2005 BCSC 116 Salico Property Marketing Corporation et al v. Farris Vaughan Wills&Murphy

Before: The Honourable Mr. Justice Burnyeat

Reasons for Judgment
(From Chambers)

Counsel for the Plaintiffs	M.A. Clemens, Q.C.
Appearing on behalf of the Estate of Allen Richard Tomlinson, Deceased	J.M. Webster
Counsel for the Defendants	C.E. Hinkson, Q.C. & S.Y. Bhura
Date and Place of Hearing:	January 13, 2005
	Vancouver, B.C.

[1] The application on behalf of the Defendants is that H.C. Ritchie Clark, Q.C. and the law firm of Devlin Jensen be removed and enjoined from acting as counsel for the Plaintiffs in these proceedings. The Defendants assert that Mr. Clark and the law firm of Devlin Jensen have a disqualifying conflict of interest in their representation of the Plaintiffs so as to disentitle them to continue to act as counsel.

BACKGROUND

[2] George and Peter Cragg are brothers and both have been involved in the design, development and construction of real estate projects since the 1970s. Salico Property Marketing Corporation (“Salico”), Cragg and Cragg Design Group Ltd. (“Design”), and Thorcon Enterprises Ltd. (“Thorcon”) are all British Columbia companies controlled by Messrs. Cragg. Robert S. Anderson is a partner of Farris Vaughn Wills & Murphy (“Farris”).

[3] Mr. Anderson has known Messrs. Craggs for approximately 15 years and has acted for them and some of their companies in a number of different litigation matters. Mr. Anderson was counsel for the Plaintiffs in an action commenced by Salico, Design, Thorcon, George Cragg, Peter Cragg and Cathy Cragg against Instafund Financial Services, also known as Instafund Financial (Commercial), Instafund Mortgage Management Corp. (collectively “Instafund”), and Edward Korbin, in the Supreme Court of British Columbia (Action number C995838 Vancouver Registry) and in the Court of Appeal of British Columbia (Action number CA028094) (collectively “Salico Action”).

[4] Alan Richard Tomlinson was the solicitor for the Plaintiffs in connection with the financing for the development project (“Tower Project”) which gave rise to the Salico Action. Mr. Tomlinson is now deceased. For the purposes of the present action, the main issue before the Court in the Salico Action is the question of whether Instafund was or was not required to advance promised financing for the Tower Project.

[5] On December 14, 2000, the Salico Action was dismissed. On September 24, 2001, the Court of Appeal dismissed the appeal from the Judgment dismissing the Salico Action.

[6] Following the decision in the Court of Appeal, Messrs. Cragg asked Mr. Anderson to provide them with an overview of a possible cause of action that they might have against Mr. Tomlinson in connection with the advice he provided relating to the proposed funding of the Tower Project. As Mr. Anderson considered himself to be a potential witness in connection with any such action, he recommended to Messrs. Cragg that they retain other counsel to represent them. The Plaintiffs retained Mr. Clark to represent them.

[7] On October 22, 2001, Mr. Anderson wrote to Salico to provide a “... brief overview of some of the issues that might arise if Salico Property Marketing Corporation ... and/or others commence an action against the estate of Mr. Tomlinson ... in connection with the advice he provided relating to the proposed funding of the Tower Project.” In that letter, Mr. Anderson advised: “As we have explained, in view of my being a potential witness in connection with any such action, we would not be able to act on your behalf.”

[8] In the letter was a “brief chronology of our involvement with Salico and Mr. Tomlinson” including the note that “clause 4.20” [the clause dealing with the obligation on the mortgagee to fund the amount set out in the commitment letter and the mortgage] did not come up in the conversations of September 17, 1999 or September 28, 1999 between Mr. Tomlinson and members of Mr. Anderson’s firm. Regarding a March, 2000 meeting between Messrs. Anderson and Tomlinson, Mr. Anderson stated that he had raised clause 4.20 with Mr. Tomlinson and that Mr. Tomlinson had stated that:

... he was aware the clause was in the mortgage and that he had reviewed it with the Craggs. He said that it had never been raised by Mr. Korbin or by Mr. McLeod. Mr. Tomlinson stated that it was his view that he had related to the Craggs that notwithstanding clause 4.20, Instafund was obliged to fund and that clauses like 4.20 relate only to draws after the initial funding. Mr. Anderson then expresses an opinion to Messrs. Cragg that Mr. Tomlinson was: “... wrong and, therefore, likely negligent in connection with this advice.”

[9] Further in the letter to Salico, Mr. Anderson stated:

In connection with clause 4.20, we understand that it is the recollection of both George and Peter Cragg that Mr. Tomlinson reviewed clause 4.20 with them during the weekend of September 10, 1999, and informed them that clause 4.20 did not allow Instafund not to fund the Instafund Third Mortgage. That advice is consistent with what Tomlinson told Anderson during their meetings in March, 2000.

