R. v. Neil, [2002] 3 S.C.R. 631, 2002 SCC 70
David Lloyd Neil Appellant
v.
Her Majesty The Queen Respondent
Indexed as: R. v. Neil
Neutral citation: 2002 SCC 70.
File No.: 28282.
2002: January 25; 2002: November 1.
Present: Major, Bastarache, Binnie, Arbour and LeBel JJ.
on appeal from the court of appeal for alberta
Criminal law — Remedies — Stay of proceedings —
Accused seeking stay of criminal prosecutions on basis that his lawyers were in
a conflict of interest — Whether stay of jury’s guilty verdict warranted.
Barristers and solicitors — Duty of loyalty —
Conflict of interest — Accused seeking stay of criminal prosecutions on basis
that his lawyers were in a conflict of interest — Proper limits of a lawyer’s
“duty of loyalty” to a current client in a case where the lawyer did not
receive any confidential information relevant to the matter in which he
proposes to act against the current client’s interest.
Following complaints that the accused paralegal was
providing legal advice contrary to the Alberta Legal Profession Act, a
police investigation led to a 92‑count indictment. The trial judge
severed the counts into five separate indictments. One charged that the
accused had fabricated court documents in a divorce action. Another contained
charges regarding an alleged scheme to defraud Canada Trust. The accused
argued that the V law firm, with which he had a solicitor‑client
relationship, was in a conflict of interest. Specifically, L, a member of the
V firm, had brought a court application to regularize a divorce which had been
obtained on the basis of documents allegedly forged by the accused. At the
suggestion of the trial judge in the divorce, L suggested to the husband that he
report the forgery to the police. L in fact steered him to the same police
officer who was responsible for the Canada Trust file and other cases pending
against the accused.
With respect to the Canada Trust indictment which was
factually unrelated to the divorce proceedings, the accused consulted the V
firm (including L) at a time when L, unbeknownst to him, was acting for his
business associate whom L knew, or ought to have known, would also be charged
in the same proceedings. The trial judge found that L had met with the accused
on the Canada Trust matters while in fact looking to run a “cut‑throat”
defence against the accused for the benefit of his former associate.
Both indictments proceeded to trial by jury. On the
indictment arising out of the divorce file, the accused was convicted. In the
subsequent trial on the Canada Trust charges, the conflict of interest
involving the V firm was brought to the attention of the trial judge, who
declared a mistrial. He also stayed further action on the jury’s verdict in
the divorce matter. The stay was vacated and the verdict restored by the Court
of Appeal, which sent the divorce matter back to the trial judge for
sentencing. The Court of Appeal also rejected the accused’s argument for a
stay of further proceedings in the Canada Trust indictment on the basis that
he was denied his right to effective representation contrary to s. 7 and
s. 11 (d) of the Canadian Charter of Rights and Freedoms , and
that further proceedings would be an abuse of process.
Held: The
appeal should be dismissed.
While the Court is most often preoccupied with uses
and abuses of confidential information in cases where it is sought to
disqualify a lawyer from further acting in a matter, or other related relief,
the duty of loyalty to a current client includes the much broader principle of
avoidance of conflicts of interest, in which confidential information may or
may not play a role. The aspects of the duty of loyalty relevant to this
appeal do include issues of confidentiality in the Canada Trust matter, but
engage more particularly three other dimensions: the duty to avoid
conflicting interests, a duty of commitment to the client’s cause, and a duty
of candour with the client on matters relevant to the retainer. The general
rule is that a lawyer may not represent one client whose interests are directly
adverse to the immediate interests of another current client — even if the
two mandates are unrelated — unless both clients consent after receiving full disclosure
(and preferably independent legal advice), and the lawyer reasonably believes
that he or she is able to represent each client without adversely affecting the
other.
Here, the V law firm, and L in particular, put
themselves in a position where the duties they undertook to other clients
conflicted with the duty of loyalty which they already owed to the accused.
Loyalty required the V law firm to focus on the interest of the accused without
being distracted by other interests including personal interests. The V firm
breached their duty to the accused in accepting a retainer that required them
to put before the divorce court judge evidence of the illegal conduct of their
client, the accused, at a time when they knew he was facing other criminal
charges related to his paralegal practice, in which their firm had had a
longstanding involvement. The divorce matter was adverse to the accused’s
interest, and advantageous to the “cut‑throat” defence planned by his
former business associate. Further, the V firm ought not to have met with the
accused on the Canada Trust matters when it was conflicted by its de facto
representation of his former business associate.
The law firm, as fiduciary, could not serve two
masters at the same time. Having said that, the accused falls short on the
issue of remedy. He may (and perhaps did) choose to take his complaint to the
Law Society of Alberta, or seek other relief, but he is not entitled to a stay
of proceedings. The law firm’s conduct did not affect the fairness of the
divorce action trial and there was no issue of confidential information. L’s
involvement in the divorce matter was in violation of his and the firm’s
professional obligations, but it contributed little to the accused’s
predicament. The falsification of the court documents came to light without
the involvement of the V firm and the independent investigation by the police
militates against a finding of abuse of process. This is manifestly not one of
those clearest of cases where a stay of the jury’s verdict is warranted. The
Court of Appeal was correct to remit the divorce matter to the trial judge for
sentencing.
Similarly, while the V law firm was in a conflict of
interest when they attempted to act simultaneously for both the accused and his
eventual co‑accused in the Canada Trust matter, in the end, the V firm
did not act for the accused. Their conflict did not result in the charges
being so vitiated as to render it an abuse of process for the state to seek a
conviction at a new trial. It is certainly not one of the clearest of cases in
which a stay would be justified. There may be other or different evidence
before the judge presiding at the new trial and the disposition of the stay
application in the Canada Trust indictment, if renewed, will be for that trial
judge to decide.
Cases Cited
Referred to:
MacDonald Estate v. Martin, [1990] 3 S.C.R. 1235; Tanny v. Gurman,
[1994] R.D.J. 10; R. v. McClure, [2001] 1 S.C.R. 445, 2001 SCC 14; Smith
v. Jones, [1999] 1 S.C.R. 455; R. v. McCallen (1999), 43 O.R. (3d)
56; Re Regina and Speid (1983), 8 C.C.C. (3d) 18; Teoli v. Fargnoli
(1989), 30 Q.A.C. 136; R. v. Parsons (1992), 100 Nfld. & P.E.I.R.
