IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20151130

Docket: S152382

Registry:
Vancouver

Between:

Kimberley
Joy McMyn

Plaintiff

And

The
Manufacturers Life Insurance Company

Defendant

Before:
The Honourable Mr. Justice Myers

Reasons for Judgment

I.                
Introduction

[1]      The defendant, which I will refer to as Manulife,
applies for an order disqualifying the plaintiff’s counsel, Jan Fishman.  The
plaintiff’s claim against Manulife is for benefits under a disability insurance
policy.  She also claims damages for breach of the insurer’s obligation of good
faith.

[2]      Mr. Fishman worked as an in-house lawyer for
Manulife from 2002 until May 31, 2012.  While at Manulife, Mr. Fishman
had nothing to do with the plaintiff’s case.  In fact, her application for LTD
benefits was not submitted until June 25, 2013, close to 13 months after Mr. Fishman
left the company.  The basis of Manulife’s application is not based on the
possession of confidential information related to the plaintiff’s case; rather,
it is based on knowledge of Manulife’s business practices, litigation strategies,
insurance policies and certain claims personnel.

II.              
Facts

[3] Manulife
is a large, transnational insurance corporation, publically traded on various
stock exchanges and subject to regulation in numerous jurisdictions around the
globe.  In 2014 it had net income of $3.5 billion.

[4] Mr. Fishman
was employed by Manulife as a litigation lawyer in Vancouver.  He defended
actions brought against Manulife, including actions for long-term disability
benefits.  His title was "Counsel", the lowest rank a lawyer may hold
at Manulife.  Mr. Fishman reported directly to another lawyer, Blair
Anderson, who worked at Manulife’s Canadian head office in Waterloo, Ontario.

[5]      Mr. Anderson was a member of Manulife’s
Litigation Management Committee (the "LMC").  The LMC was responsible
for the oversight of all of Manulife’s Canadian litigation and the flow of
information to the in-house litigation lawyers.  The LMC formulated Manulife’s national
litigation policies, strategies and procedures.  Mr. Fishman was not a
member of the committee nor did he participate in its meetings.

[6]      According
to Mr. Fishman, Manulife’s
litigation lawyers are deliberately isolated from Manulife’s business units,
including the insurance claims handling units, to avoid the risk that the
litigation lawyers become tainted as witnesses and thereby unable to act as
counsel in court. He further deposed that long-term disability claims
are handled by case managers, whom he did not work with or advise.  If an LTD
claim became the subject of litigation, the claim was removed from the case
manager and assigned to a claims consultant.  It is the claims consultant that
works with litigation counsel.

[7]      Mr. Anderson
agreed that in-house counsel were not to inject themselves into the management
or adjudication of claims and not to put themselves in the position of being
potential witnesses.  However, he deposed that:

If
a matter was highly contentious, the claimant was represented by counsel
who were making demands or threats and/or the Case Manager, Disability
Specialist or Disability Claims Manager needed legal advice on how to respond
or manage a claim or appeal in anticipation of litigation, then Mr. Fishman
was authorized to, and did, provide legal advice, though I always emphasized it
was important that he took steps to ensure that the advice was privileged, and
that another litigation lawyer assumed conduct of that matter if litigation
ensued.

In addition, he said that Mr. Fishman made at least
two presentations – which Mr. Fishman did not recall – on handling good-faith
claims.

[8]      Mr. Fishman
primarily dealt with a claims consultant in the Vancouver office –Guy Lizé – who swore two affidavits
attesting to the close relationship he and Mr. Fishman had with respect to
litigation files.  Mr. Lizé was assigned to manage the present case.  To
summarise the main points of his evidence, which were stressed by Manulife’s
counsel:

·      
At
any given time between 2005 to 2006 and 2008 to 2012 Mr. Fishman and Mr. Lizé
worked on 30-35 litigation files.  The files were discussed in depth as well as
general litigation strategies.

·      
Mr. Fishman
knows many of Manulife’s case managers and appeal specialists.  He and Mr. Lizé
would critique their performance, although this does not appear to be in any
formal way.  Mr. Fishman gained insight into the personalities and claims
handling practices of the claims managers, including the case manager in this
case, Ms. Doris Hung, and the appeals specialist who handled the second
appeal, Ms. Brown.

·      
Mr. Lizé,
as a result of his prior work in Quality Assurance for Manulife, had audited
many of the personnel in the Vancouver office and learned which were stronger
and which were not as strong.  Mr. Lizé discussed with Mr. Fishman
which personnel would make better witnesses and which would be uncomfortable
with cross-examination, and discussed with Mr. Fishman a number of times
his assessment of Ms. Hung and Ms. Brown specifically.

