1992 S.H. 81964 IN THE SUPREME COURT OF NOVA SCOTIA BETWEEN: UNITED STEELWORKERS OF AMERICA, Locals 6874 and 4883 on behalf of all members and former members who are beneficiaries of Pension Plan for Unionized Employees of the former Amherst Aerospace Ltd., and ROBERT MELANSON, ROBERT SPENCE and HARLEY ELS, Trustees, on behalf of all beneficiaries of Pension Plan for Unionized Employees of the former Amherst Aerospace Ltd., and ROBERT MELANSON AND HARLEY ELS, Trustees, on behalf of all beneficiaries of Pension Plan for Salaried Employees of the former Amherst Aerospace Ltd., and DAVID HENWOOD, beneficiary of Pension Plan for Unionized Employees of the former Amherst Aerospace Ltd., and MARIE A. LAURETTE, beneficiary of Pension Plan for Salaried Employees of the former Amherst Aerospace Ltd. and PETER KING and STEPHEN RANKIN and BRIAN FLEMMING First Defendants ‑and- AMHERST AEROSPACE INC., body corporate Second Defendant and CONFEDERATION LIFE INSURANCE CO. LTD., body corporate Third Defendant STEWART McKELVEY STIRLING SCALES and WILLIAM M. MERCER LIMITED Third Parties HEARD: Before the Honourable Justice D.W. Gruchy in Chambers in Halifax, Nova Scotia, on November 9, 1993 DECISION: December 3, 1993 COUNSEL: Ronald A. Pink, Esq., Q.C. and Ms. Leanne MacMillan, Counsel for the Plaintiffs Alan Parish, Esq., Counsel for the First Defendants Alan Stern, Esq., Q.C., Counsel for the Third Party Mercer A. William Moreira, Esq., Counsel for the Third Party Stewart McKelvey Stirling Scales ERRATUM Decision, page 4, lines and 9, the following words should be deleted: "plaintiffs and employees of‑ Amherst Aerospace Inc.", to be replaced with the following words: "Amherst Aerospace and its employees. Decision, page 7, line 1, second word "plaintiffs" should be replaced with the word "applicants". Halifax, N.S. April 14, 1994 1992 S.H. 81964 IN THE SUPREME COURT OF NOVA SCOTIA BETWEEN: UNITED STEELWORKERS OF AMERICA, Locals 6874 and 4883 on behalf of all members and former members who are beneficiaries of Pension Plan for Unionized Employees of the former Amherst Aerospace Ltd., and ROBERT MELANSON, ROBERT SPENCE and HARLEY ELS, Trustees, on behalf of all beneficiaries of Pension Plan for Unionized Employees of the former Amherst Aerospace Ltd., and ROBERT MELANSON AND HARLEY ELS, Trustees, on behalf of all beneficiaries of Pension Plan for Salaried Employees of the former Amherst Aerospace Ltd., and DAVID HENWOOD, beneficiary of Pension Plan for Unionized Employees of the former Amherst Aerospace Ltd., and MARIE A. LAURETTE, beneficiary of Pension Plan for Salaried Employees of the former Amherst Aerospace Ltd. and PETER KING and STEPHEN RANKIN and BRIAN FLEMMING First Defendants and AMHERST AEROSPACE INC., body corporate Second Defendant and CONFEDERATION LIFE INSURANCE CO. LTD., body corporate Third Defendant STEWART McKELVEY STIRLING SCALES and WILLIAM M. MERCER LIMITED Third Parties DECISION HEARD: Before the Honourable Justice D.W. Gruchy in Chambers in Halifax, Nova Scotia, on November 9, 1993 DECISION RELEASED: December 3, 1993 COUNSEL: Ronald A. Pink, Esq., Q.C., and Ms. Leanne MacMillan, Counsel for the Plaintiffs Alan Parish, Esq., Counsel for the First Defendants Alan Stem, Esq., Q.C., Counsel for the Third Party Mercer A. William Moreira, Esq., Counsel for the Third Party Stewart McKelvey Stirling Scales GRUCHY, J. This is an application by the first defendants (applicants) for an order declaring Pink Breen Larkin (Pink Breen) ineligible to represent the plaintiffs as a result of a conflict of interests. The action was commenced by the plaintiffs as members, trustees and beneficiaries of pension plan for employees of Amherst Aerospace Inc. They allege that the applicants breached their fiduciary duties owed to the plaintiffs in connection with the pension plan. The applicants say that Ronald A. Pink, Q.C., and others of the firm, Pink Breen were partners or associates in the firm of Patterson Kitz when the latter firm were solicitors for Amherst Aerospace Inc. Amherst Aerospace Inc. is, am informed, defunct. The applicants say that Patterson Kitz received privileged information from Amherst Aerospace Inc., its officers and directors, relative to the subject matter of this action. Patterson Kitz acted for Amherst Aerospace Inc. under a, very general retainer from January, 1988, to April, 1990. On June 16, 1989, Ronald A. Pink, Q.C. and other lawyers specializing in the field of labour law, administrative law and public law, left the Patterson Kitz firm and formed Pink Breen. The applicants