Reasons for Decision

Court File No.: CV-24-00000024-0000 (Kingston)
Date of Judgment: 2025-02-24
Ontario Superior Court of Justice

Between:
Mark J. Geoghegan and 629692 BC Ltd., Plaintiffs
and
Kelly Alarie, Gilles Alarie, and Carol Geoghegan, Defendants

Appearances:
Michael D. Swindley, for the plaintiffs
Martin Diegel, for the defendants

Heard: 13 February 2025, at Kingston

Introduction

(Motion for Removal of Lawyer of Record)

Mew J.:

[1] The Law Office of Martin Diegel (the “Firm”) acts for the defendants in this action. Martin Diegel is the Firm’s principal. At times material to the events that give rise to the parties’ dispute, another lawyer, Jacob-Charles Diegel, also worked for the Firm.

[2] The plaintiffs bring this motion at an early stage in the litigation for an order removing Martin Diegel as “counsel of record” for the defendant. It is asserted that Mr. Diegel has a conflict of interest because he will be a necessary witness at trial on the issue of the forfeiture of corporate property under the Forfeited Corporate Property Act, 2015, S.O. 2015, c. 38, Sched. 7 and the subsequent transfer of the subject property to the defendant, Kelly Alarie. Further, or alternatively, the plaintiffs say that two of the three defendants are potentially adverse in interest to the other defendant, and that the Firm cannot represent them all.

Nature of the Dispute

[3] The plaintiff Mark Geoghegan owns the shares in the other plaintiff, a numbered company, 629692 BC Ltd. (“BC Ltd.”), which had previously been a part owner of a property located at 1397 Anderson Road, Sharbot Lake, Ontario (the “Property”). His stepmother, the defendant Carol Geoghegan, became the President of BC Ltd. on 7 May 2004. The company was involuntarily dissolved on 26 November 2007 as a result of the failure to file ongoing annual reports with the Province of British Columbia. Mr. Geoghegan says that he only became aware of the demise of BC Ltd. in February 2020. He has since taken steps to have the company restored to good standing.

[4] In the meantime, however, Mr. Geoghegan’s sister, Ms. Alarie, who already held the other two-thirds interest in the Property, made an application to have the one-third interest previously held by BC Ltd. (which, by virtue of its dissolution and the operation of the Forfeited Corporate Property Act, had vested in the Crown in right of Ontario), transferred to her. Carol Geoghegan was given notice of that application, but Mr. Geoghegan says that he was not. The application, which was not opposed, was successful. Title to the Property is now held by Ms. Alarie and her husband, Gilles Alarie.

The Role of the Firm

[5] At the outset, it is important to note that the Firm has never acted for the plaintiffs. The Firm did, however, act for Ms. Alarie when she instructed them to represent her in the application to the Ontario Ministry of Government and Consumer Services Realty Management Branch for the transfer to her of the one-third interest in the title to the Property (previously held by BC Ltd. prior to its dissolution). According to Ms. Alarie, Jacob-Charles Diegel was the lawyer at the Firm who assisted her with the application.

[6] In the present action, the Firm acts not only for Ms. Alarie but, also, for the other defendants, Gilles Alarie (her husband) and Carol Geoghegan (her stepmother, and the former President of BC Ltd.).

[7] The material filed in support of the application under the Forfeited Corporate Property Act included an affidavit of service by Jacob-Charles Diegel, attesting to him having served notice of the application on Carol Geoghegan, as the sole listed director and officer of the dissolved corporation at her home address. The affidavit of service was commissioned by Martin Diegel. Mr. Diegel also commissioned the affidavit sworn by Ms. Alarie in support of her application.

