DATE: 22-05-2018
COURT FILE: 27741/18
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
BRIAN HAMM
Applicant
– and –
GORDON R. BAKER
Respondent
Rocco DiPucchio, Shaun Laubman, Farhad Siddiqui, Counsel for the Applicant
Tim Gleason, Brett Hughes, Counsel for the Respondent
Kenneth Prehogan, Caroline Abela, Scott McGrath, Counsel for the intervenor, Frank Shunock
HEARD: March 23, 2018
VARPIO J.
REASONS ON APPLICATION
FACTS
[1] In the litigation before me, Mr. Brian Hamm and Mr. Frank Shunock are seeking Orders as against one another regarding the possession of certain properties in Northern Ontario. During the course of the litigation, Mr. Shunock’s lawyer acquired a file from Mr. Gordon R. Baker, Q.C., a Toronto lawyer. Mr. Hamm claims privilege over that file.
[2] Mr. Hamm seeks an Order preventing Mr. Baker from disclosing the contents of the file and other ancillary Orders related to said disclosure. As grounds for the application, Mr. Hamm states that “Mr. Baker owed fiduciary duties in respect of his position for NSI [Northern Superior Industries Ltd.] in addition to the fiduciary obligations he owed as a lawyer for Mr. Hamm and the “Knight Family Trust”. It is Mr. Hamm’s position that Mr. Hamm “understood and believed that Mr. Baker was acting in his and the Knight Family Trust’s interests and as their lawyer. He understood that communications with Mr. Baker regarding the joint retainer and NSI were confidential and privileged”.
[3] In his factum, Mr. Hamm presents three issues for the Court to decide:
a. Were Mr. Hamm and Mr. Baker in a solicitor-client relationship?
b. Did Mr. Baker breach any duties owed to Mr. Hamm?
c. Should the relief requested by Mr. Hamm be granted by the Court?
[4] Upon review of the entirety of the evidence before me, it is clear that a reasonable person in Mr. Hamm’s position would not have concluded that he and Mr. Baker were in a solicitor-client relationship. Indeed, Mr. Hamm’s own representations to Mr. Baker and others make clear that Mr. Hamm understood that Mr. Baker was not his lawyer. As such, Mr. Baker owed Mr. Hamm no duty of confidentiality. The application is dismissed.
THE EVIDENCE
The Lead-Up
[5] Mr. Hamm is an experienced business person. By his own admission, he has been a director of approximately half a dozen public companies and half a dozen private companies. In cross-examination on his affidavit, however, Mr. Hamm would not concede that he was sophisticated:
BY MR. DEWART:
Q. Well, actually, just before I move on, based on what you have written here and based on what you have just told me, I take it you don’t have any difficulty agreeing with me that you are a sophisticated businessperson.
A. Yes, I would say that I understand business.
Q. Okay, and that you’re sophisticated? This is no time to be modest.
A. Okay then I’ll be modest. I understand business.
Q. Okay, and you’re sophisticated? I just didn’t...I don’t understand your answer. Are you denying that you’re sophisticated?
A. No, I understand business. That’s the way I would characterize my understanding of business’[^1].
[6] In the summer of 2016, Mr. Hamm wanted to develop certain port properties in the Wawa area. Mr. Hamm intended to develop the waterfront area of the land and sought funds so to do. Accordingly, Mr. Hamm came into contact with an investor named Mr. Phil Knight. Mr. Knight and Mr. Hamm agreed to work together on the project[^2].
[7] Mr. Baker had represented Mr. Knight in transactions dating back to the 1980’s. On July 20, 2016, Mr. Knight called Mr. Baker and asked him to become involved with the project.
[8] On July 22, 2016, Mr. Knight emailed Mr. Baker and provided an overview of the project. He indicated in his email that:
Deal was introduced to me by Brian Hamm (Toronto)
He has had these documents prepared thru Chuck Higgins at Fasken Martineau
I have made condition of my deal that you will be solicitor for the company and project
If we proceed we will be incorporating a fresh entity which will execute the option agreement
The deal I have with Brian is we will own 100 percent of the equity and he will have the ability to earn equity on milestones to be agreed.
As always since visiting project last weekend there appears to be an urgency on Brians behalf
pls review the following:
a. option agreement
b. proposed SPA
c. general overview…
[9] With respect to the statement that Mr. Baker would only “be solicitor for the company and project”, Mr. Hamm in cross-examination stated that “Mr. Knight never told me that, and that never happened”.
[10] On July 24, 2016, Mr. Knight wrote to Mr. Baker stating:
In anticipation of proceeding with Wawa project I will provide retainter of $10,000 CAD along with $50,000 to be held in trust.
The Trust funds will be utilized as a deposit on the purchase of property IAW.
[11] On July 27, 2016, Mr. Knight advised Mr. Baker that the project would be going forward. Mr. Knight sent Mr. Baker an email with a picture of the $10,000 retainer.
[12] On that same date, Mr. Knight sent an email to Mr. Baker describing certain changes to the deal and indicating:
I will have your retainer deposited today to your account and will bring bank draft for trust for lunch tmrw.
[13] Later that same day, Mr. Knight wrote that “I will deposit at TD shortly”.
[14] During this time, Mr. Hamm was working with legal counsel named Mr. Chuck Higgins. Mr. Hamm deposed that during his negotiations with Mr. Knight, the pair agreed to jointly retain Mr. Baker and that Mr. Hamm stopped using Mr. Higgins as his counsel as a result.
[15] On July 28, 2016, Mr. Baker met with Mr. Knight and Mr. Hamm. Mr. Baker was meeting Mr. Hamm for the first time. Mr. Hamm deposed that “[a]t no point did Mr. Baker tell me to obtain independent legal advice… At no point did Mr. Baker ever advise me that our communications or the information that I shared with him were not subject to privilege or being held in confidence”.
[16] In contrast, Mr. Baker deposes as follows:
I met Mr. Hamm for the first time on July 28, 2016. We discussed the transaction that the corporation later adopted, however both at our initial meeting and in all of my subsequent communications with Mr. Hamm, I did not provide him with any advice of any nature concerning his personal interests. All of my communications with Mr. Hamm were confined to providing advice about the rights, obligations and interests of Northern Superior Industries Ltd. both before and after its incorporation. I communicated with him solely in his capacity as an officer or proposed officer of the corporation.
My ordinary practice would be to tell Mr. Hamm that he should retain his own lawyer, if so advised. Although, I have no recollection of doing so, Mr. Knight advises me that he recalls that I did. I therefore believe that I did.
[17] At the meeting, Mr. Baker asked for, and received photo identification from Mr. Knight, but not Mr. Hamm.
[18] On that same date, Mr. Hamm sent Mr. Baker an email stating:
Hi Gord:
A pleasure to finally meet today.
Just a heads up that Chuck Higgins is no longer on the file and I have informed Gerald Trottier who represents the Vendor that you are taking carriage of the file…
[19] Also on July 28, 2016, Mr. Hamm forwarded a term sheet as between NSI and the vendor pertaining to the acquisition of the property in question. When asked about this term sheet, Mr. Hamm stated:
Q. So the answer, then, is that you signed it [the term sheet] in the name of the corporation, fully anticipating that a corporation would be created, and that it would be the purchaser of the shares [which would help enable NSI acquire the lands].
A. That is correct, yes.
[20] Mr. Baker deposes that he opened his file in the name of Phil Knight and that the matter was described as “Northern Superior”. Mr. Hamm did not pay Mr. Baker’s retainer or any money throughout the time that Mr. Hamm and Mr. Baker dealt with each other. Mr. Hamm however, indicated in cross-examination that he should get credit for the payment of the retainer and legal fees:
Q. I can’t imagine this is controversial. At no time did you pay any money to Mr. Baker on account of fees or disbursements?
A. Well in a circuitous way I am paying him. When I put my signature on here, Knight’s money is released from the trust account and paid to Mr. Baker. So in a circuitous way, it’s my money.
[21] On July 29, 2016, Mr. Hamm wrote to the vendor indicating:
…Gord Baker will be representing NSI going forward…
[22] On that same date, Mr. Baker received an email from the vendor’s counsel that indicated, in part:
… I am advised that you represent Northern Superior Industries.
[23] Later that same day, Mr. Baker wrote to Mr. Knight indicating:
Phil, I will need your instructions to advance the deposit. Not Brian’s. Let me know.
[24] During the course of this early negotiation and planning, Mr. Baker deposed that:
[f]rom the very outset, Mr. Hamm did not appear to be under any misapprehensions about the nature of my retainer and the fact that I acted for the corporation. If he had intimated at any time that he believed that I was acting for him or had said anything that suggested this was his belief, I would have immediately advised him that I could not do so because of a potential conflict of interest. As it happens, this was not necessary because nothing he ever said or did suggested to me that he was under any misapprehension.