say, therefore, that firm ought not to be permitted to represent the applicants in this action. Applicant's Factual Position One of the applicants, Peter King, has filed an affidavit dated July 29, 1993. He and the other applicants were officers and directors of VGM Capital Corporation when it negotiated the purchase of the shares of Enheat Limited of Amherst, Nova Scotia. VGM retained Patterson Kitz to act for it, or its nominee to be incorporated, in the purchase of Enheat. The acquisition of the shares of Enheat Limited and the eventual incorporation and operation of Amherst Aerospace Inc. involved large number of lawyers of Patterson Kitz and extensive, legal services. The retainer of the firm was general (that is, the entire firm was retained) and the bulk of the work was performed by team of lawyers who specialized in commercial law. Mr. King says that an issue addressed and reviewed by Patterson Kitz related to an unfunded pension liability. He says, and there is little doubt, that members and associates of Patterson Kitz were deeply involved in the legal work of Amherst Aerospace Inc. and its operations. He says that Patterson Kitz obtained confidential knowledge concerning the Amherst Aerospace pension plan. Patterson Kitz also had an involvement in the status of the collective agreement between Amherst Aerospace and its employees. They were also involved in the preparation of detailed prospectus for filing with the Registrar of Securities under the Nova Scotia Stock Savings Plan which included statements concerning the pension plan and collective agreement. Certain other financing of Amherst Aerospace Inc. required Patterson Kitz to review the collective agreement, the pension fund and the financial background of the Company. Various partners or associates of Patterson Kitz were directors of Amherst Aerospace Inc. and of other related companies and attended various board meetings. Mr. King says that Dennis Ashworth, who was partner of Patterson Kitz at all relevant times and was also Director of Amherst Aerospace Inc., its predecessor and parent companies, has not been named as defendant. He says that he has been informed that it is probable that members or former members of Patterson Kitz who were or are partners of Pink Breen will be called as witnesses. In 1989 Patterson Kitz, was instrumental in facilitating Government guaranteed loan of $8,750,000. After Pink Breen had left Patterson Kitz that loan was called and monitor from Price Waterhouse was appointed pursuant to the loan documentation negotiated by Patterson Kitz. The actions of the monitor, according to Mr. King, will be an issue in this action. Mr. King says "it was represented" by Patterson Kitz that clients' affairs were regularly discussed at partners', lawyers' and committee meetings. The applicants have also filed the affidavit of Dara L. Gordon, partner of Patterson Kitz, and who was the "client management lawyer for Amherst Aerospace". She took instructions from "inter alia Brian Flemming and Peter King". She said that Patterson Kitz acted as general counsel to Amherst Aerospace and she and others of Patterson Kitz attended some of the board of directors' meetings. Mr. Dennis Ashworth of the firm was member of the board of directors of Amherst Aerospace; Mr. Bruce Marchand was secretary. She listed others of the firm who had worked on Amherst Aerospace matters. She said that while Ronald Pink was "informally leader" within the firm neither he nor any of the other lawyers of Pink Breen had worked on the Amherst Aerospace files. Mr. D. Stephen Rankin has filed an affidavit in which he says he became President of Amherst Aerospace and director of that Company in late 1988. He says that when he was President, "we" requested Patterson Kitz to review the collective agreement in detail and that it was rewritten by Patterson Kitz "...in order to propose possible amendments...". Mr. Rankin is not specific as to the time of the review of the collective agreement and, in particular, as to whether that occurred before or after the departure of the lawyers of Pink Breen. He is specific, however, that Patterson Kitz dealt with series of grievances filed by the plaintiff against Amherst Aerospace. He says that if contributions were not made to the pension fund, then it was on the instructions of the monitor appointed by Price Waterhouse, pursuant to documents negotiated by Mr. Dickson of Patterson Kitz prior to June 1989. Mr. Pink was discovered preparatory to this application. Alan V. Parish, acting on behalf of the applicants, has filed excerpts