CITATION: Law Society of Upper Canada v. Savone, 2016 ONSC 3378
DIVISIONAL COURT FILE NO.: 649/15
DATE: 20160608
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
THEN, DAMBROT and SACHS JJ.
B E T W E E N :
THE LAW SOCIETY OF UPPER CANADA
Applicant (Appellant)
– and –
LUIGI SAVONE
Respondent (Respondent in Appeal)
Sean Dewart and Jonathan Schachter, for the Applicant (Appellant)
Brian N. Radnoff and Christopher A. Moore, for the Respondent (Respondent in appeal)
HEARD at Toronto: May 13, 2016
AMENDED REASONS FOR JUDGMENT
M. DAMBROT J.:
[1] The Law Society brings this appeal to challenge the extent of pre-hearing disclosure required of it in a conduct proceeding by the Appeal Division of the Law Society of Upper Canada.
Background
[2] By Notice of Application dated September 22, 2011, the Law Society alleged that the respondent committed professional misconduct when acting on twelve real estate transactions between 2000 and 2003. Specifically, it alleged that he breached the Rules of Professional Conduct in that he participated in, or knowingly assisted in, fraudulent or dishonest conduct by his vendor and purchaser clients, or associated persons, to obtain mortgage proceeds under false pretenses. In the alternative, the Law Society alleged that the Lawyer failed to be on guard against being duped by unscrupulous clients or associated persons in connection with the real estate transactions.
[3] The nature of the alleged fraud was succinctly described by the Law Society in its factum as follows:
The respondent and his … client defrauded mortgage lenders through an obvious, “no-money down,” real estate scheme. The client purchased houses on the open market and then flipped them at inflated prices to second purchasers, who obtained mortgage loans from lenders based upon the inflated purchase prices. The mortgage loans covered the cost of the first acquisition of the properties (from the original vendors) plus all of the transaction costs, and left a profit for the respondent's client. Unbeknownst to the mortgage lenders, the second purchasers obtained the properties without contributing any equity.
[4] The Law Society contends that it can be inferred from calculations in the lawyer’s files relating to the flip transactions and other circumstantial evidence that when the respondent processed these transactions, he knew that the mortgage lenders required the purchasers to contribute equity and that the second purchasers were not doing so.
[5] Before the hearing of the application by the Hearing Panel commenced, the respondent brought a motion for an order that the Law Society provide him with disclosure of the files of the two lawyers who acted for the purchasers on the flip transactions that were in the Law Society’s possession. The Hearing Panel dismissed the disclosure motion on July 27, 2012: See 2012 ONLSHP 101. The Hearing Panel acknowledged that the prosecutor had a broad duty to disclose relevant information to a licensee in a conduct prosecution. However, the Panel concluded that s. 49.12 of the Law Society Act (the “Act”) precluded the disclosure of the content of the files of other lawyers and, as a result, it was not necessary for the panel to consider whether or not the material in the files was relevant.
[6] On March 4, 2014, the Hearing Panel, constituted differently than the panel that heard the disclosure motion, proceeded to hear the merits of the Application. By reasons dated September 3, 2014, the Hearing Panel found that the respondent had engaged in professional misconduct by knowingly participating and assisting in fraudulent or dishonest real estate transactions: See 2014 ONLSTH 166. The hearing panel then heard submissions on penalty, and by decision dated March 11, 2015, determined that revocation was the appropriate penalty in the circumstances of the case: See 2015 ONLSTH 49, 2015ONLSTH 49.
[7] The respondent appealed both the finding of professional misconduct and the penalty of revocation to the Appeal Division of the Law Society Tribunal. The Appeal Division concluded that the Hearing Panel erred in dismissing the motion for disclosure of the files of the lawyers who acted for the other parties. In their view, the transaction files were potentially relevant and, subject to claims of solicitor-client privilege, they ought to have been disclosed if they were in fact relevant. Disclosure of such material was not precluded by s. 49.12 of the Act. As a result, the Appeals Panel did not address the other grounds of appeal raised by the Respondent, and ordered a new hearing: See 2015 ONLSTA 26.
[8] The Law Society appeals to this court from the decision of the Appeal Division.
