COURT FILE NO.: CV-18-603242
DATE: 2019 11 01
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: 8657181 CANADA INC., Plaintiff
- and -
MEDHI AU LLP, CHUN YU AU also known as SCOTT AU, ANTHONY D’AMICO carrying on business as FLETT BECCARIO, CLARK PEDDLE and CARLO GUALTIERI, Defendants
BEFORE: Master Todd Robinson
COUNSEL: M. Kestenberg / K. Schoenfeldt, for the moving defendants, Medhi Au LLP and Chun Yu Au also known as Scott Au
P. Starkman, for the plaintiff, 8657181 Canada Inc.
K. Mooibroek (law student), for the remaining defendants, Anthony D’Amico carrying on business as Flett Beccario, Clark Peddle and Carlo Gualtieri
HEARD: August 2, 2019
REASONS FOR DECISION
[1] This is a motion by the defendants, Medhi Au LLP and Chun Yu Au (the “Au Defendants”), for an order removing the plaintiff’s lawyers, Starkman Barristers LLP, from the record and for production of Paul Starkman’s litigation files relating to his retainer for costs submissions and an appeal in proceedings that, together with other proceedings, give rise to this solicitor negligence action. The Au Defendants have brought this motion on the basis that Mr. Starkman is likely to be a relevant witness in this litigation, that Mr. Starkman’s litigation files are relevant in this litigation, and that this action constitutes a waiver of solicitor-client privilege over those litigation files. The plaintiff, 8657181 Canada Inc. (“865 Canada”), opposes the motion on the basis that Mr. Starkman has no relevant evidence to give and will thereby not likely be a witness, or at least that the Au Defendants’ motion is premature, and that the record does not support an overbroad order for production of Mr. Starkman’s entire litigation files.
[2] Appreciating the significance of the relief sought, I have carefully considered the evidence from the parties and the arguments of counsel for each of the Au Defendants and 865 Canada. I have determined that Mr. Starkman is likely to be a relevant witness regarding 865 Canada’s efforts to mitigate damages and in assessing the portion of 865 Canada’s damages claim relating to legal fees incurred in both costs submissions from the set aside motion and the subsequent appeal of the set aside decision. In my view, Mr. Starkman’s role as a likely material witness cannot be reconciled with his role as advocate for 865 Canada. It will be least prejudicial to 865 Canada for Mr. Starkman’s removal from the record now, at this early stage in the proceeding, rather than at a later stage if it is then clearer that Mr. Starkman will more certainly be called a witness.
[3] I have also determined that relief sought by the Au Defendants for production of Mr. Starkman’s entire unredacted litigation files relating to his retainers for costs submissions and an appeal is premature. Insufficient evidence has been tendered to support the relevance of the entire litigation files. I have accordingly found it premature to determine if there has been any deemed waiver of solicitor-client privilege over the entirety of those files.
[4] For the reasons that follow, I accordingly grant the Au Defendants’ motion to remove Paul Starkman and Starkman Barristers LLP from the record as lawyers for the plaintiff, but dismiss the motion for production of Mr. Starkman’s litigation files without prejudice to bringing it again on further evidence following the completion of examinations for discovery, or earlier with leave of the court.
Background
[5] This is a solicitor negligence action by 865 Canada seeking $5 million in damages against the Au Defendants and the non-moving defendants, Anthony D’Amico carrying on business as Flett Beccario, Clark Peddle and Carlo Gualtieri (the “Flett Beccario Defendants”). It arises from legal issues encountered by 865 Canada in relation to a golf course that it owned in Welland, Ontario. 865 Canada purchased the golf course in August 2014. As part of the purchase transaction, 865 Canada gave a vendor take back mortgage to the vendor corporation, 992548 Ontario Inc. (the “VTB Mortgagee”). The disputes between the parties to this action all relate to representation of 865 Canada, either actual or alleged, in respect of that property and two actions commenced by the VTB Mortgagee in relation to its mortgage. Those actions are as follows:
(a) In December 2016, the VTB Mortgagee commenced an action in Welland against 865 Canada seeking possession of the property and payment of the mortgage debt (the “Debt Action”).
(b) In March 2017, the VTB Mortgagee issued a second action in Welland against 865 Canada claiming foreclosure on 865 Canada’s equity of redemption, possession of the property, and payment of the mortgage debt, in which the VTB Mortgagee ultimately obtained default judgment against 865 Canada.
[6] In this action, 865 Canada alleges three circumstances of negligence by the defendants, as summarized in its responding factum:
(a) handling by the Au Defendants of the Debt Action and the Foreclosure Action;
(b) handling by Carlo Gualtieri and Flett Beccario of the sale of the golf course; and
(c) representation of 865 Canada by Clark Peddle and Flett Beccario in the unsuccessful motion to set aside the default judgment obtained by the mortgagee in the Foreclosure Action.
