Neutral Citation: 2004 ONFSCDRS 186

FSCO A04-001086

BETWEEN:

GRETA WACHMENKO

Applicant

and

PRIMMUM INSURANCE CO. (CANADA LIFE)

Insurer

DECISION ON A MOTION

Before:

John Wilson

Heard:

By telephone conference call on November 24, 2004.

Appearances:

Guy A. Hurtubise for Mrs. Wachmenko

Daniel Himelfarb for Primmum Insurance Co.

The Applicant, Greta Wachmenko, was injured in a motor vehicle accident on September 12, 1994. She applied for statutory accident benefits from Primmum Insurance Co. ("Primmum"), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Mrs. Wachmenko applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The motion is for production of the Insurer's complete file to date.

Those documents, contained in pages 16, 17 and 18 of the Insurer's document listing, not subject to solicitor-client privilege, and prepared by Primmum or its predecessors, before May 1, 2000 shall be produced to Mrs. Wachmenko forthwith.
The Insurer shall forward to me within 7 days, in a sealed envelope, those documents created after May 1, 2000 identified at pages 16, 17, and 18 of its document listing and which are subject to a claim for litigation privilege. I will make a decision on the status of those documents at that time.
I order the Insurer to provide to me within 7 days, in a sealed envelope, copies of all documents upon which solicitor-client privilege is claimed, for my examination.

At a pre-hearing which took place on October 20, 2004, Mr. Hurtubise requested that Primmum produce its entire accident benefits file to date, including all adjuster's notes and records, and all communications between the adjusters and others involved in her file, including potentially those with lawyers.

At the pre-hearing, Mr. Himelfarb indicated that while Primmum would produce its file up to the date of the first application for mediation made by Mrs. Wachmenko, it claimed privilege on the balance of the file.

Since Mr. Himelfarb was not in a position to identify the individual documents upon which Primmum claimed privilege, nor the exact nature and reason for the privilege claim in each individual case, I made the following order:

Within 7 days of this pre-hearing, Primmum shall produce, serve and file a complete list of all documents in the accident benefit file, in the manner of an affidavit of documents, identifying the documents to which it claims privilege attaches, and the reason the claim for privilege is put forward.

In addition I ordered that "each party shall have until November 3, 2004, to serve and file any further written material in support of its position on the production issue."

Mr. Hurtubise filed his materials. Mr. Himelfarb, although he provided a basic list of documents, filed no information nor evidence in support of his contention that certain documents were privileged. Nor did he identify the specific privilege claimed for each document as ordered at the pre-hearing.

At the hearing of this matter, which took place by teleconference on November 24, 2004, Mr. Himelfarb indicated that the Insurer claimed privilege for the documents based on either or both of solicitor-client and litigation privilege.

Both the courts and arbitrators have noted the trend towards greater disclosure.² In the absence of a specific privilege, everything that is relevant should be producible by a party. It is trite law that the onus of proof that a document is privileged lies upon the party asserting that privilege.

Litigation Privilege

As noted, Primmum has claimed both litigation privilege and solicitor and client privilege in support of its refusal to produce the documents listed at pages 16, 17, and 18 of its document list. It does not, however, particularize which privilege applies to which document, nor has it provided any evidence related to its claim for privilege.

Notwithstanding Mr. Hurtubise's assertion that, in the absence of supporting evidence, I must find for Mrs. Wachmenko on the production issues, I held that it was important to consider the documents listed, and at the very least, hear submissions as to their characterization before making an order.

The earliest documents upon which privilege is claimed are various "Company File logs and Inquiries" created after August 23, 1995, the date when Mrs. Wachmenko first filed a mediation application arising out of her September 12, 1994 motor vehicle accident. The most recent documents listed were created as late as January 2004.

The examination was complicated by the lack of particulars, and the involvement of in-house counsel in the creation of many documents, whose identity only became clear from the Insurer's submissions. For the purposes of this decision, I will deal with those documents separately under the heading of solicitor-client privilege.

