Quinn v Holland, 2021 ABQB 116

Court of Queen’s Bench of Alberta Citation: Quinn v Holland, 2021 ABQB 116 Date: 20210223 Docket: 1901 07144; 1901 09262 Registry: Calgary 1901 07144 Between: Liam Quinn Plaintiff/ Respondent - and - Emmet Holland and Bison Iron Corporation Defendants/ Applicants 1901 09262 and Between: Liam Quinn Plaintiff/ Respondent - and - Bison Iron Corporation Defendant/ Applicant

_______________________________________________________ Memorandum of Decision of the Honourable Madam Justice C.L. Kenny _______________________________________________________ [ 1 ] This is an Application by the Defendant(s), hereinafter referred to as “Bison”, to remove Carscallen LLP as counsel of record for the Plaintiff, Quinn. [ 2 ] The two actions involved in this matter are a shareholder’s oppression action and a wrongful dismissal action. Very briefly, Quinn was employed by the corporate Defendant and his position was terminated. He also gave $300,000 to the corporate Defendant.

Those funds were either used to purchase shares in the corporate Defendant which makes him a shareholder (Quinn’s position) or were a deposit for that purpose which purpose was never fulfilled and therefore the funds are a refundable deposit due and owing to Quinn (the Defendant’s position). These actions were commenced in May and July of 2019 by Bison’s then and current counsel, Miller Thomson. Factual Background [ 3 ] Upon the recommendation of Bison’s bank, Bison contacted Mr.

Sevalrud at Carscallen LLP by email on September 26, 2019, to discuss retaining his firm with respect to documentation required by the bank including corporate requirements and the organization of the Minute Book. [ 4 ] There was a short phone conversation between Mr. Dolan and Mr. Sevalrud on October 2 nd , 2019. Mr. Dolan provided conflict names to Mr, Sevalrud by email thereafter which included Mr. Quinn’s name. [ 5 ] On October 3 rd , 2019, Mr. Sevalrud sent out a file opening sheet to be completed by Bison.

There is no evidence that sheet was ever completed and returned to Carscallen. [ 6 ] On October 4, 2019, Carscallen sent out an Engagement Letter signed by Mr. Sevalrud. The Engagement letter required a monetary retainer and that Bison sign and return the Engagement Letter as acknowledged and accepted. That was never done nor was the financial retainer paid. [ 7 ] On October 7, 2019, Bison and Mr. Sevalrud set up a lunch meeting for October 21, 2019.

The email communication in setting up this meeting indicated : 1) Bison would sign the Engagement Letter and forward with the retainer shortly, 2) as per Bison, the meeting is an introductory meeting to access next steps and further engagement, and 3) as per Mr. Sevalrud, the meeting is an introduction and get to know each other opportunity. [ 8 ] Representatives of Bison and Mr. Sevalrud met on October 21, 2019 over lunch.

According to Bison, in addition to discussions about Bison’s banking and financial arrangements, organization of the corporate minute book and Bison’s business objectives and corporate plans, the parties also discussed the ongoing litigation with Quinn including the allegations in the claims, the position and strategy of Bison with respect to those claims and the settlement offers exchanged. Mr. Sevalrud describes the discussions as a get to know you meeting wherein Bison discussed their corporate issues as well as disclosed information relating to the ongoing litigation with Quinn. Mr.

Sevalrud describes it as a high-level discussion; no notes were taken, no documents exchanged and no

summary of the meeting prepared. Mr. Sevalrud considered and treated this information as confidential. [ 9 ] At the end of the meeting, Bison says they considered Carscallen as having been retained, and they expressly indicated to Mr. Sevalrud that they were in agreement with the Engagement Letter and retainer fee. Mr. Sevalrud indicates that at the end of the meeting, he was asked if he would consider acting for Bison and he indicated he would be interested in doing so. He says Bison told him they would go away and consider whether they wished to retain the services of Carscallen.

He never received any instructions and did not hear further from Bison until November 6, 2019. He indicates that he was not specifically asked to act for Bison nor was he ever properly engaged or retained. [ 10 ] On November 6, 2019, Miller Thomson, as counsel for Bison, was served with a Notice of Change of Representation in the two actions indicating Quinn had changed solicitors to Carscallen LLP. Bison immediately emailed Mr. Sevalrud indicating that they were of the view that Sevalrud and Carscallen had agreed to represent them and that as a result, privileged information was provided to Mr. Sevalrud.

