ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 09-CV-381807
DATE: January 4, 2012
BETWEEN:
Creative Career Systems Inc., Creative Community Learning Technologies, Inc. and Gail Anne Acton
Plaintiffs
- and -
Her Majesty the Queen in Right of Ontario, Richard Jackson, Bradley Fauteux, Nancy Sheppard and Dina Waik
Defendants
COUNSEL:
• M.J. Huberman for the Plaintiffs
• H. Mackay for the Defendants
HEARING DATE: December 13, 2011
PERELL, J.
REASONS FOR DECISION
A. INTRODUCTION
[ 1 ] In this action, the Plaintiffs, Creative Career Systems Inc. (“Career Systems”), Creative Community Learning Technologies, Inc. (“Learning Technologies”) and Gail Anne Acton, sue Her Majesty the Queen in Right of Ontario and also Richard Jackson, Bradley Fauteux, and Dina Waik, who are civil servants with the Ministry of Training, Colleges and Universities.
[ 2 ] During examinations for discovery, Messrs. Jackson and Fauteux and Ms. Waik refused to answer several questions about what legal advice they had received with respect to their Ministry’s dealings with the Plaintiffs. Although the Defendants provided some details about having received legal advice about the Ministry’s position, their position was that the answers were privileged solicitor and client communications.
[ 3 ] After a refusals motion, Master Abrams ruled that the privilege had been waived. The Defendants appeal to this court to have the Master’s order set aside.
[ 4 ] For the reasons set out below, I grant the appeal.
B. FACTUAL BACKGROUND
[ 5 ] The Plaintiff, Career Systems was a “private career college,” a private educational institution that provides vocational programs to students for a fee. Private career colleges are governed by the Private Career Colleges Act, 2005 , S.O. 2005, c. 28 , which is administered by the Superintendent of Private Career Colleges of the Ministry of Training Colleges and Universities.
[ 6 ] The Defendant, Richard Jackson is the Superintendent, and the Defendants Dina Waik and Bradley Fauteux are his designates to carry out the powers of the Superintendent.
[ 7 ] To operate, private career colleges must be registered under the Act, and at one time, Career Systems was registered under the Act.
[ 8 ] The Plaintiff, Learning Technologies is a non-profit corporation that offers educational programs. It is not registered under the Private Career Colleges Act, 2005 .
[ 9 ] The Plaintiff, Gail Acton was a director of Career Systems and of Learning Technologies.
[ 10 ] In this action, the Plaintiffs sue the Defendants for negligence, misfeasance in public office, and unlawful interference in contractual relations. The Plaintiffs claim damages for, among other things, the allegedly wrongful refusal by the Ministry to process the application submitted by Career Systems to register under the Act six locations in the Greater Toronto Area that were allegedly owned or controlled by Career Systems as branches or campuses. There are other allegations of wrongdoing and abuse of power alleged against the Defendants. The Plaintiffs plead that the Defendants acted in bad faith.
[ 11 ] In refusing to register the various private career colleges, the Defendants plead that they acted in good faith in accordance with the law and pursuant to their statutory duties and they plead that their duties are to the public not the Plaintiffs.
[ 12 ] The Defendants also assert that the six campuses or branches” that Career Systems attempted to have registered were not owned or controlled by the Plaintiffs and that the Defendants were justified in refusing to register the various career colleges.
[ 13 ] The Defendants plead that the conduct of the Plaintiffs justified the Ministry’s refusal to renew their registrations and that the decision not to register the six schools as branches was justified on all of the facts.
[ 14 ] Messrs. Jackson and Fauteux, and Ms. Waik, were examined for discovery. While they stated that they had received legal advice before taking a position on the Plaintiffs’ applications for registration under the Act, and while they provided information about the factual background for the legal advice, they refused to answer questions about the substance of the advice.
[ 15 ] Mr. Jackson refused to answer questions numbered 146, 149, and 151. Mr. Fauteux refused to answer questions numbered 368, 380, and 381. Ms. Waik refused to answer question 446. The refused questions and some testimony from their examinations for discovery that provide context are set out below:
Richard Jackson
Q. 126. And in so exercising your duty in allowing or not allowing someone to do so, you said you were looking at government services documents to determine ownership, and what I am asking you is what are you looking at in the document itself to decide the question?
A. And I am telling you I am not personally looking at the documentation. I am relying on the information that has been provided to me by staff and legal counsel.
