COURT FILE NO.: CV-17-3802-00

DATE: 20180530

CORRECTED: 20180605

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Carolin Dianne Mizzi, Plaintiff

AND:

Tara Graham, Mark Anthony McClymonth, and 1949765 Ontario Inc. c.o.b Homebuyers Assistance

BEFORE: Justice F. Dawson

COUNSEL: Chris Tonks, for the Plaintiff

J. Stanleigh, Counsel for the Defendant Graham

HEARD: May 15, 2018 at Brampton

ENDORSEMENT

Correction notice

JUNE 5, 2018: The following paragraph [35] replaces the corresponding paragraph in the original endorsement issued on May 30, 2018

Introduction

1The defendant, Tara Graham, asks the court to remove Dalkeith Palmer and the law firm of Prouse, Dash and Crouch LLP as solicitors of record for the plaintiff. Ms. Graham claims that Mr. Palmer has a conflict of interest because he received confidential information from her during a telephone conversation between them prior to the institution of the action in this case. Although not completely clear from the notice of motion, the factum filed on behalf of Ms. Graham and the oral arguments on the motion require the court to consider whether a conflict arises (1) because a solicitor-client relationship arose during the telephone conversation in question; and (2) whether Mr. Palmer should be removed as counsel at this stage because he is likely to be a witness in the law suit. Counsel for Ms. Graham takes the position that he intends to call Mr. Palmer as a witness at trial.

2I will address each issue in turn. First, I will briefly set out the facts. I will deal with the applicable legal principles when I deal with the individual issues.

Factual Background

3The plaintiff, Carolin Mizzi, and her husband purchased a home. Due to her husband’s bad credit the couple could only obtain a mortgage with a high rate of interest. Further financial problems ensued due to her husband’s subsequent illness. The plaintiff was concerned about losing the property due to high interest payments on the mortgage.

4The plaintiff alleges that she was introduced to the defendants who agreed to assist her. Under a scheme which was developed, the plaintiff sold her home to Ms. Graham, who was to obtain a lower interest mortgage from a first tier lender. The plaintiff alleges that she prepaid the defendants $48,000.00 as a lump sum to cover two years of mortgage payments. She says that pursuant to her agreement with the defendants, that at the end of the two year period the property was to be reconveyed to her. She says she agreed to pay the defendants a $10,000.00 fee for their services.

5It is the defendant Graham’s position that the plaintiff had no arrangement with her. The only arrangement the plaintiff had was with the other defendants. I am advised the other defendants have been noted in default. Ms. Graham contends that her only contractual relationship was with the defendant McClymonth. Her arrangement with him was that she would be the nominal owner of the property but that he would cover all mortgage, tax and other expenses.

6Pursuant to the plan, title was transferred to Ms. Graham. The plaintiff continued to live in the property rent free. A new mortgage was obtained. However, according to Ms. Graham, in short order McClymonth defaulted on his agreement with her. Graham had difficulty covering the various payments and refinanced the property again.

7It is alleged by the plaintiff that before the two year period was up Ms. Graham agreed with the plaintiff that Graham would sell the property, deduct what she had been required to pay for the mortgage and taxes from the net proceeds of sale and provide the balance to the plaintiff. The property, which had appreciated in value, was sold but no part of the proceeds has been paid to the plaintiff.

8The defendant Graham maintains that she offered to reconvey the property to the plaintiff but the plaintiff said she had no funds to purchase it. The balance of the agreement is disputed.

9This abbreviated factual background is adequate for the purpose of resolving the conflict of interest allegation.

Evidence Related to the Alleged Conflict of Interest

10The evidence on the motion is limited to an affidavit from the defendant Graham and an affidavit from counsel of record for the plaintiff, Dalkeith Palmer. The pleadings form part of the record and are referred to in the affidavit material. No cross-examinations have been conducted.

11In addition to setting out her version of the background facts, Ms. Graham provides evidence about a telephone call she had with Mr. Palmer. Based on a consideration of all the evidence I find that telephone call took place on April 11, 2017. I observe that the Statement of Claim was not issued until September 1, 2017.