from that discovery transcript and letter from solicitor for the third party, Stewart McKelvey Stirling Scales; to the effect that Dara L. Gordon will possibly, and/or likely, be required to give evidence in the main trial. In Mr. Pink's tendered discovery, he confirmed that he had been partner of Patterson Kitz until June 19, 1989. There was labour group within that firm which then split off and formed what eventually became Pink Breen Larkin (Pink Breen). While partner at Patterson Kitz he was aware that work was proceeding with respect to Amherst Aerospace. His personal knowledge of the client was vague and as far as he knew neither he nor any of the labour group worked on the file. His knowledge of the relationship between Patterson Kitz and Amherst Aerospace was to the extent that "they were doing some securities work...". He said that none of the present Pink Breen members did any work on behalf of the plaintiffs with respect to the pension plan prior to late 1990. It was possible that member of Patterson Kitz from the Truro office acted in grievance taken by the plaintiff Union, but Mr. Pink had no direct knowledge of it. The plaintiff Union apparently handled its own grievances and arbitrations without legal assistance. Patterson Kitz had general policy that they would not act for client in labour matter when they also represented the Union. Mr. Pink testified at discovery that as far as he was concerned the action in question was entirely based on transaction which occurred after he had left Patterson Kitz and was not related to any activity which occurred while he and his present partners and associates were involved. The Issue On the basis of the facts adduced by affidavit on behalf of the applicants, the issue is stated as follows: Does the extensive involvement of Mr. Pink with the law firm of Patterson Kitz, the firm which acted as general counsel to (Amherst Aerospace Inc.) at all material times, and the fact that most of the lawyers at Pink Breen were formerly at Patterson Kitz, result in conflict of interest making Mr. Pink and the firm of Pink Breen ineligible to continue representing the plaintiffs in the action against the applicants and others? The Applicants' Position The applicants have especially focused on the "strong inference that lawyers who work together share confidences", mentioned by Mr. Justice Sopinka in Martin v. Gray (1990), 1990 CanLII 32 (SCC), 77 D.L.R. (4th) 249. They have said that the very broad retainer of Patterson Kitz included the review of the possibility of unfunded pension liability, review of the financial background of Amherst Aerospace Inc. and review of the pension plans and collective agreement of that Company. The nature of the solicitor‑client relationship in such broad retainer would of necessity be "sufficiently related" to the subject matter of this action so as to infer firstly that the confidences were relevant and, secondly, they were shared amongst the lawyers of Patterson Kitz. The applicants have also drawn from the fact that Mr. Dennis Ashworth, former partner of Patterson Kitz and former member of the board of directors of Amherst Aerospace, has not been joined as defendant and that is an act of favoritism arising from that relationship. In addition, the applicants say that certain former partners may be called as witnesses and, therefore, Mr. Pink will have to cross‑examine them. The applicants say that would automatically disqualify Mr. Pink if cross‑examination is necessary. (See Widrig v. Cox Downie et al (1992), 1992 CanLII 2797 (NS SC), 114 N.S.R. (2d) 320. They have submitted that there need not be factual connection between the confidential communication and the retainer from which it is sought to remove the solicitor. (See Canada Trustco Mortgage Co. v. Corkum et al (1991), 1991 CanLII 4367 (NS SC), 105 N.S.R. (2d) 230) It is therefore not necessary that an applicant prove that relevant information has been disclosed by the client to the lawyer or his or her firm; sufficient relationship only is necessary. Similarly, it is not necessary for the applicant to show that the confidences were shared amongst lawyers of the firm and will be used to the prejudice of the client; rather, the burden is on the lawyer to show by "clear and convincing" evidence that disclosure will not occur. It is not sufficient for the lawyer sought to be removed to say to the court, in effect, "trust me". That assurance would put the court "in the invidious position of deciding which lawyers are to be trusted and which are not". The applicants