Conflicts and the Courts
The Supreme Court of Canada has recognized in the landmark case MacDonald Estate v. Martin,  3 S.C.R. 1235 that while courts are not bound to apply codes of professional ethics in asserting their jurisdiction to remove a solicitor of record from the case in situations where a conflict of interest exists, the court should consider expressions of professional standards contained in a code of ethics as an important statement of public policy. In that case Sopinka J. held that the Legislature has entrusted to the governing bodies the role of developing standards in the profession and the court's role is merely supervisory, extending to this aspect of ethics only in connection with legal proceedings.
In MacDonald Estate, the Court indicated that two questions must be answered in a typical case:
Did the lawyer receive confidential information attributable to a solicitor and client relationship relevant to the matter at hand? To meet this requirement the solicitor must, without revealing specifics of the privileged communication, satisfy the court that a reasonable member of the public would accept that no confidential information relevant to the new matter passed between solicitor and client during the conduct of the previous matter. If it is shown that a previous relationship (sufficiently related to the retainer) existed, the court should infer that confidential information was imparted unless the lawyer can discharge the burden of showing that no relevant information could be imparted.
Is there a risk the confidential information will be used to the prejudice of the client? A lawyer who has relevant confidential information is automatically disqualified from acting against a client or former client. Further, there exists a strong inference that lawyers who work together share confidences, and clear and convincing evidence is required to show that all reasonable measures have occurred to ensure no disclosure will take place between the lawyer who possesses confidential information about the client against whom another lawyer in the firm is acting.
In R v. Neil,  3 S.C R 631, the Supreme Court established the general “bright line” rule for determining whether a conflict of interest exists. In so doing, the Court noted that it is the firm and not just the individual lawyer who owes a fiduciary duty to his or her client. As a general rule, 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 to the representation after receiving full disclosure, and the lawyer reasonably believes that he or she is able to represent each client without adversely affecting the other.
In Canadian National Railway Co. v. McKercher LLP,  2 SCR 649 the Court added that the bright-line rule is limited in scope and applies where the immediate interest of clients are directly adverse in the matters on which the lawyer is acting and applies only to legal interests. The rule cannot be raised tactically and does not apply in circumstances where it is unreasonable for a client to expect that a lawyer or law firm will not act against it in unrelated matters (see paragraph  of the commentary to rule 3.4-1).
In assessing whether a lawyer or a law firm should be disqualified from representing a client where it has determined that the lawyer is in a conflict of interest, the court will consider whether disqualification is required to:
avoid the risk of improper use of confidential information;
avoid the risk of impaired representation; and/or
maintain the repute of the administration of justice.
If you have taken on a file and find yourself in a potential conflict of interest situation, you should advise the Professional Liability Reserve Fund and get their instructions on how to proceed.
If a conflict arises in a court or tribunal setting in which you are required to withdraw your services, be sure to follow the procedures governing withdrawal from that process. (This topic is covered in the module on Withdrawal of Service.)