Ontario s Amended Rules of Professional Conduct

Ontario s Amended Rules of Professional Conduct Bruce Blain Toronto Symposium June 5, 2014 FLSC Model Code of Professional Conduct 2004 - initiative to create uniform ethical and professional conduct standards across Canada 2009 - most of Model Code adopted - similar to Ontario Rules and Commentary in format, order and content 2011 - conflicts provisions settled after much debate concerning proper interpretation of Neil bright line rule significant changes to current Ontario Rules and Commentary on conflicts implemented in 6 Provinces to date 2 1

Implementation of Model Code in Ontario Fall 2011 - Ontario Professional Regulation Committee commences review May 2012 - Committee publishes proposed amendments to Ontario Rules and related discussion paper and calls for input from the profession Fall 2012-34 submissions received October 2013 - amended Rules published certain Model Code provisions not adopted or amended and certain Ontario provisions not found in Model Code maintained October 2014 - amended Rules effective 3 Structure of Amended Rules Chapters amended Rules and related Commentary grouped by broad subject matter order of current Rules followed Rules mandatory language Commentary explanatory or advisory language 4 2

Amended Rules Numbering Scheme Model Code numbering scheme adopted Chapters single number Sections two digits separated by decimal Section 3.4 Conflicts Rules relevant section number with addition of number preceded by a dash Rule 3.4-1 Duty to Avoid Conflicts of Interest Commentary each paragraph preceded by number in square brackets 5 Amended Rules Numbering Scheme where amended Rules do not adopt a Model Code provision [FLSC not in use] (17 instances) where amended Rules amend Model Code provisions - capital letter suffix Rule 3.2-1A Legal Services Under a Limited Scope Retainer (4 instances) where amended Rules contain a Rule or Commentary not found in the Model Code numerical suffix preceded by decimal point Rule 3.4-16.1 Multi-discipline Practice (54 instances) 6 3

Chapter 2 - Integrity new Chapter consolidating material now found in current Sections 1.02 definition of conduct unbecoming a barrister or solicitor ; 1.03 Standards of the Legal Profession and 6.01(1) Integrity Commentary new Commentary encouraging lawyers to enhance the profession through contributions to colleagues, the profession and the community When participating in community activities, lawyers should be mindful of the possible perception that the lawyer is providing legal advice and a lawyer-client relationship has been created. 7 Quality of Service Rule 3.2-1 A lawyer has a duty to provide courteous, thorough and prompt service to clients. The quality of service required of a lawyer is service that is competent, timely, conscientious, diligent, efficient and civil. a new Rule for Ontario has the competent lawyer standard been raised? 8 4

Honesty and Candour Rule 3.2-2 When advising clients, a lawyer shall be honest and candid. same as old Rule 2.02(1) Commentary The duty of candour requires a lawyer to inform the client of information known to the lawyer that may affect the interests of the client in the matter. with client consent can withhold information received on a for counsel s eyes only basis but not appropriate to act where relevant material information received through retainer for a different client 9 Threatening Criminal or Regulatory Proceedings Old Rule 2.02(4) A lawyer shall not advise, threaten, or bring a criminal or quasi-criminal prosecution in order to secure a civil advantage for the client. Rule 3.2-5 A lawyer shall not, in an attempt to gain a benefit for a client, threaten, or advise a client to threaten: (a) to initiate or proceed with a criminal or quasicriminal charge; or (b) to make a complaint to a regulatory authority. 10 5