·      
Mr. Fishman
is familiar with Manulife’s preferred strategy on nominating a representative
for examinations for discovery, and Mr. Fishman would always nominate Mr. Lizé. 
If plaintiff’s counsel requested a different Manulife employee, Mr. Fishman
and Mr. Lizé would discuss the situation and developed strategies for
handling these requests.  Mr. Fishman attended three or four discoveries
with Mr. Lizé.

·      
Mr. Fishman is aware of Manulife’s practices and strategies
for handling bad faith claims, including the preference for the bifurcation of
the bad faith claim from the breach of contract claim.  Mr. Fishman
handled approximately 10 bifurcation applications.

[9]      Mr. Fishman denied or qualified most of
these points.  He said he never provided advice to senior Manulife personnel
and only dealt with them in the context of a trial strategy conference and that
he only worked on two bifurcation applications.  With respect to working
closely with Mr. Lizé, he says he simply provided legal advice and his
discovery preparations were perfunctory.  He is not aware of any specific or secret
Manulife claims handling policy.  He is not aware of and has no special insight
into the practices of the claims handling people, or "best practices"
for handling claims.

[10]    When Mr. Fishman
resigned, Mr. Anderson initially took the position that Mr. Fishman
could not act against Manulife no matter what the case.  That has changed to
the position set out in Manulife’s counsel’s letter to Mr. Fishman:

You should understand that
Manulife is not objecting to you acting on any claim whatsoever against it. If
a matter is not related to work that you undertook while at Manulife, and does
not involve people you worked with at Manulife, Manulife does not intend to
take any objection.

[11]    Mr. Fishman is handling another case
against Manulife that is very similar to this action, including a claim for bad
faith, the Galley action.  Manulife filed a Response, and later advised Mr. Fishman
that it was done without prejudice to its position that he should not be counsel. 
Sometime after that, Manulife scheduled a mediation of the claim and advised Mr. Fishman
that the client representative attending the mediation on its behalf would be Mr. Lizé. 
At the hearing of the current motion, Manulife’s counsel advised that it took
no objection to Mr. Fishman acting in the Galley action.

[12]    Both sides relied on Manulife’s non-objection to
Mr. Fishman acting in the Galley action.  Mr. Fishman says it
demonstrates an inconsistency and that if there is nothing wrong with him
handling the Galley claim there should be nothing wrong with him
continuing to act in the current action.  Manulife says that it shows they are
not being tactical in the current application and that their stance on the Galley
action shows they are trying to be as non-restrictive as possible.  In his
affidavit, Mr. Lizé said that Manulife took a different view of the Galley
action because that claim had been handled by the Toronto office and to his
knowledge Mr. Fishman had not worked with the people who handled the
claim.

[13]    Mr. Fishman also points to the timing of
this application in relation to steps already taken.  As I said above, Mr. Fishman
commenced this action in March, 2015.  On April 30, 2015, Manulife’s counsel, Mr. Martin,
called Mr. Fishman to advise that he was instructed to have him
disqualified.  Mr. Fishman engaged counsel, Mr. Hira, Q.C., who
communicated with Mr. Martin and invited him to bring Manulife’s
application as soon as possible.  No application was filed until mid-August.  In
the meantime, the pleadings have closed, including the provision of particulars. 
The lists of documents have been exchanged and discovery and trial dates have
been canvassed.

III.            
Legal Principles and analysis

[14]    This case does not fall into either of the two
categories of lawyer conflicts commonly dealt with by the courts.  It is not a
case of a lawyer concurrently representing two clients who are adverse in
interest, as dealt with by the Supreme Court of Canada in Canadian National
Railway v. McKercher, 2013 SCC 39.  Nor is it one of a lawyer who has
worked on a case moving to a firm acting against the former client on the same
case, as dealt with by the Supreme Court in MacDonald Estate v. Martin, [1990]
3 S.C.R. 1235.  Rather, a significant aspect of this application is that Mr. Fishman
did not work on the file when at Manulife; in fact, the LTD claim was not made
until well after he had left.  There is therefore no possibility of him having
information on the specific claim or case.  Moreover, this action was not
commenced until almost two years after Mr. Fishman left Manulife.  As I
set out below, account must also be taken of the fact that Mr. Fishman
worked as in-house counsel.

