Law Society of Upper Canada
Osgoode Hall
130 Queen Street West
Toronto, Ontario
M5H 2N6
tel (416) 947-3300

December 6, 2002

Jonathan G. Katz
Secretary
U.S. Securities and Exchange Commission
450 Fifth Street NW
Washington, DC
20549-0609

Re: The Law Society's Submission On The Proposed Rule: Implementation Of Standards Of Professional Conduct For Attorneys

File Number: 33-8150.wp

The Law Society of Upper Canada ("the Law Society") is pleased to provide this submission to the U.S. Securities and Exchange Commission ("the Commission") in response to its request for comments on the Proposed Rule: Implementation of Standards of Professional Conduct for Attorneys ("the proposed rules"), and in particular the Commission's inquiry relating to foreign attorneys.

The Law Society's comments address the situation of Ontario lawyers who practice law in Ontario and who provide advice to Canadian issuers that are subject to the requirements of securities laws of the United States. The proposed rules raise a number of issues of concern to the Law Society, particularly from its perspective as the regulator of Ontario lawyers. This submission, however, focuses on the definition of "appearing and practicing" before the Commission, and the threat to lawyer and client confidentiality in connection with the "up-the-ladder" reporting requirements that may lead to the "noisy withdrawal".

Appended to this submission are three rules from the Law Society's Rules of Professional Conduct ("the Law Society's rules") to which reference is made in the submission.

Introduction to the Law Society of Upper Canada

The Law Society is the largest of all Canadian law societies and is the governing body of the 32,000 members of the legal profession in the province of Ontario. It was founded on July 17, 1797, incorporated in 1822, and since its inception has been headquartered in Toronto. The Law Society was the first institution of its kind created under statute in the province and is one of the oldest continuously operating professional organizations in North America. The Law Society Act², the Ontario statute promulgated under the auspices of the Attorney General of Ontario, provides the legislative jurisdiction for the Law Society's independent regulation of the legal profession.

In 1994, the Law Society affirmed its role by adopting the following Role Statement:

The Law Society of Upper Canada exists to govern the legal profession in the public interest by

• ensuring that the people of Ontario are served by lawyers who meet high standards of learning, competence and professional conduct, and

• upholding the independence, integrity and honour of the legal profession,

for the purpose of advancing the cause of justice and the rule of law.

The Law Society's affairs are conducted by 48 governors called benchers, 40 of whom are elected by members of the legal profession every four years and eight of whom are members of the lay public appointed by the Ontario government. Benchers meet monthly to formulate policy on matters related to the governance of the legal profession and deal with other Law Society business in a forum called Convocation. Additional responsibilities include sitting on hearing panels to hear conduct, capacity and competence cases and participation on various Law Society committees. The head of the Law Society is the Treasurer, who presides over Convocation.

The Law Society is responsible for the admission of lawyers to the Law Society as barristers and solicitors. The Law Society's Bar Admission Course is completed by over 1000 students each year who are called to the Ontario bar. The Law Society also maintains and enforces standards of competence within the profession. All members of the Law Society are required to pay a levy to the Lawyers' Fund for Client Compensation which will reimburse members of the public who suffer a loss due to lawyer misconduct. All members in private practice are required to maintain professional liability insurance for claims made as a result of any negligent acts.

A key aspect of the Law Society's authority is setting and enforcing standards of professional conduct for Ontario lawyers. The Law Society investigates complaints of alleged professional misconduct made by the public and members of the profession, and will also initiate an investigation based on media or other reports that come to its attention. The Law Society, through comprehensive procedures, prosecutes those lawyers whose conduct requires a disciplinary response, and imposes penalties that include, but are not limited to, a reprimand, fines, restrictions on practice, suspension from the right to practice and disbarment. The Law Society's rules of conduct provide guidance to lawyers on ethical standards of the profession, and regulations and by-laws made pursuant to the Law Society Act govern such things as trust fund obligations and related informational filing requirements.

The Society's Initial Consideration of the Sarbanes-Oxley Act of 2002

The Law Society was recently requested by the Ontario securities regulator, the Ontario Securities Commission, to comment on the need in Ontario for rules similar to those mandated by Section 307 of the Sarbanes-Oxley Act of 2002. In its October 31, 2002 response to the Ontario Securities Commission, the Law Society noted that the "up-the-ladder" reporting issue has already been addressed in the Law Society's rules (discussed in detail below), but offered to engage in dialogue with the Ontario Securities Commission on whether there is a need to strengthen the rules for lawyers representing public companies. The Law Society's position is that if there is a need to further address this subject in rules, the Law Society will undertake that initiative, and that there is no need for parallel rules by the Ontario Securities Commission.