[10] The October 22, 2001 letter provides a very detailed analysis of the likely issues in any action for negligence against Mr. Tomlinson and the likely defences that would be available to the Estate of Mr. Tomlinson if such an action was commenced. As well, Mr. Anderson sets out in his “brief chronology” that Ms. Herbst of Farris prepared a memorandum for Mr. Anderson relating to clause 4.20 on March 20, 2000. On March 24, 2000 an affidavit of Mr. Tomlinson in the Instafund Action was “finalized and sworn”.

[11] On January 30, 2002, Mr. Clark commenced an action against the Estate of Mr. Tomlinson wherein Salico, Design, Thorcon and Peter Cragg were Plaintiffs and The Estate of Allan Richard Tomlinson, Deceased, was the Defendant, being Action No. S020570 (Vancouver Registry), (“Tomlinson Action”).

[12] In April, 2002, J.M. Webster, counsel for the Estate of Mr. Tomlinson, asked Mr. Anderson to agree to be interviewed on a without prejudice basis concerning the recollections of Mr. Anderson about what Mr. Tomlinson had told him about advice that he had given to the Plaintiffs in the Tomlinson Action.

[13] In his April 2, 2002 letter to Mr. Anderson, Mr. Webster stated in part:

I gather from Ritchie Clark that you had some discussions with Mr. Tomlinson about his advice given surrounding Instafund’s position that the loan had to be drawn down and all issues resolved, particularly the additional interest payments, by, I suppose, way of a standby fee before he died. What I would like to do is meet with you and take a tape-recorded statement of your recollection of what Mr. Tomlinson had to say. I don’t see that this could possibly have been an occasion clothed with solicitor/client privilege vis-à-vis Mr. Tomlinson seeing as he is on the proverbial other side of the fence from your clients now and the commencement of the process invokes a necessary waiver of privilege.

[14] Mr. Anderson forwarded this letter to Mr. Clark. After discussing the matter with his clients and Mr. Anderson, Mr. Clark agreed that Mr. Anderson could be interviewed and also received instructions to waive solicitor/client privilege on behalf of the Plaintiffs. Mr. Clark then advised Mr. Webster in a June 21, 2002 letter: “I confirm my client’s preliminary consent to your conducting an interview of Mr. Anderson and to provide a waiver of privilege.”

[15] Mr. Clark was being pressed by Mr. Webster to provide a List of Documents. Mr. Clark asked Mr. Anderson to assist him in the preparation of the List of Documents in the Tomlinson Action. Mr. Anderson agreed to do so and delivered the draft List of Documents to Mr. Clark on July 24, 2002.

[16] In his June 24, 2002 letter requesting Mr. Anderson assist in the preparation of the List of Documents, Mr. Clark also requested that Mr. Anderson meet with him and: “... point me to anything within your files or documents that would assist me in providing Mr. Webster with particulars of loss and damage....”

[17] On July 25, 2002, Mr. Anderson had a meeting with Messrs. Clark and Webster. Prior to the meeting, Mr. Anderson met with Mr. Clark and discussed with him the views that Mr. Anderson had regarding the Salico Action, the Tomlinson Action and his evidence. During the meeting with Messrs. Clark and Webster, Mr. Anderson was interviewed concerning his recollection of what Mr. Tomlinson had told him about his advice to the Plaintiffs.

[18] On January 21, 2003, Mr. Webster took out an appointment in the Tomlinson Action to examine Mr. Anderson as a representative of Salico. That examination took place on April 30, 2003. In preparation for that examination, Mr. Anderson met with Mr. Clark and discussed the Salico Action and the Tomlinson Action and had what he describes as a candid discussion with Mr. Clark concerning his evidence. Regarding the naming of Mr. Anderson as a representative of Salico to be examined in the Tomlinson Action, Mr. Clark states:

I had not anticipated that Appointment. I had always considered Mr. Anderson a potential witness, not a potential representative of my client for discovery. In fact, I viewed the Appointment as naming, perhaps, an inappropriate representative. I was not, however, instructed to contest the Appointment.

[19] On May 22, 2003, Mr. Webster wrote to Mr. Clark requesting the production of further documents. A copy of that letter was forwarded to Mr. Anderson. Referring to the “testimony” of the Plaintiffs in the Tomlinson Action, Mr. Webster stated:

Your clients’ testimony is that they were never advised with anything to do with the boiler plate in general or the discretion to advance clauses in particular. In my view, that is telling evidence as to the appropriate standard of practice. I will leave it for you to suggest that the practice by Farris & Company was negligent, if you dare. I want to interview [four members of Farris] ... about the advice they gave on each and every one of those mortgage transactions involving discretion to advance clauses to either of the Craggs. I am sending a copy of this letter to Rob Anderson as I assume he will be the point man on that.

