OTTAWA COURT FILE NO.: 13-59218

DATE: 2015/08/04

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Joseph Andre Boudreau and Suzanne Boudreau

Plaintiffs/Appellants

– and –

Loba Limited, Welton Parent Inc. and Sylvain Parent

Defendants/ Respondents

Paul K. Lepsoe, for the Plaintiffs/Appellants

Heather J. Williams, for the Defendants/Respondents

HEARD: July 9, 2015 at Ottawa

AMENDED REASONS FOR DECISION

The text of the original reasons for decision was corrected on October 2, 2015, and the description of the correction is appended.

KERSHMAN J.

Introduction:

[1] This is an appeal from the decision of Master MacLeod dated March 13, 2014, brought by the Plaintiffs (“Appellants”, “Boudreau”) dismissing the Plaintiff’s motion to remove McMillian LLP, and more specifically, Michael Rankin, as the lawyers of record for the Defendants (“Respondents”).

[2] This is also an appeal from the costs award of Master MacLeod, dated May 21, 2015, wherein he awarded the Respondents costs of $25,026.45 inclusive of disbursements and HST.

Factual Background

The Present Action

[3] This action involves a dispute over a contingency agreement between the Appellants and the Respondents entered into on or about January 23, 2006. The Appellants allege that the Respondents owe them money as a result of services rendered by the Appellants pursuant to the contingency agreement.

[4] The Respondents maintain that the Appellants were fully paid for the services rendered under the agreement and that additional compensation, as set out in the agreement, was not payable because there were no funds left over, resulting in none of the parties receiving the percentage of compensation originally contemplated under the agreement.

Prior Litigation Involving the Parties

[5] In August 2006, Mr. Parent, a principal of the two corporate defendants, retained Mr. Rankin and Lang Michener LLP to represent him in highly complex and protracted litigation with the Federal Crown. This litigation centered on a reciprocal pension transfer agreement between Mr. Parent and the government, which the government refused to comply with. This led to complex tax/pension related proceedings before the Federal Court of Appeal and the Supreme Court of Canada, a multimillion dollar tort action brought by the Respondents against the government in the Ontario Superior Court of Justice, as well as a complex related action brought by former public servants against the Federal Crown, in which the Respondents were made third parties. Mr. Rankin and other lawyers in his firm assisted the Respondents over a number of years with these and other legal matters. A settlement with the Federal Government in the tort action was eventually reached, in or about November 2011.

[6] In February 2011, Ms. Boudreau, one of the Plaintiffs in this matter and a former Cryptic Web pension plan holder, sought to file her own application for leave to appeal a decision of the Federal Court of Appeal to the Supreme Court of Canada. Her case dealt with the enforceability of the same pension transfer agreement.

[7] Ms. Boudreau was the counsel of record in her own case, but sought legal assistance with her leave application. Mr. Parent, as the agent of Cryptic Web, agreed to pay Lang Michener LLP to assist Ms. Boudreau with her leave application materials, with monies from the Cryptic Web pension plan account; he did so believing that if Ms. Boudreau’s leave application was successful, it would be a helpful precedent for Loba Ltd. and Welton Parent Inc.’s ongoing litigation with the Federal Crown, which would also be binding on and helpful to Cryptic Web. Through Cryptic Web, the Defendants, Mr. Parent and Welton Parent Inc., processed the payment of the legal invoice submitted which included Mr. Rankin’s time related to Ms. Boudreau’s litigation.

[8] According to the evidence of Mr. Rankin, he spent a total of .95 hours in 2007 working on Ms. Boudreau’s file. Mr. Rankin’s evidence is that he has no independent recollection of his involvement with her file or the advice he provided to Ms. Boudreau; he hasn’t seen her file since 2007 and assured the Master that he would not review it.

[9] Ms. Boudreau argues that she retained the legal services of Mr. Rankin and/or McMillian LLP, the successor to Lang Michener LLP. She asserts that a solicitor client relationship was entered into, as confidential information was provided by her to Mr. Rankin and/or McMillian LLP.

[10] Upon Ms. Boudreau issuing her statement of claim against the Defendants in this action, the Defendants sought: “…all source records to confirm the hourly expenditures that they say they were entitled to under the contingency agreement…in order to respond to the claim for an accounting of amounts already paid to date” (See: Statement of Defence in the appeal record of the Appellants at tab 10). Ms. Boudreau asserts that, by virtue of this request, “the defendants are in effect asserting a counterclaim against the plaintiffs for amounts paid apart from the contingency, though they have not pleaded it as such” (Factum of the Appellant at para 18).

[11] The Court notes that it does not read the Defendants’ above request to be a counterclaim “even though it is not pleaded as such”; rather, it is not pleaded as a counterclaim because it is not one. This appears to be a request for disclosure, which, as the Plaintiffs properly note throughout their materials, has not happened yet.

[12] The Plaintiffs claim that the “defence and the defacto counterclaim are inextricably linked to the payment of legal services performed by both Mr. Rankin and Mr. Boudreau” (Factum of the Appellant at para. 20). “The counterclaim would necessarily encompass a consideration of the value of the work done by Mr. Rankin himself while in a solicitor client relationship with Ms. Boudreau” (Appellant’s factum at para. 19).

