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Notice of Decisions

IN THE MATTER OF AN INQUIRY INTO THE CONDUCT OF

GARTH WALLBRIDGE

ARISING FROM AND IN RELATION TO DISCIPLINE FILE NO. 1707-0417

Reasons for Decision

Garth Wallbridge is a member of the Law Society of the Northwest Territories.  The conduct of Mr. Walbridge is the subject of an inquiry referred to me sitting as a sole inquirer by virtue of a Notice of Appointment dated 29 December 2017. 

Pursuant to the Notice of Appointment, the Law Society asked me to find:

  • that Garth Wallbridge acted in a conflict of interest by representing the Nahanni Butte First Nation after representing the Dehcho First Nations as chief negotiator; and
  • that Garth Wallbridge acted without integrity by acting for the Nahanni Butte First Nation after having been chief negotiator for the Dehcho First Nations.

At the commencement of the hearing, the conflict of interest complaint was amended to read:

that Garth Wallbridge acted in a conflict of interest by representing the Nahanni Butte First Nation after representing the Dehcho First Nations whether as lawyer or as chief negotiator.

At the conclusion of the Law Society’s case during the hearing, the first allegation had evolved to further particularize that Mr. Wallbridge owed and breached a fiduciary duty to the Dehcho First Nations (“DFN”).  Effectively I am asked to find that Mr. Wallbridge was a fiduciary with respect to the DFN and, even though he was not employed as a lawyer by the DFN, because he is a lawyer, a breach of his fiduciary duty constitutes a delict pursuant to the Code of Professional Conduct. 

The second allegation with respect to acting without integrity was not amended in any way.

The fiduciary duty element of the first misconduct allegation rather complicates the requisite analysis, however, for the reasons set out below, I have concluded that Mr. Wallbridge was not a fiduciary and did not have a conflict of interest in acting for the Nahanni Butte First Nation as a lawyer after having been appointed by contract to be, and working as, the Chief Negotiator for the DFN.

However, the broader proposition, that Mr. Wallbridge acted without integrity in acting for the Nahanni Butte First Nation after acting as Chief Negotiator is made out and I find that the complaint is proven to the relevant standard in this regard. 

However, the conduct that I find problematic is relatively narrow and specific - when Counsel for the DFN inquired of Mr. Wallbridge about the possibility of a conflict in acting for the Nahanni Butte First Nation, Mr. Wallbridge failed to advert to and correct the factual premise upon which the inquiry was based.

The Rules

Two Rules from the Code of Professional conduct are engaged by the allegations against Mr. Wallbridge:

  1. The Rule regarding conflicts and related commentary:

3.4-1 A lawyer must not act or continue to act for a client where there is a conflict of interest, except as permitted under this Code.

 

  1. The Rule regarding integrity and related commentary:

2.1-1 A lawyer has a duty to carry on the practice of law and discharge all responsibilities to clients, tribunals, the public and other members of the profession honourably and with integrity.

Given the conclusion I have reached with respect to integrity in the practice of law, I should set out commentary 2 upon which it is based:

[2] Public confidence in the administration of justice and in the legal profession may be eroded by a lawyer’s irresponsible conduct. Accordingly, a lawyer’s conduct should reflect favourably on the legal profession, inspire the confidence, respect and trust of clients and of the community, and avoid even the appearance of impropriety. (my emphasis)

The Evidence

During the hearing, I heard evidence from Grand Chief Herbert Norwegian (the elected leader of the DFN), Mark Pocklington (Band Manager of the NBDB), Patrick Scott (DFN Negotiations Coordinator) and Garth Wallbridge. 

A total of 20 documents were made exhibits without argument as to admissibility.

The Chronology

The essential facts regarding the timeline and most of what took place in this matter do not appear to be the subject of significant dispute.  I make the following findings of fact.

Garth Wallbridge has been a member of the Law Society of the Northwest Territories since 1992.

From 1992 to 2015 Mr. Wallbridge has practiced law, for the most part, working as a lawyer out of his office, Wallbridge Law Office, in Yellowknife.

The Dehcho First Nations (“DFN”) is a collective of 10 First Nations groups who are in the process of negotiating an agreement on lands, resources and governance with the Governments of Canada and the Northwest Territories.  As I understand the evidence of Grand Chief Norwegian, in 2016, the DFN was composed of Ka’a’gee Tu First Nation (Kakisa Lake), The Nahanni Butte Dene Band, Deh Gáh Got’îê First Nation (Fort Providence), The Fort Providence Metis Council, Łíídlıı Kų́é First Nation (Fort Simpson), Fort Simpson Metis, Pehdzeh Ki First Nation (Wrigley), Tthets’ek’ehdeli First Nation (Jean Marie River), West Point First Nation (Hay River) and K'atl'odeeche First Nation (Hay River).

In late 2015, the DFN sought a Chief Negotiator to replace George Erasmus, who had vacated the position. The job description provided that the Chief Negotiator would report to the Dehcho Leadership, lead the negotiations team and be responsible for overseeing all aspects of negotiations including directing and participating in main table sessions, preparing a work plan for main table negotiations, drafting position/interest papers for the DFN leadership, preparing position papers for on-going negotiations, maintaining appropriate liaison with governments, their agencies and interested groups, implementing a communications plan and other duties as assigned by the DFN.

