CITATION: Milicevic v. T. Smith Engineering, 2016 ONSC 2166

COURT FILE NO.:CV-14-2472-00, CV-09-8428-00CL

DATE: 20160401

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: COURT FILE NO.: CV-14-2472-00 (Brampton)

MARKO MILICEVIC, ROCCO MAZZONE AND ROC ENGINEERING INC.

Plaintiffs

AND:

T. SMITH ENGINEERING INC., BUILDING FAILURES INC., TERRANCE DRISCOLL SMITH AND LINDA DI PAOLO SMITH

Defendants

BEFORE: Ricchetti, J.

COUNSEL: C. Tonks and E. Moore for the Plaintiffs

G. Stuart for the Defendants

HEARD: December 22, 2015

AND RE: COURT FILE NO. CV-09-8428-00CL (Toronto)

BETWEEN:

BUILDING FAILURES INC.

Plaintiff

AND:

1168812 ONTARIO INC., ROCHON ENGINEERING CORPORATION, MICHAEL ROCHON AND VINCENT ROCHON

Defendants

AND BETWEEN:

ROCHON ENGINEERING CORPORATION

Plaintiff by Counterclaim

-and-

BUILDING FAILURES INC., T. SMITH ENGINEERING INC., TERRY SMITH, MARKO MILICEVIC AND ROCCO MAZZONE

Defendants to Counterclaim

BEFORE: Ricchetti, J.

COUNSEL:

G. Stuart for Building Failures Inc., T. Smith Engineering Inc., Terry Smith, Defendants to the Counterclaim

Tyler McLean for Marko Milicevic and Rocco Mazzone, Defendants to Counterclaim

No one appearing for the remaining parties

HEARD: February 12, 2016

ENDORSEMENT ON MOTIONS

Contents

THE PARTIES. 5

OVERVIEW... 5

THE BACKGROUND.. 6

The BFI Toronto Action. 6

Milicevic and Mazzone Leave TSEI. 13

The Milicevic/ Mazzone Brampton Action. 13

THE MOTIONS. 14

The Motions in the Milicevic/Mazzone Brampton Action. 14

The Cross Motions in the Milicevic/Mazzone Brampton Action. 15

The Motion in the BFI Toronto Action and Rochon Counterclaim.. 16

Direction of Associate Chief Justice Marrocco. 17

PRELIMINARY COMMENTS ON THE MOTIONS. 17

The lack of specificity or identification of specific documents. 18

Speculation documents might be disclosed. 19

Tactical Reasons for the Motions. 19

THE REMOVAL OF MCLEAN.. 20

The Position Of The Parties. 20

The Law On Removal Of Counsel Of Record. 22

a) Counsel as a Potential Witness at trial 22

b) Counsel Possessing Confidential Information. 24

c) Counsel Previously Acted for the Opposing Party in the Same Proceeding. 25

d) Where Such Motions are brought for Tactical Reasons. 27

e) Delay in Bringing such Motions. 28

Analysis. 29

a) The “independence” of McLean. 29

b) “Manufacturing a conflict”. 30

c) The Author of the Conflict Opinion Letter 31

d) Possession of Property belonging to TSEI. 34

e) The quantum of legal fees claimed under the Indemnity Agreements. 35

Conclusion on the removal of McLean. 36

THE SMITH DEFENDANTS’ DOCUMENT MOTION.. 38

The Position Of The Parties. 38

Prospective Disclosure and Identifying the Documents Sought to be Protected. 38

The Claim of Privilege. 40

The Law.. 40

Analysis on the Privilege Claim Generally. 48

Analysis on the Privilege Claim: Exhibits “ii” to “nn” in the Smith Affidavit 49

The Claim the Deemed Undertaking Rule Applies. 50

The Law.. 50

Analysis Of Deemed Undertaking Rule Claim.. 51

The Claim the Protection Order Applies. 52

Privilege with Respect to the Conflict Opinion Letter 53

a) Is the Conflict Opinion Letter privileged?. 53

b) The background to the Conflict Opinion Letter?. 54

c) Should McLean be removed?. 56

Conclusion on the Conflict Opinion Letter 57

THE MILICEVIC/MAZZONE DOCUMENT MOTIONS. 57

a) Documents in the Smith Defendant’s Affidavit of Documents. 58

b) Documents retrieved by the Smith Defendants from the TSEI server 58

AMENDMENTS TO THE PLEADINGS. 61

The Position Of The Parties. 61

The Law.. 62

Analysis. 62

a) Withdrawal of Indemnity Claim in the Brampton Action. 62

b) The originally proposed cross-claim in the Toronto Action. 65

c) The Proposed Fresh as Amended Statement of Defence and Cross-claim.. 66

THE MOTION TO REMOVE RAPLEY.. 69

The Position Of The Parties. 69

Analysis. 70

a) execution of the Milicevic Indemnity Agreement 70

b) confidential information or documentation from Milicevic/Mazzone. 70

c) Rapley’s prior representation of Milicevic/Mazzone. 72

Conclusion On The Removal Of Rapley. 77

COSTS. 78

THE PARTIES

[1] Marko Milicevic is an engineer (Milicevic). Rocco Mazzone is an engineer (Mazzone). Mazzone is the principal of ROC Engineering Inc. For ease of reference, I will simply refer to Mazzone as meaning either or both Mazzone and ROC Engineering Inc.

[2] Terrance Driscoll Smith is an engineer (Smith). He is the principal of T. Smith Engineering Inc. (TSEI) and Building Failures Inc. (BFI). Linda Di Paolo Smith is Smith's wife.

[3] Rochon Engineering Inc. (Rochon) is an engineering firm. 1168812 Ontario Inc. is a related corporation to Rochon. Michael Rochon and Vincent Rochon are principals in Rochon.

OVERVIEW

[4] In 2009, after Smith, Milicevic and Mazzone left Rochon, litigation ensued with Rochon. For about three and a half years, these parties were jointly represented by the same counsel. Then in early 2014 disputes arose between Smith and Milicevic/Mazzone.

[5] In the middle of 2014, separate litigation was commenced by Milicevic/Mazzone against Smith and his related companies.

[6] As a result, issues have arisen with respect to the disclosure, use of documents over which there are claims of privilege and confidentiality and whether counsel of record should be removed.

THE BACKGROUND

[7] Prior to 2008, Milicevic/Mazzone were employees of Rochon. Smith was an independent contractor for Rochon, through BFI. Milicevic/Mazzone worked with Smith at Rochon.

[8] In 2008, Smith left Rochon to form TSEI. TSEI competes with Rochon. Milicevic/Mazzone, soon thereafter, left Rochon and joined TSEI.

The BFI Toronto Action

[9] In 2009, after Smith had left Rochon, BFI commenced an action in Toronto against Rochon and the related parties for alleged outstanding monies. This action is No. CV-0908428-00 CL (the BFI Toronto Action).

[10] Theall Group LLP (Theall) was retained to act on behalf of BFI in the BFI Toronto Action.

[11] Rochon counterclaimed for wrongful solicitation of clients, an accounting and various other claims arising from the alleged conduct of TSEI, BFI, Smith, Mazzone and Milicevic. TSEI, BFI, Smith, Milicevic and Mazzone are defendants to this counterclaim (“Rochon Counterclaim”).

[12] Smith, on behalf of himself, TSEI and BFI (the “Smith Defendants”) retained Theall to defend the Rochon Counterclaim.

[13] As defendants to the Rochon Counterclaim, Milicevic/Mazzone needed to retain counsel. Smith approached Milicevic/Mazzone with a view to having them retain Theall to defend the Rochon Counterclaim. Milicevic/Mazzone agreed. In the middle of 2010, separate indemnity agreements between BFI (the indemnifier) and Milicevic/Mazzone (the indemnified) were prepared and executed by each of Milicevic and Mazzone (the “Indemnity Agreements”).

