British Columbia Model Code of Professional Conduct
Daniel R. Bennett
September 17, 2013
Agenda
• The Conflict Rule and consent
• Rules 3.4-1 and 2
• Definition of conflicting interest
• Former Clients Rule 3.4-10 and 11
• Concurrent Retainers and Joint Retainers
• Rule 3.4-4 and Rule 3.4-5
• What is the difference and what are the
consequences?
Model Code of Professional Conduct
• Statements of principals and sub-rules
• Set out expected minimum standards
• Commentary
• Provide more specific guidance and examples
• Intent – describe ethical standards for the
practice of law in Canada
BC Professional Conduct Handbook
• 2010 Ethics Committee extensive
consultation
• Bencher’s adopted Model Code with some
limited modifications April 2011
• Except conflicts
• Implementation January 1, 2013
Present Rule
Acting Against Current Clients
• (a) both clients are informed that the
lawyer proposes to act for both clients and
both consent, and
• (b) the matters are substantially unrelated
and the lawyer does not possess
confidential information arising from the
representation of one client that might
reasonably affect the other representation.
Present Rule
Acting Against Current Clients
• Consent may be inferred in the absence of
contrary instructions if reasonable belief that
client has:
(a) previously consented to the lawyer acting for
another client adverse in interest,
(b) commonly permitted a lawyer to act against
the client, or
(c) consented, generally, to the lawyer acting for
another client adverse in interest.
Supreme Court of Canada’s
“Conflicts Trilogy”
• MacDonald Estate v Martin (1990)
• R. v Neil (2002)
• Strother v 3564920 Canada Inc. (2007)
MacDonald Estate v Martin (1990)
• Origin of modern law on conflicts of
interest in Canada
• Focus on duty of confidentiality
• A “moving solicitor” case: young lawyer left
firm acting for client A, and joined firm
acting against A. Client A objected.
MacDonald Estate v Martin (1990)
•
•
Governing test for removal of a law firm on ground
of breach of the duty of confidentiality:
(a) Did the law firm receive confidential information
attributable to a solicitor and client relationship
relevant to the matter at hand?
(b) Is there a risk if the law firm continues to act that
this information will be used to the prejudice of
the client or former client?
Second branch of test applies only where law firm
seeks to rely on an “information screen” to show
that the client/former client is not at risk.
R. v Neil (2002)
• Focus: lawyer’s duty of loyalty
• Issue: should a criminal prosecution be
stayed because of counsel’s breach of the
duty of loyalty to a current client?
• SCC (Binnie J.): agrees that counsel
breached the duty of loyalty, but does not
accept that a stay of proceedings is the
appropriate remedy
R. v Neil (2002)
Binnie J’s “bright line” test sets out a “general rule”
that:
a lawyer may not represent one client whose
interests are directly adverse to the immediate
interests of another current client – even if the two
mandates are unrelated
unless both clients consent after receiving full
disclosure (and preferably independent legal
advice), and the lawyer reasonably believes that he
or she is able to represent each client without
adversely affecting the other.
R. v Neil (2002)
Note limiting factors in “bright line” test:
• Interests of clients must be “directly
adverse”
• Concerns “immediate” interests of client
• Concerns “current” client
Strother (2007)
Overview
• Strother was primarily a duty of loyalty
case, not a duty of confidentiality case
• Like Neil, concerns duty of loyalty owed to
a current client
• On the duty of loyalty issue, Strother was
largely a straightforward application of Neil
• Important distinction: role of lawyer’s own
business interest
Strother (2007)
Salient elements of majority decision
• Lawyers cannot prefer the interests of one
current client to those of another current client –
or prefer their own financial interests to those of
any current client
• The duty of loyalty owed to each may not
prevent the firm from acting where commercial
rather than legal interests are at stage
Rule 3.4-1
Current Client Conflicts Rule
3.4-1 A lawyer must not act or continue to
act for a client where there is a conflict of
interest, except as permitted under this
Code.
Rule 3.4-1 Commentary
A conflict of interest exists when there is a
substantial risk that a lawyer’s loyalty to or
representation of a client would be materially
and adversely affected by the lawyer’s own
interest or the lawyer’s duties to another client, a
former client, or a third person. The risk must be
more than a mere possibility; there must be a
genuine, serious risk to the duty of loyalty or to
client representation arising from the retainer.
Rule 3.4-1Commentary
• The rule reflects the principle articulated by the Supreme
Court of Canada in the cases of Neil and Strother:
• a lawyer must not represent one client whose legal
interests are directly adverse to the immediate legal
interests of another client without consent.
• this duty arises even if the matters are unrelated.
• the lawyer client relationship may be irreparably
damaged where the lawyer’s representation of one client
is directly adverse to another client’s immediate
interests.
