Date: Thu, 5 Jan 2006 15:39:34

From: Andrew Tettenborn

Subject: VL for breach of duty of loyalty

Jason Neyers wrote:

Colleagues:

I suggest that the law firm should start saving the $60 million for the inevitable judgment against them, "policy" demands it! We will of course have to wait until the SCC tells us what the policy is but waiting is half the fun.:)

More seriously, based on the facts as outlined by Lionel the judgment seems about right (in the abstract): according to traditional doctrine there can be no VL for non-good faith wrongs but the firm should be personally liable for representing the trustworthiness of the lawyer.

This wrong leads only, however, to compensatory damages.

Colleagues:

Whether or not there can be VL for non-good-faith wrongs, Jason must be right. Two points strike me about the claim for the $60m under VL.

(1) A more proper criterion for deciding whether an employer/firm has to disgorge an employee/partner's UE is, I would have thought, agency law.

If (and only if) the UE was received by the employee as the employer's agent should the employer have to return it. VL goes beyond agency liability only in limited and specialised contexts. And even there it has on occasion been reined in: for example, the employer is only liable for his employee's misrepresentation if that representation was made within actual or ostensible authority.

(2) Surely the SCC must know better than to say policy demands that the firm pay over the $60m. VL for losses is one thing: the plaintiff deserves the money and the employer ought to take at least some of the risks of hiring potential (bankrupt) wrongdoers. Not so with UE. The plaintiff doesn't deserve the money: the only reason he's entitled to it is that the employee's demerit is even greater. The employer never had it at all. Why on earth make it pay up?

Andrew

--
Andrew Tettenborn MA LLB
Bracton Professor of Law
University of Exeter, England

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LAWYER, n. One skilled in circumvention of the law (Ambrose Bierce, 1906).

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