MOTION HEARD: 20210323
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Direct Coil Inc., plaintiff
-AND-
Apurva Purohit and Cancoil Thermal Corporation, defendants
BEFORE: Master Abrams
COUNSEL: E. Bisceglia/A. Di Biase, for the plaintiff
D. Adams/M. Taft, for the defendants
REASONS FOR DECISION
The Motion
1The plaintiff (also referred to herein as “Direct Coil”) seeks the removal of Cunningham, Swan, Carty, Little & Bonham LLP (“Cunningham Swan”) as lawyers for the defendants (“Cancoil” and “Mr. Purohit”).
2This action was commenced by way of a statement of claim issued in October of 2018. The plaintiff alleges that the defendants conspired together to misappropriate the plaintiff’s confidential information and to solicit the plaintiff’s customers and employees. Inter alia, the plaintiff seeks an Order restraining the defendants from any solicitation of its employees. The action is in the nascent stages, with no defences having yet been delivered.
3The defendants are represented by a team led by Ms. Andrea Risk, a member of the 4 (now 5) lawyer/2 staff person labour and employment group at Cunningham Swan.
The Reason for the Motion--Context
4Why has this motion been brought?
5In February of 2018 (a few months before this action was commenced), Direct Coil retained Cunningham Swan to represent it in respect of labour and employment concerns—concerns that included responding to an unfair labour practice complaint, defending a union certification application and addressing “employment matters” generally. Acting for Direct Coil were two members of the Cunningham Swan labour and employment group—Messrs. Alan Whyte and Greg Dobney. The work performed for Direct Coil was not insubstantial in that the fees/disbursements paid to Cunningham Swan by Direct Coil exceeded some $50,000.
6The plaintiff’s principal, Mr. Pat Occhicone, has deposed that he “divulge[d] [to these Cunningham Swan lawyers]…[confidential] information, whether…about [the] business…[or otherwise]… …[T]he information was forthcoming from every aspect…” (cross-examination of Mr. Occhicone, at q. 609), including as it related to: the identity of the plaintiff’s employees; the plaintiff’s employee wage scale and employee advancement considerations; the sales and size of the plaintiff; the influence that, the plaintiff believed, was asserted by Cancoil (one of the defendants in this action) on a union drive targeting the plaintiff, and the reasons for this belief; the fact that the plaintiff and Cancoil were competitors (competing for the same contracts and customers); and, resulting concerns as to actions taken by Cancoil, in Mr. Occhicone’s words, to “poach” the plaintiff’s employees (a key issue in this litigation).1 He says that he did not know, at the time the information was shared by him, that Cunningham Swan had acted for Cancoil for some 28 years, including during the currency of Direct Coil’s retainer, and that he never would have divulged confidential information, of any kind, to any Cunningham Swan lawyers, had he known.
7Cunningham Swan has admitted that it received some (albeit, the firm says, limited) confidential information (and business details) from Mr. Occhicone with respect to Direct Coil including, without limitation, the plaintiff’s employee list (with job classifications/benefits information)--something which Mr. Occhicone has sworn under oath is the plaintiff’s most valued and critical piece of confidential information and something which Cunningham Swan has admitted was received by the firm in confidence, is to be kept confidential and is not a matter of public record (see, for instance, cross-examination of Mr. Dobney, at qq. 153-161, and cross-examination of Mr. Whyte, at qq. 222 and 235).
8Then too, both Messrs. Dobney and Whyte admit that Mr. Occhicone had frequently discussed Cancoil, with them, while they were acting for Direct Coil, including in respect of a stated concern as to solicitation of the plaintiff’s employees by Cancoil. Cancoil was “the only competitor” they recall being raised in their discussions with Mr. Occhicone (see: the plaintiff’s factum at notes 49 and 51 for the references in the Cunningham Swan evidence). Cunningham Swan was of the view that Mr. Occhicone’s focus (perhaps fixation) was on Cancoil (First Whyte affidavit, at para. 76, and Second Whyte affidavit, at para. 100). It is noteworthy, in discussing context, that Direct Coil has only five direct competitors--with Cancoil being its only competitor in Ontario.