[14] The Indemnity Agreements provided:

a) Milicevic/Mazzone would retain Theall to defend the Rochon Counterclaim;

b) Theall would take instructions from Smith on behalf of all defendants in the Rochon Counterclaim;

c) BFI would pay all legal accounts of Theall with respect to the Rochon Counterclaim. Mazzone and Milicevic would have no liability for Theall's accounts;

d) BFI would indemnify Mazzone/Milicevic against any damage award against them in the Rochon Counterclaim;

e) The Indemnity Agreement provided (quoted from the Mazzone Indemnity Agreement but the identical Milicevic Indemnity Agreement apparently could not be located but its existence is not an issue):

Mazzone shall have the right to employ separate counsel of his choosing, in addition to Theall Group LLP, in connection with the defence of the Counterclaim provided the fees and disbursement of such additional counsel shall be at Mazzone's expense unless any of the following applies, in which case the legal fees and disbursements of such additional counsel shall be paid by Building Failures Inc. on Mazzone's behalf: (1) the retention of such other counsel has been authorized by the Building Failures Inc.; (2) Building Failures Inc. has appointed counsel that is not satisfactory to Mazzone, acting reasonably; or (3) Mazzone obtains an opinion from independent counsel (which opinion shall be in writing and provided to Building Failures Inc.) that there is a conflict of interest between Mazzone and Building Failures Inc. such that Mazzone requires separate legal counsel.

(emphasis added)

[15] The Milicevic Indemnity Agreement remained missing until the same parties decided to re-execute it, on exactly the same terms, on February 10, 2014.

[16] Theall proceeded to defend the Rochon Counterclaim on behalf of all defendants. There was no cross-claim amongst the defendants to the Rochon Counterclaim. They had a common interest and took a common position.

[17] BFI paid Theall's legal fees and disbursements until early 2014.

[18] From time to time from 2012 until early 2014, Milicevic/Mazzone sought legal advice from Theall. Milicevic/Mazzone retained Tyler McLean at McLean & McLean LLP (McLean) to provide legal advice in “relation to their dealings with joint counsel” in the BFI Toronto Action and Rochon Counterclaim.

[19] From the date of Theall’s retainer and until early 2014, Milicevic/Mazzone had little knowledge of or involvement in the defence of the Rochon Counterclaim and no significant direct communications or dealings with Theall. Milicevic/Mazzone produced no documents for the Rochon Counterclaim. To use the words in Milicevic/Mazzone’s factum:

For the next THREE and a HALF YEARS the Employees [Milicevic/Mazzone] heard next to nothing from Theall Group or Terry Smith with respect to the within action [the BFI Toronto Action and Rochon Counterclaim]. Terry Smith would answer The Employees inquiries with respect to the litigation with responses such as, everything is fine, they got nothing on you and they keep delaying ...

As of January 30^th, 2014, the Employees only had a copy of the Counterclaim that included them, and their defence to the same. The Employees had no other documents from their lawyers or from Terry Smith...

[20] In early January 2014, Milicevic/Mazzone became aware that the examinations for discovery in the Rochon Counterclaim were scheduled for mid-2014. Milicevic/Mazzone became concerned that Smith, who was instructing Theall, was failing to consider their interests in defending the Rochon Counterclaim. On February 5, 2014, Mazzone wrote to Theall requesting a copy of the litigation file. Terry Smith immediately objected to them dealing with Theall directly noting that Theall was to take instructions from Smith.

[21] On February 10, 2014, the Smith Defendants decided to terminate Theall’s retainer and sought to retain Ms. Bawolska at Rapley & Company (Rapley).

[22] On February 10, 2014, a meeting took place at Rapley’s office with Ms. Bawolska, the Smith Defendants and Milicevic/Mazzone. During the February 10, 2014 meeting, Smith and Ms. Bawolska engaged in a private discussion. I do not accept the suggested “dark” nature of this private discussion. The nature of the discussion was disclosed in the affidavit of Ms. Bawolska’s affidavit. It related to the re-execution of the Milicevic Indemnity Agreement which is a non-issue in this case.

[23] Given that the Milicevic Indemnity Agreement had gone missing, another copy of the 2010 Indemnity Agreement was executed by BFI and Milicevic on February 10, 2014 during the meeting with Ms. Bawolska. Ms. Bawolska witnessed the execution of the replacement Milicevic Indemnity Agreement executed on the same terms as the original indemnity agreement of 2010. No one disputes that the indemnity agreement had been prepared and executed by BFI and Milicevic in 2010 when Theall was counsel. The first time that Ms. Bawolska saw the replacement indemnity agreement was on the same day as the meeting. I reject the suggestion that Ms. Bawolska provided any legal advice or “counselled” Milicevic to sign the replacement Indemnity Agreement. Ms. Bawolska’s role as a witness was to simply facilitate a re-execution of the 2010 indemnity agreement.

[24] Rapley provided a retainer agreement to Milicevic/Mazzone and asked them to execute it if they wished to retain Rapley to defend the Rochon Counterclaim. Milicevic/Mazzone signed the retainer agreement and returned it to Rapley. This retainer agreement provided that instructions and directions to Rapley would come from TSEI and Smith. The retainer agreement was executed by Milicevic/Mazzone on or about February 14, 2014.

[25] On or about February 16, 2014 Rapley became counsel of record for the Smith Defendants and Milicevic/Mazzone in the Rochon Counterclaim.

[26] Clearly, Milicevic/Mazzone had serious concerns regarding the use of joint counsel to defend the Rochon Counterclaim even though they retained Rapley as joint counsel. Shortly after Rapley was retained, Milicevic/Mazzone requested documentation from the litigation file from Ms. Bawolska. On March 2, 2014, Milicevic/Mazzone also asked Rapley to provide them with a response as to whether Rapley had a conflict between her clients. On March 2, 2014 Ms. Bawolska responded to Milicevic/Mazzone stating:

Rocco, Marko, I do not even have the file in my office yet!! I must say that this is a first for me, this level of suspicion and mistrust, and I hope we can move on and have a working relationship that is helpful for everyone. Please call me at any time to discuss this file, I will always be pleased to hear from you. If you cannot reach me, please contact my assistant Jessica Davis, whom I have copied on this e-mail.

If you have any concerns about conflicts, or if you consider me to be in a conflict of interest, this is an allegation against my professional ethics that I take extremely seriously. Please call me on Monday to discuss it further. If you wish to retain separate counsel to assist you with monitoring this file specifically with respect to the Counterclaim, or you have already done so, please advise immediately. You are of course entitled to do so, at your own expense.

Terry has instructed me to provide you, and I am more than willing to provide you, with information about this file with respect to the counterclaim against you. I have already asked you to come to my office as soon as the file arrives (I expect to have it on Monday) but as I understand it you have both declined. Please let me know if you change your mind and I will make the arrangements at a time convenient to you. I will make the Counterclaim file, and myself, available after office hours if you provide me with advance notice.

I am reluctant to provide you with any documents in this file until you provide me with details of where the physical contents (as well as any electronic copies) will be stored or whether you intend to share these with anyone. A potential breach of privilege has already occurred -I understand one of you sent an e-mail with respect to this file to my old law firm. This constitutes a breach of solicitor-client privilege that I trust will not happen again. Discussing this file or showing any documents to anyone outside of this e-mail list or formally retained on behalf of the plaintiff and defendants by counterclaim is serious, and could allow the Granite litigants access to all of our documents. I am sure Jeff Brown provided you with information on the potential consequences of such a breach, however if you have any questions about what you can and cannot do in order to preserve privilege, please call me immediately and I will be pleased to assist you. Once we have discussed how to best secure the information, I trust you will follow my direction in this regard when storing the file documents that are to be provided to you.

The allegations against you are contained in the Counterclaim. Please call me and let me know what else you require as far as details of the allegations against you.

Finally, to your question of what Terry and I discussed when we stepped out of the room for a moment. These few minutes appear to have become a sore point, and I regret this happened, although I am also surprised that you immediately assumed the conversation was against your interests. Please let me know the bases for your assumption – I hope it is not anything that I have done or said. Terry asked me whether it would be of assistance or effect for him to execute the previous indemnity agreement that had not been signed. We discussed it, he signed it, and we came back into the room and Terry handed it to you. If you had any concerns about this conversation, I would have expected you to ask me right away and I encourage you to do so in the future. If you have discussed this with anyone, and they counselled you to bring this issue up with me, please tell me right away and I will arrange for a meeting for all of us immediately so we can discuss the issue of privileged further.

With respect to the conversations Terry and I had prior to February 10, we discussed the allegations in general as set out in the pleadings, as well as the terms of my potential retainer. I did not review any documents. If you do not have a copy of the pleadings, let me know and I will provide them to you. You have a copy of the retainer agreement, which contains the terms of the agreement. If you have any specific questions, please call me so I may answer your questions.

I will let you know when the file arrives in my office.

