2022 MBKB 198, 2022 MBKB 198

Date: 20221026 Docket: FD21-01-27054 (Winnipeg Centre) Indexed as: Ryan v. Ryan Cited as: 2022 MBKB 198 COURT OF KING’S BENCH OF MANITOBA B E T W E E N: JOSEPH RONALD Ryan, ) Appearances: ) petitioner, ) Carla B. Paul ) for the petitioner - and - ) ) PAULA DAWN RYAN, ) William S. Gange respondent. ) for the respondent ) ) JUDGMENT DELIVERED: ) October 26, 2022 HATCH A.C. J. [ 1 ] The petitioner husband seeks: i. An order disqualifying Ms. Maria Grande and the law firm of Thompson Dorfman Sweatman LLP as solicitors of record for the respondent wife in these proceedings; and ii.

A determination regarding the jurisdiction of a Master to adjudicate motions for removal of counsel due to a conflict of interest. [ 2 ] For the reasons that follow: i. I find that the Master has jurisdiction to adjudicate motions for removal of counsel due to a conflict of interest. ii. The motion requesting that Ms. Maria Grande and the law firm of Thompson Dorfman Sweatman LLP be disqualified from acting against the husband is granted. I. ISSUES [ 3 ] Conflict removal is a matter of the supervisory jurisdiction of the court. T he right of a party to have their counsel of choice is only one consideration.

It is important to consider the fiduciary duties inherent in a solicitor and client relationship of loyalty to a current client and avoidance of conflicts where confidential information may be disclosed. At all times, the high standards of the legal profession and the integrity of the justice system must be maintained. [ 4 ] The issues to be determined are: i. Does the Master have jurisdiction to adjudicate motions for removal of counsel due to a conflict of interest? ii.

Did Thompson Dorfman Sweatman LLP (hereinafter the “law firm”) receive confidential information attributable to a solicitor-client relationship with the husband relevant to the family law issues pled and is there a risk that the confidential information will be used to the husband’s prejudice?

iii. Did the law firm violate the bright line rule? iv. Has the disqualification motion been brought for tactical abuse rather than for principled reasons? II. BACKGROUND [ 5 ] The factual situation is outlined in the affidavits of the husband, the wife, Mr. Donald Percy Scharf (the respondent wife’s father), Mr. Keith LaBossiere, a partner of the law firm, and Ms. Maria Lucia Grande. No cross-examination on affidavits was conducted. [ 6 ] The parties were married on October 9, 1999, and separated on October 6, 2017. The wife is an administrative assistant for her father’s company, Hitrac

(1974) Inc. (“Hitrac”). The husband, an educational assistant with the school division, also works casually as a support worker. The parties have twins who are 22 years of age and the wife has an adult son from a previous relationship. During the marriage, the wife’s father gifted a vacation condominium to the parties in joint tenancy and also transferred the title to the family home, where the parties resided, into the names of the wife, her adult son and himself. [ 7 ] On March 24, 2018, the parties signed an interim separation agreement that the wife prepared, without counsel.

The wife states that she made changes to the agreement, at the husband’s request, before the agreement was executed. The agreement provided that the wife would have primary care of the children, that the husband would pay spousal and child support to the wife of $2,110.17 per month until June 1, 2021, and that the parties would apply to the Court for a joint divorce on June 30, 2021.

Included in the agreement is a release by the husband of any interest he may have in the vacation condominium and the family home. [ 8 ] In March or April 2018, the parties signed documents at Hitrac, the wife’s place of employment, to remove the husband’s name from the vacation condominium property. Mr. Glen Agar, a lawyer at the law firm, witnessed the documents as a notary public. He did not provide any legal advice to the parties, open a file or charge a fee. The husband states he did not know who Mr.

Agar was. [ 9 ] The husband deposes that he was coerced “at separation” by the wife and her father to release his family property interest in the house and the vacation condominium. He says that the coercion respecting the proposed agreement was communicated to him through the wife and that her family members did not contact him directly. The wife deposes that she was unaware of any attempts by anyone in her family to coerce the husband to sign the agreement. Husband’s Retainer of Allan Stewart [ 10 ] The husband deposes that he was referred to Mr.

Gerald Ashcroft of the law firm through his circle of family and friends. He states that he was informed by the receptionist that Mr. Ashcroft had retired and was directed to Mr. Stewart. [ 11 ] The husband met with Mr. Stewart, a lawyer of the law firm, and provided him with a retainer of $500. The husband deposes: I consulted with Mr. Stewart on all matters relating to my separation from the Respondent. We reviewed my finances and property issues. Mr.

Stewart prepared a Homestead Notice for filing with the Land Titles Office. [ 12 ] The husband further deposes in his second affidavit: …[T]he Homestead Notice prepared by Mr. Stewart on my behalf was to be registered against property owned in part by Donald Scharf. Without disclosing additional privileged communications, I can state that Mr. Stewart was aware of the ownership considerations respecting my family property claim and the Homestead Notice was a part of the litigation strategy that, on its face, included Donald Scharf as a party opposing. [ 13 ] The husband states: In my discussions with Mr.

Stewart, I certainly informed him that my spouse’s name prior to marriage was Paula Scharf and the individual on the status of title was her father. [ 14 ] The husband says that “ sometime following the preparation of the Homestead Notice ” , he was contacted by Mr. Stewart, who indicated that he could not act on his behalf due to a conflict of interest. According to the husband, Mr. Stewart offered to proceed on his behalf if he would waive the conflict and the husband refused. Mr. Stewart then refunded the retainer provided to him and advised him to retain alternate counsel. [ 15 ] Mr.

