Conflicts of Interest

…A quick refresherLaw Society of Nunavut

May 2015

Ross McLeod

Practice Advisor

First ask…Who is my client?

Prospective clients (beauty contests, RFPs)Party who pays the billPartnerships and partnersShareholders, Directors, EmployeesRelated corporations Joint venturersFamily membersCo-accusedNear clientsAccidental clients

Who’s the client atGNWT?

You say that’s meh solicitor?

Duty of Loyalty

i. a duty of commitment to the client’s cause, ii. the duty to avoid conflicting interests, iii. a duty of candour with the client on matters

relevant to the retainer, and iv. a duty not to disclose, or abuse,

confidential information.

R. v. Neil, [2002] 3 S.C.R. 631 at para. 19

Duty of Loyalty

“The duty of loyalty is intertwined with the fiduciary nature of the lawyer-client relationship. (Neil, para. 16)…

…A fundamental duty of a lawyer is to act in the best interest of his or her client to the exclusion of all other adverse interests, except those duly disclosed by the lawyer and willingly accepted by the client.” 

• The source of the duty is not the retainer itself, but all the circumstances (including the retainer) creating a relationship of trust and confidence from which flow obligations of loyalty and transparency.

• The scope and subject matter of the retainer is

ordinarily a matter of agreement between lawyer and client.

• But, fiduciary duties provide a framework within which the lawyer performs the work and may include obligations that go beyond what the parties expressly bargained for. 

Balancing “competing interests”

• Reasonable mobility of lawyers

• Client’s right to choice of counsel

• The administration of justice itself

– R. v. Neil

The Species of Conflicts

1. Current clients within the firm

2. Former clients and lateral transfers

3. Non-clients – confidential info can come from anywhere, including pillow talk

4. Lawyer and own client – doing business or sleeping with…

A “conflict of interest” is defined in Neil as an interest that gives rise to a…

“substantial risk that the lawyer’s representation of the client would be materially and adversely affected by the lawyer’s own interests or by the lawyer’s duties to another current client, a former client, or a third person.”

Current Clients

“The bright line is provided by the general rule that a lawyer may not represent one client whose interests are directly adverse to the immediate interests of another current client — even if the two mandates are unrelated — unless both clients consent after receiving full disclosure (and preferably independent legal advice), and the lawyer reasonably believes that he or she is able to represent each client without adversely affecting the other.” (Neil, para. 29)

Current clients 2013

• [33] “…the bright line rule applies only where the immediate interests of clients are directly adverse in the matters on which the lawyer is acting.

• [35] …only when clients are adverse in legal interest.• [36] Third, the bright line rule cannot be successfully

raised by a party who seeks to abuse it.• [37] Finally, the bright line rule 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.”

Per McLachlin C.J. in McKercher v. CNR 2013 SCC 39

The Chief Justice in dissent, 2007:

“Whether an interest is “directly” adverse to the “immediate” interests of another client is determined with reference to the duties imposed on the lawyer by the relevant contracts of  retainer.  This precision protects the clients, while allowing lawyers and law firms to serve a variety of clients in the same field.  This is in the public interest.” 

Strother v. 3464920 Canada Inc. [2007] SCC 24

Not really a conflict: Concurrent clients

• Clarified in the new rules.• Conflict of interest rules do not preclude law firms

and individual lawyers from concurrently representing different clients who are economic or business competitors and whose legal interests are not directly adverse.

• Example: The firm acts for 2 separate oil companies who are bidding on the same well site

Former Clients

In MacDonald Estate, the Supreme Court reformulated the standards for conflicts of interest in the context of the lawyer’s duty of confidentiality, adopting:– A presumption of shared information; – Possibility (not probability) of disclosure; – Reasonable person/public perception; and – Heavy burden of proof to discharge.

MacDonald Estate v. Martin, [1990] 3 S.C.R. 1235

Former Clients

The duty to keep confidences is a fiduciary duty that survives termination of the retainer.

There are also other residual fiduciary duties:

– not to act against a former client on the very subject matter of the prior retainer, including a duty not to challenge what was formerly done

– a duty of candour with respect to matters relevant to the prior retainer (ie subsequently learn that advice was in error)

– not to improperly benefit from the fiduciary relationship.

Non-client conflicts

• disqualifies counsel from acting by reason of duties owed to parties who were neither clients nor former clients of the lawyer’s firm:

• Acted for the opposing client’s lender on refinancing

• Acted for opposing client’s mother last year or subsidiary corporation

Lawyer and own client conflicts

• Doing business with the client• Borrowing from or lending to the

client• Sleeping with the client (What parts

of the duty of loyalty are engaged?)• Lawyer as witness against the client

Managing Conflicts

• Withdrawal• Informed Consent of Clients• Advance Consent• Ethical Screens• Retainer / engagement letters

The role of government counsel in managing conflicts of interest --

• Ethical rules sometimes provide little guidance• Rules generally formulated for litigators• Role differentiation: policy advisor: vs legal

advisor• Global / National nature of government and

practice• Other regulators or authorities may have a role

Any questions?

Thank You!!

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