[20] When he received that letter, Mr. Clark wrote Mr. Anderson on July 31, 2003 and, after setting out the fact that Mr. Webster was taking the position that the Plaintiffs in the Tomlinson Action were fully knowledgeable about the meaning of the “discretion to advance clause” about which Mr. Tomlinson was said to have negligently advised the Plaintiffs, Mr. Clark requested that Mr. Anderson advise him about the following:

What is relevant to you, however, is that an issue has arisen which requires information from you as to the advice you gave or did not give to the Craggs when you acted for them on the mortgage transactions. The Craggs have given evidence that, prior to dealing with Mr. Tomlinson, they had never asked, specifically, any of the various lawyers who acted for them about the wording of the “boiler plate” in their mortgages, and they had never been given specific advice about the meaning of any particular discretion to advance clause. Indeed, it would be consistent with Mr. Third’s opinion that that advice would not normally be given.

The Craggs have not specifically waived solicitor/client privilege over what may or may not have been discussed between you, although they have given evidence that they did not receive any advice on the particular discretion to advance clause contained in the mortgages with respect to which you were acting.

While I agree that there is no spectre of a claim against you in this case, that has nothing to do with quantums of insurance, it is because the Craggs do not allege you breached any duty to them, and, indeed, it would be impossible to make such allegation.

The long and the short of the above is that I would like to speak with you on behalf of our mutual clients before you discuss matters with Mr. Webster. It is prudent and appropriate, in my view. Perhaps you might be kind enough to drop me a short note advising whether you have any recollection of the transactions in question, and, if so, what that recollection might be, and, in a general way, whether it is your practice to explain the boiler plate provisions to clients of the sophistication of the Craggs.

[21] Settlement discussions ensued regarding the Tomlinson Action. On October 20, 2003, Mr. Clark wrote Mr. Webster stating:

In connection with the above noted matter, your blandishments to me about Mr. Anderson which I, of course, passed onto my clients coupled with Mr. Cameron’s [of the insurer] advice that he would not settle the claim against Mr. Tomlinson without obtaining a Release of Mr. Anderson have prompted my clients to ask me for an opinion abut Mr. Anderson’s conduct. I am in the course of preparing that opinion.

It strikes me that there is not much to discuss or deal with till I have rendered that opinion to my clients. If I conclude Mr. Anderson was negligent and liable and caused some harm, then, obviously, an action would have to be commenced which would change the shape of the table. If I conclude that he was not negligent or caused no loss, then we could proceed as planed [sic].

I expect to have final instructions from my client on the issue by about the middle of next week.

[22] A copy of that letter was forwarded to Mr. Anderson by Mr. Webster with the note on it: “Rob: I thought you should know about this. Jack.” There is nothing in evidence which would allow me to conclude that Mr. Clark advised Mr. Anderson directly about the discussions with Mr. Cameron, that he was preparing an opinion about the possibility that Mr. Anderson had been negligent in the advice that he had given to the Plaintiffs in the Tomlinson Action, or that he forwarded a copy of Mr. Webster’s letter to Mr. Anderson.

[23] On January 6, 2004, this action was commenced on behalf of the Plaintiffs (“Farris Action”). Mr. Clark is counsel for the Plaintiffs and Devlin Jensen are solicitors of record for the Plaintiffs. The Statement of Claim in the Farris Action claims damages for negligent advice given by Mr. Anderson on the basis that the advice given was provided “Without conducting legal research into the applicable law” and was rendered:

with total disregard of a clause known as the discretion to advance clause, the meaning of which was well known to Farris & Company and which meaning was, in fact and in law, contrary to the advice given by Farris & Company to the Plaintiffs.

[24] The Statement of Claim also alleges that an offer to settle the Salico Action was received in an October 6, 1999 letter from the solicitors for Instafund to Mr. Anderson, that the Plaintiffs in the Salico Action “... had the financial capacity and wherewithal to implement the proposed settlement”, and that, when Mr. Anderson recommended that the settlement offer should not be accepted, he gave advice negligently in that the advice given not to settle the action was given “Without conducting legal research into the applicable law” and was rendered:

[25] In relation to the Farris Action, George Cragg in his Affidavit states:

We were informed, from time to time, that in discussions which Mr. Clark had with Mr. Webster periodically, Mr. Webster expressed the view, as both his own and that of the Law Society insurer, that the entire problem with Mr. Tomlinson not only had no merit, it was of Mr. Anderson’s making and was Mr. Anderson’s fault, and that the insurer was unhappy about that.

