SUPERIOR COURT OF JUSTICE - ONTARIO

CITATION: Sabean v. Aikman, 2017 ONSC 7278

COURT FILE NO.: CV-12-455556

DATE: 20171205

RE: LOUIS GORDON SABEAN, HEATHER ANNE TEITLER and SIAN PATRICIA SABEAN represented by her litigation guardian HEATHER ANNE TEITLER, Plaintiffs

AND:

BRUCE ROBERT AIKMAN and SEAWAY YARNS LTD., Defendants

BEFORE: Cavanagh J.

COUNSEL: Jason E. Brown and Mark A. De Sanctis, for the Plaintiffs

Jeffrey R. Goit, for the Defendants

HEARD: October 11, 2017

ENDORSEMENT

Introduction

[1] This is an appeal by Louis Gordon Sabean (“Louis”), a plaintiff and defendant by counterclaim, from the Order of Master Dash dated October 18, 2016 dismissing Louis’ motion, brought as a defendant to the counterclaim, for an order removing Mr. Jeffrey Strype and his firm Strype Barristers LLP, counsel for the plaintiff Sian Patricia Sabean (“Sian”), as her lawyer of record in this action.

[2] The question on this appeal is whether the Master erred in finding that Mr. Strype did not have a disqualifying conflict of interest such that he should be removed as the lawyer of record for Sian.

[3] For the following reasons, I conclude that the Appellant has failed to show that the Master, in making his decision, made an error of law or exercised his discretion on the wrong principles or that he misapprehended the evidence such that there is a palpable and overriding error. As a result, the appeal is dismissed.

Background Facts

The Collision

[4] The subject matter of this action is a motor vehicle accident that took place on December 7, 2010. Louis was the driver of a motor vehicle and Sian, his daughter, was a front-seated passenger. The motor vehicle operated by Louis was rear-ended by the vehicle operated by the defendant Bruce Robert Aikman (“Aikman”) and owned by the defendant Seaway Yarns Ltd. (“Seaway”).

Procedural History Leading to Motion to Disqualify Sian’s Counsel

[5] The plaintiffs issued the Statement of Claim in this action on June 7, 2012. The plaintiffs did not name Louis as a defendant. The plaintiffs allege that they sustained a broad range of serious and permanent injuries as a result of the collision, and each claims $3,000,000 in damages arising from their alleged injuries.

[6] The Statement of Defence and Counterclaim (named incorrectly as the Statement of Defence) was delivered on March 25, 2013. The Defendants deny liability for the accident and allege that the accident was caused solely by Louis. The Defendants counterclaimed against Louis for contribution and indemnity for any damages, interest or costs for which the Defendants may be found liable to pay the Plaintiffs. This counterclaim is for contribution and indemnity of the entire $3,000,000 claim of Sian. The amount of the counterclaim exceeds the policy limits of $1 million under Louis’ insurance policy.

[7] The limit of the Defendants’ insurance policy is $2,000,000.

[8] One and one-half years after being served with the Statement of Defence, Louis reported the counterclaim to his insurer and asked that he be defended. His insurer retained counsel, John Aikins of Riley + Aikins, to represent him on the counterclaim.

[9] Louis is involved in this action in two capacities: as a plaintiff with his own claim for damages and as a defendant to the counterclaim in which a claim is made against him for contribution and indemnity for the claim of Sian. In this second capacity, he owes his insurer a duty of cooperation and good faith.

[10] Louis and Sian have sworn affidavits indicating that Mr. Strype has advised them of the possibility of a conflict of interest, that they could have sought independent legal advice with respect to the possibility of a conflict, that they expressly waive any potential and/or actual conflict, and that they have full confidence that Strype Barristers LLP continues to act in their best interests.

[11] On April 20, 2016, Mr. Strype made an offer on behalf of the Plaintiffs to limit the Plaintiffs’ collective claims to the Defendants’ applicable insurance policy limits in exchange for an admission of liability. This offer was not accepted.

[12] A motion was brought by Louis in his capacity as a defendant to the counterclaim for a determination of whether Mr. Strype is in a conflict of interest in acting for both plaintiffs and, if so, removing Mr. Strype as solicitor of record for Sian. Louis was represented by Mr. Aikins on this motion.