The Court of Appeal in its Chrusz decision (supra) quoted the following text by R.J. Sharpe³ in an attempt to shed light on the nature of modern litigation privilege:

Litigation privilege, on the other hand, is geared directly to the process of litigation. Its purpose is not explained adequately by the protection afforded lawyer-client communications deemed necessary to allow clients to obtain legal advice, the interest protected by solicitor-client privilege. Its purpose is more particularly related to the needs of the adversarial trial process. Litigation privilege is based upon the need for a protected area to facilitate investigation and preparation of a case for trial by the adversarial advocate. In other words, litigation privilege aims to facilitate a process (namely, the adversarial process), while the solicitor-client privilege aims to protect a relationship (namely, the confidential relationship between a lawyer and a client).

Since the facilitation of litigation is one of the purposes of litigation privilege, the claim for privilege is intrinsically related to the existence of such litigation.

According to Master MacLeod, the link to litigation is important:

Not every investigation of facts will qualify however even if litigation was contemplated when the investigation was made and even if the document was intended to be given to counsel. There must be some connection between the creation of the document and the activities of the adversarial advocate." ⁴

Not only must there be some connection to litigation, but the dominant purpose" of the document must be litigation-related.

In keeping with this conclusion, the court ruled that the dominant purpose" test, not the substantial purpose" test, will govern claims for litigation privilege. The substantial purpose test runs against the grain of contemporary trends in discovery." To qualify for litigation privilege under the dominant purpose test, a document must be created for the purpose of actual or contemplated litigation.⁵

As Master MacLeod noted in Kennedy v. McKenzie⁶: Litigation privilege ceases to apply once the litigation is concluded."

While Mrs. Wachmenko's current arbitration may be traced to an application filed May 14, 2004 and a mediation that was completed on February 20, 2004, this arbitration is not the first claim put forward by Mrs. Wachmenko. As noted earlier, an application for mediation was made, and a report issued as early as August 23, 1995. A second mediator's report was issued on March 25, 1997.

Subsequently, an application for arbitration was filed, and a hearing on a preliminary issue took place. I issued a decision, finding that Mrs. Wachmenko was barred from proceeding to arbitration due to the expiry of the requisite limitation period. An appeal was ultimately filed of my decision. No decision on the appeal has been made to date, and the appeal is stayed pending the hearing of another matter by the Court of Appeal. The arbitration before me is based on a new mediation and application for arbitration, and is functionally separate from the earlier arbitration.

Mr. Himelfarb takes the position that, for the purposes of litigation privilege in this arbitration, an adversarial relationship began with the first application for mediation in 1995. Litigation or arbitration would have been foreseeable at that time and, according to that analysis, any documents created in connection with, or in contemplation of litigation from that date on, would be subject to litigation privilege.

As noted earlier, even if I accept the first mediation as the appropriate divide, that is only the prelude to a second stage of the examination. As noted by Master Kelly, "a sweeping assertion by the party claiming privilege is not enough."⁷

Stinson J. in First Choice sets out the second stage of the process:

The party resisting production must establish that the dominant purpose for the preparation of documents for which litigation privilege is claimed is, in fact, for assistance in preparation for, or the conduct of that litigation.⁸

To return to the determination of the appropriate divide, there is a certain attractive simplicity to considering mediation as the appropriate dividing line to litigation. In accident benefit matters, it is the pre-condition to access to the courts or arbitration. As a result, it is frequently used in arbitration as a rough and ready divide to mark the commencement of the adversarial phase of the insured/insurer relationship.

The assertion of litigation privilege turns, however, on the facts of each case. Mediation is not necessarily the first step to litigation. It may well also be the first step to resolution of a claim. Patently, not all mediations lead to litigation.

Master Clark, in dealing with a similar situation, remarked:

The plaintiff retained counsel who on October 21, 1996 delivered an application for mediation which is a prerequisite for suing on the insurance contract.

