Décision

Trackcom Systems Inc. c. Trackcom Systems International Inc.						2016 QCCS 4389
JP 1736    SUPERIOR COURT
commercial division
CANADA
PROVINCE OF QUEBEC
DISTRICT OF			MONTRÉAL
No:		500-11-043229-125
DATE:	September 12, 2016
______________________________________________________________________
PRESIDING:				THE HONOURABLE	MICHEL A. PINSONNAULT, J.S.C.
______________________________________________________________________
TRACKCOM SYSTEMS INC.
and
PHILIP MAMBO
and
BARBARA DZUIBA
Plaintiffs
v.
TRACKCOM SYSTEMS INTERNATIONAL INC.
and
KAVVERI TECHNOLOGIES INC.
and
WILLIAM RONALD MCBRIDE
and
CHENNA UMA REDDY
and
ARUN NAGESH AVADHANI
Defendants
and
MTRE ARI Y. SOREK
and
DENTONS CANADA LLP
Mis en cause
______________________________________________________________________
JUDGMENT ON AMENDED DEMAND TO DISQUALIFY ATTORNEYS FOR PLAINTIFFS (Art. 25, 49 C.C.P. and articles 72 and 76 and following of the Code of Profession and Code of Professional Conduct of Lawyers) and DEMANDE POUR FAIRE DÉCLARER ABUSIVE LA DEMANDE POUR FAIRE DÉCLARER INHABILES  LES PROCUREURS DES DEMANDEURS (Art. 51 and following and 101 of the Code of civil procedure)
______________________________________________________________________

[1]           The present motions are presented in the context of protracted litigation proceedings in oppression and damages that were initiated in 2012 by Plaintiffs, Trackcom Systems Inc., Mr. Philip Mambo and Mrs. Barbara Dzuiba against the Defendants.

[2]           Until now, the Court of appeal has been called upon to render four judgments in the present instance.

[3]           Yet, four years later, this case has still not been scheduled to be heard on its merits.

[4]           Essentially, the Defendants are seeking to have disqualified M^tre Ari Y. Sorek (“Sorek[1]”), the attorney acting for the Plaintiffs from the outset in the present instance, and thus prevent him from continuing to act as such for the Plaintiffs, as well as all the other members of his law firm Dentons Canada s.e.n.r.l (“Dentons”) (the “Motion to disqualify”).

[5]           The Defendants base their position on the fact that Sorek, having signed a sworn declaration[2] in support of Plaintiffs’ upcoming motion to homologate a transaction that would have been concluded with the Defendants (the “Motion to homologate”):

“8. Mtre. Sorek has thus become a witness in the file and his testimony will be essential to the determination and adjudication of the Demand in homologation, as he will need to testify, in particular, on the circumstances surrounding the alleged transaction and on the exchanges and discussions.”

[6]     The lawyers for the Defendants argued at the hearing that they have the “absolute right[3]” and therefore, they want to examine Sorek as a witness in the context of the recently filed Motion to homologate.

[7]           As previously indicated, the Motion to disqualify was prompted by the Motion to homologate filed on July 5^th, 2016. To all intents and purposes, pursuant to their motion, the Plaintiffs are seeking to have homologated a transaction stemming from their acceptance, on May 10, 2016, of a final offer of settlement made by the Defendants on May 6, 2016. Since then, the Defendants apparently failed and/or refused to honour their undertakings under the said transaction.

[8]           Needless to say that the Motion to homologate is contested by the Defendants.

[9]            However, given the Motion to disqualify, the Motion to homologate will only be heard once the status of the Plaintiffs’ lawyers (Sorek and Dentons) has been settled.

[10]        In addition to the Motion to disqualify, the Court is called upon to rule on a motion filed by the Plaintiffs asking that the Motion to disqualify be declared abusive pursuant to Article 51 of the Code of civil procedure (“C.c.p.”) and that they be awarded damages as a result thereof (the “Motion to declare abusive”).  

[11]        In the latter motion, the Plaintiffs are essentially alleging that:

« 2. Cette demande des défendeurs constitue un nouvel acte de procédure abusif, exercé de manière excessive et déraisonnable et motivé par le seul objectif de nuire et d’épuiser les demandeurs ainsi que de retarder le processus judiciaire;

3. Les demandeurs demandent donc à cette honorable Cour de déclarer abusive la demande pour faire déclarer inhabiles les procureurs des demandeurs et le cabinet d’avocats Dentons (« Demande en déclaration d’inhabilité »), à rembourser les honoraires extrajudiciaires encourus par les demandeurs pour contester ladite demande des défendeurs ainsi que de condamner ces derniers à des dommages-intérêts punitifs, en vertu de l’article 51 du nouveau Code de procédure civile, et ce, pour les raisons plus amplement exposées ci-après;

37. Par conséquent, cette Demande en déclaration d’inhabilité présentée par les défendeurs est abusive, constitue une manœuvre vexatoire de leur part, trahi une intention de mauvaise foi, est prématurée, et enfin ne sert que de prétexte pour écarter indûment le libre choix des demandeurs de choisir un procureur de leur choix; »

[12]        Given the nature and the tenor of the two motions that the Court is called upon to adjudicate, it is essential for a better understanding, in the Court’s opinion, to set out hereinafter the relevant facts in connection with the alleged transaction that occurred in the present instance and, in particular, with Sorek’s involvement.

[13]        It is necessary to point out that in the present judgment, the Court does not purport to express any opinion on the transaction itself. This task will rest upon the judge who will hear the Motion to homologate on its merits.  

THE FACTS

[14]        The Motion to homologate essentially reveals that by letter dated May 6, 2016 (R-6), M^tre Vincent Cérat Lagana (“Lagana”) of Fasken Martineau DuMoulin LLP (“Fasken”), one of the lawyers acting for the Defendants until recently, made the following settlement offer to Sorek’s clients:

“Our clients have instructed us to reject the offer of $650,000 in addition to TSI's intellectual property and inventory.

However, our clients remain willing to reach a full and final settlement of the present case with a payment of $500,000 to your clients in capital; interests, costs and taxes in addition to TSI’s assets, inventory and intellectual property.

