ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 09-238
DATE: 20130402
BETWEEN:
TALISMAN RESORT GP INC.
Julia E. Schatz, for the Plaintiff
Plaintiff
- and -
WOLFGANG KYSER, GARY USLING, BRUNO ARNOLD, MARCUS ARNOLD, TIMOTHY J.W. HODGES, EUROMART REALTY GROUP INC., AMBIANCE CAPITAL CORP and KHB INTERNATIONAL CORP.
Paul J. Pape and Tanya Pagliaroli, for the Defendant Wolfgang Kyser
Maureen L. Whelton, for the Defendants Bruno Arnold, Marcus Arnold and Euromart Realty Group Inc.
P. James Zibarras and Karen Sanchez, for the Defendant Gary Usling
Defendants
Timothy J.W. Hodges, in person
HEARD: March 28, 2013
REASONS FOR DECISION ON MOTIONS
Conlan J.
Introduction
[1] Should the Plaintiff’s counsel be removed at the request of some of the Defendants? That is the issue to be decided.
[2] The Plaintiff, Talisman Resort GP Inc. (“Talisman”), has sued the Defendants for specific performance of an alleged agreement made by the Defendants to purchase Talisman’s resort property or, in the alternative, damages for breach of contract.
[3] The Statement of Claim was issued on August 24, 2009. Now, approaching four years later, the litigation has not progressed at any reasonable pace and remains nowhere close to being ready for trial. Numerous motions are outstanding including one by Talisman for summary judgment.
[4] The Defendants, Wolfgang Kyser (Pape Barristers as counsel) and Bruno Arnold, Marcus Arnold and Euromart Realty Group Inc. (Stevensons as counsel), all collectively referred to hereinafter as “these Defendants”, move for an Order removing Bennett Jones LLP as counsel for Talisman on the basis of an alleged conflict of interest.
[5] In essence, the argument by these Defendants is that Bennett Jones LLP ought to be removed as counsel for Talisman because of an actual or perceived conflict of interest in that a partner in that law firm (but not the lawyer with carriage of the matter), Serafino Mantini (“Mantini”), (i) is a witness and (ii) has a personal interest in the litigation in that Mantini is the sole shareholder of Talisman’s corporate shareholder and, as a mortgagee, is owed a substantial amount of money from Talisman.
[6] None of the other Defendants still participating in the action filed materials on these motions and presumably take no position, except the Defendant Usling whose counsel appeared in court in Owen Sound on 28 March 2013 to indicate simply that Usling supports the motions to remove Bennett Jones LLP as counsel for Talisman.
[7] These motions were heard in Owen Sound on 28 March 2013. The Court reserved its decision.
[8] I am indebted to counsel for their helpful motion materials, Facta, Books of Authorities and oral submissions at court. I have read and carefully considered all of the materials filed and the oral submissions by counsel.
A Brief Summary of the Positions of the Parties
These Defendants (moving parties)
[9] These Defendants argue that Mantini is a key witness in this action as evident from the fact that Talisman relies on an Affidavit sworn by Mantini in support of its motion for summary judgment, and that Mantini’s evidence relates to contentious and important matters including, for example, whether Mr. Kyser misrepresented certain facts during the course of the proposed purchase of Talisman’s resort property by the Defendants.
[10] These Defendants argue further that Mantini has a financial stake in this litigation in that he, through his companies, is owed several millions of dollars by Talisman.
[11] Because of either or both of Mantini’s role as a witness and his financial interest in the litigation, Bennett Jones LLP ought to be removed as counsel for Talisman. So say these Defendants.
Talisman, the Plaintiff (respondent)
[12] Talisman argues that the alleged impropriety is illusory in that (i) Mantini is a witness and is a partner in the same law firm as Ms. Schatz, who has carriage of the file, and (ii) Mantini does have a financial interest in the litigation which is in common with that of Talisman, however, neither one of those facts gives rise to a conflict of interest which justifies the extraordinary Order being sought by these Defendants.
The Law
General Principles
[13] This Court’s jurisdiction to remove Bennett Jones LLP as counsel for Talisman on the basis of a conflict of interest is an inherent one. It is not derived from any particular legislation or rule. It is grounded in the Court’s objective to safeguard the proper administration of justice. Puhl v. Katz Group Canada Ltd., [2006] O.J. No. 4596 (S.C.J.) at paragraph 23.
