Electronic copy available at: http://ssrn.com/abstract=1964458 Electronic copy available at: http://ssrn.com/abstract=1964458

Conflicted Identities: The Battle over the Duty of Loyalty in Canada

Adam M Dodek*

‘The leitmotif of conflict of interest is the broader duty of loyalty.’1

‘Loyalty is a core value for the profession, although what responsibilities are encompassed within

the term is somewhat unclear.’2

Introduction

Conflict of interest has been a leading issue in the Canadian legal profession over the last three

decades, and it shows no sign of abating. No other issue has so consistently and dramatically

dominated both the practice of law and its regulation in Canada.3 This article describes the

conceptual and public battles that have been fought over conflicts of interest in Canada during

this time. These battles reveal deeper ontological divisions about the practice of law in Canada.

The clash over conflicts of interest exposes competing conceptions of what it means to be a

lawyer in Canada in the twenty-first century and how the legal profession should be governed.

* Associate Professor, Faculty of Law, University of Ottawa, Canada. An earlier version of this paper was presented at the Fourth International Legal Ethics Conference at Stanford Law School in July 2010 and at the annual meeting of the Association of Professional Responsibility Counsel in Toronto in August 2011. Some of the ideas in this paper were presented at a meeting of the Canadian Association of Legal Ethics at McGill University in January 2009. The author extends his appreciation to Professor Richard Devlin for organising the panels on conflicts of interest at both McGill and Stanford, for encouraging me to pursue research in this area and for his continued support and camaraderie. Thank you to Trevor Farrow, Aline Grenon, Marina Pavlovic, Lorne Sossin, Alice Woolley, Ellen Zweibel and the two anonymous reviewers for reading earlier drafts of this paper and providing helpful comments. Thanks also to Malcolm Mercer for his comments and his sharp but constructive criticism on a related presentation. Support for this research was provided by the Borden Ladner Gervais LLP Research Fellowship, the University of Ottawa’s Research Development Program and the Law Foundation of Ontario. Thank you to all of them for their support. Special thanks are due to my remarkable Research Assistant on this project—Flora Stikker, JD 2011 (Ottawa). Her work has been fantastic and I will be benefiting from it for many years to come. All websites accessed 15 November 2011. 1 The Hon Michel Proulx and David Layton, Ethics and Canadian Criminal Law (Irwin Law, 2001) 287, quoted by the Supreme Court of Canada in Strother v 3464920 Canada Inc, 2007 SCC 24, [2007] 2 SCR 177. 2 Simon Chester, ‘Conflicts of Interest’ in Adam M Dodek and Jeffrey G Hoskins, QC (eds), Canadian Legal Practice: A Guide for the 21st Century (LexisNexis, 2009) § 4.170. 3 For comprehensive treatment of conflicts of interest in Canada see Alice Woolley, Understanding Lawyers’ Ethics in Canada (LexisNexis, 2011) c 8; Chester, ibid; Paul M Perell, Conflicts of Interest in the Legal Profession (Butterworths, 1998); and MD McNair, Conflicts of Interest: Principles of the Legal Profession (Canada Law Book, 2005).

Electronic copy available at: http://ssrn.com/abstract=1964458 Electronic copy available at: http://ssrn.com/abstract=1964458

The conflicts of interest debate increasingly centres on the idea of ‘lawyer loyalty’—the duty of

loyalty owed by lawyers to their clients.4

In the course of the battle over conflicts of interest, participants have articulated competing

visions of lawyer loyalty. The Supreme Court of Canada strongly rejected a minimalist vision of

lawyer loyalty but has been sharply divided between a maximalist and a pragmatic vision,

ultimately adopting the latter. These markers should be conceived of as points along a spectrum

of lawyer loyalty that assist in revealing divisions of opinion rather than strict typologies.

Moreover, these visions of lawyer loyalty intersect at times with competing conceptions of how

lawyers are regulated in Canada.

While self-regulation of the legal profession is on the wane in numerous jurisdictions, Canada

stands out as a jurisdiction where self-regulation is alive and well. There have been attempted

incursions into self-regulation by governments and other regulators, but they have been episodic

and either not particularly significant5 or beaten back by the efforts of the bar with the assistance

of the courts.6 For these reasons, Alice Woolley has called Canada ‘the last bastion of unfettered

4 See Richard F Devlin and Victoria Rees, ‘Beyond Conflicts of Interest to the Duty of Loyalty: From Martin v Gray to R v Neil’ (2005) 84 Canadian Bar Review 433. For a critique of the application of the concept of loyalty in this area see Harvey L Morrison, ‘Conflicts of Interest and the Concept of Loyalty’ (2008) 87 Canadian Bar Review 566, 624 (‘Loyalty is a vague concept. While it is often yoked together with the need to protect the public’s confidence in the legal system, it lacks the precision necessary to guide members of the legal profession on the proper way to deal with day-to-day conflicts problems. There is a danger that the concept of loyalty will be used uncritically. Many more situations may be identified as giving rise to conflicts of interest when none exist. Analytical clarity would be enhanced if use of the concept of loyalty was avoided and the traditional approach of equity employed’). 5 See eg Wilder v Ontario Securities Commission (2001) 53 OR (3d) 519, [2001] OJ No 1017 (CA) (establishing that the Ontario Securities Commission has the power to regulate the conduct of lawyers appearing before it). The bar in Canada strongly resisted the attempt by securities commissions to regulate lawyers. While the attempt failed, the Ontario Securities Commission has shown little interest in regulating lawyers. 6 The most notable case is the decade-long battle between the federal government and the bar over the application of money laundering regulations to lawyers. See Law Society of British Columbia v Canada (Attorney General) (2001) 207 DLR (4th) 705, [2001] BCJ No 2420 (SC), aff’d (2002) 207 DLR (4th) 736, [2002] BCJ No 130 (CA), leave to appeal granted 25 April 2002 and notice of discontinuance of appeal filed 25 May 2002, [2002] SCCA No 52; Federation of Law Societies of Canada v Canada (Attorney General) [2001] AJ No 1697 (QB); Federation of Law Societies of Canada v Canada (Attorney General (2002) 203 NSR (2d) 53, [2002] NSJ No 199, 2002 NSSC 95; Federation of Law Societies of Canada v Canada (Attorney General) (2002) 57 OR (3d) 383 (SCJ); Federation of Law Societies of Canada v Canada (Attorney General) (2002) 218 Sask R 193, [2002] SJ No 200, 2002 SKQB 153. The Federation of Law Societies launched an assault on the federal government’s money laundering reporting requirements. After several court decisions in the Federation’s favour, the federal government settled these actions with the Federation. See Kirk Makin, ‘Ottawa Gives Up Forcing Lawyers to Tell on Clients’ Globe and Mail, 25 March 2003, A13. In 2006, the government passed Bill C-25, which exempts lawyers from the reporting requirements of this regime, but would require lawyers to record all transactions of $3,000 or more. The battle continues. See ‘Lawyers Back on the Hook in Revised Money Laundering Act’ Law Times, http://www.lawtimesnews.com/200707162503/Headline-News/Lawyers-back-on-the-hook-in-revised-money-laundering-act

Electronic copy available at: http://ssrn.com/abstract=1964458

self-regulation of the legal profession in the common law world’.7 However, in these pages

Woolley has also written about judicial regulation of the Canadian legal profession.8 Which

account is correct? In a sense both are. Woolley is absolutely right that Canada appears to

maintain the strongest regime of self-regulation in the common law world. However, she is also

correct that judicial regulation is an important aspect of the regulation of the Canadian legal

profession. The tension between judicial regulation and self-regulation is perhaps most evident in

the area of conflicts of interest. The regulation of conflicts of interest in Canada has at times been

characterised by cooperative co-regulation, but more recently the spirit of cooperation between

the bench and the bar has been displaced by competitive regulation where the courts and the bar

are clashing. The stakes are high, not only for lawyers and law firms but for self-regulation of the

legal profession in Canada. The battle over conflicts of interest is just as important as the

substantive debate over the underlying issues.

In the sections that follow, I describe the different battles over these conceptions of lawyer loyalty

in Canada and how they intersect with these regulatory approaches. However, in order to provide

the necessary context, I first explain the regulatory framework in Canada.

