Trillium Motor World Ltd. v. General Motors of Canada Limited and Cassels Brock & Blackwell LLP

COURT FILE NO.: 10-397096CP

Heard: December 2, 2013

Released: March 3, 2014

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Trillium Motor World Ltd. v. General Motors of Canada Limited and Cassels Brock & Blackwell LLP

BEFORE: Master Joan Haberman

COUNSEL: Vermette, M.A. for the moving party, plaintiff Morritt, D. for the responding party, the defendant, General Motors of Canada Limited

REASONS

Master Haberman:

[1] Trillium moves for production of various documents listed in General Motors of Canada Limited’s (hereinafter referred to as GMCL) affidavit of documents, as well as for an unredacted version of documents that they have produced.

[2] These Reasons deal with the first hearing day of three. All of these motions arose in the context of a hotly contested class action flowing from actions taken by GM Canada to ensure its ongoing survival. My recitation of the facts as set out below applies to all three days of these motions, although additional facts may be added with respect to the particular issues before me on days 2 and 3.

THE BACKSTORY

INTRODUCTION to the ISSUES

[3] For the most part, the following factual matrix is derived from affidavit evidence filed by GMCL. Though the plaintiffs filed a 7- binder motion record and a Reply record, they filed only three brief affidavits. The first and the third, filed in reply, simply refer to the documents attached to it. The second, contained in volume 7, is a brief affidavit from an expert and relates to the refusals to be argued on day 3. As a result, it appears that much of what follows is not disputed.

[4] In 2009, GMCL found itself in severe financial difficulties and during the course of that year, they came perilously close to having to make a CCAA filing.

[5] In the months leading up to the events that resulted in this action, GMCL retained financial and legal advisors to assist them in going down one of two possible roads. On the one hand, they began exploring ways to restructure the company in order to prepare for such a filing. At the same time, they investigated how they might avoid taking this drastic step.

[6] During what appears to have been a highly pressurized and compressed time frame, GMCL and their lawyers worked closely with their financial advisor, Ernst & Young (“E & Y”) and with E & Y’s legal counsel, Stikeman Elliot (SE)

[7] Ultimately, a CCAA filing was avoided, as GMCL managed to overcome what they perceived to have been three serious hurdles, as more fully described below (in the Lopez evidence). One of the possible obstacles in their path involved reaching settlements with the class members, in the form of a Wind-Down Agreement (“WD Agreement”). Their ability to achieve this settlement was among the factors that ultimately facilitated GMCL’s successful negotiation of financing agreements with both the federal and provincial governments. It is now the focus of this litigation.

[8] During the course of the work involved in either restructuring or filing under the CCAA, certain categories of documents were created by and for GMCL and its advisors. Some of these documents were apparently shared among GMCL staff and their own counsel, as well as with various outside professional advisors, and in some cases, with legal counsel working with these professional advisors.

[9] At the end of the day, the ultimate goal was for GMCL to secure financial assistance from both levels of government. To that end, financial information was shared, draft agreements exchanged and other information conveyed to government bodies.

[10] Whether or not privilege arose and if it still applies to the documents shared with professional advisors and their counsel and with the two levels of government are among the issues on this portion of motion.

[11] These Reasons also deal with whether GMCL is deemed to have waived privilege by putting its state of mind in issue, and with the propriety of GMCL having produced two categories of documents in redacted form.

MAY 2009 – the WIND - DOWN AGREEMENT (WD Agreement)

[12] On May 20, 2009, GMCL sent a letter via e-mail to approximately 240 of its dealers across Canada. The purpose of the letter was to advise that, due to financial pressures affecting GMCL and its parent, GMCL was required to restructure its dealership network. An aspect of that restructuring would involve each of the dealers contacted to agree to the premature surrender of their respective Dealer Sales and Service Agreements (hereinafter referred to as the DSS Agreement), each of which was otherwise due to expire on October 31, 2010, with a right of renewal.

[13] Attached to each May 20 letter was the WD Agreement. The WD Agreement was presented as a time-limited offer of compensation for the premature surrender by each dealer of their rights under their respective DSS agreements. In exchange for their acceptance of this offer, each dealer would receive two things: 1) a payment based on the number of vehicles that dealer had sold in the preceding year, and 2) a sign removal allowance.

[14] Payment under the WD Agreement would be made in three instalments to each dealer, subject to a number of conditions, which included:

• Sale of the dealer’s entire inventory;

• Removal of all signs;

• Cessation of all business operations; and

• Compliance with various post-termination obligations before release of the final installment.

[15] The May 20 letter indicated that 100% of the contacted dealers would have to accept the offer and sign the WD Agreement in order for it to apply to any of them, subject to GMCL’s right to waive that condition. The letter also noted that there was a strong possibility that GMCL would have to file under the CCAA in the event of their failure to achieve 100% acceptance.

[16] The offer was outstanding only until 6:00 pm on May 26, 2009, but before any dealer could accept it, they were required to obtain a certificate indicating that they had obtained independent legal advice. They were also required to provide a full waiver and a release of their right to sue GMCL and its affiliates. Each release confirmed that acceptance of the offer had been made voluntarily and with a full understanding of the implications.

[17] In the end, approximately 84% of the contacted dealers signed the WD Agreement before the expiry of deadline. GMCL ultimately waived the requirement of 100% participation for it to apply to those dealers who had accepted it. Those dealers who did not sign do not form part of the class of plaintiffs in this action. Most of the remainder do.

GMCL’S DOCUMENTS

[18] GMCL has produced in excess of 5,100 documents to-date, totalling more than 40,000 pages. They have also disclosed, and asserted privilege over, a further 3,049 documents.

[19] In addition, GMCL produced 391 documents in redacted form, claiming that what has been redacted is protected by privilege. Much of that has been resolved, such that, at this time, only 35 of the redacted documents remain in issue. These redactions are based on GMCL’s position that they have redacted out only those portions of the documents in issue that are both irrelevant and commercially sensitive.

GMCL’S POSITION REGARDING PRIVILEGE

[20] Throughout 2009, GMCL and its former parent, General Motors Corporation (“Old GM”), undertook efforts to restructure the business while preparing for insolvency proceedings in Canada and in the US. Both continued to carry on business during extremely challenging economic times, GMCL supported solely by the governments of Canada and Ontario.

[21] GMCL’s treasurer, Tyrone Lopez, provided detailed evidence regarding GMCL’s situation at that time. He notes that from December 2008 until June 2009, he worked closely with finance, treasury and other GMCL personnel, as well as with Old GM, in preparations for insolvency proceedings in both countries. In the event that the company managed to avoid CCAA proceedings in Ontario and was, instead, restructured, it was understood that this would necessarily involve financial assistance from both the federal and provincial governments.

[22] In the context of preparing for both eventualities, Lopez also worked with:

• GMCL and Old GM legal in-house staff;

• GMCL’s outside counsel, Osler, Hoskin & Harcourt LLP (“Osler’s”);

• Old GM’s outside legal counsel, Weil Gotshal & Manges; and

• a number of other professional advisors including E & Y, AlixPartners LLC, Encore Inc. and Morgan Stanley & Co.