260; McInerney v. MacDonald, [1992] 2 S.C.R. 138; Hodgkinson v. Simms,
[1994] 3 S.C.R. 377; Montreal Trust Co. of Canada v. Basinview Village Ltd.
(1995), 142 N.S.R. (2d) 337; Enerchem Ship Management Inc. v. Coastal Canada
(The), [1988] 3 F.C. 421; Jans v. Coulter (G.H.) Co. (1992), 105
Sask. R. 7 ; Stewart v. Canadian Broadcasting Corp. (1997), 150 D.L.R.
(4th) 24; Gaylor v. Galiano Trading Co. (1996), 29 B.L.R. (2d) 162; Drabinsky
v. KPMG (1998), 41 O.R. (3d) 565; Davey v. Woolley, Hames, Dale &
Dingwall (1982), 35 O.R. (2d) 599; Services environnementaux Laidlaw (Mercier)
Ltée v. Québec (Procureur général), [1995] R.J.Q. 2393; Szarfer v.
Chodos (1986), 54 O.R. (2d) 663, aff’d (1988), 66 O.R. (2d) 350; Moffat
v. Wetstein (1996), 29 O.R. (3d) 371; R. v. Silvini (1991), 5 O.R.
(3d) 545; R. v. Widdifield (1995), 25 O.R. (3d) 161; R. v. Graham,
[1994] O.J. No. 145 (QL); R. v. Henry (1990), 61 C.C.C. (3d) 455, [1990]
R.J.Q. 2455; Spector v. Ageda, [1971] 3 All E.R. 417; Ramrakha v.
Zinner (1994), 157 A.R. 279; Bolkiah v. KPMG, [1999] 2 A.C. 222; Re
Regina and Robillard (1986), 28 C.C.C. (3d) 22; R. v. Chen (2001),
53 O.R. (3d) 264; R. v. Graff (1993), 80 C.C.C. (3d) 84; R. v.
Barbeau (1996), 110 C.C.C. (3d) 69; Glasser v. United States, 315
U.S. 60 (1942); United States of America v. Cobb, [2001] 1 S.C.R. 587,
2001 SCC 19; United States of America v. Shulman, [2001] 1 S.C.R. 616,
2001 SCC 21; R. v. O’Connor, [1995] 4 S.C.R. 411; Canada (Minister of
Citizenship and Immigration) v. Tobiass, [1997] 3 S.C.R. 391; Cuyler v.
Sullivan, 446 U.S. 335 (1980); Mickens v. Taylor, 122 S. Ct. 1237
(2002); R. v. Finn, [1997] 1 S.C.R. 10; R. v. Conway, [1989] 1
S.C.R. 1659; R. v. Pearson, [1998] 3 S.C.R. 620; R. v. Jewitt,
[1985] 2 S.C.R. 128.
Statutes and Regulations Cited
Canadian Charter of Rights and
Freedoms, ss. 7 , 11 (d).
Criminal Code, R.S.C. 1985, c. C-46, s. 686(4) (b)(ii).
Legal Profession Act, S.A. 1991, c. L-9.1.
Authors Cited
American Law Institute. Restatement
Third, The Law Governing Lawyers, vol. 2. St. Paul, Minn.:
American Law Institute Publishers, 2000.
Canadian Bar Association. Code
of Professional Conduct. Ottawa: Canadian Bar Association,
1988.
Law Society of Alberta. Alberta
Code of Professional Conduct. Calgary: Law Society of Alberta,
1995 (loose‑leaf updated May 2001, release 9).
Nightingale, J. Report of the
Proceedings before the House of Lords, on a Bill of Pains and Penalties against
Her Majesty, Caroline Amelia Elizabeth, Queen of Great Britain, and Consort of
King George the Fourth, vol. II, Part I. London: J. Robins,
1821.
Waters, Donovan W. M. “The
Development of Fiduciary Obligations”, in R. Johnson et al., eds., Gérard V.
La Forest at the Supreme Court of Canada, 1985-1997. Winnipeg: Canadian
Legal History Project, Faculty of Law, University of Manitoba, 2000, 81.
APPEAL from a judgment of the Alberta Court of Appeal
(2000), 266 A.R. 363, 228 W.A.C. 363, [2000] A.J. No. 1164 (QL), 2000 ABCA 266,
allowing an appeal from a judgment of the Court of
Queen’s Bench (1998), 235 A.R. 152, [1998] A.J. No. 1135 (QL), 1998 ABQB
859. Appeal dismissed.
Nathan J. Whitling and Matthew
Milne-Smith, for the appellant.
James A. Bowron, for
the respondent.
The judgment of the Court was delivered by
1
Binnie J. — What are the
proper limits of a lawyer’s “duty of loyalty” to a current client in a case
where the lawyer did not receive any confidential information that was (or is)
relevant to the matter in which he proposes to act against the current client’s
interest? The issue arises here in the context of a series of criminal
prosecutions against the appellant. He complains that a member of a law firm,
with which he had an ongoing solicitor-client relationship in respect of
certain transactions that were the subject of criminal proceedings pending
against him, provided to the police information about an unrelated matter which
led directly to the laying of additional charges. He was eventually convicted
on those unrelated charges. The appellant’s position is that his lawyers
violated their duty of loyalty, and on that account the conviction that grew
out of their conflict of interest should be stayed.
2
The Alberta Court of Appeal, in brief reasons, considered the key point
to be that the lawyers did not disclose to the new client “any confidential
information attributable to a solicitor-and-client relationship” with an
existing client ((2000), 266 A.R. 363, 2000 ABCA 266, at para. 4). In its
view, the stay was unwarranted.
3
In my view, the law firm did owe a duty of loyalty to the appellant at
the material time, and the law firm ought not to have taken up the cause of one
of the appellant’s alleged victims (Darren Doblanko) in proceedings before a
civil court at the same time as it maintained a solicitor-client relationship
with the appellant in respect of other matters simultaneously pending before
the criminal court (the “Canada Trust” matters). The Doblanko
mandate, though factually and legally unrelated to the Canada Trust
matters, was adverse to the appellant’s interest. The law firm, as fiduciary,
could not serve two masters at the same time. Having said that, the appellant
falls short on the issue of remedy. He may (and perhaps did) choose to take
his complaint to the Law Society of Alberta, but he is not entitled to a stay
of proceedings. The law firm’s conduct did not affect the fairness of the Doblanko
trial. Its involvement predated the laying of charges by the police. There was
no issue of confidential information. The Doblanko charges were serious
and would almost certainly have been laid in any event. In my view, the
prosecution of the Doblanko charge was not an abuse of process. More
specifically, I agree with the conclusion of the Alberta Court of Appeal that
this is manifestly not one of those clearest of cases where a stay of the
jury’s verdict of guilt is warranted. I would therefore dismiss the appeal.
