Law Times

Page 4 August 19, 2013 Law Times • NEWS Ontario court applies McKercher, allowing lawyer to remain on case BY YAMRI TADDESE Law Times I n a decision referencing the Supreme Court's ruling in Canadian National Railway Co. v. McKercher LLP, an Ontario court has refused to remove counsel from a case because he had formerly represented the opposing party. Richard Hames, a founding shareholder of a construction company, wants to retire but is in dispute with the rest of the shareholders about the terms of his withdrawal from the enterprise. The shareholders' lawyer, Mark Klaiman, had previously represented Hames and his company. But while Hames claimed Klaiman was in a conflict of interest due to his former retainer with him, the court didn't readily agree. In McKercher, the court made it clear that "it is not sufficient for the former client to make bald assertions that the lawyer had obtained confidential information," Superior Court Justice David Brown wrote in Hames v. Greenberg on July 24. "The client must demonstrate that the information must be capable of being used against it in some tangible manner and that the previous relationship in which conretainer could have yielded fidential information was relevant confidential infordisclosed existed between mation that could be used Klaiman, on the one hand, against the client." and Hames and the family In Brown's view, Hames trust on the other." wasn't able to establish that Brown also dismissed Klaiman had the kind of inthe applicants' argument formation that could jeopthat Klaiman could be a witardize him in the current ness in the case. Based on litigation. the evidence before him, the Hames mentioned a judge said there was no "real luncheon meeting in which basis" to conclude that that he, Klaiman, and the other "probably, or even likely," shareholders had a discuswould happen. sion about an ongoing liti"I therefore see no reason gation matter. The evidence to disqualify him from actdidn't suggest anything said 'You've got to be really, really careful in over the lunch was confi- shareholder fights because you've got to ing as lawyer of record for dential, according to Brown. remember who your client is and who your the non-corporate respondents in this proceeding," he "More significantly, that client is not,' says Simon Chester. wrote. conversation did not take Although the judge referenced McKercher, place in circumstances where Hames could reasonably expect his discussion with Klaiman older case law would have led Brown to the in the presence of the other shareholders would same conclusion, says Simon Chester, a litigabe treated as confidential as against those tor at Heenan Blaikie LLP whose work focuses shareholders. It was a non-confidential conver- on conflicts of interest and professional responsibility. sation," wrote Brown. "While the McKercher case is very impor"I therefore find that no prior retainer or KEYNOTE SPEAKERS: LAURIE PAWLITZA, Treasurer Emeritus, Law Society of Upper Canada AND JORDAN FURLONG, Lawyer, Speaker, Consultant TO DEBATE "Should I Stay or Should I Go" For further information regarding this event please visit, www.lexpert.ca/zenith or contact any one of our Account Executives at media.sales@thomsonreuters.com or Grace So at 416-609-5838 • Joseph Galea at 416-649-9919 Steffanie Munroe at 416-315-5879 • Kimberlee Pascoe at 416-649-8875 Signature Sponsor Lexpert_LT_Aug8_13.indd 1 Platinum Sponsor Hosted in partnership with www.lawtimesnews.com Community Supporter 13-08-08 2:22 PM tant, Justice David Brown would have decided this case exactly the same way six months ago," says Chester. Still, Chester says Hames offers important lessons for lawyers. One of those lessons is that parties must raise issues of conflicts of interest in due time, he notes. In McKercher, the Supreme Court stated that parties shouldn't bring the issue of conflicts of interest for "tactical reasons." The rule is that "there are legitimate interests that need to be protected by conflict rules but you can't sit on your rear end and tolerate a conflict and assert it when it's convenient," says Chester. "You've got to do it in a timely fashion because every conflict case involves depriving another party of a choice of counsel." In the most recent case, Hames waited a year before raising a conflict allegation. In another key message, the court highlighted an area of conflict of interest Klaiman wasn't able to circumvent. Although he can represent the shareholder respondents, he'll have to recuse himself as counsel for the corporate respondents, Brown ruled. "As the case law establishes, the interests of the respondent shareholders are not identical to the interests of the respondent corporations, corporations of which Hames and the family trust remain shareholders and of which Hames remains a director," the judge wrote. "In those circumstances Klaiman cannot represent both the shareholders and corporate respondents; a conflict exists between their respective legal interests."  Shareholder disputes require lawyers to take extreme care in identifying who their clients are, Chester notes. "You've got to be really, really careful in shareholder fights because you've got to remember who your client is and who your client is not," he says. "It's really important to remember that if you're acting for a corporation, corporation interests are different from shareholders." In an important distinction from McKercher, Hames involved a lawyer who previously had a retainer with the opposing party rather than representing the two sides concurrently, says Malcolm Mercer, a partner with McCarthy Tétrault LLP's litigation group. "We'll have to see how McKercher gets applied when a lawyer is in a matter directly adverse to the interest of a current client," says Mercer. "Those issues don't arise here because it's not a current client." For the courts, it's tricky to find out whether the lawyer in question knows any confidential information that could be used against a former client because in the process of that query, that very secret information might surface, says Mercer. LT

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