9Though Mr. Whyte denies having been told by Mr. Occhicone that he believed Cancoil to be the driving force behind the union drive—the union drive being one issue in respect of which Cunningham Swan was retained, Mr. Occhicone is adamant that he had shared this information. He even recalls the context in which the discussion about it first took place (i.e. at a meeting with Mr. Whyte at a coffee shop in Toronto, after Mr. Whyte returned home from a ski trip), and some of the details of what was discussed. His recollection was tested during cross-examination and withstood scrutiny. Indeed, there is a 2.9 hour docket, about which Mr. Whyte forgot, as to the time spent during the meeting.2 Mr. Occhicone says that lacunae such as these in his former lawyers’ recollection of events give him pause as to what has been/might be shared with the defendants herein, if Cunningham Swan remains on the record. It also, he says, should have the court favour his evidence where it contradicts that of the Cunningham Swan lawyers.
10The fact that Cunningham Swan did not fully disclose to the plaintiff the nature and scope of its work for Cancoil until late was confirmed by Messrs. Whyte and Dobney. Mr. Whyte admits that, only near the end of his retainer, did he share with Mr. Occhicone the fact (with no details) that he had acted for Cancoil through a strike. Mr. Dobney says that he too had not disclosed to Mr. Occhicone that he had acted previously for Cancoil. Indeed, it was not until this motion was brought, Mr. Occhicone says, that he learned not only the length of time that Cancoil was a client of Cunningham Swan but that Cunningham Swan had acted for Cancoil on at least 39 separate matters, including while representing Direct Coil, and had acted for it with respect to the same union at issue in Direct Coil’s retainer.
Mr. Occhicone’s Perspective
11Mr. Occhicone says that the plaintiff would never have retained Cunningham Swan had it known any of what it now knows about the firm’s history and relationship with and work for Cancoil, and that he never would have disclosed confidential (and other business) information relative to Direct Coil or Cancoil. Further, he has expressed displeasure with the results achieved for Direct Coil by Cunningham Swan and, retrospectively, attributes it to the law firm’s relationship with Cancoil. That displeasure was communicated by him even before he knew of Cunningham Swan’s connection with Cancoil and, to him, is now explained by what he perceives as a divided allegiance on the part of the law firm. He has summarized his thoughts, in this regard, by saying: “How could [the lawyers] give me proper advice…if Cunningham Swan had been Cancoil’s lawyers for over 25 years and if they were acting for Cancoil at the same time as [for the plaintiff]” (Third Occhicone affidavit, at para. 36)?
Tactical or Not?
12This motion was brought when Direct Coil learned that Cunningham Swan intended to act for the defendants herein (with Mr. Occhicone having deposed that he became aware of the conflict of which he now complains in November of 2018). The motion, the plaintiff submits, is not strategic or tactical, though the defendants suggest that it is--with Direct Coil having also brought suit against Cunningham Swan. On this motion, two opinion letters were proffered by the plaintiff from persons knowledgeable about conflict issues. The defendants say that these letters ought not to be considered by the court as being, inter alia, irrelevant to the issues raised on the motion (being the action against the defendants, not the conduct of Cunningham Swan, generally). I agree that the specific contents are irrelevant and have not given any consideration or weight to them. That said, the plaintiff argues that I can and should take note of the fact that the plaintiff did not ‘shoot from the hip’, as it were. And, that I have done. I accept, as its counsel submits, that Direct Coil took advice on the conflict issue before taking action (Chapters Inc. v. Davies, Ward & Beck, LLP, 2001 CanLII 24189 (ON C.A.), at para. 25).
13The context for this motion starts with Direct Coil’s retainer of Cunningham Swan’s services. It is a lawyer-client relationship that ended in July 2018. On September 7/18, the firm wrote off some of its time (inexplicably, Mr. Occhicone suggests)--with the defendant, Mr. Purohit, resigning from the plaintiff’s employ and going to work for Cancoil only 10 days later (timelines that are tight and curious, according to Mr. Occhicone). By the end of October/18, Cunningham Swan was contacted by the defendants to act for them herein; and, Mr. Occhicone deposes, Cancoil continued to solicit Direct Coil’s employees after this action was commenced (Third Occhicone affidavit, at para. 42). Whether Cunningham Swan acted properly, or not, during the currency of Direct Coil’s retainer and whether the timing of Cancoil’s solicitation of employees is coincidental or not, Mr. Occhicone fears that Direct Coil’s confidential information can and will be used to the detriment of Direct Coil--even if the use is unintentional.
