factum by the intervener newfoundland and labrador hydro (“nlh”)

FACTUM BY THE INTERVENER
NEWFOUNDLAND AND LABRADOR HYDRO (“NLH”)
REGARDING A REQUEST BY
HYDRO-QUÉBEC CONTRÔLE DU MOUVEMENT DES ÉNERGIES
(“HQCME”, the “Reliability Coordinator” or the “RC”)
TO ADOPT RELIABILITY STANDARDS
FILE R-3699-2009
Presented to the Régie de l‟énergie du Québec (the “Régie”)
Montréal, Québec
January 8, 2010
DM_MTL/118243-00007/2192235.3
-2-
INTRODUCTION
Following the Reliability Coordinator‟s responses to questions by the interveners and the Régie,
NLH would like to make certain comments. These relate to four issues: (1) RC‟s counsel also
acting as counsel for Hydro-Québec TransÉnergie (“HQT”); (2) the reliability standards not
being adopted in the same file as the implementation of the Québec Compliance Monitoring and
Enforcement Program (“QCMEP”) and the Québec Rules of Procedure (“QROP”) for
Compliance Services; (3) the Sanction Guide; and (4) certain Reliability Standards.
(1)
The Reliability Coordinator’s Counsel Double Status
When asked to confirm that Ms. Carolina Rinfret was acting as the Reliability Coordinator‟s
counsel, the RC failed to answer directly: its only response was that the same division of HydroQuébec‟s legal department acted for the RC and HQT, and that Ms. Carolina Rinfret was an
employee of that division:
“2. Can you confirm that Ms. Carolina Rinfret is currently acting as counsel for
HQCMÉ?
R8.2
Voir la réponse à la question 8.1. Me Carolina Rinfret est une avocate qui oeuvre au
sein de la Direction Affaires juridiques – TransÉnergie.”
Nevertheless, Ms. Carolina Rinfret‟s double status as counsel for both HQT and HQCME has
been confirmed by proceedings filed by these two entities before the Régie. Indeed, the
Reliability Coordinator‟s request to adopt reliability standards was filed by “Affaires juridiques
Hydro-Québec”, represented by Ms. Carolina Rinfret. In the Régie files R-3706-2009 and R3707-2009, HQT also had its requests filed by “Affaires juridiques Hydro-Québec”, with the
same reference to Ms. Carolina Rinfret. It therefore seems that Ms. Carolina Rinfret is
simultaneously acting as counsel for each of HQT and HQCME (the RC).
This is problematic. As Reliability Coordinator, HQCME will be required to apply the reliability
standards to all network users in Québec, including HQT. It will sometimes have to take
decisions which will have commercial impacts upon the electricity transport market. Some of
these decisions will be based on information which should only be accessed by HQCME. As
attorney for HQCME, Ms. Carolina Rinfret will have access to this information and will take
part in these decisions; this is true for other attorneys working for HQCME. However, where Ms.
Carolina Rinfret or some of these other attorneys also work for HQT, confidentiality and loyalty
issues may arise, at least in appearance.
Loyalty requires that a lawyer do all that is legally possible to advance his client‟s case;
confidentiality requires that all reasonable measures be taken to avoid secret information from
being revealed. Even with the best intentions it is impossible for a person to disregard what he or
she has learned from one client when working for another; it can also prove impossible to do
everything possible to defend two conflicting positions. That is why the legislatures and courts
DM_MTL/118243-00007/2192235.3
-3have come up with codes of ethics and other rules concerning confidentiality, loyalty and other
such “fiduciary duties”. In the next pages, we examine the case law on conflicts of interest and
the inevitable disclosure doctrine.
Conflict of interest and public opinion
“[U]nless a litigant is assured of the undivided loyalty of the lawyer, neither the public
nor the litigant will have confidence that the legal system, which may appear to them to
be a hostile and hideously complicated environment, is a reliable and trustworthy means
of resolving their disputes and controversies.”1
In these words, the Supreme Court of Canada related the idea that a lawyer‟s duty of loyalty is
not only owed to his client, it is also owed to society as a whole. It is therefore, at times,
irrelevant that clients with conflicting interests agree to share the same attorney: when the public
is put under the impression that two parties which should or could be in opposition are getting
too close, by sharing the same lawyer, that lawyer has a duty to refrain from acting as counsel for
one of these parties.
