Celanese Canada Inc. et al. v. Murray Demolition Corp. et al.
[Indexed as: Celanese Canada Inc. v. Murray Demolition Corp.]
73 O.R. (3d) 64
[2004] O.J. No. 3983
Court of Appeal for Ontario,
Abella, Moldaver and Goudge JJ.A.
October 1, 2004
Civil procedure -- Counsel -- Disqualification -- Documents in respect of which defendant claimed solicitor-client privilege accidentally coming into possession of solicitors for plaintiff -- Test for disqualification of solicitors for plaintiff being whether defendant has satisfied court that there is real risk that opposing counsel will use information obtained from privileged documents to prejudice of defendant and prejudice cannot realistically be overcome by remedy short of disqualification.
The plaintiffs brought an action alleging that the defendant misappropriated and misused confidential proprietary information belonging to the plaintiffs. The plaintiffs' solicitors, Cassels, Brock and Blackwell LL.P. ("Cassels"), assisted by an American law firm, Kasowitz, Benson, Torres & Friedman ("Kasowitz"), applied for and obtained an Anton Piller order permitting the defendant's business premises to be searched and authorizing the seizure of certain documents. As a result of mistakes on both sides, documents over which solicitor-client privilege was claimed were seized and came into the possession of Cassels and Kasowitz. When the defendant learned that the privileged documents had been seized, it brought a motion to disqualify the law firms. The motion was dismissed. The motion judge found that the documents had come into the possession of the law firms unintentionally and inadvertently and not as a result of bad faith or deliberate wrongdoing, and that in such circumstances, unlike the case of moving solicitors or merging firms, relevance and prejudice could not be presumed. Accordingly, in the opinion of the motion judge, the onus rested on the defendant to establish both elements. Since in his view neither had been proved, he found that the test for disqualification had not been made out. [page65 ]
The Divisional Court allowed the defendant's appeal, holding that the motion judge erred in law in placing the onus on the defendant to prove relevance and prejudice. The court held that it was wrong to conclude that the documents had come into the hands of the law firms through inadvertence on the part of the defendant's counsel, and stated that counsel who avail themselves of the court's jurisdiction and obtain Anton Piller orders are obliged in all circumstances relating to such an order to conduct themselves in a manner that is beyond reproach. When they do not, the court must act swiftly and decisively where the terms and spirit of its order have not been complied with. The court found that it was clear on the record that relevant privileged solicitor and client documents were accessed, copied and reviewed by the plaintiffs' solicitors. That finding formed the cornerstone of the court's conclusion that prejudice should be assumed that the reasonable perception of the integrity of the administration of justice would be adversely affected by permitting the law firms to continue to act for or advise the plaintiffs. Cassels was disqualified from continuing to act as solicitors of record for the plaintiffs, and the plaintiffs and their new counsel were precluded from communicating with or receiving advice or information about the action or related proceedings from Kasowitz. The plaintiffs appealed.
Held, the appeal should be allowed.
The motion judge's finding that the law firms came to be in possession of the privileged documents inadvertently was supportable on the evidence. The evidence showed that the law firms were mindful of the defendant's confidentiality rights and concerned throughout that they be respected. There was no suggestion that the law firms set about to use the privileged communications to the defendant's disadvantage after discovering their true nature.
Where a law firm inadvertently comes into possession of documents belonging to the opposing party that are protected by solicitor and client privilege, the test to be applied in determining whether the law firm can continue to act is whether the moving party satisfied the court that there is a real risk that opposing counsel will use information obtained from the privileged documents to the prejudice of the moving party and that the prejudice cannot realistically be overcome by a remedy short of disqualification. This case was to be distinguished from those cases where the law firm at risk of disqualification has come into possession of the privileged documents through egregious conduct or has engaged in egregious conduct in obtaining them. This test does not apply to those cases; it does not have denunciation and deterrence as its primary goal. Without deciding the issue, the threshold for disqualification will no doubt be lower where egregious conduct is found to exist. Nor is the test meant to apply to situations where the law firm at risk of disqualification has been entirely passive and has come into possession of privileged documents by reason of conduct on the part of the moving party that goes beyond mere error or inadvertence. Without deciding the issue, where, for example, the moving party has engaged in sharp practice or acted with reckless indifference, the remedy of disqualification may well not be available. This case is also to be distinguished from the situation of moving solicitors and merging firms. The test in that situation is set out in MacDonald Estate v. Martin.
