Conflicts portion of the Model Code of Professional Conduct

History of new model code starts and ends with conflicts of interest

BC addresses contentious part of Federation’s proposal

The Law Society, in conjunction with the Federation of Law Societies, will soon roll out the conflicts portion of its new model code of conduct for lawyers. The profession was encouraged to review and provide feedback to this section of the code and the Benchers expect to approve it later this year. The following explains the changes and is adapted from a speech given by Joost Blom, QC, Chair of the Ethics Committee and Law Society Bencher.

The new model code of conduct has been developed by a series of committees coordinated by the Federation of Law Societies and is intended to be adopted by all Canadian Law Societies, with minor changes, for the purpose of increasing the ease with which lawyers can move and practise in other provinces.

The conflicts provision of the model code is really what started off the entire model code history, because it was the difference between the conflict rules relating to current clients in different provinces that led the Federation to consider the creation of unified standards. The non-conflicts provisions of the model code, amended in some respects, have already been adopted in BC.

The discussion and review of the conflicts portion of the code have been extensive. In particular, the current client rule has been the cause of much debate — including between the related Federation committees and the Canadian Bar Association task force — a debate that continues. After a Federation committee’s first draft of the conflicts rules met with criticism, a second committee successfully obtained Federation approval on all but the proposed current client rules. Both committees were represented in BC by Anne Stewart, QC, a member of the Ethics Committee. Ultimately, the current client rule was referred to the Federation’s Standing Committee on the Model Code, chaired by BC Law Society president, Gavin Hume, QC, which intends to report its recommendations this fall.

In the meantime, the Ethics Committee completed its own thorough review of the proposed conflicts provisions, including the current client rule and, with the approval of the Benchers, invited the profession to comment on the draft.

Many of the proposed new rules are uncontroversial and more or less track the existing Professional Conduct Handbook rules.

The Federation’s draft provides rules about acting for both borrower and lender, creating exceptions for certain borrower and lender cases. As these have no equivalent in the current rules, the Ethics Committee recommended they not be adopted.

Considering the current client rule, the view adopted by the Federation is that the rule has to start from the principle of loyalty — even if the matters are unrelated, a lawyer cannot act against a client whose immediate legal interests are directly adverse to the new client, unless both clients consent. The current Professional Conduct Handbook rule is even stricter, saying one cannot act against the interests of a current client, even with consent, if the matters are related or there is confidential information that is relevant.

The Federation code and the proposed BC code do not include those additional restrictions because they are not needed if the clients give informed consent. This is supported by R. v. Neil, [2002] 3 S.C.R. 631, 2002 SCC 70, in which Mr. Justice Binnie said there’s a bright-line rule that one cannot act against a current client, even if the two mandates are unrelated, unless both clients consent after receiving full disclosure.

The alternative view, which is favoured by the CBA task force, is that the test is one of harm and actual conflict. In other words, a lawyer cannot take on a new client if there is a substantial risk of material and adverse effect on representation. Therefore, there are some cases in which one can act against a current client without consent, if the lawyer reasonably believes that there is in fact no risk of material and adverse effect on representation.

Hence, the nub of the issue: Is the rule an absolute where one must get consent, or in some cases is consent not necessary?

As mentioned, the Federation proposed the loyalty-based rule and the absolute requirement for consent. However, the draft code sent to the profession in BC goes a step further. Believing that this is really a matter of the retainer between lawyer and client, the Ethics Committee has proposed some specific provisions where consent is not needed. One is where:

  • the matters would have to be unrelated,
  • there must be no confidential information arising from the representation of one client that might affect the other,
  • the client is a large client, such as government, financial institution, publicly traded or similarly substantial entity, or an entity with in-house counsel that has commonly consented to lawyers acting for and against them in unrelated matters, and
  • the lawyer reasonably believes that he or she is able to represent that client without materially adversely affecting the representation of the other.

The proposed BC code also deals with another situation: a lawyer may, without consent, represent a client whose interests are directly adverse to those of another current client, where the client has agreed in advance. This allows the lawyer, at the time the retainer agreement is made, to have a client agree to the fact that, in certain circumstances and without the client’s consent, the lawyer may act against the client’s direct and immediate legal interests.

Ultimately, the effect of the two sub-rules added to the Federation’s proposal is a very significant qualification of the absolute loyalty rule where it is not reasonable to expect that consent must be sought, or where consent has been obtained in advance. These qualifications address at least some of the concerns of the CBA task force.

Taking into account the feedback the Law Society receives from the profession as well as the recommendations still to come from the Federation, the Benchers expect to approve this last portion of the model code by year end.

If you have any questions about the draft model code, please feel free to contact a Law Society Practice Advisor

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