Comments on the Proposed Rules

The Definition of "Appearing and Practicing" Before the Commission

Part 205 is intended to apply to lawyers licensed in foreign jurisdictions to the extent that they appear and practice before the Commission in representing issuers. The definition of "appearing and practicing" before the Commission is very broad, and as currently drafted covers the advice that Canadian lawyers provide on Canadian law to Canadian issuers in respect of their filings with the Commission.

The broad implication of the definition is that Ontario lawyers who are not licensed in the United States would become subject to the Commission's disciplinary oversight for potential breaches of American standards, on which they have not been retained to advise. This will occur even though, in some circumstances, they will not be familiar with or could not be expected to be knowledgeable of the standards, policies or rules or court decisions interpreting the standards, policies or rules, including the American common law concept of fiduciary obligations.

Ontario lawyers typically advise issuers that are subject to regulation by the Commission as to matters that involve the application of Canadian federal or provincial law; that advice is subject to regulation in Ontario. For example, for a significant number of Canadian issuers, a registration statement filed under the Securities Act of 1933 includes a prospectus and other documents prepared in accordance with and filed under Canadian laws. Canadian lawyers also often advise Canadian issuers about the preparation of disclosure documents, such as proxy circulars required by Canadian corporate laws and material change reports required by Canadian securities laws. If a Canadian issuer has securities that have been registered in the United States, or is otherwise subject to the reporting requirements of the Securities Exchange Act of 1934, these disclosure documents will typically form part of the annual report of the issuer that must be filed with the Commission.

The Law Society questions the need for the Commission to cover virtually all functions related to a Canadian issuer's dealings with the Commission, sweeping in the Ontario lawyers whose advice relates solely to Canadian legal requirements of an issuer unrelated to the jurisdiction of the United States but for the fact that the issuer is subject to, and required to comply with, the securities laws of the United States. It seems inappropriate for the Commission to purport to extend its authority into foreign jurisdictions in order to regulate a purely domestic matter - the professional conduct of lawyers - simply because foreign lawyers may in the course of their practices from time to time act on behalf of clients that are subject to the jurisdiction of the Commission.

The Law Society is interested in exploring with the Commission how the definition of "appearing and practicing" before the Commission could be crafted to exempt the advice on Canadian or Ontario law that Ontario lawyers provide to Canadian issuers who are subject to the securities laws of the United States, and assisting in narrowing the definition to functions that relate directly to the integrity of requirements in the United States.

The "Up-the-Ladder" Reporting Requirement

The Law Society's comments on this requirement relate to how the proposed rules intersect with the Law Society's rules and whether the Commission's regulation of Ontario lawyers in this respect is necessary.

The Law Society agrees with the requirement that a lawyer report "up-the-ladder" in circumstances in which such a report is warranted. In the Law Society's view, this requirement does not violate a lawyer's obligation of confidentiality or lawyer and client privilege, as the client is the corporation and the "up-the-ladder" discussions are all with officers of the client, committees of the board or the board itself.

The Law Society's rules include a similar provision, which appears as Commentary following the rule on justified or permitted disclosure of confidential information³:

A lawyer employed or retained to act for an organization, including a corporation, confronts a difficult problem about confidentiality when he or she becomes aware that the organization may commit a dishonest, fraudulent, criminal, or illegal act. This problem is sometimes described as the problem of whether the lawyer should "blow the whistle" on his or her employer or client. Although the Rules of Professional Conduct make it clear that the lawyer shall not knowingly assist or encourage any dishonesty, fraud, crime, or illegal conduct (rule 2.02 (5)), it does not follow that the lawyer should disclose to the appropriate authorities an employer's or client's proposed misconduct. Rather, the general rule, as set out above, is that the lawyer shall hold the client's information in strict confidence, and this general rule is subject to only a few exceptions. Assuming the exceptions do not apply, there are, however, several steps that a lawyer should take when confronted with the difficult problem of proposed misconduct by an organization. The lawyer should recognize that his or her duties are owed to the organization and not to the officers, employees, or agents of the organization. The lawyer should therefore ask that the matter be reconsidered, and the lawyer should, if necessary, bring the proposed misconduct to the attention of a higher (and ultimately the highest) authority in the organization despite any directions from anyone in the organization to the contrary. If these measures fail, it may be appropriate for the lawyer to resign in accordance with the rules for withdrawal from representation (rule 2.09).

