COURT FILE NO.: CV-19-2117-00
DATE: 2019 09 20
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: LAKHVIR DHALIWAL v. GURMUKH HUNJAN and GURMEETSINGH
BEFORE: Dennison J.
COUNSEL: Joseph Figliomeni, for the Applicant
David Keith, agent for Harjyot Dhaliwal, for the Respondents
HEARD: July 25, 2019
E N D O R S E M E N T
Overview
[1] Lockyer + Hein LLP represented Mr. Lakhvir Dhaliwal in litigation from 2013 to 2015. That litigation resulted in Mr. Dhaliwal becoming a Director of the Nanaksar Satsang Sabha, which is a corporation that operates a Sikh temple (the Corporation). Lockyer + Hein LLP also represented the Corporation and dealt with Mr. Dhaliwal in his capacity as Director and Treasurer up to the time of this Application.
[2] Lockyer + Hein LLP currently represents Mr. Gurmukh Hunjan and Mr. Gurmeet Singh. They are Respondents to an Application that Mr. Dhaliwal brought. Mr. Hunjan and Mr. Singh are also Directors of the Corporation. They terminated Mr. Dhaliwal’s membership and Directorship in the Corporation. They submit that Mr. Dhaliwal’s termination is valid because he stole cash from the donation boxes for his personal use.
[3] Mr. Dhaliwal denies that he improperly used the cash donations. He further submits that Mr. Hunjan and Mr. Singh did not comply with the bylaws in terminating Mr. Dhaliwal’s membership and removing him as a Director of the Corporation.
[4] Mr. Dhaliwal seeks to disqualify Lockyer + Hein LLP from representing Mr. Hunjan and Mr. Singh in this Application.
[5] In determining whether the Motion to disqualify counsel should be granted, the issues to be determined are:
Is the present application sufficiently related to the prior matters where Lockyer + Hein LLP represented Mr. Dhaliwal?
Did Lockyer + Hein LLP receive relevant confidential information in the previous matters that would be relevant to the current Application, creating a risk that confidential information will now be used in a way that prejudices Mr. Dhaliwal?
Is Lockyer + Hein LLP taking an adversarial position as compared to the position taking in the prior litigation breaching the duty of loyalty to Mr. Dhaliwal?
Are counsel at Lockyer + Hein LLP likely to be examined as witnesses in the present Application?
Background Facts
[6] Nanaksar Satsang Sabha is a not-for-profit corporation without share capital that operates a Sikh temple, or gurdwara, located at 64 Timberlane Drive, Brampton, Ontario. It was incorporated in 1994 under the Corporations Act and the temple is registered as a charitable organization.
[7] The Corporation has several hundred members. Mr. Dhaliwal has been a member of the Corporation since its incorporation. Three members sit on the Corporation’s Board of Directors. Mr. Dhaliwal has been an Officer and Director since November 25, 2014. Mr. Dhaliwal has also held the office of Treasurer since July 25, 2015. The Respondents, Mr. Hunjan and Mr. Singh, have been Officers of the Corporation since December 8, 2014. Mr. Hunjan and Mr. Singh have been Directors of the Corporation since July 25, 2015. Mr. Hunjan is President and Mr. Singh is the Secretary.
a) Current Application
[8] Mr. Dhaliwal brought an Application to prohibit Mr. Hunjan and Mr. Singh from taking any action against him in his capacity as a Member, Director and Officer. He submits that the Directors improperly suspended his membership. He further submits that the Respondents improperly terminated him as a Director and Treasurer because they failed to comply with the Corporation’s bylaws. Those bylaws require a meeting of the members be held prior to removing a Director before the expiration of the Director’s term.
[9] Mr. Hunjan and Mr. Singh submit that Mr. Dhaliwal’s membership and Directorship were properly terminated. They submit that Mr. Dhaliwal was seen on a hidden camera on four occasions stealing charitable funds that had been donated to the Corporation. They state that Mr. Dhaliwal was confronted with the videos but failed to give an explanation when he was provided with an opportunity to do so.
[10] On May 12, 2019, Mr. Dhaliwal received a letter from Mr. Hunjan and Mr. Singh accusing him of stealing money from the Corporation. They told him that he was terminated as Treasurer and that his membership was suspended for 15 days. They asked Mr. Dhaliwal to provide written submissions regarding his position.
[11] The next day, Mr. Dhaliwal sent them a letter denying the allegations. He stated that the money he took from the gurudwara was to pay various day-to-day expenses, as per their direction. He stated that proper accounts had been maintained and could be provided for their review.