[13] On this basis, the Plaintiffs assert that a conflict arises. More particularly, they claim that:

a. The Master made palpable and overriding errors in findings of fact concerning the copy of the legal bill attached to the affidavit of Sylvain Parent, dated October 10, 2014;

b. The Master erred in fact and law in finding the plaintiff waived privilege concerning the copy of the legal bill attached to the affidavit of Sylvain Parent, dated October 10, 2014;

c. The Master erred in fact and law in finding the Plaintiffs were unable to rely on solicitor client privilege with respect to the copy of the legal bill attached to the affidavit of Sylvain Parent, dated October 10, 2014;

d. The Master erred in fact and law in failing to find Michael Rankin and McMillan LLP and the Plaintiff, Susanne Boudreau, had been in a solicitor client relationship;

e. The Master erred in fact and law in failing to find that the solicitor client relationship between Michael Rankin and Suzanne Boudreau prevents Michael Rankin and McMillan LLP from continuing to act as lawyers of record for the Defendants in the present litigation;

f. The Master erred in fact and law in failing to find that Michael Rankin’s status as a fact witness with personal knowledge of the facts at issue in the underlying matter means that he should be excluded as acting as counsel of record for the Defendants;

g. The Master erred in relying on information which was not before the court; and,

h. The Master made errors of principle in his award of costs to the Defendants.

Issue I: What is the standard of review in relation to the appeal of a decision of a Master?

[14] At the hearing, both counsel agreed that the standard of review in the case of an appeal from the decision of a Master is as follows:

1. In relation to questions of fact, the appropriate standard of review is “palpable and overriding error” (See: Zeitoun v. Economical Insurance Group, 2008 20996 (ONSC) Div. Ct. (affirmed), 2009 ONCA 415 at para. 40 and 42).

2. In relation to questions of mixed fact and law, where there is no extricable error in principle, the appropriate standard of review is “palpable and overriding error” (See: Hryniak v. Maudlin, 2014 SCC 6, [2014] 1 S.C.R. 87 at para 81).

3. In relation to an incorrect principle of law, an error with respect to a purely legal question, the decision will be reviewed on a correctness standard (See: Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 SCR 87 at para. 81 and 84).

Issue II: Did the Plaintiff waive privilege in the legal invoice dated February 22, 2007?

Appellants’ Position

[15] The Appellant argues that the Master erred in fact and law in finding that the Plaintiff waived privilege in the legal invoice, dated February 22, 2007.

[16] Ms. Boudreau argues that the Master made errors of fact regarding the invoice which lead to an incorrect legal conclusion. In particular, she submits that the following conclusions were errors of fact:

1. That the invoice “demonstrated that work was not billed to her but billed to Loba Limited” (See: paragraph 2);

2. That the invoice “was not directed to Ms. Boudreau but was sent to Loba Limited” (See: paragraph 27);

3. That the invoice “was sent to Loba Limited and not to the Plaintiff” (See: paragraph 28); and,

4. That the invoice was “billed to Loba Limited and paid by [Mr. Parent]” (See: paragraph 28).

[17] The Appellant points out that the invoice was not addressed to “Loba Ltd.” but to “C/O Loba.” She asserts that the invoice was not meant for Loba Ltd.; it was directed to Mr. Parent to be paid by a pension plan associated with Cryptic Web, being a Loba related company located at the same address.

[18] On the basis of the above factual errors, Master MacLeod made a legal error in finding that the doctrine of “shared privilege” applied to justify the loss of privilege for the contents of the affidavit. Since the document was not directed to Loba Ltd., it was not meant to be shared with Loba Ltd.

[19] Further, the Appellants argue that the Master was incorrect in finding that the Plaintiffs waived their privilege in the legal invoice. Despite Ms. Boudreau’s wish to provide evidence showing that Mr. Rankin previously provided her with legal advice, she wanted to preserve her privilege in this invoice.

[20] The Appellants also argue that in his decision the Master’s reliance, at para. 29, on Maritime Steel and Foundries Ltd. v. Whitman Benn and Associates Ltd. (1994), 1994 4317 (NS SC), 114 D.L.R. (4th) 526 (N.S.S.C.), is misplaced. The document in issue in that case was a technical report of an engineer that was shared between two entities who were on the same side, but later, became opposed in interest. The Court in that case was only concerned with litigation privilege, not solicitor client privilege.

[21] The Appellants also argue that Professor Dodek, in the book entitled Solicitor-Client Privilege, (Toronto: LexisNexis, 2014), at pages 138; 247-250, makes it clear that information on lawyers’ accounts, in particular docket entries, are subject to solicitor-client privilege. Where parties with interests in common share privileged information, they do so without having waived individual privilege.

