Date : 19990126
Docket : T-1868-98
BETWEEN:
DENHARCO INC.
Plaintiff
- and -
FORESPRO INC.
Defendant
REASONS FOR ORDER
McGILLIS J.
INTRODUCTION
[1] The plaintiff Denharco Inc. ("Denharco") has brought a motion seeking to remove the law firm Smart & Biggar as solicitors of record for the defendant Forespro Inc. ("Forespro") in this action for patent infringement on the basis of an alleged conflict of interest. The action involves the alleged infringement of Canadian patent No. 1,126,627 ("'627 patent") by the manufacture, use and sale of tree delimbers by Forespro.
FACTS
[2] On June 29, 1982, the '627 patent was granted to Équipements Denis Inc. ("Équipements Denis") for an invention called a "tree delimbing apparatus."
[3] In 1990, Équipements Denis commenced an action against Harricana Metal Inc. ("Harricana") in file No. T-768-90, alleging infringement of the '627 patent. Smart & Biggar were the solicitors of record for Équipements Denis, and Me Francois Guay had carriage of the file. Harricana was represented by Mr. David Aitken of Osler, Hoskin and Harcourt, who acts for Denharco in the present proceedings. Harricana filed a Statement of Defence, as well as a Counterclaim in which it alleged invalidity of the '627 patent on various grounds, including obviousness at the date of invention, insufficient specification by failing to describe fully or correctly the invention and its operation as contemplated by the inventor, and claiming more than the inventor invented.
[4] On May 14, 1990, Équipements Denis brought a motion for an interlocutory injunction. In support of its motion, Équipements Denis filed an affidavit of its president, Jean Yves Leblanc. The affidavit dealt with, among other things, the development and commercial success of the delimber invention.
[5] On August 14, 1990, Mr. Leblanc was cross-examined on his affidavit, and Me Guay attended as his counsel. The cross-examination included questions concerning the date of the first public display of the invention, the volume of sales, Équipements Denis' financial reports, and its knowledge of the first sales of prior delimbers. Me Guay took several questions under advisement at the cross-examination. Following the cross-examination, he promptly provided answers to the outstanding questions. Some of those answers were given under restrictions concerning confidentiality.
[6] Shortly thereafter, Marcel Boutin, one of the directors of Équipements Denis, instructed Me Guay to suspend all matters in the court proceedings on the basis that certain commercial discussions were taking place between the parties, namely Équipements Denis and Harricana. In the following weeks, Harricana acquired the assets of Équipements Denis' forestry division.
[7] On October 19, 1990, the motion for an interlocutory injunction was adjourned sine die on consent by Pinard J. All claims in the action T-768-90 were discontinued by a Notice of Discontinuance signed by counsel for the parties in June 1998.
[8] Although the evidence in the record is unclear, at some point in time, Harricana became Denharco, the plaintiff in the present action. Denharco is the successor in title of the '627 patent.
[9] On October 14, 1998, Denharco filed a Statement of Claim in file No. T-1868-98 alleging infringement by Forespro of the '627 patent, as well as Canadian patent 1,275,027.
[10] On December 14, 1998, Forespro brought a motion for an extension of time to serve and file a Statement of Defence and Counterclaim. The affidavit filed in support of the motion indicated that Me Francois Guay of Smart & Biggar had carriage of the action, and that an extension of time was required in order to permit Forespro to prepare a Counterclaim alleging the invalidity of the '627 patent. That motion was adjourned pending the disposition of the present motion.
[11] In support of the motion to remove Smart & Biggar as counsel of record for Forespro, Denharco filed an affidavit sworn by Christine E. Hicks on December 10, 1998. Ms. Hicks is employed as an associate lawyer at Osler, Hoskin & Harcourt.
