Michael Power Appellant / RESPONDENT BY CROSS APPEAL And: Association of Chartered Professional Accountants of Newfoundland v. Labrador, 2024 NLSC 12

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : Power v.

Association of Chartered Professional Accountants of Newfoundland and Labrador , 2024 NLSC 12 Date : January 23, 2024 Docket : 202201G1985 Between: Michael Power Appellant / RESPONDENT BY CROSS APPEAL And: Association of Chartered Professional Accountants of Newfoundland and Labrador Respondent / APPELLANT BY CROSS APPEAL Before: Justice Alexander MacDonald On Appeal From: Decisions of the Adjudication Tribunal dated November 30, 2020 (Merits Decision); November 9, 2021, and January 28, 2022 (Bias Decision); and June 17, 2022 (Sanctions Decision and the Final Decision and Order) pursuant to s. 43 of the Chartered Professional Accountants and Public Accountants Act, S.N.L. 2014, c.

C-10.1 . Place of Hearing: St. John’s, Newfoundland and Labrador Dates of Hearing: September 14 and 15, 2023 Appearances: David D. McKay, K.C. Appearing on behalf of the Appellant / Respondent in Cross Appeal

Augustine F. Bruce, K.C. Appearing on behalf of the Respondent / Appellant in Cross Appeal Authorities Cited: CASES CONSIDERED: Institute of Chartered Accountants of Newfoundland and Labrador v. Cole, 2017 NLTD(G) 73; CanadianPacific Limited v. Matsqui Indian Band, (SCC), [1995] 1 SCR 3; Newfoundland Telephone Company v. Newfoundland(Public Utilities Board), (SCC), [1992] 1 S.C.R. 623; Terceira v. Labourers International Union of North America,2014 ONCA 839; MacDonald Estate v. Martin, (SCC), [1990] 3 S.C.R. 1235; McAdam v. Law Society (Newfoundland& Labrador), 2010 NLTD 39; Babb Construction Limited v.

Parsons, 2020 NLSC 115; Cardinal v. Kent Institution, (SCC), [1985] 2 S.C.R. 643; Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65; Mitchell v. Institute ofChartered Accountants of Manitoba (1994), (MB KB), 22 Admin. L.R. (2d) 182, 91 Man. R. (2d) 138 (Q.B.); Yee v.Chartered Professional Accountants of Alberta, 2020 ABCA 98; Baker v. Law Society of Upper Canada (1999), (ON SC), 42 O.R. (3d) 413, 85 A.C.W.S. (3d) 448 (Sup. Ct. (Div. Ct.)); Watson v. Law Society of Ontario, 2023 ONSC 1154 STATUTES CONSIDERED: Chartered Professional Accountants and Public Accountants Act, S.N.L. 2014, c.

C-10.1; Judicature Act,R.S.N.L. 1990, c. J-4 TEXTS CONSIDERED: Janice Mucalov, Developing a Conflict Checking System for Your Law Firm (13 March 2007), online:Canadian Bar Association, <https://www.cba.org/Publications-Resources>; The Law Society of Newfoundland and Labrador, Code ofProfessional Conduct, (St. John’s: Law Society of Newfoundland and Labrador, 2013) RULES CONSIDERED: Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. D; Law Society Act, 1999, S.N.L. 1999, c.

L-91 REASONS FOR JUDGMENT MacDonald, J.: INTRODUCTION [1] This is Michael Power’s appeal of decisions of an adjudication tribunal appointed by the Association of Chartered ProfessionalAccountants of Newfoundland and Labrador (Association). The decisions arose out of complaints made against him by John Parsons. [2] Because of these complaints, the Association investigated, and laid twelve charges (Charges) against Power. It referred theCharges to a tribunal (Tribunal), under s. 31(3)(

b) of the Chartered Professional Accountants and Public Accountants Act, S.N.L. 2014,c. C-10.1 (Act). [3] On November 30, 2020, the Tribunal issued a decision on the merits of the Charges (Merits Decision). Power then took anapplication to the Tribunal that it was under a reasonable apprehension of bias when it made that decision. [4] Power asked the Supreme Court to rule on the allegation of reasonable apprehension of bias, but on June 24, 2021, this Courtordered that the Tribunal must first decide the issue. [5] On November 9, 2021, the Tribunal dismissed the application.

It gave its written reasons on January 28, 2022, (BiasDecision). On June 17, 2022, the Tribunal issued a sanction decision (Sanctions Decision). [6] Power appealed the Merits, Bias, and Sanctions Decisions on July 15, 2022. This Court stayed the Sanctions Decision pendingthis appeal. The parties ask that I not deal with the merits of the Sanctions Decision. ISSUES [7] I am to consider: ISSUE 1 Is there a reasonable apprehension of bias of the Tribunal?

ISSUE 2 What is the remedy if there is reasonable apprehension of bias? [8] If I conclude there was no reasonable apprehension of bias, I am to consider: ISSUE 3 Can Power succeed on his appeals?

