Jajj v. 100337 Canada Limited c.o.b. as BJ International/BJ Supermarket 100337 Canada Limited c.o.b. as BJ International/BJ Supermark et v. Jajj et al.
[Indexed as: Jajj v. 100337 Canada Ltd.]
Ontario Reports
Ontario Superior Court of Justice,
Stinson J.
June 5, 2014
120 O.R. (3d) 534 | 2014 ONSC 3411
Case Summary
Professions — Barristers and solicitors — Conflict of interest — Conflict of interest rules which apply to lawyers who practise in partnership also applying to lawyers who practise in association but hold themselves out to public as members of single law firm.
The defendant brought a motion to remove the plaintiff's lawyer on the basis of a disqualifying conflict of interest. The motion raised the question whether a lawyer may act for a client in litigation against someone who has received legal advice regarding the same matter from another lawyer, where the two lawyers practise in a cost-sharing association. The motion judge dismissed the motion. The defendant appealed.
Held, the appeal should be allowed.
The conflict of interest rules which apply to lawyers who practise in partnership also apply to lawyers who practise in association but hold themselves out to the public as members of a single law firm. In this case, the two lawyers held themselves out as lawyers practising under a single firm name. They shared the [page535] same telephone number (save for their individual extensions), the same fax number and the same suffix for their e-mail address. There was no evidence of any precautions put in place to prevent any sharing -- inadvertent or otherwise -- of confidential information pertaining to the clients of any particular lawyer. As a result, the fact that another lawyer from the same "firm" was acting against the defendant in relation to the very same matter on which the defendant had received advice gave rise to an appearance of conflict.
MacDonald Estate v. Martin, 1990 32 (SCC), [1990] 3 S.C.R. 1235, [1990] S.C.J. No. 41, 77 D.L.R. (4th) 249, 121 N.R. 1, [1991] 1 W.W.R. 705, J.E. 91-85, 70 Man. R. (2d) 241, 48 C.P.C. (2d) 113, EYB 1990-68602, 24 A.C.W.S. (3d) 553, apld
Other cases referred to
Consulate Ventures Inc. v. Amico Contracting & Engineering (1992) Inc., [2010] O.J. No. 4996, 2010 ONCA 788, 97 C.P.C. (6th) 16, 270 O.A.C. 182; Zeitoun v. Economical Insurance Group (2008), 2008 20996 (ON SCDC), 91 O.R. (3d) 131, [2008] O.J. No. 1771, 292 D.L.R. (4th) 313, 53 C.P.C. (6th) 308, 236 O.A.C. 76, 64 C.C.L.I. (4th) 52, 165 A.C.W.S. (3d) 770 (Div. Ct.)
APPEAL from the order of Master Glustein, 2013 ONSC 5473 (S.C.J.) dismissing an application to remove a lawyer on the basis of a disqualifying conflict of interest.
Kenneth Alexander, for plaintiff and defendants to the counterclaim, respondents.
Gregory Sidlofsky, for defendant and plaintiff by counterclaim, appellant.
Endorsement
[1] Endorsement of STINSON J.: — This case raises a question concerning the extent to which the same conflict rules that apply to lawyers who practise in law firm partnerships should apply to lawyers who practise in so-called "associations". Put simply, may a lawyer act for a client in litigation against someone who has received legal advice regarding the same matter from another lawyer, where the two lawyers practise in association? On the facts of this case, the master concluded that this was permissible. The objecting former client, the defendant, appeals that decision. For the reasons that follow, I would allow the appeal.
Facts
[2] This lawsuit concerns a claim for damages for wrongful dismissal and overtime pay. The plaintiff, Jaswinder Jajj ("Jaswinder"), was a 30-year employee of the defendant corporation, which operates a family-run grocery store business, and is owned by the Jajj family. She is the spouse of the defendant added to the counterclaim, Balwant Singh Jajj ("Balwant"), who is a former director of the defendant. Balwant is the brother of Juejar Jajj ("Juejar"), who is an officer and director of the defendant. [page536]
[3] The lawsuit is a by-product of a breakdown in the relationships among the Jajj family members. In light of that breakdown, in August 2012, Juejar, his mother and his sister Surinder Gill decided to seek legal advice regarding an anticipated claim by Jaswinder against the defendant, as well as potential claims by and against her spouse, Balwant, pertaining to the affairs of the defendant.
