Leggat v. Jennings, 2015 ONSC 237
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
BRIAN LEGGAT and 1180330 ONTARIO INC.
Plaintiffs
– and –
KELLY JENNINGS, CRAIG BECK, 1393024 ONTARIO INC., 921384 ONTARIO INC. d.b.a. MIDLAND HONDA, POWERBAND GLOBAL INC., ELIZABETH JENNINGS, BRIANNE JENNINGS, COURTNEY JENNINGS, 2213922 ONTARIO INC. d.b.a. PENINSULA AUTOMOTIVE SALES & LEASING and 2415007 ONTARIO INC.
Defendants
AND BETWEEN
KELLY JENNINGS and 1393024 ONTARIO INC.
– and –
BRIAN LEGGAT, DOUG LEGGAT, 1180330 ONTARIO INC., 2095008 ONTARIO INC., 2155866 ONTARIO INC., FOUR WAYS INC. (F.K.A. 2064281 ONTARIO INC.), 952430 ONTARIO INC., 4061420 CANADA INC. and LEGGAT PONTIAC BUICK CADILLAC LIMITED
Rocco DiPucchio and Lauren P.S. Epstein, for the Leggat parties
Neil Rabinovitch and Kathryn McCulloch, for the Jennings parties
HEARD: January 6 & 9, 2015
REASONS FOR JUDGMENT
GRay j.
1Solicitor and client privilege is said to be almost absolute. The issue on this motion is whether it has been waived by implication. The motion raises significant issues of policy.
2There are two actions. The main parties are Brian Leggat and Kelly Jennings. There are a number of other parties aligned with the principals. For convenience, I will refer to one set of parties as the “Leggat parties” and the other set of parties as the “Jennings parties”.
3This motion originally came before me for rulings on a large number of undertakings and refusals to which answers were sought by both parties. To their credit, the parties resolved almost all of them. Only one group of refusals remain for my consideration. They raise the same issue: whether the Leggat parties are entitled to the production of information and documents regarding legal advice given to the Jennings parties in connection with a settlement agreement that is, in part, the subject of this action.
4For the purposes of this motion, it is not necessary to go into the details of the issues involved in this action. It is sufficient to say that Brian Leggat and Kelly Jennings were engaged in a dispute over a number of car dealerships. After negotiations, which included the involvement of a number of law firms, the parties entered into a settlement agreement.
5Litigation has now ensued over the settlement agreement. The Leggat parties seek to rely on the settlement agreement. The Jennings parties seek to set it aside, partly on the basis of certain misrepresentations they say were made by the Leggat parties on which they relied to their detriment.
6On the examination for discovery of Kelly Jennings, questions were asked of him that would require him to produce evidence of communications between him and his solicitors. In substance, he has been asked to produce all communications with his solicitors in relation to the settlement negotiations that led up to the execution of the settlement agreement, and to produce copies of his solicitors’ files in that regard. Production of the requested information has been resisted on the basis that such communications and documents are privileged.
Submissions
7Mr. DiPucchio, counsel for the Leggat parties, submits that the requested information must be produced.
8Mr. DiPucchio points out that in his pleadings, Mr. Jennings alleges that a number of significant misrepresentations were made during the negotiations leading up to the execution of the settlement agreement. He also alleges that he relied on those misrepresentations to his detriment, and that as a result the settlement agreement is of no force and effect.
9Mr. DiPucchio points out that in their pleadings, the Leggat parties allege that Mr. Jennings voluntarily entered into the settlement agreement for good consideration, and that he was represented and advised by counsel throughout.
10Mr. DiPucchio submits that Mr. Jennings and the Jennings parties have put their state of mind in issue. By pleading that they acted on the basis of misrepresentations made by the Leggat parties, they have made the issue of legal advice relevant. It will be important to know whether or not they acted on the basis of legal advice, rather than any alleged misrepresentations, in acting as they did. It may well be that the Jennings parties made an assessment of the information given to them, with the assistance of legal advice, and, based on that legal advice, decided to act as they did. Having put their state of mind in issue, it would be unfair to allow them to shelter behind any legal advice they received and prevent an accurate assessment of their state of mind. Thus, Mr. DiPucchio asserts, the Jennings parties have impliedly waived privilege in any legal advice received and any documents in their solicitors’ files in that regard.