[15]    Manulife acknowledges that this case does not fall
within the "bright line" of a conflict, which Binnie J. explained in R.
v. Neil, 2002 SCC 70 at para. 29:

The bright line is provided by
the general rule that a lawyer may not represent one client whose interests are
directly adverse to the immediate interests of another current client – even if
the two mandates are unrelated – unless both clients consent after receiving
full disclosure (and preferably independent legal advice), and the lawyer
reasonably believes that he or she is able to represent each client without
adversely affecting the other.

In Canadian
National Railway at para. 33, the Court emphasized that the bright
line rule only applied where the immediate interests of the client are directly
adverse to the matters being handled by the lawyer.

[16]    Manulife’s application hinges on Mr. Fishman
having insight into the personalities and practices of the company.  Whether
confidential or otherwise, some or all of them would not be known by someone
who had not worked at Manulife.  The case therefore depends on a nuanced
analysis of the potential use of confidential information.

[17]    Counsel located three cases dealing with former
in-house lawyers.

[18]    The first is Atco Gas and Pipelines Ltd.
v. Sheard, 2003 ABCA 61, which Manulife says is the closest case to the
facts of this case.  That case involved an in-house counsel – Mr. Sheard –
who had been with the company for 21 years and had appeared as counsel for Atco
on general rate applications before the regulator, between 1984 and 1994.  He
left the company in 2000, and in 2002 appeared for the City of Edmonton on ATCO’s
2003/4 general rate application.

[19]    The Court in Atco described the proper analytic
approach:

[16]      To answer whether
confidential information relevant to the current issue had passed, and to avoid
the need to reveal the confidential information, the chambers judge should have
asked whether ATCO had shown the two retainers were sufficiently related. This
involved examining the breadth of the retainers to see if it was reasonably
possible to conclude, on the evidence presented by ATCO, that Sheard had
acquired confidential information from the first retainer that could have been
relevant to the second. If the answer to this question was yes, then the
presumption would arise that relevant confidential information had passed to
Sheard.  The onus would then shift to him to show that any confidential
information he possessed, as a result of his former employment as general
counsel for ATCO, was not relevant to the 2003/2004 General Rate Application.

[20]    In finding that the solicitor should be
disqualified the Court said, at paras. 19 and 25:

[19]      … The evidence disclosed that Sheard, in his
capacity as general counsel, had acted for ATCO during previous rate
applications. It was his purpose in his present retainer to act for the City of
Edmonton, a party adverse in interest to ATCO, during the current round of
General Rate Application hearings. In our view, this, by itself, might have been
enough to satisfy the test of sufficient relationship.

[25]      In this case, we have a
solicitor who, because of his former employment, is familiar with what ATCO
must do to succeed in a General Rate Application before the A.E.U.B. This same
solicitor is now acting for a party, adverse in interest to ATCO, in an
identical proceeding. In our opinion, a reasonably informed member of the
public would be concerned about this arrangement

[21]    The situation of former in-house counsel was
considered by the Manitoba Court of Appeal in Canadian Pacific Railway v.
Aikins, MacAulay & Thorvaldson (1998), 157 D.L.R. (4th) 473.  In
that case, Mr. Smith had been employed by CPR from 1983 to 1994 as
regional counsel in Winnipeg, responsible for the Prairie region.  When he left
CPR he joined the respondent law firm’s transportation group.  In 1997, the
Canadian Wheat Board retained a senior member of Aikins to commence proceedings
in the Canada Transport Agency against CPR and CNR alleging that they had not
fulfilled their statutory service obligations for grain transportation in the
1996-1997 crop year.

[22]    At the outset of its judgment, the Court noted
that Mr. Smith was not responsible for providing legal services to CPR’s
grain handling division and that the lawyers who did so did not report directly
to him.  On the other hand, he did participate in conference calls and annual
conferences, together with other senior legal officers, in which there were
exchanges of information regarding legal, strategic and operating issues
concerning CPR.  The chambers judge held that Mr. Smith was in a "blatant"
conflict of interest.

[23]    The Court of Appeal said that the chambers judge
applied the correct test from Martin:  did the lawyer receive
confidential information and if so is there a risk that it would be used
against the former client (para. 15).  However, it did not agree with his
conclusion.  The Court pointed out that, when considering the perception of the
reasonable person as to whether there was a conflict, account had to be taken
of the fact that Mr. Smith was in-house counsel (para. 18).  It noted
the competing interests that Sopinka J. had referred to in Martin:  the integrity
of the legal profession; the ability of a client to choose counsel; and
reasonable mobility in the legal profession (para. 21).