[7] Significant on this motion is the defence position of the Au Defendants that they were never retained by 865 Canada at all, including in respect of the Debt Action and the Foreclosure Action. There position, and Mr. Au’s evidence, is that the Au Defendants had been retained by the majority shareholder of 865 Canada to provide legal advice in a shareholder dispute with the minority shareholder. Mr. Au’s evidence is that Jason Zhu, who appears to be a principal of the majority shareholder, advised him in January 2017 that Flett Beccario was being retained to defend the Debt Action on behalf of 865 Canada. Mr. Au was asked by Mr. Zhu to contact the lawyer for the VTB Mortgagee to discuss possible renegotiation of the mortgage, and Mr. Au did so. Mr. Au’s evidence is that he had no further dealings with the VTB Mortgagee’s lawyer and that the Au Defendants were never retained to act on behalf of 865 Canada in respect of the Debt Action or otherwise. Mr. Au’s evidence is that he had no knowledge of the Foreclosure Action until after default judgment was obtained against 865 Canada. In particular, Mr. Au’s evidence is that Mr. Zhu advised him about the default judgment, that Mr. Au explained the difference between power of sale and foreclosure proceedings, and that Mr. Au advised Mr. Zhu to retain counsel to move to set aside the default judgment.
[8] The Flett Beccario Defendants were retained by 865 Canada to bring a motion to set aside the default judgment in the Foreclosure Action. In support of that motion, two affidavits were tendered by Mr. Zhu, who was also cross-examined. The motion was heard by Justice Maddalena, who dismissed it. In her reasons for dismissing the motion, Justice Maddalena held that 865 Canada had been represented and assisted by the Au Defendants throughout the Foreclosure Action, which was held to be “undisputed evidence” in her decision.
[9] The Flett Beccario Defendants prepared and served a notice of appeal from the decision of Justice Maddalena. The first ground of appeal is significant in the defence of the Au Defendants and on this motion. It provides that “the learned motion judge erred in making multiple findings of material fact that are not reasonably supported by the evidence, in particular paragraphs 14, 39, 40, 46, 47, 48, 49 […].” These cited paragraphs are all ones in which Justice Maddalena held and commented that 865 Canada had been represented by the Au Defendants at the material times.
[10] Starkman Barristers was subsequently retained to handle 865 Canada’s costs submissions from the unsuccessful set aside motion and to advance the appeal. Following costs submissions, Justice Maddalena ordered that 865 Canada pay costs to the VTB Mortgagee of $27,000 on a partial indemnity basis. On the same date of Justice Maddalena’s costs endorsement, Mr. Starkman wrote a letter to Mr. Au asserting that he had been retained in respect both the Debt Action and the Foreclosure Action and “did nothing including taking steps under the Rules of Civil Procedure to protect 865 Canada’s interest.” Mr. Au’s evidence is that he telephoned Mr. Starkman in response to this letter and, during their telephone conversation, confirmed that his only retainer had been by the majority shareholder of 865 Canada, that he had never been retained by 865 Canada itself, and that he would be willing to provide any information he could to assist on the appeal. Mr. Starkman is said to have confirmed he was working with the Flett Beccario Defendants to gather information for the appeal and that facts could not be modified in an appeal process. Mr. Au’s notes from the call were put in evidence and referred to by both sides in argument of this motion.
[11] In arguing the appeal, 865 Canada’s position was that the Au Defendants had been retained and that the default was the result of a “lawyer’s slip”. The first ground of appeal identified in the notice of appeal, namely that the motion judge erred in finding that the Au Defendants had been retained, was not pursued. The Court of Appeal dismissed the appeal. In rejecting the inadvertence argument, the Court of Appeal found, in part, that the equities did not support a set aside order in the circumstances because “the only explanation for the delay is that the appellant – who was represented by counsel – was ‘confused by the two actions’”: 992578 Ontario Inc. v. 8657181 Canada Inc., 2018 ONCA 416 at para. 23 (emphasis added).
[12] The Au Defendants argue that the appeal was lost, in part, because of the strategic decision made by Paul Starkman not to advance the first ground of appeal. The Flett Beccario Defendants plead a similar position. The Au Defendants argue that the position they were not retained for the Foreclosure Action was supported by the record before the Court of Appeal, and that the ground of appeal drafted by the Flett Beccario Defendants ought to have been advanced in arguing the appeal. Accordingly, the rationale behind 865 Canada’s decision not to pursue that ground of appeal is an issue in this litigation, which is argued by the Au Defendants to engage Paul Starkman’s advice to 865 Canada on how the appeal should be advanced.
[13] Prior to the long motion hearing, three telephone case conferences occurred with the parties to schedule this motion and to provide directions on an interlocutory issue arising regarding examination of the defendant, Clarke Peddle, pursuant to Rule 39.03 of the Rules of Civil Procedure, RRO 1990, Reg 194 (the “Rules”). The Flett Beccario Defendants have taken no position on the motion, but 865 Canada felt that Mr. Peddle’s evidence was material to its disposition. An interlocutory motion was scheduled regarding 865 Canada’s entitlement to compel a non-responding party in the action to an examination in respect of a pending motion, which the Flett Beccario Defendants disputed. The parties were ultimately able to reach an agreement that Mr. Peddle be examined.
[14] For this motion, the Au Defendants rely on the sworn affidavit of the defendant, Chun Yu Au. 865 Canada relies on the affidavit of Mr. Starkman’s law clerk, Tracy Pearce, and the transcript from the examination of Mr. Peddle. Mr. Au and Ms. Pearce were both cross-examined, and those transcripts were also relied upon by the parties.