The Decision of the Hearing Panel Respecting Disclosure
[9] The Hearing Panel acknowledged that the requirement and extent of disclosure in relation to conduct proceedings was governed by the principles in R. v. Stinchcombe, 1991 45 (SCC), [1991] 3 S.C.R. 326. In Stinchcombe, the Supreme Court held that in a criminal prosecution the Crown has a duty to disclose not only all of the material that it proposes to use at trial, but also evidence that might assist the accused, whether or not the prosecution proposed to adduce it, subject to the rules of privilege. While the prosecution must err on the side of inclusion, it need not produce what is clearly irrelevant.
[10] The Hearing Panel then noted that the respondent was seeking disclosure of files belonging to the two lawyers on the other side of the transactions in issue in these proceedings. The Law Society conceded that these files were “likely” in its possession. The Law Society took the position that this information did not need to be produced because it was clearly irrelevant. The Hearing Panel made clear that it did not wish to be taken to agree with this position, but concluded that it did not need to determine the question given the conclusion it reached with respect to privilege.
[11] The Hearing Panel reached this conclusion on the basis of s. 49.12 of the Act. I will set out that section in its entirely. It provides:
Confidentiality
(1) A bencher, officer, employee, agent or representative of the Society shall not disclose any information that comes to his or her knowledge as a result of an audit, investigation, review, search, seizure or proceeding under this Part.
Exceptions
(2) Subsection (1) does not prohibit,
(a) disclosure required in connection with the administration of this Act, the regulations, the by-laws or the rules of practice and procedure;
(b) disclosure required in connection with a proceeding under this Act;
(c) disclosure of information that is a matter of public record;
(d) disclosure by a person to his or her counsel;
(e) disclosure with the written consent of all persons whose interests might reasonably be affected by the disclosure; or
(f) disclosure, if there are reasonable grounds for believing that,
(i) if the disclosure is not made, there is a significant risk of harm to the person who was the subject of the audit, investigation, review, search, seizure or proceeding or to another person, and
(ii) making the disclosure is likely to reduce the risk.
[12] The Hearing Panel characterized the bar on production in s. 49.12 (1) as a “statutory privilege” that precluded the production sought by the respondent, subject to the “innocence at stake exception.” The Panel held that if the respondent could show that this exception was engaged, solicitor-client privilege could be infringed in accordance with R. v. McClure, 2001 SCC 14, [2001] 1 S.C.R. 445. To obtain the benefit of this exception, the respondent would have to show that core issues going to his guilt were involved, that there was a genuine risk of a wrongful conviction, that the information he is seeking in the solicitor-client file is not available from any other source and that he is otherwise unable to “raise a reasonable doubt as to his guilt in any other way.” Since the respondent did not rely on this exception, the Panel said, “It follows that the s. 49.12 privilege prevents disclosure.” The respondent’s motion was dismissed.
The Decision of the Appeal Panel
[13] The Appeal Panel affirmed that disclosure is fundamental to a fair hearing of a conduct application; it informs the decisions of lawyers responding to allegations of professional misconduct. Full disclosure helps to ensure that all possible admissible evidence that is relevant to the issue in dispute is placed before the hearing panel, and contributes to the fair and transparent adjudication of conduct matters in the public interest.
[14] While acknowledging that a professional discipline committee is the master of its own procedure and, subject to statutory requirements, need not adhere strictly to the disclosure rules that apply in a criminal proceeding, the Appeal Panel relied on the following statement of principle in the judgment of Laskin J.A. in Howe v. Institute of Chartered Accountants of Ontario (1994), 1994 3360 (ON CA), 19 O.R. (3d) 483, at paras. 33-34:
… But a discipline committee cannot adopt or apply procedures which are contrary to its duty to act in accordance with the requirements of natural justice or to (what in this case amounts to the same thing) its duty to act fairly: Knight v. Indian Head School Division No. 19, 1990 138 (SCC), [1990] 1 S.C.R. 653, 69 D.L.R. (4th) 489; Kane v. Board of Governors of the University of British Columbia, 1980 10 (SCC), [1980] 1 S.C.R. 1105, 110 D.L.R. (3d) 311, and W.D. Latimer Co. v. Bray (1974), 1974 698 (ON CA), 6 O.R. (2d) 129, 52 D.L.R. (3d) 161 (C.A.).
One of the requirements of natural justice is adequate disclosure. It is an essential element of a fair hearing. An affected party must have an adequate opportunity of knowing the case he or she has to meet, of answering it, and of putting in his or her own case. See de Smith's Judicial Review of Administrative Action, 4th ed. (edited by J.M. Evans) at p. 203.
