CITATION: Capital Sports v. Trinity, 2022 ONSC 6128

DIVISIONAL COURT FILE NO.: 272/22

DATE: 2022-12-15

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

STEWART, MATHESON & LEIPER JJ.

BETWEEN:

CAPITAL SPORTS MANAGEMENT INC.

Plaintiff (Appellant)

– and –

TRINITY DEVELOPMENT GROUP INC., 801 ALBERT STREET INC., TIP ALBERT GP INC., TIP ALBERT LIMITED PARTNERSHIP, TRINITY ALBERT LP, G. BIRD HOLDINGS INC., c.o.b. as GBA Development and Project Management, JOHN RUDDY and GRAHAM BIRD

Defendants (Respondents)

AND BETWEEN:

TRINITY DEVELOPMENT GROUP INC.

Plaintiff by Counterclaim (Respondent)

– and –

SHELDON PLENER, LARRY DAVIS and ADRIAN MELNIK as EXECUTORS and ESTATE TRUSTEES FOR THE ESTATE OF EUGENE MELNYK, deceased, and CAPITAL SPORTS MANAGEMENT INC.

Defendants by Counterclaim

GOWLING WLG (CANADA) LLP

Party Intervener

Counsel:

Robert Brush, Clark Tedesco and Alexandra Grishanova, for the Plaintiff, Defendant by Counterclaim (Appellant)

Milton A. Davis, Ronald D. Davis, and Hailey Abramsky, Lawyers for Trinity Development Group Inc., Trinity Albert LP and John Ruddy, Defendants, Trinity Development Group Inc. Plaintiff by Counterclaim (Respondents)

Christopher D. Bredt, Laura M. Wagner, Teagan Markin and Amitha Carnadin, Lawyers for 801 Albert Street Inc. and TIP Albert Limited Partnership, Defendants (Respondents)

Anne E. Posno, Amy Sherrard and Jonathan Mertz, Lawyers for Gowling WLG (Canada) LLP, Party Intervener

HEARD at Toronto: October 26, 2022 (by videoconference)

REASONS FOR DECISION

Matheson J.:

[1] Capital Sports Management Inc. appeals from the decision of Justice Ryan Bell dated May 2, 2022[^1] (which has an Addendum dated June 10, 2022[^2]) (the "Decision"), ordering production of certain solicitor-client documents relating to a failed joint venture between Capital Sports and Trinity Development Group Inc. Capital Sports has sued Trinity, alleging that Trinity acted in conflict of interest in relation to the joint venture, and Trinity has counterclaimed alleging bad faith, among other allegations.

[2] In 2014, Capital Sports retained Gowling WLG Canada LLP ("Gowlings") as its lawyer for the development project that gave rise to the joint venture. The joint venture began in 2015. For a period commencing in July 2015, the motion judge found an implied joint retainer of Gowlings by Capital Sports and Trinity in relation to the joint venture. As a result, the motion judge ordered production of privileged documents to Trinity. That finding was the main focus of the Decision.

[3] This court has granted leave to appeal on one issue only, regarding the scope of the production order. Capital Sports did not get leave to argue that there was no implied joint retainer commencing in 2015 and that there therefore should be no production at all.

[4] Leave to appeal was granted on this issue: [^3]

Having found an implied joint retainer among Capital Sports Management Inc., Trinity Development Group Inc. and [Gowlings], did the motion judge err in ordering the production of documents after May 2016?

[5] There was a well-documented period of adversity between the parties commencing in May 2016. Capital Sports alleged that Trinity breached its obligations in the joint venture. Both sides threatened litigation. The parties went to mediation, unsuccessfully. At the same time, the issue of Gowlings' role arose. Trinity took the position that Gowlings had a conflict of interest and could not act against it. Capital Sports disagreed. Trinity threatened to, but did not, take steps to remove Gowlings. The parties moved forward with the joint venture and Gowlings continued to be involved. The issues on this appeal relate to whether the implied joint retainer also continued throughout the period of adversity and forward, as found by the motion judge.

[6] For the reasons set out below, I would grant the appeal. The implied joint retainer ended as a result of the adversity between the parties that began in May 2016, and Trinity acquiesced to Gowlings acting for Capital Sports where there was adversity between them. The order for production of documents after May 2016 is therefore narrowed, as set out below.

Brief background

[7] The underlying lawsuit arises from a failed joint venture between Capital Sports and Trinity to develop the LeBreton Flats, a large site just west of Parliament Hill in Ottawa. In the lawsuit, Capital Sports alleges that Trinity acted in a conflict of interest when it began developing an adjacent project involving the Albert Street respondents. Capital Sports alleged that Trinity's involvement in the neighbouring development was a breach of Trinity's fiduciary duties to Capital Sports.

[8] In 2014, the National Capital Commission ("NCC") solicited proposals to develop a portion of the lands in LeBreton Flats, using a two-stage process: Stage 1 - requests for qualifications ("RFQ"); and Stage 2 - requests for proposals ("RFP").

[9] In late 2014, Capital Sports retained Gowlings as its counsel in relation to the proposal to develop the LeBreton Flats. The written retainer agreement provided that Gowlings acted for Capital Sports only.

[10] Capital Sports was part of a group that responded to the RFQ under the name RendezVous LeBreton Group ("RLG"). Capital Sports began discussions with Trinity at this stage, although Trinity was not part of the RFQ.

[11] Capital Sports and Trinity entered into a non-disclosure agreement in early 2015 (the "NDA").

[12] RLG was short-listed as one of four proponents invited to respond to the RFP. The RFP was released in April 2015.

[13] On July 23, 2015, Capital Sports and Trinity signed a letter of intent in relation to the LeBreton Flats project. Gowlings represented Capital Sports in the negotiation of the letter of intent. Trinity was represented by Fogler Rubinoff LLP ("Foglers").

