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Celanese Canada Inc. et al. v. Murray Demolition Corp. et al.
[Indexed as: Celanese Canada Inc. v. Murray Demolition Corp.]
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69 O.R. (3d) 632
[2004] O.J. No. 372
Court File No. 03-CV-250875CM2
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Ontario Superior Court of Justice
Divisional Court
MacFarland, E. Macdonald and C. Campbell JJ.
February 6, 2004
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Professions -- Barristers and solicitors -- Disqualification -- Plaintiffs' lawyer obtaining copies of documents that had been seized under Anton Piller order -- Plaintiffs' lawyer obtaining privileged documents -- Defendant moving to have plaintiffs' lawyer disqualified -- No onus on defendants to establish prejudice by disclosure of privileged documents -- Prejudice to be assumed -- Plaintiffs' lawyers disqualified from acting in litigation and related proceedings. [page633]
On June 19, 2003, Nordheimer J. granted the plaintiffs, who were represented by the law firm CB&B ("CB"), an ex parte Anton Piller order to enter the premises of the defendant Canadian Bearings Ltd. ("Bearings") to search and seize documents. The order was deficient in that it provided no procedure to be followed in the event that privileged documents were encountered. The order was executed on June 20 and 21, 2003, and electronic files were removed in their entirety from Bearings' system. The electronic files contained privileged documents. These documents were viewed by CB and by the plaintiffs' American lawyers, the firm of KBT&F, and the documents may have been viewed by representatives of the plaintiffs, who were also provided copies of relevant documents. The presence of privileged material was disclosed by the American lawyers and, when the defendants learned of it, they moved to have CB disqualified. Nordheimer J. dismissed the motion, and the defendants appealed.
Held, the appeal should be allowed.
The principal factor that concerned the motions judge was the fact that no evidence had been presented regarding the nature of the privileged material that had been disclosed. He was of the view that in order to justify disqualification of the plaintiffs' solicitors, it was for the moving party to meet the burden of establishing pressing and substantial prejudice by the disclosure of the material. This approach, however, was an error in law. Where it is clear that the documents are relevant and privileged and that they have been reviewed by counsel and others, prejudice should be assumed. It was inappropriate to require the party whose privileged documents are disclosed to demonstrate prejudice; such a requirement would defeat entirely the privilege. In the circumstances of this case, the only appropriate remedy was the removal of CB as solicitors of record for the plaintiffs in this and any related litigation. Further, the plaintiffs should be precluded in this litigation and any related litigation from receiving advice and information from KBT&F.
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Cases referred to
ATCO Gas & Pipelines Ltd. v. Sheard, [2003] 10 Alta. L.R. (4th) 222, 6 W.W.R. 219 (C.A.); 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, 1995 2507 (BC SC), [1996] 4 W.W.R. 362, 64 C.P.R. (3d) 129 (B.C.S.C.); Lavallee, Rackel and Heintz v. R., [2002] 3 S.C.R. 209, 2002 SCC 61, 4 Alta. L.R. (4th) 1, 217 Nfld. & P.E.I.R. 183, 216 D.L.R. (4th) 257, 2002 SCC 61, 292 N.R. 296, 651 A.P.R. 183, [2002] 11 W.W.R. 191, 96 C.R.R. (2d) 189, 167 C.C.C. (3d) 1, 2002 SCC 61, 2002 SCC 61, 3 C.R. (6th) 209, 4 Alta. L.R. (4th) 1, [2002] S.J. No. 61 (sub nom. R. v. Lavallee, Rackel & Heintz); MacDonald Estate v. Martin, 1990 32 (SCC), [1990] 3 S.C.R. 1235, 70 Man. R. (2d) 241, 77 D.L.R. (4th) 249, 1990 32 (SCC), 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)
Authorities referred to
Sharpe, R.J., Injunctions and Specific Performance, looseleaf ed. (Aurora, Ont.: Canada Law Book)
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APPEAL of an order dismissing a motion to disqualify the solicitors for the plaintiffs.
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Paul Bates, for Celanese Canada Inc. and Celanese Ltd.
Gavin MacKenzie and Michelle Vaillancourt, for Cassels, Brock & Blackwell and Kasowitz, Benson & Friedman. [page634]
Robert B. Bell and Douglas M. Worndl, for defendants Canadian Bearings Ltd., Forrokh Khalil, Hossein Banijamali and Canadian Petroleum Processing & Equipment Inc.