This Commentary was approved by the Law Society in June 2000, came into force November 2000, and governs the conduct of all Ontario lawyers.

The Law Society is mandated to guard the public trust in regulating the legal profession in Ontario and enforcing high ethical and professional standards. The Law Society is diligent in its oversight of the profession and prosecutes members who fail to meet these standards. The Law Society's jurisdiction obviously extends to the conduct of Ontario lawyers who provide advice to issuers making filings with the Commission, and to the extent that these lawyers offend the standards, their conduct will be addressed by the Law Society. The Law Society's position is that its enforcement of these standards, which include the "up-the-ladder" reporting provision noted above, is sufficient to deal with the reporting issue that the Commission is seeking to address through its proposed rules, and that the adjudication of this issue should be left to the Law Society as the regulator of Ontario lawyers. In particular, the Law Society will take appropriate action where there is a breach of standards by an Ontario lawyer that has been brought to the attention of the Law Society by the Commission or any other affected person.

The Law Society is mindful of the need to review its rules of conduct in light of developments that may require more stringent regulation, for example, in the area of public company representation. To that end, the Law Society will be reviewing its rules relating to the broad issue of the lawyer's role in corporate governance to determine if changes are required.

Accordingly, as the Law Society's rules already address the conduct that the Commission's proposed rules address, and as the Law Society enforces its rules, the Law Society submits that the application of this requirement to Ontario lawyers is unnecessary, and that Ontario lawyers should be exempted from its application.

The Law Society would be interested in discussing with the Commission the feasibility of agreements or arrangements between the Law Society and the Commission to deal with lawyer misconduct related to this requirement, including the handling of any complaints which the Commission may wish to make about Ontario lawyers.

The Requirement for a "Noisy Withdrawal"

The Law Society has concerns about the "noisy withdrawal" provisions. The Law Society notes that this requirement is not mandated by Section 307 of the Sarbanes-Oxley Act of 2002. The Law Society also noted with interest a March 7, 2002 letter to the then chairman of the Commission from a number of eminent American professors of securities regulation and professional responsibility, several of whom did not agree that a lawyer's obligation should extend to notice to the Commission of a withdrawal in the circumstances described in the proposed rules. The Law Society agrees with the position expressed in that letter, that the role of an auditor and lawyer representing an issuer are fundamentally different, and, as explained below, that the lawyer's reporting obligation extend only to the highest authority in the client organization.

The "noisy withdrawal" requires the lawyer's withdrawal from representation, notice to the Commission that the withdrawal was based on "professional considerations" and disaffirmation of the issuer's documents filed with the Commission in which the lawyer was involved. While the proposed rules do not expressly require disclosure of a material violation to the Commission, the nature of the disaffirmation in many cases would appear to be tantamount to such a disclosure.

This requirement may place an Ontario lawyer in conflict with the Law Society's rules which require the lawyer to hold in strict confidence all information concerning the business and affairs of the client. Justifiable exceptions to this requirement, noted previously in this submission, include a provision permitting, but not requiring, the lawyer to divulge confidential information if there is an imminent risk to an identifiable person or group of death or serious bodily harm. The lawyer may also disclose confidential information, as required, if the lawyer is defending criminal, civil or professional conduct proceedings involving a client's affairs. Unlike the rules in some American jurisdictions, the Law Society's rules do not permit disclosure to prevent a client's fraudulent act or a client's act that the lawyer reasonably believes will cause serious financial loss.

The Law Society is also concerned that the required disclosure to the Commission may operate to waive lawyer and client privilege. The privilege, of course, is that of the client. The Supreme Court of Canada has said that lawyer and client privilege must be as close to absolute as possible to ensure public confidence and retain relevance, and will only yield in certain clearly defined circumstances.⁴ The Law Society's position is that the circumstances to which the proposed rules apply do not warrant the risk of intrusion into this most fundamental of client rights.

The Law Society, in a broad sense, accepts the basis upon which the lawyer may decide to withdraw his or her services. The Law Society's rules noted above contemplate that a lawyer representing an issuer who has engaged in corporate malfeasance may find it appropriate to resign if the issuer takes no action in response to the lawyer's internal report of wrongdoing. This situation, however, would not require an accompanying notification of the withdrawal to a securities regulator, or any other party external to the lawyer and client relationship. Thus, while some aspects of the withdrawal provisions in the proposed rules reflect practices that are consistent with the Law Society's ethical prescriptions, certain other aspects of the "noisy withdrawal" do not. In the Law Society's view, the limit in its rule on disclosure is necessary not only to protect the integrity of the lawyer and client relationship, but the administration of justice and independence of the legal profession.

