Deck 22: Professional Services

Question 1

In what way are a real estate appraiser and a financial planner similar to one another?

A) Both are hired on an ad hoc basis.
B) Both investigate fee and quality disputes.
C) Both are governed by employment law.
D) Both submit bills to an independent panel for review.

Answer 1

A

Question 2

A banker was asked for an opinion about the creditworthiness of a customer. He provided an opinion describing the customer as a poor credit risk without securing the customer's consent. Which of the following is most likely to result?

A) A claim for the tort of professional negligence will be made.
B) A claim for breach of professional fiduciary duty will be made.
C) A claim for breach of professional-client privilege will be made.
D) A claim for breach of contract will be made.

Answer 2

B

Question 3

Following his accounting firm's audit team being hired by Canuck Inc. to review Northern Ltd.'s books, Tysan contacted several members he knew in the profession, advising them to buy Northern's shares. Trading in Northern's stock notably increased in ensuing weeks, driving the share price up, making it more expensive for Canuck to complete the takeover and prompting the securities commission to investigate. What did the securities commission find with respect to Tysan?

A) The firm will avoid vicarious liability, as Tysan acted independently.
B) The firm employing Tysan, not Tysan, owed a fiduciary duty to Canuck.
C) Tysan breached the fiduciary duty to maintain confidentiality of client information.
D) The claimant's loss was too remote from the professional's actions.

Answer 3

C

Question 4

A broker has transferred stock held in his own name in order to fill a request from a client and made a profit in doing so. Has the broker breached any duties to his client in this instance?

A) No, the broker is entitled to earn a profit from the services he provides to his client.
B) Yes, the broker has a conflict of interest requiring disclosure and consent.
C) Yes, the broker breached his duty of confidentiality.
D) No, the broker is completely compliant with his fiduciary duties.

Question 5

Valdyn, Jacob, and Bob have just finished a review of their business's legal expenses for the past year. While there has been an increase, it hasn't been substantial enough to warrant changing their ad hoc retainer relationships with either Sheps & Shaps LLP or Dunn & Wright LLP. What is the meaning of "ad hoc" in this instance?

A) The professional responsibilities of each firm are identical.
B) The firms receive annual retainers.
C) The relationships are regularly reviewed for cost-effectiveness.
D) The firms are hired on a project basis rather than as permanent employees.

Question 6

George is regularly retained on an ad hoc basis to mediate commercial disputes. Why is George's relationship defined by contract law?

A) professional services are being provided
B) fiduciary duties require contracts
C) because of the principles of tort
D) it is a external professional relationship

Question 7

Dr. Walton, a practising psychologist, prepared a report for litigation purposes, as requested by Hayley's lawyer. Hayley has been receiving disability benefits, which the insurer would like to terminate if it can prove she has recovered sufficiently. The insurance company has written to Dr. Walton, requesting a copy of the report prepared for Hayley's lawyer. What will most likely be the appropriate response?

A) The report must be forwarded, or Hayley will lose entitlement to benefits.
B) The duty of professional-client privilege is inapplicable to psychologists.
C) The request is denied, as the report is subject to professional-client privilege.
D) All professionals are bound by a duty of confidentiality.

Question 8

A professional service contract should provide for unseen developments during the course of the contract. In so doing, which of the following questions will be addressed?

A) How frequently will the client be contacted?
B) How will risk be allocated?
C) How will fees be charged?
D) What expertise is required for the work?

Question 9

Roslyn's company has retained Sheps & Shaps LLP with regard to its purchase of some vacant land. Sheps & Shaps LLP will include its fee and estimated disbursement in the calculation of the closing costs and render its bill when all its responsibilities have been met. In this instance, what defines these terms of the retainer relationship set out above?

A) contractual terms
B) fiduciary duties
C) code of ethics
D) statutory implied terms

Question 10

In the case of Hodgkinson v. Simms, [1994] 3 S.C.R. 377, which of the following was identified by Justice La Forest as being the linchpin of the accounting profession's credibility with the public?

A) maintenance of independence and honesty
B) reliance on skill and knowledge
C) disclosure of real conflicts to clients
D) compliance with the spirit of fair billing practices

Question 11

A consulting engineer incorrectly reports that a particular property is free from soil contamination. Several years later, the property is purchased by Jones. Later, the soil contamination is discovered and the property is substantially decreased in value. What is the most likely result of the engineer's erroneous reports?

A) The consulting engineer is probably liable for breach of contract.
B) The consulting engineer is, due to the passage of time, safe from liability.
C) The consulting engineer is probably liable for breach of fiduciary duty.
D) The consulting engineer is probably liable for breach of confidentiality.