[14] The letter of intent provided that Capital Sports and Trinity would participate in preparing and submitting a response to the RFP, and if successful, would participate in a joint venture with respect to the ownership and development of the LeBreton Flats lands. Among other things, the letter of intent provided that they would each be responsible for 50% of certain costs.

[15] The parties moved forward with the preparation of RLG's response to the RFP.

[16] RLG did not retain separate counsel. The motion judge found that there was an implied joint retainer of Gowlings by Capital Sports and Trinity in relation to RLG. The motion judge found several indicia of a solicitor-client relationship despite the earlier exclusive retainer agreement between Capital Sports and Gowlings. As noted by the motion judge at para. 45, in "meetings and correspondence with, and submissions to third parties, Gowlings represented that it acted for RLG. Gowlings met and corresponded with Trinity on matters concerning RLG. Gowlings sought and acted on Trinity's instructions. Gowlings created legal documents, and Gowlings provided legal advice."

[17] Gowlings was listed as counsel to RLG in the response to the RFP that was submitted to the NCC in December of 2015.

[18] On April 28, 2016, the NCC named RLG as the first ranked proponent for the LeBreton project.

May 2016 and following

[19] In May 2016, the relationship between Capital Sports and Trinity broke down. On May 4, 2016, Gowlings, for Capital Sports, wrote to Trinity directly alleging that Trinity had broken the NDA. The letter began"We are the solicitors for Capital Sports" and indicated that Capital Sports had instructed Gowlings to bring a court application to enforce the terms of the NDA.

[20] Foglers replied on behalf of Trinity on May 6, 2016. The letter said it was inappropriate to write directly to Trinity because Capital Sports "knew that our firm [Foglers] is counsel to Trinity with respect to [RLG] and NCC matters." Trinity denied breaching the NDA and alleged that Capital Sports had breached the letter of intent.

[21] With respect to Gowlings, the Fogler May 6 letter said as follows:

…it is unfortunate that your firm has decided to act against Trinity, one of the members of the [RLG] group… As you know, your firm has been retained by [RLG] to be the lead counsel in finalizing arrangements between [RLG] and NCC for the development of the LeBreton Flats lands. Trinity and Capital Sports are to work collaboratively on the RFP/Response … Trinity is concerned that Gowlings may have, or may obtain in the future, confidential information respecting Trinity, in the course of acting for [RLG] in its dealings with NCC. As a result of this conflict, Trinity is considering whether your firm can continue to act on behalf of [RLG] with respect to any matters dealing with NCC. [Emphasis added.]

[22] Capital Sports replied by a May 11, 2016 letter from Gowlings, providing detailed comments about the alleged breach of the NDA and requesting a consent order in that regard.

[23] Trinity replied by a May 16, 2016 letter from Foglers. It again denied that it breached the NDA and said that both sides should set aside their differences, failing which Trinity would sue Capital Sports. Among other things, Trinity said it would seek the following order:

An Order prohibiting [Gowlings] from continuing to act on behalf of [RLG], Capital Sports and/or Trinity with respect to any matters concerning NCC and/or the development or redevelopment of LeBreton Flats. Gowlings' conflict is evident, and our client cannot agree to your firm continuing as counsel in any upcoming litigation between our clients. [Emphasis added.]

[24] In that letter, Trinity went on to say the following:

We note that your letter of May 11, 2016 does not … address the conflict situation that [Gowlings] is now in. Until Capital Sports confirms that it is not pursuing the Order that you have suggested [regarding Trinity's alleged breach of the NDA], Gowlings ought not to act for [RLG] with respect to matters concerning NCC and/or the development or redevelopment of LeBreton Flats. The conflict is apparent, and Trinity will not abide Gowlings acting in that conflict of interest. [Emphasis added.]

[25] Gowlings did due diligence on the scope of retainer issue, speaking to two managing partners, a third partner, and Capital Sports' general counsel. General counsel also spoke to another lawyer, outside Gowlings. In Gowlings' opinion, there was no conflict because Gowlings had only acted for Capital Sports.

[26] Gowlings continued to represent Capital Sports with respect to RLG. The parties attempted to work out their differences. With the involvement of Gowlings and Foglers, the parties negotiated a protocol for the release of public information. On June 13, 2016, Gowlings circulated a critical path worksheet to Capital Sports and Trinity.

[27] By letter dated June 22, 2016 that again began "We are counsel for Capital Sports", Gowlings wrote to Foglers for Trinity. By that letter, Capital Sports proposed an arbitration process to resolve issues with Trinity.

[28] Trinity rejected the proposed arbitration by a letter dated June 23, 2016, from Foglers. On the subject of Gowlings, Trinity said that if their differences could not be resolved "Gowlings would be unable to act for [Capital Sports]", continuing as follows:

Your firm has represented both parties in their dealings with NCC. Preferring [Capital Sports] to Trinity would put Gowlings in a clear conflict of interest.

[29] By letter dated June 24, 2016 from Gowlings, Capital Sports replied:

We would also comment on your statement regarding Gowlings being unable to act for [Capital Sports]. As we have stated previously, we disagree with your interpretation and confirm that Gowlings will continue to act on behalf of [Capital Sports] in respect of dealings between [Capital Sports] and Trinity as we have done to date, including in the negotiation of the [letter of intent]. [Emphasis added.]

[30] Trinity's principal, the respondent John Ruddy, has acknowledged that the above letter clearly indicated that Gowlings intended to continue to act for Capital Sports. Mr. Ruddy attested that he would have assumed from that date forward that, to the extent that there were negotiations between Capital Sports and Trinity, Capital Sports would receive its own legal advice from Gowlings.