We discounted such comments and did not pay a great deal of attention to them, first of all because of the great confidence we had in Mr. Anderson to start with, and secondly because we viewed them as a tactic on the part of the insurer, and thirdly because we had not even considered bringing proceedings against Mr. Anderson and had not sought any advice from Mr. Clark or given him any instructions in any way, shape or form with respect to assessing any liability Mr. Anderson might or might not have.

However, we attended, on October 2, 2003, a settlement meeting with Mr. Cameron of the insurer and with Mr. Webster at the offices of Mr. Clark.

I understand that those discussions were without prejudice and I will not repeat them.

However, the meeting terminated when Mr. Cameron advised the meeting that he would not settle the Tomlinson matter without as well obtaining a Release from us of any liability on the part of Mr. Anderson.

That surprised us and we consulted Mr. Clark and instructed him to consider the facts and the law and to prepare an opinion for us on any potential liability Mr. Anderson might have.

Mr. Clark did so, and subsequent to receipt of that opinion we commenced these proceedings. At no time prior to the meeting with Mr. Cameron and Mr. Webster had we contemplated commencing the within proceedings against Farris & Company.

[26] In his Affidavit, Mr. Clark states that he was informed by George Cragg that, when Mr. Anderson was in the process of referring the matter of a potential action against Mr. Tomlinson out of his office, he had stated to George Cragg words to the effect of: “Your new lawyers may also want to come after me.” However, George Cragg has not sworn an affidavit to state directly such a conversation took place.

[27] Regarding that alleged conversation, Mr. Clark states:

I was not aware of that information until recently and certainly not until after I had issued the Writ of Summons and Statement of Claim herein. Rather, I understood from my clients, and confirm with Mr. Anderson, that he was a potential witness, as Mr. Tomlinson had provided an Affidavit in the action which is the subject matter of this action [sic] which Affidavit Mr. Anderson had prepared over the course of the couple of days. During the course of that preparation, I was informed by Mr. Anderson, and do verily believe, Mr. Tomlinson had described to Mr. Anderson in some detail his advice to my clients with respect to the events which caused them to lose certain mortgage funding.... Throughout our dealings and discussions I always contemplated Mr. Anderson would be called as a witness if the matter [Tomlinson Action] went to trial.

[28] Regarding that paragraph in the Affidavit of Mr. Clark, Mr. Anderson states in his Affidavit:

... I did not tell Mr. Cragg that his new lawyer “may also want to come after me”. At no time was I of the view that I was a potential defendant. At no time prior to the telephone conversation ... [with Mr. Clark after Mr. Clark’s letter to Mr. Webster had been received by Mr. Anderson] did the possibility of my being a defendant arise during my conversations with Mr. Clark.

[29] In his Affidavit, Mr. Cragg states that, after Mr. Anderson received the March 20, 2000 memorandum from Ms. Herbst on the effect of clause 4.20 of the Instafund Mortgage, Mr. Anderson advised them that:

... Mr. Tomlinson may have given us bad advice. He told us he was confident we would win our case, but in the unlikely event we were unsuccessful in the litigation, we could sue Mr. Tomlinson and suggested quite early on, if that were the case, we would have to employ the services of another lawyer as he, Mr. Anderson, was a potential witness due to admissions made to him by Mr. Tomlinson both in September of 1999 and in the course of preparing Mr. Tomlinson’s Affidavit. Whether he formed that view prior to finalizing Mr. Tomlinson’s Affidavit, some days later, I do not know.

[30] Regarding that paragraph in the Affidavit of Mr. Cragg, Mr. Anderson states:

... I did not tell Mr. Cragg that I was “confident we would win our case”. I told Mr. Cragg that they had a good chance of winning but that it was a horse race. I recall saying to Mr. Cragg that litigation was a “crap shoot”. I also told Mr. Cragg, on a number of occasions, that the Craggs should proceed to manage their affairs, and in particular the Tower Project that was the subject of the Salico Actions, on the basis that the action against Instafund would not be successful or that even if it was successful that it would take a long time before the Craggs would receive any money.

[31] In his Affidavit, Mr. Anderson further states:

If at any time I had been advised by Mr. Clark that the Plaintiffs were considering a possible claim against myself or my firm I would not have met with Mr. Clark to discuss the Salico Actions, the Tomlinson Action or my evidence prior to the July 25, 2002 meeting, I would not have attended the meeting voluntarily, I would not have prepared the draft List of Documents of the Plaintiffs in the Tomlinson Action, I would not have met Mr. Clark prior to my examination for discovery and discussed the Salico Actions, the Tomlinson Action or my evidence, I would not have voluntarily agreed to appear for the examination for discovery and would have sought advice from counsel. At no time prior to October 23, 2002 did Mr. Clark inform me that the Plaintiffs were considering any claim against me or my firm. To the contrary, Mr. Clark stated in a letter to me [the July 31, 2003 letter from Mr. Clark] after the examination for discovery that in his view the Plaintiffs did not have any claim against me or my firm.