In the Neil case, this “public order norm” was applied:
“[E]qually, the public in Edmonton, where the prosecution of the appellant had attracted
considerable notoriety, required assurance that the truth had been ascertained by an
adversarial system that functioned clearly and without hidden agendas.”2
Last year, the Superior Court reiterated this principle in 2855-0523 Québec inc. v. Ivanhoé
Cambridge.3 In this case, attorney for the plaintiff began acting for the defendant in warranty
after a settlement was reached between these two parties in the main action (defendant in
warranty was initially defendant) while still acting for the plaintiff. The Court summarized the
key case law on this issue:
“[19]
Dans l'affaire de la faillite de Castor Holdings Ltd.[3], monsieur le juge
Gendreau de la Cour d'appel écrit :
«1. Le conflit d'intérêts
A)
Généralité
L'avocat, on l'a assez répété, est un auxiliaire de la justice et, à ce titre, il a
des obligations envers les tribunaux. Certes, doit-il représenter son client «to the
end», écrit Lord Denning, qui s'empresse néanmoins d'ajouter : «He (the
barrister) must accept the brief and do all he honourably can on behalf of his
client. I say "all he honourably can" because his duty is not only to his client. He
has a duty to the court which is paramount.»
1
2
3
R. v. Neil, 2002 SCC 70, [2002] 3 S.C.R. 631, paragraph 12
Ibid., paragraph 24
2855-0523 Québec inc. v. Ivanhoé Cambridge, 2009 QCCS 2416
DM_MTL/118243-00007/2192235.3
-4À cause de cela et parce que notre système judiciaire repose sur le principe
du débat contradictoire, doit être préservée l'indépendance de l'avocat, incarnée
dans la double notion du respect de la confidentialité des informations révélées
par son client et de l'entière loyauté à ses intérêts.
[…]
C'est pourquoi le conflit d'intérêts, préjudiciable aux droits du justiciable,
doit être réprimé. C'est à ce prix que sera assurée la confiance du public dans
l'intégrité des avocats, confiance dont la perte déconsidérerait l'administration de
la justice. En ce sens, l'on peut affirmer que cette règle est d'ordre public, quoique
relative, car le client, bénéficiaire de la protection et titulaire du droit, peut y
renoncer.
[…]
Dans tous les cas, l'examen de ces questions est fait en prenant en
considération le critère de l'apparence et non celui de la certitude de
l'existence d'un conflit d'intérêts et la possibilité et non la probabilité d'un
préjudice pour la partie.»
[Our emphasis]
[20]
Dans Delia Miller c. R. Gordon Miller et Construction R.G. Miller[4], la Cour
d'appel insistait à nouveau sur la protection de l'intégrité du système judiciaire et précisait
:
«[9]
La protection de l'intégrité du système judiciaire est un objectif
primordial pour tout juge. Le droit d'une partie d'être représentée par un avocat
de son choix est indéniable. Si la conciliation de ces deux principes est
impossible, le premier doit l'emporter.»
[21]
Dans Isoco Construction inc. c. Hydro-Québec[5], le juge Gilles Hébert
décidant d'une requête en déclaration d'inhabilité, comme dans le présent cas, strictement
pour la défenderesse en garantie, mentionnait :
«[26] Le Tribunal constate qu'il y a dans le présent dossier, non seulement une
possibilité mais même une probabilité de conflit d'intérêts et d'utilisation de
renseignements confidentiels, d'autant plus qu'Isoco et St-Paul risquent même
involontairement de se trouver en conflit : les avocats visés accorderont-ils leur
loyauté d'abord à Isoco ou à St-Paul et pourront-ils utiliser, sans aucune réserve,
les renseignements fournis par chacun des clients?»”