Stewart refers to their discussion in his letter to the husband dated February 12, 2021, which states in part: Further to our recent discussion, we confirm that a conflict has arisen and that we can no longer represent you with respect to your family matter. This conflict was not apparent at the time you retained our services .

Accordingly, we are returning to you your full retainer in the amount of $500.00…. Furthermore, we are also returning to you the original documents that you provided to our firm when we were retained. [emphasis added] [ 16 ] There is no evidence as to the date that the husband retained the law firm or the number of communications that occurred thereafter between the husband and Mr. Stewart. Mr. Stewart did not file an affidavit in these proceedings. The date of “January, 2020” and the name of “Allan L.V. Stewart” are struck out in the jurat of the executed Homestead Notice.

In their place is the signature and stamp of Carla B. Paul and the date of March 4, 2021. The Homestead Notice was filed in the Winnipeg Land Titles Office on March 4, 2021. [ 17 ] There is no evidence that Mr. Stewart picked up the conflict himself. There is no way of knowing how long Mr. Stewart had the husband’s file for, because he did not provide any evidence. Wife’s Retainer of Maria Grande [ 18 ] Ms. Grande, a partner of the law firm, deposes that she was retained by the wife to act on her behalf in February 2021.

She states that she sent two emails to the husband in February 2021, requesting he advise who he retained as his counsel. [ 19 ] On March 17, 2021, the husband received an email from Ms. Grande requesting financial disclosure, where she states: …If we are forced to proceed to court for assistance on child support and related matters, we will have no alternative but to seek legal costs against you. Again, Paula wishes to move forward and finalize matters in a collaborative manner; however, to do so we need to hear from you and you need to engage in a positive manner. [ 20 ] On March 18, 2021, Ms.

Paul sent an email to Mr. Stewart requesting the husband’s information and documentation. That day, she received an email from Mr. Stewart’s assistant advising that all documents were returned to the husband, including the retainer of $500 that he had paid to the law firm, and that the law firm retained personal notes and emails between the husband and Mr. Stewart. [ 21 ] On March 18, 2021, Ms. Paul advised Ms. Grande by email that she had been retained by the husband. In her email, she writes: I am not aware of when you commenced your representation of Ms Ryan in the family matters. However, Mr.

Stewart of your office has acted on behalf of Mr. Ryan. He received a retainer, provided advice, and prepared a document on Mr. Ryan’s behalf. I understand, as well, that your firm has actively represented the financial interests of both parties during the entirety of their cohabitation. This initial communication is therefore to request that you remove yourself from representation of Ms Ryan as a result of the fairly obvious conflict in your office respecting these individuals. Please advise, within one week, if your removal will be voluntary of if court proceedings will be required.

Of course, if you voluntarily withdraw from your representation of Ms Ryan, I would also appreciate your advice as to the lawyer she retains. [ 22 ] On March 26, 2021, Ms. Paul sent a second email to Ms. Grande, requesting the wife’s position respecting the conflict, and advising that she would commence proceedings for her removal if she intends to continue her representation of the wife. [ 23 ] On March 27, 2021, in an email sent to Ms. Paul and copied to Mr. LaBossiere, Ms. Grande advised that she would respond in due course. Despite a further reminder email from Ms. Paul on March 28, 2021, Ms.

Grande did not respond to Ms. Paul’s request. [ 24 ] On May 10, 2021, the husband filed a petition for divorce and a notice of motion seeking the removal of Ms. Grande and the law firm due to a conflict of interest with a supporting affidavit. [ 25 ] In his petition for divorce, the husband seeks an equal division of property, a declaration that the separation agreement is void and relief for unjust enrichment, constructive trust and a life estate, in addition to an order removing the wife’s counsel due to a conflict of interest. [ 26 ] On May 20, 2021, in her email, Ms. Grande advises Ms.

Paul: While we understand that Mr. Ryan reached out to Mr. Stewart, upon Mr. Stewart discovering the conflict he immediately notified Mr. Ryan and returned the $500 retainer and no fees were charged. Respectfully, at the time Mr. Ryan reached out to Mr. Stewart at TDS he

would have been aware that TDS was the law firm for the Scharf family and that he would have known that the lead counsel was Keith LaBossiere, who was also a longtime friend of the Scharf family, and both Mr. LaBossiere and Mr. Ryan had met in the past at social events hosted by the Scharf family. We also understand that prior to Mr. Ryan reaching out to Mr. Stewart, he had approached Ms Scharf about reconciliation and she had told him that was not possible. We understand that Mr. Ryan was not satisfied with this reply from Ms Scharf.

We provide this context to explain from our perspective that while there may be a technical conflict, there is no real substantive conflict of interest. The provision of the Homestead Notice form and the inclusion of the legal description in no way give rise to disqualification of TDS as being alleged by Mr. Ryan. We speculate that the actions of Mr. Ryan in reaching out to TDS were perhaps out of anger and aimed at attempting to disqualify TDS . [ emphasis added ] [ 27 ] Ms. Grande further writes: We would appreciate your taking up all of the above with Mr.

Ryan and advising us if we can move forward in a positive manner to resolve matters , and thereafter proceed to an uncontested divorce. [emphasis added] [ 28 ] On May 20, 2021, Ms. Paul responds to Ms. Grande, advising: …[W]e reject your “speculation” regarding Mr. Ryan’s motivation and find it insulting. This type of scandalous assertion does not support our dialogue. …. Neither do I believe that the return of a retainer can purge a conflict…. As Mr. Stewart apparently appreciated, the issues between the parties are broader than those identified in your e-mail of March 17, 2021.

