SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-09-385219
DATE: 2012/11/02

RE: ROYNAT CAPITAL INC. et al. v REPEATSEAT LTD. et a.

BEFORE: MASTER RONNA M. BROTT

COUNSEL:
James Renihan, for the defendants Blake Cassels & Graydon LLP and Michelle Susan Cooze, moving parties

Symon Zucker for the plaintiffs/responding parties

E N D O R S E M E N T

[ 1 ] On May 15, 2007 the plaintiffs agreed to lend $7 million to the defendants Repeatseat Ltd. and Repeatseat, Inc. (“Repeatseat”). Repeatseat was obligated to comply with certain conditions in order to receive the funding, one of which was to raise $3.5 million in new equity. As proof that the required equity was raised, the plaintiffs requested Repeatseat to provide a closing certificate (“certificate”) which certified that it had raised at least $3.5 million in new equity.

[ 2 ] The plaintiffs’ transaction lawyers were Cassels, Brock & Blackwell LLP (“Cassels”) and the defendants were represented by Michelle Cooze of Blake Cassels & Graydon LLP (“Blakes”).

[ 3 ] Blakes forwarded a draft certificate to Cassels on June 19, 2007. It was to be signed by Repeatseat’s President and CEO. In the email dated June 19, 2007 attaching the certificate Blakes stated:

Please advise if this will be satisfactory or if you have any comments. I would note that BCG (Blakes) will not be providing confirmation that the $3.5 million has been raised because the subscriptions are not flowing through our office. As such, the certificate alone will need to be sufficient.

[ 4 ] On June 25, 2007 Cassels asked Blakes to provide its own certification that the equity raise was complete in addition to the certificate. On June 26, 2007 Cassels again wrote to Blakes with a list of outstanding matters that had to be addressed before closing, one of which was the certificate. Blakes responded on June 27, 2007 that the certificate regarding the equity injection was ready and ready to release. Later the same day, Ira Traves (“Traves”), a director of one of the plaintiffs, emailed Blakes directly, inquiring whether the full monies had been received and whether the $3.5 million in new equity had been raised. On the same day, Blakes emailed Cassels (with a copy to Traves) advising that Blakes did not want to communicate directly with Cassels’ client personally but rather wanted information to flow through Cassels. The correspondence also stated that “the equity had been completed and that no conditions remain on any of those funds”. Blakes advised that the certificate would be sent shortly. The plaintiffs, allegedly relying on the email from Blakes, and the certificate executed by the defendants’ President and CEO, advanced the $7 million loan and the transaction closed.

[ 5 ] Approximately three months later, on September 28, 2007, the plaintiffs were advised that the full capital had not been raised by the defendants. Repeatseat was $587,602.00 short. The parties attempted to resolve the dispute but when unable to do so the plaintiffs commenced the within action against Repeatseat and Blakes in August 2009.

[ 6 ] Traves was examined for discovery on behalf of the plaintiff and was deposed regarding a discussion that he had with his solicitor relative to the matter of whether there were any discussions touching upon Blake’s email of June 19, 2007 wherein Blakes advised that they would not be confirming receipt of equity funds. The questions were objected to on the basis of solicitor client privilege.

[ 7 ] The Blakes defendants bring this motion to compel Traves to answer questions about his communications with Cassels regarding the plaintiffs’ ability to rely on Blakes to confirm that the $3.5 million equity funds had been raised.

[ 8 ] Courts have protected solicitor client privilege except where a moving party can clearly satisfy and convince the court that there has been a waiver. The waiver may be express or implied but such waivers are limited.

[ 9 ] Courts have deemed parties to have waived privilege on grounds of fairness and consistency when he or she puts the communication with their lawyer in issue in the proceeding. The case law is clear that where a litigant puts his/her state of mind in issue, it may result in a waiver.

[ 10 ] The Blakes defendants assert that if the plaintiffs were advised by Cassels that Blakes was unwilling to confirm the completion of the equity raise and that the only confirmation would be the certificate, that information is highly relevant. Relying on Leadbeater v Ontario (2004), 2004 14107 (ON SC) , 70 O.R. (3d) 224 (S.C.) , Lloyds Bank Canada v Canada Life Assurance Co. (1991), 47 C.P.C. (2d) 167 (Ont. Gen.Div.) and Bank Leu AG v Gaming Lottery Corp. (1999), 43 C.P.C. (4 th ) 73 (Ont. S.C.) the defendants assert that it would, in their view, be unfair to force Blakes to defend the plaintiffs’ claim without that information. They insist that because the plaintiffs have pleaded reliance, they must disclose all information relevant to that alleged reliance whether privileged or not.

[ 11 ] In Creative Career Systems Inc. v Ontario 2012 ONSC 649 , [2012] O.J. No. 262 the court found that a party will be deemed to have waived its privilege on grounds of fairness and consistency when she or he makes their communication with a lawyer an issue in the proceeding. If a party places its state of mind in issue with respect to a claim or defence and has received legal advice to help form that state of mind, then the privilege will be deemed to be waived with respect to that legal advice. The court held that for a deemed waiver and an obligation to disclose privileged communications, two elements must be present:

(i) The presence or absence of legal advice is relevant to the existence or non-existence of the claim or defence; which is to say that the presence or absence of legal advice is material to the law suit;

(ii) The party who received the legal advice must make the receipt of it an issue in the claim or defence.

[ 12 ] In other words, the privilege is not waived simply because it is disclosed that legal advice has been given. It is only waived when the party relies on the receipt of that advice as “a substantive element of his or her claim or defence”. (Justice Corbett in Guelph City v Super Blue Box Corp. ).

[ 13 ] In this action the plaintiffs have disclosed that they had discussions with their counsel regarding the June 19, 2007 email. However they have not pleaded that they relied on those discussions that they had with their solicitors as an issue in this action.

[ 14 ] The plaintiffs assert that their claim and alleged reliance here are predicated upon factual information in Blake’s June 19, 2007 email and not any legal advice obtained from Cassels. As stated by Justice Heneghan in Kirkbi AG v Ritvik Holdings Inc., 2000 F.C.J. No. 768 ;

I am also of the opinion that the defences of estoppels and detrimental reliance are predicated upon the correspondence and not the legal advice exchanged between the respondents and their solicitors. Therefore, there is no expressed or implied waiver of solicitor-client privilege.

[ 15 ] Here the plaintiff relied on factual information contained in Blakes’ June 19, 2007 correspondence. There is no evidence that the plaintiff relied on legal advice received from Cassels. Therefore there is no express or implied waiver of solicitor-client privilege.

[ 16 ] Even if the plaintiffs did obtain legal advice with respect to the June 19, 2007 email, simply because legal advice was obtained is insufficient to waive the privilege. It is waived when evidence shows that a client, by his/her words or actions held a view or followed a course because of that advice given to him/her. I am of the view that there is insufficient evidence to demonstrate that the plaintiffs’ actions were taken as a result of their solicitors’ advice.

[ 17 ] The motion by the Blake defendants for an Order to compel the plaintiffs to re-attend for discovery to answer questions regarding communications with Cassels and to produce all associated relevant documents is hereby dismissed.

[ 18 ] In the event that the parties are unable to agree on the issue of costs within 30 days, they may deliver brief written submissions (1 – 2 pages) within 60 days. No reply submissions may be delivered without leave of the court.

MASTER RONNA M. BROTT

DATES HEARD: August 14 and September 24, 2012