[15] The Appeal Panel disagreed with the Hearing Panel’s characterization of s. 49.12 as creating a statutory privilege. Instead, the Appeal Panel concluded that it was a confidentiality section that prohibits disclosure of material obtained by the Law Society in carrying out investigations, subject to certain exceptions.
[16] The panel described the purpose of the provision as follows:
It protects those who are required to produce files and records to the Law Society as well as the interests of clients and third parties whose personal information and records are included in material obtained pursuant to the Law Society regulatory function.
[17] The Appeal Panel further noted that s. 49.12 contains a number of statutory exceptions to the prohibition, including “disclosure required in connection with a proceeding under this Act”: s. 49.12(2)(b), and concluded that a conduct proceeding falls within the exception:
… Part II provides the authority for the institution of conduct applications at the instance of the Law Society following authorization by the Proceedings Authorization Committee. The Rules of Practice and Procedure made pursuant to the Act, define a “conduct proceeding” as a proceeding under s. 34 of the Act: Rule 1.02(1). Thus, it is clearly an exception to the statutory prohibition in s. 49.12 where disclosure is sought in the context of a conduct proceeding against a licensee, as was the case here.
[18] As a result, the Appeal Panel did not agree with the Hearing Panel that it was necessary to apply the test from McClure in order to overcome the restriction on disclosure in s. 49.12, but rather, the statutory exceptions within this section could and do apply.
[19] The Appeal Panel then explained that there are other provisions in the Act that appropriately protect confidentiality and privilege claims arising in relation to material obtained by the exercise of the Law Society’s investigation powers. The Panel said:
Section 49.8 of the Act requires persons who must comply with investigative requests from the Law Society to provide information or documents, whether or not those items are privileged or confidential. Section 49.8(2) provides that such information or documents are admissible in proceedings under the Act, whether or not they are privileged or confidential, and 49.8(3) protects the privileged nature of the documents obtained even in circumstances where such documents or information are admissible in a proceeding. Taken together, ss. 49.8 and 49.12 allow for confidential or privileged material to be obtained, disclosed and admitted in conduct proceedings. There are other protections in the rules for third party privacy, non‑publication and hearings in the absence of the public: Rule 18, Rules of Practice and Procedure. These provisions are all consistent with the Law Society’s mandate to regulate conduct of licensees and the need to consider matters in conduct proceedings that will often involve confidential and/or privileged material.
[20] Finally, the Appeal Panel explained how the Hearing Panel ought to have dealt with the disclosure request in this case, stating:
We conclude that the hearing panel erred in applying s. 49.12 as a blanket prohibition to the material sought in this case. Once it became clear that the Lawyer was seeking the material as disclosure in the conduct proceedings against him, the exception in 49.12(2)(b) applied. At that stage, questions of relevance and solicitor-client privilege, distinct from the 49.12 prohibition, were required to be determined.
[21] Canvassing the relevance, or potential relevance, of the material in this case, the Appeal Panel observed that potential relevance is established by the nature of the proceedings and the fact that the files concern the same sale/mortgage transactions. The Appeal Panel agreed with the analysis by the panel in Law Society of Upper Canada v. Nelson Tavares Garcia, 2011 ONLSHP 30 as to why such files may meet the test of relevance in mortgage fraud proceedings.
[22] Finally, the Panel concluded that the importance of the principle of a full and fair disclosure meant that a new hearing had to be ordered in this case, and provided the following guidance for that hearing:
… The Law Society will need to review the files in its possession relating to the transactions at issue in this proceeding to determine whether there is relevant material that ought to be disclosed. It is important to note that the contents of the solicitors’ files at issue here will likely contain documents that are clearly not privileged, documents that are clearly privileged, and documents that may be privileged. Relevant non-privileged documents should be disclosed forthwith. However, if there are relevant documents that are clearly privileged or may be privileged further issues arise.
The issue of the appropriate procedure for considering claims for disclosure of documents in the solicitors’ files, which may be subject to a solicitor-client privilege, was canvassed in oral argument before us. Counsel suggested that a prudent approach might include the following elements:
• Counsel for the Law Society would review the solicitors’ files, determine whether there were relevant documents, which may be subject to a solicitor-client privilege, and advise counsel for the Lawyer of the potential claim for privilege;
• If counsel for the Lawyer seeks access to a relevant document for which a claim to solicitor-client privilege could be made, then notice should be provided to the client and to the client’s lawyer to determine whether the client is prepared to consent to disclosure;
• If the client and the client’s lawyer are not prepared to consent to disclosure, it is open to counsel for the Lawyer to bring a motion before the Hearing Division to have the claim for solicitor-client privilege determined. Notice of any such hearing would have to be provided to the client and to the client’s lawyer.
