Court File and Parties
COURT FILE NO.: CV-17-3595-00 DATE: 2018 10 24 AMENDED: 2019 01 30 ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
RAJ RANI MITTER, JAGDISH MITTER, SANJEEV KUMAR SHARMA, VISHAL DUTTA, VIVEK DUTTA, DINESH CHANDER, AJAY SHARMA, PARDEEP MALIK, SAT PARKASH MALIK, DHARMPAL DUTT and VIPAN KUMAR DIXIT Plaintiffs
Domenic Saverino, for the Plaintiffs
- and -
PARVEEN SHARMA, RAJ KAICKER, and MARK KLAIMAN Defendants
William Levitt, for the Defendants
HEARD: October 22, 2018, at Brampton, Ontario
Price J.
Amended Reasons For Order
OVERVIEW
[1] Parveen Sharma is the President of the Hindu Sabha Temple (“the Temple”), Raj Kaicker is its Treasurer, and Mark Klaiman is its lawyer. Together, these defendants retained a lawyer, Joel Levitt, to represent them in an action brought against them by several plaintiffs. One of these plaintiffs, Vipan Kumar Dixit, is a member of the Temple and a congregant.
[2] Mr. Levitt was retained as counsel for the defendants notwithstanding that Mr. Levitt represented Mr. Dixit in the past. Specifically, Mr. Dixit had retained Mr. Levitt to represent him in a counterclaim against him by Bimal Pathak, one of the defendants in an action by the Temple, in 2012, about an election for the Temple’s Board of Directors and Board of Trustees, as well as mismanagement of the Temple’s finances.
[3] Mr. Dixit is worried that Mr. Levitt will use confidential information that he received while acting on Mr. Dixit’s behalf in 2012 against him in the present action. The present action includes allegations that the 2008 proceeding was not settled in a timely manner, and that Mr. Klaiman, the lawyer for the Temple in the 2008, conducted the proceeding in a self-serving manner. Mr. Dixit is moving to remove Mr. Levitt as the defendants’ lawyer.
[4] The defendants, represented by William Levitt, requested an adjournment of Mr. Dixit’s motion on the ground that it needs to be heard after, or at the same time as, a further motion by all of the plaintiffs for leave to commence a derivative action on behalf of the Temple (“the Motion for Leave”). The plaintiffs served their Motion for Leave on the defendants on October 14, 2018 (by mail on October 9, 2018). The defendants request further time to deliver responding material and to cross-examine the affiants on their affidavits.
[5] Owing, perhaps, to an oversight of the Court office, only the material for the motion to remove Mr. Levitt was before me. The plaintiffs’ Motion for Leave was not. After hearing the defendants’ motion to adjourn both motions, the Court allowed the request to adjourn, for reasons set out briefly on a handwritten endorsement, with additional reasons to follow. The Court adjourned the motions to the week of September 23, 2019, with a timetable that was agreed to by counsel and attached as a schedule to the endorsement.
[6] These are the additional reasons. They are issued with a view to setting out the background facts for the benefit of the parties and the judge who will hear the motions. After hearing the background facts read on October 22, 2018, both counsel agreed that the facts were correctly stated.
BACKGROUND FACTS
[7] The Temple is a not for profit corporation, incorporated in 1976 pursuant to the Corporations Act, R.S.O. 1990, c. C.38. It is governed by an elected Board of Directors and an appointed Board of Trustees. It has its own constitution and by-laws for purposes of its governance.
[8] In 2008, the Temple began an action against Jatinder Sharma and several others arising from the 2007 election for the Board of Directors and Board of Trustees. The 2008 action was, in part, to recover funds that the defendants were alleged to have taken improperly from the Temple.
[9] In 2010, the Board, elected in 2007, was split into two factions. The dissident faction, consisting of five directors, and the president, who was suspended at the time, froze the Temple accounts with the Toronto-Dominion Bank. At the same time, they moved to have Mr. Klaiman removed as counsel. The Temple retained Joel Levitt for just over a month to bring a motion to unfreeze their bank account. He obtained the information for that motion from Parveen Sharma and Mr. Klaiman.
[10] In support of the Temple’s motion to unfreeze its accounts, Mr. Dixit swore an affidavit in relation to his recollection of events surrounding the taking of certain monies from the Temple in January 2008. Mr. Klaiman drafted Mr. Dixit’s affidavit based on information given to him by Mr. Dixit and documents given to him by Parveen Sharma and Mr. Klaiman. Mr. Levitt appeared on behalf of the Temple on a motion that proceeded unopposed on July 15, 2010.
[11] In 2012, one of the defendants in the Temple’s action, Mr. Bimal Pathak, counterclaimed against several individuals, including Mr. Dixit, over the Affidavit that Mr. Dixit had signed (“the Dixit action”). The defendants in the present action assert that there is no connection between the allegations made in the present action and those made in the Dixit action.