(underlining emphasis added)

[27] Milicevic/Mazzone chose not to follow up with Ms. Bawolska’s offers to meet or obtain information or documentation from her. Except for the meeting on February 10, 2014, no other meetings took place between Milicevic/Mazzone and Ms. Bawolska. There is no evidence that Ms. Bawolska gave Milicevic/Mazzone any legal advice in connection with the BFI Toronto Action and Rochon Counterclaim. It appears that aside from retaining Rapley, Milicevic/Mazzone continued to try and obtain a copy of the entire litigation file. Milicevic/Mazzone continued to be question the advisability of joint counsel:

a) Because of the apparent refusal of Rapley and Smith to produce the entire litigation file in the BFI Toronto Action and the Rochon Counterclaim. Milicevic/Mazzone wanted the entire legal file including the BFI Toronto Action portion;

b) Because of Rapley’s alleged refusal to accept instructions from Milicevic/Mazzone; and

c) Because Rapley and Smith had had the private discussions but Smith had, for some time, refused to disclose those discussions with Milicevic/Mazzone.

[28] By March 3, 2014 Milicevic/Mazzone decided they would not continue with the joint Rapley retainer. As a result, Milicevic/Mazzone sought a legal opinion from Tyler McLean as to whether Milicevic/Mazzone were entitled to retain separate counsel and compel payment of their legal fees by BFI under the Indemnity Agreements.

[29] On March 17, 2014, McLean wrote an opinion letter, sent it to BFI, setting out in detail, the difficulties that Milicevic/Mazzone allegedly had with Theall and Rapley's representation in the BFI Toronto Action and Rochon Counterclaim (“Conflict Opinion Letter”). The Conflict Opinion Letter concluded:

We respect to the Indemnity Agreement, there is a real and subsisting conflict entitling Rocco & Marko to separate legal counsel, to be paid by Building Failures Inc.

[30] On March 21, 2014 Milicevic/Mazzone retained McLean to represent them in the Rochon Counterclaim.

[31] On March 26, 2014, Rapley, upon receipt of the entire litigation file from Theall (Joint Counsel Litigation File) delivered a copy to McLean. Shortly, thereafter, Milicevic/Mazzone learned, for the first time, that the Rochon Counterclaim had increased the damages claimed from $1,000,000 to $5,000,000 in October 2013 thereby increasing Milicevic/Mazzone’s potential liability. This confirmed their belief that their interests had not been and were not being adequately considered by Smith or joint counsel.

[32] When the Joint Counsel Litigation File was provided to McLean, Rapley requested that Milicevic/Mazzone confirm the documentation in the Joint Counsel Litigation File was subject to common interest privilege.

[33] A Protection Order was issued on December 5, 2013 in the BFI Toronto Action. Rapley also requested McLean to provide written confirmation the Protection Order would apply.

[34] These confirmations were not provided as requested. This led the Smith Defendants to be concerned that privileged and/or confidential documents would be disclosed by Milicevic/Mazzone without their consent and to their detriment.

Milicevic and Mazzone Leave TSEI

[35] In the middle of April 2014, Milicevic/Mazzone terminated their relationships with TSEI. Milicevic believed he was constructively dismissed by TSEI.

The Milicevic/ Mazzone Brampton Action

[36] On May 30, 2014, an action was commenced in Brampton by Mazzone/Milicevic against TSEI, BFI, Smith and Smith's wife. The proceeding is Action No. CV-14-2472-00 (the Milicevic/Mazzone Brampton Action). Counsel of record for Milicevic/Mazzone is McLean.

[37] Milicevic/Mazzone claim damages of approximately $6,000,000 for non-payment of salaries and bonuses by TSEI, Milicevic’s constructive dismissal claim, oppression, slander, and payment of $350,000 under the Indemnity Agreements for McLean’s estimated legal fees for defending the Rochon Counterclaim.

[38] A central issue in the Milicevic/Mazzone Brampton Action is the conduct of joint counsel defending the Rochon Counterclaim and the Indemnity Agreements. This issue figures prominently in the reasons for Milicevic/Mazzone's departure from TSEI and the basis of their various claims against the Smith Defendants in the Milicevic/Mazzone Brampton Action. For example, at paragraph 23 of the Statement of Claim in the Milicevic/Mazzone Brampton Action, Milicevic pleads that what transpired between Smith and Rapley led him to conclude he was constructively dismissed from TSEI. Milicevic claims this collapse of trust arose from the manner of Smith’s dealings with joint counsel and caused of the end of the employment relationship.

[39] TSEI, BFI, Smith and Smith's wife retained Turnpenney Milne LLP to defend the Milicevic/Mazzone Brampton Action. The Smith Defendants defend Milicevic/Mazzone claims which include challenging the validity and enforceability of the Indemnity Agreements.

[40] TSEI counterclaimed for breach of fiduciary duty and other claims arising from their contractual or employment relationships.

[41] Milicevic/Mazzone defend the Smith Defendant’s counterclaim on the basis they always acted in good faith towards TSEI and relied on the Conflict Opinion Letter.

THE MOTIONS

The Motions in the Milicevic/Mazzone Brampton Action

[42] TSEI, BFI, Smith and Smith's wife seek an order for the following:

a) Removal of McLean as counsel of record for Milicevic/Mazzone; and

b) Prohibiting Milicevic/Mazzone from relying on or introducing certain documents from the BFI Toronto Action and Rochon Counterclaim.

[43] Despite knowing that McLean was counsel of record for Milicevic/Mazzone in the Milicevic/Mazzone Brampton Action in May 2014, no immediate steps were taken by the Smith Defendants to object to or have McLean removed as counsel of record. Approximately, one year later, on May 19, 2015, counsel for the Smith Defendants wrote to McLean alleging a conflict and asked McLean to withdraw as solicitor of record in the Milicevic/Mazzone Brampton Action. McLean refused.

[44] On August 18, 2015, the Smith Defendants brought this motion to remove McLean as counsel of record in the Milicevic/Mazzone Brampton Action.

The Cross Motions in the Milicevic/Mazzone Brampton Action

[45] Milicevic/Mazzone's cross motion seeks:

a) An order permitting Milicevic/Mazzone to produce and rely upon documents produced on behalf of the Smith Defendants in the BFI Toronto Action and Rochon Counterclaim;

b) to amend the Statement of Claim in the Milicevic/Mazzone Brampton Action to remove the claim under the Indemnity Agreements for the estimated legal fees to defend the Rochon Counterclaim. As set out below, at the same time, Milicevic/Mazzone initially sought to amend their defence to the Rochon Counterclaim to advance the same indemnity claim (as well as other indemnity claims) in a cross-claim against the Smith Defendants.; and

c) the destruction of certain emails between McLean and Milicevic/Mazzone. In the Smith Defendant's affidavit in support of the motion in the Milicevic/Mazzone Brampton Action, the Smith Affidavit included a number of emails between Milicevic/Mazzone and their counsel, McLean dating back to 2012.

The Motion in the BFI Toronto Action and Rochon Counterclaim

[46] Shortly after the motion was brought in the Milicevic/Mazzone Brampton Action, Milicevic/Mazzone’s counsel sought to amend their Defence to Rochon Counterclaim to include a cross-claim for contribution and indemnity under the Indemnity Agreement and at common law against TSEI and BFI. This proposed cross-claim included the indemnification claim for any liability (in addition to legal costs) in the Rochon Counterclaim based on the Indemnity Agreements and under the common law of master servant. Smith's counsel refused to consent to this amendment.

[47] As a result, Milicevic/Mazzone 's counsel brought a motion in the BFI Toronto Action and Rochon Counterclaim seeking:

a) that Rapley be removed as counsel for the Smith Defendants on the basis that Rapley previously represented Milicevic/Mazzone in the same proceeding; and

b) an amendment to their pleading to make the proposed cross-claim.

[48] After the motion in the Brampton Action was heard, Milicevic/ Mazzone amended their notice of motion in the BFI Toronto Action and Rochon Counterclaim to seek to file a Fresh as Amended Statement of Defence and Cross-claim. This new proposed pleading deleted the cross-claim under the Indemnity Agreements but left the cross-claim for indemnification against TSEI under common law. However, due to inadvertence or deliberately, the relief in the new proposed pleading continues to include a claim for indemnification from BFI and TSEI from “any and all liability or expense incurred by or occasioned to them in their defence” of the Rochon Counterclaim.