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[1] BY THE COURT: -- This is an appeal from an interlocutory order of Nordheimer J. [Reported at 2003 6649 (ON SC), 69 O.R. (3d) 618, ante] dismissing a motion to remove Cassels, Brock & Blackwell LLP as solicitors for the plaintiff and other related relief.
[2] On June 19, 2003, the plaintiffs obtained from Nordheimer J. an ex parte Anton Piller Order which permitted them to enter listed premises of the defendant Canadian Bearings Ltd. for the purposes of search, inspection, removal, detention and retention of certain documents, records and things as set out in paras. 1(a) and (b) of the Order in issue which Order we note was drafted by Cassels Brock & Blackwell (hereafter "CB").
[3] The search, inspection and seizure of documents took place June 20 and 21, 2003. Unfortunately, the Order was deficient, in that it provided no process or procedure to be followed in the event privileged documents were encountered.
[4] It is important, we think, to note that counsel often come to the court seeking Anton Piller orders on an extremely urgent basis. The orders themselves are by their nature, lengthy and contain many terms. The court very much relies on counsel, in making such orders, to not only bring forward all of the relevant evidence but also to draft the proposed orders in a way that will be least intrusive and which will preserve the purpose of the order which is the preservation of the evidence.
[5] In granting an ex parte order of this type, the presiding judge is very much reliant on counsel, not only to draft an order that will achieve its purpose of preservation but also be carried out in a way that will ensure sensitivity for the rights of the defendant.
[6] Sometimes it will happen, as it did here, that necessary terms are not included in the formal order. It is important always to have a term included which deals with privileged communications, which may be encountered during the course of the search. In this regard, this court echoes the sentiment expressed by Huddard J. (as she then was) in Grenzservice Speditions Ges.m.b.H. v. Jans (1995), 1995 2507 (BC SC), 129 D.L.R. (4th) 733, 64 C.P.R. (3d) 129 (B.C.S.C.) at para. 112 when she said"Perhaps the time has come to consider developing a standard form Anton Piller order." [page635]
[7] The paper documents were not a problem, privileged documents were identified and segregated on site before removal. The difficulties here arise in the context of the electronic documentation.
[8] The search commenced in the afternoon of June 20 and continued through the night into the early morning of June 21, 2003.
[9] When the Order was served on Bearings, it consulted its counsel Borden Ladner Gervais (hereafter "BLG") who immediately dispatched lawyers to the premises.
[10] There is some dispute on the evidence about what was said in the telephone discussion between Mr. Pinos of CB and Mr. Hendell of BLG but, in our view, it matters not for present purposes.
[11] The search and seizure of the electronic documents was done by an employee of BDO Dunwoody as the Order authorized. Some effort was made at the time of search to segregate privileged solicitor and client documents. Those identified were placed in a separate electronic file and never copied by or made available to CB. The search and seizure of the electronic information was, however, carried out quickly and there was no opportunity for the BLG people to review each electronic document -- even in a cursory way -- to ensure privileged solicitor and client documents were properly sorted. The electronic files and hard drive were removed and placed in a bag that was sealed and initialled by Bearings' solicitor on site -- Mr. Hendell of BLG -- and by Bernard Eastman, the supervising solicitor. No listing of this material was made before it was removed from the premises contrary to the explicit term of the Order in this respect.
[12] It should be noted that the electronic files were entirely removed from Bearings' system. They not only had no list of what had been taken, they had no copies of the documents.
[13] The bag was opened at the BDO premises, copied and the information provided to CB who in turn passed it on to their instructing solicitors in the USA, Kasowitz, Benson, Torres & Friedman (hereafter "KB").
[14] Before the bag was opened, Mr. Pinos, who was aware of the seal bearing Mr. Hendell's initials, took no steps to communicate with BLG at all as to whether or not BLG had any objection to him (Pinos) opening and taking copies of the electronic documents. He checked with Mr. Eastman to ensure there had been no on-site agreement made with BLG in relation to the electronic documentation and then simply relied on the terms of the order. Buried deep within the lengthy order was a term which permitted copying of the seized material. He did not consider it necessary or even prudent to contact the BLG solicitor whose initials appeared on the seal before accessing the electronic documentation. [page636]
[15] There is dispute on the evidence about the purpose of the seal and the reasons why Messrs. Eastman and Hendell put their initials there in the first place. In our view, it is not necessary to resolve that dispute for our purposes. Mr. Justice Nordheimer was critical of the actions of both Mr. Pinos and Mr. Eastman, and suffice it to say, we agree entirely with his comments in this respect.