[31] Gowlings continued to act for Capital Sports. In late June 2016, a Gowlings lawyer was appointed to represent Capital Sports at NCC meetings as an alternate to general counsel. Trinity also had external counsel in attendance at those meetings, advocating for Trinity.

[32] The parties pursued mediation rather than arbitration. The mediation took place in July of 2016. Capital Sports was represented by Gowlings. Capital Sports' general counsel was also present, as was a board member who was also a lawyer. Trinity was represented by Foglers. Mr. Ruddy attended for Trinity, among others. Mr. Ruddy did not raise an issue with respect to Gowlings acting only for Capital Sports because he was intent on keeping the joint venture alive.

[33] Although the mediation did not result in a settlement, Capital Sports and Trinity resolved to proceed with the RLG development process. Trinity did not take steps to remove Gowlings. Gowlings continued to work on items relating to RLG's negotiations with the NCC.

[34] The issue of a Gowlings conflict arose one more time. Capital Sports sought payment of a portion of third party costs under the letter of intent, including accounts from Gowlings. By a letter dated August 12, 2016, Trinity replied that for a number of reasons "those funds are not owing by our client and shall not be paid." The letter also stated as follows:

Certain of the costs claims, such as Gowlings accounts, were incurred by Gowlings as lawyers for [Capital Sports], in its attempt to resile from the [letter of intent] and [the NCC Agreement]. The claim for Gowlings costs is particularly troublesome, having regard to Gowlings role as counsel for RLG, and its continued representation of [Capital Sports] in a manner contrary to Trinity's interests, a clear conflict of interest by Gowlings. [Emphasis added.]

[35] The letter went on with allegations against Capital Sports, including alleged breaches of the letter of intent and NCC agreement among other things. In response, Capital Sports noted that Trinity had not been billed for any Capital Sports/Gowlings specific time.

[36] Trinity still did not take steps to have Gowlings removed as counsel for Capital Sports.

[37] Gowlings continued to be involved in the RLG joint venture. Shortly after the above letter about the costs claim, by letter dated September 12, 2016, Gowlings wrote to the City of Ottawa regarding RLG. That letter begins"We are the solicitors for [RLG]". On October 31, 2016, RLG submitted its resolution letter to the NCC, in support of preliminary issues set out in the first ranked proponent's terms of engagement. Gowlings worked on and submitted that submission and the related critical path worksheet.

[38] Capital Sports commenced its lawsuit against Trinity and others about two years later, on November 23, 2018. Capital Sports sued for $900 million and an accounting of the profits of the Albert Street development. Albert Street parties were also sued. Trinity counterclaimed for about $1.4 billion.

[39] In the lawsuit, Capital Sports alleges that it discovered, in the summer of 2017, that Trinity had entered into a joint venture with another party to develop the nearby property at 900 Albert Street. Capital Sports pleads a detailed course of events including Trinity having several meetings with the City of Ottawa without notice to Capital Sports, and Trinity submitting an application on behalf of RLG without notice to, or consultation with, Capital Sports. This course of events does not form part of the evidence on the production motion. There is evidence of a meeting with the Mayor on October 4, 2018. After that point there is, again, no evidence. In the lawsuit, Trinity denies any wrongdoing and alleges that Capital Sports breached the letter of intent, the NCC agreement and other agreements regarding the joint venture, and did so in bad faith, among other allegations. Capital Sports alleges that Trinity owed it fiduciary duties, which Trinity denies.

[40] The action and counterclaim moved forward.

[41] In late 2020, another two years later, Trinity took the position during an examination for discovery that Gowlings' files should be produced. Capital Sports refused the request, asserting privilege.

[42] Trinity then wrote to Gowlings, without copying Capital Sports, seeking production of the solicitor-client files. Capital Sports learned of the letter and repeated its refusal based upon privilege.

[43] In July of 2021, Trinity brought a motion for production of the privileged documents, giving rise to the Decision.

Decision ordering production

[44] The motion judge found that Gowlings acted for RLG both before and after the unsuccessful mediation in July of 2016. She concluded that a reasonable person in the position of a party with knowledge of the facts would reasonably form the belief that Gowlings was acting for both Capital Sports and Trinity in relation to RLG for the entire period from July of 2015 until the action was commenced in 2018.

[45] The motion judge ordered that Capital Sports produce documents "relating to the work of Gowlings for RLG and the LeBreton Project from July 23, 2015 [the date of the letter of intent] to November 23, 2018 [the date of commencement of the action]."

[46] Capital Sports sought clarification of the scope of the production order, which resulted in the addendum to the reasons for decision.

[47] In the addendum, the motion judge ordered that there was no exception or "carve-out" for communications between Capital Sports and Gowlings in relation to the subject matter of the joint retainer when Capital Sports' interests were adverse to Trinity. The order further provided that if Capital Sports sought advice from Gowlings about withdrawing from RLG or changing Capital Sports' participation in the LeBreton project, those communications were not privileged as regards Trinity and had to be produced.

Issues and Standard of Review

[48] Leave to appeal was granted on this issue:

Having found an implied joint retainer among Capital Sports Management Inc., Trinity Development Group Inc. and [Gowlings], did the motion judge err in ordering the production of documents after May 2016?

[49] Trinity wrongly suggests that the leave to appeal order precludes Capital Sports from making certain arguments. The order does not do so. The order leaves open the bases upon which the appellant may argue that the motion judge err in ordering production for the later time period. The appellant raises these issues in support of the appeal:

(1) whether the implied joint retainer terminated in or around May 2016 when the parties became adverse;

(2) whether Trinity is prevented from seeking production from May 2016 on forward due to acquiescence, waiver, delay or estoppel;

(3) whether there were parallel retainers of Gowlings as of May 2016 onward, which would limit the production order; and,

(4) whether an ethical breach or mistake by Gowlings regarding the scope of its retainer had the effect of Capital Sports losing its privilege.

