This Week in Legal Ethics – Corporate Law: Acting Against Former Clients

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LegalEthicsBannerBy Melanie Hodges Neufeld

The Law Society’s Ethics Committee has released a Professional Conduct Ruling to provide guidance for the profession. This ruling deals with 2.04(10) of the Code of Professional Conduct:

2.04 (10) Unless the former client consents, a lawyer must not act against a former client in:

(a) the same matter,
(b) any related matter, or
(c) any other matter if the lawyer has relevant confidential information arising from the representation of the former client that may prejudice that client.

Commentary [1] This rule guards against the misuse of confidential information from a previous retainer and ensures that a lawyer does not attack the legal work done during a previous retainer, or undermine the client’s position on a matter that was central to the retainer. It is not improper for a lawyer to act against a former client in a fresh and independent matter wholly unrelated to any work the lawyer has previously done for that client if previously obtained confidential information is irrelevant to that matter.

Cite as:                        2015 SKLSPC 9

Facts:

Lawyer X incorporated a professional corporation and acted as corporate counsel to the corporation for numerous years.  Eventually, a dispute arose between the shareholders, and a minority shareholder brought an oppression application against the majority shareholders.  After some legal wrangling between Lawyer X and Lawyer Y over potential conflicts of interest, Lawyer X purported to withdraw from acting for the corporation, in order to continue to represent the majority shareholders in the application.  Lawyer Y argued that the conflict could not be avoided simply by withdrawing from representation of one, in favour of representing the other.

Decision:

The Ethics Committee considered whether a lawyer, who acted for a corporation, as well as individual shareholders for many years, can withdraw from acting for the corporation in order to act only for the majority shareholders in an oppression application brought by a minority shareholder.

The Committee determined that Lawyer X is not able to act for any of the shareholders. The majority shareholders’ interests may be adverse to the interests of the corporation, which the member incorporated.  The matter at hand is the same, or sufficiently related to the matters on which Lawyer X previously represented the corporation.  To continue to represent clients in this dispute would breach section 2.04(10) Acting Against Former Clients. Lawyer X should withdraw immediately and direct the majority shareholders to obtain outside counsel.

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