ISSUE 4 Can the Association succeed on its appeals? [ 9 ] I will first discuss the facts giving rise to the disciplinary proceedings. BACKGROUND [ 10 ] The Charges arise out of Power’s role as the accountant for three companies for which he prepared review engagement financial statements. [ 11 ] The first company is Babb Construction Limited (BCL). Brian Babb was a director and the majority shareholder of BCL and its controlling mind. Six relatives held the remaining shares. [ 12 ] The second is 52182 Newfoundland Limited.

The Tribunal found that BCL owned 100% of the shares of 52182 Newfoundland Limited, which in turn owned the Vales subdivision on 179 acres of property in Pouch Cove, Newfoundland and Labrador. I will call the company Vales. Brian Babb was then a director of Vales. [ 13 ] The third is 58609 Newfoundland and Labrador Limited. BCL, Parsons, Gerlinde Van Driel and Kaare Eikrem each own 25% of the company shares. The company owned a commercial building on Duckworth Street in St. John’s. I will call this company Duckworth Holdings.

Brian Babb was then a director and its sole signing officer. [ 14 ] In 2011, Power was signing officer of 10546 Nfld Limited when it bought four properties from Vales. He was the sole director from February 24, 2012, to November 30, 2014. 10546 was 100% owned by a relative of Power. I will call the purchase of these properties the Purchase, and the company, the Purchaser. [ 15 ] The Charges arose after Parsons bought BCL’s shares in Vales and became the managing director for the Duckworth Holdings in 2013. Power then resigned as the companies’ accountant.

Power refused to deliver Vales’ 2011 financial statements until it paid his outstanding professional fees. [ 16 ] This refusal caused Parsons to file a complaint with the Association on April 19, 2013. Parsons complained about Power’s refusal to give Vales’ 2011 financial statements to its new accountants. [ 17 ] Parsons also said, “I am currently in dispute with Power over another matter that is before the Newfoundland Supreme Court.” (Record, Volume 3, Tab 2, page 3, para. 4). I discuss the implications of this later. [ 18 ] Vales started this other matter on March 22, 2013, as Court No. 201301G1663.

Vales took this action against Power, his firm, the Purchaser and MFE Holdings Limited (Vales – Power Litigation). Vales, now owned by Parsons, asked: (

a) for an accounting of Power’s professional fees; (

b) for an accounting of various funds paid by Vales before Parsons bought it; and (

c) to set aside the Purchase because the Purchaser and Power defrauded Vales. [ 19 ] On August 20, 2013, Parsons filed a second complaint. He alleged that Power obtained instructions from Vales, only through Brian Babb, when there was a second shareholder and director, Kaare Eikrem. The Tribunal concluded that Eikrem was not a shareholder and director at the time. [ 20 ] He further complained about how Power structured the Purchase. He complains about the various promissory notes and intercompany money transfers. [ 21 ] He says, “in regards to monies loaned to B. Babb (Babb Construction) by M.

Power … we have evidence that much of the monies were repaid and accepted by M. Power through monies and deals involving 52182 NL [Vales] …” (Record, Volume 3, Tab 2, page 5, para. 5) [ 22 ] On December 18, 2014, Parsons filed a third complaint. He alleged that, “Michael Power had, among other things, inflated cost of sales to reduce the amount of taxes due” (Record, Volume 3, Tab 2, page 9, para. 2). He referred to the way Power structured the Purchase. He again referred to the litigation with Power. [ 23 ] On August 24, 2015, Parsons filed a fourth complaint.

He alleges that Power made “grave errors” when he prepared the 2009, 2010 and 2011 Duckworth Holdings financial statements (Record, Volume 3, Tab 2, page 10, para. 4). [ 24 ] He referred to Power’s Tribunal testimony. He also referred to another legal action, by Power against him.

He also complains about the fees Power charged Duckworth Holdings for 2009, 2010 and 2011 (Record, Volume 3, Tab 2, page 11, para. 2). [ 25 ] Finally, he alleged that Power caused Brian Babb to issue a direction to Duckworth Holdings to pay Power’s accounting invoices and personal loan due from Brian Babb (Record, Volume 3, Tab 2, page 11, para. 6). [ 26 ] Because of these complaints, the Association investigated and laid 12 charges against Power. I can break these Charges into themes. The first theme is the Vales Purchase. Vales Purchase [ 27 ] Power was sole director of the Purchaser during the Purchase.

He was Vales’ accountant. He took instructions from his relative, and from Brian Babb, the majority shareholder of BCL, on the understanding that BCL owned 100% of Vales shares.