[50] The respondents object to certain legal arguments on the basis that they were not raised before the motion judge. That objection need not be addressed because the issues that dispose of the appeal were raised below.

[51] The standard of review is set out in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235. On questions of law, the standard is correctness. On questions of fact, the standard is palpable and overriding error. For questions of mixed fact and law the standard is palpable and overriding error except that, where there is an extricable legal principle, the standard of review for the legal principle is correctness.

[52] The parties differ on the nature of the issues that arise from the question for which leave was granted. The appellant submits that the motion judge erred in principle and the standard of review is therefore correctness. The respondents submit that all issues are factual, and the appellant must therefore show palpable and overriding error.

Termination of the implied joint retainer

[53] The main issue on this appeal is whether the implied joint retainer terminated as a result of the events that began in May 2016. The motion judge found that the joint retainer persisted until the commencement of the lawsuit against Trinity. Capital Sports submitted then (and now) that it terminated earlier, in May of 2016, when the parties became adverse.

[54] As of the commencement of the lawsuit, the parties were adverse. No one asserts that the implied joint retainer continued after that time. Capital Sports submits that because the parties were also adverse for a period commencing in May 2016, the motion judge erred in law in not finding termination at that earlier time. The respondents disagree. They submit that the motion judge's findings about the implied joint retainer were all factual and there was no palpable and overriding error.

[55] The appeal therefore gives rise to these questions: When does an implied joint retainer terminate? What are the applicable legal principles?

[56] Trinity submits that an implied retainer ends when the subject matter of the engagement is complete. However, looking at the proffered authority for that submission, it makes the point that when the engagement is over, so is the retainer. It does not address the issue on this appeal regarding adversity during an engagement and early termination.

[57] As noted by Prof. Dodek in Solicitor-Client Privilege (Toronto: LexisNexis, 2014), at s. 6.26"Canadian law on the issue is scarce. … As a result, Canadian courts may rely of the far more detailed American consideration of these issues." Prof. Dodek noted the decision In Re Teleglobe Communications Corp., 493 F. (3d) 345 (3rd Cir. 2007), a U.S. Court of Appeals decision that discusses joint retainers in a case where the parties to an implied joint retainer became adverse, as transpired here.

[58] Teleglobe arises from corporate transactions within the Bell Canada Enterprise Inc. ("BCE") corporate group. BCE acquired Teleglobe and the corporate group began to take steps to develop a fibreoptic network. Those steps included Teleglobe and its subsidiaries borrowing more than $2 billion to fund the project. BCE reconsidered the project and obtained legal advice from external counsel that was shared with in-house counsel. The in-house counsel also advised Teleglobe. BCE decided to cut off funding, causing Teleglobe and its subsidiaries to file for Chapter 11 protection from insolvency. The subsidiaries sought production of the legal advice given to BCE and Teleglobe before the funding was cut off.

[59] In Teleglobe, the appeal court overturned an order to produce the privileged documents. The court emphasized that while a joint retainer may arise by implication, courts must be cautious in doing so. The court described a joint retainer as requiring that there be no substantial risk of the lawyer being unable to fulfill the lawyer's duties to all co-clients because of conflicting interests between the co-clients or otherwise.

[60] With respect to the termination of an implied joint retainer, the court said, at p. 362, that the joint retainer ends once circumstances arise that readily imply to all the joint clients that the relationship is over, including when it becomes clear to all parties that the clients' legal interests have diverged too much to justify using common attorneys and the parties' conduct dissolves the essential mutual confidence.

[61] As set out in Teleglobe, if a conflict arises, the proper course is to end the joint representation. The approach described by that court is consistent with the expectations on lawyers in these circumstances, as set out in the Law Society of Ontario ("LSO") Rules of Professional Conduct. The Rules are not binding on this court but can be instructive. The Rules do allow for the lawyer to continue to advise one of the clients on the matter that has been contentious and refer the other client elsewhere where there is consent.

[62] In Teleglobe, the court further held that if the lawyer does not end the joint representation when diverging interests arise, and continues to represent both clients"the black-letter law is that when an attorney (improperly) represents two clients whose interests are adverse, the communications are privileged against each other notwithstanding the lawyer's misconduct". This finding is also consistent with the LSO rules regarding lawyer mistakes, which generally do not destroy a client's privilege. Here, it appears through hindsight that the advice Capital Sports was given that Gowlings acted solely for it was incorrect.

[63] Capital Sports further relies on Chang v. Lai Estate, 2014 BCSC 128, 64 B.C.L.R. (5th) 430. This was an estates case where a lawyer gave advice to the executors of an estate both with respect to the administration of the estate and an application to vary the terms of the will. Although the context is admittedly different, the court concluded that where the beneficiary is in an adversarial relationship with the executrix, solicitor-client privilege remained in place. As set out at paras. 19 and 20, their interests were clearly in conflict due to the variation of the will sought by the plaintiffs and legal advice sought and received for that purpose remained privileged.

[64] Further, in Bank of Nova Scotia v. Lennie (1996), 38 Alta LR (3d) 119 (Q.B.), a case where the defendant's counsel had both acted for the defendant and also jointly for both sides, the court commented that the joint retainer would end when one side decided to take steps against the other. Again, the context is different, but the case is helpful given the lack of authorities regarding the issue.

[65] Capital Sports also puts forward United Kingdom law showing that there this issue is addressed under the framework of waiver, yet the result is the same – once there is a conflict of interest, the sharing of privileged communication comes to an end: TSB Bank Plc v. Robert Irving & Burns (1998), [2000] P.N.L.R. 384 (U.K. C. A. (Civ.), at pp. 391-393.

