The Supreme Court of Canada’s recent decision in Strother v. 3464920 Canada Inc. clarifies (and arguably expands) the fiduciary duties owed by lawyers to their clients. It makes clear that while the scope of a lawyer’s retainer is determined by contract, there are fiduciary duties outside of the contract which overlay and govern the solicitor-client relationship. Strother was heard by a nine-member Supreme Court which split five-to-four on all but one minor issue under appeal.
Writing for a five-member majority of the Supreme Court of Canada, Binnie J. upheld the Court of Appeal’s finding that Strother had breached the fiduciary duty he owed to Monarch. Binnie J. held that while a lawyer does not have a duty to alter a past opinion in light of a subsequent change of circumstances, that principle did not assist Strother. Monarch’s 1998 retainer either expressly or impliedly required Strother to advise Monarch that new developments had rendered his earlier advice to be no longer operative. The fact that Strother personally benefited from not advising Monarch of the new scheme was clearly of concern to Binnie J.
The dissenting decision was written by Chief Justice McLachlin and the essence of her reasoning is captured in this passage:
[W]hether a conflict between two clients exists is dependent on the scope of the retainer between the lawyer and the client in question. The fiduciary duties owed by the lawyer are molded by this retainer, as they must be in a world where lawyers represent more than one client.
Expanding on this point, McLachlin C.J. held that a lawyer’s duty of loyalty to a client is not “a duty in the air. It is attached to the obligations the lawyer has taken pursuant to the retainer.”
McLachlin C.J.’s reason for restricting the duties owed by lawyers to clients, to duties that arise specifically from the retainer, relates to her concern that if the duty of loyalty was left as a “free-floating” duty, the potential for conflicts would be vast and lawyers would be prevented from ever acting for two clients which compete in the same business and such a result would be inimical to modern commerce.
In summary, Strother is an important new decision which confirms that lawyers have a higher duty to their clients than found in the strict terms of an existing retainer they have with clients. While a lawyer has no duty to advise a client of any change to an opinion after the lawyer-client relationship has ended, if the lawyer continues to act for the client, there is a duty of loyalty to the client to keep them apprised when the opinion is no longer operative. It is the writer’s view that this decision should not be seen as restricted to lawyers but will also have application to other professionals, such as those providing financial advisory services.