Quebec’s no-fault insurance automobile regime leaves no place for medical malpractice suits or lawsuits alleging negligence, carelessness, or recklessness committed by third parties following a car accident, held the Quebec Court of Appeal in two separate but related rulings.
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Litigation privilege given same protection as solicitor-client privilege
A provincial regulator that sought to force an insurance company to provide documents in the course of an investigation failed after the Quebec Court of Appeal held that the documents were covered by litigation privilege and solicitor‑client privilege.
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Fire sales: Law firms resorting to deep discounting to attract new business
Some law firms are so determined to attract new business that they will go to lengths that confound even the most seasoned legal observers. Perhaps one of the most extreme examples took place when an Am Law 50 firm successfully undercut by a staggering 80 percent a bid made by a competitor, another Am Law 50 firm that tentatively reached an agreement after tough negotiations to provide litigation services for a fee of US$350,000. The implausible situation prompted Dan DiPietro, chairman of the law firm group at Citi Private Bank, to ask his interlocutor to repeat the numbers to make sure he did not miss a digit. Certain law firms have gone even further, and reportedly submitted a bid of zero in auctions to obtain work for insurance giant Marsh & McLennan Companies.
The current legal marketplace, characterized by lethargic growth, too many lawyers and a buyer’s market, has driven some law firms to literally conduct fire sales. Offers to work for free are atypical. But seemingly more prevalent are cases where law firms aggressively chase work, offering rates so low that they almost certainly will lead to an unprofitable engagement or at best result in a write-down. Legal consultant Bruce MacEwen morbidly but aptly describes it as “suicide pricing.” It is a phenomena that Edmonton-based legal consultant Patrick McKenna, whose clients are exclusively American law firms, has seen all-too-often. “There are many firms that are doing it in very limited ways, regrettably in practices they shouldn’t be in the first place because they are not a major player and so try to get some work by being silly about pricing,” says McKenna. Though more widespread in the U.S., some Canadian law firms too have engaged in deep discounting. Shahir Guindi recalls seeing on a couple of occasions law firms taking very aggressive and “frankly very ridiculous” positions to land a contract, and it backfired. “It’s clear that those relationships or those ‘investments’ have not borne any fruit,” remarks Guindi, the managing partner of the Montreal office at Osler, Hoskin & Harcourt LLP.The practice is based on an enduring but fallacious presumption in the legal profession that by getting their foot in the door it will eventually lead to higher-value mandates. It simply does not work, says Ottawa-based legal consultant Jordan Furlong, a view unreservedly shared by all legal players. “This idea that lawyers have that if we do this for a very low rate but it will be of such high quality and value that the clients will be blown away and happily come back for more is a mistaken assumption because most firms are indistinguishable from each other in terms of the work that they do,” says Furlong, a partner with global consulting firm Edge International. “Having done it for a quarter of the price, why would the client come back to pay for the regular price?” Besides devaluing the work performed by lawyers, it can end up disparaging a firm’s brand and stigmatize it with the damning label of being a low-cost producer.
But more fundamentally it betrays an abysmal misunderstanding of the market forces at play. There is no doubt that the lasting and unforgiving economic climate has triggered a crisis that arguably was already in the making in the legal market before the 2008 financial crisis. Last year was yet another year of very modest growth as law firms continued to struggle with the interrelated impacts of sluggish demand for legal services, declining productivity, falling realization rates, and austerity measures intended to preserve profitability, according to a recently published report on the state of the legal market published by the Center for the Study of the Legal Profession at the Georgetown University Law Center, findings echoed by a report conducted jointly by DiPietro’s Citi Private Bank and Hildebrandt Consulting LLC.
Legal demand has dipped
It’s no secret that demand that for legal services has dipped over the past couple of years. In the U.S. the demand compound annual growth rate (CAGR) was a robust 3.7 percent between 2004 and 2007, a figure that actually declined by 0.4 percent in the 2008-2012 period, according to the Citi study. More specifically the demand for legal services in 2012 grew by a paltry 0.5 percent, as tracked by the Thomson Reuteurs Peer Monitor data base. Demand for legal services also has been marked by skimpy growth in the United Kingdom and mainland Europe; only Asia and Latin America, driven by high growth economies, saw demand on the uptake.
Productivity, as measured by the total number of billable hours recorded by a firm divided by the total number of lawyers in the firm, also suffered in 2012 just as it essentially did in the three preceding years. In 2012 the number of lawyers in US firms grew by 2 percent while demand registered only a 0.5. growth. That meant that productivity took a hit in 2012, remaining negative at 1.5 percent. Just as telling is the dramatic decrease in the past couple of years in what is known as realization rates or the percentages of work performed at a firm’s standard rates that are actually billed to and collected from clients. Though law firms have not shied away from raising rates, realization rates continued their spiraling trend. In 2012 law firms raised their rates by on average of 3.4 percent, but realization rates fell to a historic low of 83.6 percent due to client resistance. Am Law 100 firms fared even worse, achieving realization rates of 82.8 percent, according to the Peer Monitor base. In stark contrast realization rates stood at 92 percent before the financial crisis in 2007.