[32] In his Affidavit, Mr. Anderson sets out a number of communications, telephone conversations and meetings that he had with Mr. Clark including: (a) a telephone conversation in early 2002 “about the circumstances involved in the Tomlinson Action”; (b) a March 2002 discussion with Mr. Clark when the files of Mr. Tomlinson in the possession of Mr. Anderson were discussed, a decision was reached that the files should be forwarded to Mr. Webster without Mr. Clark first reviewing them; (c) a discussion in early April 2002 with Mr. Clark about the recollections of Mr. Anderson regarding the conversation that Mr. Anderson had with Mr. Tomlinson and about the Salico Action generally; (d) the receipt of a copy of a letter that Mr. Clark had written to Mr. Webster wherein Mr. Clark advised that: “... Mr. Anderson will be preparing a draft List of Documents because of his familiarity with the other action and the documents in it.”; (e) a meeting on April 28, 2003 between Messrs. Anderson and Clark where the issue of whether the understanding of Messrs. Cragg about the meaning of Clause 4.20 was or was not before the Learned Chambers Judge in the Salico Action, whether their understanding of the meaning of Clause 4.20 was res judicata in view of the fact that it was not part of the Judgment, and the offer of Mr. Anderson to “... dig out my briefs of authorities [involving the doctrine of res judicata] if it would be of assistance.”; (f) an August 5, 2003 request from Mr. Clark to Mr. Anderson that Mr. Webster had requested that Mr. Anderson be interviewed because he had witnessed a mortgage executed by Messrs. Cragg which contained a “discretion to advance” clause; and (g) a meeting that Mr. Love of Farris had with Mr. Webster in the presence of Mr. Clark wherein Mr. Webster conducted a taped interview of Mr. Love regarding what advice Mr. Love may have given to Messrs. Cragg regarding the obligation to advance clause in another mortgage.

[33] Regarding the October 6, 1999 letter from the solicitors for Instafund setting out the terms of a possible settlement of the matters in issue in the Salico Action, Mr. Clark states:

The only references I ever heard to such discussions or correspondence were the vague references in those portions of Mr. Anderson’s Examination for Discovery ... together with a much briefer but similar reference in the interview of Mr. Anderson conducted by Mr. Webster.” “At no time [prior to October, 2003] ... did I have any instructions at all in any way shape or form to consider any action against Farris & Company. It was never part of my retainer until those events. Throughout my dealings with Mr. Anderson, I always considered Mr. Anderson a potentially important and an extremely likely witness and Mr. Anderson told me that he did too.

CASE AUTHORITIES AND DISCUSSION

[34] In MacDonald Estate v. Martin, [1990] 3 S.C.R. 1235, the Supreme Court of Canada considered the standard to be applied in the legal profession in determining what constitutes a disqualifying conflict of interest. Writing for the majority, Sopinka J. stated that there were three competing values that the court must consider when determining whether there is a conflict of interest in a particular case:

(a) a concern to maintain the high standards of the legal profession and the integrity of the justice system;

(b) the concern that a litigant should not be deprived of his or her counsel of choice without good cause;

[35] To determine if there is a disqualifying conflict of interest, Sopinka J. stated that two questions must be answered:

(a) Did the lawyer receive confidential information attributable to a solicitor-client relationship relevant to the matter at hand?

(b) Is there a risk that the information obtained will be used to the prejudice of the client?

[36] In answering the first question of the test, Sopinka J. set a relatively low threshold and stated:

In answering the first question, the court is confronted with a dilemma. In order to explore the matter in depth may require the very confidential information for which protection is sought to be revealed. This would have the effect of defeating the whole purpose of the application. American courts have solved this dilemma by means of the "substantial relationship" test. Once a "substantial relationship" is shown, there is an irrebuttable presumption that confidential information was imparted to the lawyer. In my opinion, this test is too rigid. There may be cases in which it is established beyond any reasonable doubt that no confidential information relevant to the current matter was disclosed. One example is where the applicant client admits on cross-examination that this is the case. This would not avail in the face of an irrebuttable presumption. In my opinion, once it is shown by the client that there existed a previous relationship which is sufficiently related to the retainer from which it is sought to remove the solicitor, the court should infer that confidential information was imparted unless the solicitor satisfies the court that no information was imparted which could be relevant. This will be a difficult burden 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. Nonetheless, I am of the opinion that the door should not be shut completely on a solicitor who wishes to discharge this heavy burden. (at pp. 1260-1)

[37] In dealing with the second question, Sopinka J. stated:

The second question is whether the confidential information will be misused. 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. Furthermore, there would be a danger that the lawyer would avoid use of information acquired legitimately because it might be perceived to have come from the client. This would prevent the lawyer from adequately representing the new client. Moreover, the former client would feel at a disadvantage. Questions put in cross-examination about personal matters, for example, would create the uneasy feeling that they had their genesis in the previous relationship. (at p. 1261)

[38] While Sopinka J. worded the conflict of interest test in terms of confidential information received in the course of a solicitor-client relationship, subsequent cases have expanded the circumstances under which a disqualifying conflict of interest will be found so that a strict solicitor-client relationship is not necessary for a disqualifying conflict of interest to arise. Rather, it is the communication of confidential information in circumstances creating an expectation of privacy or confidentiality.

