MCW Construction Ltd. v. Trudel Estate, 2012 ABQB 346

Court of Queen ’ s Bench of Alberta Citation: MCW Construction Ltd. v. Trudel Estate, 2012 ABQB 346 Date: 20120524 Docket: 1103 11630 Registry: Edmonton Between: MCW Construction Ltd. Plaintiff - and - Margolaine Geraldine Trudel, In Her Capacity As Administrator of the Estate of Laurence Trudel Defendant _______________________________________________________ Memorandum of Decision of R. P.

Wacowich, Master in Chambers _______________________________________________________ [ 1 ] This is an application by Faber Inc., Trustee in Bankruptcy of the Estate of the late Laurence Adolph Trudel (Trudel) to disqualify Fraser Milner Casgrain LLP (FMC) from acting for MCW Construction Ltd. (MCW) in this action [ 2 ] Trudel and Mario Scozzafava (Scozzafava) were friends and occasional business partners. They became interested in a certain property in 2007. The property was purchased by Magnum International Marketing Inc. (Magnum) and Mr.

Trudel who each became a registered owner of a one half undivided interest in the land. Scozzafava was and is the sole director of Magnum. Magnum and Trudel intended to develop the land for residential use and MCW was the agent for both in developing the land. In 2008 MCW, Trudel and Magnum formalized their agreement with MCW to be the contractor with respect to development of the land.

[ 3 ] There were legal issues with regard to the acquisition of the property and a lawsuit was commenced against the lawyer, real estate agent and vendor of the land (the negligence action). FMC filed a Statement of Claim on behalf of MCW, Magnum and Trudel. FMC received instructions from Trudel, and Magnum through Scozzafava. [ 4 ] In September 2009, Scozzafava and Trudel finalized a loan agreement where Scozzafava loaned Trudel $40,000.00. At that time Trudel had outstanding debts with MCW.

Trudel signed an acknowledgement and consent to FMC acting for Scozzafava in the loan and consequent mortgage, which stated that Trudel understood that FMC were not his lawyers, were not looking out for his best interests, and advised him to consult independent legal counsel. The consent document also indicated that Trudel believed that FMC ’ s representation of Scozzafava with respect to the loan and mortgage would not effect the unrelated litigation matter which FMC was pursuing being the negligence action.

Trudel consented to FMC acting for Scozzafava in respect of the loan and mortgage and provided a Certificate of Independent Legal Advice concerning his signing the consent. [ 5 ] Further loans and amending loans and mortgage payments were entered along with a General Security Agreement in favour of MCW. Trudel died in May of 2010. The Trudel Estate retained a lawyer, Mr. Zadworny as its counsel sometime in the summer of 2010. [ 6 ] After Trudel ’ s death a lawyer with FMC and Scozzafava met with Zadworny.

Zadworny was informed that FMC was acting on the negligence action and that FMC might be commencing an action against Trudel Estate with respect to the loan. This is the current action. No objections were raised by Zadworny to FMC acting against the Trudel Estate with respect to the loan. On September 20, 2010 FMC filed a Notice of Ceasing to Act in the negligence action and Mr.

Zadworny was advised of this. [ 7 ] The issue to be determined is whether in these circumstances FMC should be disqualified for acting for MCW against the Trudel Estate because of its previous solicitor-client dealings with Trudel. [ 8 ] Rule 2.04, Code of Conduct of the Law Society of Alberta, states: Acting Against Former Clients 2.04 (4)(

a) Except with the consent of the client ..., a lawyer must not act against a former client if the lawyer has confidential information that could be used to the former client ’ s disadvantage in the new representation. [ 9 ] Rule 2.03, Code of Conduct of the Law Society of Alberta, states: Confidential Information 2.03

(1) A lawyer at all times must hold in strict confidence all information concerning the business and affairs of a 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; [ 10 ] Commentary on Rule 2.03 of Code of Conduct of the Law Society of Alberta states:

When acting for more than one party in the same matter, a lawyer must disclose to all such parties any material confidential informationacquired by the lawyer in the course of the representation and relating to the matter in question. [11] The test for disqualification is set out by Burrows, J. in Volker Estate v. Volker, 2011 ABQB 691, where he states: [17] The appropriate test to be applied in applications of this type was determined by the Supreme Court of Canada in MacDonaldEstate v. Martin (SCC), [1990] 3 S.C.R. 1235.

After canvassing the law of Canada and several other jurisdictions,Sopinka J. addressed the correct approach to be taken by the Canadian courts. [18] He observed the test to be applied must, “ ... satisfy the public requirement that there be an appearance of justice” and thatwhether confidential information obtained in the course of a solicitor-client relationship might be used to the prejudice of the client if thesolicitor represents a party in conflict with the client, is not capable of proof or disproof.

Therefore: (para. 47) . . . the test must be such that the public, represented by the reasonably-informed person, would be satisfied that no use of confidentialinformation would occur. [19] Sopinka J. identified two questions which typically arise when determining whether there is a disqualifying conflict of interest:(para. 48)

(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? [20] The first question must be answered without revelation of the confidential information for which protection is sought. Sopinka J.proposed a resolution of this dilemma: (para. 49) In my opinion once it is shown by the client that there existed a previous relationship which is sufficiently related to theretainer from which it is sought to remove the solicitor, the court should infer that confidential information was imparted unless thesolicitor satisfies the court that no information was imparted which could be relevant.

This will be a difficult burden to discharge. [21] As to the second question, Sopinka J. observed: (para. 50) A lawyer who has relevant confidential information cannot act against his client or former client. In such a case thedisqualification is automatic. No assurances or undertakings not to use the information will avail. The lawyer cannot compartmentalizehis or her mind so as to screen out what has been gleaned from the client and what was acquired elsewhere. [12] The facts in this application are somewhat similar to the fact situation in Dreco Energy Services Ltd. v.

Wenzel DownholeTools Ltd., 2005 ABQB 279 where Sanderman, J. states: The question that the court must still determine is whether a reasonably informed person would come to a conclusion that confidentialinformation received during the first relationship claimed had anything to do with the second. (para.10) 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 seeksan extreme remedy.

Before it will be granted there must be compelling evidence which shows a real connection between the two

retainers. (para. 11) 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. (para. 12) [ 13 ] In the Dreco case Sanderman, J. refused to disqualify FMC based on some minor and peripheral involvement with the applicant on an unrelated matter. While the facts in this case may display a greater connection than in Dreco , in my view, FMC acting for Magnum here is not sufficiently connected to their first involvement with these parties.

The facts do not display a real connection between the two retainers. [ 14 ] While this Court must protect solicitor-client dealings it should also be alert to a party ’ s right to choose counsel and not be overly restrictive in determining when disqualification should occur. In this case it has not been established that confidential information received by FMC during previous relations with Trudel had anything to do with this action. [ 15 ] Additionally, Trudel consented to FMC acting on the secured loans and mortgages in question.

How can it now be said the enforcement of those loans and mortgages is attributable to a previous solicitor-client relationship relevant to the matter at hand? [ 16 ] In the result, I am satisfied that a reasonably informed person would be satisfied that no use of confidential information would occur. [ 17 ] The application to disqualify FMC is dismissed with costs. Heard on the 4 th day of May, 2012. Dated at the City of Edmonton, Alberta this 24 th day of May, 2012. R. P. Wacowich M.C.C.Q.B.A. Appearances: James Culkin Barrister and Solicitor

for the Applicant, Faber Inc. Trustee in Bankruptcy of the Estate of Laurence Trudel Allison Murray Fraser Milner Casgrain LLP for the Respondent, MCW Construction Ltd.