The motion judge in this case imposed too high a test in requiring the defendant to establish pressing and substantial prejudice. He also erred in holding that the defendant had failed to show that the privileged documents were relevant to the matter at hand and potentially prejudicial and that an affidavit from one of their solicitors deposing to the nature and significance of the privileged material and its potential for prejudice to them was required. Only documents relevant to the plaintiffs' claim could lawfully be seized under the Anton Piller order and the defendant [page66 ]had never taken the position that the execution of the Anton Piller order went beyond the categories of documents defined by the order. Having applied the test he did, the motion judge failed to make critical findings of fact. The matter should be remitted back to him for determination in accordance with the proper test.
APPEAL from a judgment of the Divisional Court (MacFarland, E. MacDonald and C. Campbell JJ.) (2003), 2003 6649 (ON SC), 69 O.R. (3d) 618, [2003] O.J. No. 4211 (Div. Ct.) allowing an appeal from an order dismissing an application to disqualify solicitors.
MacDonald Estate v. Martin, 1990 32 (SCC), [1990] 3 S.C.R. 1235, 70 Man. R. (2d) 241, 77 D.L.R. (4th) 249, 121 N.R. 1, [1991] 1 W.W.R. 705, 48 C.P.C. (2d) 113 (sub nom. MacDonald Estate v. Martin & Rossmere Holdings, Martin v. Gray, Gray v. Martin), consd Other cases referred to Coulombe v. Beard (1993), 1993 8671 (ON SC), 16 O.R. (3d) 627, 22 C.P.C. (3d) 101 (Gen. Div.); Grenzservice Speditions Ges.m.b.H. v. Jans (1995), 1995 2507 (BC SC), 15 B.C.L.R. (3d) 370, 129 D.L.R. (4th) 733, [1996] 4 W.W.R. 362, 64 C.P.R. (3d) 129 (S.C.); Nova Growth Corp. v. Kepinski, [2001] O.J. No. 5993, [2001] O.T.C. 1037 (S.C.J.); R. v. Gauthier (2004), 236 Nfld. & P.E.I.R. 305, 700 A.P.R. 305, [2004] N.J. No. 150, 2004 NLSCTD 71 (T.D.)
Gavin MacKenzie and Michelle Vaillancourt, for appellant Celanese Canada Inc. et al. Alan Lenczner, for Celanese Canada Ltd. Robert Bell and Douglas Worndl, for Canadian Bearings Ltd.
MOLDAVER J.A.: --
Introduction
1When a law firm, acting for a client, inadvertently comes into possession of documents belonging to the opposing side that are protected by solicitor and client privilege, what test should be applied in determining whether the law firm can continue to act?
2That is the central issue in this appeal. It arises in the context of a motion to disqualify two law firms who inadvertently came into possession of documents protected by solicitor and client privilege following the execution of an Anton Piller order at the defendants' business premises.
3The issue has resulted in conflicting decisions by the motion judge (Nordheimer J.) and the Divisional Court (MacFarland, E. MacDonald and C. Campbell JJ.). The dispute centres around relevance and prejudice. In particular, it centres on which side bears the onus of establishing relevance and prejudice, and how and to what extent relevance and prejudice must be proven before the remedy of disqualification will be ordered. [page67 ]
4The motion judge was of the view that the moving parties bore the burden of establishing relevance and prejudice and, on the record before him, he was not satisfied that they had met their burden. In contrast, the Divisional Court was satisfied that relevance had been established and, since opposing counsel had reviewed the privileged documents, "opposite prejudice should be assumed".
5Thus, as matters presently stand, under the Divisional Court's order of February 6, 2004, the law firm of Cassels, Brock and Blackwell LL.P. ("Cassels") is disqualified from continuing to act as solicitors of record for Celanese Canada Inc. and Celanese Ltd. (collectively the "plaintiff companies") in an action brought by them against Canadian Bearings Ltd. (the "defendant company") and others. The order further precludes the plaintiff companies and their new counsel from communicating with or receiving advice or information about the action (or related proceedings) from the law firm of Kasowitz, Benson, Torres & Friedman ("Kasowitz"), attorneys for the plaintiff companies in the United States.
6The plaintiff companies appeal from that order. They submit that the Divisional Court applied the wrong test and came to the wrong conclusion in determining that Cassels and Kasowitz could no longer act for or communicate with them in their action against the defendant company and related proceedings. In short, they seek to restore the order of the motion judge dismissing the defendant company's motion to disqualify and permitting them to continue to act.
