Court File and Parties
COURT FILE NO.: CV-18-603242 DATE: 20210318
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
8657181 CANADA INC. Plaintiff/Appellant – and – MEHDI 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/Respondents
Counsel: Paul Starkman and Phil Garbutt, for the Plaintiff/Appellant Marc Kestenberg and Hunter Norwick, for the Defendants/ Respondents, Mehdi Au LLP, Chun Yu Au also known as Scott Au Gavin J. Tighe, for the Defendants/ Respondents, Anthony D’Amico carrying on business as Flett Beccario, Clark Peddle and Carlo Gualtieri
HEARD: December 10, 2020
REVISED REASONS FOR DECISION
J.E. Ferguson j.
[1] This appeal arises from the order of Master Robinson removing Paul Starkman and Starkman Barristers LLP (“Starkman”) as lawyers of record for the plaintiff/appellant, 8657181 Canada Inc. (“865”) on the basis that he may be a witness in this litigation. The appeal is dismissed and these are the reasons.
BRIEF HISTORY
[2] 865 was the owner of a golf course in Welland, Ontario (the “property”). In August of 2016, the vendor take-back mortgage (“VTB”) on the property came due. The mortgagee commenced a power of sale proceeding and subsequently a foreclosure action.
[3] The defendant/respondent, Chun Yu Au, also known as Scott Au (“Au”), is a solicitor who, along with his firm Mehdi Au LLP (hereinafter collectively referred to as the “Au defendants”), was retained to defend the actions referred to above and protect the interest of 865. This is disputed by Au and is a matter to be left to the trial judge.
[4] Au failed to file a notice of intent to defend. Consequently, the mortgagee obtained default judgment for foreclosure. The court dismissed a motion to set aside the default judgment (the “set aside motion”), and an appeal was taken which was also dismissed. This is disputed by Au and is a matter to be left to the trial judge The set aside motion was handled by the defendant/respondent, Clark Peddle (“Peddle”).
[5] In August of 2018, 865 commenced this action against the lawyers and the law firm involved who represented it, alleging negligence. 865 seeks damages including Starkman’s legal fees on the appeal. 865 is represented by Starkman.
[6] On November 1, 2019, Master Robinson released his reasons for granting the Au defendants’ motion to remove Starkman and his firm as lawyers of record for 865. More specifically, he held, among other things:
(a) “…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”; [1]
(b) “…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”; [2]
(c) “…Starkman’s evidence on strategy for the appeal will have significance in this action. In my view, that is only underscored by 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 paragraphs 48-53 of Mr. Au’s affidavit. The Au defendants were, in my view, completely stonewalled by Starkman from seeking clear confirmation on who was responsible for the strategic decisions on the appeal” [3] ; and
(d) “…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 Starkman.” [4]
ANALYSIS
Standard of Review
[7] The standard of review on this appeal is well settled:
…the decision will be interfered with only if the master made an error of law or exercised his or her discretion on the wrong principles or misapprehended the evidence such that there is a palpable and overriding error. 1
Therefore, I can only overturn the Master’s decision if he made a reviewable error.
The Test for removal of a lawyer as counsel on the basis that they may be a witness at Trial:
[8] The parties agree on the applicable principles for the removal of a lawyer as counsel on the basis that they may be a witness at trial. However, 865 argues that Master Robinson erred in his application of these principles.
[9] In Mazinani v. Bindoo, 2013 ONSC 4744, the Ontario Superior Court stated the test as follows:
- 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] 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 ("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 ("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 para.28):
… 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.
(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 ONSC 17946 ("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.
(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);
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] 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);
(x) 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 ONSC 9307 ("George S. Szeto"), at para. 13);
"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);
"[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);
(xi) 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);
"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);
"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
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).
The Factors to Consider Under Essa [5]
61 The Divisional Court in Essa (Township) v. Guergis 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):
(i) the stage of the proceedings; (i) the likelihood that the witness will be called; (ii) the good faith (or otherwise) of the party making the application; (iii) the significance of the evidence to be led; (iv) the impact of removing counsel on the party's right to be represented by counsel of choice; (v) whether trial is by judge or jury; (vi) 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 (vii) the connection or relationship between counsel, the prospective witness and the parties involved in the litigation. [6]
[10] Master Robinson correctly recognized that 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. [7]
[11] However, the plaintiffs argue that Master Robinson applied this test incorrectly. They claim that “[n]o reasonably fair-minded person would think that Starkman should be removed from the record to provide evidence about strategic decisions, where the lawyer’s legal advice is not an issue in the action and is not relevant to the negligence of the defendants, which is based on events prior to Starkman’s involvement on the Appeal.” [8]
[12] I agree with the Au defendants that Master Robinson did not commit any errors in law; nor did he exercise his discretion on the wrong principles or misapprehend the evidence such that there are any palpable and overriding errors.
