Law Times

lAw Times • April 2, 2012 COMMENT PAGE 7 B udgets are a key way that governments set a political and economic course, but it's hard to damn the torpedoes when you're dragging a $238-billion anchor. Add in a $16-billion annual defi cit and it's a navigation nightmare for Premier Dalton McGuinty's government. At the same time, its attempts to tack into the wind now are too little, too late. Th is government plans a balanced budget in 2017-18 and has a fi ve-year plan to get there. But the problem is it'll take six years and its fi rst real impact will be two years down the road. Th e 2011-12 budget puts the defi cit at $15.3 billion, up from $14 billion last year. It'll be $7.8 billion in 2015-16 and fi nally $4.2 billion by 2016-17. Much of this is pure fantasy as the Liberals are still banking on an economic recovery. Th e real shocker is that the budget projects another $65 billion heaped on the $238-billion debt we're already carrying. It costs $10 billion a year to service that debt now and when interest rates rise starting next year, we'll all be in trouble. Here's what's coming: labour unrest, more fee hikes, outsourcing, and the elimination of agencies. Promised corporate and business tax cuts are off the table. Rates are likely to rise again as has been the case in British Columbia. Indeed, $20 billion in contracts with the largest public-sector unions expire this year. Th ey include teachers and doctors, the Ontario Public Service Employees Union, and the Association of Management, Administrative, and Professional Crown Employees of Ontario. Of course, it's clear that the Queen's Park pipe. But as with many other areas, they're vague. A shiſt to online processing means greater accessibility to court forms, fi ling, and fees. While many lawyers will applaud that, when it'll happen is anyone's guess. Meanwhile, with the Youth Ian Harvey government can do things more effi ciently. In fact, 100 civilians will apparently replace 250 fully qualifi ed Ontario Provincial Police offi cers now doing data entry. Still, it's a mystery why the cops are such poor typists. Th e smaller cuts also add up. Th e $60 million that TVO and TFO get will take a hit, although the Polka Dot Door will apparently escape the cuts. I wonder, however, how long the Ontario Film Review Board, an anachronism in a digital age in which pornography streams on a BlackBerry, will continue in its current form. From a legal sector perspective, there are some other adjustments coming down the Criminal Justice Act in place for nearly a decade, diversion programs have cut the numbers of kids in youth detention facilities. In fact, there are only 370 of them in secure custody today compared to 1,017 in 2003. Th e federal government's crime legislation notwithstanding, the province will therefore close or downsize three youth centres and reduce payments to agencies providing custody services. Ontario will also make it harder for those with outstanding Provincial Off ences Act fi nes to escape payment by linking licence plate renewals to amounts owing and working with the Canada Revenue Agency to seize income tax refunds against them. I, for one, can hardly wait for the chaos that will undoubtedly result. Finally, administrative changes may or may not have a fi scal impact on spending but they will aff ect some practitioners. For one, an upgrade of the Ontario Securities Commission's powers will allow it to work more closely with police and other agencies and revamp personal property security legislation to provide for priority leverage against assets. And speaking of handing out bigger sticks, the province will also arm the superintendent of fi nancial services to ensure auto insurance companies don't continue to have free rein over hapless drivers by increasing their rates and then denying injury claims on a whim. To that end, they'll establish a chart for the most appropriate treatment of auto accident injuries. Th e one man who will be more disappointed than most with this budget will be Don Drummond. Th e reality, as he tried to point out, is that the ship has sailed too close to the rock and it's time to chuck ballast over the side. McGuinty's crew, however, is too busy shuffl ing the deck chairs. LT Ian Harvey has been a journalist for 34 years writing about a diverse range of issues including legal and political aff airs. His e-mail address is ianharvey@rogers.com. BY SUNIL MATHAI For Law Times enjoyed by lawyers, amongst others, from any liability for comments made during a judicial proceeding. So sacro- sanct was this principle to the administration of justice that courts have held that claims by third parties against lawyers for comments made during a judicial proceeding "must be stopped at once." Despite what has historically been seen as a privi- T lege without exception, the Divisional Court, ruling in Amato v. Welsh, permitted a claim to proceed as a possible exception to absolute privilege. In a split decision, the majority held that in the unique facts of the case, it was possible that a court could find that the defining principle of the duty of loyalty trumps the "indispensable attribute" of absolute immunity. In Amato, the plaintiffs commenced an action against their former solicitors and law firm for a breach of fiduciary duty, negligence, and breach of the duty of loyalty. The plaintiffs were the victims of an alleged Ponzi scheme. They loaned money to the perpetrators of the scheme on the promise of returns of approximately 25 per cent. The alleged perpetrator of the scheme retained the defendant law firm and recommended that the plaintiffs also do so. Subsequent to the retainer, the Ontario Securities