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July 12, 2013
On July 5, 2013 the Supreme Court of Canada clarified the scope of a lawyer’s duty to avoid conflicts of interest when it decided a law firm breached its duty of loyalty to its client:
BACKGROUND
Law firm McKercher LLP represented CN in three matters. It agreed to represent a class suing CN for $1.75 billion. The class action was unrelated to the other three matters; McKercher did not get CN’s consent to its representation of the class. McKercher quickly terminated two of its CN retainers, and CN terminated the third. CN immediately asked the Court to disqualify McKercher from acting in the class action on the basis McKercher had breached its duties to CN.
BRIGHT LINE “DIMMED”
The SCC confirmed the “bright line rule” that a law firm cannot act against a current client – but “dimmed” the brightness of the line by recognizing several limitations and exceptions to the rule:
The Bright Line Rule. If the “bright line rule” applies, a lawyer may not concurrently represent clients adverse in interest without first obtaining the consent of each client.
Related and Unrelated Matters. The rule applies to concurrent representation in both related and unrelated matters.
Limitations and Exceptions. The rule does not apply where it is unreasonable for a client to expect a lawyer not to act against it in unrelated matters, and only applies where:
The SCC agreed McKercher’s concurrent representation of the class against CN breached all three aspects of its duty of loyalty to CN:
NO AUTOMATIC DISQUALIFICATION
The SCC held, however, that a breach of the bright line rule does not automatically warrant disqualification of counsel: courts must also consider protection of the administration of justice. The SCC sent the case back to the original motions judge to determine the appropriate remedy in accordance with the SCC’s reasons.
Click here to read the SCC’s decision in Canadian National Railway Co. v. McKercher LLP.
Please contact your McInnes Cooper lawyer or McInnes Cooper Partner Harvey Morrison to discuss this topic or any other legal issue.
McInnes Cooper has prepared this document for information only; it is not intended to be legal advice. You should consult McInnes Cooper about your unique circumstances before acting on this information. McInnes Cooper excludes all liability for anything contained in this document and any use you make of it.
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