[13] 865 argues on this appeal that Master Robinson should have exercised his discretion differently.
[14] However, the Au defendants are correct that even if this appellate court might have come to a different conclusion, it cannot overturn Master Robinson’s decision unless he made a reviewable error. An appellate court is not free to interfere with a conclusion that it disagrees with where such disagreement stems from a difference of opinion over the weight to be assigned to the underlying facts. [9]
[15] Master Robinson expressly considered the eight Essa factors (set out above) applicable on a motion to disqualify counsel who may be a witness at trial. He also considered the additional legal principles which 865 claims he did not. At paragraph 15 of his decision, Master Robinson explicitly recognized the principles set out in Mazinani v. Bindoo, [10] including, among others:
(a) 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; [11]
(b) The court’s inherent jurisdiction extends to removing a lawyer who may be a witness in a case in which the lawyer acts as counsel; [12]
(c) Counsel appearing as a witness causes problems relating to the administration of justice. The dual roles create a conflict between counsel's obligations of objectivity and detachment owed to the court, and the obligations to the client to present evidence in as favourable a light as possible. This conflict cannot be waived by the client. [13]
(d) 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; [14]
(e) 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. Where the court is satisfied on the record before it that the counsel will be called as a witness, the decisions favour an early determination of the issue; [15]
(f) 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; [16]
(g) 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. [17]
(h) 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”; [18]
(i) 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. [19]
[16] The Au defendants have provided case law supporting the proposition that in cases such as this one, where a lawyer assumes carriage of a matter, completes the proceeding, and subsequently initiates a solicitor’s negligence action against a former lawyer, courts routinely disqualify the lawyer that assumed carriage from acting against the former lawyer. [20] In my view, this is just common sense.
[17] Further, there are no cases in the authorities cited by 865 of a court declining to remove a solicitor in these circumstances. [21]
[18] Master Robinson carefully considered the legal principles and evidence. He correctly found that Starkman would likely be a material witness at trial on the issues of mitigation and damages theory, creating a conflict with his duty to the court, as per Mazinani. I agree with the Au defendants that this appeal should be dismissed not only because Master Robinson’s findings are entitled to deference, but because Master Robinson “got it right”.
Master Robinson’s Consideration of the Essa Factors:
Stage of the Proceedings and the Impact of Removing Counsel
[19] Master Robinson considered the early stage of these proceedings and whether an order to remove Starkman was premature. He held that “[i]t will be least prejudicial to 865 Canada for 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 Starkman will more certainly be called a witness.” [22]
[20] He found that 865 led no evidence that it would suffer prejudice from Starkman’s removal (D factum; decision para. 37). The plaintiffs stated only that Master Robinson “fails to consider the complexity of the action and Starkman’s knowledge of a file and the obvious delay and cost to the Appellant of having to change lawyers”. [23] However, the Master noted that the only affidavit filed by 865 was silent on this issue. As the Au defendants point out, there was no evidence that Starkman performed any work to collect documents or prepare for oral examination for discovery.
Likelihood that Starkman will be called as a Witness and the Significance of his Evidence
[21] The Au defendants argue that Starkman would be required to give evidence on the following issues, among others:
(a) Starkman’s recollections of his discussion with Mr. Au on an October call;
(b) the reasonableness of the steps taken on the appeal following Mr. Au’s discussion with Starkman during the October call, with particular focus on Starkman’s rationale for:
- not attempting to clarify or explain Mr. Zhu’s evidence;
- not arguing that Justice Maddalena’s decision contained palpable and overriding errors given that there was no clear evidence that 865 was represented by counsel on the foreclosure action as set out in the first ground of appeal; and/or
- not attempting to adduce fresh evidence, if necessary, to clarify that 865 had not been represented by counsel throughout the foreclosure action;
(c) why Starkman chose to, instead, emphasize that Mr. Au was 865’s counsel for the foreclosure action; and
(d) the reasonableness of the work performed and the accounts for legal fees delivered by Starkman for the cost submissions and the appeal, which are now the subject matter of the damages claim in this action.
[22] Master Robinson correctly found that Starkman would likely be required to give significant evidence at trial on the following issues: (i) the October call between Mr. Au and Starkman 23; (ii) the strategic decision not to advance the first ground of appeal or to seek leave to adduce fresh evidence; 24 and (iii) the reasonableness and necessity of the legal fees charged by Starkman which account for a portion of the damages claimed in the present action. 25
The October Call
[23] I agree with the Au defendants that the October call was a live issue for trial. 865’s pleaded position regarding that phone call contradicts Au’s recollection of the call. The Master correctly noted that only Starkman’s evidence can confirm or deny Au’s account of the call and resolve this contradiction. His evidence on this point would therefore likely be required at trial.