[12] When seeking counsel, Mr. Dixit spoke with Parveen Sharma, who introduced him to Mr. Klaiman. Mr. Klaiman could not represent Mr. Dixit but referred him to another lawyer, Joel Levitt, who could. Mr. Dixit retained Mr. Levitt, who represented Mr. Dixit in 2012 and 2013.
[13] During Joel Levitt’s retainer:
(a) He received his instructions from Parveen Sharma, and direction and background from Mr. Klaiman;
(a) Mr. Dixit met with Mr. Levitt several times, giving him confidential information about what was happening in the Temple regarding issues of membership and the alleged mismanagement of funds. Mr. Dixit states, “ Mr. Levitt and I had confidential discussions in the course of my representation about my rule in [the Temple] and my dealings with certain directors at the time and I am concerned that will be used against me .”
(b) Sat Parkesh Malik, a founding member of the Temple and regular attendee, was a trustee on the Board of Trustees of the Temple since 2008, and the instructing party for the Temple in the motion to unfreeze the TD accounts. He states, “ I verily believe that Mr. Levitt was provided with private and confidential information that can and will be used against the present plaintiffs to their prejudice…. The within action involves issues concerning the present board of directors and issues involving their elections at Hindu Sabha .”
(c) Mr. Levitt served a demand for particulars on behalf of Mr. Dixit, delivered a defence, and had numerous communications with other counsel.
[14] On August 18, 2017, the plaintiffs, including Mr. Dixit, began an action seeking various relief, including leave to conduct a derivative action on behalf of the Temple. The plaintiffs, on October 14, 2018, made a Motion for Leave to undertake the derivative action.
[15] The Claim in the plaintiffs’ action alleges that Mr. Klaiman failed to advise the Temple of a sexual assault charge against Parveen Sharma in October 2015, that Parveen Sharma failed to resign as President in the face of the charge and misappropriated funds to pay for his defence, that he and Mr. Kaicker failed to comply with two resolutions that the Temple’s Board allegedly passed before the 2016 Board election, requiring that all legal invoices from Mr. Klaiman be approved by the Board and Trustees, and prohibiting private meetings between Parveen Sharma and Mr. Klaiman in the absence of at least one other Director, distributed allegedly stale dated financial statements at a meeting on August 8, 2016, gave improper advice to the independent monitor for the August 2016 election, failed to settle the 2008 litigation in a timely manner, and breached their fiduciary duty to the Temple.
ISSUES
[16] The Court must determine whether Mr. Levitt and his law firm are in a conflict of interest that precludes them from acting as the defendants’ lawyer in the action.
[17] Because Mr. Dixit acknowledges that he and the other plaintiffs have no claim against the defendants, apart from those they advance on behalf of the Temple, the plaintiffs’ Motion for Leave to commence the derivative action must be determined in order to ascertain whether Mr. Dixit has a basis upon which to move to remove Mr. Levitt as the defendants’ counsel.
[18] The positions of the parties that follow, with the Court’s observations concerning them, are based solely on the material the parties filed in relation to Mr. Dixit’s motion to remove Mr. Levitt as the defendants’ lawyer, and are premised on Mr. Dixit and the other plaintiffs being given leave to advance the claims they propose to make on behalf of the Temple in the derivative action.
PARTIES’ POSITIONS
[19] Mr. Dixit submits that Mr. Levitt and his firm have received confidential information from Mr. Dixit that places them in a conflict of interest. He submits that they should, therefore, be removed as the defendants’ lawyer in the present action. He also submits that they should be ordered not to disclose confidential information obtained from the plaintiffs to anyone, including the defendants or subsequent new counsel for the defendants, and to provide an undertaking to that effect.
[20] The defendants submit that there is no conflict of interest because there is no connection between the allegations made in the present action, or in a derivative action if it is permitted to proceed, and those made in the Dixit action.
The Test to be Applied
[21] Both parties acknowledge that the test to be applied in a motion to disqualify a lawyer from representing a client based on a conflict of interest is the one that the Supreme Court of Canada articulated in MacDonald Estate v. Martin. Sopinka J., speaking for the majority, stated:
… the test must be such that the public represented by the reasonably informed person would be satisfied that no use of confidential information would occur . That… is the overriding policy that applies and must inform the court in answering the question. [1]
[Emphasis added]
[22] Sopinka J. held that two questions must be answered to determine whether a conflict exists:
Did the lawyer receive confidential information attributable to a solicitor-and-client relationship?
Is there a risk that the information will be used to the prejudice of the client?