[4] At the suggestion of Surinder, on August 7, 2012, the trio met with Kevin Fox, who is a lawyer who practises with Davenport Law Group ("DLG)" at 174 Davenport Road in Toronto. According to Juejar, they discussed the issues with Mr. Fox, including Jaswinder's anticipated claim, and they received advice concerning her employment status and how the defendant should conduct itself pending receipt of a claim from her. At the conclusion of their consultation, Mr. Fox presented an account for his services on DLG letterhead, which was paid there and then by way of cheque drawn on the defendant's account and payable to "Kevin Fox".
[5] On November 29, 2012, Jaswinder commenced this action. The statement of claim names the plaintiff's lawyers as "Davenport Law Group, Barristers and Solicitors" and lists the name of Kenneth Alexander, another lawyer who practices with DLG. From Juejar's perspective, the lawsuit concerns the very issues that were discussed with Mr. Fox of DLG less than four months earlier.
[6] In light of the foregoing, the defendant retained its present counsel, who promptly wrote to Mr. Alexander, citing the August 2012 consultation with Mr. Fox. The letter ended with a request that Mr. Alexander remove himself from the record, "given the direct conflict of interest". Mr. Alexander responded, noting that he had been advised by Mr. Fox that "he did not act for your client with respect to this matter". Mr. Alexander invited the defendant to "seek a motion for our removal". The defendant's motion before the master followed. The master dismissed the motion
The Decision of the Master
[7] The master observed at the outset of his reasons that the motion raised a novel issue, for which neither counsel provided any authority, regarding the application of the principles articulated in MacDonald Estate v. Martin, 1990 32 (SCC), [1990] 3 S.C.R. 1235, [1990] S.C.J. No. 41 ("MacDonald Estate") to lawyers who work in association. He therefore dealt with the issue as a matter of first instance. [page537]
[8] The master summarized the principal relevant holdings in MacDonald Estate as follows:
(a) If the client satisfies the court that there existed a previous relationship with the lawyer which is sufficiently related to the retainer at issue, the court should infer that confidential information was imparted unless the lawyer satisfies the court that no information was imparted that could be relevant. This would be a difficult burden to discharge, since the lawyer would have to do so without revealing the specifics of the privileged information.
(b) If a lawyer had relevant confidential information from the client, that lawyer could not act against the client in that matter.
(c) A reasonably informed person would infer that partners and associates in a law firm discuss files, and, as such, a law firm would have to establish that protective measures were put into place to prevent the disclosure of confidential information, in order to avoid removal when the former client provided relevant confidential information to another partner or associate.
(d) Conclusory statements that a lawyer did not speak to anyone in the firm about the matter, offered by either (i) the initial lawyer who met with the client, (ii) the lawyer of record or (iii) any other member of the firm, would not be sufficient.
[9] The master noted [at para. 19] the competing values recited by Sopinka J. in MacDonald Estate [at para. 13] which must be considered by the court in determining whether a lawyer is disqualified from continuing to act for a client by reason of conflict of interest:
(i) the concern to maintain the high standards of the legal system and the integrity of our system of justice,
(ii) the countervailing value that a litigant should not be deprived of his or her choice of counsel without good cause, and
(iii) the desirability of permitting reasonable mobility in the legal profession.
[10] The master went on to observe that the value of the desirability of permitting reasonable mobility in the legal profession does not apply in the context of a removal motion when a member of an association of lawyers acts against a former client of another member of the association in the same or a sufficiently related matter. He noted, however, that a similar [page538] value arises in that there is desirability in permitting lawyers with separate practices to work with other lawyers in association, while maintaining their role as independent lawyers who are not in a law firm and are acting as individual lawyers on behalf of their clients.
[11] In relation to the application of the principles in MacDonald Estate to removal motions when a member of an association of lawyers acts against a former client of another member of the association in the same or sufficiently related matter, the master reached the following conclusions:
(a) The court must consider the concern to maintain the high standards of the legal system and the integrity of our system of justice and the countervailing value that a litigant should not be deprived of his or her choice of counsel without good cause.
(b) The test to determine whether the former client communicated confidential information should be the same as in MacDonald Estate. The master further observed that there ought to be no difference in how the court assesses whether the former client communicated confidential information to a lawyer regardless of whether the lawyer acts as a practitioner in or outside an association or in a law firm, noting that it must remain a difficult burden to discharge.
(c) The prohibition against the same lawyer acting against the former client in the same or sufficiently related matter should be the same as in MacDonald Estate.