If you wish to recommend a fulsome settlement that addresses all of the issues identified in the pleadings I am, on a without prejudice basis, happy to entertain same at any time. However, as you are well-aware, delay in proceeding with the motion presently before the court is a circumstance that will prejudice the outcome sought by Mr. Ryan. [emphasis added] [ 29 ] On June 16, 2021, Ms. Grande sent a settlement proposal to Ms. Paul. On July 30, 2021, Ms. Paul sent a settlement proposal to Ms. Grande. On November 23, 2021, approximately four months later, Ms.

Grande provided a response to the husband’s proposal of settlement. [ 30 ] Ms. Grande deposes that at no time during settlement negotiations did Ms. Paul raise an issue that the law firm was relying upon confidential information shared by the husband with Mr. Stewart or any other member of the law firm. [ 31 ] Neither the husband nor the wife had a solicitor and client relationship with the law firm during their marriage. [ 32 ] The wife’s father, Mr. Scharf, has retained the law firm to act on behalf of his company Hitrac and to provide legal advice to him on personal matters since 2005.

His main point of contact at the law firm has been Mr. LaBossiere. [ 33 ] Mr. Scharf deposes that Mr. LaBossiere would have met the husband and wife at Scharf family social events and would have been introduced to the husband as “o ur family lawyer”. Mr. Scharf says that the husband was aware that “TDS was my law firm at the time that he contacted Allan Stewart” and that he would not have consented to the firm acting on behalf of the husband in proceedings against him. [ 34 ] Mr. LaBossiere states that he has also acted for the wife’s brother, Paul Scharf, a close friend, on various matters.

He deposes that the husband “would have been made aware that TDS and I acted on behalf of Don Scharf, Paul Scharf and Hitrac. ” [ 35 ] The evidence of the husband is that he and Mr. LaBossiere met in social situations, that he knew he was a lawyer, that he did not know his last name and that he was never told, nor did he ask, which law firm he was with. He deposes:

I went to several social events for Hitrac. I was aware that some of the people were lawyers for Hitrac, but I had no more detailedinformation than that. My function at those events was to care for my disabled daughter, Megan, and she was my focus. [36] The husband states that he “inferred by his presence at some functions that Mr. LaBossiere represented Donald Scharf. However[he] did not know he was a lawyer at TDS.” He deposes: I am not knowledgeable regarding the laws of conflict. Had I known that TDS employed Keith LaBossiere or represented Donald ScharfI would never have hired Al Stewart.

I feel myself to have been coerced by the Respondent and Donald Scharf and the spectre of hislegal team. [37] The wife, however, says that she and the husband met Mr. LaBossiere on various occasions and were both aware that he was alawyer at TDS and acted on behalf of her brother, father and Hitrac. III. JURISDICTION OF THE MASTER [38] On March 17, 2022, Master Goldenberg declined to hear the husband’s motion for disqualification of the law firm. Herdisposition sheet states, “The master does not have jurisdiction on a motion to remove counsel of record.

Counsel will need to bring amotion to a judge.” Master Goldenberg did not provide any further reasons for declining jurisdiction and made no decision on themerits. [39] The husband filed a motion for a determination regarding the master’s jurisdiction to remove counsel of record. [40] Given that Master Goldenberg did not provide reasons for her decision, it is unclear why she concluded the master does not havejurisdiction on a motion to remove counsel of record. The jurisdiction of a master is reviewed in Zalizniak v. Zalizniak et al., 2007MBCA 118 (Zalizniak).

However, to the extent that Zalizniak discusses the jurisdiction of a master, its application in the caseat hand is limited. Zalizniak dealt with a Master’s jurisdiction in a context distinguishable from the case at hand. More specifically,whether a master had inherent jurisdiction to determine issues of liability and damages at a trial resulting from a delayed closing of aland transaction.

The Court of Appeal confirmed that “[t]he jurisdiction of a master is derived from statute and is not inherent like that ofa s. 96 judge” (at para. 7). [41] Unlike the issue in the present case, the question of the master’s supervisory jurisdiction did not arise in Zalizniak. [42] In MacDonald Estate v.

Martin, (SCC), [1990] 3 S.C.R. 1235 (MacDonald) the Supreme Court referenced theinherent jurisdiction of the courts respecting motions disqualifying counsel for conflict of interest as follows (at p. 1245): …The courts, which have inherent jurisdiction to remove from the record solicitors who have a conflict of interest, are not bound toapply a code of ethics.

Their jurisdiction stems from the fact that lawyers are officers of the court and their conduct in legalproceedings which may affect the administration of justice is subject to this supervisory jurisdiction…. [emphasis added] [43] The use of the word “inherent” to describe this jurisdiction is not to suggest that the jurisdiction is exclusive to superior courts. In a more recent decision, the Supreme Court clarified that all courts and tribunals, superior or statutory, have authority to removecounsel for a conflict of interest as part of their “supervisory jurisdiction” to control their own process. In R. v.

Cunningham, 2010 SCC10 (Cunningham), the Supreme Court explained at para. 18: B. Jurisdiction of the Court Superior courts possess inherent jurisdiction to ensure they can function as courts of law and fulfil their mandate to administer justice(see I. H. Jacob, “The Inherent Jurisdiction of the Court” (1970), 23 Curr. Legal Probs. 23, at pp. 27-28). Inherent jurisdictionincludes the authority to control the process of the court, prevent abuses of process, and ensure the machinery of the court functionsin an orderly and effective manner.

