CITATION: Consulate Ventures Inc. v. Amico Contracting & Engineering (1992) Inc., 2010 ONCA 788
DATE: 20101122
DOCKET: M39338-C52265
COURT OF APPEAL FOR ONTARIO
Doherty J.A.
BETWEEN
Consulate Ventures Inc.
Respondent (Plaintiff)
and
Amico Contracting & Engineering (1992) Inc., Windsor Factory Outlet Mall Ltd. and Dominic Amicone
Appellants (Defendants)
Patrick Cotter, for the respondent (moving party)
Harry Underwood, for Lenczner Slaght Royce Smith Griffin LLP (lawyers for appellants/responding parties)
Heard: October 29, 2010
Doherty J.A.:
I
OVERVIEW
[1] Consulate Ventures Inc., the respondent on appeal, brings a motion for an order removing Mr. Alan Lenczner as counsel for the appellants on this appeal. The respondent contends that Mr. Lenczner, who was retained by the respondent briefly in respect of the same matter some 11 years ago, cannot act for the appellants on this appeal. Counsel for Mr. Lenczner submits that, in the circumstances, Mr. Lenczner can act on the appeal for the appellants without compromising either his duty of confidentiality to the respondent or his obligations to his present clients, the appellants.
II
THE RELEVANT FACTS
[2] The respondent was involved in the development of an outlet mall in Windsor, Ontario between 1997 and 1999. Shortly before the mall went into operation, the respondent’s services were terminated by the developers. Mr. Sorokolit, the president of the respondent, sought legal advice from Mr. Lenczner. He arranged to meet with Mr. Lenczner and forwarded to him material relevant to the matter, including a chronology and summary prepared by Mr. Sorokolit. Mr. Lenczner and an associate met with Mr. Sorokolit in Mr. Lenczner’s offices in August 1999 for about two hours. The firm billed the respondent for its services.
[3] Mr. Sorokolit recalls meeting with Mr. Lenczner at his offices in August 1999. Mr. Lenczner had reviewed the material and expressed his views about the strength of the respondent’s case. There was also advice about a letter that should be written to the other parties to the dispute and some discussion about obtaining a certificate of pending litigation. Mr. Sorokolit acknowledges that many of the documents provided to Mr. Lenczner are now part of the trial record and are no longer confidential. He further indicates, however, that the chronology and commentary prepared by him and given to Mr. Lenczner are still confidential documents.
[4] Not surprisingly, Mr. Lenczner has no present recollection of the meeting in August 1999. He had no further connection to the dispute and the ensuing litigation until September of this year when he was approached by the appellants to act on the appeal.
[5] Subsequent to the meeting with Mr. Lenczner, the respondent retained other counsel, including Mr. Cotter. The dispute ultimately proceeded to trial in November and December 2003. In November 2004, the trial judge dismissed the respondent’s claims.
[6] The respondent appealed the dismissal. This court allowed the appeal in part and directed a new trial on the respondent’s quantum meruit claim.
[7] The new trial proceeded in March and April of 2010. The respondent was successful on the new trial. The appellants have appealed from the judgment on the new trial by Notice of Appeal dated June 11, 2010.
[8] Mr. Lenczner, after being retained by the appellants in September 2010, wrote to Mr. Cotter requesting a short extension of time to perfect the appeal. The respondent objected to Mr. Lenczner’s involvement based on his prior involvement in the matter in 1999 and this motion ensued.
III
THE DISPUTE
[9] It is important to begin with what is not in dispute. No one questions Mr. Lenczner’s integrity, honesty or professionalism. All are of the highest order. It is also accepted that Mr. Lenczner has no recollection of anything that was discussed with Mr. Sorokolit in August 1999. Indeed, until Mr. Cotter brought the matter to Mr. Lenczner’s attention, he had no recollection of ever meeting Mr. Sorokolit or acting for the respondent.
