2013 ONSC 4135

COURT FILE NO.: CV-09-378780-00CP

DATE: 20130617

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 578115 Ontario Inc. o/a McKee’s Carpet Zone et al. v. Sears Canada Inc. et al.

BEFORE: Master Glustein

COUNSEL: David Thompson and Matthew G. Moloci for the plaintiffs

Mandy L. Seidenberg and Anastasija Sumakova for the defendants Sears Canada Inc. and Sears, Roebuck and Co.

Ronald G. Chapman for the defendant Home Coverings Buying Group Inc.

HEARD: June 17, 2013

Endorsement

[1] At the initial hearing of this motion on February 6, 2013 (the “Initial Hearing”), I considered whether three particular documents (the PowerPoint presentation, the Davis letter, and the draft letters) were admissible. At that time, I imposed no advance restrictions on the scope of discovery, so that the court could consider all refusals at a subsequent motion.

[2] At the Initial Hearing, I also ordered that questions could be asked at a continued examination for discovery which may be relevant to whether the privilege claimed by the defendants Sears Canada Inc. and Sears, Roebuck and Co. (collectively, “Sears”) on their Schedule B documents was properly claimed, and that if there remained outstanding disputes on individual Schedule B documents, I would address them at the return of the motion.

[3] The examinations for discovery of Sears’ representative, Chris Davis took place on March 21, 2013. Sears refused more than 50 questions on the basis of privilege. Further, Sears maintained their claims of privilege on the Schedule B documents.

[4] At the present hearing, it was not possible to review any of the individual Schedule B documents or the refusals, as counsel required the day to present arguments as to the general principles that the court should apply when considering the refusals and the claims of privilege on the Schedule B documents.

[5] Consequently, during the course of the present hearing, I agreed to set out general principles that would govern the claims of privilege for both the refusals and the Schedule B documents. I also agreed that counsel will reattend before me on August 22, 2013 for a full-day hearing to address any refusal or Schedule B document which remains at issue. At that time, the particular refusal or document can be addressed in light of the general principles.

[6] I set out my conclusion on the general principles to govern refusals and disputed Schedule B documents below.

Principle 1: General statements of law applicable to solicitor-client privilege

[7] I adopt the following passage from Guelph (City) v. Super Blue Box Recycling Corp., [2004] O.J. No. 4468 (S.C.J.) (“Guelph”), in which Corbett J. summarizes the general statements of law applicable to solicitor-client privilege (Guelph, at para. 76):

I distil the following principles from these authorities:

(a) Privilege was originally a law of evidence, but the courts have "extended its application well beyond those limits." (Solosky, at S.C.R. 839; Pritchard (C.A.) at O.R. 103).

(b) The functional purpose of solicitor-client privilege goes to the very heart of the administration of the legal system. All persons, whether natural, corporate, or governmental, must have access to expert legal counsel without fear that this recourse may be used to their detriment: Jones v. Smith at S.C.R. 474-475; Gruenke at S.C.R. 289. Solicitor-client privilege is a "fundamental civil and legal right" (Solosky, at S.C.R. 839) and is "fundamental to the justice system in Canada" (R. v. McClure, 2001 SCC 14, [2001] 1 S.C.R. 445, per Major J.).

(c) The general statement of the principle in Wigmore still stands as a reasonable summary, in the following terms (Pritchard (C.A.) at O.R. 104-105):

Where legal advice of any kind is sought from a professional legal advisor in [his or her] capacity as such, the communications relating to the purpose made in confidence by the client are at [its] instance permanently protected from disclosures by [the client] or by the legal advisor; except that the protection be waived.

(d) The onus rests on the party asserting privilege to establish that the communications in question are, in fact, privileged: Davies v. American Home Assurance Co. (2002), 60 O.R. (3d) (2002), [60 O.R. (3d) 512 (Div. Ct.)], per Blair R.S.J. (as he then was).

