Docket: 90-3235(IT)
91-509(IT)G
91-1816(IT)G
91-1946(IT)G
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BETWEEN:
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TED J. HOCHBERG,
LINDA LECKIE MOREL,
and GEOFFREY D. BELCHETZ
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Appellants,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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____________________________________________________________________
Motions heard on April 28, 2004, at Kitchener,
Ontario,
By: The Honourable Justice E.A. Bowie
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Appearances:
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Counsel for the
Appellants:
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David M. Goodman
and
Howard Winkler
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Counsel for the
Respondent:
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Peter M. Kremer
and
Rosemary
Finchman
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____________________________________________________________________
ORDER
Upon motions by the Appellants
for an Order that their counsel, Howard Winker, and his firm, Aird &
Berlis, are not disqualified by reason of conflict of interest from acting for
them in these appeals;
And upon reading the affidavits of Michael
Spivak, Howard Winkler and Einar Bellfield, filed;
And upon hearing counsel for the parties;
It is ordered that the Appellants are
entitled to continue to be represented before this Court by Mr. Howard Winkler
and the firm Aird & Berlis.
The Appellants are entitled to costs of this
motion, with a counsel fee which I fix at $1,000.
Signed at Ottawa,
Canada, this 7th day of July, 2004.
Bowie
J.
Citation: 2004TCC487
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Date: 20040707
|
Docket: 90-3235(IT)
91-509(IT)G
91-1816(IT)G
91-1946(IT)G
|
BETWEEN:
|
TED J. HOCHBERG,
LINDA LECKIE MOREL
and GEOFFREY D. BELCHETZ,
|
Appellants,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
|
REASONS FOR ORDER
Bowie J.
[1] The motions before me are unusual ones. The Appellants
move for an Order declaring that their counsel, Mr. Howard Winkler, and his
firm, Aird & Berlis, are not disqualified by reason of conflict of interest
from acting for them in these income tax appeals. It is an issue that more
usually takes the form of an application by one party to have the counsel
representing another party disqualified from acting.
[2] The Appellants invested some years ago in one or more
of several limited partnerships that were being promoted at that time by a Mr.
Bellfield and an associate of his. The partnerships suffered substantial
losses, which the Appellants and others sought to apply in reduction of their
incomes under section 3 of the Income Tax Act. The Minister of National
Revenue has taken the position that the partnerships in question were not
partnerships at all, because they carried on no business, and consequently has
disallowed the deductions claimed. The present Appellants are said to be
representative of a large number of other investors. Over the years, they have
been represented by a number of different counsel. In June 2003 they
changed counsel once more, appointing Mr. Winkler. The Respondent is
represented by the Attorney General of Canada.
[3] Some
years ago, the Attorney General of Canada decided to prosecute
Mr. Bellfield and his associate for fraud and uttering false documents in
connection with their promotion of the limited partnerships. In December 1999
they were convicted on two charges of fraud and two charges of uttering. Since
then they have appealed those convictions to the Court of Appeal for Ontario,
unsuccessfully, and they have applied for leave to appeal to the Supreme Court
of Canada, again without success. Mr. Winkler represented Mr. Bellfield in his
application for leave to appeal to the Supreme Court, which was filed on
February 25, 2004. The Attorney General of Canada responded by opposing the
application for leave, and by moving to have Aird & Berlis and Mr. Winkler
disqualified from acting for the Applicant on grounds of conflict of interest.
Briefly stated, the Attorney General's position was that Mr. Bellfield had
defrauded the investors in his partnerships, and that Mr. Winkler therefore
could not act for both the promoter and the investors, as they had conflicting
interests. The Reasons for Judgment of the Court of Appeal contain this
statement:
The Crown alleged that the investors were defrauded of
approximately $22,000,000 and that approximately $118,000,000 in fraudulent tax
losses were claimed.
The day
after I heard this motion the Supreme Court of Canada dismissed Bellfield's
application for leave to appeal. It made no disposition of, nor even mention
of, the motion before it to disqualify Mr. Winkler and Aird & Berlis.
[4] Although
Mr. Bellfield is now not a client but a former client of Mr. Winkler, it
is not impossible for there to be a conflict of interest that would prevent him
acting for the Appellants in these appeals. The interests that are protected by
the conflict of interest rules include the entitlement of a former client to
the continuing loyalty of his former counsel, as well as the client's right to
have maintained the confidentiality of information passing between them to
which solicitor and client privilege applies. The over-arching concern is that
public confidence in the legal system not be impaired by actual or reasonably
perceived conflicts of interest.
[8] I was not referred in argument to any authority
for the proposition that this Court may make what amounts to an interlocutory
declaration of the right of a party in an appeal before the Court to be represented
by a specific counsel, nor do I know of any. Mr. Goodman did refer me to the
decision of Barry J. in R. v. Desjardins et al, where such a declaration was made in the context of a
criminal prosecution. However, it is clear to me that the Court may deal with
the issue of removal of counsel by reason of a conflict of interest under the General
Procedure Rules. In Groupe Trenca Inc. v. Techno Bloc Inc., the
Federal Court Trial Division made such an Order. Although neither Blais J. nor the Prothonotary whose
decision he reversed makes specific reference to the Rule
under which the motion was brought, it is clear that the application was an
interlocutory one. The Federal Court Rules, like the Rules of
this Court, make no specific provision for such an application. Both have
provisions dealing with the appointment and change of solicitors; although not
identical in language, there is no significant difference between them. I have
no doubt that the subject matter of disqualification of counsel for conflict of
interest is one that I can deal with on an interlocutory motion. If it can be
dealt with in the negative, then it only makes sense that it can also be dealt
with in the positive. That said, motions to declare the absence of conflict of
interest are certainly not to be encouraged. Another party, or a former client,
may, of course, seek a disqualification order on appropriate grounds, but
subject to that a client is free to choose counsel, and it is up to counsel to
be satisfied that no conflict exists.
[9] However, the peculiar facts of this case justify the
application for a declaration that there is no conflict. The Attorney General
of Canada is on record in the Supreme Court of Canada as asserting a conflict
that would disqualify Mr. Winkler and Aird and Berlis from representing both
Mr. Bellfield and the Appellants, and yet has not put forward the same argument
here. The parties, after much delay, are about to embark on discoveries that
will be time-consuming and expensive. The Appellants are entitled to know that
they will not be confronted later with an attempt to disqualify Mr. Winkler on
essentially the grounds that were advanced in the Supreme Court. I shall
therefore make the Order sought, limited to the facts as they are established
by the affidavits before me on this motion. The Appellants will have the costs
of the motion, with a counsel fee which I fix at $1,000.
Signed at Ottawa, Canada, this 7th day of
July, 2004.
Bowie
J.