As counsel are key actors in the administration of justice, the court has authority to exercisesome control over counsel when necessary to protect its process. In MacDonald Estate v. Martin, (SCC), [1990] 3S.C.R. 1235, this Court confirmed that inherent jurisdiction includes the authority to remove counsel from a case when required to ensurea fair trial: The courts, which have inherent jurisdiction to remove from the record solicitors who have a conflict of interest, are not bound to apply acode of ethics.

Their jurisdiction stems from the fact that lawyers are officers of the court and their conduct in legal proceedingswhich may affect the administration of justice is subject to this supervisory jurisdiction. [emphasis added]

[ 44 ] It would seem to follow that just as the court, in the exercise of its supervisory jurisdiction, may remove counsel from the record, it also may refuse to grant counsel ’ s application for withdrawal. In paras. 19-20 of Cunningham , the Supreme Court stated: 19 Likewise in the case of statutory courts, the authority to control the court's process and oversee the conduct of counsel is necessarily implied in the grant of power to function as a court of law.

This Court has affirmed that courts can apply a “doctrine of jurisdiction by necessary implication” when determining the powers of a statutory tribunal: ...the powers conferred by an enabling statute are construed to include not only those expressly granted but also, by implication, all powers which are practically necessary for the accomplishment of the object intended to be secured by the statutory regime ... . ( ATCO Gas and Pipelines Ltd. v.

Alberta (Energy and Utilities Board) , 2006 SCC 4 , [2006] 1 S.C.R. 140 , at para. 51 ) Although Bastarache J. was referring to an administrative tribunal, the same rule of jurisdiction, by necessary implication, would apply to statutory courts. 20 Applications regarding withdrawal or removal of counsel , whether for non-payment of fees, conflict of interest or otherwise, are the types of matters that fall within the necessarily implied authority of a court to control the conduct of legal proceedings before it . [emphasis added] [ 45 ] Authority to remove counsel is not founded on superior court jurisdiction.

It is founded on supervisory jurisdiction, which gives the court the ability to “exercise some control over counsel when necessary to protect its process” ( Cunningham at para. 18 ). [ 46 ] The Court of King’s Bench Act, C.C.S.M. c. C280 , gives the masters jurisdiction “as provided by … the rules”: Jurisdiction of a master 11.15(1) A master has jurisdiction as provided by statutes, regulations made under statutes or the rules. [ 47 ] The Court of King’s Bench Rules give jurisdiction to hear a motion to both judges and masters: Judge 37.02(1) A judge has jurisdiction to hear any motion in a proceeding.

Master 37.02(2) A master has jurisdiction to hear any motion in a proceeding, except a motion, (

a) where the power to grant the relief sought is conferred expressly on a judge by a statute or rule; (

b) to set aside, vary or amend an order of a judge; (

c) to abridge or extend a time prescribed by an order that a master could not have made; (

d) for judgment on consent in favour of or against a party under disability; (

e) relating to criminal proceedings or the liberty of the subject; (

f) in an appeal; or

(

g) for interim relief in a family proceeding in respect of custody, access, support or property. To a master 37.03(1) Subject to subrule 25.11(2) and subrule (2) of this rule, a motion within the jurisdiction of a master shall be made to a master.

To a judge 37.03(2) Where a motion is within the jurisdiction of a master and a master is not available at the centre at which the motion is to be heard or a judge grants leave to make the motion to a judge, the motion may be made to a judge. [ 48 ] Rule 37.02(2) provides that “a master has jurisdiction to hear any motion in a proceeding” with certain exceptions, one of which is not removal of counsel. [ 49 ] Rule 37.02(2) sets out those situations where the master does not have jurisdiction.

An issue of conflict is not listed in the exceptions of a master’s jurisdiction: Master 37.02(2) A master has jurisdiction to hear any motion in a proceeding, except a motion, (

a) where the power to grant the relief sought is conferred expressly on a judge by a statute or rule; (

b) to set aside, vary or amend an order of a judge; (

c) to abridge or extend a time prescribed by an order that a master could not have made; (

d) for judgment on consent in favour of or against a party under disability; (

e) relating to criminal proceedings or the liberty of the subject; (

f) in an appeal; or (

g) for interim relief in a family proceeding in respect of custody, access, support or property. [ 50 ] The master has jurisdiction to hear motions unless jurisdiction is reserved by statute to a court or unless those issues are exceptions set out in Rule 37.02(2). [ 51 ] Recently, this Court has moved to a one-judge model where pre-trials and case conferences occur early in the proceedings. Once a pre-trial or triage/case conference judge is named, he or she hears all motions in the proceedings.

However, masters retain the broad jurisdiction bestowed by Rule 37.02 before a pre-trial or triage/case conference judge is appointed. In the Family Division, all pre-triage motions within the jurisdiction of the master are heard by the master. The husband’s motion here was brought at the outset of the proceedings before a pre-trial or triage/case conference judge was named. IV.

DISQUALIFICATION OF LAW FIRM FOR CONFLICT OF INTEREST Positions of the parties [ 52 ] The husband submits that the law firm is disqualified from representing the wife for two reasons. [ 53 ] First, the husband asserts that the law firm is in a disqualifying conflict of interest because it has obtained confidential information from him which is relevant to the family matters at issue. The law firm denies it has any relevant confidential information. The wife argues that any information the husband would have provided to Mr.