(d) The strong inference that lawyers who work together share confidences as partners and associates in a law firm ought not to apply to lawyers with separate practices who work in an association. The master held that a lawyer working in an association can lead evidence that the lawyers have separate practices and, if such evidence is led, the court (i) should not presume that disclosure was made and (ii) should not require evidence of protective measures to rebut the presumption that confidences are shared (as would be required for partners or associates in a law firm). In arriving at this latter conclusion, the master relied on the obligation of confidentiality imposed by rule 2.03(1) of the Rules of Professional Conduct of the Law Society of Upper Canada. He held that if there is evidence that the structure of the association consists of lawyers with separate practices, even if the lawyers share some common expenses such as support staff, rent or other costs of operating a law practice, the court should not [page539] presume that lawyers in association work as partners and associates in a law firm. He went on to note that it would be inappropriate to presume that a lawyer with a separate practice in the association who meets with the client would either speak to another lawyer in the association about the matter or conduct a common conflicts check. On this basis, he concluded that the protective measures contemplated in MacDonald Estate do not logically follow.
[12] The master went on to conclude as follows (at para. 59):
Consequently, while the perception of [DLG] might be that they are a law firm comprised of several lawyers (given the business cards, invoice, email addresses and pleadings), the evidence is that the lawyers act in an association and each lawyer has a separate practice. There is no basis for a reasonably informed member of the public to presume that Fox disclosed any confidential information to Alexander. It would be a breach of Fox's professional ethics to discuss the file with another lawyer who shares premises in an association, just as it would be a similar breach to disclose any confidential information to lawyers who work outside the premises of the association. A presumption that Fox disclosed confidential information is not warranted on the facts of this case and the evidence does not support such a finding.
[13] On this basis, the master dismissed the motion to remove DLG and Alexander as lawyers for the plaintiff and defendants to the counterclaim. The defendant appeals from that result.
Standard of Review
[14] The test on an appeal from a decision of the master is set out in the decision of the Divisional Court in Zeitoun v. Economical Insurance Group (2008), 2008 20996 (ON SCDC), 91 O.R. (3d) 131, [2008] O.J. No. 1771 (Div. Ct.). A decision of the master will be interfered with only if the master made an error of law or exercised his or her discretion on the wrong principles or misapprehended the evidence such that there is a palpable and overriding error.
Positions of the Parties
[15] The position of the defendant-appellant is that the master erred when he concluded that, because Mr. Fox and Mr. Alexander worked in an association and not as partners, they need not establish that protective measures were in place to prevent the disclosure of confidential information. Where lawyers hold themselves out to the public and to their clients as a law firm, they should be treated as such and be held to the same conflict requirements and professional obligations as a law firm. Mr. Fox and Mr. Alexander cannot be given the benefit of the doubt that there is no risk of them sharing confidential information because [page540] technically they are only working in association; it is too late, after the fact, for them to put in place preventative measures to ensure confidential information is not shared.
[16] The position of the respondents is that the master rightly found on the facts of this case that the presumption of sharing confidential information did not apply. The master's finding that the lawyers' practices were completely separate was the greatest form of protection against disclosure. The master rightly found that each lawyer with a separate practice in association is bound by rule 2.03(1) of the Rules of Professional Conduct not to disclose anything about the client to another lawyer in the association.
Analysis
[17] The decision of the Supreme Court of Canada in MacDonald Estate established a new benchmark in relation to disqualifying conflicts of interest in the legal profession. The court considered the competing values of maintaining the high standards of the legal profession and the integrity of our system of justice, the value that a litigant should not be deprived of his or her choice of counsel without good cause and the desirability of permitting reasonable mobility in the legal profession. In the course of reaching his conclusion as to the appropriate balance among these considerations, Sopinka J. noted (at para. 42) that that there is "a strong policy in favour of ensuring not only that there be no actual conflict but there be no appearance of conflict". On this basis, he formulated the test (at para. 44) that "the public, represented by the reasonably-informed person, would be satisfied that no use of confidential information would occur". He went on to observe (at para. 51) that "in giving precedence to the preservation of the confidentiality of information imparted to a solicitor, the confidence of the public in the integrity of the profession and in the administration of justice will be maintained and strengthened".
[18] In relation to the importance to be accorded to the goal of preserving the integrity of the system of justice, in Consulate Ventures Inc. v. Amico Contracting & Engineering (1992) Inc., [2010] O.J. No. 4996, 2010 ONCA 788 (at paras. 35 and 36), Doherty J.A. stated as follows:
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." [page541]
I agree with the priority given to the preservation of the integrity of the process.
[19] In the wake of MacDonald Estate, in order to avoid potentially disqualifying conflicts of interest, law firms have developed institutional efforts to prevent them. Their purpose is to ensure that no impermissible disclosure will occur. These measures include institutional mechanisms such as firewalls, cones of silence, physical separation of lawyers and files and isolation of support staff to guard against inadvertent disclosure. Such preventative mechanisms have become standard where a lawyer who has confidential information about a client joins another firm that acts adversely to the client. Such conflicts are identified by conducting in advance a conflicts search that will reveal any overlapping matters or clients where protective measures need to be put in place.
