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On February 18, 2015, the Appeal Division of the Law Society Tribunal dismissed the Law Society’s appeal of a Hearing Panel decision dismissing charges of conflict of interest brought against Torys LLP lawyers Elizabeth DeMerchant and Darren Sukonick. The allegations concerned the lawyers work in representing Hollinger Inc. and Hollinger International Inc. in the sale of the CanWest newspaper chain and related transactions. In an earlier post, I characterized the decision by the Law Society to appeal as a “travesty.” The reasons of the appeal panel confirm this.

The Appeal Division begins by noting that the Hearing panel made errors of law in its legal analysis, but that it nevertheless came to the same conclusion. The problem for the Law Society was thus not with any legal interpretation, but rather that the facts did not support the allegations of conflict of interest being made against the lawyers. The reasons of the Hearing panel, and now the Appeal Division, make clear that this should have been evident long before the 130 days of hearing had been completed. A few extracts from the Appeal panel decision illustrate the point:

[18] The Law Society has suggested at various points in this proceeding that all aspects of control of a company are transferred to the independent directors on a related party transaction, and that management is entirely conflicted from taking any actions on behalf of the public company. This theory is inconsistent with the evidence.

[55] The allegation that the Lawyers acted in a conflict on this transaction fails because the Law Society has not shown that the Lawyers’ judgment or loyalty to HII was impaired by the interests of another client to whom it had conflicting duties. Torys only represented HII on this transaction and related matters. The Lawyers had no clients with conflicting interests to whom they owed competing duties, and we do not accept that the nature of their relationships with the executives created a conflict.

[62] The second basis on which the Law Society asserts that there were conflicting duties to the individuals, and what appears to have been the focus of the case at the outset, is that Torys had, and might have in the future, client relationships with some of the executives and Ravelston. Torys had provided legal services to Ravelston from time to time, and had also done work for Mr. Boultbee, Mr. Black and Mr. Atkinson on matters such as real estate.

[63] None of the retainers related to the transactions in this case. The Law Society is not able to point to any duties arising out of these retainers that were likely to lead to a conflict with the interests of HII.

[68] Moreover, this theory was not part of the case the lawyers answered at the very long hearing, and they had no opportunity to present evidence on it. The Law Society’s case was based on conflicting duties arising out of the solicitor-client relationship, and it fails at the outset because there were no solicitor-client relationships that created duties that conflicted with those to HII.

These comments seem to me to be extremely damaging to the Law Society’s theory of the case, and once again call into question its decision making in this long standing prosecution.