7For reasons that follow, I am respectfully of the view that neither the motion judge nor the Divisional Court applied the correct test in determining whether Cassels and Kasowitz should be disqualified. I am further of the view that in arriving at their respective conclusions, the motion judge did not make critical findings of fact and the Divisional Court made at least one critical finding that may not have been warranted on the evidence.
8In the circumstances, I believe that fairness to both sides requires that the matter be remitted back to the motion judge. At the renewed hearing, the parties should be permitted, if so advised, to adduce further evidence relevant to the test for disqualification and whether the test has been met.
9In the end, as I shall endeavour to explain, the test for disqualification will have been met if, upon consideration of the whole of the evidence, the moving party satisfies the court that there is a real risk that opposing counsel will use information obtained from the privileged documents to the prejudice of the moving party and the prejudice cannot realistically be overcome by a remedy short of disqualification. [page68]
Background
Motion to disqualify
10In view of my conclusion that the matter should be remitted back to the motion judge, I intend to keep my review of the evidence to a minimum. Where necessary, I will refer to facts that are either undisputed or accepted as having been found by the motion judge and not open to serious debate.
11The motion to disqualify has its genesis in an action commenced by the plaintiff companies against the defendant company and others. In essence, it is alleged that the defendant company and others misappropriated and misused confidential proprietary information belonging to the plaintiff companies.
12It is in that context that Cassels, assisted by Kasowitz, moved ex parte on behalf of the plaintiff companies for an Anton Piller order permitting the defendant company's business premises to be searched and authorizing the seizure of the following pertinent documents and records:
(a) All . . . documents, electronic files, computer files . . . and any extracts thereof, that depict or otherwise relate to the Plaintiffs' chemical production process . . . and
(b) All records of transmissions and communications, whether electronic or otherwise, among the Defendants and between them and any other persons or entities, including but not limited to any of the other Defendants herein, with respect to any of the Celanese Records.
13In his capacity as case-management judge, Nordheimer J. granted the order on June 19, 2003. It was executed the following day at the defendant company's premises.
14It is undisputed that in the execution of the Anton Piller order, efforts were made to segregate privileged documents (both paper and electronic) from those that were not. Despite such efforts, a number of privileged electronic documents were seized. It is further undisputed that within a day or two of the search, Cassels and Kasowitz obtained possession of the privileged documents (as well as many hundreds of unprotected electronic documents) and made copies of them. It is also accepted that Todd Colvard, a lawyer with Kasowitz, reviewed all of the electronic documents recovered from the defendant company. In doing so, he segregated certain ones (the contents of which he claims he did not review) that he thought might be protected by solicitor and client privilege. (The defendant company maintains that in the process, he missed two or three over which privilege is claimed.)
15As far as accessibility to the documents is concerned, it is common ground that 13 lawyers, three clerks and two law students [page69 ]from Cassels and 12 lawyers from Kasowitz would have been able to access the privileged electronic documents in the two- to three-week period that they remained in the possession of the law firms following the search. That said, the motion judge made no finding on the extent to which the contents of the privileged documents may have been reviewed. The Divisional Court found that the extent to which the documents had been reviewed, though a matter of dispute on the evidence, was not a determining factor.
16Several weeks after the search, the defendant company learned that a considerable number of electronic documents protected by solicitor and client privilege had been seized. It was that discovery that precipitated the motion to disqualify Cassels and Kasowitz.
Findings and Disposition by the Motion Judge
17On the motion to disqualify, the motion judge made a number of findings of fact that are not challenged. Among them, he found that Cassels and Kasowitz had come into possession of the privileged documents as a result of mistakes made by both sides. On the plaintiffs' side, the mistakes included Cassels' failure to incorporate a specific clause into the Anton Piller order dealing with privileged documents; failure on the part of the executing team to comply strictly with the terms and conditions of the Anton Piller order; and failure on the part of Cassels' counsel to obtain the consent of opposing counsel before breaking the seal on a package, which, unbeknownst to anyone at the time, contained the privileged electronic documents. On the defendants' side, the mistakes included failure by their counsel to more closely monitor the electronic documents that were being seized and failure to demand strict compliance with the terms of the order, particularly the term that no documents were to be removed until a list had been prepared and the defendant company had been given a reasonable opportunity to check it.
18In accordance with his finding that the privileged documents had come to be in the possession of Cassels and Kasowitz by mistake, the motion judge made the following additional finding of significance:
The documents in question were essentially forced out of the hands of the moving parties and into the hands of the plaintiffs' solicitors at the instance of the plaintiffs who obtained the Anton Piller order. Nonetheless, I accept that the fact that privileged documents wound up in their hands was unintended and inadvertent.