(e) There are limited circumstances where privileged communications may nonetheless be compelled from a party asserting its privilege. The first of these is waiver, as is expressed in Wigmore's statement of the principle, set out above. Canadian courts have identified a handful of other exceptions to the principle of solicitor-client privilege, including:

i. where the purpose of the privileged communication is to further "unlawful conduct": Pritchard (S.C.C.) at D.L.R. 8; Solosky at S.C.R. 835;

ii. where public safety is at risk: Smith v. Jones.

iii. where there is a genuine risk of a wrongful conviction: McClure.

iv. where privilege has been abrogated by statute.

(f) Once it is established that a communication is subject to solicitor-client privilege, the onus rests on the party seeking to overcome the privilege to establish that the communication ought to be compelled from the party asserting the privilege: Jones v. Smith, at S.C.R. 475; General Accident Assurance Co. v. Chrusz (1999), [45 O.R. (3d) 321 at 269-370 (C.A.)], per Rosenberg J.A.

(g) Solicitor-client privilege attaches equally to communications with in-house and external counsel (provided, of course, that counsel is acting in a legal capacity). It applies equally to individuals, businesses, public agencies, and governments. See: IBM Canada Ltd. v. Xerox of Canada Ltd., [[1978] 1 F.C. 513 at 516 (C.A.)]](https://www.canlii.org/en/ca/fca/doc/1977/1977canlii3143/1977canlii3143.html); Toronto-Dominion Bank v. Leigh Instruments Ltd. (Trustee of) (1997), [32 O.R. (3d) 575 at 583-4 (Gen. Div.)]; R. v. McCarthy Tetrault (1992), [9 C.E.L.R. (N.S.) 12 (Ont. Prov. Ct.)].

Principle 2: Requests for general legal information sought by a client to understand its rights is subject to solicitor-client privilege

[8] The scope of solicitor-client privilege extends to any communication with a lawyer “where legal advice of any kind is sought from a professional legal advisor in [his or her] capacity as such” (see subparagraph (c) from the excerpt in Guelph above). Consequently, there is no distinction whether a client seeks advice for general legal information to address an issue of general application, or whether a client seeks particular advice for a particular problem.

[9] Plaintiffs’ counsel sought to rely on the recent decision in Trillium Motor World Ltd. v. Cassels Brock & Blackwell LLP, 2013 CarswellOnt 3828 (“Trillium”), in which Justice Belobaba ordered that documents that disclosed “legal information” would not be subject to privilege. However, Justice Belobaba did not set out a general principle that when a client seeks advice for general legal information, rather than a particular legal situation, privilege is waived.

[10] In Trillium, an issue in the class action was whether the defendant law firm (“Cassels”) had been retained by the plaintiff dealers or whether Cassels had been retained by the Canadian Automobile Dealers Association (“CADA”). The issue before Justice Belobaba on the motion was whether CADA properly asserted privilege on documents between CADA and Cassels.

[11] Justice Belobaba distinguished between “legal advice” sought by CADA from its counsel (which would be privileged) and “legal information” obtained by CADA to understand the effect of the General Motors bailout in 2009 to better assist its dealer-members (which would not be privileged). Justice Belobaba held (Trillium, at para. 13):

Thus, if CADA sought and received advice from its counsel at CBB about its role and responsibility as a national dealer organization and its rights and duties given its mandate and jurisdiction, or sought and received advice with respect to the content of the memos it proposed to send out to its membership (to ensure they were legally accurate and did not expose CADA to legal liability), that would certainly amount to "legal advice" as described above. However, if CADA was simply asking its counsel for information about the federal bankruptcy process”or the CCAA in order to better understand the situation and thus better assist its dealer-members, that would not be legal advice as defined in the case law.

[12] Consequently, the distinction relied upon by Justice Belobaba was whether certain “legal information” was not advice to the client but rather information to better assist its members. It was in that context that Justice Belobaba distinguished between the terms “legal information” and “legal advice”, as those terms were put forward by Cassels and CADA.

[13] In that context, the term “legal information” (as defined by CADA and Cassels) consisted of “providing answers regarding the law generally, the options available, and the relevant legal procedures that might pertain” and “how it would affect the dealers”. The term “legal advice” was defined as “advice that is given with respect to the client’s legal rights and duties and is given on the understanding that it may well be followed” (Trillium, at paras. 11-12).

