|
Contracts - Joint Venture. River Cree Resort Limited Partnership v. Canada
In River Cree Resort Limited Partnership v. Canada (Fed CA, 2023) the Federal Court of Appeal characterizes (and considers) 'joint venture' contracts:B. Joint Venture Argument
[45] River Cree submits that the Tax Court Judge erred in not properly determining whether the legal relationship between River Cree and Access Cash was a joint venture. The alleged error is the failure to cite the six factors identified in paragraph 65 of Graham v. Central Mortgage and Housing Corporation and Bras D'Or Construction Ltd., 1973 CanLII 1244 (NS SC), 13 N.S.R. (2d) 183, 43 D.L.R. (3d) 686 (N.S.S.C.) (Graham) as relevant factors that must be present in order to find that there is a joint venture.
[46] In Graham, the Nova Scotia Supreme Court cited several excerpts from Volume 2 of Williston on Contracts, Third Edition, including the following excerpt:[65] As the author points out at p. 553, a joint adventure is founded entirely on an agreement between the parties. At p. 554, the author refers to the following definitions:"The joint venture is an association of two or more persons based on contract who combine their money, property, knowledge, skills, experience, time or other resources in the furtherance of a particular project or undertaking, usually agreeing to share the profits and the losses and each having some degree of control over the venture. Stated in somewhat greater detail:'It can be said that a joint adventure contemplates an enterprise jointly undertaken, that it is an association of such joint undertakers to carry out a single project for profit; that the profits are to be shared, as well as the losses, though the liability of a joint adventurer for a proportionate part of the losses or expenditures of the joint enterprise may be affected by the terms of the contract. There must be a contribution by the parties to a common undertaking to constitute a joint adventure; and a community of interest as well as some control over the subject matter or property right of the contract.
Whether the parties to a particular contract have thereby created as between themselves, the relation of joint adventurers or some other relation depends upon their actual intention, and such relationship arises only when they intend to associate themselves as such. This intention is to be determined in accordance with the ordinary rules governing the interpretation and construction of contracts.'" ...
At p. 563 the author states:"Besides the requirement that a joint venture must have a contractual basis, the courts have laid down certain additional requisites deemed essential for the existence of a joint venture. Although its existence depends on the facts and circumstances of each particular case, and while no definite rules have been promulgated which will apply generally to all situations, the decisions are in substantial agreement that the following factors must be present:(a) A contribution by the parties of money, property, effort, knowledge, skill or other asset to a common undertaking;
(b) A joint property interest in the subject matter of the venture;
(c) A right of mutual control or management of the enterprise;
(d) Expectation of profit, or the presence of 'adventure', as it is sometimes called;
(e) A right to participate in the profits;
(f) Most usually, limitation of the objective to a single undertaking or ad hoc enterprise."
[emphasis added] [47] The six factors listed above are in addition to the requirement that a joint venture has a contractual basis. An essential element of a contract is the parties’ intention to enter into the agreement. Therefore, a joint venture between two persons does not exist unless both parties intend to conduct a particular activity as a joint venture. Since the intention to create a joint venture is to be determined based on the contracts between the parties, it is a question of mixed fact and law. As a result, the standard of review for a finding that the parties did not intend to create a joint venture relationship is palpable and overriding error.
....
[49] Absent the intention to create a joint venture (and hence an agreement to create a joint venture), there is no need to consider any of the other factors cited in Graham. The Tax Court Judge therefore did not err by not referring to all of the factors identified in Graham to determine if there was a joint venture between River Cree and Access Cash. River Cree has also not established that the Tax Court made any palpable and overriding error in finding that River Cree and Access Cash did not intend to operate the ATMs as a joint venture. As a result, I would dismiss River Cree’s appeal on this issue.
[50] Although it is not necessary to do so, it should be noted that there are other factual findings made by the Tax Court Judge that, unless successfully challenged, support a finding that the parties did not intend to operate the ATMs as a joint venture.
[51] The Tax Court Judge found that Access Cash wanted to place its ATMs in the resort because Access Cash earned its fees based on the volume of transactions and there was a large number of monthly transactions (50,000 to 60,000) at the resort. This evidence indicates that Access Cash was carrying on its own business in operating the ATMs as the motivation of Access Cash to enter into the agreements with River Cree was the fees that Access Cash would earn from the high volume of transactions. This is inconsistent with an intention to create a “common undertaking” between Access Cash and River Cree to operate the ATMs.
[52] As well, the Tax Court Judge found, in paragraph 99, that Access Cash “was the only person who supplied a service to the cardholder” and also found, in paragraph 100, that River Cree “played no role in the series of supplies” that resulted in a cardholder being able to withdraw money from their bank account. These factual findings, made with respect to the Initial Periods, would preclude a finding that River Cree and Access Cash jointly provided a service to the cardholder during the Initial Periods. . Capital Sports v. Trinity
In Capital Sports v. Trinity (Div Court, 2022) the Divisional Court considers the status of solicitor-client privilege during and on termination of a joint retainer, here resultant from a joint venture:Termination of the implied joint retainer
[53] The main issue on this appeal is whether the implied joint retainer terminated as a result of the events that began in May 2016. The motion judge found that the joint retainer persisted until the commencement of the lawsuit against Trinity. Capital Sports submitted then (and now) that it terminated earlier, in May of 2016, when the parties became adverse.