No surprise then that annual profits per equity partner (PPEP), the most commonly used measure for law firm success and financial health, has taken a beating. While compound annual growth rate for PPEP stood at 6 percent between 2004 and 2008, it plunged to 1.7 percent for the period 2008-2012, reveals the Citi study. That has proven to be hard medicine to swallow for partners who experienced healthy profit margins during good times, says the Citi study, remarking that many are still clinging to the expectation that profitability will revert back to the levels before the financial crisis struck.
Boom years a distant memory
The boom years, however, that law firms enjoyed preceding the global financial crisis debatably masked a business model that was slowly beginning to unravel. The signs were there; just not that much attention was paid to by most. Even before the economic downturn in 2008, productivity growth was essentially flat in lawyer categories such as equity partners, income partners and associates – evidence that there were signs that too many lawyers were chasing not enough work. More revealing, the financial success of law firms rested on a house of cards – annual rate increases prior to 2008 averaged 6-to-8 percent per year at a time when the national inflation rate never exceeded 4 percent, points out the Georgetown Law report. “Truth be known, between 1985 and 1995, irrespective of any law firm’s strategic plan, the overall strategy in the legal business was to bill more hours and to work harder so they got partners and associates to put in more hours,” notes McKenna. “From 1996 to 2007, irrespective of what the strategic plan said, every year firms automatically raised their fees – and the client paid. Then in 2008, the shit hit the fan. Now you can’t raise your fees without a great deal of client pushback and you can’t get any leverage because you are de-equitizing (partners) and there’s more lawyers than demand for legal services. So how do you make money?” asks McKenna rhetorically.
Therein lies the conundrum. Moreover, things are not expected to get much better in the near future. “We think it is time to let go of any lingering notion that the industry will revert to the boom years before the Great Recession anytime soon,” predicts forebodingly the Citi Private Bank report. “With profit growth and other financial indices reaching lower set points in the past four years, we anticipate that the current state of the industry will remain the norm for the foreseeable future.”Canadian legal marketplace
But what about the Canadian legal marketplace? Has it coped better than its American or European counterparts? Is the future of Canadian lawyers and Canadian law firms just as bleak? Nobody really knows. In what has proved to be a sore spot for those who study the Canadian legal marketplace — and perhaps a blessing for Canadian law firms – hard figures are non-existent. There is not a single consulting firm or organization that examines or tracks the Canadian legal scene with the same depth as the Americans. “It would be really nice to have the same kind of data so that you can objectively evaluate this marketplace,” remarks Mitchell Kowalski, barrister and solicitor and author of the “Avoiding Extinction: Reimagining Legal Services for the 21st Century,” a book that by Kowalski’s admission was received with curiosity and mild interest in Canada. “So we’re stuck with anecdotes and best guesses. That in turn allows the marketplace to be even more non-reactive to any kind of change because there is no one out there with data that says there’s a problem here.” Furlong concurs. “We are hampered by the fact that there is almost no publicly available information about mid-sized to large firms in Canada in terms of their profitability and revenue,” says Furlong. “The only rankings of Canadian law firms that you will find anywhere is based on the number of lawyers. So we are working in the dark.”
Nevertheless it is widely assumed that because the Canadian economy was relatively spared by the 2008 financial crisis, the financial impacts on Canadian law firms were not nearly as severe as their American and European counterparts. Nor it does not appear that the wholesale bloodletting that is still taking place in the US in a bid to shave costs and maintain profitability has or is about to shortly occur to the same extent in Canadian law firms. In the US associates and support staff have been laid off in droves. Partners too are under the gun. De-equitization, a development that really took off three years ago, will continue unabated, says the Georgetown Law report. Approximately 15 percent of some 120 firms surveyed by Wells Fargo Private Bank’s Legal Specialty Group said they intended to cut partners in the first quarter of this year. Another survey conducted by the publication American Lawyer revealed that 55 percent of 113 managing partners and firm chairs planned to ask one to five partners to leave the firm in the coming year.
Though little quantifiable information about the Canadian legal marketplace is available for public consumption, Canadian law firms readily concede that the market has changed. “Although Canada has been more resilient than the US and Europe, the research findings (from the studies) apply in full measure,” said Les Viner, the managing partner of Torys LLP, in an e-mail. “The legal marketplace is fundamentally different. There are several reasons that is so, but the number one driver is Economics 101 – supply and demand.” André Vautour, chairman of the Board at the independent Montreal law firm Lavery, de Billy LLP, acknowledges that the market is flat, and would be surprised if it grew greater than rate of the economy over the next couple of years. “We’re not that different from the US and European markets but on the other hand I don’t think we have been affected as much they have been,” says Vautour. “We’re not seeing a big fall on realization rates for instance. Our hourly rate increases, however have been much more modest compared to before. Our productivity has decreased but it is marginal in our case. It has meant though that we have not hired as much as we did in the boom years but we haven’t made a conscious decision to reduce our payroll or reduce the number of our lawyers.” Andrew Fleming, the managing partner of the Toronto office at Norton Rose LLP points out that Canadian law firms “are not immune” to the trends that have taken hold in the US and Europe.