[23] Lopez refers to three primary obstacles that GMCL had to overcome by June 1, 2009 in order to avoid having to file under CCAA, as follows:

1. the GMCL dealership network had to be restructured so as to reduce the total number of dealers across Canada to ensure GMCL’s long term viability;

2. they had to reach agreement with the CAW to arrive at competitive labour costs; and

3. they had to resolve claims by certain unsecured note holders issued by GM Nova Scotia.

[24] None of the three appeared to be easily achievable. As a result, GMCL continued to work simultaneously towards a CCAA filing up until the last minute while dealing with these obstacles to restructuring. They therefore claim that the work that went into both options is effectively a unit, so that documents created in relation to a possible CCAA filing cannot be severed from those dealing with restructuring.

[25] GMCL also takes the position that the documents not yet produced that were shared with either level of government and with its various professional advisors are protected by privilege as they and the governments were working together towards a common objective – saving GMCL, with all that that encompassed.

THE STATEMENT OF CLAIM

[26] The statement of claim in this action was issued on February 10, 2012 and amended on April 29, 2011. As the action currently stands, the plaintiffs’ claim against GMCL revolves around their interpretation of their rights under the Arthur Wishart Act (Franchise Disclosure), 2000 S.O. , c.3. In that regard, they seek, among other things:

• a declaration that to the effect that GMCL is a franchisor under that Act;

• a declaration that the class members are entitled to the benefit of the statutory duty of fair dealing and right of association;

• damages in an aggregate amount not exceeding $750 million based on breach of their duty of fair dealing; interference with the right of association and failure to provide disclosure documents as required; and

• a declaration that the WD Agreement is null, void and unenforceable as against the class members and that it can be rescinded.

[27] Another aspect of the claim for relief as against GMCL is the plaintiffs’ request for an order directing individual hearings in respect of compensation or damages for each member of the class.

[28] Essentially, the plaintiffs indicate that they were pushed to the wall when the WD Agreement was presented and a response was required within days. They assert that what they were offered was not even sufficient, in many cases, to cover employee severance obligations and other costs associated with the ownership of a dealership. Many dealers, they say, were left with multi-million dollar, single purpose buildings, some of which had been recently purchased or developed at great cost.

[29] The plaintiffs also assert that there was no need for them to have been placed in such a pressurized situation as GMCL knew at least a month earlier that they intended to reduce their dealership network by approximately 42% as this was the subject of a public statement. The dealers assert that GMCL intentionally waited until late May 2009 to convey the offer in order to maximize pressure on the affected dealers and to minimize the dealers’ opportunity to get adequate advice and then to attempt to negotiate better terms with GMCL.

[30] Turning to CB, the plaintiffs raise CB’s retainer in relation to GMCL, claiming that though the latter was aware that CB represented the affected dealers, they then pre-selected them as their counsel. This resulted in the dealers did not getting the kind of representation they needed at this critical time.

[31] The plaintiffs’ claim against CB is structured as a breach of contract action and it is based on CB’s alleged breach of their duty to class members. A further sum, not to exceeding $750 million for the class, is sought.

[32] The foundation for the claim against CB is the plaintiffs’ assertion that the Canadian Automotive Dealers Association (“CADA”) had retained CB in April 2009 to represent its interests in the event of a restructuring, in view of the public statements being made by GMCL to that effect. Many of the affected dealers were members of CADA, so in their view, they had retained CB indirectly through CADA.

[33] In the context of this retainer, CADA acted as CB’s agent for the purpose of collecting monies from dealers for a Legal Fund, a fund created at CB’s request in order to ensure their payment. Within a short time, it is alleged that several million dollars was raised.

[34] One of the reasons that CADA selected CB for this brief was their previous involvement on behalf of GMCL’s Saturn-Saab dealers in a franchise matter.

[35] The plaintiffs allege that they were unaware that, during this time frame, CB also represented the federal government throughout the GMCL auto bailout. They claim that this dual retainer placed CB in a position of conflict and affected the nature and quality of advice CB provided during a critical and short time frame.

[36] Instead of providing advice, GMCL claims that CB advised each dealer to obtain independent legal advice from their local lawyers in the 48 hours that remained until the expiry of the deadline. CB also refused to sign any of the certificates attesting to the dealers having obtained independent legal advice from them.

[37] The plaintiffs therefore allege that CB is in breach of both fiduciary and contractual duties.

CERTIFICATION AND COMMON ISSUES

[38] The action was certified as a class action by order of Strathy J. on March 1, 2011. An abbreviated form of the common issues that were certified follows. Note that the term “Act” is used to denote the applicable franchise legislation in each of the affected areas of the country:

a) Is GMCL a franchisor within the meaning of the applicable Act?

b) Are all class members entitled to the benefit of a statutory duty of fair dealing and a right of association under the Act?

c) If GMCL owes a duty of fair dealing to the class members, did they breach it (in one of 6 ways)?

d) Did GMCL have a duty to disclose material facts concerning its restructuring to franchisees at the time of soliciting the WD Agreement? If so, did they breach it?

e) If all class members had a statutory right to associate, did GMCL interfere with, prohibit, restrict, penalize, attempt to penalize or threaten to penalize class members who exercised this right (in one of 6 ways)?

f) Are the waiver and release in the WD Agreement null, void and unenforceable?

g) Was GMCL required to deliver to each class member a disclosure document within the meaning of the Act at least 14 days before the class member signed the WD Agreement?

h) Do rescission rights arise as a result of GMCL’s failure to deliver disclosure documents?

i) Are all class members who deliver a notice of rescission or cancellation, as the case may be, entitled to compensation under the Act?

j) Did CB owe contractual duties to some or all class members and, if so, did they breach those duties?

k) Did CB owe fiduciary duties as lawyers to some or all class members, and if so, did they breach those duties?

l) Did CB owe duties of care to some or all class members and, if so, did they breach those duties? and

m) What is the amount of pre-judgement and post-judgment interest applicable to any damage award?

[39] Although he was not prepared to certify the issue of damages as a common issue, Strathy J. did note in his Reasons that the trial judge still retained authority to do so. Alternatively, the trial judge could determine that participation of individual class members was required in order to fashion a fair remedy for each of them on an individual basis. He added:

If damages have to be dealt with individually, the task will not be insurmountable. On the other hand, depending on the findings of the trial judge, there may be a basis for an aggregate assessment of damages against either GMCL or Cassels. I therefore leave the issue of aggregate assessment to the common issues judge.

[40] The plaintiffs rely on this passage as basis for their submissions that disclosure, at this stage, should not be restricted to the common issues, in that it remains open to the trial judge to convert damages to a common issue at trial. They rely on this, despite their pleading, in which they ask for damages to be assessed on an individual basis.

THE ISSUES: SPECIFIC FACTUAL CONTEXT FOR EACH

[41] The plaintiffs presented 4 issues for the court’s determination on Day 1. The first two involve their assertion that privilege cannot be made out with respect to certain documents flowing, first, between GMCL and the two levels of government and secondly, as between GMCL, E & Y and E & Y’s counsel, SE.

ISSUE 1: DOCUMENTS SHARED with GMCL and the GOVERNMENTS

[42] The plaintiffs take the position that GMCL has waived privilege over communications with government actors in view of having shared certain information with them. In their submission, GMCL cannot escape waiver by relying on “common interest” privilege, as it does not constitute a separate category of privilege. They state further that to the extent that such a privilege does exist, it does not apply on these facts.

