The Supreme Court of Canada today brought greater clarity to the practical application of the conflicts rule with the release of the McKercher decision.
This clarification substantially reduces concern that clients would be needlessly deprived of their choice of lawyer, said Malcolm Mercer, pro bono counsel for the CBA which had intervened on the issue of the scope of the duty to avoid conflicts of interest.
McKercher LLP was acting for the representative plaintiff in a class action lawsuit against CN Railway, for whom the firm was acting on other matters. CN argued that McKercher owed a “duty of loyalty” and applied to disqualify McKercher from acting on the class action suit. The CBA argued that this duty does not categorically prohibit acting directly adverse to the immediate interests of a current client.
The top court has limited the scope of the bright-line rule by making it clear that it only applies where “the immediate legal interests of clients are directly adverse in the matters on which the lawyer is acting.” The rule does not apply where it is “unreasonable for a client to expect that its law firm will not act against it in unrelated matters.”
In assessing the reasonableness of client expectations, courts are directed to consider the relationship between the law firm and client, terms of the retainer and the types of matters involved – all factors that the CBA said should be considered, Mercer said.
The court concluded that lawyers should only be disqualified to avoid the risk of improper use of confidential information; to avoid the risk of impaired representation and/or to maintain the repute of the administration of justice.
“This means that clients should not have their lawyers disqualified without good reason which has been the essential position of the CBA,” Mercer added.
“We’re pleased that the Court has brought to the profession and the public the clarity that CBA has been urging.”