Candid but Unsure

The principal duties owed to clients are well known: commitment, confidentiality, candour and competence.[i] Much has been written and debated about commitment and confidentiality. Their nature and scope are reasonably well understood. Competence and its legal twin negligence are conceptually simple enough, albeit fact-specific.

Candour is another matter. Candour seems straight-forward. Simply be honest with your clients, tell them what you know and all will be well. But this naïve approach is problematic. As is often the case in legal ethics, difficult issues arise because duties can collide. Candour and confidentiality can be irreconcilable duties and confidentiality is pervasive for lawyers. By way of example, a prospective client discloses information that shows that you cannot act because there is a conflict. Confidentiality and solicitor-client privilege require that you keep the information confidential. Candour may require that you disclose the information to your existing client. Through no one’s fault, candour and confidentiality may irreconcilably conflict without any perfect solution being available.

For those in firms, candour is something of a strange beast. Clients retain firms. Firms owe duties of commitment, confidentiality and candour to their clients. Firms are responsible for the quality of the services provided to their clients. But it is practically impossible to require that every firm member disclose all that they know that is relevant regarding every matter for every client of the firm. In a firm of any size, there would be no time to do anything else if everyone was required to consider every retainer in the firm and what they know that is relevant. No one would suggest that candour requires this. Perhaps the obligation is that those involved in the representation must disclose what they know. This is workable. But perhaps the obligation is that there be disclosure of what is known to be known by other lawyers with no obligation to search out the unknown knowns. But there is little clarity available on what the duty of candour actually means for a firm as opposed to an individual.

While candour is a duty for the benefit of our clients, there are circumstances where clients don’t expect and don’t want candour. I recall a number of years ago a very complicated commercial problem in which a number of sophisticated businesses retained highly expert experienced lawyers The lawyers were retained because of their deep knowledge of the clients, the industry, the problem and the law. Separate counsel for each client, whose interests were well aligned, would not have been viable. I have little doubt the lawyers did not share everything that they knew about each client’s predicament with every other client. I have no doubt that this was what the clients wanted and needed. While likely not recognized at the time, this was at least arguably a breach of the joint retainer rule in the Rules of Professional Conduct.

The Court of Appeal for England and Wales recently addressed candour in Goldsmith Williams Solicitors v E.Surv Ltd, [2015] EWCA Civ 1147[ii]. The relevant facts are straight-forward. A solicitor acted for the purchaser of a residential property and for the mortgage lender. The solicitor knew of a recent transaction at a price that cast doubt on whether the fair market value of the property was reflected in the current purchase price. This is relevant information to a mortgage lender as the fair market value of the mortgaged property, which is security for the loan, is material to the risk of the loan.

What was of interest and surprise in Goldsmith Williams was that the Court of Appeal considered the case on the basis of the scope of the retainer between the parties.[iii] As Sir Stanley Burton put it:

Like [the trial judge], I consider that the question whether the Solicitors were under [a duty to disclose] in the present case depends on whether, properly construed, that duty was excluded by, or was inconsistent with, the terms of the Solicitors’ retainer… .

That candour in a joint retainer can be limited by agreement in England should be a surprise for Canadian lawyers. As the Model Code of Professional Conduct provides:

3.4-5 Before a lawyer acts in a matter or transaction for more than one client, the lawyer must advise each of the clients that:

(a) the lawyer has been asked to act for both or all of them;

(b) no information received in connection with the matter from one client can be treated as confidential so far as any of the others are concerned; and

(c) if a conflict develops that cannot be resolved, the lawyer cannot continue to act for both or all of them and may have to withdraw completely.

Model Rule 3.4-5 does not contemplate that clients in a joint retainer can agree that information will be treated as confidential. The reasoning from Goldsmith Williams cited seems inconsistent with our Codes and Rules of Professional Conduct.

There is a distinction made in Goldsmith Williams which might be the basis for a more nuanced approach to the duty of candour. Specifically, reference was made to Mortgage Express Ltd v Bowerman & Partners, [1996] 2 All ER 836 (ECA) in which Millett LJ considered another case of a solicitor acting both for a purchaser and a mortgage lender. Millett LJ said:

… A solicitor who acts for more than one party to a transaction owes a duty of confidentiality to each client, but the existence of this duty does not affect his duty to act in the best interests of the other client. All information supplied by a client to his solicitor is confidential and may be disclosed only with the consent, express or implied, of his client. There is, therefore, an obvious potentiality for conflict between the solicitor’s duty of confidentiality to the buyer and his duty to act in the best interests of the mortgage lender.

No such conflict, however, arose in the present case. It is the duty of a solicitor acting for a purchaser to investigate the vendor’s title on his behalf and to deduce it to the mortgagee’s solicitor. He has the implied authority of his client to communicate all documents of title to the mortgagee’s solicitor. …

Our Codes and Rules of Professional Conduct avoid the conflict to which Millett LJ refers by requiring that confidences not be kept in joint retainers. The English approach appears permit the duty of confidentiality to continue but recognizes that conflicts may arise to be dealt with on that basis. However, Millett LJ goes on to say that there is implied authority to communicate all title documents to both clients in the case at bar.

The distinction may be seen as being between information only relating to client decisions in the matter in which the solicitor is retained and information relating to the legal work of the solicitor. In Goldsmith Williams, the solicitor was not retained to advise as to the value of the security but rather to deal with title. The price and date of the prior transaction was relevant to the value of the security but not to title. This information was relevant to the mortgage lender’s decision-making in the transaction but not to the legal work for which the solicitor was retained.