They asked that the conflict be resolved forthwith. [ 11 ] Carscallen indicates that the conflict was not picked up by their system as Mr. Whiting of Carscallen had opened the Quinn files and registered them in the law firm system on October 3, 2019. The conflict search re Mr. Quinn was also conducted on October 3, 2019 by Mr. Sevalrud’s assistant. It came back negative as the Quinn files were not yet active in the software program. [ 12 ] Mr. Sevalrud knew nothing of his partner, Mr. Whiting, acting for Mr. Quinn until the email of November 6, 2019 from Bison.

He responded to Bison indicating that he was not aware of the conflict, that he had not been asked to act for Bison, that he had not shared any of the information received from Bison with anyone and that he would immediately ensure there was an ethical wall implemented at the firm between him and the rest of the firm with respect to this matter. Mr Sevalrud indicates that other than advising Mr. Whiting that he had been contacted by Bison and had a meeting with them, no other information has been nor will be disclosed.

[ 13 ] Mr. Sevalrud acknowledges that confidential information was given to him during the meeting and advises that he has maintained the confidentiality with respect to that information to date and will continue to do so. [ 14 ] While not of significant importance given that the issue of conflict was raised immediately upon Bison finding out about the possible issue, it should be noted that the parties continued to move the files along by exchanging Affidavits of Records, discussing methods of possible resolution and attempting to set up dates for questioning. This application was then brought in July of 2020.

Position of Bison [ 15 ] Bison takes the position that Bison and Sevalrud were in a solicitor-client relationship when the confidential information was provided and therefore, there is a “bright line” such that Carscallen cannot act for Quinn and must immediately cease to act for him. In the alternative, Bison says they were a prospective client and the only reasonable remedy is for Carscallen to cease to act for Quinn. Position of Quinn [ 16 ] Quinn takes the position that Bison was not a client having never properly retained Carscallen and was at most a prospective client.

Their position is that whatever the relationship was, the remedy is not removal of Carscallen from acting for Quinn but rather the formation of an ethical wall as has been implemented to ensure that no confidential information is ever provided by Mr. Sevalrud to any other person. Were the Parties in a Solicitor-Client Relationship? The Law [ 17 ] The parties agree on the law that governs this matter. In Canadian National Railway Co v McKercher LLP , 2013 SCC 39 [ McKercher ], the court talks about the “bright line rule” set out in R v Neil , 2002 SCC 70 .

The court said that the “bright line rule” is a definitive bar on concurrent representation of two clients whose legal interests are directly and immediately adverse to one another (para 26). [ 18 ] In this case, the representation relates to the same two lawsuits in issue. The limitations set out by the court to the scope of the rule do not apply in this case. [ 19 ] The Law Society of Alberta’s Code of Conduct also deals with the issue of who is a client.

Rule 1.1-1 defines client as “a client of a lawyer’s firm, whether or not the lawyer handles the client’s work, and may include a person who reasonably believes that a lawyer- client relationship exists, whether or not that is the case at law”.

The commentary thereunder at para 1 sets out examples. [ 20 ] These include situations where “a lawyer may meet with a prospective client in circumstances that give rise to a duty of confidentiality, and, even though no lawyer-client relationship is actually established, the lawyer may have a disqualifying conflict of interest if he or she were later to act against the prospective client” (Law Society of Alberta Code of Conduct at p 3). [ 21 ] The decision in Spruce Grove Gun Club v Parkland (County) , 2018 ABQB 364 at para 25 [ Spruce Grove ] clarified the test to determine whether a solicitor-client relationship exists as follows: “whether a reasonable person in the position of a party with knowledge of all of the facts would reasonably form the belief that the lawyer was acting for a particular party”. [ 22 ] The following indicia were also provided in Spruce Grove at para 25 to make this assessment:

a) a contract or retainer;

b) a file opened by the lawyer;

c) meetings between the lawyer and the party;

d) correspondence between the lawyer and the party;

e) a bill rendered by the lawyer to the party;

f) a bill paid by the party;

g) instructions given by the party to the lawyer;

h) the lawyer acting on the instructions given;

i) statements made by the lawyer that the lawyer is acting for the party;

j) a reasonable expectation by the party about the lawyer’s role;

k) legal advice given; and

l) legal documents created for the party.