[16] As might have been predicted, had anyone given it thought, there were privileged documents contained among the electronic documents.
[17] The extent to which those documents were reviewed by CB 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.
[18] It is an uncontroverted fact that privileged solicitor and client communications of Bearings were taken pursuant to an Order of the court and were viewed 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.
[19] CB raises some fuss about the fact that BLG, on behalf of its client, raised no issue of privilege in attendances before Nordheimer J., the Case Management judge, immediately following the execution of the Anton Piller Order. To that we say, it is of no moment. Bearings had neither a list of the document taken nor the documents -- they were all removed. Indeed it appears on the record before us that Mr. Colvard of the KB firm was probably among the first persons aware that there were privileged documents among the electronic documents.
[20] In any event, BLG soon became aware and immediately moved to remedy the situation before the case managing judge for the relief earlier set out.
[21] 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, which he described as "the drastic" remedy sought.
[22] 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.
[23] The concept of shifting the onus to the complaining party that the other possessed (or used) confidential information was [page637] recently dealt with by the Court of Appeal in Alberta in the context of two related retainers of a solicitor.
[24] In ATCO Gas & Pipelines Ltd. v. Sheard, 2003 ABCA 61, 10 Alta. L.R. (4th) 222 (C.A.), the Court of Appeal concluded that the chambers judge had applied the wrong legal test by shifting the onus on ATCO to establish that Sheard possessed confidential information relevant to the current "rate application". At para. 16, the court said:
To answer whether confidential information relevant to the current issue had passed, and to avoid the need to reveal the confidential information, the chambers judge should have asked whether ATCO had shown the two retainers were sufficiently related. This involved examining the breadth of the retainers to see if it was reasonably possible to conclude, on the evidence presented by ATCO, that Sheard had acquired confidential information from the first retainer that could have been relevant to the second. If the answer to this question was yes, then the presumption would arise that relevant confidential information had passed to Sheard. The onus would then shift to him to show that any confidential information he possessed, as a result of his former employment as general counsel for ATCO, was not relevant to the 2003/2004 General Rate Application. By not adhering to this format for analysis the learned judge imposed too great an evidentiary burden on ATCO while at the same time relieving Sheard of any evidentiary obligations he might have had on the issue of relevance. In our view, this was an error of law.
[Emphasis in original omitted]
[25] The court concluded at para. 22:
Considering these factors, as well as the other facts set out in Mr. Twa's affidavit, we are satisfied that if the chambers judge had applied the proper legal test he would have found it "reasonably possible" that Sheard possessed confidential information, as a result of his work as general counsel for ATCO, that could have been relevant to ATCO's 2003/2004 General Rate Application. Had the chambers judge made such a finding, the onus would then have shifted to Sheard to show the confidential information so acquired would not be relevant to the General Rate Application.
[26] This is not a case which involves a moving solicitor as the Supreme Court considered in MacDonald Estate v. Martin, 1990 32 (SCC), [1990] 3 S.C.R. 1235, 77 D.L.R. (4th) 249. In such circumstances, inquiries as to the nature of the retainer are obviously appropriate because of the prior relationship.
[27] 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.
[28] The documents did not come into their hands through inadvertence on the part of Bearings' counsel. 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 [page638] party who obtains it to seize and view privileged solicitor and client documents of a party adverse. As noted in Injunctions and Specific Performance, R.J. Sharpe, looseleaf ed. (Aurora, Ont.: Canada Law Book), at p. 2.1280:
A broad power to grant injunctions is not a mandate to the judiciary to right all wrongs at the expense of other values and it is respectfully submitted that excessive zeal in this area is apt to attract criticism which will impair the ability of the courts to use injunctions in innovative ways in other areas.
[29] 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.
[30] When they do not, the court must act swiftly and decisively where the terms and spirit of its order have not been complied with.
[31] In our view, it was an error in law to require Bearings to provide evidence as to the significance of the privileged documents and that their seizure constituted a pressing and substantial prejudice to them.
[32] 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.