However, as this issue was not fully argued before us, we leave it to the panel hearing any motion for disclosure to determine the appropriate process, and to decide any claims for privilege.
The Argument of the Law Society on Appeal to the Divisional Court
[23] The Law Society took the position that the Appeal Panel erred in ordering disclosure of the irrelevant, privileged and confidential contents of client files of other lawyers, and that such disclosure was prohibited by the Law Society Act.
Relevance
[24] With respect to relevance, the Law Society argued that: (1) since these files were neither reviewed nor relied upon in the course of the Law Society’s independent investigation of the respondent’s misconduct, they were completely irrelevant to the Law Society’s case against the respondent; (2) the knowledge of the other lawyers is irrelevant to the material issue in the proceeding: whether the Respondent was subjectively aware of the presence of the indicia, or red flags, of fraud and processed transactions in any event; and (3) the respondent had not suggested the likely or potential relevance of the materials in question.
[25] In any event, the Law Society submitted that the respondent sought production in the wrong manner as a result of the organizational distinction between the investigating and prosecuting authorities of the Law Society. It argued that the respondent should have sought disclosure from its Investigation Department pursuant to a third party records application under the authority of R. v. O’ Connor, 1995 51 (SCC), [1995] 4 S.C.R. 411, rather than a motion for disclosure in the context of the disciplinary proceedings governed by Stinchcombe.
Privilege and Confidentiality
[26] With respect to privilege and confidentiality, the Law Society submits that regardless of the relevance of the material in question, it is protected by solicitor-client privilege, and there is no duty to disclose privileged information. Further, the material is confidential pursuant to the Rules of Professional Conduct. The clients of the other lawyers hold the privilege attached to their communications and only they can waive this privilege, which has not happened in this case.
[27] The Law Society further argued that the respondent does not meet either of the two exceptions to solicitor-client privilege recognized in law: where public safety is in jeopardy, or where someone is charged with a crime and his or her right to make full answer and defence is in jeopardy. Moreover, it argues that privilege is less likely to yield to the prosecutor’s disclosure obligations in regulatory proceedings, as compared to criminal proceeding where an accused’s liberty is in jeopardy.
Prohibition under the Law Society Act
[28] The Law Society argued that s. 49.12 was properly relied on by the Hearing Panel to refuse disclosure to the respondent. Section 49.12 permits the disclosure of information and documentation collected in the course of an investigation of a particular lawyer under the Act to be disclosed to him or her notwithstanding privilege. It does not permit disclosure to a lawyer under investigation of privileged and confidential client information and client files of other lawyers collected in the course of an investigation of those other lawyers.
The Argument of the Respondent on Appeal to the Divisional Court
[29] The respondent submits that each of the arguments of the Law Society should fail.
Relevance
[30] The respondent submitted that in a prosecution for knowing assistance in real estate fraud, the files of the lawyer acting for the purchaser are critical, as they provide information about what the vendor’s lawyer was advised and what information he had during the transaction. The files will provide direct or indirect evidence of what the lenders actually knew, the extent to which they may have been deceived about relevant aspects of the transaction, and the extent to which their interests were put at risk. They may contain exculpatory evidence.
[31] The respondent also submitted that the Law Society’s argument based on O’Connor is a new argument not made before the Hearing Panel or Appeal Panel and should not be considered on this appeal. In any event, the distinction between material in the hands of the prosecution and material in the hands of the police has no application here. There is no statutory or other legal basis for a distinction to be made between the Law Society Investigations Department and discipline counsel when dealing with disclosure. If the Law Society has in its possession relevant material regarding a misconduct proceeding, it cannot refuse to produce such material simply because it has decided not to review or rely on it.
Privilege and Confidentiality
[32] The respondent submitted that the decision of the Appeal Panel set out a process that would protect privilege. Disclosure of relevant, non-privileged material in another solicitor’s file would not undermine privilege in this case.
Prohibition under the Law Society Act
[33] The Respondent argued in agreement with the Appeal Panel’s decision that s. 49.12(2) provides an explicit exception to the prohibition on disclosure in s. 49.12 (1) for the disclosure sought in this case.