[14] In other words, Justice Belobaba did not reduce the scope of solicitor-client privilege to allow disclosure of general legal information sought by a client since he included in the term “legal advice” any advice “with respect to the client’s legal rights and duties and [which] is given on the understanding that it may well be followed” or any advice “from its counsel at CBB about its role and responsibility as a national dealer organization and its rights and duties given its mandate and jurisdiction, or sought and received advice with respect to the content of the memos it proposed to send out to its membership (to ensure they were legally accurate and did not expose CADA to legal liability” (Trillium, at paras. 12-13).

[15] Consequently, in Trillium, legal advice would include both general legal advice to understand rights and particular advice on a particular problem. The disclosure of “legal information” was not privileged in Trillium because it had not been obtained to advise CADA but was general information to be transmitted to its dealers.

[16] If Trillium were read to reduce the scope of solicitor-client privilege to allow production of any general legal information provided by counsel for the purpose of advising a client as to its rights or obligations, it would be a dramatic change to the sanctity of solicitor and client privilege protected under the principles in Guelph discussed above.

[17] In the present case, the issue in Trillium does not arise. There is no suggestion that Sears sought any legal advice which was to be for the benefit of their franchisees. The legal advice, whether on a particular issue or for general information to assist Sears, was “given on the understanding that it may well be followed” (Trillium, at para. 12) and as such remains privileged.

Principle 3: A file prepared without the product of a lawyer’s professional knowledge is not privileged, but the file is privileged if prepared and kept by a lawyer using his or her knowledge or skill to compile the file

[18] If a lawyer maintains a file with documents randomly placed in the file as a general repository of information that may later be of assistance to provide legal advice, the file is not part of a communication for the purpose of legal advice or work product privilege. In Toronto Dominion Bank v. Leigh Instruments Ltd. (Trustee of), 1997 CarswellOnt 1268 (Gen. Div. – Comm. List), Winkler J. (as he then was) held that a general reference file containing “random” documents on comfort letters would not be protected by work product privilege.

[19] However, Justice Winkler held that work product privilege would apply to protect the collection of materials selected by a lawyer using his or her skill and judgment. Justice Winkler held (Leigh Instruments, at para. 36):

On the evidence before me, I am not satisfied that these documents properly constitute part of a solicitor's brief. Mr. Taylor stated on cross-examination that the comfort letter file was a general reference file, kept in the legal department for the purpose of giving legal advice on comfort letters. It was not created by any one person, through the exercise of professional knowledge or skill in selecting appropriate documents. Rather, it was a general repository for information on comfort letters. Mr. Taylor testified that no one person was responsible for creating, maintaining or updating the file. Contributions were made to the file on an ad hoc basis, by any member of the legal department who happened to receive material on comfort letters and who decided to place the material in the file. There was no evidence as to who had selected documents 5 and 10 for the file. As such, the documents were not collected in any focused way. This element of randomness defies any characterization as the product of a lawyer's professional knowledge, judgment and skill in selecting and compiling a collection of relevant documents. The mere act of noting that a document bears on the general topic of comfort letters, and deciding to retain the document rather than discard it, cannot be enough to imbue the document with work product privilege. This conclusion alone is enough to dispose of the plaintiff's argument. [Emphasis added.]

[20] Consequently, if a lawyer maintains a file by selecting documents based on his or her professional knowledge, judgment and skill for the purpose of providing legal advice, the file remains privileged although any relevant documents contained in the file which are not privileged must be disclosed, without disclosing that counsel kept such documents in a file, which would be privileged as it would demonstrate what issues counsel believed to be important for the purpose of providing legal advice.

Principle 4: There is no implied waiver of privilege in this case on the basis of fairness or state of mind

[21] The plaintiffs submit that because the trial judge will have to determine whether Sears had and breached a common law duty of good faith to its franchisees to disclose material information, there is an implied waiver on the basis of fairness as set out by McLachlin J. (as she then was) in S&K Processors Ltd. v. Campbell Avenue Herring Producers Ltd. (1983), [35 C.P.C. 146 (B.C.S.C.)] at pp. 148-50). I do not agree.

