COURT FILE NO.: CV-14-501169 MOTION HEARD: 20 211130 REASONS RELEASED: 20 220321 SUPERIOR COURT OF JUSTICE – ONTARIO
BETWEEN:
TALON INTERNATIONAL INC. Plaintiff
- and-
BYUNG SOOK MIN Defendant
BEFORE: ASSOCIATE JUSTICE McGRAW
COUNSEL: N. Tourgis and S. Zucker Email: ntourgis@srtslegal.com -for the Plaintiff
M. Wine Email: mwine@MSTWLaw.com -for the Defendant
REASONS RELEASED: March 21, 2022
Reasons For Endorsement
Introduction
[1] This is a motion by the Plaintiff Talon International Inc. (“Talon”) for an order removing Mitchell Wine and MSTW Professional Corporation as lawyers of record for the Defendant Byung Sook Min.
Background
[2] Talon was the developer of the former Trump International Hotel and Tower Toronto (the “Hotel”). Pursuant to an Agreement of Purchase and Sale, Mr. Min purchased a condominium unit (a “Unit”) in the Hotel. Many of the Units were purchased as investments to generate income through participation in the Hotel’s Reservation Program.
[3] The Hotel opened on January 31, 2012. Most Unit purchasers took interim possession between February 2012 until December 2012. Mr. Min did not. Many Unit purchasers alleged that they suffered significant losses during the interim possession period and refused to close. This resulted in litigation between Talon and numerous purchasers with respect to the forfeiture or recovery of their deposits.
[4] Talon commenced this action by Statement of Claim issued on March 31, 2014 in which Talon claims, among other things, forfeiture of Mr. Min’s deposits totaling $480,700 (the “Deposits”) and damages of $750,000. In his Amended Statement of Defence and Counterclaim dated June 14, 2014, Mr. Min claims, among other things, the return of the Deposits.
[5] This motion arises from Mr. Wine’s previous representation of 22 other Unit purchasers (or groups of purchasers) of 27 Units (the “Wine Plaintiffs”) in 19 actions involving Talon (the “Wine Actions”). The Wine Actions were case managed by Wilson J. The Wine Plaintiffs brought a summary judgment motion in June 2015 which proceeded by agreement on the basis of two Wine Actions. The motions were dismissed by Perell J. and allowed on appeal (Singh v. Trump, 2015 ONSC 4461; 2016 ONCA 747). Talon took the position that the Court of Appeal decision was not binding on it with respect to the other Wine Plaintiffs because of findings that Talon had made negligent misrepresentations. This required each of the Wine Plaintiffs to prove that representations were made to them and relied upon therefore trials for the Wine Actions were scheduled for March 2020.
[6] The parties attended numerous pre-trial conferences and mediations with Hainey J. As a result, the Wine Actions settled in February 2020. Talon, the Wine Plaintiffs, other companies related to Talon and Alex Shnaider, Talon’s principal, signed a Mutual Release (the “Mutual Release”) which includes a confidentiality provision with respect to the terms of the settlement of the Wine Actions. Talon requested that Mr. Wine and his former Firm, Levine Sherkin Boussidan PC (“LSB”) execute a confidentiality agreement and that Mr. Wine undertake not to act for any other purchasers. Mr. Wine did not agree. Pursuant to Reasons For Decision dated September 13, 2018 (Persaud v. Talon International Inc., 2018 ONSC 5377), Perell J. held that Mr. Wine and LSB were disqualified from acting as class counsel in class proceedings commenced on behalf of another purchaser as a result of the conflict with their representation of the Wine Plaintiffs.
[7] Mr. Wine served a Notice of Change of Lawyer for Mr. Min on November 17, 2020. Until then, Mr. Min was represented by Eric Nadler who acted for him throughout discoveries, motions, amendment of his Defence and Counterclaim and mediation held in October 2020.
[8] This motion first came before me on September 10, 2021. Talon had short-served its Factum and recently amended its Notice of Motion to strike or seal certain paragraphs of the Affidavit of Nathan Fabiano sworn August 5, 2021 (the “Fabiano Affidavit”) filed by Mr. Wine as it disclosed evidence and information regarding the settlement and related discussions between Talon and the Wine Plaintiffs. This included the Mutual Release, other settlement documents, documents prepared for mediations and a pre-trial conference, without prejudice communications and references to the settlement terms and settlement discussions including discussions at mediation and a pre-trial conference. As a result, Talon claimed that Mr. Wine had breached the confidentiality provisions of the Mutual Release and settlement privilege. Given the issues raised by Talon regarding the Fabiano Affidavit, I concluded that 90 minutes was insufficient and the motion to strike should be heard first. I ordered a timetable for supplementary materials and scheduled the motion to strike for October 13, 2021.
