Teixeira v. Hamburg Olson LPC, 2017 ONSC 7532

CITATION: Teixeira v. Hamburg Olson LPC, 2017 ONSC 7532

COURT FILE NO.: CV-17-570039

MOTION HEARD: September 6, 2017

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Nilton Teixeira, Plaintiff

AND:

Hamburg Olson Law Professional Corporation, Defendant

BEFORE: Master P.T.Sugunasiri

COUNSEL: Wolpert, S.,Counsel, for the Plaintiff

Kazen, S.,Counsel, for the Defendant

HEARD: September 6, 2017

REASONS FOR DECISION

[1] This is a motion to remove Mr. Kazen as counsel for Hamburg Olson Law Professional Corporation (“HOLPC”). The action arises from the alleged wrongful dismissal of Nilton Teixeira by HOLPC. Mr. Kazen is the sole officer and director of HOLPC and has caused the corporation to retain him in this lawsuit. Mr. Kazen purchased HOLPC via his firm, Kazen Law Professional Corporation (“KLPC”) and made several offers of employment to Mr. Teixeira with respect to his future employment with HOLPC. During these negotiations he wore several hats as a purchaser of HOLPC, as a potential employer, and as agent for the principals of HOLPC. Those negotiations lie at the heart of this wrongful dismissal action thereby making Mr. Kazen, a likely witness. For the reasons set out below, the motion is granted. Mr. Kazen is removed as the Defendant’s solicitor of record.

[2] The Defendant also brings a cross-motion to allow him to act for HOLPC as the sole officer and director. In my view, if Mr. Kazen cannot act as counsel for HOLPC, Mr. Kazen cannot take off his lawyer hat and act as an agent. To do so would defeat the Court’s concern about Mr. Kazen’s involvement as HOLPC’s representative. Given my reasons on the main motion, I deny HOLPC’s cross-motion.

Facts:

[3] Mr. Teixeira was an employee of Harvey Hamburg since November 19, 1997. On November 24, 2014, HOLPC came into existence and started operating as an incorporated law practice on January 1, 2015. The sole officers, directors and shareholders of HOLPC were Mr. Hamburg and Mr. Olson. At the same time, Mr. Teixeira was employed as a law clerk for HOLPC.

[4] Mr. Kazan is the sole officer, shareholder and director of KLPC. On March 1, 2017, KLPC purchased HOLPC and became the sole shareholder of HOLPC.

[5] Prior to the sale, Mr. Teixeira met with Mr. Kazen to discuss future employment. On the record before me, it appears that neither Mr. Hamburg nor Mr. Olson participated in this discussion. On January 17, 2017 Mr. Kazen made a verbal offer of employment. According to Mr. Teixeira, the salary was 20% lower than what HOLPC had been paying him. As such, Mr. Teixeira rejected to offer.

[6] Mr. Kazen then sent a letter dated January 19, 2017 to Mr. Teixeira confirming his rejection of the offer of employment and offering severance as per an attached draft agreement. It is of note that in the letter, Mr. Kazen states “After discussing the matter with Harvey Hamburg and David Olson, the current owners of HOLPC, we have agreed that HOLPC will offer you severance on the terms set out in the attached Agreement.” Under the proposed agreement, Mr. Teixeira’s date of termination was to be February 28, 2017. The only signatories to the agreement are Mr. Hamburg and Mr. Olson but the letter was sent by Mr. Kazen on KLPC letterhead.

[7] Mr. Teixeira retained Whitten & Lublin PC to represent him on this issue of termination of his employment with HOLPC and sent a letter dated January 27, 2017 to Mr. Hamburg and Mr. Olson at HOLPC.

[8] On February 1, 2017, Mr. Kazen sent Mr. Teixeira another offer of employment on KLPC letterhead.

[9] On February 2, 2017, Counsel for Mr. Teixeira received a response to the January 27, 2017 letter. In that letter, HOLPC took the position that Mr. Teixeira was not terminated but rather chose to resign, having rejected Mr. Kazen’s offer of employment to commence March 1, 2017. It was sent on HOLPC’s original letterhead and signed by Hamburg, Olson and Kazen.

