CONFLICT OF INTERESTS REFERRAL FEES. 1. This paper will discuss the ethical issues faced by immigration lawyers in the following areas:

Transcription

1 1 CONFLICT OF INTERESTS REFERRAL FEES INTRODUCTION 1. This paper will discuss the ethical issues faced by immigration lawyers in the following areas: a. Conflict of interests in joint representation of clients, particularly in: a) spousal sponsorship applications; and b) applications for Labour Market Opinions ( LMOs ) and work permits. b. Fee sharing or referral fee arrangements. 2. The material in this paper is largely derived from the following sources: a. The Final Report (August 2008) of the CBA Task Force on Conflicts of Interest ( Report ); and b. The Model Code of Professional Conduct (12 Dec 2012) of the Federation of Law Societies of Canada ( Code ). 3. In the last two decades, three Supreme Court of Canada decisions have dramatically shaped the Canadian law of conflict of interest, starting with a case involving migrating lawyers in MacDonald Estate v Martin [1990] 1, then in the context a complex criminal proceeding in R. v Neil [2002] 2, and finally in Strother v Canada Inc. [2007] In response to the growing need for guidance, particularly in key areas which have not been litigated, the CBA set up the Task Force made up of eminent members of 1 [1990] 3 S.C.R [2002] 3 S.C.R [2007] 2 S.C.R. 177

2 2 the Bar from large, small urban and rural law firms from various areas of practice to produce the Report. 5. While each of Canada s law societies enforces a code of conduct for members of the legal profession in their jurisdiction, the law societies recognize the benefit of moving toward harmonized rules of conduct so that the public can expect the same ethical requirements to apply wherever their legal advisor may practice law. This is particularly pertinent to immigration lawyers since immigration and citizenship laws are federal. 6. The Federation of Law Societies of Canada approved the Code and a number of law societies have already adopted it. Over time, it is expected that any significant differences in rules of conduct across Canada will be eliminated. CONFLICT OF INTERESTS IN JOINT REPRESENTATION An advocate, by the sacred duty which he owes his client, knows, in the discharge of that office, but one person in the world, that client and none other. To save that client at all expedient means to protect that client at all hazards and costs to all others, and among others to himself is the highest and most unquestioned of his duties; and he must not regard the alarm, the suffering, the torment, the destruction, which he may bring upon any other One of the core values of the legal profession is the public s expectation of undivided loyalty from the lawyers whom they retain. 4 Lord Brougham in his defense of Queen Caroline against George IV s bill for divorce in the House of Lords in 1820

3 3 8. A conflict of interest is defined 5 in the Code as: the existence of a substantial risk that a lawyer s loyalty to or representation of a client would be materially and adversely affected by the lawyer s own interest or the lawyer s duties to another client, a former client, or a third person. 9. Before we go any further, it is important to identify who is our client and when a lawyer-client relationship is formed. When is a client a client? 10. The Task Force believes that the duty of loyalty is owed exclusively to clients because clients are the only ones to whom lawyers owe a duty of performance. 11. In line with the recommendation of the Report, a client is defined 6 in the Code as a person who: a. Consults a lawyer and on whose behalf the lawyer renders or agrees to render legal services; or b. Having consulted a lawyer, reasonably concludes that the lawyer has agreed to render legal services on his or her behalf. 12. This definition may not be helpful to the immigration lawyer, particularly when he/she was consulted by a Canadian sponsor intending to sponsor his/her foreign spouse for permanent residence, or when consulted by a Canadian employer intending to hire some temporary foreign workers. Is the foreign spouse or the foreign worker clients of the immigration lawyer? 5 Rule of the Code 6 Rule of the Code