[25] In cross-examination, Mr. Hamm testified that he had had no prior business dealings with Mr. Baker. He met Mr. Baker approximately a half dozen times in pursuit of this project and spoke with him on the phone approximately a dozen times. Counsel questioned Mr. Hamm about whether Mr. Hamm ever discussed anything outside the parameters of the Wawa project:
Q. Other than social niceties, have you discussed any… did you discuss anything with Mr. Baker apart from this transaction?
A. I don’t know what…
Q. Well, for example, did you discuss preparing a will? That’s just an example.
A. I did not discuss preparing a will.
Q. Okay. So now that I’ve given you that illustration, let me ask the question again. Apart from this transaction, the purchase of the shares of CSA… Is that what it’s called?
A. SAC.
Q. Thank you. Apart from the purchase of the shares of SAC, did you discuss anything else with Mr. Baker?
A. Yes, many things.
Q. Such as?
A. Well, the appointments of directors, officers, the issuance of shares, the incorporation of NSI, the… we discussed rail lines. We discussed multiple issues on this deal where I communicated Mr. Baker confidential information and sought his advice.
Q. Okay, sorry, that is what I had intended to ask. You did not discuss anything apart from this deal? That’s what I’m asking.
A. No, the rail line that wasn’t part of this I was forced to have to discuss with Mr. Baker.
[26] On August 2, 2016, Mr. Hamm emailed both Mr. Baker and Mr. Knight indicating that, “[a]re we confirmed to wire the $50K this a.m. as per the attached direction?” Mr Baker interpreted this email as Mr. Hamm’s acknowledgement that Mr. Baker required Mr. Knight’s instructions to release the funds. In response to this email, Mr. Baker emailed Mr. Knight that “I need your [Mr. Knight’s] instructions to advance funds from your trust account to Northern Superior Industries LTD.”
The Letter Agreement
[27] Mr. Knight and Mr. Baker continued to negotiate the parameters of their arrangement over the next few days. On August 12, 2016, Mr. Hamm and Mr. Knight negotiated a letter of agreement (the “Letter Agreement”) as between themselves outlining the relationship. The Letter Agreement indicated as follows:
Further to our discussions the following sets out our understanding of our pending relationship and mutual direction to Gordon R. Baker in respect to Wawa port and related activities project…
Formation
An Ontario corporation initially named Northern Superior Industries Ltd. (NSI)
Officers; Brian Hamm – President
Gordon R. Baker – Secretary/Treasurer
Directors; Brian Hamm
Gordon R. Baker (Chairman)
[28] On that same date, Mr. Knight forwarded the Letter Agreement to Mr. Baker (copying Mr. Hamm) indicating that Mr. Baker could “consider this executed and hold for my signature. Pls proceed to remit funds to receiving attorney account as provided in the option agreement”.
[29] Mr. Hamm deposed that Mr. Baker’s services were retained by both parties to execute the Letter Agreement. In support of that contention, Mr. Hamm deposed that certain specific steps were undertaken by Mr. Baker including the issuing of shares, the naming of directors, and other functions normally expected of a corporation’s legal counsel. Mr. Hamm deposed:
The Letter of Agreement confirmed our joint retainer of Mr. Gordon R. Baker Q.C.. At the bottom of page 1, Agreement provided for a “$10,000 legal retainer to Mr. Gordon R. Baker Q.C.”. This document makes very clear that the Knight Family Trust and I were jointly retaining Mr. Gordon R. Baker Q.C. as our solicitor to complete the necessary legal work to execute upon out Letter of Agreement. I have always understood that solicitor-client privilege and obligation to maintain confidence applied to all of the work that Mr. Gordon R. Baker Q.C. did in connection with the retainer and over our communications with him. I attach as Exhibit “A” to this my Affidavit a copy of the Letters of Agreement dated August 12, 2016.
The $10,000 retainer was paid to Mr. Gordon R. Baker Q.C. by way of deposit to his trust account. I attach as Exhibit “B” to this my affidavit a copy of the deposit receipt.
In addition to acting as our solicitor, Mr. Gordon R. Baker Q.C. also became an officer and director of NSI, along with me and an individual named Tom Cooper, and the assumed the fiduciary obligations accompanying that role.
Mr. Gordon R. Baker Q.C. continued to provide legal services to me and the Knight Family Trust with respect to NSI and the contemplated SAC acquisition through 2016.
At all times when I communicated with Mr. Gordon R. Baker Q.C., I understood that our communications were confidential and would be protected by solicitor-client privilege. I also believed that Mr. Gordon R. Baker Q.C. was acting on behalf of and in the interests of both the Knight Family Trust and me. I have Mr. Gordon R. Baker Q.C. instructions and shared information with him based on this understanding.
The information that I shared with Mr. Gordon R. Baker Q.C. was highly confidential and I believe he understood that. It was shared with him for the limited purpose of facilitating the joint venture that I had with the Knight Family Trust and instructing him with respect to the contemplated NSI acquisition of SAC.
Mr. Gordon R. Baker Q.C. never suggested to me that he was not jointly retained by me and the Knight Family Trust. He never suggested to me that was not duty bound to maintain privilege and confidence with respect to the retained I had along with the Knight Family Trust and the NSI file.
[30] Of note, Mr. Hamm failed to describe the specifics of the confidential information allegedly passed to Mr. Baker.
Post-Incorporation
[31] On August 16, 2016, Mr. Baker incorporated the company. Mr. Hamm was President of the company and Mr. Baker was the Secretary/Treasurer, legal counsel and Chairman of same. Mr. Thomas Cooper was named as a director of the company.
[32] On August 31, 2016, Mr. Hamm, Mr. Knight, Mr. Baker and another lawyer, Mr. Scott Lemke, met to discuss legal work that would need to be undertaken to complete the project. Mr. Lemke filed an affidavit in this application in which he deposed that:
This was my first involvement of any substance in the matter and at the beginning of the meeting, I did not have a detailed understanding of the transaction, nor did I know the parties and how they were involved in the matter. This became clearer to me as the meeting progressed.
At the bottom of the third page of my notes [of the meeting], I recorded Mr. Baker’s information to the attendees that he would be “corporate counsel + counsel to Phil”. That is, he made it clear that he would act for Northern Superior Industries Ltd. and Philip Knight.
[33] Regarding the August 31, 2016 meeting, Mr. Hamm deposed “[t]here was no discussion at the meeting about legal retainers or who Mr. Baker was acting for”. Effectively, Mr. Hamm is stating that Mr. Lemke is wrong in his assertion that Mr. Baker “made it clear” that he was acting for Mr. Knight and NSI. In his factum, Mr. Hamm asserts that Mr. Lemke’s credibility ought to be questioned since Mr. Lemke’s “LinkedIn” profile indicates that he previously worked with Mr. Baker as the latter’s junior. This fact allegedly stands in contrast to the statement that Mr. Lemke did not know the parties to the meeting. Mr. Lemke was not cross-examined on his affidavit.
[34] Mr. Hamm and Mr. Baker discussed NSI-related matters throughout the course of their business dealings.
The End of Knight/Hamm Business Relationship
[35] During September 2016, Mr. Baker worked on preparing a share purchase agreement (“SPA”). A dispute arose regarding the securing of the rail corridor from the port to the CN rail line at Hawk Junction. Mr. Hamm disagreed with the inclusion of said linkage in the SPA. The particulars of the dispute and the relevance to the project are not material to this application save and except to note that email communications ensued in the days and weeks subsequent to incorporation. On September 15, 2016, Mr. Hamm emailed Mr. Knight and Mr. Baker stating that he “never made this undertaking or suggestion, indeed I explained this would take time and extend beyond closing.”
[36] On September 15, 2016, Mr. Baker emailed the draft SPA to Mr. Knight and Mr. Hamm. Mr. Hamm and Mr. Baker exchanged several emails. Mr. Hamm emailed Mr. Baker that he was opposed to including “any reference to First Nations and/or the rail corridor”.
[37] Mr. Baker responded by emailing Mr. Hamm that “Phil [Mr. Knight] does not want to put up the closing funds unless he has some idea as to whether or not we can get the access necessary [to] carry on the port business”.
[38] On September 23, 2016, Mr. Hamm and Mr. Baker had an email exchange wherein Mr. Hamm wrote to Mr. Baker stating:
Gord:
There are a number of items in the agreement I signed with Phil on August 12, 2016, that were deliverables to me that have not been met or addressed.
The SPA that you are looking to have authorized, delivered by me to you some 42 days ago, still contained references you have inserted for the requirement for permitting regarding the rail line from the Port to Hawk Junction. This is not and was not part of our deal and as I have several times indicated to you, must be removed from the SPA prior to delivery to the Vendor. Any discussion concerning this rail line must be negotiated with me regarding my further compensation in and from NSI.