Conflict of Interest--The Law
14The question I have been asked to address is: Can/should Cunningham Swan remain on the record for the defendants or does the firm have a disqualifying conflict?
15My consideration of this question starts with a review of Rules 1.1-1 and 3.4-1 of the Law Society of Ontario Rules of Professional Conduct. These rules say that a lawyer shall not act or continue to act where there exists “a substantial risk that a lawyer’s loyalty to or representation of a client would be materially and adversely affected by the lawyer’s…duties to another client, a former client or a third person”. Rule 3.4-10 says that, unless the former client consents, a lawyer shall not act against a former client “…in any related matter…or…any other matter if the lawyer has relevant confidential information arising from the representation of the former client that may prejudice that client”.
16In MacDonald Estate v. Martin, 1990 CanLII 32 (SCC), [1990] 3 S.C.R. 1235, at para. 48, Justice Sopinka set out the test for a disqualifying conflict of interest between a lawyer and a former client as follows:
(a) Did the lawyer receive confidential information attributable to a lawyer-client
relationship relevant to the matter at hand?; and
(b) Is there a risk that the information will be used to the prejudice of the client?
The approach seeks to balance three competing values: “the concern to maintain the high standards of the legal profession and the integrity of our system of justice; the countervailing value that a litigant should not be deprived of his…[or its]…choice of counsel without good cause; and…(although it is not relevant in this case), the desirability of permitting reasonable mobility in the legal profession” (Chapters Inc. v. Davies, Ward & Beck, LLP, supra, at para. 19).
17Messrs. Whyte and Dobney have admitted to receiving business information from Direct Coil, as well as confidential information that cannot be disclosed by them to the defendants. But, they deny the scope and import of that confidential information and say that much of the confidential information imparted to them has now been shared by Mr. Occhicone, in the context of this motion. They also say that any confidences shared with them are here irrelevant, with there being no substantial relationship between this litigation and the matters on which Cunningham Swan acted for Direct Coil. For its part, Direct Coil says that, with Cunningham Swan having acknowledged that confidential information was imparted, there is no need for Direct Coil to prove a substantial relationship but, in any event, a substantial relationship between the two retainers exists and the information shared is relevant.
18Informing the analysis of these issues is Sopinka, J.’s acknowledgement in MacDonald Estate v. Martin that the very confidential information for which protection is sought may need to be revealed on a motion such as this. His Honour suggested that the tension between maintaining the confidence and discharging the burden of addressing whether the information is or is not relevant to the matter at hand might be resolved having regard to the American courts’ ‘substantial relationship’ test.
19The court in Chapters Inc. v. Davies, Ward & Beck, LLP, supra, at paras. 23 and 28 citing from MacDonald Estate v. Martin, supra, and Westinghouse Electric Corp. v. Gulf Oil Corp., 588 F.2d 221 (1978), opined that “once it is shown by the client that there existed a previous relationship which is substantially related to the retainer from which it [seeks] to remove the [lawyers], the court should infer that confidential information was imparted unless the [lawyers sought to be removed] satisf[y] the court that no information was imparted which could be relevant”. The issue is not one of certainty but, rather, “…the possibility, or appearance thereof, that confidential information might have been given to the [lawyers] in relation to the subsequent matter in which disqualification is sought”. Satisfying the court that the information could not possibly be relevant, Sopinka, J. wrote, is “a difficult burden to discharge” (MacDonald Estate v. Martin, supra, at para. 49).
20As commented on, above, the Cunningham Swan lawyers deny that a substantial (or sufficient, see: Chapters Inc. v. Davies, Ward & Beck, LLP, supra) relationship exists between this litigation and the work that the firm did for Direct Coil, and that information imparted by Mr. Occhicone, while Direct Coil was the firm’s client, is in any way related to the plaintiff’s claims herein. They point to earlier iterations of the plaintiff’s factum (served June 14/19 and August 23/19) in which the plaintiff itself “concedes that this is not the same or a directly related matter”.