[10] On February 7, 2017 Whitten & Lublin PC responded to the February 2, 2017 HOLPC letter to continue to discuss termination issues.

[11] On February 14, 2017. Mr. Kazen wrote a letter clarifying his February 1, 2017 employment offer. This was written on KLPC letterhead and had nothing to do with Hamburg or Olson.

[12] On February 21, 2017, Mr. Teixeira issued a Statement of Claim against HOLPC seeking damages for wrongful dismissal. Most importantly, he alleges that the he was terminated by letter dated January 19, 2017 with the termination effective February 28, 2017.

[13] Mr. Kazen and KLPC delivered a Statement of Defence on behalf of HOLPC alleging that:

A. HOLPC did not terminate Teixeira;

B. Teixeira was offered a salary by the “prospective purchaser” of HOLPC at a reasonable salary but he chose to decline the offer;

C. The “prospective purchaser”, feeling disappointed, made a second offer which proposed a different salary formula and invited Teixeira to propose an alternative formula if he was not satisfied; and

D. Teixeira flatly rejected that offer with no effort to counter-propose.

[14] The central issue in the action is whether or not Mr. Teixeira was terminated or whether he resigned; and if he resigned, whether it amounts to constructive termination. The issue in the motion is whether or not Mr. Kazen should continue to act for HOLPC.

Preliminary Issues:

[15] The Defendant raises a preliminary cross-motion to have Mr. Teixeira’s exhibits struck because the documents are subject to settlement privilege and solicitor-client privilege. It further seeks to strike the motion record altogether on the basis of bad faith. For the reasons that follows, HOLPC’s cross-motion is dismissed.

Settlement Privilege

[16] According to the Defendant, the Plaintiff's Exhibits A to F inclusive all contain offers to settle and are subject to settlement privilege pursuant to Rules 49.05 and 49.06(3) of the Rules of Civil Procedure. I describe Exhibits A to F as follows:

Exhibit A: Letter dated January 19, 2017 from KLPC reviewing HOLPC’s offer of employment as of March 1, 2017 and the severance package;

Exhibit B: Mr. Teixeira’s counsel’s response dated January 27, 2017 to terms of termination including a discussion of reasonable notice to be awarded “if this matter proceeds to trial”;

Exhibit C: A letter dated February 1, 2017 from KLPC offering alternative terms of employment of HOLPC as of March 1, 2017;

Exhibit D: A letter dated February 2, 2017 from HOLPC regarding termination, notice and the February 1, 2017 offer of employment commencing March 1, 2017. The letter states “… if you insist on commencing an action, we will provide Nilton with…”

Exhibit E: A letter date February 7, 2017 from Mr. Teixeira’s counsel which concludes with an offer to avoid litigation; and

Exhibit F: A letter dated February 14, 2017 from KLPC clarifying the offer of employment and inviting Mr. Teixeira to comment on any errors in the salary estimate made.

HOLPC argues that it is not necessary for proceedings to have commenced for settlement privilege to apply to communications. A litigious dispute must simply be in existence or within contemplation.[^1] I agree with HOLPC’s statement of the law.

Exhibit A is not subject to settlement privilege

[17] The January 19, 2017 letter at Exhibit A is confirmation of the verbal discussions that transpired between Mr. Kazen, as the soon to be principal of HOLPC, and Mr. Teixeira, with respect to ongoing employment. It also acted as a termination of employment letter. I have no evidence that litigation was within contemplation at that point in time nor does it make sense to consider the offers of employment and terms of severance as such. Every employment law case is premised on the disclosure of the offer of employment or terms of employment as a starting point of the employer-employee relationship. The fact that the January 19th letter attaches a proposed and unsigned agreement between the parties that discusses confidentiality does not make the document confidential or privileged. In this case, the discussions that the parties had in the early stages and what was offered or not offered is central to the action. It is required to determine whether Mr. Teixeira resigned or was constructively dismissed. Knowing what severance was offered is needed to determine if there was proper notice.