11In the alternative, Mr. DiPucchio submits that privilege has been waived through partial disclosure of some of the legal advice. He points out that Mr. Jennings voluntarily disclosed to Brian Leggat an email that he sent to one of his solicitors, Mr. Robinson. In the email chain between Mr. Jennings and Mr. Robinson, Mr. Robinson points out that there are detrimental aspects of the agreement from Mr. Jennings’ perspective. Mr. Jennings, in his response to his lawyer, points out that there are advantages to him that make the detrimental aspects “worth it”.
12Mr. DiPucchio submits that having disclosed some of the legal advice Mr. Jennings received, it is not open to him to be selective and not produce the rest of it. For this additional reason, Mr. DiPucchio submits that privilege has been waived.
13Mr. DiPucchio specifically relies on Bank Leu AG v. Gaming Lottery Corp. (1999), 43 C.P.C. (4th) 73 (Ont. S.C.J.); Roynat Capital Inc. v. Repeatseat Ltd., 2014 ONSC 653, [2014] O.J. No. 1510 (S.C.J.); Toronto-Dominion Bank v. Leigh Instruments(Trustee of) (1997), 1997 12113 (ON SC), 32 O.R. (3d) 575 (Gen. Div.); Lloyds Bank Canada v. Canada Life Assurance Co. (1991), 47 C.P.C. (2d) 157 (Ont. Gen Div.); Cromb v. Bouwmeester, 2014 ONSC 5318, [2014] O.J. No. 4298 (S.C.J.); Guelph (City) v. Super Blue Box Recycling Corp. (2004), 2004 34954 (ON SC), 2 C.P.C. (6th) 276 (Ont. S.C.J.); Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1995), 1995 7258 (ON SC), 27 O.R. (3d) 291 (Gen. Div.); and Berry v. Pulley, [2009] No. 379 (Master).
14Ms. McCulloch, counsel for the Leggat parties, submits that privilege has not been waived.
15Ms. McCulloch submits that solicitor and client privilege is of fundamental importance, and it should only be abrogated in the narrowest of circumstances. While it is possible to waive the privilege, it should only be found to have been waived rarely and in very narrow circumstances.
16Generally speaking, waiver must be voluntary. It must be express, and must be made as a result of a conscious decision of the client.
17Ms. McCulloch recognizes that there may be circumstances in which waiver can be said to be have been made by implication. However, because that does not involve a conscious, voluntary decision to waive privilege, the circumstances in which waiver by implication can be said to have occurred must be narrowly circumscribed.
18Ms. McCulloch submits that such circumstances will occur where a party has directly placed in issue the legal advice he or she has received. For example, if a party pleads that he or she has acted in a certain way based on legal advice, the party must then be required to disclose the legal advice so that the party’s reliance on it can be assessed. It is not open to a party to hide behind the privilege where the party has put reliance on the advice in issue.
19Ms. McCulloch submits that unless a party has put reliance on legal advice in issue, the privilege should not be held to have been waived.
20Ms. McCulloch submits that many of the cases relied on by the Leggat parties have been overtaken by later caselaw.
21First, she submits that the Supreme Court of Canada has more recently re-emphasized the importance of solicitor and client privilege, and its fundamental nature not only to the client but to the administration of justice. In this respect, she specifically relies on R. v. McClure, 2001 SCC 14, [2001] 1 S.C.R. 445.
22Ms. McCulloch also notes that the issue of implied waiver has been discussed more recently by Justice Perell in Creative Career Systems Inc. v. Ontario (2012), 2012 ONSC 649, 27 C.P.C. (7th) 172 (Ont. S.C.J.); and by Master Haberman in Trillium Motor World Ltd. v. General Motors of Canada Ltd., [2014] O.J. No. 1004 (Master). She submits that those cases are more persuasive than the earlier cases.
23Ms. McCulloch submits that the disclosure of a single email in which one communication between Mr. Jennings and his lawyer was disclosed does not mean that all legal advice obtained from that particular lawyer, and indeed all lawyers, must be disclosed. Mr. Jennings is entitled to waive privilege on one matter without waiving privilege on everything else. Ms. McCulloch specifically relies on the judgment of Sharpe J. (as he then was) in Transamerica Life Insurance, supra, and the judgment of Corbett J. in Guelph (City), supra.