[23] Paragraph 11 of McKercher notes that “A breach of the bright line rule normally attracts the remedy of disqualification.However, certain factors may militate against disqualification” and must be taken into consideration. Discussion [24] The parties were not cross-examined on their affidavits. On the surface, it would appear that the affidavits are in conflict.Bison says that they believed they had a solicitor-client relationship with Mr. Sevalrud. Mr. Sevalrud is of the view that no solicitor-client relationship was established. He was waiting to hear further from Bison and did not.

He acknowledges receiving confidentialinformation and that he is bound to protect that information. [25] I am of the view that there is no factual conflict between the affidavits. They each had a different view of the meeting. In myview, this is no different than many meetings between a prospective client and a lawyer; a get to know you meeting to see if it might bethe right fit. Bison had been referred to Mr. Sevalrud by their bank to get their corporate documentation in order. That could not becompleted until the litigation with Quinn was concluded as that may have affected the shareholdings. Bison told Mr.

Sevalrud about thatlitigation so he would know what was going on. He even offered an off the cuff view that it looked like Quinn may not have a case. Thatcould hardly be considered a solicitor-client legal opinion.

Assuming Bison wished to retain Carscallen after the meeting, there was norush as the corporate documentation that needed updating could not be concluded until the ongoing litigation with Quinn was finished. [26] In looking at the criteria set out in Spruce Grove, the only factors from the list that might apply here are: a meeting betweenthe lawyer and the party, and a reasonable expectation by the party about the lawyer’s role. [27] However, several important criteria are not present in this situation. There was no retainer agreement in place and noinstructions were provided to the lawyer by the client.

Litigation was anticipated, but no retainer agreement was created in anticipation oflitigation arising. [28] I am of the view that no solicitor-client relationship was formed. At best, Bison was a prospective client. Even if I am wrongin this view, the court must still determine the remedy. What Remedy is Appropriate if There Was a Solicitor-ClientRelationship? The Law [29] As noted above, “[a] breach of the bright line rule normally attracts the remedy of disqualification...However, certain factorsmay militate against disqualification” and must be taken into consideration (McKercher at para 11).

These are likely to arise where thereis no risk of misuse of confidential information. [30] Paragraph 65 of McKercher outlines these factors: (

i) behaviour disentitling the complaining party from seeking the removal of counsel, such as delay in bringing the motion fordisqualification; (ii) significant prejudice to the new client’s interest in retaining its counsel of choice, and that party’s ability to retain new counsel; and (iii) the fact that the law firm accepted the conflicting retainer in good faith, reasonably believing that the concurrent representation fellbeyond the scope of the bright line rule and applicable law society restrictions. [31] MacDonald Estate v Martin, (SCC), [1990] 3 SCR 1235, 77 DLR (4th) 249 at para 11 further adds that threecompeting values are involved in an application to disqualify legal counsel: (1) the concern to maintain the high standards of the legal profession and the integrity of our system of justice; (2) the countervailing value that a litigant should not be deprived of his or her choice of counsel without good cause; and (3) the desirability of permitting reasonable mobility in the legal profession. [32] Finally, Mayer v Mayer, 2016 BCSC 791 at para 14, citing MacDonald Estate, held that “it is in the interests of justice that alitigant not be deprived of its counsel of choice without good cause”.

What Remedy is Appropriate if Bison Was a ProspectiveClient? The Law [33] The Law Society of Alberta’s Code of Conduct outlines who is a prospective client at page 40: “A prospective client is aperson who discloses confidential information to a lawyer for the purpose of retaining the lawyer. A lawyer must maintain the

confidentiality of information received from a prospective client.” [ 34 ] Here, Bison provided confidential information during a meet and greet with the lawyer for the purpose of informing the lawyer of anticipated litigation and other legal and financial issues. As noted above, the lawyer-client relationship was not established, so Carscallen LLP’s obligation was to maintain the confidential of information received from the prospective client.

