Thursday Thinkpiece: Pitel and McKie on Privilege for Ethics Counsel

Each Thursday we present a significant excerpt, usually from a recently published book or journal article. In every case the proper permissions have been obtained. If you are a publisher who would like to participate in this feature, please let us know via the site’s contact form.

Solicitor-Client Privilege for Ethics Counsel: Lessons for Canada from the United States
Stephen G.A. Pitel and Jordan McKie
(2013) 91 Canadian Bar Review 313

(Footnotes omitted; they are available in the original, via the CBR link, and in the pre-publication version via the main hyperlink above.)

(c) Privilege and Ethics Counsel

While there is no Canadian authority on point, the American experience indicates that a Canadian law firm should be able to establish a solicitor-client relationship with its own ethics counsel. Law firms, like any other business, may consult internal counsel as they would outside counsel, and privilege attaches to legal advice or a request for legal advice which is intended to be confidential. To refuse to apply solicitor-client privilege for law firms would, as the court in Sunrise aptly noted, punish them by “holding them to a standard which has no counterpart in any other sphere of the business or professional community”. There is no principle in the Canadian jurisprudence which indicates that law firms possess some characteristic which would justify disqualifying them from having privileged communication with counsel. While it is true that lawyers have duties to their clients as fiduciaries, and that such concerns may impact the assertion of privilege for communications which relate to the representation of a current client, the threshold of establishing privilege in the first place should be no higher for law firms than for other firms. So long as the firm consults the ethics counsel for legal advice, and pays the lawyer for those services, as opposed to simply having the function carried out as an unbilled component of the duties of one of the managing partners, the relationship should be seen as one of lawyer and client. The policies which firms establish regarding the consultation of the ethics counsel can mandate a level of discretion which should establish the requisite level of confidentiality.

(d) Exceptions to the Privilege

The more difficult question is whether, as in the United States, exceptions to this privilege will significantly erode its utility. As we have seen, one exception arises when the ethics counsel is in a position of conflict of interest. In the Canadian context, a conflict of interest can arise as a result of concerns about confidential information and it can also arise as a result of concerns about loyalty to the client. Another exception relates to the question of agency, looking at whether the lawyer consults ethics counsel on behalf of the client or as client himself or herself.

(i) Conflict of Interest Based on Confidential Information

The courts that decided Sunrise and similar cases held that a conflict of interest occurred when a law firm represents itself by consulting its ethics counsel in matters regarding a current client.

By preparing itself for litigation against a current client, the firm cannot maintain its objectivity in its handling of the client’s case. The interest of the firm and the interest of the client are therefore at odds. Because the courts were prepared to accept the use of outside counsel for defence against a current client, it was the use of in-house ethics counsel, rather than the act of preparing a defence against a current client in itself, which created the conflict. This, as we have seen, rested in part on the assumption that each lawyer in the firm is the lawyer of the client and that a conflict of any one lawyer is imputed to them all.

How would Canadian law handle concerns about ethics counsel having confidential information about the client’s matter? In particular, the concern is that that ethics counsel would have the same information as the lawyer in the firm who is handling the client’s matter. This is different from the situation in which the firm retains outside counsel. In that context, the firm is permitted to disclose confidential information in order to obtain advice. However, in accordance with the general importance of preserving confidentiality, that disclosure should be limited to the information necessary for that purpose. Outside counsel would have sufficient information to provide advice but would not typically have the same amount of confidential information about the client and his or her matter than the lawyer handling that matter. . . .

. . . .

4. Conclusion

Canadian law should evolve in directions that support the use of ethics counsel by law firms. One dimension of such an evolution is that Canadian courts should accept that solicitor-client privilege can arise in respect of communications between ethics counsel and other lawyers at his or her firm. Law firms should not be treated differently in this regard than other service firms like those in accountancy, insurance, banking, finance and telecommunications. Beyond this basic principle, the difficulties then lie in working out, on a case-by-case basis, whether the appropriate preconditions to privilege exist and whether the privilege is defeated by any exceptions.

Law firms face something of a dilemma in consulting ethics counsel. If there is no tension between the firm’s interests and the client’s, the agency exception might defeat the privilege. On the other hand, if there is such a tension then the resulting conflict of interest, most notably as a violation of the duty of loyalty, might have the same effect. To avoid having the privilege defeated, the advice from ethics counsel must be sought by the firm as client rather than as agent for the firm’s client. The advice must also be provided in a manner sensitive to concerns about conflict of interest. That requires law firms to take certain structural steps in organizing the position of ethics counsel. It also requires a particular understanding of how the duty of loyalty operates in this context. This article has outlined several steps law firms can take to maximize the likelihood of a successful claim of privilege. These include segregation of ethics counsel within the firm and unique compensation arrangements. These steps could be sufficient for courts to conclude that the communications are protected. However, the law is more likely to evolve in that direction if law societies provide some specific guidance, in the rules of professional conduct, for the role of ethics counsel. Evidence that a firm has followed such guidance would carry weight with a court considering a claim for privilege.

Comments are closed.