Threatening Criminal or Regulatory Proceedings Rule 3.2-5.1 - Rule 3.2-5(b) does not apply to an application made in good faith to a regulatory authority for a benefit to which a client may be legally entitled. Commentary It is not improper, however, to notify the appropriate authority of criminal or quasi criminal activities while also taking steps through the civil system. impropriety is using criminal or regulatory proceedings for satisfaction of private grievance where regulatory authority exercises a jurisdiction that is essentially civil, not improper to threaten a complaint to achieve a benefit for the client e.g. unpaid wage claim under Employment Standards Act 11 Dishonesty, Fraud, etc. when Client an Organization Rule 3.2-8 A lawyer who is employed or retained by an organization to act in a matter in which the lawyer knows that the organization has acted, is acting or intends to act dishonestly, fraudulently, criminally or illegally, shall do the following, in addition to their obligations under rule 3.2-7: (a) advise the person from whom the lawyer takes instructions and the chief legal officer, or both the chief legal officer and the chief executive officer, that the conduct is, was or would be dishonest, fraudulent, criminal, or illegal and should be stopped; 12 6

Dishonesty, Fraud, etc. when Client an Organization (b) if necessary because the person from whom the lawyer takes instructions, the chief legal officer or the chief executive officer refuses to cause the conduct to be stopped, advise progressively the next highest persons or groups, including ultimately, the board of directors, the board of trustees, or the appropriate committee of the board, that the conduct was, is or would be dishonest, fraudulent, criminal, or illegal and should be stopped; and (c) if the organization, despite the lawyer s advice, continues with or intends to pursue the wrongful conduct, withdraw from acting in the matter in accordance with rules in Section 3.7. 13 Dishonesty, Fraud, etc. when Client an Organization old Rules 2.02(5.1) and (5.2) contain separate and slightly differing provisions concerning up the chain reporting of actual and intended activities - amended Rule consolidates the provisions and eliminates inconsistencies Commentary lawyer should consider whether it is feasible and appropriate to give any advice in writing Rule 3.7-9 requires written notice of withdrawal, specifying the reasons Professional Regulation Committee proposes to address issues particular to in-house counsel based on comments received during Call for Input 14 7

Confidentiality Rules 3.3-1 3.3-6 - add specific provisions to permit disclosure of client information where required by the Law Society to secure legal advice from another lawyer about proposed conduct Commentary A lawyer also owes a duty of confidentiality to anyone seeking advice or assistance on a matter invoking a lawyer s professional knowledge, although the lawyer may not render an account or agree to represent that person. 15 Conflicts Overview of Changes new definitions of client, conflict of interest and consent detailed Commentary addressing the duty of loyalty, factors for consideration in assessing conflicts and common conflict situations new Rule on client consent - both express and implied - and enhanced Commentary concerning criteria for adequate disclosure and informed consent new Commentary to joint retainer rule on acting for clients competing for same opportunity 16 8

Conflicts - Definitions Client Old Rule 1.02 - client includes a client of the law firm of which the lawyer is a partner or associate, whether or not the lawyer handles the client s work; Rule 1.1-1 client means a person who: (a) consults a lawyer and on whose behalf the lawyer renders or agrees to render legal services; or (b) having consulted a lawyer, reasonably concludes that the lawyer has agreed to render legal services on their behalf and includes a client of the law firm of which the lawyer is a partner or associate, whether or not the lawyer handles the client s work; 17 Conflicts - Definitions Commentary For greater clarity, a client does not include a near-client, such as an affiliated entity, director, shareholder, employee or family member, unless there is objective evidence to demonstrate that such an individual had a reasonable expectation that a lawyerclient relationship would be established. 18 9

Conflicts - Definitions Conflict of Interest Old Rule 2.04(1) A conflict of interest or a conflicting interest means an interest (a) that would be likely to affect adversely a lawyer's judgment on behalf of, or loyalty to, a client or prospective client, or (b) that a lawyer might be prompted to prefer to the interests of a client or prospective client. 19 Conflicts - Definitions Conflict of Interest Rule 1.1-1 conflict of interest means the existence of a substantial risk that a lawyer s loyalty to or representation of a client would be materially and adversely affected by the lawyer s own interest or the lawyer s duties to another client, a former client, or a third person. The risk must be more than a mere possibility; there must be a genuine, serious risk to the duty of loyalty or to client representation arising from the retainer. Commentary In this context, substantial risk means that the risk is significant and plausible, even if it is not certain or probable that the material adverse effect will occur. 20 10

