McKercher LLP
("McKercher"), a Saskatchewan law firm, was acting for Canadian
National Railway Company ("CN") on several matters when,
without CN's consent or knowledge, it accepted a retainer to act for the
plaintiff in a $1.75 billion class action against CN. CN first learned that
McKercher was acting against it in the class action when it was served with the
statement of claim. McKercher hastily terminated all retainers that the firm
had with CN, except for one which CN terminated. CN applied to the Saskatchewan
Court of Queen's Bench to remove McKercher as the lawyers of record in the class
action due to the apparent conflict of interest. The motion judge granted the
application and disqualified McKercher. The Saskatchewan Court of Appeal
overturned the motion judge's order.
On appeal to the
Supreme Court of Canada, the court allowed the appeal and ordered that the case
be remitted back to the Court of Queen's Bench for determination of an
appropriate remedy.
The Supreme Court,
in a unanimous decision, with reasons by Chief Justice McLachlin, held
that
a lawyer's duty
of loyalty to a client has three "salient
dimensions": a duty to
avoid conflicting interests; a duty of
commitment to the client's cause; and a duty of
candour.
The duty to avoid
conflicts is mainly concerned with protecting a former or current client's
confidential information and with ensuring the effective representation of a
current client.
The duty of
commitment provides that, subject to law society rules, a lawyer should not summarily drop a client simply to avoid conflicts of
interest.
The duty of candour
requires the lawyer to disclose any factors relevant to his ability to provide
effective representation to the client. A lawyer should advise an existing
client before accepting a retainer that will require him to act against the
client.
In the case of
R. v. Neil, the Supreme Court of Canada held that the
general "bright line rule" is that a lawyer (and a law firm) may not
concurrently represent clients adverse in interest without first obtaining
their consent. The rule cannot be rebutted or otherwise attenuated and it
applies to concurrent representation in both related and unrelated
matters.
However, the rule is
limited in scope. It applies only where the immediate interest of clients are
directly adverse in the matters on which the lawyer is acting and it applies
only to legal interests, as opposed to commercial or strategic interests. It
cannot be raised tactically. It does not apply in circumstances where it is
unreasonable for a client to expect that a law firm will not act against it in
unrelated matters.
In this case,
McKercher's conduct fell squarely within the scope of the bright line rule. CN
did not tactically abuse the bright line rule. It was reasonable in the
circumstances for CN to have expected that McKercher would not concurrently
represent a party suing it for $1.75 billion. McKercher's failure to obtain
CN's consent before accepting the class action retainer breached the bright line
rule. McKercher's termination of its retainers with CN breached its duty of
commitment. McKercher's failure to advise CN of its intention to represent the
class breached its duty of candour. However, McKercher possessed no relevant
confidential information that could be used to prejudice CN in the class action
proceedings.
Justice McLachlin
held that disqualification of a law firm may be required to avoid the risk of
improper use of confidential information, to avoid the risk of impaired
representation, or to maintain the repute of the administration of justice. In
this case, the only concern that would warrant disqualification is the
protection of the repute of the administration of justice.
While a breach of
the bright line rule normally attracts the remedy of disqualification, factors
that may militate against it must be considered. These factors
include:
1. behaviour
disentitling the complaining party from seeking disqualification of counsel,
such as delay in bringing the motion;
2. significant
prejudice to the new client's interest in retaining its counsel of choice, and
that party's ability to retain new counsel; and
3. the fact that
the law firm accepted the conflicting retainer in good faith, reasonably
believing that the concurrent representation fell beyond the scope of the bright
line rule or applicable law society rules.
Justice McLachlin
held that as the motion judge did not have the benefit of the Supreme Court's
reasons, the matter should be remitted to that judge for re-determination of the
appropriate remedy.
Regards,
Blair
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