I. The
Facts
4
The appellant carried on a business in Edmonton as a paralegal for many
years. He was assisted by Helen Lambert. He regularly consulted “Pops”
Venkatraman, a solicitor, about issues arising in his files, and when advised
by “Pops” that matters exceeded his competence he would refer his clients to
the Venkatraman law firm. The Law Society of Alberta took the view that these
referrals did not take place frequently enough, and in October 1994 supplied
the Prosecutors’ Office in Edmonton with complaints that the appellant was
providing legal advice contrary to the Alberta Legal Profession Act,
S.A. 1991, c. L-9.1. The police investigation eventually led to a
92-count indictment against the appellant for a variety of different
transactions related to different complainants.
5
The conflict of interest largely concerns the activities of one of the
Venkatraman firm’s associates, Gregory Lazin. Lazin shared office space and
some facilities with the law firm in the fall of 1994. The trial judge found
that as of January 1, 1995 he should be considered a member of the Venkatraman
firm for the purpose of conflict of interest and confidentiality by virtue of
the extended definition of “firm” adopted by the Law Society of Alberta in its Code
of Professional Conduct (loose-leaf), effective January 1, 1995, at
p. ix. I say “extended meaning” because the evidence established that
Lazin was essentially carrying on an independent practice despite the shared
facilities. Effective May 1, 1995, however, Lazin’s practice was rolled into
the Venkatraman firm, and Lazin himself became an employee. He has since left.
6
The trial judge concluded that the lack of legal and factual connections
among some of the 92 counts required its severance into five separate
indictments. It was agreed that all five indictments would proceed before him
and he would, after all the indictments had been dealt with, impose a sentence
if convictions were obtained.
7
We are concerned here with two of the five indictments. The first trial
involved charges that the appellant had fabricated court documents in the Doblanko
divorce action. A second group of charges related to an alleged scheme to
defraud Canada Trust. The appellant and his business associate, Ms. Helen
Lambert, were said to have combined their efforts to obtain from Canada Trust
mortgages on behalf of people whose credit worthiness would have been rejected
if their identity had been disclosed. In one such transaction, for example, a
couple called Rambaran wished to buy a property but could not obtain financing
by reason of their recent bankruptcy. The allegation was that the appellant
went to Canada Trust ostensibly to obtain a mortgage on behalf of Helen
Lambert, but in fact on behalf of the bankrupt Rambaran family, with the
intention of having the Rambarans assume the mortgage once the monies had been
advanced by Canada Trust. Other indictments related in part to allegations of
the misappropriation of funds from an estate.
8
The conflicts of interest involving the Venkatraman firm came from two
sources:
(i) With respect to the Canada Trust indictment, the firm acted
simultaneously for the appellant in the criminal proceedings and his business
associate Helen Lambert in divorce proceedings at a time when they knew, or ought
to have known, that she would also be charged in the Canada Trust
criminal proceedings, with an interest adverse to his. Two members of the firm
visited the appellant at the Remand Centre on April 18, 1995, including Lazin
who arrived late and was there for about 12 minutes during a two-hour
interview. At the time he was acting for Helen Lambert. The trial judge
concluded that Lazin attended for no purpose except to collect information from
the appellant that would be useful to him in his defence of Helen Lambert in
the anticipated criminal proceedings. Lazin’s plan was to run a “cut-throat
defence”, seeking to paint the appellant as the manipulative criminal and Helen
Lambert as an innocent dupe. He was subsequently retained formally as her
defence counsel and eventually offered the Crown Attorney’s Office a deal under
which Lambert would testify against the appellant if the charges against her
were dropped. As it was put in cross-examination, “in return for Lambert
sinking [the appellant], Lambert would walk”. None of this, obviously, was in
the appellant’s interest. The appellant was belatedly advised that the
Venkatraman law firm would not act for him in the Canada Trust criminal
case because of its involvement with Helen Lambert.
(ii) In July 1995, Lazin, still a member of the Venkatraman firm, was
approached by Darren Doblanko whose wife had obtained a divorce with the
assistance of the appellant some years previously. Quite innocently, she had
relied on an affidavit of service on Darren Doblanko (who had earlier deserted
her). The affidavit was false. The jury found that the false affidavit of
service had been prepared by the appellant. Moreover, the wife had innocently
relied on a Certificate of No Appeal containing the forged signature of
Doblanko. At the suggestion of the trial judge in the Doblanko divorce,
Lazin suggested to Doblanko that he report the forgery to the police. In fact,
Lazin steered Doblanko to the same police officer who was responsible for the Canada
Trust file and other cases pending against the appellant. It was suggested
by the appellant’s counsel that Lazin’s strategy was to multiply the
allegations of dishonesty against his client to strengthen the credibility of
the “cut-throat” defence he planned to run on behalf of Helen Lambert in the Canada
Trust case.
II. Analysis
9
I make three preliminary observations. The first is that while misuse
of confidential information is not an issue in the Doblanko case, in
which the stay was entered, it is an issue in the Canada Trust matter
where Lazin, acting against the appellant’s interest, sat in on part of the
solicitor-client interview on April 18, 1995, described above. Secondly these
cases do not require the imputation of confidential knowledge from one partner
of the firm to another. Here the same member of the firm (Lazin) had a finger
in each of the conflict situations. Thirdly, we are not being asked to
intervene based merely on an “appearance” of conflict. The conflicts were actual.
10
The Doblanko indictment was the first to go to trial. The
appellant was convicted by the jury. The verdict was entered, but as stated,
sentencing was delayed by prior arrangement until the outcome on the other four
indictments was known. During the trial of the second indictment (on the Canada
Trust matters), members of the Venkatraman law firm sought to avoid
testifying on the basis that the firm was acting for the appellant “in
circumstances that could create a conflict”. With the Crown’s consent, the
judge declared a mistrial. The trial judge then entertained the appellant’s
application for a stay of all proceedings. At the conclusion of the stay
hearing, at which time all the relevant conflicts of interest emerged in the
testimony, the trial judge stayed further action on the jury’s verdict in the Doblanko
matter. He also expressed the view that while he would not, having presided
over the stay application, proceed to hear the Canada Trust case, it was
his opinion that those proceedings ought to be stayed as well: (1998), 235
A.R. 152, 1998 ABQB 859.
