Acting as a Tax Lawyer for both a Husband and Wife

The following posts the inricacies of representing both a husband and wife. The facts of this situation are described in the issue section. This is an example of the process a lawyer would go through in determining the legal dilemma of representing two clients who may have a conflict of interest.

Can I act as a lawyer for both Husband and Wife (Max and Minnie), and not put myself in a conflict of interest as defined by the Law Society of Upper Canada’s (LSUC) Rules of Professional Conduct, where:
a) I am retained by both Minnie and Max to pursue an appeal for Minnie’s and Max’s reassessment by the CRA
b) Max has asked me about incorporating his carpentry business (“Business”), where
i) Minnie has contributed time, and money in the Business, outside of her busy job
ii) There is no indication Max wants to include Minnie in this discussion
iii) I am retained by both Minnie and Max to pursue an appeal for Minnie’s and Max’s reassessment by the CRA.

LSUC defines a ‘conflict of interest’ to be an interest likely to adversely affect a lawyer’s judgment on behalf of, or loyalty to a client, or where a lawyer is prompted to prefer the interests of another client.[1]

There would not be a conflict of interest if Minnie and Max retained me to pursue their individual appeals regarding CRA’s reassessment, because; the appeal for the CRA reassessment would have an identical application of law for both Minnie and Max, which would not adversely affect my judgment in representing either Minnie or Max.

I can act as a lawyer for Max without placing myself in a ‘conflict of interest,’ as defined by LSUC, where Max asks me to advise him on incorporating his Business, however this is a fine line because Minnie is an implicit owner in the Business, and my relationship as her lawyer.

Advising only Max on the Business’ corporate form may place me in a ‘conflict of interest’ because any advice given to Max effects Minnie directly. Minnie is an implicit owner in the Business because she does not have legal title to the Business’ ownership, and supports the Business by guaranteeing its loans and acting as an agent when scheduling clients.[2] As an owner of a partnership, Minnie must include partnership income in her taxable income, and deduct partnership losses from her taxable income. Choosing a corporate form for the Business will change what Minnie includes in her income, and the legal liabilities facing Minnie and Max.[3]

I can avoid a ‘conflict of interest’ by telling Minnie and Max that if I act for both of them, I will not keep any secrets between them (such as discussions between myself and Max on choosing the Business’ corporate form), and I will withdraw from being their lawyer if a conflict develops.[4] However, the fact that Minnie’s ownership is implicit rather than explicit may show her lack of legal sophistication and vulnerability in the Business’ matters,[5] and I should go the extra mile and advise her to obtain independent legal advice on me being her lawyer.[6]

If a conflict emerges, such as balancing Max’s and Minnie’s interests in the Business’ corporate form, rule 2.08 states I can remain their lawyer where Minnie and Max consent to me remaining their lawyer, and where they adequate disclosure is given for an informed decision.[7]
[1] Law Society of Upper Canada; “Rules of Professional Conduct,” rule 2.04(1)
[2] Alyssa Rollock, “Professional Responsibility and Organization of the Family Business: The Lawyer as Intermediary” in Lisa Phillips, Tax Lawyering 145 at 146.
[3] Supra, note 2 at 147.
[4] Supra, note 1 at rule 2.04(6)
[5] Supra, note 2 at 152.
[6] Supra, note 1 at rule 2.04(6) commentary
[7] Supra, note 1 at rule 2.04(3) commentary