As of late 2015, the DFN’s negotiations were 80 – 90% complete; the DFN was hiring someone to get the process “to the finish line”.  In cross-examination, Grand Chief Norwegian described the process as 95% complete.

On 2 December 2015, Mr. Wallbridge applied to become the Chief Negotiator for the DFN.

During the interview process Mr. Wallbridge was made aware that the DFN wanted to maintain its membership in order to maximize its negotiating strength.

The agreement pursuant to which Mr. Wallbridge became the Chief Negotiator for the DFN (“Agreement”) was signed by both Mr. Wallbridge and the DFN on 3 February 2016.

Although his correspondence referenced that he was a lawyer, as did his resume, he was hired by the DFN as a “Contractor” whose responsibility was to act as Chief Negotiator. He was not hired as a lawyer as the DFN already had a lawyer and access to other lawyers as necessary. 

From February to October 2016 Mr. Wallbridge worked as Chief Negotiator for the DFN.  He provided no legal advice to the DFN and he was not asked to do so.

By way of a Resolution dated 26 October 2016, relying upon a no cause no notice provision in the Agreement, the DFN dismissed Mr. Wallbridge effective as of that date.

On or about 5 April 2017, Mr. Wallbridge performed legal work for the Nahanni Butte Dene Band (“NBDB”) in connection with an injunction application brought on behalf of the Commissioner of the NWT in respect of a road being constructed by the NBDB (part of the Prairie Creek Mine Road (“the Road”)).  The parties came to an agreement that the construction would end.  The injunction application did not proceed.  Mr. Wallbridge was not otherwise providing legal services at this point to the NBDB.

At the end of April 2017, the Mackenzie Valley Review Board held hearings in relation to the Road.  At the conclusion of the hearings, the DFN position was:

We support our communities in their positions of support in order to benefit from mine operations and business opportunities.  We also believe that the economic opportunities to the Dehcho need to be balanced with the need for a high environmental standard.

Effectively, the DFN was in favour of the project but wanted to see additional studies, design constraints and mitigation in place prior to the start of construction. 

The NBDB, on the other hand, saw: “no negative impacts that cannot be easily managed” and wanted “the Board to proceed with all due haste to complete the review … as our people and our community need the economic activity and jobs that this project will create…”

Effectively, the NBDB was content to see the Road built within the constraints and the remediation that had already been identified.  Mr. Wallbridge drafted the submission of the NBDB to the Review Board and was aware of these different positions which appear to contemplate significantly different start dates and different construction / operation parameters.

The DFN and the NBDB had previously attempted to resolve their different views regarding development of the Road in this area without success.  One plan that was discussed in the fall of 2016 involved removing some of the land required for the Road from the Dehcho negotiation process.  It appears that the closest the NBDB and the DFN got to agreement on this issue was a resolution passed by the DFN during a November/ December DFN meeting which stated that the DFN would “consider not opposing the permit application”.  The NBDB expected that this matter would be taken up at a subsequent meeting but that did not take place.  The November/December meeting took place about a month after Mr. Wallbridge was terminated by the DFN.

The DFN was aware of the benefits that would be associated with the Road and related local development for the NBDB but the DFN had real concerns regarding environmental issues associated with the Road; the DFN did not want to lose the NBDB as a member as a result of a dispute regarding the Road.  Grand Chief Norwegian testified that the DFN was using diplomacy to delay making a decision regarding the Road. 

From the perspective of the NBDB, the lack of any subsequent steps to resolve the Road problem in light of what was taken to be a promise to “consider” the issue, left the NBDB with the impression that the DFN was not responding to its concerns and, worse, was breaking its promises.  The NBDB left the DFN solely due to its disagreement with the DFN concerning the Road because the NBDB perceived the DFN to be ignoring their concerns.

By resolution dated 6 May 2017, the NBDB withdrew from the DFN.  A copy of the resolution was emailed to the DFN on 7 May 2017. 

Mr. Walbridge testified (as did Mark Pocklington), and I accept, that Mr. Wallbridge was asked by Mr. Pocklington to draft the resolution dated 6 May 2017 for signature by the council members and elders but did not otherwise participate in the decision to withdraw from the DFN.

At some point, Grand Chief Norwegian concluded that Mr. Wallbridge was working for the NBDB; he ultimately concluded that Mr. Wallbridge was behind the withdrawal of the NBDB from the DFN.  Given, Mr. Wallbridge’s subsequent legal representation of the NBDB, the Grand Chief’s description of this state of affairs as “totally unethical, uncouth, and totally immoral” is perhaps understandable in the circumstances. 

Grand Chief Norwegian did not know that it was the NBDB’s perception of poor management of the Road issue by the DFN that resulted in the withdrawal of the NBDB from the DFN.  Grand Chief Norwegian appeared to me to be an experienced consumer of legal services.  He knew that Mr. Wallbridge was not acting as a lawyer for the DFN.  He knew that he was not getting, and that he did not want, legal advice from Mr. Wallbridge.  I am confident that had he known the true state of affairs, he would have viewed the subsequent and limited assistance provided by Mr. Wallbridge to the NBDB in a totally different light.

On 9 May 2017, Chris Reid, Counsel for the DFN emailed Mr. Wallbridge.  He wrote:

Hi Garth

As you know, I am counsel for the Dehcho First Nations.  It has come to our attention that you may be acting for Nahanni Butte Dene Band in connection with their decision to leave the DFN and the Dehcho process.  If so, this raises significant ethical issues for DFN in view of the fact that you were retained by DFN between February and October, 2016, and your contract was terminated by DFN for reasons known to you.  It is troubling, to say the least, to see you opposite your former clients and acting in an adversarial role.