Rule 3.4-1Commentary
To maintain public confidence in the integrity of the
legal profession and the administration of justice,
in which lawyers play a key role, it is essential that
lawyers respect the duty of loyalty. Arising from the
duty of loyalty are other duties, such as a duty to
commit to the client’s cause, the duty of
confidentiality, the duty of candour and the duty
not to act in a conflict of interest.
Factors To Be Considered
According to the Commentary
•
•
•
•
•
The immediacy of the legal interests;
Whether the legal interests are directly adverse;
Whether the issue is substantive or procedural;
The temporal relationship between the matters;
The significance of the issue to the immediate and
long-term interests of the client involved; and
• The clients’ reasonable expectations in retaining the
lawyer for the particular matter of representation.
Examples in the Commentary
• Acting as an advocate for a client on one
matter and against the client on another
matter
• Acting for a client in commercial transactions
and against a client in employment matters
• Sexual or close personal relationship with a
client
• Sole practitioner’s practicing together
• Acting as a Director and lawyer for a client
Structure of Conflict Rule
• 3.4-1: General prohibition on acting where
there is a conflict
• Commentary makes clear applies to all
situations including current clients
• Definition of conflict includes specific
reference to duty of loyalty
Rule 3.4-2
Conflict Waiver
• Exception to general rule
• Express or implied consent
• Requires reasonable belief that no material
adverse effect on representation or duty of
loyalty
Rule 3.4-2
Limits to Waiver
• Even with consent, a lawyer cannot act on both
sides of a dispute or absent a reasonable belief
that there will be no material adverse effect on
representation or duty of loyalty.
• Clients can waive potential material impairment
but not actual material impairment.
• This is established law in England with respect
to client representation but perhaps new with
respect to fiduciary duties.
Rule 3.4-2
Express Consent
• Disclosure necessary
• Otherwise decline to act
• Must disclose relevant circumstances
including potential adverse effect,
relationships, interests and connection in
matter
• Client decision
• In writing recommended
Rule 3.4-2
Advance Express Consent
• Material risks should be explained
• More detail equals more likely to be
effective
• Independent legal advice may be
adviseable
• Open-ended consent may not work
• Nature of client relevant to effectiveness of
advance consent
Rule 3.4-2
Implied Consent
• Writing not needed
• Required
• Substantial entity
• In-house counsel
• Unrelated matter
• No confidential information that affect other
matter
• Client commonly consents
Rule 3.4-2
Implied Consent
• Lawyer belief in reasonableness of
representation
The requirement that the lawyer reasonably believe
that he or she is able to represent each client without
having a material adverse effect on the
representation of, or loyalty to, the other client
precludes a lawyer from acting for parties to a
transaction who have different interests, except
where joint representation is permitted under this
Code.
Rule 3.4-10
Former Client Conflicts Rule
• Unless the former client consents, a
lawyer must not act against a former client
in:
• (a) the same matter,
• (b) any related matter, or
• (c) any other matter, if the lawyer has relevant
confidential information arising from the
representation of the former client that may
reasonably affect the former client.
Rule 3.4-11
Former Client Conflicts Rule
• When a lawyer has acted for a former
client and obtained confidential information
relevant to a new matter, another lawyer in
the lawyer’s firm may act against the
former client in the new matter, if the firm
establishes, in accordance with [screen
rules], that it is reasonable that it act in the
new matter,
Rule 3.4-11
Former Client Conflicts Rule
• having regard to all relevant
circumstances, including:
• (a) the adequacy and timing of the measures
taken to ensure that no disclosure of the former
client’s confidential information to the partner or
associate having carriage of the new matter will
occur;
• (b) the extent of prejudice to any party; and
• (c) the good faith of the parties.
CNR v. McKercher LLP
2011 SKCA 108
• McKercher has several files with CNR
• McKercher commences class action
against CNR
• CNR applies to have McKercher
disqualifed
• Application denied
CNR v. McKercher LLP
• Bright line not so bright
• No confidential information
• CNR failed to show imparted strategy, etc.
• Professional litigant exception
• Rationale includes spreading of work to
materially limit choice of counsel
CNR v. McKercher LLP
• McKercher breached duty of candor and
commitment by not advising CNR
• Disqualification blunt – limits plaintiff
• No continuing relationship to be protected
since CNR clear will not use lawyers again
• CNR has other remedies
• Sue for damages to transfer other files
• Law society complaint – better for deterence
CNR v. McKercher LLP
2013 SCC 39
• Appeal allowed
• Remitted to Queens Bench for remedy
CNR v. McKercher LLP
2013 SCC 39
• A lawyer’s duty of loyalty has three salient
dimensions:
• (a) a duty to avoid conflicting interests;
• (b) a duty of commitment to the client’s
cause; and
• (c) a duty of candour.
CNR v. McKercher LLP
2013 SCC 39
• 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.
CNR v. McKercher LLP
2013 SCC 39
• The duty of commitment entails that,
subject to law society rules, a lawyer or
law firm as a general rule should not
summarily drop a client simply to avoid
conflicts of interest.
