COURT FILE AND PARTIES
COURT FILE NO.: CV-08-10702CM
MOTION HEARD: 20111205
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Ray Piche, Michael Cote, Onorio Frezza and John Ross, Plaintiffs
AND:
TD Securities Inc. and Richard Maaten, Defendants
BEFORE: Master Pope
COUNSEL: Harold Geller, Counsel for the Plaintiffs
Laura Paglia, Counsel for the Defendant, TD Securities Inc.
Sara Erskine, Counsel for the Defendant, Richard Maaten
HEARD: December 5, 2011
REASONS FOR DECISION
[ 1 ] The plaintiff, John Ross (“Ross”), refused to answer certain questions during his cross-examination on his Revised Affidavit of Document sworn May 10, 2011, held June 6, 2011. The primary bases for the objections are that the answers sought are protected by solicitor-client privilege. The defendants seek an order to compel Ross to answer the questions on the basis that any such privilege was waived.
[ 2 ] The notice of action was issued on February 26, 2008 followed by the statement of claim. Solicitors for the plaintiffs at that time were the firm of Sutts Strosberg LLP. On January 21, 2011, the plaintiffs amended their statement of claim by issuance of a fresh statement of claim. The fresh statement of claim is dated July 27, 2010. By this time, the plaintiffs had changed counsel to the firm of Doucet McBride LLP, their current counsel.
[ 3 ] At the heart of this action is the issue regarding advice allegedly given by the defendant, Richard Maaten (“Maaten”), to the plaintiffs that they commute their guaranteed indexed pensions to investments with TD Waterhouse. As Ross reached the age of retirement from his position as Director of Education for the Lambton County Roman Catholic Secondary School Board sometime between 1996 and 1999, he was presented with a summary of the pension options available from his employer. Ross alleges that on Maaten’s advice he commuted his pension and thereafter Maaten invested the resulting capital in a series of investments in 2000 that exposed Ross to risk of substantial loss inconsistent with his investment objectives which consequently generated significant losses.
[ 4 ] Ross seeks damages from the defendants of $5 million as a result of breaches of applicable duties of care, including fiduciary duties owing to him by the defendants by reason of the special relationship that existed of investment advisor and customer. Further allegations are based on breach of contract, negligent misrepresentation and negligence.
[ 5 ] The defendants have pled that the plaintiffs’ claims are statute barred having commenced the action beyond the limitation period. In particular, Ross commuted his pension in 2000; whereas, this action was commenced on February 26, 2008. These claims involve both the financial advice by Maaten surrounding the commutation of their pensions and discovery of the alleged poor performance of the investments that arose from the commutation of the pensions.
[ 6 ] This motion is brought pursuant to rule 34.15(1) which provides as follows:
34.15(1) Where a person fails to attend at the time and place fixed for an examination in the notice of examination or summons to witness or at the time and place agreed on by the parties, or refuses to take an oath or make an affirmation, to answer any proper question, to produce a document or thing that he or she is required to produce or to comply with an order under rule 34.14, the court may,
(a) where an objection to a question is held to be improper, order or permit the person being examined to reattend at his or her own expense and answer the question, in which case the person shall also answer any proper questions arising from the answer;
(b) where the person is a party or, on an examination for discovery, a person examined on behalf or in place of a party, dismiss the party’s proceeding or strike out the party’s defence;
(c) strike out all or part of the person’s evidence, including any affidavit made by the person; and
(d) make such other order as is just.
[ 7 ] The issue on this motion that relates to refusal numbers one through three on the Refusals Chart is whether Ross waived solicitor-client privilege. Refusal number 4 was not answered on different grounds which will be particularized later in this decision. It would seem therefore that all elements necessary to establish solicitor-client privilege have been met -- the only issue being that of waiver.
[ 8 ] Where a party claims solicitor-client privilege over communications between solicitor and client, the onus is on the party who claims waiver to satisfy the court that the privilege ought to be set aside. As such, the defendants herein have the onus.
[ 9 ] The defendants rely on Apotex Inc. v. Canada (Minister of Health) (F.C.) 2003 FC 1480 , [2004] 2 F.C.R. 137 for the proposition that when determining whether solicitor-client privilege is deemed to have been waived, fairness to a party facing trial is the guiding principle. The Federal Court affirmed the Prothonotary’s order that contents of solicitor-client communications between the Health Canada officials and their legal advisors be disclosed as privilege had been impliedly waived by the fact that as part of the defence of reasonableness, the Minister disclosed during discovery that he intended to rely on consultations with legal advisors as an explanation for delay in issuing the NOC. [1] Apotex sued the Minister of Health for negligence, discrimination and breach of statutory duty in respect of an eight-month delay in issuing the NOC after Apotex had reached a settlement with the patent holder. It was alleged that the Minister abused his discretion, discriminated against Apotex, acted in bad faith and dealt with the submission in an irrational, arbitrary manner.