Please advise today as to your position on this issue. (my emphasis)

 

Mr. Wallbridge’s regrettably terse response reads as follows:

You were and apparently are legal counsel for the DFN.  I was not ever legal counsel for the DFN.  No conflict for me whatsoever. And no, I have no idea why my contract was terminated.  I was not given any reason.

 

Mr. Reid sent a follow up email in which he advanced his client’s position that Mr. Wallbridge was in a conflict of interest regardless of the title of his position.  Mr. Wallbridge did not reply.

On 20 June 2017, Grand Chief Norwegian signed a complaint addressed to the Law Society of the NWT alleging that Mr. Wallbridge was acting for the NBDB “in the matter of that community’s withdrawal from the DFN and the very treaty negotiations which GW (Garth Wallbridge) was previously paid to direct on behalf of DFN.”

Mr. Wallbridge never disclosed the very limited nature of his relationship with the NBDB in connection with its withdrawal from the DFN. 

It is not surprising that the NBDB withdrew from the DFN when the best it got by way of a commitment to deal with its concerns regarding the Road was what appears to have been a broken promise to “consider” the issue.  Mr. Wallbridge had nothing to do with the decision of the NBDB to leave the DFN.

The Agreement

The Agreement was executed on 3 February 2016 (Document 4 in Exhibit 5); Garth Wallbridge was engaged, as a “contractor” to work for the DFN as Chief Negotiator.

It is important to note that the Agreement contains a “whole agreement” clause (10(d)); the Agreement contains no reference anywhere to the Chief Negotiator acting as a fiduciary or a lawyer.  The whole agreement clause must be understood in light of the fact that Grand Chief Herb Norwegian made it clear to Mr. Wallbridge that Chris Reid was the DFN’s lawyer and that Mr. Wallbridge was being hired as Chief Negotiator not counsel.

In terms of the relative bargaining power of the DFN and Mr. Wallbridge, it is significant that “cause” for termination without notice or payment in lieu of notice is stated to include “by the Dehcho First Nation at its sole discretion and for any reason whatsoever.” (my emphasis)  Accordingly, Mr. Wallbridge entered an agreement in respect of which his role as Chief Negotiator was, effectively, terminable without notice and without cause.  The DFN appears to have had the upper hand in deciding what terms would be included in the agreement.  The DFN relied upon this very clause in terminating Mr. Wallbridge on 26 October 2016.

It is also important to note that the Agreement contains 3 clauses prohibiting the disclosure of any information Mr. Wallbridge may acquire during the term of the Agreement.  Schedule A to the Agreement sets out the responsibilities of the Chief Negotiator and Schedule B sets out the remuneration associated with the position.

Grand Chief Herb Norwegian states in the DFN complaint that Mr. Wallbridge “was retained as a chief negotiator largely because he is a lawyer who held himself out as an expert on Aboriginal law and treaty negotiations”.

However, Grand Chief Norwegian testified that Mr. Wallbridge’s status as a lawyer was merely “an asset”.  Chief Norwegian testified that Mr. Wallbridge was not hired as a lawyer and that the DFN did not expect or want legal services from him.  The DFN had several lawyers to whom it turned as and when they were required. 

Accordingly, it was clear that the DFN was not hiring a lawyer and it sought to protect its information in the Agreement accordingly.  Obviously, if the DFN wished to negotiate additional protections for itself it could have done so.  If the DFN had wished to retain Mr. Wallbridge as a lawyer, which would have automatically protected its information, it could have done so.

I should add that there is no evidence that Mr. Wallbridge breached the information protection provisions of the Agreement.  Further, the evidence from Grand Chief Norwegian and Mr. Scott suggests that the negotiation process was public.  Accordingly, there is no evidence from which I can conclude or infer that Mr. Wallbridge ever received any information that would have been subject to the information protection clauses. 

Nature of the Relationship

Pursuant to the Agreement Mr. Wallbridge was engaged to work as the Chief Negotiator for the DFN.  His responsibilities Chief Negotiator are set out in Appendix A to the Agreement.  Schedule A reads as follows:

The following outlines the responsibilities and duties of the Contract [sic] in relation to his contracted services as Chief Negotiator for Dehcho First Nations.

The Contractor is to report to the Executive Director concerning matters of personnel and administration and to the Grand Chief concerning matters related to negotiations

  • Attend the 2nd Strategic and Tactical Workshop in Fort Simpson February 9-11th, 2016
  • Contract specialists on short term contracts, clearly outlining the terms of reference for contracted service
  • Oversee negotiations staff hire using the Dehcho First Nations policy guidelines in the hiring process
  • Negotiate Phase 11 including an Agreement-In-Principle and a Fiinal [sic] Agreement with Canada Implement strategies as developed by Dehcho First Nastions [sic]
  • Keep accurate and comprehensive records of the total negotiation process
  • Reassess assumptions involved in negotiating the Dehcho Process as negotiations proceed
  • Supervise negotiations team, research staff and support staff
  • Ensure that the research staff attend Dehcho Proposal developmental workshops w1th regional members
  • Provide written summaries of negotiation sessions within two weeks after sessions are completed.
  • The Dehcho Process file is to be the main priority
  • Adhere to all DFN Personnel and Administration Policies as may be applicable to a contractor
  • This agreement to be reviewed in three months time
  • Other work related to negotiations as directed by Dehcho First Nations Grand Chief

 

This is a relatively specific list of responsibilities.  It seems clear that Mr. Wallbridge is not operating independently and on his own; he reports to Executive Director and the Grand Chief.  The job description that attracted the application that Mr. Wallbridge submitted (Exhibit 10) describes a position consistent with that structured by the Agreement except that it includes the proposition that he is to report to the Dehcho Leadership.

