Her Majesty the Queen in Right of Ontario v. Chartis Insurance Company of Canada et al.
[Indexed as: R. v. Chartis Insurance Co. of Canada]
Ontario Reports
Ontario Superior Court of Justice, Divisional Court,
Nordheimer J.
November 24, 2014
123 O.R. (3d) 593 | 2014 ONSC 6792
Case Summary
Professions — Barristers and solicitors — Conflict of interest — Lawyer who worked extensively on plaintiff's case going to work for defendants' law firm of record — Plaintiff dissatisfied with efficacy of ethical wall put in place and moving for order disqualifying defendants' lawyers — Motion dismissed — Leave to appeal granted — Good reason existing to doubt correctness of motion judge's order as he apparently disregarded existence of rebuttable presumption that lawyers should be disqualified — Proposed appeal involving issues of significant importance to legal profession and public.
P, a lawyer who worked on the plaintiff's case for over 160 hours, went to work for the defendants' law firm of record, LBM, a 14-member boutique litigation firm. LBM brought a motion for a declaration that it could continue to act for the defendants, and the plaintiff, dissatisfied with the ethical wall put in place by LBM, brought a cross-motion for an order disqualifying LBM. The motion judge granted LBM's motion and dismissed the plaintiff's motion. The plaintiff brought a motion for leave to appeal that order.
Held, the motion should be granted.
There was good reason to doubt the correctness of the motion judge's order as he did not appear to have approached the matter from the perspective that there was a rebuttable presumption that LBM should be disqualified, and instead apparently treated the matter as a balancing act between the plaintiff's concern over the imparting of its confidential information to opposing counsel and the defendants' right to counsel of their choice. The proposed appeal involved issues of significant importance to the legal profession and the public.
MacDonald Estate v. Martin, [1990] 3 S.C.R. 1235, [1990] S.C.J. No. 41, 77 D.L.R. (4th) 249, 121 N.R. 1, [1991] 1 W.W.R. 705, J.E. 91-85, 70 Man. R. (2d) 241, 48 C.P.C. (2d) 113, EYB 1990-68602, 24 A.C.W.S. (3d) 553, consd
Other cases referred to
Ontario v. Chartis Insurance Co. of Canada, [2014] O.J. No. 3372, 2014 ONSC 4221 (S.C.J.); Sunnybrae Farms Ltd. v. Ontario Egg Producers' Marketing Board, [1977] O.J. No. 686, 3 C.P.C. 348 (H.C.J.)
Rules and regulations referred to
Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 62.02(4)
MOTION for leave to appeal.
W. Manuel and J. Sydor, for moving party.
G. MacKenzie and B. Clancy, for responding parties. [page594]
[1] NORDHEIMER J.: — The moving party seeks leave to appeal from the order of A. O'Marra J. dated July 16, 2014 [ [2014] O.J. No. 3372, 2014 ONSC 4221 (S.C.J.)] in which the motion judge granted the responding parties' motion for a declaration that the responding parties' lawyers of record, Lloyd Burns McInnis LLP ("LBM"), could continue to act for the responding parties in this action. The motion judge concurrently dismissed the moving party's cross-motion for an order disqualifying LBM from so acting. For the reasons that follow, I have concluded that leave to appeal ought to be granted.
Background
[2] For the purposes of this motion, the background facts can be stated briefly. This proceeding involves a coverage dispute between the moving party and its insurers relating to the moving party's defence of certain class actions. While the moving party has apparently resolved matters regarding a number of the defendants, the issues are still outstanding regarding the responding parties.
[3] The moving party's lawyers on this matter are Theall Group LLP. Theall Group employed a lawyer by the name of Michael Foulds. Prior to his departure from Theall Group, Mr. Foulds had worked on this matter to the extent of over 160 hours. It is agreed that, as a consequence of his work, Mr. Foulds has extensive knowledge of privileged and confidential information relating to this proceeding.