The Plaintiffs’ Claims

[8] The plaintiffs claim that the application under the Forfeited Corporate Property Act was a violation of an agreement between Mark Geoghegan and his two sisters, Karen Reiss and the defendant Ms. Alarie, in, and following, a meeting to discuss the unintended dissolution of the numbered company, whereby it is alleged that Ms. Alarie and Ms. Reiss confirmed that:

(a) They understood that BC Ltd. had dissolved;
(b) They understood that Mr. Geoghegan was in the process of having BC Ltd. reinstated;
(c) They had been advised that Mr. Geoghegan had engaged a lawyer to assist with reinstating BC Ltd.; and
(d) Mr. Geoghegan remained the beneficial “owner” 1/3 of the Property and the intention was that after reinstatement of BC Ltd., one-third of the Property would transfer to the plaintiffs.

[9] Mr. Geoghegan asserts that he was not given notice of his sister’s application but, as the owner of all of the company’s shares, he says that he should have been. After finding out about the transfer of the Property to Ms. Alarie, Mr. Geoghegan made a request under the Freedom of Information and Protection of Privacy Act, R.S.O. 1990, c. F.31, to obtain copies of the application made by Ms. Alarie and other documents and information pertaining to the application. This yielded a number of documents, including an email from Jacob-Charles Diegel to the Ministry describing Carol Geoghegan as the “sole director, officer, and shareholder” of the numbered company.

[10] Mr. Geoghegan also asserts that the representation made to the Ontario Ministry on Ms. Alarie’s behalf, that Carol Geoghegan was the sole shareholder of BC Ltd., was false and that at all material times he was the sole shareholder. In support of that assertion (which is uncontested), he has produced a corporate resolution evidencing the issuance of 100 common shares of the numbered company to him.

[11] Mr. Geoghegan alleges that the lack of notice to him was intentional, that the Ontario Ministry was deliberately misled, and that these “bad faith efforts” constituted a “crucial part” of Ms. Alarie’s bad faith scheme to effect the forfeiture of his one-third interest in the Property.

[12] Against the defendant Carol Geoghegan, the plaintiffs allege that she breached her fiduciary duties and trust obligations owed to the plaintiffs in relation to the Property, and specifically that:

To the extent that any notice [of the application under the Forfeited Corporate Property Act] was provided to the Defendant, Carol Geoghegan, as sole officer and director of 629692 BC Ltd., the Defendant, Carol Geoghegan, failed to provide said notice to the Defendants, and thus breached her fiduciary duties to the Plaintiff, and thus she is responsible for any consequential damages suffered by the Plaintiff as a result of this failure.

Issues

[13] To the extent that there may be a conflict of interest on Mr. Diegel’s part, justifying his removal as lawyer of record for the defendants, it is said to arise from:

(a) the assertion that Mr. Diegel will be a necessary witness at trial because of the Firm’s representation of Ms. Alarie in her application under the Forfeited Corporate Property Act; and
(b) the possibility that the defendants Kelly Alarie and Gilles Alarie may, at some future point in time, decide to assert a claim against their co-defendant Carol Geoghegan because of her failure to notify the plaintiffs that Ms. Alarie had applied to have BC Ltd.’s interest in the Property transferred to her and, hence that the Firm would then be acting for parties with conflicting interests.

Discussion and Analysis

The Lawyer as Witness

[14] The plaintiffs rely on Rule 5 of the Rules of Professional Conduct (Law Society of Ontario) (Relationship to the Administration of Justice) and, in particular, Rule 5.2, which deals with “The Lawyer as a Witness”. Rule 5.2-1 provides:

5.2-1 A lawyer who appears as advocate shall not testify or submit their own affidavit evidence before the tribunal unless
(a) permitted to do so by law, the tribunal, the rules of court or the rules of procedure of the tribunal, or
(b) the matter is purely formal or uncontroverted.

[15] Part of the Commentary to that rule states:

The lawyer who is a necessary witness should testify and entrust the conduct of the case to another lawyer.

[16] The plaintiffs acknowledge that a lawyer or law firm’s ability to represent a client in litigation is not necessarily precluded by that lawyer or firm merely having a degree of prior involvement and familiarity with that client’s affairs, including developments giving rise to the particular dispute to be litigated: Andersson v. Aquino, 2018 ONSC 852, para 33.