Analysis
Removal of Plaintiff’s Lawyer from the Record
[15] There is no dispute over the legal analysis to be applied regarding the Au Defendants’ motion to remove Mr. Starkman from the record. The relevant analysis and principles around the eight factors to be considered have been recently reiterated by Master Graham in Kitchen v. McMaster, 2018 ONSC 3717 at para. 13, citing the prior decision of Mazinani v. Bindoo, 2013 ONSC 4744:
13 […] The case law on the issue of when a lawyer should be precluded from acting for a party because he will also be a witness in the same proceeding was summarized thoroughly by Master Glustein (as he then was) in Mazinani v. Bindoo, 2013 ONSC 4744(Ont. S.C.J.) at paragraphs 60 and 61:
60 I adopt the following principles as the applicable law on a motion to remove a lawyer of record who may be a witness at trial:
(i) The court has inherent jurisdiction to remove a lawyer from the record who has a conflict of interest. The inherent jurisdiction "stems from the fact that lawyers are officers of the court and their conduct in legal proceedings which may affect the administration of justice is subject to this supervisory jurisdiction" (MacDonald Estate v. Martin, 1990 32 (SCC), [1990] 3 S.C.R. 1235 ("MacDonald Estate"), at para. 18);
(ii) The inherent jurisdiction extends to removing a lawyer who may be a witness in a case in which the lawyer acts as counsel (Ontario Realty Corp v. P. Gabriele & Sons Limited et al, 2006 37844 (ON LRB), [2006] O.J. No. 4497, ("Ontario Realty"), at para. 16);
(iii) The court on a motion to remove a lawyer of record who may be a witness at trial must consider "(a) the maintenance of high standards of the legal profession and the integrity of our system of justice and (b) the right of a litigant to its choice of counsel, which he or she should not be deprived of without good cause" (Ontario Realty, at para. 17, citing MacDonald Estate, at para. 13);
(iv) The test to be applied on a motion to remove a lawyer from the record who may be a witness is whether a fair-minded reasonably informed member of the public would conclude that the proper administration of justice requires the removal of the lawyer. This determination is objective, fact-specific and based on an examination of all factors in the case (Karas v. Ontario, 2011 ONSC 5181(S.C.J. - Mast.) ("Karas") at para. 26; Ontario Realty, at para. 20);
(v) The court's concern of a lawyer appearing as a witness is that (i) there may be a conflict of interest between the lawyer and client and (ii) the administration of justice can be impaired by a conflict between the lawyer's obligations of objectivity and detachment which are owed to the court and the lawyer's obligation to his or her client to present evidence in as favourable a light as possible. In Urquhart v. Allen Estate, [1999] O.J. No. 4816 (S.C.J.) ("Urquhart"), Gillese J. (as she then was) held (Urquhart, at paras. 27-28):
When counsel appears as a witness on a contentious matter, it causes two problems. First, it may result in a conflict of interest between counsel and his client. That conflict may be waived by the client, as indeed, was done in this case. The second problem relates to the administration of justice. The dual roles serve to create a conflict between counsel's obligations of objectivity and detachment, which are owed to the court, and his obligations to his client to present evidence in as favourable a light as possible. This is a conflict that cannot be waived by the client as the conflict is between counsel and the court/justice system.
Counsel are independent officers of the court. The trial judge must be able to rely upon plaintiffs' counsel for a high degree of objectivity. The overriding value, in these circumstances, is concern for the proper administration of justice. A distinction must be drawn between the role of counsel as an independent officer of the court and the role of a witness whose objectivity and credibility are subject to challenge.
(See also Karas, at para. 27);
(vi) The integrity of a lawyer's role as an advocate is also undermined if the lawyer was a witness to a critical meeting. In Young-Tangjerd v. Official Board of Cavalry United Church, [2006] O.J. No. 2161, 2006 17946 (Ont. S.C.J.)("Young-Tangjerd"), Hockin J. held (Young-Tangjerd, at paras. 6-7):
The material fact on the motion and the fact which raised the possibility that the solicitor might be called as a witness at trial is this. The solicitor was present at a meeting at which the plaintiff was present with members of the defendant church. He was there as a member of the church not as solicitor. The plaintiff alleges that she was dismissed from her employment constructively during the course of the meeting or because of the meeting. The reasons of the motion judge posit that in this circumstance, the solicitor's disqualification is not automatic and that it could be left to another judge by motion (presumably on the eve of trial) to quash his subpoena or to the trial judge to determine whether he could act as trial counsel if he was to be called as a witness.
In my view, the issue is not the lawyer’s position as a witness but his position as advocate. I doubt whether any party or a witness may be cross-examined by a lawyer who could cross-examine not on the basis of his brief but on the basis of his participation in the event or transaction cross-examined on. Any question, leading or not, once posed by the lawyer is unfair to the witness and carries with it the appearance of an unsworn offer of the advocate's version of the facts. In addition, questions put in cross-examination by the lawyer witness would create the uneasy feeling in the mind of the plaintiff in this case that the measure of his credibility could be based not on the basis of the evidence but the unsworn declaration of a judicial participant in the proceeding, the defendant's lawyer. It goes without saying that the lawyer cannot compartmentalize his or her mind to exclude actual knowledge of the event. As well, the court should ensure no conflict in the lawyer's duty as advocate and as an officer of the court. For example, what is the lawyer to do if his memory of the event differs from the evidence in-chief he hears from his witnesses. [Italics in original.]
