by Warren T. Wilson, QC
Is an affiliate of a corporate client a client for the purpose of the duty of loyalty owed by a lawyer to a client? The recent Report of the CBA Task Force on Conflicts of Interest, August 2008 (the “Report”) devotes chapter 4 to Clients, Near-clients, and Non-clients. The Report makes the case that the client is only the person or entity that consults the lawyer and not other parties who are affiliated. I agree with this proposition. However, I have found no case in British Columbia dealing with the issue. Should the issue arise in a British Columbia case, the court may find the analysis in the Report useful.
In a national law firm, difficulties occur where the ethical rules governing lawyers in one province differ from those in another. In the Ontario case, Toddglen Construction Ltd. v. Concord Adex Developments Corp. (2004) 34 C.L.R. (3d) 111 (Ont. Sup. Ct. [Master]), the Master considered Rule 2.04(4) of the Rules of Professional Conduct of the Law Society of Upper Canada. That rule provides that “persons who were involved in or associated with the client in that matter” are also “clients” for the purpose of the loyalty rule. In the Toddglen case, the Master considered the affiliate to be a client merely because it was an affiliate, and not because it had any relationship to the matter. The Master in the Toddglen case referred to the case, UCB Sidac International Ltd. v. Lancaster Packaging Inc., 1993 CanLII 5588 (On S.C.).In the Sidac case the affiliate was associated in the matter and so was considered a client. In my view, Toddglen extends the concept beyond what was intended by the Law Society of Upper Canada and the law. I think the Toddglen case was wrongly decided. It does not appear to have been appealed.
Whether or not wrongly decided, the Toddglen case does have weight in Ontario. Many Ontario lawyers are reluctant to see their firms take on cases against affiliates of clients because of the Toddglen case. That concern constrains lawyers in offices of national firms outside of Ontario.
The foregoing relates to ethical conflicts. There is also a business conflict concern in deciding to act adverse to an affiliate of a client, even if the law firm does not act for the affiliate. At least one major financial institution requires that all its lawyers seek consent before acting against either it or any of its hundreds of affiliates. It is always wise to consider the risk of offending an existing client. Even if consent is not required for ethical reasons, giving the client a “heads up” may be the prudent course of action. In my experience most large corporations understand that lawyers will fulfill their duty of loyalty to the corporation even though the lawyer acts against a non-client affiliate. Nonetheless in-house counsel will appreciate a call to ensure that such counsel can deal with any displeasure expressed within the corporation.
Warren T. Wilson, QC is a retired partner at the Vancouver office of Borden Ladner Gervais LLP where he is currently responsible for lateral hires and professional responsibility and is Chair of the Conflicts Committee. Mr. Wilson is a Life Bencher and Past President of The Law Society of British Columbia. He is currently the Chair of The Law Foundation of British Columbia.
This article was published in the October 2008 issue of BarTalk. © 2008 The Canadian Bar Association. All rights reserved.