The EQ Journal Blog

I had an experience recently that suggested to me again that the law and ethics are not the same—ethics is a higher calling and sets a higher standard than the law does, in my view.

I was making a case in front of judge to have a commission paid to the Company I used to work for. For his own reasons, the client decided not to pay the commission owing to the firm despite having agreed to do so in writing. We sued (something I almost never do) both the client (Bill, not his real name) and his lawyer (Shelly, also not her real name).

Shelly hired a lawyer (naturally) to represent her (Ken). Ken argued that Shelly was simply following her client’s lawful instruction not to pay the commission and, therefore, if we had any claim, it was against Bill and not Bill’s lawyer in this transaction. The judge made it clear that he tended to agree with Ken…

Shelly had paid the entire proceeds (less her fee!) to the client and washed her hands of the matter.

My argument went something like this:

“I am an engineer not a lawyer so I am prepared to take Ken’s word for it that Shelly, by following her client’s instructions, was acting in accordance with the law. But you know I have closed both smaller transactions than this and larger ones and I am pretty sure that almost all the lawyers I have dealt with would have said something to me like: ‘Bruce, you signed this Agreement of Purchase and Sale—isn’t that your signature? You contracted to pay a commission and now you have changed your mind. Are you sure you want to do this?’

If I persisted, they would have probably given me two options—a. ‘Well, if you are going to renege on your promise, I am uncomfortable acting further for you in this matter. When you find yourself another lawyer who is willing to complete this transaction on this basis, let me know who they are and we will transfer the funds from our trust account to theirs. And, oh, by the way, we will be sending you our fee for hours on this file to date.’ or b. ‘If you feel you have a legitimate beef with the Realtor, why don’t we come to court with ‘clean hands’ and pay the commission into court and then we can file a counter claim against the realtor for the amount of the Commission plus any damages you feel you have sustained. Of course, litigating the matter might cost you more than simply paying the fee you agreed to but this at least keeps you in good odour with the Court.’

So while Ken says that Shelly has no legal responsibility here, in my opinion, she does have a moral and ethical responsibility to the Broker in question.

It also struck me that we may hold lawyers to a lower standard than we do soldiers.

In a time of war, if your commanding officer gives you an order and you don’t obey, you run a serious risk of court martial and maybe even a sentence of death. But if your CO tells you to go over and torch a village with innocent civilians in it and you do it, history has shown that, while the order may have been ‘lawful’, the international court of law will hold you accountable.

From the Nuremberg trials to the Mai Lai massacre to the Abu Ghraib prison scandal, experience shows us that the I-was-just-following-orders excuse doesn’t hold much water. Nor, in my view, should it.

What about your immortal soul (if you believe in such a thing) or the dignity of human life?

Lawyers tell you that: ‘Old consideration is no consideration.’ They tell a funny story to demonstrate the point—you are walking along the bank of a river and you see a man drowning. You immediately go over and pull him out. He is profusely grateful and promises you a reward of $1,000. “Gee,” you say, “that’s great. Here’s my address!”

A few weeks go by and you haven’t received the 1,000 bucks so you give him a call. “Ah shucks, I didn’t really mean what I said. Sorry, but I am not sending you the 1,000 dollars.”

Furious, you go see a lawyer. Your lawyer tells you, you have no legal claim! Why? Not because it was a verbal agreement (verbal agreements often have the power of contractual law except in the case of real estate transactions which, at least in Ontario, MUST be in writing.) You have no legal claim because you pulled him out of the river (provided the service) before being offered any compensation. The compensation was for nothing—you had already provided the service. A contract consists of offer, acceptance and consideration. You essentially had none of these.

But surely we would all agree that you have a moral right to your reward and he has an ethical duty to pay you.

But your lawyer will tell you: “Next time if you see him drowning, ask him if he will give you $1,000 if you pull him out of the river (offer).” If he says: “Yes (acceptance)” then yank him out and wait for your consideration in the mail ($1,000).

Now that might make sense to a lawyer but it sure doesn’t make sense to me.

Now everyone, makes mistakes but the difference is between errors of omission (I’m sorry, I don’t have the $1,000 to give you—I just lost my job and my home…) versus errors of commission (Tough, I am wealthy and alive (thanks to you!) but I just don’t want to give you the dough and you don’t have any legal claim anyway—too bad, so sad.)

Now lawyers will argue that ethics means different things to different people. This is called situational ethics. I get this. In some cultures, it may be OK to deceive someone if that provides you with an advantage in negotiations (just so long as you don’t get caught in a lie and suffer embarrassment from that.) In other cultures, it may be OK to take something that doesn’t belong to you because your culture has the view that property should be community property and not individually owned.

So a lawyer will argue that common law is an appropriate basis on which to make sound judgments—based as it is on precedent. But within most societies, most people have a pretty good grasp of what is ethical and what isn’t, and if they believe in a Higher Power or have a strong value system, those standards tend not to be relative—they don’t change because you forgot to ask for a thousand dollars before you risked your own life to save another’s with no thought of personal gain, the true Good Samaritan.

Dr. Bruce

(Epilogue: They did settle the matter and an offer to pay the Company was made and the offer was accepted.)

(Post Script: I also raised the argument that, if they had planned not to pay the commission, why didn’t they tell the Brokerage this before the transaction was completed? At least, that would have given the Broker an opportunity to ask the Buyer to compensate them instead of receiving no value for the work they did.)

(Post Post Script: It also occurred to me that the Seller had done very well in the transaction—he had received a price that could be demonstrated to have been as high or higher than the direct comparables…)

March 17, 2008