September 17, 2013 British Columbia Model Code of Professional Conduct Daniel R. Bennett

September 17, 2013

British Columbia Model Code of Professional Conduct

Daniel R. Bennett

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 RuleActing 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 RuleActing 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 3.4-1Current 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 ConsideredAccording 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 3.4-2Conflict Waiver

• Exception to general rule• Express or implied consent• Requires reasonable belief that no material

adverse effect on representation or duty of loyalty

Rule 3.4-2Limits 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 3.4-2Express 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 3.4-2Advance 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 3.4-2Implied Consent

• Writing not needed• Required

• Substantial entity• In-house counsel• Unrelated matter• No confidential information that affect other

matter• Client commonly consents

Rule 3.4-2Implied 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 3.4-10Former 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.


• 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,


• 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 LLP2011 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 LLP2013 SCC 39

• Appeal allowed

• Remitted to Queens Bench for remedy


• 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.


• 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 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.


• 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.


• 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.


• (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.


• 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.


• 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.


• 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


• 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 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


• (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 3.4-4Concurrent 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 9Joint 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 9Joint 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

Documents

September 17, 2013 British Columbia Model Code of Professional Conduct Daniel R. Bennett