[ 28 ] In 2011, the Purchaser paid Vales $95,000 for the first three properties bought on these terms: (

a) The Purchaser issued promissory notes for $170,000; (

b) Vales applied the “First Net Sales Proceeds” for the sale of the three properties against a $96,500 personal loan Brian Babb owed the Purchaser. The Purchaser paid Vales $18,500 in closing costs; (

c) Vales recorded the First Net Sales Proceeds as a receivable due from Brian Babb. Subsequently, Vales made a journal entry that this debt was a receivable due from BCL. I will call this the Intercompany Transfers; (

d) In December 2011, Vales released the promissory notes; and (

e) Power charged the amount of this forgiven promissory note as “cost of sales” in the 2011 financial statements. [ 29 ] Vales bought a fourth building for $95,000 in 2012 on similar terms: (

a) The Purchaser issued Vales a promissory note for $50,000; (

b) Vales applied the “Second Net Sales Proceeds” for the sale of the lot against a $40,000 personal loan Brian Babb owed the Purchaser; and (

c) On April 10, 2012, Vales released the promissory note. [ 30 ] The Tribunal did not deal with whether Vales assigned the 2012 $50,000 note to BCL, nor did it deal with whether it included $50,000 in its 2012 cost of sales, likely because Power was not Vales’ accountant when it prepared its 2012 financial statements. [ 31 ] Parsons complained about the structure of the Purchase and the cost of sales treatment in his third complaint. The second theme relates to Duckworth Holdings’ related-party charges.

Duckworth Holdings’ Related-Party Charges [ 32 ] Power, in the 2009 Duckworth Holdings’ review engagement financial statements, recorded a $123,000 management fee payable to another company with a common shareholder with Duckworth Holdings. He also included this journal entry in the 2010 and 2011 financial statements. [ 33 ] Although Duckworth Holdings claimed this fee on its income tax return, it never paid the management fee. Power did not disclose the name of the related party, nor the fee payment terms in the financial statements. Parsons complained about how Power described this fee in his fourth complaint.

The next theme is about conflict of interest. Conflict of Interest [ 34 ] The Association alleged that Power, when he was a director of the Purchaser and accountant for Vales, acted in a way that “a reasonable observer would conclude that he was in a position where his interests conflict with the interest of the client.” [ 35 ] It also alleged he put himself in a position that his duty to one client created a conflict with his duty to another client. The next theme relates to the way Power responded to the regulatory process, and to Parsons and his accountants’ requests.

Failure to Cooperate with the Disciplinary Process, to Respond Promptly to Vales’ Successor Accountants, and to Respond Promptly to John Parsons [ 36 ] The Association alleges that Power did not respond promptly to Parsons and Vales’ successor accountants (as it related to the 2011 Vales financial statements), or the Association during the disciplinary process. Charges Against Michael Power [ 37 ] Some Charges have sub-charges and have similar wording. Power thus responded to 27 offences. The Association used the same conduct to support charges under different Rules.

Preambles to the Charges have assumptions of fact. The Tribunal concluded that if Power was guilty of any of the sub-charges, he was guilty of the general charge. [ 38 ] On November 30, 2020, the Tribunal issued the Merits Decision. It convicted Power of six charges. It acquitted him on the remaining six. It dealt with each of the sub-charges separately. It is difficult to compare the number of convictions on the general charges to the number of convictions on the sub-charges because of the way the Tribunal described its finding on each sub-charge.

Power appeals all his convictions. [ 39 ] The Association appeals the Tribunal acquittals on Charge 11 and 12. It appealed other acquittals but the number of appeals is unclear because of the interrelationship between the Charges or sub-charges. However, these ambiguities are not relevant to this decision. [ 40 ] On June 17, 2022, the Tribunal imposed the following penalties in the Sanctions Decision: (

a) Power will pay a $5,000 fine; (

b) Another member must supervise his practice for six months; (

c) He must complete a professional development course, “ Ethics at Our Core ”;

(

d) The Association will publish the Merits and Sanctions Decisions as required by the Act. It will publish them on its website and itsnewsletter; and (

e) Power will pay $110,000 of the Association’s legal fees. [41] Having described the background of the disciplinary proceedings, I will first consider if there is a reasonable apprehension ofbias of the Tribunal. DISCUSSION ISSUE 1 – Is there a reasonable apprehension of bias of the Tribunal? [42] I find there is a reasonable apprehension of bias of the Tribunal. This Court in Institute of Chartered Accountants ofNewfoundland and Labrador v.

Cole, 2017 NLTD(G) 73, said the test is whether an informed bystander could realistically perceive biason the part of the adjudicator. [43] The Supreme Court of Canada in Canadian Pacific Limited v. Matsqui Indian Band, (SCC), [1995] 1 SCR 3,at para. 85, quoted Committee for Justice & Liberty v.

Canada (National Energy Board), (SCC), [1978] 1 S.C.R. 369,saying that a reasonable “apprehension of bias must be a reasonable one, held by reasonable and right-minded persons, applyingthemselves to the question and obtaining the required information” to make the decision. [44] Restated, the question is, “what would an informed person, viewing the matter realistically and practically - and having thoughtthe matter through - conclude?” (at para. 85) [45] The Supreme Court of Canada in Newfoundland Telephone Company v.

Newfoundland (Public Utilities Board), (SCC), [1992] 1 S.C.R. 623, said “the duty of fairness applies to administrative bodies, and the extent of the duty will depend uponthe nature and function of the particular tribunal” (at para. 22). [46] The Supreme Court concluded the duty to act fairly includes a “duty to provide procedural fairness to the parties.

