Steps for Dealing with Conflicts of Interest under Rule 3.04 of the New Paralegal Rules of Conduct

To determine whether there is a conflict of interest that would prevent you from acting for a client:

           ☐ Determine if there is a conflict of interest.

☐ If there is a conflict of interest, determine whether you may act despite the conflict of interest.  

PART 1  

Is there a conflict of interest?  

    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.  

PART 2  

If there is a conflict of interest, can you act despite the conflict of interest?  

    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 it is reasonable for you to conclude 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 it is not reasonable for you to conclude 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 it is reasonable for you to conclude 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 express or implied consent from the clients.  

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STEP 1  

Who is a client?  

The term “client” is a defined term in the Rules. A client is a person who

  • consults a paralegal and on whose behalf the paralegal renders or agrees to render legal services; or
  • having consulted the paralegal, reasonably concludes that the paralegal has agreed to render legal services on their behalf.

Furthermore, a client includes a client of the firm of which the paralegal is a partner or associate whether or not the paralegal handles the client’s work.

A paralegal-client relationship may arise only if there has been a consultation between the paralegal and the client. It may arise without formality even if there is no written retainer agreement.

(Rule 1.02, definition of “client”; Guideline 5: Clients, paragraph [2])

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STEP 2  

What is a representation?  

The conflicts rule applies to a paralegal’s representation of a client in all circumstances in which the paralegal acts for, provides advice to or exercises judgment on behalf of a client.

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STEP 3  

What are some of the duties that a paralegal owes to current, former and joint clients and third parties?  

A paralegal has a duty of loyalty to the client. Arising from the duty of loyalty are other duties such as the duty of confidentiality, the duty of honesty and candour and the duty to avoid conflicts of interests:

                                           

Duty of Honesty and Candour  

A paralegal must advise an existing client of all matters relevant to the retainer.

(Subrule 3.02(2); Guideline 7: Advising Clients, paragraphs [1] to [3])

Duty of Confidentiality   

The duty of confidentiality is owed to both current and former clients. It requires the paralegal to hold in strict confidence at all times all information     concerning the business and affairs of the client acquired in the course of the professional relationship. A paralegal may only disclose such information     where permitted by the Rules.

(Rule 3.03 (Confidentiality); Guideline 8: Confidentiality)

Duty to Avoid Conflicts of Interest  

A paralegal must not act or continue to act where there is a conflict of interest except in accordance with Rule 3.04. The duty to avoid conflicting interests     requires the paralegal to take care to avoid disclosing client information for a purpose other than serving the client in accordance with the terms of the     retainer. When determining whether there is a conflict of interest, paralegals should also consider the duty of confidentiality that may be owed to third     parties such as prospective clients, as well as current and former clients.

(Rules 3.04 (Conflicts of Interest - General) and Rule 3.03 (Confidentiality); Guideline 8: Confidentiality and Guideline 9: Conflicts of Interest) 

What is a conflict of interest arising out of a personal interest?  

A conflict of interest may also arise as a result of the paralegal’s personal interest. The Rules do not prohibit a paralegal from providing legal services to      friends or family, but they do require the paralegal to avoid existing or potential conflicts of interest. A conflict of interest may arise when a paralegal provides legal services to a friend or a family member or when the client and paralegal have a sexual or intimate personal relationship. In these circumstances the paralegal’s personal feelings for the client may impede the paralegal’s ability to provide objective, disinterested professional advice to the client.

A personal interest includes not only the paralegal’s own personal interests, but also the interests of others connected to the paralegal, such as the paralegal’s partners, associates or family members.

(Guideline 9: Conflicts of Interest, paragraphs [22], [53] and [54])

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STEP 4  

When is the risk substantial?  

The Rules stipulate that in order for there to be a conflict of interest, there must be a substantial risk that a paralegal’s duty of loyalty to or representation of the client would be materially and adversely affected by the paralegal’s own interest or the paralegal’s duties to another client, a former client or a third person. For the risk to be substantial, it 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.

(Rule 1.02, definition of “conflict of interest”)

What are some of the factors that a paralegal should consider in determining if there is a conflict of interest?  

To assess whether there is a conflict of interest, the paralegal will need to consider the circumstances of the retainer, the duties owed to current, former and joint clients and third parties such as prospective clients, as well as the paralegal’s personal interests.