[22] The plaintiffs plead that Sears acted in bad faith and rely, in part, on the decision of the Court of Appeal in Shelanu Inc. v. Print Three Franchising Corp., [2003 CarswellOnt 2038 (C.A.)] (“Shelanu”). Weiler J.A. held that a duty of good faith could be owed between franchisor and franchisee due to the inequality of bargaining power and a contract of adhesion. Weiler J.A. held (Shelanu, at para. 66):

The relative position of the parties as outlined by Iacobucci J. in Wallace also exists in the typical franchisor-franchisee relationship. First, it is unusual for a franchisee to be in the position of being equal in bargaining power to the franchisor: See Kentucky Fried Chicken Canada, a Division of Pepsi-Cola Canada Ltd. v. Scott's Food Services Inc. (1998), [41 B.L.R. (2d) 42, 114 O.A.C. 357 (C.A.)], per Goudge J.A. at para. 16; Machias v. Mr. Submarine Ltd., [[2002] O.J. No. 1261 (QL), 24 B.L.R. (3d) 228 (S.C.J.)]](https://www.canlii.org/en/on/onsc/doc/2002/2002canlii49643/2002canlii49643.html) at para. 109. The second characteristic, inability to negotiate more favourable terms, is met by the fact that a franchise agreement is a contract of adhesion. As I have indicated, a [page555] contract of adhesion is a contract in which the essential clauses were not freely negotiated but were drawn up by one of the parties on its behalf and imposed on the other. Further, insofar as access to information is concerned, the franchisee is dependent on the franchisor for information about the franchise, its location and projected cash flow, and is typically required to take a training program devised by the franchisor. The third characteristic, namely that the relationship continues to be affected by the power imbalance, is also met by the fact the franchisee is required to submit to inspections of its premises and audits of its books on demand, to comply with operation bulletins, and, often is dependent on, or required to buy, equipment or product from the franchisor. It is hardly surprising, therefore, that a number of courts, including the Manitoba Court of Appeal in Imasco Retail Inc. (c.o.b. Shoppers Drug Mart) v. Blanaru, [[1995] 9 W.W.R. 44, 104 Man. R. (2d) 286 (Q.B.)]](https://www.canlii.org/en/mb/mbqb/doc/1995/1995canlii16131/1995canlii16131.html), affd (1996), [[1997] 2 W.W.R. 295, 113 Man. R. (2d) 269 (C.A.)]](https://www.canlii.org/en/mb/mbca/doc/1996/1996canlii17995/1996canlii17995.html) have recognized that a duty of good faith exists at common law in the context of a franchisor-franchisee relationship.

[23] However, a pleading of bad faith and a defence of good faith does not waive privilege unless the defendant relies on legal advice to support the defence of good faith. In Davies v. American Home Assurance Co., [60 O.R. (3d) 512 (Div. Ct.)], 2002 CarswellOnt 2225 (Div. Ct.) (“Davies”), Blair R.S.J. (as he then was) reviewed this issue in the context of bad faith insurance claims, which raise the same issues of inequality of bargaining power and contracts of adhesion relied upon by the plaintiffs in this case. Blair R.S.J. held that there is no waiver by denying a bad faith claim, unless legal advice is put into issue. Blair R.S.J. held (Davies, at paras. 27, 30-32, and 44),

… The fact that an insurer has sought and obtained a legal opinion for purposes of assessing its liability to respond to an insured's claim, and presumably has considered that opinion in deciding what to do, is not sufficient in and of itself to render the legal opinion producible in litigation -- even "bad faith" litigation -- at the instance of that insured. The assertion of a bad faith claim for punitive and exemplary damages for breach of the insurer's obligation of good faith may affect the scope of what is relevant and what is not relevant in the proceedings. However, in my view, the nature of the claim -- even a bad faith claim against a "bad" insurer -- should not (and in my opinion, does not) change the analysis as to what is or is not protected by solicitor-client privilege and/or litigation privilege. The principles that the courts have enunciated for determining the existence or non-existence of those privileges -- and the evidentiary basis necessary to establish them -- remain the same.