[24]    At para. 23 the Court of Appeal said it was
troubled by the fact that CPR operated a separate section dealing exclusively
with grain transportation.  At para. 24 the Court noted that Martin
had ruled that the disclosure of the client seeking disqualification of the
lawyer could not be expected to be extensive because of the dilemma of
disclosing the confidential information it was seeking to protect.  However, the
Court then quoted from Moffat v. Wetstein (1996), 135 D.L.R. (4th) 298 (Ont.
Ct. Gen. Div.), part of which stated:

A party does not meet its onus of
establishing that the prior relationship is sufficiently related to the present
retainer, merely by making a bald assertion that the past relationship has
provided the solicitor with access to insurance policies, partnership
agreements, and litigation philosophy.

[25]    The Court then noted:

25 Because of the
nature of the relationship that exists between a large employer and its
in-house solicitor, it is reasonable to expect a high degree of pertinent and
relevant disclosure by the employer of information that is allegedly
confidential. The failure to so require will almost automatically have the
effect of placing such an ex-solicitor in the position of an indentured servant
for life, even though he is no longer employed by that employer. A detailed and
attentive look must be given to the nature of the exact duties that the
employee was discharging for the employer, not simply where he or she was
slotted in on the employer’s organizational chart.

[26]    The Court concluded that CPR had not shown that Mr. Smith
had privileged information relevant to the Canadian Transport Agency
proceedings and dismissed the application. Essential to the Court’s
conclusion was its observation, at para. 26:

…There is a distinction between
possessing information that is relevant to the matter at issue and having an
understanding of the corporate philosophy of a previous employer. This first
scenario can bring about a disqualification because of conflict; the second
does not.

[27]    Manulife says that this decision should not be
followed because the Court based its decision on a principle later held to be
incorrect in Canadian National Railway; namely, that a lawyer may act
for and against a client at the same time as long as the matters are unrelated
and the lawyer had no confidential information.  It is true that the Manitoba
Court of Appeal made that observation, but that was not a central point of its
reasoning.  More tellingly, the Supreme Court in Canadian National
Railway quoted the part of
the decision on which Mr. Fishman relies (as well as the Moffat
decision) with approval:

54        However, I cannot agree
that this is a situation where there also exists a risk of misuse of
confidential information. CN’s contention that McKercher obtained confidential
information that might assist it on the Wallace matter – namely, a general
understanding of CN’s litigation philosophy – does not withstand scrutiny. "[M]erely
… making a bald assertion that the past relationship has provided the
solicitor with access to … litigation philosophy" does not suffice: Moffat
v. Wetstein (1996), 29 O.R. (3d) 371 (Gen. Div.), at p. 401. "There
is a distinction between possessing information that is relevant to the matter
at issue and having an understanding of the corporate philosophy" of a
previous client: Canadian Pacific Railway v. Aikins, MacAulay & Thorvaldson
(1998), 23 C.P.C. (4th) 55 (Man. C.A.), at para. 26. The information must
be capable of being used against the client in some tangible manner. In the
present case, the real estate, insolvency, and personal injury files on which
McKercher worked were entirely unrelated to the Wallace action, and CN has
failed to show how they or other matters on which McKercher acted could have
yielded relevant confidential information that could be used against it.

[28]    The third case found by counsel dealing with
in-house lawyers was R. v. Sandhu, 2011 BCSC 1137.  This involved
a lawyer who had formerly worked at the Organized Crime Agency.  She
provided advice on an operation called Project Halo, which involved the investigation
of the Hells Angels.  That investigation did not lead to charges being laid.  She
then acted as defence counsel to an accused who was indicted pursuant to
another operation.  That accused had also been the subject of Project Halo and
the subject of a wiretap.  The chambers judge found that the lawyer had
discharged her burden to show that no confidential information could be misused
by her (para. 115).  An appeal of the decision was quashed but not on the
merits:  2012 BCCA 73.

[29]    There have been several cases dealing with a lawyer’s
knowledge of a former client’s personality or litigation philosophy.  One of
these was the Moffat case, referred to above, and from which the Supreme
Court quoted with approval.

[30]    In Skjerpen v. Johnson, 2007 BCSC 1290,
the Court disqualified a lawyer from acting against a former client on the
basis of the lawyer’s knowledge of the former client’s personality and
litigation strategy.  However, this case was decided prior to Canadian
National Railway and did not refer to either of the cases contained in the
quote above (para. 27).  Nor did it involve former in-house counsel.  More
recently, the trial courts have taken a more restrictive view to arguments
based on this ground: Merrick v. Rubinoff, 2013 BCSC 2352 and
Richard Zokol Enterprises Ltd. v. Sagebrush Golf & Sporting Club Ltd.,
2014 BCSC 1666.