Question 12

Harold has practised commercial law for three years. If Harold is hired by Canuck Publishing Inc. as the senior manager responsible for the quality of the content of business law texts, which of the following would be a likely result?

A) Cost-effectiveness is achieved by this arrangement.
B) The quality of his service must justify the fees he bills.
C) His legal and ethical obligations will be varied.
D) There is a need for Harold to specialize.

Question 13

Which of the following is synonymous with a "retainer" with regard to professional services?

A) the client's contractual obligation to provide accurate information for the professional opinion
B) a document setting out the terms of liability of the professional for professional negligence
C) a written promise of the professional to act in the best interests of the client
D) the advance payment requested by the professional to fund the professional's services

Question 14

A fiduciary is required to act primarily in the interests of the person to whom a responsibility is owed. Which of the following notions captures the concept of that requirement?

A) good faith and due care
B) loyalty and trust
C) honour of profession
D) due diligence and honesty

Question 15

A lawyer has entered a contract with her client to purchase the client's summer cottage and is representing both herself and the client with respect to legal matters involved in completing the transaction. What is the most likely result of this lawyer's actions in these circumstances?

A) The lawyer has breached her client's right to privilege.
B) The lawyer has formed a binding and enforceable contract.
C) The lawyer has breached her duty to provide a reasonably competent service.
D) The lawyer has placed herself in a conflict of interest.

Question 16

What will be the result if ImaBigPharma Inc. links the fees for the external services of a lawyer to subjective factors?

A) The lawyer will be offering value-based legal services.
B) The lawyer will be charging flat fees for ad hoc work.
C) The lawyer will see increased billable hours.
D) The lawyer will offer favourable payment terms.

Question 17

Accountants owe a fiduciary duty to their clients based on elements of trust and confidence. Which of the following would also be strongly supported by an accountant's fiduciary duty?

A) reliance on skill, knowledge, and advice
B) fulfilling a public function
C) reliance on honesty and integrity
D) reliance on professional-client privilege

Question 18

Which of the following would strongly support a systematic approach to assessing and controlling associated costs, regardless of the type of professional service relationship a given business may maintain?

A) payment by retainer
B) submitting bills to professional associations
C) regular evaluation of expense and calibre
D) submitting bills to taxing officers

Question 19

Why must an auditor act independently of any interest of the company that has retained him or her to perform the audit?

A) The auditor must maintain client privilege.
B) The auditor fulfills a public function.
C) The auditor must maintain client confidentiality.
D) The auditor has a duty of care.

Question 20

A lawyer met with several members of the community at a social function. During the evening, he spent a great deal of time discussing one particular client in great detail. The client's friend, unknown to the lawyer, was not impressed by some of the derogatory comments expressed during the discussion. What will likely be the result when the client's friend explains the evening's events?

A) A complaint that the lawyer has breached his client's right to privilege will be made.
B) A complaint to the Law Society for breach of client confidentiality will be made.
C) A complaint that the lawyer breached the duty to avoid commission of torts will be made.
D) A complaint that the lawyer breached his duty to perform contractual obligations will be made.

Question 21

What rule or rules apply when litigation involves a third-party claim?

A) Third-parties must be sued in separate litigation proceedings.
B) The plaintiff must sue the third party and the defendant.
C) Normal negligence principles will apply.
D) Third parties are entitled to recover the costs of being brought into the litigation.

Question 22

In which of the following circumstances will the lawyer's indemnification fund compensate the victims of one of its practising members?

A) breach of contract
B) theft of client money from trust
C) breach of confidentiality
D) professional conflict of interest

Question 23

Michelle, Michael, Savenna, and Hirsch have just concluded their new partnership's organizational meeting. The group of busy commercial lawyers determined that a limited liability partnership suited their needs best. Why did they make this choice?

A) for preferential tax treatment
B) for professional risk management
C) for public policy liability concessions
D) for insurance purposes

Question 24

What is a condition of practice that is considered to apply to most professions?

A) practising fees
B) social ethics and morality
C) errors and omission insurance
D) governing body

Question 25

In the context of professional services, what is the standard of care a professional owes to a client?

A) The standard of care will be that of an average person.
B) The professional's governing body will determine the standard of care.
C) The standard of care will be lower if the professional is providing his services free of charge.
D) The standard of care will be that of a reasonable person in that profession.

Question 26

What needs to be present in order for a professional services contract to provide the mutually intended benefits to all parties privy to the arrangement?