Exhibits B to F are subject to settlement privilege but HOLPC has waived it

[18] The letters that were exchanged AFTER the January 19th letter are however, protected by settlement privilege. Mr. Teixeira retained counsel to respond to HOLPC and discussion of the issue proceeding to trial and being adjudicated by the Courts was referenced in letters on both sides. Litigation was certainly within contemplation.

[19] The analysis does not, however, end there. Mr. Teixeira contends that in any event, HOLPC has waived any settlement privilege that may attach to Exhibits A to F. I agree. The information that HOLPC appears to be most concerned about are the terms of the employment offers made and the terms of severance. I have already concluded that the January 19th letter containing that information is not privileged. Even if I am incorrect, HOLPC has disclosed that same information in its own record and in its public Statement of Defence (“SoD”). For example, the details of the employment offers are found at paragraphs 6, 8, 18, 19, 20 and 21 of the SoD. Paragraphs 8 and 9 of the SoD plead that Mr. Teixeira rejected the offers. Further, Mr. Olson’s affidavit sworn in support of HOLPC in this motion reveals the offers and the basis for them (see paragraphs 6, 8 and 9). Re-publication of privileged information in the documents of the privilege holder, waives the privilege. [^2]

[20] If there is any concern about the disclosure of the sale of HOLPC to KLPC, that information is disclosed by Mr. Olson at paragraph 16 of his affidavit and Exhibit B of his exhibits.

[21] If there is any concern about improper disclosure of the draft agreement sent by Mr. Kazen to Mr. Teixeira, I do not strike it for the reasons set out above concerning Exhibit A, but in any event, I do not rely on any information in that document in forming my decision in the within motion.

[22] In sum, I conclude that while Exhibits B to F of Mr. Teixeira’s affidavit are subject to settlement privilege, that privilege has been waived by HOLPC by disclosing the information in those documents, within its own motion materials and in its publicly filed Statement of Defence. Exhibit A is not privileged and in any event, its contents have been disclosed in the above noted documents filed by HOLPC.

Exhibits G and H

[23] The Defendant also seeks to strike Exhibits G and H to Mr. Teixeira’s affidavit on the basis that it violates solicitor and client privilege as between Mr. Kazen and Whitten & Lublin LLP (as it then was). If I accept that solicitor-client privilege extends to prevent a solicitor from divulging the fact of a legal consultation as opposed to the details of the legal advice itself, I find that HOLPC has expressly waived that privilege in both the Olson affidavit at paragraph 25 and his Exhibit G by stating that Mr. Kazen had retained Whitten & Lublin for a one-time consultation in 2010.

[24] With respect to Mr. Kazen’s objection that these exhibits improperly provide details about the sale of HOLPC, I see no category of privilege that serves to protect that information. Contrary to HOLPC’s assertion, PIPEDA (“Personal Information Protection and Electronic Documents Act”) is a federal privacy statute that does not apply to the situation here. PIPEDA establishes rules governing the collection, use and disclosure of personal information by organizations in the course of commercial activities (s. 4(1)(a)). Even if the transaction was covered by PIPEDA, there are procedures set out in that Act to address any breaches of confidentiality.

[25] Further, and as noted above, the details of the sale are in the Olson affidavit including the sale documents attached at his Exhibit B. To say that the documents were attached as a necessary response, is not sufficient. If any privilege attaches to the information in Mr. Teixeira’s Exhibits G and H, the solution is not to re-publish that information in responding affidavits and pleadings. As noted previously, doing so waives the privilege.

Bad faith allegation against Teixeira insufficient to warrant striking of motion record

[26] This leads me to the allegations of bad faith raised in HOLPC’s cross-motion. After the claim was issued, Mr. Kazen and counsel from Witten & Lublin PC had various disputes about alleged breaches of confidentiality and conflicts of interest, which are in my view, a red herring to determining the issues in the motion.