[22] Finally, the Appellants argue that Mr. Parent, as the principal of Welton Parent Inc. and Welton Parent, was acting as the agent of Ms. Boudreau when tasked with the payment of Mr. Rankin’s statement of account on behalf of Ms. Boudreau. The case law is clear: “solicitor-client privilege extends to communications through the intermediary area of an agent.” Furthermore, privilege is not waived by sharing privileged information with third parties for accounting and billing purposes (See: Descoteaux et al. v. Mierzwinski, 1982 22 (SCC), [1982] 1 S.C.R. 860, at page 879; Dodek, Solicitor-Client Privilege, supra at page 138 and 247-250).

Respondents’ Position

[23] The Respondents submit that the findings of fact of the Master related to the invoice were reasonably available based on the entirety of the evidence. The fact that some aspects of the evidence could be capable of alternate interpretation is insufficient to support a finding of misapprehension of the evidence warranting appellate interference.

[24] The Respondents note that Master MacLeod’s finding, that the Appellants’ challenge to the admissibility of the invoice was groundless, is entitled to deference.

[25] The Respondents argue that Ms. Boudreau did not merely state or confirm the existence of an invoice, while intending to maintain privilege; Master MacLeod reproduced paragraph 28 of Ms. Boudreau’s affidavit of June 30, 2014, in which she describes the invoice in detail. In response to this description, the Respondents provided the invoice in question, as it was already in their possession.

[26] The Respondents argue that when privilege is waived, the waiver applies to the entire subject matter of the communication, not only to parts that are helpful to that party (See: Guelph (City) Super Blue Box Recycling Corp., 2004 34954(ONSC), para. 78). In Ranger v. Penterman, 2011 ONCA 412, the Court of Appeal, confirmed that parties cannot waive privilege on a selective basis where it would result in an incomplete and misleading picture being presented to the court.

[27] The Respondents point out that the Appellants bore the onus of proving that it was intended that the communications be kept confidential. They submit that Master MacLeod correctly applied the law when he found that Ms. Boudreau could not simultaneously rely on the contents of the invoice and assert privilege over it (See: Land v. Kaufman, [1991] O.J. No. 1658).

Analysis

[28] The Court has reviewed the invoice in question and notes that it is addressed to “C/O Loba Limited” and that it provides the address for Loba Ltd. If the Appellant intended the invoice to be directed to the care of Cryptic Web, located in the same building, it would have sent it to the care of Mr. Parent or Cryptic Web; not to C/O Loba Limited.

[29] The Court agrees with the argument put forward by the Respondents: the invoice being addressed as “C/O Loba Limited” as opposed to “Loba Limited” is a distinction without a difference. There is ample evidence upon which Master MacLeod could reasonably base his finding that the invoice was not directed to Mr. Parent in his capacity as an agent of a Loba related company, but rather to Loba Ltd.

[30] As the invoice was directed care of Loba Limited, it cannot be said to be a palpable and overriding error to find that it was in fact sent to Loba. There does not appear to be any misapprehension of the evidence by the Master.

[31] Further, it is not a palpable and overriding error, on the basis of the evidence, to find that invoice would be subject to shared privilege or that any privilege over the document had been waived. While the invoice could potentially be subject to a farther reaching version of solicitor client privilege, this argument is undermined for three reasons.

[32] Firstly, the invoice was sent to the Respondents. It was in their possession, prior to any discovery or production taking place in this case. The Respondents are the ones who produced the invoice. This supports a claim for shared privilege; in directing the invoice to the Respondents, the Appellants lost their right to keep the information in that same document confidential from the Respondents.

[33] Secondly, the Appellants referred to the invoice in their own materials and sought to rely on it to support their contention that there is a conflict. At the same time, the Appellants asked that the invoice be inadmissible and subject to privilege. The Ontario Court of Appeal has confirmed that parties cannot waive privilege on a selective basis that results in an incomplete and misleading picture being presented to the Court (See: Ranger v. Penterman, 2011 ONCA 411, at para. 16). This is why, as Justice MacLeod noted at para 24:

The disclosure of a lawyer's account when there is a dispute between the client and the lawyer has long been recognized as justifiable. Similarly, as in the case at bar, if there is a dispute between two parties who were both privy to the account when it was rendered, permitting the account to form part of the evidence on the motion does no violence to protection of privilege.

[34] Beyond this, Master MacLeod noted the irony in the Appellant’s claim for privilege stating, at paragraph. 25:

[e]ven if the nature of the motion itself does not justify disclosure of the services rendered — and in my view it does — the plaintiff has herself put the contents of the account into evidence in her affidavit. She does so while simultaneously claiming privilege but that she cannot do. The situation is even more clear still, given that the invoice was already in the possession of the defendant when the plaintiff tried to claim privilege.

[35] Based on the evidence properly before the Court, the Master did not make a palpable and overriding error in deciding that any privilege over the invoice had been waived.