Indeed, Canadian law firms are grappling with the underlying market forces that emerged even before the financial crisis of 2008, though some believe the crisis accelerated its evolution. The drive towards the commoditization of legal services, the emergence of non-traditional service providers, and the changing roles of in-house general counsel and corporate law departments are all disruptive forces that are forcing Canadian law firms to take a hard look at how they are operating. It’s not as if they have much of a choice because the combination of all of these forces have led to a decisive shift in the legal services market. In a word, it has become a buyer’s market. Clients are taking a much more hands-on approach, and are driving all the critical decisions over the structure and delivery of legal services. They are also holding lawyers far more accountable than ever before, and expecting – if not demanding – efficient and cost effective services delivered on a timely basis. ”Before you get retained, clients want a dialogue upfront,” says Guindi. “Clients want to control who is participating in the file. They want to have an understanding on the risk tolerance or materiality levels that are going to apply throughout the course of the mandate. They want constant dialogue, and most of all they don’t want surprises when it comes down to the issues they are going to face, the bill, the people on the file.”
Shift to buyer’s market
The shift from the seller’s market that traditionally dominated the legal industry to a buyer’s market should mean that purchasers can drive a much harder bargain. In today’s highly competitive market, discounts are almost a given. That is certainly the case in the US. With too many clients chasing too little work, the Citi study notes that pricing concessions have become a fact of life. “Clients today clearly have the upper hand when dealing with law firms on price, and they are using their newfound bargaining power with alacrity,” says the study. In turn, many firms have given in and provided discounts because they feel it is “better to keep lawyers’ plates full with lower-billing work rather than half-full with full-priced work.” But playing the heavy discount game can lead to bittersweet results, warns Matthew Peters, the national leader, markets, for McCarthy Tétrault LLP. “We have seen this in circumstances with other firms where they are loading up,” says Peters, responsible for the development of the firm’s overall approach to the marketplace and clients. “There is no barrier to scrapping up hours. Their view is that it’s such a low rate we better rack up the hours in order to increase the top-line revenues.” As importantly, adds Peters, providing hefty discounts does not address client’s needs as it can have a detrimental impact on the quality of the service they receive if only because it can be far more difficult to get the right people working on the file. “The client’s issue is what’s the total bill that I get in the mail, and deep discounts don’t address that problem because you haven’t addressed how many hours you spent to get the matter done,” says Peters. Fleming adds another proviso. Clients no doubt have the upper hand in the current economic clime but savvy in-house counsel recognize that “you can get further ahead by having a happy partner with you in the provision of legal services than if you have a disgruntled partner,” says Fleming.Corporate Canada seems to have bought into that line of reasoning. Discussions around pricing certainly hold centre-stage but Canadian corporate clients and in-house counsel are not nearly as aggressive or forceful as their American and European counterparts in their efforts to obtain steep discounts, says Furlong. “Clients are kings who really don’t realize they are on the throne,” says Furlong. Geoffrey Creighton, immediate past Chair of the Canadian Corporate Counsel Association, has a different take. The senior vice-president and general counsel at IGM Financial Inc. is not entirely convinced that the legal market is as “radical” as some people would like think it is in Canada. Canadian corporate counsel are far more inclined to focus on obtaining value for the money they spend on outside legal services than enter into tough negotiations over price, says Creighton. That doesn’t preclude them from haggling. Au contraire. Besides negotiating over value adds such as free onsite continuing legal education presentations and lawyer secondees at deeply discounted rates or even at no cost, in-house counsel and corporate law departments are progressively flexing their muscles and demanding that law firms use low-cost alternatives such as legal process outsourcers (LPO) to perform commodity work. That largely accounts for the success of ATD Legal Services PC. A Toronto-based no-frills LPO, ATD performs e-discovery and document review services and due diligence at a fraction of the hourly rate, around $100 an hour, that Big Law charges. Most of its clients are none other than law firms, says Andrea Taylor, ATD’s director of operations. “Law firms don’t have a choice because clients are demanding it,” says Taylor. “It’s a necessity they have come to accept.”
