PROVINCE OF PRINCE EDWARD ISLAND IN THE SUPREME COURT - TRIAL DIVISION

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1 Citation: Simmonds & Ors. v. Gov PEI & Ors PESCTD 09 Date: Docket: GSC Registry: Charlottetown PROVINCE OF PRINCE EDWARD ISLAND IN THE SUPREME COURT - TRIAL DIVISION BETWEEN: AND: John Alfred Simmonds, Perfection Group Limited and Perfection Dairy Group Limited Government of Prince Edward Island, Prince Edward Island Development Agency, Enterprise P.E.I., Prince Edward Island Business Development Inc. and P.E.I. Lending Agency (Plaintiffs/Responding Parties) (Defendants/Moving Parties) BEFORE: The Honourable Justice Benjamin B. Taylor Appearances: Ruth M. DeMone, solicitor for the Moving Party S. Bruce Outhouse, Q.C., solicitor for the Responding Party Place and Date of Hearing Place and Date of Decision Charlottetown, Prince Edward Island June 28, 2005 Charlottetown, Prince Edward Island January 27, 2006

2 Citation: Simmonds & Ors. v. Gov PEI & Ors PESCTD 09 GSC BETWEEN: John Alfred Simmonds, Perfection Group Limited and Perfection Dairy Group Limited (Plaintiffs/Responding Parties) AND: Government of Prince Edward Island, Prince Edward Island Development Agency, Enterprise P.E.I., Prince Edward Island Business Development Inc. and P.E.I. Lending Agency Prince Edward Island Supreme Court - Trial Division Before: Taylor J. (In Chambers) Date of Hearing: June 28, 2005 Date of Decision: January 27, 2006 [12 Pages] (Defendants/Moving Parties) Barristers and Solicitors - disqualification or removal - conflict of interest - attorney for former co-defendant of moving parties joining law firm acting for plaintiff - whether law firm may continue to act - near client concept - tests to be applied. Cases Considered: MacDonald Estate v. Martin, [1990] S.C.J. No. 41 (S.C.C.); Canada (Attorney General) v. Consortium Designers Inc., [1989] P.E.I.J. No. 51 (PESCAD), [1988] P.E.I.J. No. 123 (PESCTD); Brown v. Hodsoll et. al. (1986) 7 C.P.C. (2d) 267 (O.H.C.J.); Winford Insulations Ltd. v. Andarr Industries Inc.,[1998] A.J. No. 1530; G.C. v. CFS (2000), 185 N.S.R. (2d) 163 (F.C.); Milverton Capital Corp. v. Thermo Tech Technologies Inc., [2002] B.C.J. No. 1087; R v. Liebel, [1999] S.J. No. 466 (Sask. Q.B.);Wilson P. Abraham Constr. Corp. v. Armco Steel Corp. (1977), 559 F. 2d 250 (U.S. Court of Appeals, 5 th Circuit); Titan Linkabet Corp. v. S.E.E. See Electronic Engineering Inc. (1991), 42 C.P.R. (3d) 284 (F.C.T.D.); Ross v. NBTA (1994), 156 N.B.R. (2d) 193 (N.B.Q.B.). Texts Referred to: Code of Professional Conduct, Canadian Bar Association, 1987; The Law Society of Alberta, Code of Professional Conduct, Chapter 6, Rules and Commentaries; Legal Ethics and Professional Conduct Handbook, Nova Scotia Barristers Society. Ruth M. DeMone, solicitor for the Moving Party S. Bruce Outhouse, Q.C., solicitor for the Responding Party