The Court had no difficulty in concluding that there was an apparent conflict of interest which,
because of its effect on public opinion, can sometimes override a person‟s right to choose his
attorney:
[22]
Dans le présent dossier, il est difficile de concilier qu'après avoir intenté une
action alléguant des fautes bien définies contre MCC, après un règlement partiel, les
mêmes avocats puissent continuer d'agir à la fois pour les demandeurs principaux et pour
DM_MTL/118243-00007/2192235.3
-5MCC dans l'action en garantie. Le règlement partiel n'a pas mis fin à l'action principale et
les faits qui seront mis en preuve dans l'action principale seront aussi pertinents dans
l'action en garantie
[23]
Les fautes reprochées à MCC demeurent alléguées dans l'action principale car
le jugement sur la requête en amendement n'a pas été porté en appel. À sa face même, il y
a apparence de conflit d'intérêts.
[24]
La protection de l'intégrité du système judiciaire est primordiale et tel que le
rappelait la Cour suprême du Canada dans les arrêts R. c. Neil[6] et MacDonald c.
Martin[7], il est essentiel que le public en général ne doute pas de l'intégrité des avocats
et de notre système judiciaire.
[25]
Considérant les faits allégués et les pièces déposées dans l'action principale,
le Tribunal conclut que les procureurs agissant pour les demandeurs principaux sont
inhabiles à occuper pour la défenderesse en garantie.”4
In the case of HQT and HQCME, if Ms. Carolina Rinfret is allowed to act for both, not only
could members of the public feel uneasy about this “special status”, but some network users may
feel that the Reliability Coordinator is too close to one of the other market participants, namely
HQT, and that this closeness might lead to asymmetric information - originating from the RC between HQT and the other market participants. The divulgation of information by the RC is
dealt with in the RC‟s Code of Conduct.
HQCME Code of Conduct
As pointed out by the Reliability Coordinator in its response, the Régie had originally requested,
in its decision D-2007-95,
“(...)[d]e déposer pour approbation par la même formation, d‟ici le 28 septembre 2007, un
Code de conduite complet s‟appliquant spécifiquement aux employés de CMÉ ainsi
qu‟aux employés des autres directions du Transporteur effectuant des tâches reliées au
rôle du coordonateur de la fiabilité”.
NLH believes that the Régie required the Reliability Coordinator to file a Code of Conduct
applicable to all its employees and all the employees of the Transporter who deal with issues
related to the RC‟s role. It is most likely that the Régie had this in mind when it approved the
definition of “Staff” contained in the Code of Conduct, in its decisions D-2007-142 and D-2008004: this definition is drafted much in the same way.
It is therefore curious that the Reliability Coordinator claims, in its Response, that neither Ms.
Carolina Rinfret nor any other attorney of HQT (including those of the RC) fits into this
definition of “staff”. How can they advise the RC without accomplishing tasks related to its role?
Unfortunately the Response does not contain any explanation.
4
Ibid.
DM_MTL/118243-00007/2192235.3
-6It does, however, refer to section 3 of the Code of Conduct which provides the rationale for such
a divide between the Reliability Coordinator‟s staff and that of other divisions of HQT or of HQ:
to prevent preferential treatment. This principle is also found in the US Code of Federal
Regulations, part 358, paragraph 358.2 (a).
Non preferential treatment is not the only principle behind such codes of conduct: there must
also be a general prohibition against the use of sensitive transmission information by persons
dealing with marketing activities. Such rule is found at paragraph 4.7 of the RC‟s Code of
Conduct; it is also found at paragraph 358.2(c) of the US Code:
“RC Code of Conduct
“U.S. CODE
4.7 Staff shall not disclose to an
employee of a System User, to
an employee of another unit of
the Transmission Provider or to
an employee of an Affiliate of
the Transmission Provider any
information
conferring
Preferential Treatment.”
358.2 (c) As more fully
described and implemented in
subsequent sections of this part,
a transmission provider and its
employees,
contractors,
consultants and agents are
prohibited from disclosing, or
using a conduit to disclose, nonpublic transmission function
information to the transmission
provider‟s marketing function
employees.”