That simplycannot exist if the adjudicator is biased.” As it is impossible to determine the precise state of mind of an adjudicator, “an unbiasedappearance is ... an essential component of procedural fairness” [emphasis added] (at para. 22). [47] As this is a matter of procedural fairness, the standard of review is correctness, and I may impose my decision in place of theTribunal decision. [48] Justice Goodridge (as he was then) said in McAdam v.

Law Society (Newfoundland & Labrador), 2010 NLTD 39, at para. 11,“the complaints authorization committee is an administrative body with authority, granted by statute, to conduct a full investigation andhearing of an allegation or complaint made against a member of the Law Society.

The rules of natural justice and procedural fairnessextend to such a committee.” [49] He went on to say, “The issues … relate to natural justice and procedural fairness, for which the applicable standard of reviewis correctness.” I now turn to the facts relevant to the reasonable apprehension of bias. [50] Parsons, the complainant, and a witness in the Tribunal hearing, was party to litigation between BCL, Parsons and Vales (Vales– BCL Litigation) (Court No. 201901G1433).

On August 27, 2020, (after the end of the Tribunal hearing and before the Tribunal issuedany of its decisions) Justice Handrigan issued a decision in the Vales – BCL Litigation (Babb Construction Limited v. Parsons, 2020NLSC 115). [51] Vales – BCL Litigation arose out of Parsons’ acquisition of BCL’s Vales shares. The purchase price was $500,000. Parsonstestified in that case that the parties structured the purchase price as follows: (

a) Cash payment by Parsons to BCL of $100,000; (

b) Parsons issued a promissory note to BCL for $400,000. I will call this the Parsons – BCL Promissory Note; (

c) Vales issued a promissory note to Parsons for $400,000. I will call this the Vales – Parsons Promissory Note; (

d) BCL issued a promissory note to Vales for $400,000 as “partial payment for money owed to Vales.” I will call this the BCL –Vales Promissory Note; (

e) Parsons assigned the Vales – Parsons Promissory Note to BCL; (

f) The parties then set off Vales - Parsons’ Promissory Note and BCL – Vales Promissory Note to satisfy the purchase price. [52] BCL disagreed and said that Parsons paid the $100,000 in cash, leaving the $400,000 outstanding. It asked to void the contractbecause of this nonpayment. [53] Justice Handrigan rejected Parsons’ position. He found that Parsons did not prove the assignment of the Vales – ParsonsPromissory Note.

Therefore, he concluded Parsons still owed BCL $400,000 and gave BCL judgment for that amount. [54] Power’s counsel in this Application referred to the facts surrounding the Parsons – BCL Promissory Note. Counsel says thatParsons was not credible on this issue. He says that Justice Handrigan did not accept his evidence. [55] Power’s counsel also says that there is evidence that Parsons agreed to make the Parsons - BCL Promissory Note payable toBrian Babb’s wife in compensation for fictional management services. He says that the Canada Revenue Agency assessed a penalty

against him for this attempt. [56] Parson’s counsel says that all this is relevant because Parsons’ credibility was at issue in the Tribunal hearing. While thesefacts may affect Power’s appeal of the Merits Decision, they are irrelevant to the Conflict Decision as I discuss later. [57] Parsons appealed Justice Handrigan’s decision. The way in which he did so gives rise to the allegation of bias. Role of the Tribunal Counsel Law Firm [58] A partner at a local law firm was counsel for the Tribunal (Tribunal Counsel).

On September 21, 2020, between the end of thehearing and the Merits Decision on November 30, 2020, Parsons consulted another lawyer at the Tribunal Counsel’s law firm about theappeal of Justice Handrigan’s decision. [59] That lawyer, in a sworn statement filed with the Tribunal, said the filing deadline for a notice of appeal was September 30,2020. [60] On September 23 or 24, he discussed an issue with Tribunal Counsel “[d]uring [his] review of the file in preparation of thenotice of appeal.” Although the lawyer did not refer to names, Tribunal Counsel stopped the conversation by saying that the fact scenariosounded familiar (Volume 8, Tab 7, para. 4). [61] The lawyer then revealed that Parsons and BCL were parties to the appeal.

Tribunal Counsel told the lawyer that he wasTribunal Counsel and that “the optics were not good with our firm continuing to act on behalf of John Parsons at a time when our firmwas also acting on behalf of the Adjudication Tribunal in an ongoing matter” (Volume 8, Tab 7, para. 4). [62] The lawyer said, “It was clear to me, for this reason [Tribunal Counsel] did not want our firm to continue to represent Mr.Parsons.

And in the circumstances, I agreed.” (Volume 8, Tab 7, para. 4). [63] That may have been the end of the matter if the lawyer refused Parsons’ retainer or immediately stopped acting for him. [64] Although he told Parsons after his conversation with Tribunal Counsel that they could no longer act, the lawyer agreed to“continue [his] document preparation while he sought replacement counsel, and then deliver working draft documents to his newcounsel” (Volume 8, Tab 7, para. 9). [65] The lawyer did so until he delivered working drafts of the notice of appeal to Parsons on either September 28 or September 29,2020.