Q. 127 What information specifically are you relying on?
A. I am relying on the verbal information that they have provided me. I don’t …
Q. 128 What is the content of the information is what I am asking you?
Ms. Mackay: Don’t say any of the content of the legal advice you received. You can say any other information, but not the content of the legal information you may have received.
A. My understanding was that the information that we received did not indicate that Ms. Acton was the owner of these purported schools.
Q.146 And your definition of owner is what?
Ms. Mackay: That is a legal question. Don’t answer that.
Q. 149 You are saying you weren’t satisfied Acton was the owner. The others were the owners. I want to know on what facts do you rely to say that.
A. I will repeat for probably the sixth time I relied on the information that was provided me by staff and the interpretation of the documentation on the MGS database by legal counsel.
Q. 151 Okay, I would like your undertaking to tell me if it is not in your productions. I want every piece of documentation that has that information, and if it is not in Exhibit 1?
Ms. Mackay: We will take that under advisement what further documents we need to produce, if we have further relevant information. I have already given you an undertaking to identify where in our productions the information is.
Bradley Fauteux
Q. 368 Okay, but what I am asking you is if you got from the Ministry of Government Services the amended articles of incorporation showing what this third paragraph on the second page of this letter says, namely this reorganization technique with the 101 pref shares, would that not be satisfactory to you?
A. Legal advice that I sought at the time indicated to me that this was not going to be satisfactory, and so that is the position that I took.
Q. 369 When did you seek that legal advice? You weren’t even proposed with this yet.
Ms. Mackay: It says right there the proposal.
Q. 380. Okay, and what is wrong with that in terms of control?
A. I don’t know what that means necessarily.
Ms. Mackay: We can undertake to give you our legal position on that. That is a legal position. He indicated he sought legal advice on that because he is not a corporate lawyer. So we can undertake to give you our full legal position on that.
Q. 381 Mr. Huberman: Well, that I fine. You can give me your legal position all you want. I want to know the factual position. When this was proposed to you on October the 21st, 2007 what was your problem with the proposal?
Ms. Mackay: He answered that. He sought legal advice, and he was told that that was not sufficient to show ownership or control.
Q. 382 All right, when did you seek the legal advice?
A. On or about this date that we received this letter.
Q. 383. And who did you seek the legal advice from?
A. I recall it to be Imants Abols, who was counsel at the time.
Q. 384. Is that a Ministry lawyer?
Ms. Mackay Yes.
A. That is correct.
Dina Waik
Q. 444 And in the third paragraph of this letter you say: “Our files indicate that the said application was submitted by Creative Career Systems Inc. and signed by Ms. Gail Acton. According to the corporate information in hand, Ms. Acton had no legal right to submit said registration.” You said that right?
A. I did.
Q. 445 When you say: “had no legal right to submit said registration”, why do you say that?
A. I rely on legal advice.
Q. What, specifically, are you relying on when you say that, did you get an opinion to that effect or..”
Ms. Mackay: Don’t answer that.
Mr. Huberman: I am entitled to ask the basis for the statement.
Ms. Mackay: She received legal advice and she relied on that.
[ 16 ] The Plaintiffs submit that the refused questions should be answered. The Plaintiffs submit that they are entitled to know the case they have to meet as a matter of law and fairness. They submit that the Defendants waived privilege with respect to legal advice sought and received because: (a) they testified about the privileged communications on discovery; (b) they provided some information about the nature or substance of the legal advice received; (c) they made legal advice an issue in the proceeding; (d) they relied on privileged communications on discovery, as evidence of good faith or lack of bad faith or acting in the public interest; and (e) they disclosed the privileged communications in the delivery of written productions. Further, the Plaintiffs submit that solicitor-client privilege has been waived as a matter of fairness and consistency.
[ 17 ] The Defendants deny that there was any express or implied waiver of solicitor and client privilege.
[ 18 ] The Plaintiffs moved to compel answers to the refused questions. Master Abrams granted their motion. Her reasons are set out in a short 5 paragraph endorsement, which states:
The Defendants, Richard Jackson, Bradley Fauteux and Dina Waik are to re-attend at their own expense (and on a date to be agreed) to answer those questions on which the Plaintiffs moved herein.
