Date: 19980703
Docket: T-1064-97
MONTRÉAL, QUEBEC, THE 3rd DAY OF JULY 1998
Present: RICHARD MORNEAU, PROTHONOTARY
Between:
GROUPE TREMCA INC.
and
JAGNA LIMITED
Plaintiffs
AND
TECHO-BLOC INC.
Defendant
ORDER
This motion by the defendant for a declaration that counsel for the plaintiffs have a conflict of interest in the instant action and are accordingly disqualified from continuing to act for the plaintiffs is dismissed with costs to be assessed in accordance with column IV of Tariff B.
Richard Morneau
Prothonotary
Certified true translation
Peter Douglas
Date: 19980703
Docket: T-1064-97
Between:
GROUPE TREMCA INC.
and
JAGNA LIMITED
Plaintiffs
AND
TECHO-BLOC INC.
Defendant
REASONS FOR ORDER
RICHARD MORNEAU, PROTHONOTARY:
Introduction
[1] In 1990, the defendant"s vice-president consulted a patent agent about the patent at issue; the agent is related to the law firm representing the plaintiffs in the instant action.
[2] The issue is whether a person who was reasonably informed of the facts surrounding the consultation and the litigation history between these parties would conclude that counsel for the plaintiffs have a conflict of interest in the instant action and must accordingly be disqualified from continuing to act for their clients.
Facts
[3] In the instant case, the plaintiffs are suing the defendant for the infringement of Canadian patent 1,182,295 (hereinafter patent 295), owned by the plaintiff Jagna Limited. Groupe Tremca Inc. holds a licence for patent 295 for the province of Quebec.
[4] Patent 295 is for a retaining wall block which is generally incorporated into retaining wall systems.
[5] To understand the facts set out below, it is important to note that Jagna Limited has owned patent 295 only since September 1996. Before that, starting in at least 1985, the patent was held by Risi Stone Ltd., which belonged to Antonio and Angelo Risi, the brothers who invented the block covered by the patent at issue.
[6] The defendant TECHO-BLOC develops, manufactures and sells interlocking paving blocks and retaining wall blocks to distribution networks and landscapers.
[7] For the purposes of these proceedings, Charles Ciccarello (hereinafter Ciccarello), the defendant"s vice-president, acted for the defendant at all relevant times.
Meetings between Angelo Risi and Ciccarello
[8] As we shall see infra, Ciccarello consulted Antoine Gauvin, a patent agent who is related to counsel for the plaintiffs. However, the consultation was prompted by one or more previous meetings between Angelo Risi (hereinafter Risi) and Ciccarello.
[9] The parties" evidence differs somewhat as to the content of the meetings between these two people. However, although the burden of establishing these preliminary factual elements is on the defendant, I shall adopt the version of the facts put forward by the defendant and its counsel where possible, and point out any slight differences where necessary.
[10] According to the defendant, there was essentially one meeting between Risi and Ciccarello, in the spring of 1990. Ciccarello maintains that at the meeting, he discussed the possibility of obtaining a licence from Risi to manufacture and sell a block known as the OMNI block. (Note that this block is used to build retaining walls for landscaping purposes, as are the other blocks mentioned in these reasons, unless otherwise indicated.)
[11] During the meeting, Risi allegedly gave Ciccarello two samples and a drawing of the OMNI block.
[12] Incidentally, Ciccarello did not tender the samples or drawing in evidence. We must take it from the evidence that whatever Ciccarello might have kept from the meeting with Risi eventually found its way into the patent agent"s file. However, that file is in evidence and does not contain any samples or drawing of the OMNI block. The only drawing it holds is of a block known as the HESS block. The plans or drawing of the HESS block were tendered in evidence, at least in part, by Risi.
[13] Also during the meeting between Risi and Ciccarello, Risi purportedly mentioned that the OMNI block was covered by one of his Canadian patents, without saying which one. Nonetheless, he supposedly did mention the existence of patent 295 to Ciccarello.