[17] However, the plaintiffs argue that the situation is different when what that lawyer or law firm may, or may not, have done or witnessed lies at the substantive heart of a litigation dispute between the parties, or when evidence of the lawyer or firm realistically may be very relevant, necessary or decisive in resolving critical and contentious factual issues. In such circumstances, the lawyer or law firm should be removed as lawyer of record: Andersson v. Aquino, 2018 ONSC 852, paras 37-40, 50-51.

[18] In the present case, the plaintiffs say that the legitimacy of the transfer of the plaintiffs’ one-third interest in the Property to Ms. Alarie is at the substantive heart of this litigation. Because the Firm assisted Ms. Alarie with the transfer, the plaintiffs submit that Mr. Diegel’s evidence is relevant, necessary, and potentially decisive on that issue.

[19] I pause to note that throughout the arguments made on this motion, the terms “lawyer” and “counsel” have been used interchangeably. In Ontario, we have a fused legal profession, where lawyers are both called to the bar as barristers, and admitted to the roll of solicitors. In other common law jurisdictions where barristers and solicitors have traditionally had distinctive roles within the legal profession, the term “counsel”, depending on the context, is used to denote a lawyer acting as an advocate or a specialist adviser (usually, but not always, a barrister).

[20] Rule 15 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, deals with “Representation by Lawyer” and embraces the concept of a “lawyer of record”. Earlier incarnations of the Rules used the term “solicitor of record”. The lawyer of record acts as a litigant’s representative for the purposes of conducting the litigation. Service of notices and documents on, and by, a litigant is effected through the litigant’s lawyer of record. A lawyer of record for a litigant is responsible for the representation of the litigant at any hearings or other court processes during the course of a proceeding. However, the advocate who represents a litigant at a hearing does not have to, and will often not, be the lawyer of record. The advocate may be a partner, associate or articling student from a firm of lawyers that the lawyer of record belongs to. Or the lawyer of record may arrange for an outside lawyer – or “counsel” in the more traditional sense of that term – to appear. Indeed, even a self-represented party can be represented by a lawyer as “counsel” without the lawyer getting on the record as lawyer of record (see, generally, Morden & Perell, The Law of Civil Procedure in Ontario, 5th ed. (Toronto: Lexis Nexis Canada, 2024), at ¶2.33).

[21] The plaintiffs’ motion seeks the removal of Mr. Diegel as lawyer of record, precluding him from further conduct of the litigation in any capacity, not just in his role as advocate at trial.

[22] It is beyond contest that Mr. Diegel cannot be an advocate at trial and simultaneously be a witness. However, when a lawyer is compelled to testify against the “other” side in a lawsuit, it does not always automatically follow that the lawyer's firm must be prevented from acting in the lawsuit: Essa (Township) v. Guergis; Membery v. Hill (1993), 15 O.R. (3d) 573 (Div. Ct.), at 582. Depending on the circumstances, particularly where the likelihood that a party’s lawyer will be called as a witness only crystallises at trial, or immediately before trial, it may be permissible for another member of the lawyer’s firm, or for an advocate retained as counsel, to conduct the trial, or part of the trial, in the lawyer witness’s stead. That is a judgment which will usually be best left to a trial judge. But it is a relevant consideration on a motion such as this, where there are genuine issues as to whether the lawyer will, in fact, end up being a witness and, if he does, whether the lawyer’s evidence will be substantive or peripheral.

[23] The principles applicable to “lawyer as witness” motions to have an adverse party’s lawyer removed from the record are summarised by Leach J. in Andersson v. Aquino, 2018 ONSC 852, para 19:

[19] However, rather than approach the general “lawyer as witness” conflict of interest concern and prohibition as an absolute rule, our courts adopt a flexible approach and consider each case on its own merits, having regard to a variety of factors that, according to the circumstances of the case, may include the following:
a. the stage of the proceedings;
b. the likelihood that the witness will be called;
c. the good faith (or otherwise) of the party making the application;
d. the significance of the evidence to be led;
e. the impact of removing counsel on the party’s right to be represented by counsel of choice;
f. whether trial is by judge or jury;
g. the likelihood of a real conflict arising or that the evidence will be “tainted”;
h. who will call the witness; and
i. the connection or relationship between counsel, the prospective witness and the parties involved in the litigation.