[43] The only evidence filed by the plaintiffs on point was a letter dated July 10, 2009 from Dalton McGuinty to a GM dealer, located in the plaintiffs’ reply record. In the letter, the former Premier stated that the governments of Ontario and Canada did not ask GMCL to reduce their dealer network. Rather, the company decided it was an important change to ensure the long-term viability of its operations in Canada.

[44] The plaintiffs claim that the two levels of government were driven by a broader public interest and not by GMCL’s purely commercial interest. In this regard, they rely on the fact that the governments were also involved in the Chrysler restructuring. The plaintiffs rely on another letter contained in their Reply record, this one from Sandra Pupatello to Joanne Fordham, dated August 13, 2009. There is no quotation from that letter in their factum nor was it referred to in oral argument.

[45] This is effectively the sum total of evidence filed by the plaintiffs on this point.

[46] In contrast, GMCL filed two affidavits that address this issue and that provide factual context for their assertion of common interest privilege. The first is from Tyrone Lopez, GMCL’s treasurer. He states that, from January until May 2009, GMCL worked with the Canadian and Ontario governments to develop a restructuring plan that could help ensure GMCL’s future sustainability and competitiveness. An essential element for GMCL going forward required both levels of government to invest in the company so agreement had to be reached with each about what the governments expected to see from GMCL before they would commit.

[47] Lopez was involved in analyzing the terms the government proposed to secure their financial support. From his involvement in this work, Lopez asserts as follows:

I firmly believe that GMCL and the governments of Ontario and Canada had a common interest in the successful restructuring of GMCL to support the future viability of GMCL and in the successful completion of the transactions to provide GMCL with the financing required to carry out its restructuring.

[48] To support his belief, Lopez relies on various statements made by each level of government in which each expresses their commitment to working with Old GM and GMCL to ensure GMCL’s future sustainability.

[49] In Ontario, for example, Premier McGuinty issued a statement on December 8, 2008, in which he referred to the thousands of people and their families who relied on the auto industry to put food on their tables and a roof over their heads as one reason why the Ontario government was concerned about GMCL’s survival.

[50] In March 2009, the federal government stated that, together with the Government of Ontario and the US Government, they were working to create a viable industry and to maintain Canada’s share of Canada - US production going forward. Minister Flaherty stated that loans were being advanced to reflect our priorities and both protect our economy and exercise firm oversight over taxpayer dollars.

[51] Lopez maintains that, based on these public statements, it is clear that GMCL and the two governments had a common interest is keeping GMCL alive and thriving. He lists the benefits that the governments received in exchange for their financial support, in the form of commitments the governments received from GMCL to:

• produce certain vehicles and automotive parts at Canadian facilities;

• make substantial capital investments in Canadian facilities;

• ensure competitive Canadian labour costs; and

• partner with Canadian suppliers and universities in research and innovation.

[52] Both levels of government issued press releases on June 1, 2009, noting that the governments were “partnering” and “cooperating” with GMCL in order to achieve these benefits.

[53] Paul Risebrough, former Director of Dealer Organizations and Network Planning for GMCL from 1996- 2011, also provided responding evidence, directed specifically at document and information sharing with the two levels of government.

[54] In his first affidavit (which deals primarily with the sharing of information issue), he points out that GMCL does not claim privilege over all of its communications with the Ontario and federal governments and their respective lawyers. He then discusses the two categories of documents involving government actors over which privilege has been claimed.

[55] Dealer Damages Analysis: Risebrough’s evidence on this point is hearsay, as he essentially conveys what he learned from Neil Macdonald, GMCL VP, General Counsel and Secretary at the relevant time. However, that has not been challenged nor has the evidence been contradicted.

[56] Risebrough states he was advised by Macdonald that GMCL orally shared certain privileged information with the Ontario government from the Dealer Damages Analysis during a briefing regarding the network and the WD Agreement that took place on May 15, 2009. This information was recorded by the government in a briefing note, which was disclosed to GMCL pursuant to the Freedom of Information and Protection of Privacy Act.

[57] While GMCL has disclosed the document, they have redacted GMCL’s privileged information. According to Macdonald, GMCL shared this information with Ontario at that time as the governments were considering GMCL’s potential liabilities as part of the financing negotiations. In order to understand the whole package, the governments needed to know how GMCL proposed to deal with its potential liabilities arising from the restructuring of the dealer network. Macdonald’s belief was that this information was being shared in furtherance of the parties’ common interest of completing the financing transactions and restructuring GMCL to ensure its long term viability and without the intention of waiving privilege.

[58] Draft documents: GMCL and its lawyers exchanged drafts of agreements and other materials with the government and their lawyers in the context of negotiating the loan agreements, as well as with respect to contingency planning for a CCAA filing and sale of GMCL’s assets to GMCL Newco.

[59] Risebrough states that he was informed by Macdonald that, to the extent that these documents contain or reflect privileged communications or legal work product, GMCL shared this material with the government and their lawyers also in furtherance of the parties’ common interest of completing the financing transaction and restructuring GMCL to ensure its long-term viability and without the intention of waiving privilege.

[60] In view of that belief, GMCL shared this information with the governments on the basis that it be kept confidential. Further, a detailed non-disclosure agreement was entered into between GMCL and each level of government to drive that point home.

[61] Thus, it appears that the plaintiffs take a narrow view of what can constitute “common interest”, while GMCL takes a broader approach. GMCL’s evidence is directed at demonstrating that there was an overall common interest in keeping GMCL operating, as it provided benefits to GMCL, as well as to both levels of governments.

[62] In GMCL’s submission, the benefits do not have to be identical for a “common interest” privilege to apply. The fact that both the governments and GMCL wanted the same outcome – the survival of GMCL – was enough for the privilege to arise. In other words, though there had to be a shared interest in a particular outcome, each party could have their own individual rationale for wanting that outcome or the benefits that flow from it.

ISSUE 2: DOCUMENTS SHARED with E & Y and their counsel, SE

[63] Lopez asserts in his affidavit that GMCL required specialized legal and financial assistance to assist them in their work. They therefore engaged various experts, creating a team of trusted external advisors to provide critical legal, financial and other advice and assistance in connection both with the restructuring, as well as for preparation for a Chapter 11 filing in the US and a CCAA filing in Canada. They obtained and relied on that advice.

[64] Lopez provides detailed information about how the work was carved up. He states, at paragraph 15 and 16 of his affidavit:

Both Old GM and GMCL managed the preparations for the filings by developing coordinated workstreams responsible for certain issues and deliverables. Within Old GM, each workstream had a business lead, a legal lead, and a lead from AlixPartners. The leads worked together to achieve a deliverable assigned to their workstreams, each contributing input and analysis from their respective area of expertise. This approach ensured that each of the required deliverables incorporated the requisite business and legal considerations, with strategic consultancy, drafting and logistical support from AlixParnters.

Similarly, GMCL adopted a coordinated workstream approach for its preparations for a CCAA filing. In general, each workstream had leads assigned from the relevant GMCL business unit, GMCL’s in-house legal team, Old GM’s legal leader, Osler, AlixPartners and E & Y.