I. Regulation of the Legal Profession in Canada

Unlike in the United Kingdom and other jurisdictions, the regulatory and representative

responsibilities of the Canadian bar have long been separated. Law societies in each province and

territory regulate lawyers in their jurisdiction.9 The boards of directors of the law societies are

elected predominantly by the member lawyers. Some lay members are appointed by government,

and the increase in the number of lay members has been the most notable form of government

involvement in the regulation of the Canadian legal profession over the past few decades.10 The

law societies operate under legislation enacted by the provincial legislatures and are mandated to

regulate the practice of law ‘in the public interest’.11 They generally have good working

relationships with government and are able to obtain legislative changes to update or reform their

7 Woolley (n 3) 4. 8 Alice Woolley, ‘Judicial Regulation of the Legal Profession: Correspondent’s Report from Canada’ (2010) 13(1) Legal Ethics 104. 9 Each of the 10 provinces and three territories have a single law society except for Quebec, which has a dual bar where the Barreau du Quebec regulates lawyers and the Chambre des notaires regulates notaries. 10 In Ontario, four lay benchers were appointed by the Lieutenant Governor (OIC 3080/74) on 20 November 1974, pursuant to the Law Society Act, RSO 1990, c L.8, s 23(a). The four lay benchers attended Convocation for the first time on 17 January 1975. The number of appointees increased to eight in 1999, pursuant to the Law Society Act, RSO 1990, c L.8, s 23(1). 11 See eg Law Society Act, RSO 1990, c L.8, s 4.2(3).

operations. The law societies are statutorily empowered to enact by-laws as well as the Codes of

Conduct that lawyers are required to follow. The law societies investigate complaints and

discipline lawyers. There are limited rights of appeal or judicial review to the courts.

The Canadian Bar Association (CBA), on the other hand, is a voluntary national advocacy

association of lawyers established in 1896.12 It was modelled on the American Bar Association

(ABA), but lacks the resources or the political clout of its American counterpart. It has followed

the ABA’s lead in enacting Model Codes of Conduct and these have strongly influenced most law

societies’ codes of conduct, although that influence is being challenged by the emergence of a

newly active actor: the Federation of Law Societies, a federation of the 14 Canadian law

societies.13 In 2009, the Federation released a draft model code of conduct to be considered for

adoption by the member law societies. That process is still underway. As discussed below, the

CBA and the Federation have taken very different approaches on the conflicts issues.

Finally, there are the courts. They have the inherent power to regulate the conduct of lawyers as

officers of the court.14 The courts’ jurisdiction over lawyers finds its source in the courts’ power

to control their own process, which includes the power to regulate lawyers’ conduct in legal

proceedings that may affect the administration of justice.15 This jurisdiction underlies the courts’

power to remove counsel for a disqualifying conflict of interest,16 to refuse to allow counsel to

withdraw from a case,17 to award costs personally against counsel,18 and to sanction counsel for

abusing the court’s process.19

This is the necessary context for consideration of the battle over conflicts of interest in Canada.

This battle focuses on ‘the Conflicts Trilogy’ 20—the three Supreme Court of Canada cases

12 Canadian Bar Association, ‘About the Canadian Bar Association’, www.cba.org/CBA/about/main. 13 Federation of Law Societies of Canada, ‘About Us’, http://www.flsc.ca/en/about-us/ 14 See generally Brent Olthuis, ‘Professional Conduct’ in Adam M Dodek and Jeffrey H Hoskins, QC (eds), Canadian Legal Practice: A Guide for the 21st Century (LexisNexis, 2008) §3.311 (looseleaf). 15 Martin v Gray [1990] 3 SCR 1235 at 1245, [1990] SCJ No 41 (also known as MacDonald Estate v Martin); R v Cunningham, 2010 SCC 10, [2010] 1 SCR 331 at para 18. See also Woolley (n 8). 16 See Martin v Gray (n 15). 17 See Cunningham (n 15). 18 See eg Rules of Civil Procedure, RRO 1990, Reg 194, Rule 57.07 (Ont) (liability of lawyer for costs). 19 See eg R v Gunn (2003) 15 Alta LR (4th) 109 (Alta QB) (trial judge in impaired driving prosecution ordering defence counsel to pay costs personally to Crown on basis that counsel made improper allegations and applications amounting to abuse of process). 20 Martin v Gray (n 15) and Strother (n 1). In this article, I say as only as much about the facts of the cases as is necessary to support the narrative. I do not go any further, largely for two reasons. First, this article focuses on different visions of lawyer loyalty rather than on trying to understand each case on its own terms. Second, I think that sometimes trying to understand the confusing facts of these cases may not be worth the effort. The cases ‘have tended to involve extreme and very unusual fact situations, from which broad norms, broad prescriptive norms have been derived’. Simon Chester, The Conflicts Revolution:

between 1990 and 2007 that shaped the way in which conflicts are dealt with in legal practice and

by the courts and also set the terms of the battles.

II. Round One: Transferring Lawyers and Imputed Disqualification (1990)

In 1987, the CBA had just updated its Code of Conduct for the first time in over a decade.

However, those changes did not account for significant demographic shifts in the Canadian legal

profession. Law firms had become bigger, and lawyers’ loyalty to their firms was weakening,

making firms’ composition more fluid.21 ‘Mobility’ became a catchword in the Canadian legal

profession: the mobility of lawyers between large firms in the same city and later on the mobility

of lawyers between provinces.

Martin v Gray (1990) was the first case in the Trilogy. Its controversial nature has dulled

somewhat with time but when it was decided in 1990, the decision sent shockwaves through the

Canadian legal profession. Martin v Gray ushered in what has been described as a ‘conflicts

revolution’ in Canada.22 The case involved a junior lawyer—aptly named Dangerfield—who

transferred from her small defunct firm to a big law firm that was acting against a former client of

hers. At her former firm, Dangerfield was actively engaged in the case and had been privy to

confidences disclosed by the client.23 Dangerfield’s former firm dissolved when its principal was

appointed to the bench and she joined her new firm along with seven other of the 11 members of

that firm. Both Dangerfield and senior members of her new firm swore affidavits that the case

Martin v Gray and Fifteen Years of Change (Heenan Blaikie LLP, 2006) 93. A detailed recitation and analysis of the facts can be found in that work. 21 See David AA Stager with Harry W Arthurs, Lawyers in Canada (University of Toronto Press, 1990) 168. 22 Chester (n 20) 14 (‘Martin v Gray ignited the conflicts revolution in Canada’). For a contrary view see Gavin Mackenzie, ‘Coping with Conflicts of Interest in the Wake of MacDonald Estate, Neil and Strother’, paper presented at the Ontario Bar Association Continuing Legal Education Conference, ‘Privilege, Confidentiality and Conflicts of Interest: Traversing Tricky Terrain’, 23 October 2008 (Ontario Bar Association, 2008) 80 (‘In spite of views to the contrary by some commentators, these decisions are not revolutionary. Rather, they are unsurprising clarifications of the nature and implications of lawyers’ fiduciary duties to clients, which have long been recognized’). 23 Martin v Gray (n 15) para 2: ‘While acting for the appellant, Twaddle was assisted by Kristin Dangerfield, a graduate articled student and later a junior member of his firm. She was actively engaged in the case and was privy to many confidences disclosed by the appellant to Twaddle. Dangerfield was in attendance at numerous meetings between Mr Twaddle and the appellant Martin, assisted in the preparation of many documents, prepared and attended examinations for discovery, was present when a settlement was discussed by the parties and during discussions of a settlement with representatives of the law firm of Thompson, Dorfman, Sweatman, and participated in the taking of de bene esse evidence. Upon Twaddle’s appointment to the bench in 1985, Dangerfield joined the firm of Scarth, Dooley. Eight out of eleven members of that firm, including Dangerfield, joined the Thompson firm in 1987. The Thompson firm represents the respondent in this action.’

had not been discussed since she joined the firm and would not be.24 However, no measures were

taken by the new firm to ensure that she did not receive or reveal any information related to the

file. Dangerfield’s former client moved to disqualify her new firm as counsel.