[12] In her affidavit, Ms. Hicks stated, among other things, that the date of first public use of the delimber and its commercial success "might" be issues in the present action arising, respectively, from allegations of invalidity based on prior use or sale and on obviousness. She further stated that the confidential financial statements of Denharco "might" be in issue in relation to damages or lost profits arising from the allegedly infringing activities. Finally, she stated that the reputation of Denharco "might" be an issue arising from an allegation of invalidity based on obviousness.
[13] During her cross-examination on her affidavit, Ms. Hicks candidly conceded that she had no personal knowledge of the previous litigation, as she began her employment as a lawyer with Osler, Hoskin & Harcourt in 1994. She also testified that Mr. Aitken drafted her affidavit and decided what exhibits to include. She confirmed that all of the materials submitted on the motion were public in nature, and that she had no personal knowledge as to whether any confidential information had been disclosed to Me Guay by Équipements Denis in the context of the previous action. No other evidence was filed by Denharco in support of its motion.
[14] Forespro filed affidavits on the motion from Me Guay, Jean Sigouin, and Sylvie Paulhus. None of the affiants was cross-examined by counsel for Denharco.
[15] In his affidavit, Me Guay testified, among other things, that he was admitted to the Barreau du Québec in 1982, and has practised law since that time in intellectual property litigation. In or about the end of 1989 or the beginning of 1990, Me Guay was retained to represent Équipements Denis in a possible patent infringement action against Harricana. During the course of his retainer, most of his dealings were with Jean-Yves Leblanc, the president and director general of Équipements Denis. On a few occasions, he met with or spoke to Marcel Boutin, one of the principal directors of the company. On one occasion, he met with Laurent Denis, the inventor of the '627 patent, for fifteen or twenty minutes. The purpose of that meeting was to discuss retaining an expert witness.
[16] During his discussions with Messrs Leblanc or Boutin, Me Guay discussed the possibility of bringing a patent infringement action, the prima facie validity of the patent, possible remedies, and the possibility of bringing a motion for an interlocutory injunction. Me Guay never had any discussion with officials from Équipements Denis concerning grounds for invalidity of the patent, other than in relation to prior art, an issue which was eventually raised by Harricana in its Defence and Counterclaim.
[17] In the context of the discussion concerning the possibility of bringing a motion for an interlocutory injunction, Me Guay discussed Équipements Denis' global earnings for recent years, the importance of the delimbers on its earnings, the market for such products and its market share. All of that information was contained in the affidavit of Jean-Yves Leblanc, sworn on May 14, 1990, which was filed publicly in support of the motion for an interlocutory injunction. The affidavit of Mr. Leblanc was also filed in the present proceedings as an exhibit to the affidavit of Ms. Hicks.
[18] Me Guay did not take part in any of the commercial discussions which resulted in the acquisition of Équipements Denis' forestry division by Harricana. Following the suspension of the court proceedings at his client's instructions, Me Guay had no further involvement in the matter, save and except to sign a Notice of Discontinuance of the action.
[19] In his affidavit, Me Guay swore that he had never received any confidential information from Équipements Denis that could be used to the detriment of Denharco in the present action. In response to various allegations made in the affidavit of Ms. Hicks concerning patent invalidity, he stated that the date of invention had never been available, and that the questions of insufficient specification and claiming more than the inventor invented had never been discussed with his client. He further stated that Équipements Denis' commercial success based on the sales of its delimber was not confidential and was detailed at length in the 1990 affidavit of Mr. Leblanc for use on the motion for an interlocutory injunction. As indicated previously, that affidavit was filed publicly in 1990, and was also made an exhibit to the affidavit of Ms. Hicks in the present proceedings. Furthermore, Me Guay noted that Équipements Denis was a public company at all relevant times, and that its financial affairs were the subject of frequent commentary in the media.
[20] Over three years ago, all materials from Smart & Biggar's file in relation to the patent infringement action between Équipements Denis and Harricana were destroyed, save and except for the accounts rendered and the correspondence of Smart & Biggar with the Registry of the Court, with Osler, Hoskin & Harcourt, and with Équipements Denis. The latter correspondence was general in nature, for the purpose of forwarding Court documents or providing updates on the progress of the litigation. The file contains no other material, and the date of the last account for services rendered was December 31, 1990.