In-house counsel doing more
Since in-house counsel and corporate law departments are increasingly doing more of the legal work themselves, and using external lawyers only for specialized advice, clients have in some respects become the main competitors of outside law firms, observes Furlong. Not only are in-house counsel increasingly displacing outside lawyers as the primary trusted legal advisors in a growing number of cases, but they also deprive them of a previously steady supply of activity and revenue. It’s in the interest then of the supplier to be efficient and cost effective. “There are more in-house counsel which means there are more educated consumers that can be more precise about the specifications about what they need and getting overkill,” says Creighton. “Like in any market, that is going to drive more efficient conduct by the supplier.” A sure-fire way, adds Creighton, for a law firm to lose a client is by making the client feel that they were taken advantage of. Which in large part explains why Canadian law firms are now scrambling in pursuit of the new Holy Grail of the profession – providing value to clients. And they are going about it in different ways. Some law firms have sought a competitive advantage through consolidation in the belief that a comprehensive footprint is needed to serve the needs of international clients. It was a popular strategy as there were a record number 96 cross-border mergers announced last year, including the likes of Norton Rose with Calgary-based MacLeod Dixon and Fasken Martineau with Johannesburg-based Bell Dewar.
Other law firms are putting a lot of effort towards re-thinking their delivery systems to enhance efficiency and service while being able to stare down the pressures of operating in today’s business climate. Nearly four years ago, after sensing that clients’ expectations were shifting, McCarthy Tétrault introduced legal project management at a time when many major North American law firms are just beginning to explore the discipline. Today it is taking a step further and has just introduced legal service process mapping, a system designed to clearly lay out the steps needed to be taken over the life of a matter to improve efficiencies by identifying best practices and examine whether others such as paralegals or LPOs could perform the task. “The traditional approach has been to look at discounts but clients are telling us that they are looking at the number of hours spent,” explains Peters. “This is a whole issue of efficiency and how services are delivered. If you can examine the number of hours, the staffing profiles and just how services are delivered, you can actually impact the total bill as well. In many respects, it is a much more effective way because you are not jeopardizing quality and you are dealing with the whole issue of the total bill.”
Alternative fees
Alternative fee arrangements such as fixed fees, flat fees, or performance-based arrangements are supposedly on the upscale, and something that many law firms offer, but it turns out that in-house counsel are not exactly enamored with the model, according to 2013 In-House Counsel Barometer Survey conducted by Vision Critical in collaboration with the Canadian Corporate Counsel Association and Davies Ward Phillips & Vineberg LLP. “There is a general lack of knowledge surrounding alternative fee arrangements,” admits Creighton. “It might work in certain contexts but in others I don’t know how you’d make an alternative fee arrangement work really well if it is a big complicated transaction. I still think the traditional billable hour is appropriate form many more complex matters if you have a good trusting relationship.”Other alternatives, such as innovative new law firm models like Cognition LLP, a Toronto-based legal services provider that rents out hired guns, is seemingly gaining growing acceptance from corporate law departments and in-house counsel. Managing and controlling costs of outside counsel is a priority in today’s competitive business world, says Jill Schatz, general counsel and VP Law at Primus Telecommunications Canada Inc. “The use of alternative legal service provider models such as the virtual law office practice offered by Cognition is an invaluable tool to help contain costs,” said Schatz in an e-mail. Cognition’s co-founder Joe Milstone believes the legal services market is on the cusp, “if not already beginning and into it,” of fundamental change. “I temper that that by saying that the Canadian market is actually even more conservative and slower to respond, and in some ways, lagging other markets such as the UK and the US.”
That is a viewpoint shared by legal consultants. Kowalski likens the current Canadian marketplace to a monopoly where there is very little incentive to change. Allowing non-lawyers to own an equity interest in law firms, as is the case in Australia and the UK, would force Canadian law firms to become more innovative because as it stands there is a perception among some law firms that they have “ridden the storm fairly well so why change,” says Kowalski, who believes it would be in their interest to focus on processes, invest heavily on knowledge and information technology systems to “really help them drive” efficiencies and provide better client service. “Just drop the billable hour right off the bat and that would force them to be more efficient by having to work on a budget.”
This story was originally published in the magazine Canadian Lawyer.
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Tips on information governance
There is no doubt that technology has increased ease and efficiency. But it has also created new challenges, and many law firms are struggling to keep pace with the deluge of electronically-stored information they have to deal with. Information governance can help, say experts.Information governance is a business process that takes a centralized, global approach to managing information. Strategic coordination between various departments – information technology (IT), records and information management (RIM), security, and privacy – is critical to avoid siloing. This is, of course, easier said than done.
“You are asking, in many cases, employees to think about information in a way that they have never done,” points out Sheila Taylor, CEO of Ergo Information Management Consulting. Here are some pointers from experts.
- Senior management buy-in and oversight is essential. They should endorse and firm support information governance initiatives. Many organizations have established an advisory board, composed of key stakeholders of information, to guide and build governance policies and processes.