[12] On May 21, 2019, Mr. Dhaliwal commenced an application to prohibit Mr. Hunjan and Mr. Singh from taking any further action against him in his capacity as a Member, Director or Officer, as well as some other remedies.
[13] On May 21, 2019, Mr. Hunjan and Mr. Singh responded to Mr. Dhaliwal’s letter stating that they did not direct him to take donated funds to pay for day-to-day expenses. They requested that Mr. Dhaliwal provide records to show what the expenses were paid for with these funds, but they received no response.
[14] On May 27, 2019, Mr. Hunjan and Mr. Singh held a Board meeting. Two Directors constituted the quorum and a resolution was passed terminating Mr. Dhaliwal’s membership in the Corporation. Once Mr. Dhaliwal was no longer a member, a resolution was passed confirming that he no longer qualified to be a Director.
[15] On May 27, 2019, Lockyer + Hein LLP served and filed a Notice of Appearance to act on behalf of Mr. Hunjan and Mr. Singh. Ms. Harjyot Dhaliwal is counsel at Lockyer + Hein LLP. She is counsel for the Corporation as well as a member. She is also Mr. Hunjan’s daughter.
[16] Mr. Dhaliwal’s counsel wrote to Lockyer + Hein LLP on May 31, 2019, stating that their representation was in breach of the prohibition against acting against a former client. His counsel also demanded that Lockyer + Hein LLP confirm that they had not disclosed any of Mr. Dhaliwal’s confidential information.
[17] Lockyer + Hein LLP responded that they did not believe there was a conflict and requested particulars as to why Mr. Dhaliwal believed there was.
[18] The matter was not resolved, and the motion was brought before this Court to disqualify Lockyer + Hein LLP from acting as the Respondents’ counsel on this Application.
b) Prior Legal Proceedings Involving Mr. Dhaliwal
i.) 2013 Application: Court File CV-13-10376-OOCL
[19] In 2013, there was a power struggle within the Corporation. Two Directors brought an application against eleven respondents including Mr. Dhaliwal, Mr. Singh and Mr. Hunjan. Lockyer + Hein LLP represented the respondents. The lawsuit resolved by way of Minutes of Settlement on January 21, 2014.
[20] The lawsuit related to the governance of the Corporation and its financial operation. The Minutes named Directors who would remain in control of the Corporation, pending an Annual General Meeting that was to be held within six months. Mr. Dhaliwal did not swear any affidavits in those proceedings.
ii.) 2014 Application: Court File CV 14-2724-00
[21] The previous Directors refused to recognize the corporate Directors identified in the Consent Order and issued trespass notices against parties, including Mr. Dhaliwal.
[22] In 2014, Mr. Dhaliwal and 20 other members of the Corporation, including Mr. Hunjan and Mr. Singh, commenced an application. Lockyer + Hein LLP represented the applicants. The application sought to compel compliance of the Consent Order and to hold an Annual General Meeting. This application was ultimately resolved on consent of the parties.
[23] Mr. Dhaliwal swore an Affidavit in those proceedings dated August 20, 2014. In this Affidavit, he explained how pre-authorized donation payments were completed. As part of that process, a receipt was issued after deducting $15 for the annual membership dues. Payment of membership dues gave voting rights as a member of Nanaksar.
[24] The application was again resolved on consent of the parties. The parties agreed to a process to select three corporate Directors. The applicants and respondents each selected one Director. The applicants selected Mr. Dhaliwal and the respondents selected Mr. Didar Dhadda. Each party then put forward two names and Justice O’Conner selected the third Director by drawing the name from a box. Mr. Rajinder Singh Sahota was selected.
[25] The matter was brought back before the court because the applicants submitted that the respondents failed to comply with Justice O’Connor’s Order. The applicants also submitted that the respondents were improperly taking money from the Corporation.
[26] Mr. Dhaliwal, as Director of the Corporation, swore Affidavits dated December 9 and 16, 2014 in response to a motion brought by the respondents. He also filed Affidavits in support of the applicants’ motion to find the respondents in contempt for not complying with Justice O’Connor’s Order. In the Affidavit dated December 16, 2014, Mr. Dhaliwal discussed the various breaches of the Court Order. He explained the donation process as follows:
There is cash, which comes in on a daily basis. The Respondents refuse to give the directors control of the cash income or the bank accounts. It seems that the Respondents have not been depositing any of the cash income into the accounts. The directors do not know where these cash donations are going.
The directors are concerned that the Respondents have been and are abusing the donation funds.
[27] The motion for contempt was adjourned. It was discovered that the prior Directors had removed funds from the Corporation to pay their legal fees. One of the Directors stated that their lawyer advised him that this was appropriate to do.