[36] Thirdly, in determining whether a document is subject to privilege regard must be had to the intention of the communicator at the time the communication occurred; not the time of trial. While it is evident, by virtue of the Appellants’ motion for a sealing order, that they wanted the invoice to be confidential at the time of trial, the Appellants did not meet their onus of showing that the communication was intended to be confidential at the time it was made. Solicitor client privilege will only extend to a communication that is made in confidence that is intended to be kept in confidence. As stated by the Supreme Court of Canada in Solosky (1980), 1979 9 (SCC), 1 S.C.R. 821, at paras 23-24:

Wigmore on Evidence, McNaughton revision (1961), vol. 8, para. 2292, p. 554, framed the modern principle of privilege for solicitor-client communications, as follows:

Where legal advice of any kind is sought from a professional legal adviser in his capacity as such, the communications relating to that purpose, made in confidence by the client, are at his instance permanently protected from disclosure by himself or by the legal adviser, except the protection [can] be waived. [sic]

There are exceptions to the privilege. The privilege does not apply to communications in which legal advice is neither sought nor offered, that is to say, where the lawyer is not contacted in his professional capacity. Also, where the communication is not intended to be confidential, privilege will not attach: O'Shea v. Woods, [1891] P. 286 at 289 (C.A.). [Emphasis Added]

[37] On the evidence before Mr. MacLeod, and this Court, there is no apparent error with factual findings related to the invoice; the “C/O Loba Limited” was directed to the Defendant, Loba. Any potential error in misinterpreting who the invoice was directed at would not make this a palpable and overriding error. For a number of reasons, any privilege over the invoice was waived by the Appellants. Therefore, this ground of appeal fails.

Issue III: Did the Master err in fact and law in finding the Plaintiffs were unable to rely on solicitor client privilege with respect to the copy of the legal bill attached

[38] For the same reasons noted in issue II, above, this ground of appeal also fails. The Master did not make a palpable and overriding error in not allowing the Appellants to assert solicitor client privilege over the invoice.

Issue IV: Did the Master err in failing to find that Michael Rankin and McMillan LLP and the Plaintiff, Susanne Boudreau, had been in a solicitor client relationship

Appellants’ Position

[39] The Appellants take issue with the Master’s finding that “[t]he evidence does not substantiate any risk that Mr. Rankin or Lang Michener would have been privy to confidential information belonging to Ms. Boudreau.” The Appellants submit that the Master’s reliance on the Plaintiffs’ failure to specify what information was at risk is a reversible legal error. The Appellants quote the Supreme Court of Canada, in Martin, supra, at para 48-49:

Typically, these cases require two questions to be answered: (1) Did the lawyer receive confidential information attributable to a solicitor and client relationship relevant to the matter at hand? (2) Is there a risk that it will be used to the prejudice of the client?

In answering the first question, the court is confronted with a dilemma. To explore the matter in depth may require the very confidential information for which protection is sought to be revealed. This would have the effect of defeating the whole purpose of the application… In my opinion, once it is shown by the client that there existed a previous relationship which is sufficiently related to the retainer from which it is sought to remove the solicitor, the court should infer that confidential information was imparted unless the solicitor satisfies the court that no information was imparted which could be relevant. This will be a difficult burden to discharge. Not only must the court's degree of satisfaction be such that it would withstand the scrutiny of the reasonably-informed member of the public that no such information passed, but the burden must be discharged without revealing the specifics of the privileged communication. Nonetheless, I am of the opinion that the door should not be shut completely on a solicitor who wishes to discharge this heavy burden.

[40] The Appellants submit that the Master’s reliance on Mr. Rankin’s claim that he no longer remembers providing legal advice to Ms. Boudreau and that he would not rely on the contents of any privileged communications is a reversible error. Further, the Appellants submit that the Respondents did not discharge their burden of satisfying the court that no information was imparted that could be relevant.

Respondents’ Position

[41] The Respondents note that it has been conceded that Lang Michener LLP, provided advice to Ms. Boudreau. Further, Master MacLeod found that there was no “ongoing” lawyer-client relationship, not that there was no lawyer client relationship.

[42] In determining whether there is a conflict of interest requiring the removal of a counsel of record, the moving party will have to prove: (1) that the lawyer received confidential information attributable to the solicitor client relationship that is relevant to the matter at hand; and (2) that there is a risk that it will be used to prejudice the client (See: Wallace v. Canadian Pacific Railway, 2013 SCC 39, at para 24). “If the lawyer’s new retainer is “sufficiently related” to the matters on which he or she worked for the former client, a rebuttable presumption arises that the lawyer possesses confidential information that raises a risk of prejudice” (Ibid at para 24).

[43] The Respondents submitted that whether the retainers were “sufficiently related” was the crux of the issue before Master MacLeod. This onus of showing that the two retainers were sufficiently related rested with the Appellants. Further the onus was on the Appellants to demonstrate a possibility that Mr. Rankin received confidential information. The Appellants were unable to discharge either burden, as evidenced by Master MacLeod’s findings at paras. 43 to 44 and 53:

The evidence does not substantiate any risk that Mr. Rankin or Lang Michener would have been privy to confidential information belonging to Ms. Boudreau and certainly not information that would not already have been shared between Ms. Boudreau and the defendants. In fact due to the volume of litigation involving Loba, Cryptic Web and Ms. Boudreau herself, there is almost nothing about this dispute that is not already in the public domain. If there is any presumption of misuse of confidential information in these circumstances, it may be rebutted. I accept the evidence of Mr. Rankin that the primary involvement with the file was by a lawyer who is no longer with the firm, that he recalls little or nothing of any discussions with Ms. Boudreau and that he cannot and will not access the file. If there is a conflict here it is primarily a conflict based on the duty of loyalty.

