2017 QCCA 528, 2017 QCCA 528

Droit de la famille — 17621 2017 QCCA 528 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-026509-166 (500-12-279211-050) DATE: March 30, 2017 IN THE PRESENCE OF THE HONOURABLE ROBERT M. MAINVILLE, J.A. A APPELLANT – INCIDENTAL RESPONDENT - Plaintiff v. B RESPONDENT – INCIDENTAL APPELLANT - Defendant and [COMPANY A] [COMPANY B] [COMPANY C] [COMPANY D] IMPLEADED PARTIES – Impleaded parties and PRICEWATERHOUSECOOPERS LLP INTERVENOR JUDGMENT [ 1 ] Mr.

A (the “ Appellant ”) seeks the disqualification of the law firm of Woods s.e.n.c.r.l. (“ Woods ”) as counsel for B (the “ Respondent ”) on the ground that this law firm also represents PricewaterhouseCoopers LLP (“ PwC ”), an expert appointed by the Superior Court in the litigation opposing these parties. * * * * * [ 2 ] The Appellant and the Respondent were divorced on September 28, 2006 and have since been involved in complex legal proceedings to settle the accessory measures to their divorce. [ 3 ] In a judgment dated November 18, 2016, the Honourable Mr.

Justice Robert Mongeon of the Superior Court, District of Montreal : (

a) dismissed the Respondent’s claim that the parties shared in an equal partnership with respect to all their assets and her claim to a substantial lump sum payment pursuant to the Divorce Act ; (

b) ordered the equal division of the family patrimony by requiring the Appellant to pay the Respondent an amount of $[...], subject to a deduction for a prior advance; (

c) ordered the Appellant to pay a compensatory allowance of $[...] to the Respondent; (

d) ordered the parties to equally share the fees of the court appointed experts except (

i) with respect to the valuation of the family residence, which fees are to be assumed by the Respondent and (ii) with respect to the valuation of the jointly held firm of [Company D], which fees are to be assumed by the Appellant; and, (

e) ordered the provisional execution of the judgment notwithstanding an appeal. [ 4 ] That judgment was appealed by the Appellant on December 13, 2016, but only with respect to the order for a compensatory allowance. The Respondent subsequently cross-appealed on December 22, 2016. [ 5 ] On the same day that he appealed, the Appellant also filed an application for a stay of the provisional execution of the Superior Court judgment, but only with respect to the payment of the compensatory allowance.

Shortly thereafter, on December 15, 2016, the Respondent filed an application seeking a large suretyship from the Appellant. [ 6 ] On January 12, 2017, PwC retained Woods (Me Caroline Biron and Me Léanie Cardinal) to represent it in securing payment of its fees from the Appellant. [1] The context of Woods’ mandate for PwC was the following :

- the Superior Court had appointed experts, including PwC, to carry out independent valuations of certain corporations controlled by the Appellant and the Respondent; - the fees for these experts were to be assumed by either the Appellant or the Respondent, or both, in accordance with the instructions of the presiding judge; - after the valuations were completed, a dispute arose between the Appellant and PwC concerning the payment of certain fees, notably with respect to its valuation of [Company D], an enterprise jointly held by the Appellant and the Respondent; - in paragraph 783 ii) of the November 18, 2016 judgment, the Appellant was ordered to assume and pay the fees related to the valuation of [Company D]; - the Appellant made clear his intention to challenge the amount of fees charged by PwC for this valuation. [ 7 ] The Respondent decided to retain the services of Woods to represent her in the appeal proceedings in replacement of another the law firm.

As a result, on January 19, 2017, a so-called “Chinese Wall” was established within Woods to insulate the lawyers representing PwC from the other lawyers of the firm representing the Respondent. [2] [ 8 ] On February 14, 2017, Woods filed on behalf of PwC a de bene esse application seeking status for PwC as an aggressive intervenor in the appeal proceedings opposing the Appellant to the Respondent.

