Executive Summary: Key Legal and Evidentiary Issues

• Whether a lawyer can represent a plaintiff after previously acting for a now-dismissed co-defendant in the same action.

• Risk of improper use of confidential information and its impact on fairness and judicial integrity under McKercher principles.

• Allegation that co-defendants' counsel discussions led to exchange of confidential information, without concrete proof or privilege agreement.

• Former client (Ms. Albers) provided informed written consent, negating conflict regarding shared confidential information.

• The court found no evidence or reasonable inference that confidential information from co-defendants was shared with the lawyer.

• Disqualification was denied, with the court emphasizing consent, lack of prejudice, and improved access to justice through pro bono representation.

Facts of the case

In Bathe v 1942147 Alberta Ltd, the plaintiff, Ms. Bettina Jenkins Bathe, filed a lawsuit in 2019 alleging investment-related losses arising from representations and dealings with several individuals and their associated corporations. Among the defendants were Michelle Albers, Corewellness The Spa for Health & Beauty Ltd., and others. The litigation suffered years of stagnation, attributed largely to the self-represented status of most parties. The case was eventually placed under case management to facilitate progress.

In August 2024, Ms. Albers retained Mr. Mark Schulz of Square Law Group LLP. By October 2024, Ms. Albers was released from the litigation by mutual agreement with the plaintiff. After that, Ms. Bathe approached Mr. Schulz to act as her counsel. Mr. Schulz obtained Ms. Albers’ written consent, releasing him from obligations regarding any confidential information relevant to the case. He then agreed to represent Ms. Bathe on a pro bono basis.

Disqualification application and legal framework

Christina Laughlin and Thompson Laughlin LLP, two other defendants in the case, filed an application seeking to disqualify Mr. Schulz from acting as plaintiff’s counsel. They argued that his prior role as defence counsel for Ms. Albers created a conflict, especially since they claimed confidential information had been shared among co-defendants’ counsel during strategy discussions. They cited the Supreme Court decision Canadian National Railway Co v McKercher LLP, which outlines three grounds for disqualifying counsel: risk of misuse of confidential information, impaired representation, and damage to the reputation of the justice system.

The applicants also referenced the MacDonald Estate decision, which addresses the public’s perception of impropriety, and Gainers Inc v Pocklington, which elaborates on the “Composite Rule” to assess whether the objectionable situation gives rise to injustice or undermines public trust in legal confidentiality.

Court's analysis and findings

The court examined two sources of alleged confidential information: (1) information provided by Ms. Albers (Mr. Schulz’s former client), and (2) information supposedly shared during informal co-defendants' counsel discussions. Regarding the first, the court found Ms. Albers' written consent valid and informed, noting she no longer had an interest in the case and would not be prejudiced. Under the Alberta Code of Conduct, such consent was sufficient to permit the lawyer’s ongoing involvement.

For the second category, the court found no credible evidence that any confidential information was ever exchanged among defence counsel. The applicants failed to establish that a common interest privilege existed, and the court ruled that such assumptions could not be inferred. Mr. Schulz denied receiving any privileged information from other defendants, and the court accepted this, emphasizing that mere co-defendant status does not create a presumption of confidentiality.

Discussion of ethical policies and the Code of Conduct

The court interpreted Rule 3.4-6 of the Alberta Code of Conduct, which states a lawyer must not act against a former client in the same or a related matter without the client’s consent. Since Ms. Albers provided that consent, the court held that the rule was satisfied. Moreover, the court reiterated that co-defendants, especially those represented by separate counsel, are not presumed to be in confidential relationships unless explicit evidence supports it.

The court also referenced Chaos Water Hauling Inc v Build-All Contracting Ltd, clarifying that inferences of confidential information apply more narrowly to solicitor-client relationships, not co-litigants.

Outcome

Justice Melanie Gaston denied the disqualification application. The court concluded there was no risk of misuse of confidential information, no impaired representation, and no appearance of impropriety. It further found that Mr. Schulz had acted in good faith, had consulted the Law Society before taking on the plaintiff’s case, and his involvement could positively contribute to the progression of long-delayed litigation.

The court found no violation of professional rules or legal ethics, and emphasized that the plaintiff’s right to choose counsel—particularly on a pro bono basis—was a significant factor, especially where no prejudice was shown. The unique circumstances, including the explicit consent of the former client and lack of evidence of any confidentiality breach, supported the decision to allow Mr. Schulz to remain as counsel for the plaintiff.