(vii) Rule 4.02(2) of the Rules of Professional Conduct of the Law Society of Upper Canada provides that “Subject to any contrary provisions of the law or the discretion of the tribunal before which a lawyer is appearing, a lawyer who appears as advocate shall not testify before the tribunal unless permitted to do so by the rules of court or the rules of procedure of the tribunal, or unless the matter is purely formal or uncontroverted”;
(viii) The commentary to Rule 4.02(2) sets out the concern that a lawyer who puts personal beliefs into issue acts contrary to the lawyer’s role as an objective advocate and puts the lawyer's credibility at issue. The commentary provides:
“A lawyer should not express personal opinions or beliefs or assert as a fact anything that is properly subject to legal proof, cross-examination or challenge. The lawyer should not in effect appear as an unsworn witness or put the lawyer's own credibility in issue. The lawyer who is a necessary witness should testify and entrust the conduct of the case to another lawyer”.
(ix) Rules of Professional Conduct are not binding on a court, but are persuasive as an important statement of public policy (MacDonald Estate, at paras. 16 and 18; Karas, at para. 29);
(x) Courts should be reluctant to make what may be premature orders preventing lawyers from continuing to act. If the evidence does not necessarily have to come from the lawyer and may be obtained through admissions or documentary productions, a removal order will be premature (Essa (Township) v. Guergis; Membery v. Hill, 1993 8756 (ON SCDC), [1993] O.J. No. 2581 (Div. Ct.) ("Essa"), at para. 43; Lesniowski v. H.B. Group Insurance Management Ltd., [2002] O.J. No. 3194 (S.C.J. - Mast.) ("Lesniowski"), at para. 15);
(xi) If there is some doubt or “merely a potential” that a lawyer will be called as a witness at trial, the courts should be more generous in allowing the lawyer to remain on the record and deferring the matter until after discoveries or leaving the matter to the trial judge (George S. Szeto Investments Ltd. et al v. Ott, [2006] O.J. No. 1174, 2006 9307 (Ont. S.C.J. - Mast.) ("George S. Szeto"), at para. 13);
(xii) “In view of the expense of litigation and the enormous waste of time and money and the substantial delay which can result from an order removing solicitors, courts should only do so in clear cases” (Essa, at para. 43);
(xiii) “[A] court should be slow to interfere with the litigant's right to choose his or her counsel. ... When a litigant is deprived of the services of a lawyer whom she has chosen, there will be some hardship imposed on her. The imposition of such hardship can only be justified if it is done to prevent the imposition of a more serious injustice. It follows that the removal of counsel should be only to relieve the risk of real mischief and not a mere perception of mischief” (Urquhart, at para. 19);
(xiv) Certainty that a lawyer will be called as a witness is not required. Rather, the court must consider the likelihood of the lawyer being called as a witness (Ontario Realty, at para. 33);
(xv) “It is not sufficient for a moving party to suggest opposing counsel is a potential witness or allege only that he or she might provide material evidence. Rather, it must be established that there is a real basis to believe counsel can likely, or probably, provide material evidence” (Graham v. Ontario, [2006] O.J. No. 763 (S.C.J.) ("Graham"), at para. 35; Ontario Realty, at paras. 34-35);
(xvi) “While courts have acknowledged that the freedom to choose counsel is an important interest to protect, it is not an absolute right. The right to be represented by counsel of choice can be outweighed when the administration of justice would be detrimentally affected” (Karas, at para. 45; George S. Szeto, at para. 21; Urquhart, at paras. 21 and 28); and
(xvii) The court should approach a motion to remove a lawyer of record who may be a witness at trial by following a flexible approach and consider each case on its own merits (Essa, at para. 48) . . .
61 Given the above law, the Divisional Court in Essa set out "a variety of factors" to be considered on a motion to remove a lawyer of record who may be a witness at trial. Those factors are (Essa, at para. 48) (quoted verbatim):
(i) the stage of the proceedings,
(ii) the likelihood that the witness will be called,
(iii) the good faith (or otherwise) of the party making the application,
(iv) the significance of the evidence to be led,
(v) the impact of removing counsel on the party's right to be represented by counsel of choice,
(vi) whether trial is by judge or jury,
(vii) 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 trial judge may rule to prevent that unfair advantage arising, and
(viii) the connection or relationship between counsel, the prospective witness and the parties involved in the litigation.
[16] I have approached my decision on this motion by assessing each of the eight factors in light of the principles outlined above.
Stage of the proceedings
[17] If there is more than a real likelihood that a lawyer of record will be called as a witness, an early determination on disqualification is preferred, since such a determination later in the proceeding has a greater likelihood of adverse impact on the party whose lawyer is removed: see, for example, P&J Contracting Inc. v. Singer, 2017 ONSC 3783 at para. 42. This action is still in its procedural infancy. Pleadings have been closed, but no documentary or oral discoveries have proceeded. There is no evidence of any work performed in respect of documentary collection or production or preparations made for oral discoveries. Other than this motion, no further litigation steps have been taken.