[10] The issue on this motion comes down to this – Mr. Lenczner genuinely believes that he can act for the appellants on the appeal without in any way compromising any ongoing duty of confidentiality he owes to the respondent and without compromising his duty of undivided loyalty owed to his present clients, the appellants. Mr. Underwood, counsel for Mr. Lenczner, submits that absent any realistic possibility that a conflict could emerge in the course of the appeal, no positive purpose is served by removing Mr. Lenczner from the record and denying the appellants their counsel of choice on the appeal.
[11] Mr. Cotter, for the respondent, does not question Mr. Lenczner’s bona fides. He submits, however, that where a lawyer purports to act against a former client in the very same matter, there is an irrebuttable presumption of a sufficient risk of the misuse of confidential information to require that the lawyer be disqualified. Mr. Cotter further submits that entirely apart from confidentiality concerns, a lawyer owes a duty of loyalty to a former client which forecloses acting against that former client in the same matter.
IV
ANALYSIS
[12] Counsel disagree on the proper characterization of the circumstance in which Mr. Lenczner proposes to act for the appellants on appeal. For Mr. Cotter, the advice given by Mr. Lenczner in 1999 to the respondent and his proposed representation of the appellants on the appeal in 2010-2011 involve exactly the same matter – the dispute between the respondent and the appellants arising out of the development of the mall. Mr. Cotter submits that the question is a straightforward one, can Mr. Lenczner act in the same matter at different times for the opposing parties?
[13] Mr. Underwood submits that for the purposes of this motion, the “matter” cannot be characterized generically as the dispute arising out of the outlet mall development. Mr. Underwood characterizes the “matter” presently between the respondent and the appellants by reference to the issues that the appellants propose to raise on appeal. Mr. Lenczner will advance relatively narrow grounds of appeal relating to the treatment of the respondent’s expert’s evidence of valuation and the trial judge’s refusal to admit evidence of valuation from the appellants’ expert. Mr. Underwood contends that the merits of the motion must be determined having regard to the very different contexts in which Mr. Lenczner’s legal advice was sought by the respondent in 1999, in respect of pre-litigation matters and now some 11 years later, in respect of the specific issues to be argued on appeal.
[14] There are practical problems with the approach articulated by Mr. Underwood. The scope of any appeal is not defined exclusively by the appellant much less by the appellant’s grounds of appeal. The respondent and the court have something to say about the scope of an appeal. An approach to claims of conflict which presumes that the ambit of an appeal can be accurately and exhaustively predetermined is not suited to the prophylactic purpose of the conflict rule. Motions like this one are intended to avoid potential conflicts before they actually arise in the course of the proceeding. That purpose is not served if one assumes that the proceedings will be limited to a specific narrow issue when there is a real possibility that the issues will expand beyond that narrow range: see R. v. Widdifield (1995), 1995 CanLII 3505 (ON CA), 25 O.R. (3d) 161 (C.A.), at pp. 175-76.
[15] Apart from the practical difficulties with defining the “matter” on which a lawyer has been retained strictly by reference to the grounds of appeal, that approach is unduly orientated towards the lawyer rather than the former client. I prefer a functional approach which asks the question, from a reasonable client’s perspective, what was the matter on which that client retained the lawyer and what is the matter on which that same lawyer now proposes to act against his former client?
[16] Viewed from the perspective of the reasonable former client, I think Mr. Lenczner was retained in 1999 to advise the respondent as to its rights and remedies in respect of the dispute between the respondent and one or more of the appellants relating to the development of the mall in Windsor. Viewed from the same perspective, Mr. Lenczner is now retained by the appellants to challenge on appeal the trial judge’s determination of the respondent’s legal rights and remedies in respect of the dispute over the development of the mall that initially arose in 1999. Both Mr. Lenczner’s advice to the respondent in 1999 and his services for the appellants in 2010 relate to the same subject matter, albeit viewed from the perspective of two very different stages of the legal process.
[17] Having concluded that the two retainers relate to the same subject matter, I turn now to Mr. Cotter’s arguments in support of his claim that Mr. Lenczner cannot act. There are two submissions.
