John Langen Finnigan

The appellant investors appealed an order disqualifying their counsel and his merged law firm from continuing to represent them in a complex litigation against the respondent promoters.

The disqualification arose after the investors' law firm merged with another firm that had previously acted for the promoters in preparing the offering memorandum at the heart of the dispute.

The Divisional Court dismissed the appeal, finding that the merged firm failed to implement an ethical wall at the time the merger became effective, creating an irreconcilable conflict of interest and a risk of sharing confidential information.

The appellants, various book publishers, appealed a decision determining that they did not have priority over the Bank of Nova Scotia regarding accounts receivable collected by the distributor, General Distribution Services Inc. (GDS).

The publishers argued that because they retained title to the books, they had priority.

The Court of Appeal dismissed the appeal, finding that the arrangement between the publishers and GDS did not require the segregation of funds, allowing GDS to mingle the proceeds with its own money.

Consequently, the relationship was one of debtor and creditor, not trustee and beneficiary, and the publishers did not hold a priority interest.

The defendant sought leave to appeal an order removing their counsel due to a disqualifying conflict of interest arising from a law firm merger.

The motions judge had applied a strict 'bright line' test, disqualifying the firm because an ethical wall was not erected prior to the merger.

The Divisional Court granted leave to appeal, finding good reason to doubt the correctness of the motions judge's decision, as it failed to apply the balancing approach mandated by Rule 2.05(4) of the Rules of Professional Conduct and ignored evidence that the motion may have been brought for tactical purposes.

The appellant bank sought recovery of funds paid under a clean irrevocable letter of credit, alleging the respondent beneficiary’s call was fraudulent because the proceeds were applied to a different project under a cross-collateralization agreement unknown to the bank.

The court upheld the trial judge’s conclusion that there was no fraud, emphasizing the wording of the letter of credit, the legal advice obtained before the call, and the existence of formal grounds supporting the call in any event.

The related claims in mistake of fact and unjust enrichment failed because they were tied to the fraud allegation.

The respondent’s appeal from the trial costs disposition was also dismissed, including its request for solicitor-and-client costs and its effort to shift third party costs to the bank.