A) accountability for professional negligence
B) professional liability insurance
C) all essential terms
D) entire agreement clause

Question 27

Breanne is considered to be one of the top family law professionals in her province. She has been retained by Martha's lawyer to give an opinion with respect to the standard of care of a reasonably competent family law lawyer. What is most likely the purpose for Breanne's involvement in this litigation?

A) to help the claimant prove her indirect right to bring a derivative action for breach of care
B) to determine any other parties in a proximity of reliance on the professional
C) to help the claimant prove through expert testimony that the standard of care was breached
D) to determine any existing policy considerations that would limited the duty of care

Question 28

With which of the following is the phrase "in an indeterminate amount for an indeterminate time to an indeterminate class" synonymous with respect to the application of the law to professional relationships?

A) third-party negligence liability
B) corporate share structure
C) breach of confidentiality
D) professional negligence

Question 29

In the case of Haig v. Bamford, (1976) 72 D.L.R. (3d) 68 S.C.C., the Supreme Court found the defendants (auditors) owed a duty of care to third-party claimants. Why did the court break away from its traditional approach of refusing all third-party claims for professional negligence in this particular instance?

A) because of the limited purposes of the audited financial statements as set out in legislation
B) because of public policy pressure following the auditors' role in facilitating white collar crimes
C) because of the auditor's actual knowledge of limited third-party groups and their intended reliance
D) to assist the collectivity of the public in their task to oversee professional activity

Question 30

What is the key to limiting the duty of care owed by an auditor to third parties as defined by the foreseeability principle?

A) a statutory prohibition against reliance by third parties
B) the purpose of performing an audit is mandated by law
C) a statutory amendment allowing limited liability partnerships
D) a disclaimer against relying on information from third parties

Question 31

Which of the following is a feature typical of legislation regulating professions in Canada?

A) a fee schedule for professional services
B) a requirement of professional corporations
C) the control of entry into the profession
D) the settlement of disputes between professionals

Question 32

How have limited liability partnerships been introduced into Canadian society?

A) through the enactment of amendments to the provincial Partnership Acts
B) through changes by each profession's governing body to its codes of conduct
C) through adoption by various professions that carry errors and omissions insurance
D) through the enactment of amendments to the Canada Business Corporations Act

Question 33

Which of the following is a common characteristic of the most difficult cases involving professional tort with respect to third parties?

A) breach of fiduciary obligation of professional-client privilege
B) careless advice or misrepresentations causing economic loss
C) breach of fiduciary obligations to maintain confidentiality
D) conflict between the client's and the professional's interests

Question 34

How were members of the various professions able to secure the right to practise their professions through the limited liability partnership?

A) through a court policy to protect the viability of professions from risk of liability
B) through codes of conduct implemented by their self-governing bodies
C) through the establishment of errors and omissions insurance coverage
D) through a concerted effort to lobby governments to enact protective legislation

Question 35

Which of the following is a legitimate concern for clients or third parties who rely on professionals who provide their services through a limited liability partnership?

A) the adequacy of the profession's indemnification fund to cover losses
B) whether individual partners remain liable for their own negligence
C) whether highly specialized professional protection associations defend claims
D) whether there will be compensation for losses caused by the professional

Question 36

What was the traditional position of the courts to deny the claims of third parties based on?

A) disputes over varying levels of expertise required
B) a policy to protect the economic viability of the professions
C) a burden of proof pertaining to the causality of the loss
D) disputes over who should determine the standard of care

Question 37

Which of the following is a distinguishing characteristic of professions?

A) Their self-regulation has been curtailed by public body oversight.
B) Provincial statues provide for more than one governing body.
C) Provincial statues establish the rights of professions to govern themselves.
D) The right to perform an audit is defined by provincial legislation.

Question 38

Triston is one of a number of shareholders of TVG Group Inc. who lost a substantial sum by relying on the negligently prepared audit of the company's previous fiscal year's financial circumstances. Which of the following would strongly support a viable avenue of recourse for these shareholders against the negligent professional?

A) a class action law suit that includes the company
B) a derivative action on behalf of the company
C) a derivative third-party claim by the company
D) a derivative action on behalf of the shareholders

Question 39

What would a lawyer most likely indicate as an appropriate response to a client's indication that he has purchased a handgun and is planning revenge on the financial advisor who has stolen his life savings?

A) maintain solicitor-client privilege
B) violate confidentiality after informing the client of a conflict
C) maintain confidentiality
D) violate confidentiality and solicitor-client privilege

Question 40

In what way are losses resulting from damage to property and pure economic losses similar with respect to professional liabilities arising in tort?