An independent legal profession is integral to our system of justice. The right to counsel depends for its efficacy on independence. The Law Society is not only committed to upholding this independence, as reflected in its Role Statement, but also believes that the right to independent counsel, including counsel's role as the guardian of lawyer and client confidentiality, is a constitutionally protected right in Canada under the Canadian Charter of Rights and Freedoms⁵. This issue is currently before the Canadian courts in the context of a challenge by the Law Society and other Canadian law societies to sections of Canadian money-laundering legislation on reporting obligations to the federal government. The Canadian courts have determined that whether the independence of the bar is a constitutionally protected right in Canada presents a serious constitutional question. The case will be heard shortly.

Similarly, the requirement in the proposed rules to withdraw and report raises for Ontario lawyers the spectre of a fundamental conflict between their duties to a client, whose rights to independent counsel and the attendant confidentiality within that relationship may be constitutionally protected, and the duty to disclose what amounts to confidential information as required by the rules of an agency of the government of the United States.

Accordingly, the Law Society submits that the proposed rules should be limited to a lawyer's disclosure to the highest authority in the client organization. In the circumstances outlined in the proposed rules, the lawyer may feel compelled to resign the retainer, and in some situations may have no choice but to resign, but should not be required to do so. Nor should the lawyer be required to report the withdrawal to the Commission. In the Law Society's view, the Commission's requirement will infringe on the independence of counsel that underlies the lawyer and client relationship. It will also discourage candid and complete disclosure by a client to a lawyer because of the risk that privileged information may ultimately be disclosed.

The Law Society relies on its rules together with the Commentary noted above as the appropriate way to address this type of situation, and their enforcement where the lawyer's conduct violates these provisions. The Law Society would be pleased to discuss this issue with the Commission and explain in more detail the Law Society's concerns about the risk to lawyer and client confidentiality and privilege and the independence of the bar.

A Final Statement

The Law Society agrees that adequate regulation of those involved in the capital markets is necessary to maintain the public's confidence in the markets in Canada and the United States. However, the public must also be assured that lawyers are regulated in a way that protects the rule of law in a free and democratic society and, in particular, the fundamental values of client privilege and an independent legal profession.

Reforms that impose a new regulatory regime on the legal profession must take into account the unique role of the lawyer in society and the administration of justice. The Canadian courts have eloquently articulated this role:

...in the absence of an independent legal profession, skilled and qualified to play its part in the administration of justice and the judicial process, the whole legal system would be in a parlous state. In the performance of what may be called his private function, that is, in advising on legal matters and in representing clients before the courts and other tribunals, the lawyer is accorded great powers not permitted to other professionals.... By any standard, these powers and duties are vital to the maintenance of order in our society and the due administration of the law in the interest of the whole community.⁶

The Law Society urges the Commission to consider ways to implement reforms that will ensure that the protections accorded to the public by regulators do not interfere with the public interest in an independent legal profession.

Dialogue with the Commission

In this submission, the Law Society has referred to its willingness to discuss with the Commission the issues raised in response to the proposed rules. In particular, the Law Society believes that there is merit in discussing

• the possibility of the Commission exercising its general exemptive authority for Ontario lawyers with respect to certain provisions in the proposed rules,

• ways that the Commission and the Law Society could co-operate in addressing lawyer misconduct related to the proposed rules, and

• agreements or arrangements for the exchange of information on lawyer misconduct related to the proposed rules.

The Law Society understands that the Commission and the Ontario Securities Commission are having ongoing discussions on the requirements in the Sarbanes-Oxley Act of 2002 and the reforms of the Commission's rules that flow from them. The Law Society considers it desirable to co-ordinate its discussions on the concerns raised in this submission with the broader "regulator to regulator" discussions underway.

The Law Society trusts that its submission will assist the Commission in its efforts to adopt rules that accomplish its goals in the broader scheme of the administration of justice.

Yours truly,

Professor Vern Krishna, Q.C., FCGA
Treasurer

VK/zp

Encls.

2.02 QUALITY OF SERVICE

Honesty and Candour

2.02 (1) When advising clients, a lawyer shall be honest and candid.

Commentary The lawyer's duty to the client who seeks legal advice is to give the client a competent opinion based on a sufficient knowledge of the relevant facts, an adequate consideration of the applicable law, and the lawyer's own experience and expertise. The advice must be open and undisguised and must clearly disclose what the lawyer honestly thinks about the merits and probable results.

