Court File No.: 08-CL-7489

Released: 20090206

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Re: G. Raymond Chang Ltd. v. ShopCast Television (TV) Inc.

Before: Karakatsanis J.

Counsel: D. Ward, for the Applicant, GRCL

D. H. Jack, for the Respondents, ShopCast

Heard at Toronto: January 29, 2009

ENDORSEMENT

[1] The applicant seeks leave to appeal the Order of Pepall J dated November 28, 2008, dismissing a motion brought by the applicant for a declaration that Lerners LLP should not act against nor cross-examine Harold S. Springer in the oppression remedy application. The applicant relies upon both Rule 62.02(4) (a) and (b).

[2] The applicant concedes that Pepall J. correctly identified the applicable legal principles but submits there is good reason to doubt the correctness of her decision in the conflict motion because she erred in applying the legal principles and misapprehended the facts.

[3] GRCL brought an application for an oppression remedy against ShopCast. The application was supported by an affidavit of Springer, who was identified as a business advisor to GRCL. He was involved in the business dealings that form the factual basis for the relief sought in the application. He is not a shareholder, officer or director and discloses no identified interest in GRCL. ShopCast filed responding affidavit material in the application disputing the factual and conclusory evidence in the Springer affidavit.

[4] ShopCast is represented by Lerners LLP. Lerners was also representing Springer in sensitive personal matters, including personal tax matters. Springer deposes that he is concerned that confidential information could be used to the advantage of ShopCast and to the disadvantage of Springer in the oppression remedy litigation and that their interests are at odds in the GRCL litigation. ShopCast has indicated that it will not be cross-examine Springer on his affidavit.

[5] Pepall J found that the applicant had not put forward adequate evidence to establish a disqualifying conflict of interest, either on the basis of possession of confidential information or because of a duty of loyalty to a client.

[6] She found that the applicant had not met its onus to establish that the law firm should be disqualified on the basis that it possesses confidential information from one retainer that is sufficiently related to another retainer to warrant disqualification:

In my view, the onus has not been met in this case. The evidence of any interconnection between the two retainers is lacking and certainly is neither clear nor cogent. In fact, no particulars are provided. Mr. Springer’s stated concern is that he had been a client of Lerners for a number of years. In my view this and other vague assertions are insufficient to provide any disqualification of the basis of conflict of interest and confidential information.

[7] In addition, Pepall J found that the duty of loyalty to not act against the interest of a client or to represent a client whose interest is directly adverse to the interest of another current client was not engaged because there was inadequate evidence to establish that Springer had an interest in the GRCL oppression application:

As to the duty of loyalty, it arises in the context of two clients whose interests are directly adverse. In Neil, Binnie J. writes in terms of a lawyer representing one client whose interest are directly adverse to the immediate interest of another current client even if the two mandates are unrelated. Assuming that the duty of loyalty is a broad free standing obligation, surely it cannot have been intended to extend to a witness for an opposing party in a proceeding. Here GRCL has never been a client of Lerners. Mr. Springer is not an officer, director or shareholder GRCL nor a party to the application. …the evidence required to establish that the interest of Mr Springer for whom Lerners acts personally are directly adverse to the immediate interest of ShopCast is inadequate, using the definition of conflict adopted by Binnie J. in R. v. Neil, there is no evidence that illustrates or even suggests that there is a substantial risk that Lerner’s representation of Mr Springer would be materially and adversely affected by Lerners’ own interests or by Lerners’ duties to ShopCast or vice versa. I conclude that there is no real risk of impairment of Lerners’ ability to properly represent the legal interest of both Mr. Springer and ShopCast.

[8] The applicant’s position is that the motions judge erred in failing to consider the underlying subject matter and the specific factual allegations in the affidavits in the oppression application in both finding that there was insufficient connection or relationship between the retainers and in finding that there was no adverse interest between Springer and ShopCast. They submit that she erred by taking an overly technical approach in applying the legal principles by concluding the inquiry because Springer was not a director, officer or shareholder of GRCL. The applicant submits that given the nature of the personal tax retainer it is reasonably probable that they would have confidential information regarding his personal finances and business dealings. The applicant submits Springer was a long time business advisor to GRCL, he was intimately involved in the matters in dispute, and he advised GRCL in connection with its investment in and loans to ShopCast. The applicant characterized the response to the application as ‘all about Springer’ and the responding affidavits as attacking his motives and credibility.

[9] I am not satisfied that there is reason to doubt the correctness of the legal principles or their application to the facts as found. Nor am I satisfied there is reason to challenge the correctness of the factual findings. The findings with respect to the adequacy of the evidence to meet the legal tests are factual findings that would deserve deference from any appellate court.

[10] Although the motions judge did not refer explicitly to the responding affidavits that state that Springer and Chang, the principal of GRCL, were competing against ShopCast for business, she was aware of the factual underpinnings of the oppression litigation and refers to them generally in her decision. After noting that Springer is not an officer, director or shareholder, she further proceeded to find that there is insufficient evidence to show that Springer’s interests are directly adverse to the interests of ShopCast. There is evidence in the record before her in the motion to support her findings. The fact that the responding affidavits challenge the evidence, opinions and legal conclusions of Springer as the sole witness for GRCL does not require a finding that Springer’s interests are directly adverse to the interests of ShopCast in this litigation.

[11] The applicant further submits that the motion judge erred in failing to draw adverse inference or conclusion form the fact that the Lerners’ privacy wall was not effective and was not established until five weeks after the conflict motion was served. I am not satisfied that there is any error in principle or misapprehension of the evidence that may have impacted on her findings.

[12] As a result, I am not satisfied that there is good reason to doubt the correctness of the decision under Rule 62.02(4) (b).

[13] Nor am I satisfied under Rule 62.02(4) (a) that the motions judge decision is contrary to the decision in UCB Sidac International Ltd. v. Lancaster Packaging Inc. 1993 5588 (ON SC), 51 C.P.R. (3d) 449 (S.C.J.). The facts of that case were different; Blair J found that there was a direct connection between the two retainers as they pertained to the same agreement at issue in both matters and the law firm would likely have confidential information. In order to satisfy Rule 62.02 (4) (a) it is insufficient to show that two courts have exercised their discretion to produce different results. It is necessary to demonstrate a difference in the principles chosen as a guide to the exercise of such discretion.

[14] Counsel agreed on the appropriate quantum of costs for the successful party. The respondent shall have its costs of $5,500 all inclusive.

Karakatsanis J.

Released: February , 2009