[14] Uncertain whether the OMNI block was covered by patent 295, Ciccarello says he decided near the beginning of July 1990 to consult the firm of Robic, patent agents, for an opinion on the matter.
[15] Counsel for the plaintiffs conceded that the firm of Robic and the law firm of Léger, Robic, Richard are one and the same for the purposes of these proceedings.
Meetings between Antoine Gauvin and Ciccarello
[16] As mentioned supra, the agent seen at Robic was Antoine Gauvin (hereinafter Gauvin).
[17] It is crucial for the purposes of our subsequent analysis to specify the nature and the degree of confidentiality of the information Ciccarello professedly imparted to Gauvin.
[18] Apparently there were three meetings between them. It seems the first two meetings took place at the beginning and end of July 1990 respectively. A final meeting was ostensibly held on September 19, 1990. Ciccarello contends that it was at the first of these meetings that he handed Gauvin the plans for the OMNI block.
[19] At the cross-examination on his affidavit dated February 25, 1998, which was filed in support of the motion at issue, Ciccarello was asked to specify carefully what information he claimed to have imparted to Gauvin over their three meetings.
[20] The information imparted by Ciccarello can consequently be summarized as follows:
| i) Techo Bloc manufactures paving blocks; |
| ii) Techo Bloc manufactures an old model of retaining blocks, the TALUS; |
| iii) Techo Bloc wanted to begin manufacturing the OMNI block; and |
| iv) Techo Bloc was considering the possibility of signing a licence agreement concerning the OMNI block with Risi Stone Ltd. |
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[21] Ciccarello"s exact words appear at pages 66 to 68 of the transcript of the examination:Up to that point, when you saw Mr. Gauvin with the license, that was on September nineteenth (19th), your last meeting, you had told Mr. Gauvin -- let me summarize and tell me if I'm missing something . . . |
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Q. . . . the following; one, that your company makes paving blocks; correct? |
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Q. Two, that your company made the Talus block, which is a retaining wall block; correct? |
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Q. Thirdly, it wanted to make the Omni block; correct? |
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Q. Fourthly, you were considering entering into a license with Risi on the Omni block, if it was necessary or if you were satisfied that there was a number and so on; correct? |
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A. Yes, at that time, yes. |
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Q. Is there any other information that you provided him that doesn't fall into one of those categories? |
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Q. Is there anything else? Take your time ... |
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Q. I know, but in terms of information that you received? |
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A. Well, that's the information I received. |
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Q. I know, I'm sorry, information you gave to Gauvin. I summarized it fairly a minute ago; correct? |
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[22] By Ciccarello"s own admission, all this information was in the public domain in June 1993, when an action similar to this proceeding was brought against the defendant (the 1993 action, infra , paragraph 27). This is confirmed in the following excerpt from page 82 of the transcript:
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Q. Now, we agree that everything you told Mr. Gauvin, those five or six points we've mentioned before, about your business strategy, the products you were going to put into market, the products you were making and so on, the fact that you wanted to sign a license, by the time we sued in nineteen ninety-three (1993), all that was already known in the public; correct? |
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[Counsel for the defendant]: |
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| He answered that question, he said yes. |
[23] As for the information that presumably flowed in the other direction"from Gauvin to Ciccarello"it is noteworthy that Gauvin allegedly gave Ciccarello his opinion on the scope of the invention covered by patent 295 and expressed the view that the OMNI block was not covered by this patent.
[24] Gauvin apparently also advised Ciccarello against a licence proposal which Risi had given Ciccarello at the end of their meeting.
Production of the TECHO blocks and the 1993 action
[25] Ciccarello did not pursue negotiations with Risi and thus did not sign a licence with him for the OMNI block.
[26] The defendant evidently chose instead to begin making and selling blocks, called TECHO 1 and TECHO II (hereinafter the TECHO blocks), at the start of spring 1991. Note that the various features of the TECHO blocks are similar to those of the OMNI block.