Analysis
The Standard of Review
[34] This court canvassed the standard of review to be applied to decisions of the Law Society Appeal Panel in Igbinosun v. Law Society of Upper Canada (2008), 2008 36158 (ON SCDC), 239 O.A.C. 178 (Div. Ct.), at para. 9:
The Appeal Panel is entitled to deference on its findings of mixed fact and law, determination of penalty and its interpretation of the Act and this Court should only intervene if the Appeal Panel’s decision is unreasonable. However, on questions of law outside that area of expertise, the Appeal Panel is required to be correct.
[35] The parties took no issue with this statement of the standard of review, and we agree with it. This appeal calls into question the Appeals Panel’s interpretation of a provision of its home statute, the development by the Panel of its own procedure for disclosure in conduct proceedings and its ruling on the relevance of evidence led in such proceedings. The standard of review on all of these issues is reasonableness.
The Merits of the Appeal
[36] I propose to consider the issues raised by the Law Society in a different order than the parties argued them.
Prohibition under the Law Society Act
[37] As I have noted, the Hearing Panel characterized the bar on production in s. 49.12 (1) as a “statutory privilege” that precluded the production sought by the respondent, subject to the “innocence at stake exception.”
[38] According to the Appeal Panel, however, s. 49.12 of the Act does not create a statutory privilege. Instead, it is a confidentiality provision that prohibits disclosure of material obtained by the Society in carrying out investigations, subject to certain exceptions. One such exception is “disclosure required in connection with a proceeding under this Act”: s. 49.12(2)(b). A conduct proceeding falls within the exception.
[39] This is an entirely reasonable reading of s. 49.12 of the Act. Moreover, in my view, it is correct.
[40] Section 49.12 creates neither privilege nor confidentiality in the content of a lawyer’s file. It simply prohibits benchers, officers, employees, agents or representatives of the Society from disclosing any information that comes to their knowledge as a result of an audit, investigation, review, search, seizure or proceeding, subject to statutory exceptions. This prohibition is not directed at, but obviously includes, the content of a lawyer’s file that is produced to the Law Society in an investigation. The use that can be made of privileged or confidential information is dealt with elsewhere in the Act.
[41] As the Appeal Panel correctly pointed out, s. 49.8(2) of the Act provides that privileged or confidential information, or documents provided to the Law Society pursuant to an investigative request, are admissible in proceedings under the Act, whether or not they are privileged or confidential. Section 49.8(3) protects the privileged nature of the documents obtained, even in circumstances where such documents or information are admissible in a proceeding.
[42] In the face of these clear provisions of the Act, the interpretation placed on s. 49.12 by the Hearing Panel cannot be sustained. Section 49.12 does not preclude documents obtained from one lawyer’s file pursuant to an investigative request from being disclosed or used in another lawyer’s conduct proceeding, even if the investigation of the other lawyer is in relation to an entirely separate matter.
[43] This does not mean that s. 49.12 defeats claims of solicitor-client privilege. Where some or all of the documents in another lawyer’s file are potentially privileged, a hearing panel will be obliged to ensure that any claim of privilege is determined before such documents are disclosed or used in a proceeding against a different lawyer. The Appeal Panel was alive to this concern, and outlined a suggested procedure for resolving privilege issues. However in the end, they left it to the panel hearing any motion for disclosure to determine the appropriate process, and to decide any claims of privilege.
[44] It is incumbent on us to take the same approach. The Law Society Hearing and Appeal Panels are masters of their own house. It is for them to develop an appropriate process to resolve privilege issues, provided their approach complies with natural justice. I would make but one comment in this regard, which relates to the timing of the determination of a third party solicitor-client privilege claim.
[45] A panel establishing the procedure for the adjudication of a third party solicitor-client privilege claim should be alive to the decision of the Supreme Court of Canada in R. v. Brown, 2002 SCC 32, [2002] 2 S.C.R. 185. In that case, the Court emphasized that solicitor-client privilege is fundamental to Canada's justice system and will yield only in rare circumstances, and that the ability to infringe a third party’s solicitor-client privilege must be limited to cases where the accused's innocence is at stake, and where there is no other way to raise a reasonable doubt. As a result, in the usual case, it would be preferable to delay an application to disclose privileged information until the end of the prosecution’s case. This will better permit the trial judge to assess the strength of the Crown's case against the accused, and to determine whether the accused's innocence is, in fact, at stake. If the Crown has failed to prove its case beyond a reasonable doubt, then there will be no need to allow the application and invade a third party’s solicitor-client privilege. This process will prevent privilege from being unnecessarily violated.
