ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO: CV-08-357295-0000
DATE: 20130110
B E T W E E N:
Jetport Inc.
Plaintiff/Appellant
- and -
Global Aerospace Underwriting Managers (Canada) Limited, National Liability & Fire Insurance Company, Temple Insurance Company, Lombard General Insurance Company of Canada, and Mitsui Sumitomo Insurance Company Limited
Defendants
AND BETWEEN:
Global Aerospace Underwriting Managers (Canada) Limited
Plaintiff
- and -
Jones Brown Inc. and Grant Robinson
Defendants
AND BETWEEN:
Jetport Inc.
Plaintiff
- and -
Jones Brown Inc.
Defendant
David Chernos & Stuart Svonkin,
for the Plaintiff/Appellant
Robert Fenn, Robert Bell & Patrick H. Floyd,
for the Defendants, Global Aerospace Underwriting Managers (Canada) Limited, National Liability & Fire Insurance Company, Temple Insurance Company, Lombard General Insurance Company of Canada, and Mitsui Sumitomo Insurance Company Limited
David C. Rosenbaum & Christopher J. Rae,
for Jones Brown Inc. and Grant Robinson
HEARD: October 15, 2012
GOLDSTEIN J.:
[1] This appeal arises from three related actions that have been consolidated. The Appellant Jetport Inc. (“Jetport”) appeals from a decision of Master Graham. Master Graham required a representative of the Respondent Jones Brown Inc. (“Jones Brown”) to answer questions about a meeting in March or April 2008 (“the Spring 2008 meeting”) and to produce documents. Although the documents are in the possession of both Jones Brown and Jetport, Jetport claims litigation privilege against the Respondent Global Aerospace Underwriting Mangers (Canada) Limited (“Global”). Jetport says that the dominant purpose for the Spring 2008 meeting and the creation of documents was anticipated litigation and that the Master erred in ordering disclosure.
[2] Jones Brown and Global say, in response, that the Master was correct in finding that Jetport had failed to lay a proper evidentiary foundation for the privilege claim. Jones Brown and Global also say that regardless of whether or not the Master was correct, if there was litigation privilege arising out of a common interest between Jetport and Jones Brown, that common interest privilege has been dissolved because Jetport has chosen to sue Jones Brown.
[3] I agree with Jones Brown and Global. I find no error by the Master. I also agree that if litigation privilege had existed, it was dissolved by reason of Jetport’s action against Jones Brown. The appeal is dismissed.
FACTS:
[4] Jetport operates an executive aircraft charter business. In July 2007 Jetport took delivery of a new Bombardier 5000 Global Business Jet (“the aircraft”). Jetport’s pilots, including Chief Pilot Roger Adair, took part in training provided by Bombardier. That training took place in the classroom and in a simulator. Transport Canada and Bombardier both certified Mr. Adair as qualified to pilot the aircraft.
[5] Global is in the aviation insurance business. It underwrites insurance policies (Global acts as lead defendant for the other named insurance companies in action CV 08-00357295.). Jones Brown is an insurance broker. Jones Brown placed Jetport’s insurance policy on the aircraft with Global. Global did not actually provide the insurance; rather, it was the lead underwriter. Grant Robinson was the Jones Brown representative who dealt with Global and Jetport. The aircraft was added to Jetport’s policy and insured for $40 million. The insurance contract required that each Jetport pilot have a certain number of classroom and flight training hours. (The parties refer to this clause in the insurance contract as the “Pilot Training Clause” and I will do so as well.)
[6] On November 11, 2007, Mr. Adair was piloting the aircraft on a flight from Hamilton, Ontario, to Fox Harbour, New Brunswick. The aircraft touched down short of the runway, causing it to crash. Fortunately nobody was killed, although there were injuries. The aircraft was a total loss.
[7] In December 2007, Jetport commenced discussions with its broker, Jones Brown, regarding the loss of the aircraft. Mr. Robinson, the Jones Brown representative, informed Jetport that Global might deny coverage on the grounds that Mr. Adair’s training was insufficient to meet the terms of the insurance contract. Jetport then retained litigation counsel. Timothy Armstrong, Jetport’s President and General Counsel, had verbal and electronic discussions with Mr. Robinson. Jetport claims litigation privilege over six emails dated between February 1 2008 and March 5 2008 as well as discussions at the Spring 2008 meeting.