(Rule 3.04 (Conflicts of Interest – General); Guideline 9: Conflicts of Interest)

What are some common examples of conflict-of-interest situations?  

Conflicts of interest may arise in many different situations. The following are examples of circumstances in which conflicts of interest commonly arise:

    Conflicts Involving Current Clients  

    The paralegal acts as an advocate in one matter against a person when the paralegal represents that person on some other matter.

    Conflicts Involving Personal Interests  

A paralegal, an associate, a partner or family member has a personal financial interest in a client’s affairs or in a matter in which a paralegal is asked to act for a client.

Sexual or Close Personal Relationship  

The paralegal has a sexual or close personal relationship with the client.

Acting as a Director for a Corporation  

The paralegal or the paralegal’s firm acts for a public or private corporation and the paralegal serves as a director of the corporation.

(Rule 3.04 (Conflicts of Interest – General); Guideline 9: Conflicts of Interest, paragraph [22])

What do the Rules say about conflicts involving former clients?  

A paralegal cannot act against a former client in the same or any related matter, except with the former client’s consent.

In addition, a paralegal cannot act against a former client in any new matter if the paralegal has relevant confidential information arising from the representation of the former client that may prejudice that client unless the former client consents.

If the paralegal has acted for a client and obtained confidential information relevant to the matter, the paralegal’s partner or employee may act in the subsequent matter against the former client provided that

  • the former client consents; or
  • the paralegal’s firm establishes that it has taken adequate measures on a timely basis to ensure that there will be no risk of disclosure of the former client’s confidential information to the other licensee having carriage of the new matter.

(Subrules 3.04(5) and (6))

What do the Rules say about joint retainers?  

Joint retainers are dealt with in subrules 3.04(7) to (13). Compliance with the Joint Retainer Rules, contains resources to assist paralegals with applying these rules.

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STEP 7  

What do the Rules say about the material impairment of representation or loyalty?  

A paralegal cannot act where there is a conflict of interest and it is not reasonable for the paralegal to conclude that he or she is able to represent each client without having a material adverse effect upon the representation of or loyalty to the other client.

(Subrule 3.04(3))

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STEP 8  

What is “consent” under the conflicts-of-interest rule?  

Consent must be express or implied.

Express Consent  

Express consent must be fully informed and voluntary after disclosure of the conflict, and it must be in writing or confirmed in writing.

Disclosure is an essential requirement to obtaining client consent. The client needs to know of anything that may influence the paralegal’s judgment or loyalty. Once the paralegal has provided the client with all the details, the paralegal must allow the client the time to consider them or to ask for further clarification.

There may be situations where it is impossible for a paralegal to give a client or prospective client all necessary information. This may happen when the details about the conflict involve another client or a former client. Since a paralegal cannot reveal confidential information regarding another client, the paralegal may only say that there is a conflict and that he or she cannot continue with or accept the retainer.

The client may only consent after being given all of the information required to make an informed decision. This is called “informed consent.”

(Subrule 3.04(4); Guideline 9: Conflicts of Interest, paragraphs [29] to [31])

Implied Consent  

In limited circumstances, consent may be implied rather than expressly given.

Consent may be implied and need not be in writing only if all of the following circumstances exist:

  • the client is a government, financial institution, publicly traded or similarly substantial entity, or an entity with in-house counsel;
  • the matters are unrelated;
  • the paralegal has no relevant confidential information from one client that might reasonably affect the representation of the other client; and
  • the client has commonly consented to paralegals acting for or against it in unrelated matters.

(Subrule 3.04(4))

Consent in Advance  

In certain circumstances a paralegal 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 understands the material risks involved. A paralegal may wish to recommend that the client obtain independent legal advice before deciding whether to provide such consent. Advance consent should be recorded in writing.

(Guideline 9: Conflicts of Interest, paragraph [32])

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[1] Convocation has approved certain amendments to the Paralegal Rules of Conduct (Rules), including amendments to rule 3.04 on conflicts of interest, which will take effect on October 1, 2014 [link to rule 3.04]. The Paralegal Professional Conduct Guidelines have also been amended. Guideline 9 deals with conflicts of interest [link to Guideline 9] .This resource has been prepared to assist paralegals to comply with some of their obligations under the new conflicts-of-interest rule. Paralegals should refer to the actual Rules to determine the full extent of their obligations.

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