- Build a business case. Information governance requires commitment and resources. A cost-benefits analysis can go a long to convince naysayers. “What matters to partners is ease of access and costs,” notes Kathryn Manning, legal counsel at Wortzmans, a Toronto law firm specializing in information governance. “If you can show through the cost-benefit analysis that they are going to a be more profitable partnership, they are going to want to do it.”
- Identify gaps in the organization’s current practices. Assess risks to the organization, based on the biggest gaps. Determine whether additional information and analysis is necessary. Develop priorities and assign accountability for further development of the program. Ideally, establish a baseline to understand where you’re at now so that you can figure out if you have achieved any benefits by implementing the policy. “A lot of organizations have established a policy, have these lofty goals but really don’t know if they have achieved it because they never established their baseline, and checked to see whether that baseline is improving or not,” says Taylor.
- Management, or the information governance advisory board, need to consult. Find out from employees who work in IT, RIM, security and privacy what it is they want to see improved. Often what employees wants to improve is not necessarily what management had in mind. Use a sounding board when drafting policies, processes and procedures. Ask them whether it makes sense, if it’s practical, and if it’s workable. “Find out how they are working now, and find the way that will sort of compliment all of the different areas to the greatest extent possible,” advises Susan Nickle, former partner at Wortzmans and now general counsel at London Health Sciences Centre. “If you have a handle on how people are doing things now, the less you have to change the way they are working, the more likely the new system will be adopted.”
- Start small. A pilot project is a good idea, ideally with a group that would like to be part of the exercise. A pilot project gives you an opportunity to find out what works and what doesn’t so that you can improve upon it before you start rolling it across the organization, and “hopefully save any embarrassment that otherwise might have occurred,” says Taylor.
- Be patient. Implementing information governance requires time, effort, and resources. Expect roadblocks at the implementation stage because “that’s where you start asking them to make changes in their behavior,” says Manning. Depending on the size and needs of an organization, it can take anywhere from four-to-six months from start to finish.
- Don’t skimp on education and training. “Law firms often under evaluate the change management resources they need to put in place to train people,” says Dominic Jaar, national practice leader of information management services with KPMG LLP (Canada). “Develop a communications strategy and systematically remind people and support people through that change.” Tailor training to the audience. Publish “Top 10” guidelines on information governance policy via cheat sheets, employee newsletter articles, posters. Configure systems with information guidance alerts.
- Monitor and audit. Firms should monitor and evaluate key information governance processes on a regular basis to ensure that the organizations meets the goals of the program. “When all of those areas of specialty work together you can have a system,” says Kelly Friedman, a partner with Davis LLP, an expert in electronic information issues. “It won’t be 100 per cent safe because you can never eliminate risk. But you will make everything easier – privacy compliance, e-discovery, finding things when you need them – because you have practices in place that are coordinated.”
This story was originally published in the magazine Canadian Lawyer.
Categories: Legal Practice Management -
Minimizing data breaches
Law firms have often been described as the “soft underbelly” of cyber security or the “path of least resistance to steal sensitive client information,” as one Canadian forensic expert put it. Down south, the U.S. Federal Bureau of Investigation went so far as to warn law firms that they are not doing enough to guard against cybercrime.Here, the situation is more of the same. “A lot of people in the legal community are coming around to cyber risk but there definitely needs to be increased awareness regarding cyber threats that law offices face,” says Kevvie Fowler, a partner and one of Canada’s leading forensic experts with KPMG LLP (Canada).
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Protocol amends Canada – UK tax treaty
After more than two years of negotiations, Canada and the United Kingdom signed a protocol to amend a tax treaty between the two countries that adds a new “exchange of information” provision and a new clause that would allow a tax authority from one country to “enter the other” to conduct tax audits.The 12-page protocol, which came into force just before the Christmas holidays, permits an authorized tax representative from the U.K. to enter in Canada to interview individuals or even examine a person’s books and records.
“It used to be that foreign tax debt was viewed as essentially not enforceable in other countries so absent a law imposed through the enactment of a treaty, the Canadian courts would by and large not assist a foreign government in collecting from a Canadian resident,” pointed out Charles Taylor, a partner with Deloitte. “Now, as governments are intent on preventing fiscal evasion, they have agreed to help each other and we have a provision in the protocol that essentially says the two governments will assist in the collection of taxes covered by the convention.”
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Former student leader acquitted of contempt of court
A former Canadian student activist best known for his role during the 2012 Quebec student protests won an appeal reversing his contempt of court conviction after the Quebec Court of Appeal held that individuals have the right to hold strongly held convictions even in the face of a court order.
Gabriel Nadeau-Dubois, the former spokesman of the major student organization CLASSE, was found guilty three years ago of inciting students during a television interview to strike and ignore a court order that guaranteed students access to their classrooms during the student conflict in the spring of 2012 when thousands took to the streets to protest planned tuition fee increases. He was sentenced to 120 hours of community service, which was thrown out.