[8] Global hired Airclaims International Inc. (“Airclaims”) to conduct an investigation into the accident. Part of Airclaims’ investigation concerned whether Mr. Adair’s qualifications complied with the Pilot Training Clause. Global sent Jetport a “reservation of rights” letter indicating that there might have been a violation of the Pilot Training Clause. In February 2008 Jetport submitted a proof of claim for $40 million, representing the cost of the aircraft. Global denied the claim by way of letters sent in February and March 2008. Global’s position was that Mr. Adair did not have the flight training hours required by the insurance contract. Jetport had therefore breached the Pilot Training Clause. Jetport’s position was that Mr. Adair’s hours in the simulator were sufficient to meet the clause. In March or April 2008, the Spring 2008 meeting took place between representatives of Jetport and Jones Brown. Jetport’s outside litigation counsel was present.
[9] The accident gave rise to three actions:
• In what I refer to as the “Jetport/Global” action, in June 2008 Jetport sued Global and the consortium of named insurance companies for refusing the claim. The heart of the dispute is whether Jetport breached the Pilot Training Clause.
• In what I refer to as the “Global/Jones Brown/Jetport” action, in November 2009 Global sued Jones Brown and Mr. Robinson personally for contribution and indemnity in the event Jetport is successful in the Jetport/Global action. In July 2010, Jones Brown and Mr. Robinson added Jetport as a third party.
• In what I refer to as the “Jetport/Jones Brown” action, in October 2010 Jetport sued Jones Brown for negligence, breach of contract, and its costs in the Jetport/Global action.
[10] The three actions have been consolidated by order of Whitaker J. on consent. His Honour ordered that affidavits of documents filed in one action by a party would apply to the other actions in which they were named. His Honour also ordered that discovery of a party by another party would apply to the other actions in which they were named. In other words, there would be one set of affidavits of documents and one set of discoveries for each of the three sets of parties and the three actions.
[11] The privilege issue came to light this way: while preparing the affidavit of documents for Jones Brown and Mr. Robinson, counsel discovered communications and documents passing between Jetport and Jones Brown that Jetport had not produced. He believed that those documents should have been produced by Jetport. Jetport explained that they were not produced because they were subject to litigation privilege.
[12] Examinations for discovery took place in June and November 2011. Jones Brown produced Mr. Robinson. Counsel for Jetport objected to 12 questions that counsel for Global attempted to ask Mr. Robinson. The objection was grounded in litigation privilege. Counsel for Jones Brown instructed Mr. Robinson not to answer. His position was that he could not produce the documents absent consent from Jetport or a court order notwithstanding that he believed that no privilege existed.
[13] Global brought a motion before Master Graham to compel production of the documents over which Jetport claimed litigation privilege. Global also sought an order that Mr. Robinson be required to answer the refused questions. Jones Brown supported Global. The Master found, in a short endorsement, that Jetport had simply not met its onus to substantiate the claim of litigation privilege. He ordered that the documents be produced and that Mr. Robinson answer the questions. Jetport appeals.
ANALYSIS
[14] In my view, there are two issues to be decided in this motion:
Did the Master err in his determination that Jetport had failed to establish an evidentiary basis for its assertion of litigation privilege?
Even if the Master did err, should the appeal still be dismissed on the basis that litigation privilege has been dissolved?
[15] Mr. Chernos, for Jetport, accepts that Jetport bears the onus of establishing litigation privilege. He argues, however, that the Master misapprehended the evidence by failing to take into account the fact that litigation was contemplated was early as January 28 2008, when Global delivered a “reservation of rights” letter. He argues as well that the Master erred by misapprehending the fact that almost all of the communications occurred after the date that Jetport knew there would be litigation. There was, he says, more than enough evidence to find that the communications were made for the dominant purpose of litigation.
[16] In response, Mr. Fenn and Mr. Rosenbaum, for Global and Jones Brown, respectively, argue that the Master was correct that Jetport simply failed to meet its evidentiary onus to establish that the communications were for the dominant purpose of litigation. Moreover, they argue that any privilege that may have existed was dissolved when Jetport sued Jones Brown. There can be no common purpose privilege where the parties are in litigation against each other.
1. Did the Master err in his determination that Jetport had failed to establish an evidentiary basis for its assertion of litigation privilege?