[46] I appreciate that s. 49.8(2) of the Act makes privileged information and documents produced to the Law Society in the course of a review of a lawyer’s competence or conduct admissible in a proceeding under the Act, while s. 49.8(3) leaves the privilege intact for other purposes. While it is arguable that s. 49.8(2) broadens the circumstances in which documents protected by solicitor-client privilege are admissible in discipline proceedings against a lawyer who is not the owner of the files under consideration, the comments in Brown about timing may still have application.
Relevance
[47] As I have mentioned, the Law Society argued the content of the lawyers’ files under consideration here are not relevant because: (1) they were neither reviewed nor relied upon in the course of the Law Society’s investigation of the respondent’s misconduct; (2) the knowledge of the other lawyers is irrelevant to the material issue in the proceeding, namely whether the Respondent was subjectively aware of the presence of the indicia, or red flags, of fraud and processed transactions in any event; and (3) the respondent had not suggested the likely or potential relevance of the materials in question.
[48] The respondent submits that a prosecution for knowing assistance in real estate fraud, the files of the lawyer acting for the purchaser are critical, as they provide information about what the vendor’s lawyer was advised and what information he had during the transaction. He argues that the files will provide direct or indirect evidence of what the lenders actually knew, the extent to which they may have been deceived about relevant aspects of the transaction, and the extent to which their interests were put at risk. They may contain exculpatory evidence.
[49] The Appeal Panel observed that in this case, potential relevance is established by the nature of the proceedings and the fact that the files concern the same sale/mortgage transactions as the ones in question in this proceeding.
[50] In my view, the Appeal Panel’s finding of relevance was entirely reasonable. The Law Society’s argument misconceives the prosecutor’s obligation to disclose. The extent of the obligation to disclose was described as follows in Stinchcombe, at para 29:
With respect to what should be disclosed, the general principle to which I have referred is that all relevant information must be disclosed subject to the reviewable discretion of the Crown. The material must include not only that which the Crown intends to introduce into evidence but also that which it does not. No distinction should be made between inculpatory and exculpatory evidence. The attempt to make this distinction in connection with the confession rule proved to be unworkable and was eventually discarded by this Court. See Piché v. The Queen, 1970 182 (SCC), [1971] S.C.R. 23, at p. 36; Rothman v. The Queen, 1981 23 (SCC), [1981] 1 S.C.R. 640, at p. 645. To re-introduce the distinction here would lead to interminable controversy at trial that should be avoided. The Crown must, therefore, disclose relevant material whether it is inculpatory or exculpatory.
[51] The fact that the Law Society does not rely on relevant information in its possession does not exclude that information from the obligation to disclose. The fact that the Law Society has limited the proof of its case to the respondent’s awareness of and response to indicia of fraud does not limit the scope of what may be relevant, and what must be disclosed, to the content of the respondent’s own file. Some or all of the content of the file of the lawyers acting for other participants in the allegedly fraudulent transaction may also be relevant, and may also have to be disclosed. It is axiomatic that where counsel for the vendor is alleged to have participated in a fraud on the purchaser’s mortgage provider, the files of counsel for the purchaser will inevitably contain potentially relevant material, whether that information is inculpatory or exculpatory in relation to the respondent.
[52] The Law Society argues that the state of the knowledge of the lawyers for the purchasers which may be disclosed by an examination of the content of their files is irrelevant to the material issue in this proceeding. The only relevant issue, according to the Law Society, concerns the respondent's knowledge. This is simply wrong. The files of the other lawyers may, for example, tend to prove or disprove whether the lender was defrauded at all. Whatever may have been in the mind of the respondent, he could not have participated in a fraud if there was, in fact, no fraud.
[53] The Law Society’s argument that the respondent has not suggested the likely or potential relevance of the materials in question merits particular attention. First, I note that the respondent’s counsel has in fact suggested several possible bases upon which some of the content of these files might be relevant, all of which are sound. But that misses the point. The respondent is not required to conjure up specific theories of relevance at this stage of the inquiry. As I have said, it is evident that where counsel for the vendor is alleged to have participated in a fraud on the purchaser’s mortgage provider, the files of counsel for the purchaser will inevitably contain potentially relevant material. When such files are in the possession of the Law Society, the prosecutor is obliged, at least upon request, to review those files and disclose what it considers to be relevant, subject to review by the panel. As stated in Stinchcombe, at para 26, in the criminal prosecution context: “The initial obligation to separate ‘the wheat from the chaff’ must … rest with Crown counsel.”