Moreover, in its RFI, NLH alluded to an attorney‟s duty of loyalty under s. 3.00.01 of the Code
of ethics of advocates. While attempting to best serve one of its client – HQT – wouldn‟t a loyal
attorney use all the information at his disposal to fulfill his mandate? Unfortunately, the
Reliability Coordinator fails to address this issue, alleging that it goes beyond the scope of the
evidence in this file.
Inevitable Disclosure Doctrine
NLH is not accusing the Reliability Coordinator‟s attorneys of divulging sensitive transmission
information to employees of HQT‟s marketing division: it is simply raising a flag regarding the
difficult position in which they might find themselves. This position is even more difficult than
that of a law firm in which two or more lawyers are working for opposing interests: at least in
that case it would be possible to erect a “Great Wall” / “Chinese Wall” or some kind of barrier
between the files of the conflicting clients. Yet even in this case a firm can be “conflicted out”.
In the case of an individual, such barriers are not possible: one cannot divide one‟s mind in two
or more separate compartments. That is why in circumstances – where the same person carrying
sensitive information is employed by entities of divergent interests – legal doctrine and case law
have developed the theory of inevitable disclosure.
DM_MTL/118243-00007/2192235.3
-7Mtre. Nathalie-Anne Béliveau and Mr. Derek Knoechel, in an article entitled “Réflexions sur la
doctrine de la divulgation inevitable”5, presented the origins and applications of the “inevitable
disclosure doctrine”:
“Aux États-Unis, la doctrine de la divulgation inévitable a été élaborée et est employée
afin de protéger les secrets commerciaux et renseignements confidentiels de l‟employeur
en pareilles circonstances. Cette doctrine est fondée sur la prémisse qu‟un employé qui
bénéficie d‟une connaissance spécifique des secrets commerciaux ou renseignements
confidentiels de l‟employeur et qui est embauché par un concurrent pour occuper un
poste similaire divulguera ou utilisera inévitablement ces informations dans l‟exercice de
ses nouvelles fonctions et ce, même en l‟absence de toute intention de ce faire.”6
As its title suggests, this doctrine does not require evidence of bad faith on the part of the
employee:
“Certains suggèrent néanmoins que le tribunal doive d‟abord conclure à la
mauvaise foi de l‟ex-employé avant d‟accorder la mesure injonctive. Même s‟il ne fait
aucun doute que le tribunal sera en de telles circonstances davantage disposé à inférer
qu‟il existe un risque réel et important de divulgation, l‟absence d‟une telle conclusion de
mauvaise foi ne devrait pas jouer un rôle déterminant dans l‟issue de la réclamation.
Cette doctrine est en effet fondée sur le principe voulant qu‟il existe des situations dans
lesquelles une personne, encore soit-elle de bonne foi, divulguera inévitablement les
secrets commerciaux ou renseignements confidentiels auxquels elle a eu accès dans le
cadre de son emploi précédent.”