[13] The motion was heard by Master Dash (the “Master”) who dismissed the motion.

Reasons for Decision of the Master

[14] In his reasons, the Master identified the following alleged conflicts on the part of Mr. Strype in representing both Sian and Louis as plaintiffs that were raised by counsel for the Appellant:

a. Mr. Strype’s client, Sian, has an interest in maximizing her own damages. Mr. Strype’s other client, Louis, by virtue of the fact that he is also a defendant by counterclaim, could be found liable for indemnifying the defendants for all or part of Sian’s damages, and as such has an interest in minimizing Sian’s damages. This is compounded by the fact that Sian’s claim exceeds Louis’s policy limits with his insurer. There is as a result a risk of impaired representation.

b. There is a risk that Louis could pass on confidential information to Mr. Strype about Sian that Louis may have learned in his capacity as defendant by counterclaim, for example, from Mr. Aikins.

[15] The Master considered similar cases in the jurisprudence, and wrote that neither counsel had provided jurisprudence that is factually on all fours with the situation before him. The Master considered that each case is fact specific and all of the circumstances must be considered in determining if there is an inherent conflict with the risk of impaired representation or if there is a substantial risk of improper disclosure of confidential information.

[16] The Master wrote that should Louis be found partially at fault for the accident such that his insurer would be required to indemnify the defendants for Sian’s damages, the interests of Louis as defendant to the counterclaim could be theoretically conflicted with the interests of Sian as plaintiff on the issue of Sian’s damages. The Master considered this policy to be slim. The Master referred to evidence that Mr. Strype formally offered to restrict the combined claims to the defendants’ policy limits (of $2 million) if the defendants admitted liability, and that the defendants have to date not accepted that offer. The Master acknowledged that the Plaintiffs have not formally reduced their claims to an amount within the Defendants’ insurer’s policy limit.

[17] The Master wrote that it was unclear to him how this conflict would play out in practical terms. He wrote that, “given the combined claim within the Aikman policy limit”, there are no conflicting claims by Sian and Louis to limited funds. The Master wrote that the situation would be no different if there were two separate lawyers, one representing Sian as plaintiff and the other representing Louis as plaintiff in the situation where, as here, Louis has not been named as a defendant. The Master noted that once Louis was named as a defendant to the counterclaim, Mr. Strype did not represent him but sent him to his insurer to appoint defence counsel. The Master noted that Mr. Strype does not purport to act for Louis as defendant in any capacity and that there is no evidence that Mr. Strype ever gave advice to or assisted Louis in his capacity as defendant to the counterclaim.

[18] The Master concluded that, in his view, the likelihood of conflict on damages is remote and contingent, rather than actual or likely. In his view, the risk of conflict is minimal, rather than substantial.

[19] The Master wrote that even if there were a risk of conflict, Sian and Louis have waived that conflict as they had a right to do. The Master wrote that each has sworn an affidavit indicating that Strype Barristers has advised them of the possibility of a conflict of interest arising out of their claims for damages surpassing the defendants’ policy limits, have been advised of the right to independent legal advice, have waived “all potential and/or actual conflicts of interest” between them and have given written authority to Mr. Strype to act as their respective solicitor notwithstanding any potential conflict. The Master wrote that he has no reason to believe that the consents of Sian and of Louis are anything other than fully informed consents.

[20] The Master also addressed in his reasons whether there is a risk that Louis could pass on confidential information to Mr. Strype about Sian, if both remain his clients, which would benefit Sian as plaintiff and detrimentally affect Louis’ interest as defendant to the counterclaim. The Master addressed examples of how confidential information could be improperly transmitted, and he concluded that there is no evidence that Mr. Strype has received evidence from Louis contrary to the interests of Sian or contrary to Louis’ interest as a defendant to the counterclaim, and the Master concluded that the ongoing risk of disclosure of confidential information is clearly speculative rather than genuine and substantial.

[21] The Master concluded that the likelihood of conflict of interest, risk of impaired representation or risk of real mischief is remote, speculative and minimal, rather than actual, substantial or likely. The Master wrote that, in his view, the immediate legal interests of Sian and Louis in the circumstances of this case are not directly adverse. He concluded by writing that, in his view, a fair minded reasonably informed member of the public would not conclude that the proper administration of justice required the removal of the Plaintiffs’ solicitor of choice in the circumstances of this case.

