Lawyers acting in conflict of interest

It can be difficult for a lawyer to determine whether they are acting in conflict in modern practice. A lawyer may not know the alleged conflicting client, have never worked on the client’s case, and still be in conflict. A lawyer may also be in conflict with current and former clients. Additionally, a lawyer may not recognize that they are in conflict as defined by the Law Society of Ontario (OSL) Rules of ethics (Rules) and by the court. This article aims to shed light on when conflicts of interest arise in modern legal practice.

Who is a customer?

The first step in determining whether a lawyer is acting in conflict is to find out who their current and previous clients are. Although a court is not bound by the Rules, the Supreme Court of Canada mentioned that the Rules are considered “an important statement of public policy”.[i] The Rules define a client as:

a person who consults with an attorney and on whose behalf the attorney renders or agrees to render legal services, or who reasonably concludes that the attorney has agreed to render legal services on his or her behalf; and includes a client of the law firm of which the attorney is a partner or associate, whether or not the attorney is performing the work.”[ii]

The Commentary to the Rules further clarifies that a lawyer-client relationship may be established without formality or retainer agreement. The test used by the LSO to determine the existence of an attorney-client relationship is whether the alleged client had a reasonable expectation, in all the circumstances, that the attorney was protecting his or her interests.[iii]

In determining who a lawyer’s current and past clients are, the search is not limited to those with whom he has signed a retainer and personally provided legal services. Individuals who have corresponded with a lawyer or their firm and who reasonably believe that the lawyer has agreed to perform legal services on their behalf or that the lawyer would protect their interests may also be considered their client.

Duties due to the client

A lawyer has a duty of loyalty, which includes duties of confidentiality, candor and commitment to the client’s cause to all of his clients. A lawyer cannot be simultaneously loyal to several clients whose interests are in conflict. A lawyer cannot simultaneously respect his duty of candor towards a client while respecting his duty of confidentiality towards the other when these clients are in conflict. Finally, a lawyer cannot be fully committed to the cause of two clients whose interests are in conflict. A lawyer’s duties of loyalty, confidentiality, candor and commitment to the client’s cause are all impaired when acting in conflict.[iv]

Inherent Jurisdiction of the Courts

If found to be acting in conflict, the Court has the inherent power to remove a lawyer and his firm from the case. This jurisdiction derives from the fact that lawyers are officers of the court and their conduct in legal proceedings, which may affect the administration of justice, is subject to the Court’s supervisory jurisdiction.[v]

Three Competing Values

In resolving conflicts of interest, the court is concerned with three competing values. First, the court aims to uphold the high standards of the legal profession and the integrity of our justice system. Second, the court respects that a litigant should not be deprived of their choice of counsel without cause. Finally, the Court recognizes the desirability of allowing reasonable mobility within the legal profession. Where the court finds a conflict, the need to maintain the high standards of the legal profession and the integrity of our justice system will prevail.[vi]

Conflict with current customers

There is a “clear line rule” which states that a lawyer, and by extension his firm, cannot simultaneously represent clients with opposing interests without obtaining their consent. The “clear line rule” applies whether the customer’s questions are related or not.[vii]

Conflict with previous clients

A lawyer may be in conflict with a former client if he has confidential information relevant to a retainer with a current client. The court will disqualify a lawyer if an impartial and reasonably informed member of the public concludes that removal of the lawyer is necessary for the proper administration of justice.[viii] A reasonably informed member of the public would conclude that the attorney’s removal is necessary if he or she possesses confidential information regarding the conflicting retainer. In determining whether such a disqualifying conflict of interest exists, the court will consider two questions: (1) Did the attorney receive confidential information attributable to an attorney-client relationship relevant to the matter at issue? (2) Is there a risk that it will be used to the detriment of the client?[ix]

In answering the first question, the client must demonstrate the existence of a prior relationship sufficiently related to the mandate from which he seeks to withdraw the lawyer. Once this is shown, the court will infer that confidential information was disclosed, unless the lawyer convinces the court that no relevant information was disclosed. This is a difficult burden to bear because the lawyer must convince the court that he would withstand the scrutiny of the reasonably informed member of the public that no such information was passed on. This burden must be discharged without revealing the specifics of privileged communication.[x]

For two retainers to be sufficiently linked, the court must find that it is reasonably possible that the lawyer acquired confidential information under the first retainer that could be relevant to the case at hand.[xi]

In answering the second question, the court must determine whether the confidential information will be misused. A lawyer who has relevant confidential information cannot act against his client or his former client. In such a case, disqualification is automatic.[xii]

Exceptions to the rule against conflicts with prior customers

If it turns out that you are in conflict with a former client, the court is not automatically required to remove you from the case. When the court concludes that the above test is met, there are situations where it will not prevent the lawyer from acting because of the conflict.

The court will not disqualify a lawyer or law firm for acting in a conflict of interest if the plaintiff makes the claim tactically. For example, the Supreme Court of Canada recognizes a strong possibility of tactical abuse in the case of institutional clients dealing with large national companies, when these institutional clients have the resources to retain a significant number of companies. Maintaining a single partner in these firms may prevent other lawyers in the country from acting against the client.[xiii]

Further, there are circumstances in which it is unreasonable for a client to expect their law firm not to act against them in unrelated matters. The Supreme Court of Canada in Canadian National Railway Company v. McKercher LLP used the example of “professional litigants”, such as governments, who generally allow lawyers or law firms to act for them in some matters and against them in other unrelated matters. Private professional litigants, such as chartered banks, may also have multiple cases that are independent enough that there is no risk of misuse of confidential information.[xiv]

Finally, if the Court finds that a motion to remove a lawyer of record due to a conflict of interest was brought in bad faith, it may not grant the motion. For example, the courts have used the delay in filing the petition as a factor in dismissing the petition due to bad faith.[xv]

Avoid conflicts

To determine whether they are acting in conflict, a lawyer must first determine who his clients or the clients of his firm are. Next, the lawyer must ensure that he is not currently representing two clients with conflicting interests, whether their mandates are linked or not. Finally, the lawyer must ensure that he does not possess any relevant confidential information from a former client whose interests are opposed to his current mandates. If the attorney is currently acting for two clients with opposing interests, or has relevant confidential information from a former client who has interests opposing their current retainers, they will likely be deemed to be acting in conflict.

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