COURT FILE NO. Div. Ct. 249/04

Date: 20050127

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

O’DRISCOLL, SWINTON, HENNESSY JJ.

B E T W E E N:

KATHLEEN FOTWE

John C. Ritchie, for the Plaintiff (Respondent)

Plaintiff (Respondent)

• and -

THE CITADEL GENERAL ASSURANCE COMPANY

Daniel I. Reisler, for the Defendant (Appellant)

Defendant (Appellant)

Heard at Toronto: January 27, 2005

SWINTON J. (ORALLY)

1This is an appeal from a decision of Spence J. allowing an appeal from a decision of Master Haberman, who ordered the removal of J. Patrick Brown and McLeish Orlando LLP as solicitors of record for the Plaintiff. Leave to Appeal was granted by MacFarland J.

2The facts are set out in the Reasons of Mr. Justice Spence, found at Tab 6 of the Appeal Book. The respondent, Kathleen Fotwe, commenced this action seeking entitlement to certain statutory accident benefits, as well as punitive and exemplary damages, from the appellant, Citadel General Assurance Company. In paragraphs 6 through 10 and 16 and 17 of his Reasons, Spence J. stated:

6In a letter dated March 18, 2003, Brian Atherton of Atherton Barristers, the solicitors for The Citadel, set out his opinion of Ms. Fotwe’s claims, the Citadel’s exposure, and an estimate of settlement figures. This opinion letter was addressed to Ken Enston of The Citadel, but was inadvertently faxed by Mr. Atherton’s clerk to the office of McLeish Orlando, Ms. Fotwe’s solicitors.

7McLeish Orlando received the opinion letter by fax on March 19, 2003 and, as is the common practice in the firm, the opinion letter was filed by an assistant at that time without being directed to the attention of a lawyer immediately.

8Late in the afternoon on Friday, June 20, 2003 [sic], while reviewing Ms. Fotwe’s file in preparation for the mediation scheduled for July 29, 2003, Mr. Brown became aware of the opinion letter for the first time.

9Mr. Brown read a portion of the opinion letter and stopped reading it when he realized that it had been sent by Mr. Atherton’s office to McLeish Orlando in error.

10Mr. Brown returned the opinion letter to Mr. Atherton with a covering letter on July 2, 2003 (because July 1 was a holiday) without reading any further and without making any copies of the opinion letter.

16On October 14, 2003, Mr. Brown received a copy of Mr. Atherton’s supplementary affidavit from Mr. Reisler, which again inadvertently included a copy of the opinion letter as Exhibit “A”. Mr. Brown did not read the opinion letter at that time.

17Mr. Brown immediately phoned Mr. Reisler and sent the entire package back to him along with a covering letter, dated October 14, 2003.

3A Judge hearing an appeal from a decision of a Master should not intervene unless the decision is clearly wrong (Marlene Investments Ltd. v. McBride (1979), 1979 1895 (ON SC), 23 O.R. (2d) 125 (H.C.J.)).

4In this case, the Master applied MacDonald Estate v. Martin, 1990 32 (SCC), [1990] 3 S.C.R. 1235, a case that Spence J. correctly held to be distinguishable, because it sets out the test to apply to the disqualification of a solicitor because of a conflict of interest. The case before the Master dealt with the disqualification of a solicitor who inadvertently received a privileged communication from the solicitor of the opposing party, here the Defendant.

5Since the decision of Spence J. on March 26, 2004, the Court of Appeal has held, in Celanese Canada Inc. and Celanese Ltd. v. Murray Demolition Corp. et al., 2004 31856 (ON CA), [2004] O.J. No. 3983, that the issue for the Court, in a case such as this, is whether there is a real risk of prejudice to the opposing party that cannot be cured by alternative remedies to the removal of the solicitor who received the privileged document (see paragraphs 41, 42 and 46). The test in Celanese seeks to give consideration to the interests of both parties, including the right of a litigant in the situation of the Plaintiff to have her counsel of choice (see paragraph 39).

6In his Reasons in Celanese, Mr. Justice Moldaver stated, at paragraphs 38 to 43:

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. 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 considerations discussed in MacDonald Estate, supra, at 1243. [See Note 1 below]. 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.

7Spence J. concluded that the Master erred in finding a risk of real prejudice to the Defendant here. In his words, at paragraph 41, “There is no basis to apprehend a material risk of prejudice at trial”, and therefore, he concluded that her decision was clearly wrong.

8In our view, he was correct, and his conclusion is consistent with the test set out in Celanese. The Master concluded that there was a risk that the information in the letter could be used at trial. However, the document is privileged, and therefore, it cannot be so used, as Spence J. concluded, and as counsel for the Appellant conceded before us. Moreover, the Master erred in concluding that there was a real risk of material prejudice at mediation, as she failed to consider the evidence of Mr. Brown about his position on the merits prior to receiving the information, his lack of knowledge of details in the letter, and the non-binding effect of mediation.

9Finally, while we need not decide the question whether the Master had jurisdiction to order a solicitor removed from the record in these circumstances and to make the corollary orders which she made, we are not to be taken as concluding that she had such jurisdiction.

10Therefore, as Spence J. made no error in overturning the decision of the Master, the appeal is dismissed.

11We reserve the matter of costs, on which we have heard submissions. Likewise, we reserve the question of what should or should not remain sealed. Those matters will be dealt with in the Reasons that will be later released as an addition to the Oral Reasons already given by Madam Justice Swinton.