Direction of Associate Chief Justice Marrocco

[49] It is difficult to deal with the issues in the Milicevic/Mazzone Brampton Action in isolation without considering the issues and impact on the BFI Toronto Action and Rochon Counterclaim.

[50] This raises the potential for inconsistent decisions on similar or identical issues. This is particularly so when the same claim was sought to be removed from the Milicevic/Mazzone Brampton Action and included in the BFI Toronto Action and Rochon Counterclaim.

[51] The Smith Defendants describe in their factum in the BFI Toronto Action and Rochon Counterclaim motion: “It is essential to consider both actions when determining the propriety of the proposed amendment in this action.” I agree.

[52] Given these circumstances, Associate Chief Justice Marrocco directed that I hear the motions in the BFI Toronto Action and Rochon Counterclaim and the Milicevic/Mazzone Brampton Action.

PRELIMINARY COMMENTS ON THE MOTIONS

[53] Let me make some comments regarding these motions.

The lack of specificity or identification of specific documents

[54] There is considerable difficulty with these motions where privilege or confidentiality is claimed or where an order is sought that “documents in an Affidavit of Documents” are producible and admissible, because there is no specific identification of documents or categories of documents.

[55] While I recognize that, in some cases, it might be counterproductive and time consuming to require a detailed listing of all alleged privileged and/or confidential documents or documents, the party seeking the order must do more than just point to a group of documents, suggest that the group of documents might contain privileged or confidential documents and seek an order which would have the effect of ruling that the entire group of documents are privileged and not producible. Similarly, a party cannot point to an Affidavit of Documents, alleged that the documents are relevant/ admissible and seek an order under Rule 30.1. 01(8) to all the documents in the Affidavit of Documents.

[56] There may be documents in the group of documents which are not privileged or where privilege has been waived. Similarly, some of the documents in the Affidavit of Documents may be privileged or not relevant.

[57] Issuing an order of general application (an order applicable to unspecified documents by list or by a specified category) would be inappropriate. Further, issuing such a “general order” will likely not end the matter as disputes will inevitably arise with respect to the application of the “general order” to specific documents.

Speculation documents might be disclosed

[58] Much of the Smith Defendant’s motion regarding privileged documents is based on speculation of potential future disclosure of privileged documentation by Milicevic/Mazzone. Yet, Milicevic/Mazzone deny that they will or intend to produce or rely on any privileged documents:

“The Plaintiffs claims do not rely on any of the documentation the Defendants are alleging violate the deemed undertaking rule or are subject to solicitor-client privilege. The facts upon which this Action are based were sufficiently known to Mazzone and Milicevic when it was commenced, and were not based on any information received from Smith, BFI, or TSEI in the BFI Claim or the Rochon Counterclaim.”

[59] It is unclear why the motion needs to be dealt with at this time before there is a threatened disclosure of privileged documents and before an order can be made specifying what documents can or cannot be disclosed or produced.

Tactical Reasons for the Motions

[60] To a very large degree, these motions have been brought for tactical reasons. For example, both groups seek to have the other’s counsel removed for differing reasons. Neither group has set out any evidence of real, serious or even tangible concerns as to how they would be prejudiced if counsel was not removed.

[61] Clearly, without any indication that there is, potentially will be or even theoretically will be prejudice or reasons to be concerned, these motions would appear to be brought for tactical reasons. One group brings a motion to remove counsel and the other party responds with a similar motion to remove their counsel. The tactical reasons are that a change of counsel will increase the costs of litigation to the party and will delay the proceedings.

[62] Motions brought solely or even primarily for tactical reasons ought to be discouraged by the courts. The cost of legal proceedings increase to the parties unnecessarily. Judicial resources are expended at the expense of delaying other proceedings from being tried on the merits or dealing with other motions.

[63] I echo the concerns expressed by Justice Spies in Montesano v. Montesano [2006] O.J. No. 2639 at para 33 (as affirmed at 2007 ONCA 177) and Justice Granger in Moffat v. Wetstein (1996) 29 O.R. (3d) 37 where Justice Granger stated:

Although it may appear obvious, where a motion is brought which appeals to the court's equitable discretion to remove a solicitor of record, the relief should only be granted where the motion has proceeded on the basis of a genuine concern with respect to the merits of the alleged conflict. In other words, where a motion to remove a solicitor of record is brought for the purpose of frustrating or delaying one's opponent or to otherwise secure a tactical advantage in the course of litigation, the motion should be dismissed.

THE REMOVAL OF MCLEAN

The Position Of The Parties

[64] The Smith Defendants submit McLean should be removed as counsel of record in the Milicevic/Mazzone Brampton Action because:

a) McLean provided legal advice prior to the Conflict Opinion Letter and this creates a lack of independence – “independent counsel” being a term used in the Indemnity Agreements;

b) McLean is now acting on behalf of Milicevic/ Mazzone in the Rochon Counterclaim because the Smith Defendants are concerned that McLean may have been "advising Messrs. Mazzone and Milicevic to manufacture a situation and alleged grievances that were designed to provide a foundation for the claim of constructive dismissal in this action, and related claims, and to allow them to leave their employment with TSEI with compensation and set up a competing business.";

c) The validity of the Conflict Legal Opinion is a significant issue at trial because of the claim for legal fees under the Indemnity Agreements;

d) McLean has possession of documentation which are privileged or in breach of the deemed undertaking rule; and

e) The Smith Defendants submit that Tyler McLean will have to testify at trial to establish the quantum of the damages under the Indemnity Agreements.

[65] In response, Milicevic/Mazzone submit the following:

a) They deny that Tyler McLean is a necessary witness. They state they will not call Tyler McLean as a witness at trial. Further, they submit that Tyler McLean will not necessarily be called as a witness by the Smith Defendants;

b) They submit that their proposed amendment to the Statement of Claim to remove the claim for legal costs under the Indemnity Agreements will eliminate any potential need for Tyler McLean to testify at the trial;

c) They deny that they “manufactured” a conflict of interest;

d) They submit that the Conflict Opinion Letter was properly given and triggers the indemnity under the Indemnity Agreements; and

e) They deny there has been any breach or use of privileged communications or a breach of the deemed undertaking rule.

The Law On Removal Of Counsel Of Record

[66] The courts have an inherent supervisory jurisdiction that extends to the removal of solicitors from the record. See MacDonald Estate v. Martin, at p. 1245 S.C.R. 1235.

[67] A court should be slow to interfere with the litigant's right to choose his or her own counsel. See Fraresso v. Wanczyk, [1995] B.C.J. No. 1046 (B.C. S.C.). When a litigant is deprived of the services of a lawyer whom he/she has chosen, there will be some hardship imposed on him/her. The imposition of such hardship can only be justified if it is done to prevent the imposition of a more serious injustice. It follows that the removal of counsel should be only to relieve the risk of real mischief and not a mere perception of mischief. Chapman v. 3M Canada Inc. (1995), 1995 CanLII 7128 (ON SC), 25 O.R. (3d) 658 (Ont. Gen. Div.).

[68] Removal of counsel can occur in a number of situations including:

a) where counsel is a potential witness at trial;

b) where counsel has confidential information relevant to the proceeding; or

c) where a current or former client is a party in the proceeding.

a) Counsel as a Potential Witness at trial

[69] Removal of counsel does not depend on whether the lawyer may be called as a witness but rather whether there is a real likelihood that counsel will be called as a witness at trial. See Graham v. Ontario, [2006] O.J. No. 763 (S.C.J.) at para 35.

