Introduction

What are the limits on the powers of self-governing professional bodies? The question raises both administrative law issues and the commercial effect of decisions taken by administrative bodies.

This matter involved a successful action by the FCT Insurance Company, a provider of title insurance policies, to have declared invalid the provision in the New Brunswick Law Society standards for the practice of real property lawyers. The FCT succeeded at trial and on appeal.

The crux of the matter at both levels of court was whether the impugned provision truly existed to protect the public interests in some way, or whether the FCT had proven it to be a manifestation of an improper purpose, and therefore outside the broad ambit of the Law Society's powers.

Facts

The FCT Insurance Company is a corporation that offers title insurance policies to, among other customers, residential home owners and financial institutions involved with re-financings for mortgages of residential home owners. The company offers its services in all provinces of the country.

In November 2001, the Law Society of New Brunswick added a provision to its standards for the practice of real property law such that lawyers submitting certain electronic documents (necessary for appropriate registration of title and mortgage interests) are now required to obtain an affidavit of the owner sworn before a notary, and an accompanying notarial certificate. No such requirement for notarial involvement exists in the New Brunswick Land Titles Act. In New Brunswick, only lawyers are notaries.

The FCT sought a declaration that the provision was invalid, and aimed directly at the FCT's business model; the affidavits provided by the title insurer's customers were sworn before a commissioner for taking oaths. In other words, the impugned provision injected extra lawyer costs into the process.

The FCT alleged that the impugned provision was inconsistent with the Land Titles Act, ultra vires the Law Society's powers, and had a predominant purpose of stifling competition for lawyers arising from the customer option of title insurance (as opposed to the traditional lawyer-driven method of residential real estate transactions).

McCarthy Tétrault Notes:

In reasons released on October 19, 2007, Riordon, J. struck down the provision as inconsistent with the Land Titles Act, and ultra vires the Law Society. Notably, in finding that the primary purpose of the impugned provision was to stifle competition, Riordon, J. was clear that the motivations of the then-President of the Law Society and the committee he headed in drafting the impugned provision could be imputed to the Law Society as a body.

On May 8, 2009, the Court of Appeal affirmed that the trial judge had sufficient evidence to support his findings and that the practice standard conflicted with the province's Land Titles Act. The Appeal Court also affirmed that the Law Society had adopted the impugned provision for the "improper purpose" of protecting its members against competition from title insurers.

The Court of Appeal also rejected the Law Society's counter-claim that the FCT had been engaged in the unauthorized practice of law, finding that the FCT's lawyers provided legal services only to the company and not to its customers.

This decision represents a significant limitation on the power of law societies, or other self-governing bodies, to take improper steps that benefit their members under the guise of serving their mandate to protect the public interest. Further, it is an important example of the obstacles and aggressive approach that a private entity may face when challenging the authority of a governmentally created institution.

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