Analysis

[22] The following issues arise on this appeal:

a. Did the Master err in finding that the likelihood of conflict of interest and the risk of impaired representation, or risk of real mischief, is remote, speculative and minimal, rather than actual, substantial or likely, such that the immediate legal interests of Sian and Louis in the circumstances are not directly adverse?

b. Did the Master err in finding that Louis and Sian waived any potential conflict of interest and consented to Mr. Strype continuing to act for both of them?

c. Did the Master err in finding that the risk that Louis could pass on confidential information to Mr. Strype about Sian if both remained his clients is not sufficient for him to find that Mr. Strype is in a disqualifying conflict of interest?

Standard of Review

[23] The appropriate standard of review of a Master’s order, whether it be final or interlocutory, is that the decision 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: Zeitoun v. Economical Insurance Group, 2008 20996 (ON SCDC), 2008 CarswellOnt 2576 (Div. Ct.), at paras. 40-42; aff’d 2009 ONCA 415.

[24] The decision of a Master is entitled to considerable deference. In Wellwood v. Ontario Provincial Police, 2010 ONCA 386 Cronk J.A. wrote at para. 28:

It is now settled law in Ontario that an appeal from a Master’s decision is not a rehearing. Rather, on questions of fact and mixed fact and law, deference applies and the role of the reviewing court is limited. An appellate court cannot substitute its interpretation of the facts or re-weigh the evidence simply because it takes a different view of the evidence from that of the Master. On questions of law, the correctness standard applies [citations omitted].

Master’s statements of applicable legal principles

[25] In paragraphs 6 to 14 of his reasons, the Master set out the legal principles that apply to the motion before him.

[26] The Master referred to the Rules of Professional Conduct of the Law Society of Upper Canada that state that “a lawyer shall not act or continue to act for a client where there is a conflict of interest, except as permitted under the rules…” The Master cited Rule 1.1-1, and wrote that a “conflict of interest” is defined as “the existence of a substantial risk that a lawyer’s loyalty to or representation of a client would be materially and adversely affected by the lawyer’s own interests or the lawyer’s duty to another client... The risk must be more than a mere possibility; there must be a genuine, serious risk to the duty of loyalty or to client representation arising from the retainer.” The Master quoted from Commentary [1] under the definition of “conflict of interest” in rule 1.1-1, which states that substantial risk “means that the risk is significant and plausible, even if it is not certain or even probable that the material adverse risk will occur”.

[27] The Master, at paragraph 7 of his reasons, wrote, citing Rule 3.4-2 of the Rules of Professional Conduct, that a lawyer may represent a client in a matter when there is a conflict of interest if “there is express or implied consent from all clients and it is reasonable for the lawyer to conclude that he or she is able to represent each client without having a material adverse effect upon the representation of or loyalty to the other client.”

[28] The Master, at paragraph 12 of his reasons, wrote:

[12] The Supreme Court of Canada in Wallace v. Canadian Pacific Railway has recently considered the bright line rule when a lawyer purports to act for adverse parties:

The bright line rule holds that a law firm cannot act for a client whose interests are adverse to those of another existing client, unless both clients consent.

The consent must be given “after receiving full disclosure”, preferably (but not necessarily) with independent legal advice and “the lawyer reasonably believes that he or she is able to represent each client without adversely affecting the other.” [citations omitted]

[29] In my view, the Master correctly stated the general legal principles to be applied in paragraphs 6-14 of his reasons.

Did the Master err in finding that the likelihood of conflict of interest and the risk of impaired representation, or risk of real mischief, is remote, speculative and minimal, rather than actual, substantial or likely, such that the immediate legal interests of Sian and Louis in the circumstances are not directly adverse?

[30] The Appellant submits that Mr. Strype is in an actual disqualifying conflict that cannot be waived because, as the Master noted at paragraph 39 of his reasons, should Louis be found partially at fault for the accident such that his insurer would be required to indemnify the Defendants for Sian’s damages, the interests of Louis as defendant to the counterclaim could theoretically be in conflict with the interests of Sian as plaintiff on the issue of damages.