At the Supreme Court of Canada, all seven judges who heard the appeal25 agreed that Dangerfield

had tainted her new firm and that as a result, her former client was entitled to have Dangerfield’s

firm removed as counsel for his opponent.26 Martin v Gray does not directly discuss lawyer

loyalty.27 However, three different perspectives on lawyer loyalty emerge from the closely

divided 4-3 decision in this case.28

The first was a minimalist vision of lawyer loyalty. Under this version, lawyer loyalty is equated

with a duty not to breach confidences and not to use client information against a client. The

concern here is with actual violations of confidentiality. The proposed rule would only prohibit

actual violations, not appearances. It does not encompass prophylactic measures. This minimalist

vision was articulated by the law firm in Martin v Gray in its ‘trust-me’ assertion that no one had

discussed the case with Dangerfield. This vision suffers from what I have elsewhere described as

24 Ibid, para 3. 25 There are nine members of the Supreme Court of Canada. A quorum is any five judges. See Supreme Court Act, RSC 1985, c S26, s 25. The Chief Justice determines how many judges will hear each particular case. See Peter W Hogg, Constitutional Law of Canada (Carswell, 5th edn 2007) § 8.3. 26 Indeed, the Court heard the case on 4 May 1990 and rendered its decision six days later with reasons to follow. Those reasons were released seven and a half months later, on 20 December 1990. Justice Brian Dickson had participated in the hearing but retired from the Court on 1 July 1990 (puisne justice Antonio Lamer, who became Chief Justice, had not participated in the case). By statute, Dickson had to complete all judgments within six months of the date of his retirement or his vote would not be counted. See Supreme Court Act, RSC 1985, c S26, s 27(2). Thus, Dickson would have been functus by 1 January 1991, 10 days after Martin v Gray was released. Without Dickson’s vote, the Court would have been deadlocked 3-3. There might have been no majority reasons (although still a unanimous decision) or the case might have been ordered for a rehearing with additional judges. 27 Loyalty is mentioned only once in the Court’s decision, where it cites the CBA’s Rule on Conflicts of Interest (which had been adopted by the Manitoba Law Society). This Rule provided: ‘The lawyer must not advise or represent both sides of a dispute and, save after adequate disclosure to and with the consent of the client or prospective client concerned, he should not act or continue to act in a matter when there is or there is likely to be a conflicting interest. A conflicting interest is one which would be likely to affect adversely the judgment of the lawyer on behalf of or his loyalty to a client or prospective client or which the lawyer might be prompted to prefer to the interests of a client or prospective client.’ Canadian Bar Association, Code of Professional Conduct (CBA, 1987) c V, Rule (as cited in Martin v Gray (n 15) para 17). 28 Others may take issue with my taxonomy. My point is not precision but to provoke conceptual reflection based upon different conceptions of lawyer loyalty. The three visions may be considered different points on a spectrum. Many see the Canadian rules as more absolute than pragmatic, and the rules in other jurisdictions as far more pragmatic. See eg Chester (n 20) 16 (‘The Strict Canadian Approach’), 25 (‘New Zealand Opts for Pragmatism’) and Canadian Bar Association, Task Force on Conflicts of Interest (Canadian Bar Association, 2008) 29–34. However, the point of my classification is not comparative analysis but internal reflection.

lexomorphism29—the tendency to ascribe lawyer-like characteristics to clients based on lawyers’

projecting their own values and beliefs onto clients. Lexomorphism creates rules for lawyers

about clients by taking into account the actions and beliefs of lawyers while placing minimal

value on the concerns and interests of clients and members of the public. Lexomorphic

approaches suffer by failing to attempt to understand the position of the client or the legitimate

concerns of the public.30 The minimalist vision was rejected by all members of the court in

Martin v Gray.

Although it was ultimately rejected, the conceptual foundation of the minimalist vision was

reviewed in the majority decision of the Court. Specifically, the Court considered—and

rejected—the English test of ‘probability of real mischief’ articulated in Rakusen v Ellis, Munday

& Clarke,31 pursuant to which the court ‘must be satisfied that real mischief and real prejudice

will in all human probability result if the solicitor is allowed to act’.32 Rakusen is generally

recognised as a liberal rather than a restrictive test.33 In Martin v Gray, the Supreme Court of

Canada rejected the probability of real mischief test in favour of a stricter test.34

However, the majority of the Supreme Court of Canada adopted a middle course between

Rakusen’s minimalist vision of lawyer loyalty and the minority’s maximalist conception of

lawyer loyalty discussed below. The majority’s view reflects a pragmatic vision of lawyer loyalty

because it explicitly embraces practical considerations arising from new, real-world contexts.35 In

discussing the changes to the legal profession, the majority opined that ‘the fundamental

professional standards’ must be ‘maintained and indeed improved’ in the face of such changes.

According to the members of the majority, ‘[n]othing is more important to the preservation of this

relationship than the confidentiality of information passing between a solicitor and his or her

client’.36

29 See Adam M Dodek, ‘Reconceiving Solicitor-Client Privilege’ (2010) 35 Queen’s Law Journal 493, 511. 30 Janine Griffiths-Baker has done superb work interviewing clients in order to ascertain their perspectives on lawyer loyalty and conflicts of interest. See J Griffiths-Baker, Serving Two Masters: Conflicts of Interest in the Modern Law Firm (Hart Publishing, 2002) 102–3, 119–20. See also Allan C Hutchinson, ‘Who Are “Clients”? (And why it Matters)’ (2005) 84 Canadian Bar Review 411; Robert K Vischer, ‘Legal Advice as Moral Perspective’ (2006) 19 Georgetown Journal of Legal Ethics 225 (discussing the need for dialogue between lawyer and client). 31 [1912] 1 Ch 831 (CA). For commentary on the Rakusen case and its treatment by Commonwealth courts see Griffiths-Baker, ibid, 20–39. 32 As quoted in Martin v Gray (n 15) para 20. 33 See Chester (n 20) 11. For a detailed analysis of the decision in the Canadian context see 11–14. 34 See Griffiths-Baker (n 30) 82–85; Chester (n 20) 16. 35 I use the term ‘pragmatic’ in the sense of being concerned with practical rather than theoretical considerations. See Oxford English Dictionary Online (Nov 2010 Release) sv pragmatic. 36 Martin v Gray (n 15) para 7.

The majority identified three competing values that needed to be balanced:

1. the maintenance and integrity of our system of justice;

2. the right of litigants not to be lightly deprived of their chosen

counsel; and

3. the desirability of permitting reasonable mobility in the legal

profession.37

Interestingly, neither the majority nor the minority identified the basis for selecting these values

as worthy of consideration. The foundations of the first two values are easily found in the Anglo-

Canadian legal system. The maintenance and integrity of our system of justice is connected to the

Rule of Law which has been identified as an unwritten constitutional principle in Canada.38 The

Right to Counsel in criminal matters is constitutionally entrenched39 and strongly protected in

non-criminal matters. Indeed, it is the combination of the right to counsel and the rule of law that

provides much of the conventional justification for the right to solicitor-client privilege.40

Together, these two values are directly tied to the protection of client confidences, the basis upon

which the Supreme Court decided Martin v Gray. They are important aspects of the idea of

lawyer loyalty. However, the desirability of permitting reasonable mobility in the legal profession

has no comparable pedigree. It is not supported in the text, history or precedents of the Canadian

Constitution.41 No link is made between reasonable mobility of the legal profession and clients’

interests, the justice system or the public interest.42 One is left to conclude that reasonable

mobility was elevated to a principled level based solely on the subjective considerations of the

members of the majority without adequate justification.

In balancing these three values, the majority elected a middle approach between minimalism and

maximalism. It rejected Rakusen’s ‘probability of mischief’ approach as insufficiently protective

37 Ibid, para 13. 38 See Reference re Secession of Quebec [1998] 2 SCR 217. 39 See Canadian Charter of Rights and Freedoms, Part I of the Constitution Act, 1982, being Schedule B to the Canada Act 1982 (UK), 1982, c11, s 10(b). 40 See eg Anderson v Bank of British Columbia (1876) 2 Ch D 644, 649 (CA); R v McClure, 2001 SCC 14, [2001] 1 SCR 445, para 33; see generally Dodek (n 29) 506–7. 41 The Canadian Charter of Rights and Freedoms (n 39) expressly protects some occupational mobility rights, but these involve the right to move and take up residence in another province and to pursue ‘the gaining of a livelihood in any practice’ (s 6(2)). These rights are expressly made ‘subject to any laws or practices of general application in force in a province other than those that discriminate among persons primarily on the basis of province of present or previous residence’ (s 6(3)). It was never suggested that a restrictive conflicts rule would infringe this section of the Charter. The issue before the Court in Martin v Gray was not inter-provincial but intra-provincial mobility (intra-municipal to be precise). 42 Although Chief Justice McLachlin would later make this link in Strother (n 1) paras 137–8.

but it also declined the minority’s view that there should be an irrebuttable presumption that when

a lawyer transfers firms, she will share confidential information about past files. Instead, the

majority held that there should be a rebuttable presumption. The majority held that that

presumption could be rebutted by a showing that the firm had used what we now call ‘screening

measures’ (referred to by the Court as Chinese Walls and Cones of Silence). The Court rejected

the firm’s ‘trust-me’ position.43 The Court’s pragmatism continued in its approach to regulation

which is discussed below.

The majority’s pragmatic approach can be contrasted with a maximalist vision of lawyer loyalty

embraced by Justice Cory for the three judge minority. A maximalist vision is not absolutist;

rather, it places heightened emphasis on lawyer loyalty and considers it the predominant value.