[18] First, Mr. Cotter submits that Mr. Lenczner received confidential information from the respondent in 1999. The evidence to that effect is unchallenged. Mr. Cotter goes on to contend that as the appeal relates to the same subject matter, there is an irrebuttable presumption that if Mr. Lenczner acts for the appellant, there is a risk that the confidential information will be used against the interests of the respondent. Mr. Cotter further submits that if he overstates the effect of the presumption when he describes it as irrebuttable, the presumption can only be rebutted by cogent evidence negating the risk of the misuse of the confidential information. A solicitor’s honest assertion that he has no recollection of the content of the confidential information will not suffice. Memories can come and go, especially when refreshed by reference to events that one believes to have been long forgotten.
[19] Counsel relies heavily on the analysis in MacDonald Estate v. Martin, 1990 CanLII 32 (SCC), [1990] 3 S.C.R. 1235. MacDonald Estate goes at least as far as to place the onus on the solicitor who is acting against a former client to demonstrate that there is no risk of the misuse of confidential information. I am not sure that MacDonald Estate goes so far as to declare an irrebuttable presumption that there is a risk of the misuse of confidential information whenever a lawyer purports to act against a former client in the same matter.
[20] I hesitate to support a rule drawn so broadly as to always require disqualification based on the assumption that there is always a risk of the disclosure of confidential information. In some cases where a lawyer purports to act against a former client in the same matter, there is virtually no risk of any disclosure of confidential information. Indeed, this may be one of those cases. I see little value in anchoring a rule disqualifying the lawyer on what in some cases would be a pure legal fiction.
[21] The resolution of this motion does not, however, require me to decide whether the presumption relied on by the respondent is irrebuttable and, if not, whether Mr. Lenczner has successfully rebutted it. I am satisfied that the respondent succeeds on the second argument made by Mr. Cotter.
[22] Counsel submits that lawyers owe a duty of loyalty to their former clients. That duty is not premised on or confined to confidentiality obligations, but flows from a broader concept of fidelity that is essential to the proper functioning of the client/solicitor relationship. Clients must be able to speak frankly and without fear of exposure to their lawyers about their legal problems. To do so, clients must be confident that their lawyers will not become their adversaries’ lawyers at some subsequent point in the course of the same dispute. The prospect of one’s lawyer switching sides must undermine the confidence essential to the operation of the client/solicitor relationship. There is also concern that if lawyers act against former clients in the same manner, the public confidence in the integrity of the legal profession will suffer. That confidence is crucial to the effective and just administration of justice.
[23] The Rules of Professional Conduct of the Law Society of Upper Canada (“Rules”) offer cogent support for the duty of loyalty relied on by the respondent. Rule 2.04(4)(a) provides:
(4) A lawyer who has acted for a client in a matter shall not thereafter act against the client or against persons who were involved in or associated with the client in that matter
(a) in the same matter[.]
[24] No doubt, the Rules are not binding on the courts: MacDonald Estate at p. 1245. The Rules are, however, a clear expression of the profession’s concept of the duties owed to former clients. That expression must be given considerable weight by the courts.
[25] This court long ago recognized a broad obligation not to act against former clients in the same dispute. In Re R. and Speid (1983), 1983 CanLII 1704 (ON CA), 43 O.R. (2d) 596, a very strong panel of this court dealt with a Crown motion to disqualify the accused’s lawyer. That lawyer’s partner had acted for the accused’s wife in the same investigation. She was now a principal Crown witness.
[26] Dubin J.A., speaking for himself, Martin J.A. and Robins J.A. (both former Treasurers of the Law Society), said this at p. 600:
A client has a right to professional services. Ms. Nugent [the witness] had that right as well as Mr. Speid [the accused]. It was fundamental to her rights that her solicitor respect her confidences and exhibit loyalty to her. A client has every right to be confident that the solicitor retained will not subsequently take an adversarial position against the client with respect to the same subject matter that he was retained on. That fiduciary duty, as I have noted, is not terminated when the services rendered have been completed. [Emphasis added.]
[27] Speid and similar cases have been aptly described by P. Perell (now Perell J.) in Conflicts of Interest in the Legal Profession (Toronto: Butterworths, 1995) at pp. 38-42 as the “turncoat cases”. In these cases, disqualification is not based on confidentiality concerns but rather “the need to foster and maintain public confidence in the integrity of the legal profession and in the administration of justice.”