[ 10 ] The court in Apotex relied on Bank Leu Ag v. Gaming Lottery Corp. (1999), 43 C.P.C. (4 th ) 73 (Ont. S.C.J.) , upheld by the Ontario Divisional Court, reported at (2000), 132 O.A.C. 127 , for the law on the concept of implied waiver, at paragraph 25:
Privilege may be waived expressly or impliedly. . . . When determining whether privilege should be deemed to have been waived, the court must balance the interests of full disclosure for purposes of a fair trial against the preservation of solicitor client and litigation privilege. Fairness to a party facing a trial has become a guiding principle in Canadian law. Privilege will be deemed to have been waived where the interests of fairness and consistency so dictate or when a communication between a solicitor and client is legitimately brought into issue in an action. When a party places its state of mind in issue and has received legal advice to help form that state of mind, privilege will be deemed to be waived with respect to such legal advice. [Emphasis by Justice Lemieux.]
[ 11 ] In Apotex , the court held that implied waiver of solicitor-client privilege may occur if a party relies on the contents or the substance of legal advice received where reasonableness and good faith are pled as a defence. When determining whether solicitor-client privilege is deemed to have been waived, fairness to a party facing a trial is a guiding principle. Further, the element of fairness will be balanced against the values underlying solicitor-client privilege depending on the circumstances and the underlying pleadings.
[ 12 ] Similarly, in Alberta Wheat Pool v. Estrin (1986), 75 A.R. 348 (Q.B.), referred to in Apotex , the court found that the defendant had waived his solicitor-client privilege when he put in issue his intention, the state of his knowledge and the information he had at the time he prepared a letter. The defendant, Estrin, acted as a solicitor in a real estate transaction and was sued for negligent misrepresentation, having provided a letter attached to an offer to purchase that he was holding in trust a bank draft when in fact he only had a non-certified cheque post-dated to the date of closing. On discovery, Estrin stated before issuing the letter he had consulted two lawyers and had discussions with them. He refused to answer a series of questions which related to when and why the discussions were held and the contents of the discussions, on the basis of solicitor and client privilege.
[ 13 ] Justice Chrumka found that because the denial of fraudulent and negligent behaviour could not be tried in absence of evidence of the legal advice which Estrin received prior to the preparation of that letter, the plaintiff must be entitled to examine upon this aspect. He further held that because Estrin consulted two lawyers and sought legal advice raises the question whether he was induced to write the letter in reliance upon the advice of the two lawyers or either of them. He found that this evidence is material to the issue of whether Estrin acted fraudulently or negligently or whether he had an honest belief ( Apotex , at para. 39).
[ 14 ] The plaintiffs rely on several cases where the issue of solicitor-client privilege was determined in the context of criminal proceedings. The statements by the Supreme Court of Canada regarding the evolution of the principles of privilege and waiver are informative. Those cases deal with specific exceptions to the protection afforded privilege claims in criminal proceedings.
[ 15 ] The most recent of those cases is R. v. McClure , 2001 SCC 14 , [2001] S.C.J. No. 13, in which the court enunciated at paragraphs 35, 42 and 43 that:
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 balance of interests on a case-by-case basis.
Solicitor-client privilege and the right to make full answer and defence are principles of fundamental justice.
The importance of both of these rights means that neither can always prevail. In some limited circumstances, the solicitor-client privilege may yield to allow an accused to make full answer and defence.
[ 16 ] The Supreme Court of Canada went on to explain the existing tests which help to identify when the right to make full answer and defence will prevail over the need for confidentiality regarding production of medical records that are in the hands of third parties and, secondly, in circumstances when the identity of an informer might have to be revealed.