The clash between the maximalist and the pragmatic visions is seen in how the majority and the

minority dealt with the three values identified above.

The minority placed the greatest weight on the first value—the maintenance and integrity of the

justice system—and chastised the majority for giving too much weight to lawyer mobility.44 As a

result, the minority would have established an irrebuttable presumption of sharing of confidential

information when lawyers work together. As Justice Cory explained,

Neither the merger of law firms nor the mobility of lawyers can be

permitted to affect adversely the public's confidence in the judicial

system. At this time, when the work of the courts is having a very

significant impact upon the lives and affairs of all Canadians, it is

fundamentally important that justice not only be done, but appear to be

done in the eyes of the public.45

Under Justice Cory’s maximalist vision, the most important factor is the preservation of the

integrity of the justice system.46 In his words,

The necessity of selecting new counsel will certainly be inconvenient,

unsettling and worrisome to clients. Reasonable mobility may well be

important to lawyers. However, the integrity of the judicial system is of

43 Martin v Gray (n 15) para 49. 44 Ibid, para 57. 45 Ibid, para 56. 46 Ibid, para 57.

such fundamental importance to our country and, indeed, to all free and

democratic societies that it must be the predominant consideration in

any balancing of these three factors.47

According to Justice Cory, our judicial system cannot function properly if there is any doubt or

suspicion in the mind of the public that the confidential information disclosed by a client to a

lawyer might be revealed.48 It is here that Justice Cory implicitly connects loyalty and

confidentiality by stating that a perception of unfairness would arise ‘from the ease with which

confidential information received from clients could be privately communicated between lawyers

who are working together in the same firm’.49 The maximalist vision of lawyer loyalty is stated in

Justice Cory’s conclusion that where a lawyer who has received confidential information joins a

firm that is acting for those opposing the interests of the former client, there should be ‘an

irrebuttable presumption that lawyers who work together share each other’s confidences with the

result that a knowledge of confidential matters is imputed to other members of the firm. This

presumption must apply to the members of the new firm the lawyer joins if public confidence in

the administration of justice is to be maintained.’50

The maximalist vision came within one vote of being adopted, and has provided important

conceptual foundations for later debates. For now, the pragmatic vision carried the day.

Martin v Gray sent shockwaves through the Canadian legal profession; no law society had rules

about transferring lawyers and few firms had established the elaborate conflicts mechanisms that

exist today. However, consistent with its generally pragmatic approach in the case, the majority

anticipated that its decision would have a significant impact on the legal profession. The Court

adopted an approach of cooperative co-regulation where it acknowledged and empowered the bar

as a partner in the regulation of conflicts of interest.

First, the Court invited the CBA to take steps to develop national regulatory standards.51 Next, the

Court invested the mandate with both an urgency and necessity by stating that absent ‘exceptional

circumstances’, until the governing bodies had given their regulatory imprimatur to a system of

47 Ibid, para 58. 48 Ibid, para 60. 49 Ibid, para 62. 50 Ibid, para 63. 51 Ibid, para 49 (‘It can be expected that the Canadian Bar Association, which took the lead in adopting a Code of Professional Conduct in 1974, will again take the lead to determine whether institutional devices are effective and develop standards for the use of institutional devices which will be uniform throughout Canada’). Griffiths-Baker notes the unusualness of the Court’s deference to the profession in this regard. See Griffiths-Baker (n 30) 83–86.

screening, courts would be unlikely to accept such devices as sufficient evidence of effective

screening.52 As Simon Chester has noted, ‘this was an innovative (and unconventional) move by

Sopinka J to ensure that whatever standards or models were developed to prevent information

flow would represent a more considered consensus than is possible in a fact-constrained bi-polar

dispute resolution process’.53 Finally, the Court adopted an extremely deferential position towards

the bar’s regulatory role, underplaying the Court’s role by describing it as ‘merely supervisory’.

In full, the majority stated:

In this regard, it must be borne in mind that the legal profession is a

self-governing profession. The Legislature has entrusted to it and not to

the court the responsibility of developing standards. The court's role is

merely supervisory, and its jurisdiction extends to this aspect of ethics

only in connection with legal proceedings. The governing bodies,

however, are concerned with the application of conflict of interest

standards not only in respect of litigation but in other fields which

constitute the greater part of the practice of law. It would be wrong,

therefore, to shut out the governing body of a self-regulating profession

from the whole of the practice by the imposition of an inflexible and

immutable standard in the exercise of a supervisory jurisdiction over

part of it.54

Not surprisingly, the CBA took up the Court’s invitation, creating a Task Force which produced a

report on conflicts of interest, disqualification and screening methods.55 Its recommendations

were incorporated into the CBA’s Code of Conduct56 and adopted by the Federation of Law

52 Martin v Gray (n 15) para 49 (‘Although I am not prepared to say that a court should never accept these devices as sufficient evidence of effective screening until the governing bodies have approved of them and adopted rules with respect to their operation, I would not foresee a court doing so except in exceptional circumstances. Thus, in the vast majority of cases, the courts are unlikely to accept the effectiveness of these devices until the profession, through its governing body, has studied the matter and determined whether there are institutional guarantees that will satisfy the need to maintain confidence in the integrity of the profession’). 53 Chester (n 20) 17. 54 Martin v Gray (n 15) para 49. 55 Canadian Bar Association Task Force Report, Conflicts of Interest Disqualification: Martin v Gray and Screening Methods, 1993. While what we now call screening devices or ethical walls are the centrepiece of law firm transfers, some have questioned their efficacy. See Chester (n 20) 9, 75–82. 56 Canadian Bar Association, Code of Professional Conduct, 2004.

Societies as a template ultimately enacted by most law societies.57 At the end of the first battle,

the only hostile skirmish had taken place within the Court itself. Through the majority’s

pragmatic approach and embrace of cooperative co-regulation, the Court had avoided any clashes

between it and the bar. This great peace would last but a decade.

III. Round Two: Neil and the Bright Line Rule (2002)

In R v Neil,58 the Supreme Court addressed the issue of conflicts of interest between two

concurrent clients. In doing so, it shifted the lawyer’s duty of loyalty to the centre of the

analysis.59

By 2002, Canadian firms had grown larger and Canada now boasted ‘national law firms’—firms

with multiple offices in major Canadian cites like Montreal, Ottawa, Toronto, Calgary and

Vancouver. In Neil, a unanimous five judge panel held60 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 the lawyer reasonably believes he or she is able to represent each client without

adversely affecting the other.61 This has become known as ‘the bright line rule’ in Neil.

57 Federation of Law Societies of Canada, ‘Model Rule with Respect to Conflicts of Interest Arising as a Result of Transfers between Law Firms’ (1994), www.flsc.ca/en/publications/conflictRule.asp. 58 R v Neil, 2002 SCC 70, [2002] 3 SCR 631. 59 The decision sparked significant commentary. See Michael Brooker, ‘R v Neil: A New Benchmark for the Duty of Loyalty?’ (2004) 23(1) The Society Record 16; Richard F Devlin and Victoria Rees, ‘Beyond Conflicts of Interest to the Duty of Loyalty: From Martin v Gray to R v Neil’ (2006) 84 Canadian Bar Review 433; David Gambrill, ‘Conflict of Interest Involves Loyalty to Client’ (2002) 13(39) Law Times 5; Kimberly J Jakeman and Shanti M Davies, ‘The Bright Line: The Decision of R v Neil and its Impact on the Business of Law in Canada’ (2003) 61 The Advocate (Vancouver) 715; Julius Melnitzer, ‘Courts Expanding Duty of Loyalty after Neil’ (2005) 16(26) Law Times 11; Jim Middlemiss, ‘The Conflicts Conundrum’ (2005) 14(5) The National 38; Paul M Perell, ‘Disqualifying Conflicts of Interest, reductio ad absurdum’ (2003) 27 Advocates’ Quarterly 218; Don Stuart, ‘(Annotation)’ (2003) 6 CR (6th) 3; Judy Van Rhijn, ‘Widening the Net to Catch Conflicts of Interest’ (2006) 17(17) Law Times 9; Jan Weir, ‘Conflict/Duties Enlarged’ (2004) 24 Lawyers Weekly 8 . 60 Only five judges are required for a quorum of the Supreme Court. See Supreme Court Act, RSC 1985, c S26, s 25. The Chief Justice assigns the judges to hear each case, known as the coram. Since Chief Justice McLachlin became Chief Justice in January 2000, over 81% of cases have been heard by corams of seven or nine justices. See DR Songer, The Transformation of the Supreme Court of Canada: An Empirical Examination (University of Toronto Press, 2008) 117. In cases where there are appeals of right (see Criminal Code of Canada, RSC 1985, c C-46, s 691), it is not uncommon for the Chief Justice to assign only five justices. Neil was an appeal as of right. The fact that the Chief Justice assigned only five judges to hear the case and did not include herself indicates that the Court did not think that the case was particularly important. Moreover, there were no interveners in Neil, unlike in Strother where the Canadian Bar Association intervened. 61 Neil (n 58) para 29.