[70] The rationale for the removal of counsel as witness was described in Rice v. Smith et al., 2013 ONSC 1200 where Justice Leach wrote:

[18] One specific conflict of interest concern, (identified by almost identical provisions and commentaries in the codes of professional conduct adopted by the Canadian Bar Association and the Law Society of Upper Canada), is addressed by the long-established prohibition on a lawyer simultaneously acting as counsel and witness. In particular, a “lawyer must not in effect become an unsworn witness or put the lawyer’s credibility in issue”, and the “lawyer who is a necessary witness should testify and entrust the conduct of the case to someone else”.[4]

[19] The particular conflict of interest prohibition dealing with “lawyer as witness” is intended to prevent the inevitable conflict of interest a lawyer otherwise would have between the duty owed to his or her client, and duties of independence otherwise owed to others, especially the Court.[5] In particular, lawyers are independent officers of the court, and a trial judge must be able to rely upon counsel for a high degree of objectivity and detachment. That fundamental relationship is compromised, and the administration of justice and integrity of the system accordingly are undermined, where the objectivity and credibility of counsel necessarily are subjected to challenge in the course of determining the substantive merits of an underlying dispute.[6]

[20] However, rather than approach the general “lawyer as witness” conflict of interest concern and prohibition as an absolute rule, our courts adopt a flexible approach and consider each case on its own merits, having regard to a variety of factors that, according to the circumstances of the case, may include the following:

a. the stage of the proceedings;

b. the likelihood that the witness will be called;

c. the good faith (or otherwise) of the party making the application;

d. the significance of the evidence to be led;

e. the impact of removing counsel on the party’s right to be represented by counsel of choice;

f. whether trial is by judge or jury;

g. the likelihood of a real conflict arising or that the evidence will be “tainted”;

h. who will call the witness; and

i. the connection or relationship between counsel, the prospective witness and the parties involved in the litigation.[7]

[21] The above principles focus on “lawyer as witness” conflict of interest concerns.

[22] More generally, however, lawyers must not place themselves in any situation, or act or continue to act in a matter, where there is or is likely to be a conflicting interest. This includes situations where a lawyer owes conflicting duties of representation and confidentiality to parties on both sides of a legal dispute.[8]

[23] Of course, there are many varied circumstances in which such concerns might arise.

[71] The principles involved in the removal of counsel as witness was recently summarized in Forsyth v. Blue Rock Wealth Management Inc., 2015 ONSC 6666:

THE TEST FOR REMOVAL OF A LAWYER OF RECORD

[31] The overriding test for removal of counsel of record has been stated as follows:

The test for the removal of a solicitor of record is whether a fair-minded and reasonably informed member of the public would conclude that the removal of counsel is necessary for the proper administration of justice.

[32] The right to counsel of choice absent a compelling reason is one of the key considerations:

[T]he plaintiff is entitled to be represented by counsel of its choice, absent a compelling reason to the contrary based on the public perception of the integrity of the administration of justice.

The courts must balance a party’s “right to select counsel of choice” with the “public interest in the administration of justice” and “basic principles of fundamental fairness”. A removal order should not be made “unless there are compelling reasons”.

[33] Lawyers cannot act as counsel in an action where they will appear as witness on a contentious matter. Acting in this dual role would put the lawyers' credibility in issue and would create a conflict between counsel and the justice system. It would create a conflict between counsel’s obligation of objectivity and detachment, which are owed to the court, and his obligation to his client to present evidence in as favourable a light as possible.[4] A “distinction must be drawn between the role of counsel as an independent officer of the court and the role of a witness whose objectivity and credibility are subject to challenge.”

[34] Courts however should remove a solicitor on this basis only in cases where it is clear the lawyer will likely be called to testify and should be reluctant to make premature orders in view of the waste of time and money and substantial delay which can result from a removal order. Where neither party has indicated a clear intention to call the lawyer as their witness, the motion to remove on that basis is premature, although the issue can be revisited should the likelihood of her testifying change. The court must carefully consider the right of a client to be represented by counsel of choice.

b) Counsel Possessing Confidential Information

[72] Where counsel has obtained privileged or confidential information of the opposing party, counsel will invariably be removed. As stated by the Supreme Court in MacDonald Estate at paragraph 47:

The second question is whether the confidential information will be misused. A lawyer who has relevant confidential information cannot act against his client or former client. In such a case the disqualification is automatic. No assurances or undertakings not to use the information will avail. The lawyer cannot compartmentalize his or her mind so as to screen out what has been gleaned from the client and what was acquired elsewhere. Furthermore, there would be a danger that the lawyer would avoid use of information acquired legitimately because it might be perceived to have come from the client. This would prevent the lawyer from adequately representing the new client. Moreover, the former client would feel at a disadvantage. Questions put in cross-examination about personal matters, for example, would create the uneasy feeling that they had their genesis in the previous relationship.

(emphasis added)

c) Counsel Previously Acted for the Opposing Party in the Same Proceeding

[73] Rule 2.04(4) (a) of The Rules of Professional Conduct of the Law Society of Upper Canada:

Rule 2.04 (4) A lawyer who has acted for a client in a matter shall not thereafter act against the client or against persons who were involved in or associated with the client in that matter

(a) in the same matter[.]

[74] However, the Rules are not binding on the courts. See Consulate Ventures Inc. v. Amico Contracting & Engineering (1992) Inc., 2010 ONCA 788 at para 24.

[75] At the core of this issue is a lawyer’s duty of loyalty not to act against a former client in the same proceeding. This duty of loyalty was described by the Court of Appeal in Consulate Ventures:

[22] Counsel submits that lawyers owe a duty of loyalty to their former clients. That duty is not premised on or confined to confidentiality obligations, but flows from a broader concept of fidelity that is essential to the proper functioning of the client/solicitor relationship. Clients must be able to speak frankly and without fear of exposure to their lawyers about their legal problems. To do so, clients must be confident that their lawyers will not become their adversaries’ lawyers at some subsequent point in the course of the same dispute. The prospect of one’s lawyer switching sides must undermine the confidence essential to the operation of the client/solicitor relationship. There is also concern that if lawyers act against former clients in the same manner, the public confidence in the integrity of the legal profession will suffer. That confidence is crucial to the effective and just administration of justice.

[31] Cromwell J.A. reviewed the case law, including Speid and the authoritative texts at length. He concluded that lawyers had a duty of loyalty to former clients that was rooted both in confidentiality concerns and the need to foster and maintain public confidence in the client/solicitor relationship and the due administration of justice. He said at para. 51:

This broader continuing duty of loyalty to former clients is based on the need to protect and promote public confidence in the legal profession and the administration of justice. What is of concern is the spectre of a lawyer attacking or undermining in a subsequent retainer the legal work which the lawyer did for the former client or of a lawyer effectively changing sides by taking an adversarial position against a former client with respect to a matter that was central to the previous retainer. [Emphasis added.]

[35] In his concurring judgment in MacDonald Estate, Cory J., at p. 1265, recognized that applications to disqualify lawyers require the court to balance the maintenance and integrity of the justice system, the rights of the litigants to counsel of choice, and the desirability of preserving mobility within the legal profession. He went on to say, at p. 1265: “Of these factors the most important and compelling is the preservation of the integrity of our system of justice.”

[36] I agree with the priority given to the preservation of the integrity of the process. In my view, that goal finds expression in the Rules of Professional Conduct cited above and in the controlling jurisprudence. ...

[76] Removing counsel in these circumstances is not automatic as the Smith Defendants submit. In Celanese Canada Inc. v. Murray Demolition Corp., Binnie J. held that a court should always consider a remedy short of removing counsel if it can “cure the problem” caused by disclosure of privileged documents. Binnie J. stated at para. 56:

I agree with the courts below that if a remedy short of removing the searching solicitors will cure the problem, it should be considered. As the intervener Canadian Bar Association ("CBA") puts it in its factum, the task "is to determine whether the integrity of the justice system, viewed objectively, requires removal of counsel in order to address the violation of privilege, or whether a less drastic remedy would be effective". The right of the plaintiff to continue to be represented by counsel of its choice is an important element of our adversarial system of litigation. In modern commercial litigation, mountains of paper are sometimes exchanged. Mistakes will be made. There is no such thing, in these circumstances, as automatic disqualification.

[77] In Stewart v. Humber River Regional Hospital, Goudge J.A. adopted a similar approach and held that counsel should not be removed if the integrity of the justice system can be protected with a remedy short of removal. He stated at para. 56:

Both MacDonald Estate and Celanese recognize that in cases like these the courts need to be concerned about the integrity of the administration of justice and the importance to it of solicitor-client privilege, but also of the right of litigants to select counsel of their choice. Celanese makes it clear that if the integrity of the justice system can be protected with a remedy short of removal, that lesser remedy should be employed.

