In this post we intend to discuss conflicts of interest between law firms and their clients. The CLE Conveyancing Deskbook (the “Conveyancing Deskbook”) has information concerning conflicts of interest between real estate licensees and their clients, see Conveyancing Deskbook chapter 2 (Real Estate Licencees) of the British Columbia Real Estate Practice Manual, 3rd ed. (CLEBC, 2006).
It is common for a law firm to be asked to represent more than one party with different interests in a real estate transaction. For example, purchasers often ask their law firms to act for the lender, or to act for the vendor and the purchaser in a conveyance among family members in order to minimize the legal expenses of the conveyance. It is commonplace for law firms to act for both the purchaser and the purchaser’s lender as a service to their clients. In addition to the regular conflict checks that a firm conducts for every matter, it is important, particularly in real property transactions, that the firm complies with the requirements of the Code of Professional Conduct for British Columbia (the BC Code).
The BC Code prohibits lawyers from representing parties with different interests except in the circumstances set out in BC Code, s. 3.4 and Appendix C of the BC Code, which are included at “Rule 3.4 and Appendix C of the BC Code” in this chapter. Prior to agreeing to act for multiple parties in a real estate transaction, lawyers must review the transaction details and their scope of engagement with each party carefully.
In a family situation, for example a lawyer is acting on a transfer from a grandparent to a grandson, conflicts can give rise to claims that the lawyer ought to have recognized undue influence by one party. Further, it may not be sufficient for a lawyer to advise a client in these circumstances that “I’m required to tell you to get independent legal advice but, if you do not want to, I’ll still witness your signature”, if there are other red flags to suggest that something inappropriate is going on – sending one party to an independent lawyer, and yes! it means another lawyer at another law firm, not your colleague working are your firm.
A lawyer’s duty of loyalty to clients is discussed in Commentary  to rule 3.4-1 of the BC Code:
 … The lawyer-client relationship is a fiduciary relationship and as such, the lawyer has a duty of loyalty to the client. To maintain public confidence in the integrity of the legal profession and the administration of justice, in which lawyers play a key role, it is essential that lawyers respect the duty of loyalty. Arising from the duty of loyalty are other duties, such as a duty to commit to the client’s cause, the duty of confidentiality, the duty of candour and the duty not to act in a conflict of interest. This obligation is premised on an established or ongoing lawyer client relationship in which the client must be assured of the lawyer’s undivided loyalty, free from any material impairment of the lawyer and client relationship.
This means that a law firm cannot represent two parties when there is a conflict.