3 Taylor J.: [1] This is a motion by the defendants for a declaration the law firm McInnes Cooper, solicitor of record for the plaintiffs, is in a conflict of interest, and for an order removing the law firm as solicitor of record. For the reasons set out below, the motion is dismissed. BACKGROUND [2] This action began September 10, 1996 when the plaintiffs sued the Government of Prince Edward Island, Enterprise P.E.I., the PEI Development Agency, PEI Opportunities Fund Inc., Stewart McKelvey Stirling Scales, Ernst & Young, and Ernst and Young Inc. The action claims damages arising from the financial failure of Perfection Foods, a major Prince Edward Island dairy processing business. The plaintiffs claim the failure was caused by the actions of the defendants, and assert conspiracy and interference with economic relations. Since 1996, the plaintiffs have replaced some Government defendants with others, and have discontinued their claims against all non-government defendants: Stewart McKelvey in October, 2001; Ernst & Young and Ernst & Young Inc. in November, [3] As it now stands, lawyers presently with the firm of McInnes Cooper act or have acted for all three plaintiffs and for eight of the nine parties who are or were defendants, the sole exception being the former defendant Stewart McKelvey. Kenneth Clark acted for all the plaintiffs when the action was commenced. He continued to act until August, 1998, when Reginald Cluney, Q.C. of McInnes Cooper became solicitor of record (now assisted by Stephen Kingston). Roger Langille, Q.C. acted for the government defendants from the time the action was started until 2000, when he joined McInnes Cooper. Roger Langille signed an agreement dated November 1, 2000 with the Attorney General of P.E.I. agreeing not to disclose any information about the case. Douglas Lutz, of the Halifax firm of Flinn, Merrick acted for the defendants Ernst & Young, and Ernst & Young Inc. from September, 1998, until the claims against the Ernst & Young defendants were discontinued in November, He joined McInnes Cooper in Graham Stewart, Q.C., of the Charlottetown firm of Campbell, Stewart acted for the defendant Stewart McKelvey from the time the action was started until it was discontinued against Stewart McKelvey in October, [4] Mr. Cluney, Mr. Kingston and Mr. Lutz all practise out of the Halifax office of McInnes Cooper and all three are senior litigation lawyers in that office. Mr. Cluney, Q.C. has practised since 1955, is a former partner and is now senior counsel. Mr. Kingston has practised since 1986, Mr. Lutz since [5] The defendants assertion of conflict of interest is not based on their former counsel Mr. Langille joining McInnes Cooper; it is based on Mr. Lutz joining McInnes

4 Page: 2 Cooper. The defendants do not assert Mr. Lutz ever acted for the Government defendants, rather, the defendants notice of motion asserts Lutz s previous retainer by Ernst & Young and his relationship to the defendants raises an inference that Lutz, therefore McInnes Cooper, received confidential information which may be used to the detriment of the defendants in this proceeding to gain an advantage over the defendants, therefore McInnes Cooper is in a conflict of interest in continuing to act for the plaintiffs in this matter. [6] The affidavit of Brian J. Gallant sets out the defendants evidence of conflict of interest at paragraph 11: the correspondence exchanged between the parties...mentions several discussions and exchanges which took place between Mr. Langille and Mr. Lutz concerning the file, including the review of their respective draft defences and reference to a lunch meeting held sometime in early November, As counsel for codefendants, I feel that it is at the very least possible that confidential information or strategies may have been dealt with during one or all of these discussions. Given their present positions and the passage of time, it is no longer possible to determine the substance and details of those discussions.... [7] Mr. Cluney s affidavit says when Mr. Lutz was hired in 2003,...Mr. Lutz did not indicate that by his joining McInnes Cooper there was a potential conflict of interest due to his prior representation of Ernst & Young... [paragraph nine]. A memorandum was circulated at McInnes Cooper on October 3, 2003 setting out safeguards to be followed regarding conflict of interest problems associated with Mr. Lutz s hiring, but this action was not one of the problem files identified. [8] Ernst & Young has not given consent to Mr. Lutz to discuss his communications with Mr. Langille. In his affidavit, Mr. Lutz undertakes not to discuss the file with McInnes Cooper. Mr. Langille did not swear an affidavit for this motion. [9] In 1989, the Law Society of Prince Edward Island adopted the provisions of the Canadian Bar Association s 1987 edition of the Code of Professional Conduct. The Code provides: Chapter IV The lawyer has a duty to hold in strict confidence all information concerning the business and affairs of the client acquired in the course of the professional relationship, and should not divulge such information unless disclosure is expressly or impliedly authorized by the client, required by law or otherwise permitted or required by this Code.