[65] This arrangement made information sharing a necessary and essential component of getting the work done. As Lopez states at paragraph 17:

…it was necessary for members of the workstreams, including members from external advisors, to receive communications in furtherance of legal advice to enable Old GM and GMCL’s advisors to perform their responsibilities. In general, and as explained in further detail below, the input and analysis provided to Old GM and GMCL’s lawyers with respect to the financial or other implications of the restructuring was required for legal counsel to provide meaningful legal advice. Similarly, the input and analysis provided by the lawyers with respect to the legal implications of the restructuring was required for the financial and other non-legal advisors to provide meaningful advice to Old GM and GMCL.

[66] GMCL retained E & Y to act as their financial advisor with respect to strategic alternatives, and in particular, a CCAA filing. Their letter of engagement, dated January 23, 2009, lists 5 services for which E & Y was engaged. The first item is to advise regarding alternatives available for financial restructuring and the next three items involve providing detailed financial analysis and information, the last of the 3 highlighting that this would be with a view to identifying potential alternative financing sources.

[67] Preparedness for a CCAA filing only appears as the 4th item in the list and is worded as a contingency plan, to be relied on only if other strategic initiatives are not successful. Thus, the letter of engagement suggest that E & Y had a much broader role to play than simply getting GMCL ready to file under the CCAA. Learning as much as E & Y could about the company’s financial status was, at the same time, seen to be an invaluable asset to GMCL, as part of the plan was to use E & Y as the court appointed Monitor should a CCAA filing be necessary.

[68] Lopez confirms this in his evidence. He states that it was understood that E & Y would be appointed as Monitor in the event that a CCAA filing was necessary. E & Y therefore worked very closely with the GMCL business teams, as well as with their in-house and outside lawyers in preparing for the filing. E & Y worked out of GMCL’s headquarters for much of the engagement and actively participated in communications with GMCL’s legal counsel and other E & Y advisors.

[69] E & Y’s role as the perspective Monitor made them essential to the legal advice provided to GMCL. In view of their involvement at this stage, it was expected that if GMCL did file under the CCAA, the court would rely heavily on E & Y’s view when considering certain restructuring actions, such as the sale of assets to GMCL Newco.

[70] E & Y, in turn, retained SE as their lawyers to advise them during the planning for CCAA filing. Lopez believes that SE provided advice to E & Y on draft CCAA materials that were prepared for GMCL and its legal team and SE would have advised them had E & Y ultimately been appointed Monitor.

[71] In the end, a CCAA filing was avoided so no Monitor was appointed. It is important to note that E & Y never filled the role of court-appointed monitor.

[72] Lopez concludes his evidence regarding outside advisors as follows, at paragraphs 29, 30 and 31 of his evidence. He states that GMCL viewed all external advisors as members of a team that E & Y expected to work seamlessly and collaboratively (with) throughout the process.

[73] More specifically, GMCL expected their external lawyers and in-house counsel to interact directly with the financial; and other non-legal advisors to that legal advice could be obtained and decisions made as quickly and efficiently as possible.

[74] Lopez completes this portion of his evidence by stating that the need to ensure close collaboration at times required team members to share privileged documents or advice with external advisors and to include these advisors in privileged communication between Old GM and/or GMCL and their lawyers. This atmosphere of inclusion was essential in facilitating the legal advice and decision-making required to carry out all aspects of the restructuring and preparing for the Chapter 11 and CCAA filings.

[75] Lopez makes it clear that the parties were working under time constraints such that an efficient approach was needed. He states that Old GM and GMCL expected that all matters relating to the restructuring and possible Chapter 11 and CCAA filings would be kept confidential by their own employees and by their external advisors, in particular communications with their in-house and outside lawyers. He adds that none of the lawyers, in-house or external, believed E & Y were waiving privilege when external advisors were present during their discussions or involved with respect to communications.

[76] Risebrough also discusses the documents passing between GMCL and its advisors in his evidence. He notes, once again, that a blanket privilege is not being claimed over all documents falling into this category. Once again, he gleans his information from Mr. Macdonald.

[77] In particular, it appears that GMCL shared documents relating to the Dealer Damages Analysis with these two entities, at the request of E & Y, for use in the liquidation analysis of GMCL that E & Y was preparing for the CCAA filing.

[78] E &Y and SE were also included in communications sent to the broader team preparing for Old GM’s Chapter 11 filing as well as GMCL’s CCAA filings, such as communications coordinated the various workstreams preparing for the filing.

[79] John McKenna, a senior partner in the Corporate Advisory and Restructuring group of PricewaterhouseCoopers LL.P, submitted expert evidence with respect to this issue by way of affidavit. Neither his qualifications nor his evidence have been challenged.

[80] He states that he has spent over 20 years in practice in the area of corporate restructuring and that he has extensive experience working with significant corporations in financial distress, where options must be investigated and assessed.

[81] McKenna indicates that he has reviewed the Lopez and Risebrough affidavits and that, in his opinion, it is expected and “the norm” that information of the type described in the Lopez Affidavit and the Risebrough Affidavit that information that is shared by the company with its professional advisors will be treated as confidential and will not be disclosed to others except with the consent of the company, if it is necessary and appropriate to do so in a court assisted process or it is required by court order.

[82] McKenna also indicates that it is common practice in restructurings of this kind to work in multi-disciplinary teams to explore options in order to achieve the best outcome. In his view, it is essential that the professional advisors and the company work seamlessly as a team and that all members have a clear and current understanding of all of the elements involved that could affect their work. In view of the extreme time pressure under which work of this kind is generally performed, it is crucial that there be a flow of information that is not artificially impeded.

[83] McKenna states:

A successful restructuring requires consideration of not just legal issues in isolation, but financial, operation and other discrete and overlapping issues where specialized legal and non-legal knowledge and experience is required. If it were not possible, without waiving privilege or preventing privilege from arising, to include other non-legal advisors on the team that considers and advises on the company’s position and potential options and works to achieve an effective restructuring, I believe that the ability of the company to be properly advised could be significantly impaired.

[84] McKenna also points out that a monitor is always required in a CCAA filing and is, in fact, a central aspect of the process. He notes that the monitor, commonly retained first as a financial advisor, as was the case here, has a unique role as an officer of the court, as it provides assistance and advice to the debtor during the course of the CCAA proceeding. It has a responsibility in assisting the debtor in preparing the statutorily required cash flow forecasts, a task which cannot be performed “at the last minute”. Careful consideration of the results of this analysis takes time.

[85] In his view, neither the company nor the retained professional advisors would expect that privilege would be lost in these circumstances and that if that is the result of this case, they will all have to alter the way in which they communicate regarding the giving and receiving of legal advice and with respect to how professional advisors are used. In McKenna’s opinion, this would have a detrimental impact on the way in which restructurings are undertaken and in their prospects for success.

ISSUE 3: IMPLIED WAIVER BASED ON PLEADINGS

[86] This issue flows from the plaintiffs’ challenge to the validity of the release signed by each dealer and GMCL’s assertion, in defence, that they changed their position in reliance on the fact that these releases were signed.

[87] The plaintiffs assert that by pleading reliance on the release provision of the WDA, GMCL has placed its state of mind in issue with respect to the validity and enforceability of these provisions, such that it must now disclose any legal advice received regarding those issues. They rely on the interests of fairness and consistency.

[88] GMCL asserts that the plaintiffs have approached the proposition backwards, and that it does not operate as they suggest. The principle of law is as follows: a party puts its state of mind in issue when it relies on legal advice received as the basis for its state of mind. In such instance, it is deemed to have waived the legal advice received.