So far, this doctrine has mainly been used to protect trade secrets by impeding certain key
employees of a company from working for a competitor, at least for a certain time. As explained
in the quotation above, since disclosure of vital information is not always conscious, there is no
need for a demonstration of mala fides on the part of the employee: the inevitable disclosure
doctrine can be used to prevent an employee from ever putting himself in a situation where he
could possibly divulge sensitive information. Béliveau and Knoechel further explain the
principles guiding the application of this doctrine:
“Cette hésitation dont font preuve certains tribunaux à entériner la doctrine de la
divulgation inévitable découle notamment du fait qu‟elle met en jeu des intérêts d‟ordre
public qui s‟opposent[4]. Parmi les facteurs qui militent en faveur de l‟application de la
doctrine se trouve notamment l‟intérêt qu‟ont les employeurs à assurer la protection des
innovations et inventions qu‟ils développent au prix d‟efforts et d‟investissements
considérables. Mentionnons aussi l‟intérêt général de la société de veiller à ce que les
entreprises continuent d‟innover en ayant l‟assurance que leurs secrets commerciaux
soient protégés. L‟adoption de cette doctrine peut également être envisagée comme un
moyen de promouvoir et de maintenir des normes d‟éthique commerciale élevées[5].”7
5
6
7
Published in Développements récents en droit du travail, 2008, Éditions Yvon Blais, p. 387
Ibid., p. 389
Ibid., p. 391
DM_MTL/118243-00007/2192235.3
-8PepsiCo Inc. v. Redmond8
The leading case on this issue is PepsiCo Inc. v. Redmond: in the middle of a “sports drink war”
between Quaker and PepsiCo, the former hired the defendant Redmond who at the time held a
high-level position (general manager for California) with the latter. PepsiCo sued. It introduced
evidence that the defendant had detailed knowledge of [PepsiCo]‟s pricing architecture and that
he was aware of and had been involved in preparing [PepsiCo]‟s customer development
agreements and that he had intimate knowledge of [PepsiCo]‟s “attack plans” for specific
markets. In short, the defendant carried with him a lot of information which, if it fell into the
hands of Quaker, could give this company an undue advantage.
The Court then assumed the difficult task of weighing the threat of divulgation of information
against the harm done to the free movement of labour. It begins by summarizing the district
court‟s analysis:
“[u]nless Redmond possessed an uncanny ability to compartmentalize information, he
would necessarily be making decisions about Gatorade and Snapple by relying on his
knowledge of [PepsiCo]‟s trade secrets. It is not the „general skills and knowledge
acquired during his tenure with‟ PepsiCo that PepsiCo seeks to keep from falling into
Quaker‟s hands, but rather „the particularized plans or processes developed by [PepsiCo]
and disclosed to him while the employer-employee relationship existed, which are
unknown to others in the industry and which give the employer and advantage over his
competitors‟. ”
It then states that this case differs from the “traditional trade secret case” where a former
employee willfully joins enemy ranks to give a competitor an unfair advantage. Quaker and
Redmond assert that they have not and do not intend to use whatever confidential information
Redmond has by virtue of his former employment. To this, the court responds:
“The defendants‟ arguments fall somewhat short of the mark. Again, the danger of
misappropriation in the present case is not that Quaker threatens to use [PepsiCo]‟s
secrets to create distribution systems or coopt [PepsiCo]‟s advertising and marketing
ideas. Rather, PepsiCo believes that Quaker, unfairly armed with knowledge of
[PepsiCo]‟s plans, will be able to anticipate its distribution, packaging, pricing and
marketing moves. Redmond and Quaker even concede that Redmond might be faced with
a decision that could be influenced by certain confidential information that he obtained
while at PepsiCo. In other words, PepsiCo finds itself in the position of a coach, one of
whose players has left, playbook in hand, to join the opposing team before the big game.”
The court therefore affirms the district court‟s decision.
Hyman Cos v. Erwin Pearl, Inc.9
This decision is of particular interest for the case at hand: in concerns an attorney, Mr. Brozost,
who left to work for a competitor of his employer.10 His position involved access to vital
information:
8
9
[1995] 54 F. 3d 1262
119 F. Supp. 2d 499 (E.D. Pa. 2000)
DM_MTL/118243-00007/2192235.3
-9“9. In his capacity as counsel for Hyman, Mr. Brozost handled all legal matters arising
out of Hyman‟s business operations, including employment, insurance, billing,
collections, and copyright issues. Much of his time was spent conducting site inspections,
lease negotiations and administration and in coordinating efforts with real estate
consultants. In this position, Mr. Brozost also developed relationships with landlords,
developers and casino and hotel operators.
10. Mr. Brozost had contact on an almost-daily basis with Nat Hyman regarding, among
other issues, employment and benefit matters, leasing, the profitability of individual
stores and which regions and stores were most profitable. Hyman‟s general criteria for
selecting store locations and how these criteria applied to specific locations, new ideas for
store design, lighting and siting, potential expansion opportunities, including which stores
might be purchased from other store owners and which stores Hyman might be willing to
sell, arguments for why developers should choose to rent to Hyman as opposed to its
competitors, specific criteria for the hiring of new employees and Hyman‟s future plans.