A) neither require proof of reliance on expertise
B) claims of this type are more challenging
C) both deny liability to third parties
D) either is subject to an exemption from duty to mitigate

Question 41

The fiduciary must comply with the spirit of the obligations owed by it and not merely the letter.

Question 42

Limited liability partnerships were originally introduced to Canadian society through the federal government's amendment of the Canada Business Corporations Act.

Question 43

In order to maximize the utility and manage the risk inherent to the engagement of professional services, business clients need knowledge of the workings of professional bodies.

Question 44

Where shareholders have detrimentally relied on a negligently prepared professional audit to make investment decisions, their only recourse against the professional is their indirect right to bring a derivative action on behalf of the company.

Question 45

In very limited circumstances, a professional duty of confidentiality must be violated when a patient tells her doctor that she is going to either hurt herself or intends to cause harm another.

Question 46

The recent removal of interprovincial barriers to professional practice will only prove themselves to be beneficial to Canadian society if the professionals are actually competent with various differing legal procedures, forms, and laws in each of the provinces the professional purports to practise in.

Question 47

Although courts have traditionally denied the claims of third parties who suffered an economic loss as a result of the reliance on a professional's negligent misstatements, modern public intolerance of white collar crime has begun to override the court's underlying policy of protecting the professions.

Question 48

As a result of its role in the Enron affair, the accounting firm of Arthur Andersen was charged with the criminal offence of obstruction of justice based on alleged concealment and destruction of key documents. These charges were possible because professional-client privilege only governs lawyer-client relationships.

Question 49

The self-regulating model applied to professions has come under attack for its alleged failure to protect the public interest by the sacrifice of professional accountability in favour of self-interest and protection of members.

Question 50

The least difficult cases are those in which professionals give careless advice or make misrepresentations causing negative economic consequences to third parties.

Question 51

In the case of a negligently prepared audit, a reasonably foreseeable use and reliance by a number of individual third parties establishes that the professional's duty of care exists. By applying the judiciary's imposed policy considerations at the second step of the test, the court is able to shield the professional from liability by limiting the use of the audit to its statutory purpose.

Question 52

An advance payment requested by a professional from a client is typically required prior to the professional performing any work on the client's behalf.

Question 53

The most contentious issues relating to professionals tend to be those relating to quality of service and fees.

Question 54

A professional should inform the client if expertise required for a certain matter should be sought from an alternate source.

Question 55

Professional service contracts define the parameters of the work that professionals are engaged to do, provided all essential terms have been included in the agreement at the time it was created.

Question 56

In order to advance a claim for professional negligence, the defendants must be in a position to prove the requisite causation and lack of remoteness of damage.

Question 57

When shareholders use audited statements as the basis for their investment decisions, court-imposed policy has shaped the law to consider this use outside the intended statutory purpose of the audit. In so doing, the courts have allowed the professional to be released from any duty of care to these individuals for any investment losses incurred as a result of relying on the audit.

Question 58

The potential for third-party claims for economic loss resulting from negligent misrepresentations was first recognized in Canada in 1964.

Question 59

Self-regulating professions are empowered by special statutes to create a governing body for themselves and to specify when individuals may represent themselves as being qualified to practise in a particular province.

Question 60

If a contract price is not stated in a professional services contract, the principle of quantum meruit will be deemed to be inapplicable.

Question 61

One of the characteristics of a professional is that the duties owed by the professional often extend well beyond any contractual obligations the professional may have assumed with his or her client. Outline these additional non-contractual obligations that may be owed by a professional.

Question 62

Briefly discuss the effects of a limited liability partnership on liability for partners of a firm and the firm itself.

Question 63

Explain how professions derive their ability to be self-regulating. Briefly discuss the criticisms of the professional self-regulating model and measures that have been taken to remedy the problem in other common law jurisdictions.

Question 64

How has the Supreme Court of Canada limited the potential for third-party claims for economic loss (in the Hercules Managements v. Ernst & Young case)?

Question 65

Briefly discuss the concept of professional-client privilege.

Question 66

Identify the profession that has experienced a movement toward client demand for value-based services. Identify and briefly explain the linking process that may allow the client's goal of value-based services to be achieved.

Question 67

Identify specific obligations that apply to a professional as fiduciary.

Question 68

Identify the profession where the fiduciary obligation to give independent advice free from self-interest has a distinct meaning, and briefly discuss any additional obligations that would apply in this particular profession.

Question 69

Identify the various ways in which a practising lawyer may charge fees for the professional services he or she renders.

Question 70

List the ways in which professionals can manage risk arising from their professional responsibilities.