[78] The ultimate goal of this court on such a motion, is to consider, in the circumstances of the case, the impact on and the balancing of:

a) the need to protect and promote public confidence in the legal profession and the justice system, and

b) the rights of litigants to counsel of choice

[79] When balancing these factors, the court must keep in mind the statement by Cory J. MacDonald Estate, at p. 1265, where he stated the court is required to balance the maintenance and integrity of the justice system, the rights of the litigants to counsel of choice, and the desirability of preserving mobility within the legal profession but went on to say at p. 1265: “Of these factors the most important and compelling is the preservation of the integrity of our system of justice.”

d) Where Such Motions are brought for Tactical Reasons

[80] Courts should be loath to permit party’s to remove the opposing party’s counsel of choice when such motions are brought predominantly or solely for the purpose of obtaining a tactical advantage in the proceeding. This is a factor, albeit not determinative, which weighs in favour of not removing the lawyer. In Amcan Consolidated Technologies Corp. v. Connell Limited Partnership, [2001] O.J. 3213 (SCJ) Campbell J. had the following to say about such motions:

[58] On the other hand, a strategic disqualification of counsel of choice to a client should not be easily countenanced under a colour of a solicitor/client relationship which does not involve the potential for misuse when there is no confidential information involved. The reliance by Wabash on Amcan and its patent attorney was in these circumstances limited. To deprive Amcan at this stage of reliance on Mr. Milne and his firm in further preparation in connection with the action would appear to be more strategic than involve the "appearance of impropriety."

[81] A similar statement was made by Granger J. in Moffat v. Wetstein, (1996) 29 O.R. (3d) 37 (Gen. Div.) at para 32

The Tactical Nature of Conflict Motions

Although it may appear obvious, where a motion is brought which appeals to the court's equitable discretion to remove a solicitor of record, the relief should only be granted where the motion has proceeded on the basis of a genuine concern with respect to the merits of the alleged conflict. In other words, where a motion to remove a solicitor of record is brought for the purpose of frustrating or delaying one's opponent or to otherwise secure a tactical advantage in the course of litigation, the motion should be dismissed.

Again, while that may appear "obvious", recent cases have expressly endorsed that principle. For example, in Manville Canada Inc. v. Ladner Downs, supra, after concluding that there was no conflict of interest in the matter before him, Esson C.J.S.C. stated, at p. 224:

Until very recently, applications to remove lawyers were so rare an event that, at least in this jurisdiction, few judges or lawyers seemed to be more than vaguely aware that such a remedy existed. Nor, so far as I am aware, was there any general feeling of discontent on the part of the public arising from the possibility of conflict. But there was and is a rising tide of discontent with the length, complexity and cost of proceedings. Since MacDonald Estate v. Martin, the application to disqualify has become a growth area as it began to do 20 or so years ago in the United States where it seems to have reached the stage of being a common feature of major litigation. No doubt, some of those applications are brought to prevent a risk of real mischief. But can there be any doubt that many are brought simply because an application to disqualify has become a weapon which can be used, amongst many others, to discomfit the opposite party by adding to the length, cost and agony of litigation. If that becomes a regular feature of our litigation it would not likely do much to improve the profession's standards in an area in which there seem to have been few serious problems. But it could do much to further reduce the court's ability to get judgment in a timely way.

In Rayner v. Enright (1993), 1993 CanLII 8761 (SK QB), 20 C.P.C. (3d) 269 (Sask. Q.B.), Kyle J. expressed a similar concern stating at p. 271:

Concerns have been expressed that motions such as these have become a standard tactic in litigation in recent years. The courts must be vigilant to confine the principle to those cases where a litigant's interests are threatened or at least reasonably appear to be threatened as any expansion of the principle beyond the present guidelines will make the delivery of legal services to the public by law firms of large or medium size extremely difficult. Such is not a concern only for the lawyers, the expense and inconvenience to a litigant required to obtain new counsel cannot be overlooked in assessing the impact of judicial decisions in this area.

Essentially, commentary such as this reaffirms the fundamental principle that a party's choice of counsel should not be interfered with by the courts unless there is a compelling reason to do so. Certainly, the real possibility that the solicitor knows of relevant confidential information of an adverse party which was disclosed to him on a prior retainer is a compelling reason.

e) Delay in Bringing such Motions

[82] Delay in bringing motions to remove counsel is also a factor to be considered in the exercise of the court’s discretion. While it is a relevant factor, it is not necessarily determinative of the issues on the motion.

[83] It is important to examine the delay in the context of the proceedings to determine the weight to be given to this factor. In Ramsbottom v. Morning (1991), 48 C.P.C. (2d) 177 (Ont. Gen. Div.), Hawkins J. dismissing the motion, stated, at p. 179:

The recent Supreme Court of Canada decision, McDonald Estate v. Martin, December 20, 1990 [since reported 1990 CanLII 32 (SCC), 48 C.P.C. (3d) 113, [1991] 1 W.W.R. 705, 70 Man. R. (2d) 241, 121 N.R. 1, 77 D.L.R. (4th) 249], rejects the "probability of real mischief" test in favour of the higher standard of "possibility of real mischief". If there were no other considerations I would have no hesitation in granting the relief sought. However, there is another consideration and that is the question of delay. The third-party notice was delivered shortly after July 15, 1988. The present motion was launched July 9, 1990, almost 2 years later. There is no explanation for that delay. Even if the discovery by GO transit in June of 1989 of the possession by Fireman and Co. of the vehicle reports is taken as a starting point, there is no satisfactory explanation for the delay of over 1 year between that event and the bringing of the present motion. The interests of the defendant are entitled to some consideration and it would be unfair at this late date to require the defendant to give up the solicitors of its choice when the conflict has been apparent for all to see for over 2 years.

Analysis

a) The “independence” of McLean

[84] The Indemnity Agreements require that the legal opinion of a conflict be provided by “independent” counsel to establish BFI’s obligation to indemnify Milicevic/Mazzone for legal fees. The Indemnity Agreement does not define who or what constitutes “independent” counsel. It might be interpreted to be counsel other than the joint counsel. It might be interpreted to mean counsel that had no prior dealings with any of the parties. If necessary, the trial judge will have to interpret the word “independent” in the Indemnity Agreements.

[85] The Smith Defendants submit that, because McLean provided legal advice to Milicevic/Mazzone for several years prior to March 2014, McLean was not “independent” capable of providing the required opinion on conflict of interest under the Indemnity Agreements.

[86] There is no evidence that, prior to the Conflict Opinion Letter; McLean provided any legal advice to Milicevic/Mazzone regarding the merits of the Rochon Counterclaim. The evidence shows that prior to the Conflict Opinion Letter, McLean had little information or documentations regarding the BFI Toronto Action and Rochon Counterclaim. Milicevic/Mazzone’s uncontradicted evidence was that they had virtually no discussions or involvement with either Smith or Theall regarding the BFI Toronto Action and Rochon Counterclaim prior to early 2014. Without any information or documentation and there being no evidence that McLean provided any legal advice with respect to the merits of the Rochon Counterclaim, there appears to be, on the record before me, little substance to the Smith Defendant’s claim that McLean was not “independent” counsel because of McLean’s prior limited retainer with Milicevic/Mazzone.

[87] I am not persuaded that McLean’s limited involvement and advice to Milicevic/Mazzone prior to the Conflict Opinion Letter are grounds to remove McLean as counsel of record in this proceeding.

b) “Manufacturing a conflict”

[88] Smith expresses his “belief” that McLean was involved with Milicevic/Mazzone in “manufacturing” the conflict of interest set out in the Conflict Opinion Letter. The very speculative nature and lack of any evidentiary basis for this allegation is set out in the Smith Defendant’s factum:

“The timing of these emails, and the events that unfolded since that time, caused Mr. Smith to infer that Mr. Milicevic was obtaining advice from Mr. McLean as to how to manufacture a “conflict” within the terms of the Indemnity Agreement...”.

(emphasis added)

[89] There is no evidence that Milicevic/Mazzone “manufactured” a conflict so that they could retain McLean as counsel in the Rochon Counterclaim and have BFI pay McLean’s legal fees under the Indemnity Agreements.

[90] Moreover, the allegation of “manufacturing” a conflict by McLean to obtain a legal brief paid by a third party is a very serious allegation against a lawyer. The speculative nature of this serious allegation was described by the Smith Defendants in their factum as follows:

Mr. McLean had a clear self interest in arranging a situation wherein the Plaintiffs would end their relationship with joint counsel and retain him separately.

[91] There is no evidence of any such improper motivation on the part of McLean.

[92] McLean’s prior advice to Milicevic/Mazzone as to what information and documentation they were entitled to from joint counsel, Theall and later Rapley, was not participation in “manufacturing a conflict”. Providing a legal opinion as to whether there was a conflict of interest between Milicevic/Mazzone and the Smith Defendants was not manufacturing a conflict. The real issue is whether there was, in fact and law, a conflict of interest between Milicevic/Mazzone and the Smith Defendants.