(Emphasis added) [page70 ]
19With that finding in place, the motion judge went on to consider whether, on the material before him, the moving parties had made out a case for the "drastic remedy" of disqualification. In the end, he concluded that they had not for two reasons.
20First, he considered it fatal that the moving parties had not filed an affidavit from one of their solicitors "deposing to the nature and significance of the privileged material and its potential for prejudice" to them. In his view, such evidence was required because unlike the situation in "the moving solicitor/merging firms type of case where the significance of the information . . . and its potential for harmful use is self-evident", in the case at hand, there was no way of knowing whether the confidential information in the privileged documents was "mundane" or "irrelevant to the underlying issues" or, as the moving parties would have it, "crucial to the defence of the claim".
21Contrary to the position of the moving parties, the motion judge was not prepared to accept "at face value" their assertion that "the privileged material, if revealed, would seriously prejudice them." While acknowledging that the missing affidavit posed "a dilemma for the moving parties since it would require them to reveal the very information that they wish to protect and reveal it to the very lawyers whom they seek to disqualify and who say that they have not reviewed such material", the motion judge did not consider it an "unfair burden to place on the moving parties" given the "impact of the remedy sought" and the assumption, underlying the motion, that the opposing law firms had already familiarized themselves with the contents of the privileged documents.
22Second, the motion judge considered it fatal that the moving parties had failed to adduce "evidence that would establish a pressing and substantial prejudice" to them. His reasons for holding that such evidence was required are set out below:
Having said that, even if I accept that the documents are significant, absent evidence that would establish a pressing and substantial prejudice to the moving parties, I am not satisfied that the remedy sought is warranted. In this case, there is no suggestion of bad faith or deliberate wrongdoing. While there was what I have found to be a serious mishandling of the sealed envelope, it is not suggested that this was done deliberately to get at priviledged documents. Further, when counsel for the moving parties raised the issue directly and provided a list of the documents over which privilege was claimed, Mr. Pinos [counsel at Cassels] made immediate arrangements to delete all of those documents from the Cassels Brock computer system and instructed the Kasowitz firm to do likewise. While I believe that an affidavit from the attorney in charge of this matter for the Kasowitz firm ought to have been filed confirming that such material had been deleted and that no one at the firm had accessed the information prior to such deletion (with the obvious exception of Mr. Colvard who has been isolated from the case), I do [page71] not consider that the absence of that affidavit is a sufficient reason by itself to warrant the granting of the order sought. I would, however, leave it open to the moving parties to insist on such an affidavit being provided if they wish to be further satisfied in this regard.
23Hence, in determining whether this was a case for disqualification, the motion judge placed little emphasis on the Anton Piller order and its use as the device by which Cassels and Kasowitz had come to be in possession of the privileged documents. Far more significant, it was his finding that the documents had come into their possession unintentionally and inadvertently and not as a result of bad faith or deliberate wrongdoing. In such circumstances, unlike the case of moving solicitors or merging firms, relevance and prejudice could not be presumed. Accordingly, in the opinion of the motion judge, the onus rested on the moving parties to establish both elements. Since in his view neither had been proved, it followed that the test for disqualification had not been made out. Accordingly, Cassels and Kasowitz could continue to act.
Findings and Disposition by the Divisional Court
24The Divisional Court disagreed with the analysis and conclusion of the motion judge. In the court's view, the motion judge erred in law in placing the onus on the moving parties to prove relevance and prejudice:
It appears to us that the principal factor which concerned the motions judge below was the fact that no evidence had been placed before him "regarding the nature of the privileged material that had been disclosed". He was not prepared to accept at face value that the privileged material, if revealed, would seriously prejudice the moving party. He was of the view that it was for the moving party to meet the burden of establishing pressing and substantial prejudice before he would remove CB [Cassels], which he described as "the drastic" remedy sought.
In this, we are of the view that the learned judge fell into error. In our view, it was an error in law to place this burden on the moving party.
25As well, unlike the motion judge, the court placed particular emphasis on the Anton Piller order and its use as the device by which the privileged documents were obtained. In the court's opinion, it was wrong to conclude that the documents had come into the hands of Cassels and Kasowitz "through inadvertence on the part of Bearings' [the defendant company's] counsel". Instead:
They were taken pursuant to the authorization of an Anton Piller Order, one of the court's most extreme remedies. The purpose of an Anton Piller Order is to preserve evidence. Such an order does not permit a party who obtains it to seize and view privileged solicitor and client documents of a party adverse. . . . [page72 ]
Counsel who avail themselves of the court's jurisdiction and obtain such Orders are obliged in all circumstances relating to such an order to conduct themselves in a manner that is beyond reproach.