[24] Having considered all of these factors, I am not persuaded that it is appropriate to disqualify the Firm or Mr. Diegel from acting for the defendants. My reasons for coming to this conclusion assume that this matter will be tried by a judge (no jury notice has been filed and pleadings are closed) and that the plaintiffs would seek to call Mr. Diegel as a witness. They further assume that while the defendants’ choice of legal representative should be respected, the disqualification of the Firm at this juncture would not be unduly prejudicial to their interests.

Stage of the Proceedings

[25] The motion is brought at an early stage of the litigation. Pleadings have closed, but discovery has yet to take place. The plaintiffs justify the timing of their application on the basis that removing Mr. Diegel now will minimise the risk of prejudice to the defendants arising from their chosen lawyer’s disqualification to act for them in this proceeding.

[26] The only evidence before the court is that contained in the motion records.

[27] In Essa (Township) v. Guergis, O’Brien J. said, at 582:

I believe courts should be reluctant to make what may be premature orders preventing solicitors from continuing to act. 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 do so only in clear cases.

[28] In the same case, O’Brien J. also said that a motion to remove a lawyer should not be made until it is certain there is a problem.

[29] As I have already suggested, often the trial judge will be best positioned to make these determinations. But even if it might be regarded as prudent to deal with concerns about the lawyer as witness well before trial it will, in all but the most obvious of cases, and where there is no other potential conflict of interest, be premature to disqualify an opposite party’s lawyer unless and until it is clear that evidence appropriately sought by a party can only be obtained by examining that lawyer (and that such evidence can be obtained without encroaching upon, or obtaining a waiver of, lawyer-client privilege).

[30] As I go on to discuss, at this stage of the litigation, there are a number of reasons to view the plaintiffs’ motion as premature at best, and ill-founded at worst.

The Likelihood that Mr. Diegel Will be Called as a Witness

[31] For a start, I do not accept the assertion by the plaintiffs that Martin Diegel’s evidence will be the best available evidence on the issue of whether the transfer of BC Ltd.’s interest in the Property to Ms. Alarie was “legitimate”.

[32] The evidence obtained so far indicates that the lawyer who handled the application was Jacob-Charles Diegel. Furthermore, the contents of the lawyer’s file and any communications between the lawyer and Ms. Alarie are presumptively privileged. The plaintiffs have already obtained the Ontario Ministry’s file relating to the application though the Freedom of Information process.

[33] Even accepting for the purposes of this motion, that Jacob-Charles Diegel, acting on Ms. Alarie’s part, did inaccurately (or, as Mr. Geoghegan would have it, falsely) represent to the Ontario Ministry that Carol Geoghegan was the sole shareholder of BC Ltd., no authority has been provided to me that such (mis)representation would void Ms. Alarie’s solicitor-client privilege with Jacob-Charles Diegel or the Firm. Ms. Alarie is prima facie bound by any representations or misrepresentations made on her behalf by her lawyer and agent, Jacob-Charles Diegel.

[34] In oral submissions, the plaintiffs argued that Kelly Alarie waived her solicitor-client privilege as a result of the following paragraph in her affidavit:

26. I am advised by Mr. Diegel that he could only be examined on what is already apparent from the documents, which could be admitted under a Notice to Admit, or as Business Records under the Evidence Act, R.S.O. 1990, c. E.23, or as Government records, and that anything else would be subject to solicitor/client privilege, which I do not have to waive, and likely would not waive. Therefore, this Motion seems to be designed to run up costs and for no reasonable objective purpose.