If Martin v Gray was an earthquake, Neil was treated more like a tsunami threatening Canadian

legal practice.62 To American lawyers, the rule in Neil might seem familiar. Indeed, Neil’s author,

Justice Binnie, explicitly adopted the definition of conflict in the American Law Institute’s

Restatement of The Law Governing Lawyers as 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 client, a former client, or a third person’.63 Justice Binnie’s message

was clear: if American lawyers can make this rule work surely Canadian lawyers can too.

However, many Canadian lawyers did not quite see it that way, especially those at the large

national firms who would be most impacted by this rule.64

Neil marks the ascension of the maximalist vision of lawyer loyalty in Canadian law. Justice

Binnie placed the lawyer’s duty of loyalty at the centre of the conflicts of interest analysis. He

articulated a robust and maximalist vision of the lawyer’s duty of loyalty. He explicitly

considered and rejected pragmatic considerations of the reality of how big firms operate. He

acknowledged that the bright line rule was ‘undoubtedly a major inconvenience’ to large law

firms and especially to ‘national firms with their proliferating offices in major centres across

Canada’ but he was not moved by this.65 He insisted that it is the firm and not just the individual

lawyer that owes a fiduciary duty to its clients.66 Again, eschewing pragmatic considerations, he

asserted that ‘[l]oyalty includes putting the client’s business ahead of the lawyer’s business’.67

Many of the contours of the maximalist vision of lawyer loyalty are set out in this 2002

decision—by an unanimous court. Because of the procedural posture of the case,68 no

countervailing positions were presented to the Court. In essence, with Neil, Justice Binnie shot a 62 Alice Woolley has rightly called Neil ‘the case of the decade’ in the law governing lawyers in Canada. See Alice Woolley, ‘The Italics that Rocked the Decade (for Canadian Lawyers)’ ABlawg.ca, http://ablawg.ca/2010/02/01/the-italics-that-rocked-the-decade-for-canadian-lawyers. 63 American Law Institute, Restatement of the Law Third, Restatement of the Law: The Law Governing Lawyers (ALI, 2000) vol 2, § 121. 64 Devlin and Rees divide the reactions to Neil into two categories: conventionalists and reactionaries. See Devlin and Rees (n 59) 441–53. One of the leading commentators on lawyers’ ethics in Canada and a former Treasurer (president) of the Law Society of Upper Canada opined that ‘[i]n spite of views to the contrary by some commentators, these decisions [ie Neil and Strother] are not revolutionary. Rather, they are unsurprising clarifications of the nature and implications of lawyers’ fiduciary duties to clients, which have long been recognized.’ Mackenzie (n 22) 80. 65 Neil (n 58) para 29. 66 Ibid, para 29. 67 Ibid, para 24. 68 Neil was a criminal case where the conflict issue was generally accepted. The case was an appeal as of right, a case that the Supreme Court of Canada had to hear rather than one that it elected to hear. The issue as framed by the parties was one of the appropriate remedy, ie whether a stay of the criminal proceedings was appropriate in this case. As a result, the case did not attract the attention of the CBA or the Federation of Law Societies which would have likely sought to intervene and participate in the case if they had known that it would be decided on the basis of setting out a sweeping rule regarding conflicts of interest among current clients.

very large cannon across the bow of the bar. It was completely unexpected and it took some time

for the bar to figure out how to respond. And as the bar was beginning to respond, the third case

in the trilogy was making its way to the Supreme Court of Canada.

IV. Round Three: Strother and the Limits of Lawyer Loyalty (2007)

Five years after Neil, divisions within the Supreme Court along the maximalist-pragmatist axis

were exposed in the 2007 Strother decision. Strother involved complicated tax shelters for

investment in film production services by American studios making films in Canada. Mr Strother

represented a first client under the terms of a written retainer which expressly prohibited his law

firm from acting for other clients in relation to the tax shelter schemes. The first client continued

to use the law firm’s services after the written retainer terminated. The Minister of Finance

plugged the tax loophole. Mr Strother told the first client that he didn’t have a ‘fix’ to avoid the

effect of the rule change. Some months or a year later a former employee of the first client

approached Mr Strother to discuss the potential of a revised tax shelter scheme. Mr Strother had

found a ‘fix’ for the rule change to benefit this second client. However, he did not tell the first

client. Furthermore, unbeknownst to the members of his firm, Mr Strother had gone into business

with a second client in competition with another client in an extremely lucrative deal involving $4

billion worth of transactions with profits approaching $130 million. Mr Strother and his business

partner’s share exceeded $64 million. Mr Strother’s law firm acted for the business throughout

and received fees exceeding $9 million. The issue in Strother was the temporal and substantive

extent of the lawyer’s duty of loyalty to that first client. In writing the majority decision, Justice

Binnie again led in articulating a maximalist vision of the duty of loyalty. However, unlike in

Neil, there was a strong minority view in Strother, authored by Chief Justice McLachlin. The

minority view reflected a more pragmatic vision of lawyer loyalty which focused on the nature of

the retainer agreement between the law firm and its clients.

Justice Binnie’s majority decision explicitly confirmed the unrelated matters rule from Neil. He

began by stating that ‘[a] fundamental duty of a lawyer is to act in the best interest of his or her

client to the exclusion of all other adverse interests, except those duly disclosed by the lawyer and

willingly accepted by the client’.69

The division between the majority and the minority can be easily stated. To the majority, the

scope of the retainer is governed by contract law but the solicitor-client relationship created

69 Strother (n 1) para 1.

thereby is overlaid with certain fiduciary responsibilities.70 To the minority, the scope of the

fiduciary duties are circumscribed the retainer agreement, ‘as they must be in a world where

lawyers represent more than one client’.71 This is a fundamental point of disagreement between

the majority and the minority. To the majority, the source of the duty owed by lawyers to their

clients is not the retainer itself ‘but all the circumstances (including the retainer) creating a

relationship of trust and confidence from which flow obligations of loyalty and transparency’.72

To Justice Binnie, fiduciary duties provide the framework for the lawyer-client relationship which

may include obligations beyond the express terms of the retainer.73 Justice Binnie and the Chief

Justice also took different positions on what the retainer in question required.

In writing for the minority, the Chief Justice opined that whether a conflict exists between two

clients depends on the scope of the retainer between the clients in question: ‘The fiduciary duties

owed by the lawyer are molded by this retainer, as they must be in a world where lawyers

represent more than one client.’74 In the view of the Chief Justice, a retainer between a lawyer and

client is a special form of agency agreement which attracts a duty of loyalty. The agreement

commits the lawyer to do certain things for that client. The fiduciary duty attaches to this

commitment and there is no such thing as a free-floating duty of loyalty ‘in the air’.75

To the Chief Justice, the starting point is always the terms of the retainer. From this we

understand to what the duty of loyalty attaches. She explains the relationship between the two as

follows: ‘The lawyer owes the client a duty to act loyally for the client in performing as agreed in

the retainer.’76 The minority’s pragmatic approach is underscored in the statement that ‘[t]his

manner of viewing a lawyer’s duties conforms to the realities of the legal profession and the

needs of clients’.77 The clearest articulation of the pragmatist approach is demonstrated by the

Chief Justice’s statement that ‘[o]ur law rightly imposes rigorous fiduciary duties on lawyers, but

it also recognizes the need to ensure that fiduciary obligations remain realistic and meaningful in

the face of the realities of modern practice’.78

The Chief Justice squarely addressed potential criticisms of her pragmatic approach. She stated:

70 Ibid, para 34. 71 Ibid, para 117. 72 Ibid, para 34, quoting and adopting the Factum of the Appellant law firm Davis & Company. 73 Ibid, para 34 74 Ibid, para 117. 75 Ibid, paras 133, 135. 76 Ibid, para 135. 77 Ibid, para 137. 78 Ibid, para 138 (emphasis added).

Practical considerations … cannot be used to dilute the rigor of the

fiduciary duties that the law rightly demands of lawyers. Rather, they

explain why the law has developed a precise conception of the

lawyer’s duty grounded in the contract of retainer.79

At first glance, the Chief Justice’s pragmatic approach seems to embrace the type of cooperative

co-regulation evidenced by the majority in Martin v Gray. However, this deference is different.

The majority in Martin v Gray expressly invited the regulators to adopt screening standards.