[89] In GMCL’s submission, a party’s reliance on legal advice is core to the principle and they have not asserted that they have done so or that they even received legal advice regarding these issues.

[90] Neither party relies on any evidence with respect to this issue.

ISSUE 4 : REDACTIONS

[91] In his second affidavit, Risebrough explains that GMCL operates in a highly competitive industry, such that it has an important interest in protecting information relating to future predictions and other product planning decisions, its marginal costs of manufacturing and selling vehicles, its costs and its overall productivity. He provides considerable detail to demonstrate the importance of confidentiality on the basis:

(1) of ensuring its competitors do not have access to GM’s technological developments;

(2) of keeping its relatively high fixed costs out of the public domain, to avoid having its competitors using that information to GMCL’s disadvantage; and

(3) that access to GMCL’s cost reduction strategies and productivity improvement initiatives would give competitors an advantage in the market.

[92] In essence, all three reasons revolve around keeping GMCL’s information and numbers from its competitors in the context of a highly competitive industry.

[93] Risebrough, himself, was personally involved in the process of collecting, reviewing and producing the relevant documents. He swore GMCL’s affidavit of documents and was involved in the redaction process, so that relevant documents were included without what he says was the commercially sensitive information contained within them.

[94] He states:

Based on my 40 years of experience working in various sales and marketing roles for GMCL, I believe that disclosure of the categories of confidential information listed below would create a risk of serious commercial and competitive harm to GMCL. He adds that he believes the information he sought to shield by way of redaction would tend to reveal GMCL’s production costs, profit margins, competitive strategies and product planning decisions. Having to disclose the redacted portions may place GMCL at a significant competitive disadvantage.

[95] Risebrough then goes into further detail regarding each type of information listed.

[96] In the end, the plaintiffs withdrew their objection to most categories of redactions that were initially part of this motion. Although submissions were made at large, their concerns now appear to be limited to the following two categories of documents, although this is not entirely clear from their factum:

• detailed financial information (former category E); and

• information relating to the restructuring of the Old GM (part of Category G)

[97] This aspect of the motion appears to have been a moving target, so while the factum makes it clear that the plaintiffs no longer question certain areas, in oral submissions, it seems further aspects of this part of the motion were abandoned so there was a need to correlate the numbering yet again. In the context of a 63-page factum, this is not helpful.

[98] With respect to GMCL’s detailed financial information (Category E), Risebrough points out that GMCL is a wholly owned subsidiary, such that its financial statements are consolidated with those of its parent. The latter are rarely publicly disclosed.

[99] Many of the documents in GMCL’s productions that fall into this category contain information that is provided to senior management and deals with GMCL’s assets and liabilities, as well as their profits and losses. It is used by management to analyze GMCL’s business performance and for future panning. By its nature it is commercially sensitive and of potential use by competitors.

[100] With respect to documents relating to the restructuring of Old GM (part of Category G), Risebrough’s evince indicates that the redactions contain detailed financial, strategic and other confidential and commercially sensitive information relating to the restructuring of GMCL’s former parent, Old GM, as well as its affiliates in regions such as Mexico, Latin America and Europe. He continues:

I believe that disclosure of this information could give competitor(s) of GMCL’s affiliates in those regions a competitive advantage for the same reason that disclosure of GMCL’s confidential financial or strategic information would give GMCL’s competitors an advantage.

[101] There is no evidence from the plaintiffs about any of this, which is not surprising as they can’t be expected to have information about these issues. This has not stopped them, however, from making assumptions about both the relevance and the alleged confidentiality asserted by Risebrough. Though they chose not to cross-examine Risebrough to explore the basis for his concerns, the plaintiffs assert that his evidence is based on the false premise that this information will be disclosed to competitors.

[102] In the face of this sworn evidence, the plaintiffs say the following:

• The onus was on GMCL to prove that these partial redactions were proper;

• To satisfy that onus, they had to list each of the affected documents in schedule “B” of their affidavit of documents, setting out the function, role and status of both the sender and recipient of each affected document, but they failed to do so;

• Confidentiality, alone, is not a legitimate ground for redaction;

• The plaintiffs do not agree that all of the information that was redacted is irrelevant;

• Lack of relevance, alone, is not a proper basis for redaction.

THE LAW, ANALYSIS and CONCLUSIONS

ISSUE 1: PRIVILEGE and DOCUMENT SHARING with GMCL and the GOVERNMENTS

[103] The only two categories of documents in issue here are what the parties have referred to as the “Dealer Damage Analysis” and “draft Documents.” These documents were disclosed within schedule “B” of GMCL’s affidavit of documents, so the debate focuses on:

the plaintiff’s assertion, that GMCL has waived privilege over these documents as a result of having shared them with various government entities; and

GMCL’s response, that the documents have retained their privileged status by virtue of the doctrine of common interest privilege.

[104] The plaintiffs assert that there is no separate category of common interest privilege. Rather, it has been applied to protect privilege from waiver in appropriate cases. Their position is that it does not operate to do so here. While they agree that the court now accepts that this doctrine can apply to commercial interests, the plaintiffs caution that care must be taken to not overextend its application.

[105] Further, the plaintiffs deny that there is any form of common interest as between GMCL and the government actors as, in their view, this case is not a “typical” commercial transaction. While GMCL had a private commercial interest to protect, the plaintiffs submit that the governments had a broader public interest to protect, and were dealing with public funds.

[106] GMCL counters, stating that for the first five months of 2009, GMCL worked with both levels of government, with the shared goal of developing a restructuring plan that would ensure GMCL’s future sustainability, which, in turn, was dependent on its ongoing competitiveness. An essential element of that restructuring involved successfully negotiating the conditions under which both levels of government would agree to invest in GMCL.

[107] As GMCL’s evidence demonstrates, in order to reach this point, they had to share privileged information orally with the Ontario government regarding the Dealer Damages Analysis, as it was a potential liability. This information found its way into a government briefing note, which was disclosed to GMCL. GMCL has produced the note, but has redacted certain portions of it which they view as privileged as it pertains to legal advice received. They assert they did not intend to waive that privilege.

[108] Similarly, GMCL and its lawyers exchanged draft agreements and other documents as more fully set out above with the two levels of government and their legal counsel in the course of negotiating loan agreements and as part of the contingency planning for a possible CCAA filing. GMCL has redacted those portions of these documents that deal with GMCL’s privileged communications or their legal work product. They deny waiver and maintain that disclosure was made in confidence.

[109] On GMCL”s reading of the cases, common interest privilege is a well-recognized doctrine, not a new approach as the plaintiffs suggest, and the court has applied it to protect privilege in a wide variety of circumstances. They advocate that the court should take a broad approach here to be consistent with the current state of the law.

[110] In CC & L Dedicated Enterprise Fun (Trustee of) v. Fisherman, [2001] CarswellOnt 514, Cumming J. spoke of “common interest privilege” as a principle that applies to legal opinions provided in the context of a corporate transaction. He stated that it may:

…attach to documents shared by parties with a common interest despite the fact that they become adverse in respect of another related action.

[111] To that, he added that the fact that parties may become adverse in interest down the road is not a sufficient basis to deny the existence of the privilege at the outset. Based on his reading of General Accident General v. Crusz (1999), 45 OR (3d) 321, he stated that a party seeking to override the privilege would have to demonstrate a clear intention to waive privilege.