When they do not, the court must act swiftly and decisively where the terms and spirit of its order have not been complied with.
26With these principles in mind, the court concluded that it was wrong in law to require the moving parties to establish relevance and prejudice:
In our view, it was an error in law to require Bearings [the defendant company] to provide evidence as to the significance of the privileged documents and that their seizure constituted a pressing and substantial prejudice to them.
In our view, where it is clear that the documents are relevant and privileged and they have been reviewed by counsel and others, opposite prejudice should be assumed.
27The court then considered the number of people at Cassels and Kasowitz who would have had access to the privileged documents. After noting that a large number of lawyers at both firms, and three clerks and two students from Cassels "could have accessed the electronic documents", the court continued:
Mr. Colvard of the Kasowitz, Benson firm, is to be commended for bringing the issue of privileged documents to light. However, as Nordheimer J. noted, there was no evidence from that firm confirming that the privileged information had been deleted from the firm's computer system and that no one other than Mr. Colvard had accessed the information prior to any deletion. It is no answer to [the moving parties] to say that Mr. Colvard will no longer work on the file nor is it an answer to say, as he did, that he reviewed privileged documents "but not in detail".
(Emphasis added)
28Earlier in its reasons at paras. 17 and 18, the court commented on the extent to which the documents had actually been reviewed. The relevant passage reads as follows:
The extent to which those documents were reviewed by CB [Cassels] and others is also a matter of dispute on the evidence. In our view, that too is not a determining factor in a case of this kind.
It is an uncontroverted fact that privileged solicitor and client communications of Bearings [the defendant company] were taken pursuant to an Order of the Court and reviewed by the plaintiff's counsel both in Canada and the United States and may well have been viewed by representatives of the Plaintiffs who were also provided copies of the relevant documents.
(Emphasis added)
29On the basis of that analysis, the court made the following critical finding at para. 27 of its reasons: [page73]
In the case before this court, it is clear on the record that relevant privileged solicitor and client documents were accessed, copied and reviewed by the plaintiffs' solicitors.
(Emphasis added)
30That finding was central to the court's decision. It formed the cornerstone of its conclusion that "opposite prejudice should be assumed" and that "the reasonable perception of the integrity of the administration of justice would be adversely affected" by permitting Cassels and Kasowitz to continue to act for or advise the plaintiff companies. Hence, the court made the order forming the subject of this appeal.
Analysis
31Against that background, I turn to the central issue on this appeal, identified earlier as follows:
When a law firm, acting for a client, inadvertently comes into possession of documents belonging to the opposing side that are protected by solicitor and client privilege, what test should be applied in determining whether the law firm can continue to act?
32In framing the issue, I have used the word "inadvertently" to describe the manner by which the law firm at risk of disqualification came to be in possession of the privileged documents. I have done so because that is what the motion judge found and his finding is supportable on the evidence.
33In light of that finding, I believe that in fashioning the appropriate test for disqualification, it is important to note what this case is not about.
34Anton Piller order or not, this is not a case in which Cassels and Kasowitz set out intentionally to search for and seize the defendant company's confidential solicitor and client communications; nor is it a case in which Cassels and Kasowitz acted in flagrant or reckless disregard of the defendant company's confidentiality rights or in a manner that represented a marked departure from the standard of care expected of them. On the contrary, the evidence shows that they were mindful of the defendant company's confidentiality rights and concerned throughout that they be respected. Finally, there is no suggestion that Cassels or Kasowitz set about to use the privileged communications to the defendant company's disadvantage after discovering their true nature.
35As such, this case is to be distinguished from those cases where the law firm at risk of disqualification has come into possession of the privileged documents through "egregious" conduct or has engaged in "egregious" conduct after obtaining them. The [page74 ]test that I am proposing is not meant to apply to those cases. It does not have denunciation and deterrence as its primary goals. Without deciding the issue, the threshold for disqualification will no doubt be lower where egregious conduct is found to exist (see, for example, Grenzservice Speditions Ges.m.b.H. v. Jans (1995), 1995 2507 (BC SC), 129 D.L.R. (4th) 733, [1996] 4 W.W.R. 362, (B.C.S.C.) at p. 760 D.L.R., and Nova Growth Corp. v. Kepinski, [2001] O.J. No. 5993, [2001] O.T.C. 1037 (S.C.J.), leave to appeal to Div. Ct. refused [2002] O.J. No. 2522 (Div. Ct.), leave to appeal to S.C.C. refused [2002] S.C.C.A. No. 396).