“Now we have a ruling which says that one of the things to be considered when it comes to verbal contempt of court is whether freedom of expression is threatened, and it is particularly important in matters where a person expresses disagreement with a judgment,” said Julius Grey, a leading civil libertarian and human rights advocate, who represented the Canadian Civil Liberties Association which was an intervenor in the case. “That is a major achievement, and extremely important.”
In its 17-page ruling in Nadeau-Dubois v. Morasse 2015 QCCA 78, the Quebec Court of Appeal underlines the exceptional nature of contempt of court procedures, stressing that it is a legal remedy that should be used “sparingly.” In a case of civil contempt, the appeal court reiterated that certain elements must be established beyond a reasonable doubt: the terms of the order must be clear and unambiguous, proper notice must be given to the contemnor of the terms of the order, there must be clear proof that the contemnor intentionally committed an act prohibited by the terms of the order, and mens rea must be proven. While the order was clear and unambiguous, none of the other elements were proven in Nadeau-Dubois’ case. The appeal court held that it was not proven, “let alone proved beyond any reasonable doubt,” that Nadeau-Dubois knew about the injunction at the time of the interview. The appeal court noted that the injunction was not served to him personally and that he was not aware of its contents or scope. “Even if such knowledge had been proved, the appellant should nevertheless be acquitted because it was not demonstrated that he violated the order,” wrote Quebec Court of Appeal Justice Jacques Dufresne in a unanimous ruling.
The appeal court held that Nadeau-Dubois neither encouraged civil disobedience nor anarchy but rather exercised his right to freedom of expression by publicly defending his controversial position. His “strong encouragement” during the interview to maintain pressure tactics through picketing did not constitute a violation of the order, added Justice Dufresne. “The right to inform as many members of the public as possible of one’s strongly held convictions in a conflict falls within the scope of freedom of expression as protected by the Canadian Charter of Rights and Freedoms and the (Quebec) Charter of human rights and freedoms, as well as the underlying right to information,” said Justice Dufresne in a key passage that will likely cited by lawyers defending individuals accused of civil contempt.
The appeal court decision is reassuring because it makes a clear distinction between incitement to civil disobedience of a court order and public disagreement with a court decision, said Pierre Trudel, a law professor with the Public Law Research Centre at the Université de Montréal. In order for the courts to conclude that an individual incited civil disobedience of a court order, the remarks must be clear and unequivocal, added Trudel. “If the lower court ruling would have been upheld, it would have created a dangerous precedent that would have limited the right to freedom of expression because it implied that publicly disagreeing with a judgment is tantamount to inciting civil disobedience of a court order, said Trudel.
The ruling also warns that in cases where one is accused of making remarks that infringe a court order, the courts must be even more prudent to infer incitement, noted Rebecca Laurin, a Montreal lawyer who helped to successfully defend Nadeau-Dubois. For a person to be found guilty of contempt of court, the person must have committed an illegal act (actus reus) and had the required state of mind (mens rea) for the criminal offence. Both elements of the offence, the actus reus and the mens rea, must be proven beyond a reasonable doubt, added Laurin. “The appeal court ruling states that the courts must be even more prudent in such cases because the actus reus will be demonstrated by the interpretation of the remarks, and opinions are protected by the freedom of expression provisions in the Charter and the Quebec Charter,” said Laurin. “Interpreting the remarks too liberally risks paralysing the right to freedom of expression.”
But Maxime Roy, who represented Jean-François Morasse, a student who lodged the complaint that Nadeau-Dubois encouraged students to ignore the court injunction, forcefully argues that the ruling has created a “perilous precedent” that will make it far more difficult to find someone guilty of contempt of court. “This is not a case about freedom of expression but incitement,” said Roy, a Quebec City criminal lawyer with Thibault, Roy Avocats. “The ruling has given weapons to people to be more easily acquitted. It is a poorly founded judgment that runs against jurisprudence. Freedom of expression does not allow to acquit someone who incites (others) to not respect a court order.
“I have the impression that the appeal court reappropriated the facts, the trial. In my opinion, there was no error of law in the decision of the judge of first instance. The role of an appeal court is not to change the verdict because they think it should have been something else. That’s what I think they did.”
Morasse intends to file an application for leave to appeal before the Supreme Court of Canada.
This story was originally published in The Lawyers Weekly.
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OSFI exchanges with insurers and financial institutions not confidential
The Quebec Court of Appeal upheld a lower court ruling that could have a chilling effect on the flow and quality of confidential information financial institutions disclose to regulatory authorities, and even potentially undermine the “safety and soundness” of Canada’s financial system, according to business lawyers.In a majority decision in line with two Ontario Superior Court decisions, the Quebec Court of Appeal held that documents and exchanges between federally regulated firms such as banks and insurance companies with the Office of the Superintendent of Financial Institutions (OSFI) are protected by statutory confidentiality provisions imposed by Regulations under the Insurance Companies Act, with some exceptions. While the regulations were enacted to limit the communication of supervisory information, the appeal court found that sections 2 and 3 of the Regulations did not create an absolute prohibition on disclosure and could be subject to production in civil proceedings.
