Court of Appeal for Ontario

Dylex Limited (Re)

Date: 2002-06-20

Counsel: James C. Orr and Josee S. Gravelle, for the appellant, Hardof Wolf Group Inc.

File Number: C37888

[1] By the Court: In the ordinary case, there would have to be a two-stage process for dealing with a claim that the solicitor-client privilege is lost because of an allegation of fraud. We are satisfied, however, that in this case the two-stage process was unnecessary because of the particular circumstances. The appellant is a single purpose company incorporated for the sole purpose of the acquisition. The law firm was retained solely for that purpose. Spence, J., found that the trustee has made out a prima facie case of fraud in that the appellant carried through the acquisition transaction so as to use the corporate funds of Dylex to put itself in a position to obtain benefits from Dylex to the detriment of the proper interests of the creditors. In our view, that finding embraces the entirety of the transaction. In those circumstances, Spence, J., was not required to conduct a further document by document review.

[2] Accordingly, the appeal is dismissed with costs fixed at $5,000 (which includes the costs of the leave motion).

Appeal dismissed.