In his February 2, 2015 decision in Mallory v. Werkmann Estate, Strathy C.J.O. removed counsel for an insured when one of the grounds of appeal in the notice of appeal was contrary to the interests of the insured, suggesting counsel's loyalty lay with the insurance company that had retained him. That insurance company's motion for leave to intervene was also dismissed because it was not clear how it would be affected by the judgment and, to the extent that it might be, it was partially the architect of its own misfortune. The decision is a cautionary tale about never forgetting one's duty of loyalty to one's client. It also emphasizes the importance of a third party not "waiting to see" whether it will be affected by a case and only then attempting to intervene at a late stage.
Removal of Counsel
Strathy C.J.O. found that "removing counsel for the appellant [was] necessary to protect the administration of justice and avoid the appearance of impropriety" (para. 28). Even though this is a high standard, he wrote:
[30] It was not in the appellant's interest to include the issue of his own insurance coverage as a ground of appeal. The inclusion of ground 8 gives rise to a clear conflict between the interests of the appellant on the one hand and the interests of his insurer on the other. The same is true of ground 7.
[31] The inclusion of these grounds gives rise to the inescapable conclusion that defence counsel was acting on the instruction of the insurer to advance a ground of appeal contrary to the interests of the insured.
[...]
[33] In the circumstances, it would bring the administration of justice into disrepute to permit [counsel] to continue to act as counsel for the appellant. The motion to remove that firm is granted.
Motion to Intervene
Strathy C.J.O. also denied the insurance company's intervention motion. It was unclear how the insurance company would be affected by the decision but, in any event, it had had ample time to put forward its position in the litigation prior to the appeal but had chosen not to do so:
[35] [...] RSA seeks to intervene as an added party under rule 13.01(1)(b), on the basis that it may be adversely affected by a judgment in the proceeding.
[36] RSA's real complaint is that it will be affected by the trial judge's finding that the appellant had insurance coverage. However, RSA has not established how it will be adversely affected by a finding of fact in a proceeding to which it was not a party. Although the judgment had still not been taken out when the parties appeared before me, I am not satisfied that RSA will be adversely affected by the judgment in the proceeding. Therefore, it has not met the test for intervention.
[37] Second, even if the finding could adversely affect RSA's interests, RSA is partly to blame for the situation it finds itself in.
[38] At the opening of trial, the trial judge attempted to clarify the scope of issues that would be addressed. [...]
[39] I have read the transcript of the ensuing discussion that occurred with counsel. The trial judge specifically raised the issue of coverage. When defence counsel, who was appointed and paid by RSA, responded that RSA had not made a decision on coverage, the trial judge raised the prospect of a conflict of interest. [...]
[42] It took no steps prior to the judgment being released to clarify these points [important to it] and bears some responsibility for the resulting confusion. It could have added itself as a statutory third party pursuant to s. 258(14) of the Insurance Act, but chose not to.
[43] Moreover, after the trial, RSA failed to pursue the invitation to contact the trial co-ordinator to arrange an appointment before the trial judge. Counsel submits this was not done because RSA had no standing and would not have been permitted to make submissions on the point. This was not a foregone conclusion. The judgment had not been taken out at that time, the judge was not functus, and if there was any issue concerning the court's order or any alleged error in the reasons, it should have been brought directly to the attention of the trial judge.
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[45] RSA is not in a position to now complain on appeal about the confusion surrounding coverage.
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