As the lawyer was doing this legal work on behalf of Parsons, he was acting for him. [66] I do not know the contents of the working draft notice of appeal. The filed notice has 22 paragraphs. Paragraph 2(h), (i), (j), (k)and (

l) refer to accounts that may include the Vales – BCL Intercompany Transfers. Parsons complained about Power’s role in thestructuring of the Intercompany Transfers in this second complaint. Parsons also seems to put the Vales – BCL Intercompany Transfersat issue in his third complaint. [67] Catherine Mercer Oliver, Director of Regulatory Affairs for the Association, swore that no one informed her about the lawyer’sretention until December 10, 2020. This was after the Tribunal issued its Merits Decision.

The Tribunal, in paragraph 19 of the ConflictDecision said, “… the previous legal counsel to the Tribunal, is no longer representing the Tribunal.” [68] Neither Tribunal Counsel nor his colleague gave an explanation how the firm’s conflict protocol did not discover this potentialconflict. They say the law firm opened the file in the name of the Association and Power. [69] The law firm should have named Parsons, BCL and Vales as related parties so that their names would appear in their conflictsystem. Power’s relationship with Parsons and these companies was the trigger for the disciplinary process.

I describe Parsons’ issueswith Power in paragraph [100]. [70] If this happened, the lawyer would have discovered the potential conflict. However, the operation of the firm’s conflict systemis not the proximate cause of the conflict. [71] The lawyer continued to act for Parsons after he knew there was a potential conflict, and after he and the Tribunal counselagreed he would not. The lawyer did so without obtaining consent from any of the parties to the proceeding and without institutingproper MacDonald Estate mechanisms, I describe later. [72] In Terceira v.

Labourers International Union of North America, 2014 ONCA 839, at para. 27, the Court of Appeal, whendescribing the distinction between a lawyer’s conflict of interest and a tribunal’s reasonable apprehension of bias, said (referring to theSupreme Court of Canada in MacDonald Estate v.

Martin, (SCC), [1990] 3 S.C.R. 1235, at page 1260) as between thelawyers “the imparting of confidential information is presumed to occur.” [emphasis added] [73] It said at paragraph 28, that the rules governing lawyers’ conflict of interest stem in part from the existence of a fiduciaryrelationship and a duty of loyalty owed to the client. [74] The Vales – BCL Litigation relates in part to the BCL - Vales Promissory Note due to Vales, first from Brian Babb and thenfrom BCL. These promissory notes reflect intercompany accounts and may include the Intercompany Transfers.

The Tribunal dealt withPower’s description of the Intercompany Transfers in the 2011 Vales financial statement. [75] An actual transfer of information between Tribunal Counsel and his colleague is not the issue. I am to presume that theknowledge of one lawyer is the knowledge of the other. Law firms share information on computer servers and through common filesystems. Lawyers can access these files. In MacDonald Estate, at paragraph 51, “there is, however, a strong inference that lawyers whowork together share confidences.”

[ 76 ] It concluded that, “the court should therefore draw the inference, unless satisfied on the basis of clear and convincing evidence, that all reasonable measures have been taken to ensure that no disclosure will occur by the ‘tainted’ lawyer to the member or members of the firm who are engaged against the former client.

Such reasonable measures would include institutional mechanisms such as [ethical] walls and cones of silence.” [ 77 ] It continued, “It can be expected that the Canadian Bar Association, which took the lead in adopting a Code of Professional Conduct in 1974, will again take the lead to determine whether institutional devices are effective and develop standards for the use of institutional devices which will be uniform throughout Canada.” [ 78 ] The Canadian Bar Association (CBA) issued such Guidelines . The Guidelines at

Section VI. Managing a Conflict of Interest - Waiving a Conflict with Informed Consent ) say, “The rules of professional conduct allow lawyers to act in the vast majority of cases, despite actual or likely conflicts of interest, if the firm has the informed consent of the affected client(

s) or former client(s), i.e., there is a waiver of the conflict of interest.” ( Janice Mucalov, Developing a Conflict Checking System for Your Law Firm (13 March 2007), online: Canadian Bar Association, < https://www.cba.org/Publications-Resources >) [ 79 ] The CBA says, “the consent of a client is unlikely to be effective if you act against that client in a matter substantially related to your earlier representation of that client – even if the client is sophisticated or received independent legal advice concerning their consent.” [ 80 ] The Law Society of Newfoundland and Labrador, Code of Professional Conduct , (St.

John’s: Law Society of Newfoundland and Labrador, 2013), also provides guidance on conflicts. [ 81 ]

