Day v. Norwood Foundry Limited, 2012 ABQB 186

Court of Queen ’ s Bench of Alberta Citation: Day v. Norwood Foundry Limited, 2012 ABQB 186 Date: 20120319 Docket: 1103 10010 Registry: Edmonton Between: Robert Day Plaintiff/Respondent - and - Norwood Foundry Limited Defendant/Applicant _______________________________________________________ Memorandum of Decision of R. P.

Wacowich, Master in Chambers _______________________________________________________ [ 1 ] This is an application seeking the disqualification and removal of Barry King as the lawyer of record for the Plaintiff Robert Day in a wrongful dismissal action against Norwood Foundry Limited (Norwood). Mr. King previously acted for Norwood in the defence of a 2006 wrongful dismissal action by Joseph Kozell (Kozell). The Statement of Claim in this action was filed on June 17, 2011. [ 2 ] In 2007 Norwood retained Mr.

Willis of the Strathcona Law Group to act as its defence counsel in the wrongful dismissal action brought by Kozell against Norwood. The alleged wrongful dismissal in the Kozell action was partially based on alleged dishonesty with respect to improper purchases. This is also the reason for dismissal in this action based on the alleged dishonesty of Mr. Day including misuse of Norwood ’ s assets.

[ 3 ] Mr. King was one of the lawyers at the Strathcona Law Group during the representation of Norwood in the Kozell matter. He was present for the initial meeting of Norwood ’ s representatives Fred and Bart Dornan (the Dornans) with Mr. Willis at which Mr. Willis informed Norwood that Mr. King would assist in the matter. Mr. King corresponded with opposing counsel on the Kozell matter and his actions concluded in a settlement agreement. [ 4 ] In this action, an Affidavit was filed by Fred Dornan who deposed that instructions in the Kozell matter were provided by the Dornans to Mr. Willis and Mr.

King and they now provide instructions to present counsel for Norwood in the within action. [ 5 ] The instructions provided by the Dornans to Mr. Willis and Mr. King in Kozell included directions as to Norwood ’ s preferred approach to litigation and settlement. In 2009 Mr. King was assigned management of Mr. Willis ’ practice including the entire Kozell action which, as indicated, was ultimately settled by Mr. King on behalf of Norwood. [ 6 ] The issues are whether or not Mr.

King should be disqualified and removed as counsel for Robert Day given that he received confidential information in a solicitor and client relationship in the Kozell action which is relevant to this action; further, is there a risk that any such information would be used to the prejudice of Norwood? [ 7 ] The law in this area is relatively straightforward. The Courts have adopted a two part test to determine whether or not counsel should be removed for a conflict:

(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 claim? MacDonald Estate v. Martin [1990] 3 S.C.R. 1235 , 1990 Can LII 32 (S.C.C.) at p. 27 ; Atco Gas and Pipelines Ltd. v. Sheard , 2003 ABCA 61 , at para. 6 ; Cern v. Chern , 2006 ABCA 16 at para. 14 . [ 8 ] The Supreme Court of Canada decision in MacDonald Estate clearly indicates that the paramount consideration for Courts to apply in reviewing a disqualification application is the preservation of the integrity of our system of justice.

The Court held at p. 33: My Colleague stated that this appeal called for the balancing of three competing values, namely: the maintenance and integrity of our system of justice; the right of litigants not to be lightly deprived of their chosen counsel; and the desirability of permitting reasonable mobility in the legal profession. Of these factors, the most important and compelling is the preservation of the integrity of our system of justice. The necessity of selecting new counsel will certainly be inconvenient, unsettling and worrisome to clients. Reasonable mobility may well be important to lawyers.

However, the integrity of the judicial system is of such fundamental importance to our country and, indeed, to all free and democratic societies that it must be the predominant consideration in any balancing of these three factors. Also Atco Gas and Pipelines Ltd. v. Sheard , at para. 25 MacDonald Estate v. Martin , at pp. 11 and 31. [ 9 ] So the first issue to be answered is whether Mr. King received confidential information attributable to a solicitor and client

relationship relevant to the matter at hand. Was information received in the Kozell action which was relevant to the current action? In Atco Gas and Pipelines Ltd. v. Sheard , at para. 11 the Court states that: ... in order to satisfy the first stage of the MacDonald analysis, an applicant seeking to disqualify a lawyer needs to show a sufficient relationship between the two retainers to raise a rebuttable presumption that relevant confidential information has passed.

To show sufficient relationship, and invoke this presumption, the applicant needs to show it is “ reasonably possible ” the lawyer acquired confidential information that “ could be relevant to the current matter. ” [ 10 ] It seems clear that confidential information could have been acquired in the Kozell matter which could be relevant to the current action. The Kozell action involved Norwood and the Dornans as defendants in a wrongful dismissal. The high level employee was dismissed for dishonesty and misuse of Norwood assets. The same allegations exist in this action.

Also the Dornans provided instructions in the Kozell matter and are providing instructions here as well. [ 11 ] This is where Mr. King submits that disqualification should not arise in that any information provided in the Kozell matter was not confidential given that Mr. Day, the current Plaintiff, was the chief instructing officer for Norwood in Kozell. Thus any information held by Mr. King would be equally held by Mr. Day and there would be no privilege attaching to Mr.