Is it shocking to the conscience and would it bring the administration of justice into disrepute to permit Mr. Rankin to act for Loba in this fee dispute? That would be the case if Ms. Boudreau believed that Mr. Rankin was her lawyer in 2007 and that he is now turning on her by acting for her adversary. It is hard to see how that can be so.

In my view of the evidence I find that the involvement of Lang Michener or Mr. Rankin with the Boudreau leave application was fleeting and minor and no confidential information would have been imparted. Indeed under the circumstances Lang Michener were quite clearly acting in Loba's interests in assisting Ms. Boudreau and legal advice given to her to assist her with her leave application was as much to assist Loba as to assist her. In addition, she herself was in a solicitor client relationship with Loba. She could not reasonably have expected a duty of loyalty which would preclude Mr. Rankin from acting for Loba in the current fee dispute. [Underline added.]

[44] The breach of a duty of loyalty must be grounded in reasonable expectations. Ms. Boudreau was unable to show that the minor assistance that Mr. Rankin provided her gave rise to any reasonable expectation that he would be loyal to her.

Analysis

[45] The retainer between Ms. Boudreau and Lang Michener LLP related to a leave application against the Federal Government. The matter at issue between the Appellants and the Respondents in the present matter is a contingency agreement and potential monies still owing under that agreement. As stated in Wallace v. Canadian Pacific Railway, 2013 ONSC 39, at para 27:

…a lawyer may not represent a client in one matter while representing that client's adversary in another matter, unless both clients provide their informed consent. Binnie J. articulated the rule thus:

The bright line is provided by the general rule that a lawyer may not represent one client whose interests are directly adverse to the immediate interests of another current client — even if the two mandates are unrelated — unless both clients consent after receiving full disclosure (and preferably independent legal advice), and the lawyer reasonably believes that he or she is able to represent each client without adversely affecting the other. [Underline added.]

[46] However, as the Court went on to explain, at para 32:

…the scope of the rule is not unlimited. The rule applies where the immediate legal interests of clients are directly adverse. It does not apply to condone tactical abuses. And it does not apply in circumstances where it is unreasonable to expect that the lawyer will not concurrently represent adverse parties in unrelated legal matters.

[47] The Court then set out four exceptions that limit the scope of the bright line rule, at paras. 33 to 37; namely:

… First, the bright line rule applies only where the immediate interests of clients are directly adverse in the matters on which the lawyer is acting…

…Second, the bright line rule applies only when clients are adverse in legal interest. The main area of application of the bright line rule is in civil and criminal proceedings. Neil and Strother illustrate this limitation. The interests in Neil were not legal, but rather strategic. In Strother, they were commercial:

... the conflict of interest principles do not generally preclude a law firm or lawyer from acting concurrently for different clients who are in the same line of business, or who compete with each other for business....

The clients' respective "interests" that require the protection of the duty of loyalty have to do with the practice of law, not commercial prosperity.

Third, the bright line rule cannot be successfully raised by a party who seeks to abuse it. In some circumstances, a party may seek to rely on the bright line rule in a manner that is "tactical rather than principled." The possibility of tactical abuse is especially high in the case of institutional clients dealing with large national law firms. Indeed, institutional clients have the resources to retain a significant number of firms, and the retention of a single partner in any Canadian city can disqualify all other lawyers within the firm nation-wide from acting against that client.

Finally, the bright line rule does not apply in circumstances where it is unreasonable for a client to expect that its law firm will not act against it in unrelated matters….In some cases, it is simply not reasonable for a client to claim that it expected a law firm to owe it exclusive loyalty and to refrain from acting against it in unrelated matters. As Binnie J. stated in Neil, these cases are the exception, rather than the norm. Factors such as the nature of the relationship between the law firm and the client, the terms of the retainer, as well as the types of matters involved, may be relevant to consider when determining whether there was a reasonable expectation that the law firm would not act against the client in unrelated matters. Ultimately, courts must conduct a case-by-case assessment, and set aside the bright line rule when it appears that a client could not reasonably expect its application.

[48] It is clear from Master MacLeod’s decision that he engaged in a thorough assessment of Ms. Boudreau’s case. He very clearly chose not to apply the bright line rule, in an instance where the client, Ms. Boudreau, could not reasonably expect its application.

[49] Master MacLeod’s conclusion on this issue, found at paras. 51 to 53 of his decision, makes it clear that he considered and applied the appropriate law:

The duty of loyalty is grounded in part on reasonable expectations… The "bright line rule" does not apply in this case. There is no simultaneous representation of parties adverse in interest. On the facts of this case I simply cannot conclude that Ms. Boudreau would be justified in expecting that Loba's lawyers would have to cease acting should there subsequently be a dispute over her fees in the tort action.