[93] Given the total absence of evidence put forward by the Smith Defendants on this issue, this issue does not provide any basis for the removal of McLean as counsel of record.

c) The Author of the Conflict Opinion Letter

[94] The Conflict Opinion Letter does not deal with the merits of the BFI Toronto Action and Rochon Counterclaim. The essence of the Conflict Opinion Letter was the refusal or failure of Theall (and later Rapley) to respond to the Milicevic/Mazzone requests for information and documentation and the failure to take instructions from Milicevic/Mazzone. See page 10 of the Conflict Opinion Letter. Many of the facts forming the basis of the Conflict Opinion Letter were documented in the written communications between Milicevic/Mazzone and joint counsel. These facts are not in dispute.

[95] That leaves one real issue for consideration – the legal opinion whether, the facts set out in the documentation, created a legal conflict of interest between Milicevic/Mazzone and the Smith Defendants.

[96] The Smith Defendants, in their factum, submit that:

“the validity of the Plaintiffs’ position that the Indemnity Agreement was breached turns on the opinion provided by Mr. McLean, purporting to act as independent counsel, although he had advised them before and had a personal interest in breaking down the relationship with joint counsel.”

[97] There are two possible interpretations of the Indemnity Agreements:

a) “Obtaining” a legal opinion of a conflict of interest from independent counsel is sufficient to establish the liability to indemnify Milicevic/Mazzone under the Indemnity Agreements; OR

b) There is a “valid and legal conflict of interest” between the Smith Defendants and Milicevic/Mazzone in the BFI Toronto Action and Rochon Counterclaim.

i) “obtaining” a legal opinion that there is a conflict of interest

[98] If all that is required is that Milicevic/Mazzone “obtain” an opinion that there is a conflict of interest, there is no need for Tyler McLean to give evidence at trial.

ii) there is a “valid and legal conflict of interest”

[99] The Smith Defendants dispute that a “valid and legal conflict of interest” existed between them and Milicevic/Mazzone. In other words, they dispute the correctness of McLean’s legal opinion. That is the essence of the Smith Defendant’s position.

[100] In this interpretation, a determination whether there existed a conflict of interest will be dependent on all the facts (not necessarily just those set out in the Conflict Opinion Letter) and the legal determination whether there was a conflict of interest by the trial judge.

[101] In this scenario, it is difficult to understand why McLean’s opinion is relevant to the judge’s determination of whether a conflict existed in law. The fact McLean gave such an opinion doesn’t mean it was correct. It doesn’t mean it was wrong. In many cases, litigation counsel gives a client an opinion on the merits of the litigation. That opinion is not relevant or admissible at trial. The court makes that legal determination from the evidence adduced at trial and the application of the law.

[102] In my view, if this interpretation is the correct interpretation, it will be necessary for the court to hear evidence on the dealings between Milicevic/Mazzone and the joint counsel. Much of that is in writing and set forth in the Conflict Opinion Letter. This evidence can be given, based on personal knowledge by Milicevic/Mazzone. This interpretation does not require Tyler McLean to give evidence based on hearsay from Milicevic/Mazzone as to their dealings with joint counsel or Tyler McLean’s legal opinion. The factual basis for the opinion will be established by Milicevic/Mazzone. Once the court has that factual evidence before it, the rest is legal argument as to whether, on the facts, there is a valid and legal conflict of interest.

[103] I am not persuaded that Tyler McLean’s evidence regarding the Conflict Opinion Letter is likely to be relevant or material at trial and is not a basis for the removal of McLean.

d) Possession of Property belonging to TSEI

[104] The Smith Defendants have included in their counterclaim, allegations that Milicevic/Mazzone “misappropriated or unlawfully retained property belonging to TSEI”. The Smith Defendants submit that, given these allegations and McLean’s advice throughout, McLean “has material information with respect to these events, which is subject to privilege.”

[105] Milicevic/Mazzone deny this.

[106] The Smith Defendants do not provide specifics regarding what “property” or “material information” they are referring to. Given that Milicevic/Mazzone have set out in their affidavit that they had virtually no information or documentation regarding the BFI Toronto Action and Rochon Counterclaim until early 2014, the Smith Defendants can only be referring to the documentation in the Joint Counsel Litigation File received by McLean.

[107] For the reasons set out below, any privileged documents in the Joint Counsel Litigation File would be subject to common litigation privilege. However, such privileged documents may be produced and used in the Milicevic/Mazzone Brampton Action because it is a proceeding essentially between the same parties entitled to claim the common litigation privilege. Possessing common law privilege documents is not a basis for the removal of McLean.

[108] For the reasons set out below, the deemed undertaking rule does not apply to the produced documents which Milicevic/Mazzone received in the Joint Counsel Litigation File.

[109] I see no merit in this submission favoring the removal of McLean as counsel of record.

e) The quantum of legal fees claimed under the Indemnity Agreements

[110] The Smith Defendants submit that Tyler McLean will have to testify at trial to establish the quantum of the legal fees recoverable under the Indemnity Agreements.

[111] Milicevic/Mazzone submit this will not be an issue if this court permits its amendment to delete their claim for legal fees under the Indemnity Agreements. For the reasons set out below, leave is denied to amend Milicevic/Mazzone’s Statement of Claim to delete this claim. As a result, this submission does not assist Milicevic/Mazzone.

[112] Milicevic/Mazzone deny they intend to call Tyler McLean as a witness to prove the quantum of his fees claimed under the Indemnity Agreements.

[113] If successful on their claim, Milicevic/Mazzone will have to prove the quantum of reasonable legal fees incurred in defending the BFI Toronto Action and Rochon Counterclaim.

[114] The real question is whether Tyler McLean’s evidence on the quantum of legal costs will be necessary or material at trial.

[115] The quantum of the indemnification, if Milicevic/Mazzone are successful, is a matter of the assessment of legal costs. Perhaps, the issue of quantum of legal costs can be dealt with by Milicevic/Mazzone’s evidence as to the fees actually incurred by tendering their legal invoices from McLean. Another possible process would be that the legal costs be assessed by the trial judge after liability is established, making Tyler McLean’s evidence during the liability portion of the trial unnecessary. Yet another option would be for the trial judge, if Milicevic/Mazzone are successful, to determine what level of costs they are entitled to recover and order that the costs be assessed by an Assessment Officer. Any of these options would eliminate any potential for Tyler McLean to give evidence on this issue at trial. I am not persuaded that Tyler McLean’s evidence is at trial is of such significance in favour of the removal of McLean as counsel of record.

[116] In conclusion, I do not see a costs assessment as a serious issue requiring the removal of McLean as counsel of record.

Conclusion on the removal of McLean

[117] Considering the above, the following factors persuade me not to exercise my discretion to remove McLean as counsel of record in the Milicevic/Mazzone Brampton Action:

a) This is a judge alone trial;

b) The issue of the quantum of legal fees payable under the Indemnity Agreements (if liability is found) is not so significant a trial issue to be supportive of the removal of McLean as counsel of record;

c) There was considerable delay in bringing this motion by the Smith Defendants after they knew that McLean was acting on behalf of Milicevic/Mazzone in the Milicevic/Mazzone Brampton Action. The reason for the delay has not been explained by the Smith Defendants;

d) Given McLean’s involvement in the action since March 2014, the removal of McLean as counsel of record, would be prejudicial to Milicevic/Mazzone’s right to counsel of choice;

e) Removal of McLean would delay the Milicevic/Mazzone Brampton Action and significantly increase the legal costs to Milicevic/ Mazzone, due to the need to retain new counsel;

f) There has been no specific evidence of any demonstrable, real or potential prejudice to the Smith Defendants if McLean were permitted to continue on this brief. Much of the Smith Defendant’s concerns are nothing but bald statements of belief or concern of potential prejudice of McLean’s continued retainer;

g) For the reasons set out above, this motion was brought for tactical reasons;

h) the Smith Defendants’ concerns regarding McLean’s possession of the privileged/confidential documents from the Joint Counsel Brief are dealt with below. The documents in the Joint Counsel Litigation File are not privileged in the Milicevic/Mazzone Brampton Action and do not raise any basis for McLean’s removal as counsel of record. There are no other specific documents or information which the Smith Defendants have put forward to support their position; and

i) I note that the Smith Defendants do not seek to remove McLean as counsel of record for Milicevic/Mazzone in the Rochon Counterclaim despite the fact McLean has acted for Milicevic/Mazzone in that proceeding for almost 2 years. I fail to see how McLean would be in a position to be removed in the Brampton action but not be a concern for the Smith Defendants in the Toronto action.