conclude that there are significant factual links between the current action and the previous relationship of Patterson Kitz, Amherst Aerospace and the applicants which encompass the subject matter of the current action. Mr. Pink was not directly involved in the Amherst Aerospace retainer, but his involvement in the Patterson Kitz firm, together with the extensive nature of the firm's retainer infers strongly that the affairs of Amherst Aerospace were shared within the firm and, accordingly, Mr. Pink should be automatically disqualified. Pink Breen's Position Pink Breen has submitted: (a) There was no solicitor client relationship between the applicants and either Patterson Kitz or Pink Breen. (b) The information relevant to these issues in the action imparted to Patterson Kitz or Pink Breen by Amherst Aerospace Inc. was not confidential. (c) The cause of action in the main action is unrelated to the retainer of Patterson Kitz by Amherst Aerospace Inc. (d) No risk of prejudice to Amherst Aerospace Inc. exists. Pink Breen has filed affidavits of Dara L. Gordon and Leanne MacMillan. Ms. Gordon has sworn that to the best of her information and belief no member of Patterson Kitz provided formal legal opinion concerning the financial position of the pension plans in question. She says Patterson Kitz provided no information by way of replies to lenders to Amherst Aerospace concerning the pension plans and that they provided no formal legal opinion concerning the collective agreements. She says that the policy of Patterson Kitz, which she followed, was not to offer advice with respect to employer‑employee relations to employers who dealt with unions which were also represented by Patterson Kitz. She says she reviewed the legal opinion of J. Gerald Godsoe of September 29, 1989, concerning the legality of the proposed use of pension funds by Confederation Life, but she had not reviewed any drafts of that opinion prior to September 29, 1989. The affidavit of Leanne MacMillan sets forth the notification to the applicants of the demand or demands by the plaintiffs for the return of pension funds. In addition, Mr. Pink referred extensively in both the written and oral submission to the Court to the pleadings in this action. Allegations made by the plaintiffs against the other parties which have been denied may not be relied upon as facts. will not do so. The Law In Martin v. Gray Mr. Justice Sopinka addressed the tests to be applied in determining whether there is disqualifying conflict of interest requiring that solicitor not be permitted to act for particular client. He discarded the probability of mischief test as the question of the use of confidential information involves the examination of matter not usually susceptible of proof. Rather, he said that the 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?" Mr. Justice Sopinka continued: Typically, these cases require two questions to be answered: (1) Did the lawyer receive confidential information attributable to solicitor­and‑client relationship relevant to the matter at hand? (2) Is there risk that it will be used to the prejudice of the client? Mr. Justice Sopinka went on to explain the dilemma involved in the first question. That is, "in order to explore the matter in depth may require the very confidential information for which protection is sought to be revealed". Before dealing with that question, however, there is preliminary point to be decided: Was there solicitor and client relationship between Patterson Kitz and the applicants? It is only after that question has been answered that it is necessary to proceed to determine whether the information was relevant to the matter at hand. As Mr. Justice Sopinka went on to say, ...once it is shown by the client that there existed previous relationship which is sufficently 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. (emphasis added) It seems to me that the threshold question has to be whether the relationship existed. The applicants were each involved in VGM Capital Corporation: Mr. King as President, Mr. Flemming as Chief Executive Officer and Chairman of the Board and Mr. Rankin as Director. VGM first retained Patterson Kitz. Patterson Kitz, on the instructions of VGM, incorporated Amherst Aerospace Acquisition Inc. for the purpose of purchasing the assets of Enheat. (The various corporations had name changes which need not be detailed for the purposes of this decision.) The correspondence exhibited to me in the affidavit of Peter King shows that Patterson Kitz corresponded with Messrs. Flemming