Court File and Parties

COURT FILE NO.: CV-18-00602114 MOTION HEARD: 20181204 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Ali Karimzadeh Bangi, Plaintiff AND: Shahin Yamin, a.k.a. Fereidoon Bashar and Anna Chen, a.k.a. Anna May, Defendants

BEFORE: Master Mills

COUNSEL: C. Cosgriffe, Counsel, for the Plaintiff A. Tratnik, Counsel, for the Defendant Anna Chen

HEARD: December 4, 2018

Reasons for Decision

[1] The plaintiff seeks an order to remove Shawna Sosnovich (“Sosnovich”) and Devry Smith Frank LLP (“DSF”) as counsel of record for the defendant Anna Chen a.k.a. Anna May (“Chen”) on the basis the lawyer and the firm is in a conflict of interest. Having regard to the evidence filed and considering the relevant law, I must agree. For the reasons that follow, the motion is granted.

[2] The plaintiff (“Bangi”) and the defendant Shahin Yamin a.k.a. Fereidoon Bashar (“Yamin”) are 50% shareholders in ASL 19 Inc. (“ASL 19”). This proceeding will address the circumstances which gave rise to the share structure of ASL 19 and its ongoing management. Claims of oppression and breach of contract are asserted in the Statement of Claim. Yamin’s counterclaim seeks damages for breaches of fiduciary duty and good faith arising from Bangi’s personal conduct.

[3] Yamin is the sole officer and director of ASL 19 with Bangi having resigned effective November 21, 2017. The defendant Chen is an employee of ASL 19, although there are allegations she held herself out as a co-director of the company with the knowledge and consent of Yamin. The course of events leading to the present management structure will be of fundamental importance to determining the rights and legal obligations of all parties.

[4] There is no dispute that Lorne Shapiro (“Shapiro”) was retained to provide legal advice to ASL 19 with respect to its corporate affairs. There was no retainer agreement signed by Bangi or ASL 19 with Shapiro, his prior law firm or DSF. Shapiro disputes the suggestion that he also acted for Bangi, other than in two minor matters where numbered companies were established for Bangi’s personal use. Shapiro denies obtaining any confidential information from Bangi that could be compromised in this litigation.

[5] In July 2016, at the direction of Bangi, Shapiro prepared the necessary corporate documents to effect a transfer of 50% of the shareholdings in ASL 19 from Bangi to Yamin, for no consideration. The transaction was purportedly done for tax reasons. In his affidavit, Shapiro admits making inquiries of Bangi as to the appropriate valuation of ASL 19 and suggesting a shareholders agreement would be prudent to govern the relationship of Bangi and Yamin going forward as equal shareholders.

[6] Serious criminal charges were laid against Bangi in December 2016. Although the alleged incident giving rise to the criminal charges was not related to the business affairs of ASL 19, Bangi, together with his criminal counsel, met with Shapiro to discuss the implications of the charges and whether there was an obligation to disclose them to ASL 19 or its employees. The collective decision was there was no obligation to make a formal disclosure of the criminal charges to anyone at ASL 19 at that time. The failure to disclose is now alleged to be a breach of Bangi’s fiduciary and good faith duties owed to ASL 19.

[7] By November 2017, the criminal charges had become public knowledge and the social media backlash was having an impact on the business affairs of ASL 19. On or about November 21, 2017, Bangi and Yamin met with Shapiro and it was agreed by all that it would be in the best interests of ASL 19 if Bangi were to voluntarily resign as an officer and director effective immediately and to have Yamin appointed as the sole officer and director. Shapiro prepared the appropriate corporate resolutions to effect the changes.

[8] Bangi relies on these personal meetings to support his understanding and belief that Shapiro was representing his interests together with those of ASL 19. Shapiro maintains that at all times he was solely acting as counsel for ASL 19 and that despite meeting on these personal matters, he never came to have any confidential information which would operate to prejudice Bangi in this lawsuit. It was only after Bangi’s resignation from the company that Shapiro confirmed in writing that he and DSF were representing only the interests of ASL 19.

[9] The parties have very different views of the agreement reached at the meeting of November 21, 2017. Bangi alleges his resignation was to be on a temporary basis until such time as the criminal charges could be properly addressed, after which he was to be reinstated. He further alleges that dividends were to be paid to him on a monthly basis in accordance with the existing practice. Yamin alleges there was no such agreement for reinstatement nor for the ongoing payment of dividends. In his affidavit, Shapiro appears to support the version of events as alleged by Yamin. There does not appear to be any notes, memos or documents to confirm the terms of any agreement reached between Bangi and Yamin as to their intentions for the future control or management of ASL 19.