This offer is made under reserve without prejudice and without any admission and it shall not be used in a Court of law in any way.

This offer is now made for the third time by our clients and constitutes a final opportunity for your clients to settle the file at an amount which we consider to be substantial in view of TSI's history and the value and nature of your claims.

This offer is valid until May 11, 2016, at noon at which time it will become null and void.”

[Emphasis added]

[15]        By email dated May 10, 2010 (R-7), addressed to Lagana, Sorek accepted the settlement offer on behalf of the Plaintiffs, as follows:

“Dear Colleague,

It is with a heavy heart that I am instructed to accept the settlement offer contained in your letter of May 6, 2016.

Accordingly, you will forward to Dentons Canada in trust, without delay, the sum of $500,000.

In addition, your clients will execute and prepare the necessary documents in view of formalizing the fact that all the assets, inventory and intellectual property of all Trackcom entities are completely and irrevocably remitted to Mr. Mambo.

The aforesaid sum of $500,000 and the relinquishment by your clients of any rights, title and interests they may have in any of the aforesaid assets, inventory and intellectual property shall constitute the consideration for our client's agreement to discontinue its proceedings.

Of course, the parties will grant each other a full and final mutual and reciprocal release and discharge.

We will be awaiting the appropriate settlement documents which we understand you will prepare.”

[Emphasis added]

[16]        The Motion to homologate also reveals that Mister Justice Stephen W. Hamilton was expected to adjudicate on a particular issue involving the accounting firm of Ernst & Young in the present instance. On May 13, 2016, Sorek sent the following email message to the judge (R-8):

“Dear Mr. Justice Hamilton,

We thought it appropriate to advise you that our clients have accepted a settlement offer received from the Defendants.

We are awaiting the draft settlement agreement from counsel for Defendants.

We therefore consider that there no longer is a need for the Court to adjudicate the matter of the E&Y mandate.

We will, however, need to request an extension of the delay to inscribe for proof and hearing, the deadline for which expires on May 18, 2016.

We thank you for your patience and cooperation in this matter.”

[17]        Exhibit R-9[4] reveals that on May 10, 2016, at 6:53 p.m., Lagana responded as follows to Sorek’s previous email message asking for a confirmation that he had indeed received his email of earlier that same day in which his clients accepted the Defendants’ latest offer of settlement:

“I did receive it [Sorek’s email R-7] and I transferred it to my clients, with whom I have not spoken since. I will follow up with you after I do.

Thank you and have a good evening.”

[18]        Some two weeks later, on May 24, 2016 in the morning, Sorek, who had not yet received from Lagana the settlement documentation, wrote the following email to him (R-9):

“Vincent

Please send me draft settlement agreement this week.

Thanks”

[19]        In the afternoon, Lagana responded as follows (R-10):

“Dear Colleague,

We were able to discuss the eventual transaction with our clients after they had been traveling in the last week. We will prepare a draft transaction which will cover, inter alia, the mutual and reciprocal release, the payment of $500,000 in addition to TSl's assets, inventory and IP and the modalities of same, the precise consideration of such payment and the necessary provisions to end all business relationship and common shareholding between the parties. Prior to completing a draft, our clients have instructed us to advise you of the modalities for the payment that they are offering:

-       Payment of $100,000 and delivery of assets, inventory and IP upon the approval of an eventual transaction by the Superior Court, pursuant to the CBCA.

-       Payment of 12 monthly instalments of $33,333.33 each month for the 12 months that will follow the approval of the transaction.

Please confirm whether your clients agree to these modalities in order for us to move forward with the other outstanding questions, which we will submit to you in the form of the draft transaction and which will have to be agreed upon by the parties.

The transaction process will also have to include the complete reimbursement of the sums paid into EY's trust account by our clients.

Subject to the above, we hope to submit a draft for your review before the end of the week or early next week. Any transaction to be concluded by the parties will be subject to an agreement on the content of this document.

Thank you and best regards,”

[20]        A few minutes later, Sorek responded essentially that the question of payment of the $500,000 settlement by way of installments was never discussed or mentioned previously. He asked for a $500,000 certified cheque or bank draft (R-11).

[21]        Lagana immediately replied the following (R-11):

“Dear Colleague,

The modalities of the payment of the amount, like a number of other modalities, were indeed not discussed yet. This is what is offered by our clients in this regard. We will communicate to them your position.

Thank you and best regards,”

[22]        On the following morning, Sorek wrote to Lagana (R-11):

“The situation is fragile. If your client likes the deal they proposed, they should find a way to close it fast. If they don't care to settle with a lump sum payment of $500,000, they will have a problem.

You know that Mr. Mambo did not jump at this offer, but now that he accepted it, we should make it happen.

We need to know this week please.

Thanks

Ari”

[23]        On May 30, 2016, Sorek wrote to Lagana (R-12) asking what was his clients’ position following their email exchanges of May 24^th.

[24]        On May 31, 2016, Lagana responded (R-12):

“We should be able to provide our clients' answer tomorrow.”

[25]        Effectively, on June 1, 2016, Lagana conveyed by an email addressed to Sorek his clients’ position (R-13):

“We advised our clients of your clients' refusal regarding the proposed terms of payment. They have instructed us to modify the offered terms in order to complete the payment within ten months. The amount of $500,000 which is offered to your clients does not change. The modalities would be the following:

-       Payment of $100,000 and delivery of assets, inventory and IP upon the approval of an eventual transaction by the Superior Court;

-       Payment of 10 monthly instalments of $40,000 each for the ten months that will follow the approval of the transaction by the Superior Court.

As already discussed, the whole remains subject to an agreement on all of the other items and terms of an eventual transaction between the parties and, if your client agrees to these modalities, we will prepare a draft which will cover these other aspects and on which there will have to be an agreement. The transaction is also subject to the approval of the Superior Court and the complete reimbursement to our clients of the sums which are currently in EY's trust account.