and King, but the contents of that correspondence is clear that it was directed to them as directors. There is no evidence showing personal retainer of Patterson Ritz by the applicants. Mr. Justice Nathanson of this Court dealt with an application for an order declaring that counsel were disqualified b9 reason of conflict of interest from acting for the Royal Bank of Canada in the petition for the bankruptcy of Philip M. Robinson. (See Re Robinson (Bankrupt) (1992), 114 N.S.R. (2d) 72) Mr. Robinson was the operating mind of P.M. Robinson Associates Limited or Eastland Group Limited and in that capacity had instructed the solicitors in question. At p.74 Mr. Justice Nathanson said: The parties to the prior relationship and the parties to the present relationship must be the same. Any confidential information received by the law firm arising from its involvement in Phase of the Spring Garden Place project was received from the law firm's client which was P.M. Robinson Associates Limited or Eastland Group Limited. Robinson was not the client. Therefore, there did not exist a solicitor-­and‑client relationship between him and the law firm. The law firm did not receive confidential information attributable to solicitor‑and-­client relationship with Robinson. Because in law corporation is distinct from, and different from, its owners or controllers, Robinson cannot stand in the stead of the corporation he controlled with respect to the relationship between the law firm and that corporation as its client. Chief Justice Glube addressed similar question in Widrig v. Cox Downie et al. She said at p.327: In the present situation, all of the dealings with Mr. Widrig except for his wills and the purchase of property and possibly the incorporation of Pursuit resulted from his being employed by Pursuit 1987. As an employee of Pursuit 1987, he was not dealing with MCR on solicitor‑client basis nor in his personal capacity. Even if it could be said that Reardon was acting for Widrig when he incorporated Pursuit, there is no evidence of anything arising out of that retainer or in the preparation of his will or his wife's will which is relevant to the present action. Martin and Gray does not stand for the proposition that once firm has acted for person they can never act against that person. Although the present case has some similarities to Corkum, in my opinion the case of Robinson is closer to the present facts. find there is nothing in the previous relationship sufficiently related to Wrathall's retainer by the Claims Fund and Martin to lead me to infer that relevant confidential information was obtained which could be imparted to the defendant. find there is no confidential information relevant to the present action which has come to MCR as result of members of that firm dealing with Mr. Widrig in his capacity as an employee of or as the President of Pursuit 1987. also find that there is no information which was imparted to MCR which is relevant to this action. The situation addressed by Chief Justice Glube is to be contrasted with that addressed by Goodfellow, J. in Canada Trustco Mortgage Co. v. Corkum et al. The relationship of Mr. Corkum with Patterson Kitz in that case had been personal and diverse. It had involved many personal aspects of the applicant's affairs. Mr. Justice Goodfellow said: Here the plaintiffs law firm acted extensively for Eric J, Corkum in his personal, financial and business endeavours over such prolonged period that, in my view, reasonably informed person would not be satisfied that no use of confidential information would occur. reasonably informed person knowing of the extent of the plaintiff's law firm's confidential knowledge of the personal, financial and business affairs of Eric J. Corkum, which would have been imparted by him over lengthy period of time on such variety of matters, all in confidence, that sooner or later such knowledge would surface as detriment to Eric J. Corkum. Any client, including Eric J. Corkum, must be secure in the knowledge that revelations made in confidence cannot, without waiver, come back to haunt him inadvertently or otherwise. There is no evidence before me that relationship such as that which existed between Mr. Corkum and his law firm existed between the applicants, or any of them, and Patterson Kitz. have concluded that there is no solicitor and client relationship between the applicants and the Patterson Kitz firm, either before or after the formation of the Pink Breen firm. The solicitor and client relationship was with VGM or Amherst