CITATION: Kaganovsky v. 2057057 Ontario Inc., 2012 ONSC 3252

DIVISIONAL COURT FILE NO.: 398/11

DATE: 20120601

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: CAROLYN KAGANOVSKY

Plaintiff/Appellant

• AND -

2057057 ONTARIO INC., ABDUL HAFEEZ KHAN, PAULINE LALLA, PLATINUM ONE REALTY INC, B2B TRUST, TRUSTEE FOR SELF DIRECTED RETIREMENT SAVINGS PLAN NO. B602137, MICHAEL E. WEIR and WEIR, NAKON

Defendants/Respondents

BEFORE: JENNINGS, HOCKIN and SWINTON JJ.

COUNSEL: John Russo and Marc Whiteley

for the Plaintiff/Appellant

J. Lofaso

for the Defendants/Respondents

HEARD AT TORONTO: May 29, 2012

ENDORSEMENT

JENNINGS j.:

[1] The plaintiff Carolyn Kaganovsky appeals the order of Corrick J. (“the motions judge”) dated August 12, 2011, which set aside the order of Master Muir, dated June 8, 2011, which declared that the defendants (other than Weir and Weir, Nakon) had waived solicitor/client privilege with respect to the drafting of certain provisions in their statement of defence. Leave to appeal was granted by Pardu J. in an endorsement dated October 18, 2011, which expressed her reasons for doubting the correctness of the decision of the motions judge.

background

[2] The plaintiff issued her claim in April 2007. The defendants delivered their statement of defence on July 11, 2007. In April 2009 the defendants retained their present solicitors. In December 2010 the defendants sought the plaintiff’s consent to amend their statement of defence. Consent was refused because in the plaintiff’s opinion the proposed amendments sought to withdraw an admission. The defendants brought a motion to amend supported by an affidavit of the defendant Khan sworn March 5, 2011. In his affidavit Mr. Khan deposed that the amendment was required because his former solicitor “either misunderstood our version of events or simply drafted the pleadings in spite of same” and that he had not discovered the mistakes made by the solicitor until recently when reviewing the document with his present counsel.

[3] The plaintiff sought to cross-examine Mr. Khan on his affidavit. Mr. Khan denied that he had waived solicitor/client privileges.

[4] As a result the plaintiff brought a motion seeking a declaration that solicitor/client privilege was waived. Because of that, the defendants’ motion to amend the statement of defence was adjourned, so that the “waiver motion” could be heard. The bringing of that motion was the inevitable response to the refusal of Mr. Khan to answer questions sought to be put to him on the allegations of solicitor’s error that he included in his affidavit.

[5] The defendants’ motion to amend was brought under the provisions of Rule 26 only. We were told during argument that the defendants made it clear to the Master on the argument of the waiver motion that the provisions of Rule 51.05 (seeking leave to withdraw an admission) would be relied upon at the motion if necessary.

[6] At paragraph 5 of his reasons, Master Muir said, in part, referring to the complaints made by Mr. Khan of the failings of his former solicitor:

… this evidence from Khan can only be directed to the issue of whether the proposed amendments to the statement of defence and counterclaim amount to withdrawals of admissions. In order to be granted leave to withdraw an admission, a party must satisfy the Court, … that the admission was inadvertent or the lawyer who made the admission was wrongly instructed … It seems to me that Khan’s evidence …. is designed to do just that. However, the Khan defendants do not want the plaintiff to be able to test that evidence by examining Khan and his former lawyer and by inspecting relevant documents. In my view, by including this evidence in their supporting affidavit, the Khan defendants have waived any solicitor/client privilege that may have attached.

[7] The defendants appealed the Master’s decision.

the appeal to the motions judge

[8] The reasons of the motions judge do not reveal any consideration of the standard of review to be applied by her to an appeal from the Master. This Court, in Zeitoun v. Economical Insurance Group (2008), 2008 20996 (ON SCDC), 91 O.R. (3d) 131 (aff’d 2009 ONCA 415, 96 O.R. (3d) 639 (C.A.)) settled the question of the standard of review in appeals from the Master by applying to those cases the standard set by the Supreme Court of Canada in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235 – that the Master’s decision will be interfered with only if the Master made an error of law or exercised his or her discretion on the wrong principles or misapprehended the evidence such that there is a palpable or overriding error.

[9] The central issue before the Master was whether or not there had been a waiver of solicitor/client privilege. The Master found that there had been such a waiver. The motions judge did not find that the Master erred in finding a waiver of solicitor/client privilege; to the contrary, in paragraph 9 of her reasons, she confirmed that finding.

[10] In our opinion, that should have been the end of the matter. However, she went on to hold that the Master ought to have refused to hear the waiver motion until the leave motion had been heard and a determination had been made whether the proposed amendment amounted to the withdrawal of an admission. This was an attempt at case management which, with respect, was not open to the motions judge to do on the hearing of this appeal.

[11] In confirming the Master’s decision that solicitor/client privilege had been waived by Mr. Khan, and finding no palpable or overriding error made by the Master in his appreciation of the facts, in our opinion the motions judge was obliged to dismiss the appeal. In failing to do so, she erred.

[12] Accordingly, the appeal is allowed and the order of the Master is restored.

costs

[13] Costs must be awarded to the appellant. Costs of the leave motion were fixed by Pardu J. at $5,000 to be awarded by this Court following the outcome of the appeal. We are all of the opinion that those costs were generous. We are not asked to review them, and they are to be paid to the appellant. However, given that this appeal was in essence a re-argument of the appeal to the motions judge and took something under 2 hours to argue, and in view of the amount of the costs awarded on the leave motion, we are all of the view that we cannot accept the submission of counsel as to the quantum of costs for this appeal. In our opinion, $3,000 would be appropriate and would certainly satisfy the requirements of Boucher v. Certified Public Accountants.

[14] In a costs endorsement dated November 9, 2011, having received and considered written submissions from counsel, the motions judge awarded costs to the defendants of $6,000. That amount seems appropriate and should now be awarded to the successful plaintiff.

[15] The total costs to be paid to the plaintiff forthwith are as follows:

(a) the motion before the Master - $4,000

(b) the motion before the motions judge - $6,000

(c) the motion for leave to appeal - $5,000

(d) the appeal to this Court - $3,000

Total - $18,000

conclusion

[16] The appeal from the order of the motions judge is allowed and the order of the Master is restored with total costs payable by the defendants (except Weir & Weir, Nakon) to the plaintiff forthwith fixed at $18,000.

[17] We do not wish to leave this matter without expressing our concern that what is essentially a relatively simple pleadings issue should have consumed so much court time, and put the parties to so much cost. We appreciate that the matter of settling the pleadings is still pending and express the hope that the parties can expedite the settlement of that matter so that discoveries can be completed and the matter set down for trial.

JENNINGS J.

HOCKIN J.

SWINTON J.

RELEASED: June 1, 2012