[39] Accordingly, a person who is not a client of a lawyer may be afforded protection from the possible disclosure of communications by that lawyer if the person conveyed the information in circumstances creating an expectation of privacy: Williamson v. Roberts and Griffin, [1997] B.C.J. (Q.L.) No. 2248 (B.C.C.A.); KPMG Peat Marwick Thorne v. Davis & Co., [1996] B.C.J. (Q.L.) No. 2016 (B.C.S.C.); Popowich v. Saskatchewan, [1995] 6 W.W.R. 314 (Sask. Q.B.); UCB Sidac International Ltd. v. Lancaster Packaging Inc. (1993), 51 C.P.R. (3d) 449 (Ont. G.D.); and Manville Canada Inc. v. Ladner, Downs, [1993] B.C.J. (Q.L.) No. 554 (B.C.C.A.).

[40] In Williamson, the Regional District of Comox-Strathcona retained Mr. Williamson’s law firm to advise regarding its uninsured exposure in an action brought by a Mr. MacDonald. When Mr. MacDonald received an award of $5 million which was $2 million above the total liability insurance of Comox-Strathcona, Comox-Strathcona retained Roberts & Griffin to represent it in negligence actions against a number of law firms but not including the law firm of Mr. Williamson. Ms. Baker of Roberts & Griffin asked Mr. Williamson to assist in the preparation of the action and later advised him it would be necessary for him to appear as the representative of Comox-Strathcona at the examination for discovery. Mr. Williamson met with Ms. Baker on several occasions to prepare his evidence for the examination for discovery. Afterwards, Mr. Williamson was then served with a notice of motion for an order to add him as a defendant.

[41] An order was made removing the law firm of Roberts & Griffin as counsel and the appeal of that order was dismissed. In delivering Judgment on behalf of the Court, Newbury J.A. stated:

There is no doubt that these and the other cases cited to us have focussed very largely on the confidentiality of client information as the basis for disqualification and that for the obvious reasons cited by Mr. Sugden, courts have strongly resisted interfering in solicitor-client relationships unless such confidentiality is clearly threatened. But Mr. Grauer on behalf of the petitioners says this misses the point. He willingly concedes that Mr. Williamson could not reasonably have expected that any information he disclosed to Roberts & Griffin would be kept confidential from Comox. Instead, he grounds his disqualification application on Mr. Williamson's expectation of an "identity of interest" between Mr. Williamson and Comox an expectation that Roberts & Griffin erroneously (albeit unintentionally) induced by meeting with him in preparation for his discovery as Comox's representative in the ICBC Action. Although he may not have been Roberts & Griffin's client (and in my view he clearly was not), he met with Ms. Baker to work towards a common goal - the success of Comox's action - and was, it may be assumed, encouraged to follow her advice as to how to respond to questions from opposing counsel. He was a "near-client".

From there, it is but a short step to say that Mr. Williamson was entitled to expect that having taken his evidence, Roberts & Griffin would not then move to the other side of the table and cross-examine him on it or otherwise use it against him. Thus it is precisely because Roberts & Griffin were duty-bound to disclose everything they learned from Mr. Williamson to their client that the possibility of unfairness or prejudice to the petitioners arises. In the informal meetings with Ms. Baker, Mr. Williamson may well have been more candid or forthcoming than a properly-prepared party would be in cross-examination. Had he or his firm appreciated they were in jeopardy, they might well have retained their own counsel to be present or might have applied under R. 27(4) of the Supreme Court Rules for an order requiring that some other person be examined as Comox's representative. Almost certainly, they would not have met informally with Ms. Baker as Mr. Williamson did. None of this occurred to Mr. Williamson because Roberts & Griffin had encouraged him to think of himself as a member of Comox's "team". Unlike the corporate officers in cases such as Meehan v. Hopps, supra, he was acting under a misapprehension as to his own position even though, as the Chambers judge found, the circumstances on which his potential liability was based were well-known to the interviewing firm.