[10] The events that led up to this meeting with Shapiro and the meeting itself will be of significant importance in this litigation. Shapiro will most certainly be a witness having regard to the statements contained in his affidavit filed on this motion.

[11] I accept that a court should only remove a solicitor at a pre-trial stage in the clearest of cases and that typically, a removal should only occur following documentary production and examinations for discovery so as to ascertain whether it will in fact be necessary to call counsel as a witness based on the evidence disclosed. [1]

[12] Having filed an affidavit on this motion, Shapiro has already provided evidence as to his recollection of the events which now give rise to the plaintiff’s allegations of oppression. Shapiro’s evidence at paragraph 20 of his affidavit directly contradicts the evidence of Bangi. There can be no doubt Shapiro will be necessary and material witness at the trial of this action in respect of a significant event which laid the foundation for this litigation.

[13] The court has inherent jurisdiction to remove a lawyer in circumstances where the lawyer may be a witness in the case on which the lawyer acts as counsel. [2] This is to ensure the lawyer’s duties of objectivity and detachment which are owed to the court do not run afoul of the lawyer’s obligation to present evidence in a manner as favourable as possible to the client. [3] The proper administration of justice would require the lawyer to be removed.

[14] The factors to be considered on a motion to remove the lawyer of record who may stand as a witness at trial were outlined in Essa (Township) v. Guergis [4] as follows: a. the stage of the proceedings, b. the likelihood that the witness will be called, c. the good faith (or otherwise) of the party making the application, d. the significance of the evidence to be led, e. the impact of removing counsel on the party’s right to be represented by counsel of choice, f. whether trial is by judge or jury, g. who will call the witness if, for example, there is a probability counsel will be in a position to cross-examine a favourable witness, a judge may rule to prevent that unfair advantage arising, and h. the connection or relationship between counsel, the prospective witness and the parties involved in the litigation.

[15] As noted above, it is all but a certainty Shapiro will be called as a witness and the evidence to be led will be of significance. Shapiro is a partner of Sosnovich at DSF. Sosnovich will be in a position to cross-examine a favourable witness as Shapiro has already indicated his evidence aligns with that of Chen’s co-defendant Yamin. At this early stage of the proceedings, the impact of removing Sosnovich and DSF as counsel to Chen is limited and is far outweighed by the prejudice to Bangi if they were permitted to continue as counsel of record. Yamin is represented by independent counsel. It is appropriate for Chen to also have counsel independent of DSF and Shapiro.

[16] There has been no suggestion by counsel, nor any evidence filed to support a suggestion that this motion was brought for anything other than good faith reasons.

[17] Having regard to all the above noted factors, it is clear that Sosnovich and DSF cannot continue to act as counsel for Chen. I am satisfied that a fair-minded reasonably informed member of the public would conclude that the proper administration of justice requires the removal of Sosnovich and DSF. [5]

[18] Having reached this conclusion, it is unnecessary to consider whether a solicitor/client relationship existed between Bangi and Shapiro or if Shapiro obtained confidential information that may be compromised in this litigation. The conflict Sosnovich and DSF have in this litigation is with the court and counsel’s obligations of objectivity and detachment. This is a conflict that cannot be waived by a client.

[19] The motion is granted and there shall be an order removing Sosnovich and DSF as counsel of record for Chen.

[20] Having been successful on the motion, Bangui is entitled to his costs on a partial indemnity basis. If the parties cannot agree on quantum, brief written submissions (not to exceed two pages in length plus a Costs Outline) may be made within 10 days of the release of these reasons.

Master Mills Date: December 7, 2018

Footnotes

[1] Bank of Montreal v. Combra Furniture Ltd., 2008 CarswellOnt 2647 at para. 37; Sidhu v. BarBurrito Restaurants Inc., 2013 ONSC 7752 at para. 13. [2] Ontario Realty Corp. v. P. Gabriele & Sons Ltd., 2006 CarswellOnt 6983 at para. 16. [3] Urquhart v. Allen Estate, 1999 CarswellOnt 4126 at para. 27. [4] Essa (Township) v. Guergis, 1993 CarswellOnt 473 at para 48. [5] Kara v. Ontario, 2011 CarswellOnt 8948 at para. 26.