The mediator delivered his report on January 28, 1997 and the plaintiff commenced an action on April 19, 1997. Mr. Aikins argues that on that last day, it can be said that the defendant contemplated litigation.

The defendant asserts that his client reasonably could have contemplated that it would (be) sued when, on October 24, 1996 the plaintiff applied for mediation.

(There is not usually any direct and convincing evidence of the date when one or other of the parties contemplated litigation, and there is none here. However it might help in future cases for the court to know at least what percentage of accident-benefit mediations succeed.)

Mr. McClelland argued that the defendant contemplated litigation as soon as it knew in May 1996 that the plaintiff had retained counsel. But that assumes too much. Counsel are needed by most insured to put forward a proper position in mediation and to avoid accepting an unworthy settlement from insurance representatives experienced in such matters. Early May 1996 is too early for the defendant to claim it contemplated that it would be sued.⁹

What evidence is there that litigation privilege commenced in August 1995? There is the report of the mediator, which was followed by the first application for arbitration in May of 2000. Somewhere between those two dates, one may infer that the Insurer had a reasonable contemplation of litigation. Given the delay in the filing for arbitration, one could also infer that much of the interval was given to the search for a resolution.

Given the positive onus on the Insurer to establish privilege and its total failure to provide supporting evidence for some earlier bright line division of actual contemplation of litigation, I am unable to accept that mediation in this case was anything more than one end of the non-adversarial claims adjustment continuum. While it is quite possible that litigation was contemplated earlier than May 2000, on the limited evidence before me such a conclusion could only be speculative.

Even if one accepts that litigation privilege commenced somewhere between the first application for mediation and the application for arbitration, the fact remains that the process begun at that time is not the same as this arbitration. That arbitration¹⁰ was dismissed by preliminary issue decision dated July 20, 2001.

The present arbitration¹¹ is based on a different application for arbitration, although relying on the same underlying circumstances to base the claim for benefits. While the Insurer, in its response, raised an argument of res judicata or issue estoppel, it is notable that, by the time of the pre-hearing, the only preliminary issues remaining were the questions of whether certain disputes had been mediated, and the effect of Mrs. Wachmenko's failure to attend a section 65 examination.

On the face of it, the two arbitrations are separate. If this is the case, then litigation privilege in the current arbitration cannot be seen to have begun much before the mediation, which took place between October 23, 2003 and February 20, 2004.

The earlier arbitration dealt with income replacement benefits. The current arbitration does not.

An appeal of the earlier arbitration is stayed indefinitely. It has not been dismissed, however. Litigation privilege for documents created after August 1995, but before mediation of the current claims, may well be subject to litigation privilege arising out of that arbitration, providing that it can be shown that their dominant purpose is related to the litigation of the income replacement benefit issue that was the focus of that arbitration. Presumably such privilege would remain in place until such time as the original arbitration was dismissed or withdrawn, or a final decision made on entitlement.

Likewise, with the same proviso, documents created after June 2004 may be subject to litigation privilege arising out of the second arbitration.

The principal problem in accepting the Insurer's claim of litigation privilege for any of the documents for which privilege is claimed is that, notwithstanding my order that any evidence in support of privilege be filed by November 3, 2004, none was filed. Nor was any offered at the hearing of the matter, although submissions were made. It is not simply a matter of an incomplete affidavit of documents, but of the complete failure to supply any evidentiary support for the Insurer's argument.¹²

Mr. Hurtubise did file documents in support of his responding argument that no litigation privilege attached to the Insurer's documents. These include the report of the mediator in this arbitration, and letters exchanged between his office and Mr. Luke Mullin, a solicitor retained by Primmum, and other representatives of the Insurer. Consequentially, I will make any decision based on that evidence, together with the submissions made by the parties, and any inference that may be drawn from the record of this arbitration.

I accept that, after the receipt of the application for arbitration in this matter, dated May 14, 2004, there can be no dispute that, with regard to the issues in this arbitration, the parties were patently in an adversarial position.