[66] Capital Sports also relies on the well-established legal principle that the protection of solicitor-client privilege is of fundamental importance to the administration of justice. In turn, when such a fundamental right is eroded, the principle of minimal impairment must be observed: Smith v. Jones, [1999] 1 S.C.R. 455, at para. 28. Applying these principles, Capital Sports submits that the scope of an implied joint retainer should be construed narrowly because of the consequences to the privilege rights of clients. This case is a prime example. Under the Decision, Capital Sports, wrongly believing it had its own counsel and therefore had confidentiality from Trinity, loses that confidentiality due to the continuation of an implied joint retainer with its now adversary.

[67] The respondents rely heavily on the principle that there is no confidentiality between clients in a joint retainer. That is so, but it avoids the issue here regarding whether the joint retainer terminated in or around May 2016. Prior to that time, there is no confidentiality between the joint clients.

[68] The respondents also rely heavily on the motion judge's finding of fact. That engages two questions: were there extricable legal errors and were there palpable and overriding errors of fact. I conclude that there were extricable legal errors and the correct legal principles engage what are admitted facts in this case.

[69] The motion judge erred in principle in not considering the legal implications of the period of adversity that began in May of 2016 and in relying on the alleged fiduciary duty.

[70] The motion judge expressly considered the issue of the duration of the joint retainer. The motion judge rejected the termination date of May 2016 for two reasons. First, there were facts later that year that supported a finding that the parties were again using Gowlings as counsel for RLG. While those facts could have represented the resumption of an implied joint retainer, the motion judge did not find a termination and resumption. Second, the motion judge relied on her finding regarding fiduciary duty. The motion judge accepted submissions from the Albert Street respondents on that subject. She found that because Capital Sports had alleged that Trinity had breached fiduciary duties owed to Capital Sports, there was a duty to disclose that extended to its privileged communications. In turn, the motion judge found that this duty to disclose supported the continuation of the joint retainer during and after the period of adversity.

[71] The fiduciary duty analysis is problematic. It is based on the allegations by Capital Sports that Trinity owed it fiduciary duties (not that Capital Sports was a fiduciary). Trinity denies that it owed the alleged fiduciary duties. That issue will be determined at trial. Further, Trinity pleads that if it is a fiduciary so too is Capital Sports, owing the same duties to Trinity. If the obligation to disclose was based on the prospect that each joint venture partner may owe fiduciary duties to the other, to be determined at trial, the resulting lack of confidentiality would also apply to Trinity. The pleadings do not support a finding of a fiduciary duty on one joint venturer only for the purposes of production of documents. As a result, Trinity would be obliged to turn over its lawyers' files as well. Although those files were not produced on this motion, that motion for production would come next.

[72] Although some of the respondents' submissions appear to suggest otherwise, there is no question that a party to a joint venture may retain its own counsel and have the benefit of solicitor-client privilege to the exclusion of the other joint venturer. The motion judge correctly stated these legal principles, at para. 32:

(1) when joint venturers jointly seek legal advice, there is no privilege between them but the privilege exists as against outsiders;

(2) this does not mean that whenever parties enter a joint venture relationship, they give up their ability to consult their own lawyers in confidence;

(3) as between joint venture parties, communications between one party and their lawyer will not be privileged if (i) there was a joint retainer of the lawyer; and (ii) the communications are in relation to the subject matter of the joint venture. [Emphasis added.]

[73] The motion judge's discussion of fiduciary duty and duration are in conflict with these accepted legal principles. The alleged fiduciary duty does not support the production order.

[74] Returning to the issue of adversity, the undisputed facts are that the communications between the parties commencing in May 2016 show clear conflict between the parties both regarding their obligations within the joint venture and with respect to Gowlings' role. Each party threatened to sue the other. Capital Sports put forward its position that Gowlings represented it only, and Trinity disagreed. Trinity said it would take steps to remove Gowlings. Trinity did not so. Trinity knew that Gowlings was going to continue to act for Capital Sports against Trinity and decided not to take steps to remove Gowlings.

[75] The mediation took place during this period. Trinity decided not to object to Gowlings acting for Capital Sports in the mediation. The parties had their dispute mediated, each with counsel. The mediation was unsuccessful. Yet, if the implied joint retainer continued throughout this period of conflict, Trinity claims all of the privileged documents from the opposite party in the mediation. The motion judge expressly concluded that there were no carve outs in the roughly three-month period.

[76] There was therefore the commencement of adversity in May 2016, as a result of which Trinity was on express notice that Capital Sports saw Gowlings as its lawyer only. An implied joint retainer could not persist in those circumstances. The joint retainer ended once circumstances arose that readily implied to all the joint clients that the joint retainer relationship was over. As of May 2016, it was clear to both parties that their legal interests had diverged too much to justify using common lawyers. The uncontested facts ended the implied joint retainer due to the parties' material adversity.

[77] There is then the question of the steps that Gowlings took in the fall for RLG, beginning with the September letter. The next period of adversity culminated in the lawsuit between Capital Sports and Trinity. In the circumstances of this case, Trinity acquiesced to the role of Gowlings in that later period.

Acquiescence

[78] Capital Sports submits that the motion judge erred in failing to find that Trinity acquiesced to Gowlings acting for Capital Sports in or around May 2016 on forward. I agree.

[79] Acquiescence is an equitable doctrine that arises when a party has knowledge of an issue (here, Gowlings acting for Capital Sports, adverse to Trinity) and refrains from taking steps to address the breach. The term acquiescence is sometimes used interchangeably with waiver: e.g., Serniak v. Teitel (Ont. C.A.), Sheriff v. Apps, 2012 ONSC 565. The respondents submit that while acquiescence was raised before the motion judge, waiver was not, and should not be raised now. In this case, I see no material difference.