While issue may be taken with the Court’s invitation to the CBA to lead on this issue because the

CBA is an advocacy and not a regulatory body, the Court’s invitation was properly grounded in

the CBA’s historical role in promulgating ethical standards for the legal profession. However,

‘the realities of modern practice’ are created by the cumulative actions of individual lawyers and

law firms who have no statutory mandate to act in the public interest. As a profession, lawyers

claim special privileges in the name of the public interest but this is of a very different character

from regulators who have a statutory mandate to regulate in the public interest and may be held

accountable for their acts. By recognising ‘the realities of modern practice’, the Chief Justice has

empowered private acts as legally relevant for the determination of fiduciary duty. This is strong

pragmatism and the Chief Justice’s opinion has emboldened Neil’s critics.

V. Round Four: The CBA’s Response to Neil (2008-Present)

The CBA again took the lead in responding to the Supreme Court of Canada’s 2002 conflicts of

interest decision in Neil but it did so in a very different manner than it had a decade before.80 In

1991, the CBA was expressly invited by the Supreme Court of Canada to take up where the Court

had left off. In 2002, the CBA received no such invitation. Cooperative regulation was displaced

by competitive regulation. Whereas after 1991, the CBA and the Canadian legal profession

embraced or at least accepted Martin v Gray, the same could not be said about their attitude

towards Neil. The CBA made conflicts of interest a top priority and clearly set the ‘bright line

rule’ in Neil in its sights. The CBA established a well-resourced Conflicts of Interest Task Force

with two apparent purposes: to provide concrete guidance on dealing with conflicts and to

79 Ibid, para 138. 80 Post-Neil only a few law societies changed their rules to specifically incorporate the bright line rule.

delegitimise and displace the unrelated matters rule. It succeeded on the first point and it is too

early to reach a conclusion on the second.

The CBA Task Force began by issuing a Consultation Paper which clearly articulated its position:

The letter from the Chair of the Task Force began:

o Our current conflict of interest rules impose a heavy burden on

lawyers, law firms, the courts and, unexpectedly, on clients. There is a

growing concern that these rules are out of step with the modern

practice of law and in need of review.

o Current requirements are cumbersome, time-consuming, and an

impediment to the efficient delivery of legal services. We believe that

the existing conflict rules are not protecting clients or serving the

public interest as well as they might.

o For these reasons … the [CBA] established a Task Force on

Conflicts of Interest to consider a more practical approach to managing

conflicts for clients and the profession and to develop useful model

materials for lawyers. Our long-term goal is to develop a CBA

consensus on changes to the rules that may be considered by the law

societies and incorporated into their existing codes of conduct.81

The letter was clearly returning the shot across the Supreme Court’s bow. The CBA Task Force

sought input on issues raised by the current conflict rules, including whether:

o loyalty requirements are being interpreted appropriately;

o presumptions of information-sharing within a law firm should be

rebuttable,

o retainer letters should be encouraged or required, and

o the rules pose problematic challenges for particular areas and rural

and remote communities.82

81 CBA Task Force on Conflicts of Interest, Letter from the Chair, R Scott Joliffe (2007), www.cba.org/CBA/groups/conflicts/consultation.aspx. 82 Ibid.

These may be considered leading questions and the Consultation Paper continued along such

lines.83

The CBA Task Force produced a 150 page report plus a toolkit on dealing with conflicts of

interest.84 The importance of the latter should not be underestimated. The toolkit is valuable,

practical and comparatively uncontroversial. In contrast, the report is controversial, provocative

and ‘surprisingly confrontational’85 in places.

On the theme of competitive regulation, the CBA Report treats the Supreme Court’s decisions

with little deference. The Report describes Neil’s ‘unrelated matters rule’ as obiter86 which

Justice Binnie has strongly disputed in extra-judicial writing.87 In my mind, the resolution of the

obiter issue is far less material than the fact that the CBA has made it an issue. Characterising the

unrelated mandates rule as obiter is a remarkable way for the leading legal organisation to

characterise part of a Supreme Court decision. This is a highly formalistic approach which is

simply inconsistent with how other courts, the government and the bar generally respect

Supreme Court decisions. For example, strictly speaking, all Supreme Court of Canada references

are obiter; they are advisory opinions with no binding force.88 Yet they are respected and many of

them are hallowed by the bar. Moreover, the CBA Report noted the 5-4 division of the Court in

Strother as a factor which weakens the persuasiveness of the ‘unrelated matters rule’.89 This point

83 CBA Task Force on Conflicts of Interest, Consultation Paper: Practical Difficulties with Today’s Conflict of Interest Rules (CBA, 2007), www.cba.org/consultation/survey.aspx. 84 CBA Task Force on Conflicts of Interest, Conflicts of Interest: Final Report, Recommendations & Toolkit, 2008. 85 Alice Woolley, ‘Task Force on Conflicts of Interest: Correspondent’s Report from Canada’ (2009) 12(1) Legal Ethics 87, 91. 86 CBA Task Force Report (n 84) 37. 87 Ian Binnie, ‘Sondage Après Sondage … Quelques Réflexions sur les conflits d’intérets’ (‘Poll After Poll: A Few Thoughts about Conflicts of Interest’ (edited version of speech given at Les Journées Stasbourgeoises, Strasbourg, France, 4 July 2008) (French version published in l’Institut canadien d’études juridiques, Droits de la personne: éthique et droit: nouveaux défis: actes des Journées strasbourgeoises de l’Institut canadien d’études juridiques supérieures 2008 (Éditions Yvon Blais, 2009) (English version of speech on file with author). 88 See Hogg (n 25) § 8.6(d) (explaining that the black letter law is that references are not binding even on the parties to the reference and lack the same precedential weight as an opinion in an actual case, however there are no recorded instances where a reference opinion was disregarded by the parties or where it was not followed by a subsequent court on the ground of its advisory character; in practice reference opinions are treated in the same way as other judicial opinions). 89 CBA Task Force Report (n 84) 37. The CBA would repeat this argument in its response to the Federation of Law Societies proposed conflicts rule. See CBA, ‘Response to Federation of Law Societies of Canada Advisory Committee Report on Conflicts of Interest’ (16 August 2010), www.cba.org/CBA/groups/PDF/Response%20to%20FLSC%20Niagara%20%282%29.pdf.

can only be considered ironic given that there was a similar division between the maximalist and

pragmatic visions of lawyer loyalty in Martin v Gray.90

The clear intent of characterising the ‘unrelated matters rule’ as obiter was to say that the

profession was not bound to follow the rule and the issue could be revisited—reconsidered on a

blank slate as it were. This was disingenuous to say the least. As Alice Woolley has written, even

if strictly speaking the unrelated matters rule was obiter in Neil, it was reconfirmed in Strother

and applied because Strother did involve the conflict that arose between existing clients on

unrelated matters.91

The Task Force further critiqued the Unrelated Matters Rule in a manner that Alice Woolley

describes as ‘unprincipled, unjustified and harmful’.92 The Task Force recommended that the rule

be abandoned. The CBA amended its Code of Conduct to implement the Task Force’s position on

the Unrelated Matters Rule and other issues. The CBA’s goal was clear and expressly articulated

in the Report: to get the regulators to adopt their position and eschew the unrelated matters rule.93

The Task Force report recommended a significant challenge to the Supreme Court’s regulatory

authority regarding conflicts of interest in both tone and substance.94 As one author has written

about the Task Force Report’s recommendations:

These recommendations are based on the hope that the practical

difficulties caused by the Supreme Court’s decision can be ameliorated

by changes to codes of professional responsibility. The validity of that

assumption may be questionable.95

The Task Force’s direct challenge was likely intended to convince the Court to abandon the

unrelated matters rule. It did not take long for that challenge to elicit a response from the Court.

90 The CBA Report also criticises the rule in Martin v Gray that screening devices be put in place prior to a firm acting against a former client as overly rigid. See CBA Task Force Report (n 84) 86–89, 99. For commentary see Woolley (n 85) 88–90. 91 Ibid, 92. 92 Ibid, 93. 93 See CBA Task Force Report (n 84) xiii, 150: Recommendation 21: ‘The Task Force is therefore recommending that the CBA … forward the Task Force Report to the Federation of Law Societies of Canada for the Federation’s consideration in the development of its model code of conduct, noting the importance of having harmonized conflicts rules in place across Canada.’ 94 Moreover, as Alice Woolley has written, the tone of the CBA’s Report is extremely strident. See Woolley (n 85) 95 (terming the CBA’s report ‘harsh and almost disrespectful in its indictment of the Court’s reasoning’). 95 Harvey L Morrsion, ‘Conflicts of Interest and the Concept of Loyalty’ (2008) 87 Canadian Bar Review 566, 587-–8.