11
As stated, the stay was vacated and the verdict restored by the Alberta
Court of Appeal, which sent the matter back to the trial judge for sentencing.
A. The
Lawyer’s Duty of Loyalty
12
Appellant’s counsel reminds us of the declaration of an advocate’s duty
of loyalty made by Henry Brougham, later Lord Chancellor, in his defence of
Queen Caroline against the charge of adultery brought against her by her
husband, King George IV. He thus addressed the House of Lords:
[A]n advocate, in the discharge of his duty, knows but one person in
all the world, and that person is his client. To save that client by all means
and expedients, and at all hazards and costs to other persons, and, among them,
to himself, is his first and only duty; and in performing this duty he must not
regard the alarm, the torments, the destruction which he may bring upon
others. Separating the duty of a patriot from that of an advocate, he must go
on reckless of consequences, though it should be his unhappy fate to involve
his country in confusion.
(Trial of Queen Caroline (1821), by J. Nightingale, vol.
II, The Defence, Part 1, at p. 8)
These words
are far removed in time and place from the legal world in which the Venkatraman
law firm carried on its practice, but the defining principle — the duty of
loyalty — is with us still. It endures because it is essential to the
integrity of the administration of justice and it is of high public importance
that public confidence in that integrity be maintained: MacDonald Estate v.
Martin, [1990] 3 S.C.R. 1235, at pp. 1243 and 1265, and Tanny v.
Gurman, [1994] R.D.J. 10 (Que. C.A.). Unless a litigant is assured of the
undivided loyalty of the lawyer, neither the public nor the litigant will have
confidence that the legal system, which may appear to them to be a hostile and
hideously complicated environment, is a reliable and trustworthy means of
resolving their disputes and controversies: R. v. McClure, [2001] 1
S.C.R. 445, 2001 SCC 14, at para. 2; Smith v. Jones, [1999] 1 S.C.R.
455. As O’Connor J.A. (now A.C.J.O.) observed in R. v. McCallen (1999),
43 O.R. (3d) 56 (C.A.), at p. 67:
. . . the relationship of counsel and client requires clients,
typically untrained in the law and lacking the skills of advocates, to entrust
the management and conduct of their cases to the counsel who act on their
behalf. There should be no room for doubt about counsel’s loyalty and
dedication to the client’s case.
13
The value of an independent bar is diminished unless the lawyer is free
from conflicting interests. Loyalty, in that sense, promotes effective
representation, on which the problem-solving capability of an adversarial
system rests. Other objectives, I think, can be related to the first. For
example, in MacDonald Estate, supra, Sopinka J. speaks of
the “countervailing value that a litigant should not be deprived of his or her
choice of counsel without good cause” (p. 1243). Dubin J.A. remarked in Re
Regina and Speid (1983), 8 C.C.C. (3d) 18 (Ont. C.A.), at p. 21:
We would have thought it axiomatic that no client
has a right to retain counsel if that counsel, by accepting the brief, puts
himself in a position of having a conflict of interest between his new client
and a former one.
See also: Teoli
v. Fargnoli (1989), 30 Q.A.C. 136.
14
These competing interests are really aspects of protecting the integrity
of the legal system. If a litigant could achieve an undeserved tactical
advantage over the opposing party by bringing a disqualification motion or
seeking other “ethical” relief using “the integrity of the administration of
justice” merely as a flag of convenience, fairness of the process would be
undermined. This, I think, is what worried the Newfoundland Court of Appeal in
R. v. Parsons (1992), 100 Nfld. & P.E.I.R. 260, where the accused
was charged with the first degree murder of his mother. The Crown sought to
remove defence counsel on the basis that he had previously acted for the father
of the accused in an unrelated matrimonial matter, and might in future have to
cross-examine the father at the son’s trial for murder. The accused and his
father both obtained independent legal advice, after full disclosure of the
relevant facts, and waived any conflict. The father also waived
solicitor-client privilege. The court was satisfied there was no issue of
confidential information. On these facts, the court concluded that “public
confidence in the criminal justice system might well be undermined by
interfering with the accused’s selection of the counsel of his choice”
(para. 30).
15
Sopinka J. in MacDonald Estate, supra, also mentioned as
an objective the “reasonable mobility in the legal profession” (p. 1243).
In an era of national firms and a rising turnover of lawyers, especially at the
less senior levels, the imposition of exaggerated and unnecessary client
loyalty demands, spread across many offices and lawyers who in fact have no
knowledge whatsoever of the client or its particular affairs, may promote form
at the expense of substance, and tactical advantage instead of legitimate
protection. Lawyers are the servants of the system, however, and to the extent
their mobility is inhibited by sensible and necessary rules imposed for client
protection, it is a price paid for professionalism. Business development
strategies have to adapt to legal principles rather than the other way around.
Yet it is important to link the duty of loyalty to the policies it is intended
to further. An unnecessary expansion of the duty may be as inimical to the
proper functioning of the legal system as would its attenuation. The issue
always is to determine what rules are sensible and necessary and how best to
achieve an appropriate balance among the competing interests.
16
The duty of loyalty is intertwined with the fiduciary nature of the
lawyer-client relationship. One of the roots of the word fiduciary is fides,
or loyalty, and loyalty is often cited as one of the defining characteristics
of a fiduciary: McInerney v. MacDonald, [1992] 2 S.C.R. 138, at p. 149;
Hodgkinson v. Simms, [1994] 3 S.C.R. 377, at p. 405. The lawyer
fulfills squarely Professor Donovan Waters’ definition of a fiduciary:
In putting together words to describe a “fiduciary”
there is of course no immediate obstacle. Almost everybody would say that it is
a person in whom trust and confidence is placed by another on whose behalf the
fiduciary is to act. The other (the beneficiary) is entitled to expect that the
fiduciary will be concerned solely for the beneficiary’s interests, never the
fiduciary’s own. The “relationship” must be the dependence or reliance of the
beneficiary upon the fiduciary.