[27] As a result of these blocks being produced, the co-plaintiff Groupe Tremca Inc. and Risi Stone Systems Inc. filed an action against the defendant on June 25, 1993 for the infringement of patent 295 (file T-1572-93, hereinafter the 1993 action).
[28] The evidence in the record shows that from the very inception of the 1993 action, the defendant had considered the possibility of having the firm of Léger, Robic, Richard disqualified for"and this is what I have been given to understand"essentially the same reason as in the instant action, namely that Gauvin had been asked for an opinion on the scope of patent 295.
[29] In a letter to Ciccarello dated July 20, 1993, his then-counsel indicated the following:
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Léger, Robic, Richard also deny that they are in a conflict of interest position, even though they have both represented Risi and opined in respect to your own blocks vis-à-vis the Pavestone blocks prior to your deciding to enter into the License Agreement with Pavestone Plus. |
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We are considering this matter further and will communicate with you again this week in more detail as to what we recommend in the circumstances.
[30] The defendant"s end response to this indication of potential conflict is explained by Ciccarello in the seventh paragraph of his affidavit dated March 20, 1998, as follows:
The issue of a conflict of interest was not pursued, as my previous attorney, Mr. John A.A. Swift, informed me that it would cost TECHO a substantial amount of money to present a Motion to disqualify the law firm of Léger Robic Richard and that it would be in the best interest of TECHO to file a Statement of Defence, as this could very well put an end to this action.
[31] A statement of defence was therefore filed by the defendant in 1993 and the conflict-of-interest issue was not pursued further in that case.
[32] With respect to the defendant"s 1993 statement of defence, counsel for the plaintiffs made a point of drawing the Court"s attention to the fact that it happened to be similar to a statement of defence that another corporation, Groupe Permacon Inc., had filed in response to an action similar to this proceeding, brought by the same plaintiffs as in the 1993 action (file T-1005-89, hereinafter the Permacon case).
[33] These statements of defence, according to counsel for the plaintiffs, relied on a February 1990 interlocutory judgment of this Court in the Permacon case in which, in dismissing an application for an interlocutory injunction sought by the then-plaintiffs, the Court indicated that it was arguable that the patent at issue, patent 295, might be invalid.
[34] However, in September 1995 the validity and scope of patent 295 were upheld on the merits by final judgment of this Court when the action was allowed in the Permacon case.
[35] After the statement of defence was filed in the 1993 action, the proceedings in that case went no further for a while.
[36] In the interim, the defendant decided to stop making the TECHO blocks, and then decided to market a modified version of them, the MINI-BLOK (hereinafter the MINI block).
[37] The significant difference between all the blocks mentioned up to this point appears to lie in the way they fit together. In this respect, I believe I perceived a certain consensus between counsel for the parties on the following points.
[38] The MINI block uses a different anchoring system than the TECHO blocks. However, the TECHO blocks and the OMNI block fit together in a similar manner.
[39] In view of the defendant"s switch from the TECHO blocks to the MINI block, the plaintiffs attempted to proceed with the 1993 action in relation to the MINI block and to amend their statement of claim accordingly. However, in spite of the discussions which took place from 1995 to 1997, the parties did not agree on the terms on which this change should be effected. This is what prompted the plaintiffs to bring the instant action in June 1997 (hereinafter the 1997 action).
[40] In February 1998, through its present counsel, the defendant filed the motion now before us in both the 1993 action and the 1997 action.
Analysis
Whether the existence of a solicitor-client relationship is sufficient
[41] Counsel for the defendant"s first argument is that once it has been established that there was a solicitor-client relationship in a case, the solicitor, or the solicitor"s firm, cannot subsequently act for a party who opposes the client in a matter that is connected to the case; there is no need to try to determine whether or not the client imparted confidential information to the solicitor at the time.