[27] I can say that I do not find Mr. Kazen’s accusations persuasive that Whitten & Lublin PC are in a conflict of interest in acting for Mr. Teixeira because of a single consultation that took place between Mr. Kazen and Mr. Whitten or Mr. Lublin 10 years ago. I further reject the suggestion that the real impetus for this motion is out of retaliation for calling Whitten & Lublin PC out on this conflict. In my view, Mr. Teixeira’s concern about Mr. Kazen’s representation is reasonable and warranted. I say no more about the acrimony that is evident on the record between counsel and between the parties, other than to encourage civility.

Conclusion on Preliminary Issue:

[28] Based on the foregoing, HOLPC’s cross-motion is dismissed. Mr. Teixeira is able to rely on his affidavit and exhibits to support his motion. I shall address global costs at the end of my decision.

The Main Motion:

Mr. Kazen should be removed as solicitor of record

[29] The issue in the main motion is whether or not Mr. Kazen should continue to act as HOLPC’s solicitor of record in this wrongful dismissal action because of his involvement with the employment negotiations that took place between HOLPC and Mr. Teixeira. While I find on the facts of this case that Mr. Kazen’s role as a potential witness does not disqualify him from being HOLPC’s counsel of choice, Mr. Kazen’s demonstrated and understandable attachment to the case as the principal of HOLPC, does.

Jurisprudence on Lawyer as Witness

[30] There is no doubt that Courts expect lawyers to be independent officers of the court who are to approach their cases with objectivity and detachment. A lawyer acting as witness presents an inevitable conflict of interest between the lawyer’s duty of independence towards the court, and the duty owed to his or her client. This conflict of interest undermines the administration of justice, as the trial judge must be able to rely upon counsel for a high degree of objectivity and detachment.[^3]

[31] The Court in Urquhart v. Allen Estate[^4] aptly highlighted the dilemma that is presented when a lawyer appears as witness:

When counsel appears as a witness on a contentious matter, it causes two problems. First it may result in a conflict of interests between counsel and his client. That conflict may be waived by the client, as indeed, was done in this case. The second problem relates to the administration of justice. The dual role serves to create a conflict between counsel’s obligations of objectivity and detachment, which are owed to the court, and his obligation to his client to present evidence in as favourable a light as possible. This is a conflict that cannot be waived by the client as the conflict is between the counsel and the court/justice system.

[32] The question remains whether this is sufficient to remove Mr. Kazen as HOLPC’s solicitor of record. As noted above, the answer to this question, is no.

[33] In Forsyth v. Blue Rock Wealth Management Inc. (“Forsyth”), our Court laid out the principles to be considered for the removal of a lawyer of record:[^5]

a. Whether a fair-minded and reasonably informed member of the public would conclude that the removal of counsel is necessary for the proper administration of justice;

b. The plaintiff is entitled to be represented by counsel of its choice, absent a compelling reason to the contrary based on the public perception of the integrity of the administration of justice;

c. The courts must balance a party’s “right to select counsel of choice” with the “public interest in the administration of justice” and “basic principles of fundamental fairness”;

[34] More specifically, in making its determination in a lawyer as witness situation, the Court must take a flexible approach, and consider each case on its merits with reference to a number of factors, including:[^6]

a. the stage of the proceedings;

b. the likelihood that the witness will be called;

c. the good faith (or otherwise) of the party making the application;

d. the significance of the evidence to be led;

e. the impact of removing counsel on the party's right to be represented by counsel of choice;

f. whether trial is by judge or jury;

g. the likelihood of a real conflict arising or that the evidence will be "tainted";

h. 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

i. the connection or relationship between counsel, the prospective witness and the parties involved in the litigation.

[35] As in all discretionary decisions, each case turns on its facts and these factors are neither exhaustive nor exclusively determinative of the issue. They do however provide a useful framework in balancing the interests of the parties and the overall administration of justice.

