"Preventive Law Aims to Head Off Problems Before Court", Vancouver Sun

by Janice and George Mucalov

A good lawyer has traditionally been regarded as someone who gets you out of a legal jam. Now there's a move afoot within the legal profession that is client-centered and goes a step further. Referred to as "preventive law", the idea is that instead of putting out fires, the focus should be on preventing fires from happening in the first place.

Preventive law aims to do more than just anticipate problems. The analogy used is that of preventive medicine. Just as you visit your doctor for yearly check-ups, so preventive law encourages "legal checkups" for you or your business to see if any unnecessary legal risks can be erased by taking proper proactive steps.

Contracts provide another example. The view is sometimes expressed that the best test of a good contract is how well it would stand up in court. But preventive lawyering takes the approach that a good contract should actually go beyond that. It should, first and foremost, help the contracting parties achieve their goals and avoid litigation. Provisions for mediation or arbitration may be appropriate, so if any disputes do arise, the parties don't end up in messy litigation. The argument is that having to go to court is perhaps evidence of a lack of thoughtful planning and foresight.

To some extent, preventive law is what good business lawyers have always done and corporate general counsel (inside or outside) have always seen as a key function of their role - to understand their client's business, look at the bigger picture and provide guidance which keeps their corporate client out of trouble in the first place. In fact, in-house general counsel have long argued that this is what distinguishes them from outside lawyers - because they have intimate knowledge of the company's business from within, they can best help in planning and charting the company's course of action.

Consider the new U.S. Sarbanes-Oxley Act, which requires CEO's to certify that their company's financial statements are accurate, based on their knowledge. It also calls for lawyers working for companies to report securities violations and other misconduct they spot to the company's chief legal or executive officer, and if nothing is done, to take the matter to the company's directors.

David Brown, chairman of the Ontario Securities Commission and Canada's top securities regulator, has recently asked companies, brokerage firms, accounting institutions and law societies about whether these anti-corporate-corruption rules should also be adopted in Canada.

Alert corporate counsel will bring new rules such as the Sarbanes-Oxley Act to the attention of company management immediately. Indeed, inter-listed Canadian companies are currently lobbying for exclusion from these onerous rules. Outside lawyers are not slow off the mark either. Some enterprising firms in Canada have taken out full-page newspaper ads warning of the dangers and pitfalls of the SOX legislation.

Lawyers regularly think about how changes in the law may affect the business of their clients. Many law firms send out newsletters to their regular clients on important legal developments and changes in the law. When new environmental legislation was introduced in BC some years ago, a flood of bulletins were sent to clients alerting them to the implications, and environmental law practice groups quickly sprang up in most major firms.

Most small businesses, including home-based businesses, arguably need the services of "in-house counsel" from time to time - just like larger corporations. You're probably just as concerned about things like choosing a business name, whether you should incorporate your business, zoning, contracts, and intellectual property issues like how to protect your trade secrets and copyright. You probably would also benefit from periodic legal reviews.

How has your business grown and changed? How has the law changed? How do these changes affect your growing business? Like an annual physical, an annual legal check-up can uncover and deal with possible problems before they threaten the survival of your business.

For individuals, wills and estate planning is an obvious must.

Preventive law may be a great idea. The irony is that clients may not want to pay for it - at far greater cost later.

© Copyright by Janice and George Mucalov

A version of this column was first published in the Vancouver Sun. The column provides information only and must not be relied on for legal advice. Consult your lawyer if you need legal advice.