In any event, I am in the process of retaining legal counsel to represent my interests in NSI. When I have completed same, they will contact you in respect to the matters I have indicated here, as well as other outstanding matters.
Brian
[Emphasis in original]
[39] On September 24, 2016, Mr. Hamm emailed Mr. Baker, copying Mr. Knight and Mr. Cooper:
Gord:
A Kindergarten class, or conversely, a cartload of Chimpanzees could readily make the determination that when purchasing a port/wharf that it would be optimal to include the rail bed tie in rather than exclude. If you are thinking that your middle of the night epiphany whilst pissing into the porcelain is some profound revelation that has escaped me, then I think you may be sorely underestimating my intellectual capacity.
The facts as known to me, having been engaged in this project for the past 2-1/2 years vs. the understanding of these issues that you folks have accumulated very recently is what is at odds here.
Let me present the facts:
Not in the Term Sheet, the draft SPA, verbally or otherwise have I ever represented that the rail bed has any relationship to the acquisition of the Port/Wharf. The simple fact is that it does not. It is a separate transaction. You’ve agreed to adopt my signed Term Sheet and close that deal on or before November 10, 2016 and the rail bed is no part of that transaction.
Whilst negotiating my package, I had initially proposed a simple deal, investor gets his advances back first, then we split the upside, a classic and simplistic model used in business deals for eons. This was countered with; you get a 20% and build yourself back to 50% by achieving deliverables. The 2 significant deliverables are a) the rail bed and b) the iron ore properties.
If you would like me to explain how I will seamlessly bring the rail bed (and iron ore properties) into the portfolio then simply honour the obligations that you have agreed to, and then we can have that conversation. Indeed, if these obligations had been met in the normal course, we wouldn’t be wasting our Saturday morning on this.
Continuing to treat me as Hank Rearden was in Atlas Shrugged will ensure that we will continue having these meaningless and exhaustive exchanges. What has been achieved in the past month and one half is embarrassing. I would fire any manager working for me that delivered such a profoundly abysmal result. I know exactly how to roll this deal out, that’s why I’m the President, and you folks just need to clear the way for me so I can do my job.
[40] Mr. Baker replied to Mr. Hamm’s email, copying Mr. Knight and Mr. Cooper on September 24th, 2016:
Brian, I have heard your comments many times and discussed this with you. After discussions with Phil Knight, who is funding the purchase, and Tom Cooper, it is seen as an important issue and imprudent to not address these access issues. I first raised these issues in my capacity as a lawyer. Phil as the financier and major shareholder considers access an important issue and agrees with the language. This was also discussed with Tom Cooper the other director, who has also seen your comments on the SPA and your emails.
[41] Mr. Hamm replied the next day:
Gentlemen:
There is to be no communication with any party that I have introduced to you, including but not limited to SAC, their counsel or representatives or any other party associated with this transaction without my prior consent.
My lawyers will be contacting you during this coming week.
Brian
[42] On October 7, 2016, Mr. Baker convened NSI directors’ and shareholders’ meetings to discuss the issues highlighted above as well as Mr. Hamm’s payment for consulting services.
[43] The project appears to have moved forward in some form or another with Mr. Knight and Mr. Baker seeming to work at cross-purposes as per Mr. Baker’s email to Mr. Knight and Mr. Cooper on October 26, 2016:
Phillip and Tom, I just had a telephone call with Brian Hamm. I told him I was going to see the site and to talk to the chief and the city. He says he could’ve arranged to buy the right away from the First Nation. I told him that she said they would not sell the land. He didn’t know the difference between an easement and a lease. I explained to him the easement was much easier to negotiate than a lease and much shorter. He would not tell me any of its discussions with the First Nation, other than he could buy the property, and he would not tell me any of his discussions with the Municipality of Wawa. He ranted and raved about not being paid consulting fees, commencing after the closing of the transaction. He said he’s just being played with. Says that we have not provided him with a draft shareholders agreement or consulting agreement. I told him that the shareholders agreement is not to protect the majority shareholder, but the minority shareholder gives him and he should be sending a draft shareholders agreement and further that the consulting agreement was his consulting agreement and you should send his draft consulting agreement. He said he wasn’t going to spend any money doing that. He said that the closing date is November 10 and there will be no extensions; and he said has got financing and will be taking over the deal. He said we want to control him and he said, we will have a quote “no control over him”. And “nobody will control him”. “Those are the rules.” He also said we be getting a letter from MacMillan’s. He complained that you wouldn’t put in the working capital.
I did not get into any of the facts as to why he’s not been paid, other than the agreement doesn’t call for that. He kept repeating that monies not been paid to him. I did not raise the issue that I raised at the board meeting when asked whether there were any reports to support the $10 million cost of putting the railing in. His Offering Memorandum provided an estimate of $10 million for the 43km. He said there were none. He said that’s something we do after we close. I didn’t mention that my contact at CN indicated that the cost would be: “The estimate cost for building track is approx. $1M per KM or mile. Excludes and structure (culverts, bridges road crossings, pipeline, protection etc.)”. A material misrepresentation in the Offering Memorandum. Furthermore, his discussions with you as to how he would deal with Chief of the First Nation was not discussed. However, at the board meeting we did discussed that he was refusing to provide any information any demanding we not contact anybody.
[44] Mr. Baker deposes that, on October 26, 2016 he spoke with Mr. Hamm. Mr. Hamm indicated that he had spoken with members of the Michipicoten First Nation as well as other potential sources of financing.
[45] On Friday November 4, 2016, Mr. Hamm emailed Mr. Baker, Mr. Knight and Mr. Cooper. He appears to have attached a document entitled: “Status Agreement: Letter of Agreement executed August 12, 2016 between Brian Hamm & Phil Knight”. Points 4 and 5 of this document state as follows:
As you well know, the rail initiative & mineral concessions are not part of our deal. They are my assets. In respect of the rail initiative, I am aware that you have authorized your counsel [Mr. Baker] to contact and meet with certain counterparties in the rail initiative without my consent and in an effort to circumvent my economic interests. You will be held liable for any damages in this regard.
It is a requirement of our agreement that you and I enter into a shareholders’ agreement prior to closing the property purchase (i.e. November 10, 2016). I have been ready, willing and able to have this discussion. To date, you have delivered no such draft agreement. If no shareholders agreement is executed between us, you cannot close the property purchase. [emphasis added]
[46] On November 6, 2016, Mr. Hamm and Mr. Knight emailed each other whereby Mr. Hamm wondered if Mr. Knight remained interested in the deal and Mr. Knight indicated that he was so interested provided that Mr. Hamm and Mr. Knight could work out their differences. On November 9, 2016, Mr. Hamm emailed Mr. Baker and Mr. Knight to advise them that Mr. Georges Dubé of McMillan “will be representing me re: NSI”.
[47] On January 12, 2017, the directors of NSI passed a resolution removing Mr. Hamm as an officer of NSI. In cross-examination, Mr. Baker admitted that Mr. Hamm did not receive notice of this meeting as Mr. Baker had not gotten around to sending same.
[48] Finally, Mr. Baker’s accounts were rendered to “Northern Superior Industries Ltd.” Mr. Hamm’s name was on at least one of the accounts, under the company name. Mr. Baker deposes this account(s) was sent to Mr. Baker in his capacity as President of NSI. Mr. Baker further deposes that he did not seek payment from Mr. Hamm, that Mr. Hamm did not pay the account(s), and that Mr. Hamm did not offer to pay the account(s) or otherwise agree to pay the account(s).
Mr. Shunock’s Acquisition of Mr. Baker’s File
[49] Subsequent to Mr. Hamm’s involvement with Mr. Knight and Mr. Baker, Mr. Hamm and Mr. Shunock became involved with the lands in Wawa. Matters broke down to the point where the parties commenced litigation. During the course of litigation, Mr. Shunock’s counsel, Mr. Prehogan, spoke with Mr. Baker. Mr. Baker provided his file to Mr. Prehogan. Mr. Prehogan wrote to Mr. Hamm’s counsel and asked Mr. Hamm’s counsel if the latter wished to see the file. Mr. Hamm’s counsel indicated that Mr. Hamm asserted privilege over the file. Accordingly, the instant application was brought before me.
[50] On February 23, 2018, Mr. Baker apparently convened a meeting of NSI’s directors to pass a resolution waiving any claim of privilege over Mr. Baker’s file. Only Mr. Baker signed the resolution. Mr. Hamm spent considerable argument suggesting that such a unilateral, ex post facto waiving of privilege provided considerable evidence that Mr. Baker breached his duties to Mr. Hamm. In cross-examination, Mr. Baker indicated that the resolution was passed in order to “take away argument I didn’t have the authority [to disclose the file]”.