The Onus of Proof
[23] Mr. Dixit acknowledges that he, as the moving party, bears the onus of establishing that Mr. Levitt is disqualified by a conflict of interest from representing the defendants in the present action. He therefore bears the burden of proving that Mr. Levitt received relevant confidential information attributable to a solicitor-client relationship between him and Mr. Levitt.
[24] There is no dispute that a solicitor-client relationship existed between Mr. Dixit and Mr. Levitt. Mr. Dixit argues that in those circumstances, the court should infer that confidential information was imparted. [2] In MacDonald Estate v. Martin, the Court held that:
… once it is shown by the client that there existed a previous relationship which is sufficiently related to the retainer from which it is sought to remove the solicitor, the court should infer that confidential information was imparted unless the solicitor satisfies the court that no information was imparted which could be relevant . [3]
[Emphasis added]
[25] The defendants argue that depriving a litigant of its choice of counsel is a serious matter, one that has been characterized as an “extreme remedy”. Dubin J.A. stated in The Queen v. Speid:
We would have thought it axiomatic that no client has a right to retain counsel if that counsel, by accepting the brief, puts himself in a position of having a conflict of interest between his new client and a former one . [4]
[Emphasis added]
Did Mr. Levitt Receive Confidential Information Attributable to a Solicitor-and-Client Relationship with Mr. Dixit?
[26] Mr. Dixit asserts that the Court should find that he disclosed confidential information to Mr. Levitt for the following reasons:
(a) Based on the undisputed fact that Mr. Levitt was Mr. Dixit’s counsel, Mr. Dixit asserts that the Court should infer that confidential information was imparted unless Mr. Levitt satisfies the Court that no information was imparted that could be relevant to the present action. Mr. Dixit argues that Mr. Levitt has not discharged his onus of proof in this regard.
(b) The present action concerns conflict that has existed in the Temple since 2008, between different factions of the Board of Directors and Board of Trustees of the Temple, and its congregants and members.
(c) The present action concerns the 2008 action, in which the Dixit action was a counterclaim, and Mr. Klaiman’s role was counsel for the Temple. The Statement of Claim in the present action alleges that the defendants failed to settle the 2008 litigation in a timely manner, and breached their fiduciary duty to the Temple. It also alleges that Mr. Klaiman acted in a financially self-serving manner that was contrary to the interests of the Temple.
(d) Mr. Dixit states, “Mr. Levitt and I had confidential discussions in the course of my representation about my rule in [the Temple] and my dealings with certain directors at the time and I am concerned that will be used against me.”
(e) Sat Parkesh Malik, a founding member of the Temple and regular attendee, a trustee on the Board of Trustees of the Temple since 2008, and the instructing party for the Temple in the motion to unfreeze the TD accounts, states, “ I verily believe that Mr. Levitt was provided with private and confidential information that can and will be used against the present plaintiffs to their prejudice…. The within action involves issues concerning the present board of directors and issues involving their elections at Hindu Sabha .”
Is there a risk that the information will be used to the prejudice of the client?
[27] If the Court finds that Mr. Levitt received confidential information attributable to a solicitor-client relationship relevant to the current action, it must consider whether there is a risk that such information will be misused. [5]
[28] Mr. Dixit relies on the fact that where the court finds that a solicitor-client relationship existed and infers that confidential information was imparted, it will presume that a risk exists that the information will be misused. Sopinka J ., in MacDonald Estate v. Martin, states:
A lawyer who has relevant confidential information cannot act against his client or former client . In such a case the disqualification is automatic . No assurances or undertakings not to use the information will avail. The lawyer cannot compartmentalize his or her mind so as to screen out what has been gleaned from the client and what was acquired elsewhere. Furthermore , there would be a danger that the lawyer would avoid use of information acquired legitimately because it might be perceived to have come from the client. This would prevent the lawyer from adequately representing the new client . Moreover, the former client would feel at a disadvantage . Questions put in cross-examination about personal matters, for example, would create the uneasy feeling that they had their genesis in the previous relationship. [6]
[Emphasis added]
[29] Ultimately, the test for a conflict is whether the public, represented by the reasonably informed person, would be satisfied that no use of confidential information would occur. Mr. Dixit asserts that confidential information was communicated and that a reasonably informed member of the public would be satisfied that it could be misused.
Would a duty of loyalty be undermined?
[30] As noted above, there is no dispute that a solicitor-client relationship existed between Mr. Dixit and Mr. Levitt. Mr. Dixit therefore argues that Mr. Levitt owes a duty of loyalty that would be at risk of being undermined by Mr. Levitt’s representing the defendants in the present action, which he says is closely related to Mr. Dixit’s action.