4 4 13. Some immigration lawyers have taken the position that the foreign spouse or the foreign worker is not their client, and as such, conflict of interest issues do not arise for consideration. 14. I would suggest that unless these issues have been litigated, or guidance has been obtained from their law societies, it may be risky for immigration lawyers to assume this position. Use of a Representative IMM Immigration lawyers usually require foreign spouse applicants or temporary foreign workers to sign Use of a Representative forms (IMM 5476) in order to conduct business on their behalves with Citizenship and Immigration Canada ( CIC ) and the Canada Border Services Agency ( CBSA ). 16. Section 91 of the Immigration and Refugee Protection Act ( IRPA ) specifies the classes of persons who may represent or advise a person for consideration in connection with a proceeding or application under IRPA. Uncompensated representatives, such as family, friends and religious and non-governmental organizations may also represent persons under IRPA. 17. It has therefore been argued that a completed IMM 5476 per se does not create a lawyer-client relationship between the applicant and the immigration lawyer. 18. When the immigration lawyer conducts business with CIC and CBSA on behalf of the foreign spouse or foreign worker: a. Confidential information is obtained from the applicant; b. Advice is sometimes rendered to the applicant;

5 5 c. Submissions are made on behalf of the applicant, and are frequently prefaced with phrases like We act for or We are the solicitors for. 19. Taking into account the scope of work undertaken by the immigration lawyer on behalf of the applicant, I would suggest that it will take more than technical dissections of the rules to convince a disciplinary committee of a law society that the applicant was not a client. The Code on Conflict of Interests 20. Paragraph [5] of the Commentary to Rule of the Code reads as follows: The Fiduciary Relationship, the Duty of Loyalty and Conflicting Interests The value of an independent bar is diminished unless the lawyer is free from conflicts of interest. The rule governing conflicts of interest is founded in the duty of loyalty which is grounded in the law governing fiduciaries. The lawyer-client relationship is a fiduciary relationship and as such, the lawyer has a duty of loyalty to the client. To maintain public confidence in the integrity of the legal profession and the administration of justice, in which lawyers play a key role, it is essential that lawyers respect the duty of loyalty. Arising from the duty of loyalty are other duties, such as a duty to commit to the client s cause, the duty of confidentiality, the duty of candour and the duty not to act against the interests of the client. This obligation is premised on an established or ongoing lawyerclient relationship in which the client must be assured of the lawyer s undivided loyalty, free from any material impairment of the lawyer and client relationship.

6 6 21. Rule of the Code deals with Joint Retainers, and reads as follows: Before a lawyer acts in a matter or transaction for more than one client, the lawyer must advise each of the clients that: a) the lawyer has been asked to act for both or all of them; b) no information received in connection with the matter from one client can be treated as confidential so far as any of the others are concerned; and c) if a conflict develops that cannot be resolved, the lawyer cannot continue to act for both or all of them and may have to withdraw completely. 22. In some cases, the lawyer should recommend independent legal advice to ensure that the clients consent to the joint retainer is informed, genuine and un-coerced. This is especially so when one of the clients is less sophisticated or more vulnerable than the other Rules and of the Code read as follows: If a lawyer has a continuing relationship with a client for whom the lawyer acts regularly, before the lawyer accepts joint employment for that client and another client in a matter or transaction, the lawyer must advise the other client of the continuing relationship and recommend that the client obtain independent legal advice about the joint retainer. 7 Commentary [1] to Rule 3.4 5

7 When a lawyer has advised the clients as provided under rules and and the parties are content that the lawyer act, the lawyer must obtain their consent 24. It is suggested that a carefully crafted retainer agreement recommending independent legal advice and requiring written consents of all clients should be in compliance with the Code and allow for joint representations. Potential conflict situations 25. Some questions that may help to identify a multiple interest conflict include 8 : a. Where people have a joint interest, are their bargaining positions unequal? b. To maximize the interest of one of the persons involved, will the interests of another person be compromised or negatively affected? c. Is there real potential for the parties to have a falling out in the future? 26. In a spousal sponsorship application, some potential conflict situations may arise when: a. The Sponsor requests the lawyer to draft a pre-nuptial agreement; b. Advice is rendered to the Sponsor on his/her undertaking in a spousal sponsorship; c. Advice is rendered on the two-year conditional permanent resident status for the Sponsored Spouse Applicant; d. Advice is rendered on the five-year bar on sponsorship for the Applicant; e. An Applicant s background (e.g. past criminality, past relationships, children from past relationships) are revealed to a lawyer without the knowledge of the Sponsor. 8 Guidelines for Multiple Representation CBA Final Report