Nor is this a situation in which Mr. Rankin is taking a position contrary to the position he was attempting to advance on behalf of Ms. Boudreau. There is nothing about the fee dispute that brings into question the merits of the Minister's decision or the attempt to appeal it.

In my view of the evidence I find that the involvement of Lang Michener or Mr. Rankin with the Boudreau leave application was fleeting and minor and no confidential information would have been imparted. Indeed under the circumstances Lang Michener were quite clearly acting in Loba's interests in assisting Ms. Boudreau and legal advice given to her to assist her with her leave application was as much to assist Loba as to assist her. In addition, she herself was in a solicitor client relationship with Loba. She could not reasonably have expected a duty of loyalty which would preclude Mr. Rankin from acting for Loba in the current fee dispute.

[50] Based on the Court’s review of the evidence, there has been no misapprehension of the evidence by Master MacLeod. His application of Wallace v. Canadian Pacific Railway is completely appropriate; no palpable and overriding error was made with regard to whether there was a solicitor client relationship. Any solicitor client relationship between Ms. Boudreau and Lang Michener and/or McMillan LLP was not, at that point in the litigation, sufficient to conflict Mr. Rankin out of acting for the Defendants.

Issue V: Did the Master err in fact and law in failing to find that the solicitor client relationship between Michael Rankin and Suzanne Boudreau prevents Michael Rankin and McMillan LLP from continuing to act as lawyers of record for the Defendants in the present litigation

[51] For the same reasons noted in issue IV, above, this ground of appeal also fails. The Master did not make a palpable and overriding error in failing to find that the solicitor client relationship between Mr. Rankin and Ms. Boudreau prevents Mr. Rankin and McMillan LLP from acting for the Respondents in the present litigation.

Issue VI: Did the Master err in failing to find that Mr. Rankin’s status as a potential fact witness excludes him from acting as counsel of record for the Respondents?

Appellants’ Position

[52] The Appellants argue the Master erred in fact and law in finding that Mr. Rankin’s status as a potential witness with personal knowledge of the underlying facts of the matter does not exclude him from acting as counsel of record for the Respondents.

[53] They argue that Mr. Rankin was personally involved and had firsthand knowledge with respect to the legal and other circumstances surrounding the litigation of Loba’s claim. They claim that he is likely a witness regarding evidence that will be significant to potential trial issues. The Appellants rely on the following cases to asserting that the lawyer only has to be a potential, not a likely witness, to be excluded: Mazinani v. Bindoo, 2013 ONSC 4744, para. 71; Karas v. Ontario 2011 ONSC 5181, at para. 34; and, Levico v. Rona, 2015 ONSC 2077, at para. 14.

[54] The Appellants also argue that a lawyer should be removed as solicitor of record where his previous involvement with the underlying facts is incompatible with his role as an advocate – even if he may not be a witness (See: Young-Tangjerd v. Official Board of Calvary United Church, [2006] O.J. No. 2061, at para. 7). They argue that the Master erred in ruling on Mr. Rankin’s status as a witness, as opposed to ruling on the basis of his incompatibility as an advocate, even if not called as a witness.

Respondents’ Position

[55] The Respondents argue that the cases cited by the Appellant do not stand for the proposition that a lawyer will be disqualified as counsel of record if he or she is a “potential witness.”

[56] The Respondents argue that the Appellants are required to establish that a fair minded, reasonably informed member of the public would conclude that the proper administration of justice requires the removal of Mr. Rankin as solicitor of record for the Respondents (See: Mazinani at para. 60; Karas at para. 26; and Levico at para. 6. This is to be considered with a view to the following factors, set out in Essau at para 48, as quoted in Mazinani, 2013 ONSC 4744, at para 61:

(i) the stage of the proceedings,

(ii) the likelihood that the witness will be called,

(iii) the good faith (or otherwise) of the party making the application,

(iv) the significance of the evidence to be led,

(v) the impact of removing counsel on the party's right to be represented by counsel of choice,

(vi) whether trial is by judge or jury,

(vii) who will call the witness if, for example, there is a probability counsel will be in a position to cross-examine a favourable witness, a trial judge may rule to prevent that unfair advantage arising, and

(viii) the connection or relationship between counsel, the prospective witness and the parties involved in the litigation.

[57] The Respondents submit that Master McLeod considered these factors, and found that the Appellants failed to establish that Mr. Rankin can likely or probably provide material evidence. Neither Mr. Rankin nor anyone from Lang Michener LLP was involved in the drafting of the contingency agreement at issue; there is no risk of Mr. Rankin being a witness on this point. The Respondents, therefore, dispute the necessity of Mr. Rankin to testify to accounting issues related to the agreement. Further, even if there were relevant accounting issues, Mr. Parent, who incurred the expenses and accounted for hours spent under step two of the agreement can speak to the lack of funds for step three, on the basis of invoices, dockets, and other business records.