[28] Mr. Dhaliwal swore an Affidavit dated March 25, 2015, in response to the Director’s assertion. In that Affidavit, Mr. Dhaliwal addresses payments of funds that were made to counsel from the Corporation’s bank account. Mr. Dhaliwal also addressed allegations that the respondents improperly took money as petty cash and paid it to FRM Technology, which the applicants submitted was in violation a Court Order.
iii.) The 2015 Application: Court file CV-15-2522-00
[29] In June 2015, Mr Dhaliwal was named as a respondent to an application commenced by certain members of the Corporation. Mr. Dhaliwal again retained Lockyer + Hein LLP to represent him. The applicants sought to add two additional Directors to the Board of Directors. The applicants also sought confirmation that the steps Justice O’Connor ordered to be taken were invalid.
[30] Mr. Dhaliwal swore a responding Affidavit dated June 5, 2015. This Affidavit set out the prior history of the litigation and addressed what happened at the Director meetings regarding the “new” appointment of Directors that the respondents sought to make.
[31] The application was dismissed by Lemay J. on June 25, 2015. Ms. Dhaliwal states that Mr. Dhaliwal never asked for, nor received, advice from Lockyer + Hein LLP during this litigation about how collected donations should be accounted for.
[32] On July 25, 2015, the Corporation held an Annual General Meeting of its members. Mr. Hunjan and Mr. Singh were elected as Directors to replace Dedar Singh and Rajinder Singh Sahota. Mr. Dhaliwal remained a Director and was elected as Treasurer.
iv.) Law Firm represents the Corporation
[33] Lockyer + Hein LLP represents the Corporation and communicates with its Directors, including Mr. Dhaliwal, Mr. Singh and Mr. Hunjan. Ms. Dhaliwal is the lawyer at the firm who is responsible for dealing with the Corporation’s Directors.
[34] Shortly before this litigation commenced, Mr. Dhaliwal sent an email to Ms. Dhaliwal dated March 18, 2019. In that email, Mr. Dhaliwal advised her that he had not received any gurdwara mail for the past six months. He stated that Mr. Singh and Mr. Hunjan had the keys to the mailbox and were taking the mail. He did not know who was writing cheques. He further stated that all bills and invoices were to be presented to him and he was not sure why Mr. Singh and Mr. Hunjan were hiding these bills. He asked Ms. Dhaliwal for assistance.
[35] Ms. Dhaliwal addressed her response to this email to all three Directors. She stated that the issue should be discussed between all Officers and Directors so that the duties of each individual were understood.
[36] Ms. Dhaliwal also stated that, contrary to Mr. Dhaliwal’s statement, no “internal control policies” with respect to cash donations were discussed with Mr. Dhaliwal. Ms. Dhaliwal states that advice provided to Mr. Dhaliwal related to his position as a member and Director of the Corporation. She denies that any confidential information was disclosed to Lockyer + Hein LLP by Mr. Dhaliwal.
Position of the Parties
[37] Mr. Dhaliwal submits that Lockyer + Hein LLP is in a conflict because this Application is related to the previous applications where he was represented by Lockyer + Hein LLP. He further submits that he gave the lawyers confidential information when they previously represented him which may cause him prejudice in the current Application. In the alternative, he submits that even if no confidential information was shared, the law firm owes him a duty of loyalty and that permitting the law firm to represent the Respondents is a breach of that duty of loyalty and would adversely impact the administration of justice.
[38] Mr. Hunjan and Mr. Singh state that there is no conflict of interest. The previous litigation had nothing to do with stealing money, but rather dealt with a power struggle as to who would be a corporate Director. The applications addressed the holding of an annual General Meeting and whether new Directors should, or should not, be appointed. They further submit that Mr. Dhaliwal has not demonstrated that he provided any confidential information relevant to the current Application that could be used in a prejudicial manner against him.
Guiding Principles
[39] Conflicts of interest may arise in many different circumstances. For example, a) where a lawyer acts for more than one client in a multiple retainer; b) where a lawyer is retained on a matter that involves acting against a former client; c) where a lawyer, who has knowledge of a client’s legal affairs, changes law firms and accepts a retainer against a former client; and d) where a lawyer is in a position of having to give evidence.
[40] The Law Society of Ontario’s Rules of Professional Conduct (the Rules) provide some guidance to lawyers and courts on questions of conflicting interests. The Rules make it clear that, absent consent, a lawyer shall not act against a former client in the same or related matter: see Rules 3.4-10.