[17] Litigation privilege, as distinct from solicitor-client privilege, exists to advance the adversarial process. Litigation privilege creates a “zone of privacy” in which the advocate can apply his or her skill and training in order to effectively prepare a case. The nature and purpose of litigation privilege was described in General Accident Assurance Co. v. Chrusz, [199] O.J. No. 3291, 1999 7320 (ON CA), 45 O.R. (3d) 321 (C.A.):
23 R.J. Sharpe, prior to his judicial appointment, published a thoughtful lecture on this subject, entitled "Claiming Privilege in the Discovery Process" in Law in Transition: Evidence, L.S.U.C. Special Lectures (Toronto: De Boo, 1984) at 163. He stated at pp. 164-65:
Litigation privilege, on the other hand, is geared directly to the process of litigation. Its purpose is not explained adequately by the protection afforded lawyer-client communications deemed necessary to allow clients to obtain legal advice, the interest protected by solicitor-client privilege. Its purpose is more particularly related to the needs of the adversarial trial process. Litigation privilege is based upon the need for a protected area to facilitate investigation and preparation of a case for trial by the adversarial advocate. In other words, litigation privilege aims to facilitate a process (namely, the adversary process), while solicitor-client privilege aims to protect a relationship (namely, the confidential relationship between a lawyer and a client).
Rationale for Litigation Privilege
Relating litigation privilege to the needs of the adversary process is necessary to arrive at an understanding of its content and effect. The effect of a rule of privilege is to shut out the truth, but the process which litigation privilege is aimed to protect - the adversary process - among other things, attempts to get at the truth. There are, then, competing interests to be considered when a claim of litigation privilege is asserted; there is a need for a zone of privacy to facilitate adversarial preparation; there is also the need for disclosure to foster fair trial.
[18] The standard of review of a Master’s decision was summarized by Strathy J. in Paul v. Pizale, 2011 ONSC 3490:
19 The standard of review on appeal from the Master was set out by the Divisional Court in Zeitoun v. Economical Insurance Group (2008), 2008 20996 (ON SCDC), 91 O.R. (3d) 131 (Ont. Div. Ct.), aff'd, (2009), 2009 ONCA 415, 96 O.R. (3d) 639 (Ont. C.A.): the 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. Where there is an error of law, the standard of review is correctness, whether the order is final or interlocutory. Where there is an error in the exercise of discretion, it must be established that the discretion was based on a wrong principle or that there was a palpable or overriding error in the assessment. See also Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235 (S.C.C.).
[19] Whether or not a document is protected by litigation privilege is a question of mixed fact and law: Davies v. American Home Assurance Co., 2002 62442 (ON SCDC), [2002] O.J. No. 2696, 60 O.R. (3d) 512 (Div.Ct.). Thus, in this case, Master Graham’s statement and application of the test for litigation privilege are questions of law and are therefore subject to a standard of correctness. The underlying finding of fact that the communications were not created for the dominant purpose of litigation is entitled to deference absent an exercise of discretion based on the wrong principles, or a misapprehension of the evidence such that there has been a palpable and over-riding error: Zeitoun, supra, at para. 40.
[20] A party seeking to assert litigation privilege must demonstrate:
• that at the time of the communications there was a reasonable contemplation of litigation: Klair v. Security National Insurance Co., 2006 93713 (ON SC), [2006] O.J. No. 4016, 2006 CarswellOnt 2691 (Sup.Ct.); and,
• that the communications were made or created for the dominant purpose of litigation: General Accident Assurance Co. v. Chrusz, supra.
[21] This is the crux of the Master’s decision:
In order to successfully assert this privilege, which was first claimed in 2011, Jetport must put evidence before the court to demonstrate that the dominant purpose for which the documents were created was the litigation. Although the documents post-date the retainer by Jetport of outside counsel on December 8 2007, and the first reservation of rights letter of January 28 2008, there is no specific evidence that they were prepared primarily for the purpose of contemplated litigation. The response at Q. 3622 of Mr. Robinson’s discovery as to what transpired at a meeting and his answer was that “we were simply strategizing about getting facts in order so that we could figure out how to get the claim paid.” This would suggest that the focus at that point was still advancing the claim rather than commencing litigation.
I conclude that Jetport has not met the evidentiary onus to substantiate its claim of litigation privilege and these documents must be produced.
[22] The Master appears to have concluded, by implication, that there was a reasonable possibility of litigation between Jetport and Global. That conclusion was certainly available to him on the evidence.