[31] The Appellant agrees that these circumstances raise a conflict, and submits that the Master erred in law by concluding that the conflict is only theoretical, given that both liability and damages are live issues.

[32] With respect to the Master’s treatment of the risk of Louis being held liable, the Appellant submits that the Master erred by placing undue reliance on the fact that the collision was a rear end collision. The Appellant submits that the allegation of negligence creates the conflict, and not an actual finding of liability, and that the Master made findings of liability that were unsupported. The Appellant submits that by incorrectly focusing on findings of liability, the Master erroneously turned the conflict motion into a motion to test the strength of the Defendants’ counterclaim, without the benefit of submissions or responding materials from the Defendants.

[33] I disagree with the Appellant’s submission that the Master made a finding that Louis would not be liable. The Master considered the evidence before him with respect to how the collision occurred as part of a proper assessment of the circumstances that would inform his decision concerning whether there was a disqualifying conflict of interest that could not be waived. The Master referred to long-standing jurisprudence with respect to liability for rear-end collisions in Ontario in order to assess the likelihood of a finding of liability on the part of Louis on the record before him. The Master properly used this assessment as part of his analysis to determine whether there is a disqualifying conflict of interest and a substantial risk of impaired representation, or actual impaired representation. In my view, it was open to the Master, and proper, to consider the likelihood of a finding of liability on the part of Louis with respect to the accident, and to conclude that it is unlikely that there will be a finding of liability on his part. The Master did not have evidence from the Defendants before him on the issue of liability, but he recognized that, given the pleadings, it was possible that Louis could be found partially at fault, and he took this possibility into consideration as part of his analysis.

[34] The Master was required to assess whether the circumstances are such that there is a genuine, serious risk to the duty of loyalty or to client representation arising from the retainer. I conclude that the Appellant has failed to show that the Master made a palpable and overriding error in his assessment of the circumstances that relate to the risk that Louis may be found to be liable for the damages that were caused by the collision, and in using this assessment to inform his analysis of whether Mr. Strype is in a disqualifying conflict of interest that cannot be waived.

[35] The Appellant also submits that the Master made a palpable and overriding error in his consideration of the likelihood of the Plaintiffs’ claims exceeding the policy limit of the Defendant’s insurer. The Appellants submit that the Master incorrectly decided, in his reasons at paragraphs 39-40, that the Plaintiffs’ claims do not exceed this policy limit whereas, in fact, the Plaintiffs are continuing to assert their claims as pleaded, with each claiming damages of $3 million. The Master, in paragraph 39 of his reasons, referred to “the agreement of Mr. Strype that the combined damages of Sian and Louis will not exceed the insurance limits on the defendants’ vehicle”. The Master, in paragraph 40 of his reasons, wrote that the combined claim was “within the Aikman policy limit”.

[36] It is clear from the Master’s reasons when read as a whole that he understood that the Plaintiffs’ offer to limit their claims in exchange for an admission of liability was not accepted, and that the Plaintiffs had not formally reduced their claims to an amount within the Defendants’ insurance policy limits: see paragraphs 5, 39 and 60 of the Master’s reasons. In paragraph 60, the Master stated that “they [the Plaintiffs] have not formally reduced their claims to an amount within those limits”. I therefore disagree with the Appellant’s submission that the Master incorrectly decided that the Plaintiffs’ claims do not exceed the policy limit of the Defendants’ insurer.

[37] In my view, the Master did not err in finding that the evidence that the Plaintiffs’ counsel acknowledges that the Plaintiffs’ combined claims will not exceed the Defendants’ $2,000,000 policy limits, plus costs, is a relevant circumstance that he was entitled to take into consideration in assessing whether there is a substantial risk that Mr. Strype’s loyalty to or representation of Sian would be materially and adversely affected by the counterclaim by the Defendants against Louis.

[38] I conclude that the Appellant has failed to show that the Master made a palpable and overriding error by describing the Plaintiffs’ position with respect to damages as he did.

[39] The Appellant has failed to show that the Master made palpable and overriding errors in his consideration of the circumstances and in his conclusions that the likelihood of conflict on damages is remote and contingent, rather than actual or likely, and that risk of conflict is minimal, rather than substantial.