[80] The motion judge found that Trinity did not acquiesce based on the evidence of Mr. Ruddy, because of the evidence that Gowlings acted for RLG at a later stage, and because there was "no evidence" of detrimental reliance.

[81] Contrary to the discussion in the reasons for decision, Mr. Ruddy's evidence demonstrates acquiescence. Knowing that Gowling was going to continue to act for Capital Sports, including in disputes with Trinity, Mr. Ruddy decided not to object. He was the principal of Trinity. His is the only evidence on this point. Finding that his evidence supported an opposite finding was a palpable and overriding error.

[82] Further, there was evidence of detrimental reliance. There was ample evidence that Gowlings continued to act for Capital Sports, and the privileged documents created are the very subject of the motion for production. Important steps proceeded with Gowlings acting against Trinity, most notably the mediation, to the knowledge of Trinity. Given the fundamental importance of solicitor-client privilege, the expectation of confidentiality in privileged communications is more than sufficient to show detrimental reliance.

[83] I conclude that the motion judge erred in regard to acquiescence. Trinity did acquiesce and cannot now seek production of documents when the parties were adverse, commencing in May 2016. There is then the later period of time, when Gowlings took some steps for RLG. Again, Trinity acquiesced to Gowlings being put forward in that way despite acting for Capital Sports against Trinity. Mr. Ruddy's reason for not objecting is consistent with these events. He decided not to object because he was intent on keeping the joint venture alive.

[84] The order for production of documents shall be amended to exclude documents post-May 2016. The other issues raised need not be addressed.

Orders

[85] I would therefore grant this appeal, with Trinity paying costs to Capital Sports in the agreed amount of $80,000.

Justice W. Matheson

I agree _______________________________

Justice E. Stewart

Leiper J. (Dissenting):

I. Introduction

[86] This appeal concerns a failed joint venture, a lawsuit between the former joint venturers Capital Sports Management Inc and Trinity Development Group Inc, and an order for production of documents. Capital Sports claimed privilege over the documents based on an assertion of an exclusive solicitor client relationship with Gowlings WLG Canada LLP.

[87] For the reasons below, I would allow the appeal in part. This is because I have concluded that the motion judge made a finding of fact that was available to her, which was during the life of the joint venture, Gowlings was counsel to the joint venture. Unlike my colleagues for the majority, I did not find any palpable and overriding error in the way that the motion judge approached the question of whether that joint retainer ended in May of 2016.

[88] However, with respect, I conclude that the motion judge erred by declining to decide whether there was a concurrent retainer between Capital Sports and Gowlings as of May of 2016 that did not involve Trinity. There was ample evidence to support a finding of a concurrent retainer. This concept is recognized in Canadian law: see Canadian National Railway Co. v. McKercher LLP 2013 SCC 39. In failing to resolve that question, I conclude that the motion judge ordered an over-broad scope of production and included records over which Capital Sports has a valid claim of solicitor-client privilege.

[89] I adopt my colleagues' articulation of the facts and will refer only to the facts as needed to explain my analysis of the issue on appeal. I also agree with my colleagues' application of the standard of review.

II. The Issue On Appeal

[90] I begin with the issue on which leave to appeal was granted: having found an implied joint retainer among Capital Sports, Trinity and Gowlings, did the motion Judge err in ordering production of documents created after May 2016?

[91] I approach the issue by considering these two questions:

a. Did the motion judge err in finding that there was an ongoing joint retainer between the members of the joint venture and Gowlings after May of 2016?

b. Did the motion judge err in the scope of production ordered?

III. ANALYSIS

The Joint Venture

[92] The motion judge found that Capital Sports and Trinity formed a joint venture in 2015 and that Gowlings was counsel to the joint venture. Although this finding is not the subject of appeal, it is part of the prelude to the question of the formation of an implied joint retainer among the parties with Gowlings, and the duration of the joint retainer.

[93] The motion judge found that the RLG relationship was a joint venture. Her finding was supported by the evidence and by the submissions of the parties before her who described RLG variously as a "joint venture" or a "contractual joint venture." The mutual rights and responsibilities created by the parties are part of the issues that will be determined at the trial of the action.

Gowlings' Role in the Joint Venture

[94] The motion judge next considered whether there was a joint retainer between Gowlings and the two parties to the joint venture.

[95] The motion judge applied the fact-specific test for the creation of a solicitor-client relationship, as articulated in Trillium Motor World Ltd. v. General Motors of Canada Limited, 2015 ONSC 3824, 48 B.L.R. (5th) 142, appeal allowed on damages only, 2017 ONCA 544, 72 B.L.R. (5th) 177, leave to appeal refused, [2017] S.C.C.A. no. 366 at para. 461.

[96] The motion judge correctly stated the legal principles concerning joint retainers, including that when joint venturers jointly seek legal advice, there is no privilege between the members of the joint venture but there is privilege among them as against outside parties. The parties will be privy to all communications between them and their solicitor: Sopinka, Lederman & Bryant: The Law of Evidence in Canada (5th ed.) at para. 14.51, Archibald v. Archibald 2018 SKCA 86 at para. 28; Rule 3.4-5 of the Rules of Professional Conduct, Law Society of Ontario.