I agree with Mr. Huberman when he says that the questions at issue are relevant. Specifically, they relate to ‘..whether or not CCS had sufficient control/ownership over its branch locations to comply with the Private Career Colleges Act, 2005 (Ontario)’ [see: Fresh as Amended Statement of Claim, paras. 1, 16, 23, 26-28 and 36-38 and Statement of Defence to the Fresh as Amended Statement of Claim, paras. 15, 42 and 45--which allegations make relevant an exploration of: (a) the reasons behind the defendants' refusal to process the September 2007 application of CCS, and of (b) whether and to what extent the defendants acted in good faith in accordance with the law and pursuant to their statutory duties, in declining to register six locations as branches/campuses of CCS (because o f what the defendants alleged was a lack of or failings in ownership and/or control)]. 1
The personal defendants have testified about solicitor-client communications on discovery; they have relied on privileged communications on discovery (as evidence of good faith or lack of bad faith); they have provided some information about the legal advice they received; they have made legal advice an issue in the proceeding; and, they have disclosed solicitor-client advice in some of the documents produced by them. By way of illustration: Exhibit "J" to the May 18/1 . 1 affidavit of Heidi Dunn references "...corporate information in hand [according to which] Ms. Acton had no legal right to submit [an application on behalf of CCS Tricare]" and contains a statement that ownership of non-voting shares in CCS Tricare by CCS "...is not evidence of ownership or control". Specific legal advice received is thus referenced. In the answer to undertaking #8 (Q. 142/p. 36), Mr. Jackson specifically relies on the fact that he received legal advice on the issue of CCS' ownership of the six branches at issue --with the advice serving as a source of information used by him in his determination of ownership. Then too, Ms. Waik responds to Q. 446/p.115 by saying that she "relied on legal advice" for "...her opinion that Ms. Acton had no legal right to submit registration".
The defendants have placed their state of mind in issue and have adduced evidence that they received legal advice which informed their state of mind. Further, they have provided some information as to the nature and substance of that legal advice. In the circumstances, fairness and consistency require that the defendants not shield themselves behind their claims of reliance on legal advice, for doing so would deny the plaintiffs the ability to know the case they have to meet and to understand the nature of and bases for the defences asserted on the issue of the defendants' determination of ownership and contro1. 2 ….
Notes:
I note that argument was made in respect of the questions, as a group (as opposed to each question seriatim). I am ruling accordingly.
See: S.K. Processors Led. v, Campbell Ave. Herring Producers Ltd. (1983), 1983 407 (BC SC) , 35 C.P.C. 146 (B.C.S.C.) at para. 6 : … and, Toronto Dominion. Bank v. Leigh Instruments Ltd. (Trustee of) , (1997), 1997 12113 (ON SC) , 32 O.R. (3d) 575 at 593: …
[ 19 ] The Defendants appeal Master Abrams’ order. They submit that she erred in law because: (a) they did not disclose any legal advice that they received in their productions or on their examinations for discovery; (b) they do not rely on any legal advice received in defence of any issue in this action, and (c) they have not put their state of mind in issue.
C. STANDARD OF APPELLATE REVIEW
[ 20 ] A Master’s decision should not be interfered with unless the Master made an error of law, exercised his or her discretion on the wrong principles, or misapprehended the evidence such that there was a palpable or overriding error: Zeitoun v. Economical Insurance Group (2008), 2008 20996 (ON SCDC) , 91 O.R. (3d) 131 (Div. Ct.); affd. (2009), 2009 ONCA 415 , 96 O.R. (3d) 639 (C.A.).
[ 21 ] When the master has decided a matter of law, which includes determinations of whether a question is relevant or whether evidence is privileged, the standard of review is correctness: Leadbeater v. Ontario 2004 14107 (ON SC) , [2004] O. J. No. 1228 (S.C.J.) at para. 29 ; Kennedy v. McKenzie , [2005] O.J. No. 2060 (S.C.J.) at para. 15 .
D. DISCUSSION
[ 22 ] Solicitor and client privilege attaches to confidential communications between government agencies and their salaried legal officers: Stevens v. Canada (Prime Minister) , 1997 4805 (FC) , [1997] F.C.J. NO. 228 (T.D.) at para.27; Weiler v. Canada (Department of Justice) (1991), 1991 13609 (FC) , 37 C.P.R. (3d) 1 (F.C.T.D.); Gauthier v. Canada (Minister of Justice) , 2004 FC 655 , [2004] F.C.J. No. 794 (T.D.) at paras. 46-52 .
[ 23 ] This issue on this appeal is whether the Master correctly applied the law about waiver of privilege.