[36] I also add that I respectfully decline to follow the case of Leung v. Rotstein,[^7] cited by HOLPC in which the Court suggests that a Court should not interfere with a lawyer giving evidence and continuing as counsel. In my view, the cases cited above more accurately reflect the current state of the law in Ontario.

The Position of the Parties

[37] The Plaintiff’s argument can be summarized as follows:

Kazen is a participant and a witness, whose evidence is significant in relation to all of the material issues in dispute. His involvement in this action transcends any status as advisor or communicator of decisions taken by his client. He was not a passive witness. His role in all of the critical events lies at the centre of the substantive disputes between the parties, and justifies his removal as counsel. In short, it was Kazen’s communications with the Plaintiff, as well as the documents that he authored and delivered to the Plaintiff, that precipitated Teixeira’s claims in this action.

[38] HOLPC’s position is that the issues in dispute are legal and not factual. In other words, it is the legal effect of the job offers and Mr. Teixeira’s rejection of them that is really in issue. As such, any evidence that Mr. Kazen may or could give about the various job offers is not controversial and would not lead to any need for assessing his credibility. Secondly, HOLPC maintains that Mr. Hamburg or Mr. Olson could speak to the job offers and issue of mitigation as the owners of HOLPC during the material time. Finally, even if there is deficiency in the evidence about job offers, this would only prejudice HOLPC because such information relates to calculating the pay in lieu of notice to which Mr. Teixeira may be entitled. If HOLPC cannot validly tender evidence on point, this would be to Mr. Teixeira’s benefit, not his detriment.

Analysis:

[39] In my view, factors a) to c), f) and i) above are uncontroversial. The action is at the pleadings stage and there is no issue of delay in bringing this motion. Further, removing Mr. Kazen at this early stage would allow HOLPC to retain new counsel. Second, it is clear from Mr. Teixeira’s evidence that he would want to call Mr. Kazen at trial as the author of the job offers and as a participant in the negotiations. Third, I have already ruled that I find no bad faith on the part of Mr. Teixeira nor his counsel in bringing this motion. Fourth, this is a trial by a judge who will be able to distinguish Mr. Kazen’s role as counsel from his role as a participant in the subject negotiations. Finally, there is no doubt that Mr. Kazen is closely linked to the parties and the subject matter.

[40] Despite Mr. Kazen’s involvement, the seminal question in this case is whether the fact of Mr. Kazen’s involvement is sufficient to deprive HOLPC of the right to counsel of choice The factor of particular importance in this case is my consideration of the significance of the evidence to be tendered (factor (d) above). I accept HOLPC’s recitation of the law that the availability of other means and other witnesses to prove the relevant facts must also be weighed.[^8]

[41] The pleadings define the nature of the action and provide a roadmap of what evidence might be required for each party to prove its case. In the case of wrongful dismissal, the onus is on the employer to justify its actions. Upon review of the Statement of Claim, the Statement of Defence and Reply, there appears to be little or no factual dispute about the events that involved Mr. Kazen. For example, on the issue of the alleged termination, I set out below what each pleading states:

Statement of Claim

Statement of Defence

Reply

By letter dated January 19, 2017, the Defendant terminated Mr. Teixeira’s employment, effective February 28, 2017.

HOLPC did not dismiss, or terminate the employment, of Mr. Teixeira.

A then prospective purchaser of the Defendant offered Nilton employment in his current capacity, with his current hours, and current entitlement to vacation at a salary of $57,000.00.”

Mr. Teixeira declined the purchaser’s offer.

The then prospective purchaser of the Defendant, feeling disappointed that Mr. Teixeira rejected the offer, made a second offer by which Mr. Teixeira would work for a combination of a base salary plus commissions. Based on historical revenue since 2010, where there was typical volume, Mr. Teixeira would make $71,000 per year.

HOLPC did not have the opportunity to give Mr. Teixeira paid notice as Mr. Teixeira demanded from HOLPC an exorbitant lump sum payment for no work, commenced litigation, and then simply stopped attending work as of March 1, 2017…

On January 17, 2017, Samuel Kazen, the principle of Kazen Law, met with Mr. Teixeira and offered him employment with Kazen Law with compensation of $57,000 base salary per annum. Mr. Teixeira rejected the offer, given that it would amount to a 20% decrease in his annual compensation.