[9] As a result of discussions with counsel at the beginning of the attendance on October 13, 2021, the parties agreed to resolve the interim motion to strike by redacting the disputed paragraphs and Exhibits of the Fabiano Affidavit and removing and replacing the unredacted version on the record with a redacted version. On this basis, the removal motion was scheduled for 3 hours on November 30, 2021.
The Law and Analysis
[10] Talon submits that Mr. Wine and his Firm are in a conflict of interest and should be removed as lawyers of record for Mr. Min as a result of his previous representation of the Wine Plaintiffs. Talon argues that Mr. Wine has knowledge of the confidential terms of settlement of the Wine Actions and other information which is directly relevant to this action which he is duty bound to keep confidential and cannot use in his representation of Mr. Min. Talon also submits that Mr. Wine has already demonstrated that he will use the confidential information by filing some of it on this motion.
[11] In MacDonald Estate v. Martin, [1990] 3 S.C.R. 1235, the Supreme Court held that the principal issue on a motion to remove counsel is the balancing of 3 competing values: i.) the maintenance of high standards of the legal profession and the integrity of our system of justice; ii.) the right of a litigant to its choice of counsel, which he or she should not be deprived of without good cause; and iii.) the desirability to permit mobility in the legal profession. The most important and compelling value is the integrity of our system of justice (MacDonald at paras. 57-58).
[12] The court should consider the Rules of Professional Conduct when exercising its jurisdiction over counsel (Campeau v. Campeau, [2006] O.J. No. 1701 (S.C.J.)). The Rules of Professional Conduct define a “conflict of interest” as follows:
“The existence of a substantial risk that a lawyer’s loyalty to or representation of a client would be materially and adversely affected by the lawyer’s own interest or the lawyer’s duties to another client, a former client, or a third person. The risk must be more than a mere possibility; there must be a genuine, serious risk to the duty of loyalty or to client representation arising from the retainer.” (Rules of Professional Conduct, Section 1.1-1)
[13] In Canadian National Railway Co. v. McKercher LLP, 2013 SCC 39, the Supreme Court summarized the law of conflicts as follows:
“The law of conflicts is mainly concerned with two types of prejudice: prejudice as a result of the lawyer's misuse of confidential information obtained from a client; and prejudice arising where the lawyer "soft peddles" his representation of a client in order to serve his own interests, those of another client, or those of a third person. As regards these concerns, the law distinguishes between former clients and current clients. The lawyer's main duty to a former client is to refrain from misusing confidential information. With respect to a current client, for whom representation is ongoing, the lawyer must neither misuse confidential information, nor place himself in a situation that jeopardizes effective representation…”
The first major concern addressed by the duty to avoid conflicting interests is the misuse of confidential information. The duty to avoid conflicts reinforces the lawyer's duty of confidentiality - which is a distinct duty - by preventing situations that carry a heightened risk of a breach of confidentiality. A lawyer cannot act in a matter where he may use confidential information obtained from a former or current client to the detriment of that client. A two-part test is applied to determine whether the new matter will place the lawyer in a conflict of interest: (1) Did the lawyer receive confidential information attributable to a solicitor and client relationship relevant to the matter at hand? (2) Is there a risk that it will be used to the prejudice of that client?: Martin, at p. 1260. If the lawyer's new retainer is "sufficiently related" to the matters [page662] on which he or she worked for the former client, a rebuttable presumption arises that the lawyer possesses confidential information that raises a risk of prejudice: p. 1260.” (McKercher at paras. 23-24).
[14] In MacDonald Estate, Sopinka J. held that the test is whether the public represented by the reasonably informed person would be satisfied that no use of confidential information would occur:
“45 Typically, these cases require two questions to be answered: (1) Did the lawyer receive confidential information attributable to a solicitor and client relationship relevant to the matter at hand? (2) Is there a risk that it will be used to the prejudice of the client?