As Major J. noted in McClure, at para. 33,

The danger in eroding solicitor-client privilege is the potential to stifle communication between the lawyer and client. The need to protect the privilege determines its immunity to attack. [Emphasis added.]

A legal opinion from a lawyer to his or her client is the quintessential example of a communication between solicitor and client for the purpose of obtaining legal advice, and falls squarely into this category, in my opinion. It is immune from attack in the absence of an express or implied consent or waiver.

Such is not the case here and, in my opinion, the motions judge erred in concluding that the opinion letters by Mr. Regan are not protected by solicitor-client privilege, and in directing that they be produced.

The point is that litigation privilege (or solicitor-client privilege), when properly asserted, trumps relevance in almost all circumstances. That is its very nature. There is no "bad faith insurance claim" exception to either litigation privilege or solicitor-client privilege that creates a special rule for bad faith claims against insurers and consigns the normal rules respecting privilege to other claims. The same rules apply in all cases. [Emphasis added.]

[24] Corbett J. adopted the same approach in Guelph, when he held (Guelph, at paras. 87, 88, 97, 98, 100, 101):

In my view, mere 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, that 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. One example from the context of criminal law ought to illustrate the point: it is commonplace for an accused person to refuse to participate in a police interrogation. Often that accused person will explain to authorities that he is exercising his right to remain silent on the basis of legal advice. Thus the accused explains his conduct on the basis of privileged advice he has received. Surely that does not give rise to a waiver of the entirety of the privileged communications between the accused and his counsel.

However, if the accused puts the substance of the advice in issue in the legal proceeding, then the privilege will be lost. If, for example, the accused seeks to have a statement kept out of evidence on the grounds that counsel failed to advise him to remain silent, privilege will have been waived over the communication in order to determine whether counsel did, or did not, advise the accused to remain silent. 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 the advice to justify conduct in respect to an issue at trial: see Livent v. Drabinsky, [2003] O.J. No. 1618 (S.C.J.) per Farley J.; and Stuart Olson Construction Inc. v. Sawridge Plaza Corp., [[1996] 2 W.W.R. 396 at 404 (Alta. Q.B.)]](https://www.canlii.org/en/ab/abqb/doc/1995/1995canlii9211/1995canlii9211.html) per Dea J.

Privilege can be claimed regardless of the opposite party's allegations. However, when faced with a claim of bad faith, a party that 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), [60 O.R. (3d) 512 (Div. Ct.)].

Guelph has not pleaded good faith reliance on legal advice. Accordingly, it has not waived privilege in its pleadings.

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 "Legal" 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. [Emphasis added.]

[25] In Creative Career Systems Inc. v. Ontario, 2012 ONSC 649, [2012] O.J. No. 262 (S.C.J.) (“CCS”), Perell J. relied on the above passages from Guelph and reiterated the principle that a party must utilize the presence of legal advice as a material element of the defence in order to waive privilege. Perell J. held (CCS, at paras. 27, 29-30):

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.

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. …

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. [Emphasis added.]

[26] On the basis of the above case law, Sears has not waived privilege either in the pleadings or on the basis of fairness. Sears submits that its disclosure complied with its statutory and common law obligations. The trial court will make that determination based on the statutory requirements and any common law duty of good faith if it exists. Even if there is a subjective component of Sears’ intent that arises from the Shelanu decision, Sears has not relied in any way on legal advice as an element of its good faith defence.

Principle 5: Documents created in a “continuum of communication” for the purpose of obtaining legal advice are privileged

[27] I accept the submission of Sears that documents in a lawyer’s file that fall within a “continuum of communication” for the purpose of obtaining legal advice are privileged.

[28] I adopt the principle as stated by Henderson J. in No. 1 Collision Repair & Painting (1982) Ltd. v. Insurance Corp. of British Columbia, 1996 CarswellBC 167 (S.C.) at para. 5:

Moreover, I am satisfied that a communication which does not make specific reference to legal advice is nevertheless privileged if it falls within the continuum of communication within which the legal advice is sought or offered: see Manes and Silver, supra, p. 26. If the rule were otherwise, a disclosure of such documents would tend in many cases to permit the opposing side to infer the nature and extent of the legal advice from the tenor of the documents falling within this continuum. Thus, the intent of the rule would be frustrated. [Emphasis added.]