[97] In support of her finding of fact that Gowlings acted as counsel to the joint venture and that there was an implied joint retainer with Trinity and Capital Sports, the motion judge considered the following:

• Trinity and Capital Sports signed the LOI on July 23, 2015 which set out their intention to work collaboratively toward the common goal of the LeBreton Project;
• The Letter of Intent making Capital Sports and Trinity responsible for 50 per cent of the third-party costs for the responses to the RFQ and the RFP, including Gowlings' fees;
• The response to the RFP described RLG as a joint venture between Capital Sports and Trinity;
• Gowlings' logo was on the bid, and it identified itself as a participant in the RLG bid;
• Gowlings represented that it acted for RLG at meetings, in correspondence and in submissions to third parties;
• Gowlings met and corresponded with Trinity on matters concerning RLG;
• Gowlings sought and acted on Trinity's instructions;
• Gowlings created legal documents and provided legal advice to Trinity;

[98] Thus, the motion judge found that Capital Sports and Trinity formed a joint venture, known as RLG, on July 23, 2015, and that Gowlings was thus retained jointly by the members of RLG. That finding sets the stage for the analysis of the issue on appeal.

IV. Analysis

a. Did the motion judge err in finding that there was an ongoing joint retainer among Capital Sports, Trinity, and Gowlings after May of 2016?

[99] Capital Sports relies on In Re Teleglobe Communications Corp., 493 F.3d 345 at p. 362 (2007, US COA 3d Cr.) that once the relationship between joint clients ends, and their legal interests have diverged too much to justify using a common lawyer, then the joint retainer, and the sharing of privileged communication, ends. See also TSB Bank Plc v. Robert Irving & Burns, [2000] P.N.L.R. 384 at p. 391-393 (U.K. Court of Appeal (Civil Division)). Here, Capital Sports submitted that once the parties became adverse in May of 2016, the joint retainer ended, and the cloak of privilege covers all work done by Gowlings from that point forward.

[100] I disagree. The outcome turns on the facts of each case. Here, the motion judge considered and resolved the factual question of whether Gowlings continued to be counsel to RLG after the response to the RFP was delivered in December of 2015. She concluded that the documentary evidence established that Gowlings acted for RLG after May of 2016. This included the work on the critical path worksheet in June of 2016, ten meetings by Gowlings on behalf of RLG between June and September of 2016 and Gowlings correspondence to the City of Ottawa on September 8, 2016 on behalf of RLG, in which Gowlings introduced itself as counsel on behalf of RLG.

[101] The motion judge found that after the unsuccessful mediation"both parties continued to work to advance their common goal and, consistent with this, Gowlings continued to work on items relating to RLG's negotiations with the NCC." Based on the records before her, this was a factual determination that was open to the motion judge. Gowlings took steps that objectively could be seen as moving toward the common goal, that is furthering the joint venture. Unusually perhaps, these efforts by Gowlings for RLG continued after the dispute between the parties arose, including prior to and after the mediation where Gowlings acted for Capital Sports. However, the record supported that regardless of the friction between the parties, the joint venture did not end, and Gowlings continued to take steps as counsel for the joint venture. I would not disturb the findings of the motion judge that the implied joint retainer for RLG continued because it is a reasonable one on the record before the motion judge.

[102] In accordance with finding that the implied joint retainer continued after the period of adversity in May of 2016, the motion judge ordered that Capital Sports produce records as follows:

(i) Capital Sports shall produce all correspondence, memos, accounts, emails, data, and other documents in its possession, control or power relating to the work of Gowlings for RLG and the LeBreton Project from July 23, 2015 to November 23, 2018; and

(ii) if not already produced, where a document listed in Schedule "A" to Trinity's notice of motion has been redacted on the basis of solicitor-client privilege and the redaction relates to Gowlings' work for RLG and the LeBreton Project for the period July 23, 2015 to November 23, 2018, Capital Sports shall produce the document in unredacted form.

[103] After releasing this decision, the parties asked for clarification and the motion judge issued the addendum. This moves the analysis into the scope of the production order.

Did the motion judge err in the scope of production ordered?

[104] At the hearing of the motion, Capital Sports submitted that there was a second exclusive retainer with Gowlings which ran in parallel to the joint retainer.

[105] In her reasons at paragraph 83, the motion judge summarized her understanding of the parties' positions and wrote:

Contrary to Capital Sports's submission, Trinity does not seek production of all communications between Capital Sports and Gowlings; rather, it seeks production of communications that are in relation to the subject matter of the joint retainer, that is, RLG.

[106] In a footnote to para. 83, the motion judge wrote"It is therefore not necessary for me to address Capital Sports' argument that a joint retainer may be found to exist in parallel to an exclusive retainer."

[107] This comment suggests that the motion judge understood Trinity to be conceding that some of the communications between Capital Sports and Gowlings were to remain privileged as part of an exclusive retainer.

[108] However, the parties could not agree on the scope of production and the terms of the order. Capital Sports asserted that the records relating to their dispute with Trinity, starting in May of 2016, were excluded. Capital Sports distinguished those communications from those on behalf of RLG for the LeBreton Project.

[109] Trinity argued that the motion judge's reasons and the application of the "no secrets" rule among joint venture parties meant that Gowlings and Capital Sports would have to produce all records having anything to do with RLG or the LeBreton Project during the relevant time.

[110] The motion judge released an addendum in response. It is clear from the final sentences in the addendum that the motion judge proceeded on the basis that there was a single retainer, ongoing joint retainer and made no "carve-out" for a parallel or concurrent retainer. The final portion of the addendum states:

…there is no exception or "carve-out" for communications between Capital Sports and Gowlings in relation to the subject matter of the joint retainer in which Capital Sports's interests were adverse to Trinity. Further, if Capital Sports sought advice from Gowlings about withdrawing from RLG or changing Capital Sports's participation in the LeBreton Project, these communications would be in relation to the subject matter of the joint venture and they would not be privileged as between Capital Sports and Trinity. If such communications exist, they must be produced as they would fall within the scope of my order.