POSITION OF THE PARTIES
[51] Mr. Hamm submits that he and Mr. Baker had a solicitor-client relationship – as either a client or a “near client”- such that communications from Mr. Hamm to Mr. Baker are cloaked with a duty of confidentiality. Any documentation in Mr. Baker’s possession that pertains to the acquisition of the Wawa lands are also subject to the same overriding duties. Mr. Baker’s cooperation with Mr. Shunock in the matters before the Court is thus a breach of the duty of confidentiality flowing from said solicitor-client relationship.
[52] In support of this position, Mr. Hamm points to the following factors as indicia of the solicitor-client relationship:
a. The Letter Agreement describing the “mutual direction” to Mr. Baker depicts a joint retainer whereby Mr. Hamm is Mr. Baker’s client;
b. Mr. Baker opened a file with respect to the project listing Mr. Hamm as a contact for the file;
c. Mr. Baker’s first task upon retention was to form a sole-purpose corporation on Mr. Hamm’s behalf, and to advise Mr. Hamm with respect to corporate governance and organization;
d. Extensive correspondence flowed as between Mr. Baker and Mr. Hamm regarding matters central to the joint retainer;
e. Mr. Hamm instructed Mr. Baker including the exchange of comments on a draft Share Purchase Agreement;
f. Mr. Hamm provided confidential information to Mr. Baker and Mr. Baker kept that information confidential until disclosure to WeirFoulds;
g. Mr. Baker rendered multiple accounts to Mr. Hamm;
h. Mr. Hamm understood that Mr. Baker was his lawyer;
i. Mr. Baker never advised Mr. Hamm to get independent legal counsel; and
j. Mr. Baker gave legal advice to Mr. Hamm regarding a variety of issues related to the acquisition of the Wawa properties.
[53] Mr. Baker takes the position that Mr. Hamm was never his client and that Mr. Hamm would never have reasonably believed that this was the case. Mr. Baker submits that this lack of reasonable belief would have extended to both the times where Mr. Hamm was acting as NSI’s President, and those times where he was not so employed. Mr. Baker points to both Mr. Baker’s representations and to Mr. Hamm’s statements as proof that all parties understood at all times that Mr. Baker was not Mr. Hamm’s lawyer.
ANALYSIS
The Law
Solicitor-Client Relationship
[54] The courts look to the presence or absence of various indicia to assist in determining whether a reasonable person would conclude that a given lawyer was acting for a particular party. The leading case in this area is Jeffers v. Calico Compression Systems, 2002 ABQB 72. Jeffers has been cited on a number of occasions as outlining the governing test. In Trillium Motor World Ltd. v. General Motors of Canada Limited¸2015 ONSC 3824, McEwen J. described the test to be considered at paragraphs 411 to 413 of his judgment:
The solicitor-client relationship is based on general concepts of contract and the specific contract of a retainer: Filipovic v. Upshall (2000), 2000 CanLII 26971 (ON CA), 133 O.A.C. 151 at para. 5 (C.A.). Whether a solicitor-client relationship exists is a question of fact. There is no need for a person to formally retain a lawyer by way of letter or other document. Nor is it necessary that an account be rendered or a bill paid. Rather, a court must look to a number of factors to ascertain whether such a relationship exists.
Justice Hawco helpfully identified twelve relevant indicia in Jeffers v. Calico Compression Systems, 2002 ABQB 72, 314 A.R. 294 [Jeffers]. Both parties agree that these indicia are accurate and apply to this case. They are as follows:
(i) a contract or retainer;
(ii) a file opened by the lawyer;
(iii) meetings between the lawyer and the party;
(iv) correspondence between the lawyer and the party;
(v) a bill rendered by the lawyer to the party;
(vi) a bill paid by the party;
(vii) instructions given by the party to the lawyer;
(viii) the lawyer acting on the instructions given;
(ix) statements made by the lawyer that the lawyer is acting for the party;
(x) a reasonable expectation by the party about the lawyer's role;
(xi) legal advice given; and
(xii) any legal documents created for the party.
Not all indicia need to be present. Rather, as Hawco J. explains at para. 8,
...the question appears to be whether a reasonable person in the position of a party with knowledge of all the facts would reasonably form the belief that the lawyer was acting for a particular party.
Further, the twelve indicia are not exhaustive. Depending on the facts of the case, other indicia may be relevant.
[55] McEwen J. further stated at para. 417:
The existence of a solicitor-client relationship is a fact-driven and multifaceted analysis. Sometimes, it will be readily apparent that a retainer exists. Other times, a careful examination of the facts must be undertaken. The court must take a holistic approach to the question at hand, considering the evidence in its totality.
[56] At paragraph 440 of Trillium, McEwen J. also examined objective facts about both parties’ conduct (lawyer and putative client) when determining whether or not a solicitor-client relationship existed:
Cassels' second submission requires the court to consider the nature of the legal test for finding a solicitor-client relationship. The underlying suggestion is that only facts which are known to the putative client (or possibly, to both parties) qualify as indicia of a solicitor-client relationship. I disagree. While a putative client's knowledge is important, the existence of a retainer cannot be totally dependent on what the putative client thought or knew about the existence of the solicitor-client relationship. Equally important is what the lawyer knew or ought to have known about the reasonable expectations of the persons with whom he or she is dealing directly or indirectly. The court must be able to consider objective facts about the parties' conduct that suggest such a relationship. The opening of a file is a good example. A client need not be present in the office or privy to an email chain when the lawyer opens the file, in order for that to count as an indicium.
“Near Clients”
[57] A similar analytical approach has been undertaken by courts in determining whether lawyers can act for “near clients” who did not formally retain counsel. For example, in Milverton Capital Corp. v. Therm Tech Technologies 2002 BCSC 773 (BCSC), a corporate officer (Mr. Braconnier) was involved in legal proceedings as against his former employer (Milverton). Mr. Braconnier sought an Order removing the law firm that represented the company in so far as the law firm was in a conflict of interest vis a vis Mr. Braconnier. Milverton’s allegations as against Mr. Braconnier involved a variety of corporate malfeasances including fraudulent misrepresentation, breaching of fiduciary duties and other issues. Nielson J. looked at whether the mere fact that Mr. Braconnier worked as a corporate officer and gave instructions to the corporation’s law firm would create a conflict of interest for the corporation’s lawyer. Nielson J. looked at the relevant rules of professional conduct from the Canadian Bar Association from 1987 which stated:
Acting Against Former Client
- A lawyer who has acted for a client in a matter should not thereafter act against the client (or against persons who were involved in or associated with the client in that matter) in the same or any related matter, or take a position where the lawyer might be tempted or appear to be tempted to breach the Rule relating to confidential information. It is not, however, improper for the lawyer to act against a former client in a fresh and independent matter wholly unrelated to any work the lawyer has previously done for that person.
Acting for More Than One Client
- A lawyer who is employed or retained by an organization represents that organization acting through its duly authorized constituents. In dealing with the organization's directors, officers, employees, members, shareholders or other constituents, the lawyer shall make clear that it is the organization that is the client when it becomes apparent that the organization's interests are adverse to those of the constituents with whom the lawyer is dealing. The lawyer representing an organization may also represent any of the directors, officers, employees, members, shareholders or other constituents, subject to the provisions of this Rule dealing with conflicts of interest.
[58] Nielson J. then considered the argument that Mr. Braconnier’s previous position generated a conflict of interest at paras 55 to 57:
In my view, such an approach fails to adequately address the implications of Mr. Branconnier's position as a director and officer of companies in the Thermo Tech Group. As Guiding Principle 12 indicates, acting as a solicitor for a corporation necessarily involves taking instructions from its representatives. Where, as here, the instructing representative is a director or officer of the corporation, he owes a fiduciary duty to the company. Similarly, the corporate solicitors stand in a fiduciary relationship to their client. In these circumstances, Mr. Branconnier could have little reasonable expectation that his communications to Clark, Wilson in the course of corporate matters would be kept confidential from the Thermo Tech Group: Gainers Inc. v. Pocklington (1995), 1995 ABCA 177, 125 D.L.R. (4th) 50 (Alta.C.A.) at pp. 58-60, leave to appeal dismissed, [1995] S.C.C.A. No. 353.
In Meehan v. Hopps (1956) 301 P.2d 10, a judgment considered in Williamson v. Roberts & Griffin, supra, at p. 222, the District Court of Appeal of California stated:
Appellant has not cited, nor have we found, any case holding that an attorney for a corporation is disqualified from representing it in an action brought by it against one of its officers, nor that in such an action the attorney may not use information received from such an officer in connection with company matters. The attorney for a corporation represents it, its stockholders and its officers in their representative capacity. He in nowise represents the officers personally. It would be a sorry state of affairs if when a controversy arises between an attorney's corporate client and one of its officers he could not use on behalf of his client information which that officer was required by reason of his position with the corporation to give to the attorney.
and further:
To hold that the giving of such information in that more or less intimate relationship which necessarily must exist between an officer of the corporation and its attorneys would prevent the corporation attorneys from thereafter using it in favour of the corporation in litigation against the officer, would be unfair to the corporation and its stockholders, and would violate the above mentioned very important precept, namely, that the attorney's first duty is to his client.