[29] Similarly, in Cusson v. Quan, 2004 CarswellOnt 3395 (S.C.J.-Mast.) (“Cusson”), Master Beaudoin (as he then was) held (Cusson, at para. 14):

I am satisfied, on the particular facts of this case, that the draft article was a "necessary step" in the obtaining of legal advice on the defendants' exposure to a claim in defamation and therefore part of the "continuum of communication" between Quan and his counsel. Moreover, a comparison of the draft to the final article may permit the plaintiffs to ascertain the advice given to Quan by his lawyer, something they freely admit they hope to do in order to substantiate a claim of bad faith against these defendants. [Emphasis added.]

[30] Consequently, solicitor-client privilege attaches to documents in the “continuum of communication” that either reveal legal advice or are a “’necessary step’ in the process of receiving legal advice (see also Mitsui & Co. (Point Aconi) Ltd. v. Jones Power Co., 2000 CarswellNS 234 (C.A.) at para. 33).

Principle 6: Whether a party receives legal advice on a particular subject matter is privileged

[31] The fact of receiving legal advice is not privileged, since it reveals nothing about the content of the advice. However, questions about whether advice was provided in a particular area indicate the aspects of the subject matter about which the advice was sought, which would breach solicitor-client privilege.

[32] I adopt the analysis of Master Haberman in Romspen Investment Corp. v. Woods, 2010 ONSC 30005, 2010 CarswellOnt 4008 (S.C.J.-Mast.), at paras. 20-24:

The motion is dismissed with respect to these questions, which were disposed of in court with reasons to follow. Whether or not legal advice had been sought, generally, would have been a perfectly acceptable question, as it simply seeks a fact without revealing anything about the discussion between a client and her counsel. Thus, Romspen could have asked if legal advice was sought in connection with the transaction without breaching privilege.

However, asking whether advice was provided in a particular area is a different matter. If advice was, indeed, sought "about the risk Home Depot was taking" in view of the existing mortgages on title, a response to that effect would provide some indication as to a particular aspect of the transaction about which advice was sought, and that would result in a breach of the privilege.

In this regard, Home Depot relies on Blue Line Hockey Acquisition Co., Inc. v. Orca Bay Hockey Limited Partnership 2007 BCSC 143. There, the court drew a distinction between questions that sought facts, only, and those which, if answered, could disclose something about the contents of the communication between the solicitor and client.

There, a question as to whether legal advice was sought regarding whether an individual could enter a particular agreement in light of other legal commitments was not permitted. Though still a factual question - "was legal advice sought?" - the response would have made it clear in respect to what aspect of the deal the advice had been sought and received.

Though I am not bound by this decision, I find it persuasive and apply it here. Question 76 seeks very particular information about what was conveyed between a solicitor and client - "whether any concern was expressed by anyone" about the failure to obtain a document evidencing a partial discharge. This is clearly privileged. Romspen was unable to take me to any case law indicating, that in order to properly consider the applicability of the doctrine of subrogation, the court was prepared to go so far as to first trample on solicitor-client privilege. [Emphasis added.]

Principle 7: Scope of proper questions arising from the productions held not to be privileged at the Initial Hearing

[33] At the Initial Hearing, I held that privilege over the PowerPoint presentation had been waived because both Sears and HCBG rely on the document in their pleadings for their adverse positions to each other. Consequently, I held that “any privilege that may have existed, whether solicitor-client privilege as it relates to legal advice from counsel given on franchising issues, or common interest privilege (if it existed which I do not need to decide) is waived by reference in the pleadings, production as against an adverse party, and by Sears permitting certain questions on the document from HCBG”.

[34] At the Initial Hearing, I held that the draft letters were privileged as solicitor-client communications but that privilege had been waived because the documents “are produced by HCBG in an adverse position to Sears, and Sears allowed certain questions from HCBG without objecting to production as a privileged document”.

[35] Consequently, the issue arises as to the scope of proper questions arising from the productions held not to be privileged at the Initial Hearing.

