The Ethical Screen: A How to Guide
Authors: Tahir Khorasanee (Associate) and Rachel McKenzie (Student-at-Law)
Adhering to the Rules of Professional Conduct provided by the Law Society of Ontario (“LSO”) and implementing the additional best practices produced by the Canadian Bar Association (“CBA”) encapsulate how to successfully implement an Ethical Screen. Failure to do so can result in a breach of confidentiality, conflict of interest and disqualification from representation, as highlighted in the case of Ontario v. Chartis Insurance Company of Canada (“Chartis”).
Chartis has attained infamy for its application, and ultimate failings, in erecting an Ethical Screen. This case involved a conflict of interest between Mr. Foulds (a lawyer) and LBM (a law firm) and their representation of the Defendants.[i] By using Chartis as a case study, this article will explore how to avoid similar errors and successfully establish an Ethical Screen.
Rules of Professional Conduct
The LSO provides the framework for the ethical standards required of lawyers in Ontario, including:
“3.4-2: A lawyer shall not represent a client in a matter when there is a conflict of interest unless there is consent, which must be fully informed and voluntary after disclosure, from all affected clients and the lawyer reasonably believes 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.”[ii]
With a high degree of importance associated with preventing conflicts of interest, particular caution is required when a firm represents two parties engaged in a dispute.
Consent to Representation
If both parties consent to continued representation by the firm, obtaining sufficient consent is crucial. To meet this standard, the consent obtained must be:
1. In writing;
2. Informed; and
3. Provided after being advised of the option to obtain Independent Legal Advice.[iii]
Ethical Screen
Assuming the parties have provided their consent, construction and implementation of the Ethical Screen is necessary. An Ethical Screen operates to ensure that the matters from which the conflict originates are kept completely separate, with protections by technical and physical barriers, and the implementation of mechanisms to restrict access.
How to Establish an Ethical Screen
Turning to the CBA, a quasi-checklist for how to establish an Ethical Screen has been established:
1. Receive informed and written consent from both parties to the conflict detailing their consent to the firm’s continued representation;
2. The lawyers and staff working on the matter requiring an Ethical Screen should not be involved with the lawyers and staff representing the conflicting client. They should also be physically separated;
3. The confidential files need to be distanced from the regular filing system and have limited access;
4. The firm should have a written policy detailing the measures taken to screen the lawyers and staff involved in the conflict; and
5. Affidavits are needed from the firm’s lawyers and staff confirming adherence to the Ethical Screen.[iv]
While these criteria are required for the establishment of an Ethical Screen, Chartis identifies that adherence to statute does not guarantee a successful outcome.
Chartis: Outcome & Penalties of Non-Compliance
The appropriate test for determination as to whether a “disqualifying conflict exists”[v] originates from the case of MacDonald Estate v. Martin (“MacDonald”) and asks whether a “reasonably informed person would be satisfied that no use of confidential information would occur.”[vi]
Although the Ethical Screen in Chartis met the relevant statutory requirements, the resulting Ethical Screen did not pass the Macdonald test.[vii] The Court of Appeal was influenced by the degree of time that Mr. Foulds spent with colleagues at LBM, who were involved in the conflicting matter (approximately 50-60% of his time).[viii]
Takeaways
To avoid the disqualification faced by LBM, reviewing the following factors could be beneficial:
1. The larger the law firm the less risk of contact between lawyers involved in conflicting matters;
2. Ensure the firm’s physical layout separates relevant parties;
3. Take care when establishing the file storage system (location, screening measures); and
4. Implement the Ethical Screen imminently.[ix]
While these additional precautions are not mandatory, this due diligence further protects you and your firm against facing the same fate as Mr. Foulds and LBM.
[i] Ontario v. Chartis Insurance Company of Canada, 2017 ONCA 59.
[ii] Rules of Professional Conduct, s 3.4-2.
[iii] Bell, K. H. Karen, “Managing Conflict of Interest Situations: Practice Pro.”
[iv] Ibid.
[v] Ibid at para 32.
[vi] MacDonald Estate v. Martin, 1990 CanLII 32 (SCC).
[vii] Ibid at paras 67-68.
[viii] Ontario v. Chartis Insurance Company of Canada, 2017 ONCA 59, at para 65.
[ix] Mucalov Janice, “Developing a Conflict Checking System for your Law Firm” (2007). The Canadian Bar Association.