[42] As indicated supra (see paragraph 15), the plaintiffs admit that the 1990 consultation between Ciccarello and Gauvin amounts to a consultation between Ciccarello and a solicitor from the law firm representing the plaintiffs.
[43] In my view, MacDonald Estate v. Martin, [1990] 3 S.C.R. 1235 (hereinafter Martin) is the leading decision with respect to any conflict of interest involving lawyers.
[44] To my mind, Martin eliminates the defendant"s first argument.
[45] According to my reading of that judgment, the potential communication of confidential information by the client in his or her initial dealings with the solicitor is the basic factor to look for in assessing the possible existence of a conflict when the solicitor subsequently ends up acting against the client.
[46] The Supreme Court is above all concerned about maintaining public confidence in the integrity of the legal profession, as can be seen at page 1244 of the judgment, where the Court stated the following:
Nothing is more important to the preservation of this relationship than the confidentiality of information passing between a solicitor and his or her client. . . . Clients do this in the justifiable belief that nothing they say will be used against them and to the advantage of the adversary.
[47] As can be seen farther on, at pages 1259"60 of the judgment, the misuse of confidential information is part of the Court"s overriding policy on the question at issue:
[T]he test must be such that the public represented by the reasonably informed person would be satisfied that no use of confidential information would occur. That, in my opinion, is the overriding policy that applies and must inform the court in answering the question: Is there a disqualifying conflict of interest?
[48] As leading authorities in support of its argument, counsel for the defendant cited Chapter V of the Canadian Code of Professional Conduct (the Code) as well as Inventions Morin v. Entreprises Claude Élément Inc. (1992), 46 C.P.R. (3d) 547 (Morin), Bristol-Myers Squibb Canada Inc. v. Merck Frosst Canada Inc. (1996), 66 C.P.R. (3d) 521 (Bristol-Myers Squibb) and Domaine Ti-Bo Inc. et al. v. Corporation municipale de la ville de Repentigny et al., unreported judgment dated November 25, 1997, Superior Court, No. 705-05-002236-9770 (Domaine Ti-Bo).
[49] Note that before making the above-quoted remarks, Mr. Justice Sopinka was fully aware of the existence of the Code, and more particularly Chapter V of the Code and the rules of interpretation for Chapter V, which were specifically quoted by counsel for the defendant.
[50] If we read Morin, Bristol-Myers Squibb and Domaine Ti-Bo, it is clear that actual communication and misuse of confidential information were factors in each of those judgments.
[51] Therefore, in order to reject the defendant"s first argument, it is unnecessary to follow it through with an assessment of whether the purpose of the 1990 consultation between Ciccarello and Gauvin is sufficiently related to the retainer received by the firm of Léger, Robic, Richard for the instant action.
The communication of confidential information
[52] In the alternative, counsel for the defendant submitted that if the question of the communication of confidential information to the solicitor must be examined, the facts of the instant case support a finding of conflict of interest, applying the test adopted by the Supreme Court in Martin.
[53] In Martin, the Court asked the question to be resolved in the instant case and described the approach to be taken in resolving it in the following terms:
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. . . Did the lawyer receive confidential information attributable to a solicitor and client relationship relevant to the matter at hand? . . . |
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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.
[54] When asked in the instant case, the Court"s question amounts to ascertaining whether Gauvin, and thus Léger, Robic, Richard, received confidential information from Ciccarello concerning the matter at issue when Ciccarello consulted Gauvin in July and September 1990.
[55] In order to get to the pivotal point which settles the question, let us assume for the sake of argument that there is a substantial relationship"that Ciccarello"s 1990 consultation is sufficiently related to the retainer given to counsel for the plaintiffs in the instant case.
[56] If we accept this point"without, however, deciding it"the presumption that confidential information was imparted to Léger, Robic, Richard in 1990 will arise in the defendant"s favour.
[57] However, the presumption is not irrebuttable. It merely puts the ball in counsel for the plaintiffs" court, giving them a chance to discharge the heavy burden"to use the words of the Supreme Court"of satisfying a reasonably informed member of the public that no confidential information was imparted to them in 1990.