By letter dated January 19, 2017, Mr. Kazen delivered a letter to Mr. Teixeira, which stated…

Attached to the January19 letter was a separation agreement, which specifically referred to February 28, 2017 as Mr. Teixeira’s “last day of work.”

By letter dated February 1, 2017, Mr. Kazen delivered a letter to Mr. Teixeira which provided three options

[42] The February 1 letter noted in the pleading is acknowledged in the motion materials. In other words, there is no dispute about the letters that Mr. Kazen sent to Mr. Teixeira or their contents. The only conversation solely in Mr. Kazen’s knowledge is that of January 17, 2017 which all parties agreed are reflected in the letter of January 19, 2017. In any event, the Plaintiff pleads that it is the January 19, 2017 letter that amounted to termination. There are other letters found in the motion materials – none of which seem to be in controversy and relate to the main documents described in the various pleadings.

[43] The mere fact of the letters being authored by Mr. Kazen does not disqualify him from being counsel of record. The issue is whether or not Mr. Kazen is a potential witness on a contentious matter.[^9] Certainly Mr. Kazen is a potential witness with respect to the letters that he authored and the employment offers that he made. However, the letters are not themselves, contentious. As the Plaintiff notes in his factum, the three issues in the action are:

a. Did HOLPC terminate Teixeira’s employment, or did he voluntarily resign;

b. If Teixeira did resign, was he constructively dismissed; and

c. Did Teixeira fail to mitigate his losses by refusing alternate employment with Kazen Law.

[44] All of these issues relate to the effect of the offers made by Mr. Kazen and the position taken by Mr. Teixeira.

[45] The rest of the pleading alleges facts that are well within the knowledge of the former principals of HOLPC, Mr. Hamburg and Mr. Olson. This includes the nature and terms of Mr. Teixeira’s employment, and the terms of the severance letter attached to the January 19, 2017. What is clear from the pleadings is that the parties disagree as to the legal effect of the various letters and positions taken by the parties. No one disagrees as to the contents of those letters. If the reasoning for making the offers becomes relevant, at this juncture it is not clear to me that only Mr. Kazen can speak to that point, as there is some evidence on the record that Mr. Kazen did keep Mr. Olson and Mr. Hamburg involved in the negotiations.

[46] Based on the foregoing, I do not think that Mr. Kazen’s participation in the negotiations with Mr. Teixeira disqualifies him from acting as counsel of record. There are other means of obtaining the evidence and there is little danger that the judge will have a tainted evidentiary record such it would impede the decision-making process. If I am incorrect and Mr. Kazen’s testimony does become contentious, the appropriate time to consider this is when that situation arises or at the discretion of the trial judge.

[47] I also do not accept that HOLPC will have an undue advantage by the Plaintiff calling Mr. Kazen as a witness. Mr. Teixeira claims that that would allow Mr. Hamburg or Mr. Olson to cross-examine Mr. Kazen favourably and with specialized knowledge and familiarity. Neither Mr. Hamburg nor Mr. Olson are the principals of HOLPC and do not have a right of cross-examination. HOLPC will either have to forego cross-examination or retain counsel on a limited retainer to conduct it, or do whatever is ordered by the trial judge. Even if Mr. Hamburg or Mr. Olson were in a position to cross-examine Mr. Kazen, for the reasons stated above, Mr. Kazen’s testimony is not particularly contentious and it would be premature at this stage to remove Mr. Kazen solely on this basis.