[14] The question is whether these Defendants have established on a balance of probabilities that a fair-minded and reasonably informed member of the public would conclude that the removal of Bennett Jones LLP as counsel for Talisman is necessary for the proper administration of justice. MacDonald Estate v. Martin, [1990] 3 S.C.R. 1235 at paragraph 47.
[15] In answering that question, the Court ought to balance these factors: maintaining respect for, the integrity of and the high standards of the legal profession and our justice system as a whole; the principle that a litigant has a right to choose its counsel, and that right should not be interfered with lightly; and the objective of allowing reasonable mobility in the legal profession. MacDonald Estate v. Martin, supra, at paragraphs 16, 21 and 77.
[16] In answering the issue, the Court ought to consider not only whether there is an actual conflict of interest but also whether a conflict of interest could be reasonably perceived in all of the circumstances. In other words, is there an appearance of a conflict of interest? Puhl, supra, at paragraph 18.
[17] In analyzing the question, the Court may consider any applicable rules of professional conduct. Where there is a rule or guideline or ethical principle directly on point, the Court ought to consider it but is not bound by it. MacDonald Estate, supra, at paragraph 21.
The Lawyer as Witness
[18] There is nothing in the Law Society of Upper Canada’s Rules of Professional Conduct which prohibits a lawyer from acting as counsel for a client when another lawyer in the same firm is a witness in the matter. What is generally prohibited is a lawyer as advocate also testifying before the tribunal (with some exceptions): Rule 4.02(2).
[19] The Canadian Bar Association’s Code of Professional Conduct, Chapter IX – Commentary number 5, is wider in scope. It provides that a lawyer as advocate should not submit the lawyer’s own affidavit to or testify before a tribunal (with some exceptions), and that the said guideline also applies to the lawyer’s partners and associates.
[20] The CBA’s Code is subject to “local rule or practice” and, thus, is subject to the Law Society’s Rules.
[21] There is no jurisprudence holding that a lawyer in Ontario who appears as an advocate before a tribunal shall not tender evidence from that lawyer’s partner or associate, whether testimonial or by affidavit. The matter is discretionary and requires a flexible, case by case approach which involves a consideration of some or all of these factors: the stage of the proceedings; the likelihood that the witness will be called and the significance of his or her evidence; whether the party applying to remove counsel from the record is doing so in good faith; the impact of the order sought on a litigant’s right to counsel of choice; whether the trial is by judge or judge and jury; the likelihood of a real conflict arising or that the evidence will be tainted; which party will call the witness; and the connection between counsel, the witness and the parties to the litigation. Essa (Township) v. Guergis (1993) 15 O.R. (3d) 573 (Divisional Court) at paragraph 48.
The Lawyer with a Financial Stake
[22] If a lawyer cannot properly discharge his or her duties as an independent officer of the court due to the lawyer’s personal interest in the litigation, then that lawyer may have to be removed from the record. The policy reason underlying that is clear; a lawyer with a personal interest in the litigation may, in fact or in perception, put his or her own interests above the obligations owed by the lawyer to the client and to the Court, thereby bringing the administration of justice into disrepute. Karas v. Ontario, 2011 ONSC 5181, at paragraphs 52, 54 and 55.
[23] Again, the Court ought to consider not only whether there is an actual conflict of interest but also whether a conflict of interest could be reasonably perceived in all of the circumstances. In other words, is there an appearance of a conflict of interest.
[24] The Law Society’s Rules recognize that a lawyer who has a personal financial interest in the client’s affairs or in the subject matter of the litigation may be in a conflict of interest if that personal financial interest interferes with the lawyer’s duties owed to the client and/or adversely affects the lawyer’s judgment: Rule 2.04(1) and the related Commentary.
[25] In deciding whether there is a conflict of interest on this ground, the question is whether the personal financial interest gives rise to a substantial risk that the lawyer’s representation of the client would be materially and negatively affected by the lawyer’s own interest. Regina v. Neil, 2002 SCC 70 at paragraph 31.