5 Page: 3 Chapter V The lawyer shall not advise or represent both sides of a dispute and, save after adequate disclosure to and with the consent of the clients or prospective clients concerned, shall not act or continue to act in a matter when there is or is likely to be a conflicting interest. [10] The Chapter V commentaries, which are part of the Code, state: 3. Conflicting interests include, but are not limited to the duties and loyalties of the lawyer or a partner or professional associate of the lawyer to any other client, whether involved in the particular transaction or not, including the obligation to communicate information. [Emphasis added.] A lawyer who has acted for a client in a matter should not thereafter act against the client (or against persons who were associated with the client in that matter) in the same or related matter, or take a position where the lawyer might be tempted or appear to be tempted to breach the Rule relating to confidential information. It is not, however, improper for the lawyer to act against a former client in a fresh and independent matter wholly unrelated to any work the lawyer has previously done for that person. [Emphasis added.] [11] At the hearing, plaintiffs counsel advised discoveries had not yet taken place and the claim would have to be amended. ISSUES [12] I will deal with the following issues in the following order: (1) The lawyers duty of confidentiality towards former clients; (2) The client s right to counsel of his or her choice; (3) Safeguards against disclosure; (4) The law respecting near clients ; and (5) The breadth or range of the near client concept. Issue #1 - The lawyer s duty [13] In the majority decision in MacDonald Estate v. Martin, [1990] S.C.J. No. 41

6 Page: 4 (S.C.C.), ( Martin ) Sopinka J. stated at paragraph 15: Merger, partial merger and the movement of lawyers from one firm to another are familiar features of the modern practice of law. They bring with them the thorny problem of conflicts of interest. When one of these events is planned, consideration must be given to the consequences which will flow from loss of clients through conflicts of interest. To facilitate this process some would urge a slackening of the standard with respect to what constitutes a conflict of interest. In my view, to do so at the present time would serve the interest of neither the public nor the profession...nothing is more important to the preservation of...[the relationship between the public and the profession] than the confidentiality of information passing between a solicitor and his or her client. Clients...[bare their souls] in the justifiable belief that nothing they say will be used against them and to the advantage of the adversary. Loss of this confidence would deliver a serious blow to the integrity of the profession and to the public's confidence in the administration of justice. [14] Sopinka, J. noted the Code of Professional Conduct had been adopted by all Canadian Law Societies and held all courts should accept the Code of Professional Conduct and, in particular the expression of the professional standard concerning conflict of interest, as an important statement of public policy and the expression by the profession in Canada that it wishes to impose a very high standard on a lawyer who finds himself or herself in a position where confidential information may be used against a former client...[it] has been accepted by the profession that even an appearance of impropriety should be avoided. [paragraph 18] [15] The Supreme Court established a two-part test to determine if a conflict of interest existed. The first question is whether...the lawyer receive[d] confidential information attributable to a solicitor and client relationship relevant to the matter at hand. [Martin, paragraph 45] [16] Mitchell, J.A. (as he then was) of our Court stated: Generally a law firm should not be enjoined from continuing if the transferring lawyer has not actually worked on the opposite party s case and has no confidential information concerning it. [Canada (Attorney General) v. Consortium Designers Inc., [1989] P.E.I.J. No. 51 (PESCAD), paragraph four] When the client shows the existence of a previous relationship sufficiently related to the case from which the client seeks to remove the lawyer, the burden is on the transferring solicitor to prove no confidential information relevant to the case was disclosed. This will be a difficult burden to discharge. [Martin, paragraph 46] [17] The second question is whether there is...a risk...[the confidential information] will be used to the prejudice of the client. [Martin, paragraph 45]