36By the same token, the test that I am proposing is not meant to apply to those situations where the law firm at risk of disqualification has been entirely passive and has come into possession of privileged documents by reason of conduct on the part of the moving party that goes beyond mere error or inadvertence. Without deciding the issue, where for example, the moving party has engaged in sharp practice or acted with reckless indifference, the remedy of disqualification may well not be available.
37Next, this case is to be distinguished from the situation of moving solicitors and merging firms. In those cases, it is usually difficult, if not impossible, to know with any certainty the nature or extent of the confidential information that has been transferred. Moreover, there are likely to be nuances both about the client and the client's interests that are known because of the solicitor and client relationship and that could be used to the client's prejudice. As well, there are important policy considerations at play. Notions of disloyalty, professional unseemliness, and the fundamental concern that clients be able to speak freely with their counsel, secure in the knowledge that counsel will not disclose or take advantage of the information, are all factors that figure prominently in the case of moving solicitors and merging firms. Those considerations are of little or no consequence in the case at hand.
38The test for disqualification in the case of moving solicitors and merging firms has been set down in MacDonald Estate v. Martin, 1990 32 (SCC), [1990] 3 S.C.R. 1235, 77 D.L.R. (4th) 249. The threshold is quite low, reflecting as it does the practical difficulties and policy considerations to which I have referred. The test for disqualification should be higher in cases, like the present one, where those concerns are largely absent.
39Turning to the facts and circumstances of this case, the test that I have fashioned is directed at preserving the integrity of our system of justice while at the same time recognizing that litigants should not be deprived of their counsel of choice without good cause. As such, it reflects two of the three competing policy [page75] considerations discussed in MacDonald Estate, supra, at p. 1243 S.C.R. [See Note 1 at the end of the document] It also takes into account the finite nature of the information contained in the privileged documents, the fact that the privileged documents were obtained through inadvertence (albeit in the execution of an Anton Piller order) and the absence of a fiduciary relationship between the firm sought to be disqualified and the moving party. If an innocent mistake has been made, the question is the real risk of harm.
40In short, the test I am proposing is meant to be fair to both sides. Under it, disqualification will result if, upon consideration of the whole of the evidence, the moving party satisfies the court that there is a real risk that opposing counsel will use information from the privileged documents to the prejudice of the moving party and the prejudice cannot realistically be overcome by a remedy short of disqualification.
41Turning to specifics, I begin by emphasizing that the risk of prejudice must be real. A fanciful, speculative or imaginary risk will not suffice. In short, there must be a realistic possibility that the confidential information will be used to the prejudice of the moving party.
42Second, when I refer to "prejudice", I simply mean "detriment". Is there a real risk that the privileged information will be used to the detriment of the moving party in the proceeding at hand or proceedings closely connected to it? The nature and extent of the prejudice will vary from case to case depending on the content of the privileged information. In some instances, it may be high (substantial and pressing); in others, it may be trifling (minor and inconsequential). Manifestly, in deciding whether the remedy of disqualification is warranted, the court will wish to consider the nature and extent of the potential prejudice.
43Third, the onus lies with the moving party to establish the requisite risk of prejudice. To meet that onus, it will, initially, fall on the moving party to establish that:
(1) opposing counsel has received confidential information protected by solicitor and client privilege;
(2) the confidential information is relevant to the matter at hand; and if so,
(3) the relevant confidential information is potentially prejudicial. [page76 ]
44In terms of process, as a rule, it will be for the moving party to serve the opposing side with a notice of motion and an affidavit. [See Note 2 at the end of the document] The affidavit should set out, in general terms, the nature of the documents and why they are protected by solicitor and client privilege, how the documents are relevant and why they are potentially prejudicial. To the extent that one or more of those matters are disputed (including the degree of relevance and/or prejudice), the moving party should be entitled to have the court inspect the document or documents in issue. In such circumstances, unless the moving party consents or the motion judge orders otherwise [See Note 3 at the end of the document], the inspection should take place on an ex parte in camera basis. Where privilege and/or relevance and potential prejudice are not or may not be apparent by simply reviewing the document, the moving party should be able to adduce evidence and make submissions in support of its position. If this requires that the proceeding be conducted on an ex parte basis in order to safeguard the privilege, the motion judge may proceed accordingly.