[ 17 ] The plaintiffs also rely on S. & K. Processors Ltd. v. Campbell Avenue Herring Producers Ltd. , [1983] B.C.J. No. 1499 (B.C.S.C.) at para. 6 , which held that waiver of privilege is established where it is shown that the possessor of the privilege knows of the existence of the privilege and voluntarily evinces an intention to waive that privilege. Further, waiver may also occur in the absence of an intention to waive, where fairness and consistency so require. This case involved the plaintiff’s application for an order compelling production of certain supporting documents to the defendants’ accountants’ report where both litigation and solicitor-client privilege were claimed. The subject report was produced pursuant to the Evidence Act , R.S.B.C. 1979, c.116, s.11 shortly before trial. The court found that while the Act abrogates the privilege attaching to such reports by requiring that the facts upon which the expert’s opinion is based be disclosed, the plaintiffs were said to be seeking an extension of the “inroad on privilege” legislated by the Act (para. 8). The court went on to consider whether in the interest of fairness and consistency the doctrine of waiver requires their disclosure. It concluded, at paragraphs 11 and 12, that even if production of the report pursuant to the Act could be said to constitute waiver, in those circumstances it could not be said to be unfair or inconsistent that the party producing it retain such privilege as is left to him by the Act. It concluded that privilege which attached to the requested documents had not been waived such that the plaintiffs were not entitled to production.
[ 18 ] The plaintiffs also rely on the Supreme Court of Canada’s decision in Pritchard v. Ontario (Human Rights Commission) , 2004 SCC 31 , [2004] S.C.J. No. 16. The court found that the communication between the Ontario Human Rights Commission and its in-house counsel was a legal opinion and protected by solicitor-client privilege. In reference to R. v. McClure , the court stated that the privilege is “jealously guarded and should only be set aside in the most unusual circumstances, such as a genuine risk of wrongful conviction” (para. 17).
[ 19 ] It is noteworthy that in the one case relied on by the plaintiffs that was determined in the context of a civil action; namely, S. & K. Processors , the court considered the interests of fairness and consistency when considering whether privilege had been waived. Similarly, the court in Apotex , a more recent case relied on by the defendant, affirmed by the Ontario Divisional Court in 2000, considered fairness to a party facing a trial as a guiding principle on the issue of waiver of privilege. Further, Apotex held that the element of fairness is to be balanced against the values underlying solicitor-client privilege depending on the circumstances and the underlying pleadings. Therefore, it is my view that the case law is consistent in the approach to determining whether privilege has been waived.
[ 20 ] I will now consider each question that Ross refused to answer in the context of the law as set out above.
Refusals
[ 21 ] I will deal with the first two refusals as they were both refused on the grounds of solicitor-client privilege.
Refusal Number 1: Question 78, page 30:
[ 22 ] The defendants requested that Ross inquire of Sutts Strosberg LLP as to whether that firm had any records of comments Ross may have made on the draft notice of action or statement of claim. Ross refused to answer on the basis that comments between counsel and client are protected by solicitor and client privilege and further that privilege has not been waived.
Refusal Number 2: Question 79, page 30-31:
[ 23 ] The defendants asked Ross to explain what he meant when he said that Sutts Strosberg LLP never provided him with any legal advice regarding the commutation of his pension. Ross refused to answer on the basis of solicitor-client privilege.
[ 24 ] It is the defendants’ position that Ross placed the advice, or lack thereof, from his previous counsel in issue as further supported by his underlying pleadings. They say that the requested disclosure is the advice Ross received from his former counsel at the time the action was commenced in order to confirm whether Ross was induced to take certain steps due to that advice. In that case, they state, privilege over that advice is waived.
[ 25 ] It is necessary to first consider the allegations in the statement of claim and fresh statement of claim. Allegations contained in the statement of claim are summarized as follows:
Breach of the defendants’ professional, regulatory and legal duties to the plaintiffs including a failure to properly manage, monitor, and supervise the plaintiffs’ accounts.
Breach of an express or implied term in the agreement between the parties that Maaten would provide honest, competent and diligent services on the plaintiffs’ behalf and that the plaintiffs would receive a minimum of 10 per cent return on their investment, while their capital either remained intact or grew.
Breach of the fiduciary relationship that existed between the plaintiffs and the defendants with respect to investment advice, investment strategies and securities recommended.
Maaten negligently misrepresented the advice he gave to the plaintiffs, among other things, commuting the plaintiffs’ pension and investing their moneys with the defendants.
Negligence on the part of the defendants based on, inter alia, failure to properly assess the plaintiff’s suitability for investments in their accounts, and failure to perform a formal, or any, risk tolerance assessment.
[ 26 ] The material facts as pled in the fresh statement of claim are not materially different than the statement of claim. Similarly, the fresh statement of claim alleges that the plaintiffs relied on Maaten’s expertise and advice and to commute their pensions and to transfer the maximum amounts to his management at TD Waterhouse. With both claims, it is further alleged that the defendants breached numerous fiduciary duties of care owed to the plaintiffs and breach of the agreement between each plaintiff and the defendants.