[112] Cumming J. also found that that while common interest privilege implies parties uniting to combat a common foe, their “common interest” need not be an identical interest (see Supercom of California v. Sovereign General Insurance Co. (1998), 37 OR (3d) 597).

[113] The decision of the Federal Court, Trial Division in Pitney Bowes of Canada v. R. 2003 FCT 214, [2003] CarswellNat 361 is also of assistance, as O’Reilly J. went into some depth in his exploration of this area of the law. He began by saying that the courts have already recognized that this privilege applies where parties share legal opinions in the context of certain commercial transactions. He then accepted what Lowry J. said in Fraser Milner Casgrain LLP v. Minister of National Revenue, 2002 BCSC 1344, [2002] BCJ No. 2146, where Lowrie J. found that economic and social values inherent in fostering commercial transactions favoured recognition of a common interest privilege based on the parties’ common interest in the successful completion of a transaction.

[114] O’Reilly J. was clear that that the mere existence of a commercial transaction as the backdrop would not suffice on its own to shield documents shared with third parties from disclosure, so, in his view, it would be hard to craft a hard and fast rule. He added that, while a court might want to rule out its application in the context of a merger or other business transactions where the parties were clearly adverse in interest, there were obviously many commercial transactions where the parties want to negotiate on the footing of a shared understanding of each other’s legal position. If each party to the transaction has an understanding and appreciation of where the others are coming from, negotiations can proceed in an open and informed way. Further, in such instances:

The expectation, whether express or implied, will be that the opinions are in aid of the completion of the transaction and, in that sense, are for the benefit of all parties to it. Such circumstances, in my view, create a presumption that the privilege attaching to the solicitor-client communications remain intact notwithstanding that they have been disclosed to other parties.

[115] The Supreme Court of Canada recognized the existence of the common interest exception to waiver in Pritchard v. Ontario Human Rights Commission 2004 SCC 31, [2004] SCJ No. 16. There, they describe it as having originated in the context of parties sharing a goal or seeking a common outcome. Again, there is nothing in that case, where it was found that common interest privilege could not apply with respect to an administrative board as regards the parties who appear before it, that would dictate that the exception could not apply on the facts before this court.

[116] The plaintiffs rely on two cases to assist them in advancing their position. In R. v. Toronto Star Newspapers Ltd., [2005] OJ No. 5533, Nordheimer J. had to deal with whether or not various Crown documents had been properly redacted. The documents, reports by various financial experts, had been given to the police and filed with the court, yet the federal Crown maintained that its privilege had not been waived.

[117] Nordheimer J. took issue with whether the privilege existed, but he was very specific in stating why:

No authority was provided to me that holds that litigation privilege in general, and common interest privilege in particular, can be asserted over a document that is provided to the Crown and the police by a third party for the express purpose of being used to instigate or advance a criminal investigation.

[118] Having found that no privilege existed, he then considered whether, if one had been found, it had been waived in the circumstances of this case. In his view, there was no common interest here. As he saw it, one group had a private commercial interest to protect, while the Crown was protecting a broader public interest, and the only thing they had in common was that the same people were involved regarding the same issues. Accordingly, Nordheimer J. felt these facts did not fall within the common interest exception to waiver as defined in General Accident (supra).

[119] In view of Nordheimer J.’s initial findings regarding the non- application of privilege, these comments are obiter, and a more detailed examination of the facts provides helpful context. The application before the court was brought by several media organizations, as well as the individuals and a company which had been referred to in four search warrants. All of the applicants sought the Information that had been used to obtain the search warrants, which, at that time, was subject to a sealing order.

[120] The Crown had provided an edited version of the warrants, with redactions on about 1500 of the 2000 pages produced. The redactions included information taken from public releases and statements, newspaper reports, published interviews, websites and other public records. The Crown also sought to exempt reports prepared by BDO Dunwoody, used by the RCMP investigators in developing their investigative theory to support their belief that criminal offences had been committed. These reports were, in Nordheimer J.’s words the fruits of the investigation, which revealed the material facts on which the Crown attempted to develop its theory of criminal activity. As his Honour put it:

To withhold these reports would effectively allow the Crown to withhold the sum and substance of its case.

[121] In that factual context it is not at all surprising that the court was of the view that these documents had to be disclosed.

[122] Though this case also involved the Crown as an actor, the Crown’s role was as the protector and prosecuting arm of government. There was no commercial interest involved, no ultimate transaction to consummate and no shared goal. Further, the Crown was subject to certain disclosure obligations in the context of its role as the prosecuting authority and could not claim privilege in order to withhold the sum and substance of its case. I fail to see how this case has any application to the matter now before the court.

[123] The plaintiffs also rely on the General Accident case. General Accident was a seminal case of our Court of Appeal, released in 1999, dealing with solicitor-client privilege and how it differs from litigation privilege. The issue of waiver also arose in the context of legal advice obtained for an insurer and provided to their adjuster. This occurred during the investigation of a potential arson case.

[124] The Court of Appeal concluded that the legal advice had not been waived by virtue of its having been shared with the adjuster, as the communications were in furtherance of that function (a function which is essential to the existence or operation of the solicitor-client relationship) and which meet the criteria for client-solicitor privilege.

[125] While the case is clear on its facts, there is nothing in the rationale that suggests that the court intended to restrict the scope of common interest privilege in this particular factual scenario.

[126] Indeed, Carthy J.A. cites with approval an extract from the US Court of Appeal decision in United States of America v. American Telephone and Telegraph Company, 642 F.2d 1285 (1980, SCCA). It reads:

Moreover, with common interests on a particular issue against a common adversary, the transferee is not at all likely to disclose the work product material to the adversary. When the transfer to a party with such common interest is conducted under a guarantee of confidentiality, the case against waiver is even stronger.

[127] In the case at bar, confidentiality agreements were entered into with both levels of government, such that the documents were shared with parties under a guarantee of confidentiality. To that extent, this case actually supports GMCL’s position.

[128] Further, in more recent case law, the developing trend places an increased emphasis on protection from disclosure where solicitor-client communications are involved, where they include communications shared with third parties in furtherance of a common commercial interest. Thus, in Maximum Ventures Inc. v. de Graaf, [2007] CarswellBC 3231, the BC Court of Appeal stated:

Where legal opinion are shared by parties with mutual interests in commercial transactions, there is 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.

[129] This decision was cited with approval in Ontario by Master Glustein in 578115 Ontario Inc. v. Sears Canada, [2013]CarswellOnt 8258. The concept of common interest or “common litigation privilege” was also relied on by C. Campbell J. in Barrick Gold Corp. v. Goldcorp, [2013]CarswellOnt 7453.