Likelihood that the witness will be called
[18] There must be a real basis to believe that counsel can likely, or probably, provide material evidence, not certainty that counsel will be called as a witness: Kitchen v. McMaster, supra at para. 13 (extracted above). The Au Defendants seek to examine Mr. Starkman regarding his strategic decisions and advice on the appeal, his recollections of the telephone call with Mr. Au, and the reasonableness of Starkman Barristers’ legal accounts claimed as damages in this action. I agree that these are all relevant issues in the litigation, but that alone does not make it “likely” or “probable” that Mr. Starkman will be called as a witness.
[19] 865 Canada argues that the Au Defendants are “confused” about this motion, since Mr. Starkman is not a fact witness because the record is fixed on an appeal. 865 Canada argues that he accordingly has no relevant evidence to give. I do not accept that argument. I agree that Starkman Barristers was clearly retained after the events that would give rise to liability of the defendants. However, in my view, the Au Defendants do not argue that Mr. Starkman has evidence to give regarding liability. The evidence that the Au Defendants seek from Mr. Starkman would only be relevant to mitigation and quantification of damages.
[20] In my view, given the nature of the questions that the Au Defendants suggest would be put to Mr. Starkman, the likelihood of him being called as a witness turns more on the significance of the evidence that would be obtained from such questions than the fact that they would be relevant to the litigation. I accordingly assess the likelihood of Mr. Starkman being called as a witness concurrently with the significance of his evidence in the three areas of proposed examination.
Significance of evidence to be led
[21] As noted above, the Au Defendants highlight three areas of evidence that they argue will be significant on which Mr. Starkman would be examined: appeal strategy, Mr. Au’s telephone call with Mr. Starkman in October 2017, and the reasonableness of Starkman Barristers’ legal accounts.
[22] Dealing first with appeal strategy, the Au Defendants argue that Mr. Starkman’s evidence on why the first ground of appeal (i.e., that 865 Canada was not represented by the Au Defendants) was not argued is relevant to this proceeding. They argue that there was sufficient evidence before Justice Maddalena, and thereby in the record before the Court of Appeal, to permit 865 Canada to at least advance the ground of appeal. Paragraphs 71-72 of the Au Defendants’ factum outline some specific evidence and arguments. 865 Canada argues that there is nothing to support that advancing the first ground of appeal would have assisted the appeal. The responding factum points to cross-examination evidence supporting an argument that Mr. Au was retained by 865 Canada. Essentially, 865 Canada argues that the ground of appeal was meritless, or at least there is no basis to find it had any likelihood of success.
[23] I need not determine if such evidence from the record does, in fact, support the ground of appeal. Whether or not the Au Defendants were, in fact, retained by 865 Canada and the merits of pursuing the ground of appeal are issues for determination by the trial judge. On this motion, I am concerned with the positions of the parties and the likelihood of Mr. Starkman being called as a witness to give evidence supporting those positions.
[24] I am satisfied, though, that there is some merit and basis for the Au Defendants’ argument. In my view, the reasons for which 865 Canada did not advance the first ground of appeal will be an issue of some significance in assessing mitigation. The Au Defendants specifically plead, at para. 55 of their statement of defence, that Mr. Starkman and the Flett Beccario Defendants ought to have taken steps on the appeal to correct inaccurate evidence of Mr. Zhu put before Justice Maddalena and to adduce fresh evidence to clarify that 865 Canada had not been represented by counsel throughout the Foreclosure Action. 865 Canada’s failure to mitigate is further pleaded at para. 70 of the statement of defence.
[25] Cross-examination evidence from Tracy Pearce confirmed that Mr. Starkman made all of the strategic decisions and recommendations with respect to the appeal. Mr. Starkman himself confirmed during the cross-examination that he prepared the factum in perfecting the appeal. There are several exchanges between Mr. Starkman and Ms. Kestenberg (examining counsel) during that cross-examination supporting that Mr. Starkman likely has the relevant knowledge on what strategic decisions were made and why they were so made. During the examination of Clarke Peddle, Mr. Peddle confirmed that he had no role in preparing the appeal factum and had no discussions with Mr. Starkman regarding the merits of the appeal. It is reasonably inferred from that evidence that Mr. Starkman performed the merits assessment.
[26] In my view, Mr. Starkman’s evidence on strategy for the appeal will have significance in this action. In my view, that is only underscored by Mr. Starkman’s evasiveness and ultimate refusal to permit Ms. Pearce to answer questions about the decision not to pursue the first ground of appeal, which is a matter squarely at issue on this motion by virtue of paras. 48-53 of Mr. Au’s affidavit. The Au Defendants were, in my view, completed stonewalled by Mr. Starkman from seeking clear confirmation on who was responsible for the strategic decisions on the appeal. I have given particular weight to the following exchange in forming that view:
- Q. Who would be, Ms. Pearce, in the best position to consider the Notice of Appeal, to consider these paragraphs and make strategic decisions with respect to the evidence?
MR. STARKMAN: Sir, you could have asked Mr. Peddle about that this morning.
THE DEPONENT: Mr. Peddle would.
MR. STARKMAN: But you chose not to.
BY MR. KESTENBERG:
- Q. Mr. Peddle would know what?
A. Well, he drafted this, so he would know.
- Q. Correct. And the decision not to argue that ground of Appeal, who would be the best person to ask about that?
MR. STARKMAN: I don't know. You can ask Mr. Peddle why it was in the Notice of Appeal.
BY MR. KESTENBERG:
- Q. No. The decision not to argue that ground of Appeal
MR. STARKMAN: Sir.