[26] Obviously, it is important in addressing that question to know whether the lawyer’s personal financial interest is in any way at odds with the interests of the client. Triple 3 Holdings Inc. v. Jan (2006), 2006 30457 (ON CA), 82 O.R. (3d) 430 (C.A.) at paragraphs 22 to 27.
Analysis
The Lawyer as Witness
[27] I glean little assistance from the CBA’s Code because (i) it is subject to the Law Society’s Rules and (ii) it is suggestive and not a directive (note that the word in Chapter IX, Commentary number 5 is “should” and not “shall”).
[28] Neither the Law Society’s Rules nor any jurisprudence prohibits Bennett Jones LLP from acting as counsel for Talisman when one of its partners is a witness.
[29] Thus, the issue turns on the discussion in Essa, supra. This is a discretionary matter.
[30] I disagree with any assertion by Talisman that some of the factors outlined in Essa, supra are irrelevant because Mantini is not the court advocate for Talisman. The factors remain relevant, although their importance may be affected by the fact that Mantini is not the court advocate for Talisman.
[31] It must be remembered that, to some degree, all members of a law firm are identified as one in the eyes of the law. Forward v. Zurich Insurance Co., [2002] A.J. No. 664 (Alberta Court of Appeal) at paragraph 8.
[32] I will now discuss the Essa, supra factors in turn.
[33] This action is neither in the very early stage nor is it approaching trial readiness, thus, the stage of the proceeding is a neutral factor.
[34] There is a very high likelihood that Mantini will be a material witness at trial, and he is certainly a key witness on the summary judgment motion brought by Talisman. Notwithstanding that Mantini is not the lawyer with carriage of the file, I find that this factor is in favour of these Defendants. I pause here to comment on the decision of Justice Ground of the Ontario Superior Court of Justice in Teltscher v. PTC Accounting, 2006 29284. That decision, in my view, should in no way be interpreted to suggest that disqualification will result once there is a finding that there is a likelihood that the lawyer will be called as a witness (see paragraph 13 in particular). Justice Ground referred specifically to the Essa, supra factors (at paragraph 10), and thus, it is clear that the likelihood of the lawyer being a witness is one factor.
[35] There is no evidence of actual bad faith on the part of these Defendants, however, these motions ought to have been brought much closer to the time that Bennett Jones LLP was appointed as counsel for Talisman and much earlier than the hearing of Talisman’s motion for summary judgment. This factor tips slightly in favour of Talisman.
[36] Unquestionably, the removal of Bennett Jones LLP as counsel for Talisman would have a significant impact on Talisman’s right to counsel of choice. This factor is in favour of Talisman. Although I reject Talisman’s argument that I should find that Talisman will not be able to continue the action if Bennett Jones LLP is removed as its counsel (because I find insufficient evidence in the record to so find), it must be emphasized that Courts ought to tread carefully when being asked to interfere with a litigant’s right to counsel of choice. In fact, it has been said that “Canadian Courts exercise the highest level of restraint before interfering with a party’s choice of counsel” – Kaiser, 2011 CarswellOnt 12822 (Court of Appeal for Ontario) at paragraph 21.
[37] This action will be tried without a jury. That factor is neutral in this case.
[38] Whether a real conflict of interest is likely to arise in this case or the evidence somehow will become tainted is a factor in favour of Talisman. Tainting of the evidence of Mantini is very unlikely because his evidence is known and was adduced in support of Talisman’s motion for summary judgment before Bennett Jones LLP was even on the record. Tainting of any other evidence as a result of Mantini’s connection to counsel, Talisman and the litigation is, at best, speculative and certainly not likely. The possibility of Bennett Jones LLP developing a real conflict of interest vis a vis Talisman and/or the court is remote.
[39] The issue of which party will call Mantini as a witness at trial is a factor that tips slightly in favour of these Defendants even with a condition that counsel for Talisman not be permitted to cross-examine Mantini. That will be up to the trial Justice, however, it is a reasonable measure in my opinion. Counsel for Talisman has given that undertaking to the court and should be held to it. Although one partner in a law firm questioning another partner in the same law firm in direct examination is preferable over the same occurring in cross-examination, it is not ideal.
