Canadian Lawyer

Hume, chairman of the standing commit- tee and associate counsel at Vancouver's Harris and Co. LLP. But individual law societies do not have to adopt the federation's model code. While it is generally expected they will choose to accept most of the recom- mendations, they have the right to set their own rules and may choose to mod- ify the model code as they see fit. And that is what McGrath and other CBA members will be urging regulators to do. The Law Society of British Columbia is currently seeking input from B.C. lawyers on this issue and McGrath anticipates other law societies will engage in simi- lar consultations. These consultations will likely reignite a dispute that has been sim- mering for several years. It's a polite, lawyerly dispute focused largely on differing interpretations of judi- cial dictates, but it involves issues of huge importance to the legal profession and — at least in the eyes of the legal profession — for the public at large. It's a big issue because Canada has a small population spread over a huge area with a limited number of law firms, says Malcolm Mercer, a partner and general counsel at McCarthy Tétrault LLP, and a consultant to the CBA task force. He says client conflicts pose problems, not only in small communities, but also in large commercial centres where there are rela- tively few law firms capable of putting together the kinds of specialized teams that businesses often require. "Conflict rules that are too tight and regulate that which need not be regulated mean that clients have real difficulty getting the lawyers they need," he says. The federation, which represents the bodies responsible for regulating the legal profession in Canada, has consid- ered the issue from the perspective of "what's in the public interest, not what's in the law firms' interest," says Hume. "We concluded that if we looked at it from the perspective of the public inter- est, loyalty to a client was very much a guiding principle." But — whatever motives and high principles lie behind this dispute — the key issue involves differing interpreta- tions of a couple of paragraphs in a 2002 Supreme Court of Canada decision. R. v. Neil involved a claim by the defen- dant in two separate trials that the law firm representing him had a conflict of interest. David Lloyd Neil, a paralegal in an Edmonton law firm, had been charged with a series of offences includ- ing an indictment relating to an alleged fraud and one involving the fabrication of court documents in a divorce case. His claims of conflict of interest resulted in a mistrial on one indictment and a stay of proceedings in the other. An appeal court overturned the trial judge's decisions to grant a stay and order a mistrial, and Neil appealed to the SCC. The Supreme Court found that there was indeed a con- flict of interest, but that was not grounds for halting the criminal proceedings and therefore dismissed the appeal. What made this a landmark case were Justice Ian Binnie's comments on the duties of lawyers and law firms with regard to client conflicts. In one paragraph of the ruling he set out a "bright line" rule "that a lawyer may not represent one client whose interests are directly adverse to the immediate inter- ests 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 reason- ably believes that he or she is able to represent each client without adversely affecting the other." Lawyers and law firms have since argued that this rule is too onerous. To McGrath, for example, it would mean that she can't represent the wife of a busi- nessman in a divorce proceeding because she handled the incorporation of the husband's business years before and still prepares the corporate minutes, while having no knowledge whatsoever of the husband's finances or business affairs. In another scenario, she would not be able to take on a new client because of a conflict involving a former client who started a court action then abandoned it, subsequently moving away from the The Federation of Law Societies of Canada's report on conflicts of interest can be found at community, leaving no contact informa- tion, and leaving McGrath still on the record in the abandoned suit with no way of finding the former client to get his consent. But McGrath and other members of the CBA task force argue that the "bright line" was not Binnie's last word on the conflicts issue. In fact, two paragraphs later in his judgment, he stated that he adopted the notion of conflicts, as set out in a legal text Restatement Third, The Law Governing Lawyers, "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." This more restrictive definition would allow law firms more leeway in making realistic decisions as to whether a conflict does or does not represent a substantial risk that a client would be materially and adversely affected. "We want the situation where the lawyer will be able to evaluate whether there is substantial risk or not. Right now the bright-line test takes any kind of judgment call away from the lawyer. We have to get consent, pref- erably with independent legal advice," says McGrath, whose task force proposed deleting references to the bright-line rule in the federation's recommendations — a proposal that the federation rejected. As McGrath and others lobby law soci- eties seeking a broader definition of con- flict of interest, they are also hoping the Supreme Court of Canada takes a fresh look at the matter. It will have this oppor- tunity if it gives leave to appeal in the Saskatchewan case Wallace v. Canadian Pacific Railway, which involves a claim by Canadian National Railway Co. that a law firm that commenced a class action suit against the company was in conflict because it also represented CN on a num- ber of other unrelated matters. And the federation's new model code is not cast in stone, says Hume. "We will continue to refine and improve it. And, as the jurisprudence evolves, we will contin- ue to look at that. It's a living document." Freelance journalist and business writer Kevin Marron can be reached at kevin@kevinmarron.com. www.CANADIAN Lawyermag.com FEBRUA R Y 2012 23 tin yurl.c om/c onflictsr eport.

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