21‘Not the same’ or ‘not directly related’ doesn’t mean not sufficiently related, and in any event, counsel for Direct Coil points out, a statement in a factum is a lawyer’s handiwork and does not constitute evidence. Here the evidence of Mr. Occhicone, the principal of Direct Coil, is that “…the current litigation is sufficiently similar to the [Direct Coil] [u]nion [l]itigation, especially with regard to the confidential information that…Cunningham Swan received with respect to [Direct Coil’s] employees, management, sales, customers and competitors” (Second Occhicone affidavit, at para. 25) and that such information can be used to the detriment of Direct Coil (cross-examination of Mr. Occhicone, at qq. 601-602). Indeed, the issues raised by Direct Coil when represented by Cunningham Swan, and now, relate to labour and employment matters, business tactics, treatment and retention of employees, and poaching of employees, inter alia, with Cancoil being a point of focus for Mr. Occhicone.
22To this end, and though it did not think it necessary for the reasons that follow, Direct Coil says that it did not choose to “rest on a bald assertion that the retainers are sufficiently related”. It provided “clear and cogent evidence from which the court [might] reach that conclusion” and shared some confidential information to elucidate the issue (Chapters Inc. v. Davies, Ward & Beck, LLP, supra, at para. 29). And to the extent that Direct Coil shared more confidential information than it might have otherwise, Mr. Occhicone says that it did so in order to refute (and correct) what Mr. Occhicone considered (and considers) to be inaccuracies/misstatements on the part of the Cunningham Swan lawyers (see: cross-examination of Mr. Occhicone, at q. 624). He points out that, at no time, did he/Direct Coil waive privilege (see Fourth Occhicone affidavit, at paras. 16 and 18) and the confidential information shared by him is not the whole of the information that he had imparted to counsel (cross-examination of Mr. Occhicone, at qq. 607 and 618)3. As was the case in Chapters (supra, at para. 33), he says, he strategically withheld some information. And while it is true that some of his affidavit evidence was served directly on Ms. Risk, he explains that is because it wasn’t until after six affidavits were served that Direct Coil learned that there was a Conflicts Motion Team (this in November of 2019).
23Although Cunningham Swan suggests that some of the confidential information disclosed to it may be dated, tangential and/or readily discoverable through the ordinary disclosure process (or may, as Direct Coil suggests in its pleading, already be in the hands of Mr. Purohit, one of the defendants herein), Direct Coil denies that this is so and points to its allegations of conspiracy between Mr. Purohit and Cancoil. Further, it posits, the scope of the litigation has yet to be defined, with no statement of defence having been delivered.
24Cunningham Swan’s position is that, confidential or not, the information it received is not “relevant” to this action (Remus v. Remus, 2002 CanLII 2763, at para. 12 (ON SC)); it is not information that “assists the lawyers to advance the cause of the new client against the old client” (Chapters Inc. v. Davies Ward & Beck LLP, supra, at para. 36)--information that is capable of being used by the defendants in some “tangible” manner herein (Canadian National Railway Co. v. McKercher LLP, 2013 SCC 39, at para. 54). But, as Direct Coil points out, the issue is not whether the information imparted is or must be relevant but, rather, whether it is reasonably possible that it could be relevant (Chapters Inc. v. Davies Ward & Beck LLP, supra, at para. 30). And, the fact that a conflict screen (also referred to herein as a “confidentiality screen”) was put in place by Cunningham Swan, about which more will be said below, suggests that the firm itself believed it could be relevant.
25“A lawyer who has relevant confidential information cannot act against his…former client. In such a case the disqualification is automatic. No assurances or undertakings not to use the information will avail” (MacDonald Estate v. Martin, supra, at para. 50). And, in the particular circumstances of this case, this applies to the whole of the Cunningham Swan firm, the plaintiff argues—given the small size of its labour and employment department and given the manner in which the conflict screen was put in place and has evolved.
The Risks
26With (I accept) the Cunningham Swan firm having received relevant confidential information and with there being a sufficient nexus between the Direct Coil work and the litigation here at issue (with Cancoil’s alleged employee poaching being of concern throughout), the question remains: Is there a risk of improper disclosure of the plaintiff’s confidential information? Cunningham Swan bears the onus of presenting clear and convincing evidence that the plaintiff’s confidential information is not at risk of improper disclosure, to the prejudice of the plaintiff (MacDonald Estate v. Martin, supra, at para. 51). The plaintiff says that it has not done so; and, with respect, I am inclined to agree.