The reporting obligation and the requirement that written summaries of the negotiation sessions be produced within 2 weeks of the completion of the session suggests that Mr. Wallbridge’s work as Chief Negotiator was closely supervised by Grand Chief Norwegian.

Although there was no direct evidence called on this point, it does not appear that the Chief Negotiator had authority to conclude an agreement with the parties with whom he was negotiating. 

Grand Chief Norwegian testified that it was very important that the 10 first nations that make up the Dehcho First Nation be kept together.  Grand Chief Norwegian testified that it was very important that the Chief Negotiator understand that the collective needed to be kept intact.  Grand Chief Norwegian considered keeping people together to be a duty related to that of Chief Negotiator.  Mr. Wallbridge testified that he understood that it was Grand Chief Norwegian’s job to keep the member nations together.  He agreed that the DFN’s negotiating position was stronger if the member nations maintained their membership.  Mr. Scott testified that the Dehcho negotiation process required that individual Chiefs of the 10 member nations sign the final product.  From this testimony, I infer that each of the members of the DFN had the ability to come or go as they pleased (as had Fort Liard) and, similarly, the members could accept the terms of the negotiated agreement or not as they saw fit.  No one was stuck with what Mr. Wallbridge negotiated.

Finally, my understanding from the evidence of Grand Chief Norwegian is that although Mr. Wallbridge was the Chief Negotiator, he was part of a negotiating team composed of several individuals one of whom was a lawyer retained as counsel to the DFN, Christopher Reid.

I have no evidence that as a result of the Agreement, Mr. Wallbridge had power to unilaterally affect the interests of the DFN and the Agreement itself suggests that this was not the case.  And there is no evidence that Mr. Wallbridge attempted to exercise such power.

It is important to understand the position of the parties as a result the Agreement as this is the starting point for the analysis regarding fiduciary duty.

Policy Considerations

Parties to a contract should be able to rely upon the terms of the contract.

Mr. Wallbridge was not retained as counsel by the DFN.  Accordingly, his relationship with the DFN was created by a contract, with a termination clause, in respect of which significant authority / power was retained by the DFN. 

Given the clear contractual basis for the relationship, it would not be appropriate to treat the relationship between the DFN and Mr. Wallbridge, on its own, as creating the functional equivalent of a solicitor and client relationship.  Although there are obvious drafting errors in the Agreement, I do not think that permits me to infer that the DFN is somehow vulnerable in respect of Mr. Walbridge.  To the contrary, for Mr. Wallbridge to have agreed to the termination clause he did, suggests to me that the DFN was the stronger of the two parties both prior to and within the relationship created by the Agreement.

Fiduciary duty as a basis for conflict of interest

A number of questions arise in connection with the Law Society’s fiduciary duty argument; the first, obviously, being whether there was a fiduciary relationship.  If so, what exactly is the duty that was owed?  Most importantly, the Law Society posits that the duties of Wallbridge as a fiduciary, which duties arise from a contract, survive the termination of the contract which is the source of the duty – is that possible?

Given the Law Society’s argument that Mr. Wallbridge is a fiduciary I have reviewed the law regarding fiduciary obligations.

The Law Society’s position is “When one party is given a discretionary power to affect legal or practical interests of another, a fiduciary relationship results.  This discretionary power is the fundamental hallmark of a fiduciary relationship.”  Although I was referred by counsel to Galambos v. Perez, 2009 SCC 48 (CanLII), in support of this proposition, Galambos specifically states that discretionary power alone is not sufficient to permit a relationship to be identified as fiduciary.

Galambos, in fact, states that a fiduciary relationship requires some sort of undertaking/agreement by the fiduciary to act as such in addition to a transfer of discretionary power.  From a jurisprudential perspective, Galambos, overturning a Court of Appeal decision, seems to be more about what the Court of Appeal got wrong than defining fiduciary duty but Galambos and the jurisprudence to which it refers is of assistance.

The decision in Galambos is useful in that it notes that a breach of an obligation by one who happens to be a fiduciary is not necessarily a breach of fiduciary duty.

[36] Certain categories of relationships are considered to give rise to fiduciary obligations because of their inherent purpose or their presumed factual or legal incidents: Lac Minerals Ltd. v. International Corona Resources Ltd., 1989 CanLII 34 (SCC), [1989] 2 S.C.R. 574, per La Forest J., at p. 646. These categories are sometimes called per se fiduciary relationships. There is no doubt that the solicitor-client relationship is an example. It is important to remember, however, that not every legal claim arising out of a per se fiduciary relationship, such as that between a solicitor and client, will give rise to a claim for a breach of fiduciary duty.

