Date: 19991110
Docket: A-623-98
| CORAM: DÉCARY J.A. |
LÉTOURNEAU J.A.
NOËL J.A.
BETWEEN:
GROUPE TREMCA INC.
- and -
JAGNA LIMITED,
Plaintiffs/Appellants,
AND:
TECHNO-BLOC INC.,
Defendant/Respondent.
Hearing held at Montréal, Quebec, Tuesday, November 9, 1999
Judgment rendered at Montréal, Quebec, Wednesday, November 10, 1999
REASONS FOR JUDGMENT BY: DÉCARY J.A.
Date: 19991110
Docket: A-623-98
| CORAM: DÉCARY J.A. |
LÉTOURNEAU J.A.
NOËL J.A.
BETWEEN:
GROUPE TREMCA INC.
- and -
JAGNA LIMITED,
Plaintiffs/Appellants,
AND:
TECHNO-BLOC INC.,
Defendant/Respondent.
REASONS FOR JUDGMENT OF THE COURT
(Delivered from the bench at Montréal, Quebec
on Wednesday, November 10, 1999)
DÉCARY J.A.
[1] We are all of the view that Blais J. was right to reverse the prothonotary"s decision and rule that counsel for the appellants were disqualified from representing them because of a conflict of interest with the respondent. The judgment of Blais J. is published in (1998) 159 F.T.R. 1, and that of the prothonotary in (1998) 158 F.T.R. 68.
[2] The prothonotary in fact imposed a lower burden of proof on counsel than that required in the circumstances.
[3] In 1990 counsel currently representing the appellants were consulted by the respondent about the marketing of a product which might infringe a patent held by the appellants. At that time counsel gave the opinion that the patent would not prevent the marketing of the product and they advised the respondent not to sign the operating licence for this product proposed by the appellants. The respondent, on receiving this opinion, did not sign the licence and marketed a product slightly different from the one about which it consulted counsel.
[4] Seven years later, in 1997, the appellants, represented by the same counsel who had formerly advised the respondent, brought proceedings against the respondent for infringement of their patent on this new product.
[5] In the Court"s opinion this was a case of a conflict of interest which prima facie falls within the prohibition against a lawyer who has acted for a client acting against that same client in the same or a related case. (See as to this Comment No. 8 of Chapter V of the Canadian Bar Association Code of Professional Conduct.)
[6] There was lengthy discussion in the judgment a quo and in the pleadings of the judgment by the Supreme Court of Canada in MacDonald Estate v. Martin, [1990] 3 S.C.R. 1235. That judgment did lay down the general rules applicable in conflict of interest cases, but care should be taken not to regard them as an automatic solution to every dispute that may arise in this area. The context was that of a conflict of interest that might have occurred due to the fact that "a former junior solicitor for the appellant transferred her employment to the law firm acting for the respondent" (at 1239). Reference was made to the solicitor"s "mobility", "changes in the composition and management practices of law firms . . . reflected in changes to ethical practices of the profession" and to "merger, partial merger and the movement of lawyers from one firm to another" (at 1243).
[7] To determine whether there was such a conflict of interest as to disqualify the solicitor, the Supreme Court imposed a three-stage procedure.
[8] First, the client had to show "that there existed a previous relationship which is sufficiently related to the retainer from which it is sought to remove the solicitor" (at 1260).
[9] Secondly, once this burden has been met the court "should infer that confidential information was imparted unless the solicitor satisfies the court that no information was imparted which could be relevant". At this stage, Sopinka J. continued for the majority, "this will be a difficult burden [for the solicitor] to discharge. Not only must the court"s degree of satisfaction be such that it would withstand the scrutiny of the reasonably informed member of the public that no such information passed, but the burden must be discharged without revealing the specifics of the privileged communication".
[10] Thirdly, once the first two stages have been passed the Court must decide "whether the confidential information will be misused" (at 1261). Sopinka J. continued, "a lawyer who has relevant confidential information cannot act against his client or former client. In such a case the disqualification is automatic. No assurances or undertakings not to use the information will avail. The lawyer cannot compartmentalize his or her mind so as to screen out what has been gleaned from the client and what was acquired elsewhere". (My emphasis.)
[11] In MacDonald Estate, the Supreme Court of Canada dealt with a possible conflict in a mega-firm. A solicitor had worked actively on the case in which the new firm employing her was acting against her former client. This is a modern illustration of the type of conflict facing lawyers in this era of mobility resulting inter alia from mergers of firms, where as a result information given to one counsel may end up in another firm.
[12] The situation is quite different in the case at bar, which is an illustration of the traditional type of conflict: a client goes to a firm which then acts against the client. Only one firm is involved and the question of whether information, once regarded as confidential and relevant, ends up in another firm does not arise since the information only circulated within this firm. The third factor mentioned by Sopinka J. in MacDonald Estate, namely that of "the desirability of permitting reasonable mobility in the legal profession" (at 1243), is not involved in this traditional type of conflict. It is not the lawyer who is changing firms, it is the firm which is changing clients. It follows that the balance to be maintained in the case at bar is between the first factor identified by Sopinka J. " "the concern to maintain the high standards of the legal profession and the integrity of our system of justice" " and the second factor " "[the right of] a litigant . . . not [to] be deprived of his or her choice of counsel without good cause".