[58] This degree of satisfaction may be sought by cross-examining the person who was the client at the time of the relationship as a result of which the confidential information was allegedly imparted. As already quoted (see supra, paragraph 53), the Supreme Court in Martin had precisely this possibility in mind:
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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. |
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[My emphasis.]
[59] In the instant case, on cross-examination Ciccarello himself identified the content of his conversations with Gauvin. If I am not mistaken, it was not argued before me that the information was confidential in nature. Moreover, I doubt this could have been argued. There was a very good chance in the instant case that the information was already known to Risi because of his previous meeting or meetings with Ciccarello.
[60] Furthermore, Ciccarello also acknowledged that when the 1993 action was commenced, all the information was in the public domain"however much we might otherwise have been prepared to consider it to have been confidential between 1990 and 1993.
[61] Although the question does not need to be answered directly, we can nonetheless infer from this that a person who was reasonably informed of the foregoing facts would have concluded that when the 1993 action was commenced, the law firm representing the then-plaintiffs and the present plaintiffs could not have seen itself as having a conflict of interest since it could not have been considered to have confidential information imparted by Ciccarello. Therefore, the firm could not have misused the information against Ciccarello.
[62] In my view, if this is our finding with respect to the 1993 action, it must also be our finding with respect to the 1997 action especially since there were no further meetings between Ciccarello and Gauvin after the 1990 meetings. Furthermore, the 1993 action involved the TECHO blocks, whereas the 1997 action involves the MINI block. The consultation between Ciccarello and Gauvin concerned the OMNI block, which is similar to the TECHO blocks, not the MINI block. The 1997 action is thus all the more removed from the 1990 consultation.
[63] To my mind, this would be sufficient for the question stated in the introduction to be answered in the negative and accordingly for the defendant"s motion to be dismissed.
[64] I think it necessary, however, to touch on a few additional points before concluding.
[65] Counsel for the defendant argued that the reason why the plaintiffs filed a discontinuance of their 1993 action in March 1998 was to avoid having to respond to the conflict-of-interest motion in the 1993 action (and the instant action) filed by the defendant in February 1998. According to him, the plaintiffs sensed that they were in a far weaker position in the 1993 case than in the 1997 action.
[66] Although the 1990 consultation is more closely related to the 1993 action than to the 1997 action, there are several facts that can reasonably explain why the plaintiffs did not file their discontinuance until March 1998.
[67] It must be recalled that the final judgment of the Court in the Permacon Inc. case occurred in September 1995, and that at about the same time the defendant modified the blocks it was marketing. As a result, counsel for the plaintiffs had to hold discussions with a number of lawyers who represented the defendant in succession in order to adapt the 1993 action to the new facts. As mentioned supra, all of this failed to take shape and the 1997 action was brought in June 1997. Once that was done, it might have been less worthwhile to proceed with the 1993 action.
[68] Going back to the 1993 action serves the defendant"s cause poorly, in my opinion. The defendant"s attitude toward the lawyers being involved in the 1993 action in my view demonstrates that it was beginning to be resigned to their involvement. When the 1993 action was the only one on the docket"such that the plaintiffs could hardly have dropped it just to avoid a conflict-of-interest motion against their counsel"the defendant did not see fit to raise the issue of conflict of interest before the Court. As we have seen (see supra , paragraph 30), for practical purposes it instead sought to protect its interests by filing a statement of defence, despite detecting a conflict situation and discussing it with its then-counsel.
[69] In my view, this resignation was also apparent in the 1997 action, as the action was brought in June 1997 but the defendant"s conflict-of-interest motion was not filed until February 1998. In an affidavit, Ciccarello explained that it was research done following his examination for discovery in February 1998 as part of the 1997 action that finally led him to make the connection between Gauvin"s firm, that is, Robic, and the law firm of Léger, Robic, Richard.