[21] On or about November 2, 1998, Me Guay was asked, in a telephone call from Jean Sigouin, to represent the interests of Forespro in the action for patent infringement instituted by Denharco. Another law firm, which was unable to accept the retainer, had referred Mr. Sigouin to Me Guay at Smart & Biggar. When Me Guay received the relevant documentation from Mr. Sigouin, he realized that he was familiar with one of the patents in issue, namely the '627 patent. Me Guay informed Mr. Sigouin of the situation, and advised him that, although he did not believe there was a conflict of interest, he intended to seek an opinion from the Barreau du Québec.
[22] Shortly thereafter, Me Guay communicated with Me Daniel Madron of the Barreau du Québec. He advised Me Madron, among other things, that he had never received any confidential or technical information concerning the invention, interpretation or validity of the patent, or the commercial or financial affairs of Équipements Denis. Furthermore, he had not acted for Équipements Denis in any other matter. Following his consideration of the matter, Me Madron concluded that, on the basis of the facts disclosed to him, Me Guay was not in a conflict of interest within the meaning of the Code of Ethics of Advocates of the Barreau du Québec. A letter from Me Madron was filed as an exhibit to Me Guay"s affidavit.
[23] As indicated earlier, counsel for Smart & Biggar also filed on the motion an affidavit from Jean Sigouin, the secretary of Forespro. In his affidavit, Mr. Sigouin stated, among other things, that Denharco's Statement of Claim was served on Forespro on October 16, 1998. He forwarded the document to Forespro's lawyers, who advised him to retain a law firm specializing in patent litigation. On or about October 23, 1998, he spoke to a lawyer in such a law firm, but that firm was unable to accept the retainer due to a conflict of interest. The lawyer suggested that he telephone Me Guay at Smart & Biggar. On October 26, 1998, he spoke to Me Guay, and forwarded the relevant documents to him a few days later. During one of their initial conversations, Me Guay informed Mr. Sigouin that he had previously represented Équipements Denis in a patent infringement action concerning the '627 patent, and that he intended to seek an opinion from the Barreau du Québec concerning a conflict of interest. On November 6, 1998, a lawyer from Smart & Biggar advised Mr. Sigouin of the ruling from the Barreau du Québec and confirmed that the firm could act for him. At the conclusion of his affidavit, Mr. Sigouin reiterated the efforts that he had made to retain counsel in this matter, and confirmed that Smart & Biggar is the law firm that he wants to represent the interests of Forespro. Furthermore, in the event that Me Guay is unable to represent Forespro, he nevertheless wants Smart & Biggar to continue to act in the matter.
[24] The affidavit of Sylvie Paulhus, filed by Forespro on the motion, contains various media articles concerning the commercial and financial success of Équipements Denis.
ISSUE
[25] The sole question to be determined is whether Smart & Biggar is disqualified from continuing to act on behalf of Forespro by reason of a conflict of interest.
