To determine whether there is a conflict of interest that would prevent you from acting for a client:
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☐ First, determine if there is a conflict of interest.
☐ Second, if there is a conflict of interest, determine whether you may act despite the conflict of interest.
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PART 1
Is there a conflict of interest?
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STEP 1
☐ Determine who your client is.
STEP 2
☐ Consider the nature of your retainer and the duties to your client arising from your retainer.
STEP 3
☐ Determine
whether the duties that you owe to current clients, former clients and any
third persons might affect the duties owed to your client. Similarly, determine
whether you have any personal interests that might affect the duties owed to
your client.
STEP 4
☐ Determine
if there is a substantial risk that your duty of loyalty to the client or the
representation of the client would be materially and adversely affected by your
own interest or your duties to another client (current, former or joint
clients) or a third person. If so, there is a conflict of interest.
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PART 2
If there is a conflict of interest, can you act despite the conflict of interest?
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STEP 5
☐ Determine
if you are being asked to represent both sides of a dispute. If so, you cannot
act or continue to act.
STEP 6
☐ If
you are not being asked to represent both sides of a dispute, determine whether
you reasonably believe that you are able to represent each client without
having a material adverse effect on the duties owed to the other client.
STEP 7
☐ If you
do not reasonably believe that you are able to represent each client without
having a material adverse effect on the duties owed to the other client, then
you cannot act.
STEP 8
☐ Alternatively,
if you reasonably believe that you are able to represent each client without
having a material adverse effect on the duties owed to the other client, then
you may act if there is consent from all of the affected clients, which consent must
be fully informed and voluntary after disclosure.
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STEP 1
Determine who your client is.
Who is a client?
The term
“client” is a defined term in the Rules. A client is a person who
- consults a lawyer and on
whose behalf the lawyer renders or agrees to render legal services; or
- having consulted the lawyer,
reasonably concludes that the lawyer has agreed to render legal services
on their behalf.
A
lawyer-client relationship may arise only if there has been a consultation
between the lawyer and the client. It may arise without formality even if there
is no written retainer.
Furthermore,
a client includes a client of the law firm of which the lawyer is a partner or
associate whether or not the lawyer handles the client’s work.
(Rule 1.1-1, definition of “client”)
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STEP 2
Consider the nature of your
retainer and the duties to your client arising from your retainer.
What are a
lawyer’s duties to a client arising from the retainer?
In addition to the duty of representation arising
from the retainer, the law imposes other duties on the lawyer, particularly the
duty of loyalty. Aspects of the duty of loyalty include: the duty of commitment
to the client’s cause, the duty of candour and the duty of confidentiality. The
rule on conflicts protects all of these duties from impairment from a
conflicting duty or interest.
Duty of commitment
to the client’s cause
The
lawyer’s duty to commit to the client’s cause prevents the lawyer from
withdrawing from representation of a current client, especially summarily and
unexpectedly in order to circumvent the conflict-of-interest rules. This duty
is reflected in Rule 3.7-1 dealing with withdrawal from representation.
Duty of candour
The duty of
candour requires a lawyer or law firm to advise an existing client of all
matters relevant to the retainer. Even where a lawyer concludes that there
is no conflict of interest in acting against a current client, the duty of
candour may require that the client be advised of the adverse retainer in order
to determine whether to continue the retainer. This duty is reflected in Rule
3.2-2 dealing with honesty and candour.
Duty of confidentiality
Rule
3.4-2 permits a lawyer to act in a conflict in certain circumstances with the
clients’ consent. The duty of confidentiality reflected in Rule 3.3-1 owed to
both current and former clients may limit a lawyer’s ability to obtain client
consent as permitted under Rule 3.4-2 because the lawyer may not be able to
disclose the information required for proper consent. Where there is a conflict
of interest and consent cannot be obtained for this reason, the lawyer must not
act. In this regard, Rule 3.4-2 provides that client consent does not permit a
lawyer to act where there would be actual impairment rather than merely the
risk of impairment.
(Rule
3.4-1, commentary [2] and [13])
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STEP 3
Determine whether the duties that
you owe to current clients, former clients and any third persons might affect
the duties owed to your client. Similarly, determine whether you have any
personal interests that might affect the duties owed to your client.
In what
situations, do conflicts of interest commonly arise?
Current
Client Conflicts
Duties
owed to another current client can impair client representation and loyalty. The
following are examples of situations where conflicts of interest involving
current clients may or will arise:
- acting
for opposing parties in a dispute;
- acting in
a joint retainer where the interests of the parties diverge;
- acting
for more than one client in separate but related matters because of the nature
of the retainers; and
- acting
for clients in unrelated matters where the duty of confidentiality owed to one
client may be inconsistent with the duty of candour owed to another client
depending on whether information obtained by the lawyer during either retainer
would be relevant to both retainers.