In addition to seeking recognition as an intervenor, PwC was requesting a judicial declaration confirming that the Appellant was bound by paragraph 783 ii) of the Superior Court judgment pertaining to its fees, as well as the dismissal of any stay application affecting these fees. [ 9 ] On February 17, 2017, Woods (Me James A. Woods, Me Marie-Louise Delisle and Me Bogdan Catanu) filed a representation statement for the Respondent. Soon thereafter, on February 21, 2017, the Appellant filed a disqualification application alleging that Woods could not represent both PwC and the Respondent.

That same day, the law firm of Langlois Avocats s.e.n.c.r.l. (Me Bernard Jolin) filed an appearance for PwC and provided notice to all counsel that it had been substituted to Woods as PwC’s law firm. [ 10 ] On February 22, 2016, a hearing was held before Justice Bélanger with respect to the Appellant’s stay application, the Respondent’s application for a suretyship and PwC’s intervention application. Woods acted for the Respondent at that hearing on the understanding that this would not prejudice the Appellant’s disqualification application.

Me Jolin acted for PwC. [ 11 ] At that hearing, Me Jolin informed Justice Bélanger that PwC only wished to intervene for the purpose of ensuring that there would not be a stay of the provisional execution of paragraph 783 ii) of the Superior Court judgment concerning its fees, a matter which was not being appealed by the Appellant and for which no stay was being sought.

Justice Bélanger received PwC’s intervention for the sole purpose of recording in the minutes of the hearing that there was no pending appeal of paragraph 783 ii) of the trial judgment by any party and that the debate pertaining to PwC’s fees would be held elsewhere than in the Quebec Court of Appeal. [ 12 ] On March 6, 2017, Justice Bélanger ordered a stay of the provisional execution of the compensatory allowance.

She also ordered the Appellant to provide a suretyship in the amount of $[...] within 60 days. * * * * * [ 13 ] The Appellant does not claim that confidential information useful to the appeal proceedings has been disclosed to Woods as a result of its mandate for PwC.

Nor does he assert that any impropriety was purposefully committed by Woods in representing both the Respondent and PwC or in having PwC aggressively intervene in the appeal proceedings. [ 14 ] The thrust of the Appellant’s submissions is that Woods was clearly in a conflict of interest situation by representing both the court appointed expert in these proceeding and the Respondent, that this conflict of interest was exacerbated by PwC directly intervening in the appeal proceedings with Woods acting as its counsel, and that this conflict cannot be remedied by now simply substituting another law firm to Woods as PwC’s counsel. [ 15 ] The Appellant adds that PwC’s aggressive intervention in the appeal proceedings at the behest of Woods had an important impact on the suretyship application.

He submits that PwC’s intervention was uncalled for since at no point was any party appealing paragraph 783 ii) of the Superior Court judgment dealing with PwC’s fees. The practical effect of that intervention was to support the Respondent’s suretyship application by colouring the Appellant as untrustworthy, thus influencing Justice Bélanger’s decision to order a suretyship.

The Appellant notes that in the reasons justifying the suretyship, Justice Bélanger specifically referred to the unpaid fees of PwC. [3] [ 16 ] No argument is made on behalf of the Appellant that Woods would have purposely acted improperly in having PwC intervene in the appeal proceedings so as to gain some advantage for the Respondent, though the Appellant does note that this was the practical effect of that intervention. Rather, it is the pre-existing conflict of interest in which Woods placed itself which would lead to the appearance of impropriety.

According to the Appellant, that in itself is sufficient to disqualify Woods, since the integrity of the judicial system must not only be maintained in fact, but it must also at all times appear to be maintained. * * * * * [ 17 ] Woods submits that there is no conflict of interest between PwC and the Respondent, and that consequently it was entirely permissible to represent at the same time PwC with respect to its claim for fees and the Respondent with respect to the appeal proceedings.

The Appellant may dislike the fact that the same firm is acting against him in both cases, but that dislike does not constitute or create a conflict. Insofar as the interests of both its clients (PwC and the Respondent) are not opposed, there can be no conflict in representing them both. [ 18 ] It adds that it only represented PwC for a short period of time and that, in any event, a new law firm now acts for that client.

