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Legal Profession - Barristers and solicitors - Representation - Disqualification or removal of counsel - Relationship with client - Conflict of interest - Duty to former client - Lawyer joining another firm

Thursday, March 23, 2017 @ 8:00 PM  

Appeal by the defendants from an order allowing the plaintiff’s appeal from the refusal to remove counsel for two of the defendant insurers, Chartis Insurance Company and American Home Assurance Company, based on an alleged conflict of interest. The respondent, the Province of Ontario, sued the appellants as a result of an insurance coverage dispute. Ontario was represented by an outside law firm. One of the lawyers at the firm, Foulds, who had been working closely with senior counsel to Ontario on the dispute, moved to the firm representing the appellants and was working closely with counsel for the appellants. Counsel for the two parties discussed the apparent conflict before Foulds took up his new position. An ethical screen was implemented at the law firm representing the appellants, which included all of the measures suggested by the Law Society Guidelines. Those measures included Foulds having no involvement in the action, or discussing the action with lawyers in the new firm, and being physically and electronically segregated from the file. Foulds and the appellants’ lawyers and staff involved in the coverage dispute gave undertakings to comply with the terms of the screen. In addition, a senior partner in the firm was appointed to supervise the screen. Ontario continued to oppose counsel for the appellants continuing to act. Ontario argued that despite the ethical screen, there was a possibility of inadvertent disclosure due to the close working relationship between the lawyers at issue in the context of working at a small law firm. The appellants brought a motion for a declaration that the ethical screen was sufficient to prevent disclosure of the respondent’s confidential information and that it was in the interests of justice that they continue to act. The respondent brought a cross-motion for the removal of appellants’ counsel. The motion judge concluded the appellants’ counsel had been pro-active in minimizing the risk of disclosure of confidential information and that the ethical screen was comprehensive. He found that it was in the interests of justice to allow the appellants’ counsel to continue to act. Ontario appealed. The Divisional Court overturned the decision and disqualified the appellants’ firm from continuing to act. The appellants appealed, arguing that the Divisional Court applied the wrong test.

HELD: Appeal dismissed. Foulds had received confidential information attributable to a solicitor-client relationship relevant to the matter at hand. He had a close working relationship with the appellants’ lawyer such that the potential for inadvertent disclosure was great; in fact, the most striking feature of the case was that Foulds spent 50 to 60 percent of his time working with the appellants’ counsel. In the face of that fact, it could not be said that there was clear and convincing evidence that all reasonable measures had been taken to ensure that no disclosure would occur by Foulds to the appellants’ counsel. Any such disclosure had the potential to be very prejudicial to the respondent. The reasonably informed person could not be satisfied that no use of confidential information would occur.