(D. W. M. Waters, “The Development of Fiduciary Obligations”, in
R. Johnson et al., eds., Gérard V. La Forest at the Supreme Court of
Canada, 1985-1997 (2000), 81, at p. 83)
Fiduciary
duties are often called into existence to protect relationships of importance
to the public including, as here, solicitor and client. Disloyalty is
destructive of that relationship.
B. More
Than Just Confidential Information
17
While the Court is most often preoccupied with uses and abuses of
confidential information in cases where it is sought to disqualify a lawyer
from further acting in a matter, as in MacDonald Estate, supra,
the duty of loyalty to current clients includes a much broader principle of
avoidance of conflicts of interest, in which confidential information may or
may not play a role: Montreal Trust Co. of Canada v. Basinview Village Ltd.
(1995), 142 N.S.R. (2d) 337 (C.A.); Enerchem Ship Management Inc. v. Coastal
Canada (The), [1988] 3 F.C. 421 (C.A.); Jans v. Coulter (G.H.) Co.
(1992), 105 Sask. R. 7 (C.A.); Stewart v. Canadian Broadcasting Corp.
(1997), 150 D.L.R. (4th) 24 (Ont. Ct. (Gen. Div.)); Gaylor v. Galiano
Trading Co. (1996), 29 B.L.R. (2d) 162 (B.C.S.C.).
18
In Drabinsky v. KPMG (1998), 41 O.R. (3d) 565 (Gen. Div.), where
the plaintiff sought an injunction restraining the accounting firm KPMG (of
which the plaintiff was a client) from further investigating the financial
records of a company of which the plaintiff was a senior officer, Ground J., grouping
together lawyers and accountants, said, at p. 567:
I am of the view that the fiduciary relationship
between the client and the professional advisor, either a lawyer or an
accountant, imposes duties on the fiduciary beyond the duty not to disclose
confidential information. It includes a duty of loyalty and good faith and
a duty not to act against the interests of the client. [Emphasis added.]
Some members
of the accounting profession assert the efficacy of “Chinese walls” in
accounting practices even with respect to the affairs of current
clients. Whether this belief is justified in the absence of informed consent
from the clients concerned is an issue for another day. Insofar as the legal
profession is concerned, Ground J.’s view of the duty of loyalty to
current clients is unassailable.
19
The aspects of the duty of loyalty relevant to this appeal do include
issues of confidentiality in the Canada Trust matters, but engage more
particularly three other dimensions:
(i) the duty to avoid conflicting interests: Davey v.
Woolley, Hames, Dale & Dingwall (1982), 35 O.R. (2d) 599 (C.A.), and Services
environnementaux Laidlaw (Mercier) Ltée v. Québec (Procureur général),
[1995] R.J.Q. 2393 (C.A.), including the lawyer’s personal interest: Szarfer
v. Chodos (1986), 54 O.R. (2d) 663 (H.C.), aff’d (1988), 66 O.R. (2d) 350
(C.A.); Moffat v. Wetstein (1996), 29 O.R. (3d) 371 (Gen. Div.); Stewart
v. Canadian Broadcasting Corp., supra.
(ii) a duty of commitment to the client’s cause (sometimes
referred to as “zealous representation”) from the time counsel is retained, not
just at trial, i.e. ensuring that a divided loyalty does not cause the lawyer
to “soft peddle” his or her defence of a client out of concern for another
client, as in R. v. Silvini (1991), 5 O.R. (3d) 545 (C.A.); R. v.
Widdifield (1995), 25 O.R. (3d) 161 (C.A.); R. v. Graham, [1994]
O.J. No. 145 (QL) (Prov. Div.); and,
(iii) a duty of candour with the client on matters relevant to
the retainer: R. v. Henry (1990), 61 C.C.C. (3d) 455, [1990] R.J.Q.
2455 (C.A.), at p. 465 C.C.C., per Gendreau J.A.; Spector v.
Ageda, [1971] 3 All E.R. 417 (Ch. D.), at p. 430; the Canadian
Bar Association, Code of Professional Conduct (1988), c. 5,
Commentary 4-6. If a conflict emerges, the client should be among the first to
hear about it.
C. The
Venkatraman Law Firm’s Breach of Professional Obligations
20
The present appeal involves criminal proceedings and it is in that
context that I propose to review the applicable legal principles.
(1) Did a Solicitor-Client Relationship Exist at the Relevant Time?
21
The Crown argues that the Canada Trust retainer ended before the Doblanko
retainer began, and the relevant principles are therefore those that govern
acting against a former client rather than the stricter and more
comprehensive rules about acting against a current client.
22
The Code of Professional Conduct of the Law Society of Alberta
defines “client” as follows, at p. viii:
“client” generally means a person on whose behalf the lawyer renders
professional services and with whom the lawyer has a current or ongoing
lawyer/client relationship, but may also include a person who reasonably
believes that a lawyer/client relationship exists although one or more of the
customary indicia of such a relationship are absent.
23
The trial judge made the finding that “Venkatraman and Associates had a
solicitor client relationship with Neil [the appellant] relating to the giving
of advice generally but including specifically advice relating to matters for
which Neil [the appellant] was charged” (para. 66). This relationship,
which seems to have been in the nature of a general retainer, predated the
events in question, and continued through the events in question. Not only did
the appellant claim a continuing solicitor-client relationship but the
Venkatraman law firm took the position at the time of the Canada Trust
trial in 1997 that there was a continuing solicitor-client relationship
(see Exhibit 6, letter dated January 14, 1997). In these circumstances, the
trial judge’s finding that a solicitor-client relationship existed between the
appellant and the Venkatraman law firm at all relevant times should not be
disturbed.
(2) The Duty of Loyalty to an Existing Client
24
The Law Society of Alberta’s Code of Professional Conduct
provides that “[i]n each matter, a lawyer’s judgment and fidelity to the
client’s interests must be free from compromising influences” (c. 6,
Statement of Principle, p. 50). The facts of this case illustrate a
number of important objectives served by this principle. Loyalty required the
Venkatraman law firm to focus on the interest of the appellant without being
distracted by other interests including personal interests. Part of the
problem here seems to have been Lazin’s determination to hang onto a piece of
litigation. When Lazin was asked about “the ethical issue” in acting for Lambert,
he said maybe “it was a question of not wanting to give up the file”. Loyalty
includes putting the client’s business ahead of the lawyer’s business. The
appellant was entitled to a level of commitment from his lawyer that whatever
could properly be done on his behalf would be done as surely as it would have
been done if the appellant had had the skills and training to do the job
personally. On learning that his own lawyer had put before the divorce court
evidence of his further wrongdoing, the appellant understandably felt
betrayed. Equally, the public in Edmonton, where the prosecution of the
appellant had attracted considerable notoriety, required assurance that the
truth had been ascertained by an adversarial system that functioned clearly and
without hidden agendas.