Although Mr. Hurtubise argues that the nature of accident benefits, and the ongoing obligation of the Insurer to deal fairly with the claims as a matter of utmost good faith, create a situation where litigation privilege is inapplicable, even after the filing of the later application to arbitration, his argument is overreaching the jurisprudence in this area.

Certainly courts have accepted that insurers have a special relationship with their insured, characterized as utmost trust or good faith. As Master Clark noted:

This is an accident benefit action. It is not a tort action. The plaintiff and defendant (insured and insurer respectively) are bound together by obligations and responsibilities until it can be said that to one or the other the prospect of litigation between them is clear.¹³

The Court of Appeal in Plaza Fiberglass¹⁴ made it clear, however, that utmost trust does not automatically translate into a fiduciary duty. Drawing from Lac Minerals¹⁵, Robins J.A. found that the pre-conditions for the existence of a fiduciary obligation were as follows:

(1) The fiduciary has scope for the exercise of some discretion or power;

(2) The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary's legal or practical interests; and

(3) The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power.

The Supreme Court has found that the existence of a fiduciary relationship, such as that between and doctor and a patient, creates a right on behalf of a patient to access copies of his or her medical records. LaForest J. in McInerney¹⁶ stated that, "The patient's interest in his or her records is an equitable interest arising from the physician's fiduciary obligation to disclose the records upon request."

If there is a comparable fiduciary relationship between Mrs. Wachmenko and her insurer, it would follow that she would have a similar right to inspect her" insurance records.

There is another significance to whether or not a fiduciary relationship exists between an insured and an insurer. Potentially, such a relationship could give rise to a sufficient common interest to defeat any claim for privilege as between the two parties. While normally used as a shield to avoid a waiver of privilege, it also can serve to buttress requests for disclosure between two parties whose interests are closely linked.

In CC & L Dedicated Enterprise Fund v. Fisherman, Cumming J. noted that "Common Interest Privilege may attach to documents shared by parties with a common interest despite the fact that they become adverse in respect of another related action."¹⁷

According to Major J. in Pritchard:¹⁸

The common interest exception originated in the context of parties sharing a common goal or seeking a common outcome, a selfsame interest" as Lord Denning, M.R. described it in Buttes Gas & Oil Co. v. Hammer (no. 3) [1980] 3 All E.R. 475 (C.A.), at p. 483. It has since been narrowly expanded to cover those situations in which a fiduciary or like duty has been found to exist between the parties so as to create common interest.

On the material before me I find it difficult to conclude that a relationship akin to a trustee-beneficiary relationship was established between Mrs. Wachmenko and Canada Life. While any insurer, in dealing with its insured, is subject to high standards of good faith, I find that there is no evidence to suggest that, in Mrs. Wachmenko's case, this translated into a fiduciary relationship.

Even if there was such a relationship early in the claims period, it would be difficult to see any common interest surviving the Applicant's filing for arbitration, notwithstanding any attempt to resolve or otherwise adjust the claims file subsequent to that date.

Given my finding that both arbitrations are still "live" even though the first is stayed for the time being, I find that any documents subject to litigation privilege in the first arbitration remain so.

I find, as well, that only materials created after Mrs. Wachmenko's application for arbitration in the first arbitration (May 2000) could reasonably be subject to litigation privilege. I make this as an assumption based on the presence of actual litigation, as evidenced by an application for arbitration. Once again, since the Insurer has presented no evidence in support of its claim for privilege arising at an earlier date, I have no basis for a finding of an earlier date.

As noted earlier, the second part of the test for litigation privilege is an examination of whether the dominant purpose of the creation of a document was for litigation purposes. While assumptions can be made that, after the application for arbitration there is a likelihood that internal documents were created for litigation purposes, what is required is proof, on the balance of probabilities that such indeed was the case. There is no evidence of that nature. Indeed, the correspondence submitted by Mrs. Wachmenko seems to show that, as late as February 15, 2002, efforts were being made to deal with her claims.

