ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Helen Berman, By her Litigation Guardian and Attorney for Property, Evie Garnet, 754273 Ontario Limited, 754274 Ontario Limited and Milliken Mills Investment Inc.
Plaintiffs
– and –
Samuel Schwartz, Samuel Schwartz in his capacity as former Estate Trustee of the Estate of Joseph Berman, Davis LLP, Goodman and Carr LLP, and the Estate of Joseph Berman, by its Estate Trustee, Reuben Rosenblatt
Defendants
R.S. Harrison, for the Plaintiffs
Joseph Groia and David Sischy, for the Defendants, Samuel Schwartz, Samuel Schwartz in his capacity as former Estate Trustee of the Estate of Joseph Berman, Davis LLP, and Goodman and Carr LLP
HEARD: November 19, 2012
E.M. Morgan, J.
1The moving parties, being the Defendant Samuel Schwartz in his several capacities together with his law firms, Davis LLP and Goodman and Carr LLP (collectively “Schwartz et al.”), seek an Order removing Evie Garnet as litigation guardian of Ms. Garnet’s mother, the Plaintiff Helen Berman. Schwartz et al. contend that Ms. Garnet is in an irreparable conflict of interest and cannot serve as litigation guardian.
2Schwartz et al. also seek an Order removing the law firm Solmon Rothbart Goodman (“SRG”) as solicitors of record for the Plaintiffs. They submit that SRG is in an equally irreparable conflict of interest and cannot serve as counsel to the Plaintiffs.
I. The Factual Background
3Mr. Schwartz was longtime solicitor for the late Joseph Berman and his wife, Helen Berman, and was formerly the Estate Trustee for Joseph Berman. He is currently the managing partner of the Defendant, Davis LLP. For many years prior to that, he was a partner of the Defendant, Goodman and Carr LLP.
4Mr. Harrison of Fasken Martineau argued the motion on behalf of Ms. Garnet/Ms. Berman as responding parties. He was, in turn, instructed by the SRG firm. This was appropriate given that SRG are counsel of record for the Plaintiffs but SRG’s own role is at issue in the motion. Specifically, SRG represents Ms. Garnet in her capacity as litigation guardian for Ms. Berman, and it also represents Ms. Garnet in her personal capacity as Third Party. SRG has also previously represented Ms. Garnet’s other siblings in dealing with the estate of their father and their mother’s assets.
5Ms. Garnet is one of several children of Joseph and Helen Berman. She has commenced the present action in her capacity as Ms. Berman’s litigation guardian and attorney for property. Ms. Garnet is also defending a Third Party Claim brought against her personally by Mr. Schwartz.
6The within action makes various claims against Schwartz et al., all based on a serious diminution in value of Ms. Berman’s assets since the death of Mr. Berman. Ms. Garnet, as litigation guardian for Ms. Berman, claims that this diminution occurred due to the acts of Mr. Schwartz as Ms. Berman’s solicitor and advisor and as Estate Trustee for Mr. Berman. As originally issued in May 2010, the claim specifically challenged, inter alia, the propriety of substantial gifts that Ms. Berman made to her family members. According to the evidence of Mr. Schwartz, these distributions amounted to nearly $6 million of an estate worth approximately $7.6 million.
7Of the distributions directed by Ms. Berman, it would appear from Mr. Schwartz’ evidence that nearly $5.3 million went directly to her children and grandchildren, including Ms. Garnet, her spouse, children, and grandchildren. Ms. Garnet, in the original Statement of Claim issued on Ms. Berman’s behalf, alleges that the amount of family distributions is even higher – somewhere in the range of $7 million.
8It would appear that, taking into account a forgivable loan worth $800,000.00 made by Ms. Berman to Ms. Garnet’s husband, Stan Garnet, Ms. Garnett and her immediate family were possibly the largest recipients of her mother’s distributions. In view of that background, Schwartz et al. issued a Third Party Claim against Ms. Garnet. The Third Party Claim seeks a declaration that Ms. Garnet is liable to repay Ms. Berman the distributions she and her immediate family received, and an accounting and/or equitable tracing of those monies. It also alleges that Ms. Berman was under the undue influence of Ms. Garnet in depleting her net worth in the way that she did.