[4] Mr. Foulds left Theall Group and joined LBM. He did so at the urging of Douglas McInnis, a partner at LBM. Mr. McInnis is also primary counsel to the responding parties in this matter. Indeed, Mr. McInnis is the counsel used exclusively by the responding parties with respect to this matter. Mr. McInnis sought out Mr. Foulds with the specific goal of having him work on matters for the responding parties. However, Mr. Foulds was specifically not to work on this matter.
[5] LBM proposed terms for an ethical screen to be implemented in an effort to address the evident conflict of interest that Mr. Foulds' move to LBM would create. LBM advised Theall Group of their intentions in this regard. On instructions from the moving party, Theall Group eventually notified LBM that, while the moving party did not take issue with the terms of the ethical screen per se, the moving party did not consider an ethical screen to be adequate in this case. Indeed, the moving party advised that no use of ethical screens or walls would suffice, in these circumstances, to address the conflict of interest. As [page595] a consequence, the moving party asked that LBM withdraw as counsel for the responding parties, but LBM refused.
[6] One other relevant fact that should be noted is that LBM is described as a 14-member boutique litigation firm.
Analysis
[7] In order to obtain leave to appeal, the moving party must satisfy one of the two tests set out in rule 62.02(4) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, that reads:
62.02(4) Leave to appeal shall not be granted unless,
(a) there is a conflicting decision by another judge or court in Ontario or elsewhere on the matter involved in the proposed appeal and it is, in the opinion of the judge hearing the motion, desirable that leave to appeal be granted; or
(b) there appears to the judge hearing the motion good reason to doubt the correctness of the order in question and the proposed appeal involves matters of such importance that, in his or her opinion, leave to appeal should be granted.
[8] The moving party submits that it satisfies both of these tests. The responding parties say that the first test is not met because there are no conflicting decisions, as that term is understood in the context of the test for leave to appeal. In particular, the responding parties submit that any asserted conflict in the cases is not a conflict in principle but, rather, is a conflict in what the responding parties characterize as "obiter dictum" in certain cases. In my view, I do not have to get into the issue whether there are conflicts between some of the existing cases or whether the characterization of any conflict being obiter is correct. I say that because, regardless of any conclusion regarding the first test, I am satisfied that the second test is met, that is, that there is good reason to doubt the correctness of the order made by the motion judge and that the appeal involves matters of such importance that leave to appeal should be granted.
[9] The motion judge gave considered reasons for his decision.[^1] In particular, he compared the terms of the ethical screen proposed in this case to the suggested terms that are set out by the Law Society of Upper Canada under s. 3.4-17 of the Rules of Professional Conduct regarding the transfer of lawyers between law firms and the guidelines contained in the commentary to that [page596] section.[^2] The motion judge found that the terms of the ethical screen proposed in this case were reasonable ones. Indeed, the motion judge asked rhetorically [at para. 41] "what more could be done to protect the confidentiality of the plaintiff's information".
[10] The motion judge then went on to find that, even if the possibility of inadvertent disclosure of confidential information remained, it was trumped by the right of the responding parties to their counsel of choice. The motion judge noted that Mr. McInnis had been dealing with matters related to the current action for more than five years and had docketed more than 400 hours to this particular matter. While the motion judge acknowledged that there were a number of experienced lawyers who could provide counsel to the responding parties on the issues raised in this matter, he found that none of those lawyers had the depth of knowledge, experience and understanding of the responding parties' particular issues, as did Mr. McInnis.
[11] In conclusion, the motion judge said, at para. 44:
. . . I find that a reasonably informed person would be satisfied that the use of confidential information had not occurred or would likely occur, and it is in the interests of justice to allow Mr. McInnis to remain as [the responding parties'] counsel of choice.