Please advise us of your clients' position regarding the foregoing. Should your clients refuse these terms and put an end to the negotiations, please advise us as to whether EY [Ernst & Young] will want to be directly heard by Justice Hamilton and we will be able to jointly advise Justice Hamilton of the situation and plan the next steps (either another hearing involving EY or the rendering of his judgment). You had also mentioned new motions that you wanted to present. Please advise as to what those will be. However, as already mentioned to Me Karczewska, I am not available next week and we will have to discuss another date for the presentation of your motions, depending on what they are.”

[26]        By email dated June 16, 2016, Lagana wrote the following email to Sorek (R-13):

“We are writing further to our email dated June 1st, 2016 and to our subsequent telephone conversations. After discussion with our clients, they have instructed us to add one element to the proposal that they made in our June 1^st email regarding the modalities of the payment to be made by them if a transaction intervenes between the parties.

Our clients are indeed prepared to provide an acquiescence to judgment for the monetary value of the potential transaction, i.e. $500,000. The acquiescence to judgment document will be held in trust by Fasken Martineau and can only be used if our clients are in default of making one of the instalments provided for by the transaction. It is understood that the initial payment of $100,000 which will be made upon the approval of an eventual settlement by the Superior Court as well as the value of any instalment made thereafter will count against the value of this acquiescence to judgment, should it ever be used.

Our clients deny the usefulness of this measure and reiterate that they will duly proceed to the instalments and that the amount of the settlement will be fully paid within ten months of the approval of an eventual transaction. As such, they are only adding this element to their proposal to accelerate the negotiations of the settlement in order for all parties to move forward.

Please advise us of your clients' position.”

[27]        Realizing that in all likelihood, the Defendants would not honour their side of the transaction, the Plaintiffs, acting through their lawyer Sorek, notified to Lagana on July 5, 2016, the Motion to homologate and filed the same in Court with a date of presentation of August 4, 2016.

[28]        On July 29, 2016, M^tre Pierre Lefebvre of Fasken, a partner of Lagana, informed Sorek that the Defendants had revoked the mandate of Fasken in the present case as follows (RDA[5]-5):

“Mr. Sorek,

By the present, I am informing you that the mandate of Fasken Martineau to represent the defendants in the abovementioned file has been revoked last night. Fasken Martineau is therefore no longer representing the said defendants

and a notice to this effect will be sent to you in accordance with the Quebec code of civil procedure.”

[29]        Within a few days, Spiegel Sohmer Inc. (“Spiegel”) accepted to take over as the new attorneys for the Defendants seeking immediately from Sorek, without any difficulties, a postponement of the presentation of the Motion to homologate from August 4 to August 18, 2016 (RDA-6).

[30]        The Court also understands that from the outset of Speigel’s involvement in this matter, discussions took place between Sorek and M^tre Neil G. Oberman (“Oberman”), the new lawyer representing the interests of the Defendants in this matter with a view to attempt to settle the Motion to homologate and, as a result thereof, settle definitively the present proceedings in oppression.

[31]        On Monday August 15, 2016, the negotiations that took place between Sorek and Oberman for some two weeks failed, as evidenced by a series of emails exchanged between the two lawyers (RDA-07).

[32]        At 12:59, Oberman sent the following email to Sorek:

“Given that a settlement would be homologated by consent the same would in our client's perspective be sufficient to protect both Parties.

With respect to the pro-forma date of August 18, 2016, if not settlement is reached, our client will seek preliminary means and seek to contest the Motion on the merits.

I hope that your client can appreciate the offer and the robust lump sum payment as a clear intention to settle the matter.

Please advise as to your client's position.

Nothing herein should be construed as an admission or renunciation to any rights or recourses that our client may have or may seek to invoke.”

[33]        Seven minutes later, Sorek responded to Oberman (RDA-7):

“Thank you.

The "robust lump sum payment" your client is prepared to make is indicative of absolutely nothing at all. It is indicative of the fact that it is prepared to instruct EY to transfer the money to Dentons so as to have this $100,000 sum-being money that your client will never see again no matter how this plays out-apply to settlement rather than to an audit.

Your client is not disbursing one penny as a demonstration of its intention to provide any consideration to purchase the peace. It is not prepared to make any concession to show its good faith.

We were encouraged by your stated intention to come in to the file as the voice of reason with pragmatic solutions, but we note that the offer is the same as the one made via Fasken; that you were unable to convince your client to show good faith; that you did not succeed in bringing any pragmatic solutions to the table; and that your client, through your good offices, will continue its tradition and practices of dilatory and abusive procedure.

We will see you in Court on Thursday [August 18].”

[34]        At 13:12, Oberman replied:

“Dear Ari:

I am sorry that you feel that way, my intentions are not to obstruct the process but to defend the legitimate interests of our client.

In light of your comments, I will assume that the offer has been rejected with no counter-offer.

We have served our Answers this day so we are officially on record.

I will be serving some additional materials shortly in support of our client's position.

In the interim, we invite you to contact the undersigned if necessary.”

[35]        Three hours later at 16:06, Sorek received notification of the Defendants’ Motion to disqualify him and each and every member of Dentons as attorneys of the Plaintiffs, which the Court understands came as a total surprise and shock to Sorek, since throughout his discussions and negotiations with Oberman from the beginning of August, Oberman never alluded to the fact that in light of the Motion to homologate, its allegations and Sorek’s sworn declaration, the latter had placed himself in a position of conflict of interest that warranted his disqualification from this matter, together with all other members of Dentons.

[36]        At 17:38, Sorek sent the following email to Oberman (RDA-10):  

“Dear Colleague,

We appreciate your good cooperation in this file and we note that what you say on the phone has no relation whatsoever to the actions you prepare in parallel.

Your motion is abusive and dilatory. We grant you until tomorrow noon to confirm your withdrawal of same, failing which we will be filing a motion for a declaration of abuse of proceedings and a condemnation in damages. We reserve the right to seek a condemnation for damages against your firm directly as well. You know, or ought to know, the clear jurisprudence on this matter, which clearly establishes as a matter of trite law that the motives you invoke in your motion do not serve to disqualify an attorney. It is clear that either your client is telling you how to conduct your practice and you are failing to provide advice according to the dictates of Quebec law, or that you are recommending to your client to institute abusive proceedings.”