25
The general duty of loyalty has frequently been stated. In Ramrakha
v. Zinner (1994), 157 A.R. 279 (C.A.), Harradence J.A., concurring,
observed, at para. 73:
A solicitor is in a fiduciary relationship to his
client and must avoid situations where he has, or potentially may, develop a
conflict of interests . . . . The logic behind this is cogent in that
a solicitor must be able to provide his client with complete and undivided
loyalty, dedication, full disclosure, and good faith, all of which may be
jeopardized if more than one interest is represented.
26
The duty of loyalty was similarly expressed by Wilson J.A. (as she then
was) in Davey v. Woolley, Hames, Dale & Dingwall, supra, at
p. 602:
The underlying premise . . . is that, human nature being what it is,
the solicitor cannot give his exclusive, undivided attention to the interests
of his client if he is torn between his client’s interests and his own or his client’s
interests and those of another client to whom he owes the self-same duty of
loyalty, dedication and good faith.
27
More recently in England, in a case dealing with the duties of
accountants, the House of Lords observed that “[t]he duties of an accountant
cannot be greater than those of a solicitor, and may be less” (p. 234) and
went on to compare the duty owed by accountants to former clients (where
the concern is largely with confidential information) and the duty owed to current
clients (where the duty of loyalty prevails irrespective of whether or not
there is a risk of disclosure of confidential information). Lord Millett
stated, at pp. 234-35:
My Lords, I would affirm [possession of
confidential information] as the basis of the court’s jurisdiction to intervene
on behalf of a former client. It is otherwise where the court’s
intervention is sought by an existing client, for a fiduciary cannot act at
the same time both for and against the same client, and his firm is in no
better position. A man cannot without the consent of both clients act for one
client while his partner is acting for another in the opposite interest. His
disqualification has nothing to do with the confidentiality of client
information. It is based on the inescapable conflict of interest which is
inherent in the situation. [Emphasis added.]
(Bolkiah v. KPMG, [1999] 2 A.C. 222 (H.L.))
28
In exceptional cases, consent of the client may be inferred. For
example, governments generally accept that private practitioners who do their
civil or criminal work will act against them in unrelated matters, and a
contrary position in a particular case may, depending on the circumstances, be
seen as tactical rather than principled. Chartered banks and entities that
could be described as professional litigants may have a similarly broad-minded
attitude where the matters are sufficiently unrelated that there is no danger
of confidential information being abused. These exceptional cases are
explained by the notion of informed consent, express or implied.
29
The general prohibition is undoubtedly a major inconvenience to large
law partnerships and especially to national firms with their proliferating
offices in major centres across Canada. Conflict searches in the firm’s
records may belatedly turn up files in another office a lawyer may not have
been aware of. Indeed, he or she may not even be acquainted with the partner
on the other side of the country who is in charge of the file. Conflict search
procedures are often inefficient. Nevertheless it is the firm not just the
individual lawyer, that owes a fiduciary duty to its clients, and a bright line
is required. The bright line is provided by the general rule that a lawyer may
not represent one client whose interests are directly adverse to the immediate
interests of another current client — even if the two mandates are unrelated
— unless both clients consent after receiving full disclosure (and preferably
independent legal advice), and the lawyer reasonably believes that he or she is
able to represent each client without adversely affecting the other.
30
The Venkatraman law firm was bound by this general prohibition to avoid
acting contrary to the interest of the appellant, a current client, who was a
highly vulnerable litigant in need of all the help and reassurance he could
legitimately get.
(3) Breaches of the Duty of Loyalty
31
In my view the Venkatraman law firm, and Lazin in particular, put
themselves in a position where the duties they undertook to other clients
conflicted with the duty of loyalty which they owed to the appellant. I adopt,
in this respect, the notion of a “conflict” in § 121 of the Restatement
Third, The Law Governing Lawyers (2000), vol. 2, at pp. 244-45,
as a “substantial risk that the lawyer’s representation of the client would be
materially and adversely affected by the lawyer’s own interests or by the lawyer’s
duties to another current client, a former client, or a third person”.
32
The initial conflict was to attempt to act simultaneously for both the
appellant and his eventual co-accused in the Canada Trust charges, Helen
Lambert. They were clearly adverse in interest. It is true that at the time
Lazin and his colleague from the firm met the appellant in the Remand Centre
on April 18, 1995 Lazin had not been retained by Lambert on the criminal
charges. He was acting only with respect to her divorce. It is also true that
in the end the appellant was eventually represented by other counsel.
Nevertheless the trial judge found that on April 18, 1995, Lazin was in fact
(if not yet officially) acting on Lambert’s behalf in the criminal proceedings.
Her indictment was reasonably anticipated (given her involvement in the subject
matter of the Canada Trust charge) and, most importantly, the trial
judge held that the purpose of Lazin’s attendance at the Remand Centre was to
get evidence to run a “cut-throat” defence against the appellant who, he found,
was an ongoing client of the Venkatraman law firm. The fact that the appellant
eventually looked elsewhere for a lawyer in the Canada Trust case,
whether as a result of his choice or theirs, did not diminish their duty of
loyalty. Nor does it make a difference that no professional fee was charged
for that particular consultation. The Venkatraman firm (Lazin) appreciated
that the appellant having been arrested, the long arm of the law would soon be laid
on Helen Lambert. In fact, Helen Lambert was arrested less than two months
later, on June 6, 1995.