46…In my opinion, once it is shown by the client that there existed a previous relationship which is sufficiently related to the retainer from which it is sought to remove the solicitor, the court should infer that confidential information was imparted unless the solicitor satisfies the court that no information was imparted which could be relevant. This will be a difficult burden to discharge. Not only must the court's degree of satisfaction be such that it would withstand the scrutiny of the reasonably informed member of the public that no such information passed, but the burden must be discharged without revealing the specifics of the privileged communication. Nonetheless, I am of the opinion that the door should not be shut completely on a solicitor who wishes to discharge this heavy burden.
47 The second question is whether the confidential information will be misused. A lawyer who has relevant confidential information cannot act against his client or former client. In such a case the disqualification is automatic. No assurances or undertakings not to use the information will avail. The lawyer cannot compartmentalize his or her mind so as to screen out what has been gleaned from the client and what was acquired elsewhere. Furthermore, there would be a danger that the lawyer would avoid use of information acquired legitimately because it might be perceived to have come from the client. This would prevent the lawyer from adequately representing the new client. Moreover, the former client would feel at a disadvantage. Questions put in cross-examination about personal matters, for example, would create the uneasy feeling that they had their genesis in the previous relationship.” (MacDonald Estate at paras. 44-47)
[15] Much of the relevant case law deals with potential conflicts of interest arising as a result of lawyers acting for new clients who are adverse in interest to the lawyer’s previous clients where the issue is the risk that counsel will use privileged or confidential information received from the former client. In the present case, Mr. Wine did not represent Talon. He acted for the Wine Plaintiffs against Talon in the 19 Wine Actions, settled those actions, and is now acting against Talon again for Mr. Min. Talon claims that there is a real risk that Mr. Wine will use confidential information he received during the settlement negotiations with Talon to Talon’s prejudice.
[16] Talon relies on the Supreme Court’s decision in Celanese Canada Inc. v. Murray Demolition Corp., 2006 SCC 36, [2006] S.C.J. No. 35. In that case, the Supreme Court considered the effect of conflicts on the administration of justice holding that the analysis from MacDonald does not depend on a pre-existing solicitor-client relationship:
“34 Whether through advertence or inadvertence the problem is that solicitor-client information has wound up in the wrong hands. Even granting that solicitor-client privilege is an umbrella that covers confidences of differing centrality and importance, such possession by the opposing party affects the integrity of the administration of justice. Parties should be free to litigate their disputes without fear that their opponent has obtained an unfair insight into secrets disclosed in confidence to their legal advisors. The defendant's witnesses ought not to have to worry in the course of being cross-examined that the cross-examiner's questions are prompted by information that had earlier been passed in confidence to the defendant's solicitors. Such a possibility destroys the level playing field and creates a serious risk to the integrity of the administration of justice. To prevent such a danger from arising, the courts must act "swiftly and decisively" as the Divisional Court emphasized. Remedial action in cases such as this is intended to be curative not punitive.
46 Kasowitz submits that "[t]he facts of this case do not raise the concerns whatsoever addressed by the Court in MacDonald Estate [because] Kasowitz had no relationship whatsoever with the Appellants". I do not agree. The relevant elements of the MacDonald Estate analysis do not depend on a pre-existing solicitor-client relationship. The gravamen of the problem here is the possession by opposing solicitors of relevant and confidential information attributable to a solicitor-client relationship to which they have no claim of right whatsoever.”
[17] Talon also cites Campeau, in which family law counsel was removed due in part to receiving confidential settlement information with respect to related litigation:
“50 I am aware of the principle which espouses a litigant's right to be represented by his or her choice of counsel and that he or she should not be deprived of this right without good cause. In my opinion there is, in this matter, good cause. Mr. Langlois relies on paragraph 40 of a decision of the Ontario Court of Appeal in Celanese Canada Inc. v. Murray Demolition Corp., [2004] O.J. No. 3983:
- In short, the test I am proposing is meant to be fair to both sides. Under it, disqualification will result if, upon consideration of the whole of the evidence, the moving party satisfies the court that there is a real risk that opposing counsel will use information from the privileged documents to the prejudice of the moving party and the prejudice cannot realistically be overcome by a remedy short of disqualification. I have no difficulty whatsoever with this proposition. However, it is important to note that the proposition is made in the context of a case where a law firm, acting for a client, inadvertently comes into possession of documents belonging to the opposing side where those documents are protected by solicitor and client privilege. That, of course, is not the situation with which we are concerned in this matter. In any event, I am satisfied on the evidence before that there is here a real risk that Ms. Wilcox and, therefore, her co-counsel, may, even inadvertently, use privileged information arising from Ms. Wilcox's earlier retainers and, of course, the use of such information will or may be prejudicial to persons who have rights under the retainers. In my view, the risk is not fanciful, speculative, or imaginary. There is a real possibility that confidential information will be used to the prejudice of the moving parties (see paragraph 41 of the foresaid decision). Mr. Langlois also relies on the cases of Duffy v. Great Central Publishing Co. Ltd., [1995] O.J. No. 4057 (Gen. Div.) and Merck & Co. v. InterPharm Inc. (1993), 61 F.T.R. 1 for the proposition that even assuming that information obtained from a prior retainer of the former client is confidential, or subject to an employed undertaking rule, if that information is obtainable through the normal litigation process, its receipt through a past retainer will not prohibit counsel from proceeding against the former client on a different matter. In my opinion, this proposition is simply not applicable to the facts of the case before me.”