7 Page: 5 [18] A transferring lawyer has a duty to avoid the appearance of the possibility of any conflict of duty, and both the transferring lawyer and his new colleagues...who are, may, or might be perceived to be privy to the confidential information...would be tainted with the brush of conflict of interest. [Canada (Attorney General) v. Consortium Designers Inc., [1988] P.E.I.J. No. 123 (PESCTD) page 7] [T]he Court ought to be concerned not only with the actual possibility of a conflict of duty, but also with the appearance of such a possibility. [Saunders, J. in Brown v. Hodsoll et. al. (1986) 7 C.P.C (2d) 267 (O.H.C.J.), cited in Canada (Attorney General) v. Consortium Designers Inc. (PESCTD.) at page 8] [19] In Canada (Attorney General) v. Consortium Designers, the transferring lawyer actively assisted the principal counsel for the Attorney General, and received confidential information from the client. In the present case, Mr. Lutz was counsel for the Ernst & Young defendants and undoubtedly received confidential information from Ernst & Young but there is no evidence Mr. Lutz received confidential information from the Government defendants. To succeed in this motion, the Government defendants must show a) the existence of a previous solicitor-client relationship, or a near client relationship; b) that there is a presumption Mr. Lutz received confidential information from the Government defendants via their counsel Mr. Langille; and c) that Mr. Lutz owes the Government defendants a duty of confidentiality. Only then could Mr. Lutz s new firm be in a conflict of interest in continuing to act for the plaintiffs. Issue 2 - Clients right to counsel of choice [20] The plaintiffs say if McInnes Cooper is disqualified from acting on their behalf, the plaintiffs will not be able to get suitable representation because the regional firms all have conflicts. Mr. Simmonds states at paragraphs of his affidavit: 12. THAT, due to the complexity of the case and the time and effort required to complete it, the Plaintiffs require experienced counsel working in a large firm with the necessary resources to properly represent their interests. 13. THAT, to the best of my knowledge and belief, McInnes Cooper is one of four regional law firms in the Atlantic Provinces. 14. THAT the other three regional firms have had a direct involvement in this case and the Plaintiffs could not retain them as alternate counsel even if the Plaintiffs had the financial means to do so, which they do not.

8 Page: THAT, if the Defendants application to remove McInnes Cooper as solicitor for the Plaintiffs is successful, I believe the Plaintiffs will not be able to retain suitable alternate counsel and will be left unrepresented. [21] Although he does not say so, I gather Mr. Simmonds intends to assert the case is extremely complex, will take a great deal of time and effort, and will require resources which cannot be found in a smaller firm. If this were so, the plaintiffs ought to have advanced evidence to prove it. [22] There is nothing in the affidavit to suggest Mr. Simmonds is qualified to assert the opinions or beliefs in these paragraphs, and I am drawn to the conclusion Mr. Simmonds is reciting advice he received. This is secondhand legal opinion masquerading as belief. [23] I do not accept Mr. Simmond s assertions. This province and the Maritimes have many competent litigation lawyers in firms big and small who are capable of handling difficult cases. To illustrate, Mr. Lutz was a member of an off-island nonregional firm when he represented the defendant Ernst & Young and Ernst & Young Inc.; the plaintiff was represented by an on-island sole practitioner; and Stewart McKelvey was represented by an on-island firm. I found it interesting and perhaps ironic to see this competence assertion advanced at the motion hearing by a senior litigator from a non-regional off-island firm. [24] The plaintiffs say if McInnes Cooper is disqualified from acting on their behalf, the plaintiffs will not be able to afford new counsel. Mr. Simmonds states at paragraphs 7-11: 7. THAT when McInnes Cooper was retained, it agreed to represent the Plaintiffs in this action on a fixed fee plus contingency fee arrangement. 8. THAT I am informed by R.A. Cluney, Q.C. and verily believe that the fixed fee paid to McInnes Cooper has long since been exhausted on a time charge basis. 9. THAT I am further advised by R. A. Cluney, Q.C. and verily believe that further extensive discovery examinations and other preparatory work need to be completed before the action can be set down for trial. 10. THAT neither I nor the other Plaintiffs, Perfection Group Limited and Perfection Dairy Group Limited, have the financial means to engage new counsel on a fee-for-service basis in the event that