[41] The purpose of Rule 3.4-10 is discussed in the commentary as follows:
Duties owed to a former client, as reflected in Rule 3.4-10, can impair client representation and loyalty. As the duty of confidentiality continues after the retainer is completed, the duty of confidentiality owed to a former client may conflict with the duty of candour owed to a current client if information from the former matter would be relevant to the current matter. Lawyers also have a duty not to act against a former client in the same or a related matter even where the former client’s confidential information is not at risk. In order to determine the existence of a conflict of interest, a lawyer should consider whether the representation of the current client in a matter includes acting against a former client.
[42] While the court is not bound by the “letter of law society rules,” “an expression of a professional standard in a code of ethics…should be considered an important statement of public policy”: see MacDonald Estate v. Martin, 1990 CanLII 32 (SCC), [1990] 3 S.C.R. 1235, at p. 1246.
[43] Courts have an inherent jurisdiction to disqualify a lawyer for a conflict of interest. In exercising this jurisdiction, the court seeks to balance three competing policy values: i) the right of a litigant to choose counsel; ii) the desirability of permitting mobility in the legal community; and iii) maintaining high standards in the legal profession and maintaining the integrity of the administration of justice: see MacDonald Estate, at p. 1245; Canadian National Railway Co. v. McKercher LLP, 2013 SCC 39, [2013] 2 S.C.R. 649, at para. 22.
[44] A lawyer owes a duty of confidentiality to a former client that includes a prohibition against misusing confidential information provided by the client. A lawyer cannot act in a matter where he may use confidential information obtained from a former client to the detriment of that client. A two-part test is applied to determine whether the new matter will place the lawyer in a conflict of interest. First, did the lawyer receive confidential information attributable to a client relationship that is relevant to the matter at hand? Second, is there a risk that it will be used to the prejudice of that client? See: MacDonald Estate, at p. 1260.
[45] Where a lawyer’s new retainer is “sufficiently related” to matters the lawyer worked on for the former client, there is a rebuttable presumption that the lawyer possesses confidential information that raises a risk of prejudice to the former client: McKercher, at para 24.
[46] A lawyer also has a duty of loyalty. In R. v. Neil, 2002 SCC 70, [2002] 3 S.C.R. No. 631, the Supreme Court considered the duty of loyalty apart from the concern of a client’s confidential information in considering if a lawyer should be disqualified from acting against a former counsel. Binnie J held that the duty of loyalty includes putting a client’s business ahead of the lawyer’s business. Loyalty further involves not just confidentiality, but also a duty to avoid of conflicts of interest, commitment to the client’s cause, and candour with the client on matters relevant to the retainer: at para 17.
[47] Binnie J. held that the bright line rule for fiduciary duty provides that “a lawyer may not represent a client whose interests are directly adverse to the immediate interests of another client - even if the two mandates are unrelated” unless both clients consent: at para. 29.
[48] In McKercher LLP, The Supreme Court of Canada confirmed, and explained, the bright line rule for conflicting interests. The Court explained that the dimensions of the duty of loyalty includes: (1) a duty to avoid conflicting interests; (2) a duty of commitment to the client’s cause; and (3) a duty of candour.
[49] In McKercher, the Supreme Court indicated that disqualification was not appropriate for every case but may be required: (1) to prevent the misuse of confidential information; (2) to prevent the risk of impaired representation because of the lawyer’s conflicting loyalties; and (3) to maintain the integrity and repute of the administration of justice that recognizes the importance of trust and loyalty in the lawyer-client relationship.
[50] The Court held that, where the lawyer-client relationship has been terminated and there is no risk of misuse of confidential information, there “is generally no longer a concern of ongoing prejudiced to the complaining party.” The court should, however, also consider other factors such as: i) behaviour disentitling the complaining party from seeking removal (such as delay in bringing a motion for disqualification); ii) whether the client would be significantly prejudiced by having to retain new counsel; and (iii) whether the law firm with the conflict had accepted the retainer, in good faith, believing that it had not offended the bright line rule: at para. 65.
[51] Ultimately, a litigant will not be deprived of counsel of its choice without good cause, and thus the court will not disqualify a lawyer unless a fair-minded and reasonably informed member of the public would conclude that counsel’s removal is necessary for the proper administration of justice: see Kaiser, Re, 2011 ONCA 713, at para. 21.
Analysis
Issue #1: Is the Current Application Sufficiently Related to Matters where the Law firm Previously Represented Mr. Dhaliwal?
