CITATION: Roynat Capital Inc. v. Repeatseat Ltd., 2014 ONSC 4249
DIVISIONAL COURT FILE NO.: 69/14
DATE: 20140714
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
ROYNAT CAPITAL INC., RPS CAPITAL LP, by its general partner KNIGHT’S BRIDGE CAPITAL PARTNERS INC. and KNIGHT’S BRIDGE LP by its general partner KNIGHT’S BRIDGE CAPITAL PARTNERS INC.
Plaintiffs
– and –
REPEATSEAT LTD., REPEATSEAT, INC., COMPTROL SYSTEMS INC., BLAKE CASSELS & GRAYDON LLP, MICHELLE SUSAN COOZE, GEORGE DAVIDSON, ROBERT CHRISTIANSON, GEORGE WATSON, SHARI PUSCH, MARY BENNING, CLARK JOHANNSON, MAX FANTUZ and GARY BENTHAM
Defendants
Symon Zucker and
Nancy J. Tourgis, for the Plaintiffs
James Anthony Renihan, for the Defendants
HEARD at Toronto: July 14, 2014
D. L. CORBETT J. (orally)
[1] Under the loan agreement, Repeatseat was to raise $3.5 million in equity as a condition of Roynat advancing the loan.
[2] Blakes, counsel for Repeatseat, advised Roynat through its counsel, Cassels Brock & Brockwell, that Blakes, the law firm, would not itself certify that the $3.5 million had been raised, because the money was not going to be passing through Blakes’ hands. The assurance, instead, would come from Repeatseat through a certificate signed by one of its officers. As the transaction went on, there was correspondence between counsel by email and fax. Late in the transaction, Blakes received a communication directly from someone at Roynat. Blakes responded that it was uncomfortable dealing directly with the client when the client was represented by Cassels Brock & Blackwell. Blakes also indicated in its responding email that the funds had been received by Repeatseat and that the certificate from Repeatseat would follow in due course. Blakes subsequently delivered the certificate from Repeatseat as part of the closing.
[3] As it turned out, the certificate from Repeatseat was incorrect, or so it is alleged, and only about $3 million of the $3.5 million was raised. Roynat is now suing as a result of the failure to raise the $3.5 million and the representations made to it that the $3.5 million had been raised prior to closing.
[4] Roynat sues Blakes for negligent misrepresentation. Suing the law firm of the other side of the transaction is an unusual claim, and to succeed in these circumstances, Roynat must establish that it received a representation from Blakes, that it relied on that representation to its detriment and, of course, that the representation was false.
[5] This motion hinges on the allegations of detrimental reliance.
[6] During discoveries, Blakes asked Roynat about discussions it had with its own lawyers at Cassels Brock & Blackwell about the communications from Blakes regarding the equity raise. Roynat objected on the basis that its discussions with its own solicitors are privileged. That issue was litigated and Master Brott upheld the objection.
[7] On appeal, Greer J. reversed the Master on the basis that Roynat must establish detrimental of reliance in order to succeed in its claim. This puts Roynat’s statement of mind in issue. Greer J. reasoned that there is a deemed waiver of solicitor/client communication bearing on Blakes state of mind and that this is a waiver that arises from the fact that Roynat has alleged that it detrimentally relied on the statement by Blakes.
[8] In my view, there is good reason to doubt the correctness of this conclusion. The general principles described by Perrell J. in Creative Career Systems Inc. v. Ontario, 2012 ONSC 649 and prior to that, in my own decision in Guelph v. Super Blue Box Recycling Corp., 2004 34954 (ON SC), [2004] O.J. No. 4468, both describe waiver as arising from reliance in law on legal advice in respect to a claim or defence. This reliance – in law and not just in fact – is a much higher bar than the one set by Greer J. in this case. Arguably, the bar set by Greer J. equates waiver with relevance, subject only to considerations of “fairness and consistency.” This would have the effect of diluting the principles of solicitor/client privilege to virtually nil in the circumstances subject only to a discretion in the Court to enforce the privilege. In my view, the conflict between that decision and the other authorities decided in the Superior Court on the circumstances in which there will be a deemed waiver of privilege is stark enough that it ought to be addressed.
[9] This is also an issue that arises with predicable regularity and is usually dealt with at first instance by the Masters. Given the apparent conflict in the lines of authority here, and perhaps the undue complexity of some of the reasoning in some of the cases, the time seems right for some appellate guidance on these points.
[10] For these reasons, leave to appeal is granted.
[11] I have endorsed the Motion Record, “For reasons given orally, leave to appeal granted with costs in the discretion of the appeal panel.”
D. L. CORBETT J.
Date of Reasons for Judgment: July 14, 2014
Date of Release: July 23, 2014
CITATION: Roynat Capital Inc. v. Repeatseat Ltd., 2014 ONSC 4249
DIVISIONAL COURT FILE NO.: 69/14
DATE: 20140714
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
D. L. CORBETT J.
BETWEEN:
ROYNAT CAPITAL INC., RPS CAPITAL LP, by its general partner KNIGHT’S BRIDGE CAPITAL PARTNERS INC. and KNIGHT’S BRIDGE LP by its general partner KNIGHT’S BRIDGE CAPITAL PARTNERS INC.
Plaintiffs
– and –
REPEATSEAT LTD., REPEATSEAT, INC., COMPTROL SYSTEMS INC., BLAKE CASSELS & GRAYDON LLP, MICHELLE SUSAN COOZE, GEORGE DAVIDSON, ROBERT CHRISTIANSON, GEORGE WATSON, SHARI PUSCH, MARY BENNING, CLARK JOHANNSON, MAX FANTUZ and GARY BENTHAM
Defendants
ORAL REASONS FOR JUDGMENT
D. L. CORBETT J.
Date of Reasons for Judgment: July 14, 2014
Date of Release: July 23, 2014