9 Page: 7 McInnes Cooper is disqualified from continuing to act on our behalf. 11. THAT, given the complexity of the case and the time and effort required by counsel to complete it, I believe it will be virtually impossible for the Plaintiffs to find alternate counsel willing to assume the conduct of the matter on a contingency fee basis. [25] These statements appear premised on the assumption McInnes Cooper will have no further duty to the plaintiffs if disqualified. In my view, this is wrong. The firm took the clients money and promised to take the case through to conclusion, with an additional contingent fee if successful. Now the firm, in pursuing its economic interests, may have imperiled its ability to represent the clients. If the firm is unable to represent the clients as it promised to do, the clients should not be the ones to suffer. [26] The plaintiffs submissions on right to counsel are not well founded, but even if the plaintiffs had presented solid evidence to show their right to counsel would be seriously compromised if McInnes Cooper were forced to withdraw, the plaintiffs argument is based on Alberta and Nova Scotia cases which do not apply in this jurisdiction because, as explained below, the codes of conduct are different. Issue #3 - Safeguards [27] In Martin, the Supreme Court had no doubt a lawyer who had relevant confidential information could not act against a former client. As to whether partners or associates could so act, Sopinka J. noted some courts had applied the concept of imputed knowledge: the knowledge of one member of the firm is the knowledge of all. Sopinka J. also noted some law firms had adopted this concept as an internal operations rule and said this is commendable and to be encouraged [paragraph 48], but said it was an assumption which is unrealistic in the era of the mega-firm. [paragraph 48] On the other hand, there is...a strong inference that lawyers who work together share confidences. [paragraph 49] Sopinka J. concluded, In answering this question [is there a risk that the confidential information will be used to the prejudice of the client], the court should therefore draw the inference [that confidences are likely to be disclosed], unless satisfied on the basis of clear and convincing evidence, that all reasonable measures have been taken to ensure that no disclosure will occur by the tainted lawyer to the member or members of the firm who are engaged against the former client. [paragraph 49] The Supreme Court of Canada then gave examples of what safeguards could be put in place ( Chinese walls and cones of silence ) but stated unless Law Societies passed rules adopting such safeguards as appropriate,...i would not foresee a court doing so except in exceptional circumstances. [paragraph 50]

10 Page: 8 [28] As I read it, the majority decision staked out the Supreme Court s role as regulator, not innovator or legislator, and urged Canadian law societies to pass resolutions saying what safeguards would be acceptable, but failing these, stated the strict rule of imputed knowledge would apply to the partners and associates of tainted lawyers. The Supreme Court s minority decision opted for the strict rule without exception. [29] Our Law Society has not adopted safeguards in the 15 years since Martin, so from our perspective Martin amounts to a unanimous decision no safeguards should be accepted by this Court except in exceptional circumstances. [paragraph 49] In any case, there are no safeguards described in the submissions of the plaintiffs, except for Mr. Lutz s undertaking not to speak to anyone. The Supreme Court says lawyers undertakings are not acceptable [paragraph 50], since they amount to the lawyer saying trust me, promising not to do what the lawyer is already bound not to do, and such undertakings are unlikely to satisfy the public. [30] Counsel referred me to the decision in Winford Insulations Ltd. v. Andarr Industries Inc., [1998] A.J. No. 1530, a decision which weighed mitigating and aggravating factors in deciding whether a firm in conflict of interest was nevertheless able to act. Winford has no application to this jurisdiction: post Martin, Alberta adopted detailed rules relating to lawyers mobility and conflicts of interest. Alberta has decided these rules may be sufficient to overcome the risk of disclosure of confidential information and the appearance of impropriety (see The Law Society of Alberta, Code of Professional Conduct, Chapter 6, Rules and Commentaries). Our Law Society has not followed. [31] G.C. v. CFS (2000), 185 N.S.R. (2d) 163 (F.C.) must also be distinguished. It is very different factually and unlike our Law Society, the Nova Scotia Barristers Society has adopted a Legal Ethics and Professional Conduct Handbook which sets out guidelines and safeguards concerning conflict of interest. Issue #4 - The law respecting near clients [32] In Milverton Capital Corp. v. Thermo Tech Technologies Inc., [2002] B.C.J. No. 1087, Nelson J. considered the concept of the near client. At paragraph 50-51: 50 Cases decided since MacDonald Estate v. Martin, supra, show that the application of its principles has not been limited strictly to solicitor/client relationships. Restraining orders have also been made against solicitors based on what have been termed "near client" relationships. Where an individual has a commonality of interest or a close association with a client of a solicitor, the same protection has been extended to that person, even if