[36] I find that there was a common interest privilege between Sears and HCBG. The parties shared sufficient common interest to support the extension of privilege. The disclosures were intended to be in confidence. I adopt the comments of the British Columbia Court of Appeal in Maximum Ventures Inc. v. De Graf, 2007 BCCA 510 (C.A.) at para. 14:

Recent jurisprudence has generally placed an increased emphasis on the protection from disclosure of solicitor-client communications, including those shared in furtherance of a common commercial interest. In the instant case the McEwan draft was produced within the recognized solicitor-client privileged relationship. The common interest privilege issues arise in response to a plea of waiver of that privilege. The common interest privilege is an extension of the privilege attached to that relationship. The issue turns on whether the disclosures were intended to be in confidence and the third parties involved had a sufficient common interest with the client to support extension of the privilege to disclosure to them. In my view, the ambit of the common interest privilege is aptly summarized in the Sopinka on evidence 2d ed., Supp. of 2004 @ p. 133 which cites the case of Pitney Bowes of Canada Ltd. v. Canada (2003), 225 D.L.R. (4th) 747, 2003 FCT 214 quoted by the chambers judge at para. 31 of his reasons. Where legal opinions are shared by parties with mutual interests in commercial transactions, there is a sufficient interest in common to extend the common interest privilege to disclosure of opinions obtained by one of them to the others within the group, even in circumstances where no litigation is in existence or contemplated. [Emphasis added; italicized emphasis in original.]

[37] The commercial context in the present case is similar to those authorities relied upon by Sears at paragraph 38 of their factum for the Initial Hearing. The commercial relationship between Sears and HCBG is similar to the examples of a sale with the parties sharing an interest in seeing the transaction completed (Canmore Mantan Villas Inc. v. Alberta (Ministry of Seniors and Community Supports), [2009] A.J. No. 606 (Q.B.) at para. 7), a conduit and an investors’ committee involved in negotiating an agreement with stakeholders (Barclays Bank PLC v. Devonshire Trust (Trustee of), [2010] O.J. No. 4234 (S.C.J.) at para. 23), parties exchanging information with a view to a proposed merger (Anderson Exploration Ltd. v. Pan-Alberta Gas Ltd., [[1998] A.J. No. 575 (Q.B.)]](https://www.canlii.org/en/ab/abqb/doc/1998/1998abqb455/1998abqb455.html) at para. 27), and individuals who are part of a “deal team” (Barrick Gold Corp. v. Goldcorp Inc., [2011] O.J. No. 3530 at paras. 2-3).

[38] If the party who claims common interest privilege does not waive privilege, then it can maintain privilege on all internal discussions and productions related to the document even if the other party with common interest discloses the document. Otherwise, a party who had a common interest privilege could get access to all of the adverse party’s privileged communications by choosing to waive privilege.

[39] I adopt the comments of Reed J. in Almecon Industries Ltd. v. Anchortek Ltd., [[1998] F.C.J. No. 1664 (T.D.)]](https://www.canlii.org/en/ca/fct/doc/1998/1998canlii9108/1998canlii9108.html) (“Almecon”) at paras. 13 and 14:

In the present case, counsel for the plaintiff's argument amounts to the assertion that because a third party (albeit one having a common interest in the litigation with Anchortek) has disclosed privileged communications between Anchortek and its counsel, Anchortek is required to answer questions concerning that communication. I do not understand that to be the law.

The refusal that is identified as giving rise to this appeal is a refusal by Anchortek "to answer questions concerning a letter received by Anchortek from Ogilvie and Company and forwarded to Western Explosives". One such question put to Anchortek was why it had sought an opinion letter from its counsel. I do not think that Western's disclosure of the privileged correspondence can open the door to require Anchortek to answer such questions. These communications are covered by solicitor-client privilege; this privilege originated with Anchortek; the communications of Anchortek with its counsel remain privileged despite Western's disclosure of the letters. I also have a concern that this type of question is not likely to be relevant but I do not decide that point.