[130] The principles that I extract from these cases are as follows:

• The court refers to this concept interchangeably as an exception to waiver of privilege and as common interest or common litigation privilege, though the term “common interest privilege” seems to be the most prevalent. They all involve similar scenarios, so no distinction is merited;

• Common interest privilege in the context of commercial transactions has been clearly recognized by the court;

• This privilege, or exemption from waiver of privilege, has been found to exist because it advances the economic and social value in encouraging commercial transactions. Sharing of information of a legal nature can enhance negotiations as it supports open and informed discussions by putting parties on a common footing;

• It applies where parties share a legal opinion that is in aid of the completion of a transaction; where there is an expectation that that opinion will be kept in confidence; and where completion of a transaction is of benefit to all parties;

• Being of benefit to all means the parties are seeking a shared goal or a common outcome, such as the completion of a transaction. The privilege is not defeated because each party wants this outcome for a different reason;

• Therefore, for this privilege to apply, the common interests need not be identical interests;

• While common interests need not be identical, there must be sufficient common interest and a mutual interest in the commercial transaction;

• The privilege will apply even where parties who share the documents may become adverse in interest in the future or if they are already adverse in respect of another related action;

• There needn’t be litigation in existence or even contemplated at the time the information is shared for this privilege to arise; and

• Because the existence of this privilege is so fact-dependant, there can be no hard and fast rules as to when it will or will not arise;

• The mere existence of a commercial transaction will not suffice to create it.

[131] The plaintiffs suggest that the common interest here could not have been of a commercial nature, by virtue of the fact that the recipients of the documents were both government bodies, such that the government actors acted in the public interest. They view this principle as having a very narrow scope, such that, if their view is accepted, it is difficult to envisage how documents shared with government in furtherance of a common goal could ever retain their intended privilege. This is contrary to how the courts are currently interpreting this concept. It is also difficult to accept in the context of the evidence filed about what took place here and the rationale for it.

[132] It is important to understand that government wears different hats at different times. When it acts as prosecutor in the criminal law context, it acts only in the public interest, and is clearly not engaged in any form of commercial activity.

[133] However, all levels of government regularly enter into contracts for goods and services and partake in various activities that are clearly of a commercial nature. That would include making “bail-out” loans to industry. The fact that governments are entering into to these agreements for the benefit of the public does not make them any less commercial in nature.

[134] Providing loans to major Canadian corporations to help them stay afloat following protracted negotiations clearly has a mixed purpose, from government perspective. While the corporations, themselves, had a purely commercial interest in the outcome, the government’s interest, though ultimately for the benefit of the public good, also has a commercial component to it. One has to ask one simple question to reach that conclusion.

[135] The question, simply put, is: how would keeping GMCL be for the “public good”? There are several answers to this question, many of which have a financial or commercial impact. Keeping GMCL alive meant maintaining jobs for a lot of its labour force in Canadian facilities. Keeping people employed results in a stronger tax base. The agreement reached ultimately provided other benefits for the governments, including a commitment to partner with Canadian suppliers and universities in research and innovation. These also have financial ramifications.

[136] While the overriding interest for government may have been “the public good”, the public good, in this instance, involved, in large part, financial outcomes. The case law accepts the application of this principle where the common interests are not identical, and where one or both parties may have mixed interests. What is important is that, at the end of the day, what GMCL shared with both levels of government was the common goal of keeping GMCL afloat, and that, on these facts, makes out a sound basis for the application of common interest privilege.

[137] Further, there is no evidence of a clear intent to waive that privilege, in fact, quite the contrary, in view of the confidentiality agreements that were signed.

[138] The plaintiffs also rely on the decision of the IPC adjudicator dealing with what they say is the same issue: whether common interest privilege can apply as between GMCL and the Ontario government. In his decision, dated January 18, 2013 (Order PO-3154), the adjudicator found that the interests of the ministry and GMCL did not coincide, as the government is charged with managing the economy, while GMCL’s mission was to run a business and maximize profits or minimize losses, for the benefit of its shareholders.

[139] This narrow approach, of characterizing a government participant by focusing solely on the basis of its public function without looking at its role in the particular situation, is not consistent with case law, which for many years has acknowledged that the Crown has obligations analogous to those of other legal persons when it enters into contractual and commercial agreements.

[140] It also ignores the current approach of focusing on the common goal of the parties, rather than on their respective reasons for achieving that common goal - that there can be a common goal of sustaining GMCL despite different rationales for that goal. That does not detract for the fact that GMCL and the governments were engaged in a common mission to save GMCL, though their reasons for doing so may not have been identical. The fact that their interests, or reasons for working together, were not identical, is not an impediment to the application of public interest privilege on these facts.

[141] I am not bound by the IPC adjudicator’s decision, not do I find it persuasive in the light of current jurisprudence. I therefore decline to follow it.

[142] I find that common interest privilege exists and the redacted portions of the documents falling into this category remain protected with respect to both categories of documents.

ISSUE 2: DOCUMENTS SHARED WITH E & Y and their COUNSEL

[143] The plaintiffs state that GMCL has improperly claimed privilege over 59 documents sent or received by representative of E & Y, and over 46 documents sent or received by E & Y’s counsel, SE.

[144] There is no dispute that E & Y, while assisting GMCL with its potential restructuring as well as the possible CCAA filing, would have been appointed as GMCL’s monitor had the CCCAA filing been necessary. In the end, this was avoided and no monitor was needed so E & Y was never appointed to that office, vis a vis GMCL .

[145] The plaintiffs rely on various cases which describe the role of the monitor as an officer of the court, responsible and accountable to the court, owing a fiduciary duty to all parties. A monitor must act independently, considering the interests of the debtor as well as those of the creditors. It serves as a neutral, acting in the best interests of all parties, rather than a mouthpiece or surrogate of the debtor-applicant. These duties and obligations, they say, are inconsistent with E & Y having been part of a team that shares information for the benefit of GMCL. Their ultimate obligation would have gone well beyond those of the debtor.

[146] I do not believe there is any dispute in this case as to the role of a court-appointed monitor. What is in issue is whether E &Y would ever have been subject to such obligations, in view of the fact that they were never appointed as monitor in this case.

[147] The plaintiffs accept GMCL’s evidence, to the effect that accounting firms often begin their work before they are formally appointed as monitors. However, they suggest that if the monitor must start its work before being formally appointed as monitor by the court, its duties of independence and neutrality must start before court appointment, thus, it would not have been reasonable for GMCL to expect to keep what it conveyed to E & Y and their counsel confidential. They site no source for this assertion, which runs counter to GMCL’s expert evidence and ignores the fact that E & Y never actually functioned as a monitor.

[148] The cases discuss these principles in situations where the monitor has already been appointed as such. There is no case I have been taken to that indicates that these duties can arise before that time, regardless of the nature or extent of work being undertaken at an earlier stage and despite the fact that such “early” retainers are common in the industry. Until appointed as monitor, an accounting firm acts in the best interests of the party who retained them, though they may acquire information that could be potentially useful down the road if and when appointed as the monitor.

[149] John McKenna submitted expert evidence on behalf of GMCL in this regard. He makes it clear that sharing confidential information with professional advisors is normal practice in the industry and that it is understood by all that the information will be treated as confidential and not disclosed beyond the professional team without the client’s consent or court order.

[150] McKenna indicates that the monitor is commonly retained first as a financial advisor. As they can’t be expected to suddenly come up with the statutorily required cash flow forecasts if retained at the last minute, their earlier involvement in a matter is invaluable.

[151] This “prospective monitor” is part of this inter-disciplinary team of experts, where each contributes to the overall picture, each expecting their work to remain within the closed circle of the group. To deviate from this model would have a significant negative impact on a company’s ability to get ready in short order for a CCAA filing. This is not a social or economic value that has any appeal.

[152] As McKenna puts it, I believe that the ability of the company to be properly advised could be significantly impaired.