[48] The other issue is whether HOLPC as defendant will have an advantage because Mr. Kazen was privy to negotiations first hand and has an inside view for the purposes of cross-examination of Mr. Teixeira. For the reasons described above, I do not find that this is particularly prejudicial to Mr. Teixeira. The material facts are not largely in dispute and there is only one conversation that is within the exclusive knowledge of Mr. Kazen and Mr. Teixeira. That conversation is later reflected in a letter, the contents of which are not disputed. Further, Mr. Teixeira’s counsel were involved at an early stage of the negotiations and therefore have almost as much knowledge of the facts as do the parties. Indeed Mr. Teixeira’s counsel wrote to Mr. Kazen/HOLPC on behalf of Mr. Teixeira from January 27, 2017 onwards. They were, in one sense, as much a party to the employment negotiations as were Mr. Teixeira and Mr. Kazen. The fact that Mr. Teixeira might feel uncomfortable is not sufficient reason to displace HOLPC’s right to counsel of choice.

[49] In sum, I am of the view that the potential of Mr. Kazen being a witness in this case does not in and of itself disqualify him from being counsel of record for the Defendant HOLPC. If this were the only issue, I would deny Mr. Teixeira’s motion. If everyone were able to conduct themselves professionally and civilly, Mr. Kazen’s status as a material but non-contentious witness does not disqualify him to be HOLPC’s lawyer. However, there is another aspect of Mr. Kazen’s conduct that raises concern and cannot be overlooked. It appears that Mr. Kazen is no longer able to be an impartial advocate for HOLPC. When this issue is coupled with the potential of him being a material witness, his removal as solicitor for HOLPC is warranted.

Lawyer as an Impartial Advocate

[50] The importance of lawyers being impartial, objective and detached is integral to the administration of justice. What is of concern in the present case is whether Mr. Kazen’s impartiality as an advocate and officer of the court has been compromised such that a fair-minded and reasonably informed member of the public would conclude that the removal of counsel is necessary for the proper administration of justice.

[51] On March 13, 2017, HOLPC delivered its Reply to the within motion. Mr. Kazen took exception to the disclosure of certain information that is alleged to be confidential. I have addressed those issues in my analysis of the preliminary motion. In particular, Mr. Kazen states:

By proceeding to file the Reply, this confidential information will be a matter of public record. This will cause irreparable damage to the practice that I have purchased… I write to demand that you refrain from filing this Reply, or any other document that discloses any information about the purchase of HOLPC. To be clear, you do NOT have my permission, HOLPC’s permission, or Kazen Law Professional Corporation’s permission to publicly disclose any of the said information. Should you proceed to do so, despite my specific demand to the contrary, I will immediately commence an action against Nilton Teixeira, your law firm, and you personally… Should you proceed to file the said Reply, I would file a note with the Law Society of Upper Canada expressing my concern that you are abusing my confidential information…

[52] It is clear that in sending this email, Mr. Kazen is too involved in the litigation and has entered the fray as an effected participant. He refers to the contents of a legitimate litigation document as abusing his confidential information and damaging a practice that he has purchased. These are personal references, and reflect a level of involvement in this lawsuit beyond that of an impartial advocate.

[53] While being a potential witness does not on its own disqualify Mr. Kazen for the reasons explained above, the line is crossed when being a potential witness is coupled with the level of attachment reflected in Mr. Kazen’s email. From this perspective, maintaining the principle of detachment as a cornerstone of a just legal system weighs heavily. Public perception of counsel objectivity is also important to the integrity of the justice system. In my view, a fair-minded and reasonably informed member of the public would conclude that Mr. Kazen is too close to this litigation, and should not act as counsel of record. On the facts of this case, these considerations override HOLPC’s right to counsel of its choice.

[54] I do not intend for my ruling to suggest in any way that I am being critical of Mr. Kazen. It is quite understandable that he would have a personal interest in this litigation as the de facto principal of HOLPC (his firm KLPC being the legal owner).

Cross-motion to act as agent for HOLPC denied

[55] In the event that I removed Mr. Kazen as HOLPC’s counsel of record, HOLPC brings a cross-motion seeking alternative relief for leave to allow Mr. Kazen to act for HOLPC as the sole officer, director and shareholder. Rule 15.01(2) states:

A party to a proceeding that is a corporation shall be represented by a lawyer, except with leave of the court.