Encouraging Compromise or Settlement

(2) A lawyer shall advise and encourage the client to compromise or settle a dispute whenever it is possible to do so on a reasonable basis and shall discourage the client from commencing useless legal proceedings.

(3) The lawyer shall consider the use of alternative dispute resolution (ADR) for every dispute, and, if appropriate, the lawyer shall inform the client of ADR options and, if so instructed, take steps to pursue those options.

Threatening Criminal Proceedings

(4) A lawyer shall not advise, threaten, or bring a criminal or quasi-criminal prosecution in order to secure a civil advantage for the client.

Dishonesty or Fraud by Client

(5) When advising a client, a lawyer shall not knowingly assist in or encourage any dishonesty, fraud, crime, or illegal conduct, or instruct the client on how to violate the law and avoid punishment.

Commentary A lawyer should be on guard against becoming the tool or dupe of an unscrupulous client or persons associated with such a client.

A bona fide test case is not necessarily precluded by subrule 2.02(5) and, so long as no injury to the person or violence is involved, a lawyer may properly advise and represent a client who, in good faith and on reasonable grounds, desires to challenge or test a law and the test can most effectively be made by means of a technical breach giving rise to a test case.

Client Under a Disability

(6) When a client's ability to make decisions is impaired because of minority, mental disability, or for some other reason, the lawyer shall, as far as reasonably possible, maintain a normal lawyer and client relationship.

Commentary A lawyer and client relationship presupposes that the client has the requisite mental ability to make decisions about his or her legal affairs and to give the lawyer instructions. A client's ability to make decisions, however, depends on such factors as his or her age, intelligence, experience, and mental and physical health, and on the advice, guidance, and support of others. Further, a client's ability to make decisions may change, for better or worse, over time. When a client is or comes to be under a disability that impairs his or her ability to make decisions, the impairment may be minor or it might prevent the client from having the legal capacity to give instructions or to enter into binding legal relationships. Recognizing these factors, the purpose of this rule is to direct a lawyer with a client under a disability to maintain, as far as reasonably possible, a normal lawyer and client relationship. A lawyer with a client under a disability should appreciate that if the disability of the client is such that the client no longer has the legal capacity to manage his or her legal affairs, the lawyer may need to take steps to have a lawfully authorized representative appointed, for example, a litigation guardian, or to obtain the assistance of the Office of the Public Guardian and Trustee or the Office of the Children's Lawyer to protect the interests of the client. In any event, the lawyer has an ethical obligation to ensure that the client's interests are not abandoned.

Medical-Legal Reports

(7) A lawyer who receives a medical-legal report from a physician or health professional that is accompanied by a proviso that it not be shown to the client shall return the report immediately to the physician or health professional unless the lawyer has received specific instructions to accept the report on this basis.

Commentary The lawyer can avoid some of the problems anticipated by the rule by having a full and frank discussion with the physician or health professional, preferably in advance of the preparation of a medical-legal report, which discussion will serve to inform the physician or health professional of the lawyer's obligation respecting disclosure of medical-legal reports to the client.

(8) A lawyer who receives a medical-legal report from a physician or health professional containing opinions or findings that if disclosed might cause harm or injury to the client shall attempt to dissuade the client from seeing the report but, if the client insists, the lawyer shall produce the report.

(9) Where a client insists on seeing a medical-legal report about which the lawyer has reservations for the reasons noted in subrule (8), the lawyer shall suggest that the client attend at the office of the physician or health professional to see the report in order that the client will have the benefit of the expertise of the physician or health professional in understanding the significance of the conclusion contained in the medical-legal report.

Title Insurance in Real Estate Conveyancing

(10) A lawyer shall assess all reasonable options to assure title when advising a client about a real estate conveyance and shall advise the client that title insurance is not mandatory and is not the only option available to protect the client's interests in a real estate transaction.

Commentary A lawyer should advise the client of the options available to protect the client's interests and minimize the client's risks in a real estate transaction. The lawyer should be cognizant of when title insurance may be an appropriate option. Although title insurance is intended to protect the client against title risks, it is not a substitute for a lawyer's services in a real estate transaction. The lawyer should be knowledgeable about title insurance and discuss with the client the advantages, conditions, and limitations of the various options and coverages generally available to the client through title insurance. Before recommending a specific title insurance product, the lawyer should be knowledgeable about the product and take such training as may be necessary in order to acquire the knowledge.

(11) A lawyer shall not receive any compensation, whether directly or indirectly, from a title insurer, agent or intermediary for recommending a specific title insurance product to his or her client.