[Emphasis added]

[37]        On the morning of August 16^th, M^tre Cécile Desforges (“Desforges”), working with Oberman in this matter, advised Sorek that they were seeking further instructions from their clients regarding their Motion to disqualify as a result of Sorek’s August 15^th email (17:38) and asked that Sorek prolong his delay ending on August 16^th, at noon until noon on the following day August 17^th (RDA-10):

« Nous avons pris connaissance de votre courriel et allons communiquer celui-ci à nos clients pour instructions.

Compte tenu du décalage horaire entre les pays qui complique les communications, nous vous demandons de bien vouloir prolonger votre délai jusqu'à demain midi [August 17, 2016]. »

[38]        In all evidence, Spiegel and their clients refused to withdraw their Motion to disqualify as it was presented to the undersigned together with the Plaintiffs’ Motion to declare abusive.

-             The Amended Motion to disqualify

[39]        The Motion to disqualify reveals the following grounds to justify the Defendants’ demand that Sorek and Dentons be disqualified from representing the Plaintiffs in the present proceedings:

“7. As appears from the allegations of the Demand in homologation and of the Exhibits filed in support thereof, Mtre. Sorek alleges that a transaction occurred between Plaintiffs and Defendants following his written and oral exchanges;

8. Mtre. Sorek has thus become a witness in the file and his testimony will be essential to the determination and adjudication of the Demand in homologation, as he will need to testify, in particular, on the circumstances surrounding the alleged transaction and on the exchanges and discussions;

9. The determination and adjudication of the Demand in homologation is a contested matter;

10. Moreover, Mtre. Sorek has signed an affidavit in support of the Demand in homologation thereby confirming his status as witnesses;

11. In order to be able to defend themselves against the Demand in homologation, Defendants will need to (…) cross-examine out of Court Mtre. Sorek on his affidavit to obtain information on the circumstances surrounding the alleged transaction;

12. During the said cross-examination, it may reveal additional factual witnesses from the firm of Dentons Canada LLP;

13. To adjudicate on the Demand in homologation, the Court will need to assess the veracity of the evidence and statements made in support of the Demand in homologation;

14. Considering the foregoing, the Mis en causes Mtre. Sorek and Dentons Canada LLP must be disqualified;

15. The interests of justice would not be served if attorneys for Plaintiffs were to continue acting in the present matter;”

[40]        The Motion to disqualify was amended on August 16, 2016 to add the following paragraph:

“15.1 On August 15, 2016, the undersigned attorney received an e-mail from Mis en cause Mtre. Sorek whereby the latter asked Defendants to withdraw their Demand to Disqualify Attorneys for Plaintiffs, failing which they would file a motion for declaration of abuse of proceedings and claim damages against the Defendants and the undersigned attorneys, as appears from the e-mail of August 15, 2016, filed in support hereof as EXHIBIT R-1;”

[41]        The amendment also came with an affidavit by Mr. William McBride stating the following:

“1. I am a Defendant in the present matter;

2. I have been authorized by all other Defendants to sign the present affidavit in their name for the purpose only of the present Amended Demand to Disqualify Attorneys for Plaintiffs;

3. On August 15, 2016, our attorneys forwarded us an e-mail received from Mis en cause Mtre. Sorek whereby the latter asked us to withdraw our Demand to Disqualify Attorneys for Plaintiffs, failing which they would file a motion for declaration of abuse of proceedings and claim damages against us and our attorneys, as appears from the email of August 15, 2016, filed in support hereof as EXHIBIT R-1;

4. All the facts alleged in the present Amended demand are true.”

[42]        The Court questions the relevancy and the usefulness of such an amendment in the present context, but can only explain it as the necessity of indicating that ultimately the decision to present the Motion to disqualify was made by the Defendants and not by their new lawyers, Spiegel.

ANALYSIS

[43]        In support of their position, the lawyers for the Defendants invoked sections 71, 72 and 76 of the Code of Professional Conduct of Lawyers (the “Code of conduct”) that read as follows:

“71. A lawyer must avoid any situation of conflict of interest.

72. There is a conflict of interest when there is a substantial risk that the lawyer’s own interests or his duties to another client, a former client, or another person would adversely interfere with his duties to the client and, in particular:

(1)  when he acts for clients with conflicting interests; or

(2)  when he acts for clients whose interests are such that he might tend to favour certain among them or that his judgment and loyalty may be unfavourably affected.

When the lawyer engages in his professional activities within a firm, conflict of interest situations must be assessed with regard to all the firm’s clients.

76. A lawyer must not personally act in a dispute if he knows or should know that he will be called upon as a witness.

However, he may act:

(1)  if the fact of not acting is of a nature to cause serious prejudice to the client; or

(2)  if his testimony only refers to:

(a)  an uncontested matter;

(b)  a question of form and there is no reason to believe that serious proof will be offered to contradict such testimony; or

(c)  the nature or value of the professional services rendered by him to the client or, as the case may be, by another professional who engages in his activities within the same firm.”

[Emphasis added]

[44]        Article 193 C.p.c. also deals with a lawyer that may be called upon to testify at a trial:

“193. On a party’s application, a lawyer may be declared disqualified to act in a proceeding, as when the lawyer is in a conflict of interest situation and does not take steps to remedy it, has disclosed or is likely to disclose confidential information to another party or a third person, or is called to testify in the proceeding on essential facts. In the latter case, the lawyer may only be declared disqualified for serious cause.”

[Emphasis added]

[45]        Based on the allegations of the Motion to disqualify and the oral representations of the lawyers for Defendants, the Court understands that the Defendants’ main, if not sole justification to seek the disqualification of Sorek and of Dentons, rests essentially on the fact that Sorek, having executed the sworn declaration in support of the Motion to homologate, must testify in connection therewith as it is the “absolute right[6]” of the Defendants to examine the lawyer on his sworn declaration. The lawyers insisted that the Court could not deny the Defendants such an “absolute right” and therefore, that it must disqualify the witness Sorek before he testifies. [Emphasis added]

[46]        Although absent from any mention in the Motion to disqualify, at the hearing the lawyers for the Defendants also expressed their doubts as to the objectivity of Sorek in this matter as contradictory evidence would undoubtedly be offered to counter his testimony, without any further explanations.