Consequently, I find that the Insurer has not met its onus of proving that the parties were in contemplation of litigation at any date prior to the first application for arbitration, which would be at the beginning of May 2000.

In addition to the principle of wide and open disclosure, there is at least another competing principle at stake here in making determinations on privilege. There is a societal interest that in the context of litigation a party or a solicitor may properly prepare himself or be prepared to conduct proceedings with complete confidence that the material gathered and the advice rendered or prepared for that purpose will not be disclosed to anyone without consent.

As noted earlier, the determination of litigation privilege is a two-stage process. While I am prepared to order production prior to May 2000, when there is no evidence of contemplation of litigation, I am not prepared to make the same order subsequent to that date, without first examining the individual documents to determine if their dominant purpose appears, on the face, to be litigation-related.

Consequently, the Insurer shall forward to me within 7 days, in a sealed envelope, those documents created after May 1, 2000 identified at pages 16, 17 and 18 of its document listing and which are subject to a claim for litigation privilege. I will make a decision on the status of those documents at that time.

Solicitor-Client Privilege

Solicitor-client privilege is of a different nature than litigation privilege. While litigation privilege applies only in the context of specific litigation, and terminates with that litigation, solicitor-client privilege is more fundamental and far reaching.

As Major J. commented in Pritchard:

Solicitor-client privilege describes the privilege that exists between a client and his or her lawyer. Clients must feel free and protected to be frank and candid with their lawyers with respect to their affairs so that the legal system, as we have recognized it, may properly function.¹⁹

The pre-conditions for solicitor-client privilege have been described as:

(i) a communication between solicitor and client;

(ii) which entails the seeking or giving of legal advice; and

(iii) which is intended to be confidential by the parties.²⁰

Once established, solicitor-client privilege is "nearly absolute"²¹:

...solicitor-client privilege must be as close to absolute as possible to ensure public confidence and retain relevance. As such, it will only yield in certain clearly defined circumstances, and does not involve a balancing of interests on a case-by- case basis.²²

Although there are few legal exceptions to solicitor-client privilege, there are factual considerations that may remove documents from eligibility for that privilege. Not everything touched by a solicitor is automatically privileged. In many organizations lawyers may be involved, as in-house counsel, in matters not strictly in the legal domain.

Policy advice, and administrative work may not be directly related to the relationship of solicitor/client and may not be protected. As Major J. noted in Pritchard²³:

Owing to the nature of the work of in-house counsel, often having both legal and non-legal responsibilities, each situation must be assessed on a case-by-case basis to determine if the circumstances were such that the privilege arose. Whether or not the privilege will attach depends on the nature of the relationship, the subject matter of the advice, and the circumstances in which it is sought and rendered.

Mr. Himelfarb conceded that many of the lawyers involved in this matter were working in-house. Given the number of years following the accident that benefits were dealt with by Canada Life, and communications made involving persons who were lawyers, it is not necessarily obvious that all such communications related to a formal solicitor-client relationship. Indeed, I have no evidence that any did.

Given the primordial importance identified by the Supreme Court in protecting solicitor-client privilege, I find that, even in the absence of any supporting evidence, it is not appropriate to order release of the documents without an intervening step. I order the Insurer to provide to me copies of all documents upon which solicitor-client privilege is claimed, for examination.²⁴ At least, in the absence of other evidence, the documents can speak for themselves.

EXPENSES:

Mrs. Wachmenko has been successful in much of her claim for production. More importantly, the Insurer, by failing to provide the full particulars of its file, as ordered, and by failing to provide any evidence in support of its claim for privilege, has unnecessarily delayed this process.

I exercise my discretion to award Mrs. Wachmenko her expenses incurred in this motion hearing, which I fix at $900.00, which shall be payable forthwith, in any event of the cause.

December 16, 2004

John Wilson Arbitrator

Date