Nevertheless, Guiding Principle 12 from the Canadian Bar Association Code of Professional Conduct does make it clear that a lawyer in such circumstances has an obligation to ensure that a corporate representative understands the distinction between his personal situation, and that of the corporate client, particularly if the potential for conflict of interest arises.
[59] At paragraphs 58 to 60, Nielson J considered the impact that relaying personal information can have upon the Jeffers analysis:
As well, in Gainers Inc. v. Pocklington, supra, at p. 57 Coté J.A. observed:
. . . sometimes a company shareholder might seek legal advice about his personal position and his shareholding from the same law firm which also acts for the company. That can pose serious dangers of a conflict for the law firm.
He went on at p. 58 to make it clear that a fact-specific inquiry is required in such circumstances, to ensure that the corporate solicitors did not develop such a close relationship with an instructing corporate representative that it would be wrong to permit the solicitors to use confidences from that individual against him.
Such a situation led to the removal of a solicitor in Jeffers v. Calico Compression Systems, 2002 ABQB 72, [2002] A.J. No. 79 (Q.B), where a corporate solicitor who had endeavoured to act for two shareholders in preparing a shareholders' agreement was required to withdraw from representing the company when the shareholders had a falling out.
In considering the facts here in the context of these authorities, the onus is on Mr. Branconnier to establish that a solicitor/client relationship, or a relationship as a "near client" based on confidential communications, developed between him and Clark, Wilson in the course of his dealings with them as a representative of the Thermo Tech Group.
[60] Thus, Neilson J. examined Jeffers and held that the Jeffers test demanded that the party claiming conflict of interest has the obligation to prove its case. Neilson J. then considered Mr. Braconnier’s situation and effectively found that Mr. Braconnier’s sophistication was such that Mr. Braconnier knew that his communications with the law firm would not be confidential as regards normal, confidential corporate information (paras 61 and 67). Nielson J. found that the law firm in question had, however, previously represented Mr. Braconnier in a personal matter. As such Nielson J. undertook the analysis as described in MacDonald Estate v. Martin 1990 CanLII 32 (SCC), [1990] 3 S.C.R. 1235 (S.C.C.) which established the principles to be applied in determining whether a law firm must be disqualified when a conflict of interest is alleged by an opposing litigant. Nielson J. found that the nature of the personal retainer did not necessitate the removal of the law firm (paras. 93 to 96).
[61] This proposition regarding the relationship as between a corporate officer and corporate solicitor was echoed in Harris v. Leikin Group Inc., 2013 ONSC 1525 (Ont. S.C.) when Brown J. (as he then was), quoted both International Capital Corp. v. Schafer, 1996 CanLII 6847 (SK QB), [1996] S.J. No. 799 (Q.B.) and Jeffers at paragraphs 508 and 509 of his reasons:
A solicitor/client relationship does not arise between a corporate solicitor and a corporate officer merely because the officer had consulted or given instructions to the corporate solicitor. However [Brown J. quotes International Capital Corp]:
In certain circumstances a solicitor and client relationship with the individual shareholders or directors of a corporation may exist even where the solicitor purports to act on behalf of the corporation only and bills all his services to it. An example is a husband and wife who instruct their personal solicitor to incorporate their farm or business and to subsequently act for this new closely-held corporation of which they are the sole shareholders and directors. In such a case multiple solicitor and client relationships would exist. The one between the corporation and the solicitor would simply be an additional one to that which previously existed between the solicitor and the husband and wife.
Whether a solicitor-client relationship exists in any particular set of circumstances is a question of fact. A formal letter of retainer is not required to find a solicitor/client relationship, nor is it necessary that there be an account rendered by the lawyer to or paid by the complaining party. Courts look to a number of factors to ascertain whether a solicitor/client relationship has arisen in particular circumstances [Brown J. quotes Jeffers]:
These indicia include: a contract or retainer; a file opened by the lawyer; meetings between the lawyer and the party; correspondence between the lawyer and the party; a bill rendered by the lawyer to the party; a bill paid by the party; instructions given by the party to the lawyer; the lawyer acting on the instructions given; statements made by the lawyer that the lawyer is acting for the party; a reasonable expectation by the party about the lawyer's role; legal advice given; and legal documents created for the party. Not all indicia need to be present. As Madam Justice Romaine stated in Guardian Insurance, [1999] A.J. No. 987, supra, the question appears to be whether a reasonable person in the position of a party with knowledge of all the facts would reasonably form the belief that the lawyer was acting for a particular party.
[62] Mr. Hamm pointed me to Brown J.’s passage quoting International Capital Corp. Mr. Hamm indicated that this passage supports his contention that Mr. Baker acted for him such that Mr. Baker owes Mr. Hamm a duty of confidentiality. I note, however, that Brown J.’s adoption of International Capital Corp. presupposes that, prior to incorporation, the lawyer had a pre-existing solicitor-client relationship with the individual client. Thus, if I accept that Mr. Baker and Mr. Hamm had a solicitor-client relationship prior to the incorporation of NSI, this passage makes clear that Mr. Baker would continue to owe Mr. Hamm a duty of confidentiality despite the incorporation. I do not believe that this passage goes beyond this proposition.
[63] It is also clear from the above-referenced case law that the courts will look to objective factors to determine whether or not a party’s contention regarding a putative solicitor/client relationship is reasonable. The courts will look to the factors outlined in Jeffers and apply them on a case-specific basis. In Harris, Brown J. undertook an analysis of the relevant Jeffers factors to determine that the law firm in question had never had a solicitor-client relationship with certain individuals related to the corporation in question (paras 529 – 533):
The plaintiffs argued that as counsel to the Leikin Group of Companies, with knowledge of the family nature of the corporations, Ogilvy Renault not only owed a fiduciary duty to the boards of directors which managed those companies, but also to the shareholders of the families whom each director represented. I do not accept this argument.
No party disputed that Ogilvy Renault had been retained by the Leikin Group a few years before the transaction in question ever arose to act as counsel for the corporations. As corporate counsel, Ogilvy Renault owed its duty of loyalty to the companies, and it was obliged to advise all directors of the companies so that the Boards could make informed decisions in the best interests of the companies.
No plaintiff adduced evidence that he or she had retained Ogilvy Renault to represent his or her interests on the share redemption transaction. None of the typical indicia of the existence of a solicitor-client relationship between Ogilvy Renault and the plaintiffs could be found in the evidence: there were no retainer letters; no bills paid by the plaintiffs; no separate meetings attended only by a plaintiff and Jameson to discuss the plaintiff's personal interest in the share redemption transaction; no reporting letters or emails from Ogilvy Renault to the plaintiffs. In fact, the evidence overwhelmingly indicated the contrary: the Harris family plaintiffs had retained Mainzer; Rick Kesler retained Jules Lewy; and, David Spieler retained Sandra Appel. As set out in great detail above, the negotiations over the terms of the LOI saw Lewy communicate the position of the Selling Shareholders as a group, and Jameson communicate that of the Non-Selling Shareholders. During the course of those negotiations the Selling Shareholders did not seek advice from Jameson. True, Spieler, while still a Non-Selling Shareholder, approached Jameson for advice, but Jameson counseled him to secure independent legal representation, and Spieler ended up retaining Appel.
Although none of those facts support finding the existence of a solicitor-client relationship between Ogilvy Renault and the plaintiffs, as I understand their argument the plaintiffs contend, in effect, that the nature of the share redemption transaction meant that by operation of law such a solicitor-client relationship existed. Thus, the plaintiffs argued that with all directors of the corporations in a conflict of interest position regarding the transaction, the duties owed by corporate counsel to the corporation, acting through its board of directors, became transferred to the shareholders.
I do not accept that line of argument. The duty of corporate counsel remained a duty to the corporation.
Evidential Burden and the Lack of Written Retainer
[64] Where a lawyer fails to reduce her or his retainer into writing, the lawyer faces a heavy burden to prove that the solicitor’s position regarding the retainer is to be accepted. The “heavy onus” was described by Faieta J. in John Doe v. McDonald [2015] O.J. No. 4211 (Ont. S.C.); aff’d [2016] O.J. No. 2283 (O.C.A.) at paragraphs 14 to 20:
In upholding a client's understanding regarding the terms of a retainer, the Ontario Court of Appeal in Plater v. Arenson (1999), 1999 CanLII 2382 (ON CA), 175 DLR (4th) 102, at para. 5, adopted the following statement:
The Solicitors' Act and the common law are founded on the premise that the client should be protected. It is also well settled law that when there is any doubt or ambiguity, it is to be resolved in favour of the client.