 

[37] A claim for breach of fiduciary duty may only be founded on breaches of the specific obligations imposed because the relationship is one characterized as fiduciary: Lac Minerals, at p. 647. This point is important here because not all lawyers’ duties towards their clients are fiduciary in nature.  Sopinka and McLachlin JJ. (as the latter then was) underlined this in dissent (but not on this point) in Hodgkinson, at pp. 463-64, noting that while the solicitor-client relationship has fiduciary aspects, many of the tasks undertaken in the course of the solicitor-client relationship do not attract a fiduciary obligation. Binnie J. made the same point in Strother v. 3464920 Canada Inc., 2007 SCC 24 (CanLII), [2007] 2 S.C.R. 177, at para. 34: “Not every breach of the contract of retainer is a breach of a fiduciary duty.”  The point was also put nicely by Rupert M. Jackson and John L. Powell, Jackson & Powell on Professional Liability (6th ed. 2007), at para. 2-130, when they said that any breach of any duty by a fiduciary is not necessarily a breach of fiduciary duty.

 

In addition to per se fiduciary obligations, there are ad hoc fiduciary duties that arise more narrowly in connection with the particular circumstances of a relationship.

The Court in Galambos also observes that a fiduciary obligation does not just arise in the abstract; the fiduciary must agree to act as such:

[77] The fiduciary’s undertaking may be the result of the exercise of statutory powers, the express or implied terms of an agreement or, perhaps, simply an undertaking to act in this way. In cases of per se fiduciary relationships, this undertaking will be found in the nature of the category of relationship in issue. The critical point is that in both per se and ad hoc fiduciary relationships, there will be some undertaking on the part of the fiduciary to act with loyalty.

 

Accordingly, a fiduciary duty does not arise absent an undertaking on the part of the fiduciary to act exclusively in the interests of the other party.

Galambos does state that a transfer of some sort of discretionary power is also a necessary condition for a relationship to be identified as fiduciary.  The Court notes:

[84] The nature of this discretionary power to affect the beneficiary’s legal or practical interests may, depending on the circumstances, be quite broadly defined. It may arise from power conferred by statute, agreement, perhaps from a unilateral undertaking or, in particular situations such as the professional advisory relationship addressed in Hodgkinson, by the beneficiary entrusting the fiduciary with information or seeking advice in circumstances that confer a source of power: see, e.g., Lac Minerals and Hodgkinson. While what is sufficient to constitute power in the hands of the fiduciary may be controversial in some cases, the requirement for the existence of such power in the fiduciary’s hands is not. The presence of this sort of power will not necessarily on its own support the existence of an ad hoc fiduciary duty; its absence, however, negates the existence of such a duty. (my emphasis)

 

Unfortunately, Galambos does not give us any guidelines for determining what and/or how much power has to end up transferred to the transferee in order for the relationship to be properly identified as fiduciary.  Presumably, for example, giving an interior designer the discretionary power to pick the colour of your towels does not make that person a fiduciary. 

From the jurisprudence referenced in Galambos, it appears to me that more than mere discretionary power is required.  Galambos refers to the decision of Dickson J in Guerin v. The Queen with respect to discretionary power.  In Guerin, the reasons of Dickson J refer to a significant power imbalance associated with discretionary power:

Professor Ernest Weinrib maintains in his article The Fiduciary Obligation (1975), 25 U.T.L.J. 1, at p. 7, that "the hallmark of a fiduciary relation is that the relative legal positions are such that one party is at the mercy of the other's discretion." (my emphasis)

Guerin v. The Queen 1984 CanLII 25 (SCC), 384

 

Galambos also refers to what it describes as the “influential guidelines” of Wilson J from Frame v. Smith where she writes the following in dissent:

60. Relationships in which a fiduciary obligation have been imposed seem to possess three general characteristics:

(1) The fiduciary has scope for the exercise of some discretion or power.

(2) The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary's legal or practical interests.

(3) The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power.

Frame v. Smith 1987 CanLII 74 (SCC) (my emphasis)

Other jurisprudence cited in Galambos suggests that significant vulnerability is seen as critical to the fiduciary relationship.  In Hodgkinson v. Simms, Laforest J for L' Heureux -Dubé and Gonthier JJ writes as follows:

This conceptual approach to fiduciary duties was given analytical structure in the dissenting reasons of Wilson J. in Frame v. Smith, 1987 CanLII 74 (SCC), [1987] 2 S.C.R. 99, at p. 136, who there proposed a three-step analysis to guide the courts in identifying new fiduciary relationships.  She stated that relationships in which a fiduciary obligation has been imposed are marked by the following three characteristics:  (1) scope for the exercise of some discretion or power; (2) that power or discretion can be exercised unilaterally so as to effect the beneficiary's legal or practical interests; and, (3) a peculiar vulnerability to the exercise of that discretion or power.  Although the majority held on the facts that there was no fiduciary obligation, Wilson J.'s mode of analysis has been followed as a "rough and ready guide" in identifying new categories of fiduciary relationships; see Lac Minerals, supra, per Sopinka J., at p. 599, and per La Forest J., at p. 646; Canson, supra, at p. 543; and M. (K.) v. M. (H.), supra, at pp. 63-64.  Wilson J.'s guidelines constitute indicia that help recognize a fiduciary relationship rather than ingredients that define it.