Conflicts Prohibition on Acting Old Rule 2.04 (2) A lawyer shall not advise or represent more than one side of a dispute. (3) A lawyer shall not act or continue to act in a matter when there is or is likely to be a conflicting interest unless, after disclosure adequate to make an informed decision, the client or prospective client consents. Rule 3.4-1 - A lawyer shall not act or continue to act for a client where there is a conflict of interest, except as permitted under the rules in this Section. Rule 3.4-3 - Despite rule 3.4-2, [Consent], a lawyer shall not represent opposing parties in a dispute. 21 Conflicts Prohibition on Acting Commentary the meaning of representation includes advice to and judgment on behalf of client elements of the duty of loyalty - commitment to a client s cause; duty of confidentiality; duty of candour and duty to avoid conflicting interests factors to consider in assessing whether a conflict exists examples of situations where conflicts of interest commonly arise 22 11

Conflicts Prohibition on Acting Accordingly, factors for the lawyer s consideration in determining whether a conflict of interest exists include (a) the immediacy of the legal interests; (b) whether the legal interests are directly adverse; (c) whether the issue is substantive or procedural; (c) the temporal relationship between the matters; (d) the significance of the issue to the immediate and long-term interests of the clients involved; and (e) the clients' reasonable expectations in retaining the lawyer for the particular matter or representation. 23 Conflicts - Consent Section 1.1-1 consent means fully informed and voluntary consent after disclosure (a) in writing, provided that, where more than one person consents, each signs the same or a separate document recording the consent, or (b) orally, provided that each person consenting receives a separate written communication recording their consent as soon as practicable; 24 12

Conflicts - Consent Rule 3.4-2 A lawyer shall not represent a client in a matter when there is a conflict of interest unless there is express or implied consent from all clients and it is reasonable for the lawyer to conclude that he or she is able to represent each client without having a material adverse effect upon the representation of or loyalty to the other client. Rule 3.4-2(a) Express consent must be fully informed and voluntary after disclosure. 25 Conflicts - Consent Commentary client can accept risk of possible material impairment of representation or loyalty but actual material impairment cannot be waived even with client consent, a lawyer cannot act if it is reasonable to conclude that client representation or loyalty will be materially impaired disclosure should inform client of material risks consent entails and include relevant circumstances and reasonably foreseeable ways conflict could adversely affect client s interests discussion of effectiveness of advance conflict waivers 26 13

Conflicts - Consent Rule 3.4-2(b) Consent may be implied and need not be in writing where all of the following apply: (i) the client is a government, financial institution, publicly traded or similarly substantial entity, or an entity with in-house counsel, (ii) the matters are unrelated, (iii) the lawyer has no relevant confidential information from one client that might reasonably affect the representation of the other client, and (iv) the client has commonly consented to lawyers acting for and against it in unrelated matters. current Ontario Rules do not address implied consent 27 Conflicts Competing Clients Rule 3.4-5(b) Joint Retainers where a lawyer acts in a matter for more than one client, no information received in connection with the matter from one client can be treated as confidential vis a vis the other clients Model Code Rule 3.4-4 permits concurrent representation of sophisticated clients with competing interests without the sharing of confidential information if various conditions met, including disclosure of risks independent legal advice client consent separate lawyer groups and law firm screening mechanisms law firm withdrawal if unresolved dispute among clients 28 14

Conflicts Competing Clients Ontario has not adopted the Model Code Rule Commentary to Rule 3.4-5 amended where law firm retained to assist two or more clients simultaneously competing for same opportunity not a joint retainer with client consent, different lawyers in firm can act for each client without sharing information provided appropriate internal confidentiality screen confidentiality screen not permitted in joint retainer 29 Doing Business With a Client Rule 3.4-28 - A lawyer must not enter into a transaction with a client unless the transaction is fair and reasonable to the client, the client consents to the transaction and the client has independent legal representation with respect to the transaction. new Rule in Ontario requirement for ILR not consistent with requirements for independent legal advice in certain existing Rules which have been adopted in-house counsel can provide ILR or ILA for employer, if no personal conflicting interest 30 15