[ 24 ] In S. & K. Processors Ltd v. Campbell Ave. Herring Producers Ltd., (1983), 1983 407 (BC SC) , 35 C.P.C. 146 (B.C.S.C.) at paras. 6 , 10, Justice McLachlin, as she then was, described when privilege is waived as follows:
Waiver of privilege is ordinarily established were it is shown that the possessor of the privilege: (1) knows of the existence of the privilege; and (2) voluntarily evinces an intention to waive that privilege. However, waiver may also occur in the absence of an intention to waive, where fairness and consistency so require. Thus, waiver of privilege as to part of a communication will be held to be waiver as to the entire communication. Similarly, where a litigant relies on legal advice as an element of his claim or defence, the privilege which would otherwise attach to that advice is lost: Hunter v. Rogers , 1981 710 (BC SC) , [1982] 2 W.W.R. 189.”
… In Rogers v. Hunter , the intention to partially waive was inferred from the Defendant’s act of pleading reliance on legal advice. In Harrich v. Stamp (1979), 1979 1904 (ON CA) , 27 O.R. (2d) 395 (C.A.), it was inferred from the accused’s reliance on alleged inadequate legal advice in seeking to explain why he had pleaded guilty to a charge of dangerous driving. In both cases, the plaintiff chose to raise the issue. Having raised it, he could not in fairness be permitted to use privilege to prevent his opponent exploring its validity.”
[ 25 ] A party will be deemed to have waived privilege on grounds of fairness and consistency when he or she makes their communication with a lawyer an issue in the proceeding: Bank Leu AG v. Gaming Lottery Corp. (1999), 43 C.P.C. (4th) 73 (Ont. S.C.J.) at p. 77, affd. (2000), 132 O.A.C. 127 (Div. Ct.) ; Leadbeater v. Ontario , supra at para. 32 ; Guelph (City) v. Super Blue Box Recycling Corp. 2004 34954 (ON SC) , [2004] O.J. No. 4468 (S.C.J.) at paras. 77-100 .
[ 26 ] Thus, if a party places its state of mind in issue with respect to its claim or defence and has received legal advice to help form the state of mind, privilege will be deemed to be waived with respect to such legal advice: Bank of Leu AG v. Gaming Lottery Corp . [1999] O.J. No. 3949 (S.C.J.) at paras. 5-11 ; Toronto Dominion Bank v. Leigh Instruments Ltd. (1997), 1997 12113 (ON SC) , 32 O.R. (3d) 575 (Gen. Div.); Woodglen & Co. v. Owens (1995), 1995 7070 (ON SC) , 24 O.R. (3rd) 261 (Gen. Div.); Lloyd’s Bank of Canada v. Canada Life Assurance Co . (1991), 47 C.P.C. (2d) 157 (Ont. Gen. Div.) .
[ 27 ] There is, however, a subtle and profound point here about when a party must answer questions about the occurrence of legal advice in the factual narrative of a case. The subtle and profound point is that there is no waiver of the privilege associated with lawyer and client communications from the mere fact that during the events giving rise to the claim or defence, the party received legal advice, even if the party relied on the legal advice during the events giving rise to the claim or defence. For a party to have to disclose the legal advice more is required.
[ 28 ] In Doman Forest Products Ltd. v. GMAC Commercial Credit Corp. , 2004 BCCA 512 , a case about whether privilege associated with legal advice had been waived, Justice Smith points out at para. 28 that it is not enough to constitute waiver that a pleading puts a party’s state of mind in issue and that its state of mind might have been influenced by legal advice, there must be the further element that the state of mind involves the party understanding its legal position in a way that is material to the lawsuit. In other words, the presence or absence of legal advice itself must be material to the claims or defence to the lawsuit. The materiality of the legal advice to the claims or defences in the law suit makes questions about it relevant.
[ 29 ] But the materiality of the legal advice, while necessary to make questions about it relevant, is still not sufficient to justify the compelled disclosure of the legal advice. To justify a party being required to answer questions about the content of privileged communications, the party must utilize the presence or absence of legal advice as a material element of his or her claim or defence. The waiver of the privilege occurs when the party uses the receipt of legal advice as a material fact in his or her claim or defence. While the waiver is a deemed waiver, it requires the intentional act that the party makes legal advice an aspect of his or her case. In Simcoff v. Simcoff , 2009 MBCA 80 , Justice Steel made the point neatly at para. 27, where he stated:
- However, a mere reference to the receipt of legal advice does not constitute waiver. Waiver must involve something more. It requires not simply disclosing that legal advice was obtained, but pleading reliance on that advice for the resolution of an issue.
[ 30 ] Thus, a deemed waiver and an obligation to disclose a privileged communication requires two elements; namely: (1) the presence or absence of legal advice is relevant to the existence or non-existence of a claim or defence; which is to say that the presence or absence of legal advice is material to the lawsuit; and (2) the party who received the legal advice must make the receipt of it an issue in the claim or defence.