[70] I find it hard to accept this version of events, as it appears to me that Ciccarello, having identified this potential conflict situation in 1993, should immediately have raised the issue when the 1997 action was served on the defendant in June 1997. The mind cannot be so otherwise occupied that one would fail to react to a law firm"s involvement in a case if it was once seriously felt that this firm had a conflict.
[71] In addition, based on his review of Gauvin"s file, counsel for the defendant submitted that the plan for the HESS block which is found in its entirety in that file"not just in part as Risi produced it"is confidential information which Ciccarello allegedly imparted to Gauvin.
[72] Having regard to the record as a whole, I cannot find the HESS plans to be confidential information. Furthermore, the defendant alleged that Ciccarello had given Gauvin the plans for the OMNI block; in my view, it was never established that the plans for the HESS block came from Ciccarello.
[73] Moreover, the fact that Risi produced the plans in part only and that Gauvin"s file as produced by the plaintiffs for the purposes of the hearing is thicker than counsel for the plaintiffs may have at one time represented are not factors which to my mind, under the circumstances, might lead a reasonable person to conclude that Gauvin"s [TRANSLATION] "real" file contained more than the file which was ultimately produced and that the additional information it supposedly contained would be confidential in nature.
[74] What really upsets Ciccarello, in my opinion, is that Gauvin gave his opinion as to the limited scope of patent 295 and that Léger, Robic, Richard is now apparently acting on the basis of a different opinion with regard to a different infringing item. At page 67 of the transcript of Ciccarello"s examination on his affidavit of February 25, 1998, he put it as follows:
I believed that, for what it's worth, that Mr. Gauvin said it [patent 295] had, called it that it was in a crowded field of inventions and that it had a narrow ambit of protection. And based on this opinion of his, I mean this always stays in the back of your mind somewhere, later the firm of Léger Robic Richard, who are related to Robic, sued me on the 295 patent. Also, the license agreement that I went to Gauvin to get advice on, which his comments were very negative not to sign that license agreement, ended up in reality, what happened was that I got sued under 295 from basically the same firm that told me that it had a narrow ambit of protection.
[75] Perhaps the situation was deceptive in Ciccarello"s opinion but in my view this is not a reason to answer the question stated in the introduction in the affirmative.
[76] The motion will accordingly be dismissed with costs. In view of the amount of work involved in presenting the motion in question"and in defending it"each party claimed costs on a solicitor-and-client basis.
[77] I do not consider this an appropriate reason to award costs on that basis. However, costs will be awarded in accordance with the maximum in column IV of Tariff B.
Richard Morneau
Prothonotary
MONTRÉAL, QUEBEC
July 3, 1998
Certified true translation
Peter Douglas
Federal Court of Canada
Court No. T-1064-97
BETWEEN
GROUPE TREMCA INC.
-and-
JAGNA LIMITED
Plaintiffs
" and "
TECHO-BLOC INC.
Defendant
REASONS FOR ORDER
FEDERAL COURT OF CANADA
NAMES OF COUNSEL AND SOLICITORS OF RECORD
COURT FILE NO.:
STYLE OF CAUSE:
T-1064-97
GROUPE TREMCA INC.
-and-
JAGNA LIMITED
Plaintiffs
AND
TECHO-BLOC INC.
Defendant
PLACE OF HEARING:Montréal, Quebec
DATE OF HEARING:June 18, 1998
REASONS FOR ORDER BY RICHARD MORNEAU, PROTHONOTARY
DATE OF REASONS FOR ORDER:July 3, 1998
APPEARANCES:
François Grenier and
Bob H. Sotiriadis for the plaintiffs
Jean Carrière and
Richard Uditsky for the defendant
SOLICITORS OF RECORD:
Léger, Robic, Richardfor the plaintiffs
Montréal, Quebec
Mendelsohn, Rosentzveig, Shacterfor the defendant
Montréal, Quebec
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