Consequently any remote possibility of conflict is now removed going forward. In Woods view, the disqualification proceedings are a destabilising tactic on the part of the Appellant as no positive purpose is served by removing it from the file so as to deny the Respondent her right to the counsel of her choice. [ 19 ] As to the reference to the unpaid fees of PwC in Justice Bélanger’s reasons, Woods submits that this is simply a fact which was relevant whether or not PwC intervened in the appeal proceedings.

Moreover, there is no evidence of any collusion or ulterior purpose with respect to PwC’s intervention. * * * * * [ 20 ] When issues arise as to whether a law firm may act for a client in appeal proceedings, it is the duty of the judges of this Court to resolve those issues. The purpose of this supervisory power over lawyers and law firms is to protect the clients from prejudice and to preserve the repute of the administration of justice. [4] [ 21 ] As a general rule, a lawyer, and by extension a law firm, owes a duty of loyalty to a client.

This duty has three salient dimensions: (1) a duty to avoid conflicting interests; (2) a duty of commitment to the client’s cause; and (3) a duty of candour. [5] In Neil , Binnie J. articulated as follows what is known as the bright line rule [6] : (…) The bright line is provided by the general rule that a lawyer may not represent one client whose interests are directly adverse to the immediate interests of another current client – even if the two mandates are unrelated – unless both clients consent after receiving full disclosure (and preferably, independent legal advice), and the lawyer reasonably believes that he or she is able to represent each client without adversely affecting the other. [Emphasis in original] [ 22 ] This bright light rule applies only where the immediate interests of clients are directly adverse in the matters on which the lawyer is acting and only when clients are adverse in legal interest. [7] When a situation falls outside the scope of the bright line rule for any reason, the question becomes whether the concurrent representation of clients creates a substantial risk that the lawyer’s representation of the client would be materially and adversely affected.

The determination of whether there exists a conflict becomes more contextual, and looks to whether the situation is liable to create conflicting pressures on judgment as a result of the presence of factors which may reasonably be perceived as affecting judgment. [8] [ 23 ] The bright line rule was not infringed in this case. Indeed, the interests of the Respondent in the appeal proceedings are not adverse to those of PwC with respect to the payment of its fees.

It is only the amount of the fees which is being challenged by the Appellant, and the result of that challenge will have no financial or other impact on the Respondent. [ 24 ] Likewise, PwC has no adverse interest to the Respondent in the appeal proceedings since the result of the appeal and cross appeal will have no impact on its claim for fees against the Appellant. [ 25 ] The problem here lies elsewhere than in the bright line rule. It is the fact that PwC has acted as an independent court appointed valuation expert in the proceedings opposing the Appellant to the Respondent which presents a special challenge.

In light of that court mandate, PwC owes continuing duties of impartiality, independence and good faith not only to the court which appointed it, but also to all the parties to the proceedings, including both the Appellant and the Respondent. [9] [ 26 ] In this case, PwC’s independent valuation of [Company D] was challenged by the Appellant in the Superior Court. It is possible – even likely - that PwC’s valuation will be one of the issues to be dealt with in appeal.

The fact that Woods simultaneously represented PwC and the Respondent could give rise to the appearance that the loyalty of PwC rests with the Respondent.

That appearance of impropriety was further exacerbated by PwC’s aggressive intervention in the appeal proceedings, an intervention which served no useful purpose in view of the fact that the Appellant was not appealing the conclusions of the trial judge with respect to the fees nor seeking to stay the execution of those conclusions. [10] By representing both PwC and the Respondent in the appeal proceedings, Woods placed itself in an untenable situation. [ 27 ] Consequently, Woods’ concurrent representation of PwC and the Respondent, though not a conflict of interest in the formal sense of the bright line rule, was nevertheless bound to raise serious ethical questions with respect to the impartiality, independence, and good faith of PwC acting as a court appointed valuation expert.

That is a situation which calls upon this Court to exercise its authority to develop fiduciary principles that govern lawyers in their duties so as to protect the integrity of the administration of justice and to avoid the appearance of impropriety in situations such as these. [11] [ 28 ] Pursuant to that authority, I find that it was improper for Woods to represent simultaneously PwC in it claim for fees as an independent court appointed expert and the Respondent in the appeal proceedings.

