Mountain View Credit Union Ltd. v. Cowboy Trail Realty Ltd., 2012 ABQB 351

Court of Queen ’ s Bench of Alberta Citation: Mountain View Credit Union Ltd. v. Cowboy Trail Realty Ltd., 2012 ABQB 351 Date: 20120525 Docket: 0901 17588, 0901 17587 Registry: Calgary Between: Mountain View Credit Union Ltd. Plaintiff - and - Cowboy Trail Realty Ltd. and Donna Oberik Defendants Action No. 0901 17587 And Between: Mountain View Credit Union Ltd. Plaintiff - and - Donna Cheryl Oberik and Randall Shayne Oberik Defendants

_______________________________________________________ Memorandum of Decision of J.B. Hanebury, Master in Chambers _______________________________________________________ [ 1 ] This is an application to remove Mr. Corenblum of Lirenman Peterson as counsel for Mountain View Credit Union in a foreclosure action due to a conflict of interest. As there were two foreclosure actions involving similar parties, I directed that both actions be stayed pending my determination of the issue. Further affidavits were subsequently filed by Mr Oberik and Mr. Corenblum and have been considered in coming to this determination.

FACTS Action 0901-17588 - Cowboy Trail Foreclosure [ 2 ] Mr. Corenblum, acting as counsel for Mountain View Credit Union, commenced this action in November, 2009, naming Cowboy Trail Realty Limited and Donna Oberik as defendants (the Cowboy Trail foreclosure). The action was in relation to a mortgage and other loans registered against the title to property owned by Cowboy Trail Realty. Donna Oberik guaranteed the obligations of Cowboy Trail Realty to the Credit Union. [ 3 ] A consent Order Nisi/Order for Sale was granted in February, 2010, and executed by counsel on behalf of both defendants.

The property was appraised at $369,000 in early 2010, and the Order Nisi indicated the balance outstanding was in the amount of $335,000. A redemption period expiring March 3, 2010 was granted, to be followed by a 90 day listing. Leave was given to speak to the question of judgment on the guarantee given by Donna Oberik. [ 4 ] The listing was extended several times and a preservation order granted.

In March, 2011, the listing was extended again and the price reduced to $275,000. [ 5 ] In April, 2011, counsel for the defendants filed a Notice of Ceasing to Act. [ 6 ] In September, 2011, the listing was extended at a list price of $259,900. The only offer received during this time period was in the sum of $135,000. [ 7 ] In early 2012, the Credit Union applied to purchase the property at the last list price of $259,900 and for judgment against Ms. Oberik for the difference. That application was adjourned on several occasions and finally came on for hearing on March 22, 2012.

The order was granted and stayed for 30 days for the matter to be returned to court to deal with this application seeking to remove Mr. Corenblum from the record. Action 0901-17587 - Oberik Foreclosure [ 8 ] The second action is a foreclosure action against Donna Oberik in relation to two mortgages, both of which were guaranteed by her husband, Randall Oberik (the Oberik foreclosure). A consent Order Nisi /Order for Sale was entered into in February, 2010, with

a redemption period expiring March 3, 2010, followed by a listing at the fair market value of $590,000. [ 9 ] This action followed a trajectory similar to that in the Cowboy Trail foreclosure. However, on May 17, 2011, an offer to purchase in the sum of $450,000 was accepted and the Credit Union was given leave to seek judgment against the defendants at a future date. On November 21, 2011, judgment was granted by Master Laycock against Randall Oberik in the sum of $193,831.04.

For reasons that are not apparent on the file, judgment was not granted against Donna Oberik. [ 10 ] On March 22, 2012, contemporaneously with the application in the Cowboy Trail foreclosure, Mr. Oberik filed a motion in this action seeking to “reopen” the file due to an alleged conflict of interest by Mr. Corenblum. In his affidavit in support of this application Mr. Oberik alleged that counsel for the Credit Union had intentionally served notice of the application for judgment to his old address despite previously serving him at his new address.

Therefore he is seeking to “open up the file”, which appears to mean open up the judgment against him. Evidence in Relation to the Conflict of Interest [ 11 ] The two actions will be described separately as neither the evidence nor the applications are identical. First I note from the advice of Mr. Oberik and the materials on file, Ms. Oberik is apparently very ill. She has not attended in court personally. [ 12 ] In the application in the Cowboy Trail foreclosure Ms. Oberik filed an affidavit. She states that she, Mr. Corenblum and Cowboy Trail Realty “go back about 10 years”.