Categories: Business, Class actions, Corporate law, Financial services, Quebec, Quebec Court of Appeal, Rulings -
Family of non-smoker awarded $1.7 million
The family of a non-smoker who died of lung cancer at the age of 44 was awarded $1.7 million after the Quebec Court of Appeal held that two doctors were negligent in a case that draws on the rarely used notion of “unfavourable inference” of proof of causation, a development applauded by medical malpractice legal experts.
In a ruling that highlights the difficulty of proving the causal link between medical negligence and a patient’s damage in a civil suit, the Quebec Court of Appeal overturned a lower court ruling because it failed to apply negative inference, a “robust and pragmatic approach” that is sometimes wrongly confused with a reversal of burden of proof. Quebec courts have rarely applied unfavourable inference even though it was first described by the Supreme Court of Canada in Snell v. Farrell [1990] 2 S.C.R. 311 and confirmed in a Quebec medical malpractice suit in St. Jean v. Mercier [2002] 1 S.C.R. That may now change, hope medical malpractice lawyers.
“What this ruling does is rehabilitate Snell because judges did not pay attention to it, did not apply it, and even refused to apply it,” said Marc Boulanger, a medical malpractice lawyer with Tremblay Bois Mignault Lemay Avocats LLP in Quebec City.
Medical malpractice suits are notoriously difficult to win, say lawyers. The case involving Marc Émond was no different. On November 2005, at the request of his family physician Dr. Albert Benhaim, Émond had a chest X-ray taken as part of his annual physical exam even though he was both physically fit and asymptomatic. Dr. Michael O’Donovan, a radiologist, discovered a lesion, and recommended to Dr. Benhaim that another chest X-ray be taken. On January 2006, Émond had another chest X-ray, and Dr. O’Donovan yet again noticed the presence of a lesion and suggested that another X-ray be taken in a couple of months, which was not done. On December 2006, during his annual medical examination, Émond had another chest X-ray. This time, Dr. O’Donovan noticed that the lesion grew from 1.5 – 2.0 centimetres to 2.5 centimetres. Dr. Benhaim ordered a battery of tests, and on January 2007, Émond was diagnosed with Stage IV lung cancer, which is inoperable and incurable. He sued both doctors, but after he died on June 2008, 31 months after the first chest X-ray was taken, his wife took over the lawsuit. The suit alleged, based on the medical opinions provided by their experts, that the physicians’ failure to provide Émond with timely testing for a pathological diagnosis of his condition was the cause of his death.
The trial judge found that, when reviewing the results of Émond’s chest X-rays in November 2005 and January 2006, the physicians had failed to compare the images to his previous medical records and they had failed to take reasonable steps to determine if the lesion on the X-rays was an indication of cancer. But while the trial judge decided that Cathie St-Germain, Émond’s spouse, had established fault, she concluded after reviewing conflicting expert opinions that at the time of the fault in November 2005, Émond’s cancer was already inoperable because he suffered from cancer that was at least at stage III. (According to evidence produced at the trial, the rate of cure by surgery for a stage I cancer is 70%; the prognosis for a stage III cancer is dismal as only 10-to-15% live beyond five years). She ordered the physicians to pay St-Germain and her son $70,000 in damages. St-Germain appealed the decision.
The Quebec Court of Appeal overturned the ruling but rather unusually for different reasons. Relying on guidance provided by the Supreme Court in Laferriére v. Lawson [1991] S.C.R. 541, appeal court Justice Jacques Fournier noted that causation in law is not identical to scientific causation, and must be established on the balance of probabilities, taking into account all the evidence. He points out that according to the unanimous opinion of medical experts, stage III or IV cancer is usually fatal within 12 months. Émond was on the balance of probabilities therefore most likely afflicted with stage I or stage II cancer at the time when the fault by the physicians was committed on November 2005, held Justice Fournier. He concluded that St-Germain satisfied the burden of proof and established causation between the fault and the loss.
“The ruling examines the weight of evidence, and reminds judges that they have to look at all the evidence to appreciate causation, and not just scientific evidence,” said Jean-Pierre Ménard, a medical malpractice lawyer with Ménard, Martin avocats in Montreal. “Scientific causation is not the same as causation in law, but in reality judges always demand for scientific evidence.”