27Why do I say this? First, and as the plaintiff points out, there was no conflict screen in place during the time that Cunningham Swan was acting for Direct Coil, such that it is not known what information/what confidences may have been shared, then, with Cancoil’s lawyers/Cancoil. One example Direct Coil gives is that Ms. Tarle, Ms. Risk’s regular assistant, assisted Mr. Whyte on the Direct Coil legal matters. No evidence has been proffered as to what, if anything, may have been shared with Ms. Risk at a time when there was no conflict screen.
28Cunningham Swan says that it first put a confidentiality screen in place, in respect of this litigation (in late October of 2018), to address the fact that Messrs. Whyte and Dobney had previously acted for the plaintiff. Ms. Risk deposes having sent out a confidentiality screen memorandum to all lawyers and staff members who had done work for Direct Coil and all lawyers and staff members who would be working for Cancoil and Mr. Purohit herein—this out of an abundance of caution (though, having spoken to Mr. Whyte about his retainer, she had concluded that there was no conflict). The memorandum prohibits discussions about matters that are the subject of the confidentiality screen.
29Yet, under cross-examination, Ms. Risk and Mr. Whyte both confirmed that they had spoken with each other (with Ms. Risk confirming having also spoken with Mr. Dobney) with regard to Direct Coil and in respect of the evidence filed on this motion by Mr. Occhicone (with Ms. Risk being of the view that she may have reviewed Mr. Occhicone’s evidence with Messrs. Whyte and Dobney), after the confidentiality screen (in its various iterations) had been put in place—with no notes having been kept of the discussions, with the time spent not having been docketed and with the issues discussed not having been recorded in emails or otherwise (see, for instance, Ms. Risk’s cross-examinations, at qq. 216-246, 260-263, 272-276 and Mr. Whyte’s cross-examination, at qq. 34-55).
30Mr. Whyte further disclosed that a discussion, not detailed in any of the affidavits sworn by Cunningham Swan in respect of this motion and not noted in any Cunningham Swan’s files, took place as among Ms. Risk, Mr. Adams, Mr. Matt Taft and, perhaps, Mr. Dobney with respect to the issues herein (Mr. Whyte’s cross-examination, at qq. 38-46).
31The plaintiff says that this context makes clear that the confidentiality screen was/is inadequate and ineffective and, though amended since it was first put in place, remains so. Specifically: It was amended in June 2019 to add Mr. Adams to the Cancoil Team. One month later, Mr. Adams was moved to the Conflict Motion Team and, by virtue of his membership on that team, was permitted to have discussions with and garner information from the lawyers representing both the plaintiff and the defendants. Though Cunningham Swan will not disclose the role Mr. Adams played when he was part of the Cancoil Team, he has been permitted to have access to information from the Direct Coil team to address this motion. And, indeed, Mr. Adams met with Mr. Dhatta, the principal of Cancoil, and Mr. Purohit, at least twice after he was placed on the Conflict Motion Team. What was discussed has not been disclosed, with a request for disclosure refused by Cunningham Swan (cross-examination of Ms. Risk, at q. 342). Further, there is no evidence from Mr. Adams as to what he did/didn’t say during the meeting.
32Relying on MacDonald Estate v. Martin (supra, at para. 50), the plaintiff says that the lawyers who were or are part of the Cancoil Team (even if now part of the Conflict Motion Team) “cannot compartmentalize [their]…mind[s] so as to screen out what has been gleaned from the client and what was acquired elsewhere”.
Balancing of Considerations
33With no evidence adduced as to measures taken by Cunningham Swan, at the time it was acting for Direct Coil, to safeguard Direct Coil’s confidential information from disclosure, with there being 4 (or 5) lawyer members of the employment and labour group (and two staff persons)--with two lawyers having acted for Direct Coil and one having acted for Cancoil but now being part of the Conflict Motion Team, with Mr. Whyte’s memory being shown to be flawed in respect of at least one 2.9 hour docket entry (about which Mr. Occhicone’s recollection was strong), as discussed above, with there being no disclosure of the meeting among Ms. Risk, Mr. Taft, Mr. Adams and, perhaps, Mr. Dobney save in the context of cross-examination, with Cunningham Swan conceding that Direct Coil’s file does not contain notes of all conversations as between Mr. Occhicone and Cunningham Swan lawyers (cross-examination of Mr. Dobney, at qq. 185-186), with no dockets, notes, emails or records of any post-conflict screen discussions having been produced, and with some of the employees listed on the confidential employee list provided to Cunningham Swan having been solicited by Cancoil after Direct Coil ceased working with Cunningham Swan, the suspicions and concerns of Mr. Occhicone/Direct Coil have not been abated or allayed.