[23] Was there a basis for the Master’s conclusion that that the evidence was insufficient to find that the dominant purpose of the communications was for litigation? Notwithstanding Mr. Chernos’s skilful argument, I am not persuaded that the Master misapprehended the evidence. An analysis of the chronology of the salient events assists:
• October 2007
Jetport acquires the aircraft
• November 11 2007
The aircraft is destroyed in a crash at Fox Harbour, Nova Scotia
• December 7 2007
Robinson of Jones Brown advises Armstrong of Jetport that Global might take the position that the Pilot Training Clause had been breached
• December 8, 2007
Jetport retains litigation counsel
• January 2008
Airclaims delivers its report on the loss
• January 28 2008
Global delivers a “reservation of rights” letter indicating that Jetport might have violated the insurance policy
• February 1 2008
Email from Robinson to Armstrong (privilege claimed)
• February 4 2008
Email from Robinson to Armstrong (privilege claimed)
• February 15 2008
Global writes a letter denying Jetport’s claim
• February 20 2008
Email from Robinson to Armstrong (privilege claimed)
• March 3 2008
Email from Armstrong to Robinson (privilege claimed)
• March 4 2008
Email from Robinson to Armstrong (privilege claimed)
• March 5 2008
Email from Armstrong to Robinson (privilege claimed)
• March 19 2008
Global writes a second letter denying Jetport’s claim
• March or April 2008
The Spring 2008 meeting between representatives of Jones Brown and Jetport is held
[24] There was also the following evidence:
• The last email over which litigation privilege is claimed was sent on March 5 2008, which was prior to Global’s second letter denying coverage. Mr. Robinson’s evidence was that at the Spring 2008 meeting what was discussed was a strategy for getting the insurance claim paid. There is no reason why the Master would have somehow been required to draw the inference that emails dated prior to the Spring 2008 meeting were for the dominant purpose of litigation.
• As counsel for Jetport was present at the meeting, it is surely not controversial that Jetport knows exactly when the meeting took place. That information was not placed before the Master.
• Jetport placed no evidence before the Master, other than the “tombstone” information of facts and dates, and relied on transcripts of the examination for discovery of Robinson. I appreciate that counsel seeking to advance a claim of litigation privilege must walk a fine line between disclosing enough to validate the claim, and not so much as to reveal the contents of the privileged communications. A trier of fact still requires something upon which to base a finding.
[25] Most of the evidence that Jetport relies on to advance its claim of litigation privilege goes to the issue of the date upon which there was a reasonable contemplation of litigation rather than the purpose of the communications.
[26] The mere fact that an insurance company has retained litigation counsel does not, in and of itself, mean that everything done from that point forward is cloaked with litigation privilege: Torchia v. Royal Insurance Co. of Canada, [2000] O.J. No. 1827 (Sup.Ct.). There is no reason that an insured should be any different. Jetport’s retention of litigation counsel does not necessarily mean that all discussions with Jones Brown were automatically conducted for the dominant purpose of litigation from that point forward. I accept that the retention of counsel is some evidence upon which a trier of fact could conclude that litigation was a reasonable possibility. Indeed, as noted, the Master appears to have accepted that litigation was a reasonable possibility. I also accept that the retention of counsel is some evidence as to the purpose of the discussions. That said, the Master, in evaluating the evidence, was entitled to conclude that it was not enough in the circumstances. His conclusion is entitled to deference.
[27] Mr. Chernos argues that the Master’s conclusion about the meeting in March or April 2008 is clearly wrong, since Jetport and Jones Brown both knew at that point that there would be litigation with Global. It would have been open to the Master to reach that conclusion, but I respectfully disagree that the Master was required to make that finding. As the Master noted, Mr. Robinson actually said the following at the discovery:
3607
Q. When was the first time you sat down with lawyers for Jetport, and who were they?
A. I believe it was sometime - it was March or April
3608
Q. Of what year?
A. 2008
3620
Q. How long did the meeting take?
A. Somewhere between 45 minutes and an hour and a half.
3621
Q. Did the lawyers ask you questions?
A. I didn’t see it as being questioned.
3622
Q. Were they simply asking you for information about the Global 5000?
A. We were simply strategizing about getting facts in order so that we could figure out how to get the claim paid.
[28] The Master was entitled to consider the evidence of Mr. Robinson in addition to the letters written by Global, and he is entitled to deference in his factual conclusions.
[29] If the law in Ontario were that it merely be sufficient that litigation be a “substantial” purpose for the creation of a document, I might be persuaded that litigation privilege cloaks the six documents and the Spring 2008 meeting. If there was any doubt prior to General Accident Assurance Co. v. Chrusz as to whether the “substantial purpose” test or the “dominant purpose” test applied to questions of litigation privilege it was laid to rest in that case. There is no question that the “dominant purpose” test now applies. I agree with Mr. Chernos that litigation was a reasonable possibility during the entire period at issue. I find, however, no misapprehension of the evidence by the Master such as to give rise to a palpable and over-riding error. He made no error in his factual finding that there was insufficient evidence that the dominant purpose of the emails and the Spring 2008 meeting was for the purpose of litigation.
2. Even if the Master did err, should the appeal still be dismissed on the basis that litigation privilege has been dissolved?
[30] Jetport has now sued that Jones Brown. Does that action constitute waiver or dissolution of litigation privilege?