In Lac Minerals I elaborated further on the approach proposed by Wilson J. in Frame v. Smith.  I there identified three uses of the term fiduciary, only two of which I thought were truly fiduciary.  The first is in describing certain relationships that have as their essence discretion, influence over interests, and an inherent vulnerability.  In these types of relationships, there is a rebuttable presumption, arising out of the inherent purpose of the relationship, that one party has a duty to act in the best interests of the other party.  Two obvious examples of this type of fiduciary relationship are trustee-beneficiary and agent-principal.  In seeking to determine whether new classes of relationships are per se fiduciary, Wilson J.'s three-step analysis is a useful guide. (my emphasis)

            Hodgkinson v. Simms 1994 CanLII 70 (SCC) p 408 et seq

 

Sopinka J for McLachlan and Major JJ in Hodgkinson v. Simms also discusses vulnerability as a critical part of a fiduciary relationship; he writes:

Vulnerability does not mean merely "weak" or "weaker".  It connotes a relationship of dependency, an "implicit dependency" by the beneficiary on the fiduciary (D. S. K. Ong, "Fiduciaries: Identification and Remedies" (1984), 8 U. of Tasm. L. Rev. 311, at p. 315); a relationship where one party has ceded power to the other and is, hence, literally "at the mercy" of the other.

This then is the hallmark to which a court looks in determining whether a fiduciary relationship exists; is one party dependent upon or in the power of the other.  In determining if this is the case, the court looks to the characteristics referred to by Wilson J. in Frame v. Smith.  Does one party possess power or discretion over the property or person of the other?  Can that power or discretion be exercised unilaterally, that is, without the consent of the other?  In the final analysis, can the powerless party be said to be "peculiarly vulnerable" or "at the mercy of" the party who holds the power?  To quote Keenan J. in Varcoe v. Sterling (1992), 1992 CanLII 7478 (ON SC), 7 O.R. (3d) 204 (Gen. Div.), at p. 236, relied upon by our colleague La Forest J., at p. 419: "Because the client has reposed that trust and confidence and has given over that power to the broker, the law imposes a duty on the broker to honour that trust and respond accordingly."

Phrases like "unilateral exercise of power", "at the mercy of the other's discretion" and "has given over that power" suggest a total reliance and dependence on the fiduciary by the beneficiary.  In our view, these phrases are not empty verbiage.  The courts and writers have used them advisedly, concerned for the need for clarity and aware of the draconian consequences of the imposition of a fiduciary obligation.  Reliance is not a simple thing.  As Keenan J. notes in Varcoe v. Sterling at p. 235, "[t]he circumstances can cover the whole spectrum from total reliance to total independence".  To date, the law has imposed a fiduciary obligation only at the extreme of total reliance. (my emphasis)

            Hodgkinson v. Simms 1994 CanLII 70 (SCC) p 467

 

Although it does not say perhaps as much as might be hoped with respect to the extent of vulnerability, it is clear from Galambos that vulnerability in respect of the abuse of the power that ends up in the hands of the fiduciary is part of the analysis:

[67] An important focus of fiduciary law is the protection of one party against abuse of power by another in certain types of relationships or in particular circumstances. However, to assert that the protection of the vulnerable is the role of fiduciary law puts the matter too broadly. The law seeks to protect the vulnerable in many contexts and through many different doctrines. As La Forest J. noted in Hodgkinson, at p. 406: “[W]hereas undue influence focuses on the sufficiency of consent and unconscionability looks at the reasonableness of a given transaction, the fiduciary principle monitors the abuse of a loyalty reposed” (emphasis added). This brief sentence makes two important points which help sharpen the focus on the role of fiduciary law.

 

[68] The first is that fiduciary law is more concerned with the position of the parties that results from the relationship which gives rise to the fiduciary duty than with the respective positions of the parties before they enter into the relationship. La Forest J. in Hodgkinson, at p. 406, made this clear by approving these words of Professor Ernest J. Weinrib: “It cannot be the sine qua non of a fiduciary obligation that the parties have disparate bargaining strength. . . .  In contrast to notions of conscionability, the fiduciary relation looks to the relative position of the parties that results from the agreement rather than the relative position that precedes the agreement” (“The Fiduciary Obligation” (1975), 25 U.T.L.J. 1, at p. 6). Thus, while vulnerability in the broad sense resulting from factors external to the relationship is a relevant consideration, a more important one is the extent to which vulnerability arises from the relationship: Hodgkinson, at p. 406.

 

[69] The second is that a critical aspect of a fiduciary relationship is an undertaking of loyalty: the fiduciary undertakes to act in the interests of the other party. This was put succinctly by McLachlin J. in Norberg, at p. 273, when she said that “fiduciary relationships ... are always dependent on the fiduciary’s undertaking to act in the beneficiary’s interests”. See also Hodgkinson, per La Forest J., at pp. 404-7.

 

This jurisprudence suggests that the degree of vulnerability must be significant (the beneficiary must be “at the mercy of the fiduciary”) and the power transferred must also be significant.  Further, the Frame v Smith paradigm suggests that the power, the abuse of which is at the heart of the delict, must be capable of being exercised unilaterally.

Did Mr. Wallbridge have a fiduciary duty?

In the Agreement, Mr. Wallbridge agreed to act as the Chief Negotiator for the DFN; it is not clear to me, however, that he agreed to act as a fiduciary.  He is agreeing to act as part of a team with stated reporting obligations and no evident power to effect unilateral decisions.

