Deck 22: Professional Services

Question 1

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

Answer 1

B

Question 2

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.

Answer 2

B

Question 3

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

Answer 3

B

Question 4

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 5

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 6

Which of the following is NOT a typical function fulfilled by professional self regulatory bodies?

A) setting standards for admission to the profession
B) indemnification and assurance fund
C) community service
D) discipline of members

Question 7

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 8

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 9

In the case of Deloitte & Touche v Livent Inc (Receiver of)(Livent),how did the court limit the liability of auditors for errors in audited financial statements?

A) The court held that auditors are liable to anyone who relies on the audited financial statements.
B) The court held that only shareholders may sue the auditors in the event of carelessness in preparing the audited financial statements.
C) The court held that the auditor's liability was limited to the specific purpose of its engagement.
D) The court held that auditors may only be sued by investors for errors in the audited financial statements.

Question 10

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 11

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 12

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 13

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 14

What distinguishes professionals from other workers and service providers?

A) payment by retainer
B) special relationship of trust and loyalty
C) regular evaluation of expense and calibre
D) professionals are not employees

Question 15

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 16

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 17

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 18

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 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

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 21

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 22

What are the practical implications of the fact that most professions in Canada are self regulated?

A) Cost effectiveness is achieved by this arrangement.
B) Professionals are not subject to discipline.
C) Legislation gives autonomy and sometimes a monopoly over specific professional activities.
D) Professionals do not need to be licensed.

Question 23

What type of losses or damages are typically incurred in cases of professional misstatement?

A) property loss
B) pure economic loss
C) punitive damages
D) aggravated damages

Question 24

Which statement best represents one of the features of lawyer client privilege?

A) It cannot be waived.
B) It arises out of contract.
C) It belongs to the client and can only be waived by the client.
D) It belongs to the lawyer and can only be waived by the lawyer.

Question 25

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 26

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 27

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 28

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 29

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 30

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 31

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 32

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 33

Why has the self regulation model of professional regulation been criticized in other jurisdictions?

A) Self regulating professions are too expensive.
B) Self regulation replaces criminal prosecution.
C) Self regulating professions are in a conflict of interest.
D) Self regulating bodies may fail to adequately protect the public interest.

Question 34

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 35

Dravena is an accountant and she also regularly dabbles in commercial real estate investments.Recently she advised one of her accounting clients to invest in an apartment building that her and another accountant are building.Has Dravena breached any of her obligations to her client?

A) She has breached her client's right to privilege.
B) She has breached her duty of confidentiality.
C) She has breached her duty to provide a reasonably competent service.
D) She has placed herself in a conflict of interest.

Question 36

Grace is a lawyer in a medium sized law firm where she represents a variety of small businesses.Which of the following describes one of her duties as a fiduciary?

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

Question 37

Glenda,a lawyer,has recently established a professional corporation.Which of the statement best describes her legal position?

A) She can no longer be sued for professional negligence.
B) Her personal assets remain exposed to claims of professional negligence.
C) She is relieved of her fiduciary responsibilities.
D) Only her corporation's assets are available in the event of a claim against her for professional negligence.

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

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 40

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 41

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

Question 42

LLPs protect individual partners from personal liability for negligence committed by another partner in the firm,so long as the partner did not know about the negligence or participate in the work that was done negligently.

Question 43

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 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

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

Question 47

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 48

Lawyer-client privilege belongs to the client-not the lawyer-and can only be waived by the client.

Question 49

In general,an auditor does not owe a duty of care to persons other than its client.

Question 50

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 51

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

Question 52

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 53

Professionals are subject to criminal prosecution in addition to discipline from their professional body if their misconduct constitutes a criminal offence.

Question 54

The essence of the professional-client relationship is fiduciary.

Question 55

Most Canadian professions are regulated by government agencies.

Question 56

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 57

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

Question 58

Where professional incorporation is allowed,it typically does not protect the professional from the liability of greatest concern-personal liability for negligence.

Question 59

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 60

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 61

How has the Supreme Court of Canada limited the potential for third party claims against auditors in its decision in Deloitte & Touche v Livent Inc (Receiver of)(Livent)?

Question 62

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 63

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

Question 64

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

Question 65

List three ways professionals can manage risk.

Question 66

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 67

According to the court in Deloitte & Touche v Livent Inc (Receiver of)(Livent),how does a plaintiff in an action for negligent misstatement establish a duty of care was owed by a professional?