34Further, the plaintiff points out, the refusals listed at paragraph 1 of the plaintiff’s fresh as amended factum have tended to heighten the plaintiff’s concerns that protection of the privilege and rights of Cancoil has been and is being preferred by Cunningham Swan. Indeed, the refusals include a refusal to advise whether Mr. Adams investigated any alleged employee poaching by Cancoil, a refusal to produce certain conflict searches, Cunningham Swan’s conflict policy, Cunningham Swan’s retainer policy and Cunningham Swan’s retainer with Cancoil4--these being relevant to the scope of its work on behalf of Cancoil, and a refusal to share details of any kind as to Mr. Adams’ meetings/discussions with the principal of Cancoil in relation to this motion. The concerns are all the more acute given the proximate timing of the conclusion of the Direct Coil retainer (and the manner in which it concluded) to Cunningham Swan’s representation of the defendants herein.
Conclusion and Disposition
35The defendants submit that the removal of a party’s lawyers, in the context of a motion such as this, is “discretionary, equitable relief of a type that is granted only sparingly and with great caution”. The “highest level of restraint” is to be exercised before interfering with a party’s choice of counsel. The court must consider whether a fair-minded and reasonably informed member of the public would conclude that the counsel’s removal is “necessary” for the proper administration of justice (Re Kaiser, 2011 ONCA 713, at paras. 21 and 23).
36For its part, the plaintiff says that, based on the evidence adduced, no reasonably informed person could be satisfied that there would be no misuse of confidential information should Cunningham Swan be permitted to act for the defendants herein. “It is fundamentally important that justice not only be done but appear to be done in the eyes of the public” (MacDonald Estate v. Martin, supra, at paras. 57 and 60). Further, it says, given that the defendants have yet to file a statement of defence herein, they will not suffer prejudice if denied their first choice of counsel.
37In all, I agree with the plaintiff. The preservation of the public’s confidence in the administration of justice is paramount. It trumps a client’s right to counsel of its choice. The court must give “primacy” to the integrity of the legal profession and the administration of justice (Ontario v. Chartis, 2017 ONCA 59, at paras. 69-71). The same considerations that have given Mr. Occhicone pause, as summarized in, inter alia, paragraphs 33 and 34 (supra), here give me pause. They are brought into sharp relief and are all the more concerning by virtue of the very small size of the Cunningham Swan labour and employment department and Mr. Occhicone’s admitted fixation, while Cunningham Swan was acting for Direct Coil, on Cancoil. The plaintiff’s motion is thus granted (with costs to be addressed by way of a separate hearing, arranged through my ATC).
38In ruling as I have, I am not opining on what Cunningham Swan ought to have done as Direct Coil’s lawyers. I am not levelling criticism against the firm. I am simply saying that, in the circumstances of this action and these parties (and for the reasons discussed above), there is a real and considered risk that confidential information received from Direct Coil can, as Direct Coil posits, find its way into the representation of the defendants herein, if Cunningham Swan lawyers are not removed from the record. Just as the Court of Appeal said in Ontario v. Chartis, supra, at para. 73, I say here: “…[T]he concern of inadvertent disclosure should not be taken as a reflection of the integrity of [any of the firm’s] lawyer[s]. Rather, it is the integrity of the justice system that is in issue”.
June 23, 2021 Original Signed by Master Abrams
Footnotes
- Some of this information has been delineated by him in his affidavits and on cross-examination.
- Then too, Mr. Whyte acknowledges having spoken by telephone with Mr. Occhicone between February 28/18 and March 4/18 but having no notes of his discussions and having no recollection of what was discussed (cross-examination of Mr. Whyte, at qq. 73-74 and 78).
- Messrs. Whyte and Dobney acknowledge that they do not have notes of all conversations with Mr. Occhicone. Further, the whole of the file was not produced, with there being “several notes that aren’t in the records” (cross-examination of Mr. Dobney, at qq. 185-186).
- I note that there was no retainer agreement with Direct Coil.