[40] On the overall connection or relationship between counsel, Mantini and the parties, that factor is in favour of these Defendants. Although Mantini is not the court advocate for Talisman, he is a partner of Talisman’s litigation lawyer. And Mantini has a direct and significant connection to Talisman. He has a substantial financial interest in Talisman and in the litigation.
[41] This is not a lesson in arithmetic. We do not make decisions by adding up the checkmarks on each side.
[42] This is a close call. But, having considered the factors outlined in Essa, supra, I exercise my discretion to permit Bennett Jones LLP to remain as counsel for Talisman.
[43] To borrow an expression from Justice Cronk of the Court of Appeal for Ontario in Kaiser, supra, “there must be a possibility of real mischief should a removal order be refused” (paragraph 21). Despite the very able submissions of counsel for these Defendants, I disagree that such exists here.
The Lawyer with a Financial Stake
[44] Taken alone, this argument by these Defendants has very little merit. There is no reason to remove Bennett Jones LLP as counsel for Talisman on the sole basis that Mantini has a personal financial interest, no matter how sizeable, in Talisman and in the litigation.
[45] It is without question that Mantini’s personal financial interest is ad idem with the interests of Talisman. They are not at odds with each other. There could not possibly be any likelihood, real or perceived, that Mantini’s own interests will be given priority to the duties owed by Bennett Jones LLP to Talisman and to the court, thereby bringing the administration of justice into disrepute.
[46] Put bluntly, if Talisman wins then Mantini benefits. If Talisman loses then Mantini does too.
[47] There is nil evidence that Bennett Jones LLP, during its representation of Talisman in this action, is likely to do something or omit to do something that will prejudice Talisman because of the fact that Mantini has a personal financial interest in Talisman. Indeed, I suspect that Talisman is very content to have Bennett Jones LLP as its counsel because of the fact that Mantini has a personal financial interest in Talisman.
[48] This argument is relevant, however, in the overall contextual analysis required and in the assessment of the Essa, supra factors, including that dealing with Mantini’s relationship with and connection to Talisman, Bennett Jones LLP and the subject matter of the litigation. As can be seen from my reasons above, I have taken this argument into careful consideration, however, my conclusion remains unchanged.
Conclusion
[49] In balancing the factors outlined by the Supreme Court of Canada in MacDonald Estate, supra, and recognizing that the Court must be concerned with not only actual conflicts of interest but also reasonable perceptions of conflicts of interest, I conclude that these Defendants have not established on a balance of probabilities that a fair-minded and reasonably informed member of the public would conclude that the removal of Bennett Jones LLP as counsel for Talisman is necessary for the proper administration of justice.
[50] It was stated a few times by counsel for these Defendants that not a single court decision was filed by them or the Plaintiff on the motions which, on the same or very similar facts, allowed counsel to remain on the record. That may be true, but that is no reason to grant the motions. Not a single Parliament of Canada decided to extend the right to vote to women before that happened either.
[51] The motions by these Defendants are therefore dismissed. Bennett Jones LLP shall be permitted to remain as counsel for the Plaintiff, Talisman.
[52] Talisman is entitled to its costs. If the parties are unable to settle the issue of costs, counsel may contact the Trial Coordinator in Owen Sound to schedule a further court attendance of sixty minutes in length, maximum, to hear submissions and consider filings in that regard. Arrangements can be made for that further court attendance, if necessary, to be by teleconference if the parties so desire. I shall consider the matter of costs resolved between the parties if the Trial Coordinator is not contacted by counsel within two weeks of the release of these reasons.
[53] I encourage the parties to move this action along. It is time to get on with the substantive motions and, if necessary, the trial.
Conlan J.
Released: April 2, 2013
COURT FILE NO.: 09-238
DATE: 20130402
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
TALISMAN RESORT GP INC.
Plaintiff
- and -
WOLFGANG KYSER, GARY USLING, BRUNO ARNOLD, MARCUS ARNOLD, TIMOTRHY J.W. HODGES, EUROMART REALTY GROUP INC., AMBIANCE CAPITAL CORP. and KHB INTERNATIONAL CORP.
Defendants
REASONS FOR DECISION
ON MOTIONS
Conlan J.
Released: April 2, 2013