[ 27 ] The defendants contend that the following testimony given by Ross places the advice, or lack thereof, from his previous counsel in issue:
Ross was supposed to meet with Jim McCabe of TD Waterhouse before Christmas 2005 as he had concerns regarding the performance of his investments with Maaten.
At the time Ross was to meet with Mr. McCabe, he had no concerns about the financial advice surrounding the commutation of his pension. The “big issue” was the financial advice concerning the investments recommended by Maaten. The financial advice surrounding the commuting of his pension was “never in our thinking until we met Mr. Geller here” (p. 15, q. 58). Mr. Geller is plaintiffs’ counsel.
Before the statement of claim dated March 27, 2008 was filed, his former counsel provided him with a draft of either the notice of action or statement of claim for his review (p. 25, q. 74, p. 26, q. 76).
Ross did not recall giving his previous counsel instructions to issue the statement of claim (p.28, q. 76).
When asked whether he instructed previous counsel to proceed with the filing of the statement of claim, Ross refused to answer on the grounds of solicitor-client privilege (p. 25, q. 74). Subsequently, Mr. Geller stated the following on the record:
With respect to the issue around whether instructions were provided with respect to the filing of the Statement of Claim, the recollection, and the obvious instructions that a lawyer would have received are at odds, and so I have not had time since last Thursday when I learned of this issue to inquire either of the file or – which we have their notes – or of Ms. Horvat (p.27, q.76).
Ross’ previous counsel never provided him with any legal advice regarding the commutation of his pension (p. 31, q. 79).
When asked whether paragraph 10 of the statement of claim was an accurate statement of his allegations regarding Maaten at the time, Ross refused to answer on the basis of solicitor-client privilege and later refused on the basis that the question is not a fair question as phrased (p. 32, q. 81).
[ 28 ] In my view, there is clearly inconsistency between the allegations contained in the plaintiffs’ claims and Ross’ testimony. Particularly, both claims allege, inter alia, negligent misrepresentation in the advice given by Maaten to commute the pensions. Conversely, Ross’ testimony on cross-examination was that the financial advice surrounding the commuting of his pension was not in the minds of the plaintiffs until they met with Mr. Geller. It appears that the plaintiffs retained Mr. Geller in or about July 27, 2010, being the date of the fresh statement of claim. Further, Mr. Geller stated on the record that Ross’ recollection as to whether he gave instructions to Sutts Strosberg to issue the notice of action and file the statement of claim is in issue.
[ 29 ] One of the issues to be determined at trial will involve the defendants’ limitation defences as pled. The plaintiffs’ have made numerous allegations against the defendants including breach of contract, breach of fiduciary duties, negligent misrepresentation and negligence. Each of those allegations relate to more than one event. For example, the allegation of negligent misrepresentation relates to both the advice given to commute the pension and to investment advice. In my view, it is critical to the limitation defences that the defendants have full disclosure of all the facts surrounding all allegations in order to properly defend the action and properly put forth its position on the limitations defences. If it is found at trial that the plaintiffs did not give instructions to their former counsel to issue the statement of claim and it is found that the plaintiffs did not, in fact, have an issue with the financial advice regarding the commutation of their pensions at the time the claim was issued in 2008, the defendants may succeed on their limitations defences with respect to the commutation allegation.
[ 30 ] In the Apotex and Alberta Wheat Pool cases, it was held that the defendants were deemed to have waived solicitor-client privilege as they had relied on the contents or the substance of legal advice received where reasonableness and good faith were pled as a defence. Unlike those two cases, it is the defendants herein who are seeking to establish that the plaintiffs waived solicitor-client privilege over communications with their former counsel in a situation where the plaintiffs have not pled, nor is it Ross’ testimony, that the plaintiffs relied on any such legal advice prior to or at the time the action was commenced. However, what is problematic is Ross’ testimony that Maaten’s financial advice surrounding the commuting of the pensions was not in the minds of the plaintiffs until they met their current counsel, Mr. Geller. In other words, Maaten’s financial advice surrounding the commuting of the pensions was not in the plaintiffs’ minds at the time the claim was issued in 2008 although the allegations in the statement of claim state otherwise.