Chapter 7 Relationship to Law Society and Other Lawyers - Inadvertent Communications Rule 7.2-10 - A lawyer who receives a document relating to the representation of the lawyer's client and knows or reasonably ought to know that the document was inadvertently sent shall promptly notify the sender. new Rule in Ontario Commentary document includes an e-mail does not address whether there s an obligation to return or destroy the document 31 Chapter 7 Relationship to Law Society and Other Lawyers - Undertakings and Trust Conditions Rule 7.2-11 - A lawyer shall not give an undertaking that cannot be fulfilled and shall fulfill every undertaking given and honour every trust condition once accepted. Commentary concerning trust conditions should be imposed and accepted in writing when property delivered should be reasonable, clear and state time within which conditions must be met once accepted, must be fulfilled personally, even if unreasonable or not in accord with client s obligations cannot be retroactively imposed by lawyer who delivers property or unilaterally be made subject to cross conditions by performing lawyer 32 16

Looking Ahead FLSC Standing Committee on Model Code ongoing monitoring of need for changes to Model Code FLSC Model Code Liaison Committee representatives of Provincial Law Societies Standing Committee review of implications of SCC decision in CNR v McKercher Model Code provisions relating to lateral transfers 33 Looking Ahead Reflecting CNR v McKercher settlement of Model Code conflicts provisions delayed several years by debate over proper interpretation of R v Neil bright line rule in connection with unrelated matters 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 Model Code adopts bright line rule in Commentary to Rule 3.4-1, rather than as a Rule 34 17

Looking Ahead Reflecting CNR v McKercher subsequently Supreme Court of Canada re-examined the Neil bright line rule in CNR v McKercher LLP - 2013 SCC 39 - and set out a framework for analysing conflict situations amended Ontario Rules and Commentary published post McKercher and delete Model Code Commentary relating to Neil bright line rule Ontario Committee to propose further changes following review of FLSC Standing Committee recommendations 36 Looking Ahead Reflecting CNR v McKercher in McKercher, the SCC unanimously reaffirmed Neil bright line prohibition, but limited its scope where applicable a deemed conflict of interest does not require an assessment of the likelihood or materiality of harm to client representation or loyalty - a substantial risk of a material and adverse affect on loyalty or representation presumed 36 18

Looking Ahead Reflecting CNR v McKercher the bright line rule limited to direct adversity of immediate legal interests of two current clients in a matter on which the law firm is acting bright line prohibition does not apply if a former client indirect adversity of interests adversity to strategic or commercial rather than legal interests tactical rather than principled use unreasonable for the client to expect a firm wouldn t act against it on unrelated matters 37 Looking Ahead Reflecting CNR v McKercher open ended exception based on reasonable expectations of client In some cases, it is simply not reasonable for a client to claim that it expected a law firm to owe it exclusive loyalty and to refrain from acting against it in unrelated matters.. Ultimately, courts must conduct a case-by-case assessment, and set aside the bright line rule when it appears that a client could not reasonably expect its application. McKercher - para 37 burden on law firm to establish cases where this applies will be exception, rather than the norm 38 19

Looking Ahead Reflecting CNR v McKercher relevant factors listed in McKercher nature of client Neil professional litigant exception the nature of the relationship between the law firm and the client the terms of the retainer the types of matters involved must consider totality of client/law firm relationship 39 Looking Ahead Reflecting CNR v McKercher if bright line rule not applicable, must still assess whether there s a substantial risk that the lawyer s representation of one client would be materially and adversely affected determination contextual - is the situation liable to create conflicting pressures on judgment as a result of the presence of factors which may reasonably be perceived as affecting judgment onus on the client to establish on a balance of probabilities there is only a deemed conflict of interest if the bright line rule applies 40 20

QUESTIONS 41 21