Even if the Agreement can be construed as meaning that he agreed to act as fiduciary, it is difficult to conceive of that fiduciary relationship surviving the termination of the Agreement upon which the fiduciary relationship is founded.  Accordingly, even if there was a fiduciary relationship, it ended on 26 October 2016.

However, more than mere agreement to act as such is required to establish a fiduciary relationship.

The Law Society in argument references a position of trust and authority.  There is no question but that Mr. Wallbridge clearly had some authority as Chief Negotiator and he was trusted (at least to some extent, if not ultimately) by the DFN.  The Agreement, for example, gives him authority over those he is supervising.  However, there is no evidence that he had authority or power to affect the interests of the DFN or its members unilaterally, or otherwise, such that they were “at his mercy”.  He was part of a negotiating team and reporting to Grand Chief Norwegian in respect of an agreement that was as much as 95% negotiated.

Ultimately the question is not whether there was power or authority but rather - Was the DFN vulnerable to the abuse of power it ceded to Mr. Wallbridge in reliance upon his promise of loyalty?

Apart from his reporting relationship with Grand Chief Norwegian and the Dehcho leadership, additional factors weigh against the conclusion that Mr. Wallbridge was a fiduciary.  If, for example, as was the case with the NBDB, one of the members of the DFN withdrew from the DFN or simply refused to sign, Mr. Wallbridge had no power of which I am aware to conclude a treaty on that member’s behalf.

One can assume that the DFN’s interests might have been affected in some fashion if a new Chief Negotiator had to be hired to fix decisions that Mr. Wallbridge made but there is no evidence that the DFN was “at his mercy” or “peculiarly vulnerable”.  There is no evidence of something akin to (or even remotely akin to) “total reliance and dependence on the fiduciary by the beneficiary.”  To the contrary, looking at the relationship created by the Agreement, the putative beneficiary retained ultimate control over the relationship and could (and did) terminate the Agreement without notice or cause.

Ultimately, if the DFN or its members chose not to sign whatever was negotiated, there was nothing Mr. Wallbridge could do about it.  No one was at his mercy.  In this regard, it is worth noting that once the NBDB decided to withdraw from the DFN, there was no power that even the Grand Chief had, but the power of persuasion, to change that.  If even the Grand Chief could have his power with respect to a member nation taken away by a simple withdrawal from the DFN, how could the DFN have given Wallbridge more power than that?

Anyone negotiating anything on behalf of more than one entity knows that there is strength in numbers; this is not some special knowledge Mr. Wallbridge gained from Grand Chief Norwegian or as a result of working as Chief Negotiator.  This proposition came up several times in Grand Chief Norwegian’s testimony.  Once it is clear, however, as I found it to be, that the DFN’s failure to deal with the NBDB’s concerns regarding the Road, is the reason the NBDB left the DFN, the strength in numbers issue becomes irrelevant.  It is clear that Mr. Wallbridge did nothing to disrupt the relationship between the DFN and the NBDB.

The Law Society suggests, and this is critical to the fiduciary duty theory of liability, that if he was a fiduciary, Mr. Wallbridge’s fiduciary obligations survived the termination of the Agreement upon which they are based.  Since a critical part of the creation of a fiduciary obligation is the agreement of the fiduciary to accept same on either an ad hoc or per se basis, we have only the Agreement upon which to base the assertion that Mr. Wallbridge agreed to act as a fiduciary.  Since it is the exercise of ceded or transferred power that is controlled by the law of fiduciaries, there is no policy reason to conclude that fiduciary responsibilities, if, indeed, there were any, survived the termination of the Agreement because at that point Mr. Wallbridge had no power.

I have considered that if Mr. Wallbridge had acquired some specialized knowledge in a fiduciary capacity, one might argue that a fiduciary obligation arises in respect thereof but factually he did not come into possession of such information and in any event fiduciary obligations can be very discrete.  Given that there is no evidentiary basis for concluding that, somehow, information needed to be protected, particularly given that this is already covered by the Agreement, I can see no possible basis to conclude that any fiduciary duty could possibly have survived the termination of the Agreement.

Even if there was a fiduciary obligation to protect information, I do not see how that would give rise to a conflict in these circumstances.

I have done my best to determine what possible fiduciary duties might be said to have arisen or remained after the termination of the Agreement but I see no basis for a finding that there was any kind of duty owed by Mr. Wallbridge. 

In light of the fact that fiduciary duties can be discrete, particularly in the case of ad hoc fiduciary obligations, it was incumbent on the Law Society to say exactly what the duty was and how it was breached.

From a contract law perspective, the Agreement works without importing additional obligations that survive the contract, particularly given the whole agreement clause and the fact that information protection does survive the Agreement.  Moreover, the fact that there are provisions that survive the termination of the agreement militate against the suggestion that there are unwritten obligations that are intended to survive termination.

I should add that it is of no real significance that Mr. Wallbridge corresponded with the DFN and invoiced for the work he did using his Wallbridge Law Office stationary.  It was crystal clear that a) he was a lawyer and b) he was not being hired as a lawyer by the DFN and not being asked to provide legal advice.

Conflict Conclusion

Although I do not believe that I am restricted to the Law Society’s theory of liability on this issue, I do not see a factual basis for concluding that Mr. Wallbridge had a fiduciary relationship with the DFN such that the legal work he performed for the NBDB after he was discharged as Chief Negotiator gave rise to a conflict of interest. 

I see no other grounds to conclude that there was a conflict.

