Deck 22: Professional Services

Question 1

Which of the following statements represents one of the key criticisms of the Supreme Court of Canada decision in Hercules Management Ltd.v,Ernst & Young?

A) that it establishes too low a standard for the conduct of auditors
B) that it fails to protect professionals
C) that it unreasonably extends personal liability of professionals
D) that it imposes too much liability on professional bodies

Answer 1

A

Question 2

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

Answer 2

A

Question 3

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.

Answer 3

C

Question 4

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.

Question 5

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 6

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 7

In what way are professionals similar to one another?

A) Both are considered employees of their clients who are,in turn,vicariously liable for their negligence.
B) They have ethical obligations that other employees and service providers
Do not have and are usually members of professional governing bodies.
C) They are governed by employment law and are usually regulated by federal bodies that establish rules of conduct and codes of ethics.
D) Both submit bills to an independent panel for review.

Question 8

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 9

Peabody and Company,a law firm,prepared a will for a client who has since passed away.Unfortunately,the firm was careless in preparing the will,and two individuals who were inadvertently left out of the will now wish to sue the firm.Which of the following describes the possible basis for this lawsuit?

A) breach of contract
B) breach of contract and professional negligence
C) breach of fiduciary duty
D) professional negligence

Question 10

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 11

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 12

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.

Question 13

Which of the following is a distinguishing feature of fiduciary relationships?

A) They are created by contract.
B) Fiduciaries owe duties of loyalty,trust,and confidence.
C) Fiduciary relationships are always professional relationships.
D) Fiduciaries are permitted to claim privilege with regard to communications with their clients.

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 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 16

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 17

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 18

George is a lawyer who provides legal services "in-house" for a manufacturing company.Which of the following statements is correct regarding this arrangement?

A) George must be an independent contractor.
B) George is a fiduciary to his employer.
C) His employer is not vicariously liable for his negligence.
D) George is no longer a member of the Law Society.

Question 19

Sheps & Shaps LLP provides legal services by preparing contracts for an architectural firm on a regular basis.Which of the following best describes the nature of Sheps & Shaps' duties under this arrangement?

A) contractual duties and employee duties
B) fiduciary duties and contractual duties
C) ethical and contractual duties
D) contractual,tort,and fiduciary duties

Question 20

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 21

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 22

What must be present in order for a professional to owe a duty of care to a particular plaintiff?

A) contract for services
B) professional liability insurance
C) special relationship
D) fiduciary relationship

Question 23

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 24

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 25

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 26

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 27

Which of the following represents a service provided by legal self-regulating bodies (Law Societies)?

A) criminal prosecutions
B) indemnification and assurance fund
C) free legal advice
D) review of lawyer fee accounts

Question 28

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 29

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 30

Pym and Pike is a law firm that is considering forming an LLP.Which of the following statements correctly describes the key advantage to Pym and Pike's partners of forming an LLP?

A) Partners will not be obliged to avoid conflicts of interest.
B) Partners cannot be sued by one another for contribution or indemnity.
C) Partners will have limited liability for the debts of the partnership.
D) Partners will not be liable for one another's professional negligence.

Question 31

Which of the following is a condition of practice in most professions?

A) Canadian citizenship
B) Ph.D.
C) errors and omissions insurance
D) limited liability partnership

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

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 34

Which of the following represents a criticism of the self-regulating model of professional regulation?

A) Self-regulating bodies are unelected.
B) Self-regulation replaces criminal prosecution.
C) The standard of care is lower if professionals are self-regulating.
D) Self-regulating bodies may fail to adequately protect the public interest.

Question 35

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 36

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 37

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 38

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 39

Why are most professional firms unincorporated?

A) because corporations are too costly to establish and maintain
B) because partnerships are a preferable mode of business to most professionals
C) because legislation prohibits them from avoiding personal liability for negligent work
D) because they are required to have liability insurance,and thus incorporation is not needed to protect from negligence suits

Question 40

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 41

Most Canadian professions are regulated by government agencies.

Question 42

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 43

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

Question 44

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 45

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 46

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

Question 47

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 48

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

Question 49

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 50

Professionals who are employees are governed by the basic principles of employment law.

Question 51

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 52

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 53

The decision in Hercules Management Ltd.v.Ernst & Young has been criticized on the basis that it establishes too high a standard for the conduct of auditors.

Question 54

In order to successfully sue for negligent misrepresentation,the recipient must have reasonably relied on the misrepresentation.

Question 55

LLPs protect individual partners from personal liability for negligence committed by another partner in the firm.

Question 56

The essence of the professional-client relationship is fiduciary.

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

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 59

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 60

If a professional's contract price is not stated,the principle of quantum meruit applies.

Question 61

What important question was settled in the court's decision in Haig v.Bamford?

Question 62

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 63

There must be a duty of care based on a special relationship between the
professional and the recipient of the advice.
2.The representation made by the professional must be untrue,inaccurate,or
misleading.
3.The professional must have been negligent in making the representation.
4.The recipient must have reasonably relied on the misrepresentation.
5.The reliance by the recipient on the representation must have resulted in
damages to the recipient.

Question 64

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 65

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

Question 66

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

Question 67

In what ways are professional relationships related to fiduciary relationships?

Question 68

Briefly discuss the concept of professional-client privilege.

Question 69

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 70

Is it reasonably foreseeable that carelessness by one party would adversely affect the other?
2.Are there any considerations that should limit the duty owed or eliminate it entirely?

Question 71

Briefly outline the five requirements for proof of negligent misrepresentation.

Question 72

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