Very often when doing transactional work, be it in the commercial, real estate or family law context, the need for a party to the transaction to obtain Independent Legal Advice (ILA) will arise. Often lawyers provide ILA to help a friend who refers the person. Though the nature and value of the transaction will vary, there is a common perception that ILA should be a quick exercise for a modest fee. From your professional liability insurer’s perspective, such a perception is misguided.
If you are providing ILA, it is important to remember that the person you provide the advice to is, from that moment, your client for that purpose. Accordingly, when providing ILA, you must ensure the client understands your advice and that your file is properly documented. Review LIANS’ resources on Independent Legal Advice, and consider the following:
- Only give ILA if you practise in the area of law in question
- Check the identification of the person to whom you are giving the advice (see NSBS Client ID regulations)
- If the client needs an interpreter, have a neutral party interpret rather than a member of their family or a person tied to another party to the transaction
- Gather enough information about the circumstances surrounding the transaction to be able to explain them to your client and predict problems. In particular, you should know the client’s age, level of experience and motivation, the relationship between the parties, and your client’s relative bargaining power. You should know enough about the client’s financial situation to know the financial impact of the transaction
- Ensure your client understands not only the nature and effect of the transaction, but also their underlying rights and entitlements
- Have clients explain in their own words their understanding of the transaction, instead of simply asking if they understand the transaction in question
- Ensure clients are exercising their own free will. Be especially diligent in the situation of giving ILA to a guarantor if they are a relative of the borrower, subservient to the borrower, or an unsophisticated party
- Be sure the document is fully complete before you or the client sign
- Obtain an appropriate acknowledgment from the client if they decide to act contrary to your instructions
- Only accept payment from the client and not someone adverse in interest to your client
- Keep full notes of the meeting and follow up any comments or concerns you have in a letter to the client. If your comments were verbal, make sure your notes have sufficient detail
- Open a file and docket your time
If the ILA relates to a domestic contract, review Family Law Standard #6-Documentation of Advice and Instruction and Standard #12-Independent Legal Advice, and these areas of note:
- Obtain complete financial disclosure from both your client and the other side
- Determine if the document was sufficiently well-drafted to accomplish your client’s objectives
- Ensure that the terms of the agreement are both certain and enforceable
- Ensure that, if the agreement is to be filed against property or as an order of the court, any statutory requirements for filing have been met
- Explain the final nature of the agreement
- Review the risks and consequences of the agreement including the effects it may have on the client if the spouse dies first
All told, this is, we admit, a lot of work. Ironically, there is often little difference between the work to be done when giving ILA, and the work to be done by the lawyer who referred the client to you (and who is advising on the transaction as a whole).
If there is a potential conflict between parties to a transaction and they do not have independent counsel, a referral for ILA is appropriate. However, looking at ILA through the lens of your professional liability insurer, it is nothing more than a method of spreading risk. There is nothing wrong with that, and ILA is important for many transactions.
However, if you are the person providing the ILA, you must do so properly and that involves your full consideration of what is necessary to provide complete advice, then determining and charging an appropriate fee. Considering the work involved, rarely is an appropriate fee $150.00. A further caveat for new lawyers – despite what the referring lawyer might tell you, rarely does providing ILA lead to a long relationship with the client. Providing ILA is, more often than not, a one off.