Commission initiated an investigation into the scheme and interviewed the alleged perpetrator in the presence of counsel from the defendant law firm. The plain- tiffs allege that, during the interview with the alleged perpetrator, the solicitor failed to advise the OSC of the plaintiffs' existence despite being aware that the defendant was operating a Ponzi scheme. The plaintiffs claimed that had the defendant solicitor disclosed their existence, the OSC would have discovered the Ponzi scheme earlier and reduced the losses suffered. None of the allegations have been proven in court. The defendants brought a Rule 21 motion to strike the pleading on the basis of absolute privilege. The defendants argued that the statement of claim con- tained pleadings that relied solely on what the defen- dant solicitor did and didn't say during the course of Absolute privilege not so absolute anymore u SPEAKER'S CORNER he Merriam-Webster dictionary defines the word absolute as "having no restric- tion, exception, or qualification." Fittingly, the word absolute was used to define the privilege the interview. At first instance, the court dismissed the defendants' motion. Justice Thomas Lederer then granted leave to appeal. In a split 2-1 decision, the Divisional Court upheld the motion judge's ruling. Justice Alexandra Hoy (now of the Court of Appeal), writing on behalf of the majority of the Divisional Court, held that the duty of loyalty owed by the defendant law firm to the plaintiffs could, in fact, trump absolute privilege. Noting that earlier Ontario jurisprudence had held that the doctrine of absolute privilege didn't preclude a former client from suing a solicitor for negligence during the course of a judicial proceeding, Hoy held that it wasn't "plain and obvi- ous" that absolute privilege precluded an action in the circumstances. The minority decision, penned by Justice Peter Hockin, distinguished the earlier jurisprudence on the basis that "absolute privilege cannot protect [a] law- yer from claims of negligence or breach of fiduciary duty in the representation of a client, if it is that client whom the lawyer represented before the tribunal or court. That is not the case here." As the plaintiffs were third parties to the retainer in terms of the OSC inves- tigation, they couldn't claim liability for the conduct of the solicitor during the course of it. The split decision represents the flipside of the interpretive coin of the duty of loyalty. On the facts of the case, the majority decision interprets the duty as including an obligation to protect the plaintiffs' interests despite the fact the defendant that they hadn't retained law firm for the OSC investigation. Underlying the majority's decision is an expansive view of the plaintiffs' retainer with the defendant law firm. In that scenario, the related nature of the OSC investigation to the original retainer requires the defendant law firm to continue to represent the best interests of the plaintiffs during it. The minority decision, on the other hand, inter- prets the duty of loyalty as solely to the alleged perpe- trator. The defendant law firm had a duty to zealously represent the alleged perpetrator without any divided loyalty. The minority decision interprets the plaintiffs' www.lawtimesnews.com retainer with the defendant law firm in a limited manner. In that scenario, the duty owed to the plaintiffs couldn't interfere with the obligation to the perpetrator during the OSC investigation. The defendant law firm has sought leave to appeal from the Court of Appeal. It has yet to render a decision on leave. The Divisional Court's split decision reflects the complicated nature of lawyers' loyalty to their clients when acting on behalf of multiple parties in related matters. Accepting the facts as pleaded, the deci- sion reflects the importance of continually assessing whether there are conflicts that would cause divided loyalty between clients. Oddly, it would appear that allowing the plaintiffs to commence a claim for the conduct of the lawyer during the OSC investigation actually creates a divid- ed loyalty. That fact is evident in the plaintiffs' claim that the defendant solicitor should have revealed their existence to the OSC as this would have led to an earlier discovery of the Ponzi scheme. But assist- ing the OSC in ascertaining the unlawful conduct would have been contrary to the solicitor's duty to the alleged perpetrator. Permitting this exception to absolute privilege opens the door to divided loyalties that would otherwise not exist within the context of the OSC investigation. The protection afforded by absolute privilege allows solicitors to represent their clients without divided loy- alties. Creating an exception, no matter how unique the set of facts, runs the risk of fettering lawyers' ability to zealously represent their clients' interests. The defendant law firm's request for leave to appeal, then, provides the Court of Appeal with the opportu- nity to add clarity to the conflicting interpretation of the duty of loyalty and its application to the doctrine of absolute privilege. On the facts of the Amato case as pleaded, the court found the defendants' liability could be founded in a breach of loyalty that occurred outside of the OSC investigation. Where liability can be founded outside of the judicial proceeding, I question the utility of expanding the scope of solicitors' liability by creating exceptions to a doctrine intended to protect the zeal- ous representation of a client. LT Sunil Mathai is a lawyer with Falconer Charney LLP. Budget too little, too late, too vague Amato v . W elsh

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