[18] Mr. Wine submits that he has always acted against Talon and therefore owes Talon no duty. Although he did not personally sign the Mutual Release or agree to any confidentiality provisions, he acknowledges that he owes a duty of confidentiality arising from the execution of the Mutual Release by the Wine Plaintiffs and has no intention of ignoring these obligations.
[19] Mr. Wine further submits that his knowledge of the settlement amounts and negotiations from the Wine Actions are of no use in settlement discussions or defending this action on behalf of Mr. Min. He notes that even Talon took the position in this litigation after the Court of Appeal’s decision on the summary judgment motion that each of the Wine Actions was unique. Mr. Wine submits that there are numerous factors which distinguish the Wine Actions from the present action, including that Mr. Min is a defendant; the Wine Actions had multiple defendants while Mr. Min can only look to Talon for recovery and may bring a security for costs motion given Talon’s receivership; the effect of return on investment estimates provided to purchasers; some of the Units were purchased by assignment; one of the Wine Plaintiffs passed away; three of the Wine Plaintiffs closed their sales; one of the Wine Actions involved the purchase of a residential unit; the Wine Actions were for different amounts and Mr. Wine paid a separate additional deposit. Mr. Wine also submits that the structure of the settlement payments further supports his position that the confidential information he possesses is unhelpful and not relevant.
[20] Turning to the two-part test, I am satisfied that Mr. Wine’s retainer for Mr. Min is sufficiently related to his representation of the Wine Plaintiffs and that a presumption arises that Mr. Wine is in possession of confidential information relevant to this action which has not been rebutted. The Wine Actions and the present action relate to Units purchased from the same developer in the same Hotel substantially all as investment properties during the same time period and, as Mr. Wine concedes, based on Agreements of Purchase and Sale with similar terms. Although Mr. Min is a Defendant, like the Wine Plaintiffs, he has brought a counterclaim against Talon for the Deposits. I accept that there are some differences between the Wine Actions and Mr. Min’s action. However, the distinguishing factors identified by Mr. Wine are not material and are outweighed by the underlying common factual and legal issues and the significant number of previous retainers.
[21] This is not a case of a lawyer who represented one client or had one previous retainer opposite the moving party. Mr. Wine’s previous retainers for the Wine Plaintiffs involved 19 actions, 22 clients and 27 Units. Mr. Wine was involved for 8 years and participated in extensive settlement discussions including judicial pre-trials and mediation on behalf of the Wine Plaintiffs. During this process, Mr. Wine has received disclosure of confidential information regarding, among other things, Talon’s valuation of the Wine Actions. I conclude that this is relevant to both potential settlement discussions between Talon and Mr. Min and defending this action at trial. While Mr. Wine argues that Talon can simply choose not to settle, this is inconsistent with the public interest in encouraging meaningful and open settlement discussions given the benefits of settlement to the parties and the justice system (Sable Offshore Energy Inc. v. American International Corp., 2013 SCC 37 at para. 13). These benefits have been demonstrated by the settlement of the Wine Actions. Further, I do not accept that the confidential information with respect to the 19 Wine Actions has no use or relevance at trial.