[47]        The case against the other members of Dentons is even more tenuous and is only based on the allegations of paragraph 12 of the Motion to disqualify evidencing that the Defendants (and their new lawyers) are engaged at best in a fishing expedition against Dentons:

“12. During the said cross-examination, it may reveal additional factual witnesses from the firm of Dentons Canada LLP;”

[Emphasis added]

[48]        The Defendants (and their new lawyers) seem to have forgotten that their exercise of an “absolute right” is always subject to the imperative provisions of Articles 6 and 7 of the Civil Code of Quebec that stipulate:

“6. Every person is bound to exercise his civil rights in good faith.

7. No right may be exercised with the intent of injuring another or in an excessive and unreasonable manner which is contrary to the requirements of good faith.”

[49]        During the hearing, the “absolute” position of the lawyers for the Defendants towards Sorek evolved, not to mention that it somewhat softened.

[50]        Based on the oral representations of the lawyers for the Defendants, it became quite clear, in the eyes of the Court, that had Sorek not executed the sworn declaration in support of the Motion to homologate, he would not have found himself in the present situation facing his disqualification. The lawyers even suggested that Sorek should have replaced his sworn declaration with one of his clients after the fact to avoid his examination and that they [the lawyers for the Defendants] would have acted accordingly. The Court understood that under such circumstances, the testimony of Sorek would not have been sought.

[51]        Furthermore, at the outset of the hearing, the same lawyers also suggested that the hearing on the present two motions should be postponed until they would have the opportunity to examine Sorek on his sworn declaration, indicating that his responses may resolve the present impasse and avoid the presentation of their Motion to disqualify. This did not indicate that the Defendants (and their new lawyers) were so certain that their Motion to disqualify was well-founded to start with.

[52]        The foregoing position voiced by the lawyers for the Defendants left little doubts in the mind of the Court that other than “clinging” unto Sorek, thanks to the strategic benefit of his sworn declaration to justify his examination, the lawyers have failed to propose any compelling arguments to justify the remedies sought in their Motion to disqualify.

[53]        As it will be discussed further hereinafter, the mere right to examine a lawyer, even if it is an “absolute right”, does not justify in itself the disqualification of a lawyer acting for the opposing party.

[54]        A series of criteria developed by the jurisprudence must be met by the party seeking the disqualification of a lawyer representing a party to legal proceedings. 

[55]        Sorek cannot be disqualified simply on the basis that he will undoubtedly be called as an essential witness given his personal involvement in the transaction that is the object of the Motion to homologate. Such an involvement would trigger a multitude of disqualifications, as more often than not, such transactions are concluded directly between lawyers acting for their respective clients. Given such a direct involvement of lawyers, it is not surprising that they would execute sworn declarations in support of motions to homologate such transactions. Again, the “absolute right” to examine them on their sworn declarations does not automatically entail their disqualification without the other criteria being met as well.

[56]        Although the lawyers for the Defendants claimed that Sorek could not avail himself of one of the exceptions of section 76 of the Code of conduct, the mere fact that one party may wish to examine the lawyer of the opposing party is not sufficient in itself to warrant a disqualification.

[57]        One must bear in mind that Article 193 C.p.c. stipulates that a lawyer may only be declared disqualified for serious cause if he is called to testify in the proceeding on essential facts. [Emphasis added]

[58]        With all due respect, the lawyers for the Defendants failed to convince the Court that any of the various criteria developed by the jurisprudence to disqualify a lawyer find application in the present instance.

[59]        Firstly, the jurisprudence on disqualification of lawyers shows that in such circumstances, the facts of each case are important and must be assessed by the Court. “En matière de déclaration d’inhabilité, les faits importent. Chaque cas est un cas d’espèce.[7]”

[60]        In Canerector Inc. v. 169889 Canada Inc.[8], Madam Justice Rousseau described the role of the judge in such matters as follows:

“[66] The Court must carry out a balancing act: on the one hand, a litigant's entitlement to be represented by the lawyer of his choice; on the other hand, the adverse party's entitlement to present relevant and admissible evidence.

[67] This balancing act requires an assessment of the legal proceedings and of the evidence to weed out "abuse of process, bad faith, stratagem or caprice", and to ascertain whether "l'intégrité du procès civil et le respect de l'apparence de justice" require the disqualification of the lawyer of choice; the availability of other means and other witnesses to prove the relevant facts must also be weighed; the prejudice and inconvenience to be suffered by each party is also of concern.”

[Emphasis added and references omitted]

[61]        Although the notion of the appearance of a conflict of interest must always be the first and foremost part of the Court’s preoccupations, the Court called upon to disqualify a lawyer, especially when based on his or her upcoming testimony at or before trial, must be guided, inter alia, by the right of a litigant to chose his or her counsel and that fundamental right must not be overridden except for serious and compelling reasons[9]. [Emphasis added]

[62]        In Condax v. Charron[10], Mister Justice Brossard made an excellent analysis of the guiding principles in such matters:

« [53] La règle déontologique voulant qu’un avocat ne puisse agir dans un litige s’il est évident qu’il y sera appelé comme témoin a pour objectif de préserver son indépendance et sa crédibilité comme plaideur et de lui éviter de plaider que la position de la partie qu’il représente devrait être retenue sur la foi de son propre témoignage.

[54] Cela dit, la Cour d’appel enseigne que les tribunaux ne doivent pas appliquer cette règle de prohibition avec un automatisme absolu, et ce, même en l’absence de preuve d’un préjudice irréparable pour la partie qui risque de se voir privée de son avocat. Ainsi, compte tenu du caractère fondamental du droit au libre choix de l’avocat, le juge saisi d’une requête en déclaration d’inhabilité doit appliquer ladite règle avec réserve.