She states that after a number of transactions they ceased retaining Mr. Corenblum as “he slapped me in a case in Calgary where he represented us.” She says that they subsequently taxed his statement of account and he settled with them just prior to the hearing. She is concerned that he “may harbor resentment” toward her as a result of the taxation of his account and believes he is in a conflict of interest for that reason and because he acted for them on several real estate files. [ 13 ] Mr. Oberik, in his affidavits, makes some of the same points and provides some further detail.

He states that in October, 2003, Mr. Corenblum acted for them as counsel on a mortgage with the Royal Bank. He states that in November of the same year he acted for them as counsel on a motor vehicle accident. Mr. Oberik states that since they set down the taxation of Mr. Corenblum’s account he believes that Mr. Corenblum has acted vindictively against them. [ 14 ] Mr. Oberik attaches to his affidavit a 2006 letter from a lawyer acting for Cowboy Trail Realty to Mr. Peterson, a member of Lirenman Peterson, Mr. Corenblum’s firm. It is in reference to an action against Cowboy Trail Realty filed by Mr.

Peterson of that firm on behalf of his client. That letter states that Lirenman Peterson represented Cowboy Trail Realty in relation to a proposed sale of the company during which it was provided with confidential information regarding the business. It states that the firm acted for the company at a Real Estate Board hearing and on behalf of Ms. Oberik in a personal injury action. The letter concludes by saying that if Lirenman Peterson continues to act in the action against Cowboy Trail Realty, an application will be brought to remove it from the file. [ 15 ] In the Cowboy Trail foreclosure Mr.

Corenblum filed an affidavit in response. He states that he did not act for Ms. Oberik in a motor vehicle accident, but in 2003 he assisted her in retrieving her accident file from another lawyer and in taxing that lawyer’s account. He states that he has no recollection of any involvement in the sale of Cowboy Trail Realty but does remember reviewing a contract for it in relation to its sales agents in 2002 or 2003. He states that he was never made aware of the letter to Mr. Peterson alleging a conflict. Finally he attaches a letter from Ms.

Oberik to him in 2011 and points out that it makes no mention of a conflict. That letter refers to Mr. Corenblum as “Bruce” and says that she will refer potential buyers of the property in foreclosure to him. [ 16 ] In the Oberik foreclosure the grounds for the application refer to “issues regarding service”. Mr. Oberik’s affidavit in support is very brief and states that he believes Lirenman Peterson and Mr. Corenblum “intentionally served notice to me at my old address knowing I would not respond to the remedy sought” as “documents served previous came to the new address”. [ 17 ] In this action Mr.

Corenblum filed a lengthy affidavit in response setting out the history of the two actions. He states that he has acted for the Credit Union for eight years. He acknowledges representing the Oberiks and Cowboy Trail Realty with respect to a hearing before the Calgary Real Estate Board in 2003 or 2004. He states that he “did not receive confidential information, provide advice or attain instructions” from the Oberiks or the company with respect to the lands in foreclosure.

[18] He also states that he was not consulted by the Oberiks or Cowboy Trail Realty with respect to the loans that are now inforeclosure nor in respect to Mr. Oberik’s guarantee. He states that he has “not received relevant or any confidential information withrespect to any of these matters from any of the applicants.” He further states that “I have not to my recollection been retained [by them]with respect to any real estate matter.” [19] The parties have filed different evidence in each action, which results in a complete record of their prior dealings being foundin neither action.

Due to the similarity of the parties, and the applicability of my determination to both actions, the evidence filed in bothactions will be considered in order to determine the question of whether Mr. Corenblum is in a conflict of interest. ANALYSIS [20] Mr. Oberik argues that, in light of Mr. Corumblum’s past representation of he, his wife and the company, Mr. Corenblumcannot continue acting for Mountain View Credit Union. Mr. Corenblum responds that, as he has no confidential information, there isno bar to his continued representation of the Credit Union. He provided one case in support of his position: Holte v.

Macor 1998 ABQB696. [21] Conflict of interest is a matter covered extensively in the recent Code of Conduct adopted by the Law Society of Alberta.While this Code is, of course, not binding on this court, the descriptions of conflict are helpful and they are based on the extensive recentcase law on the subject. Two sections are relevant to the facts before this court. [22]

Section 2.04 (4) provides that “except with the consent of the client or approval of the court… a lawyer must not act against aformer client if the lawyer has confidential information that could be used to the former client’s disadvantage in the newrepresentation.” [23] The commentary states that “confidential information” means “all information concerning a client’s business, interests andaffairs acquired in the course of the lawyer client relationship” and goes on to note that an adverse representation is not allowed if suchknowledge could potentially be used to a client’s disadvantage.