[20] The underlying rationale behind the foregoing measures is so that the test posited by Sopinka J. in MacDonald Estate may be met: based on the measures taken, a reasonably informed person would be satisfied that no transmission or misuse of confidential information would occur. This is now the accepted standard in relation to a law firm partnership. The question presented in this case is whether a different standard should apply to lawyers who practice "in association" than that which applies to lawyers who practice in a law firm partnership.
[21] On the facts of this case, both Mr. Fox and Mr. Alexander hold themselves out as lawyers practicing under the firm name "Davenport Law Group". They practise under that name, together with other lawyers (although the number of lawyers who do so is not stated). They share the same business address and premises at 174 Davenport Road, Toronto. They share the same telephone number, save for their individual three-digit extensions. They share the same fax number. They share the same suffix for their e-mail address: "davenportlaw.ca". Nowhere on their letterhead or on Mr. Fox's business card is there any indication that DLG is not a firm name under which its various lawyers practice as partners. There is no mention in the materials before the court of any public disclosure that DLG is an association, or that the lawyers who practice under that name do so as lawyers who have practices that are somehow independent one from another. Thus, on its face, DLG exhibits to the general public the same traits that one would expect to find if all the lawyers there were partners or associates in a law firm partnership. There is no evidence that Mr. Fox told the representatives of the defendant that DLG was merely an association of lawyers whose practices are independent of one another. [page542]
[22] As a result of the foregoing, the fact that another DLG lawyer is acting against the defendant in relation to the very same matter gives rise to an appearance of conflict. It is therefore not surprising that when Juejar learned that a DLG lawyer was acting against the defendant, he considered it improper and prejudicial. His reaction is an indication that such an arrangement would undermine the confidence of the public in the integrity of the profession and in the administration of justice.
[23] The only evidence filed in response to the defendant's motion was the affidavit of Mr. Fox, the lawyer who was consulted by the defendant in August 2012. On the critical subject of the nature of his relationship with Mr. Alexander, he deposed as follows:
Kenneth Alexander and I work in association under the name Davenport Law Group along with other lawyers; however we have completely separate practices, separate bank accounts and separate conflicts search system [sic].
In addition to denying that he was given any confidential information regarding a claim, Mr. Fox deposed that he had not discussed with Mr. Alexander the issues that he discussed in the consultation with Juejar and Surinder, other than to indicate that he provided general employment law advice. He further denied that he imparted any information to Mr. Alexander.
[24] Apart from stating that he and Mr. Alexander "work in association" and that they "have completely separate practices", the evidence of Mr. Fox provides no insights into the internal workings of DLG. To state the obvious, the lawyers at DLG do not represent to the general public that they are sole practitioners, at least by way of their firm name, premises, telephone and fax numbers, letterhead or business cards. Indeed, in the absence of any public disclaimer, the logical inference is that one of the reasons they choose to represent themselves in such a fashion, utilizing a common firm name, is to create the impression for clients and others that outsiders are somehow dealing with a group of lawyers, and not merely with a sole practitioner, or at the very least a lawyer who has resources available beyond those which might be available to a lawyer who practises alone. In my view, to a reasonably informed member of the public, the arrangements described by Mr. Fox would not provide adequate or sufficient assurance that confidential information imparted to a lawyer at DLG would remain confidential to that particular lawyer.
[25] Despite the fact that, to the outside world, lawyers at DLG present themselves in the same fashion as partners and associates of a law firm partnership, the master held that because Mr. Fox gave evidence that they had separate practices, bank accounts and conflict systems, the same presumptions [page543] regarding sharing of information would not apply. In my respectful opinion, in so doing, the master erred in law, because he relied upon the very type of evidence that was rejected by the Supreme Court of Canada in MacDonald Estate. As Sopinka J. said (at para. 50):
A fortiori undertakings and conclusory statements in affidavits, without more are not acceptable. These can be expected in every case of this kind that comes before the court. It is no more than the lawyer saying "trust me". This puts the court in the invidious position of deciding which lawyers are to be trusted and which are not. Furthermore, even if the courts found this acceptable, the public is not likely to be satisfied without some additional guarantees that confidential information will under no circumstances be used . . . [A]ffidavits of lawyers difficult to verify objectively will fail to assure the public.