This has been adhered to, pursuant to the undertaking provided by the lawyer. [ 35 ] The final issue here is whether Carscallen LLP should be disqualified as Counsel for Mr. Quinn on the grounds that Bison was a prospective client. Page 41 of the Code of Conduct notes the following: The firm may act or continue to act contrary to the interests of the prospective client in relation to the proposed retainer if the lawyer takes adequate steps to ensure that: (

a) Confidential information is not disclosed to other firm members representing clients adverse to the prospective client, and (

b) firm members who have the confidential information will not be involved in any retainer that is related to the matter for which the prospective client sought to retain the firm. The adequacy of the measures taken to prevent disclosure of the information will depend on the circumstances of the case. [ 36 ] Therefore, if Carscallen LLP has taken sufficient measures to prevent the disclosure of confidential information shared by Bison, disqualifying Carscallen LLP as counsel would not be an appropriate remedy. Discussion on Remedy [ 37 ] Carscallen sets out the steps taken to protect the confidential information.

These include: 1) ensuring that the confidential information is not disclosed to the members of Carscallen who are representing Quinn in the actions; 2) ensuring that Sevalrud will not be involved in the Quinn Files; 3) ensuring that Sevalrud will not discuss the Quinn Files or any information in relation to his communication with Bison, Holland, and Dolan with anyone else at Carscallen; 4) ensuring that no member at Carscallen will discuss with Sevalrud the Quinn Files or Sevalrud’s previous communication with Bison, Holland, and Dolan; 5) ensuring that the Quinn Files are discussed only within the limited group that is working on the matters; 6) ensuring that the electronic Quinn Files are segregated from Carscallen’s regular filing system, accessible only to those lawyers and support staff who are working on the matters; 7) Ensuring that no member of Carscallen shows to Sevalrud any documents relating to the Quinn Files; 8) Sevalrud has given a lawyer’s undertaking to the Court that he will not engage in any discussion with anyone regarding Bison, Holland Dolan or Quinn; and 9) Sevalrud has sworn an affidavit confirming that he has not disclosed any confidential information received from the Applicants to anyone else. [ 38 ] Even if Bison was a current client of Carscallen, which I have found they are not, McKercher ( supra ) sets out when the court may require disqualification or where other factors may point in another direction.

These include: (para 61) (

a) Avoid the risk of improper use of confidential information. In this case, the list of steps taken by Carscallen set out above addresses this issue. (

b) Avoid the risk of impaired representation. This is not applicable here as Carscallen does not represent Bison and Quinn. (

c) Maintain the repute of the administration of justice. In this case, the court in McKercher at para 65 spoke of factors for the court to consider. One is behavior of the applicants that has disentitled them from seeking removal of counsel. In this case, it is clear that Bison provided notice about a possible conflict immediately upon it coming to their attention. It was 9 months later that the application to disqualify was brought.

In the interim, each party served an Affidavit of Records, dates for questioning were proposed by each party and a litigation plan was proposed by Quinn. [ 39 ] Another factor is significant prejudice to the new client’s interest in retaining counsel of choice. Quinn has incurred significant legal fees in reviewing records, preparing for questioning and overall representation. All of these fees would be duplicated with new counsel.

Thee would also be a further delay in the event Quinn had to retain new counsel and bring them up to speed on the litigation. [ 40 ] The third factor referred to by the court is the fact that the law firm accepted the retainer in good faith. The conflict arose out of very unique circumstances. Carscallen had a conflict system in place. Both lawyers for Quinn and for Bison used the system before proceeding further with representation. It was a matter of timing and nothing more. There was no bad faith involved.

Decision [ 41 ] I do not find that there was a solicitor and client relationship established. At most, Bison was a prospective client of Carscallen. Even if I am wrong on the solicitor-client relationship, I am satisfied in all of the circumstances that the steps taken by Carscallen are an appropriate remedy such that there is no basis on which Carscallen should be disqualified as counsel for Quinn. [ 42 ] The Application is dismissed. [ 43 ] If required, the parties may speak to the matter of costs within 60 days. Heard on the 21 st day of January, 2021.

Dated at the City of Calgary, Alberta this 23rd day of February, 2021. C.L. Kenny J.C.Q.B.A. Appearances: Michael Whiting for the Plaintiff Darin Hannaford / Adrienne Funk for the Defendants