Analysis
24There can be no doubt that solicitor and client privilege is of fundamental importance. This has been emphasised repeatedly by the Supreme Court of Canada since 2001, when R. v. McClure was decided. At para. 17 of McClure, Major J. stated:
Solicitor-client privilege is part of and fundamental to the Canadian legal system. While its historical roots are a rule of evidence, it has evolved into a fundamental and substantive rule of law.
25Commencing at para. 26, Major J. discussed other sorts of communications that are worthy of confidentiality. At para. 31, he stated:
The foregoing privileges, such as communication between a doctor and his patient, do not occupy the unique position of solicitor-client privilege or resonate with the same concerns. This privilege, by itself, commands a unique status within the legal system. The important relationship between a client and his or her lawyer stretches beyond the parties and is integral to the workings of the legal system itself. The solicitor-client relationship is a part of that system, not ancillary to it.
26At para.35 he stated:
However, solicitor-client privilege must be as close to absolute as possible to ensure public confidence and retain relevance. As such, it will only yield in certain clearly defined circumstances, and does not involve a balancing of interests on a case-by-case basis.
27These principles have been restated and re-emphasised in subsequent cases decided by the Supreme Court of Canada: see R. v. Brown, 2002 SCC 32, [2002] 2 S.C.R. 185; Lavallée, Rackel & Heintz v. Canada (Attorney General), 2002 SCC 61, [2002] 3 S.C.R. 209; Pritchard v. Ontario (Human Rights Commission), 2004 SCC 31, [2004] 1 S.C.R. 809; and Canada (Privacy Commissioner) v. Blood Tribe Department of Health, 2008 SCC 44, [2008] 2 S.C.R. 574.
28It is with this background in mind that I must assess the competing interests here. On the one hand, the Leggat parties submit that they have an interest in full disclosure of what motivated the Jennings parties to enter into the settlement agreement. The Jennings parties say they entered into the agreement because misrepresentations were made upon which they relied. Full disclosure, according to the Leggat parties, means that they must have all evidence that is relevant to the Jennings parties’ state of mind. That would include any legal advice they received.
29On the other hand, the Jennings parties submit that they must have close to an absolute right to communicate with their solicitors, and to obtain advice during the negotiations. To grant the order sought would mean that what they thought were confidential communications are not confidential. This will have a chilling effect not only for them but for others who seek and rely on legal advice.
30In view of the almost absolute nature of the privilege, competing interests are much less relevant, and indeed, as stated by Major J. in McClure, a balancing of interests is not appropriate. Solicitor-client privilege will almost invariably prevail over other interests. It is with that focus that I will analyze the issue before me, which is whether the admitted privilege has been waived either by implication or by partial disclosure.
31It is clear that the privilege is that of the client. It is for the client to waive the privilege, and no one else. Ordinarily, that requires a deliberate, conscious decision on the part of the client. In my view, anything that purports to be a waiver that does not involve a conscious, deliberate decision must be narrowly construed and applied.
32It is clear that a party may impliedly waive privilege where it has put reliance on legal advice in issue.
33The mere fact that a party’s state of mind is in issue is not sufficient. For example, merely alleging that the other party has acted in bad faith cannot defeat solicitor and client privilege: see Davies v. American Home Assurance Co. (2002), 2002 62442 (ON SCDC), 60 O.R. (3d) 512 (Div. Ct.). However, when a party directly raises the issue of reliance on legal advice as an explanation for his or her conduct or state of mind, privilege is impliedly waived: see R. v. Campbell, 1999 676 (SCC), [1999] 1 S.C.R. 565.
34The issue in this case is whether a litigant, having put its own state of mind in issue, has opened up an inquiry as to whether legal advice has affected that party’s state of mind, and if so, whether any privilege in legal advice has thereby been waived. In my view, the answer in most cases is no.
35Both counsel have advised me that there is no appellate authority on the point. However, there are a number of decisions of single judges and masters that address the issue.
36On one side, there are the decisions in Bank Leu AG; Roynat; Leigh Instruments; and Lloyds Bank Canada. On the other side are the decisions in Creative Career Systems, and Trillium Motor World. With one exception, I do not think the cases are as starkly different as they may appear to be.
37The main case relied on by the Leggat parties is Leigh Instruments, a decision of Winkler J., as he then was. In that case, one of the defendants had provided a series of “comfort letters” in support of a loan of $40.5 million. The Bank sued on the comfort letters and pleaded that it relied to its detriment on alleged representations and obligations in the comfort letters. The defendants, during the trial, sought disclosure of evidence as to the knowledge of the Bank’s legal department regarding comfort letters, and the legal advice offered by the legal department concerning comfort letters generally and those at issue in the lawsuit. The plaintiff claimed privilege. Winkler J. ordered that the information requested be disclosed. He ruled that privilege had impliedly been waived.