Given the fiduciary nature of the solicitor-client relationship, the imbalance of legal knowledge between solicitor and client, and the fact that a solicitor knows, or should know, the risks involved, the courts have given more weight to a client's understanding of the terms of an oral retainer rather than that of the solicitor.
Lord Denning in Griffiths v. Evans, [1953] 1 W.L.R. 1424 (C.A), at 1428, explained this principle and its rationale as follows:
On this question of retainer, I would observe that where there is a difference between a solicitor and his client upon it, the courts have said, for the last 100 years or more, that the word of the client is to be preferred to the word of the solicitor, or, at any rate, more weight is to be given to it...The reason is plain. It is because the client is ignorant and the solicitor is, or should be, learned. If the solicitor does not take the precaution of getting a written retainer, he has only himself to thank for being at variance with his client over it and must take the consequences.
Griffiths remains good law in England. See Fladgate LLP v. Harrison, [2012] EWHC 67 (Q.B.) where the Court stated, at para. 55:
The Defendant submitted that, where a dispute arises between a solicitor and a client over the nature of an oral retainer, the client's version of the retainer should prevail, citing...Griffiths v. Evans...However, that principle does not preclude me from finding against the client, where his case is clearly contradicted by other documentary and witness evidence.
In Ontario, this principle is well-established. In Re Eccles (1868), 1 Ch. Cham. 263, at 264 the Court stated:
It is the practice of this court that where a retainer is asserted by a solicitor and denied by the alleged client, to give weight to the denial of the client as against the solicitor. It is very careless of solicitors not to take a written retainer from clients, as they render themselves liable at any moment to have their claim for costs disputed, especially where the party sought to be charged is not the party to the suit; if solicitors are so incautious as not to take a written retainer, they must submit to the loss.
More recently, the Ontario Court of Appeal adopted this principle in Rye and Partners v. 1041977 Ontario Inc., [2004] O.J. No. 2480, at para. 2:
...when a solicitor fails to reduce to writing the terms of his or her retainer and a dispute arises, there is a heavy onus on the solicitor to establish a retainer.
Similarly, in Ellyn Barristers v. Stone, [2006] O.J. No. 1242, aff'd 2007 ONCA 565, [2007] O.J. No. 3114 (C.A.), this Court, at para. 18, adopted Griffiths as trite law for the principle:
...where a solicitor fails to reduce his or her retainer to writing, and a dispute arises, there is a heavy onus on the solicitor to satisfy the court that his/her version of its scope ought to be preferred.
Findings
Mr. Hamm’s Personality and the Nature of the Hamm/Baker Communications
[65] I find that it is beyond doubt that Mr. Hamm is a sophisticated business person. He has been a director of several public and private companies. He negotiated with Mr. Knight (an obviously affluent investor) and others regarding land and related projects worth considerable sums of money. In his September 24, 2016 email to Mr. Baker and Mr. Knight, Mr. Hamm indicated that he is the President of the NSI and that he “knows exactly how to roll this out”.
[66] It is also clear from the September 24, 2016 email as well as his other communications that Mr. Hamm is confident in his abilities and is unafraid to voice a specific concern. For example, Mr. Hamm would not easily concede that he was a sophisticated business person in cross-examination. Instead, he chose to indicate that he “understood” business. Mr. Hamm’s willingness to confidently assert a position is also evidenced by his aggressive communications with Mr. Knight and Mr. Baker wherein he, upon occasion, resorted to both vulgarity and literary references in support of his contention that he is a man of both formidable intellect and exceptional business acumen.
[67] Given the foregoing, I find that Mr. Hamm is not someone who would be blindly led by a lawyer into the abyss. Instead, Mr. Hamm’s communications to Mr. Baker in the summer and fall of 2016 make clear that Mr. Hamm is more than willing to communicate forcefully and aggressively to pursue his interests.
[68] With respect to the nature of the “confidential information” provided to Mr. Baker, Mr. Hamm was pressed in cross-examination regarding the matters he discussed with legal counsel. Mr. Hamm did not point to any issue that fell outside the ambit of the possible land acquisition project other than possible rail line issues. However, and despite Mr. Hamm’s cross-examination evidence to the contrary, Mr. Hamm’s own email of September 24, 2016 makes clear that the rail line issue was related to the project: “A Kindergarten class, or conversely, a cartload of Chimpanzees could readily make the determination that when purchasing a port/wharf that it would be optimal to include the rail bed tie in rather than exclude.”
[69] For his part, Mr. Baker deposed that he only discussed project-related issues with Mr. Hamm.
[70] Accordingly, given Mr. Baker’s evidence and Mr. Hamm’s inability to describe any items discussed beyond the parameters of the project, I accept that Mr. Baker and Mr. Hamm’s only discussions pertained to the acquisition of the impugned lands near Wawa, Ontario and related issues.
Mr. Hamm’s Actual Belief Regarding Mr. Baker’s Retainer
[71] In both oral and written argument, Mr. Hamm gave several indicia of the fact that Mr. Baker was acting as legal counsel to Mr. Hamm. At paragraph 52 of my reasons above, I outlined the indicia relied upon by Mr. Hamm to prove the solicitor-client relationship.
[72] The problem with the indicia described in paragraph 52 is that they largely do not address the key determination in this case: In which capacity was Mr. Baker giving legal advice to Mr. Hamm? Was Mr. Baker ever giving legal advice to Mr. Hamm in the latter’s personal capacity, or were all of Mr. Baker’s interactions with Mr. Hamm within the purview of the latter’s role as President of NSI? As seen in Harris, this is a key distinction. If Mr. Baker was only consulting with Mr. Hamm qua President, then no solicitor-client relationship likely existed as between Mr. Baker and Mr. Hamm qua Mr. Hamm. It would thus follow that Mr. Hamm would not be in a position to claim privilege over Mr. Baker’s file since Mr. Hamm was not Mr. Baker’s client or “near client”. The instant application would therefore fail.
[73] For example, Mr. Baker’s rendering of an account to Mr. Hamm at NSI does not necessarily indicate that Mr. Baker represented Mr. Hamm’s personal interests. It could be that Mr. Hamm was merely receiving the invoice on behalf of the client corporation. Equally, the passing of confidential information from Mr. Hamm to Mr. Baker does not necessarily provide an indication that Mr. Baker was representing Mr. Hamm personally. Mr. Hamm would undoubtedly pass confidential information to Mr. Baker in the former’s capacity of President of NSI, irrespective of any personal relationship between the two individuals.
[74] In order to determine Mr. Hamm’s actual understanding of Mr. Baker’s retainer, the contemporaneous documentation provides strong insight. Mr. Knight sent a July 22, 2016 email to Mr. Baker wherein Mr. Knight states that he has made his involvement with Mr. Hamm conditional upon the fact that Mr. Baker “will be solicitor for the company and the project”. Mr. Hamm states that this communication never occurred. Mr. Hamm has not, however, provided me with any reason to doubt the veracity of the email. It was made contemporaneously. It also makes sense that Mr. Baker’s retainer would be discussed by sophisticated business people and that Mr. Baker would not represent Mr. Hamm personally so as to avoid potential conflicts of interest. Accordingly, Mr. Hamm’s evidence that he and Mr. Knight agreed to a joint retainer runs contrary to business sense. I also note that Mr. Knight has no interest in the litigation and would have no reason to misrepresent a conversation of this magnitude. Given the unbiased email, I accept that Mr. Baker’s involvement as solicitor for the company was discussed as between Mr. Knight and Mr. Hamm. I also accept that Mr. Knight indicated that Mr. Baker would represent the corporation, and that it was clear that Mr. Baker would not represent Mr. Hamm’s personal interests. Mr. Knight’s email provides strong evidence of same.
[75] With respect to the July 28, 2016 meeting, I find that Mr. Baker maintained his usual practice and advised Mr. Hamm that the latter could receive independent legal advice if he were so inclined. Several pieces of evidence lead me to this conclusion. First, as noted above, Mr. Knight made Mr. Baker’s involvement in the project – and the terms of that involvement – a condition precedent for his own participation in the project. Mr. Baker was aware of Mr. Knight’s insistence thereon. It would be likely, therefore, that Mr. Baker would have complied with his normal practice in such a situation.
[76] Second, Mr. Hamm was already acting as an officer of NSI by July 28, 2016. Mr. Hamm indicated in his cross-examination that, by July 28, 2016, he had signed a term sheet, not in his personal capacity, but as President of NSI. Mr. Hamm was already acting in this capacity two weeks prior to incorporation and, as such, it is reasonable that he understood that Mr. Baker would not represent his personal interests.