[55] Dans Studio 48 inc. c. Samson, le juge Gagnon résume les critères qui doivent être appliqués :

(a)  c’est celui qui entend appeler l’avocat de la partie adverse comme témoin qui doit justifier l’utilité de ce témoignage, voire même sa nécessité;

(b)  l’intention de faire témoigner le procureur d’une partie doit être fondée sur des considérations sérieuses;

(c)  doit être considérée la possibilité, pour la partie, de faire sa preuve autrement que par le témoignage de l’avocat;

(d)  la simple éventualité d’un possible besoin du témoignage de l’avocat n’est pas suffisante. L’intention de le faire témoigner doit être réelle et bien arrêtée;

(e)  La demande en déclaration d’inhabilité doit être présentée de façon diligente et ne pas constituer une manœuvre vexatoire.

(références omises)

[56] Ainsi, la partie qui entend faire déclarer un avocat inhabile à agir au dossier doit démontrer que le témoignage envisagé portera sur un élément important du litige.

[57] En outre, la partie requérante doit également démontrer que le témoignage est non seulement utile, mais nécessaire pour faire pleinement valoir ses droits, bref, qu’il revêt une importance déterminante au litige. L’intention de faire témoigner l’avocat doit être fondée sur la bonne foi et procéder de motifs suffisamment sérieux pour ne pas donner à l’application de la règle un caractère injuste ou prématuré. Le juge Bouchard le formule ainsi dans 9071-2852 Québec inc. (Syndic de):

[16]      Il ne suffit pas d’indiquer qu’une partie a l’intention d’interroger l’avocat de la partie adverse pour qu’il soit immédiatement déclaré inhabile à occuper pour son client. Cette intention ne doit pas servir de prétexte pour écarter indûment le libre choix de l’avocat et c’est pourquoi, il faut s’interroger sur la nécessité du témoignage de l’avocat afin de mettre en preuve certains faits (référence omise).

[58] Il convient d’ajouter que la nécessité du témoignage doit apparaître clairement du dossier, tel que constitué à la date de la requête en déclaration d’inhabilité.

[59] La nécessité du témoignage et le sérieux de la motivation se mesureront notamment à la possibilité de faire la preuve par d’autres moyens, soit par d’autres témoins soit par une preuve documentaire. Le juge Riordan l’exprime comme suit dans Cinar Corporation c. Weinberg :

[10]      Our system recognizes that the right of a litigant to his counsel of choice is an important one that must not be overridden except for serious and compelling reasons. Accordingly, in the case of a demand from the opposing party to call the other party's lawyer as a witness, every effort should be made to find an accommodation in order to avoid disqualifying the lawyer merely because of that. For example, the lawyer should not be called where it is possible to enter the evidence into proof by another means, i.e., an admission, a document or another witness. (références omises)

[60] Par ailleurs, en règle générale, la prohibition qui est faite à l’article 3.05.06 du Code de déontologie ne s’étend pas à l’ensemble du cabinet de l’avocat concerné. Ainsi, l’inhabileté de l’avocat n’entraîne pas celle de son cabinet. Il en sera autrement s’il est plus que probable que la crédibilité de l’avocat soit mise en cause ou s’il est raisonnablement vraisemblable que le sort du litige dépende notamment de la crédibilité qui lui sera accordée. »

[Emphasis added and references omitted]

[63]        Based on the foregoing principles, the Defendants also failed to make a probable case that the testimony of Sorek is necessary and essential in order that they be able to present a full defence to the Motion to homologate.

[64]        Moreover, of particular importance in the present case, the Defendants, via their lawyers, had a “duty to try to arrive at an accommodation that would avoid the need for such testimony”, if it was at all possible. They never even attempted to do so.

[65]        When the lawyers proposed to postpone the presentation of their Motion to disqualify until they could examine Sorek on his sworn declaration with the possibility that Sorek’s answers could prompt them to withdraw their motion, it could not have been a more eloquent illustration of the importance of this particular criterion.

[66]        The Motion to disqualify is totally silent on the steps taken by the lawyers for the Defendants “to try to arrive at an accommodation that would avoid the need for the testimony [of Sorek], e.g. admissions, the production of documents or the identification of an alternative witness on the point”, and that for one reason. The Defendants’ lawyers completely ignored the steps that should be taken prior to seeking the disqualification of a lawyer based on the need to examine him or her as a witness in the case in which he or she occupies.

[67]        On the contrary, while Oberman was negotiating with Sorek, his colleagues were “discreetly” preparing the Motion to disqualify. Only a few hours after the negotiations failed, Sorek was notified with the same without any prior warning nor any attempts to verify if his testimony would be essential given the allegations of the Motion to homologate and if such evidence could not be obtained from other sources.

[68]        The questionable behavior of the lawyers for the Defendants in this matter gives all the indications of an intent to take the Plaintiffs’ lawyers by surprise and gain more time or delay in these four-year old proceedings and by the same token cause prejudice to the Plaintiffs who would be suddenly forced to find an alternate counsel at such a late stage of the proceedings.

[69]        As previously indicated, until the unexpected notification of the Motion to disqualify, there had been no attempts whatsoever made by the Defendants’ lawyers to find some grounds of accommodation in order to avoid the testimony of Sorek. 

[70]        Furthermore, why would Oberman acting for the Defendants accept to negotiate over a two-week period with Sorek, a lawyer who knowingly should be disqualified from the present proceedings in his opinion as he was allegedly in a conflict of interest situation?

[71]        Again, the attitude and the behavior of the lawyers for Defendants are even more questionable when the Court takes into consideration the fact that the presentation of the Motion to disqualify could have apparently been prevented with the benefit of Sorek’s prior testimony under his sworn declaration.

[72]        How about a discussion between lawyers before filing such a motion? In the present instance, such a courteous gesture (required by the jurisprudence) was impossible as it was clearly not part of the strategy developed by the Defendants and their new lawyers.     

[73]        The Court finds another compelling element that is quite revealing, in its view, with respect to the failure, if not the refusal of the lawyers for the Defendants, to even attempt to find an alternate solution to Sorek’s testimony before filing their Motion to disqualify.

[74]        Upon reading the Motion to homologate, it appeared quite easily to the Court from the various allegations made therein that the basis of the Plaintiffs’ claim regarding the existence of the transaction is the written exchange of emails between Sorek and Lagana. The various facts previously set out above by the Court in the present judgment, all of which are supported by many emails exchanged between the lawyers, are quite eloquent about the true nature of what is really at stake in the Motion to homologate.

