Canadian National Railway Co v McKercher LLP | |
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Hearing: 24 January 2013 Judgment: 5 July 2013 | |
Full case name | Canadian National Railway Company v. McKercher LLP and Gordon Wallace |
Citations | 2013 SCC 39 |
Docket No. | 34545 [1] |
Prior history | APPEAL from Wallace v Canadian Pacific Railway, 2011 SKCA 108 (28 September 2011), setting aside Wallace v. Canadian Pacific Railway, 2009 SKQB 369 (21 September 2009) |
Ruling | Appeal allowed; case remanded to court of first instance for final determination |
Holding | |
The bright-line rule concerning a duty of loyalty by a lawyer to his client, first stated in R. v. Neil, applies in this matter, and disqualification may be necessary to maintain the repute of the administration of justice | |
Court membership | |
Chief Justice | Beverley McLachlin |
Puisne Justices | Louis LeBel, Morris Fish, Rosalie Abella, Marshall Rothstein, Thomas Cromwell, Michael Moldaver, Andromache Karakatsanis, Richard Wagner |
Reasons given | |
Unanimous reasons by | McLachlin CJ |
Canadian National Railway Co v McKercher LLP [2] is a significant case of the Supreme Court of Canada that consolidated Canadian jurisprudence on conflicts of interest in the legal profession.
The Supreme Court of Canada has recast Canadian jurisprudence in recent years concerning professional conflicts of interest in the legal profession. In its 1990 ruling in Macdonald Estate v. Martin, [3] it first addressed the question of confidential information being handled by lawyers.
In 2002, the SCC dealt with the question of loyalty, ruling in R. v. Neil [4] that the question of whether a conflict of interest may exist in how lawyers deal with clients was subject to a bright-line rule, where a lawyer, and by extension a law firm, may not concurrently represent clients adverse in interest without first obtaining their consent. While this was obiter to the case at hand, in 2007 it became the ratio for determining the later SCC case of Strother v. 3464920 Canada Inc. [5] [6]
In 2008, McKercher LLP (a large law firm in Saskatchewan) was representing Canadian National Railway with respect to various corporate matters within the province. In the same year, it also accepted a retainer from Gordon Wallace to act against CN in a $1.75 billion class action based on allegations that CN had illegally overcharged Western Canadian farmers for grain transportation. McKercher did not advise CN that it intended to accept the Wallace retainer, and CN only learned of it when it was served with the statement of claim in 2009. All of McKercher's dealings with CN were subsequently terminated that year, On McKercher's initiative in some matters, and on CN's initiative in another.
Following receipt of the statement of claim, CN applied for an order removing McKercher as solicitor of record for Wallace in the class action against it, on the grounds that McKercher:
At the Court of Queen's Bench for Saskatchewan, Popescul J found that the firm had breached the duty of loyalty it owed CN, and the relationship was "materially and adversely affected" by its decision to accept the Wallace retainer, [7] indicated by several relevant factors: [8]
The Queen's Bench ruling was overturned by the Court of Appeal for Saskatchewan. In his ruling, Ottenbreit JA held that: [9]
The appeal was allowed by the SCC. In a unanimous ruling, McLachlin CJ identified several key issues. [10]
The courts have inherent powers to resolve issues of conflicts in cases that may come before them. [11] This is not to be confused with the statutory powers conferred on the legal profession by the various legislatures, [3] as the courts are concerned with the administration of justice, and the various law societies are concerned with the good governance of the profession. [12]
A lawyer owes his client a duty of loyalty, which has three dimensions: [13]
With regard to the first dimension, the nature of the bright line rule stated in Neil and Strother was clarified:
[31] The bright line rule holds that a law firm cannot act for a client whose interests are adverse to those of another existing client, unless both clients consent. It applies regardless of whether the client matters are related or unrelated.... [32] However, Neil and Strother make it clear that the scope of the rule is not unlimited. The rule applies where the immediate legal interests of clients are directly adverse. It does not apply to condone tactical abuses. And it does not apply in circumstances where it is unreasonable to expect that the lawyer will not concurrently represent adverse parties in unrelated legal matters....
In that regard: [14]
In the case at hand:
Disqualification may be required: [18]
In the last case, the courts must consider several factors in arriving at the appropriate decision: [19]
In the current appeal, only the last case was relevant, and the matter was remanded back to the court of first instance to be decided in accordance with these reasons:
[67] As discussed, a violation of the bright line rule on its face supports disqualification, even where the lawyer-client relationship has been terminated as a result of the breach. However, it is also necessary to weigh the factors identified above, which may suggest that disqualification is inappropriate in the circumstances. The motion judge did not have the benefit of these reasons, and obviously could not consider all of the factors just discussed that are relevant to the issue of disqualification. These reasons recast the legal framework for judging McKercher's conduct and determining the appropriate remedy. Fairness suggests that the issue of remedy should be remitted to the court for consideration in accordance with them.
McKercher consolidated and clarified the case law in this field, and was seen as a statement that the bright line rule in Neil was to be firmly applied, and not to be treated as a rebuttable presumption. [20]
The bright line rule has also been integrated by Law Societies in ethics codes such as at article 3.4-1 of the Model Code of Professional Conduct of the Federation of Law Societies of Canada.