Strategy on the Appeal
[24] Master Robinson exercised his discretion correctly in finding that Starkman’s strategic decisions on the appeal were relevant matters for which he would likely be a witness. He correctly noted that 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. [24] Based on this test, he found that there was “some merit and basis for the Au defendants’ argument” that the first ground of appeal ought to have been pursued, and that Starkman’s evidence about the rationale to not argue this ground of the appeal would be significant to the action. [25] Master Robinson was correct in finding that this evidence from Starkman would be relevant and that he would likely testify to it at trial.
[25] Moreover, solicitor-client privilege would not prevent Starkman from giving evidence. 865 argues that the Master’s decision violates solicitor-client privilege because it requires Starkman to disclose documents and advice about the Appeal on the plaintiff’s behalf. It claims that 865, as the client, had not waived privilege over these communications and documents. [26] I disagree. As the defendants point out, the act of suing one’s former lawyer constitutes a waiver of the solicitor‑client privilege between them. In particular, the client waives privilege over all matters going to the issue of what caused the loss suffered by the client and to what extent the loss is attributable to their lawyer. [27] In this case, the plaintiffs waived privilege over all information relating to the Foreclosure Action by commencing this Action. Therefore, they cannot argue that Starkman would be prevented from testifying due to solicitor-client privilege and that the Master erred in finding that Starkman would likely have to testify about his strategic decisions on the appeal.
Good Faith
[26] Master Robinson considered and correctly rejected 865’s argument that this motion was tactical, noting that there was no evidence of any bad faith by the Au defendants. [28]
[27] The plaintiffs argue that the Master ignored evidence of the Au defendants’ bad faith. They claim that the Master “discusses delay in bringing the motion without addressing the evidence of bad faith including seeking to remove Starkman on the grounds that he was involved in the Set Aside Motion”. [29] However, the plaintiffs provided no evidence of this bad faith. I agree that the Au defendants’ raising the issue of Starkman’s conflict at the first reasonable opportunity is an indicator that the motion was brought in good faith. Master Robinson correctly found it reasonable for the Au defendants to have deferred bringing the motion given Starkman’s failure to reply to a letter from Kestenberg. [30]
Calling the Witness
[28] Master Robinson found that it was unlikely that 865 would call Starkman as a witness given its position that Starkman has no relevant evidence to give. [31] Conversely, the Au defendants testified that they were likely to call Starkman as a witness on the issues identified.
[29] In these circumstances I agree that Master Robinson correctly recognized that 865 would have a clearly unfair advantage of cross-examining its lawyer. [32]
[30] Accordingly, Master Robinson also found that Starkman would be left in an unreconcilable position if his memory of the events differed from Au’s evidence‑in‑chief. Questions that Starkman posed to Au at trial would be unfair to Au and would carry the appearance of an unsworn offer of Starkman’s own version of the facts. [33]
[31] The plaintiffs submit that Master Robinson ignored the fact that the Au defendants had not undertaken to call Starkman as a witness. However, the Essa factor of “calling the witness” refers only to a “probability counsel will be in a position to cross-examine a favourable witness”. [34] Master Robinson correctly noted that the Au defendants “evinced a clear intention to summons him as a witness”, [35] which satisfies the criterion from Essa.
Connection or Relationship Between, Counsel, Witness and the Parties
[32] I agree with the Au defendants that because Starkman is counsel for 865 and a prospective witness, it is in the interest of justice to prevent a conflict from arising. This factor alone is sufficient to remove Starkman from the record. [36] Starkman was one of the lawyers who acted for 865 in the default action and the foreclosure a. As previously noted, he will therefore likely have to give evidence at any trial arising from this matter.
[33] Master Robinson correctly found that Starkman’s position as advocate could not be reconciled with his position as a likely witness, and that a fair-minded, reasonably informed member of the public would therefore conclude that the proper administration of justice requires the removal of Starkman as solicitors of record in this matter. [37]
DISPOSITION
[34] The appeal is dismissed. If the parties cannot agree on costs, I am prepared to receive brief submissions from the plaintiff/appellant by March 8, 2021 and from the defendants/respondents by March 18, 2021. Any cost submissions may be emailed to my assistant at: lorie.waltenbury@ontario.ca.
J.E. Ferguson
Released: March 18, 2021