[35] As the excerpted paragraph makes clear, Ms. Alarie was aware that her dealings with Jacob-Charles Diegel are privileged, and that only she can waive that privilege. To the extent that she discloses what might otherwise be regarded as privileged information, it is her receipt of Mr. Diegel’s advice that anything other than documents already in the public domain would be subject to privilege.

[36] In my view this would not result in an implicit waiver of privilege pertaining to the entire application to transfer the Property to Ms. Alarie. There is no disclosure of, or reference to, what advice was offered, or actions taken, by Mr. Diegel, or the Firm, in relation to the application. Specifically, none of the advice that Jacob-Charles Diegel or anyone else at the Firm may or may not have given in relation to the Property is disclosed or alluded to in paragraph 26.

[37] This is not a situation in which it would be unfair to the plaintiffs to permit Ms. Alarie to selectively claim privilege over some documents or information, but not others. In such circumstances, implied waiver could be found to have occurred (see, for example, Ranger v. Penterman, 2011 ONCA 412). Nor is it a case where Ms. Alarie has put the advice she received from the Firm and her reliance on that advice in issue (as, for example, in Pytka v. Pytka Estate, 2010 ONSC 2549).

[38] Rather, the advice disclosed by Ms. Alarie is only what Martin Diegel told her in relation to his own examinability at trial. Since there is no disclosure of what advice or assistance Ms. Alarie was given in relation to the Property, there is not an issue of fairness that requires a finding that privilege pertaining to the Firm’s advice in respect of the transfer application or the Property was waived.

[39] Finally, and as observed in Essa (Township) v. Guergis, as a proceeding progresses, concessions or admissions may be made which will obviate the need to call the lawyer as a witness at all. Furthermore, the evidence the lawyer could give may be readily obtainable from other witnesses.

[40] The “likelihood of being a witness” factor weighs against the removal of the Firm.

Good Faith (or otherwise) of the Plaintiffs

[41] It is a reality that not all motions to remove a lawyer of record are brought with “the purest of motives”: Essa (Township) v. Guergis, at 583.

[42] In the present case, it is evident that Mr. Geoghegan considers himself to have been badly wronged by his sister, Ms. Alarie, and there is a clear animus between them.

[43] The defendants invite me to find that the plaintiffs’ motion is tactical. While I can understand why they may suspect that to be the case, I decline to make a finding to that effect on the record presently before the court.

The Significance of the Evidence to be Led

[44] While Ms. Alarie could presumably be questioned on discovery and at trial about her application, including the accuracy of any representations made on her behalf, I have difficulty conceiving of many admissible and relevant questions that could properly be asked of Jacob-Charles Diegel, which would not encroach on solicitor-client privilege, beyond confirming what is already in the public record, whether he was retained by Ms. Alarie, and whether he was acting in the course of that retainer in his dealings with the application.

[45] On the core issue of whether the application to transfer the Property, and its outcome, were “legitimate”, that would seem to me to be a determination for the court to make on all of the evidence, most, if not all, of which will come from the documents and the parties themselves. At this early stage, what can be said with some confidence is that such evidence will likely include what, if any agreement or understanding existed between the parties, and whether the pertinent notice requirements of the Forfeited Corporate Property Act were complied with.

[46] Even if Martin Diegel were to ultimately be deemed a relevant and compellable witness at trial, the plaintiffs have failed to make a strong case, at this stage of the litigation, that his evidence would be of any significance. Indeed, to the extent that any lawyer could be a relevant witness, it would be Jacob-Charles Diegel, formerly a lawyer at the Firm, and not Martin Diegel.

[47] This factor also weighs against removal of the Firm.

The Likelihood that Mr. Diegel’s Evidence Would be “Tainted”

[48] As lawyer to the defendants, Mr. Diegel would of course owe them a duty of loyalty. But as an officer of the court, he would also owe a duty to the court. As O’Brien J. noted in Essa (Township) v. Guergis, in the course of litigation an honest witness is often compelled to give evidence which will assist a party that witness feels is “opposite”.