Justice Binnie delivered a forceful and direct defence of the unrelated matters rule and of a

maximalist vision of lawyer loyalty in extra-judicial comments made in France in the summer of

2008,96 several months before the CBA Council adopted the Task Force’s final report, responding

to its earlier Discussion Paper. As the author of Neil and the majority decision in Strother, Justice

Binnie is most associated with the maximalist vision of lawyer loyalty.97 Justice Binnie’s speech

was entitled ‘Sondage après sondage’—‘poll after poll’—and it took its name from a line in a

speech given by the former head of the Barreau du Québec several weeks earlier:

[TRANSLATION] In poll after poll [sondage après sondage] dealing with

public confidence in different professions, lawyers find themselves at

the bottom of the list in the company of politicians and used car

dealers—there is therefore a major problem of perception that we must

continue to work at …98

Perhaps liberated by speaking outside of Canada, Justice Binnie’s remarks were remarkably

candid and he directly confronted the Bar’s response to his decisions. The President of the CBA

who had created the Task Force on Conflicts was in the audience and Justice Binnie specifically

recognised him in his remarks.

Sondage après sondage is the strongest most comprehensive articulation of the maximalist vision

of lawyer loyalty in Canada. First, Justice Binnie was defensive. He emphasised that a duty of

loyalty is not a special rule for lawyers.99 It has its roots in the general law governing fiduciaries,

96 Binnie (n 87). Justice Binnie offered the usual caveat that ‘the perspective on the jurisprudence’ was his own and ‘may or may not be shared by other members of the Supreme Court’ (1 fn 1). 97 Justice Binnie cannot be accused of a lack of understanding of the realities of legal practice. He was a leading litigator when he was appointed directly from practice to the Supreme Court of Canada in 1998. He is the only member of the Supreme Court to have been appointed directly from practice. From 1986 to the time of his appointment to the Supreme Court in 1998, Justice Binnie was a senior partner at McCarthy Tétrault, one of Canada’s largest law firms with offices in six Canadian cities. See ‘Supreme Court of Canada, About the Court, Judges of the Court, The Honourable Mr Justice William Ian Corneil Binnie’, www.scc-csc.gc.ca/court-cour/ju/binnie/index-eng.asp, and see ‘McCarthy Tétrault, Our Firm, About McCarthy Tétrault’, http://www.mccarthy.ca/about_mccarthy_tetrault.aspx 98 Allocution de Me Gérald R Tremblay, élu Passation des pouvoirs, Québec, le 31 mai 2008, p 4. ‘Sondage après sondage, les avocats se retrouvent en bas de la liste en compagnie des politiciens et des vendeurs d’autos usagées au chapitre de la confiance du public envers les diverses professions … Il y a donc un problème majeur de perception sur lequel nous ne devons jamais cesser de besogner.’ Quoted in Binnie (n 87). 99 See Binnie (n 87), citing MV Ellis, Fiduciary Duties in Canada (Carswell, 2004) 1–5: ‘[T]he law requires the individual subject to the duty [of loyalty] to scrupulously avoid placing himself in a possible or potential conflict of interest. Therefore, the fact that a conflict could have arisen, but did not, does not exculpate the fiduciary from wrongdoing … Entering into a potential conflict of interest is a breach whether or not the conflict is operative …’

of which lawyers form a small part. He said that in Neil, the Supreme Court was not ready to

modify the general principles governing fiduciaries for the benefit of those fiduciaries who

happen to be engaged in the practice of law. He also noted that Canadian courts have been quite

conservative in granting remedies for breaches of the duty of loyalty—as if to say to the bar,

‘don’t worry’. Then Justice Binnie went on the offensive.

On the issue of ‘Unrelated Mandates’, Justice Binnie skewered the CBA Discussion Paper in

several respects. First, he attacked the CBA Discussion Paper for not mentioning the ABA Rule

in the English version of its report while quoting verbatim from it in the French version of its

report. Justice Binnie then mocked the CBA Task Force’s concern that the Supreme Court’s

concern for a lawyer’s duty of loyalty will pose a major obstacle to lawyers taking on legal aid

files or unpaid legal work. Invoking the American experience once again, Justice Binnie noted

that the ABA rules have not prohibited large American law firms from acting in pro bono cases.

He then turned to the CBA Task Force’s position that the conflicts issue has had a bad effect not

only on big firms but also on small firms in small towns. Justice Binnie responded: ‘It seems that

despite acceptance of the ABA conflict rules, the legal profession in small towns across the

United States has flourished (as indeed it has flourished in the big firms in the big cities too, both

in the United States and Canada).’ Finally, Justice Binnie turned to his own personal experience,

noting that when he was in private practice with a large law firm he ‘just hated to give up a file’.

He said: ‘Mercantile motives are nowhere admitted by the CBA Task Force, to be relevant to its

consideration of these issues even though its roster of authors includes representatives from big

firms not generally seen as indifferent to which firm gets what business …’100

On competitive regulation, Justice Binnie further challenged the CBA’s motives. He stated:

An outsider reading the CBA documents might conclude that the only

concern of the authors is the well being of prospective clients in search

of their advocate of choice, including the workers and orphans bearing

their legal aid certificates, or pro bono clients in search of a welcome

mat. However, if firms and their clients are all of the view that the

dominant policy should be ‘freedom of choice of counsel’, who is

bringing these disqualification motions that the CBA Task Force

complains about? Are they all purely tactical or is it possible that

100 Binnie (n 87).

clients, particularly vulnerable clients, may feel more strongly than

some lawyers about loyalty issues?101

Justice Binnie directly challenged the proposition urged by the CBA that by changing the rules of

professional conduct it could alter the conflict of interest rules. He noted that the duty of loyalty is

closely linked to a lawyer’s fiduciary duties. He then continued: ‘The self-governing bodies of the

legal profession can make rules governing professional conduct but I suggest they cannot change

the principles governing the fiduciary duty of lawyers and law firms to their clients.’102 Then

Justice Binnie issued a rather ominous warning: ‘It is important that lawyers not be misled by any

changes to the rules of professional conduct into a belief that compliance with a law society’s

rules will preempt a client’s claim for compensation for breach of a fiduciary duty or contractual

obligation.’103 In short, Justice Binnie asserted the pre-eminence of the courts in regulating

conflicts of interest.

The conflict over conflicts continued. Despite Justice Binnie’s admonitions, the CBA adopted the

Task Force Report later that summer. The CBA amended its Code of Conduct in conformity with

the Task Force’s recommendation. And the Federation of Law Societies entered the fray.

In October 2009, the Federation adopted its Model Code of Conduct sans the chapter on

conflicts.104 More time was needed to address the issue, especially in light of the clash between

the CBA position and that of the Supreme Court. In June 2010, the Federation’s Special Advisory

Committee on Conflicts of Interest, composed of representatives from the constituent law

societies, submitted its report to the governing council of the Federation. It sided with Justice

Binnie and adopted a proposed rule consistent with Supreme Court jurisprudence.105 The

Federation Committee explained why it diverged from the CBA’s recommendations. It noted that

while the perspectives of lawyers and firms were important in its deliberations, ultimately the

public interest mandate of law societies was foremost in its final considerations. It also noted that

the courts were not bound to accept and apply professional conduct rules set by the law societies.

101 Ibid. 102 Ibid. 103 Ibid. 104 See Federation of Law Societies of Canada, Model Code of Conduct (January 2010), www.flsc.ca/en/federation-model-code-of-professional-conduct. The other missing piece was the future harm exception to the duty of confidentiality. The author was a member of the Special Advisory Committee on the Future Harm Recommendation whose recommendations were submitted to the Federation in June 2010; see http://www.flsc.ca/_documents/Future-Harm-Report-June-2010.pdf 105 See Federation of Law Societies of Canada, Special Advisory Committee on Conflicts of Interest, Final Report, 2 June 2010, http://www.flsc.ca/_documents/Conflicts-of-Interest-Report-June-2010.pdf. See also Supplementary Report, February 2011, http://www.flsc.ca/_documents/Supplementary-Report-Conflicts-of-Interest-Feb-2011.pdf

It noted that if the CBA’s position were adopted it could lead to the situation where a lawyer

complied with the ethical rules but was still subject to disqualification by the courts based on

common law fiduciary duties. The Federation felt that this would place lawyers in an untenable

position.106 This raises an important but overlooked point: that ethical duties set by law societies

may be broader than legal duties enforced by the courts, but they cannot be narrower.