Building on this distinction, it seems to me that there are at least three categories of information to which the duty of candour applies in Canada. Before reading Goldsmith Williams, I had thought that there were two.

The first category is information about the lawyer-client relationship rather than the subject-matter of the retainer. Canadian National Railway Co. v. McKercher LLP, [2013] 2 SCR 649 provides a convenient example. A lawyer who sues his or her client for another client has a duty of disclosure in that regard whether or not a deemed conflict exists. A client is entitled to fire their lawyer whether or not the lawyer is acting properly and is entitled to disclosure of information that might cause the client to do so. Similarly, clients are entitled to know when their lawyers may be in a conflict of interest or may have been negligent in their work.

The second and third categories are in respect of the subject matter of the retainer. The second category is information about the legal issues and work. Clients are entitled to disclosure of the work done for them, the basis of legal advice given to them and information relevant to their decisions and instructions on legal issues.

The third category is information relevant to the matter in respect of which legal assistance is sought but not to the legal work per se[iv]. The distinction between information relating to the value of the mortgaged property and to title to the mortgaged property illustrates the difference between the second and third category.

Thought of in this way, it is less surprising that a duty of disclosure with respect to information going to the value of mortgage security might be affected by the agreement between the parties. An analogy may be drawn to conflict waivers. Conflicts can be waived but only if the result is not a material adverse effect on client representation. Where a solicitor is not retained to deal with the value of the mortgage security, the solicitor’s representation of the client is not affected by non-disclosure of information going to value even though the client’s interests are affected.

On the other hand, failing to disclose a prior mortgage would obviously materially impair the very work entrusted to the solicitor namely ensuring that the expected mortgage is conveyed to the mortgage lender.

Read with these distinctions in mind, Model Rule 3.4-5 is perhaps somewhat enigmatic. The Model Rule says that “no information received in connection with the matter from one client can be treated as confidential so far as any of the others are concerned”.

This very bald statement can’t mean exactly what is says. It cannot be intended to refer to information that is irrelevant to the joint retainer. But does it refer to information relevant to the client’s decision-making in respect of the joint retainer which is not related to the legal representation and issues?[v]

Separate from the joint retainer rule, our Codes and Rules of Professional Conduct require candour in all matters but, unlike avoiding conflicts, there is no provision for consent otherwise. Does the scope of the candour rule include information relevant to client decision-making but not to the legal representation and issues? If so, can the client agree otherwise.

Reflecting back on the “very complicated commercial problem” with a number of clients with a common problem, I’m now less convinced that there was a problem as it appears that the information in issue related to the clients’ commercial decision-making rather than to the legal representation and issues and the clients would have been appalled to have their commercial information shared. While I’m uncertain about the actual operation of the conduct rules in this context, I’ve less doubt that the clients should have been able to decide for themselves subject to ensuring that legal representation was not compromised as a result.

On the other hand, a presumption that such information should be disclosed absent express consent might be salutary. There are far too many cases where lawyers have withheld information that clients would have expected to have disclosed. This is particularly true in cases of mortgage fraud where lawyers have not disclosed prior property flips, unpaid deposits and doubtful credits . In this context, it is worth underscoring Model Rule 3.4-15 which applies irrespective of the joint retainer rule and the duty of candour:

3.4-15 When a lawyer acts for both the borrower and the lender in a mortgage or loan transaction, the lawyer must disclose to the borrower and the lender, in writing, before the advance or release of the mortgage or loan funds, all material information that is relevant to the transaction.

Our current approach to candour may be an example of over-enthusiastic embrace of well-intentioned principles. Clearly, lawyers must be honest and candid with their clients. But saying no more than that raises its own problems. Clients must be protected by conduct rules but conduct rules should not unnecessarily limit client choices in their own best interests.



[i] One can quibble whether avoidance of conflicts is included in commitment or is a separate duty. Competence is required under the Codes and Rules of Professional Conduct while the obligation at law is not to be negligent.

[ii] Thanks to Harvey Morrison for pointing out the case.

[iii] In Commerce Capital Trust Co. v. Berk (OCA) (1989), 68 OR (2d) 257, Justice McKinlay wrote for the Court “… when a fiduciary relationship exists (as it undoubtedly does in this case, given the solicitor-client relationship), one then looks to the nature of any alleged breach of that fiduciary relationship to determine liability. In this case, the alleged breach was the non-disclosure of the facts which have been outlined above. If the undisclosed facts are “material”, then there can be no “speculation” by the court as to what course the client mortgagee would have taken had full disclosure been made.” It is interesting that Canadian courts have considered candour in this context as a matter of fiduciary obligation while the English courts appear to have considered disclosure as a matter of the duty of care.

[iv] Of course, these are not necessarily water-tight compartments.

[v] To be clear, I do not suggest that the duty of candour does not apply to information that could affect the client’s commercial assessment of the risks of in the matter in which the lawyer is acting. see The Law Society of Upper Canada v Nguyen, 2015 ONSC 7192 . My limited point is that confidentiality may not necessarily be waived with respect of any and all relevant information by Rule 3.4-5. A lawyer who is possessed of information that cannot be disclosed because of a duty of confidentiality and must be disclosed because of a duty of candour cannot continue to act without resolving the conflict in a proper way. Ignoring either duty is not acceptable.

Comments are closed.