Appeal court Justice Nicholas Kasirer, which Justice Dominique Belanger agreed with, took a different tack. Justice Kasirer held that an unfavourable inference of proof of causation against the doctors should be applied because it was impossible for the appellants to show scientifically that the fault resulted in a delay in the treatment of the disease that ultimately caused Émond’s death. The appellants also filed in evidence authoritative medical evidence that there was a 78% probability that the cancer was at stage I when it was discovered fortuitously, which served to discharge, prime facie, their burden of proving that Émond’s cancer was on the balance of probabilities at stage I at that time. “In the absence of proof to the contrary, the combination of these two facts…gave rise to the adverse inference that the negligence had caused the losses connected to his death,” said Justice Kasirer in St-Germain v. Benhaim 2014 QCCA 2207.
A court, added Justice Kasirer, would be justified in drawing an inference of causation against defendants even if scientific proof of causation is not adduced so long as the plaintiff advances some affirmative evidence that the fault is directly linked to the loss. In this case, the affirmative evidence was the statistical proof presented by the plaintiffs.
“With a decision like this, the notion of unfavourable inference will certainly be raised in arguments,” noted Alexandre Éthier, a Montreal medical malpractice lawyer with Dubé, Latreille Avocats. “It can perhaps even lead defendants to think twice before advancing arguments that rest on the fact that the plaintiff is not capable of demonstrating fault or harm. It will be an important ruling in medical malpractice suits if the courts heed the guidance by the appeal court.”
The ruling is also notable because of the amount in damages awarded to St-Germain and her son, the third largest ever granted by a Quebec court, said Ménard. (That’s not counting out-of-court settlements). He notes that while the chances of a patient winning a medical malpractice lawsuit against a doctor are slim, Quebec courts have been granting substantially greater amounts over the past five years in successful malpractice suits.
In calculating the damages, the Quebec Court of Appeal curiously held that Émond would have likely retired at the age of 62, pointed out Daniel Gardner, a law professor at the Université de Laval whose work on damages awarded in medical malpractice suits was cited in the ruling. Most courts have held the retirement age to be 65 when calculating damages, noted Gardner. Unlike the rest of Canada, Quebecers tend to retire at an earlier age, at 62.5, added Gardner. Émond, however, who testified before passing away, testified that he had no intention of retiring early. “While the courts must take into account that the average Quebecer retires earlier than Canadians so that they are not overcompensated, the courts should also examine each case individually because there can be instances where the evidence demonstrates that people intend to work more than the norm.
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Information Governance: Taming a world of chaos
It appears to have become the new norm. Not a week seems to go by without a report about a data breach. America’s largest bank, JP Morgan Chase, is the latest high-profile victim, and it is still reeling from this summer’s cyber attack that compromised the accounts of 76 million households — the equivalent of 65% of all U.S. households — and seven million businesses. Law firms are far from immune. An American multi-state criminal firm discreetly filed a report in late June with California authorities, the first U.S. state to adopt data breach notification legislation, after a hard drive containing backup files for one of the firm’s servers was stolen from the locked trunk of an employee’s vehicle. -
Federal government unveils new corporate social responsibility policy for extractive sector
Less than a month after the federal government introduced a new transparency law that that will require oil, gas, and mining companies in Canada to disclose their payments to governments around the world, Ottawa announced that it intends to punish companies in the extractive sector that do not adhere to its new corporate social responsibility policy by withdrawing Canadian diplomatic and economic support.The new corporate social responsibility (CSR) strategy redefines the role of the Office of the Extractive Sector CSR Counsellor, introduces new international best practices extractive companies should adopt, and for the first time links Canada’s “economic diplomacy” assistance in foreign jurisdictions to a company’s adherence to the new policy. While the federal government has been lauded for its efforts, legal observers have voiced concerns over the lack of guidance and legislative framework surrounding the new strategy.
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Differences between the sexes
Lawyers work hard. More than half of Quebec lawyers work put in more than 40 hours a week. That’s not surprising for a profession whose image is intricately linked with workaholism.What’s interesting is the differences between the sexes. Surprisingly, more women than men put in 60 hour-plus weeks than men, according to a report by Quebec’s law society. While nine per cent of women surveyed by the Barreau du Québec said they work more than a sixty hours a week, only six per cent of men made the same claim. However, more men than women log 51-to-60 hour work weeks, and more women than men work between 31-and-40 hours a week.
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Employer has the right to fire police officer facing criminal charges, rules appeal court
The dismissal of a former Quebec City police officer was upheld by the Quebec Court of Appeal after it ruled that his employer had the right to fire him while he was the subject of a pending criminal investigation. -
Appeal court provides guidance on workplace investigations
A controversial lower-court ruling that ordered a Montreal lawyer to pay moral damages to a college teacher for pain and suffering after an investigation she had headed into psychological harassment complaints breached the duty of procedural fairness was overturned by the Quebec Court of Appeal in a precedent-setting ruling that provides guidance on workplace investigations.
In a closely-watched ruling by the business and legal community, the Quebec Court of Appeal held that workplace investigations are “intrinsically linked to an employer’s exercise of power in matters of management and discipline,” and therefore do not have to abide by the same procedural fairness standards applied in administrative law.