A bright
line rule has been developed by the courts to protect the representation of and
loyalty to current clients (Canadian
National Railway Co. v. McKercher LLP, [2013] 2 S.C.R. 649). The bright
line rule holds that a lawyer cannot act directly adverse to the immediate
legal interests of a current client without the clients’ consent. The bright
line rule applies even if the work done for two clients is completely
unrelated. The scope of the bright line rule is limited. It provides that a
lawyer cannot act directly adverse to the immediate legal interests of a
current client. Accordingly the main area of application of the bright line
rule is in civil and criminal proceedings. Exceptionally, the bright line rule
does not apply in circumstances where it is unreasonable for a client to expect
that the client’s law firm will not act against the client in unrelated
matters.
The
bright line rule recognizes that the lawyer-client relationship may be
irreparably damaged where the lawyer’s representation of one client is directly
adverse to another client’s immediate legal interests. One client may
legitimately fear that the lawyer will not pursue the representation out of
deference to the other client, and an existing client may legitimately feel
betrayed by the lawyer’s representation of a client with adverse legal
interests. This type of conflict may also arise outside a law partnership, in
situations where sole practitioners, who are in space-sharing associations and
who otherwise have separate practices, hold themselves out as a law firm snd
lawyers in association represent opposite parties to a dispute.
A conflict
of interest may arise from duties owed to another current client even if the
bright line rule does not apply. In matters involving another current client,
lawyers should take care to consider not only whether the bright line rule
applies but whether there is a substantial risk of impairment. In either case,
there is a conflict.
(Rule
3.4-1, commentary [6] to [9])
Joint
Retainers
Joint retainers are dealt with in Rules 3.4-5 to
3.4-9, 3.4-12 to 3.4-16, and 3.4-16.7 to 3.4-16.9. Appendix 1, Compliance
with the Joint Retainer Rules, contains some resources to assist
lawyers with the application of these rules.
Personal
Interest Conflicts
A
conflict of interest may also arise as a result of the lawyer’s personal
interest in the client’s affairs or in the matter in which the lawyer is asked
to act for the client. A personal interest includes not only the lawyer’s own
personal interests, but also the interests of others connected to the lawyer,
such as the lawyer’s partners, associates or family members.
(Rule
3.4-1, commentary [4])
Former
Client Conflicts
Duties
owed to a former client reflected in Rule 3.4-10 can also impair client
representation and loyalty. Since the duty of confidentiality continues after
the retainer has been completed, the duty of confidentiality owed to a former
client may conflict with the duty of candour owed to a current client if
information from the former matter would be relevant to the current matter.
Lawyers also have a duty not to act against a former client in the same or a
related matter even where the former client’s confidential information is not
at risk. In order to determine the existence of a conflict of interest, a
lawyer should consider whether the representation of the current client in a
matter includes acting against a former client. Rules 3.4-10 and 3.4-11 deal
specifically with the lawyer’s obligations when acting against a former client.
(Rule
3.4-1, commentary [10])
Other
Conflicts
The Rules also contain specific obligations
with respect to certain conflicts-of-interest situations. Some examples
include: doing business with a client (Rules 3.4-27 to 3.4-36); acting for a borrower
and lender (Rules 3.4-12 to 3.4-16); and acting for a transferor and transferee
in transfers of title (Rules 3.4-16.7 to 3.4-16.9).
Conflicts
Arising from Duties Owed to Other Persons
Duties
owed to other persons can also impair client representation and loyalty. For
example, a lawyer may act as a director of a corporation or as a trustee. If a lawyer
acts against such a corporation or trust, there may be a conflict of interest.
But even acting for such a corporation or trust may affect the lawyer’s
independent judgment and fiduciary obligations in either or both roles, make it
difficult if not impossible to distinguish between legal advice from business
and practical advice, or jeopardize the protection of lawyer-client privilege. Lawyers
should carefully consider the propriety and the wisdom of wearing “more than
one hat” at the same time.
(Rule 3.4-1,
commentary [11])
Duty of Confidentiality to Third
Parties
When
determining whether there is a conflict of interest, lawyers should also
consider the duty of confidentiality that may be owed to third parties. The Rules provide
that a lawyer owes a duty of confidentiality to anyone seeking advice or
assistance on a matter invoking a lawyer’s professional knowledge, although the
lawyer may not render an account or agree to represent that person. A
solicitor-client relationship is often established without formality. A lawyer
should be cautious in accepting confidential information on an informal or
preliminary basis since possession of the information may prevent the lawyer
from subsequently acting for another party in the same or a related matter.
