2010 ONSC 6994, 2010 ONSC 6994

CITATION : Canada v. Canadian Transit Co., 2010 ONSC 6994 COURT FILE NO.: 09-46882 DATE: 2010 1217 ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: HER MAJESTY THE QUEEN IN RIGHT OF CANADA ) ) )))) J. Bruce Carr-Harris and Lawrence A. Elliott for the Respondent, Her Majesty the Queen in Right of Canada - and - ) )) THE CANADIAN TRANSIT COMPANY, THE DETROIT INTERNATIONAL BRIDGE COMPANY and THE CENTRAL CARTAGE COMPANY OF DETROIT ) ) )))) Larry P. Lowenstein and Laura K. Fric for the Appellant The Canadian Transit Company ARGUED: October 6, 2010 (Ottawa) HACKLAND RSJ .

REASONS FOR JUDGMENT [ 1 ] This is an Appeal from the Order of Master MacLeod dated August 6, 2010 wherein he dismissed the Motion of the Canadian Transit Company (the “CTC”), seeking to have the law firm of Lenczer Slaght Royce Smith Griffin LLP (“Lenczner Slaght”) disqualified from acting on behalf of Her Majesty the Queen in Right of Canada in this Application. [ 2 ] The parties are essentially in agreement that the issue on appeal is whether the Master, in exercising his judicial discretion in refusing to disqualify Lenczner Slaght as solicitors of record, applied the wrong legal standards or based his conclusions on irrelevant facts or on factors to which he attached inappropriate weight.

I agree that this is an accurate statement of the issue and the proper standard of review. [ 3 ] The Master provided the following

summary of the background to this litigation between the Government of Canada and the appellants, who are one of the principal owners of the Ambassador Bridge which connects Windsor and Detroit. This very public and high profile litigation has been going on for many years: 6 By way of background, the respondents are the operators of the Ambassador Bridge between Windsor and Detroit and the parent company which controls both.

The bridge was privately constructed in the 1920s pursuant to reciprocal legislation in Canada and the United States granting the respondents the right to construct and maintain the bridge and to collect tolls. CTC is a Canadian corporation operating the Canadian end of the bridge but it is under the same ownership and control as the other respondents all of whom are ultimately owned by the Moroun family.

The Ambassador Bridge is the busiest commercial border crossing in North America. 7 In 1982 litigation was commenced in the Trial Division of the Federal Court of Canada 1 between the government of Canada and CTC under the Foreign Investment Review Act ("FIRA"). The issue was an attempt by the government to block restructuring of the ownership and control of the Canadian company (CTC) under the provisions of the Act. There was also parallel litigation in the United States. The legal proceedings were ultimately resolved by way of settlement agreements signed in 1990 & 1992.

Interpretation of those

agreements is the subject matter of the application and I need not say much about them here.

The government agreed not to block therestructuring under FIRA and the bridge company dropped its response that Canada was attempting to illegally expropriate the bridge.There was also a substantive commitment by the respondents to carry out certain construction in compliance with the Customs Act. 8 The current proceeding is an application by the federal government2 seeking a declaration from the court that the 1990 & 1992agreements neither prevent Canada from establishing a new crossing on the Detroit River nor do they require that the AmbassadorBridge be maintained as the premier border crossing.

The applicant seeks a declaration that the settlements between Canada and CTCimpose no ongoing obligation on Canada with respect to the operation of the Canadian portion of the Ambassador Bridge and do notexempt the respondents from provisions of the International Bridges and Tunnels Act, S.C. 2007, c. 1 ("IBTA").

Amongst its otherprovisions, IBTA purports to supersede any inconsistent provisions of the 1921 legislation that established CTC and to imposerequirements for construction or expansion of international crossings generally. ... 11 Competing plans to either increase the capacity of the Ambassador Bridge or to build a new crossing in a different location havebeen under discussion for many years.

Studies of problems associated with bridge traffic go back more than a decade but by the year2000 the governments of Canada, Ontario, Michigan and the United States or their agencies formally began the Detroit RiverInternational Crossing Project or "DRIC". DRIC is a project to link Highway 401 in Ontario directly to the "I-75" in Michigan. As theDRIC process has proceeded from a study to a proposal, it has ultimately rejected twinning of the Ambassador Bridge. The DRICproposal currently in its final approval stages is for an entirely new bridge.