[12] My reason for doubting the correctness of the order arises from my concern that the motion judge, in the course of his reasons, appears to have reversed the onus that ought to apply when determining these types of matters. The motion judge referred to the seminal decision in this area, namely, MacDonald Estates v. Martin, [1990] 3 S.C.R. 1235, [1990] S.C.J. No. 41. Indeed, the motion judge noted, at para. 21:
Sopinka J. held in MacDonald Estates v. Martin that in assessing the risk of prejudice, the court should infer that the migrating lawyer, (in this instance Mr. Foulds), has imparted confidential information of the former clients to members of his or her new firm. However, the inference is rebuttable if the measures instituted by the tainted firm (LBM) would satisfy a reasonably informed person that the use of confidential information had not occurred or was likely to occur.
[13] Notwithstanding that reference, however, it is not clear to me that the motion judge approached this matter from the perspective that there was a presumption that LBM should be disqualified, unless LBM could rebut that presumption. Instead, the motion judge appears to have treated the matter as a balancing [page597] act between the moving party's concern over the imparting of its confidential information to opposing counsel and the responding parties' right to counsel of their choice. I reach that conclusion, at least in part, from what the motion judge said, at para. 42 of his reasons:
Even if a doubt remains that there is the possibility of inadvertent disclosure, I consider in the balance, the impact of a disqualification order on the opposing parties' right to counsel of choice.
[14] In that regard, it is worth repeating what Sopinka J. said in MacDonald Estate. He first held that, in such cases, two questions had to be answered: (1) Did the lawyer receive confidential information attributable to a solicitor and client relationship relevant to the matter at hand? (2) Is there a risk that it will be used to the prejudice of the client? In this case, it is accepted that the answer to the first question is yes. Further, the motion judge appears to have answered the second question in the affirmative, or at least allowed that it might be answered in the affirmative in this case. Where the answer to both questions is yes, it is important to remember what Sopinka J. said the result then ought to be. He said, at para. 49:
There is, however, a strong inference that lawyers who work together share confidences. In answering this question, the court should therefore draw the inference, unless satisfied on the basis of clear and convincing evidence, that all reasonable measures have been taken to ensure that no disclosure will occur by the "tainted" lawyer to the member or members of the firm who are engaged against the former client.
[15] I repeat that it is agreed that Mr. Foulds was in possession of extensive confidential information regarding the moving party's position in this action, the very same action that the partner in LBM, who recruited him to join that firm, is the chief counsel on. I also repeat that LBM is a 14-member boutique firm. This is not a law firm of hundreds of lawyers operating out of multiple offices. The potential for inadvertent disclosure of confidential information is therefore heightened in this case. When one adds to that reality the fact that it was, and is, intended that Mr. Foulds will work closely with Mr. McInnis on other matters, including on matters for the responding parties, the potential for inadvertent disclosure of confidential information increases even more.
[16] In conclusion, I will offer the reminder that, in granting leave to appeal under the second test, I do not have to be satisfied that the order is in error. I need only be satisfied that there is good reason to doubt its correctness: Sunnybrae Farms Ltd. v. Ontario Egg Producers' Marketing Board, [1977] O.J. No. 686, 3 C.P.C. 348 (H.C.J.), at paras. 11-14. I am so satisfied. [page598]
[17] Finally, I am satisfied that the proposed appeal involves matters of such importance that leave to appeal should be granted. The issue of lawyers transferring between firms, and the fallout from such transfers including the possible disclosure of client's confidential information, remains a matter of significant importance, both to the legal profession and to the public.
[18] For these reasons, I have concluded that leave to appeal should be granted. The costs of this motion are fixed in the agreed amount of $9,000, inclusive of disbursements and HST. I leave the disposition of those costs to the panel hearing the appeal.
Motion granted.
[^1]: Ontario v. Chartis Insurance Co. of Canada, [2014] O.J. No. 3372, 2014 ONSC 4221 (S.C.J.). [^2]: The motion judge actually refers to subrule 2.05(4) but that appears to be a reference to an older version of the Rules of Professional Conduct.