This duty continues indefinitely, although the passage of time maymitigate the effect of the lawyer’s possession of particular confidential information and may permit the lawyer to eventually act against aformer client where that information becomes outdated or irrelevant to the point that it no longer has the potential to prejudice the formerclient. [24]

Section 2.04 (10), “impairment of objectivity” states that a lawyer must not act personally in a matter when the lawyersobjectivity is impaired to the extent that the lawyer would be unable to properly and competently carry out the representation. Thecommentary on this

section states that it refers to situations in which a lawyer’s professional objectivity in a matter may be threatened ordestroyed by circumstances personal to the lawyer, such as a family or other close relationship, an outside activity, a financial interest, ora strong belief or viewpoint. [25]

Section 2.04(4) is based on developments in the law that occurred in a trilogy of Supreme Court of Canada cases: MacDonald Estate v. Martin; Gray v. Martin, (SCC), [1990] 3 S.C.R. 1235; R. v. Neil, 2002 SCC 70 ,[2002] 3 S.C.R. 631; and Strother v. 3464920 Canada Inc., 2007 SCC 24; and are found in a number of Alberta Court of Appealdecisions including: Atco Gas and Pipelines Ltd. v. Sheard. 2003 ABCA 61; Dreco Energy Services Ltd. v. Wenzel Downhole ToolsLtd., 2006 ABCA 39; Chern v. Chern, 2006 ABCA 16; and Alberta Union of Provincial Employees v.

United Nurses of Alberta, Local168, 2009 ABCA 33. [26] The first Supreme Court of Canada case, MacDonald Estate, considered the situation where a lawyer moved from the firmacting for one side of a dispute to the firm acting for the other side.

The Court set out the three competing values that requireconsideration: the maintenance of the integrity of our system of justice; the right of a litigant to his or her choice of counsel; and, thedesirability of permitting reasonable mobility in the legal profession. [27] This decision established the questions to be asked to determine if there is a conflict of interest: Did the lawyer receiveconfidential information attributable to the solicitor and client relationship relevant to the matter at hand; and, is there a risk that it will

be used to the prejudice of the client? [ 28 ] The Court noted the difficulty in answering the first question as an exploration could require the release of the confidential information that is to be protected. To avoid this the court found that once it is shown by the client that there existed a previous relationship with the client that was 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 lawyer satisfies the court that no potentially relevant information was imparted.

This, noted the court, will be a burden difficult to discharge. If the burden is not discharged by the lawyer, the disqualification is automatic and assurances that the information will not be used are insufficient to stop the disqualification. [ 29 ] In Neil , the Court expanded on this analysis, noting the duty of loyalty to a client, a duty which is intertwined with the fiduciary nature of the lawyer-client relationship. That duty, said the Court, is essential to the integrity of the administration of justice and the maintenance of public confidence in that integrity.

However, noted the Court, a litigant should not achieve an undeserved tactical advantage over the opposing party by launching a disqualification motion. Allowing such behaviour would also undermine the fairness of the process. [ 30 ] In the last case Supreme Court of Canada case, Strother , the majority of the Court noted that the scope of the lawyer’s retainer is governed by the retainer contract.

However, the source of the lawyer’s fiduciary duties is not found in the retainer but in all of the circumstances, including the retainer, that create the relationship of confidence and trust which leads to the lawyer’s obligations of loyalty and transparency, which in turn includes the avoidance of conflicts of interest. These duties provide a framework within which the lawyer performs the work and may include obligations beyond those expressly considered in the contract.

Pointing to MacDonald Estate and Neil the court noted that the foundation upon which this is based is the need to protect the integrity of the administration of justice. [ 31 ] The court noted that sometimes the claim of a conflict is asserted for purely tactical reasons, a practice that is objectionable.

Such tactics, said the court, are a factor to be taken into account in determining what relief, if any, is to be accorded, noting at paragraph 59: The spectre is flourished of long dormant files mouldering away in a lawyer’s filing cabinet that are suddenly brought to life for the purposes of enabling a strategically minded client to assert a conflict for tactical reasons. But a court will be well able to withhold relief from a claim clearly brought for tactical reasons. [ 32 ] In Atco Gas and Pipelines Ltd. v.