(at paras. 10-1)

[42] Newbury J.A. then concluded:

In my view, what transpired in early 1996 between Mr. Williamson and Roberts & Griffin gave rise to an obligation or duty of fairness to Mr. Williamson and his firm that required at the least that he be warned of his potential liability - a potentiality which should have been apparent to Comox's solicitors. Having induced Mr. Williamson to consider himself as "on the same side" as Comox and therefore to be more open than he would otherwise have been, Roberts & Griffin should not now be permitted to rely on their failure to consider his potential liability until it was too late. I fully appreciate that from Comox's point of view, it is harsh to require now that it retain other counsel when any information Roberts & Griffin obtained from Mr. Williamson has assumedly passed to their client; but larger issues relating to the integrity of the justice system - and in the particular, the perceived integrity of lawyers operating as adversaries - are also engaged. Were we to accede to the argument of Roberts & Griffin in this instance, the possibility for real mischief in other cases would, as Mr. Grauer suggested in his factum, be unacceptable:

... it is unreasonable for the Roberts firm to suggest, as it does, that when Williamson attended upon Ms. Baker at her request to be prepared to give evidence on discovery, he could not reasonably expect that he could look to them for advice and counsel without fear that they would use his evidence against him as adverse counsel. If the position of the Roberts firm is accepted in this regard, then it is submitted that any lawyer with less integrity than Ms. Baker and Mr. Roberts can freely "sandbag" potential defendants in the position of Williamson (servants, agents, officers, employees, etc., of a client) by luring them into disclosing information in circumstances of an apparent identity of interest and mutuality of representation, which will then be used against them. It follows that all witnesses in such circumstances would be well advised to obtain independent counsel before agreeing to the procedure. (at para. 16)

[43] Newbury J.A. quoted the following passage from the decision of the learned trial judge and appears to have adopted what was stated by him:

The appearance of conflict of interest exists in the circumstances before me. I do not accept the submission of counsel that Comox would be surprised to hear that the Roberts firm could not continue to act for it. It would be apparent to any reasonably informed member of the public that it is inappro-priate to act for -a client or a representative of a client one day, with full knowledge of the potential for conflict of interest, obtain information from the representative and then act against that repre-sentative. Comox would surely understand that, where the Roberts firm continued to obtain information from Mr. Williamson, when the potential for adding him as a defendant was placed squarely before them by Mr. Doherty's pleadings, the firm should not be permitted to act against him. (at paras. 29-30)

[44] In UCB Sidac International, supra, R.A. Blair J. stated:

... The first is that the word "client" must be taken, in this context, to include "persons who were involved in or associated with [the client] in [the] matter" as pointed out in the excerpt cited from the Commentaries to the Code of Professional Conduct by Sopinka J. earlier in the decision. The second is that the central question addressed in the judgment was not the two "typical" questions noted, but the overriding question: "Is there a disqualifying conflict of interest?" (see p. 267). In addressing this question, one should look to see whether there is "a previous relationship" not only between the lawyer and the client but also between the lawyer and the "person involved in or associated with" the client in connection with the original matter "which is sufficiently related to the retainer from which it is sought to remove the solicitor" to justify the removal sought.

In my opinion, whether technically "clients" of Faskens or not, the defendants Lancaster and Mulholland were "persons involved in or associated with "the client -- UCB -- in the matter of UCB's Canadian operations. Indeed, as noted earlier, they were UCB's Canadian operations until the dispute which is the subject-matter of the lawsuit arose. The dispute is a "related matter" to the Fasken retainer regarding those Canadian operations. It certainly cannot be said to be "a fresh and independent matter wholly unrelated to any work [the Firm] has previously done" for the client or person associated with the client, to adopt the language of the code of ethics.

I am satisfied that "there existed a previous relationship" between the law firm and the defendants Lancaster and Mulholland "which is sufficiently related to the retainer from which it is sought to remove the solicitor[s]" that the inference regarding the imparting of confidential information arises. On the conflicting evidence before me the law firm has not discharged the "difficult burden" of displacing that inference. In the interests of ensuring, in the eyes of the reasonably informed member of the public who is possessed of all the facts, "that even an appearance of impropriety should be avoided", the law firm should cease to act in the action. (at p. 452)

[45] Counsel for the Plaintiff seek to distinguish the decision reached in Williamson on the basis that it was the client and not the opposing party that decided that Mr. Williamson would be the appropriate party to be examined for discovery. I cannot distinguish the decision of Williamson on that basis. First, Mr. Anderson was long involved in the Tomlinson Action so that the request that he be the party to be examined as a representative of Salico postdates his involvement at the request of the plaintiffs in the Tomlinson Action and Mr. Clark, their counsel in that action. Second, while Salico and Mr. Clark were in a position to oppose the naming of Mr. Anderson as the representative of Salico to be examined, that was not done. Rather, with the assistance of Mr. Clark, Mr. Anderson prepared himself for that examination and attended at it. I cannot distinguish the decision in Williamson and I am satisfied that I am bound by the conclusions reached in Williamson.

