Novotny v. LePan, 2011 ABQB 205

Court of Queen ’ s Bench of Alberta Citation: Novotny v. LePan, 2011 ABQB 205 Date: 20110324 Docket: 4801 137319 Registry: Calgary Between: Wendy Jane Novotny Plaintiff - and - Craig Wendell LePan Defendant And Between: Wendy Jane Novotny Plaintiff - and - Craig Wendell LePan Emily McCann FLIPP Advertising Inc. Defendants _______________________________________________________

Reasons for Decision of the Honourable Mr. Justice P.R. Jeffrey _______________________________________________________ [ 1 ] The Plaintiff, Ms. Novotny, applies for an order that would have the effect of preventing counsel for all three of the Defendants from continuing to act for all three. She says that counsel opposite can continue to act either for Ms. Emily McCann and FLIPP Advertising Inc. or for Mr. Craig LePan, but not for all three.

She says that by continuing to act for all three, counsel opposite will be forced to breach either his implied confidentiality undertaking, now also contained in Rule 5.33, or his professional obligation to disclose information received for one of his clients to all of his clients. It will be impossible, Novotny argues, for counsel opposite to satisfy both obligations simultaneously. For the reasons that follow I dismiss the application. Background [ 2 ] The issue arises within the context of matrimonial litigation. The relevant procedural facts are as follows.

Novotny filed a Statement of Claim naming LePan as Defendant in which she claims relief under the Divorce Act , R.S.C. 1985, c. 3 (2nd Supp.), and also under the Matrimonial Property Act , R.S.A. 2000, c. M-8. The Alberta Rules of Court , Alta. Reg. 124/2010, as did the former rules, permit these two forms of relief to be claimed within a single Statement of Claim. [ 3 ] Some months later Novotny amended that Statement of Claim by adding a second style of cause. It identified again herself as Plaintiff and this time LePan plus two others as Defendants. The others are McCann and FLIPP.

McCann appears to be an individual with whom LePan commenced a new relationship since separating from Novotny and FLIPP is her business. The new claim was advanced pursuant to

section 10 of the Matrimonial Property Act . [ 4 ] McCann and FLIPP retained counsel who applied to have the claim against them struck. That application failed. [ 5 ] LePan then retained the counsel who had been representing McCann and FLIPP to also represent him in defence of all claims from Novotny. [ 6 ] LePan’s counsel sent to Novotny a formal demand that she disclose relevant financial information (the “Demand).

Novotny says that she assembled the required information but has not yet sent it over to counsel for LePan because once he receives the information he will be forced to breach one of these two conflicting duties. [ 7 ] Novotny says that the Demand was issued in the divorce action, to which McCann and FLIPP are not parties. Novotny says that the two actions are distinct though they are proceeding by a single Statement of Claim within a single court file. She cites in support of that proposition: Marbach v. Marbach , 2008 ABQB 516 , 459 A.R. 43 , and Lord v.

Bell-Lord , 2007 ABQB 274 , 419 A.R. 214 . [ 8 ] Novotny also refers to the Law Society of Alberta Code of Professional Conduct , (the “ Code ”) at 7-1,

Chapter 7, Rule 8(d), which states: When acting for more than one party in the same matter, a lawyer must disclose to all such parties any material confidential information acquired by the lawyer in the course of the representation and relating to the matter in question.

The effect of this provision, says Novotny, is to oblige counsel for LePan to reveal to McCann and FLIPP the information coming into his possession in response to the Demand from LePan, in order to comply with the Code . [ 9 ] However, Novotny says that in doing so, counsel for LePan will violate the implied undertaking applicable to litigants and their counsel to not disclose to other persons the confidential information of a litigant opposite.