Sheard , 2003 ABCA 61 , the Alberta Court of Appeal dealt extensively with the steps necessary to undertake the analysis described in MacDonald Estate and summarized the law at paragraphs 11 and 12: ...[I]n 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 a 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.” The onus then shifts to the lawyer to show that no information was imparted that could be relevant to the issues at hand. As the Supreme Court noted in MacDonald, this latter test is an onerous one.

Regarding the second test in MacDonald, [whether there is a risk the information will be used to the prejudice of the client] where a lawyer is acting against a former client, and the first test is met, disqualification is automatic. [ 33 ] The place for consent when dealing with a conflict of interest question was considered by the Alberta Court of Appeal in Alberta Union of Provincial Employees v. United Nurses of Alberta, Local 168 (supra). It noted that while consent can overcome many problems relating to conflicts of interest, there are limits.

Consent is usually sought in relation to a discrete matter, and should be obtained only after full disclosure and, ideally, independent legal advice. In certain situations it can be more generic, ie. by acquiescence, such as when a law firm with specialized expertise acts for a number of clients in the same industry. [ 34 ] From this analysis the Court must address the following questions in this case:

1. Have the Oberiks shown a sufficient relationship between the two retainers to raise a rebuttable presumption that relevant confidential information has passed? 2. Has Mr. Corenblum rebutted this presumption by showing that there was no information received that was relevant to the issues at hand? 3. Did the Oberiks consent to Mr. Corenblums retainer by the Credit Union? 4. What remedy is appropriate?

Have the Oberiks shown a sufficient relationship between the two retainers to raise a rebuttable presumption that relevant confidential information has passed? [ 35 ] To determine whether the lawyer received confidential information, the initial burden lies on the applicant to show a sufficient relationship between the old and the new retainer. The former matter must be sufficiently related to the current matter that a risk of prejudice exists. The focus is not on the information that passed but on the relationship.

The applicant must show that the possibility of relevant confidential information having been acquired is not just theoretical. For the court to find that the retainers are sufficiently related it must examine the circumstances and hold that it is reasonably possible that the lawyer acquired confidential information as a result of the first retainer that could be relevant to the current matter. [ 36 ] Mr.

Corenblum argues that the matter is a foreclosure against two parcels of land and as he did not act for the Credit Union to place the mortgages or other security that are the subject of these actions, there is no conflict. [ 37 ] That could be the case if the Credit Union’s claims were limited to the land alone, but they are not. The Credit Union has a judgment against Mr. Oberik and is seeking one against Ms. Oberik. The mortgage granted by Cowboy Trail Realty is a corporate mortgage which means the company is also liable for any deficiency.

In light of the fact that the Credit Union has claims in personam against Mr. Corenblum’s former clients, the court must consider whether the prior relationship raises a presumption of the transfer of confidential information relevant to those claims. [ 38 ] The evidence of the Oberiks provides limited information about the details of their retainer of Mr. Corenblum and the relevant circumstances. Mr. Corenblum states he does not recall some of the alleged retainers with the Oberiks and he has added some details of the nature of his work for them.

For reasons that are unknown, he does not appear to have reviewed his records to allow him to set out exactly the matters for which he was retained. [ 39 ] The prior retainers, according to the Oberiks, include a personal mortgage file, some real estate matters, the potential sale of Cowboy Trail Realty, a hearing before the Calgary Real Estate Board and a motor vehicle matter. Mr. Corenblum remembers reviewing a contract for that company, a hearing before the Calgary Real Estate Board and the transfer of a motor vehicle accident file from another lawyer.

The relevant circumstances apparently include a physical altercation involving Mr. Corenblum and Ms. Oberik and the scheduled taxation and settlement of Mr. Corenblum’s accounts, neither of which were dealt with by Mr. Corenblum in his evidence. These retainers and events appear to have occurred over several years, ending by 2005 when the Oberiks determined that they would not further retain Mr. Corenblum and sought to tax his accounts. These actions were commenced in 2009. In

summary, Mr. Corenblum acted for the parties personally and for their company on a number of matters terminating in 2005. [ 40 ] These retainers are sufficiently related to Mr. Corenblum’s present retainer for the Credit Union that it is not merely theoretical but reasonably possible that relevant confidential information could have passed. Mr. Corenblum could have received information about the Oberiks’ and Cowboy Trail Realty’s assets, bank accounts, liabilities, and other matters of a financial nature that could be germane to the collection of the judgments his client seeks.