38At para. 51, Winkler J. stated:
Placing state of mind in issue will not amount to a waiver in every case. The guiding principles must be fairness and consistency. In a case where a party has placed its state of mind in issue, and has given evidence that it received legal advice which, in part, formed the basis of that state of mind, the distinction between state of mind and the legal advice giving rise to it cannot be maintained. [emphasis added]
39At para. 52 he stated:
In the present case, applying the test as enunciated by MacDonald J., the plaintiff has placed its state of mind in issue by pleading that it relied upon the defendant’s representations and conduct to its detriment, and has led evidence both that it consulted the legal department before doing so, and that it believed the comfort letter to be strong. The defendant Plessey and GEC assert, in paragraphs 51-52 and 48-49 of their respective statements of defence, that the plaintiff, and its legal department, were at all material times aware that letters of comfort, generally, and the Plessey letters in particular, did not constitute guarantees or contractual obligations to repay the indebtedness of Leigh. Here, as in Rogers, supra, a “significant legal decision” had been rendered during a material time period. It seems to me that, in all of these circumstances, it would be fundamentally unfair to permit the plaintiff to shield behind a claim of solicitor-client privilege, evidence of the knowledge and advice of the legal department in respect of the strength and enforceability of comfort letters. In the interest of fairness and consistency, any solicitor-client privilege in this respect must be deemed to have been waived. [emphasis added]
40In my view, Winkler J. did not hold that merely because the state of mind of a party has been placed in issue by that party, and that that party has received legal advice, it automatically results in a waiver of solicitor-client privilege.
41At para. 51 he was careful to say that it is only where a party has placed its state of mind in issue and has given evidence that it received legal advice which, in part, formed the basis of that state of mind, there can be said to have been a waiver of privilege. In the case before him, as reflected in para. 52, he was satisfied that the Bank had led evidence that it consulted its own legal department in coming to its conclusions as to the strength and reliability of comfort letters.
42At para. 48, Winkler J. referred with approval to Lloyds Bank Canada, supra. In that case, Van Camp J. held that the plaintiff had waived solicitor-client privilege by putting in issue its state of mind, namely, that it relied on representations made by the defendants. She held that the plaintiff had waived privilege insofar as it must divulge whether it had obtained legal advice before authorizing the loan based on the representations. In that respect, her analysis goes beyond that of Winkler J., who required that there be evidence that legal advice influenced the state of mind of the party whose state of mind was at issue. The case represents the high water mark on the side of the cases relied on by the Leggat parties.
43The main case on the other side of the issue is the decision of Perell J. in Creative Career Systems. In that case, the defendants refused to answer questions about what legal advice they had received with respect to the defendants’ dealings with the plaintiff. The defendants had pleaded that they acted in good faith in accordance with the law and pursuant to their statutory duties. A master of this court had ruled that the questions must be answered. Perell J. disagreed, and held that solicitor-client privilege had not been waived.
44Justice Perell’s reasoning is encapsulated in paragraphs 27-30 of his judgment:
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.
In Doman Forest Products Ltd. v. GMAC Commercial Credit Corp., 2004 BCCA 512, a case about whether privilege associated with legal advice had been waived, Justice Smith points out at para. 28 that it is not enough to constitute waiver that a pleading puts a party’s state of mind in issue and that its state of mind might have been influenced by legal advice, there must be the further element that the state of mind involves the party understanding its legal position in a way that is material to the lawsuit. In other words, the presence or absence of legal advice itself must be material to the claims or defence to the lawsuit. The materiality of the legal advice to the claims or defences in the law suit make questions about it relevant.
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 of absence of legal advice as a material element of his or her claim or defence. The waiver of privilege occurs when the party uses the receipt of legal advice as a material fact in his or her claim or defence. While the waiver is a deemed waiver, it requires the intentional act that the party makes legal advice an aspect of his or her case. In Simcoff v. Simcoff, 2009 MBCA 80, Justice Steel made the point neatly at para. 27, where she stated:
However, a mere reference to the receipt of legal advice does not constitute waiver. Waiver must involve something more. It requires not simply disclosing that legal advice was obtained, but pleading reliance on that advice for the resolution of an issue.