45Once privilege, relevance and potential prejudice have been established, the moving party will have met its initial evidentiary burden. It will then be for the opposing side to adduce evidence, if it so chooses, to rebut the moving party's evidence. That evidence is likely to take one of the following forms:
(1) The opposing side has no real knowledge or appreciation of the contents of the privileged communications because the document or documents were either not reviewed or reviewed only in a cursory fashion before being returned forthwith to the moving party and deleting or destroying any copies that may have been made (see, for example, R. v. Gauthier, 2004 NLSCTD 71, [2004] N.J. No. 150, 236 Nfld. & P.E.I.R. 305 (T.D.) at para. 35).
(2) The documents do not contain information that is protected by solicitor and client privilege. [page77 ]
(3) The documents, though reviewed, do not contain information that could realistically be used to prejudice the moving party (see, for example, R. v. Gauthier, supra, at para. 35 and Coulombe v. Beard (1993), 1993 8671 (ON SC), 16 O.R. (3d) 627, 22 C.P.C. (3d) 101 (Gen. Div.), at p. 633 O.R.).
(4) Where privileged documents containing potentially prejudicial information have been reviewed and are within the knowledge of one or more lawyers or employees of the opposing law firm, evidence establishing that all reasonable measures have been taken to ensure that the tainted person or persons have not disclosed and will not disclose the confidential communications to the member or members of the firm having carriage of the litigation (see MacDonald Estate v. Martin, supra, at p. 1261 S.C.R.).
(5) The existence of a remedy short of disqualification that will realistically overcome the prejudice. [See Note 4 at the end of the document]
Whatever form the opposing evidence takes, it will of course be open to the moving party to rebut it.
46To repeat, where privileged information has been inadvertently received, the test for disqualification will have been made out only if, after considering the whole of the evidence, the moving party satisfies the court that there is a real risk that opposing counsel will use information obtained from the privileged documents to the prejudice of the moving party and the prejudice cannot realistically be overcome by a remedy short of disqualification.
Application to this Case
47As indicated, I am respectfully of the view that neither the motion judge nor the Divisional Court applied the correct test in determining whether Cassels and Kasowitz should or should not have been disqualified. To be fair to both of them, it must be said that the prior jurisprudence provided no clear direction.
48To be specific, I believe that the motion judge imposed too high a test in requiring the moving parties to establish "pressing and substantial prejudice". I am further of the view that he erred in holding that the moving parties had failed to show that the privileged documents were relevant to the matter at hand and potentially prejudicial and that an affidavit from one of their [page78 ]solicitors "deposing to the nature and significance of the privileged material and its potential for prejudice" to them was required. My disagreement on the issue of relevance and potential prejudice stems essentially from the fact that the documents over which privilege is claimed were seized pursuant to the Anton Piller order.
49The Anton Piller order takes on special significance in this case primarily in the context of relevance and potential prejudice. To be precise, I agree with the following submission at para. 28 of the defendant company's factum:
By their very nature, all documents seized from the Bearings Defendants were either among the allegedly proprietary information that the plaintiffs say was improperly taken from them (the "Celanese Records" as defined in paragraph 1(a) of the Anton Piller Order) or among communications with respect to the Celanese Records ("Transmission Records" as defined in paragraph 1(b) of the Anton Piller Order). Therefore, by operation of the Anton Piller Order, the privileged communications seized and transferred to Cassels and Kasowitz would have been among the Transmission Records, and not only are they relevant to the Action but by Celanese's own definition, would go to the heart of the issues in the Action.
50Expressed somewhat differently, only documents relevant to the plaintiff's claim could lawfully be seized under the Anton Piller order and, as the defendant company points out, "Celanese has never taken the position that the execution of the Anton Piller Order went beyond the two categories of documents defined by the order."
51In sum, so far as the Anton Piller order is concerned, given the motion judge's finding that the privileged documents ended up in the hands of Cassels and Kasowitz through inadvertence, any mistakes attributable to the plaintiff companies that contributed to that outcome do not, in my view, feature significantly in the "disqualification" determination. Manifestly, while mistakes of the kind made here are to be discouraged, the risk of disqualification will probably act as a sufficient deterrent. To do more would risk putting an undue chill on Anton Piller orders and prevent their legitimate use in appropriate circumstances.