Moreover it is a proposal to create a bridge which will bepublically owned by agencies of the four governments. 12 The DRIC proposal is being strenuously opposed by the respondents in the media, before regulatory bodies, politically and ofcourse on legal grounds. The respondents have opposed environmental and other regulatory approval of the new bridge and they haverelentlessly lobbied to persuade politicians and the public of the merits of their proposal. [4] In 2001 CTC was represented in its dealings with the Government of Canada by the law firm of Fraser Milner Casgrain(“FMC”).

CTC came to be concerned that FMC was in a conflict of interest because it was discovered that another member of the firmhad accepted another retainer from a competitor of CTC, which was engaged in promoting a new truck only tunnel crossing. [5] It was in order to deal with this conflict that Mr. Slaght of the Lenczner Slaght firm was retained by CTC. CTC did not wantFMC to act for one of its competitors, but at the same time did not wish to lose the services of a particular senior partner of the firm. Mr.Slaght drafted two letters for CTC to send to FMC.

The evidence is that he spent no more than an hour on the matter over the space oftwo weeks in the September-October 2001 timeframe. Mr. Slaght has no current recollection of the information provided to him. Hedoes not accept the appellant’s position that in order to advise CTC on the conflict issue he would have had to have had disclosure ofconfidential aspects of CTC’s strategy. The evidence was that the purpose of Mr. Slaght’s involvement was to try to persuade FMC topreserve CTC’s retainer and at the same time to encourage the firm to cease acting for the competitor.

As matters transpired, FMCdecided that it could not act for either client. [6] A significant finding of the Master was that CTC did not retain Mr. Slaght to advise it on its dealings with the Government ofCanada. Rather, as noted, the purpose of the retainer was to assist CTC to persuade FMC to deal with the conflict of interest in themanner proposed by CTC. [7] The Master held, correctly in my opinion, that any disqualification of Mr. Slaght and his firm would be because of access toconfidential information relevant to the matters currently in issue in the present retainer.

He stated: 17 The question for the purpose of this motion is whether or not Mr. Slaght's involvement in 2001 creates a disqualifying conflict ofinterest in the present proceeding? Since CTC is not a current client of the firm and has not retained Mr. Slaght other than once and sincehe was never retained to litigate against the government of Canada, this is not a "duty of loyalty" case. If there is a conflict it arisesbecause of access to confidential information related to the matters now in issue. [8] The Master went on to pose the question as to whether it is reasonably possible that Mr.

Slaght acquired confidentialinformation pursuant to the first retainer in 2001 that could be relevant to the current application. This question followed from theanalysis of the Court of Appeal in Chapters Inc. v. Davies, Ward & Beck (2001), (ON CA), 52 O.R. (3d) 566, atparagraph 30. The Master accepted that in the context of the 2001 retainer, Mr. Slaght undoubtedly received information which at thattime was confidential and privileged.

However, he held the question is “whether that information is sufficiently relevant to the currentretainer to require disqualification and that is ultimately a question of fact which must be answered based on the evidence in the contextof a particular case”. [9] In terms of burden of proof the Master noted that the Chapters decision established that the moving parties must convince thecourt by clear and cogent evidence that the retainers are sufficiently related.

He correctly pointed out that while it is not necessary todetail the confidences in such a manner that the whole purpose of privilege is destroyed, the client “must demonstrate that the possibilityof relevant confidential information having been acquired is realistic, not just theoretical”. He noted that this analysis is contextual andrequires consideration not just of confidentiality but also of relevance. [10] The Master concluded that the evidence put forward by the appellants failed to convincingly explain what aspect of theinformation imparted to Mr.

Slaght in 2001 is related in any specific manner to the application to construe the agreement signed in the1990’s, which is the current issue before the court. [11] The Master ultimately concluded:

There is nothing in the nature of the retainer of Mr. Slaght that would have required him to be instructed on anything confidential in relation to the

interpretation of the settlement agreements. Although the affidavit states that ... [FMC] ... provided an opinion on the legal obligations of the government, Mr. Slaght was not asked to do so. There is nothing in the evidence that convincingly relates the work that he did or the discussion Mr. Slaght had with Mr. Mancini to the matter to be argued on this application. (paragraph 46) [ 12 ] In

summary, the Master concluded that the appellant had not discharged its burden of showing by clear and cogent evidence that the earlier retainer was sufficiently related to the issues in the current application (the

interpretation of the settlement agreements and the obligations placed on the Government of Canada by such agreements). [ 13 ] As the Court of Appeal stated in Chapters , the question of whether the two retainers in question are sufficiently related, is a question of fact involving judicial discretion. As such, the Master’s findings should only be reversed on appeal if he is found to have applied the wrong legal standard or based his conclusions on irrelevant factors or on factors to which he attached inappropriate weight. [ 14 ] I am unable to find any such errors in the Master’s reasons.