Stewart was not confidential because financial disclosure in family proceedings is mandatory and p roperty issues depend upon public registry documents and principles of resulting trust law. [ 54 ] Second, the husband submits that the law firm is in a disqualifying conflict of interest because it represented him respecting a separation with his wife and cannot represent the wife for the same purpose and act against him as an adversary. He asserts that this is a violation of the duty of loyalty between a solicitor and client and of the “bright line rule” established in R. v. Neil , 2002 SCC 70 ( Neil ) .

The wife argues that the husband’s removal motion was brought for tactical purposes and that the bright line rule should not be enforced. [ 55 ] The wife’s position is that she should not be deprived of her choice of counsel due to a conflict of interest for six reasons. [ 56 ] First, she states that she intended to retain the law firm which has represented her family for many years prior to the husband’s retainer of Mr. Stewart for a joint application to the Court for a divorce which eliminates the MacDonald analysis.

The husband argues that whether members of the wife’s family and the family corporation had retained the law firm over the years is irrelevant respecting the law firm’s conflict concerning his wife and himself. He also points out that the email sent by Ms. Grande to him dated March 17, 2021, was not limited to a “joint application” for a divorce, but rather raised issues of child support and financial disclosure.

[ 57 ] Second, the wife submits that the law firm would never have agreed to act for the husband if the husband had disclosed to Mr. Stewart that he intended to sue Mr. Scharf, as the law firm would never have acted against Mr. Scharf. The husband deposes that Mr. Stewart was aware of the ownership considerations regarding his family property claim and that the Homestead Notice was part of a litigation strategy that included Mr. Scharf as an opposing party.

He asserts that the law firm provided advice, prepared the Homestead Notice and retained confidential notes. [ 58 ] Third, the wife says that the husband’s contact with Mr. Stewart was limited to a meeting and Mr. Stewart preparing a Homestead Notice but he did not file it. The husband disputes this and points out that Mr. Stewart chose not to file an affidavit setting out the number of times that the husband and Mr.

Stewart met or communicated. [ 59 ] Fourth, the wife says that the husband knew or should have known that the law firm had a longstanding relationship with her father and that this imputed knowledge voids the conflict. The husband denies that he knew the law firm had represented the wife’s father, brother and Hitrac. [ 60 ] Fifth, the wife submits that it was brilliant strategy for the husband to retain the law firm so that she and her father, a longstanding client of the law firm, could not make use of the law firm.

She argues that the husband knew that she and her father would pay a “premium” in settlement negotiations in order to retain the law firm. She asserts that the husband is estopped from seeking the remedy of disqualification because the prejudice to her outweighs the prejudice to the husband. The husband denies there is a tactical advantage. [ 61 ] Sixth, the wife submits that the husband’s behavior in engaging in settlement negotiations with the law firm in order to obtain a beneficial settlement demonstrates that there was no genuine concern about the law firm using confidential information.

She says he has “waived any equitable grounds to rely upon a conflict of interest and is therefore estopped from relying upon a conflict.” The husband states that it was the wife who initiated the settlement discussions and that he relied on the advice of his counsel, who felt it would be irresponsible to reject Ms. Grande’s invitation to engage in settlement discussions. V.

THE LAW [ 62 ] Legal principles for assessing whether a disqualifying conflict of interest exists, are found in four seminal cases of the Supreme Court. [ 63 ] Sopinka J., writing for the majority in MacDonald , articulates the foundational principle that “[a] lawyer who has relevant confidential information cannot act against his client or former client ” (at p. 1261). [ 64 ] In MacDonald , the Supreme Court established a two-step disqualifying conflict of interest test: 1. Did the law firm receive confidential information attributable to a solicitor and client relationship relevant to the matter at hand? 2.

Is there a risk that the confidential information will be used to the prejudice of the client? [ 65 ] The court is to infer that confidential information was shared where the client demonstrates that a previous solicitor-client relationship existed that is sufficiently related to the retainer under attack ( see MacDonald at p. 1236).

The test respecting the use of confidential information is whether the “public represented by the reasonably informed person would be satisfied that no use of confidential information would occur ” (at p. 1260). [ 66 ] There is a heavy onus on the lawyer because the court must be satisfied that a reasonably-informed member of the public would conclude that no confidential information was shared.

The lawyer cannot reveal the specifics of the privileged communication. [ 67 ] Binnie J. in Strother v. 3464920 Canada Inc. , 2007 SCC 24 ( Strother ) at para. 59 , distinguishes the treatment of cases of concurrent clients where no confidential information is at risk: … Conflict between concurrent clients where no confidential information is at risk can be handled more flexibly than MacDonald Estate situations because different options exist at the level of remedy, ranging from disqualification to lesser measures to protect the interest of the complaining client.

In each case where no issue of confidential information arises, the court should evaluate whether there is a serious risk that the lawyer’s ability to properly represent the complaining client may be adversely affected, and if so, what steps short of disqualification (if any) can be taken to provide an adequate remedy to avoid this result. [ 68 ] In addition to the duty not to disclose confidential information, the duty of loyalty to an existing client inherent in the fiduciary relationship of a solicitor and client is an important consideration when assessing whether a disqualifying conflict of interest exists ( see Neil ; Strother ; and Canadian National Railway Co. v.

McKercher LLP , 2013 SCC 39 ( McKercher ) ). [ 69 ] In Strother , Binnie J., writing for the majority of the Supreme Court, states at paras. 34-35: When a lawyer is retained by a client, the scope of the retainer is governed by contract… The solicitor-client relationship thus created is, however, overlaid with certain fiduciary responsibilities, which are imposed as a matter of law…. ….