[54] I note that in the course of oral argument, the Law Society sought to avoid this responsibility on the basis that the other lawyers’ files were acquired by the Law Society in “different” investigations: the investigations of the potentially fraudulent conduct of those other lawyers, albeit in many of the same transactions. Counsel for the Law Society took the position that the obligation to disclose related only to the fruits of this particular investigation.
[55] Reference to the obligation to disclose the fruits of an investigation first arose in Stinchcombe. Sopinka J. stated the following, at para. 12 of the judgment:
I would add that the fruits of the investigation which are in the possession of counsel for the Crown are not the property of the Crown for use in securing a conviction but the property of the public to be used to ensure that justice is done. In contrast, the defence has no obligation to assist the prosecution and is entitled to assume a purely adversarial role toward the prosecution. The absence of a duty to disclose can, therefore, be justified as being consistent with this role.
[56] As is apparent, the Court made reference to the phrase “the fruits of the investigation” to explain the Crown’s disclosure obligation. This phrase does not limit disclosure to the material found only in the narrow investigation of the particular individual accused. The Law Society’s effort to limit disclosure in this regard is unsupportable. Suppose, for example, that the Law Society found a contemporaneous letter from the respondent to the vendor’s lawyer in the vendor’s lawyer’s file in which he either confessed to an involvement in a fraudulent scheme, or explained that he had been innocently duped into participating in it. The Law Society could not possibly avoid the obligation to disclose this letter to the respondent on the basis that it was the fruit of a different investigation.
[57] I note that the meaning of the term “fruits of the investigation” was addressed by the Supreme Court in R. v. McNeil, 2009 SCC 2, [2009] 1 S.C.R. 66. Charron J., for the Court, said at para. 22, “… the Stinchcombe disclosure regime only extends to material relating to the accused’s case in the possession or control of the prosecuting Crown entity. This material is commonly referred to as the ‘fruits of the investigation’”. When the Court referred to material “relating to the accused’s case”’ it was not limiting that obligation to the content of the particular investigative file. As I will address more fully momentarily, the prosecuting Crown who is put on notice of the existence of relevant information in the hands of the investigating police agency, but not in the particular investigative file, cannot simply disregard the matter. Unless the notice appears unfounded, Crown counsel is obliged to obtain the information if it is reasonably feasible to do so, and make disclosure of it absent a valid reason not to do so.
[58] The Law Society cannot avoid its disclosure obligation in this case on the basis that potentially relevant evidence located in the files of other lawyers was acquired by the Law Society in the process of different investigations.
Stinchcombe v. O’Connor
[59] Finally, I turn to the Law Society’s submission that the respondent sought production in the wrong manner as a result of the organizational distinction between the investigating and prosecuting authorities of the Law Society. As I have already noted, it argued that the respondent should have sought disclosure from its Investigation Department pursuant to a third party records application under the authority of R. v. O’ Connor, 1995 51 (SCC), [1995] 4 S.C.R. 411, rather than a motion for disclosure in the context of the disciplinary proceedings governed by Stinchcombe.
[60] The respondent submitted that the Law Society’s argument based on O’Connor is a new argument not made before the Hearing Panel or Appeal Panel and should not be considered on this appeal.
[61] The short answer to this particular submission is that the respondent is correct that the issue is now being raised for the first time on this appeal, and should not be considered by this Court. But because the argument will undoubtedly arise again, it does bear some comment.
[62] In O’Connor, the court developed a procedure for the production of records held by third parties in which there is a reasonable expectation of privacy, referred to by the Court as “private records”. In the end, the procedure developed in that case places an obligation on the trial judge to balance the salutary and deleterious effects of ordering the production of the records to the court for inspection, having regard to the accused's right to make full answer and defence, and the effect of such production on the privacy and equality rights of the subject of the records.
[63] However, the Court was very careful to limit the reach of the judgment to private records held by third parties, and not to private records in the possession of the Crown. The Court stated, at para. 98:
As a preliminary matter, it should be noted that the issue before us relates to the production of private records held by third parties. We are not concerned here with the extent of the Crown's obligation to disclose private records in its possession, or with the question whether privacy and equality interests may militate against such disclosure by the Crown. Although my colleagues Lamer C.J. and Sopinka J. deal with these questions at great length in their reasons, I prefer not to pronounce on these issues as they do not arise in this appeal and were not argued before us. Any comment on these questions would be strictly obiter.