[49] I would regard the likelihood that Mr. Diegel’s evidence would be “tainted” as a neutral factor.

Conclusion on the Lawyer as Witness Issue

[50] In conclusion on the “lawyer as witness” issue, it may well be that Martin Diegel is not a necessary and proper witness at all. Even if he is, his removal as lawyer of record is not an automatic consequence of him being summoned as a witness, although if compelled to testify he would, as the Rules of Professional Conduct indicate, at a minimum, have to arrange for another lawyer to conduct all or part of the trial. But that possibility lies well down the path of this litigation.

[51] This is not a case where it can be said at this stage that it is both clear that Mr. Diegel will be a necessary and proper witness and, if he is, that he or the Firm must be disqualified.

Conflict of Interest Between Defendants

[52] The plaintiffs rely on the Rules of Professional Conduct (Law Society of Ontario) in support of their contention that the Firm and, in particular, Martin Diegel, should not be permitted to act as lawyer of record for the defendants. Rule 1.1 defines a conflict of interest as:

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.

[53] Although courts are not bound by the codes of professional conduct that lawyers must adhere to, an expression of a professional standard in a code of ethics relating to a matter before the court should be considered an important statement of public policy: Rice v. Smith, 2013 ONSC 1200, para 17.

[54] The so-called “Bright Line Rule” developed by the Supreme Court of Canada provides that a lawyer may not represent one client whose interests are directly adverse to the immediate interests of another current client – even if the two mandates are unrelated – unless both clients consent after receiving full disclosure (and preferably independent legal advice), and the lawyer reasonably believes that he or she is able to represent each client without adversely affecting the other. The Bright Line Rule applies when clients are adverse in legal interest: R. v. Neil, 2002 SCC 70, para 29; Canadian National Railway Co. v. McKercher LLP, 2013 SCC 39, para 39.

[55] The plaintiffs argue that the immediate interests of Kelly Alarie and Gilles Alarie are adverse to the immediate interests of their co-defendant, Carol Geoghegan. Because Carol Geoghegan, as President of BC Ltd. arguably breached her fiduciary obligations to both the company and its sole shareholder when she failed to execute her administrative duties, which led to BC Ltd.’s unintentional dissolution, and then failed to provide Mr. Geoghegan with notice of Ms. Alarie’s Forfeited Corporate Property Act application, Kelly Alarie and Gilles Alarie would plausibly have a crossclaim against Carol Geoghegan for the value of BC Ltd.’s one-third interest in the Property in the event that it is found that the transfer of the Property was improper and BC Ltd.’s interest is restored.

[56] The theoretical possibility that the Alaries could sue Carol Geoghegan is not a basis for parties adverse to the defendants to obtain the removal of the Firm as the defendants’ lawyers. Should an actual conflict between the defendants arise, and the defendants not waive the conflict, then the representation of the defendants in this litigation would, of course, need to be examined, most likely at the behest of one or more of the defendants. But unless and until such a conflict becomes manifest, it does not lie in the wheelhouse of the plaintiffs to ask the court to interfere with the defendants’ choice of lawyers.

Disposition

[57] For the foregoing reasons, the motion to have Martin Diegel and the Firm removed as lawyer of record is dismissed, without prejudice to a further application being made at a subsequent stage of this litigation if new evidence comes to light which would warrant such application.

[58] The parties have agreed that, subject to any offers to settle that may be pertinent, the unsuccessful party on the motion, in this case the plaintiffs, should pay the successful party’s costs of the motion, fixed in the all-inclusive amount of $9,900.

[59] If the opportunity to make further submissions on the issue of costs is sought, the party seeking a different disposition of costs should serve and file a written submission of no more than three (3) pages in length (plus a copy of any offer that was made) within 14 days of the release of these reasons; any response, also not to exceed three pages in length, to be served and filed no more than 14 days thereafter.

Graeme Mew
Released: 24 February 2025