[13] It seems to the Court that once a law firm issues a legal opinion leading the client to adopt a particular line of conduct, that firm places itself in a conflict of interest situation which is no longer potential but actual if it subsequently takes it upon itself to act against that client for activities relating to the line of conduct. The firm must bear the consequences of its choices of client, and the first client chosen should as a general rule be the only one represented in any problem arising out of the particular retainer. A firm which in such circumstances undertakes to represent a second client will have difficulty persuading the Court that the second client"s right to retain its services takes priority over the first client"s right to assume the loyalty of its counsel.
[14] It seems clear in the case at bar that the client has discharged the first burden upon it: there is a relationship between the retainer it gave counsel for the appellants in 1990 and the retainer now relied upon by the same counsel against their former client, such that there is no need for further argument before passing on to the second stage.
[15] At this stage, it seems equally clear that "relevant confidential information" was given to counsel for the appellants by the respondent. Counsel knew that the respondent was trying to place itself outside the scope of the appellant"s patent. That was essentially the reason the respondent consulted counsel and the latter are hardly in a position now to argue that what was said at the time is now neither confidential nor relevant. The respondent acted on the legal opinion and advice which it received in 1990. In our opinion, this is of the greatest relevance when it is this activity which is the basis for the action brought against it by the very people who had advised it.
[16] We thus come to the third stage, and here the Supreme Court is categorical: counsel who has received relevant confidential information cannot act against his or her former client. The pendulum previously in motion now points irrevocably towards a conflict of interest. In our view, this is where the prothonotary went wrong.
[17] The prothonotary erred in stopping at the second stage. In his review of the confidential information he failed to take into account all the exchanges which had occurred between the parties, and especially the fact that in the case at bar counsel for the appellants were told of the respondent"s strategy. He should have regarded the line of conduct the respondent adopted on receiving the opinion as relevant for the purposes of the case. In short, he erred in principle by not adjusting the general rules laid down by the Supreme Court in MacDonald Estate to the circumstances of the case.
[18] That being so, Blais J. could review the case de novo and the appellants did not persuade this Court that in so doing the judge made any error that would justify its intervention.
[19] In concluding, we adopt these observations by Gonthier J., then a judge of the Quebec Superior Court, referred to by Blais J. in paragraph 39 of his reasons and repeated in part by Sopinka J. at 1256:
| [TRANSLATION] |
| However, solicitor-client privilege is not the only reason to prohibit a conflict of interest independently of any issue as to simultaneity of retainers. To allow a solicitor to advise and act on behalf of clients with opposing interests, albeit successively, in the same case without their agreement, would undermine the confidence that a litigant must have in relation to his counsel, and would be incompatible with the loyalty that a solicitor owes to his client. These two conditions are closely interrelated and essential to the accomplishment by the solicitor of his role as a counsellor of his client and as his client"s representative in court. Such a practice is especially inadmissible given the necessity not only to assure the independence and impartiality but also to make this apparent. This is the price of ensuring not only that justice is done but that it is seen to be done, in accordance with the well-known maxim on which the integrity of the judicial system (of which solicitors are an essential element) is based. Such a practice may also be in conflict with the right of the parties to a full and equal hearing, as prescribed by s. 23 of the Charter. |
| These conclusions are consistent with the interpretation of conflict of interest by the profession itself in the Canadian Bar Association"s Code of Professional Conduct , in which a very similar general provision is found in article 3.5.04, in Chapter 5. |
[20] The appeal will be dismissed with costs.
| Robert Décary J.A. |
Certified true translation
Bernard Olivier, LL. B.
| FEDERAL COURT OF CANADA APPEAL DIVISION Date: 19991110 Docket: A-623-98 BETWEEN: GROUPE TREMCA INC. - and - JAGNA LIMITED, Plaintiffs/Appellants, AND: TECHNO-BLOC INC., Defendant/Respondent. REASONS FOR JUDGMENT |
FEDERAL COURT OF CANADA
APPEAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
| COURT No.: A-623-98 |
| STYLE OF CAUSE: GROUPE TREMCA INC. |
- and -
JAGNA LIMITED,
Plaintiffs/Appellants,
AND:
TECHNO-BLOC INC.,
Defendant/Respondent.
| PLACE OF HEARING: Montréal, Quebec |
| DATE OF HEARING: November 9, 1999 |
REASONS FOR JUDGMENT OF THE COURT (DÉCARY, LÉTOURNEAU AND NOËL JJ.A.)
| DATED: November 10, 1999 |
APPEARANCES:
| François Grenier for the Plaintiffs/Appellants |
| Jean Carrière for the Defendant/Respondent |
SOLICITORS OF RECORD:
| LÉGER, ROBIC, RICHARD for the Plaintiffs/Appellants |
Montréal, Quebec
| MENDEL, ROSENTZVEIG, SHACTER for the Defendant/Respondent |
Montréal, Quebec