[111] The motion judge ought to have considered and decided the parallel retainer argument, given the arguments made by Capital Sports and the evidence of adversity between the parties between May and July of 2016. The issue of whether there could have been a parallel retainer at the time the parties became adverse was a live question. The issue came into sharper focus because of the request for clarification. The issue needed to be addressed because there was evidence before the motion judge that was capable of supporting a finding a joint retainer and a second, exclusive retainer as of May of 2016.

The Parallel Retainer Argument

[112] Capital Sports submits that had the motion judge considered its argument that it was possible for Gowlings to have a "parallel retainer" separate from implied joint retainer, Capital Sports would have a valid claim of privilege over the documents created within the ambit of the exclusive retainer.

[113] Trinity submits that Canadian law does not recognize "parallel" retainers because this would offend the duties owed to clients by their jointly retained lawyers, as provided in the Law Society of Ontario, Rules of Professional Conduct, Ch. 3. 4-5 "Joint Retainers."

[114] I disagree. While not using the language of "parallel" retainers, in Canadian National Railway Co. v. McKercher LLP 2013 SCC 39, the Supreme Court of Canada considered the tensions and practical realities relative to concurrent retainers. The Supreme Court confirmed the bright line rule that a lawyer, and by extension a law firm, may not concurrently represent clients adverse in interest without first obtaining their consent. To do so is to risk an application to the courts for removal, or to be subject to regulatory action by the Law Society.

[115] However, the Supreme Court in McKercher recognized that there are some circumstances in which the bright line rule against concurrent representation may not apply. For example, conflicting interests may be more commercial than legal. Institutional or large clients might employ strategic assertions of conflict to disqualify a firm for litigation advantage. Those considerations would be relevant to motions to disqualify a firm or to prevent counsel from acting. They might also inform discipline proceedings before a legal regulator. Nevertheless, McKercher recognizes concurrent retainers and discusses instances where such retainers may be tolerated as part of modern legal practice.

[116] There was ample evidence before them motion judge on the question of whether Capital Sports retained Gowlings exclusively, and separate from the ongoing RLG joint retainer, for litigation services as of May of 2016. This evidence is reviewed in detail by the majority. In summary this evidence included:

• The correspondence from litigation counsel at Gowlings on May 4, 2016 in which Capital Sports threatened to sue Trinity for breach of the NDA;
• The responding correspondence from counsel for Trinity, Fogler Rubinoff of May 6, 2016, in which Foglers asserted that Gowlings was in a conflict;
• The correspondence from litigation counsel at Gowlings on June 22, 2016 in which Gowlings counsel proposed arbitration to resolve the differences of the two joint venture parties over their roles and responsibilities;
• The June 23, 2016 correspondence from Foglers to Gowlings repeating the assertion that Gowlings was in a conflict of interest, along with a counter-proposal to mediate;
• The June 29 agreement to mediate, the confirmation of the ongoing disagreement;
• The roles of counsel on the mediation;
• The evidence of John Ruddy that despite his disagreement over Gowlings acting for Capital Sports he did not object to them being on the Capital Sports side of the table for the mediation and participated despite his disagreement on the conflict of interest point.

[117] The John Ruddy evidence was capable of amounting to acquiescence or waiver by Trinity for Gowlings to act solely for Capital Sports at the time of the dispute between the parties in May of 2016 and leading up to and including the mediation. He testified as follows:

[w]hile I disagreed with a Gowlings lawyer attending the mediation and

purporting to act for Capital Sports, (especially given that at the exact same time, Gowlings was continuing to work on items relating to RLG's negotiations with the NCC, as explained below) in the interest of a productive discussion, and in the hope that the RLG joint venture and the LeBreton opportunity could be preserved, we proceeded with the mediation.

[118] The fact that Trinity pointed out the conflict in strong terms and complained about it does not mean that a concurrent exclusive retainer was not created. Trinity could have moved to disqualify Gowlings but did not. It could have withdrawn from the joint venture. Mr. Ruddy's participation in the mediation "under protest" does not mean that factually, Capital Sports and Gowlings were not in a solicitor-client relationship with each other that excluded Trinity. While the parties may have been arguing, at this stage neither party moved to terminate the joint venture, nor refused to instruct Gowlings to take steps on their joint behalf relative to the City of Ottawa or the NCC.

[119] In sum, there was ample evidence before the motion judge to support a finding of a concurrent retainer between Gowlings and Capital Sports, during the life of the implied joint retainer to the joint venture. The motion judge was bound to consider that, particularly when the parties sought clarification of the scope of the production order, and after Capital Sports explicitly requested a "carve-out" for the period of adversity when Gowlings was solely acting for Capital Sports as against Trinity.

Disposition and Costs

[120] I would allow the appeal in part. We heard the appeal on an urgent basis because the trial is set to begin in January of 2023. Given the timing, and the extensive evidence on the point, rather than send the matter back to the motion judge to consider the concurrent retainer, I would instead find that there was a concurrent retainer between Gowlings, and Capital Sports beginning in May of 2016 and vary the Production Order as follows:

i) Capital Sports shall produce all correspondence, memos, accounts, emails, data, and other documents in its possession, control or power relating to the work of Gowlings for RLG and the LeBreton Project from July 23, 2015 to November 23, 2018 except for:

i. communications after May 4, 2016, and before November 23, 2018 between Capital Sports and Gowlings in relation to matters in which Capital Sports was adverse to Trinity, including consultations between Capital Sports and Gowlings about Trinity withdrawing from RLG, or changing Capital Sports' participation in the LeBreton Project.

[121] The parties have agreed that costs of $80,000 should be ordered in favour of the successful party. There has been mixed success on this appeal, thus I would make no order as to costs.

Justice J. Leiper

Released: December 15, 2022

[^1]: 2022 ONSC 2657

[^2]: 2022 ONSC 3509

[^3]: 2022 ONSC 4901