[75]        At the hearing, still representing his clients, Sorek, confirmed that he was to establish the existence of the said transaction with the written documentation exchanged with Lagana already filed in support of his Motion to homologate. That was all that he needed and what he intended to present in terms of evidence on his clients’ motion. Sorek added that his sworn declaration was only needed to introduce his written exchange of emails with Lagana and that he had nothing to add to what Lagana wrote in connection therewith.

[76]        One of the lawyers for the Defendants responded to the foregoing that he had no idea before the present hearing that Sorek did not intend to testify in addition to the documentary evidence referred to in the Motion to homologate.

[77]        Isn’t it precisely one of the types of situations contemplated by the requirement for the party seeking the disqualification of a lawyer to find, if possible, an alternate manner to submit the evidence without necessarily having to resort to the testimony of that lawyer? Again, a courteous and frank discussion between Sorek and Oberman would have avoided the present proceedings and the unnecessary delays and costs resulting therefrom for the Plaintiffs (and the Defendants).

[78]        The lawyer in question tried to justify their decision to file the Motion to disqualify on the allegation appearing at paragraph 22 of the Motion to homologate that reads as follows:

« 22. Jamais dans le cadre des discussions entamées par les défendeurs et qui ont eu lieu par la suite afin de régler le présent dossier pour une somme totale de 500 000$ il ne fut question que la somme susmentionnée ne soit pas payée intégralement en un seul versement, le tout tel qu’il appert des correspondances des défendeurs ci-haut mentionnées comme pièce R-5 et pièce R-6; »

[79]        The lawyer claimed that upon his reading of this particular paragraph, he concluded that Sorek had to be examined regarding the alleged “discussions”. Yet, the allegations in the said paragraph are clearly linked to the Exhibits R-5 and R-6 that are various emails exchanged between Sorek and Lagana.

[80]        In the said paragraph, it is alleged that, to all intents and purposes, the two lawyers never discussed the issue of installments for the settlement amount. That position of Sorek is not only supported by the exhibits filed in support thereof, but in Exhibit R-11, Lagana wrote that “the modalities of the payment of the amount, like a number of other modalities, were indeed not discussed yet”.

[81]        How could the lawyers for the Defendants ignore such relevant and obvious facts before filing their Motion to disqualify? Clearly, there is no issue on that subject between Sorek and Lagana. They both affirm the same thing (i.e. the payment of the settlement amount in installments was never discussed between them).

[82]        If the two lawyers (Sorek and Lagana) never discussed the modalities of the payment of the $500,000 settlement, what could they possibly testify on a fact that does not even appear to be in dispute by either side?

[83]        How could the lawyers for the Defendants ever reasonably expect that Sorek would be contradicted if examined on that subject?

[84]        What could possibly be essential and necessary in the examination of Sorek on the nature of his oral discussions with Lagana if all the relevant facts already appear from their written exchanges? 

[85]        In summary, at this juncture, the lawyers for the Defendants failed completely to satisfy the Court that the examination of Sorek was essential and necessary.

[86]        Consequently, there are no justifications or valid grounds for the Court to disqualify Sorek from the case.

[87]        As so clearly appears from the Defendants’ motion[11], there are absolutely no reasons to even consider the disqualification of the other members of Dentons, the Defendants’ lawyers “hoping” to find other factual witnesses in the law firm to warrant the disqualification of the entire firm with the examination of Sorek.

[88]        How could they possibly present their Motion to disqualify against Dentons before even knowing if they could prove the grounds to justify the disqualification of the other members of Dentons? [Emphasis added]

[89]        All of the foregoing leads the Court to now address the Plaintiffs’ Motion to declare abusive.

-               The Motion to declare abusive the Defendants’ Motion to disqualify

[90]        In light of the Court’s findings above, there is no doubt in its opinion that the Motion to disqualify constitutes a pleading or a proceeding that must be declared abusive within the purview of Article 51 C.p.c.

[91]          Article 51 C.p.c. reads as follows:

“51. The courts may, at any time, on an application and even on their own initiative, declare that a judicial application or a pleading is abusive.

Regardless of intent, the abuse of procedure may consist in a judicial application or pleading that is clearly unfounded, frivolous or intended to delay or in conduct that is vexatious or quarrelsome. It may also consist in a use of procedure that is excessive or unreasonable or that causes prejudice to another person, or attempts to defeat the ends of justice, particularly if it operates to restrict another person’s freedom of expression in public debate.”

[92]        Given the nature of the issues at stake in the Motion to homologate, the Motion to disqualify was not warranted at all. Again, a frank and courteous discussion between the opposing lawyers would have easily established the nature of the evidence to be adduced on each side with respect to the Motion to homologate and the absence of necessity to examine Sorek at this juncture of the proceedings.

[93]        The Motion to homologate could have already been pleaded and disposed of within less time that it took for the present motions.

[94]        Based on the evidence available to the Court, it can conclude that in all likelihood, the Motion to disqualify prepared while the lawyers were negotiating and in the absence of any prior warnings and discussions, served one purpose for the Defendants, retaliate against the Plaintiffs who refused their proposed terms and conditions of settlement and delay as much as possible the presentation of the Motion to homologate and by the same token the entire legal proceedings.

[95]        But that was not all; the Court file also reveals that from the outset, the Plaintiffs have claimed to be at a significant financial disadvantage vis-à-vis the Defendants’ economic power.

[96]        The Court emphatically agrees with Sorek that the other goal likely sought by the Defendants with their Motion to disqualify was to force the Plaintiffs to abandon the present proceedings for lack of financial resources in the event that Sorek and Dentons were disqualified. Under such a scenario, the Plaintiffs having lost their lawyers would have found themselves in the obligation to find new counsel. The current state of the proceedings that so far have lasted four years without an end in sight and with already four presences before the Court of appeal, without mentioning the complexity of the commercial issues raised in the context of the present oppression remedy case, would have rendered prohibitive the cost of bringing a new lawyer up to speed. In all probabilities, it would have indeed forced the Plaintiffs to abandon their case without ever having submitted the same to a judge on its merits.