In addition, Mr. Brozost had access to and was given, when needed, financial information
on the profitability of many of the individual Hyman stores, including the actual profit
and loss statements. The only information to which Mr. Brozost did not have access was
the salary of other company executives.”
An interlocutory injunction was first issued, followed by a permanent one, to prevent
Mr. Brozost from representing his new employer in specific situations where his former
employer and new employer had conflicting interests. This is particularly relevant here: not only
can the inevitable disclosure doctrine prevent a person from working for a competitor of his
former employer, it can even apply to the act of legal representation. The court noted that:
“[e]ven in the absence of a restrictive covenant, a former employer can enjoin the
competitive use of confidential information obtained as a result of the trust and
confidence of a former employment.”11
Inevitable disclosure doctrine in Québec
Béliveau and Knoechel list numerous cases in Québec where the inevitable disclosure doctrine
has been applied. Amongst these we find Lawrence Home Fashion c. Sewell12, in which Justice
Wery said the following, at paragraph 40:
“[À] ce stade, et toujours du point de vue des apparences, même avec les meilleures
intentions et en présumant de sa bonne foi, il semble qu‟il pourrait être difficile, sinon
impossible, à Sewell de ne pas faire usage, d‟une façon ou d‟une autre, des informations
confidentielles de la demanderesse dans sa stratégie pour obtenir plus d‟affaires de Sears
du Canada au détriment de son ex-employeur.”
These authors also quote Justice Mongeon in Ubisoft Divertissements inc. c. Tremblay:
10
11
12
Although the inevitable disclosure doctrine is not explicitly mentioned in the decision, this case has been cited as
an example of the doctrine. See, for instance, The Inevitable Disclosure Doctrine: Safeguarding the Privacy of
Trade Secrets, an article by Jessica Lee published under 33 The Colorado Lawyer 17 (October 2004). The
Québec author Nathalie-Anne Béliveau also discusses this case in her article, supra note 1.
Ibid., page 504
2003 CanLII 43377 (C.S.), D.T.E. 2003T-643 (C.S.)
DM_MTL/118243-00007/2192235.3
- 10 “Tremblay, au surplus, possède une grande connaissance du fonctionnement de Ubisoft et
est même a même, parfois inconsciemment, de prendre des décisions chez Vivendi qui
13
pourraient affecter Ubisoft négativement.”
Similarly, we find in Alstom Hydro Canada Inc. c. Néron14 the following quotation by Justice
Fournier:
“Qu‟il soit bien compris qu‟au moment présent l‟honnêteté et la bonne foi de André
Néron ne sont en aucune façon mis en doute par le tribunal; il en est de même pour
Litostroj.
Ce qu‟il faut éviter c‟est que André Néron subisse ou vive une situation de « high
probability of inevitable disclosure ». ”
Yet another application of this doctrine can be found in Justice Trahan‟s reasoning in ING
Canada Inc. c. Robitaille15
“N‟oublions pas aussi qu‟une fois révélée, une information confidentielle perd, à tout
jamais, cette qualité. Je prends en compte la nature des choses et la nature humaine, on a
beau essayer de ne pas dire certaines choses, il arrive que l‟on s‟échappe!”
Similarities between the inevitable disclosure doctrine and the duty of loyalty
In Neil, the same rationale used to support the inevitable disclosure doctrine – the inability for
human beings to compartmentalize their brains – is invoked to justify the duty of loyalty
preventing an attorney from acting for two conflicting clients:
“25
The general duty of loyalty has frequently been stated. In Ramrakha
v. Zinner reflex, (1994), 157 A.R. 279 (C.A.), Harradence J.A., concurring, observed, at
para. 73:
A solicitor is in a fiduciary relationship to his client and must avoid situations
where he has, or potentially may, develop a conflict of interests . . . . The logic
behind this is cogent in that a solicitor must be able to provide his client with
complete and undivided loyalty, dedication, full disclosure, and good faith, all of
which may be jeopardized if more than one interest is represented.