12Ms. Graham addresses the phone call with Mr. Palmer at paras. 15 to 19 of her affidavit. At para. 15 she acknowledges that it was the plaintiff who asked her to call “her lawyer”, Mr. Palmer. According to Graham, the plaintiff said Mr. Palmer wanted to speak to her “about the arrangements between” Ms. Graham and Mr. McClymonth.

13At para. 16 Ms. Graham deposes that she phoned “plaintiff’s counsel” and discussed with him her dealings with McClymonth. She said that she answered Mr. Palmer’s questions about that subject without hesitation. In subsequent paragraphs she deposes that Mr. Palmer never told her that he intended to initiate proceedings against her, never told her that she should seek independent legal advice and that he never told her he had a conflict of interest.

14Based on this evidence, when Ms. Graham made the call she knew she was calling the plaintiff’s lawyer. I observe that at no point in Ms. Graham’s affidavit does she say that she was calling Mr. Palmer to obtain legal advice for herself or to retain him. The closest she comes to that is at para. 19, where she swears that Mr. Palmer invited “me and my mother who had issues with [McClymonth] to seek his advice at any time and that he was willing to initiate proceedings on our behalf…”. I note that there is no suggestion anywhere that Ms. Graham’s mother was involved in any way with the subject matter of this action. Mr. Palmer also provides a different version of this aspect of the matter in his affidavit which I will refer to momentarily.

15In his affidavit Mr. Palmer acknowledges the telephone call with Ms. Graham. He deposes that his purpose during the call was to find out about the transaction in question “and whether or not Ms. Graham was prepared to reach a resolution with my client”. He swears that his client had advised him that Ms. Graham “was amenable to resolving the dispute.” I pause to indicate that in the defendant Graham’s affidavit she acknowledges having spoken to the plaintiff about selling the home back to her. That was before the telephone conversation in question.

16Mr. Palmer then goes on in his affidavit to detail the information he was given by Ms. Graham about the transaction. Much of that information is contained in the pleadings filed by both sides in the action which was subsequently instituted.

17Mr. Palmer deposes that Ms. Graham told him that she believed McClymonth had bilked her and her relatives out of other monies. He understood that allegation was unrelated to the transaction in question. He swears that he may have said that she should consider suing McClymonth, but asserts that he did not say that he was willing to initiate proceedings on her or her family’s behalf against McClymonth. Mr. Palmer is very clear in his affidavit that Ms. Graham never sought legal advice from him and that he did not provide legal advice to her.

18Mr. Palmer provided his handwritten notes of his conversation with Ms. Graham as an exhibit to his affidavit.

Analysis

The Solicitor-Client Relationship Issue

19In MacDonald Estate v. Martin, 1990 CanLII 32 (SCC), [1990] 3 S.C.R 1235, [1990] S.C.J. No. 41, at para. 45, the court held that in determining whether a disqualifying conflict of interest exists on this basis a court will typically have to answer two questions: (1) Did the lawyer receive confidential information attributable to a solicitor-client relationship relevant to the matter at hand? (2) Is there a risk that it will be used to the prejudice of the client?

20In his affidavit Mr. Palmer states that he did not receive confidential information from Ms. Graham because she did not tell him anything he had not already heard from his client. In my view, that is no answer to the allegation. The fact that others had the same or similar information does not mean that Ms. Graham would not regard the information as confidential when coming from her. What she said about her involvement in the transaction could constitute an admission against her interest, rendering it admissible in evidence if relevant to a proceeding in which she was involved. The information had a different quality when coming from her and was quite confidential when viewed with that in mind. The fact that someone else may have given the same information to Mr. Palmer does not undermine Ms. Graham’s interest in confidentiality, if that was her due because she had a solicitor-client relationship with Mr. Palmer. Consequently, I am unable to accept the submission that the information provided was not capable of constituting confidential information.