8 8 27. In an application for a Labour Market Opinion and a work permit, some potential conflict situations may arise when: a. An employee Applicant requests that the employment contract be vetted by the lawyer; b. Advice on wages and benefits are rendered when preparing advertisements; c. Suitably qualified Canadians respond to the advertisements; d. Employee has criminality issues. What happens when a contentious issue arises? 28. Rule of the Code provides: Except as provided by rule 3.4-9, if a contentious issue arises between clients who have consented to a joint retainer, a) the lawyer must not advise them on the contentious issue and must: i. refer the clients to other lawyers; or ii. advise the clients of their option to settle the contentious issue by direct negotiation in which the lawyer does not participate, provided: A. no legal advice is required; and B. the clients are sophisticated. b) if the contentious issue is not resolved, the lawyer must withdraw from the joint representation. 29. Unfortunately, no guidance is given on the meaning of sophisticated.

9 9 30. Rule of the Code provides: Subject to this rule, if clients consent to a joint retainer and also agree that if a contentious issue arises the lawyer may continue to advise one of them, the lawyer may advise that client about the contentious matter and must refer the other or others to another lawyer. 31. Rule appears to allow the lawyer to continue acting for one client provided initial agreement was obtained by clients. 32. However, the Commentary to the rule specifically states: [1] This rule does not relieve the lawyer of the obligation when the contentious issue arises to obtain the consent of the clients when there is or is likely to be a conflict of interest, or if the representation on the contentious issue requires the lawyer to act against one of the clients. [2] When entering into a joint retainer, the lawyer should stipulate that, if a contentious issue develops, the lawyer will be compelled to cease acting altogether unless, at the time the contentious issue develops, all parties consent to the lawyer s continuing to represent one of them. Consent given before the fact may be ineffective since the party granting the consent will not at that time be in possession of all relevant information. 33. In other words, if clients consent at the time the contentious issue develops, the lawyer may continue acting for one of the clients.

10 10 Advance waivers 34. In circumstances where an immigration lawyer is, for example, acting for a large Canadian employer intending to hire a number of temporary foreign workers, it may not be practical or palatable to the lawyer to obtain written consents from all clients every time a contentious issue arises, or to cease acting for the Canadian employer and send the client to another lawyer. 35. Rule allows the immigration lawyer to build an advance waiver into the joint retainer agreement, allowing him/her to continue acting for one client when a contentious issue arises. 36. The validity and effectiveness of any conflict waiver, especially advance or blanket waivers of future conflicts, is likely to be judged by the degree of specificity of the disclosures made in order to obtain the waivers A carefully crafted joint retainer agreement, setting out potential conflict situations instead of a blanket type clause would be preferable. DIVISION OF FEES AND REFERRAL FEES 38. Immigration practice is different from other types of legal practice in the sense that in some situations, our potential clients are mainly overseas. 39. And unless the immigration lawyer has a connection with a particular ethnic group or nationality, it may be challenging for the Canadian immigration lawyer to market his/her legal services to clients who are overseas, although advances in technology have brought the world closer. 9 Anthony E. Davis Professional Responsibility: Effective Waivers of Conflicts New York Law Journal (May 1, 2006)

11 So, it is not unusual for immigration lawyers to be approached by contacts overseas who are prepared to introduce potential clients in return for a referral fee. 41. Rules to 7 of the Code provide: Division of Fees and Referral Fees If there is consent from the client, fees for a matter may be divided between lawyers who are not in the same firm, provided that the fees are divided in proportion to the work done and the responsibilities assumed If a lawyer refers a matter to another lawyer because of the expertise and ability of the other lawyer to handle the matter, and the referral was not made because of a conflict of interest, the referring lawyer may accept, and the other lawyer may pay, a referral fee, provided that: (a) the fee is reasonable and does not increase the total amount of the fee charged to the client; and (b) the client is informed and consents A lawyer must not: (a) directly or indirectly share, split, or divide his or her fees with any person who is not a lawyer; or (b) give any financial or other reward for the referral of clients or client matters to any person who is not a lawyer. 42. Immigration lawyers cannot share or pay referral fees to a non-lawyer.