What happens when the lawyer who once helped you is now acting against you in the same proceeding? In Suguitan (Re), 2026 ONCA 738, released October 20, 2026, the Court of Appeal for Ontario set aside an order made in a bankruptcy case because the trustee's lawyers had earlier acted for the bankrupt on his proposal to creditors (para. 6). The Court ordered a new hearing and disqualified that law firm from acting for the trustee at it (paras. 5, 32).
One point needs to be clear from the start: the Court did not decide whether the property transfer at the centre of the case was a transfer at undervalue. It set the order aside on the conflict issue alone and said it was "not necessary to consider the other grounds of appeal" (para. 6). That question goes back for a new hearing (para. 32).
The decision at a glance
Citation: Suguitan (Re), 2026 ONCA 738 (Court of Appeal for Ontario; reasons by Trotter J.A., Zarnett and Madsen JJ.A. agreeing). Released October 20, 2026.
Official text: Court of Appeal for Ontario decision
Result: fresh evidence admitted; appeal allowed; order set aside; new hearing directed; the trustee's law firm disqualified from acting at the new hearing; $5,000 in costs, inclusive, to the appellant (paras. 5, 32).
What happened
The husband was deemed to have made an assignment in bankruptcy on March 3, 2023 (para. 1). The licensed insolvency trustee applied under s. 96(1)(b)(ii) of the Bankruptcy and Insolvency Act for a declaration that he had made a transfer at undervalue. The trustee alleged that, less than five years before the bankruptcy, he transferred his half-interest in a Florida property to his wife for nominal consideration, with the intent to defraud, defeat or delay a creditor. At the time, he was a named defendant in several Ontario lawsuits. The trustee asked for an order requiring the wife to pay US$250,000, the price the property later sold for (para. 2).
At a hearing where both spouses represented themselves, the motion judge found a transfer at undervalue. Because the wife already owned a half-interest, he voided only the part of the transfer relating to the husband's interest, valued at US$117,340.18 (para. 3). The wife appealed.
Why the order was set aside
Before the bankruptcy, the husband had retained the law firm that later acted for the trustee, for help preparing a proposal to creditors. When the proposal did not come to fruition, he was deemed bankrupt (para. 6). Acting for the trustee, his former lawyers then alleged that he had transferred his interest with the intent to "defraud, defeat or delay a creditor" (para. 6).
The Court found the proceedings before the motion judge were unfair because of that conflict of interest (para. 5). Its reasoning:
1. Courts can disqualify lawyers. Judges have an inherent jurisdiction to disqualify lawyers who act in the face of a conflict of interest (para. 19).
2. Loyalty is broader than confidentiality. Relying on the Supreme Court's decision in R. v. Neil, the Court noted that the duty of loyalty "includes a much broader principle of avoidance of conflicts of interest, in which confidential information may or may not play a role" (para. 20).
3. The professional conduct rules matter. Courts are not bound by the Law Society's rules, but those rules "should be considered an important statement of public policy" (para. 21). Rule 3.4-10 of the Law Society of Ontario's Rules of Professional Conduct says that, unless the former client consents, a lawyer shall not act against a former client in the same matter (para. 22). Its commentary says the duty applies "even where the former client's confidential information is not at risk" (para. 23).
4. The firm switched sides. By representing the trustee in the very bankruptcy proceedings that arose from the matter it had been retained on, the firm acted against its former client and breached its duty of loyalty (paras. 24, 28).
5. Silence is not consent. No formal consent was obtained. The Court did not treat the failure to object earlier as the consent the rules contemplate (paras. 25-26).
6. The risk is enough. The question "is not whether confidential information will be or has been used; it is whether there is a risk that it might be" (para. 27).
7. Having to prove your former client acted dishonestly was enough. To succeed, the firm had to prove that its former client acted dishonestly, "perhaps even fraudulently". That was enough to trigger a conflict that breached the duty of loyalty and required disqualification (para. 29).
8. Counsel should have clarified. When the wife raised the conflict at the hearing, the trustee's counsel did not tell the motion judge the underlying circumstances (para. 6). The Court said counsel "should have clarified the issue", especially because the spouses were self-represented (para. 30).
What changed, and what didn't
The Court applied existing law on conflicts (paras. 19-23). What the case adds is a clear appellate example in a bankruptcy setting: on these facts, a lawyer who helped a debtor with a proposal cannot later act for the trustee against that debtor in the proceedings that followed (paras. 6, 24). It also shows that a self-represented party's attempt to raise a conflict is not the end of counsel's obligation to explain (para. 30).
Who this affects
People who transferred property to a spouse or family member before a bankruptcy, and the family members who received it, when a trustee challenges the transfer (para. 2).
Anyone whose former lawyer appears against them in the same or a related matter (paras. 22-24).
Self-represented parties, who may not know the professional conduct rules. The Court noted the bankrupt said he was unaware of them until late 2024 (para. 26).
Practical takeaways
Raise a conflict as soon as you see it. The wife raised it at the hearing, and on appeal it was decisive (paras. 6, 30).
Not objecting earlier is not consent (para. 26).
You do not have to prove secrets were used. The risk of misuse is the test, and loyalty goes beyond confidentiality (paras. 20, 27).
Frequently asked questions
Can my former lawyer act against me?
Under r. 3.4-10 of the Law Society of Ontario's rules, as quoted by the Court, a lawyer shall not act against a former client in the same matter unless the former client consents (para. 22).
Does the former client have to show confidential information was used?
No. The Court said the question is whether there is a risk confidential information might be used, and that loyalty extends beyond confidentiality (para. 27).
If I didn't object earlier, have I consented?
Not in this case. The Court did not treat the failure to raise an earlier objection as consent under the rules (para. 26).
Did the Court decide the property transfer was at undervalue?
No. The Court set aside the order on the conflict issue alone and did not consider the other grounds of appeal (para. 6). It directed a new hearing (para. 32).
Concerned about a conflict in your case? Book a consultation
Francis Mehr LLP handles civil and commercial litigation for clients in Ottawa and across Ontario. Book a consultation with the lawyers at Francis Mehr LLP: call (613) 226-1011 or contact us.
Written by the lawyers of Francis Mehr LLP. Published October 30, 2026; reflects the decision released October 20, 2026. This post is general information, not legal advice.