This implied undertaking has recently been codified in the Alberta Rules of Court in this form: 5.33(1) The information and records described in subrule (2) must be treated as confidential and may only be used by the recipient of the information or record for the purpose of carrying on the action in which the information or record was provided or disclosed unless (

a) the Court otherwise orders, (

b) the parties otherwise agree, or (

c) otherwise required or permitted by law. [ 10 ] Novotny argues that, to resolve his dilemma, counsel for the Defendants must cease acting either for Lepan or for McCann and FLIPP. [ 11 ] Counsel for the Defendants argues that Novotny has taken Marbach and Bell-Lord out of context. The Defendants concede that the divorce and matrimonial property Statement of Claim comprised two separate causes of action, but submit that once causes of action have been consolidated together under

Part 12, Rule 12.9 of the Alberta Rules of Court , they become one legal action for all intents and purposes. Rule 12.9 states: 12.9(1) A proceeding that is both a proceeding under the Divorce Act (Canada) and a proceeding under the Matrimonial Property Act may be started by filing a statement of claim for divorce and division of matrimonial property in Form FL-3 and serving it in accordance with rule 12.55.

(2) The statement of claim for divorce and division of matrimonial property must set out separately (

a) the claim under the Divorce Act (Canada) proceeding, and (

b) the claim under the Matrimonial Property Act proceeding. [ 12 ] The Defendants argue that, even if the divorce and matrimonial property actions are separate actions, Rule 5.33 cannot be used in the manner proposed by the Plaintiff to remove Defendants’ counsel as counsel for one of the Defendants.

They argue that the Plaintiff’s application is premature and that Rule 5.33 cannot be used as a means to remove counsel for one of the Defendants, that there is no potential mischief, that it is not a breach of Rule 5.33 for one counsel to act for all the Defendants, and that the untimeliness of the Plaintiff’s application to remove counsel is highly prejudicial to the Defendants. Finally, the Defendants argue in the alternative that if Rule 5.33 is applicable then a waiver of the Rule should be granted pursuant to Rule 5.33(1)(a).

Analysis [ 13 ] In my view the divorce action and the matrimonial property action have not been consolidated. If they were, then I would agree with the Defendants’ argument. While headings are rarely determinative, they are often instructive. The heading immediately before Rule 12.9 is “Starting Combined Proceeding”. This suggests a different intent than consolidation and is in keeping with the reasoning in Lord at paras. 27-31 .

In that decision Chrumka J. stated (at para. 30) that Rule 563 (the predecessor to Rule 12.9) “is a procedural rule which permits two actions to be commenced together but this does not result in those two actions becoming one.” [ 14 ] The obligation in Rule 5.33 is triggered when information “for the purpose of carrying on an action” is received.

In the context of a combined proceeding, then, involving more than one action, the Rule 5.33 obligation does require a litigant and a counsel, such as the Defendants’ counsel here, to not disclose to third parties information received from an adverse party for the purposes of that single action, even when those third parties are involved in some capacity in the combined proceeding.

[15] The issue before the Court falls to be determined on the basis of whether the Code obliges Defendants’ counsel to breach thisimplied undertaking and Rule 5.33. [16] A threshold observation warrants comment. Codes of ethics are important statements of public policy; however courts are notbound to apply them: MacDonald Estate v. Martin, (SCC), [1990] 3 S.C.R. 1235, at 1244-1246 (majority decision ofSopinka J.). The Law Society of Alberta is a self-regulating body and is the primary interpreter and enforcer of its own rules.

This Courtis sometimes called upon to review such decisions or the fairness of the process leading to such decisions, but that is not the request here. [17] However, this Court does have an inherent jurisdiction to remove counsel, including for matters addressed by the Code.

Thisjurisdiction “stems from the fact that lawyers are officers of the court and their conduct in legal proceedings which may affect theadministration of justice is subject to this supervisory jurisdiction”: MacDonald at 1245 (majority decision of Sopinka J.). [18] Rule 5.33 prohibits LePan and his counsel from disclosing Novotny’s confidential information outside the scope andpurposes of “the action” for which it was received – in this case the divorce action.

Section 8(

d) of

Chapter 7 of the Code addresses thesituation where a counsel acts for more than one party in “the same matter”. If the words “action” and “matter” are synonymous,Defendants’ counsel is not at risk of breaching one of his duties merely by complying with the other. [19] Novotny relies on the Black’s Law Dictionary definition of “matter”, which she submits should be interpreted as of similarmeaning to “cause of action.” She argues that “In the instant case the causes of action, or foundational matters, are overlapping whereasthe actions themselves are distinct.” [20] The Defendants rely upon D.R.