Fiduciary responsibilities include the duty of loyalty, of which an element is the avoidance of conflicts of interest... [ 70 ] Binnie J., writing for the unanimous Court, describes the bright line rule in Neil at para. 29 : … [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 added] [ 71 ] Writing for the unanimous Court, McLachlin C.J.C. in McKercher noted that the duty of loyalty owed by a lawyer and by extension, a law firm to clients, 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 (at para. 19).” [ 72 ] In McKercher , McLachlin C.J.C. articulates that the bright line rule applies “where immediate legal interests of clients are directly adverse” (at para. 32) but does not apply “where it is unreasonable for a client to expect that its law firm will not act against it in unrelated matters” (at para. 37), nor does it apply “to condone tactical abuses ” (at para. 32).

See also Strother at para. 59 . [ 73 ] All four decisions of the Supreme Court emphasize the need to protect the integrity of the justice system and to maintain the public’s confidence in that integrity in conflict removal cases which involve fiduciary responsibilities of law firms. Lawyers practising in Canada must adhere to the responsibilities established by the Supreme Court in these cases as well as the rules of ethical standards of their governing bodies.

Rule 3.4 of the Code of Professional Conduct in Manitoba, which requires a lawyer to avoid conflicts of interest, is relevant to the circumstances of this case and provides some insight as to what a reasonably-informed person is entitled to expect from their solicitor. [ 74 ] Rule 3.4-1, states: “A lawyer must not act or continue to act for a client where there is a conflict of interest, except as permitted under this Code.” The bright line rule does not apply to condone a strategic maneuver, as noted in commentaries [1] and [2] to Rule 3.4- 1: [1] Lawyers have an ethical duty to avoid conflicts of interest.

Some cases involving conflicts of interest will fall within the scope of the bright line rule as articulated by the Supreme Court of Canada. The bright line rule prohibits a lawyer or law firm from representing one client whose legal interests are directly adverse to the immediate legal interests of another client even if the matters are unrelated unless the clients consent . However, the bright line rule cannot be used to support tactical abuses and will not apply in the exceptional cases where it is unreasonable for the client to expect that the lawyer or law firm will not act against it in unrelated matters.

See also rule 3.4-2 and commentary [6]. [2] In cases where the bright line rule is inapplicable, the lawyer or law firm will still be prevented from acting if representation of the client would create a substantial risk that the lawyer’s representation of the client would be materially and adversely affected by the lawyer’s own interests or by the lawyer’s duties to another current client, a former client, or a third person.

The risk must be more than a mere possibility; there must be a genuine, serious risk to the duty of loyalty or to client representation arising from the retainer. [emphasis added] [ 75 ] The duty of loyalty is at the heart of the conflict of interest rules. Commentaries [4], [6] and [7] to Rule 3.4-1 state: [4] The rule governing conflicts of interest is founded in the duty of loyalty which is grounded in the law governing fiduciaries. The lawyer-client relationship is based on trust. It is a fiduciary relationship and as such, the lawyer has a duty of loyalty to the client.

To maintain public confidence in the integrity of the legal profession and the administration of justice, in which lawyers play a key role, it is essential that lawyers respect the duty of loyalty.

Arising from the duty of loyalty are other duties, such as a duty to commit to the client’s cause, the duty of confidentiality, the duty of candour and the duty to avoid conflicting interests. [6] The lawyer’s duty of confidentiality is owed to both current and former clients, with the related duty not to attack the legal work done during a retainer or to undermine the former client’s position on a matter that was central to the retainer. [7] The lawyer’s duty of commitment to the client’s cause prevents the lawyer from summarily and unexpectedly dropping a client to circumvent conflict of interest rules.

The client may legitimately feel betrayed if the lawyer ceases to act for the client to avoid a conflict

of interest. [ 76 ] Rule 3.4-10 provides that a lawyer cannot act against a former client in certain situations without consent. It reads: 3.4-10 Unless the former client consents, a lawyer must not act against a former client in: (

a) the same matter; (

b) any related matter; or (

c) any other matter if the lawyer has relevant confidential information arising from the representation of the former client that may prejudice that client. [ 77 ] Commentary [1] explains the purpose of Rule 3.4-10. It states: [1] This rule guards against the misuse of confidential information from a previous retainer and ensures that a lawyer does not attack the legal work done during a previous retainer, or undermine the client’s position on a matter that was central to a previous retainer.

It is not improper for a lawyer to act against a former client in a fresh and independent matter wholly unrelated to any work the lawyer has previously done for that client if previously obtained confidential information is irrelevant to that matter. [ 78 ] As Bock J. observed in The City of Winnipeg v. 3177751 Manitoba Ltd. , 2022 MBQB 85 , at para. 20 : These common law rules and rules in the Code of Conduct governing conflicts of interest share a common purpose: they aim to promote public confidence in the legal system by holding lawyers to a high standard of competence, skill and integrity, and to protect every client’s right not to be deprived of counsel of their choice without good cause.

VI. ANALYSIS I.

Did the law firm receive confidential information attributable to a solicitor-client relationship with the husband relevant to the matter at hand, being the separation of the husband and the wife? [ 79 ] One of the principles in conflict cases established by the Supreme Court as noted above is that a lawyer cannot act against his client or former client if the lawyer has received relevant confidential information ( MacDonald per Sopinka J. at p. 1261). [ 80 ] The husband has established that the law firm received confidential information from him relevant to the separation and is in a disqualifying conflict of interest.

