Date: Tue, 20 Jun 2006 09:54:47 -0400

From: Lionel Smith

Subject: Lawyer's No Conflict Rules

Perhaps I am misguided but to me this is clearly a question of fiduciary law! Whether fiduciary obligations belong to contract or tort, or perhaps a bit of both, is a whole other can of worms.

We had a big case in Canada that reviewed the whole question of intra-firm conflicts of duty and duty, though not in a takeover context: Macdonald Estate v. Martin [1990] 3 S.C.R. 1235. This decision, which examined the solutions in a range of common law jurisdictions, invited the Canadian Bar Association to reformulate the ethical standards governing "Chinese walls," which it did.

In Chapters Inc. v. Davies, Ward & Beck L.L.P. (2001), 52 O.R. (3d) 566 (C.A.), a takeover target applied successfully to have a large firm disqualified from acting on behalf the bidder due to earlier work that the firm had done for a predecessor of the target. I read in the newspaper a few years ago (Globe and Mail, 4 December 2000, page B1) that a large national corporation made a point of having work done for it by all the big law firms, so that if it was ever a takeover target, none of them could act for the bidder.

The decision of the Privy Council in Kelly v Cooper [1993] AC 205 found an implicit waiver by the client of a real estate agent of the normal prophylactic rule against conflicts of duty and duty; many would say they were a little too quick to find this waiver. It is a fun case to read however, involving Ross Perot and the lifestyles of the rich and famous in Bermuda.

Lionel

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