[ 31 ] Nevertheless, when determining whether privilege should be deemed to have been waived, the court must balance the interests of full disclosure for purposes of a fair trial against the preservation of solicitor-client privilege. It is recognized that the plaintiffs have a strong interest in preserving privilege over all solicitor-client communications they had with their former counsel.
[ 32 ] It is my view that by his testimony, Ross has put in issue the plaintiffs’ state of mind and intentions at the time the statement of claim was issued. Further, given the limitations defences and the numerous allegations contained in both the statement of claim and fresh statement of claim, the defendants would not be afforded a fair trial without the defendants being entitled to examine on this issue. In my view, this evidence is material to the issue of the limitations defences.
[ 33 ] For the above reasons, I find that Ross is deemed to have waived solicitor-client privilege with respect to any instructions he may have given to former counsel regarding the draft pleadings (Refusal number 1). I also find for the same reasons that Ross is deemed to have waived solicitor-client privilege with respect to the advice, if any, Sutts Strosberg gave him regarding the commutation of the pensions (Refusal number 2). Therefore, the objections to these questions were improper and they shall be answered by Ross.
Refusal Number 3: Question 81, page 32
[ 34 ] Ross refused to answer the question as to whether paragraph 10 of the statement of claim was an accurate statement of his allegations regarding Mr. Maaten at the time. Subsequently, the question was rephrased to ask whether that paragraph is an accurate statement of his complaint regarding Mr. Maaten at the time that he persuaded Ross to commute his pension by making certain representations. Ultimately the question was objected to as not being a fair question.
[ 35 ] Paragraph 10 of the statement of claim is as follows:
Maaten persuaded the plaintiffs to commute their pensions by making the following representations, on which the plaintiffs relied: (i) that the capital value of the plaintiffs’ commuted pensions would grow by at least 10% annually; and (ii) even by conservative estimates, the plaintiffs’ capital would generate at least $60,000 in income annually for each of the plaintiffs.
[ 36 ] I am inclined to agree with the defendants. In my view, the defendants asked a simple question as to the accuracy of the statement. This question elicits a “yes” or “no” answer. Even Mr. Geller recognized that the statements are clearly part of the statement of claim. I fail to understand why this question is not a fair question. Therefore, the objection to this question was improper. The question must be answered by Ross.
Refusal Number 4: Question 160, page 56
[ 37 ] Ross refused to review his accounts opened with Maaten and to advise which accounts and what money is not in issue in this lawsuit on the grounds that it is an improper question at a cross-examination on an affidavit of documents and not part of the purpose of that examination.
[ 38 ] The evidence is that Ross had other investments with the defendants other than the funds from the commutation of his pension. The plaintiffs contend that they may be required to retain an expert to determine which of Ross’ investments are derived solely from the commutation of his pension.
[ 39 ] It is my view that this question relates more so to Ross quantifying his claim. In many cases, a plaintiff is unable to quantify his claim without the assistance of a third party such as an accountant. While Ross will have to quantify his claim ultimately, in my view, this cross-examination is not the proper time to require that he do so. The defendants have pointed to no case law that requires a plaintiff to quantify his claim at the time of examination on an affidavit of documents. Therefore, the objection to this question was proper and Ross is not required to answer it.
Conclusion
[ 40 ] In conclusion, the following orders shall issue:
The questions that gave rise to refusal numbers 1, 2 and 3 on the Refusals Chart at Appendix 1 to the Motion Record shall be answered by Ross;
The question that gave rise to refusal number 4 is not required to be answered by Ross;
Ross shall reattend for cross-examination at his own expense and answer the questions referred to in 1 above within 60 days of the release of these Reasons, and in which case he shall also answer any proper questions arising from the answers.
[ 41 ] A copy of the completed Refusals Chart, being Appendix 1 to the Motion Record, is attached hereto.
Costs
[ 42 ] The defendants have been substantially successful on this motion; therefore, they are entitled to their costs on a partial indemnity basis. However, Maaten is not seeking costs. If the parties are unable to agree on costs of this motion, TD Evergreen may serve and file a costs outline along with short written submissions within 14 days of the release date of these Reasons. Thereafter, the plaintiffs may serve and file responding written submissions within a further 14 days of being served with the defendant’s submissions.
Timetable
[ 43 ] Further to my endorsement on the Motion Record on September 26, 2011, counsel shall schedule a case conference for the purpose of entering into a timetable for completion of the balance of the steps in this action.
“Original signed by “Lou Ann M. Pope”
Master Lou Ann M. Pope
Date: April 18, 2012
[^1]: The meaning of the acronym, “NOC”, was not set out in the decision.