[28] Mr. Underwood, in his effective submissions, tries to distinguish Speid by pointing out that there was a very real and obvious conflict between the witness and her former lawyer. Her former lawyer was testifying at the accused’s trial and revealing statements made to him by the witness for the purpose of discrediting her.
[29] It is true that Speid involved an actual breach of confidentiality and a blatant conflict of interest. I do not think, however, those aggravating factors detract from the general application of the principle set out in the passage quoted above. Dubin J.A. clearly does not tie the duty of loyalty exclusively to the duty of confidentiality.
[30] The law governing the disqualification of lawyers who purport to act against former clients was considered in some detail in Brookville Carriers Flat Bed GP Inc. v. Blackjack Transport Ltd. (2008), 2008 NSCA 22, 263 N.S.R. (2d) 272 (C.A.). In that case, a lawyer purported to act against a former client in a different but related lawsuit. There was no risk that the lawyer could compromise his former client’s confidences by acting against him in the second lawsuit. Cromwell J.A., for the court, held that the lawyer was properly disqualified.
[31] Cromwell J.A. reviewed the case law, including Speid and the authoritative texts at length. He concluded that lawyers had a duty of loyalty to former clients that was rooted both in confidentiality concerns and the need to foster and maintain public confidence in the client/solicitor relationship and the due administration of justice. He said at para. 51:
This broader continuing duty of loyalty to former clients is based on the need to protect and promote public confidence in the legal profession and the administration of justice. What is of concern is the spectre of a lawyer attacking or undermining in a subsequent retainer the legal work which the lawyer did for the former client or of a lawyer effectively changing sides by taking an adversarial position against a former client with respect to a matter that was central to the previous retainer. [Emphasis added.]
[32] Cromwell J.A. went on to consider whether the two lawsuits in issue in Brockville Carriers were sufficiently “related” to justify disqualifying counsel. As I have already explained, I do not regard the two retainers in issue here as merely “related”. Mr. Lenczner’s retainers involve the same matter.
[33] Mr. Underwood submits that there is no duty of loyalty owed to former clients. He relies on Bolkiah v. KPMG, [1999] 2 A.C. 222 (H.L.). He submits that the Law Lords held that the only duty owed by a lawyer to a former client is the duty to preserve the confidentiality of information imparted to the lawyer by the former client.
[34] The passage relied on from Bolkiah is directed at a comparison between the obligations to a present client and those owing to a former client. The case was about confidential information. In my view, it cannot be taken as holding that a lawyer’s professional obligations to a former client extend only to maintaining confidences. Nor, in my view, does the case address the power of the courts to restrain a lawyer from acting in a manner which undermines public confidence in the due administration of justice. Those issues did not arise in Bolkiah. In any event, if Mr. Underwood’s interpretation of Bolkiah is correct, it is inconsistent with both Speid and Brookville Carriers. I agree with the analysis in those cases.
V
CONCLUSION
[35] In his concurring judgment in MacDonald Estate, Cory J., at p. 1265, recognized that applications to disqualify lawyers require the court to balance the maintenance and integrity of the justice system, the rights of the litigants to counsel of choice, and the desirability of preserving mobility within the legal profession. He went on to say, at p. 1265: “Of these factors the most important and compelling is the preservation of the integrity of our system of justice.”
[36] I agree with the priority given to the preservation of the integrity of the process. In my view, that goal finds expression in the Rules of Professional Conduct cited above and in the controlling jurisprudence. A lawyer’s obligation, whether described as a duty of loyalty owed to a former client, or as a professional obligation to promote public confidence in the legal profession and the administration of justice dictates that Mr. Lenczner cannot act on this appeal against the respondent, his former client.
[37] The motion is granted and an order shall go removing Alan Lenczner and the firm of Lenczner Slaght Royce Smith Griffin LLP as counsel of record for the appellants.
[38] I think this motion was necessary to resolve the issue. Given the nature of the issue, each party should bear its own costs.
RELEASED: “DD” “NOV 22 2010”
“Doherty J.A.”