11 Page: 9 he or she is not, strictly speaking, a client of the solicitor: Williamson v. Roberts & Griffin (1997), 39 B.C.L.R. (3d) 216 (C.A.); UCB Sidac International Ltd. v. Lancaster Packing Inc. (1993), 51 C.P.R. (3d) 449 (Ont. Gen. Div). 51 That protection is based on the confidential character of the relationship between the lawyer and the applicant. In Manville Canada Inc. v. Ladner Downs, [1992] 2 W.W.R. 323 (B.C.S.C.), Esson C.J.S.C., as he then was, noted at para. 12: If the applicant has reposed confidence in a lawyer in circumstances which properly give rise to an expectation of confidentiality, that applicant has an interest in protecting that confidence even if it was not, in the strict sense, a client of the lawyer. [33] In the present case, the evidence before me discloses few opportunities for Mr. Lutz and Mr. Langille to have communicated, and no discoveries or motions during the period when their client representations coincided. They may have discussed their positions in detail, but there is no evidence of this. [34] There is no evidence Mr. Lutz ever communicated directly with any of the Government defendants, and no evidence he ever communicated indirectly in the sense he indirectly received instructions from Government or gave advice. What he did do was to speak to Government s lawyer, Mr. Langille. There is no evidence of what they spoke about. Communications between lawyers for co-defendants are common and would occur through correspondence, telephone calls and in-person discussions. The topics could typically include scheduling, drafting of pleadings, production of documents, discoveries, professional courtesies and many other nonconfidential matters. [35] Less commonly, counsel may share confidential client information. Defendants lawyers in a given case might for example attempt to put together a settlement package to offer the plaintiff in the course of which they could discuss liability, evidence and what they were willing to offer. They might join to retain and instruct a private investigator or expert witness. The clients would almost certainly be aware of such discussions. Where confidential information is exchanged between codefendants counsel, the information may lose its lawyer/client privilege. A Joint Defence Agreement between co-defendants would protect against the risk of loss of privilege. There is no evidence there was a Joint Defence Agreement in this case. Issue #5 - The breadth or range of the near client concept [36] The near client concept involves finding the circumstances created an

12 Page: 10 implied duty of confidentiality by a lawyer to a non-client, and a duty not to act against the non-client, akin to the duty owed to a client. In this motion, the Government defendant seeks to expand the range of the near client concept to include an implied duty by a lawyer for one defendant towards other co-defendants. I do not believe such an interpretation is reasonable. [37] In multi-party cases, it is not enough to establish transferring counsel has a connection with the case, i.e. a connection with any one of the parties. The moving party must establish the connection is with the moving party, must show the connection is real, not speculative, and must show in general terms what confidential information the transferring lawyer received. It is not enough to say transferring counsel may have received unspecified confidential information. [38] There can be no automatic presumption of an implied duty of confidentiality between one defendant s counsel and another defendant represented by counsel. Indeed, I can only think of one circumstance where such a presumption would exist where the parties entered into a joint defence agreement with respect to all or part of their case and shared information in the common cause of defeating the plaintiff. If such an agreement existed, the onus would be on the party asserting the agreement to prove it. If there is no agreement, there would have to be actual proof the parties shared confidential information. [39] In this case, the transferring lawyer spoke to co-defendants counsel and then joined the firm representing the plaintiff. The Government defendants suspect the two lawyers were talking about confidential matters relating to a joint defence, but there are many situations in which there is a dispute among defendants, perhaps even the main dispute. Defendants in a civil case may well act against each other in a cutthroat defence. The term cutthroat defence is characterized by an accused attacking the defence of another co-accused with the intent of enhancing his own defence. [R v. Liebel, [1999] S.J. No. 466 (Sask. Q.B.) at paragraph 11] The mere fact that co-defendants counsel speak to each other creates no presumption it would be surprising if they did not. [40] Wilson P. Abraham Constr. Corp. v. Armco Steel Corp. (1977), 559 F. 2d 250 (U.S. Court of Appeals, 5 th Circuit) considered a situation in which federal charges had been brought against steel companies for anti-trust violations including bid rigging and price fixing. Co-defendants, including Armco, met concerning these charges possibly to agree on a joint defence. [41] Later, the plaintiff Wilson P. Abraham Const. Corp. started a civil suit against Armco and others over matters related to the federal charges. The plaintiff sought to