[54] As of the commencement of the lawsuit, the parties were adverse. No one asserts that the implied joint retainer continued after that time. Capital Sports submits that because the parties were also adverse for a period commencing in May 2016, the motion judge erred in law in not finding termination at that earlier time. The respondents disagree. They submit that the motion judge’s findings about the implied joint retainer were all factual and there was no palpable and overriding error.
[55] The appeal therefore gives rise to these questions: When does an implied joint retainer terminate? What are the applicable legal principles?
[56] Trinity submits that an implied retainer ends when the subject matter of the engagement is complete. However, looking at the proffered authority for that submission, it makes the point that when the engagement is over, so is the retainer. It does not address the issue on this appeal regarding adversity during an engagement and early termination.
[57] As noted by Prof. Dodek in Solicitor-Client Privilege (Toronto: LexisNexis, 2014), at s. 6.26, “Canadian law on the issue is scarce. … As a result, Canadian courts may rely of the far more detailed American consideration of these issues.” Prof. Dodek noted the decision In Re Teleglobe Communications Corp., 493 F. (3d) 345 (3rd Cir. 2007), a U.S. Court of Appeals decision that discusses joint retainers in a case where the parties to an implied joint retainer became adverse, as transpired here.
[58] Teleglobe arises from corporate transactions within the Bell Canada Enterprise Inc. (“BCE”) corporate group. BCE acquired Teleglobe and the corporate group began to take steps to develop a fibreoptic network. Those steps included Teleglobe and its subsidiaries borrowing more than $2 billion to fund the project. BCE reconsidered the project and obtained legal advice from external counsel that was shared with in-house counsel. The in-house counsel also advised Teleglobe. BCE decided to cut off funding, causing Teleglobe and its subsidiaries to file for Chapter 11 protection from insolvency. The subsidiaries sought production of the legal advice given to BCE and Teleglobe before the funding was cut off.
[59] In Teleglobe, the appeal court overturned an order to produce the privileged documents. The court emphasized that while a joint retainer may arise by implication, courts must be cautious in doing so. The court described a joint retainer as requiring that there be no substantial risk of the lawyer being unable to fulfill the lawyer’s duties to all co-clients because of conflicting interests between the co-clients or otherwise.
[60] With respect to the termination of an implied joint retainer, the court said, at p. 362, that the joint retainer ends once circumstances arise that readily imply to all the joint clients that the relationship is over, including when it becomes clear to all parties that the clients’ legal interests have diverged too much to justify using common attorneys and the parties’ conduct dissolves the essential mutual confidence.
[61] As set out in Teleglobe, if a conflict arises, the proper course is to end the joint representation. The approach described by that court is consistent with the expectations on lawyers in these circumstances, as set out in the Law Society of Ontario (“LSO”) Rules of Professional Conduct. The Rules are not binding on this court but can be instructive. The Rules do allow for the lawyer to continue to advise one of the clients on the matter that has been contentious and refer the other client elsewhere where there is consent.
[62] In Teleglobe, the court further held that if the lawyer does not end the joint representation when diverging interests arise, and continues to represent both clients, “the black-letter law is that when an attorney (improperly) represents two clients whose interests are adverse, the communications are privileged against each other notwithstanding the lawyer's misconduct". This finding is also consistent with the LSO rules regarding lawyer mistakes, which generally do not destroy a client’s privilege. Here, it appears through hindsight that the advice Capital Sports was given that Gowlings acted solely for it was incorrect.
[63] Capital Sports further relies on Chang v. Lai Estate, 2014 BCSC 128, 64 B.C.L.R. (5th) 430. This was an estates case where a lawyer gave advice to the executors of an estate both with respect to the administration of the estate and an application to vary the terms of the will. Although the context is admittedly different, the court concluded that where the beneficiary is in an adversarial relationship with the executrix, solicitor-client privilege remained in place. As set out at paras. 19 and 20, their interests were clearly in conflict due to the variation of the will sought by the plaintiffs and legal advice sought and received for that purpose remained privileged.
[64] Further, in Bank of Nova Scotia v. Lennie (1996), 1996 CanLII 10353 (AB KB), 38 Alta LR (3d) 119 (Q.B.), a case where the defendant’s counsel had both acted for the defendant and also jointly for both sides, the court commented that the joint retainer would end when one side decided to take steps against the other. Again, the context is different, but the case is helpful given the lack of authorities regarding the issue.
[65] Capital Sports also puts forward United Kingdom law showing that there this issue is addressed under the framework of waiver, yet the result is the same – once there is a conflict of interest, the sharing of privileged communication comes to an end: TSB Bank Plc v. Robert Irving & Burns (1998), [2000] P.N.L.R. 384 (U.K. C. A. (Civ.), at pp. 391-393.