52That said, it should be emphasized that when it comes to the protection of a defendant's confidentiality rights, plaintiffs who obtain and execute Anton Piller orders should make every effort to avoid the kind of mistakes made here. The very nature of an Anton Piller order places a particular onus on parties who obtain them to execute them carefully and properly, especially where privileged documents may be among the documents being seized. If that care is not taken, it may be hard in the Anton Piller context to characterize any resulting mistake as inadvertent. [page79 ]
53Hence, in the end, while the Anton Piller order does not get the moving parties "all the way home", it certainly benefits them on the issue of relevance and potential prejudice. As stated, in the circumstances of this case, its significance goes primarily to the nature and contents of the documents seized, their "deemed" relevance to the matter at hand and their potential prejudicial use.
54Having applied the test he did, the motion judge failed to make critical findings of fact on the two issues raised by Cassels and Kasowitz in response to the motion to disqualify, namely: (1) that the privileged documents were either not reviewed or reviewed only in a cursory fashion, and (2) that a firewall was immediately put around Mr. Colvard of the Kasowitz firm, thereby preventing him from tainting others with the knowledge he may have gained from reviewing the privileged documents.
55That, in turn, leads to my concerns with the decision of the Divisional Court and the test applied by it for disqualification. They are threefold.
56First, I believe that the court may have over-emphasised the significance of the Anton Piller order. Although not entirely clear, the reasons of the court reproduced at para. 25 above suggest that the court was unwilling to accept the motion judge's finding that the privileged documents had come into the possession of Cassels and Kasowitz through inadvertence. Rather, in its view, because the documents were obtained through the device of an Anton Piller order, it was up to the court to "act swiftly and decisively" where counsel had "failed to conduct themselves in a manner beyond reproach" and "the terms and spirit of the order [had] not been complied with."
57From this, I read the court as introducing a punitive element into the test for disqualification. For reasons indicated earlier, in the circumstances of this case, I do not agree with that approach.
58Second, I have considerable difficulty with what I have termed the "critical finding of fact" made by the court at para. 27 of its reasons. That finding (quoted above at para. 29) is reproduced again for convenience:
In the case before this court, it is clear on the record that relevant privileged solicitor and client documents were accessed, copied and reviewed by the plaintiffs' solicitors.
(Emphasis added)
59With respect, the court's finding that the documents were "reviewed" is puzzling in view of its earlier observation at para. 17 that: [page80 ]
The extent to which those documents were reviewed by CB [Cassels] and others is also a matter of dispute on the evidence. In our view, that too is not a determining factor in a case of this kind.
60I am unable to agree with the court's observation that "the extent to which [the] documents were reviewed . . . is not a determining factor in a case of this kind." As I have attempted to explain, if the documents were reviewed only in a cursory fashion, that could well negate the risk of prejudice asserted by the moving parties. It follows that I disagree as well with the statement, made in relation to Mr. Colvard, that it is no "answer to say, as he did, that he reviewed the privileged documents 'but not in detail'". On the contrary, if he only skimmed the documents in a cursory way and gained no real knowledge or appreciation of their contents, that would be a complete answer.
61Third, I cannot accept the court's blanket statement, made in relation to Mr. Colvard, that it is "no answer . . . to say that [he] will no longer work on the file". As I have pointed out, that may indeed be an answer if appropriate steps were taken to prevent him from tainting others with the knowledge he may have gained from reviewing the privileged documents.
Conclusion
62In view of the test set out in these reasons, it is clear that necessary findings of fact were not made by the motion judge. For that reason, I have determined that the matter should be remitted back to him for determination in accordance with the proper test. It will be for the motion judge to determine whether the crucial findings of fact can be made on a paper record. If not, viva voce evidence may be required.
63For these reasons, I would allow the appeal and vary the order of the Divisional Court accordingly.
Costs
64In the circumstances, I am of the view that the parties should bear their own costs of this appeal, the appeal to the Divisional Court, and the two leave motions. As for the motion itself, it will be for the motion judge to assess the costs of the motion in its entirety once it has been completed.
Appeal allowed.
Notes
Note 1: The third policy consideration does not apply here. It relates to the desirability of permitting reasonable mobility in the legal profession.
Note 2: Although the moving parties did not file such an affidavit in this case, their failure to do so is not fatal. Cassels and Kasowitz conceded the issue of solicitor and client privilege in respect of most of the documents and, for reasons that will become apparent, prima facie proof of relevance and potential prejudice could be inferred from the manner by which the documents were seized (see paras. 50 and 51, infra).
Note 3: For example, where the opposing side concedes that it has reviewed the documents and has knowledge of their contents, the motion judge may decide that the proceeding need not be ex parte.
Note 4: For example, there may be cases where the risk of prejudice can be overcome by an order preventing the disclosure and use of information contained in the privileged document or derived therefrom.