21Turning to the second aspect of the first question posed in MacDonald Estate v. Martin, I agree with J.W. Quinn J. in Paylove v. Paylove, 2001 CanLII 28169 (ON SC), [2001] O.J. No. 5009 (S.C.J), at para. 18, that it need not be established that the lawyer was actually retained before a duty of client confidentiality will arise. A relationship of trust requiring that confidences be respected may arise in circumstances where the potential client imparts confidential information for the purpose of obtaining legal advice, even if no retainer results. In that regard, cases dealing with the circumstances in which solicitor-client privilege will apply even when there is no concluded retainer, are instructive: see Descôteux v. Mierzwinkski, 1982 CanLII 22 (SCC), [1982] 1 S.C.R 860; Solosky v. The Queen, 1979 CanLII 9 (SCC), [1980] 1 S.C.R 821.

22In Descôteux, at p. 893, Lamer J., (as he then was), held that solicitor-client privilege applies from the moment the potential client takes their “first steps and consequently even before the formal retainer is established.” However, it is also clear from these and other authorities that the person who occupies the position of the “potential client” must intend to seek legal advice from the lawyer: Cushing v. Hood, 2007 NSSC 97, at para. 33, aff’d 2008 NSCA 47; Solosky, at p. 835, 837; Descôteux, at p. 872; Peritus Inc. v. Elder, 2011 ONSC 1953 (Div. Ct.), at para. 9. It is at this stage of the analysis that the submissions of the moving party, Ms. Graham, falter.

23I find that when all of the evidence provided is considered, Ms. Graham has failed to establish on a balance of probabilities that when she contacted Mr. Palmer by telephone she did so for the purpose of obtaining legal advice. In particular, I note the following. Ms. Graham only contacted Mr. Palmer because the plaintiff asked her to. Ms. Graham knew that she was calling the plaintiff’s lawyer. The potential for a legal dispute between the plaintiff and herself was obvious. Ms. Graham had previously offered to sell the property back to the plaintiff. There is no statement by Ms. Graham in her affidavit that she was calling Mr. Palmer for legal advice, nor is there any suggestion that she asked Mr. Palmer for advice during the telephone call.

24Mr. Palmer swears that he wanted information. If he could obtain information which might assist his client then it seems to me he was acting in the best interests of his client, Ms. Mizzi. I am not satisfied that circumstances arose during the course of the telephone conversation that raised the potential for a conflict of interest such that Mr. Palmer was obligated to caution Ms. Graham or to stop her from speaking when she had not sought and he was not giving legal advice. He was entitled to collect information that might assist his client.

25Mr. Palmer asserts in his affidavit that he discussed the situation with Ms. Graham in order to see if a resolution might be achieved. This is supported by the contents of Ms. Graham’s own affidavit. According to Ms. Graham, Mr. McClymonth had breached the agreement she had with him and she had gone to the plaintiff to see about a potential resolution. I accept that Mr. Palmer was attempting to resolve matters, if possible. This would have been in the best interests of his client, Ms. Mizzi.

26Counsel for Ms. Graham refers to Mr. Palmer’s handwritten notes. He submits that there is no mention of a settlement discussion in those notes. I agree. However, the overall tenor and content of the notes supports the conclusion that legal advice was not being sought by or provided to Ms. Graham by Mr. Palmer. Ms. Graham was not represented by counsel and this was not, per se, a settlement meeting. In the circumstances it is not surprising that explicit reference to settlement discussions does not appear in the notes. I do observe, however, that an issue may arise at trial about whether what was said by Ms. Graham during the telephone call is protected as a “without prejudice” settlement discussion. That observation, however, plays no role in my decision on this motion.

27This aspect of the matter turns on my factual findings. Ms. Graham has failed to establish that she was seeking legal advice during the telephone call in question. A relationship which would render Mr. Palmer obligated to protect Ms. Graham’s confidences has not been established.

The Potential for Mr. Palmer to be a Witness

28When Mr. Palmer spoke to Ms. Graham, as I have said, he was serving his client’s interests by gathering evidence and exploring the possibility of resolving the matter. However, if later in this action it becomes relevant and admissible to prove what Ms. Graham said during the telephone call, Mr. Palmer may be the only source of such evidence. That potentially places Mr. Palmer in a difficult position. If it becomes necessary, in the plaintiff’s case or in reply, to prove what Ms. Graham said, Mr. Palmer will either have to deprive his client of relevant evidence or become a witness. If he becomes a witness he may not be able to continue as counsel.