[52] In MacDonald Estate, the Supreme Court of Canada held that a court must consider the underlying purpose of the conflict inquiry when determining if the two matters are related. The purpose of this inquiry may be to protect the improper sharing of confidential information or to protect the duty of loyalty to former clients, based on the need to protect and promote public confidence in the legal profession and the administration of justice. As explained by Cromwell J. in Brookville Carriers, the duty of loyalty is concerned with the “lawyer attacking or undermining in a subsequent retainer the legal work which the lawyer did for the former client.” Concerns about the duty of loyalty may also arise where the lawyer effectively changes “sides by taking an adversarial position against a former client with respect to a matter that was central to the previous retainer.” This principle is not to be applied too broadly because of the importance of the parties to be able to retain and instruct counsel of their choice: Brookville Carriers Flatbed GP. Inc. v. Blackjack Transport Ltd., 2008 NSCA 22, 263 N.S.R. (2d) 272, at paras. 51, 52 and 57.
[53] The onus is on Mr. Dhaliwal to demonstrate that the previous retainer is sufficiently related to the current application: Moffat v. Wetstein, 1996 CanLII 8009 (ON SC), [1996] 29 O.R. (3d) 371, at para. 101.
[54] Mr. Dhaliwal submits that Lockyer + Hein LLP represented him in previous litigation that related to the Corporation’s governance and financial operation. He submits that the current Application relates to the same issues.
[55] The Respondents take the position that the present ligation is not related to the previous representation of Mr. Dhaliwal. They submit that this Application is a is a clear-cut case of theft – they have Mr. Dhaliwal on video taking money from the charitable collection. They submit this Application is not about corporate governance or about holding an annual general meeting, as in the previous litigation.
[56] I disagree. This litigation is sufficiently related to the prior applications. It relates to the governance of the Corporation. Lockyer + Hein LLP is also changing sides in a related matter regarding who should be a Director of the Corporation.
[57] In 2014, Lockyer + Hein LLP represented Mr. Dhaliwal in his personal capacity, along with Mr. Singh, Mr. Hunjan and other members of the Corporation. The application dealt with how the Corporation’s Board of Directors would be determined and who would be Directors. That application resulted in a consent order naming Mr. Dhaliwal as a Director of the Corporation. Mr. Dhaliwal was put forward by his counsel as an appropriate person to be the Director. Now counsel seeks to represent two Directors to defend their position that Mr. Dhaliwal should not be a Member, Director or Treasurer of the Corporation because he stole charitable donations.
[58] The present Application is about more than just an allegation of theft. This Application is about whether the Respondents had the right to terminate Mr. Dhaliwal as Treasurer, Director and as a Member of the Corporation based on their assertion that he improperly took charitable donations. It is also about whether the Directors complied with corporate bylaws when they terminated Mr. Dhaliwal’s membership, Directorship and role as Treasurer.
[59] Mr. Dhaliwal submits that he took the funds for corporate day-to-day operations. Whether or not that was appropriate will be determined at the upcoming Application. Mr. Dhaliwal's counsel raised similar issues in the previous application – that former Directors were not properly accounting for the charitable donations and were using the funds improperly.
[60] Mr. Dhaliwal’s submission that this application is about the governance of the Corporation is supported, to an extent, by an email which was sent before allegations were made against him. On March 18, 2019, Mr. Dhaliwal sent an email to Ms. Dhaliwal, asking her for assistance because Mr. Singh and Mr. Hunjan had not provided him with the bills they received in the mail over the past six months. Mr. Dhaliwal needed these bills because he was responsible for paying them as the Treasurer for the Corporation. Mr. Dhaliwal may argue that his termination is based on a power struggle between the Directors, which is the same issue that was raised in the previous application. Issues of corporate governance, including who should be a Director, are an issue that Mr. Dhaliwal would be entitled to raise in the present Application.
[61] Viewed from the perspective of the reasonably informed client, Ms. Dhaliwal and Lockyer + Hein LLP were first retained to represent Mr. Dhaliwal to support him and the other applicants’ involvement in the Corporation. In the previous litigation counsel put Mr. Dhaliwal forward as an appropriate candidate for Directorship. Lockyer + Hein LLP also supported Mr. Dhaliwal in retaining his role as a Director in the Corporation. Lockyer + Hein LLP is now retained to act against Mr. Dhaliwal and to uphold his removal as a member, Director and Treasurer of the Corporation. In the circumstances, the two matters are sufficiently related.
Issue #2: Did the Law Firm Receive Confidential Information Relevant to the Current Proceeding that Would Prejudice Mr. Dhaliwal?