BY MR. KESTENBERG:
- Q. --- who would be the best ---
A. I don't know.
MR. STARKMAN: Sir, we're not going to answer that because that is an issue that's not raised in your client's Affidavit. Your client's Motion isn't worth the paper it's written on, quite frankly, and now, you're putting forward another ground?
You're now creating an issue that has not been raised by your client in his Affidavit?
MR. KESTENBERG: Not only has it been raised, but you examined him on it ---
MR. STARKMAN: No, it hasn't been raised.
MR. KESTENBERG: --- this morning.
MR. STARKMAN: No, it hasn't, sir. The issue that your client -- of -- highlighted for us was the adducing of fresh evidence on the Appeal, not what's pleaded in paragraph one, blah, blah, of the Notice of Appeal, which, by the way, is not even included in your Motion Record.
We put it in our Responding Record so the court could see what Mr. Peddle did. Now, you want to create an issue based on that which is not part of your client's Motion. We are not going to answer questions about it. So, move on to something relevant or say you're done, please.
BY MR. KESTENBERG:
- Q. Ms. Pearce -- sorry.
MR. KESTENBERG: Is that a refusal?
MR. STARKMAN: Well, I'm not sure. I was stating our position. I don't know if there's ---
MR. KESTENBERG: Well, I want to ---
MR. STARKMAN: I don't know if there was a question.
MR. KESTENBERG: There was.
MR. STARKMAN: We're certainly not going to comment, A, on the Notice of Appeal drafted by Mr. Peddle and B, an issue which you're now raising for the first time. It's not part of your Motion .
MR. KESTENBERG: I think we're going to agree to disagree whether it's been raised.
MR. STARKMAN: All right. Well, let's move on then, Counsel, so we can all get out of here. I've got lots of other work to do .
MR. KESTENBERG: I'm sure you do.
MR. STARKMAN: Good. Good. You seem to, you know, want to sit here for an unnecessary period of time. Let's move on. Let's finish this. It's 1:33.
BY MR. KESTENBERG:
- Q. Ms. Pearce, who made the strategic decision not to pursue ---
MR. STARKMAN: Don't answer it.
BY MR. KESTENBERG:
- Q. --- the first ground of Appeal ---
MR. STARKMAN: Don't answer it.
BY MR. KESTENBERG:
- Q. --- in the Notice of Appeal?
MR. STARKMAN: It's not part of your -- it's not part of your Motion. This is unbelievable. Don't answer that, okay? Next question.
[27] There is no clear evidence before the court that Mr. Starkman himself actually made the strategic decision not to advance the first ground of appeal or to seek leave to adduce fresh evidence, as alleged by the Au Defendants. I am satisfied, though, that there is sufficient evidence to support that he would reasonably have given advice to 865 Canada regarding the merits of appeal grounds and that he has relevant evidence on both that issue and what other options were considered and assessed in seeking to mitigate any losses suffered by 865 Canada by dismissal of the set aside motion.
[28] The second area of evidence is around the telephone call between Mr. Au and Mr. Starkman in October 2017. The Au Defendants argue that the telephone call is a “critical meeting” in this action, and that Mr. Starkman’s participation undermines his role as an advocate (one of the principles relevant on a removal motion in the case law outlined above). At paras. 50-62 of the Au Defendants’ statement of defence, they plead the content of the discussion between Mr. Au and Mr. Starkman and strategic errors that followed on the appeal, which include failing to seek leave to adduce fresh evidence on the appeal. 865 Canada’s reply pleading specifically denies the Au Defendants’ position, stating as follows (emphasis added):
- With respect to paragraph 49 of the Statement of Defence, at no time prior to filing the Statement of Defence, did Au attempt to “correct” the record about his not being retained by the Plaintiff, even though he was given the opportunity to do so in October, 2017 by the Plaintiff's lawyer which enclosed a copy of the court's decision dismissing the Set Aside Motion. Au is now estopped from claiming he was never retained by 865 Canada based on his failure to advise anyone of his position or otherwise prior to filing the Statement of Defence. Moreover, said paragraph is incredulous, frivolous and vexatious. It claims that Jason Zhu ("Zhu") perjured himself in swearing an affidavit in support of the Set Aside Motion, and being cross-examined on same. At no time did Au seek to have the evidence "corrected" even though Au knew that an Appeal would be heard in the future.
[29] The October 2017 call took place prior to perfection of the appeal. Mr. Au’s evidence is that, during that call, he specifically confirmed to Mr. Starkman that the Au Defendants were not retained to defend the Foreclosure Action and would assist in the appeal in any way that he could. I agree with the Au Defendants’ submission that the affidavit of Tracey Pearce implies by its wording that the discussion did not take place. During cross-examination, Mr. Starkman confirmed that, for the purposes of this motion, 865 Canada would concede the accuracy of Mr. Au’s account of the telephone call, but it would not be conceded for trial. The Au Defendants take issue with that position because they say Mr. Starkman’s account of the call will therefore be required for trial.
[30] In my view, the concession does not assist 865 Canada in its opposition to this motion. The court’s assessment requires review of the significance of the evidence to a trial, not solely on this removal motion. In my view, Mr. Starkman’s recollections of his call with Mr. Au are put squarely in issue by 865 Canada’s pleaded position, which is contrary to Mr. Au’s account of the call. In its reply, 865 Canada has specifically pleaded that the Au Defendants made no effort to correct the record whereas Mr. Au’s evidence is that he explained the issue to Mr. Starkman and offered to assist in correcting the record.
