Consultation by the Ethics Committee

Acting for and against a sophisticated client in unrelated matters

At the request of the Benchers, the Ethics Committee is calling for comments from BC lawyers on whether the current rules in the Professional Conduct Handbook should be modified to permit lawyers to act against current, sophisticated clients in some circumstances. It is not intended to change the rules to apply to any clients that do not fit the definition of sophisticated client in proposed Rule 6.31(c), set out below.

Current rules

In 2001 the Benchers passed rules that permit lawyers to act for one client and against another in some limited circumstances. The scope of those circumstances is described in Chapter 6, Rules 6.3 and 6.4 of the Handbook, which state:

6.3 A lawyer must not represent a client for the purpose of acting against the interests of another client of the lawyer unless:

(a) both clients are informed that the lawyer proposes to act for both clients and both consent, and

(b) the matters are substantially unrelated and the lawyer does not possess confidential information arising from the representation of one client that might reasonably affect the other representation.

6.4 For the purposes of Rule 6.3, the consent of a client to the lawyer acting for another client adverse in interest may be inferred in the absence of contrary instructions if, in the reasonable belief of the lawyer, the client would consent in the matter in question because the client has

(a) previously consented to the lawyer, or another lawyer, acting for another client adverse in interest,

(b) commonly permitted a lawyer to act against the client while retaining the same lawyer in other matters to act on the client's behalf, or

(c) consented, generally, to the lawyer acting for another client adverse in interest.

Benchers' policy decision of October, 2002

The Benchers, on the recommendation of the Ethics Committee, agreed to further broaden the circumstances in which lawyers could act against current sophisticated clients. In October, 2002 they agreed in principle to permit lawyers to act against sophisticated clients in certain circumstances. The rationale for the decision was to provide sophisticated clients with greater choice of counsel and to reduce the possibility that firms acting for such clients would be removed as counsel when no legitimate interest of the client was at stake.

The circumstances under which a lawyer could act against sophisticated clients were to be restricted to when:

1) the matters are substantially unrelated,

2) the lawyer has no confidential information arising from the representation of one client that might reasonably affect the other representation, and

3) the clients have been informed in advance by their lawyers that their lawyers may act against them in the circumstances set out in 1) and 2) above.

Proposed rule change

To give effect to the Benchers' decision of October, 2002, the Ethics Committee has proposed the addition of Rule 6.31 to Chapter 6 of the Handbook. Rule 6.31 would state:

Acting against a current client - exception for sophisticated clients

6.31 As an exception to rule 6.3(a), a lawyer may represent a client against the interests of another client who does not consent if:

(a) the client, to the knowledge of the lawyer, regularly engages another lawyer,

(b) the lawyer has notified the client in writing at the time the lawyer was engaged3.1 that the lawyer may act against the interests of the client in circumstances permitted by this rule, and

(c) any client involved that does not regularly engage another lawyer consents.

Footnote:

3.1 In the case of an engagement existing when this Rule comes into effect, the lawyer may notify the client in writing on or before [date] (three months after rule comes into effect).

Developments in the case law since October, 2002

Since the Benchers made the October, 2002 policy decision in regard to sophisticated clients, there have been two important court decisions that are directly relevant: R. v. Neil 2002 SCC 70 (www.lexum.umontreal.ca/csc-scc/en/pub/2002/vol3/html/2002scr3_0631.html) and Ribeiro v. The City of Vancouver 2002 BCCA 678 (www.courts.gov.bc.ca/jdb-txt/ca/02/06/2002BCCA0678.htm).

In R. v. Neil the Supreme Court of Canada, in obiter dicta, articulated a general rule that a lawyer may not represent one client whose interests are directly adverse to the immediate interests of another current client. The rule applies even if the two matters are not related, unless both clients consent after full disclosure and the lawyer reasonably believes that it is possible to represent each client without adversely affecting the other. The court recognized that, in the case of entities that can be described as professional litigants such as governments and large corporations, such consent may be implied in some circumstances.

In Ribeiro v. City of Vancouver, however, the BC Court of Appeal distinguished Neil on its facts, and declined to accept that a lawyer's duty of loyalty prevented the lawyer from continuing to represent a client where the lawyer's firm simultaneously represented the other side on other non-related matters. Leave to appeal the decision in Ribeiro to the Supreme Court of Canada was refused.

Some Benchers and other lawyers have expressed concern about implementing the Benchers' October, 2002 policy decision on the basis it is inconsistent with the principles in R. v. Neil. Others, who favour implementing the decision, argue that it is not inconsistent because it applies only to sophisticated clients who have had notice, and Neil contemplates that clients' consent to their lawyers acting against them may be implied. Moreover, proponents of a rule change note that a rule incorporating the October, 2002 decision would be clearly consistent with Ribeiro.

Summary of arguments for and against the proposed change

Those who favour this proposed change make some of the following arguments for it:

  • It will provide sophisticated clients with greater choice of counsel. In particular, a sophisticated client will not necessarily be forced to relinquish a lawyer with whom the client has a longstanding relationship simply because, in an unrelated matter, that lawyer or the lawyer's firm acts for a client adverse in interest.
  • Lawyers and law firms will not have to refuse to act for some sophisticated clients just because they act for a client adverse in interest on an unrelated matter.
  • Since a rule change will affect only sophisticated clients (those who regularly use other lawyers), such sophisticated clients that desire it can negotiate an agreement with their lawyers to require those lawyers to act only for them.

Those who oppose this proposed change make some of the following arguments against it:

  • The Law Society would have a different standard for determining conflicts than the Supreme Court of Canada has defined in Neil. Since law societies have concurrent jurisdiction with the courts, this is permissible, but not desirable.
  • Even sophisticated clients, in some circumstances, may feel a sense of betrayal if their lawyers act against them even if, before the disputed representation began, they received advance notice of the lawyers' right to do so.
  • Even with all lawyers adhering to the existing rules, there is still a wide choice of lawyers for all clients.
  • The definition of sophisticated client in the proposed Rule is too broad and includes potential clients who may not really be sophisticated.

 


The Ethics Committee welcomes your comments on the proposed rule change. Please send comments to Jack Olsen, Staff Lawyer - Ethics, by April 29, 2004 at:

 

Law Society of British Columbia
845 Cambie Street
Vancouver, BC V6B 4Z9
Tel.: 604 443-5711
Fax: 604 646-5902
Email: jolsen@lsbc.org