Section 3.4-2 provides that “A lawyer must not represent a client in a matter when there is a conflict of interest unless there is express or implied consent from all affected clients and the lawyer reasonably believes that he or she is able to represent the client without having a material adverse effect upon the representation of or loyalty to the client or another client.” [ 82 ] Express consent must be fully informed after disclosure and voluntary. A firm may infer the client’s consent, which need not be in writing if: (

a) the client is a government, financial institution, publicly traded or similarly substantial entity, or an entity with in-house counsel; (

b) the matters are unrelated; (

c) the lawyer has no relevant confidential information from one client that might reasonably affect the other; and (

d) the client has commonly consented to lawyers acting for and against it in unrelated matters. [ 83 ] The law firm did not obtain the consent of Power, Parsons, the Association or the Tribunal. There is no evidence that I can infer anyone’s consent. [ 84 ] Even if the law firm had obtained consents from Power, Parsons, the Association or the Tribunal, s. 3.4-4 of the Code provides that the law firm could concurrently act for both Parsons and the Tribunal [1] if, among other things: (

a) The law firm disclosed the risk to each client of the concurrent representation; (

b) The law firm recommends that the clients receive independent legal advice about the risk of the concurrent representation; (

c) The clients consented to the concurrent representation; (

d) A different lawyer represents each client; (

e) Appropriate screening mechanisms are in place to protect confidential information; and (

f) All lawyers in the law firm withdraw from the representation of all clients in respect of the matter if a dispute that cannot be resolved develops among the clients. [ 85 ] The CBA gives guidance on these screening mechanisms. [2] These mechanisms can include [3] : (

a) The screened lawyer (Parsons/Vale counsel in this case) should not be involved in the law firm’s representation of its client (Tribunal in this case); (

b) The screened lawyer should not discuss the current matter or any information relating to the representation of the former client (the two may be identical) with anyone else in the law firm; (

c) No lawyer in the law firm should discuss the current matter or the previous representation with the screened lawyer; (

d) The current matter should be discussed only within the limited group that is working on the matter; (

e) The files of the current client, including computer files, should be physically segregated from the law firm’s regular filing system, specifically identified, and accessible only to those lawyers and support staff in the law firm who are working on the matter or who require access for other specifically identified and approved reasons; (

f) No lawyer in the new law firm should show the screened lawyer any documents relating to the current representation;

(

g) The measures taken by the law firm to screen the transferring lawyer should be stated in a written policy explained to all lawyers and support staff within the firm, supported by an admonition that violation of the policy will result in sanctions, up to and including dismissal; (

h) Affidavits should be provided by the appropriate law firm lawyers setting out that they have adhered to and will continue to adhere to all elements of the screen; (

i) The former client, or if the former client is represented in that matter by a lawyer, that lawyer, should be advised: (

i) The screened lawyer is now with the law firm, which represents the current client, and (ii) The measures adopted by the law firm to ensure that there will be no disclosure of confidential information; (

j) The screened lawyer’s office or workstation and that of the lawyer’s assistant should be located away from the offices or workstations of lawyers and support staff working on the matter; and (

k) The screened lawyer should use associates and support staff different from those working on the current matter. [ 86 ] Here, Tribunal Counsel says, “My office is on a different floor than [the other lawyer’s] office and we do not have occasions to work on many files together.

To the best of my recollection, there were no matters on which we collaborated during the fall of 2020.” (Record, Volume 8, Tab 6, para. 18) [ 87 ] The other lawyer adds, that their “respective files were maintained in separate storage areas” (Record, Volume 8, Tab 7, para. 6). [ 88 ] Based on the sworn statements filed by the two lawyers, the Tribunal concluded, “There was no sharing of information between [the lawyers] related to the civil proceedings and, consequently there could be no sharing of that information between Tribunal Counsel and the Tribunal” (Conflicts Decision, para. 42(iv)).

However, the lawyers’ evidence that they did not share information does not decide the matter. [ 89 ] The lawyers’ Affidavits only say that the law firm instituted the measures described in paragraph [85] (

a) and (j). There is no evidence that it followed any of the others. [ 90 ] Thus, the facts do not support sufficient “institutional mechanisms” that would satisfy the Macdonald Estate requirements. I do not see how the lawyers’ sworn statements describe a process different from how they might deal with any of their files. [ 91 ] Thus, I conclude that Tribunal Counsel was in a conflict of interest. I find that Parsons, the Association, the Tribunal and Power did not waive the conflict nor did the law firm take proper MacDonald Estate institutional measures.

I now turn to whether this creates a reasonable apprehension of bias of the Tribunal. Reasonable Apprehension of Bias of the Tribunal [ 92 ] As described in Terceira , I am to presume that the Tribunal is impartial. Power must rebut this presumption. I find that he has. I find that a reasonable person knowing all these facts would conclude that there is a reasonable apprehension of bias on behalf of the Tribunal. [ 93 ] Self-regulating professional associations like those for lawyers and accountants, decide matters of immense importance to its members. Reputation is a professional’s greatest asset.

The nature of this disciplinary process affects the extent of the duty of impartiality referred to in Newfoundland Telephone. [ 94 ] In McAdam , Justice Goodridge said in paragraph 42, “the Law Society is a self-regulating professional body. The Law Society Act, 1999 , [S.N.L. 1999, c.

L-91], grants authority to set and maintain professional standards of practice, which then enable the Society to fulfill its principal role of protecting the interests of the public.” [ 95 ] He continued, “It is especially important for the Law Society, fulfilling this role, to guard against even a perception of conflict with a member of the complaints authorization committee.” [ 96 ] He concluded, “Without this public confidence, the Law Society’s self-regulating system cannot command the respect and acceptance necessary to its continued existence and effective operation.