[62] In considering if there was a breach of confidentiality relevant to the current application, the court must determine if it is reasonably possible that the lawyers acquired confidential information pursuant to the first retainer that could be relevant to the current Application. There must be a realistic possibility, not just theoretical possibility, that confidential information was shared: see Chapters Inc. v. Davies Ward & Beck LLP, 2001 CanLII 24189 (ON CA), 141 O.A.C. 380, (C.A.), at para. 30.
[63] Where the matters are closely related, there is a rebuttable presumption that the lawyers possess confidential information that raises a risk of prejudice. There is a heavy onus to rebut this presumption, and the test is whether an informed person would be satisfied that the confidential information would not be used: see MacDonald Estates, at paras. 47 & 49.
[64] Mr. Dhaliwal submits he provided Ms. Dhaliwal and her colleagues at Lockyer + Hein LLP confidential information when he retained the firm. He states that he shared information with various lawyers under the previous retainers, including Ms. Dhaliwal, David Keith, Pavel Malysheuski and Robert Filkin. He submits that the information he provided to these parties could be used to his detriment in this Application. The confidential information included details about Mr. Dhaliwal’s status as a Member, Director and Officer of the Corporation. He submits that he shared information about his knowledge and understanding of the Corporation’s financial management and internal control policies. He also states that he signed numerous affidavits on the advice and direction of lawyers from Lockyer + Hein LLP.
[65] Mr. Dhaliwal also states that since his election to the Board of Directors in November 2014, he has retained and relied on various lawyers at Lockyer + Hein LLP to provide advice with respect to various corporate governance issues, including financial management of the Corporation’s receipts and disbursements.
[66] The Respondents submit that Mr. Dhaliwal provided no confidential information in the previous applications. The information provided was of a public nature to respond to the applications in court. The information Mr. Dhaliwal provided in the previous litigation was in relation to charitable receipts. The lawsuit did not discuss policies about taking money without knowledge of the other parties.
[67] The Respondents have not rebutted the presumption that confidential information was obtained in the related matters. I am satisfied that it is reasonably possible that the law firm received confidential information from Mr. Dhaliwal when they previously represented him in his personal capacity.
[68] There are two main issues in the present Application. First, whether Mr. Dhaliwal was entitled to take the money from the Corporation as Treasurer. Second, whether the Directors properly terminated his membership and Directorship pursuant to the bylaws.
[69] Mr. Dhaliwal, with the assistant of counsel, prepared affidavits in previous litigation that related to the receipt of cash received by the Corporation and the improper use of the funds. I accept the Respondents’ submission that the information contained in the affidavits and filed with the court is not confidential. However, this fails to recognize that Mr. Dhaliwal worked with counsel in preparing the Affidavit that related to this issue. Any information that Mr. Dhaliwal told his lawyer, as well as his understanding of how the financial processes operated, is confidential information. Such information is relevant to the present Application and may prejudice Mr. Dhaliwal.
[70] Similarly, as a Director and Treasurer, Mr. Dhaliwal had discussions with counsel about bylaws, such as when the AGM must be held, as reflected in the email provided. At issue in this Application is whether the other Directors properly followed the bylaws in terminating Mr. Dhaliwal. As such, any conversation that Mr. Dhaliwal had regarding his understanding of how the bylaws should, or do, operate is confidential information relevant to this Application.
[71] Mr. Dhaliwal also sought advice from counsel regarding the payment of monies, as set out in the email dated March 18, 2019, which was only to counsel. The Respondents submit that this was not confidential information as counsel replied to all of the Directors of the Corporation. While that may be the case, the email demonstrates that the Directors, including Mr. Dhaliwal, relied on Lockyer + Hein LLP to provide advice with respect to corporate financial operations.
[72] In all of the circumstances, a reasonably informed person would find that it is reasonably possible that Lockyer + Hein LLP obtained confidential information pursuant to the earlier retainers that could be relevant to the present Application that raises a risk of prejudice to Mr. Dhaliwal.
Issue #3: Was There a Breach of the Duty of Loyalty?
[73] Even if Mr. Dhaliwal provided no confidential information to Lockyer + Hein LLP, the duty of loyalty and the protection of administration of justice requires that Lockyer + Hein LLP be disqualified from acting as the Respondents’ counsel in this Application.
[74] As discussed in Brookville Carriers at para. 23, where the matters are closely related, a law firm has a duty to abstain from acting against a former client in the same or related matter, even where no relevant confidential information has been shared: see Brookville Carriers, at para. 23; see also Consulate Ventures Inc. v. Amico Contracting & Engineering (1992) Inc., 2010 ONCA 788, 270 O.A.C. 182, at para. 34.