[46] I am satisfied that Mr. Anderson was a person who conveyed information to Mr. Clark and to the Plaintiffs in circumstances creating an expectation of privacy. Even though Mr. Anderson could not act as counsel in the Tomlinson Action, much of the assistance that he provided put him virtually into the role of co-counsel. On October 22, 2001, Mr. Anderson provided a very detailed analysis of the potential action against Mr. Tomlinson, the likely defences that would be available to the Estate of Mr. Tomlinson, and the involvement of Farris in advising Mr. Tomlinson and the Plaintiffs in the Tomlinson Action about clause 4.20 in the Instafund documentation. Prior to meeting with Mr. Webster, Mr. Anderson met with Mr. Clark to review what Mr. Anderson would be telling Mr. Webster. At the request of Mr. Clark, Mr. Anderson created the List of Documents which was ultimately provided in the Tomlinson Action. At the request of Mr. Clark, Mr. Anderson was to advise Mr. Clark regarding any particulars of loss or damage that would be revealed in the Farris files. Mr. Anderson and members of the Farris firm responded to the request of Mr. Clark and provided Mr. Clark with details about what advice they had given to the Plaintiffs regarding clauses like 4.20 when Farris had acted for the Plaintiffs on previous financing transactions. Mr. Anderson was the representative of Salico at an examination for discovery. Prior to that examination, Mr. Anderson met with Mr. Clark to discuss his testimony on behalf of Salico. Throughout, Mr. Anderson and Farris were acting under the assurance contained in the July 31, 2003 letter from Mr. Clark that there was “... no spectre of a claim against you....” and “... the Craggs do not allege you breached any duty to them, and, indeed, it would be impossible to make such an allegation.”

[47] As was the case in Williamson, there was an “identity of interest” between Mr. Anderson and the Plaintiffs, an assumption that they were working towards a common goal. Mr. Anderson had become a “near-client” so that Mr. Anderson was entitled to expect that Mr. Clark and Devlin Jensen would not then “move to the other side of the table” and use information that they had obtained against Mr. Anderson and Farris. I am satisfied that Mr. Anderson may well have been more candid or forthcoming than a properly prepared witness would be in his cross examination as a partner of Farris in the Farris Action. Mr. Anderson was not given the opportunity to retain his own counsel and was not in a position to apply under Rule 27(4) of the Rules of Court for an order in the Tomlinson Action requiring that some other person be examined as the representative of Salico.

[48] I am satisfied that what transpired in 2001 through 2003 gave rise to an obligation or duty of fairness to Mr. Anderson and Farris that required that, at the very least that they be warned of their potential liability as I am satisfied that this was a potentiality which should have been apparent to both the Plaintiffs and Mr. Clark. Salico was aware that Mr. Anderson had discussions with Mr. Tomlinson regarding clause 4.20 and that Mr. Anderson had received a memorandum of law from Ms. Herbst of Farris regarding clause 4.20. While Mr. Clark claims no knowledge of the October 6, 1999 settlement letter from the solicitors for Instafund, he acknowledges that there were “vague references” to settlement discussions and correspondence in the examination for discovery of Mr. Anderson and he apparently overlooks that the List of Documents prepared by Mr. Anderson and adopted by him lists the October 6, 1999 letter. Even a cursory review of that letter by Mr. Clark might well have led him to seek instructions from the Plaintiffs whether they should continue to seek the assistance of Mr. Anderson or warn Mr. Anderson that he might well be wise to consider his potential liability. Having induced Mr. Anderson either inadvertently or advertently to consider himself as being “on the same side” as the Plaintiffs therefore leading him to be more open that he might otherwise have been, Mr. Clark and Devlin Jensen should not now be permitted to rely on the failure to consider his potential liability until Mr. Anderson’s assistance was committed and completed. I am satisfied that counsel for Mr. Anderson and Farris have met the onus set out in U.C.B. Sidac, supra, of showing that Mr. Anderson was a person so involved in or associated with the Plaintiffs to justify the removal of Mr. Clark and Devlin Jensen from the retainer to continue to act in both the Farris Action and the Tomlinson Action which has now been joined with the Farris Action for trial purposes.

[49] H.C. Ritchie Clark, Q.C. and the law firm of Devlin Jensen will be removed and enjoined from acting as counsel for the Plaintiffs in these proceedings as well as counsel for the Plaintiffs as well as in the Tomlinson Action, being Supreme Court of British Columbia action number S020570 (Vancouver Registry).

“G.D. Burnyeat, J.”
The Honourable Mr. Justice G.D. Burnyeat

Citation:	*Salico Property Marketing Corporation et al v. Farris Vaughan Wills & Murphy,*
	2005 BCSC 116