[31] As outlined above, I have accepted that the reasons for which 865 Canada did not advance the first ground of appeal will be an issue of some significance in assessing mitigation efforts by 865 Canada. If Mr. Au’s account of the telephone call is accurate, then if and how that information was considered when assessing what appeal steps to take (including whether or not to move for leave to adduce fresh evidence) and what grounds of appeal should be argued will be relevant to 865 Canada’s mitigation efforts. It accordingly follows that the accuracy of Mr. Au’s account, disputed by 865 Canada’s pleading, is a relevant issue for determination in this action. Since the only parties to that call were Mr. Au and Mr. Starkman, only Mr. Starkman’s evidence can confirm or deny Mr. Au’s account.
[32] 865 Canada argues that Mr. Starkman had no duty to the Au Defendants to “correct” the record. This misstates and misunderstands the Au Defendants’ position. It is not their position that Mr. Starkman had a duty to the Au Defendants to take steps to correct the record. Whether or not 865 Canada could and should have sought to correct the record or adduce fresh evidence is pursued by the Au Defendants as an issue of proper mitigation of damages. The Au Defendants’ position in the litigation is that 865 Canada failed to properly mitigate by not pursuing an appeal ground with substantial merit of success when it ought to have been pursued and failing to take the opportunity to seek to adduce fresh evidence when it ought to have done so. Whether or not that defence position ultimately succeeds is for the trial judge to decide.
[33] The third area of evidence is regarding 865 Canada’s damages claim for legal accounts rendered by Starkman Barristers for the set aside motion costs submissions and the appeal of the set aside motion. It will be 865 Canada’s onus to prove the reasonableness and necessity of the legal expenses as charged and paid. In my view, Mr. Starkman, his clerk, and other employees of Starkman Barristers are likely to be necessary witnesses in proving this portion of 865 Canada’s damages claim.
[34] For the reasons outlined above, Mr. Starkman is likely to be called as a witness in this proceeding and, in my view, his evidence has significance to determining the reasonableness of 865 Canada’s mitigation efforts and quantification of those damages claimed for Starkman Barristers’ legal accounts.
Good faith of the Au Defendants
[35] There is no evidence of any bad faith by the Au Defendants in bringing this motion. I do not accept 865 Canada’s position that the motion is tactical. The Au Defendants raised the issue of Mr. Starkman’s removal a few days after 865 Canada’s reply was served. Letters explaining the Au Defendants’ position on why Mr. Starkman could not continue to act were sent. Mr. Starkman did not respond to the last letter and no further correspondence followed for several months. This motion was brought in response to Mr. Starkman seeking to move this action forward to documentary and oral discoveries.
[36] I do not find it unreasonable for the Au Defendants to have deferred bringing this motion in the absence of a response by Mr. Starkman to the letter from Mr. Kestenberg of December 7, 2018, which sought to further explain how Mr. Starkman was likely to be a witness.
Impact of removing counsel
[37] There is no evidence from 865 Canada regarding any negative impact or prejudice that it would suffer from Mr. Starkman’s removal. Ms. Pearce’s affidavit is silent on the issue.
Whether trial is by judge or jury
[38] There has bee no jury notice served in this action. I find this factor to be neutral in disposition of this motion.
Calling the witness
[39] Given 865 Canada’s position that Mr. Starkman has no relevant evidence to give, it seems unlikely they will call him, but the Au Defendants have evinced a clear intention to summons him as a witness. That would result in 865 Canada having the clearly unfair advantage of cross-examining its own lawyer.
[40] The Au Defendants also cite Master McAfee’s decision in 1298781 Ontario Inc. v. Levine, 2013 ONSC 2894, and point to an exchange between Mr. Au and Mr. Starkman during Mr. Au’s cross-examination as support for their submission that there is a likelihood of a conflict arising for Mr. Starkman at trial, or that evidence at trial will become tainted. During cross-examination, Mr. Starkman challenged Mr. Au’s recollection of the call in October 2017 and Mr. Au’s expectations for what should have followed it. I agree with the submission of the Au Defendants that, at trial, Mr. Starkman would be left in an unreconcilable position if Mr. Au’s trial evidence varied from Mr. Starkman’s recollection of events. I also accept that cross-examination of Mr. Au by Mr. Starkman could well carry the appearance of an unsworn offer of Mr. Starkman’s own version of the facts. It could also potentially afford Mr. Starkman an opportunity to directly challenge evidence from Mr. Au that may be in conflict with Mr. Starkman’s own evidence to be given, which is a particular concern if an order excluding witnesses is sought. As submitted by the Au Defendants, such an order would be unworkable if Mr. Starkman is also called.
Connection/relationship between counsel, witness, and parties
[41] In my view, Mr. Starkman’s direct role in advising 865 Canada on appeal options and strategy and other means of mitigating its losses raises an issue that could directly affect the outcome of this action.
[42] Having considered the applicable factors, I find that they overall favour removal of Mr. Starkman as 865 Canada’s lawyer. I agree with the Au Defendants that Mr. Starkman’s position as advocate cannot be reconciled with his position as a likely witness. In my view, a fair-minded reasonably informed member of the public would conclude that the proper administration of justice requires the removal of Mr. Starkman.