[75] As explained Doherty J.A. in Consult Ventures, the duty of loyalty “flows from a broader concept of fidelity that is essential to the proper functioning of the client/solicitor relationship.” Clients must be able to speak freely with their counsel, and to do so, they must be confident that their lawyers will not become adversaries in the same dispute. It is not just the client’s confidence that is at issue but the public’s confidence in the integrity of the legal profession and the administration of justice: see para. 22; see also Brookville Carriers, at para. 48 referring to the comments of Paul Perell (now Perell J.) Conflicts of Interest in the Legal Profession (Toronto, Butterworths: 1995).
[76] Where legal counsel attacks a former client’s honour in closely related matters, the public interest justifies disqualifying a lawyer based on the duty of loyalty.
[77] For example, the law firm in Chiefs of Ontario v. Ontario (2003), 2003 CanLII 32351 (ON SC), 63 O.R. (3d) 335 (S.C.J.), represented a First Nation with respect to casino revenue matters. After that matter was concluded, the First Nation consented to the law firm continuing to act on behalf of the Chiefs of Ontario with respect to the same casino revenue issues. The law firm then made various allegations against the First Nation, including deception and bribe-taking in relation to a matter in which the firm had previously advised the First Nation. While the case is distinguishable because the First Nation originally consented to the law firm representing the Chiefs of Ontario, the Court also discussed the broader duty of loyalty, stating that the “public interest in the administration of justice requires the confidence of every litigant that their legal advisers will not attack their honour in matters closely related to their confidential retainers”: at para 112, see also Harris v. Reichardt, 2001 BCSC 1824.
[78] Similarly, in Miller v. Dartmouth Dodge Chrysler (1991) Inc. (1999), 1777 N.S.R. (2d) 117, the Court disqualified a lawyer who represented Mr. LeBlanc in a disability claim and then sought to represent a Dodge Chrysler responding to Mr. LeBlanc’s wrongful dismissal claim. The Court held that Mr. LeBlanc’s credibility would be at issue in both cases. The Court noted that it would be difficult to compartmentalize what the lawyer learned from Mr. LeBlanc through the previous retainer and “it would appear most peculiar and unfair to any reasonable observer if our system of justice countenanced or expected Mr. LeBlanc to be vigorous in challenging the plaintiff’s credibility, when only months earlier he vouched for it when advancing and settling Mr. Miller’s disability claim”: p. 17.
[79] While I recognize that the matters are approximately four years a part, I am satisfied that Lockyer + Hein LLP owes Mr. Dhaliwal a duty of loyalty and that proceeding as counsel is a breach of that duty. The circumstances of this case justify disqualifying counsel.
[80] In the previous litigation, legal counsel put forward Mr. Dhaliwal as an appropriate person to be a Director of the Corporation. In the present Application, they will be attacking his credibility and his honour in relation to his ability to be a Director of the Corporation on the basis that he stole money. Moreover, Lockyer + Hein LLP provided advice to Mr. Dhaliwal in his role as a Director since his appointment in 2015 up and until he was terminated as Director. Lockyer + Hein LLP now wishes to represent the other Directors who seek to uphold Mr. Dhaliwal’s dismissal, not just as a Director, but as a member of the Corporation. I find that a reasonably informed person would find that this adversely impacts the public’s confidence in the integrity of the legal profession and the administration of justice.
Issue #4: Is it Likely that Lawyers from the Law Firm will be Called as Witnesses in this Application?
[81] Counsel may also be disqualified from acting as counsel where it is clear from outset of the litigation, or becomes clear during the proceeding, that counsel will be a material witness: see Bose v. Bangiya Parishad Toronto, 2018 ONSC 7639, at para. 98.
[82] If there is a potential that counsel will have substantive evidence, and may be called as a witness, the court on a motion to disqualify counsel considers a number of factors including: (a) how likely the lawyer will be a witness; (b) the materiality and significance of the lawyer’s evidence; (c) the likelihood of a real conflict or that the evidence will be tainted; (d) the stage of the proceedings; (e) the timeliness of the motion; (f) the impact of removal of counsel on his or her client’s right to be represented by counsel of choice; (g) the good faith of the party making the application; (h) the mode of trial, whether judge alone or judge and jury; (i) who will call the counsel as witness; and (j) the current and past relationship between counsel and the parties involved in the litigation: see Bose, at para. 99.
[83] I would not disqualify Lockyer + Hein LLP solely on the basis that counsel may be called as a witness. While there is a possibility that Ms. Dhaliwal will be a material witness, Mr. Dhaliwal has not provided sufficient details with respect to what exactly he discussed with counsel and how it may be relevant to the Application to justify disqualifying Lockyer + Hein LLP on this basis alone. That may change once discoveries take place.