CNR v. McKercher LLP
2013 SCC 39
• The duty of candour requires disclosure of
any factors relevant to the ability to
provide effective representation. A lawyer
should advise an existing client before
accepting a retainer that will require him to
act against the client.
CNR v. McKercher LLP
2013 SCC 39
• R. v. Neil, 2002 SCC 70, [2002] 3 S.C.R.
631, held that the general bright line rule is
that a lawyer, and by extension a law firm,
may not concurrently represent clients
adverse in interest without first obtaining
their consent.
CNR v. McKercher LLP
2013 SCC 39
• (a) based on the inescapable conflict of
interest inherent in some situations of
concurrent representation.
• (b) reflects the essence of a fiduciary’s
duty of loyalty.
• (c) cannot be rebutted or otherwise
attenuated and it applies to concurrent
representation in both related and
unrelated matters.
CNR v. McKercher LLP
2013 SCC 39
• When the bright line rule is inapplicable:
• Does the concurrent representation of
clients create a substantial risk that the
lawyer’s representation of the client would
be materially and adversely affected by
the lawyer’s own interests or by the
lawyer’s duties to another current client, a
former client, or a third person.
CNR v. McKercher LLP
2013 SCC 39
• The rule is limited in scope:
• (a) only where the immediate interests of
clients are directly adverse in the matters
on which the lawyer is acting.
• (b) only to legal interests, as opposed to
commercial or strategic interests.
• (c) it cannot be raised tactically.
CNR v. McKercher LLP
2013 SCC 39
• Disqualification 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.
• Only the third at issue in this case
CNR v. McKercher LLP
2013 SCC 39
• While a breach of the bright line rule
normally attracts the remedy of
disqualification, factors that may militate
against it must be considered.
CNR v. McKercher LLP
2013 SCC 39
• These factors may include:
• (a) behaviour disentitling the complaining
party from seeking the removal of counsel,
such as delay in bringing the motion for
disqualification.
• (b) significant prejudice to the new client’s
interest in retaining its counsel of choice,
and that party’s ability to retain new
counsel
CNR v. McKercher LLP
2013 SCC 39
• (c) 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.
Concurrent v. Joint Retainers
• Rule 3.4-4 – Concurrent Representation
• Where “two or more lawyers in a law firm …
act for current clients with competing
interests.”
• Rule 3.4-5 to 9 – Joint Retainer
• Where “a lawyer acts in a matter or
transaction for more than one client”
• “Competing interests” is not defined in the
Model Rules nor in the jurisprudence
Concurrent Representation
• The Commentary provides an example:
• An example is a law firm acting for a number
of sophisticated clients in a matter such as
competing bids in a corporate acquisition in
which, although the clients’ interests are
divergent and may conflict, the clients are not
in a dispute.
Concurrent Representation
• This rule presumably deals with the situation
described in Strother:
• The American Reinstatement offers the example of
two business competitors who seek to retain a single
law firm in respect of competing applications for a
broadcast licence, ie, a unique opportunity. The
Reinstatement suggests that acting for both without
disclosure and consent would be improper because
the subject matter of both retainers is the same
licence. The lawyer’s ability to provide even-handed
representation is put in issue.
Concurrent v. Joint
• Where lawyers separately act for two or
more clients pursuing the same
opportunity, the concurrent matter rule
applies.
• Where lawyers act for two or more clients
in the same matter or transaction, the joint
retainer rule applies.
Rule 3.4-4
Concurrent Representation
• Requirements for Concurrent Retainer
•
•
•
•
•
•
Disclosure of risk
Independent legal advice
Clients to decide in their best interest
Separate representation
Screens required
Withdrawal if dispute
Rule 3.4-5 to 9
Joint Retainers
• Steps to be taken
• Disclosure that lawyer is asked to act for both
• Advise no confidential information
• Disclose that, if unresolved conflict, required
to withdrawal
• May require independent legal advice if
unsophisticated
Rule 3.4-5 to 9
Joint Retainers
• Points to note
• The conflicts rule applies to joint retainers
including limits to consent, Actual impairment
of representation is not permitted in a joint
retainer.
• Confidentiality between joint clients is not
permitted in joint retainers event with client
consent.
Joint Retainers
• Specific commentary on instructions from
spouses or partners re: wills
• If continuing relationship with one client
must advise other client and recommend
independent legal advice
• Consent required
• Confirmed in writing
• Avoid joint representation if contentious
issue likely
Joint Retainers (Cont’d)
• Process if contentious issues
• No advice to be given
• Referral to other lawyers
• Can advise on settlement options if:
•
•
No legal advice required
Sophisticated clients
• If issue not resolved lawyer must withdraw
• If client consent can agree lawyer continue to advise
one in fact of contentious issue
•
Lawyer may still need to resign