33
The second conflict relates to the Doblanko charges. As
mentioned, both Doblanko and his former wife (who had by now remarried and
produced children of her second “marriage”) needed their earlier divorce to be
regularized. The Venkatraman firm breached their duty to the appellant in
accepting a retainer that required them to put before the divorce court judge
evidence of the illegal conduct of their client, the appellant, at a time when
they knew he was facing other criminal charges related to his paralegal
practice, in which their firm had had a long-standing involvement. It was
contended that the Doblanko and Canada Trust cases were wholly
unrelated in the sense that Lazin could not have obtained in the Doblanko
mandate confidential information that would be relevant in the Canada Trust
mandate. This, as stated, is not the test of loyalty to an existing
client, and it is not entirely true either. While the two cases were wholly
independent of each other in terms of their facts, the Lambert’s cut-throat
defence was helped by piling up the allegations of dishonest conduct in
different matters by different complainants in a way that would make it easier
for the jury to consider her a victim rather than a perpetrator. The linkage
was thus strategic. The Doblanko application was initiated in July
1995. The Crown advised us that the Canada Trust criminal charges
against Helen Lambert were not resolved until the spring of 1996.
34
In the course of the Doblanko application, the divorce court
judge expressed the view (according to Lazin) that Lazin should report the
appellant’s apparent falsification of documents to the police. I think at that
point that Lazin, as an officer of the court, was obliged to do so. Lazin then
called the Law Society (without disclosing that the appellant was a client of
his firm) who advised that Lazin could advise his divorce court client
to report the matter to the police but he was not bound to. Lazin advised
neither the trial judge nor the Law Society that the suspected forger (the
appellant) was a client of his firm. Further, Lazin made a point of having the
matter reported to the police officer who was responsible for investigating the
appellant in connection with the Canada Trust and other matters.
35
It was the Venkatraman firm that put the cat among the pigeons by
bringing the Doblanko application before the divorce court. Mr. Doblanko
would likely have found another lawyer to make the application, and the facts
might equally have eventually made their way to the police, but it was in
violation of the firm’s duty of loyalty to the appellant to contribute in this
way to the appellant’s downfall.
(4) Remedies for Breach of the Duty of Loyalty
36
It is one thing to demonstrate a breach of loyalty. It is quite another
to arrive at an appropriate remedy.
37
A client whose lawyer is in breach of his or her fiduciary duty has
various avenues of redress. A complaint to the relevant governing body, in
this case the Law Society of Alberta, may result in disciplinary action. A
conflict of interest may also be the subject matter of an action against the
lawyer for compensation, as in Szarfer v. Chodos, supra. Breach
of the ethical rules that could raise concerns at the Law Society does not
necessarily give grounds in a malpractice action or justify a constitutional
remedy.
38
More specifically, in the criminal law context, if the material facts
surface while court proceedings are ongoing, an application to disqualify the
lawyer from acting further may be brought, as in Re Regina and Robillard
(1986), 28 C.C.C. (3d) 22 (Ont. C.A.); Re Regina and Speid, supra,
at pp. 20-21; Widdifield, supra, at p. 177, per
Doherty J.A.; R. v. Chen (2001), 53 O.R. (3d) 264 (S.C.J.). The
conflict should, of course, be raised at the earliest practicable stage. If
the trial is concluded, the conflict of interest may still be raised at the
appellate level as a ground to set aside the trial judgment, but the test is
more onerous because it is no longer a matter of taking protective steps but of
asking for the reversal of a court judgment.
39
In R. v. Graff (1993), 80 C.C.C. (3d) 84, the Alberta Court of
Appeal held that in a post-conviction situation, if an accused is to challenge
a conviction or sentence on appeal, he or she must show more than a possibility
of conflict of interest; while actual prejudice need not be shown, the
appellant must demonstrate the conflict of interest and that the
conflict adversely affected the lawyer’s performance on behalf of the
appellant. See also Silvini, supra, at p. 551, per
Lacourcière J.A.; Widdifield, supra, at p. 173; R. v. Barbeau
(1996), 110 C.C.C. (3d) 69 (Que. C.A.), at p. 81, per Rothman J.A.
It is not necessary for the accused to demonstrate actual prejudice because
“[t]he right to have the assistance of counsel is too fundamental and absolute
to allow courts to indulge in nice calculations as to the amount of prejudice
arising from its denial”: Glasser v. United States, 315 U.S. 60 (1942),
at p. 76.
40
If the two-part conflict/impairment test is satisfied, the court may
order a new trial. The appellant is unable to meet this test because, of
course, he was not represented in any court proceedings (trial or pre-trial) by
the Venkatraman law firm in either the Doblanko or the Canada Trust
matters. Moreover he seeks more than a new trial. The appellant seeks a stay
of the Doblanko verdict and a stay of further proceedings in the Canada
Trust matters on the basis he was denied his right to effective
representation contrary to s. 7 and s. 11 (d) of the Canadian Charter
of Rights and Freedoms , and that further proceedings on these matters would
be an abuse of process. So abusive, he says, that this sorry affair amounts to
one of the “clearest of cases” where a stay is justified: United States of
America v. Cobb, [2001] 1 S.C.R. 587, 2001 SCC 19; United States of
America v. Shulman, [2001] 1 S.C.R. 616, 2001 SCC 21.
41
Here again his pathway is impeded by the fact that the Venkatraman law
firm did not act as his counsel, ineffective or otherwise, at any stage of the
criminal proceedings. He consulted them and took them into his confidence, but
he was not represented by them. He is therefore thrown back on the “residual
category” of stay applications, described in R. v. O’Connor, [1995] 4
S.C.R. 411, as follows, at para. 73:
This residual category does not relate to conduct affecting the
fairness of the trial or impairing other procedural rights enumerated in the Charter ,
but instead addresses the panoply of diverse and sometimes unforeseeable
circumstances in which a prosecution is conducted in such a manner as to
connote unfairness or vexatiousness of such a degree that it contravenes
fundamental notions of justice and thus undermines the integrity of the
judicial process.
In Canada
(Minister of Citizenship and Immigration) v. Tobiass, [1997] 3 S.C.R. 391,
the Court added that the residual category is a small one. “In the vast
majority of cases, the concern will be about the fairness of the trial” (para.
89).
42
The appellant’s argument that the purity of the waters of the fountain
of justice was irredeemably polluted in these cases by the action of the
Venkatraman law firm (to borrow a metaphor from Lord Brougham’s era) is very
difficult to sustain on the facts.
43
The Alberta Court of Appeal noted that the actions of the Venkatraman
law firm are not state actions, and therefore do not as such attract Charter
scrutiny. The appellant says that a lawyer is an “officer of the court” but
this, I think, is an inadequate basis on which to base state responsibility.
