These materials provide practical guidance and precedents that are intended to help lawyers to recognize, deal with and avoid conflicting interests across different practice contexts. That said, much of the material provided is most relevant to the private sector context. Public sector lawyers and in-house lawyers experience unique conflicts of interest issues that are not fully explored in this Toolkit. Lawyers working in these sectors may wish to consult additional material prepared with their practice contexts specifically in mind.¹

What are conflicting interests and why do lawyers need to avoid or appropriately manage conflicts that arise?

Lawyers have a duty to avoid conflicting interests. Professional conduct codes define a conflict of interest as “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.”²

A conflicting interest can arise when:

• a lawyer’s duty to another client, a former client or a third person creates a substantial risk of a material and adverse effect on the effective representation of a client;
• a lawyer acts in a matter that creates a substantial risk that confidential information obtained from a client will be used to that client’s disadvantage;
• the lawyer’s personal circumstances create a risk that the lawyer will use the lawyer-client relationship to obtain an improper advantage or benefit for themselves or otherwise fail to represent the client appropriately; or
• the lawyer’s relationship to the client or to the matter creates a risk that the lawyer will be unable to satisfy their obligations to the legal process and the administration of justice.³

Why do conflicts of interest cause concern? One of the main purposes of conflict of interest rules is to protect clients against two types of prejudice: (1) prejudice as a result of the lawyer’s misuse of confidential information obtained from a client; and (2) prejudice arising where the lawyer “soft peddles” their representation of a client in order to serve the lawyer’s own interests, those of another client, or those of a third person.⁴ Less commonly, but still importantly, conflict of interest rules are also directed towards protecting the proper administration of justice.⁵

The consequences of a conflict of interest for the lawyer can be severe and costly. They can include:

• a law society investigation, resulting possibly in a public hearing and sanctions;
• disqualification from representation of one or more clients;
• forfeiture of fees charged; and the inability to charge for work in progress and other time invested;
• a damage claim which may include punitive damages; or
• embarrassment and cost in time and money of defending a malpractice claim.

Checking for, identifying and avoiding conflicts of interest need to be part of every lawyer’s practice. In fact, every time you have a new client or a new matter for an existing client, and throughout the course of any active matter, you should be on the lookout for the existence of a real or potential conflict of interest and be alert to the possibility that confidential client information you have about one client may bar you from acting for another. Lawyers also need to be alert to the possibility that they may have personal interest which might interfere with appropriate representation of a client.

The conflicts checking system used by many lawyers and law firms usually catch common types of conflicts, and most lawyers instinctively recognize a conflicts issue when it actually arises. Sometimes conflicts can be missed, however, if lawyers are in a rush or unaware of their ethical obligations in particular situations.

The requirements for successfully managing conflicts of interest are quite basic: be aware of your obligations; exercise good judgment; and effectively communicate and document the decisions you make and the actions you take when dealing with conflicts of interest. The guidelines, checklists and precedents in this Toolkit are designed to assist you in achieving this objective.

In general, the references throughout this document are to the Federation of Law Societies of Canada’s Model Code of Professional Conduct. When seeking guidance in relation to conflicts of interest, lawyers should have regard to the relevant corresponding provisions in their own jurisdiction’s professional conduct code. Provincial and territorial law societies also have helpful practice management materials and practice advice resources that lawyers may want to avail themselves of when faced with conflicts of interest issues or questions.