While it is apparent that Mr. Slaght may well have received some confidential information in the context of his brief retainer relating to the conflict of interest issue, the appellant has failed to establish that such information is likely to be used in the current proceedings against the Government of Canada, to the detriment of his former client. [ 15 ] In Consulate Ventures Inc. v.

Amico Contracting and Engineering 1992 Inc. (October 29, 2010), a decision of Doherty J.A. of the Court of Appeal, handed down after the argument of this appeal, it was held that a solicitor was disqualified from acting against a former client in respect of which he had a very brief involvement, similar to Mr. Slaght’s involvement in the present case.

The appellants contend that the facts in Consulate Ventures were strikingly similar to the facts of the present case including that: • counsel was retained “briefly” “for about 2 hours” by the opposing party 11 years earlier, including for advice “about a letter that should be written”; • counsel had no present recollection of the earlier retainer; • many of the documents were no longer confidential, although some were. [ 16 ] Justice Doherty held that the lawyer’s obligation, whether described as a duty of loyalty owed to a former client, or as a professional obligation to promote public confidence in the legal profession and the administration of justice, precluded the lawyer from acting against his former client in the same matter. [ 17 ] The appellants therefore argue that Mr.

Slaght and his firm should be disqualified from continuing to act for the Government of Canada because of their former retainer with the appellant CTC in what they contend is essentially the same matter. [ 18 ] In my opinion, the decision in Consulate Ventures would be binding in this case if Mr. Slaght’s earlier retainer with the appellant was on the same matter as the current case before this court. However, I respectfully agree with the Master’s conclusion that Mr. Slaght’s earlier retainer with the appellant was not the same matter as currently before the court.

It is to be noted that Doherty J.A. in Consulate Ventures expressly found that the two retainers were not merely related but that they were the “very same matter”. I agree with the respondent’s submission that there is no suggestion that Mr. Slaght had been retained to deal with and, or, give any legal advice on any issues on the underlying application.

Rather, he was retained to deal with a peripheral and completely separate issue, namely whether CTC’s relationship with the Fraser Milner firm could be salvaged in the face of a conflict of interest. [ 19 ] The Master’s finding that the two retainers were not sufficiently related to invoke the loyalty principle, which ultimately governed the decision in Consulate Ventures, is entitled to substantial deference and indeed I agree with it. While the appellant’s affidavit filed by Mr. Mancini, made assertions with respect to confidential information being provided to Mr.

Slaght, his assertions were vague and unspecific and in the context of this very public dispute, simply failed to meet the test of clear and cogent evidence establishing a real possibility of the abuse of confidential information.

In my view, the Master in effect adopted the “functional approach” advocated by Doherty J.A. in Consulate Ventures by carefully scrutinizing the nature of the retainers, the very different issues at play and the evidence concerning the allegedly confidential information, in ultimately concluding that there was no real risk of any disclosure of relevant confidential information. [ 20 ] The appellant alleges that the Master made a number of statements, apparently findings of fact, about aspects of the operation of the Ambassador Bridge and about the on-going litigation between the parties, which are based on media coverage of the issues and which he accessed through the internet.

It is said that some of this information is not substantiated by the court record. [ 21 ] I take the Master’s purpose in summarizing some of this information to be to demonstrate the highly public nature of this dispute and that the appellant’s legal position has been put forward in detail in various public proceedings. He saw this as a contextual factor in considering whether there was an air of reality to the concern that counsel might be in a position to use confidential information from the 2001 retainer in the present highly public dispute.

While it is not helpful to mix public information from the media with the evidentiary record, I am satisfied that this did not materially influence the Master’s analysis and did not prejudice the appellant. [ 22 ] I am also of the view that the findings of the Master are not binding at the trial of this application. [ 23 ] In the result the appeal of the Master’s order herein is dismissed.

[ 24 ] The respondent will provide brief costs submissions within 30 days of the release of these reasons and the appellant will respond within 30 days from receipt of the respondent’s submissions. ____________________________ Mr. Justice Charles T. Hackland Released: December 17, 2010 CITATION : Canada v. Canadian Transit Co., 2010 ONSC 6994 COURT FILE NO.: 09-46882 DATE: 20101217

ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: HER MAJESTY THE QUEEN IN RIGHT OF CANADA and THE CANADIAN TRANSIT COMPANY, THE DETROIT INTERNATIONAL BRIDGE COMPANY and THE CENTRAL CARTAGE COMPANY OF DETROIT REASONS FOR JUDGMENT Mr. Justice Charles T. Hackland Released: December 17, 2010