Day ’ s information. [ 12 ] While this is an interesting argument, in my view it does not suffice to cover all dealings between Norwood and the Dornans in the Kozell action. [ 13 ] The test as articulated by the Supreme Court of Canada in MacDonald at p. 27 is explained as: ... the test must be such that the public represented by the reasonably informed person would be satisfied that no use of confidential information would occur. (p. 27) [ 14 ] While it may be that Mr.

Day would be aware of some of the negotiating matters and strategies and information flow in the Kozell matter, it cannot be said with any certainty that he would have the full and complete access that Mr. King would have had to Norwood and the Dornans. Further, a member of the public would find it odd that a lawyer could act on behalf of a company defending a wrongful dismissal action with allegations of dismissal for dishonesty and misuse of assets and then soon thereafter act for another company employee of that same company in an action alleging dishonesty and misuse of assets.

In my view, a member of the public would view it as inappropriate for a lawyer to act for an employee against a company after having quite recently acted for the company in a similar action. [ 15 ] The Law Society of Alberta Code of Conduct Rule 2.03(1) indicates that: A lawyer at all times must hold in strict confidence all information concerning the business and the affairs of the client acquired in the course of the professional relationship and must not divulge any such information unless: (

a) expressly or impliedly authorized by the client; (

b) required by law or a court to do so; .... [ 16 ] The solicitor-client relationship must be closely guarded and any waiver of that privilege should have to be express and clear. It is clear that by this application including the Affidavit of Fred Dornan that Norwood does not expressly or impliedly authorize the use of any information in the Kozell action in the current action. [ 17 ] In essence, Mr. King submits that Mr. Day was the principal representative of Norwood providing instructions on the Kozell

action and therefore would have been knowledgeable of all the principle information related to that action. I cannot agree with this submission as it is impossible to say that Mr. Day would have been knowledgeable of all principle material information of Norwood and the Dornans related to the Kozell action that Mr. King would have had. [ 18 ] In general support of his position Mr. King raises the case of Dreco Energy Services Ltd. v. Wenzel Downhole Tools Ltd. , 2005 ABQB 279 .

He quotes Sanderman, J. at para. 11, wherein he states in reference to the onus that the applicant must meet when disqualifying counsel: The applicant must meet the onus set out in Atco Gas and Pipelines Ltd , supra. This onus cannot be met by making allegations broadly. A general claim that the previous retainer has given information that would lead to disqualification is not sufficient. The applicant seeks an extreme remedy.

Before it will be granted there must be compelling evidence which shows a real connection between the two retainers. [ 19 ] However in the paragraph before this quote Sanderman, J. states: The question that the court must still determine is whether a reasonably informed person would come to a conclusion that confidential information received during the first relationship claimed had anything to do with the second. [ 20 ] Also he states in paragraph 12: The premise that Fraser Milner Casgrain LLP was retained by the applicant during the previous relationship is false.

The mere paying of a legal account does not establish this relationship. In this case, the borrower is obliged, by the agreement to pay the legal accounts tendered by the lawyer for the lender. This is standard practice in transactions of this kind.

It is necessary to examine what information Fraser Milner Casgrain LLP in Calgary received from the applicant to determine whether it has some relevancy to the matter at hand. [ 21 ] In the Dreco case Sanderman, J. refused to disqualify a law firm based on some minor and peripheral involvement with the applicant on an unrelated matter. [ 22 ] In this case, as previously indicated, it is my view that a reasonably informed person would come to the conclusion that confidential information received during the first relationship was relevant to the second.

In my view the information obtained in the first relationship relates to this matter at hand and a true conflict arises. The fact that Mr. Day would have known of some of the Dornans and Norwood ’ s dealings on the Kozell action is not sufficient to establish that Mr. King is not privy to other confidential information from the Kozell matter that would affect his dealings on this action. [ 23 ] Having thus established that the 2007 matter was sufficiently related to the present action, the onus shifts to the Respondent to show that relevant confidential information did not pass to Mr. Willis or Mr. King.

As our Supreme Court of Canada has explained, this is a difficult burden for the Respondent: 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. MacDonald Estate v. Martin , supra, at p. 28 . On the material before this Court, the Respondent has not met the onus. Is there a risk that it will be used to the prejudice of the client?

[ 24 ] The Supreme Court of Canada has explained that this second branch of the test applies differently depending on the circumstances. It held that where the same lawyer who acted for the client, later, acts against them, disqualification is automatic: ... 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 v. Martin , supra, at pp. 28-29 [ 25 ] Mr. King was in such a relationship with respect to Norwood.

He conducted the settlement communications with the opposing counsel on behalf of Norwood in the 2007 matter, participated in the initial meeting, received litigation and settlement strategies from the Dornans and took complete control over the file in 2009 from Mr. Willis. [ 26 ] In

summary, disqualification of counsel should be viewed in light of the primacy of maintaining the legal profession ’ s integrity in the eyes of the public which overrides any interest in allowing plaintiffs to have counsel of their own choosing. Accordingly Mr. King is disqualified from acting for Mr. Robert Day and is removed as his counsel from this action. [ 27 ] The application is granted with costs to the Applicant under the appropriate column. Heard on the 1 st day of March, 2012. Dated at the City of Edmonton, Alberta this 19 th day of March, 2012. R. P. Wacowich M.C.C.Q.B.A. Appearances: James Lingwood McLennan Ross for the Plaintiff

Barry King Strathcona Law Group for the Defendant