[31] The defendants argue that because Mr. Dixit is advancing claims solely on behalf of the Temple, the question of whether Mr. Levitt owes a duty of loyalty that would be at risk of being undermined depends on whether the plaintiffs are granted leave to advance a derivative claim on behalf of the Temple. They further argue that, if the plaintiffs are granted leave to advance the derivative action, the risk that must be assessed is whether Mr. Levitt’s duty of loyalty to Mr. Dixit would be undermined by his representing the defendants in the action that Mr. Dixit asserts on behalf of the Temple.
[32] The defendants argue that Mr. Dixit should not be granted leave to advance a derivative action on behalf of the Temple because, among other reasons, it would not be in the Temple’s interests that he do so. If he is not granted such leave, then there is no risk that Mr. Levitt’s duty of loyalty to him, arising from Mr. Dixit’s defence of the counterclaim in the 2008 action, would be undermined. If he and the other plaintiffs are granted leave, the issue that the court must address is whether the duty of loyalty that Mr. Levitt owes to Mr. Dixit would be undermined by his representing the defendants in the action that Mr. Dixit advances on behalf of the Temple.
ANALYSIS AND EVIDENCE
[33] As noted above, Mr. Dixit acknowledges that the plaintiffs, whose Statement of Claim seeks leave to undertake a derivative action on behalf of the Temple, have no claims apart from those they assert on behalf of the Temple. The plaintiffs’ Motion for Leave to commence the derivative action therefore needs to be addressed before, or at the same time as, Mr. Dixit’s motion to remove Mr. Levitt as the defendants’ counsel.
[34] The plaintiffs did not serve their Motion for Leave to commence the derivative action until October 14, 2018 (served by mail October 9, 2018). The defendants require more time to deliver responding material, and they seek leave to cross-examine Mr. Dixit and the plaintiffs’ other affiants on their affidavits.
[35] As a result, perhaps, of an error of the Court office, only the motion by Mr. Dixit to remove Mr. Levitt is before me. The material the plaintiffs delivered for their Motion for Leave to undertake the derivative action is not.
[36] The defendants requested that Mr. Dixit’s motion to remove Mr. Levitt as the defendants’ lawyer be adjourned. Mr. Dixit initially opposed their request. It became evident, however, in the course of argument of the request for adjournment, that, for the reasons stated above, the Motion for Leave to commence the derivative action could not be heard today. It follows that Mr. Dixit’s motion must be adjourned so that both motions can be heard at the same time or one following the other.
[37] The parties have agreed on a timetable, which they have filed. They also have agreed that the costs of the defendants’ motion for adjournment of Mr. Dixit’s motion, which the parties estimate at $750.00 each, and the costs of Mr. Dixit’s motion to the present point, which the parties estimated at $5,000.00 each, be reserved to the judge hearing both Mr. Dixit’s motion to remove Mr. Levitt, and the plaintiffs’ Motion for Leave to commence the derivative action.
CONCLUSION AND ORDER
[38] For the foregoing reasons, it is ordered that:
Mr. Dixit’s motion, and the plaintiffs’ Motion for Leave to commence a derivative action, are adjourned to the week of September 23, 2019, for a hearing that is estimated to require four hours.
The parties shall conform to the timetable, attached hereto as Schedule “A”.
The costs of the parties to this point, including the costs of the contested request for adjournment of Mr. Dixit’s motion, are reserved to the judge presiding at the hearing of both motions during the week of September 23, 2019.
Price J.
Released: October 24, 2018 Amended: January 30, 2019
Schedule “A”
Mitter v. Sharma Court File No. CV-17-3595
Timetable
Responding material from defendants served on or before March 1, 2019.
Reply material if necessary from plaintiffs served on or before March 29, 2019.
Cross-Examinations completed on or before June 28, 2019.
Factum to be exchanged on or before September 9, 2019.
Motion returnable the week of September 23, 2019 (4 hours).
COURT FILE NO.: CV-17-3595-00 DATE: 2018 10 24 AMENDED: 2019 01 30 ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: RAJ RANI MITTER, JAGDISH MITTER, SANJEEV KUMAR SHARMA, VISHAL DUTTA, VIVEK DUTTA, DINESH CHANDER, AJAY SHARMA, PARDEEP MALIK, SAT PARKASH MALIK, DHARMPAL DUTT and VIPAN KUMAR DIXIT Plaintiffs - and – PARVEEN SHARMA, RAJ KAICKER, and MARK KLAIMAN Defendants AMENDED REASONS FOR ORDER Price J. Released: October 24, 2018 Amended: January 30, 2019
[1] MacDonald Estate v. Martin, [1990] 3 S.C.R. 1235, at pp. 1259-60.
[2] Supra note 1 at p.1260.
[3] Supra note 1 at p. 1260.
[4] The Queen v. Speid (1984), 43 O.R. (2d) 596 (C.A.) at pp. 598-99.
[5] Supra note 1 at p. 1260.
[6] Supra note 1 at p. 1261.