[97]        Had they succeeded in their ploy, the Defendants would have been able to defeat the ends of justice.     

[98]        Such circumstances lead the Court to find the Defendants’ conduct in connection with their Motion to disqualify to be abusive, dilatory and vexatious within the meaning of Article 51 C.p.c.

[99]        The Court also finds that the use by the Defendants of the Motion to disqualify in the present instance constituted a use of procedure that was not only excessive but unreasonable as well with the result of causing prejudice to the Plaintiffs.    

[100]     It must be pointed out that towards the end of the hearing, one of the lawyers for the Defendants suggested to the Court without ever demanding to amend the Motion to disqualify, that Sorek (and consequently Dentons) should now only be disqualified for the presentation of the Motion to homologate, implying that if the said motion is dismissed, Sorek and Dentons could resume their role as attorneys for the Plaintiffs.  

[101]     The good faith of the Defendants in the present circumstances is highly doubtful and their abusive behaviour must be sanctioned.

[102]     The Defendants not only abuse the Plaintiffs with their clearly ill-founded procedure but they abused as well the limited resources of the judicial system. Again, the Court is of the view that the Motion to homologate could have been heard and dealt with in less time that it took for the present motions.

[103]     The intent to delay the proceedings at all costs is obvious. But, it should not be done at the expense of the Plaintiffs.

[104]     The lawyers for the Defendants failed to convince the Court that the Motion to disqualify should not be declared abusive pursuant to Article 51 C.p.c.

[105]     In their Motion to declare abusive, the Plaintiffs are claiming that the extra-judicial fees that they incurred in the context of the Motion to disqualify be paid by the Defendants. In that respect, they are claiming a condemnation of $12,362.97 (RDA-11).

[106]     Furthermore, the Plaintiffs are claiming punitive damages of $10,000.  

[107]     Both amounts are claimed pursuant to the provisions of Article 54 C.p.c. that read as follows:

“54. On ruling on whether a judicial application or pleading, including one presented under this division, is abusive, the court may order a provision for costs to be reimbursed, order a party to pay, in addition to legal costs, damages for any injury suffered by another party, including to cover the professional fees and disbursements incurred by that other party, or award punitive damages if warranted by the circumstances.

If the amount of the damages is not admitted or cannot be easily calculated at the time the application or pleading is declared abusive, the court may summarily determine the amount within the time and subject to the conditions it specifies or, in the case of the Court of Appeal, refer the matter back to the court of first instance for a decision.”

[Emphasis added]

[108]     In light of the evidence, the Court evaluates and arbitrates to $10,000 the amount of the extra-judicial fees that should be paid by the Defendants solidarily to the Plaintiffs who once again, should not have to bear the financial consequences of an abusive proceeding such as the present Motion to disqualify.

[109]     As to the punitive damages sought by the Plaintiffs, although the Court finds the conduct and behaviour of the Defendants in this particular matter highly reprehensible and filled with bad faith, the Court nevertheless finds that the condemnation of $10,000 in payment of the extra-judicial fees incurred unnecessarily as a result therefrom is sufficient under the present circumstances to act a deterrent against similar behaviour in the future.

[110]     However, should the Defendants persist in their abusive conduct and proceedings, the Court shall reserve the right of the Plaintiffs to claim such punitive damages at a later date.

[111]     Finally, the Court realizes that with the dismissal of the Motion to disqualify, the Defendants may still persist to exercise their “absolute right” to examine Sorek on his sworn declaration filed in support of the Motion to homologate.

[112]     Under the particular circumstances of the present case, the interest of justice dictates that the Court acts herein in a prudent manner and defers to the judge who will hear the case on its merits the decision as to whether Sorek should be called upon to testify in the context of the Motion to homologate and of his sworn declaration[12].  Before the hearing of the Motion to homologate on its merits, there will be no out-of-court examination of Sorek on his sworn declaration as the sole true purpose of this examination was the disqualification of Sorek and of Dentons.

FOR THESE REASONS, THE COURT:

[113]     DISMISSES the Amended Demand of the Defendants to disqualify the attorneys for the Plaintiffs;

[114]     GRANTS in part the Demande pour faire déclarer abusive la demande pour faire déclarer inhabiles les procureurs des demandeurs;

[115]     DECLARES that the present Amended Demand of the Defendants to disqualify the attorneys for the Plaintiffs constitutes an abusive proceeding within the meaning of article 51 C.p.c. in that it was designed with the intent to unduly delay the due prosecution of the Plaintiffs’ claim against the Defendants whose conduct herein has been vexatious with the objective to cause financial prejudice to the Plaintiffs without mentioning to impede the exercise of their rights and recourses;

[116]     CONDEMNS the Defendants Trackcom Systems International Inc., Kavveri Technologies Inc., William Ronald McBride, Chenna Uma Reddy and Arun Nagesh Avandhani to pay solidarily to the Plaintiffs the sum of $10,000.00 in damages representing the extra-judicial fees incurred unnecessarily by the Plaintiffs as a result of the present abusive proceedings, the whole with legal interest at the rate of 5% per annum and the additional indemnity of Article 1619 of the Civil Code of Quebec from the date of the present judgment; 

[117]     RESERVES the rights of the Plaintiffs to claim from the Defendants in the future punitive damages should they persist in their abusive conduct and proceedings in the present instance;

[118]     DEFERS to the judge who will hear the Plaintiffs’ Motion to homologate on its merits, the decision as to whether M^tre Ari Y. Sorek should be called upon to testify as a witness and the terms and conditions of his testimony, as the case may be;

[119]     THE WHOLE WITH COSTS AGAINST DEFENDANTS SOLIDARILY IN BOTH MOTIONS.

		__________________________________ MICHEL A. PINSONNAULT, J.S.C.
Mtre Ari Y. Sorek
Mtre Antony Rudman
Dentons Canada LLP
Attorneys for Plaintiffs Trackcom Systems inc. et al. and the Mis en cause
Mtre Antonin Roy
Mtre Cécile Desforges
Spiegel Sohmer inc.
Attorneys for Defendants Trackcom Systems International Inc. et al.
Date of hearing:	August 18, 2016