[58] On this basis, Master MacLeod appropriately held that he would not remove Mr. Rankin as the solicitor of record.

Analysis:

[59] The Court has reviewed Mazinani, Karas and Levico. There is a minimum threshold required to remove a solicitor from acting as the lawyer of record.

[60] Mr. MacLeod was cognizant of the fact that lawyers generally cannot act as witnesses and counsel for a case. He stated, at para. 54:

Though it is not an absolute rule, the cases are clear that a lawyer such as Mr. Rankin should generally not be permitted to act as both advocate and witness and may not properly act as counsel when he or his law firm have a personal stake in the outcome of the litigation.

[61] He considered relevant case law and noted the risk factors present in the case at hand, at paras. 54 and 60-61:

Either situation may undermine the independence and integrity of the barrister by inhibiting his ability to properly discharge his duty to the court and to his client. If that risk is found to be significant then he should be removed from the record.

I recognize that undertaking not to call the lawyer as witness is not a complete answer. In the first place if the lawyer is truly a witness to a material fact then the opposing party could issue a summons. There are cases in which lawyers have been removed because of their deep personal involvement in the facts on the basis that it may affect the fairness of the process even if they do not give evidence. Any situation in which the lawyer's duty to act as an independent officer of the court and a fearless advocate for the client conflicts with the personal interest of the lawyer and his or her law firm may be grounds for removal. Situations in which the quality of the legal advice provided by the firm are implicitly on trial have been held to create such a conflict. Similarly even if the lawyer avoids being called as a witness, if it is clear the lawyer is so privy to the facts in issue that he or she will be unable to cross examine on the "basis of his brief but on the basis of his participation in the event or transaction" removal may be justified.

…Of course it would be improper to require a lawyer to give evidence about legal advice or other legal services which remain subject to privilege. In this case it is conceivable that Mr. Rankin's evidence might be required if there is a significant issue concerning legal services rendered by him. It is conceivable but by no means inevitable and the evidence before me on that point is largely speculative

[62] At para. 62 of his decision, Master MacLeod found the following:

As things stand therefore, at this point in time, the evidence does not support the removal of the solicitor. As noted above, Mr. Rankin denies any direct knowledge of what work was done by Ms. Boudreau. The suggestion that he will have to defend the value of the work by Lang Michener or by McMillian is purely speculative and the affidavit material is insufficient to persuade the Court that he is an essential or probable witness. I do not rule out the possibility that events will transpire in future which will require this issue to be revisited but at the moment, the risk appears hypothetical at best. [Emphasis added]

[63] The Court notes that Master MacLeod was cognizant of the fact that, at that specific point in time, the evidence did not support the removal of Mr. Rankin as the solicitor of record. However, as Master MacLeod pointed out, it may be necessary to revisit the issue at a later point in time.

[64] While there is some room to find that Master MacLeod could potentially have decided this particular issue another way, this is a question of mixed fact and law to which a palpable and overriding error standard applies. Master MacLeod’s decision considered the appropriate law and applied it to the facts. His determination deserves deference; any potential error with regard to this issue does not rise to the level of a palpable and overriding error.

[65] Therefore, the Court does not find that Master MacLeod erred in relation to this ground. This ground of appeal also fails.

Issue VII: Did the Master err in using information which was not before the Court, thereby contributing to a decision not supported by the evidence properly before the Court?

Appellants’ Position

[66] The Appellant argues that the Master erred in fact and law by taking judicial notice of facts that were not before the Court. In particular, it is submitted that he erred in fact and law by relying on information and representations of counsel of other related parties obtained from the Hart v. Canada, [2012] ONSC 3534, matter.

[67] The Appellant further argues that the Master made an incorrect factual finding at para. 45, that “the Plaintiff played many roles at once.” One of the roles mistakenly ascribed to the Plaintiff is described in paragraph 4(b) of his decision being “the efforts by Loba and the Plaintiff Suzanne Boudreau to overturn the de-registration.”

Respondents’ Position

[68] The Respondent argues that the Appellants did not identify any facts that were not before the Court. Further, they did not specify how the facts, purportedly not in evidence, affected the Master’s decision.

[69] The Respondent argues the Master’s involvement in the Hart case is completely irrelevant to this decision and to the alleged conflicts of interest in relation to Mr. Rankin and his law firm.

Analysis:

[70] Based on a thorough reading of Master MacLeod’s decision, the Court is satisfied that he considered all of the facts and relevant legal principles in arriving at his decision to dismiss the Appellant’s motion.

[71] While Master MacLeod may have heard the Hart matter, that is a separate matter which is irrelevant to this one. Judges and Masters are trusted to only consider the matters before them. The Appellants have not given the Court any reason to doubt Master MacLeod’s ability to do so.

[72] Further, the fact that Master MacLeod made a reference to “reciprocal transfer agreements” instead of “reciprocal pension transfer agreements” is not a palpable and overriding error. At its highest interpretation in favour of the Appellants, this is a very minor error.