Did the Master err in finding that Louis and Sian waived any potential conflict of interest and consented to Mr. Strype continuing to act for both of them?

[40] In his reasons, the Master wrote that Louis and Sian have waived the conflict as they had a right to do, and that they consented to Mr. Strype continuing to act as their lawyer notwithstanding any potential conflict. The Master wrote that he has no reason to believe that the consents given by Louis and Sian are anything other than fully informed consents.

[41] On the motion before the Master, affidavits from Sian, Louis and Mr. Strype were filed. The Appellant chose not to cross-examine any of the deponents on their affidavit.

[42] Louis, in his affidavit, gave evidence that he waives all potential and/or actual conflicts of interest between himself and Sian and that he has given written authority to Strype Barristers LLP to continue to act as solicitors for himself notwithstanding any potential conflict with Sian. Sian, in her affidavit, gave evidence that she waives all potential and/or actual conflicts of interest between herself and Louis and she confirms that she has given written authority to Strype Barristers LLP to continue to act as solicitors for herself in this proceeding, notwithstanding any potential conflict with Louis. Both Louis and Sian gave evidence that they had been advised by Strype Barristers LLP and understand that each could have sought independent legal advice with respect to the possibility of a conflict.

[43] The Appellant submits that the affidavits of Louis and Sian do not refer to their having received advice from Mr. Strype concerning a possible conflict because of the counterclaim, but refer only to a potential conflict arising out of their claims for damages surpassing the insurance policy amounts held by the Defendants. The Appellant submits that there is insufficient evidence to support a finding that there was fully informed and voluntary consent from both clients given the nature of the conflict with respect to Sian’s damages.

[44] The three affidavits were sworn in response to the motion that was heard by the Master. The issue relating to the possible conflict arising from the counterclaim was squarely before the court on this motion. The statements in the affidavits of Louis and Sian that each waives all potential and/or actual conflicts of interest are clear and unqualified. I do not agree that the fact that the counterclaim is not specifically referenced in the affidavits leads to a fair inference that the effect of the counterclaim was not discussed with Louis and Sian by Mr. Strype.

[45] If counsel for the Appellant wished to challenge the statements made in the affidavits in order to obtain evidence that the statements by Sian and Louis that each waives any potential or actual conflict of interest were made without the informed consent of each client, it was open to him to cross-examine Sian, Louis and/or Mr. Strype on their affidavits. I do not accept the submission made on behalf of the Appellant that the fact that Louis, in his capacity as defendant by counterclaim, is the client of counsel for the Appellant, and that this relationship introduces a very awkward situation in having counsel for the Appellant conduct a cross-examination of his own client, is a sufficient explanation for the failure to cross-examine any of the deponents.

[46] The Master addressed, in paragraph 44 of his reasons, the question of what discussions took place about potential conflict at various times, including after the alleged conflict was raised by counsel for the Appellant. The Master, having considered the evidence and the submissions, concluded that he has “no reason to believe that the consents of Sian and of Louis are anything other than fully informed consents”. By failing to cross-examine any of the deponents, the Appellant took the risk that the unchallenged evidence given by Sian and Louis would be accepted by the Master.

[47] The jurisprudence is clear that considerable deference is owed to a Master on a review of his or her decision, and that an appellate court must not substitute its views for the views of the Master unless the Master has made a palpable (readily or plainly seen) and overriding error. I see no basis upon which to conclude that the Master misapprehended the evidence with respect to whether the consents given by Sian and Louis were fully informed ones. I conclude that the Appellant has failed to show that the Master made a palpable and overriding error in this respect.

[48] The Appellant also submits that the nature of the conflict here is such that Sian’s representation will be actually impaired if Mr. Strype continues to represent both clients, even with client consent. The Appellants point to Commentary [0.1] to section 3.4-2 of the Rules of Professional Conduct that states:

Rule 3.4-2 permits a client to accept the risk of material impairment of representation or loyalty. However, the lawyer would be unable to act where it is reasonable to conclude that representation or loyalty will be materially impaired even with client consent. Possible material impairment may be waived but actual material impairment cannot be waived.