9In his factum, Mr. Groia, on behalf of Schwartz et al., contends that, having already benefitted from her mother’s largesse, Ms. Garnet has brought the present action in her capacity as litigation guardian “in order to try to restore the value of the Estate for the benefit of herself, her husband, her children, and her siblings…” In turn, Ms. Garnet, in her Third Party Defence, describes the Third Party Claim against her as having been brought “solely as a tactic in litigation…”
10Perhaps sensing the contradictory position in which the challenge to Ms. Berman’s family gifts put her, Ms. Garnet has now amended the claim. The Fresh as Amended Statement of Claim deletes those portions of the old Statement of Claim which referred specifically to the distributions to family members. It therefore no longer reads on its face as if the Plaintiffs are claiming that money in their right pocket has vanished from their left.
11Despite these amendments, the claim continues to make in paragraph 1(a) serious allegations against Schwartz et al. In addition to challenging the legal fees charged and disbursements incurred by Mr. Schwartz and his two law firms in advising Ms. Berman and the Estate of Mr. Berman, it continues to allege breach of fiduciary duty, breach of trust, and negligence. In all, the Fresh as Amended Statement of Claim seeks damages in the amount of $5 million as a result of those breaches.
12If one looks at the particulars alleged against Mr. Schwartz in the new pleading, however, one can see that they do not seem to total anywhere near the amount claimed. Indeed the new list of allegedly wrongful distributions made or advised by Mr. Schwartz (other than the legal fees and disbursements challenged in the claim) comes to a total of under $90,000. The distributions now listed in the Fresh as Amended Statement of Claim range from a gift made by Ms. Berman to Mr. Schwartz himself in the amount of $40,000, to a donation made by Ms. Berman to the University of Toronto in the amount of $1,000.
13In other words, although specific reference to the gifts to Ms. Garnet and the other family members have been deleted from the new pleading, the action still needs to impugn those distributions if it is to add up to anything more than a largely non-particularized claim. Otherwise, the dispute would be limited to a challenge to the legal fees and disbursements charged by Schwartz et al., and could be done as an assessment procedure and/or a passing of accounts. Serious assertions of substantive wrongdoing in representing a client such as those contained in paragraph 1(a) would not likely be contained in a claim based on fees and disbursements alone. In any case, a claim for a refund of fees and disbursements does not explain the large damages award sought in the Plaintiffs’ new pleading.
14For this reason, the Third Party Claim remains a real part of this litigation even in the face of the Fresh as Amended Statement of Claim. It seems likely that although the distributions to Ms. Garnet and family have disappeared from the pages of the pleadings, they will be live issues in the action. After all, much of what Mr. Schwartz actually did in advising Ms. Berman and in administering Mr. Berman’s estate is to look after these family distributions.
II. The Litigation Guardian Conflict
15Ms. Garnet will therefore be litigating in two capacities – i.e. claiming on her mother’s behalf and defending on her own behalf. While that might not in itself represent a conflict of interest, there is a chance that she has put herself at odds with her siblings, their children and families, and everyone else who received distributions from Ms. Berman while she was advised by Mr. Schwartz. And since those distributions were, according to the evidence in the record, made on the specific instructions of Ms. Berman, she appears to have put herself in direct conflict with Ms. Berman as well.
16It seems clear that Ms. Garnet’s position as a personal defendant in the Third Party Claim is problematic in terms of her neutrality as Ms. Berman’s litigation guardian. As the person steering the action for the Plaintiff, she could potentially steer it away from her personal liability as Third Party. This type of conflict on the face of the pleadings has been identified as grounds for removal of the litigation guardian. See Fischer v. Balofsky (2005), CarswellOnt 3161, at para. 9. The requirement under Rule 7.06 that a litigation guardian act in the best interest of the person under disability requires personal “indifference” as to the outcome of the claim. Stark (Litigation Guardian) v. Ontario, [2010] ONSC 1726, at para. 53 (SCJ).
17As the Supreme Court of Canada has put it, “[a] litigation guardian who does not have a personal interest in the outcome of the litigation will be able to keep the best interests of the dependent adult front and centre, while making decisions on his or her behalf.” Gronnerud (Litigation Guardian) v. Gronnerud Estate, 2002 SCC 38, [2002] 2 SCR 417, at para. 20 [emphasis added]. Ms. Garnet does not fit this description, as she is not personally indifferent to the claim against Schwartz et al. She will face any number of strategic questions in pursuing the main action that will directly impact on her defense of the Third Party Claim. Indeed, in amending the Statement of Claim to remove all particular references to the family distributions, she has already made just such a conflicted strategic decision.