The CBA responded critically to the Federation’s recommendations.107 The CBA criticised both

the process by which the Federation formulated its recommendation and the substance of those

recommendations. The Council of the Federation then asked the Special Advisory Committee on

Conflicts of Interest to review the CBA’s response and to conduct whatever additional

consultations it deemed necessary. That Committee presented a further report to the Federation

Council in February 2011 which recommended adoption of the unrelated matters rule.108 In the

course of making its recommendations, the Advisory Committee met with members of the CBA

Task Force and also commissioned an independent review from Professor Brent Cotter of the

University of Saskatchewan Law School on the question of how the public interest is best

protected by an ethical rule governing acting against a former client. Professor Cotter concluded

that the bright line rule of Neil best advances the public interest.109 The CBA Task Force then

commissioned an opinion from the Honourable Michel Bastarache, a retired justice of the

Supreme Court of Canada. I, among others, publicly questioned Mr Bastarache’s wading into the

battle as he had participated in two of the three cases in the Conflicts Trilogy.110 Not surprisingly,

106 Ibid. See also Morrsion (n 95) 566, 588. 107 Canadian Bar Association, ‘Response to Federation of Law Societies of Canada Advisory Committee on Conflicts of Interest Final Report’ (August 2010), www.cba.org/CBA/groups/PDF/Response%20to%20FLSC%20Niagara%20%282%29.pdf. 108 Federation of Law Societies of Canada, Advisory Committee on Conflicts of Interest, Supplementary Report, 14 February 2011, www.flsc.ca/_documents/conflicts-of-interest-supp-feb-2011C.pdf. 109 Professor Cotter’s opinion is attached as an appendix to the Supplementary Report of the Federation Advisory Committee, ibid. 110 Justice Bastarache was a member of the five-strong panel that unanimously decided Neil (n 58) and a member of the minority in Strother (n 1). His opinion is also attached as an appendix to the Supplementary Report of the Advisory Committee (n 108). To be clear, there exist no guidelines for the activities of retired judges in Canada and thus Justice Bastarache could not be said to have broken any rules. This absence of rules for retired judges spurred a group of law professors to write to the Canadian Judicial Council, the Canadian Bar Association and the Federation of Law Societies of Canada urging consideration of the issue. See Cristin Schmitz, ‘Law Profs Call for Rules to “Guide” Ex-Judges’ Lawyers Weekly, 1 April 2011, www.lawyersweekly.ca/index.php?section=article&articleid=1382. In August 2011, a leading member of the Canadian Judicial Council stated publicly that the Council is considering updating its guidelines for judges to address this issue, amongst other things. See Cristin Schmitz, ‘Ethics, Judges and Mediation’ Lawyers Weekly, 2 September 2011), www.lawyersweekly.ca/index.php?section=article&articleid=1487 (‘Manitoba Chief Justice Richard Scott, the chair of the CJC’s judicial conduct committee, revealed during an interview that the disciplinary body for Canada’s 1,100 federally appointed judges is preparing to revisit, and eventually update, its ethical

given that he was in the minority in Strother,111 Justice Bastarache’s opinion sided with the CBA.

Professor Cotter considered Justice Bastarache’s opinion and then produced a supplementary

opinion confirming his prior opinion.112 The Federation Council considered the Advisory

Committee’s report in March 2011 and asked it to further consider the rule for current clients.

Behind the scenes, members of the CBA Task Force on Conflicts of Interest have been attempting

to lobby law societies to adopt their conflicts rule while discussions continue between the CBA

and the Federation aimed at finding a compromise. A different committee of the Federation, the

Standing Committee on the Model Code of Professional Conduct, delivered a long-awaited

further report on conflicts to the Federation Council at the end of November 2011.113 This report

essentially endorses the principles contained in previous Federation reports, although choosing

the structure the rule differently. Most importantly, the Federation continues to expressly support

the position of the Supreme Court of Canada and the bright-line rule of Neil.

Unless the Federation does an about-face, law society representatives will be forced to choose

between competing rules and competing visions of lawyer loyalty. Many are awaiting the

Supreme Court’s next foray into the dispute. The stakes are high, not only in business terms but

in regulatory terms as well. As Alice Woolley has argued, if provincial regulators were to follow

the CBA’s lead and adopt a similar attitude towards the Supreme Court of Canada’s regulatory

authority, the privilege of self-regulation may be called into question.114

Conclusion

The duty of loyalty is now squarely at the centre of the conflicts of interest analysis in Canada.

While self-regulation is on the wane in other common law countries, the bar in Canada still clings

to a mythical view of unfettered self-regulation, recognising that lawyers are officers of the courts

guidelines for judges. He said since the council of federal chief justices and associate chief justices issued the “guidelines” (they are advisory only) in 1998, new ethical questions have emerged, including concerns about Canadian judges’ participation in international activities and judges returning to the practice of law after they step down or retire from the Bench’). To be absolutely clear, I am on record as opposing what Justice Bastarache did in this case. I do not think it is appropriate for a retired judge to give legal advice that directly relates to cases in which he participated. It was ill-advised for the CBA to ask Justice Bastarache to render an opinion and it was ill-advised for Justice Bastarache to have agreed to do so. I think it also risks undermining the legitimacy of the Supreme Court’s authority. See my comments in Schmitz, ibid. 111 n 1. 112 Also attached as an appendix to the Supplementary Report of the Advisory Committee (n 108). 113 Federation of Law Societies of Canada, Standing Committee on the Model Code of Professional Conduct, Report on Conflicts of Interest (November 21, 2011) http://www.flsc.ca/_documents/Conflicts-of-Interest-Report-Nov-2011.pdf 114 Woolley (n 85) 91.

but at times unwilling to acknowledge that the courts have a legitimate role in regulating the

conduct of lawyers. Cooperative co-regulation has acceded to competitive regulation. This is not

only a battle between the bar and the courts but a battle within the bar as the Federation and the

CBA clash over who is the authoritative voice in articulating the values of the legal profession.

The CBA is the authoritative voice of the legal profession in Canada; the Federation is the

national voice of the legal regulators. They have different mandates but they are each proposing

competing codes of conducts with contrasting conflict rules which reveal different visions of

lawyer loyalty.

Neither the CBA nor the Federation has been willing to directly confront the elephant in the

room: money. What neither of these groups seems willing to acknowledge directly is that the

issue is more than one of principle, it is also one of profit. The clash over conflicts of interest is

very much about the business of law in Canada.115 The key protagonists seem unwilling to

confront this obvious point. Perhaps this is because such an acknowledgement would necessitate

introspection and an open debate about the profession’s ‘core values’116—what it means to be a

lawyer in Canada. The fundamental question—which is one of high principle—is whether the

rules of ethics should be dictated by the realities of practice or whether the realities of practice

should be made to conform to the rules of ethics. I firmly believe that it should be the latter.

In an August 2011 address to the Canadian Bar Association, the Governor General of Canada,

himself a lawyer and former law dean, reminded those present that self-regulation stems from a

social contract between lawyers and society. According to His Excellency, if Canadian lawyers

fail to meet our obligations under the social contract, society will intervene and regulation and

change will be forced upon the Canadian legal profession.117 Self-regulation does not inherently

attach to the practice of law, as has been clearly confirmed by events in other common law

jurisdictions. It is only when and because self-regulation is shown to be in the public interest that

this privilege can be preserved. Thus, the rules of ethics must be independently determined and

demonstrated to protect the public interest, not made derivative of the practice of law.

To be sure, the CBA has engaged the debate on the level of principle but Alice Woolley is correct

in her observation that its definition of the public interest aligns all too easily with lawyers’

115 See Kimberly J Jackeman and Shanti M Davies, ‘The Bright Line: The Decision of R v Neil and its Impact on the Business of Law in Canada’ (April 2003) The Advocate 715; Chester (n 20) 8. 116 cf Paul D Paton, ‘Multidisciplinary Practice Redux: Globalization, Core Values, and Reviving the MDP Debate in America’ (2010) 78 Fordham Law Review 2193. 117 His Excellency The Right Honourable David Johnston, ‘Canadian Bar Association’s Canadian Legal Conference—The Legal Profession in a Smart and Caring Nation: A Vision for 2017’, Halifax, Nova Scotia, 14 August 2011, www.gg.ca/document.aspx?id=14195.

interests on conflicts of interest.118 Ultimately, as noted above, self-regulation itself may be at

risk. If the CBA is successful in loosening the restrictions on conflicts of interest, the legal

profession in Canada may end up looking less like a profession and more like a business,

weakening the case for self-regulation. If this occurs, it will be the bar itself that may provide the

basis for a challenge to self-regulation. With the battle over conflicts of interest in Canada now in

its third decade, there is a real danger of the bar delivering a self-inflicted wound on self-

regulation.

118 Woolley (n 85) 91.