As lawyers, we always have to consider whether we can act for someone before we are retained. Often, the question of whether we are in a conflict is a simple one; however, occasionally, it is more difficult to assess whether we can or more importantly, should, act for someone.
In a recent case, a Plaintiff moved to remove counsel for the Defendant due to a perceived conflict of interest (Gloger v Evans 2018 ONSC 4919).
Otillie and Jochen Gloger, whose children are the parties in this action retained a law firm, to prepare their Wills. Otillie died first and Jochen retained the law firm to prepare a survivorship application with respect to their joint property.
Jochen’s Will named both the Plaintiff and the Defendant in this matter as the Estate Trustees of his Estate and the Estate was divided equally between the Plaintiff and the Defendant.
In this action, following Jochen’s death, the Plaintiff sought to have the Defendant removed as Estate Trustee based on various allegations such as misappropriation of assets and breach of fiduciary duty.
The Defendant retained the law firm to represent her in this action. In turn, the Plaintiff alleged that the firm could not represent the Defendant because there were several conflicts of interest and more importantly, such representation would undermine public confidence in the administration of justice.
The Court considered the test set out in MacDonald Estate v Martin (1990) 3 SCR 1235, which requires that two questions be answered:
- Did the lawyer receive confidential information attributable to a solicitor client relationship relevant to the matter at hand?
- Is there a risk that it will be used to the prejudice of the client?
Because prejudice is difficult to prove, the “test must be such that the public, represented by the reasonably informed person, would be satisfied that no use of confidential information would occur…”.
Analysis and Decision
The Court held that, at its best, the Plaintiff’s evidence was that he and the Defendant initially retained the law firm but that, three days later, he retained his own lawyer. The Plaintiff never met with a lawyer at the law firm but he apparently had a telephone call with someone at the law firm while the Defendant listened in. However, he could not advise whom he spoke with, nor what that person’s occupation was. Furthermore, the Plaintiff did not sign a retainer agreement nor did he provide a retainer.
Given this evidence, the Court held that the Plaintiff did not retain the law firm and was therefore not a former client. Even if he was a former client, however, the Plaintiff stated at his cross-examination that he did not provide any confidential information to the law firm.
The Court did not believe that any confidential information provided by the Deceased, with respect to the Will which named both the Plaintiff and the Defendant as the beneficiaries and Estate Trustees of the Estate, was relevant to this action regarding trustee misconduct, given that the Will was not ambiguous, nor was there a challenge to the Will.
In making this decision, the Court also commented on the importance of the right of the client to be represented by counsel of their choice and that a flexible approach must be taken.
In light of the foregoing, the Court did not consider the second step of the test and dismissed the Plaintiff’s motion for the removal of the law firm, as the Defendant’s counsel.
This case reminds us that it is important to consider whether you should act for someone in the circumstances of each individual case. The above-noted test helps one determine whether a potential conflict of interest may arise.
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Certain types of assets, such as life insurance proceeds or RRSPs, may be designated to be paid out directly to a beneficiary upon the death of the owner. In such a case, the asset does not pass through the estate and Estate Administration Tax is not paid on the value of the asset. It is not strictly required that they be referred to in a will, as the beneficiary designation in the plan itself is sufficient to gift the asset on death. However, it is possible, as per section 51(1) of the Succession Law Reform Act, RSO 1990, c S.26 (“SLRA”), to refer to a plan in a will, either to confirm the designation in the plan itself, or to make the designation.
However, an issue may arise if there is a beneficiary designated in both the plan and the will, but the named beneficiary is not the same. It is then necessary to determine which designation will prevail.
Section 52(1) of the SLRA states that a “revocation in a will is effective to revoke a designation made by instrument only if the revocation relates expressly to the designation, either generally or specifically.” Accordingly, if there is a conflict between the will and the plan with respect to the designated beneficiary, as long as the will expressly refers to the plan designation, the will should govern the ultimate beneficiary of the plan. Moreover, it may be possible to determine which designation will prevail by looking at which was made most recently. As per section 52(2) of the SLRA, a later designation revokes an earlier designation, to the extent of any inconsistency.
There is also case law to support overriding a plan designation based on the clear intention of the testator. In McConomy-Wood v McConomy, 2009 CanLII 7174 (ONSC), the testator designated one of her three children, Lisa, as the beneficiary of her RRIF a few weeks prior to her death. However, throughout her life, it was the testator’s consistent intention, frequently expressed to her children, that they would all be treated equally and that all of her assets would be divided equally amongst the three of them.
The will did not expressly refer to the designation, but it named Lisa as the sole estate trustee to hold the assets of the estate in trust for all three siblings equally. The judge in McConomy-Wood v McConomy therefore found that the intention of the testator with respect to the RRIF designation was that her daughter hold the proceeds of the RRIF on the same terms as the estate.
The most prudent way of dealing with potential conflicts is to be aware of beneficiary designations in the plans themselves. If you choose to also refer to the designation in your will, take the time to verify who the named beneficiary is and to be consistent between the will and the plan, in order to avoid any conflicts or confusion.
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