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Commentary

How the new code of conduct for lawyers could affect businesses Add to ...

The regulation of the legal profession in Canada is carried out by provincial and territorial law societies, which have always regulated the lawyers within their jurisdictions under their own regulatory “Codes of Professional Conduct.”

The problem for lawyers and clients was that the regulatory code of conduct of one province might well be different than the code of conduct in another. As Canadian lawyers have had, since the early 2000s, mobility rights enabling them to practice law in other jurisdictions without specifically qualifying in the those jurisdictions, what does the B.C. lawyer do when she’s practising Ontario law and she encounters a potential ethical issue where the Codes of the two provinces differ, say on a matter of a potential conflict of interest?

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This year, Canadian law societies have been replacing their regulatory codes of conduct with variations of the new Model Code of Professional Conduct that is expected to apply across Canada. The Model Code was developed by the Federation of Law Societies in Canada as part of a drive to standardize regulatory frameworks across the country.

So why should the business community care?

First, your business may need legal services from a number of lawyers in many provinces, especially in transactional work where the vendor is in once province, the purchaser is in another and perhaps the assets being acquired are in a third province (or in many different provinces). Different professional conduct codes in different provinces could affect the lawyer’s ability to act and adversely affect the client. Indeed, if your lawyers have to deal with a professional conduct issue relating to the transaction that applies in two provinces but not all ten, this could complicate the transaction through no fault of the client. Arguably, standardized regulation through a Model Code that is similar throughout Canada also will assure the public that lawyers are held to the same high level of competence and ethics, wherever lawyers practice in Canada.

Second, if you live in one of Canada’s larger cities, your business may be utilizing the services of one of Canada’s large national firms that have offices across Canada. Standardization of the regulatory environment across Canada makes it easier for law firms with particular expertise to do your legal work in whatever province you are in from whatever province they are in, regulated under a code of professional conduct common to all jurisdictions. It also assists with lawyer mobility across Canada.

One of the most contentious issues in developing the Model Code, and the most visible area of difference between the provinces that affects both lawyers and clients, is the determination of conflicts of interest. There are two major questions:

1. Can a lawyer who has acted for a client in the past, act against that client in the future?

2. Can a lawyer who currently acts for a client, act against that client on unrelated matters? While the answers may seem obvious, they’re neither obvious nor straightforward.

For example, in a small town where there may only be one or two lawyers, not allowing a lawyer to act against a former client could all but render that potential client without any available legal counsel at all, even though the former client’s matter was unrelated and concluded years before. The new Model Code deals with this issue by only permitting a lawyer to act against a former client with the consent of that former client or, if the former client does not consent, where the current and former matters are unrelated and do not put the former client’s confidential information at risk.

In cases where lawyers wish to act against current clients (this happens regularly in banking, foreclosure, governmental and some insurance work now anyway), to ensure protection of the public, the Federation of Law Societies believed that a lawyer must not act against a current client – even if the matters are unrelated – unless both clients consent.

However, the Code permits that consent to be obtained in advance when a lawyer and client negotiate the original engagement agreement. In some circumstances, where the clients are government, a financial institution, a publicly traded entity or similarly sophisticated client, a lawyer may infer client consent to its lawyer acting against it on other matters.

With respect to lawyers acting against current clients, the Canadian Bar Association has a different view than the Federation of Law Societies. It argued the Federation’s approach to conflicts was too broad and that, in unrelated matters, client consent should not be required if the lawyer believed there was no conflict of interest and there was no real or substantial risk to the representation of a client. In the end, the Federation did not accept the Canadian Bar Association view and decided that requiring client consent in most circumstances was in the public interest.

Since then, law societies in British Columbia, Alberta, Saskatchewan, Manitoba, Nova Scotia and Newfoundland and Labrador have implemented their own versions of the Model Code, with some changes to reflect local practice and conditions.

Yet, the debate continues and will be tested in a case now before the Supreme Court of Canada – Canadian National Railway v. McKercher LLP. The case involves CN’s request to have a law firm disqualified from acting for a plaintiff because the law firm had acted for CN on other matters.

While the legal profession awaits that decision, clients in those provinces that have approved new model code can expect to be asked for consent for their lawyers to act against them in some circumstances when potential conflicts of interest might arise. A provision such as this is expected to be included in the firm’s engagement letter it has with clients.

Lawyers may not be happy about the work involved, particularly when it may not always be easy to determine whether a disqualifying conflict of interest prevents the lawyer from acting against a current or former client. However, from the perspective of the public, including small business, clients now enjoy greater protection from potential conflicts of interests by their lawyers.

Tony Wilson is a franchising, licensing and intellectual property lawyer at Boughton Law Corp. in Vancouver, he is an adjunct professor at Simon Fraser University (SFU), and he is the author of two books: Manage Your Online Reputation, and Buying a Franchise in Canada. His opinions do not reflect those of the Law Society of British Columbia, SFU or any other organization.

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