[153] To suggest that sharing this information with financial advisors constitutes waiver of privilege conflicts with case law that deals with the protection afforded to documents contained within the continuum of communications (see Camp Development Corp. v. South Coast Greater Vancouver Transportation Authority, [2011] Carswell BC 112 where the court recognized that teams of individuals with focused expertise …are a practical reality in major commercial projects.)

[154] To distinguish this case on the basis of E & Y’s role as a potential monitor when they were never assigned that role is, in my view, an unwarranted stretch and one that could have a chilling effect on the use of financial advisors in instances where the need for monitor down the road may be a possibility, only. If that possibility never comes to fruition, and no monitor is appointed, does the privilege that would otherwise attach to shared documents evaporate in light of the fact that they may have been appointed as monitor? I think not.

[155] The evidence is clear that E &Y worked as part of a team of professional advisors, along with legal counsel, towards both possible outcomes (restructuring and CCAA filing) simultaneously. The professional advisors worked seamlessly and collaboratively, the goal being to maximize the success of the restructuring option. All communications were understood and expected to be privileged and to remain confidential and a confidentiality agreement was entered into to highlight GMCL`s expectation in that regard.

[156] In terms of SE, McKenna also makes it clear in his evidence that it is customary for a prospective monitor to retain their own legal counsel, who, as a matter of course, would have to be privy to all that the prospective monitor had learned in order to add value.

[157] McKenna`s view is that, in cases such as this one, all experts involved in formulating a restructuring plan have an expectation that the information they share will remain confidential, whether or not they are also a prospective monitor

[158] GMCL also points out that it has not claimed a blanket privilege over all communications involving E & Y and or SE. Instead, they have restricted their claim of privilege to only those communications that reflect legal advice, or shared legal opinions and analysis, which are prima facie privileged.

[159] In summary, GMCL asserts that common interest privilege should be found to exist here, and that it has not been waived, as all of the professional advisors worked together towards a common goal. They rely on SNC- Lavalin Engineers & Contractors Inc. v. Citadel General Assurance Co., [2003] CarswellOnt 213 for the list of legal propositions articulated in that case, which essentially read as follows:

• Solicitor-client privilege should not be lightly interfered with, and only deemed to be waived in the clearest of cases. The onus on establishing waiver is on the party who asserts that it occurred;

• This approach maintains public confidence in a clients’ right to communicate in confidence with counsel;

• Each case must be decided on its own facts;

• Did the client intend to waive privilege or to retain confidentiality despite giving information to a third party?

• Was sharing information with the third party in the client’s interests? The standard for showing “interest” is not a high one;

• Is the relationship between the parties such that the third party who received the privileged information can be said to have a common interest with the client?

• Does fairness dictate that waiver should be implied?

[160] In the case before the court, the evidence indicates that confidentiality was expected, and waiver was not intended. The professional advisors with whom information was shared also shared GNCL’s goal of a successful negotiation with both levels of government leaving to restructuring of the company. Fairness does not dictate a different approach.

[161] On the basis of all of the foregoing, I find that commercial reality dictates that information of this type is protected by privilege and that such privilege has not been waived by virtue of the information having been shared it with a prospective monitor. Had a CCAA filing been required, things would have taken a very different direction and certain documents that are the subject of this discussion may have ultimately been shared with the court. In that event, they would have been available to be viewed by the plaintiffs, subject, perhaps, to a sealing order being obtained. That, however, is not this case, as no monitor was ever appointed.

[162] Accordingly, I find that the privilege was properly claimed and that it has not been waived in this instance.

ISSUE 3: IMPLIED WAIVER BASED ON THE PLEADINGS

[163] The principle of law that deals with waiver privilege by virtue of placing one’s state of mind in issue, is set out in Creative Career Systems Inc. v. Ontario, [2012] CarswellOnt 797. There, Perell J. stated:

…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.

[164] His Honour goes on to make the point that waiver is not automatic simply because legal advice was received. As he put it:

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 a party makes legal advice an aspect of his or her case.

[165] Perell J. relies on Simkoff v. Simkoff, 2009 MBCA 80¸which articulates the principle in a similar way:

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.

[166] In Guelph (City) v. Super Blue Box Recycling Corp. (2004), (2004) CarswellOnt 4488, Corbett J. pointed out that deemed waiver actually occurs as a matter of a party’s choice. It does not occur because a party admits having received legal advice, or because he admits having relied on it. It arises because a party chooses to use that legal advice as a substantive element or his or her pleading.

[167] The plaintiffs rely on Toronto-Dominion Bank v. Leigh Instruments Ltd. 32 OR (3d) 578, but in that case, the issue arose as an evidentiary ruling in the course of a trial. It was clear that that the plaintiff had placed his state of mind in issue by pleading reliance on the defendants’ representations, but he then went further and gave evidence that he received legal advice, which, in part, formed the basis of his state of mind. Reference to and reliance on that legal advice remains at the core of this ruling.

[168] In my view, the current state of the law is as stated by Perell J., not as set out in a series of older cases dealing with comfort letters. Not only had GMCL not used legal advice as a substantive element of their pleading, there is no indication that they obtained or relied on such advice as regards these releases. The plaintiffs’ proposition is not a correct one and such an extension of this legal principle is not warranted. I therefore find that there is nothing in these pleadings which could give rise to a legitimate claim that privilege has been waived on these facts.

[169] ISSUE 4: REDACTION

The evidence from GMCL is that all redactions were done on the basis that what was omitted was both irrelevant and confidential. They have filed Risebrough’s evidence, to the effect that disclosure of the categories of documents would create a serious risk of serious commercial and competitive harm to GMCL.

[170] Although they have not cross-examined Risebrough nor filed conflicting evidence, the plaintiffs take the position that his affidavit is based on a “false premise”, to the effect that revealing what has been redacted will be disclosed to GMCL’s competitors and the general public. They have also argued that the information is dated, again without having put that proposition to Risebrough.

[171] This is a class action, with in excess of 200 participants. At this stage, there is little information regarding each class member as to who is where, doing what. It is not inconceivable that some of them, having already operated car dealerships, are doing just that now, but for non-GMCL motor vehicle manufacturers. Any one of them could be a competitor of GMCL at present. According to counsel for GMCL, many of them are. There is no reference to this in the factum, nor did he take me to any evidence to that effect and this assertion is not accepted by plaintiffs’ counsel.

[172] The plaintiffs claim that there is adequate protection to keep these materials out of the hands of possible competitors. They rely on Strathy J.’s deemed undertaking order, which they say prohibits counsel and the representative plaintiff from disclosing documents and information produced by GMCL to others, including other class members, except within prescribed parameters.

[173] Much turns on the outcome of how this issue is resolved and I am troubled by GMCL’s reference to the fact that other class members are, in fact, now their competitors. As this portion of the motion was argued late in the afternoon, the parties did not, in my view, get into a real discussion about the protection afforded by Strathy J’s order of July 19, 2012. The fact that GCML applied for it and that that the order was ultimately granted on a consent basis suggests there may well have been evidence before the court to the effect that there are class members who are, indeed, GMCL’s competitors at this time. If that is the case, I want to ensure that fact is captured in my Reasons.

[174] For this reason, I am adjourning this part of motion for further submissions. I will speak with counsel shortly about how this can be addressed.

Master Joan M. Haberman

Released: March 3, 2014