29Mr. Palmer might provide testimony of an admission made by Ms. Graham which could assist with proof of the plaintiff’s case or, depending on what Ms. Graham says, he might provide evidence of a prior inconsistent statement relevant to Ms. Graham’s credibility. Whether either or both is the case will be better known after discoveries are concluded. At that point it will be determinable whether Mr. Palmer could provide evidence which is not available from any other source. Mr. Palmer and his client may have to make some difficult choices depending upon their analysis of the situation as it is known at that time. Obviously, that determination should be made at the earliest opportunity to avoid wasting judicial resources and, potentially, the plaintiff’s resources. I am not satisfied, however, that I should remove Mr. Palmer from the record on this account at this time. Such a decision would be premature given the importance of facilitating counsel of choice.

30I turn now to the defence case. Mr. Stanleigh submits that he intends to call Mr. Palmer as witness. However, Mr. Stanleigh was not able to tell me how, within the confines of the rules of evidence, Mr. Palmer would have admissible evidence to give as part of the proof of the factual underpinnings of the defence case.

31Ms. Graham is available to give evidence about the factual matters that will be relevant to the trial of the action. If she testifies in accordance with what is set out in the affidavit material filed on this motion, then there would be nothing to be gained by Mr. Stanleigh calling Mr. Palmer. In such circumstances Mr. Palmer could provide only evidence of prior consistent statements by Ms. Graham. Prior consistent statements are not admissible to prove the truth of the assertion contained in the statement. Such statements would only become admissible if one of the recognized exceptions to the general rule, such as to rebut an allegation of recent falsification, was triggered. To trigger that exception it would have to be alleged in the plaintiff’s case, or during cross-examination of the defendant Graham, that at some point subsequent to her telephone discussion with Mr. Palmer, she developed a motive to lie and changed her story as a result. See generally, R. v. Stirling, 2008 SCC 10, [2008] 1 S.C.R. 272; R. v. Campbell (1978), 1977 CanLII 1191 (ON CA), 17 O.R. (2d) 673; Jones v. Southeastern and Chatham Railway Co. (1918), 87 L.J.K.B. 775, at p. 779.

32Once again, the scenarios in which Mr. Palmer may have to testify at the instance of the defendant Graham may be avoided, depending upon what is revealed during examinations for discovery.

33It seems to me that there is definitely a potential for Mr. Palmer to be called as a witness in this case by virtue of his having spoken to Ms. Graham. However, I am not able to say at this point how likely that is. Considerably more will be discernable after discoveries. The authorities suggest that a court should be slow to interfere with counsel of choice. It must be established that there is a real basis to believe that counsel can likely provide material evidence. It should first be determined whether the evidence may be available from another source: Mazinani v. Bindoo, [2013] O.J. No. 3540 (S.C.J) per Master Glustein, at para. 60 (x) - (xvii); Ontario Realty Corp. v. P. Gabriele & Sons Ltd., 2006 CanLII 37844 (ON LRB), [2006] O.J. No. 4497 (S.C.J); Essa (Township) v. Guergis; Membery v. Hill (1993), 1993 CanLII 8756 (ON SCDC), 15 O.R. (3d) 573, [1993] O.J. No. 2581 (Div. Ct.); R. v. Harris, 1994 CanLII 2986 (ON CA), [1994] O.J. No. 1875 (C.A.), at para 5; Graham v. Ontario, [2006] O.J. No. 763 (S.C.J).

34It is premature to say that Mr. Palmer should be disqualified as counsel on the basis that he is a witness who likely has material evidence to give. This issue may have to be re-evaluated after examinations for discovery are complete.

Conclusion

35The defendant, Tara Graham’s motion is dismissed. If counsel are unable to agree on costs brief written submissions should be filed by the plaintiff within ten days and by the defendant within seven days thereafter. There will be no reply submissions.