Production of Litigation File
[43] The second part of the Au Defendants’ motion seeks production of Mr. Starkman’s entire unredacted litigation files in relation to his work on the costs submissions following dismissal of the set aside motion and the subsequent appeal of the set aside motion. No specific rule is cited in the Au Defendants’ notice of motion for the order sought. The Au Defendants argue that there has been a deemed waiver of solicitor-client privilege over the files by virtue of this action being commenced and pursued, relying on the decisions in Kota v. Raphael, [2003] OJ No 3003 (SCJ), Froates v. Spears, [1999] OJ No 77 (SCJ), and Norhal Quarries & Holdings Ltd. v. Ross & McBride, [2000] OJ No 1082 (SCJ). They argue that fairness and consistency require production of the files, since the advice given by Mr. Starkman is relevant to mitigation and also relevant to damages.
[44] 865 Canada denies that there is any deemed waiver and argues that the decisions cited by the Au Defendants are distinguishable. Specifically, 865 Canada argues that it is not suing Starkman Barristers and that Starkman Barristers did not take over the underlying proceeding, but rather was engaged for the subsequent appeal proceeding. 865 Canada further argues that the production request is overbroad. No specific document or documents have been identified that are needed or wanted from the litigation files, and nothing has been tendered on why any specific documents are relevant to this action.
[45] In my view, on the facts of this case, I need not address the issue of whether or not waiver of solicitor-client privilege has arisen over the contents of the entire litigation files. Even if not protected by privilege, I am not satisfied on the evidence filed that the entirety of Mr. Starkman’s litigation files in relation to the costs submissions and the appeal will be relevant and producible, or that an order for production of the entire files is necessary or proportional.
[46] The Rules require production of documents relevant to any matter in issue in an action that is in the possession, control or power of a party. Rule 30.02 governs what documents must be disclosed and produced for inspection, and Rules 30.03 to 30.10 govern the means by which that is done. Rule 30.03 requires that each party to an action produce an affidavit of documents. None of the parties to this action have done so yet. Rule 30.04 governs inspection of documents referenced in an affidavit of documents, pleadings or affidavits. Rule 30.04(5) grants the court authority to, at any time, order production for inspection of documents that are not privileged and that are in the possession, control or power of a party and, where privilege over a document is claimed, Rule 30.05(6) permits the court to inspect the document to determine the validity of the claim. Rule 30.06 provides the court with authority to make various orders where evidence satisfies the court that a relevant document has not been disclosed or a claim for privilege is improper.
[47] I agree that aspects of Mr. Starkman’s files may be relevant and producible. In Kitchen v. McMaster, supra, Master Graham held that there was a deemed waiver regarding the advice received by the plaintiff in respect of a related proceeding and that, accordingly, the documents from the lawyer’s file relevant to such advice should be produced. Master Graham also held that the lawyer’s accounts were producible since they were claimed as damages. However, there is no clear evidence before me that 865 Canada’s decision to forgo pursuit of the first ground of appeal was based on legal advice that exists in any written form. Questions put to Ms. Pearce on cross-examination about the strategy in not pursuing that ground were refused on the basis of relevance to the motion (not privilege) and the Au Defendants did not move on those refusals. I am also not satisfied that full production of the litigation file is necessary to test the reasonableness of the claim for legal fees. The legal accounts themselves will certainly need to be produced. However, 865 Canada has not yet served its affidavit of documents and has not taken a position that it will not produce the accounts. It has opposed the broader full production order sought by the Au Defendants.
[48] The Au Defendants do not argue for production of any specific class or narrower group of documents within Mr. Starkman’s files as an alternative to full production. Since the record does not support that the entirety of Mr. Starkman’s files for the costs submissions and the appeal are relevant or that an order for their production is proportional, I dismiss that portion of the Au Defendants motion without prejudice to it being brought again following at least completion of exchange of affidavits of documents and productions.
Orders
[49] For the foregoing reasons, I order as follows:
(a) Paul Starkman and Starkman Barristers LLP are hereby removed as lawyers of record for the plaintiff.
(b) The Au Defendants’ motion for production of litigation files from Paul Starkman is hereby dismissed without prejudice to bringing it again following completion of exchange of affidavits of documents and productions.
Costs
[50] On the date of the motion hearing, the Au Defendants provided 865 Canada with their costs outline. In my endorsement on that date, reserving this decision, I also directed that 865 Canada and the Flett Beccario Defendants provide costs outlines by August 23, 2019. I have already received written costs submissions from the Flett Beccario Defendants, seeking $1,000 in costs on a partial indemnity basis from 865 Canada in relation to the examination of Clarke Peddle.
[51] If the parties are unable to resolve costs themselves, then the Au Defendants shall deliver written costs submissions by November 15, 2019. 865 Canada shall deliver joint responding submissions to the submissions of both the Au Defendants and the Flett Beccario Defendants by November 29, 2019. There shall be no reply or oral costs submissions unless I direct otherwise. Costs submissions shall not exceed four pages, excluding costs outlines and any offers to settle or case law. They may be submitted directly to me by email.
MASTER TODD ROBINSON
DATE: November 1, 2019