[31]    With these cases as a guide, I will now address
the issues raised by Manulife.

[32]    With respect to the claim for LTD benefits, it
is up to the plaintiff to show that she fell within the terms of the policy.  The
terms of the policy are certainly not secret.  It cannot be argued or assumed
that Manulife has some secret interpretation of the policy that Mr. Fishman
has knowledge of.  It is hard to see that knowledge of the claims people would
have any effect on Mr. Fishman’s train of inquiry on that issue, including
the handling of examinations for discovery.  As in most LTD claims the real
issue will no doubt be – and no one argued otherwise – Ms. McMyn’s medical
condition and how that fits into the wording of the policy.

[33]    With respect to the bad faith claim, the
plaintiff must show a failure of Manulife to act with reasonable promptness or
a failure to deal with the insured fairly: 702535 Ontario Inc. v.
Non-Marine Underwriters, Lloyd’s London, England, [2000] O.J. No. 866
(Ont. C.A.).  That will obviously depend on the way this claim was
handled based on the evidence in this case.  Knowledge of how the claims
people may have handled past claims will be of little or no assistance.

[34]    Manulife argued that Mr. Fishman has insight
into how the claims people or Mr. Lizé perform in examinations for
discovery.  That might be true.  But it must be put into perspective.  First,
in terms of witnesses selected for examination for discovery or at trial, the
relevant witnesses are those that have familiarity with the facts of the claim. 
That is something that any lawyer would be able to ascertain through document
discovery or interrogatories.  Mr. Fishman has no inside knowledge of that
because he was not at Manulife when the plaintiff filed her claim.

[35]    Knowledge of how Manulife personnel perform in
examinations for discovery might provide a minor advantage.  But any lawyer
who had previously done an examination for discovery or cross-examination in
trial of that witness would also have that insight.  It is to be borne in mind
that Manulife as a major LTD insurer in Canada is an institutional litigator.  This
is not a one-off claim being made against it.  Any lawyer specialising in LTD
claims would be expected to act against Manulife multiple times and most likely
come up against the same Manulife personnel.

[36]    Insofar as Mr. Fishman being aware of
Manulife’s claims handling procedures, once again he has been gone from the
company for over two years.  The issue will be the way this claim is handled.  If
there are Manulife claims handling manuals their existence will come out in the
examinations of discovery conducted by any counsel.

[37]    In Sandhu the Court noted, at para. 32,
that the approach to this type of application is a "cautious one" and
that the court should only interfere in "clear cases".  While the
Court of Appeal disqualified the lawyer, this case comes nowhere near to the
facts in that case, where the lawyer had knowledge of confidential information
pertaining directly to her new client.

[38]    Regarding Mr. Fishman having handled
bifurcation applications, Manulife said Mr. Fishman is aware of Manulife’s
preference for bifurcation of bad faith claims.  So would any lawyer who was
previously on the receiving end of that type of application from Manulife.  In
this case, the simple fact is that Manulife will make the application or it will
not.  I fail to see what confidential strategy could have been involved in
bifurcation claims that would give Mr. Fishman an advantage.

[39]    Finally, I do not place any significant weight
on Mr. Lizé having been appointed as the case manager on this file.  He
was not appointed until after Manulife knew that Mr. Fishman was acting on
the case.  Manulife also appointed Mr. Lizé as the case manager on the Galley
action.  Manulife says it would be inconvenient to appoint another case
manager, because they would have to come from out of town for discoveries,
trial or meetings.  However, for a company the size of Manulife that must be a
small consideration.

[40]    In Atco, the Court concluded that the
case the lawyer was acting on against Atco was sufficiently connected to the
work he had done at Atco to raise the rebuttable presumption that he had
confidential information pertaining to the new retainer.  The connections in
that case were more direct than the ones here.  In Atco the lawyer knew
all of the data and other corporate information relevant to Atco’s rate applications. 
Here, there is only a general knowledge of claims practices and company
personnel.

[41]    I conclude that the connections between this
case and the work Mr. Fishman did at Manulife are not sufficient to raise
the presumption that he had obtained confidential information that could be
used in this case.

[42]    The application is therefore dismissed.  If
there is any debate as to costs, that may be addressed by way of written
submissions.

"E.M. MYERS, J."