[31] In Chruz, supra, Blair J.A. stated the following:
43 While solicitor-client privilege stands against the world, litigation privilege is a protection only against the adversary, and only until termination of the litigation. It may not be inconsistent with litigation privilege vis-à-vis the adversary to communicate with an outsider, without creating a waiver, but a document in the hand of an outsider will only be protected by a privilege if there is a common interest in litigation or its prospect.
44 The general principle was first enunciated by Denning L.J. in Buttes Gas and Oil Co. v. Hammer (No. 3), [1980] 3 All E.R. 475 (C.A.) at pp. 483-84:
In case this be wrong, however, I must go on to consider the claim for legal professional privilege. The arguments became complicated beyond belief. Largely because a distinction was drawn between Buttes (who are the party to the litigation) and the ruler of Sharjah (who is no party to it). Such as questions as to who held the originals and who held the copies and so forth. Countless cases were cited. Few were of any help.
I would sweep away all those distinctions. Although this litigation is between Buttes and Occidental, we must remember that standing alongside them in the selfsame interest are the rulers of Sharjah and UAQ respectively. McNeill J. thought that this gave rise to special considerations, and I agree with him. There is a privilege which may be called a 'common interest' privilege. That is a privilege in aid of anticipated litigation in which several persons have a common interest. It often happens in litigation that a plaintiff or defendant has other persons standing alongside him who have the selfsame interest as he and who have consulted lawyers on the selfsame points as he but who have not been made parties to the action. Maybe for economy or for simplicity or what you will. All exchange counsels' opinions. All collect information for the purpose of litigation. All make copies. All await the outcome with the same anxious anticipation because it affects each as much as it does the others. Instances come readily to mind. Owners of adjoining houses complain of a nuisance which affects them both equally. Both take legal advice. Both exchange relevant documents. But only one is a plaintiff. An author writes a book and gets it published. It is said to contain a libel or to be an infringement of copyright. Both author and publisher take legal advice. Both exchange documents. But only one is made a defendant.
In all such cases I think the courts should, for the purposes of discovery, treat all the persons interested as if they were partners in a single firm or departments in a single company. Each can avail himself of the privilege in aid of litigation. Each can collect information for the use of his or the other's legal adviser. Each can hold originals and each make copies. And so forth. All are the subject of the privilege in aid of anticipated litigation, even though it should transpire that, when the litigation is afterwards commenced, only one of them is made a party to it. No matter that one has the originals and the other has the copies. All are privileged.
[32] The application of the doctrine was summarized by Cumming J. in CC&L Dedicated Enterprise Fund (Trustee of) v. Fisherman, [2001] O.J. No. 637 (Sup.Ct.):
25 Privilege applies where parties with a common interest in anticipated litigation exchange facts, advice or other information regarding the litigation.
[33] Common interest privilege can be lost where parties become adverse in interest: Western Canadian Place Ltd. v. Con-Force Forest Products Ltd., 1997 14770 (AB KB), [1997] A.J. No. 354, 50 Alta.L.R. (3d) 131 (Q.B.).
[34] I simply cannot see how Jetport and Jones Brown can be said to have a common interest in the litigation, especially given that the three actions have been consolidated. I acknowledge that Jetport and Jones Brown may still have some interests in common – for example, if Jetport were to be successful against Global, it would no longer have an interest in recovering against Jones Brown. I find, however, that in the circumstances of this case if there was litigation privilege attaching to the emails and the Spring 2008 meeting, it has been dissolved by reason of Jetport’s action against Jones Brown.
DISPOSITION
[35] The Appeal is dismissed. If the parties are unable to agree on costs, the Global and Jones Brown may submit, within 30 days, a brief costs submission (not exceeding 2 pages) and a costs outline. Jetport may then submit, within 15 days after that, a brief costs submission (also not exceeding 2 pages) and a costs outline in reply.
[36] I wish to thank counsel for their highly professional and helpful presentations.
GOLDSTEIN, J.
DATE: January 10, 2013
COURT FILE NO: CV-08-357295-0000
DATE: 20130110
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Jetport Inc.
Plaintiff/Appellant
- and -
Global Aerospace Underwriting Managers (Canada) Limited, National Liability & Fire Insurance Company, Temple Insurance Company, Lombard General Insurance Company of Canada, and Mitsui Sumitomo Insurance Company Limited
Defendants
AND BETWEEN:
Global Aerospace Underwriting Managers (Canada) Limited
Plaintiff
- and -
Jones Brown Inc. and Grant Robinson
Defendants
AND BETWEEN:
Jetport Inc.
Plaintiff
- and -
Jones Brown Inc.
Defendant
JUDGMENT
GOLDSTEIN J.
Released: January 10, 2013