ANALYSIS
[26] The seminal case outlining the principles to be applied in determining whether a lawyer or a law firm has a conflict of interest in a matter is MacDonald Estate v. Martin, [1990] 3 S.C.R. 1235. Sopinka J., writing for the majority, enunciated the test in the following terms, at pages 1259-1260:
| In dealing with the question of the use of confidential information we are dealing with a matter that is usually not susceptible of proof. As pointed out by Fletcher Moulton L.J. in Rakusen, "that is a thing which you cannot prove" (p. 841). I would add "or disprove". If it were otherwise, then no doubt the public would be satisfied upon proof that no prejudice would be occasioned. Since, however, it is not susceptible of proof, 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? In this regard, it must be stressed that this conclusion is predicated on the fact that the client does not consent to but is objecting to the retainer which gives rise to the alleged conflict. |
| Typically, these cases require two questions to be answered: (1) Did the lawyer receive confidential information attributable to a solicitor and client relationship relevant to the matter at hand? (2) Is there a risk that it will be used to the prejudice of the client? |
[27] In dealing with the first question, namely whether the lawyer received relevant confidential information in the context of the previous solicitor-client relationship, Sopinka J. acknowledged that circumstances may exist in which no confidential information relevant to the subsequent and related retainer was conveyed to the lawyer by the client. In that regard, he stated as follows, at pages 1260 -1261 :
| There may be cases in which it is established beyond any reasonable doubt that no confidential information relevant to the current matter was disclosed. One example is where the applicant client admits on cross-examination that this is the case ... In my opinion, once it is shown by the client that there existed a previous relationship which is sufficiently related to the retainer from which it is sought to remove the solicitor, the court should infer that confidential information was imparted unless the solicitor satisfies the court that no information was imparted which could be relevant. This will be a difficult burden to discharge. Not only must the court"s degree of satisfaction be such that it would withstand the scrutiny of the reasonably informed member of the public that no such information passed, but the burden must be discharged without revealing the specifics of the privileged communication. Nonetheless, I am of the opinion that the door should not be shut completely on a solicitor who wishes to discharge this heavy burden. |
[28] In applying the principles enunciated in MacDonald Estate v. Martin, supra, to the facts of the present case, the threshold question to be determined is whether Denharco has established the existence of a previous solicitor-client relationship "sufficiently related" to Smart & Biggar's retainer with Forespro. However, it is unnecessary for me to answer that threshold question. Even if I were to assume that Smart & Biggar's previous solicitor-client relationship with Équipements Denis is sufficiently related to its current retainer with Forespro, I am not satisfied, on the basis of the evidence adduced on the motion, that any relevant confidential information was conveyed to Smart & Biggar in the previous relationship. In that regard, I note that the evidence of Me Guay, in which he unequivocally denied receiving any confidential information from Équipements Denis concerning the '627 patent or other commercial or financial matters, was not challenged on cross-examination. Furthermore, the only evidence adduced by Denharco in support of its motion was the affidavit of an associate at Osler, Hoskin & Harcourt who had no personal knowledge as to whether Me Guay had received any relevant confidential information in the context of his previous solicitor-client relationship with Équipements Denis. In the circumstances, I have no hesitation in preferring the uncontradicted and unchallenged evidence of Me Guay that he did not receive any relevant confidential information in the context of his previous solicitor-client relationship with Équipements Denis.
[29] I have therefore concluded that Smart & Biggar has discharged the heavy onus placed on it, and has rebutted the inference that confidential information was imparted to it by adducing clear and unchallenged evidence to the contrary. As a result, I am satisfied, on the basis of the evidence adduced, that a reasonably informed member of the public would likewise conclude that no confidential information was imparted that could be relevant in the present proceeding. In the circumstances, it is unnecessary for me to address the second question in the test outlined in MacDonald Estate v. Martin, supra, namely whether there is a risk that the confidential information will be used to the prejudice of the client.
[30] Although my finding that Smart & Biggar received no relevant confidential information is determinative of the issue raised on the motion, I also note that Denharco adduced no evidence to indicate that it objected to Smart & Biggar's retainer with Forespro which gave rise to the alleged conflict of interest. In MacDonald Estate v. Martin supra, Sopinka J. stated at page 1260 that a finding of a disqualifying conflict of interest was "...predicated on the fact that the client does not consent to but is objecting to the retainer which gives rise to the alleged conflict." In the event that Denharco objected to the retainer, it ought to have adduced evidence on the motion to establish that fundamental fact.
[31] The motion to remove Smart & Biggar as solicitors of record for the defendant is dismissed. Costs of the motion at the upper end of the Column III scale in Tariff B are payable to the defendant in any event of the cause.
| D. McGillis |
| Judge |
OTTAWA
January 26, 1999