The husband’s retainer with the law firm was for purposes of the separation of the husband and wife. The evidence is clear that confidential information was provided by the husband to the law firm respecting family law issues respecting the separation. One of the issues in the pleadings filed by the parties relates to the husband’s property claims regarding the family home and vacation condominium. Not only did the husband discuss family property issues with Mr. Stewart, but Mr.

Stewart prepared the Homestead Notice which claimed an interest on behalf of the husband in the family home adverse to the titleholders to the property, being the wife, her adult son and her father. [ 81 ] As Carr J. points out in Melnyk v. Melnyk , 2008 MBQB 238 , in a family law file, “the exchange of information between lawyer and client often includes discussions of a highly personal, and of course, confidential nature” (at. para. 5). [ 82 ] I do not accept the wife’s argument that the law firm did not receive confidential information because financial disclosure is mandatory in family law proceedings.

The suggestion that financial information given by a client to their lawyer is not confidential information because family law legislation and the New Family Case Flow Model require the production of certain financial disclosure is not reasonable. Whether the financial disclosure is a Form 70DD, which the client prepares in draft to review with the lawyer, or an income tax return, the financial disclosure does not lose its confidential nature. (It is unknown what “original documents” Mr.

Stewart returned to the husband in his letter sent on February 12, 2021.) [ 83 ] Nor do I accept the wife’s submission that no confidential information was disclosed respecting the husband’s property claims regarding the wife and the father because property issues are dependent upon public registry documents and principles of resulting trust law. The husband relied on Mr. Stewart’s advice, expertise and

interpretation of the facts and the law of resulting trust to his circumstances. Their discussions and communications respecting the outstanding issues of child support, spousal support and property constitute confidential information, as well as their agreement to have Mr. Stewart prepare the Homestead Notice for the husband. [ 84 ] The husband was not cross-examined on his evidence as to either the nature of the communications he had with Mr. Stewart or

the confidential documents that he provided to Mr. Stewart. Mr. Stewart did not file an affidavit denying the husband’s evidence. Whilethe law firm returned the husband’s documents to him, they continue to be in possession of “notes” of their communications with thehusband and emails with him.

II.Is there a risk that the confidential information will be used to the prejudice of the client? [85] Having found that the law firm received confidential information attributable to the solicitor and client relationship with thehusband relevant to the separation of the parties, I must consider whether there is a risk that the confidential information will be shared,resulting in prejudice to the husband. The risk is determined from the perspective of a reasonably-informed person, who represents thepublic.

The appearance of impropriety, not just actual misuse of confidential information, is considered when assessing the risk. [86] As expressed by Sopinka J. in MacDonald, there is a presumption that all members of a law firm are imputed with theconfidential information obtained by other members of the law firm and that to overcome this presumption, there must be “clear andconvincing evidence” that the lawyers have taken all reasonable measures to prevent disclosure (at pp. 1262-63): …There is, however, a strong inference that lawyers who work together share confidences.

In answering this question, the court shouldtherefore draw the inference, unless satisfied on the basis of clear and convincing evidence, that all reasonable measures have been takento ensure that no disclosure will occur by the "tainted" lawyer to the member or members of the firm who are engaged against the formerclient.

Such reasonable measures would include institutional mechanisms such as Chinese walls and cones of silence. … [87] The Supreme Court in MacDonald did not find from the sworn affidavits of the two subject lawyers that no discussions of thecase had occurred and their undertaking that none would occur was sufficient to rebut the “strong inference of disclosure”.

Further, theCourt noted the absence of “independently verifiable” screening steps (at p. 1264). [88] In the present case, there is no affidavit evidence from the law firm that indicates that no discussions of the case have occurred,nor an undertaking that none will occur. Nor is there an assurance that the husband’s file was sealed and not accessible to any member ofthe law firm or that any other “firewall” effort was taken.

No assurances have been given to the Court whatsoever. [89] I find that there is a risk that the confidential information that the law firm possesses about the husband will be used to theprejudice of the husband. The consequence of disclosure is actual, not speculation. As Sopinka J. emphasized in MacDonald (at p.1263), the preservation of the confidentiality of information given to a lawyer and the confidence of the public in the integrity of theprofession and the administration of justice take precedence over the value of the right to counsel of one’s choice.

The Bright Line Rule [90] In addition to the law firm being in a disqualifying conflict of interest because it possesses relevant confidential information thatcould be used to prejudice the husband, I find that the law firm’s concurrent representation of the husband and the wife, who wereadverse in legal interests, triggers the bright line rule. The law firm breached the bright line rule when it accepted the wife’s retainer andalso its duty of commitment to the husband’s cause when it terminated the husband’s retainer in favour of the wife’s.

As McLachlinC.J.C. in McKercher notes at para. 10: In addition to its duty to avoid conflicts of interest, a law firm is under a duty of commitment to the client’s cause which prevents it fromsummarily and unexpectedly dropping a client in order to circumvent conflict of interest rules…. [91] In the present case, the immediate legal interests of the husband and wife are directly adverse. The law firm’s concurrentrepresentation of the husband and wife fell within the scope of the bright line rule.

It was reasonable for the husband to expect that hislaw firm would not act against him in respect to the matter for which he retained the law firm for personal advice. The “Duty of Loyalty” Between Solicitor and Client [92] The duty of loyalty provides that having represented a party, the same law firm cannot act as an adversary of that party. I amsatisfied that, at all material times, there was a “current meaningful” solicitor-client relationship between the husband and the law firm.