The adage — justice must not only be done, but must manifestly be seen to be done — applies.” These comments also apply to the Association. [ 97 ] Tribunal Counsel gave legal support for the Tribunal. He said that his role included: ... d. “Reviewing draft decisions as prepared by the Tribunal following its deliberations; and e.

Discussing draft decisions with the Tribunal, so as to ensure they were reflective of the Tribunal members collective findings and reasoning.” (Record ,Volume 8, Tab 6, para. 20) [ 98 ] In its Conflict Decision, the Tribunal “notes” in paragraph 12(vii) that Tribunal Counsel is no longer acting on behalf of the Tribunal. That is not the point. He was acting when the Tribunal was considering the Merits Decision.

[ 99 ] Tribunal Counsel could only continue to act for the Tribunal in the face of his colleague’s retention if the Parsons, Power, the Association and the Tribunal waived the conflict and after the firm instituted adequate MacDonald Estate mechanisms [4] . [ 100 ] Parsons’ issues with Power relate to these facts: (

a) Parsons bought Vales in 2013; (

b) Parsons is the shareholder and director of Vales; (

c) In the Vales – Power Litigation, Parsons puts at issue Power’s role in structuring the Purchase; (

d) In the Vales – BCL Litigation, the promissory notes that reflect intercompany Accounts may include the Intercompany Transfers,; (

e) Parsons is a shareholder and managing director of Duckworth Holdings; (

f) Power’s conduct as accountant for Vales and Duckworth Holdings, is central to the Charges; (

g) Parsons complained to the Association about Power’s disregard of an alleged 50% shareholder in Vales, Kaare Eikrem; (

h) Parsons complained to the Association about Power’s conduct in structuring the Purchase; (

i) Parsons complained to the Association about Power’s conduct in Duckworth Holdings. (

j) Parsons complained to the Association that Power’s conduct in creating and reporting the Intercompany Transfers (owed first from Brian Babb and then from BCL) is at issue in the Vales - Power Litigation, the Vales – BCL Litigation and the Charges; (

k) Parsons specifically refers to his court disputes with Power in all his complaints. He admits that when he filed his first complaint, he did so in part to support the Vale - Power Litigation; (

l) Parsons testified before the Tribunal for two days; and (

m) Tribunal Counsel’s firm, in September 2020, acted for both Parsons and the Tribunal at the same time. It did so for longer than the one-day concurrent representation in McAdam. [ 101 ] It is irrelevant whether Parsons was a credible witness or not. It is irrelevant whether Tribunal Counsel obtained any confidential information when Parsons hired his firm.

It is irrelevant whether the Tribunal obtained any information because of that retention. [ 102 ] In its simplest form, it is problematic that Parsons and the Tribunal were both clients of the Tribunal Counsel’s firm when the Tribunal considered the Merits Decision. The Tribunal, the Association, and Power did not consent to this concurrent retention. The firm did not institute proper MacDonald Estate protocols. [ 103 ] Justice Goodridge in McAdam dealt with a comparable situation.

He considered whether there was a reasonable apprehension of bias of the Complaints Authorization Committee of the Law Society of Newfoundland and Labrador. [ 104 ] In May 2008, a complainant filed complaints against her former lawyer. She alleged they overbilled, did not act on instructions, did not respond to her communications, and did not keep her informed of the status of litigation. She also hired a lawyer to deal with taxation of her former lawyer’s legal bill. [ 105 ] That lawyer’s partner was chairperson of the Complaints Authorization Committee.

The complainant’s lawyer ended his client relationship with her sometime after June 19, 2008, when she gave him information that might be relevant to her complaints.

Justice Goodridge concluded that although this information did not deal with the taxation, the issue overlapped with issues before the committee. [ 106 ] Justice Goodridge concluded that her lawyer received confidential information “attributable to a solicitor and client relationship, which existed for at least a short period of time on June 20th, 2008” (at para. 39). [ 107 ] Justice Goodridge found that there was no evidence that the chairperson received any confidential information from his partner. He concluded that Macdonald Estate applied.

He considered that knowledge of one firm member is knowledge of the other. [ 108 ] He said the impartiality of the Complaints Authorization Committee “may have been compromised” (at para. 44). He vacated its decision and returned the complaints to the Committee to reconsider. [ 109 ] Although Tribunal Counsel was not a member of the Tribunal, the principles described by Justice Goodridge are still applicable as the Tribunal Counsel assisted the Tribunal when it made the Merits Decision. [ 110 ] I sympathize with both Tribunal Counsel and the Tribunal.

There is no evidence that Tribunal Counsel was aware that his colleague continued to act for Parsons after they agreed he would not do so. The Tribunal and the Association did not know about this retention until after the Merits Decision. [ 111 ] I agree with the Tribunal when it said in paragraph 46 of the Conflict Decision that, “it is regrettable that [Tribunal Counsel’s colleague] was retained by Mr.

Parsons while [Tribunal Counsel] was acting for the Tribunal.” [ 112 ] My sympathy and the Tribunal’s regret cannot overcome the standards needed from professional disciplinary bodies when they decide on the reputations of its members. I now turn to the remedy available to Power.