[84] Mr. Dhaliwal submits that he sought and received advice from Lockyer + Hein LLP regarding his various corporate governance issues, including financial management of the Corporation’s receipts, disbursements and internal control policies. He further asserts that he has retained proper accounts. In contrast, Ms. Dhaliwal states in her affidavit that “no internal control policies were ever discussed with Mr. Dhaliwal.” I agree with Ms. Dhaliwal that it is self-evident that the firm would not advise a person to take cash without accounting for it, however, that is not Mr. Dhaliwal’s evidence at this point – he states that he can account for it.
[85] The disagreement between Ms. Dhaliwal and Mr. Dhaliwal about whether they discussed any “internal control policies” could result in her being called as a witness. Whether or not there were any discussions about internal control policies may be relevant to Mr. Dhaliwal’s position that he took the cash to pay for day to day operating expenses of the Corporation. I find it possible that Mr. Dhaliwal will be called as a witness in the Application, but it is premature to disqualify Lockyer + Hein LLP on that basis at this time.
Other Relevant Factors
[86] In determining that Lockyer + Hein LLP should be disqualified from acting as counsel for the Respondents, I have also considered other relevant factors.
[87] First, Mr. Dhaliwal brought this Motion at the earliest opportunity. He also raised his concern with Lockyer + Hein LLP representing Mr. Singh and Mr. Hunjan at the earliest opportunity, shortly after the notice of representation was filed with the court. As such, there is no basis to assert that this Application was brought to delay the proceedings or to create an unfair tactical advantage.
[88] Second, given how early in the proceedings the Motion was brought, the Respondents will not be significantly prejudiced by having to find new counsel to at this early stage: see Moffat, at para. 131.
[89] Third, I have also considered the importance of the parties’ right to be represented by their counsel of choice and that this right should not be lightly interfered with: see Moffat, at para. 115; Brookville, at paras. 52-53.
Conclusion
[90] After balancing all of the factors set out in my decision, I am satisfied that “a fair minded and reasonably member of the public would conclude that counsel’s removal is necessary for the proper administration of justice”: Maftoun v. Banitaba, 2012 ONCA 786, at para. 4, citing N.M. Davis Corp. v. Ross, (2012), 2012 ONSC 1697, 110 O.R. (3d) 196 (Ont. S.C.J).
[91] I order that Lockyer + Hein LLP be removed as lawyers of record for Mr. Singh and Mr. Hunjan. The Respondents are to appoint new counsel within the next 60 days.
[92] Given my ruling that Lockyer + Hein LLP is disqualified, I am not satisfied that there is a basis to require Lockyer + Hein LLP to produce an unredacted copy of the files relating to matters where the law firm represented Mr. Dhaliwal. I am, however, ordering that the Lockyer + Hein LLP maintain the files in its position and not disclose or disseminate any information contained in the files to any persons unless otherwise ordered by the Court.
[93] Upon the Respondents obtaining new counsel, the parties are to create a timetable for hearing the Application. If the parties cannot agree, a motion may be brought before the court.
Costs
[94] At the end of the Motion, I received costs submissions and cost outlines from both parties. The parties take similar positions with respect to the amount of costs to be awarded in this matter on both a partial and substantial indemnity basis. The Applicant seeks costs in the amount of $10,000, if partial indemnity costs are ordered. The Respondent seeks costs in the amount of $8,348.91, should partial indemnity costs be ordered.
[95] In considering the issue of costs, I have considered the principles set out in s. 57.01 of the Rules of Civil Procedure, including the result, the time spent, the complexity of the matter as well as the application of the principle of proportionality. In addition, I have considered the principles set forth by the Court of Appeal in Boucher v. Public Accountants Counsel for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.). The Court in that case held that the overall objective of a costs assessment is to fix costs in an amount that is fair and reasonable for an unsuccessful party to pay, in light of the particular circumstances rather than the actual costs incurred by the successful litigant.
[96] In all of the circumstances, reasonable costs in this matter should be paid by the Respondent to Mr. Dhaliwal in the amount of $8,500.00 within 30 days of this judgment.
Dennison J.
DATE: September 20, 2019
COURT FILE NO.: CV-19-2117-00
DATE: 2019 09 20
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: LAKHVIR DHALIWAL v. GURMUKH HUNJAN and GURMEETSINGH
COUNSEL: Joseph Figliomeni, for the Applicant
Harjyot Dhaliwal, for the Respondents
ENDORSEMENT
Dennison J.
DATE: September 20, 2019