[56] After Mr. Teixeira left HOLPC, Mr. Kazen became the sole officer and director of HOLPC, and KLPC became the sole shareholder. In turn, Mr. Kazen is the sole shareholder, officer and director of KLPC.

[57] HOLPC argues that the fact that Mr. Kazen is a lawyer is not a bar to such an order. The cases he cites stand for a slightly different proposition – namely – that a lawyer is not barred from acting for himself.[^10] In this case, Mr. Kazen is not asking to act for himself. A corporation, which is a subsidiary of his law firm, seeks to have him represent it. As long as the corporate veil exists, Mr. Kazen and HOLPC are not the same person.

[58] In any event, Mr. Kazen cannot simply remove his lawyer hat to act as agent or representative of HOLPC. He cannot escape the fact that he is a lawyer and currently lawyer of record for HOLPC. Given my conclusions on the issue of conflict, the solution is not to allow Mr. Kazen to represent HOLPC as a layperson. This does not preclude HOLPC from seeking leave to be represented by another individual who is not a lawyer pursuant to subrule 15.04(6)(b).

Disposition:

[59] Given the foregoing, Mr. Kazen is removed as solicitor of record for the Defendant, HOLPC.

[60] Pursuant to subrule 15.04(6) of the Rules of Civil Procedure, HOLPC must appoint a solicitor of record within 45 days from the date of the reasons by serving a notice under subrule 15.03(2) or obtain and serve an order under subrule 15.01(2) granting it leave to be represented by a person other than a lawyer. If HOLPC fails to comply with subrule 15.04(6), the court may strike out its defence; and in an appeal, a judge of the appellate court may, on motion, dismiss the corporation’s appeal or the court hearing the appeal may deny it the right to be heard.

Costs

[61] The Plaintiff has been successful in his motion and in resisting the cross-motions. He is entitled to costs on a partial indemnity basis. At the end of the hearing, I was provided with costs outlines from both parties. Taking into account the factors in Rule 57, the reasonable expectations of HOLPC on costs and Rule 1.04 of the Rules, costs are awarded to Mr. Teixeira in the amount of $10,000 inclusive of disbursements and HST payable within 45 day from the date of these reasons. In my view, this is an amount that would be within HOLPC’s expectations and in line with its own costs outline. I have discounted the hours spent on the reply materials which I find to be excessive, and note that this is a simplified procedure action in which proportionality must come into play in managing time and cost.

Original signed

“Master P.T.Sugunasiri”

Date: December 18, 2017

[^1]: Temex Resources Corp. v. Walker, 2014 ONSC 3170 at para 52 (QL). [^2]: Camosun College v. Levelton Engineering Ltd., 2014 BCSC 1190 at paras. 10 and 12. [^3]: Rice v. Smith, 2013 ONSC 1200 at para. 19 (“Rice”). [^4]: Urquhart v. Allen Estate, [1999] OJ No 4816 at para. 27 (SCJ)(QL). [^5]: Forsyth v. Blue Rock Wealth Management Inc., 2015 ONSC 6666 at paras. 31-33 (“Forsyth”). [^6]: Forsyth at para. 35; and Rice, supra at para 20. [^7]: Leung v. Rotstein, 2002 BCSC 1470 at paras. 12, 23-25. [^8]: Canerector Inc. v. 169889 Canada Inc., 2008 QCCS 228 at paras. 66 – 67. [^9]: Urquhart v. Allen Estate, [1999] OJ No 4816 at para. 27 (SCJ) (QL); Webb v. Attewell, [1994] BCJ No 2180 at para. 32 (CA)(QL). [^10]: Fong v. Chan, 1999 CanLII 2052 (ON CA), 1999 CarswellOnt 3955, [1999] OJ No 4600(SCJ)(QL); M. McGrath Canada Ltd. v. Vincent Dagenais Gibson LLP, [2008] OJ No 2208 (SCJ)(QL)(law firm was a limited partnership, not a corporation); Leung v. Rotstein, 2002 BCSC 1470 at paras. 12, 23-25.