrary to the origi- nal goal of referral fees, which was to have the most qualified lawyers dealing with the most complicated cases. "In my view, it will signifi- cantly reduce the number of people who would otherwise have accepted or engaged in re- ferral fee situations," he adds. Adam Wagman, a senior partner at Toronto personal in- jury boutique Howie Sacks & Henry LLP, is also concerned about the new forms. "The process they have de- vised, while well intentioned, may have solved one problem by creating new ones," says Wag- man, who is also the immediate past president of the OTLA. "When you create rules that impact on members of the public, you should be looking at principles of simplicity and transparency. Respectfully, I think these principles could have been satisfied without re- quiring lawyers to hand over five or six pages of additional mate- rial to clients at the outset of a case," he says. "We all know that people don't read the fine print, and this is not going to do much more than add to the confusion that a potentially seriously injured per- son, with all the stress and un- certainty that comes with that, is already feeling when they meet with a lawyer." At Will Davidson LLP, part- ner Paul Cahill and some of the firm's other personal injury law- yers have responded to the new referral fee rules by creating a lunch-time CPD offering that helps lawyers comply. He says his own firm does not rely heavily on referrals, but it has already made changes to its standard contingency fee agree- ment to include appropriate lan- guage for those cases when they do come in. Cahill and his colleagues discuss the ethics and history of referral fees in the sessions, trav- elling to the offices of interested lawyers, including non-personal injury firms where the chances of lawyers making referrals are higher. "We anticipated referral fees were going to be a hot topic last year and got approval from the law society to offer the pro- gram," Cahill says, adding that he was pleased to see the regula- tor impose a cap on the fees. "It is important to compen- sate lawyers who make a referral, but there can be a concern when the compensation is out of pro- portion with what they are actu- ally doing," he adds. A recent case highlights just how competitive the referral fee market got before the LSUC stepped in. Srebrolow Lebowitz Spada- fora PC v PW Lawyers Pro- fessional Corporation et al. involved a dispute between the personal injury law firm SLS and Paul Wilkins, one of its for- mer lawyers who left to start his own firm. According to Ontario Su- perior Court Justice Jasmine Akbarali's May 19 endorse- ment, Wilkins said under cross- examination that he was unable to function at SLS because the firm's policy to pay referral fees of 15 per cent put him in danger of losing his own referral sourc- es, who wanted 33 per cent. In an interview with Law Times, Wilkins says most of his own firm's business is cur- rently generated through word of mouth and marketing efforts, rather than paid referrals. As part of the separation agreement between the two par- ties, Wilkins was required to hand over 50 per cent of the net fees he received on files that left SLS with him, after the payment of any referral fees. Wilkins in turn was due 20 per cent of SLS' recovery on files of which he initially had carriage but that remained with the firm after his departure. However, last summer, SLS personal injury What do your clients need? The means to move on. Guaranteed. ™ Baxter Structures customizes personal injury settlements into tax-free annuities that can help your clients be secure for life. » Pre- and post- settlement consultation and support » Caring professionalism for over 30 years » No fee to you or your clients Need more information? Contact us at 1 800 387 1686 or baxterstructures.com Kyla A. Baxter, CSSC PRESIDENT, BAXTER STRUCTURES Untitled-3 1 2016-10-12 10:02 AM See Imperative, page 16 Paul Cahill says he and some other lawyers at his firm have responded to the new LSUC referral fee rules by creating a continuing professional development offering that helps lawyers comply.

• Cover