26
The duty of loyalty was similarly expressed by Wilson J.A. (as she
then was) in Davey v. Woolley, Hames, Dale & Dingwall, supra, at p. 602:
The underlying premise . . . is that, human nature being what it is, the solicitor
cannot give his exclusive, undivided attention to the interests of his client if he is
torn between his client‟s interests and his own or his client‟s interests and those
of another client to whom he owes the self-same duty of loyalty, dedication and
good faith.”16
13
14
15
16
2006 QCCS 2475, D.T.E. 2006T-493 (C.S.), paragraph 41
2006 QCCS 5483, D.T.E. 2007T-143 (C.S.), paragraphs 17 and 18
2007 QCCS 634, D.T.E. 2007T-239 (C.S.), paragraph 57
R. v. Neil, supra note 1, paragraphs 25 and 26
DM_MTL/118243-00007/2192235.3
- 11 Application of the inevitable disclosure doctrine to the present case
One might ask why NLH invokes the inevitable disclosure doctrine in this case. The dynamic is
indisputably different: whereas in the classic case the possible disclosure of information to the
new employer would be detrimental to the former employer, in this case, disclosure would be
detrimental to third parties: the other network users, and the public in general.
There is also a time issue: since one cannot work simultaneously for two competitors (one or
both of them would get upset and terminate the employee), the classic case usually involves a
“former employer” and a “new employer”. In our case, HQCME counsel would work and
continue working for HQCME and HQT.
This difference does not render the inevitable disclosure doctrine inapplicable to the present
situation. On the contrary, as is the case with the duty of loyalty, it is even stronger when the
attorney is acting for both conflicting clients at the same time:
“27
More recently in England, in a case dealing with the duties of
accountants, the House of Lords observed that “[t]he duties of an accountant cannot be
greater than those of a solicitor, and may be less” (p. 234) and went on to compare the
duty owed by accountants to former clients (where the concern is largely with
confidential information) and the duty owed to current clients (where the duty of loyalty
prevails irrespective of whether or not there is a risk of disclosure of confidential
information). Lord Millett stated, at pp. 234-35:
My Lords, I would affirm [possession of confidential information] as the
basis of the court‟s jurisdiction to intervene on behalf of a former client. It is
otherwise where the court‟s intervention is sought by an existing client, for a
fiduciary cannot act at the same time both for and against the same client, and his
firm is in no better position. A man cannot without the consent of both clients
act for one client while his partner is acting for another in the opposite interest.
His disqualification has nothing to do with the confidentiality of client
information. It is based on the inescapable conflict of interest which is inherent
in the situation. [Emphasis added.]
(Bolkiah v. KPMG, [1999] 2 A.C. 222 (H.L.))” 17
Conclusion on the Reliability Coordinator’s Counsel’s double status
Considering that Ms. Caroline Rinfret – and perhaps some other attorneys also working for
HQT – has already begun representing HQCME, she has most likely already been exposed to
sensitive information. The same fundamental logic applies in this case as did in all those cited
above: in order to protect secret information, and absent the possibility of compartmentalizing
the information within the mind, it must be forbidden for any of HQCME‟s counsel to represent
both it and HQT in its commercial functions. For this reason, HQCME current counsel must not
be allowed to continue representing or advising HQT in this case. In subsequent cases, the same
17
Ibid., paragraph 27
DM_MTL/118243-00007/2192235.3
- 12 principle should apply to all present and future HQCME attorneys: they should not and must not
be allowed to represent HQT.
(2)
Reliability Standards not examined with QCMEP and QROP
As pointed out by the intervener Rio Tinto Alcan18, there should have been a hearing before the
Régie on the Implementation of the Québec Compliance Monitoring and Enforcement Program
(QCMEP) and the Québec Rules of Procedure (QROP) for Compliance Services: it would also
have been preferable for this hearing to take place in the same file as the adoption of the
Reliability Standards (R-3699-2009).