However, I would not want to shut the door entirely on the basis of lack of
state action. At common law, the doctrine of abuse of process was rooted in
objectionable conduct by private litigants, for example using the courts for an
improper purpose. Although s. 7 of the Charter incorporates the
abuse of process doctrine, it does not extinguish the common law doctrine under
which the courts have an inherent and residual discretion to control their own
processes and prevent their abuse: Cobb, supra, at
para. 37. Even in Charter terms, there is much to be said for the
view of Powell J. of the United States Supreme Court who observed in Cuyler
v. Sullivan, 446 U.S. 335 (1980), that, if defence counsel is incompetent
or otherwise violates his or her duties in such a way as to adversely affect
the representation of an accused, “a serious risk of injustice infects the
trial itself. . . . When a State obtains a criminal conviction through such a
trial, it is the State that unconstitutionally deprives the defendant of his
liberty” (p. 343). See also Mickens v. Taylor, 122 S. Ct. 1237
(2002), at p. 1245. We do not need to consider this argument in this
case. It is difficult to see how the conduct of a law firm that is not
actually engaged as defence counsel, as here, could have such a drastic impact
on the constitutionality of the trial. Here there was no wrongful state
action. Nor did the conduct of the Venkatraman law firm “infect” the
appellant’s trial with “a serious risk of injustice”. Further, with respect to
the tertiary ground, there is nothing in the Doblanko verdict to
contravene our fundamental notions of justice.
D. The
Stay Sought by the Appellant With Respect to the Doblanko Verdict
44
In my view, the stay entered by the trial judge against the Doblanko
verdict was properly vacated by the Court of Appeal for the following reasons:
(i) The falsification of court documents came to light without the
involvement of the Venkatraman firm. Mr. Doblanko had already obtained from
the divorce court the documents incriminating the appellant before he came to
see Lazin. Doblanko wished to remarry and both he and the wife he had deserted
years previously required that their status be regularized. A court action was
inevitable and any judge confronted with court documents possibly falsified by
someone holding themselves out as a paralegal could be expected to have the
matter reported to the police. Lazin’s involvement in the process was in
violation of his and the firm’s professional obligations, but it in truth
contributed little to the appellant’s predicament.
(ii) The Venkatraman firm’s involvement ended with the report to the
police. At that point, the police conducted their own investigation and laid
charges. The “independent investigation and decision by the authorities” to
prosecute militates against a finding of abuse of process here: R. v. Finn,
[1997] 1 S.C.R. 10, at para. 1.
(iii) The appellant acknowledged that any confidential information
obtained with respect to the Canada Trust matters or his other files
with the Venkatraman law firm had no relevance whatsoever to the Doblanko
divorce.
(iv) In light of the tenuous connection between the Venkatraman law
firm and the Doblanko prosecution, it simply cannot be said that the
lawyers’ violation of their duty of loyalty was an “affront to fair play and
decency . . . disproportionate to the societal interest in the effective
prosecution of criminal cases [and] the administration of justice”: R. v.
Conway, [1989] 1 S.C.R. 1659, at p. 1667.
(v) The charges are extremely serious. Falsification of court
documents strikes at the root of the integrity of the court’s process. It
would be irrational to deprive the state of the jury’s verdict because of a law
firm’s private conduct of which the state had no knowledge and over which it
had no influence.
45
The appellant’s alternative submission is that the Alberta Court of
Appeal was wrong to send this case back for sentencing. He says he is entitled
to a new trial in the Doblanko matter as well as the Canada Trust
matters. He treats the trial judge’s stays as an acquittal, and argues that
where an appeal court overturns an acquittal by a judge sitting with a jury it
has no power to enter a verdict of guilty; it must order a new trial: Criminal
Code, R.S.C. 1985, c. C-46, s. 686(4) (b)(ii). However, the jury
in this case did not acquit. It found the appellant guilty. The effect of its
guilty verdict was stayed by the trial judge. As we pointed out in R. v.
Pearson, [1998] 3 S.C.R. 620, at para. 15, stay procedures may “lead
to a two-stage trial, in which the two stages are autonomous”. The stay was
lifted by the Court of Appeal. The jury’s verdict was thereby not reversed but
activated. For purposes of the right of an appeal to this Court, the reversal
of the stay was treated as equivalent to setting aside an acquittal, but only
for that limited purpose. Dickson C.J. pointed out in R. v. Jewitt,
[1985] 2 S.C.R. 128, at p. 148:
We are concerned here with a stay of proceedings
because of an abuse of process by the Crown. While a stay of proceedings of this
nature will have the same result as an acquittal and will be such a final
determination of the issue that it will sustain a plea of autrefois acquit,
its assimilation to an acquittal should only be for purposes of enabling an
appeal by the Crown. Otherwise, the two concepts are not equated.
Accordingly
the Court of Appeal was correct to remit the Doblanko matter to the
trial judge for sentencing.
E. The
Stay Sought by the Appellant With Respect to the Pending Canada Trust Charges
46
As mentioned, the trial judge declared a mistrial with respect to the Canada
Trust charges and directed that they proceed to a new trial before a
different judge. He did, however, express in his reasons the view that
eventually those charges as well should be stayed because of the conflict of
interest engaged in by the Venkatraman law firm. It is appropriate that we
comment on his expression of opinion.
47
The conflict of interest in Canada Trust relates to a brief
period of consultation that ended soon after it began. The Venkatraman law
firm was in breach of its duty of loyalty to the appellant, but shortly
thereafter they recognized the conflict and acted no further on the Canada
Trust file. Other counsel were retained, who were not privy to whatever
confidential information the Venkatraman firm possessed. The Helen Lambert
charges have been resolved. There is no danger that the Venkatraman law firm’s
conflict would affect the fairness of a new trial. On the basis of the record
we have before us, I would not regard the Canada Trust charges as so
vitiated by the law firm’s conduct as to render it an abuse of process for the
state (which had no role in the conflict of interest) to seek a conviction at a
new trial. In any event it is certainly not one of the “clearest of cases” in
which a stay would be justified. There may of course be other or different
evidence before the judge presiding at the new trial and the disposition of the
stay application, if renewed, will be for that trial judge to decide.
III. Disposition
48
I would dismiss the appeal.
Appeal dismissed.
Solicitors for the appellant: Parlee McLaws, Edmonton.
Solicitor for the respondent: The Attorney General for
Alberta, Edmonton.