[40] On the other hand, if a party chooses either to waive privilege (whether express or implied), the scope of questions extends to “all communications between the solicitor and the client in respect of the particular subject matter of the legal advice, including the background communications necessary to place the advice in context”, as summarized by Matheson, W. (now Justice Matheson) and Necpal J. in Annual Review of Civil Litigation 2010, Implied Waiver of Solicitor-Client Privilege in Civil Litigation, 2010 Archibald-AnnRevCivil J at p. 19.

[41] A similar approach to the scope of questions permitted upon waiver of privilege was adopted by Corbett J. in Guelph at para. 101 and by Master Haberman in Zesta Engineering Ltd. v. Cloutier, 2008 CarswellOnt 390 (S.C.J. – Mast.) at paras. 99, 101.

[42] Consequently, I distinguish between the PowerPoint presentation and the draft letters when considering the scope of questions that can be asked as a result of the waiver of privilege. On the PowerPoint presentation, Sears waived privilege by relying on the document in its pleading. Consequently, the broader scope of waiver (albeit limited to the “particular subject matter” of the presentation and background communications necessary to place the presentation in context) would apply.

[43] For the draft letters, privilege was waived because HCBG produced the document, which on its own would not expand the scope of privilege to any internal discussions between Sears and its counsel. Unlike the PowerPoint presentation, Sears did not rely on the draft letters in support of its pleading, and cannot be said to have waived privilege on that basis.

[44] However, Sears did allow some questions to be asked on the draft letters which may also waive privilege to permit questions on the particular subject matter of the legal advice. The scope of such waiver would depend on (i) whether Sears maintained privilege over internal conversations and only answered questions relating to common discussions between the parties and (ii) any other waiver which can be argued on the basis of the permitted questions. I do not decide the scope of waiver on the draft letters as the particular examination questions were not argued before me.

Process

[45] On the basis of the above principles, I anticipate that counsel may be able to resolve many of the outstanding issues regarding privilege claims on documents and on refusals. I agreed to hear those outstanding matters on August 22, 2013 for a full-day continuation of this motion.

[46] I order the following process (based on discussion with counsel at the hearing with some slight modifications arising from my consideration of the principles I discuss above):

(i) Step 1: Plaintiffs’ counsel will identify those documents in Schedule B that present privilege issues from the description of the document, either because the document appears to have been delivered to a party other than Sears, does not appear to contain legal advice, or for any other reason does not appear to attract privilege. Plaintiffs’ counsel will prepare a chart setting out these issues and deliver the chart to Sears by July 5, 2013. Plaintiffs’ counsel will also review the refusals and prepare a similar chart of those refusals on which they intend to proceed, also to be delivered to Sears by July 5, 2013;

(ii) Step 2: Sears’ counsel will review the plaintiffs’ charts and provide a responding position setting out the basis for the privilege claim for both Schedule B documents and refusals, to the extent Sears maintains the privilege claims once Sears reviews the plaintiffs’ charts. Sears will provide its responding charts by July 26, 2013;

(iii) Step 3: The parties will discuss their respective positions and prepare a joint chart of opposed refusals and a joint chart of Schedule B documents which are at issue based on the positions of the parties;

(iv) Step 4: The parties will provide me with the joint chart of refusals and the joint chart of contested Schedule B documents by August 12, 2013. Sears will also provide me with both an electronic and a hard copy of all the Schedule B documents on which Sears maintains privilege, with a chart indicating the pages in the documents on which the purported legal advice can be found. The court will review all of the contested documents (and those not part of the contested documents to the extent requested by plaintiffs’ counsel) to ensure privilege has been properly claimed. The court will attempt to complete the review with sufficient time prior to the hearing to advise counsel which documents the court will want Sears to address on the issue of privilege; and

(v) Step 5: At the hearing, the court will address the outstanding refusals and claims of privilege on the Schedule B documents.

[47] If counsel require any clarification or modification to the above process, I will be available for a case conference any day until June 21, 2013 but not available during the week of June 24, 2013.

[48] Costs of this attendance are reserved to the hearing of the continued motion on August 22, 2013, when counsel will bring costs outlines and make submissions.

[49] I again thank counsel for their superb written and oral submissions, as well as their civility and professionalism, which are of great assistance to the court.

Master Benjamin Glustein

DATE: June 14, 2013