[ 31 ] Justice Corbett in Guelph (City) v. Super Blue Box Recycling Corp. , supra, at paras. 87, 88, 97, 100, and 101 made the useful observation that the deemed waiver occurs as a matter of the party’s choice. Waiver does not occur because the party discloses that he or she received legal advice, nor does it occur because the party admits that he or she relied on the legal advice; it occurs because the party chooses to use the legal advice as a substantive element of his or her claim or defence. Justice Corbett stated:
[M]ere disclosure of the receipt and reliance upon legal advice in the discovery process is not sufficient to give rise to waiver of privilege. Where the reliance on the legal advice will be relied upon at trial in respect to a substantive issue between the parties is another matter. That is covered by “waiver by reliance.” But mere disclosure, by itself, that legal advice was received and followed to explain why a party did something should not be sufficient, by itself, for a waiver of privilege. ….
However, solicitor-client privilege is not waived by disclosing that a solicitor’s advice was obtained. It is waived when the client relies upon the receipt of advice to justify conduct in respect of an issue at trial. ….
Privilege can be claimed regardless of the opposite party’s allegations. However, when faced with a claim of bad faith, a party who responds by relying on good faith conduct as a result of following legal advice will thereby waive its privilege: Sovereign General Insurance Co. v. Tanor Industries , 2002 ABQB 101 , [2002] A.J. No. 107; where a party attempts to justify its position “on the grounds of detrimental reliance upon the legal advice received,” it waives privilege associated with that legal advice; Davies v. American Home Assurance Co. (2002), 2002 62442 (ON SCDC) , 60 O.R. (3d) 512 (Div. Ct.).
It remains Guelph’s choice as to whether it will rely upon the legal advice it sought and received as evidence of its lack of bad faith, its good faith, and/or its acting in the public interest. …
… [I]t is irrelevant whether Guelph received and followed legal advice on these issues. It is only to the extent that Guelph relies upon the fact that it received legal advice on these topics to establish its good faith that privilege will be waived on the basis of reliance. Mere disclosure that legal advice was received on the topic, by itself, does not give rise to waiver on the subject matter at hand. …. The fact that [the legal department] was fully involved in the “process” establishes relevance, but not a waiver of privilege. The fact that legal advice was sought, obtained and relied upon, as a matter of fact, is not sufficient to give rise to waiver. …..
[ 32 ] In the case at bar, in my opinion, the Master was incorrect in her analysis of whether the Defendants have waived the privilege associated with their communications with the Ministry’s lawyers.
[ 33 ] The fact that the Defendants’ had received legal advice about whether the Plaintiffs owned or controlled the private career colleges for which they sought registration was not relevant to the issue of whether the Plaintiffs did own or control these private career colleges. Similarly, it is irrelevant to the lawsuit that the Plaintiffs may have obtained legal advice to support their assertion that they owned the private career colleges. Ultimately, the court will decide the ownership issue based on facts that do not include either party’s lawyer’s legal opinion about ownership.
[ 34 ] And while the fact that the Defendants had received legal advice could have been relevant to the issue of whether the Defendants were acting in good faith, the Defendants do not rely on their having received legal advice as an aspect of that defence.
[ 35 ] I will borrow what Justice Corbett said in Guelph (City) v. Super Blue Box Recycling Corp. , supra . It is only to the extent that the Defendants rely upon the fact that they received legal advice to establish their good faith that privilege will be waived on the basis of that reliance. Mere disclosure that legal advice was received about the Plaintiffs’ ownership of the private career colleges, by itself, does not give rise to waiver. The defendants do not rely on their having received[2` legal advice as evidence of their good faith. In my opinion, there was no waiver of privilege in the circumstances of the case at bar.
E. CONCLUSION
[ 36 ] For the above reasons, I grant the appeal and set aside the Master’s order.
If the parties cannot agree about the matter of costs, they may make submissions in writing beginning with the Defendants’ submissions within 15 days of the release of these Reasons for Decision, followed by the Plaintiffs’ submissions within a further 15 days.
Perell, J.
Released: January 4, 2011
COURT FILE NO.: 09-CV-381807
DATE: January 4, 2012
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Creative Career Systems Inc., Creative Community Learning Technologies, Inc. and Gail Anne Acton
Plaintiffs
‑ and ‑
Her Majesty the Queen in Right of Ontario, Richard Jackson, Bradley Fauteux, Nancy Sheppard and Dina Walk
Defendants
REASONS FOR DECISION
Perell, J.
Released: January 4, 2012.