(12) A lawyer shall disclose to the client that no commission or fee is being furnished by any insurer, agent, or intermediary to the lawyer with respect to any title insurance coverage.

Commentary The fiduciary relationship between lawyer and client requires full disclosure in all financial dealings between them and prohibits the acceptance of any hidden fees by the lawyer, including the lawyer's law firm, any employee or associate of the firm, or any related entity.

(13) If discussing TitlePlus insurance with the client, a lawyer shall fully disclose the relationship between the legal profession, the Society, and the Lawyers' Professional Indemnity Company (LPIC).

2.03 CONFIDENTIALITY

Confidential Information

2.03 (1) A lawyer at all times shall hold in strict confidence all information concerning the business and affairs of the client acquired in the course of the professional relationship and shall not divulge any such information unless expressly or impliedly authorized by the client or required by law to do so.

Commentary A lawyer cannot render effective professional service to the client unless there is full and unreserved communication between them. At the same time, the client must feel completely secure and entitled to proceed on the basis that, without any express request or stipulation on the client's part, matters disclosed to or discussed with the lawyer will be held in strict confidence. This rule must be distinguished from the evidentiary rule of lawyer and client privilege concerning oral or documentary communications passing between the client and the lawyer. The ethical rule is wider and applies without regard to the nature or source of the information or the fact that others may share the knowledge. A lawyer owes the duty of confidentiality to every client without exception and whether or not the client is a continuing or casual client. The duty survives the professional relationship and continues indefinitely after the lawyer has ceased to act for the client, whether or not differences have arisen between them. Generally, the lawyer should not disclose having been consulted or retained by a particular person about a particular matter unless the nature of the matter requires such disclosure. A lawyer should take care to avoid disclosure to one client of confidential information concerning or received from another client and should decline employment that might require such disclosure. A lawyer should avoid indiscreet conversations, even with the lawyer's spouse or family, about a client's affairs and should shun any gossip about such things even though the client is not named or otherwise identified. Similarly, a lawyer should not repeat any gossip or information about the client's business or affairs that is overheard or recounted to the lawyer. Apart altogether from ethical considerations or questions of good taste, indiscreet shop-talk between lawyers, if overheard by third parties able to identify the matter being discussed, could result in prejudice to the client. Moreover, the respect of the listener for lawyers and the legal profession will probably be lessened. Although the rule may not apply to facts that are public knowledge, nevertheless, the lawyer should guard against participating in or commenting on speculation concerning the client's affairs or business. In some situations, the authority of the client to disclose may be implied. For example, some disclosure may be necessary in court proceedings, in a pleading or other court document. Also, it is implied that a lawyer may, unless the client directs otherwise, disclose the client's affairs to partners and associates in the law firm and, to the extent necessary, to non-legal staff, such as secretaries and filing clerks. But this implied authority to disclose places the lawyer under a duty to impress upon associates, employees, and students the importance of non-disclosure (both during their employment and afterwards) and requires the lawyer to take reasonable care to prevent their disclosing or using any information that the lawyer is bound to keep in confidence. A lawyer may have an obligation to disclose information under subrule 4.06(3) (Security of Court Facilities). If client information is involved in those situations, the lawyer should be guided by the provisions of rule 2.03. The rule prohibits disclosure of confidential information because confidentiality and loyalty are fundamental to the relationship between a lawyer and client and legal advice cannot be given and justice cannot be done unless clients have a large measure of freedom to discuss their affairs with their lawyers. However, there are some very exceptional situations identified in the following subrules where disclosure without the client's permission might be warranted because the lawyer is satisfied that truly serious harm of the types identified is imminent and cannot otherwise be prevented. These situations will be extremely rare, and, even in these situations, the lawyer should not disclose more information than is required.

Justified or Permitted Disclosure

(2) When required by law or by order of a tribunal of competent jurisdiction, a lawyer shall disclose confidential information, but the lawyer shall not disclose more information than is required.

(3) Where a lawyer believes upon reasonable grounds that there is an imminent risk to an identifiable person or group of death or serious bodily harm, including serious psychological harm that substantially interferes with health or well-being, the lawyer may disclose, pursuant to judicial order where practicable, confidential information where it is necessary to do so in order to prevent the death or harm, but shall not disclose more information than is required.