The Appellant submits that that Strype Barristers LLP is in a disqualifying conflict of interest that cannot be waived, and that to allow the firm to continue to represent Sian would bring the integrity of the administration of justice into disrepute.

[49] The Respondents submit that there is no actual material impairment in this case.

[50] The Master recognized the possibility of a conflict of interest, but he concluded that the likelihood of conflict of interest and the risk of impaired representation is remote, speculative and minimal. In reaching this conclusion, the Master took into consideration the circumstances of the case, including the likelihood of a finding of liability against Louis and of the claims exceeding the Defendants $2 million policy limits. I addressed the Master’s decision in this respect in my analysis of the first issue raised on this appeal.

[51] The Master, in his reasons, addressed the principle that a client cannot waive actual material impairment. He concluded that the circumstances in this case are such that there is no actual material impairment of representation of Sian by Strype Barristers LLP. In my view, it was open to the Master to find that, in the circumstances of this case, it is reasonable for Strype Barristers LLP to conclude that the firm is able to represent each client without having a material adverse effect upon the representation of or loyalty to the other client.

[52] The Master concluded that it was open to Louis and Sian to, by their consents, accept the risk of possible material impairment of representation or loyalty. I conclude that the Appellant has failed to show that the Master made a palpable and overriding error in reaching this conclusion.

Did the Master err in finding that the risk that Louis could pass on confidential information to Mr. Strype about Sian if both remained his clients is not sufficient for him to conclude that Mr. Strype is in a disqualifying conflict of interest?

[53] In his reasons, the Master addressed the submissions that were made on behalf of the Appellant that there is a risk that Louis could pass on confidential information to Mr. Strype about Sian, if both remained his clients, which would benefit Sian as plaintiff and detrimentally affect Louis’ interest as a defendant to the counterclaim. The Master addressed the examples that were given by the Appellant’s counsel as to how this risk could come about. The Master considered that the risk that arose from one example is speculative and lacks an air of reality, and that the risk that arose from another example is highly speculative and without evidentiary foundation. The Master commented on the fact that examinations for discovery of both Louis and Sian have now been completed so their evidence is on the record, eliminating or reducing the risk of shared confidential information.

[54] The Master noted that courts are reluctant to remove counsel of choice except in the clearest of cases where there is a genuine and real conflict or a substantial risk of disclosure of confidential information. The Master concluded that there is no evidence of Mr. Strype having received evidence from Louis contrary to the interests of Sian or contrary to Louis’ interest as defendant to the counterclaim. He concluded that the ongoing risk of disclosure of confidential information contrary to the interest of Louis as defendant to the counterclaim is clearly speculative, rather than genuine or substantial. The Master noted that, in any event, whether or not Sian or Louis was a client of Mr. Strype, or whether either or both were clients of other lawyers, Louis, as a father and not as a client, would be passing on information to Sian or her counsel.

[55] In my view, the Master considered the factual circumstances and he properly addressed the examples that were cited as possibly giving rise to a risk of communication of confidential information contrary to the interest of Louis as a defendant to the counterclaim. He applied the relevant jurisprudence to the factual circumstances when he reached his conclusion that the risk of disclosure of confidential information was not such as to result in Mr. Strype being in a disqualifying conflict of interest. I am satisfied that, in reaching this conclusion, the Master applied the correct principles of law and that the Appellant has failed to show that the Master made an error in principle or a palpable and overriding error in his assessment of the evidence.

[56] The Master’s overall conclusion was that, in his view, a fair minded and reasonably informed member of the public would not conclude that the proper administration of justice required the removal of the Plaintiffs’ counsel of choice in the circumstances of this case. The Appellant has not shown that, in reaching this conclusion, the Master made an error of law or exercised his discretion on the wrong principles or that he misapprehended the evidence such that there is a palpable and overriding error.

Disposition

[57] The appeal is dismissed.

[58] If the parties are unable to resolve costs, the Respondents may make written submissions within 20 days. The Appellant may make responding submissions within 15 days of receipt of the Respondents’ submissions. If so advised, the Respondents may make brief reply submissions within 5 days thereafter.

Cavanagh J.

Date: December 5, 2017