[77] Third, Mr. Baker did not ask Mr. Hamm for photo identification at the July 28, 2016 meeting. A sophisticated businessman like Mr. Hamm would likely be aware that the receipt of photo identification is a precursor for opening a legal file. Accordingly, the failure to secure photo identification from Mr. Hamm is also more consistent with Mr. Baker’s position that he made it clear that Mr. Baker did not represent Mr. Hamm, than it is with Mr. Hamm’s contention.
[78] Fourth, Mr. Hamm’s emails shortly after the meeting also appear to indicate that Mr. Hamm understood that he was not Mr. Baker’s client. On August 2, 2016, Mr. Hamm wrote to Mr. Baker and Mr. Knight asking whether or not $50,000 was to be wired as per an attached direction. Mr. Baker wrote to Mr. Knight indicating that “I need your [Mr. Knight’s] instructions to advance funds from your trust account to Northern Superior Industries LTD.” This email chain makes clear that: (a) Mr. Hamm did not appear to think that he could direct Mr. Baker to advance the funds; and (b) Mr. Baker was operating as though Mr. Hamm could not provide said instructions.
[79] Fifth, Mr. Baker’s affidavit indicates that Mr. Knight recalls Mr. Baker making specific representations regarding the limitations of the retainer at the July 28, 2016 meeting. Because Mr. Baker did not expand upon the nature of the Mr. Knight’s recollection or give particulars of same, Mr. Knight’s hearsay statement is admissible but is entitled to only limited weight.
[80] The five aforementioned points provide strong evidence that Mr. Baker complied with his usual practice and, on July 28, 2016, advised Mr. Hamm that he would not represent Mr. Hamm’s personal interests. By way of contrast, Mr. Hamm only provides bald assertions. I prefer Mr. Baker’s evidence to that of Mr. Hamm.
[81] I also accept Mr. Lemke’s evidence regarding the August 31, 2016 meeting. His affidavit indicates that Mr. Baker delineated his retainer and Mr. Lemke attached his notes of the meeting. He was not cross-examined on his affidavit. Counsel for Mr. Hamm submits that Mr. Lemke’s failure to disclose his prior working relationship with Mr. Baker, coupled with Mr. Lemke’s statement that he did not know the “parties” to the meeting, is such that Mr. Lemke’s credibility must be diminished considerably. I disagree with that assertion. First, the reference to “parties” can easily be explained by the notion that the “parties” to a legal matter are generally considered to be the clients, and not the lawyers. While it could be argued that Mr. Baker was a “party” given his role as Secretary/Treasurer of NSI, this nicety was not explored on cross-examination. Secondly, while I agree that it would have been preferable to disclose the prior working relationship between Mr. Lemke and Mr. Baker so as to provide adequate background to assess the parties’ credibility, I do not find that the failure so to do is a major blemish upon Mr. Baker or Mr. Lemke’s credibility.
[82] As for Mr. Hamm’s credibility, I have concerns with respect to his testimony. Specifically, Mr. Hamm’s emails shortly after the August 31, 2016 meeting are consistent with Mr. Hamm understanding the limited nature of Mr. Baker’s retainer. Mr. Hamm’s September 23 and 24, 2016 emails to Mr. Baker suggest that Mr. Hamm is not instructing someone whom he considers to be his lawyer. Instead, Mr. Hamm appears to be negotiating with Mr. Baker regarding the SPA. I have no doubt that, if Mr. Hamm believed that Mr. Baker was his lawyer, he would have instructed Mr. Baker to represent his interests by instructing him to remove any reference to the rail line in the SPA. I find that Mr. Hamm would have reminded Mr. Baker in clear and unequivocal terms of Mr. Hamm’s expectations of his legal counsel. To suggest otherwise ignores the pattern of communication used by Mr. Hamm in the summer and fall of 2016. Mr. Hamm’s failure to instruct Mr. Baker in such a fashion corroborates Mr. Lemke’s evidence.
[83] Most importantly, Mr. Hamm in a November 4, 2016 email tells Mr. Knight that Mr. Baker is “your” lawyer. That is an admission by Mr. Hamm in real time that he understands that Mr. Baker was not his legal counsel. Mr. Hamm is a sophisticated man with a strong command of the English language. In cross-examination, he would not easily concede “sophistication” and chose his words carefully. He attempted to take “circuitous” credit for Mr. Knight’s payment of Mr. Baker’s retainer. Given Mr. Hamm’s obvious communication skills, I place considerable weight upon Mr. Hamm’s contemporaneous understanding that Mr. Baker was “your” lawyer and not “my” lawyer or “our” lawyer.
[84] Thus, I accept Mr. Lemke’s evidence that Mr. Baker informed Mr. Knight, Mr. Hamm and Mr. Lemke at the August 31, 2016 meeting that he was representing only Mr. Knight and NSI. Given Mr. Hamm’s sophistication, Mr. Hamm knew by implication that this meant that Mr. Baker was not his lawyer. Mr. Hamm confirmed this understanding on November 4, 2016 when he described Mr. Baker as “your” lawyer, not “our” lawyer. I also note that, had Mr. Hamm first learned of the limits of the retainer on August 31, 2016, he would have raised the issue with Mr. Baker contemporaneously. The fact that he did not do so corroborates the position that Mr. Hamm always understood that Mr. Baker was not representing his personal interests.
[85] It should be noted, however, that Mr. Baker’s evidence is not without blemish. Mr. Hamm asks me to find that Mr. Baker’s evidence is suspect given the fact that Mr. Baker has admitted in cross-examination that he is being paid by Mr. Shunock’s lawyers to participate in this litigation. Indeed, based upon Mr. Baker’s invocation of the “common intention” privilege, I do not know whether or not Mr. Baker was being paid to testify at his cross-examination. This fact causes me concern.
[86] Equally, NSI’s February 23, 2018 resolution is curious. While I am not aware of any theoretical legal impediment that would prevent NSI from passing a resolution waiving privilege[^3], doing so in the middle of litigation also causes me some concern.
[87] Nonetheless, and despite my concerns raised in the preceding two paragraphs, the evidence corroborating Mr. Baker’s position in this matter is expansive, weighty, contemporaneous and convincing.
[88] By way of contrast, Mr. Hamm provided bald statements in his affidavit without providing a specific basis for accepting his evidence. He provided no “real-time” written communications to substantiate his alleged belief nor did he provide fulsome details as to why his recollection ought to be preferred over Mr. Baker’s evidence. As noted earlier, I expected Mr. Hamm to express his views with both vehemence and detail when confronted with specific allegations with which he disagreed. Mr. Hamm could have described what he told Mr. Baker at the relevant times. Mr. Hamm could have described any conversation that would have been consistent with his belief that Mr. Baker was representing Mr. Hamm’s personal interests. Mr. Hamm could have described the specific confidential information he passed to Mr. Baker in his personal capacity. Mr. Hamm did not do so. In fact, as noted in these reasons, Mr. Hamm’s current position appears to be contradicted by his own contemporaneous emails. Accordingly, I find his evidence lacking.
Conclusion Regarding Mr. Hamm’s Actual Belief
[89] I am faced with strong evidence supporting Mr. Baker’s position that Mr. Baker would have conformed with his normal practice by advising Mr. Hamm ab initio that Mr. Baker would not represent Mr. Hamm’s personal interests. I am also faced with weak evidence supporting Mr. Hamm’s claim that no such representations were ever made.
[90] Weighing all of the evidence, I accept that Mr. Hamm knew that Mr. Baker was not representing the former’s personal interests. I accept that Mr. Knight advised Mr. Hamm of such prior to July 28, 2016. I accept that Mr. Baker advised Mr. Hamm of such on July 28, 2016 and again on August 31, 2016.
[91] Clearly, it would have been better had Mr. Baker reduced his retainer to writing in light of the somewhat complicated nature of the legal relationship as between Mr. Baker and Mr. Hamm. Nonetheless, and despite the heavy evidential burden facing Mr. Baker as per Griffiths, the preponderance of evidence suggesting that Mr. Baker advised Mr. Hamm of the limited nature of Mr. Baker’s retainer is such that Mr. Baker has satisfied me that Mr. Hamm knew that Mr. Baker was not representing his personal interests at all times.
The Letter Agreement
[92] Given the foregoing, the Letter Agreement describing Mr. Knight and Mr. Hamm’s “mutual direction” to Mr. Baker merely confirms that Mr. Hamm, as President of NSI, would instruct Mr. Baker in the latter’s capacity as corporate counsel. Mr. Hamm puts considerable weight upon this document as providing clear evidence of a joint retainer. That position is, however, belied by both the strong evidence supporting my previous finding, as well as the opaque language used in the Letter Agreement.[^4] Given that Mr. Baker advised Mr. Hamm of the limitations of Mr. Baker’s legal representation, it is unsurprising that Mr. Knight and Mr. Hamm did not feel the need to specifically delineate Mr. Baker’s retainer in the Letter Agreement. It is also worth noting that the Letter Agreement was not drafted by Mr. Baker.