Commentary A lawyer employed or retained to act for an organization, including a corporation, confronts a difficult problem about confidentiality when he or she becomes aware that the organization may commit a dishonest, fraudulent, criminal, or illegal act. This problem is sometimes described as the problem of whether the lawyer should "blow the whistle" on his or her employer or client. Although the Rules of Professional Conduct make it clear that the lawyer shall not knowingly assist or encourage any dishonesty, fraud, crime, or illegal conduct (rule 2.02 (5)), it does not follow that the lawyer should disclose to the appropriate authorities an employer's or client's proposed misconduct. Rather, the general rule, as set out above, is that the lawyer shall hold the client's information in strict confidence, and this general rule is subject to only a few exceptions. Assuming the exceptions do not apply, there are, however, several steps that a lawyer should take when confronted with the difficult problem of proposed misconduct by an organization. The lawyer should recognise that his or her duties are owed to the organization and not to the officers, employees, or agents of the organization. The lawyer should therefore ask that the matter be reconsidered, and the lawyer should, if necessary, bring the proposed misconduct to the attention of a higher (and ultimately the highest) authority in the organization despite any directions from anyone in the organization to the contrary. If these measures fail, it may be appropriate for the lawyer to resign in accordance with the rules for withdrawal from representation (rule 2.09).

(4) Where it is alleged that a lawyer or the lawyer's associates or employees are

(a) guilty of a criminal offence involving a client's affairs,

(b) civilly liable with respect to a matter involving a client's affairs, or

(c) guilty of malpractice or misconduct, a lawyer may disclose confidential information in order to defend against the allegations, but the lawyer shall not disclose more information than is required.

(5) A lawyer may disclose confidential information in order to establish or collect the lawyer's fees, but the lawyer shall not disclose more information than is required.

Literary Works

(6) If a lawyer engages in literary works, such as a memoir or an autobiography, the lawyer shall not disclose confidential information without the client's or former client's consent.

Commentary The fiduciary relationship between lawyer and client forbids the lawyer from using any confidential information covered by the ethical rule for the benefit of the lawyer or a third person or to the disadvantage of the client.

Relationship to Clients

2.09 Withdrawal from Representation Rule 2

2.09 WITHDRAWAL FROM REPRESENTATION

Withdrawal from Representation

2.09 (1) A lawyer shall not withdraw from representation of a client except for good cause and upon notice to the client appropriate in the circumstances.

Commentary Although the client has the right to terminate the lawyer-client relationship at will, the lawyer does not enjoy the same freedom of action. Having undertaken the representation of a client, the lawyer should complete the task as ably as possible unless there is justifiable cause for terminating the relationship. No hard and fast rules can be laid down about what will constitute reasonable notice before withdrawal. Where the matter is covered by statutory provisions or rules of court, these will govern. In other situations, the governing principle is that the lawyer should protect the client's interests to the best of the lawyer's ability and should not desert the client at a critical stage of a matter or at a time when withdrawal would put the client in a position of disadvantage or peril.

Optional Withdrawal

(2) Subject to the rules about criminal proceedings and the direction of the tribunal, where there has been a serious loss of confidence between the lawyer and the client, the lawyer may withdraw.

Commentary A lawyer who is deceived by the client will have justifiable cause for withdrawal, and the refusal of the client to accept and act upon the lawyer's advice on a significant point might indicate a loss of confidence justifying withdrawal. However, the lawyer should not use the threat of withdrawal as a device to force a hasty decision by the client on a difficult question.

Non-payment of Fees

(3) Subject to the rules about criminal proceedings and the direction of the tribunal, where, after reasonable notice, the client fails to provide funds on account of disbursements or fees, a lawyer may withdraw unless serious prejudice to the client would result.

Withdrawal from Criminal Proceedings

(4) Where a lawyer has agreed to act in a criminal case and where the interval between a withdrawal and the trial of the case is sufficient to enable the client to obtain another lawyer and to allow such other lawyer adequate time for preparation, the lawyer who has agreed to act may withdraw because the client has not paid the agreed fee or for other adequate cause provided that the lawyer

(a) notifies the client, preferably in writing, that the lawyer is withdrawing because the fees have not been paid or for other adequate cause,

(b) accounts to the client for any monies received on account of fees and disbursements,

(c) notifies Crown counsel in writing that the lawyer is no longer acting,

(d) in a case when the lawyer's name appears on the records of the court as acting for the accused, notifies the clerk or registrar of the appropriate court in writing that the lawyer is no longer acting.

Commentary A lawyer who has withdrawn because of conflict with the client should not indicate in the notice addressed to the court or Crown counsel the cause of the conflict or make reference to any matter that would violate the privilege that exists between lawyer and client. The notice should merely state that the lawyer is no longer acting and has withdrawn.