[33] It would be inappropriate to require the party whose documents they are to demonstrate the prejudice; such a requirement would defeat entirely the privilege. The importance of the solicitor and client privilege cannot be overstated. As noted by Sopinka J. in MacDonald Estate v. Martin, at p. 1244 S.C.R.:
The legal profession has historically struggled to maintain the respect of the public. This has been so notwithstanding the high standards that, generally, have been maintained. When the management, size of law firms and many of the practices of the legal profession are indistinguishable from those of business, it is important that the fundamental professional standards be maintained and indeed improved. This is essential if the confidence of the public that the law is a profession is to be preserved and hopefully strengthened. Nothing is more important to the preservation of this relationship than the confidentiality of information passing between a solicitor and his or her client. The legal profession has distinguished itself from other professions by the sanctity with which these communications are treated. The law, too, perhaps unduly, has protected solicitor and client exchanges while denying the same protection to others. This tradition assumes particular importance when a client bares his or her soul in civil or criminal litigation. Clients do this in the justifiable belief that nothing they say will be used against them and to the advantage of the adversary. Loss of this confidence would deliver a serious blow to the integrity of the profession and to the public's confidence in the administration of justice. [page639]
[34] The importance of the conclusion reached by Huddard J. in Grenzservice, supra, to preserve the confidentiality of privileged documents, is exemplified in the following quote from the decision [at paras. 114-15]:
As in conflict of interest cases, the court must be concerned with balancing competing values: in this case, the integrity of the judicial system and the rights of litigants not to be deprived of counsel without good cause.
It is obvious from what I have said that the integrity of the judicial system is challenged whenever a solicitor, authorized to supervise the execution of a court order that infringes an individual's right to privacy, permits those who seek to benefit from it to go beyond a strict interpretation of the order. The right to confidentiality of solicitor-client communications was infringed. The only way a court can express its disapproval of such egregious behaviour is by removing counsel from the record.
[35] On the material before us, there were 13 Cassels, Brock lawyers, three clerks and two students working on this matter who would have been able to access the electronic documents. Twelve Kasowitz, Benson lawyers in New York and Houston were identified as among those who could have accessed the electronic documents.
[36] 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 BLG 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".
[37] In Lavallee, Rackel and Heintz v. R., [2002] 3 S.C.R. 209, 2002 SCC 61, 216 D.L.R. (4th) 257, the Supreme Court of Canada considered solicitor/client privilege in the context of a search warrant under the Criminal Code, R.S.C. 1985, c. C-46. Madam Justice Arbour, writing for the majority, noted, at p. 241 S.C.R., p. 285 D.L.R.:
Indeed, solicitor-client privilege must remain as close to absolute as possible if it is to retain relevance. Accordingly, this Court is compelled in my view to adopt stringent norms to ensure its protection. Such protection is ensured by labeling as unreasonable any legislative provision that interferes with solicitor-client privilege more than is absolutely necessary. In short, in the specific context of law office searches for documents that are potentially protected by solicitor-client privilege, the procedure set out in s. 488.1 will Pass Charter scrutiny if it results in a "minimal impairment" of solicitor-client privilege.
[38] While the above statement was made in the criminal law context, the importance in the civil law setting of solicitor/client [page640] privilege is equally clear. This is particularly the case in the context of the growing use of electronic documentation and reproduction.
[39] In our view, in the circumstances of this case, the only appropriate remedy is the removal of CB as solicitors of record on behalf of the plaintiffs in this and any related litigation. We point out that this is not a case where the parties are on the eve of trial. The case is only at the statement of claim stage. Mr. Pinos conceded in cross-examination that other counsel could do the work. The right to [choose] counsel yields to what occurred in the execution of the Anton Piller order in this case.
[40] Further, the plaintiffs should be precluded in this litigation or any related proceeding from receiving advice or information directly and/or indirectly from the firm Kasowitz, Benson, Torres & Friedman of the United States of America.
[41] All copies of privileged communications seized are to be returned to BLG without copies being retained in any form, all as set out in paras. 3 and 4 of the Notice of Appeal filed.
[42] In our view, the reasonable perception of the integrity of the administration of justice would be adversely affected were Cassels, Brock & Blackwell permitted to remain solicitors of record for the plaintiffs and the Kasowitz, Benson firm permitted to continue to provide advice of any nature, in the circumstances of this case.
[43] An order will issue setting aside the Order of Nordheimer J. made September 2, 2003, and in its place an order will issue in the terms of these reasons.
[44] If counsel are unable to agree on costs, they may file brief written submissions to the court by counsel for Bearings within seven days of the release of these reasons and by counsel for Cassels Brock within seven days thereafter.
Order accordingly.
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