18Reviewing the correspondence in the record, it is difficult to see how Ms. Garnet could have been an acceptable litigation guardian in the first place. Ms. Berman had for several years instructed Mr. Schwartz that her children were not to have information about her financial affairs, or to know how much she had gifted and otherwise distributed to each other. Once Ms. Garnet became the holder of a power of attorney over Ms. Berman’s assets and her litigation guardian, she inevitably obtained information in that capacity that she was personally not supposed to have. She therefore cannot truly represent Ms. Berman’s interests in the way that Ms. Berman herself appears to have desired.
III. The Solicitors’ Conflict
19What is true for Ms. Garnet is equally true for her legal counsel, SRG.
20It is self-evident that “the solicitor cannot give his exclusive, undivided attention to the interests of his client if he is torn between his client’s interests and…those of another client to whom he owes the self-same duty of loyalty, dedication and good faith.” Davey v. Woolley, Hames, Dale& Dingwall (1982), 1982 CanLII 1787 (ON CA), 35 OR (2d) 599, at para. 8. Moreover, the courts have articulated “a strong policy in favour of ensuring not only that there be no actual conflict but that there be no appearance of conflict.” Martin v. MacDonald Estate (Gray), 3 SCR 1235, at para. 45.
21Ms. Garnet has been represented since the inception of this action, and before it began, by SRG. It was SRG that dealt with Mr. Schwartz on behalf of Ms. Garnet and her siblings seeking disclosure of the financial position of Mr. Berman’s estate and Ms. Berman’s personal finances from July 2008 onwards. It was likewise SRG that wrote to Mr. Groia on July 16, 2008 insisting that Mr. Schwartz cease advising Ms. Berman on financial and property decisions and that Ms. Garnet must make those decisions on Ms. Berman’s behalf under a power of attorney held by Ms. Garnet. It was also SRG that advised Mr. Schwartz on August 6, 2008 that his retainer by Ms. Berman had been terminated.
22If Ms. Garnet is conflicted in the two capacities in which she is involved in the present litigation, then ipso facto so is the law firm that represents her in both of those capacities. As the Supreme Court of Canada said in R. v. Neil, 2002 SCC 70, [2002] 3 SCR 631, at para. 3, “[t]he law firm, as fiduciary, could not serve two masters at the same time.” Further, to the extent that Ms. Garnet is in conflict with her siblings (who are not parties to the present litigation), the SRG firm is also in an impossible position vis-à-vis those siblings as its former clients. The Court of Appeal has pointed out that, “it is axiomatic that no client has a right to retain counsel if that counsel, by accepting the brief, puts himself in a position of having a conflict of interest between his new client and a former one.” Re Regina and Speid (1983), 1983 CanLII 1704 (ON CA), 8 CCC (3d) 18 (Ont CA).
23Of course, I would not want to frame the test for lawyers’ conflicts in an excessively strict fashion, as that would not accurately reflect the operation of the law in this area. It has already been noted elsewhere that recent Supreme Court of Canada jurisprudence may have “smudged the bright line” rule against conflicts more than it defined it. Phillips v. Goldson (2003), 2003 CanLII 64306 (ON SC), 68 OR (3d) 737, at para. 101 (SCJ).
24Likewise, Canadian scholars of legal ethics have indicated that the prohibition on serving conflicting interests should be seen more as a general policy than an inflexible rule. As one learned author has explained, “the prohibition may be waived by fully informed and properly advised clients, and…clients’ consent may be inferred in certain circumstances.” Gavin MacKenzie, “How Murky Can a Bright Line Be? Coping with Conflicts of Interest in the wake of R. v. Neil”, CBA Task Force on Conflicts of Interest, 2005, at p. 81.
25Nothing in the present case, however, triggers a need to bend the line drawn by the Supreme Court against serving two masters. Here, SRG’s two masters are Ms. Garnet in her dual capacities; there is no question of informed consent by one in waiving a conflict with the other. And insofar as there is a potential conflict with Ms. Garnet’s siblings as SRG’s former clients, there is no evidence one way or another as to what their view might be or whether they have received any independent advice on the issue.
26It is evident that a number of the strategic decisions that Ms. Garnet will have to make in her capacity as Ms. Berman’s litigation guardian will conflict with her personal interest. These will be decisions made in the litigation context, and will necessarily be made pursuant to advice from her lawyers.