[66] Capital Sports also relies on the well-established legal principle that the protection of solicitor-client privilege is of fundamental importance to the administration of justice. In turn, when such a fundamental right is eroded, the principle of minimal impairment must be observed: Smith v. Jones, 1999 CanLII 674 (SCC), [1999] 1 S.C.R. 455, at para. 28. Applying these principles, Capital Sports submits that the scope of an implied joint retainer should be construed narrowly because of the consequences to the privilege rights of clients. This case is a prime example. Under the Decision, Capital Sports, wrongly believing it had its own counsel and therefore had confidentiality from Trinity, loses that confidentiality due to the continuation of an implied joint retainer with its now adversary.
[67] The respondents rely heavily on the principle that there is no confidentiality between clients in a joint retainer. That is so, but it avoids the issue here regarding whether the joint retainer terminated in or around May 2016. Prior to that time, there is no confidentiality between the joint clients.
[68] The respondents also rely heavily on the motion judge’s finding of fact. That engages two questions: were there extricable legal errors and were there palpable and overriding errors of fact. I conclude that there were extricable legal errors and the correct legal principles engage what are admitted facts in this case.
[69] The motion judge erred in principle in not considering the legal implications of the period of adversity that began in May of 2016 and in relying on the alleged fiduciary duty.
[70] The motion judge expressly considered the issue of the duration of the joint retainer. The motion judge rejected the termination date of May 2016 for two reasons. First, there were facts later that year that supported a finding that the parties were again using Gowlings as counsel for RLG. While those facts could have represented the resumption of an implied joint retainer, the motion judge did not find a termination and resumption. Second, the motion judge relied on her finding regarding fiduciary duty. The motion judge accepted submissions from the Albert Street respondents on that subject. She found that because Capital Sports had alleged that Trinity had breached fiduciary duties owed to Capital Sports, there was a duty to disclose that extended to its privileged communications. In turn, the motion judge found that this duty to disclose supported the continuation of the joint retainer during and after the period of adversity.
[71] The fiduciary duty analysis is problematic. It is based on the allegations by Capital Sports that Trinity owed it fiduciary duties (not that Capital Sports was a fiduciary). Trinity denies that it owed the alleged fiduciary duties. That issue will be determined at trial. Further, Trinity pleads that if it is a fiduciary so too is Capital Sports, owing the same duties to Trinity. If the obligation to disclose was based on the prospect that each joint venture partner may owe fiduciary duties to the other, to be determined at trial, the resulting lack of confidentiality would also apply to Trinity. The pleadings do not support a finding of a fiduciary duty on one joint venturer only for the purposes of production of documents. As a result, Trinity would be obliged to turn over its lawyers’ files as well. Although those files were not produced on this motion, that motion for production would come next.
[72] Although some of the respondents’ submissions appear to suggest otherwise, there is no question that a party to a joint venture may retain its own counsel and have the benefit of solicitor-client privilege to the exclusion of the other joint venturer. The motion judge correctly stated these legal principles, at para. 32:(1) when joint venturers jointly seek legal advice, there is no privilege between them but the privilege exists as against outsiders;
(2) this does not mean that whenever parties enter a joint venture relationship, they give up their ability to consult their own lawyers in confidence;
(3) as between joint venture parties, communications between one party and their lawyer will not be privileged if (i) there was a joint retainer of the lawyer; and (ii) the communications are in relation to the subject matter of the joint venture. [Emphasis added.] [73] The motion judge’s discussion of fiduciary duty and duration are in conflict with these accepted legal principles. The alleged fiduciary duty does not support the production order.
[74] Returning to the issue of adversity, the undisputed facts are that the communications between the parties commencing in May 2016 show clear conflict between the parties both regarding their obligations within the joint venture and with respect to Gowlings’ role. Each party threatened to sue the other. Capital Sports put forward its position that Gowlings represented it only, and Trinity disagreed. Trinity said it would take steps to remove Gowlings. Trinity did not so. Trinity knew that Gowlings was going to continue to act for Capital Sports against Trinity and decided not to take steps to remove Gowlings.
[75] The mediation took place during this period. Trinity decided not to object to Gowlings acting for Capital Sports in the mediation. The parties had their dispute mediated, each with counsel. The mediation was unsuccessful. Yet, if the implied joint retainer continued throughout this period of conflict, Trinity claims all of the privileged documents from the opposite party in the mediation. The motion judge expressly concluded that there were no carve outs in the roughly three-month period.
[76] There was therefore the commencement of adversity in May 2016, as a result of which Trinity was on express notice that Capital Sports saw Gowlings as its lawyer only. An implied joint retainer could not persist in those circumstances. The joint retainer ended once circumstances arose that readily implied to all the joint clients that the joint retainer relationship was over. As of May 2016, it was clear to both parties that their legal interests had diverged too much to justify using common lawyers. The uncontested facts ended the implied joint retainer due to the parties’ material adversity.
|