Their relationship is not so long ago that it can be said that any confidential information would be irrelevant today. The evidence of the nature of their relationship is sufficient to raise a presumption that relevant confidential information passed.

Has Mr. Corenblum rebutted this presumption by showing that there was no information received that was relevant to the issues at hand? [ 41 ] As noted, Mr. Corenblum does not appear to have reviewed his records prior to providing his evidence. His response is that he does not recall receiving any confidential information about the lands in foreclosure or relevant to “any of these matters” and did not provide advice to them on the security granted to the Credit Union. [ 42 ] The case provided by Mr. Corenblum to this court makes it clear such a denial is insufficient: Holte v.

Macore , para. 67, and see as well Atco Gas and Pipelines Ltd. V. Sheard , para. 20 . Did the Oberiks consent to Mr. Corenblum ’s retainer by the Credit Union? [ 43 ] By attaching to his affidavit a letter from Ms. Oberik to him that did not raise the issue of a conflict, Mr. Corenblum tries to point to an inferred consent to his acting on this matter. The Alberta Court of Appeal made it clear in Alberta Union of Provincial Employees v. United Nurses of Alberta, Local 168 , that consent in this situation is usually explicit and accompanied by full disclosure and, preferably, independent legal advice.

This is not a situation where consent should be implied. What remedy is appropriate? [ 44 ] In Strother the Supreme Court of Canada considered how a court should deal with a claim of conflict that is raised as a purely tactical measure and suggested that such behaviour is a factor to be considered when determining what, if any, remedy will be granted. [ 45 ] In this case the Oberiks only brought this application after the actions had been ongoing for over two years. During the first year and half they were represented by counsel and, in light of their 2006 letter to another member of Mr.

Corenblum’s firm, they were clearly alive to potential conflicts. Yet, in this case, they did nothing. No explanation was provided by them for the delay. [ 46 ] The Court cannot know the rationale behind their delay. They may have thought that the properties would satisfy the debt, leaving the Credit Union without reason to pursue them on the claims for personal judgment.

Alternately, they may be throwing up the last barrier they can to try to delay the decision in relation to the personal judgment sought against them. [ 47 ] The following remedies seek to balance the maintenance of the integrity of the administration of justice with the concern that the application may be simply a last ditch, and perhaps vindictive, delaying tactic. CONCLUSION [ 48 ] In the Cowboy Trail foreclosure, Mr. Corenblum may file the order for sale and judgment that has been granted and complete the sale transaction.

He should then remove himself from the file. [ 49 ] In the Oberik foreclosure the outstanding matter is the application to open up the judgment obtained against Mr. Oberik, who is alleging that he was not properly served with the application. As Master Laycock heard that application originally, it is to be returned before him. Mr. Corenblum may defend that application and then, once an order has been granted, regardless of whether the judgment is upheld or not, he is to remove himself from the file. [ 50 ] It follows that confidential information of any nature received by Mr.

Corenblum or his firm from the Oberiks or Cowboy Trail Realty as a result of his prior retainers is not to be disclosed to the Credit Union.

[ 51 ] Finally, I note that the Law Society of Alberta Code of Conduct also considers the appropriateness of a lawyer acting against a client where there has been a personal relationship. Although the above-described case law does not consider this situation, it is directly relevant to one of the values underpinning the analysis of conflicts undertaken by the Supreme Court of Canada in the aforementioned trilogy of cases: maintenance of the integrity of the administration of justice. [ 52 ] A lawyer who has had a prior personal altercation with the party he is now suing places this value in question.

Actions that a lawyer might take in the normal course of a file can appear to be tinged with personal rancour with the result that to an outside observer the fairness and impartiality of the legal system appears compromised. I am not saying that inappropriate steps were taken by Mr. Corenblum. That determination may be part of the application to be heard by Master Laycock. [ 53 ] However, in my view, in light of the allegation that Mr. Corenblum slapped Ms.

Oberik, an allegation that he has not denied, it is inappropriate for him to now act against her. [ 54 ] Each party will bear their own costs of this application. Specifically, neither Mr. Corenblum or the Credit Union may seek reimbursement of their costs from the Oberiks or Cowboy Trail Realty. Heard on the 05 th day of April, 2012. Dated at the City of Calgary, Alberta this 25 th day of May, 2012. J.B. Hanebury M.C.C.Q.B.A. Appearances: E. Bruce Corenblum Lirenman Peterson LLP for the Plaintiff Randall Shayne Oberik for the Defendants Randall Shayne Oberik and Donna Cheryl Oberik