The fact that the law firm returned the husband’s retainer funds after the wife subsequently retained it, does not undo the fact that thehusband provided the law firm with confidential information and obtained advice and assistance from the law firm respecting hisseparation. [93] The law firm, not just Mr. Stewart, “owes a fiduciary duty to its clients” (at para. 29 in Neil).

Is the disqualification motion brought for tactical abuse rather than principled reasons? [94] The wife argues that the husband has brought his disqualification motion for tactical reasons. [95] Our Court of Appeal in Canadian Pacific Railway Company v. Thorvaldson, (MB CA), noted the importanceof determining whether there is a genuine issue of conflict or whether the motion for removal is a strategy for delay or positioningpurposes at para. 19: …It is incumbent to ask if there is genuinely an issue of conflict, or is the issue simply being raised as a strategic tool where it might

well advantage the party raising it simply to delay matters or for other positioning purposes? … [ 96 ] I do not find that the claim of conflict is asserted by the husband for purely tactical reasons. The husband was never cross- examined on this. The husband has nothing to gain in requiring the wife to have a lawyer who is not at the law firm. The wife admits that she has never been a client of the law firm until February 2021.

Within a month upon retaining new counsel, the husband immediately expressed his objection to the wife being a client of the law firm that he had previously retained for their separation. [ 97 ] I accept the evidence of the husband that he was referred to the law firm, in particular to Gerald Ashcroft by family and friends, and that he did not know that the law firm had represented the wife’s father, brother and company over the years. The husband deposes that he knew that Mr. LaBossiere was a lawyer who likely represented Hitrac and/or Donald Scharf but that he did not know Mr.

LaBossiere’s last name or the law firm with which that individual was associated. The evidence of Mr. Scharf, Mr. LaBossiere and the wife that the husband knew otherwise is speculation.

The husband was not cross-examined on his affidavit evidence. [ 98 ] In my view, the evidence does not support a finding that the husband, a layperson, would have absorbed which lawyer represented the wife’s father or where they practiced from introductions at social events and then designed an entire plot based on those introductions. [ 99 ] Nor do I accept the wife’s assertion that the husband’s retainer of the law firm and his removal motion was a strategy to bolster his settlement position because the wife’s father and the wife would pay a “premium” to settle the case to prevent (1) the wife’s father from having to find another law firm to act for him regarding the husband’s property claims and (2) the wife from losing the law firm of her choice. [ 100 ] It was the wife who initiated settlement discussions through Ms.

Grande, not the husband. The nature of the settlement offers are not before the Court. [ 101 ] Further, the wife’s suggestion that the husband may have withheld information from Mr. Stewart, such as the identity of Mr. Scharf or that he planned to sue Mr. Scharf, is contrary to the evidence of the husband, which is unchallenged. It is common practice for family law clients to provide the maiden name of a spouse to their solicitor, for conflict searches and for preparing court documents. Based on this well-established practice, it is probable that Mr.

Stewart would have had the wife’s maiden name to use for purposes of a conflict search. In addition, in order to prepare the Homestead Notice, Mr. Stewart would have conducted a legal search of the property, confirming that Mr. Scharf was an owner of the property. Mr. Stewart would have been aware that Mr. Scharf, as an owner of the property, may be a party adverse in interest.

I accept the husband’s unchallenged evidence that he did not withhold any relevant information from the law firm. [ 102 ] I do not accept the wife’s submission that the husband’s actions of participating in settlement negotiations suggest that there was no genuine concern regarding the danger of confidential information being shared. Nor do I find that the husband waived the conflict of interest when he agreed to engage in settlement negotiations initiated by the wife’s counsel.

The New Family Case Flow Model, amendments to the Divorce Act , R.S.C., 1985, c. 3 (2 nd supp .), The Family Law Modernization Act , S.M. 2019, c. 8 , Bill 9, 4 th session, 41 st Legislature and The Family Law Act, the Family Support Enforcement Act and the Inter-Jurisdictional Support Orders Amendment Act , S.M. 2022, c. 15 , Bill 17, 4 th Session, 42 nd Legislature (to be proclaimed), encourage parties to attempt settlement discussions.

The husband raised the objection on the ground of conflict of interest at the earliest opportunity and should not be prejudiced for agreeing to the wife’s suggestion to participate in genuine settlement negotiations, with the goal of minimizing legal costs and family disharmony. VII. CONCLUSION [ 103 ] I accept the husband’s position that the law firm is in a disqualifying conflict of interest because the husband shared confidential information with the law firm that is directly related to the issues that the parties have pled in their pleadings. The law firm continues to retain Mr.

Stewart’s notes and emails regarding his representation of the husband and has given no assurances that the confidential information received will not be shared. Mr. Stewart did not offer any evidence to suggest that he only had the file a brief time and that he never discussed the file with any of his colleagues.

He provided no evidence to refute the allegations of the husband. [ 104 ] In addition, I find that the law firm is in a disqualifying conflict of interest because it breached the bright line rule by accepting the retainer of the wife when already acting for the husband respecting the separation of the parties. [ 105 ] I am not persuaded that it would be appropriate in the circumstances of this case to exercise my discretion and permit the law firm to represent the wife, having represented the husband respecting their separation. This is early in the proceedings, prior to a triage conference being held.

This is not a situation where the conflict was discovered in the latter stages of the litigation. In this case, the husband’s counsel sent a letter to the law firm immediately upon being retained about the conflict. Further, the law firm has no history with the client. [ 106 ] I find that the interests of the administration of justice require that the law firm be disqualified from representing the wife and acting against the husband in connection with their family law proceedings. [ 107 ] Costs may be spoken to if not agreed to by counsel. _________________________ ACJ