{"id":8228,"date":"2022-04-04T01:44:11","date_gmt":"2022-04-04T01:44:11","guid":{"rendered":"https:\/\/cpatacabamcdev.wpengine.com\/?page_id=8228"},"modified":"2022-05-31T20:24:30","modified_gmt":"2022-05-31T20:24:30","slug":"rule-5-fees-and-disbursements-foreign-agents","status":"publish","type":"page","link":"https:\/\/cpata-cabamc.ca\/en\/your-practice\/professional-conduct\/ethical-analyses-and-guidance-old\/rule-5-fees-and-disbursements-foreign-agents\/","title":{"rendered":"Rule 5 \u2013 Fees and Disbursements; Foreign Agents\u00a0"},"content":{"rendered":"\t\t
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The <\/span><\/span>Code <\/span>of Professional Conduct<\/span><\/span><\/a> provides ethical rules for the conduct of licensees, which range from the broad, guiding principle of integrity to more specific rules about how to practice ethically. Included in the Code are rules with respect <\/span>to <\/span>such practical matters as <\/span>fees<\/span> and billing practices. <\/span>The Code provides that a licensee <\/span>should<\/span> not charge a client for a disbursement <\/span>for which<\/span> the licensee has not yet paid. <\/span>L<\/span>icensees <\/span>have <\/span>recently contacted <\/span>CPATA <\/span>with ethics <\/span>inquiries <\/span>about the effect of <\/span>this rule<\/span> on their current billing practices with respect to fees paid to foreign agents<\/span>.<\/span><\/span>\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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The Scenario <\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Many licensees work with foreign agents to assist them with foreign filings. It may be the licensee\u2019s or their firm\u2019s billing practice to charge a flat fee to a client for their services, or a licensee or firm might work routinely with a foreign agent who submits bills to the licensee or firm on a schedule. This scenario could result in a client being charged a foreign agent\u2019s fee on a bill before the licensee or firm has paid the foreign agent.\u00a0<\/span>\u00a0<\/span><\/p>

\u00a0<\/span>Some licensees have also contacted CPATA with questions about the effect of Rule 5(5) of the Code, which provides that a client should not be invoiced for a disbursement that has not yet been paid to a third party, as it is their practice to invoice a client for a foreign agent\u2019s services, and this sometimes occurs before they have paid the foreign agent for their services. The licensees shared that this has been their practice prior to the Code coming into effect and the licensees were wondering whether their billing practices were running afoul of the new Code.\u00a0<\/span>\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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The Code came into effect as of June 28, 2021.<\/span> Rule 5(5), paraphrased above, states that:<\/span>\u00a0<\/span><\/p>

\u00a0<\/span>an agent must separately and clearly detail all fees and disbursements <\/span>and must not show as a disbursement to a third party any amount that has not been paid to the third party<\/span> [emphasis added].<\/span>\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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Rule 5(5) (above) raises the question of whether a licensee and\/or firm billing a client for a foreign agent\u2019s fees where they have not yet paid the foreign agent is running afoul of the rules in the Code.\u00a0<\/span>\u00a0<\/span><\/p>

\u00a0<\/span>In order to evaluate a licensee\u2019s obligations in these circumstances, CPATA needs to consider the principles underpinning Part 5 of the Code, which deals with Fees and Disbursements, as well as the Model Code of Professional Conduct <\/span>from which the CPATA Code of Conduct was largely built. The Model Code of Professional Conduct has commentary to its rules with respect to fees which includes:<\/span><\/p>

\u00a0<\/span>A lawyer may charge as disbursements only those amounts that have been paid <\/span>or are required to be paid to a third party by the lawyer on a client’s behalf<\/span> [emphasis added].<\/span>\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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While this portion of the Commentary was not adopted by CPATA, it does appear to be consistent with the spirit of the Principle of Part 5 of the CPATA Code, which states that \u201can agent owes a duty of fairness and reasonableness in their financial dealings with the client.\u201d The Principle of Part of 5 of the Code informs how the rules are to be read, in addition to the Fundamental Canon of the Code <\/span>which provides that\u00a0<\/span>\u00a0<\/span><\/p>

\u00a0<\/span>the most important attribute of an agent is integrity. That principle is implicit in this Code and in each of the rules and commentaries set out in it.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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CPATA\u2019s analysis is based on these principles. In evaluating whether a licensee or firm that invoices a client and includes a fee for retaining a foreign associate, even where the firm has not yet paid that foreign agent, the College considered whether this would be a fair and reasonable way to manage financial dealings with the client and whether this billing practice maintains the principle of integrity.\u00a0<\/span>\u00a0<\/span>\u00a0<\/span><\/p>

In order to ensure that the billing practice is fair and reasonable the licensee\/firm must:\u00a0<\/span>\u00a0<\/span>\u00a0<\/span><\/p>