Indeed, there would be greater coherence in examining both the reliability standards and the
related enforcement/procedure rules at the same time; there would also be fairness in allowing
the network users – to whom the QCMEP and QROP rules will apply – to adduce expert
evidence and submit, and greater transparency in allowing for a hearing.
(3)
Comments on the Sanction Guide
Section 3.11 of the Sanction guide19 tells us that the penalties for violation of the Reliability
Standards should be such that they will make such non-compliance uneconomical:
“3.11 Economic Choice to Violate
Owners, operators, and users of the bulk power system may be presented with situations
or circumstances where compliance with the Reliability standards preclude or reduce an
economic gain that could be realized by violating the Standards. Penalties shall be
sufficient to assure that entities responsible for complying with reliability standards do
not find it attractive to make economic choices that cause or unduly risk violations to
Reliability Standards, or risk or cause incidents resulting from violations of the reliability
standards. Penalties levied to violators who have made such a choice shall reflect this
aspect of the violation.”
HQT, like all network users, will be subject to sanctions by the Régie for non-compliance with
the Reliability Standards. The proceeds of the fines paid will be returned to HQT to be used for
reliability purposes. These are to be put into a separate account and should not be considered as
“costs” when determining HQT‟s tariffs since they are not paid by HQT.
A question may arise, however, regarding the accounting for fines paid by HQT: when a sum of
money is paid by HQT as a penalty but is subsequently used by HQT to improve its network:
who will ultimately bear this charge? NLH believes that the money paid by HQT as fines (and
18
19
Commentaires de Rio Tinto Alcan inc. à l’égard des règles des Règles de procédure applicables aux services
relatifs à la conformité pour le Québec (RPCQ) de la NERC et du Programme de suivi de la conformité du
Québec du NPCC, filed on November 27, 2009, pages 5 and 6
B-1- HQCME-2, document 9, filed on June 2, 2009
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- 13 subsequently used by it for reliability purposes) should be borne by Hydro-Québec‟s
shareholders through reduced benefits, and not by its customers through increased tariffs;
otherwise, HQT will have no economic incentive to comply with the Reliability Standards.
In other words, if HQT normally spends “X” $ on reliability – which it charges to its clients
through its tariff – but then is asked to pay a fine of “Y” $, which it later spends on reliability,
NLH believes that HQT should only be able to claim (X – Y) $ as “reliability charges” in its next
tariff case; this way, the fine of Y $ will not be passed on to its customers.
(4)
Comments related to certain Reliability Standards
NLH would like to point out that its first request for information to the Reliability Coordinator
allowed for the correction by the latter of certain errors contained in the draft version of its
Reliability Standards:
“Question 4 (by NLH):
At section D of this standard (page 7), we find three provisions under section 1.3 “Data
Retention” whereas the NERC standards only have two; we also note that in the
HQCME version, provisions 1.3.2 and 1.3.3. are the same in the English version, but are
different in the French version.”20
“Answer 4 (by HQCME):
Le coordonnateur de la fiabilité constate qu'une erreur s'est glissée lors de la traduction
du document. Le paragraphe D-1.3.3. ne devrait pas exister. La norme CIP-006-1 est
révisée et déposée à la pièce HQCMÉ-2, document.”21
It also pointed out that there were many differences between the glossary of terms filed by the
Reliability Coordinator and NERC‟s.22
CONCLUSION
NLH generally agrees with the reliability standards proposed by the Reliability Coordinator
where these will actually serve to increase reliability on HQT‟s network and not serve HQ‟s
commercial interests. But, keeping this last part in mind, NLH would prefer for the Régie to
study these standards and the QCMEP and QROP rules in the same file. This would give market
participants a better understanding of these new sets of rules and a global perspective on the new
reliability framework for Québec. Due process is the first stone on the road to fairness in a
commercial setting.
20
21
22
C-4-6- NLH- Information request no. 1 submitted to the Reliability Coordinator, filed on October 19, 2009
B-10 – HQCME – Réponses à la demande de renseignement numéro 1 de NLH, filed on November 5, 2009
Information request no.1, supra, note 20, Question 7
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