In Piikani Nation v. McMullen, 2024 ABCA 306, the applicants applied for permission to appeal a decision that disqualified Gowling WLG from acting as counsel against the respondent.
“The decision by the chambers judge disqualifies Gowlings from acting through the interplay of two legal concepts arising from a lawyer’s duty to avoid conflicts of interest,” wrote Justice Alice Woolley. “Specifically, the principle that lawyers have legal obligations to ‘near clients’ as well as to clients, and the principle that lawyers have an ongoing obligation not to act in a matter which would deprive a former client of the benefits obtained from the lawyers’ prior representation of that former client.”
It was held by the chambers judge that an individual can be a near client even if the law firm does not have confidential information from them and that a lawyer’s ongoing duty of loyalty to former clients applies to former near clients.
The respondent, Dale McMullen, ought to be considered a former near client, according to the chambers judge. The respondent was the key contact between the firm and Piikani Investment Corporation and Piikani Energy Corporation and had no independent privilege. Anything shared by or with him could be used by the corporations.
The chambers judge was satisfied that based on the respondent’s information, Gowling was “seeking to challenge the validity of some of the advice” they gave the respondent and the companies from 2005 to 2008. The chambers judge could not see “how they can properly do that.”
Gowling posited that all of the lawyers who were involved with Piikani Nation, the respondent and the corporations were “long gone” If they need to testify, counsel from another firm would be involved to lead the evidence or cross-examine.
“I do not see how that solves the problem,” wrote Justice Woolley. “I do not know how that gets around the basic problem raised by [Brookville Carriers Flatbed GP Inc. v. Blackjack Transport Ltd., 2008 NSCA 22] and so succinctly stated by Justice Devlin: A lawyer may not act for a new client to undermine work they have done for a former client.”
She noted that the chamber’s judge’s determination was made while also not finding that there were any risks to confidential or privileged information.
“In part for that reason, he did not disqualify Caireen Hanert, the main lawyer in this case, from personally acting against the respondent.”
The chambers judge identified that Gowling had worked on an indemnification agreement at issue in the litigation, a factual determination disputed by the applicants.
“He also relied on the proposition that, as a near client, Mr. McMullen ‘should have full access to Gowlings’ files for matters that were engaged on during his tenure as managing director and CEO, as the contents of their files and the advice they gave on various matters may be key to his defences on some of the allegations against him.’” wrote Justice Woolley.
“He also based his decision to remove Gowlings in part on the possibility that Mr. McMullen might have to call lawyers who were at Gowlings at the time Mr. McMullen was a near client.”
Still, Justice Woolley granted permission to appeal as it raised significant questions of law, the significance of the issue to the applicants and the administration of justice.
“The chambers judge’s interpretation and application of the law on conflicts of interest raises novel issues of importance to the practice and the legal profession,” she said.
“I note in particular that the chambers judge’s determination that lawyers owe an ongoing duty of loyalty to former near clients appears to be both an extension and alteration of fundamental principles of the law governing lawyers,” she continued. “It is not clear, for example, how a duty of loyalty to a near client can co-exist with a lawyer’s fiduciary obligation to their actual clients.”
The progress of the actions was already said to be hampered due to complexities arising from the decision to remove Gowling as counsel.
“It is important to determine whether that removal was legally appropriate.”
Permission to appeal was allowed.
Counsel for the applicants were Carsten Jensen and Ripple Kaila of JSS Barristers.
The respondent appeared on his own behalf.
They were not immediately available for comment.
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