Integrity in the practice of law

This is where I have a concern with the conduct of Mr. Wallbridge.

It is clear from the commentary associated with this rule that “integrity” means more than simply honesty.  In particular, as previously noted, commentary [2] provides that:

[2] Public confidence in the administration of justice and in the legal profession may be eroded by a lawyer’s irresponsible conduct. Accordingly, a lawyer’s conduct should reflect favourably on the legal profession, inspire the confidence, respect and trust of clients and of the community, and avoid even the appearance of impropriety. (my emphasis)

 

Conceptually, the rule that lawyers must act with “integrity” is intended to cast a fine net.  That net appears to be intended to catch even conduct that may be, in substance, appropriate or proper on the grounds that it simply appears to be improper.

It is clear on the facts, that Mr. Wallbridge did not avoid the appearance of impropriety.  The viva voce evidence of Grand Chief Norwegian regarding his reaction to what he understood to be the role of Mr. Wallbridge’s in the withdrawal of the NBDB from the DFN is not the ultimate standard which I must apply, but it is evidence of a problematic appearance. 

Similarly, the email and complaint of Chris Reid both point to the understanding that Mr. Wallbridge was acting for the NBDB in connection with its withdrawal from the DFN. Mr. Reid’s email states: “It has come to our attention that you may be acting as counsel for Nahanni Butte Dene Band in connection with their decision to leave the DFN and the Dehcho process.” The complaint Mr. Reid drafted alleges: “GW now acts for Nahanni Butte Dene Band in the matter of that community’s withdrawal from DFN and the very treaty negotiations which GW was previously paid to direct on behalf of DFN.”

Although on the facts of this matter, I found no basis for a breach of a fiduciary duty, I am not sure that I would have come to the same conclusion had there been evidence that Mr. Wallbridge began acting for the NBDB prior to his termination by the DFN.

Mr. Wallbridge’s terse response that he had no conflict because he was not legal counsel for the DFN does not come close to responding to the factual basis for concerns expressed by Mr. Reid.

Although I specifically found that Mr. Wallbridge had nothing to do with the decision of the NBDB to leave the DFN and that he had no fiduciary duty to the DFN, it is clear that no one at the DFN knew anything about the limited nature of the legal assistance he provided to the NBDB or the timing of same.

The conclusion that there was an appearance of impropriety is unavoidable.

I have considered whether the fiduciary argument as advanced by the Law Society both in respect of its conflict position and integrity position circumscribes my inquiry, for reasons of natural justice, once I have concluded that Mr. Wallbridge was not a fiduciary.  It appears, however, that I have more or less accepted the position set out in the Law Society’s written submission at paragraph 40 without subparagraph d.  Accordingly, the issue of the appearance of impropriety is squarely before me.

Had Mr. Wallbridge advised Mr. Reid what had taken place, with the support of Mr. Pocklington, it would have been clear that there was no basis for complaint.

The Relevant Statutory Rules

Section 22 of the Legal Profession Act, R.S.N.W.T. 1988, c.L-2 defines conduct unbecoming:

conduct unbecoming a barrister and solicitor or student-at-law" means any act or conduct that, in the judgment of a Sole Inquirer or Committee of Inquiry, or the Court of Appeal, as the case may be,

(a) is such as to be harmful to the best interests of the public or the members of the Society, or

(b) tends to harm the standing of the legal profession generally;

 

There is much authority for the proposition that a breach of the Rules of Professional Conduct alone is a basis for a finding of conduct unbecoming but it seems clear that the reputation of the profession is harmed by an appearance of impropriety and then apparent intransigence in the face of a professional inquiry regarding same.

I want to be clear that this conclusion is not premised upon the language of Grand Chief Norwegian.  This is my assessment regarding whether or not the conduct of Mr. Wallbridge harms the standing of the legal profession generally. 

For certainty, the facts I have found herein and in particular those that support my conclusion with respect to misconduct have been proven on a balance of probabilities, a notionally higher standard only being associated with more serious misconduct.

Section 29.1(1) of the Legal Profession Act, R.S.N.W.T. 1988, c.L-2 mandates a reprimand in light of my finding of guilt and I do so.

I look forward to the submissions of Counsel with respect to whether any of the consequences referenced in section 29.1(2) are warranted in the circumstances.

I will leave it to Counsel to fix a timetable for submissions and I undertake to respond within a week to same.

I cannot conclude without offering an apology for the time it has taken to provide these reasons.  Discipline becomes enormously problematic when it does not take place promptly.  Worse still, the parties are left in a state of uncertainty and stress with respect to the outcome of the process; I deeply regret prolonging that.  Unfortunately, coming to grips with the fiduciary duty element of this matter required careful research and reflection.

Dated this 10th day of March 2019

 

_____________

Peter Harte

 

Specifically I reviewed Guerin v. The Queen 1984 CanLII 25 (SCC); Hodgkinson v. Simms 1994 CanLII 70 (SCC); Frame v. Smith 1987 CanLII 74 (SCC); Norberg v. Wynrib 1992 CanLII 65 (SCC); Galambos v. Perez 2009 SCC 48 (CanLII); Paul Miller “A Theory of Fiduciary Liability” (2011) 56:2 McGill L.J.

This online notice is a reproduction of the official notice posted on March 10, 2019 and signed by Glenn Tait. The original signed notice is available at the office of the Law Society of the Northwest Territories (Yellowknife, NT).