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Exchange of confidential info needed for conflict: judge

|Written By Yamri Taddese

The appearance of conflicts of interest may be common in small towns where lawyers know everyone, but as an Ontario Superior Court judge found, the test for conflict is the same everywhere.

In Stewart v. Hosack, Superior Court Justice Gordon Lemon declined to order damages against Cline Backus LLP, a Simcoe, Ont., law firm, after finding that despite its lawyers’ connection to former client Jordan Stewart, there was no concrete proof the firm was in conflict when it represented a woman accused of threatening to kill Stewart at a local bar.

Lemon said the firm abruptly ended its retainer with Stewart under the pretense of an outstanding account when it decided to represent the accused, a move that amounted to a breach of fiduciary duty, according to the judge. However, Lemon found the firm’s actions did not amount to a conflict of interest.

In what’s perhaps a sign of how complex it can be to practise in a small town, one of Cline Backus’ lawyers, R. Paul Hosack, is a co-owner of the bar where the alleged threat took place and he’s also a friend of the accused woman’s boyfriend.

But Hosack also knew Stewart, and his firm acted for him in a real estate matter. In addition, Stewart said Hosack had attended her wedding and his wife is an acquaintance of hers as well as a customer at her clothing boutique.

The web of relationships, not uncommon in small towns, led Stewart and the Crown attorney involved in the criminal matter to insist there was a conflict on the firm’s part, which led to the firm’s eventual withdrawal from the criminal case.

But Lemon found none of those links actually meant Stewart had provided confidential information to the firm that could have had relevance in the criminal matter.

“Just because counsel knew Ms. Stewart and her family, [that] does not, in and of itself, generate a conflict. There must be confidential information arising out of a solicitor/client relationship,” wrote the judge. “For the purposes of the criminal prosecution, Ms. Stewart was not an adverse party but a witness.”

Added Lemon: “Ms. Stewart’s fear of confidential information being misused, even if genuine, was unreasonable and unsubstantiated. Most of the information that she had given to the firm was not confidential.

“The information concerning the real estate transaction was available in the public registry to anyone who cared to look. The information concerning the identity of her family members and her home and business address was well known in the small community in which she lives.”

But Lemon did rule the firm’s termination of its retainer with Stewart amounted to a breach of fiduciary duty.

“The fact that the reason for the termination is left unexplained supports an adverse inference against the defendants. That is to say, I find that both Ms. Stewart and her husband were clients of the firm with respect to the open real estate files throughout the time in question,” wrote Lemon.

The judge said the firm’s decision to drop Stewart as a client was “an error in judgment,” but declined to order damages in favour of Stewart after finding that she wasn’t “so inconvenienced as she might allege.”

“I can understand how Ms. Stewart is upset about how she was treated by the defendants. I have found that she was treated poorly when she was sent off to find new counsel without being given clear and accurate reasons,” he said.

Toronto lawyer Ben Hanuka says the firm did nothing wrong in deciding to end its retainer with Stewart. Just as clients have the right to fire their lawyers, counsel can choose to drop their clients, he says.

“What’s good for the goose is good for the gander,” he says.

“As long as it’s not under circumstances that require a court’s leave — for example, there’s a trial or situations covered under the rules of professional conduct — then there’s no legal principle that should bar either side from terminating the relationship.”

But loyalty is an “elastic concept,” according to Toronto lawyer Paul Bates, and it could have different meanings in small towns and big cities.

While it’s true that clients who retain a firm don’t own it, a law firm must have a proper justification to terminate a retainer and communicate that justification to the client, says Bates.

“That did not occur here,” he adds. “The law firm simply discontinued representing client A and started representing a party in a matter that wasn’t related but affected client A.”

Still, the judge was right to find the impact on Stewart was minor, adds Bates.

“It was more an indignity to the client than an actual prejudice or injury.”

When reached by telephone for comment, Hosack said he would have to seek his counsel’s advice before speaking to Law Times. Neither he nor his counsel got in touch with Law Times before press time.

  • Bruce Elman
    Interesting case.
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