Issue 2 - What is the remedy when there is reasonable apprehension of bias against the Tribunal? [113] I set aside the Merits, Bias, and Sanctions Decisions. I refer the matter to a new adjudication tribunal. [114] The Supreme Court of Canada in Newfoundland Telephone, referred to Cardinal v.

Kent Institution, (SCC),[1985] 2 S.C.R. 643, in which the court said, “the denial of a right to a fair hearing must always render a decision invalid, whether or notit may appear to a reviewing court that the hearing would likely have resulted in a different decision” (at para. 40). [115] In Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, the Supreme Court noted that the usual remedyfor an unreasonable decision is to quash the decision and remit the matter back to the original decision-maker.

The court said thisrecognizes that the legislature has entrusted the matter to the administrative body and not to the court. [116] Justice Wright said in Mitchell v. Institute of Chartered Accountants of Manitoba (1994), (MB KB), 22Admin. L.R. (2d) 182, 91 Man. R. (2d) 138 (Q.B.), said in paragraph 41. “The decision ... should be quashed whether the decision or thereasons are right or wrong.

In other words, the correctness or appropriateness of the decision, otherwise is no answer to the fatal flaw ofreasonably based suspicion of bias.” [117] Although the parties asked that I not deal with the Sanctions Decision there is no principled basis on which the Association or theTribunal can expect Power to be liable for sanction arising out these flawed proceedings. I therefore also set it aside. [118] The Alberta Court of Appeal in Yee v.

Chartered Professional Accountants of Alberta, 2020 ABCA 98 made the same dispositionin a case with procedural unfairness. [119] As I have set aside the Merits, Bias, and Sanctions Decisions, it is inappropriate that I deal with the remaining issues in thisApplication. I now turn to costs. COSTS [120] Power asked for his cost of this Appeal and of the Tribunal proceeding. As Power succeeded in his appeal, I award him his costsfor this Appeal taxed on Column III of the Scale of Costs in the Appendix of Rule 55 of the Rules of the Supreme Court, 1986, S.N.L.1986, c. 42, Sch. D.

I now turn to whether I will award of Power’s costs for the first proceeding. I will not. [121] Section 34(1)(

d) of the Judicature Act, R.S.N.L. 1990, c. J-4, says that on “an appeal from a tribunal or a court of inferiorjurisdiction [I] may refer the proceeding back to the court of inferior jurisdiction or the tribunal for further consideration in whole or inpart.” [122] Section 34(2)(

e) says I “may make orders as to costs.” Rule 58.17(2) gives me the same powers. Rule 58.17(3) says I mayexercise these powers “in respect of all or any part of the … proceedings appealed from…” The Tribunal hearings are part of theproceedings appeal from, that is they are hearings leading to the Merits, Bias, and Sanctions Decisions. [123] I must be cautious about deciding whether the Rules give me power to make an order for Power’s Tribunal costs when thelegislation does not.

Furthermore, counsel made no argument on this issue. [124] The three judge Ontario Superior Court of Justice (Divisional Court) panel, dealt with a similar issue on an appeal in Baker v.Law Society of Upper Canada (1999), (ON SC), 42 O.R. (3d) 413, 85 A.C.W.S. (3d) 448 (Sup. Ct. (Div. Ct.)). [125] The panel decided, after a quashing a disciplinary decision because of a reasonable apprehension of bias, “Awarding costs of anyof the proceedings before the discipline panel would be equivalent to awarding solicitor and client costs which we are not prepared todo” (at para. 9).

I will now deal with whether I should refer this cost issue back to any new tribunal. [126] I order that any new tribunal will consider whether Power should have his costs of the second proceeding because of theTribunal’s reasonable apprehension of bias in the first proceeding. [127] Section 36(2)(

a) of the Act says. “Where an adjudication tribunal decides that a respondent is not guilty, it shall dismiss thecomplaint and may, where it believes that the submission of the complaint to the tribunal for a hearing was unreasonable, order thatthose costs that the tribunal considers appropriate be paid by the association to the respondent.” [128] Thus, the Tribunal could have ordered that the Association pay Power’s costs if it found that the complaints were unreasonable.That is not the case here. The first hearing is void.

Therefore, there the Tribunal did not decide that the complaints were unreasonable. [129] The Ontario Superior Court of Justice (Divisional Court) in Watson v. Law Society of Ontario, 2023 ONSC 1154, consideredWatsons’s costs for a disciplinary hearing aborted because of flaws in the Law Society’s conduct.

It referred the issue of the costs of anysecond hearing back to a new disciplinary panel constituted to hear the matter. [130] The court (at para. 127) decided that the issue “should be re-examined if the new hearing panel determines that some costs arerecoverable under Branch 2 of r. 25.01.” [emphasis added] [131] That rule allows a panel to award costs against the Law Society if it “caused costs to be incurred without reasonable cause or to bewasted by … other fault, or where the proceeding becomes unwarranted” after they start. [132] A new tribunal shall consider the issue of Power’s costs for any second hearing and may consider the differences between the Actand any tribunal rules from the Ontario legislation and the rules the court considered in Watson.

_____________________________ Alexander MacDonald Justice