[73] As to the roles played by Suzanne Boudreau, the Court does not understand the logic of the Appellants’ argument in relation to paragraph 4(b) of the Master’s decision. There is clear evidence that both Loba and Suzanne Boudreau wanted to overturn the de-registration of the pension plans by the Minister of National Revenue. Therefore, this argument is also rejected.

[74] The Court finds that the Master relied on information properly before the Court; no error was made.

Issue VIII: Should the costs award made by Master MacLeod be set aside?

Appellants’ Position

[75] The Appellants argue that the Master erred in principle in three respects concerning the costs decision:

a) by holding that the Respondents partial indemnity rate should be 80% of the actual fee for actual time spent;

b) allowing for significant overlap of double counting of senior counsel representing the Defendants in the action and outside counsel representing the Defendants/Respondents on the motion; and,

c) failing to apply the principles of reasonableness and proportionality.

Respondents’ Position

[76] The Respondents argue that the costs are discretionary (See: Laurin v. Martin, 2008 ONCA 512. They rely on Goldentuler v. Mercedes Benz Canada Inc., 2014 ONCA 361, in asking this Court to provide deference to Master MacLoed’s costs decision. Paragraph 6 of Goldentuler states:

The standard of review as to costs is high – a costs award should only set aside if the trial judge has made an error in principle or if the costs award is plainly wrong.

Indeed, an award of costs is a discretionary order to which the appellant court will give considerable deference.

Analysis:

[77] As stated in the Goldentuler, a costs award should only be set aside if the Judge has made an error in principle or if the costs award is plainly wrong.

[78] The Court has reviewed the very thorough costs decision of the Master in which he reviewed the necessary principles related to costs. The costs award is not plainly wrong; the Defendants were successful on the motion and, as such, they were presumptively entitled to the costs they were granted.

[79] The Court does not see any error in principle in terms of the award of costs or the amount of costs.

[80] The Court was aware that two senior counsel were involved on the file for the Respondents. In relation to this, Master MacLeod stated at para. 9:

The actual total of the fees calculated, the applicable rate was $43,471. By contrast Mr. Lepsoe’s costs outline contains only his own time and he has not provided a calculation for anything other than partial indemnity, multiplying the hours spent by his full actual hourly rate which would generate a bill of less than half the amount.

[81] At the hearing of the appeal, Mr. Lepsoe was asked how much he billed on a partial indemnity basis. He confirmed that it was approximately $13,860, inclusive of disbursements and HST. The Court notes that the $13,860 is a much greater figure than the $5,000 to $10,000, suggested by Mr. Lepsoe at the hearing of the appeal as being the appropriate amount for costs.

[82] Master MacLeod acknowledged, at paras. 13-14, that he used a partial indemnity rate of 60% for Mr. Rankin’s portion of the fees and a partial indemnity rate of 80% for Ms. Williams’s portion of the fees, after reducing the Respondent’s account by $14,000. Furthermore, at para. 15 Master MacLeod reasoned:

As I said earlier in these reasons, the Court is not bound by slavish adherence to hourly rates nor to a particular formula. Having regard to the difficulty and complexity of the motion, the importance of the issues and considering the balancing exercise required under the rule, partial indemnity costs of $21,813 seems appropriate. To this must be added HST of $2,835.69 and disbursements of $377.76. This totals $25,026.45.

[83] Based on the aforesaid, the Court finds that the Master’s costs award to be appropriate. He did not err in relation to the issue of costs.

Conclusion

[84] Based on the above analysis, all the Appellants’ grounds of appeal fail. Therefore the appeal is dismissed.

Costs:

[85] The parties have exchanged Cost Outlines. The parties will have 15 days to resolve the issue of costs of this appeal. If they are unable to do so, they shall contact the trial co-ordinator and request 30 minutes at 9:30 a.m. on a date to be set by the trial co-ordinator. Each party will have 10 minutes to argue the issue of costs.

[86] Order accordingly.

KERSHMAN J.

Released: August 4, 2015

APPENDIX

The following words were removed from paragraph 14.1:

or questions of mixed fact and law

The following paragraph is inserted in the place of paragraph 14.2:

In relation to questions of mixed fact and law, where there is no extricable error in principle, the appropriate standard of review is “palpable and overriding error” (See: Hryniak v. Maudlin, 2014 SCC 6, [2014] 1 S.C.R. 87 at para 81).

Paragraph 14.2 was not modified but became paragraph 14.3.

The following modification was made to the first sentence of paragraph [82]: paras. 13-14

The following words are added to paragraph [82] after the words “partial indemnity rate of 60%”:

for Mr. Rankin’s portion of the fees and a partial indemnity rate of 80% for Ms. Williams’s portion of the fees

OTTAWA COURT FILE NO.: 13-59218

DATE: 2015/08/04

ONTARIO
SUPERIOR COURT OF JUSTICE

B E T W E E N:

Joseph Andre Boudreau and Suzanne Boudreau
Plaintiffs/Appellants

– and –

Loba Limited, Welton Parent Inc. and Sylvain Parent

Defendants/Respondents

AMENDED REASONS FOR DECISION

KERSHMAN J.

Released: August 4, 2015