ARE YOU LIABLE WHEN MAKING REFERRALS TO ANOTHER PROFESSIONAL?

A decision by the Supreme Court of Canada made me think about my own practice when referring matters outside my expertise to other professionals.

The facts of the court case were one where a lawyer referred his clients to a financial advisor who appeared to have been incompetent and was involved in fraudulent activities.?? The lawyer himself had a relationship with the financial advisor, which could be construed as a conflict of interest.

The Supreme Court ruled in favour of the plaintiff.? The lawyer making the referrals to the financial advisor was held responsible for damages and losses incurred by the plaintiff.?

The Supreme Court of Canada endorsed the following standard of conduct for lawyers who refer clients to other professionals or advisors:

“Lawyers who refer clients to other professionals or advisors have an obligation of means, not one of result.? Although lawyers do not guarantee the services rendered by professionals or advisors to whom they refer their clients, they must nevertheless act competently, prudently and diligently in making such referrals, which must be based on reasonable knowledge of the professionals or advisors in question.?? Referring lawyers must be convinced that the professionals or advisors to whom they refer clients are sufficiently competent to fulfill the contemplated mandates.”

For reference, the case name is Salomon v. Matte-Thompson, 2019 SCC.

My background is not that of a lawyer, however, the above standard as laid out by the Supreme Court of Canada made me think about certain questions and my own practice when referring clients to other professionals.

How do I ensure the professional I’m referring to is competent and experienced?? In order to ensure competence, how do I ensure that I’m independent from the professional I’m referring?? How do I ensure the professional I’m referring is independent with respect to the matter being considered? ??For a particular service area, do accreditations and designations now matter even more?? What is the standard of care in making referrals on important matters??

As a matter of sound professional practice, I have always endorsed the fact that accreditations and designations are in place to ensure that a professional meets the minimum standard of competencies and experience required to perform services in a particular field of expertise.?

Without these accreditations and designations by reputable and industry accepted institutions, there is no real way to evaluate the professional’s competence and experience, without being directly involved in the review of their work.

I personally have issued thousands of expert reports which have been relied on by the Courts and the Canada Revenue Agency (CRA) in supporting values in estate and succession planning and damages in civil litigation proceedings. During these legal proceedings or CRA audits, your reports are reviewed and scrutinized by opposing experts, legal counsel and judges.?

Further, it is common for practice reviews to be conducted by a professional’s governing body.? These practice reviews are in place to ensure the quality and consistency of the final work product.

A professional remaining in good standing with their insurer and their professional associations as it relates to professional liability or practice standards, is a strong indication of the competence of that professional.

I do not believe it is enough to say, “Well this professional has been doing the work for an extensive period of time”.? I have been in a number of situations where the professional acted as a consultant, however when the actual expert report was to be issued to the Courts or CRA, they quickly engaged my services.? Often my findings were quite different than that of the consultant’s findings.? Essentially, the client duplicated their costs by not engaging the actual expert directly.?

Having slightly more knowledge than your client on a subject matter does not make you competent on that subject matter.

The accreditations and designations behind a professional’s name provide some comfort in that the individual you are referring to has the appropriate technical competency and experience.? If the individual cannot be bothered because of the effort and time required in the accreditation process, are they worthy of your referral?? Why should you expose yourself to a liability in making a referral to another professional who is not appropriately accredited in a particular field of expertise??

At the very least if issues do result with a professional whom you have referred clients to, your defence might include the fact that the individual was appropriately accredited by an industry accepted professional body in that field of expertise.

Further, being a member of a professional Institute allows the referrer the opportunity to ensure the professional is compliant with the Institutes’ rules and professional standards.? These rules typically include requirements for continued professional development and ongoing practice reviews.

The point here is, even though you may not have the required expertise to assess the professional you are referring clients to, certain professional organizations are in place to ensure that the professional who is worthy of your referrals are indeed qualified in a technically proficient and experienced manner. ?Many of these professional Institutes also have standards around professional independence.?

I believe that this ruling by the Supreme Court of Canada shows leadership by the courts and reflects the advancements made by all professions in protecting the public’s interest by ensuring minimum professional standards are in place and enforced.

Let us keep the Wild West behind us and move forward in ensuring a quality product.? After all, in the Supreme Court of Canada’s opinion you are worth protecting.

“You cannot escape the responsibility of tomorrow by evading it today”. Abraham Lincoln.

Andrea Pontoni holds an Honours Bachelor of Commerce Degree, is a Chartered Professional Accountant (CPA), Chartered Accountant (CA), Chartered Business Valuator (CBV) with the Canadian Institute of Chartered Business Valuators (CBV Institute), Accredited Senior Appraiser (ASA) in business valuations with the American Society of Appraisers and Certified in Financial Forensics (CFF) with CPA Canada and the American Institute of Certified Public Accountants.? Andrea has also completed the three parts Chartered Professional Accountants of Canada’s in-depth tax specialty program.? Andrea has over 30 years of experience with 17 of those years at two National Firms where he held senior positions including that of a partner.? His practice includes providing advice on business valuation, succession and estate planning, personal and corporate taxation, economic loss quantifications, financial investigations, accounting advice, financial forecasts, business planning and corporate finance matters to clients varying in size and industry. For more information on his background visit his website at www.pontonifinancialsolutions.com.? He can be reached at 519-890-6288 or by email at [email protected]