The Supreme Court of Canada (SCC) confirmed in Canadian National Railway Co. v. McKercher LLP, 2013 SCC 39 (“McKercher”) the dimensions of the duty of loyalty owed by lawyers: (1) avoid conflicting interests, (2) commitment to the client’s cause and (3) candour. The SCC confirmed the “bright line rule” may disqualify a lawyer from representing a client whose interests are directly adverse to the immediate legal interests of another client, even on an unrelated matter, unless both clients consent. If the bright line rule does not apply, counsel still has to consider whether possession of confidential information prevents the representation.
In the post-McKercher cases there are few instances of the bright line test being applied, and many more cases considering whether the possession of confidential information results in disqualification. The bright line test was recently applied in Trillium Motor World Ltd. v. General Motors of Canada Limited, 2015 ONSC 3824 (“Trillium”) where a substantial damages award was made against a law firm. (See also Kastner v. Fairfax Partners Corp., 2015 ONSC 3365 where counsel was disqualified for acting “at the very least, for a few hours” both for and against Fairfax.)
Most of the post-McKercher cases arise in the litigation context. Some do not involve direct adversity. For example, in R. v. I.A., 2015 ONSC 1765, the Crown successfully applied to remove counsel for a criminal defendant because counsel had previously represented a Crown witness on other criminal charges.
Many cases have addressed the confidentiality measures required to permit representation when a potential conflict is identified. The main relevance of McKercher in such cases is its reaffirmation of MacDonald Estate v. Martin, 1990 CanLII 32 (SCC). In HMTQ v. Imperial Tobacco Canada, 2013 BCSC 1963, one of the partners of the plaintiff’s firm had previously acted as counsel for the defendant on the same matter while at a previous firm. The firm established password protection on electronic files, a protected server for the litigation, and a room that could not be accessed by the conflicted lawyer. A retired British Columbia Supreme Court (BCSC) judge advised on the confidentiality protocol. The BCSC found that a reasonably informed person, knowing the measures that were put in place, would be satisfied that there was no risk that confidential information would be abused.
McKercher also considered the issue of a party spreading work across different firms and then seeking to disqualify those firms. In MediaTube Corp. v. Bell Canada, 2014 FC 237, Bell sought to disqualify counsel for MediaTube because they had previously acted for Bell ExpressVu and Bell Media, subsidiaries of Bell Aliant. The Federal Court, in a well-reasoned and thorough analysis, found that “there are circumstances where a law firm may owe duties to related corporations, but these circumstances do not exist in this case.” While it was a fact-dependent analysis, it demonstrates the necessity of knowing who your client is and ensuring that is accurately reflected in the retainer. That issue was also of critical importance in Trillium, above.
It seems safe to say that McKercher was not the last word, but perhaps we now have as much guidance from the SCC as the lower courts need.