Simply put, in order to protect the integrity of the administration of justice and to avoid the appearance of impropriety, a law firm cannot represent a court appointed expert in the litigation while at the same time representing another party in that same or closely related litigation. The fact that the proceedings are now at an appellate level changes nothing to this conclusion. [12] [ 29 ] What is the appropriate remedy in this case? Where there is a need to prevent misuse of confidential information, disqualification is generally the only appropriate remedy.

This is not the case here since no disclosure or misuse of confidential information is alleged. Similarly, when the concern is a risk of impaired representation, disqualification will normally be required if the law firm continues to currently act for both clients. However, here again, this is not the situation since Woods no longer acts for PwC. [ 30 ] The third purpose that may result in disqualification is to protect the integrity and repute of the administration of justice.

Disqualification may be required to send a public message that the conduct involved is not condoned by the courts, thereby protecting the public’s confidence in the judicial system and deterring other law firms from similar practices. This is the principal ground raised by the Appellant for seeking the disqualification of Woods.

[ 31 ] However, in assessing whether disqualification is required on this ground alone, all relevant circumstances must be considered, including certain factors identified by the Supreme Court of Canada in McKercher . [13] On the other hand, it must be acknowledged that in circumstances where the lawyer-client relationship has been terminated and there is no risk of misuse of confidential information, there is generally no longer a concern of ongoing prejudice to the complaining party.

In light of this reality, courts faced with a motion for disqualification on this third ground [related to the integrity and repute of the administration of justice] should consider certain factors that may point the other way. Such factors may include: (

i) behaviour disentitling the complaining party from seeking the removal of counsel, such as delay in bringing the motion for disqualification; (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 fell beyond the scope of the bright line rule and applicable law society restrictions. [ 32 ] In this case, I acknowledge that Woods accepted the concurrent mandates from PwC and the Respondent in good faith and reasonably believing that the simultaneous representation of both clients fell beyond the scope of the bright line rule and other applicable restrictions.

Though it erred in holding this belief, there is no allegation that the acceptance of both mandates was carried out in bad faith by Woods or with the purpose of harming any party or gaining some form of improper strategic advantage. [ 33 ] The Respondent has a right to retain the counsel of her choice and that right may only be interfered with for serious and compelling reasons. [14] This right must also be considered. [ 34 ] This Court and other appellate courts have used the test of whether a fair minded and reasonably informed member of the public would conclude that the proper administration of justice compels the disqualification of a lawyer or law firm. [15] Taking into account the short time in which both clients were represented by Woods, that no disclosure of confidential information is alleged to have occurred, the novelty of the ethical issues raised, the right of the Respondent to be represented by the lawyer of her choice, and the overall circumstances of the proceedings, I am of the view that a fair minded and reasonably informed member of the public would not conclude that the proper administration of justice compels, in this case, the disqualification of Woods from further representing the Respondent. [ 35 ] Even though the motion for disqualification will be dismissed, Woods will be required to assume and pay the legal costs on the motion.

FOR THESE REASONS, THE UNDERSIGNED JUDGE: [ 36 ] DISMISSES the motion in disqualification; [ 37 ] ORDERS Woods s.e.n.c.r.l. to assume and pay the legal costs on the motion. ROBERT M. MAINVILLE, J.A. Mtre Karim Renno Mtre Michael Emmanuel Vathilakis RENNO VATHILAKIS INC. Mtre Lynne Kassie Mtre Benjamin Prud’homme ROBINSON SHEPPARD SHAPIRO Mtre Linda Schachter DEVINE SCHACHTER POLAK For Appellant-Incidental respondent Mtre François Giroux Mtre Vincent Boutet-Lehouillier McCARTHY TÉTRAULT For Woods s.e.n.c.r.l. regarding the motion in disqualification Mtre James A.

Woods Mtre Marie-Louise Delisle WOODS For Respondent-Incidental Appellant Date of hearing: March 24, 2017