[22] I also conclude that there is a real risk that the confidential information will be used to the prejudice of Talon which cannot be overcome by a remedy short of Mr. Wine’s disqualification. I do not reach this conclusion because Mr. Wine disclosed documentation and information regarding the settlement of the Wine Actions on this motion. Given the resolution of Talon’s interim motion to strike, I make no findings as to whether settlement privilege or the terms of the Mutual Release were breached. As above, my conclusions are based on Mr. Wine’s extensive involvement in the negotiations leading to the settlement of the 19 Wine Actions which, given the number of actions and factual and legal similarities to the present case has provided him with a high level of disclosure. It is a result of the position that Mr. Wine was in, having so many similar retainers with highly similar factual and legal issues and settling the related claims, that there is a real risk of even inadvertently misusing the confidential information he possesses. This is particularly true where Mr. Wine acknowledges that Mr. Min, after being represented by Mr. Nadler for 6 years until after mediation, retained Mr. Wine due to his success, results and “intimate involvement” in litigating and settling the Wine Actions. The use of the confidential information would result in prejudice to Talon by undermining the level playing field necessary for settlement discussions and at trial given the nature and amount of disclosure involved.
[23] Mr. Wine relies on Fortin v. Brunet, 2009 O.J. No. 4768 (S.C.J.). In Fortin, the defendant sought to have plaintiff’s counsel removed on the basis that plaintiff’s counsel was in possession of confidential information arising from a release and settlement negotiated with the defendant for a previous client with respect to the same investment product. In dismissing the motion, R.A. Riopelle J. held that the evidentiary record was “too weak” including no statement in evidence that plaintiff’s counsel obtained an unfair insight into secrets disclosed in confidence by the defendants to their legal advisors; no allegations of conduct prohibited by the release; and the evidence was uncontradicted that there was no confidential information known by the plaintiff’s lawyer relevant to the action. The court also concluded that there were significant differences between the two actions.
[24] In my view, while Fortin is analogous to the present case, it is distinguishable in numerous material respects. Unlike Fortin, where there was one previous retainer with 2 clients, Mr. Wine’s previous retainers involved 19 actions and 22 clients. Further, the record on the present motion is not weak or uncontradicted with respect to the relevant confidential information disclosed; there are allegations of conduct prohibited by the Mutual Release given the disclosure of settlement documentation and information on this motion and I have concluded that there is a sufficient relationship between the retainers.
[25] In arriving at my conclusions, I have placed no reliance on Perell J.’s disqualification of Mr. Wine as class counsel. I accept Mr. Wine’s submissions that the circumstances in which he was removed as putative class counsel are distinguishable given his concurrent representation of the Wine Plaintiffs at that time. I have also placed no weight on the numerous assertions made by the parties as to what Wilson J. or Hainey J. might have said during various court attendances. No findings or determinations were made and any such comments are irrelevant to my determination of this motion. In this regard, I also reject Mr. Wine’s submissions that Talon does not come to court with clean hands because of any references to the alleged judicial comments and the late filing of its Factum. I also do not accept Mr. Wine’s assertion that this motion is a tactical attempt by Talon based on a specious conflict of interest argument to disqualify him because he has knowledge about this matter that no other lawyer has.
[26] In my view, the removal of Mr. Wine and his Firm in these circumstances strikes the necessary balance between the public interest in maintaining the integrity of the justice system and Mr. Min’s right to his choice of counsel. Based on my conclusions above, there is good cause to deprive Mr. Min of his choice of counsel in the circumstances. Mr. Wine submits that preventing an individual like Mr. Min with “a poor command of English” facing “a litigation-savvy opponent would bother a reasonably informed observer more than knowledge of an irrelevant settlement number from another case.” I disagree. This is not a case where Mr. Min is being deprived of long-standing counsel or would suffer prejudice or hardship from having to retain new counsel. Mr. Min had the same counsel for 6 years up to and including mediation before retaining Mr. Wine. In my view, the prejudice that Talon would suffer in settlement discussions and at trial by Mr. Wine’s continued representation given his previous retainers and the confidential information disclosed outweighs any prejudice Mr. Min would incur by having to retain new counsel.
[27] Having considered all of the relevant factors and circumstances and balanced the competing interests, I conclude that a fair-minded reasonably informed member of the public would be unable to conclude that the confidential information would not be used and that the proper administration of justice requires the removal of Mr. Wine and his Firm as Mr. Min’s counsel.
Disposition and Costs
[28] Order to go removing Mr. Wine and his Firm as lawyers of record for Mr. Min.
[29] If the parties cannot agree on costs, they may file written submissions not to exceed 3 pages (excluding Costs Outlines) on a timetable to be agreed upon by counsel.
Released: March 21, 2022
Associate Justice McGraw