27One example will suffice: Ought Ms. Berman, as Plaintiff, raise, as an instance of Mr. Schwartz’ allegedly negligent advice, his supposed failure to counsel against forgiving the large loan to Stan Garnet? Ms. Garnet cannot make that decision on Ms. Berman’s behalf with the necessary level of “indifference”. Likewise, her lawyers at SRG cannot advise her on Ms. Berman’s behalf with the necessary level of “undivided attention”.
28In my view, Ms. Garnet is conflicted in her role as litigation guardian for Ms. Berman, and SRG is conflicted in its role as counsel for Ms. Berman and her litigation guardian.
IV. The Moving Party
29The only remaining question is whether the entire issue is properly before the court. After all, it was brought to court in a motion by Schwartz et al. None of those parties have what would traditionally be considered to be a direct interest in the conflict issues. Ms. Garnet has a conflict with Ms. Berman’s interest, and SRG is caught between Ms. Garnet and Ms. Berman as its two clients. Mr. Harrison submits that Mr. Schwartz is unaffected by either of those conflicts and so has no standing to move on them.
30The problem of status of the moving party is not a pressing issue when it comes to appointing or removing a litigation guardian. Rule 7.06(2) of the Rules of Civil Procedure does not specifically identify any moving party for removal of a litigation guardian. It simply grants a discretionary power to remove the person from that office “[w]here it appears to the court that a litigation guardian is not acting in the best interests of the party under disability”. Indeed, it may be a relatively common occurrence that it is the court, and not one of the parties, that so intervenes.
31Rule 7.06(2) is drafted in a way which allows the court to safeguard the interests of a party under disability, even to the extent of doing so on its own motion. The Rule does not require a moving party to have any special standing or interest. The court would no doubt discourage, as it does in other contexts, any sign of officious intermeddling by an entirely disinterested party. See Buday v. Locator of Missing Heirs Inc. (1993), 1993 CanLII 961 (ON CA), 16 O.R. (3d) 257, esp. at 262 (C.A.). However, that is not the case here.
32The Rule itself does not require anything more than that the issue come to the court’s attention in a way that reflects the interest of justice in the case and concern for the position of the party under disability. There is no reason why removal of a litigation guardian cannot be requested by another party in the case, as long as there are valid grounds to do so such as those here.
33As for removal of a party’s counsel of record, that is a more delicate matter. In the criminal process, Canadians have a Charter right to counsel of their own choice. R. v. Willier, 2010 SCC 37, at para. 35. In civil proceedings, litigants’ common law right to choose their own lawyer is not to be lightly interfered with. Ribeiro v. Vancouver (City) (2002), 2002 BCCA 678, 8 BCLR (4th) 207 (BCCA). Judicial interference with that right “should be granted only to relieve the applicant of the risk of ‘real mischief’…” Manville Canada Inc. v Ladner Downs (1992), 1993 CanLII 955 (BC CA), 63 B.C.L.R. (2d) 102 (per , aff’d (1993), 76 B.C.L.R. (2d) 273 (BCCA).
34I am certainly of the view that a party cannot be permitted to argue conflict of interest where the intent is simply to hamper the case by making an opponent change lawyers. As courts in the United States have often put it, conflict issues cannot be used by a party “as both a shield requiring disqualification of [opposing counsel] and a sword to prove [or improve] her claims.” Twin Caliber (MA) LLC v. Furey, 20 LCR 139 (Mass, 2012). One must be wary of that possibility where a party to a dispute, who suffers no conflict himself, tries to disqualify an adversary’s legal counsel in the middle of litigation.
35Mr. Harrison argues that the present motion is just such a tactic. He submits that Mr. Schwartz knew back in 2008 all the circumstances that he alleges amount to a conflict of interest, and yet Schwartz et al. waited until now to bring this motion. This, he contends, demonstrates that the motion has been brought for tactical reasons, and not because there is a true conflict which impacts on any rights in the litigation.
36The problem with Mr. Harrison’s argument is that here there is a true conflict. Without having heard the merits of the claim, I can only surmise that it is equally plausible that Ms. Berman’s case will improve with a neutral litigation guardian and non-conflicted counsel. From a conflict of interest point of view, virtually any other law firm in Ontario could take over as counsel for the Plaintiffs. I see no tactical advantage accruing to Schwartz et al. in seeking to have Plaintiffs’ counsel replaced by lawyers who will have only the Plaintiffs’ interest in mind.