(5) Where a lawyer has agreed to act in a criminal case and where the date set for trial is not far enough removed to enable the client to obtain another lawyer or to enable another lawyer to prepare adequately for trial and an adjournment of the trial date cannot be obtained without adversely affecting the client's interests, the lawyer who agreed to act may not withdraw because of non-payment of fees.

(6) Where the lawyer is justified in withdrawing from a criminal case for reasons other than non-payment of fees and there is not a sufficient interval between a notice to the client of the lawyer's intention to withdraw and the date when the case is to be tried to enable the client to obtain another lawyer and to enable such lawyer to prepare adequately for trial, the first lawyer, unless instructed otherwise by the client, should attempt to have the trial date adjourned and may withdraw from the case only with the permission of the court before which the case is to be tried.

Commentary Where circumstances arise that in the opinion of the lawyer require an application to the court for leave to withdraw, the lawyer should promptly inform Crown counsel and the court of the intention to apply for leave in order to avoid or minimize any inconvenience to the court and witnesses.

Mandatory Withdrawal

(7) Subject to the rules about criminal proceedings and the direction of the tribunal, a lawyer shall withdraw if

(a) discharged by the client,

(b) the lawyer is instructed by the client to do something inconsistent with the lawyer's duty to the tribunal and, following explanation, the client persists in such instructions,

(c) the client is guilty of dishonourable conduct in the proceedings or is taking a position solely to harass or maliciously injure another,

(d) it becomes clear that the lawyer's continued employment will lead to a breach of these rules, or

(e) the lawyer is not competent to handle the matter.

Commentary When a law firm is dissolved it will usually result in the termination of the lawyer-client relationship as between a particular client and one or more of the lawyers involved. In such cases, most clients will prefer to retain the services of the lawyer whom they regarded as being in charge of their business before the dissolution. However, the final decision rests with the client, and the lawyers who are no longer retained by that client should act in accordance with the principles here set out, and, in particular, should try to minimize expense and avoid prejudice to the client.

Manner of Withdrawal

(8) When a lawyer withdraws, the lawyer shall try to minimize expense and avoid prejudice to the client and shall do all that can reasonably be done to facilitate the orderly transfer of the matter to the successor lawyer.

(9) Upon discharge or withdrawal, a lawyer shall

(a) subject to the lawyer's right to a lien, deliver to or to the order of the client all papers and property to which the client is entitled,

(b) give the client all information that may be required in connection with the case or matter,

(c) account for all funds of the client then held or previously dealt with, including the refunding of any remuneration not earned during the representation,

(d) promptly render an account for outstanding fees and disbursements, and

(e) co-operate with the successor lawyer so as to minimize expense and avoid prejudice to the client.

Commentary The obligation to deliver papers and property is subject to a lawyer's right of lien. In the event of conflicting claims to such papers or property, the lawyer should make every effort to have the claimants settle the dispute. A lawyer acting for several clients in a case or matter who ceases to act for one or more of them should co-operate with the successor lawyer or lawyers to the extent required by the rules and should seek to avoid any unseemly rivalry, whether real or apparent. Where upon the discharge or withdrawal of the lawyer, the question of a right of lien for unpaid fees and disbursements arises, the lawyer should have due regard to the effect of its enforcement upon the client's position. Generally speaking, the lawyer should not enforce the lien if to do so would prejudice materially the client's position in any uncompleted matter.

Duty of Successor Lawyer

(10) Before agreeing to represent a client, a successor lawyer shall be satisfied that the former lawyer approves, has withdrawn, or has been discharged by the client.

Commentary It is quite proper for the successor lawyer to urge the client to settle or take reasonable steps towards settling or securing any outstanding account of the former lawyer, especially if the latter withdrew for good cause or was capriciously discharged. But if a trial or hearing is in progress or imminent or if the client would otherwise be prejudiced, the existence of an outstanding account should not be allowed to interfere with the successor lawyer acting for the client.

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2	R.S.O. 1990 c.L.8.
3	Law Society of Upper Canada, Rules of Professional Conduct, Rule 2.03(3). The rule, together with rules 2.02 and 2.09 referenced in the Commentary quoted above, is appended to this submission.
4	R. v. McClure [2001] 1 S.C.R. 445 at 503.
5	Enacted as Part 1 to Schedule B, Constitution Act 1982 (79), of the Canada Act 1982 (U.K.) 1982, c. 11.
6	Andrews v. Law Society of British Columbia, [1989] 1 S.C.R. 143 at pp. 187-188