Court File and Parties
COURT FILE NO.: CV-09-096044
DATE: 20120518
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: METRO CONCRETE FLOORS, Applicant
AND:
FIELDVIEW CONSTRUCTION, MARY POMPILI and POMPILI HOLDINGS, Defendants
BEFORE: THE HON. MADAM JUSTICE S.E. HEALEY
COUNSEL:
G. Hemsworth, for the Applicant
J. Sesito, for Fieldview Construction, Defendant
M. McQuade, for Mary Pompili and Pompili Holdings, Defendants
HEARD: May 15, 2012
ENDORSEMENT ON MOTION
[ 1 ] In this action the plaintiff alleges that Fieldview Construction Corp. ("Fieldview"), a company already adjudged to have misappropriated trust funds from a construction project (the "Keele Street Project"), diverted those funds to or for the benefit of Pompili Holdings Inc. ("Pompili Holdings") by the hand of either the sole director and officer of each corporation, Lou Pompili, and/or the hand of his wife, Mary Pompili, who is a shareholder of Pompili Holdings. It is alleged that such trust funds were used to purchase a condominium in Vaughn, Ontario in 2007. It is also alleged that the finishing materials were purchased from trust funds, and it is undisputed that Fieldview occupied the condominium for a period of time. The only issue remaining between the parties on this motion is whether Pompili Holdings should be required to produce the reporting letter and solicitor’s account from the purchase transaction. Pompili Holdings and Mary Pompili resist such an order on the grounds that: 1) that the documents are not relevant; 2) the plaintiff has provided no evidence to rebut the presumption that solicitor-client privilege attaches to the documents; and 3) they have provided evidence suggesting that funds were advanced from a line of credit in the name of Mary Pompili in February 2007, the day before the closing.
[ 2 ] The plaintiff’s counsel points to the fact that while the amount of $213,821 was transferred from Mary Pompili's line of credit account, the trust account ledger statement from the purchase indicates that a lesser sum of $109,740 was received from Pompili Holdings on closing. The plaintiff seeks the documents for the purpose of obtaining information as to the source of the purchase funds. Plaintiff’s counsel argues that the documents sought do not meet the fourth part of the tests for privilege set out in R. v. Solosky (1979), [1980] 1 S.C.R. 821 (S.C.C.) because they are not a communication directly related to the seeking, formulating or giving of legal advice, and secondly, the allegation of fraud against Pompili Holdings permits the court to displace the privilege.
[ 3 ] On the issue of whether solicitor-client privilege attaches to the reporting letter and account, the moving party relies on R. v. Defehr 2011 CarswellBC 3015 (" Defehr ") , where, on application by the Crown requesting that records be unsealed and the court make a determination as to privilege, the applications judge determined that reporting letters were not privileged. The presiding judge was able to review the documents and determined that the reporting letters contained transactional documents within the public domain, and that there was nothing on the documents suggesting that the communication was designed to be of a confidential nature made for the seeking or giving of legal advice. I do not have the benefit of reviewing the reporting letter or account, but even without such insight I would be highly cautious about adopting the approach taken in Defehr . In my view it would have to be the most innocuous of letters, for example a covering letter simply noting the enclosure of correspondence from an opposing party, that might fall outside the scope of a communication "directly related to the seeking, formulating or giving of legal advice", and even that could be arguable. Clients seek solicitors for purchase transactions to offer both guidance and advice, and the reporting letter and account to the client are direct by-products of the legal advice and assistance both sought and given for such transactions. Accordingly, I declined to have the documents produced on the basis of the argument that no privilege attaches to a reporting letter or account.
[ 4 ] With respect to displacing the privilege due to fraud, it is not enough that an accusation of fraud has been made. The law of solicitor-client privilege in such circumstances was reviewed by Master Peppiatt in Silverman v. Morres 1982 CarswellOnt 438 (S.C.) at para. 10 , where he set out the principles earlier summed up by Lacourcière, J. (as he then was) in Re Goodman & Carr v. Minister of National Revenue , 1968 340 (ON SC) , [1968] 2 O.R. 814 (H.C.):
In general, where fraud is charged, no privilege can be claimed for documents relating to the alleged fraud.
Some definite charge or allegation of fraud must be made in order to displace the privilege.
A mere allegation of fraud in the pleading is not sufficient; a prima facie case of fraud must be made in fact.
[ 5 ] In this case the pleading alleges that the individual Pompilis diverted trust funds from the Keele Street Project for the benefit of Pompili Holdings, and did so with a view to defeating Fieldview's creditors. Yet on this motion the plaintiff has produced no evidence that the money for the condominium purchase came from a source other than the credit facility available to Mary Pompili. It is suspicious that Fieldview occupied the unit for a time, but that does not amount to a prima facie case of fraud. It cannot be said that the plaintiff has shown a prima facie case of fraud sufficient to displace solicitor-client privilege.
[ 6 ] Accordingly, while potentially relevant to having a full picture of the flow of funds or other benefits involved in the condominium purchase, I conclude on the basis of the record before me that the documents sought by the plaintiff remain protected by privilege and therefore are not producible in this litigation at this time.
[ 7 ] In the result the plaintiff's motion is dismissed.
[ 8 ] If the parties are unable to agree upon the costs of this motion, they may make brief written submissions through the office of the judicial assistants in Barrie on a timetable agreed between counsel, but all submissions to be delivered by no later than Friday, June 22, 2012.
HEALEY J.
Date: May 18, 2012