Near Client
[93] Mr. Hamm takes the position that Mr. Baker owes Mr. Hamm a duty of confidentiality as a “near client”. This position also fails.
[94] First, as I noted earlier, it was always clear based upon Mr. Knight’s negotiation with Mr. Hamm that Mr. Baker would be representing the corporation and Mr. Knight. Second, Mr. Hamm’s sophistication is such that he would have understood that his representations to NSI’s lawyer would not necessarily create solicitor-client duties of confidentiality for Mr. Hamm qua Mr. Hamm. As was effectively admitted by Mr. Hamm in cross-examination, Mr. Hamm’s communications were limited to the scope of the project undertaken by NSI. There would therefore have been no confusion about the nature of Mr. Baker’s role and Mr. Baker’s duties vis a vis Mr. Hamm personally. To hold otherwise on the facts of this case would mean that a great many officers and directors could be owed a duties of confidentiality as regards communications with corporate solicitors, even when those communications are solely within a corporate context. Such a result would completely blur the distinction between the personal and professional capacities of officers and directors and would run contrary to the case law quoted above.
[95] Second, the timing of the business relationship is such that this is not a case where Mr. Hamm worked as a corporate officer of NSI for years and relayed considerable confidential business information to Mr. Baker over the course of time. One can easily imagine where, in such circumstances, the information relayed qua officer or qua individual could blur. Instead, on the facts before me, the information was communicated over a relatively brief period and pertained solely to the affairs of NSI. No reasonable person in Mr. Hamm’s sophisticated position would believe that Mr. Baker was representing Mr. Hamm’s personal interests as per Harris.
[96] Accordingly, Mr. Hamm was not owed any “near client” duties of confidentiality arising from his discussions with Mr. Baker.
Other Jeffers Factors
[97] The other objective factors outlined in Jeffers provide strong evidence that Mr. Hamm always understood that Mr. Baker did not represent his personal interests. First, Mr. Knight paid the retainer. In his cross-examination, Mr. Hamm took the position that the payment of a retainer by Mr. Knight was indirectly a payment by Mr. Hamm. In his factum, Mr. Hamm states that the payment of a retainer to Mr. Baker gave rise to an indicia of a solicitor-client relationship as between Mr. Baker and Mr. Hamm[^5]. For obvious reasons this position fails.
[98] The following factors also provide strong evidence that Mr. Hamm did not reasonably believe that Mr. Baker represented Mr. Hamm’s personal interests:
a. Mr. Baker opened his file in Mr. Phil Knight’s name and the matter was described as “Northern Superior”;
b. Mr. Baker’s accounts were rendered to “Northern Superior Ltd.” The fact that Mr. Hamm’s name appeared on an account(s) is consistent with Mr. Baker billing NSI and sending his bill along to NSI’s president. I do not infer that Mr. Hamm would have been led to believe that Mr. Baker represented Mr. Hamm’s personal interests as a result of same, especially given Mr. Hamm’s business sophistication;
c. Mr. Hamm did not personally pay any account; and
d. There is no evidence to suggest that Mr. Hamm offered to personally pay the account.
[99] Mr. Hamm’s reliance upon Mr. Baker’s provision of legal advice is also of limited value. Had Mr. Hamm been able to provide instances where Mr. Baker provided advice regarding Mr. Hamm’s personal affairs, I would have considered this evidence through the Jeffers lens. Mr. Hamm did not provide such evidence. Nor did Mr. Hamm aver to the specific nature of the confidential evidence provided to Mr. Baker. Accordingly, I have no evidence that any communication as between Messrs. Hamm and Baker dealt with anything other than NSI business. Indeed, Mr. Hamm has effectively conceded that his dealing with Mr. Baker dealt only with NSI affairs. As noted in Harris, such interactions standing alone do not give rise to a “near client” relationship. Mr. Hamm has failed to adduce satisfactory evidence on this point and his submission accordingly has very limited weight.
[100] With respect to Mr. Hamm’s other submissions regarding the Jeffers indicia, I make the following observations:
a. The fact that Mr. Baker opened a file listing Mr. Hamm as a contact for NSI does not provide an indication that Mr. Hamm understood – reasonably or otherwise – that Mr. Baker was representing his personal interests. This fact is consistent with Mr. Hamm’s position as President of NSI which, as noted in Harris, does not create an independent solicitor-client relationship (or “near client” relationship) as between officer and corporate counsel;
b. The formation of a sole-purpose corporation by Mr. Baker does not provide evidence that Mr. Baker owes any duty to Mr. Hamm given my previous finding regarding Mr. Hamm’s actual understanding;
c. The rendering of account by Mr. Baker to Mr. Hamm is not an indication of any independent legal duty given Mr. Hamm’s position as President of NSI; and
d. While the Baker/Hamm meetings could, in some circumstances, provide evidence of a solicitor-client relationship, the fact that only NSI-related business was discussed at these meetings demands that this factor does not weigh in favour of finding that such a solicitor-client relationship existed as between Mr. Baker and Mr. Hamm (in the latter’s personal capacity).
CONCLUSION
[101] Based on all of the foregoing, the overwhelming evidence in this application is that Mr. Hamm did not have a reasonable belief that Mr. Baker would represent his interests. In fact, Mr. Hamm understood the opposite to be the case from the outset of his discussions with Mr. Knight. Mr. Knight made it a condition of his involvement in the project that Mr. Baker would be solicitor for “the corporation and project”. Mr. Baker advised Mr. Hamm at their initial July 28, 2016 meeting that Mr. Baker was not representing Mr. Hamm’s personal interests. Mr. Baker confirmed this understanding at the August 31, 2016 meeting. Mr. Hamm negotiated with Mr. Baker in the fall of 2016 as though the men had adverse interests. Mr Hamm confirmed his understanding that Mr. Baker was “your” counsel in a November 4, 2016 email. Mr. Hamm, therefore understood at all times that Mr. Baker was not his lawyer.
[102] Equally, Mr. Hamm had no reason to believe that Mr. Baker owed him any duties of confidentiality as per Jeffers. Mr. Hamm understood that he was not Mr. Baker’s client. Mr. Hamm was not Mr. Baker’s “near client” flowing from Mr. Hamm’s role as President of NSI. Mr. Hamm did not pay Mr. Baker. Mr. Baker’s file was opened with NSI as the client. Any confidential information given by Mr. Hamm to Mr. Baker dealt with matters within Mr. Hamm’s role as President of NSI.[^6]
[103] Given the foregoing, Mr. Baker had no solicitor-client relationship with Mr. Hamm, nor did he owe Mr. Hamm any duties of confidentiality as a “near client”.
[104] NSI has not made a claim to have its file returned. NSI has not suggested that Mr. Baker has breached his duties. I therefore need not deal with Mr. Hamm’s concern that Mr. Baker has acted in an untoward fashion by passing the February 23, 2018 resolution.
[105] Since all other Orders sought in this application rest upon a finding that Mr. Baker owed a duty of confidentiality to Mr. Hamm, I therefore dismiss the instant application in its entirety.
[106] All previous interim Orders sealing Mr. Baker’s file are hereby vacated. I hereby vacate the provisional Orders deeming the previous hearings in this application to be in camera in nature.
COSTS
[107] The parties will provide me with cost submissions not exceeding five pages (excluding attachments) within 30 days of the release of these reasons.
Varpio J.
Date: May 22, 2018
COURT FILE: 27741/18
DATE: 2018-05-22
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
BRIAN L. HAMM
Applicant
- and –
GORDON R. BAKER
Respondent
REASONS ON APPLICATION
Varpio, J
Released: May 22, 2018
[^1]: The evidence (cross-examinations, emails etc.) in this judgment is reproduced including spelling and/or grammatical errors. For the sake of efficiency, I will not use the term “[sic]” in the reproductions of same.
[^2]: The acquisition of the Wawa property involved a number of steps including the creation of a company known as Northern Superior Industries Ltd. (“NSI”), the purchase of certain shares, negotiations with third parties, etc. Rather than list the individual steps to be undertaken in this venture, I will deal with only those that have a bearing on whether or not a solicitor-client relationship existed as between Mr. Hamm and Mr. Baker.
[^3]: I note that Mr. Hamm submits that the passing of the resolution was improperly performed such that it has no legal consequence.
[^4]: i.e. The language in the Letter Agreement is equally consistent with Mr. Hamm providing instruction to Mr. Baker in the former’s capacity as President of NSI, as it is with a joint retainer.
[^5]: It is interesting to note, however, that Mr. Hamm’s factum does not concede that Mr. Knight in fact paid the retainer.
[^6]: Mr. Hamm’s role as shareholder (which was raised by counsel) is, in the final analysis of this case, relatively meaningless since Mr. Hamm was by the President of NSI.