13 Page: 11 hire a lawyer who had previously acted for one of Armco s co-defendants. Armco asserted the lawyer had a conflict of interest. The per curiam decision stated at paragraphs six to eight:...a former client seeking to disqualify an attorney who appears on behalf of his adversary, need only to show that the matters embraced within the pending suit are substantially related to the matters or cause of action wherein the attorney previously represented him...this rule rests upon the presumption that confidences potentially damaging to the client have been disclosed to the attorney during the former period of representation. The case before us, however, presents somewhat of a twist to the usual attorney-client controversy. It is not a former client of Mr. Susman who seeks to disqualify him, but rather co-defendants of a former client. The defendants here contend that in a case alleging conspiracy, such as the case at bar, the defendants have a right to consult together about the case, and that all information derived by any of the counsel from such consultation is necessarily privileged. The defendants persuasively argue that in a joint defense of a conspiracy charge, the counsel of each defendant is, in effect, the counsel of all for the purposes of invoking the attorney-client privilege in order to shield mutually shared confidences. We agree, and hold that when information is exchanged between various co-defendants and their attorneys that this exchange is not made for the purpose of allowing unlimited publication and use, but rather, the exchange is made for the limited purpose of assisting in their common cause. In such a situation, an attorney who is the recipient of such information breaches his fiduciary duty if he later, in his representation of another client, is able to use this information to the detriment of one of the co-defendants...an attorney should...not be allowed to proceed against a co-defendant of a former client wherein the subject matter of the present controversy is substantially related to the matters in which the attorney was previously involved, and wherein confidential exchanges of information took place between the various codefendants in preparation of a joint defense....we unfortunately are unable to presently resolve the controversy. Exactly what information was exchanged between Mr. Susman when he represented Whitlow Steel Company and worked with counsel for the various defendants is greatly contested. Here there is no presumption that confidential information was exchanged as there was no direct attorneyclient relationship. Mr. Susman should not be disqualified unless the trial court should determine that Mr. Susman was actively privy to confidential information. [Emphasis added] [42] Canadian courts have also held the applicant must establish 1) the information was indeed confidential and 2) was given under the clear understanding it could not be used by the solicitor against the non-client, but the second of these two conditions may be fact specific and may not apply to the present case. [Titan Linkabet Corp. v. S.E.E. See Electronic Engineering Inc. (1991), 42 C.P.R. (3d) 284 (F.C.T.D.); Ross v.

14 Page: 12 NBTA (1994), 156 N.B.R. (2d) 193 (N.B.Q.B.)] Summary [43] The defendants have failed to prove a near client relationship giving rise to a duty of confidentiality existed between Mr. Lutz and the defendants. Mr. Lutz s joining McInnes Cooper did not create a conflict of interest, and accordingly McInnes Cooper may continue to act for the plaintiffs. Mr. Lutz will be unable to participate in or discuss the case, not because he owes a duty to the Government defendants, but because he has a continuing duty of confidentiality towards Ernst & Young. [44] The defendants motion is dismissed with costs to the plaintiffs on a partial indemnity basis. The plaintiffs will have ten days from the date of this decision to file their submission on costs and the defendants will have ten days thereafter to file their response, if any, following which I will fix costs. January 27, 2006 J.