(Rule
3.3-1, commentary [4])
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STEP 4
Determine if there is a
substantial risk that your duty of loyalty to the client or the representation
of the client would be materially and adversely affected by your own interest
or your duties to another client (current, former or joint clients) or a third
person. If so, there is a conflict of interest.
When is
the risk substantial?
A
“conflict of interest” is defined in the Rules as the existence of a
substantial risk that a lawyer’s loyalty to or representation of a client would
be materially and adversely affected by the lawyer’s own interest or the
lawyer’s duties to another client, a former client or a third person. The risk
must be more than a mere possibility: there must be a genuine, serious risk to
the duty of loyalty or to client representation arising from the retainer.
The rule
addresses the risk of impairment rather than actual impairment. The expression
“substantial risk” in the definition of conflict of interest describes the
likelihood of the impairment as opposed to its nature or severity. A
substantial risk is one that is significant and plausible, even if it is not
certain or even probable that it will occur. There must be more than a mere
possibility that the impairment will occur. Except as otherwise provided in
Rule 3.4-2 dealing with consent, it is for the client and not the lawyer to
decide whether to accept the risk.
(Rule
3.4-1, commentary [1]; Rule 1.1-1, definition of “conflicts of interest,”
commentary [1])
A lawyer
should examine whether a conflict of interest exists not only from the outset but
throughout the duration of the retainer because new circumstances or
information may establish or reveal a conflict of interest. For example, the
addition of new parties in litigation or in a transaction can give rise to new
conflicts of interest that must be addressed.
(Rule 3.4-1, commentary [12])
If you do
not reasonably believe that you are able to represent each client without
having a material adverse effect on the duties owed to the other client, then
you cannot act.
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STEP 8
If you reasonably believe that
you are able to represent each client without having a material adverse effect
on the duties owed to the other client, then you may act if there is consent
from all of the affected clients, which consent must be fully informed and
voluntary after disclosure.
What is
“consent” under the conflicts-of-interest rule?
Rule
1.1-1 provides that “consent” must be in writing or confirmed in writing where
consent is provided orally.
Disclosure
is an essential requirement to obtaining a client’s consent and arises from the
duty of candour owed to the client. Where it is not possible to provide the
client with adequate disclosure because of the confidentiality of the
information of another client, the lawyer must decline to act.
Disclosure
means full and fair disclosure of all information relevant to a person’s
decision in sufficient time for the person to make a genuine and independent
decision and the taking of reasonable steps to ensure understanding of the matters
disclosed. In making disclosure, the lawyer should therefore inform the client
of the relevant circumstances and the reasonably foreseeable ways that the
conflict of interest could adversely affect the client’s interests. This would
include the lawyer’s relations to the parties and any interest in or connection
with the matter.
Furthermore
to ensure that the client’s consent is informed, in some circumstances, such as
when the client is vulnerable or not sophisticated, the lawyer should recommend
that a client obtain independent legal advice.
(Rule 3.4-2, commentary [1] to [2A];
Rule 1.1-1, definition of “consent”)
Consent
in Advance
In
certain circumstances the lawyer may be able to obtain the client’s consent in
advance to conflicts that may arise in the future. However, the effectiveness
of such consent is generally determined by the extent to which the client
reasonably understands the material risks that the consent entails. Therefore
the more comprehensive the explanation of the types of future representations
that might arise and the actual and reasonably foreseeable adverse consequences
of those representations, the greater the likelihood that the client will have
the requisite understanding. A general, open-ended consent will ordinarily be
ineffective because it is not reasonably likely that the client will have
understood the material risks involved. If the client is an experienced user of
the legal services involved and is reasonably informed regarding the risk that
a conflict may arise, such consent is more likely to be effective, particularly
if, for example, the client is independently represented by other counsel in
giving the consent and the consent is limited to future conflicts unrelated to
the subject of the representation.
While not
a prerequisite to advance consent, in some circumstances it may be advisable to
recommend that the client obtain independent legal advice before deciding
whether to provide consent. Advance consent must be recorded, for example in a
retainer letter.
(Rule
3.4-2, commentary [4] and [5])
Consent and the “Bright Line
Rule”
The
“bright line rule” developed by the courts to protect the representation of and
loyalty to current clients does not apply in circumstances where it is
unreasonable for a client to expect that its law firm will not act against it
in unrelated matters. No issue of consent arises in such circumstances absent a
substantial risk of material and adverse effect on the lawyer’s loyalty to or
representation of a client. Where such a risk exists, consent is required even
though the bright line rule does not apply.
(Rule
3.4-2, commentary [6])
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The rules on conflicts of interest are contained
in Section 3.4 of the Rules. This resource has been prepared to assist
lawyers to comply with some of their obligations under the
conflicts-of-interest rules. Lawyers should refer to the actual Rules to
determine the full extent of their obligations.
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