Aerospace, or any of their other corporate names. am not aware of any case in which the solicitor‑and­-client confidence of corporate client automatically extended to its directors. The Nature of the Information The second aspect of Mr. Justice Sopinka's first question requires that an applicant raise question as to whether the lawyer received confidential information relevant to the matter at hand. What is the confidential information? The essence of this action is the alleged improper withdrawal and investment of pension funds. There is nothing in the evidence before me which would suggest that the pension plan itself was of confidential nature. Similarly, the status of the collective agreement is not confidential. The revelation of information concerning the pension plan or the collective agreement would create. no dilemma. have concluded that the applicants have not. passed the. threshold of showing that there is any confidential information concerning these items over which solicitor and client confidentiality existed. It seems to me that an applicant in case such as this one ought to be expected to lay foundation by giving to the Court some hint as to the type of information sought to be protected, without exposing the client to the dilemma described by Mr. Justice Sopinka. The applicants in this matter have considered the extremely wide range of services rendered to Amherst Aerospace Inc. and have drawn the conclusion that because of the diversity of services rendered there must be substantial relationship between what was done by the Patterson Kitz and the matters in question in this action. That is too great an inference to be drawn. The applicants should show by fact or even by reasonable inference that the substance of the current action was broached during the Pink Breen tenure at Patterson Kitz. That is, the applicants ought to be able to suggest that the seeds of the alleged scheme were sown during their tenure. There is no such evidence before me. The evidence also points to conclusion that the arrangements made with respect to the withdrawal of the pension funds occurred after the Pink Breen departure from the firm of Patterson Kitz. conclude that the applicants have failed to achieve positive response to either of the two aspects of Mr. Justice Sopinka's first question. If my conclusions are correct, then it is not necessary to consider Mr. Justice Sopinka's second question; i.e., is there risk that the information will be used to the prejudice of the client. Witnesses The applicants have suggested that a number of former partners of Pink Breen in the Patterson Kitz firm may be either subject to discovery or may become witnesses during the trial. Such a possibility does not disqualify Mr. Pink. (See Phoenix v. Metcalfe, 1974 CanLII 1704 (BC CA), [1974] W.W.R. 661) Costs am not at all critical of the applicants for having brought this application. The material produced before me and the arguments made had to be done to clear the air. Given the substance of the material and having heard the arguments and submissions, feel that am now in the position of the reasonably informed public. In that capacity, I find that there is no conflict of interest and that Pink Breen will be permitted to continue to act. But it took this appliction to put me into position to reach that conclusion. It was reasonable exercise. There will, therefore, be no extra costs awarded with respect to this matter and the costs will be costs in the cause. Halifax, N.S. J.
The solicitor for the plaintiff union had been a partner of the law firm which incorporated the defendant company and was under a general retainer to them. Several of the defendants made application to have the plaintiff s solicitor removed as solicitor of record claiming this was a conflict of interest. Dismissing the application, that the test in such circumstances is whether the public represented by the reasonably informed person would be satisfied that no use of confidential information would occur. To do so it must be shown that a solicitor client relationship existed. There must not be a danger of the confidential information coming back to haunt the client. The court found that such a relationship did not exist in this instance. In addition, the applicant must demonstrate that the solicitor received information which is relevant to the matter at hand. The court found no such evidence of this possibility. It is no bar to representation by a solicitor that some former partners at a previous firm will be examined for discovery or called to testify.