[64] The treatment of potentially relevant material in the hands of state authorities other than the prosecution, specifically the police, was directly addressed in McNeil. The Court in McNeil considered the extent of the Crown’s duty to disclose material in the possession or control of the Crown. Charron J., for the Court, concluded that “the Crown”, for disclosure purposes does not encompass other state authorities. Such an approach would be unworkable. The Stinchcombe disclosure regime only extends to material relating to the accused’s case in the possession or control of the prosecuting Crown entity.
[65] On the other hand, the Court stated, the Crown cannot explain a failure to disclose relevant material on the basis that the investigating police force failed to disclose it to the Crown. In order to fulfil its Stinchcombe disclosure obligation, the prosecuting Crown who is put on notice of the existence of relevant information cannot simply disregard the matter. Unless the notice appears unfounded, Crown counsel will not be able to fully assess the merits of the case and fulfil its duty as an officer of the court without inquiring further and obtaining that information if it is reasonably feasible to do so. The same duty to inquire applies when Crown counsel is informed of potentially relevant evidence pertaining to the credibility or reliability of the witnesses in the case.
[66] In the end, the Law Society’s argument that the lawyer’s files should have been the subject of an O’Connor application, and not a Stinchcombe application, must fail for two reasons.
[67] First, while “the Crown”, for disclosure purposes, does not encompass other state authorities, there is no basis for making an entirely artificial distinction between the Law Society Investigations Department and the Law Society’s discipline counsel when dealing with disclosure. As the respondent correctly observes, there is no statutory or other legal basis for making such a distinction.
[68] Second, even if there is a basis for making a distinction between the Law Society Investigations Department and discipline counsel when dealing with disclosure, once discipline counsel is put on notice that there is potentially relevant information in a different Law Society file, discipline counsel will not be able to fulfil its Stinchcombe disclosure obligation in accordance with McNeil and fully assess the merits of the case without inquiring further, obtaining the information, and disclosing whatever is relevant and not subject to privilege. The Law Society cannot simply stand by and demand that the lawyer whose conduct is under review bring an O’Connor application.
[69] Finally on this point, even if I am wrong, and the disclosure request, if made in a criminal case, would have to be made in the form of an O’Connor application, the Hearing Panel would not be obliged to duplicate the O’Connor procedure. As noted by Laskin J.A. in Howe v. Institute of Chartered Accountants of Ontario, at para. 33:
In general, a professional discipline committee, like other administrative tribunals, is the master of its own procedure and, subject to statutory requirements, need not adhere strictly to all the evidentiary and disclosure rules that apply in court proceedings. But a discipline committee cannot adopt or apply procedures which are contrary to its duty to act in accordance with the requirements of natural justice or to (what in this case amounts to the same thing) its duty to act fairly.
[70] Certainly a Hearing Panel would not have to require an applicant to serve a subpoena duces tecum on the Law Society Investigations Department for disclosure of the content of another lawyer’s file in the possession of the Law Society.
Disposition
[71] For these reasons, the appeal is dismissed and the decision of the Appeal Panel is affirmed.
[72] Counsel for the parties submitted their bills of costs to us at the close of argument. Neither party contested the reasonableness of the other’s bill of costs. Having regard to their respective positions, we award partially indemnity costs to the respondent fixed in the amount of $15,000, all inclusive.
DAMBROT J.
THEN J.
SACHS J.
RELEASED: June 8, 2016
CORRECTION NOTICE
Corrected decision: The text of the original judgment was corrected on June 15, 2016, and the description of the corrections is appended:
The neutral citation was changed from 649/15 to 3378 and the Divisional Court file was changed from 2100/15 to 649/15
CITATION: Law Society of Upper Canada v. Savone, 2016 ONSC 3378
DIVISIONAL COURT FILE NO.: 649/15
DATE: 20160608
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
THEN, DAMBROT and SACHS JJ.
B E T W E E N :
THE LAW SOCIETY OF UPPER CANADA
Applicant (Appellant)
– and –
LUIGI SAVONE
Respondent (Respondent in Appeal)
AMENDED REASONS FOR JUDGMENT
M. DAMBROT J.
RELEASED: June 8, 2016