New Ontario conflict of interest decision

Ontario v Chartis Insurance Company of Canada, 2016 ONSC 43 addresses the issue of conflicts arising from a transferring lawyer. In this case, the law firm to which the lawyer was transferred was disqualified despite the fact that a confidentiality screen was put in place in a timely manner.

The Court held that there was no question that the transferring lawyer had received relevant, confidential information that was attributable to the solicitor–client relationship between the plaintiff and its counsel, his previous employer. On the question of whether there was a risk that the confidential information would be used to the prejudice of the plaintiff, the Court noted, inter alia:

[42]          ….There is nothing that suggests that every conflict which arises can be successfully met by the imposition of the guidelines found in the Rules of Professional Conduct or some alternate form of ethical screen. To think otherwise circumvents the precedence of maintaining the integrity of the administration of justice. It replaces it with a concern for the presence of a screen which is comprehensive, not one that will necessarily work. There will be circumstances where the conflict of concern may not be overcome by whatever protective measures can be put in place. “The test must be such that the public represented by the reasonably informed person would be satisfied that no use of confidential information would occur”. There will be circumstances where such a person cannot be satisfied, where the relationships are just too close and the appropriate segregation cannot be made or its presence maintained….

[43]           In this case, the idea is that all of the protections imposed will appropriately guard against a breach between two lawyers where 50 to 60 percent of the practice of the migrating lawyer will be working with counsel continuing to have carriage of this file for AIG and 50 percent of the practice of the migrating lawyer will have him acting for AIG. For all of the protections proposed, this case is reduced to whether a member of the public, properly informed, will accept that two lawyers can work this closely and no breach of confidential information, inadvertent or otherwise, will occur and no use of such information made.

[45]           …. The closeness of the working relationship is such that the prospect of a breach will not be set aside by the ethical screen that is proposed, at least not to the informed and reasonable member of the public. The integrity of the administration of justice will be impaired if counsel is allowed to continue.

[46]           This can be more easily understood from the following. Insurance companies such as AIG are frequent litigators. This arises from the nature of their business. This is a “coverage action”. The plaintiff seeks a finding as to its insurance coverage in respect of three class actions commenced against it. This is hardly an unusual issue to find its way to court. What if a similar issues arises in some other case in which counsel for AIG is retained to act for it and the migrating lawyer is involved in that representation? The same strategic considerations could arise. It is not difficult to see the experience in one case assisting in the other and the threat of an inadvertent breach, despite all the care that has been taken, being real. I venture to say that the hypothetical member of the public would not be satisfied that the use of confidential information would not be imparted and used. The idiom “too close for comfort” is, if anything, a cliché. Certainly, it is not a legal principle. Nonetheless, it has application to this appeal.

[footnotes omitted]

For the full set of reasons, see here.


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