37Mr. Groia responds to the delay argument by stating that the motion was delayed in order to give SRG every opportunity to cure its own conflict voluntarily. That explanation is well documented in the history of correspondence contained in the record. I do not view the present motion as a mere litigation tactic nor as having been unduly delayed.
38Rather, I see this motion as reflecting a bona fide concern on Mr. Schwartz’ and Mr. Groia’s part for the proper administration of justice. Anyone looking at the present dispute can see that Schwartz et al. are the only parties that will ask the question that needs to be asked about whether the same law firm should be representing the Plaintiffs and the Third Party. The lawyers’ conflict is wrapped up with the litigation guardian’s conflict, and there is therefore no one else to properly speak to the question of Ms. Berman’s legal representation.
39Most importantly, I do not see this motion as posing any real concern about depriving Ms. Berman, as Plaintiff, of her choice of counsel. I am not even sure that one can refer to SRG as her “choice”.
40As indicated above, Mr. Schwartz was notified in early August 2008 that his retainer had been terminated by Ms. Berman. The record before me shows that this notification was delivered to Mr. Schwartz via fax from the SRG office to Mr. Groia on August 6, 2008. The faxed SRG letter enclosed a short note from Ms. Berman to Mr. Schwartz dated July 31, 2008 terminating his role as her lawyer. This note, in turn, enclosed a document entitled “Authorization and Direction” signed by Ms. Berman and addressed to Mr. Schwartz, instructing him to pass all of her files to SRG.
41On August 3, 2008, three days later after Ms. Berman’s letter was signed (and three days before it was delivered), a qualified psychiatrist, Dr. Michel Silberfeld, diagnosed Ms. Berman as suffering from dementia. Dr. Silberfeld wrote that upon examination Ms. Berman had “no understanding of the matters at hand, the litigation, and the potential consequences of any instructions to the lawyer.” It is on the basis of this diagnosis that Ms. Berman is represented in this action by a litigation guardian and cannot carry on instructing counsel herself. Ms. Garnet, as litigation guardian, cannot (and does not) contend that this medical diagnosis was anything but accurate.
42Given that the termination of Mr. Schwartz and the retaining of SRG occurred either three days before or three days after the diagnosis by Dr. Silberfeld (depending on whether one goes by the date of Ms. Berman’s note enclosing the Authorization and Direction or the date of the SRG letter enclosed both of those documents), the entire genesis of SRG’s representation of Ms. Berman is in question. If she lacked the mental capacity to instruct a lawyer, she no doubt also lacked the capacity to choose one.
43It is significant that the appointment of SRG as Ms. Berman’s law firm was not done by Ms. Garnet on her behalf. Rather, the record shows that it was done by Ms. Berman herself – signed in her own handwriting. The problem, as indicated, is that it was done at a time when a qualified psychiatrist has opined that she could not understand what she was signing.
44Accordingly, the usual exercise in balancing the conflict of interest rule with a person’s right to choose their own counsel is really no exercise at all under present circumstances. I find that SRG cannot remain as counsel of record for the Plaintiffs.
V. Conclusion
45Ms. Garnet is removed as litigation guardian for Ms. Berman, to be replaced by a suitable and willing person as soon as is feasible.
46SRG is removed as counsel of record for the Plaintiffs, to be replaced by another lawyer or law firm as soon as is feasible.
47The parties may make written submissions addressing costs of the motion. Those submissions should be sent to my attention within two weeks of the date of release of this judgment.
Morgan, J.
Released: December 3, 2012
COURT FILE NO.: CV-10-403945
DATE: 20121203
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Helen Berman, By her Litigation Guardian and Attorney for Property, Evie Garnet, 754273 Ontario Limited, 754274 Ontario Limited and Milliken Mills Investment Inc.
Plaintiffs
– and –
Samuel Schwartz, Samuel Schwartz in his capacity as former Estate Trustee of the Estate of Joseph Berman, Davis LLP, Goodman and Carr LLP, and the Estate of Joseph Berman, by its Estate Trustee, Reuben Rosenblatt
Defendants
REASONS FOR JUDGMENT
E.M. Morgan, J.
Released: December 3, 2012