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]
45At para. 31, he referred to the judgment of Justice Corbett in Guelph (City) where Justice Corbett stated, at para. 87: “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.”
46Justice Perell’s conclusion is captured in para. 30 of his reasons, quoted above, where he sets out a two-part test that must be satisfied in order to conclude that privilege has been waived. The following must be shown:
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
the party who received the legal advice must make the receipt of it an issue in the claim or defence.
47I agree with and adopt Perell J.’s conclusion. To the extent that there is any difference between his analysis and the analysis in the cases relied on by the Leggat parties, I prefer the analysis of Justice Perell.
48In my view, there are good policy reasons for this conclusion. As noted earlier, solicitor-client privilege is of fundamental importance. Ordinarily, it can be waived only by a conscious, deliberate decision by the client. To the extent that the client can be said to have put his or her reliance on legal advice squarely in issue in litigation, it comes closest to the making of a conscious, deliberate decision to waive privilege. Anything beyond that, in my view, runs the risk that solicitor-client privilege may be lost inadvertently. For the reasons articulated by the Supreme Court of Canada in the cases to which I referred earlier, that is not in the public interest.
49In the case before me, it is clear that the Jennings parties have not made the receipt of legal advice an issue in the case. They have not pleaded that they relied on legal advice in deciding to do what they did. They say they relied on misrepresentations by the Leggat parties. If the Jennings parties relied on legal advice, it cannot be said that they have raised reliance on legal advice as an issue in the case.
50For these reasons, I conclude that solicitor-client privilege has not been waived by implication.
51I am also of the view that privilege has not been waived by partial disclosure.
52In Transamerica¸supra¸ Sharpe J. stated at para. 41:
It is plainly not the law that production of one document from a file waives the privilege attaching to other documents in the same file. It must be shown that without the additional documents, the document produced is somehow misleading.
53At para. 42, he stated:
The waiver rule must be applied if there is an indication that a party is attempting to take unfair advantage or present a misleading picture by selective disclosure. However, a party should not be penalized or inhibited from making the fullest possible disclosure. In my view, too ready application of the waiver rule will only serve to inhibit parties to litigation from making the fullest possible disclosure.
54In my view, by disclosing one email between Mr. Jennings and his lawyer, the Jennings parties are not attempting to take unfair advantage or present a misleading picture by selective disclosure. The Jennings parties have not sought to rely on one privileged document that assists them but resist the rest. The document produced does not assist the Jennings parties. It can hardly be said that they are making selective disclosure for their own advantage.
55It has not been shown, in my view, that by disclosing a single email the Jennings parties have waived privilege in all solicitor-client communications leading up the execution of the settlement agreement.
56For the foregoing reasons, the motion for the disclosure of the requested information and documents is dismissed.
57I will entertain brief written submissions with respect to costs, not to exceed three pages, together with a costs outline. Ms. McCulloch will have five days to file submissions and Mr. DiPucchio will have five days to respond. Ms. McCulloch will have three days to reply.
Gray J.
Released: January 12, 2015
Leggat v. Jennings, 2015 ONSC 237
COURT FILE NO.: 7135/12 AND 673/13
DATE: 2015-01-12
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
BRIAN LEGGAT and 1180330 ONTARIO INC.
Plaintiffs
– and –
KELLY JENNINGS, CRAIG BECK, 1393024 ONTARIO INC., 921384 ONTARIO INC. d.b.a. MIDLAND HONDA, POWERBAND GLOBAL INC., ELIZABETH JENNINGS, BRIANNE JENNINGS, COURTNEY JENNINGS, 2213922 ONTARIO INC. d.b.a. PENINSULA AUTOMOTIVE SALES & LEASING and 2415007 ONTARIO INC.
Defendants
AND BETWEEN
KELLY JENNINGS and 1393024 ONTARIO INC.
– and –
BRIAN LEGGAT, DOUG LEGGAT, 1180330 ONTARIO INC., 2095008 ONTARIO INC., 2155866 ONTARIO INC., FOUR WAYS INC. (F.K.A. 2064281 ONTARIO INC.), 952430 ONTARIO INC., 4061420 CANADA INC. and LEGGAT PONTIAC BUICK CADILLAC LIMITED
REASONS FOR JUDGMENT
GRAY J.
Released: January 12, 2015