Devine Roofing & Sheet Metal Ltd. v. Ledcor Construction Ltd. (2007), 51 C.P.C. (6th) 314(Ont. S.C.J.), where the Defendants submit that the phrases “same matter” and “same dispute” are used interchangeably. TheDefendants further submit that the phrase “same matter,” when used in the context of Ch. 7 Rule 8, is synonymous with the phrases“same action,” “same lawsuit” and “same dispute” and thus no issue arises. [21] Although helpful I do not find the guidance provided by the parties determinative. My impression would be that the two aredifferent as Novotny suggests, “matter” having a broader scope than “action”.

But I am reluctant to interpret definitively a term of theCode given both the nature of the document as described above and without the benefit of the Law Society of Alberta’s representationson the point. Fortunately, for the reasons that follow, it is not necessary for me to do so in the context of this application. I deny theapplication for the following two reasons. [22] First, the Defendants’ counsel’s obligation to share information under Ch. 7 Rule 8(

d) is triggered only if the information is“material”. If, as Novotny argues, her confidential information in response to the Demand is irrelevant to the claims against McCann andFLIPP, then it is not material to them and need not be disclosed to them pursuant to Ch.7 Rule 8(d).

If the information is material, thenthe information which Defendants’ counsel would be professionally obligated to disclose to all clients would be information thatMcCann and FLIPP would be entitled to receive directly from the disclosing litigant opposite, in the normal course, regardless of whoacts for them. [23] It might be argued that by that reasoning I have mistaken “material” for “relevant”. Materiality and relevance are notsynonymous but, in the context of the Code at Ch.7 Rule 8(d), in my view the term “material” was intended to entail that the informationis also relevant.

The Code would not require members to communicate irrelevant information to other unaffected clients simply becauseit was material simpliciter. Counsel representing a number of plaintiffs as a class comes to mind as but one example.

The Code obligationwould not extend to require counsel to the class to disclose, say, medical information material to one member of the class, to all membersof the class even though irrelevant to the individual legal interests. [24] Therefore, Defendants’ counsel does not appear to be required by the Code to disclose Novotny’s information that hereceives on behalf of LePan in the divorce action to his other clients that he represents in the matrimonial property action. It is notmaterial to them.

If it was material to their legal interests within the matrimonial property action, they would be entitled to thatinformation directly from Novotny. Therefore Defendants’ counsel will not be placed in the situation of breaching at least one of Rule5.33 or the Code upon receipt of Novotny’s disclosure.

[25] Second, the Court is averse to deny a litigant their choice of counsel. See, for example, Alberta (Treasury Branches) v. Leahy,1998 ABCA 286, 223 A.R. 113. The standard for the removal of counsel is objective and is that of a reasonably informed member of thepublic: MacDonald Estate at 1259-1260 (majority decision of Sopinka, J.). As stated in Everingham v. Ontario (1992), (ON SC), 8 O.R. (3d) 121 (Div.

Ct.) at 127, “[t]he issue is whether a fair-minded reasonably informed member of the public wouldconclude that the proper administration of justice required the removal of the solicitor.” [26] On this standard, I see no reason to displace the Defendants’ choice of counsel. Novotny has not shown how the currentmulti-party representation offends the administration of justice. She submits that, practically speaking, it would be impossible for theDefendants’ counsel to keep her confidential disclosure in the divorce action separate from the disclosure pursuant to the matrimonialproperty action.

I have been given no reason to apprehend that Defendants’ counsel shall not abide his professional and legal obligationsas conscientiously as any other member of the Law Society of Alberta.

A fair-minded reasonably informed member of the public wouldnot conclude that the proper administration of justice required the removal of Defendants’ counsel from representing one or some of theDefendants. [27] Novotny is directed to deliver her response to the Demand to LePan’s counsel forthwith. [28] LePan’s counsel is reminded of the importance of impressing upon LePan that he is also bound by the implied undertakingand Rule 5.33, including in respect of information he will soon receive from Novotny in the divorce action. Heard on the 9th day of March, 2011.

Dated at the City of Calgary, Alberta this 24th day of March, 2011. P.R. Jeffrey J.C.Q.B.A. Appearances: Tamasine I. Davies Soby Boyden Lenz for the Plaintiff Arthur H. Wenngatz Caron & Partners LLP for the Defendants