[26] In the present case, the respondents' evidence that there is no cause for concern is, in essence, based on the assurance of Mr. Fox that there is no conflict, and that he can be trusted to respect rule 2.03(1). Despite having held himself out (as has Mr. Alexander) as a member of DLG, he now assures the court (after the fact) that he will not share any confidences with Mr. Alexander. For clients such as the defendant, having entrusted its confidences to another lawyer at DLG, that is cold comfort.
[27] Moreover, conspicuous by its absence in this case is any evidence of any precautions put in place at DLG to prevent any sharing -- inadvertent or otherwise -- of confidential information pertaining to the clients of any particular lawyer. For example, a common fax number is shared by all lawyers at DLG, yet there is no evidence regarding how fax communications are dealt with to ensure that no information is conveyed to the wrong lawyer. There is likewise no evidence regarding instructions to support staff to take appropriate precautions regarding maintaining confidentiality, or dealing with such things as mail addressed to the firm, direct information or telephone communications, despite the acknowledged sharing of support staff and facilities.
[28] Of particular concern is the absence of any mechanism to identify situations where the risk of such disclosures may arise, so that appropriate protective measures may be taken to preserve confidentiality. The evidence is that all lawyers at DLG maintain separate conflicts search systems. Presumably, such systems enable an individual lawyer to identify potential conflicts among the clients of that particular lawyer. On the other hand, because the conflicts systems are separate from one another, there is no way to detect, advert to, and respond appropriately to situations where overlaps and potential conflicts exist with the clients of other lawyers who practise in the association. In my view, lawyers who practise "in association" ought to maintain some form of common [page544] conflicts search system in order to avoid the very type of problem that has arisen in this case.
[29] I agree with the master that it is desirable to permit lawyers to practise in non-partnership, cost-sharing arrangements. That said, those arrangements must take into account the need to preserve public confidence in the administration of justice by implementing in advance measures that will protect client confidentiality, in order to offset any concerns that would otherwise legitimately arise in such circumstances as these.
[30] In my view, where lawyers who practice "in association" nevertheless hold themselves out to the public and to their clients as a law firm, they should be treated as such and be held to the same conflict requirements as a law firm partnership. To hold otherwise would undermine the confidence of the public in the integrity of the profession and would fail to give priority to the preservation of the integrity of the system of justice. In this case, to allow one member of DLG to provide advice to a client on a matter and another member of DLG to then act against the former client on the very same matter would reduce the public's confidence in the justice system. Where lawyers wish to practise in association, they must at a minimum publicly hold themselves out as practising in that fashion. They must also take appropriate steps to identify potential conflicts and deal with them suitably in a prophylactic fashion.
[31] I therefore hold that the master erred in law by failing to consider properly the effect of the evidence that DLG had held itself out to the defendants as a law firm and, in the face of that evidence, accepting as sufficient the assertion by Mr. Fox that he would abide by his professional obligations. In the absence of evidence that satisfactory preventative measures had been put in place in advance of the conflict arising, the master should have concluded that a disqualifying conflict was present and he should therefore have granted the defendant's motion.
Conclusion and Disposition
[32] For these reasons, I set aside the order of the master and in its place make an order directing that Kenneth Alexander and the Davenport Law Group must cease to act as lawyers for the plaintiff and defendants to the counterclaim.
[33] Before leaving the matter, I am compelled to record that Mr. Alexander himself argued the motion to have him removed as counsel for the plaintiff, and the appeal from the master's decision. Although he did so ably, as a result of arguing the motion and the appeal himself he was put in the unhappy position [page545] of, in effect, defending his own actions and professional judgments, as well as those of his associate, Mr. Fox. While one would hope that motions of this nature would be rare, when they do arise it would be far preferable, in my opinion, for separate counsel to argue them so as to avoid the undesirable situation of counsel defending himself or herself. As well, by retaining counsel for that purpose, the lawyer whose position is impugned can receive the benefit of an independent assessment of the situation, which might well result in the resolution of the issue without the necessity of court intervention.
[34] In relation to costs, if the parties are unable to reach agreement, I direct as follows:
(a) The appellant shall serve its bills of costs on the respondents accompanied by written submissions within 15 days of the release of these reasons.
(b) The respondents shall serve their response within 15 days thereafter.
(c) The appellant shall serve its reply, if any, within ten days thereafter.
(d) In all cases, the written submissions shall be limited to three pages, plus bills of costs.
(e) I direct that counsel for the appellant shall collect copies of all parties' submissions and arrange to have that package delivered to me in care of judges' administration, Room 170 at 361 University as soon as the final exchange of materials has been completed. To be clear, no materials should be filed individually; rather, counsel for the appellant will assemble a single package for delivery as described above.
Appeal allowed.
End of Document