THE SMITH DEFENDANTS’ DOCUMENT MOTION

The Position Of The Parties

[118] As described above, Milicevic/Mazzone had no documents except pleadings in the BFI Toronto Action and Rochon Counterclaim until early 2014. There is no evidence McLean was provided any documents relating to the BFI Toronto Action or Rochon Counterclaim until he was provided with a copy of the Joint Counsel Litigation File.

[119] The Smith Defendants submit that documents from the Joint Counsel Litigation File are necessary and will inevitably be necessary to be produced and relied on by Milicevic/Mazzone in the Brampton Action.

[120] The Smith Defendants seek to prevent Milicevic/Mazzone’s use of the documents in the Joint Counsel Litigation File on a variety of grounds – privilege, deemed undertaking, and the Protection Order.

[121] Milicevic/Mazzone deny that they need to or will produce any “privileged” documents, deny that they have or will breach any deemed undertaking rule or the Protection Order.

Prospective Disclosure and Identifying the Documents Sought to be Protected

[122] The Smith Defendants submit that the “privileged documents will be essential to the adjudication of this action” and, therefore, seek an order prohibiting the use of these “privileged documents” or documents subject to the deemed undertaking rule.

[123] The Smith Defendants submit the facts “raise a reasonable concern by the Moving Parties that the Plaintiffs have not preserved or will not preserve”:

• the privileged documents;

• the documents subject to the deemed undertaking; or

• the documents subject to the Protection Order.

[124] However, the Smith Defendants fail to identify (either in a general manner by specific categories or a detailed document by document manner) specific documents which they allege are subject to exclusion, which are of concern to them and which they seek a non-production order of this court. The Smith Defendants simply say “including all documents and information protected by....”

[125] It is also important to note that the Smith Defendants are concerned regarding the prospective disclosure of documents. Except in two categories (the TSEI documents and exhibits in Smith’s affidavit) there has been no disclosure or threatened disclosure of the documents sought to be protected. There is only concern of possible future disclosure.

[126] In my view, the court should not issue an order unless:

a) The party seeking the order identifies the documents with a degree of specificity, whether it be a detailed description of each document or a specific description of the type, category or subject matter of the documents sought to be protected so that subsequently there can be a clear identification as to whether the order applies to a specific document;

b) there has been disclosure or threatened disclosure of the documents or type of documents sought to be protected;

c) the court is able to determine that the documents or types of documents sought to be protected are subject to legal protection because they are privileged, subject to the deemed undertaking rule, or subject to a court protection order; and

d) The legal protection of the document(s) sought to be protected has not been lost or waived. For example: the privilege was waived by the client; an exception to the deemed undertaking rule applies; or while subject to common interest privilege against third parties, the documents sought to be protected are sought to be used in a proceeding between the clients who are entitled to maintain the privilege.

[127] In this case, the Smith Defendants have not identified the type or subject matter, either specifically or by category, of the documents sought to be protected.

The Claim of Privilege

The Law

a) Solicitor-client privilege

[128] The classic solicitor-client privilege statement is found in J. H. Wigmore, Evidence in Trials at Common Law, ed. by J. T. McNaughton (Boston: Little, Brown, 1961) vol. 8 at 27:

Where legal advice of any kind is sought from a professional legal advisor in his capacity as such, the communications relating to the purpose made in confidence by the client are at his instance permanently protected from disclosures by himself or by the legal advisor, except the privilege be waived?

The rationale for solicitor-client privilege is to allow the client and his or her lawyer to communicate in confidence. It does not extend beyond communications made for the purpose of giving and receiving legal advice to all information relevant to a legal problem.

[129] In Solosky v. The Queen, 1979 CanLII 9 (SCC), [1980] 1 S.C.R. 821, repeated in Pritchard v. Ontario (Human Rights Commission), 2004 SCC 31, [2004] 1 S.C.R. 809, the Supreme Court described the criteria for establishing solicitor-client privilege as follows:

[15] Dickson J. outlined the required criteria to establish solicitor-client privilege in Solosky v. The Queen, 1979 CanLII 9 (SCC), [1980] 1 S.C.R. 821, at p. 837, as: “(i) a communication between solicitor and client; (ii) which entails the seeking or giving of legal advice; and (iii) which is intended to be confidential by the parties”. Though at one time restricted to communications exchanged in the course of litigation, the privilege has been extended to cover any consultation for legal advice, whether litigious or not: see Solosky, at p. 834.

[16] Generally, solicitor-client privilege will apply as long as the communication falls within the usual and ordinary scope of the professional relationship. The privilege, once established, is considerably broad and all-encompassing. In Descôteaux v. Mierzwinski, 1982 CanLII 22 (SCC), [1982] 1 S.C.R. 860, the scope of the privilege was described, at p. 893, as attaching “to all communications made within the framework of the solicitor-client relationship, which arises as soon as the potential client takes the first steps, and consequently even before the formal retainer is established”. The scope of the privilege does not extend to communications: (1) where legal advice is not sought or offered; (2) where it is not intended to be confidential; or (3) that have the purpose of furthering unlawful conduct: see Solosky, supra, at p. 835.

[130] Once solicitor-client privilege is established, its application is very broad and not strictly limited to the “legal advice” provided by counsel. See Currie v. Symcor Inc. (2008), 2008 CanLII 37901 (ON SCDC), 244 O.A.C. 3 (Div. Ct.), at para. 46. However, the application of the “broad” protection of communications must be carefully scrutinized and does have limits. Solicitor-client privilege does not extend to communications:

(1) where legal advice is not sought or offered;

(2) where the communications are not intended to be confidential; or

(3) that have the purpose of furthering unlawful conduct.

b) Litigation Privilege

[131] There is a distinction between solicitor client privilege and litigation privilege. The distinction between solicitor-client privilege and litigation privilege was described in Chrusz, at pp. 330-31:

R.J. Sharpe, prior to his judicial appointment, published a thoughtful lecture on this subject, entitled "Claiming Privilege in the Discovery Process" in Law in Transition: Evidence, L.S.U.C. Special Lectures (Toronto: De Boo, 1984) at p. 163. He stated at pp. 164-65:

It is crucially important to distinguish litigation privilege from solicitor-client privilege. There are, I suggest, at least three important differences between the two. First, solicitor-client privilege applies only to confidential communications between the client and his solicitor. Litigation privilege, on the other hand, applies to communications of a non-confidential nature between the solicitor and third parties and even includes material of a non-communicative nature. Secondly, solicitor-client privilege exists any time a client seeks legal advice from his solicitor whether or not litigation is involved. Litigation privilege, on the other hand, applies only in the context of litigation itself. Thirdly, and most important, the rationale for solicitor-client privilege is very different from that which underlies litigation privilege. This difference merits close attention. The interest which underlies the protection accorded communications between a client and a solicitor from disclosure is the interest of all citizens to have full and ready access to legal advice. If an individual cannot confide in a solicitor knowing that what is said will not be revealed, it will be difficult, if not impossible, for that individual to obtain proper candid legal advice.

Litigation privilege, on the other hand, is geared directly to the process of litigation. Its purpose is not explained adequately by the protection afforded lawyer-client communications deemed necessary to allow clients to obtain legal advice, the interest protected by solicitor-client privilege. Its purpose is more particularly related to the needs of the adversarial trial process. Litigation privilege is based upon the need for a protected area to facilitate investigation and preparation of a case for trial by the adversarial advocate. In other words, litigation privilege aims to facilitate a process (namely, the adversary process), while solicitor-client privilege aims to protect a relationship (namely, the confidential relationship between a lawyer and a client).

Rationale for Litigation Privilege

Relating litigation privilege to the needs of the adversary process is necessary to arrive at an understanding of its content and effect. The effect of a rule of privilege is to shut out the truth, but the process which litigation privilege is aimed to protect -- the adversary process -- among other things, attempts to get at the truth. There are, then, competing interests to be considered when a claim of litigation privilege is asserted; there is a need for a zone of privacy to facilitate adversarial preparation; there is also the need for disclosure to foster fair trial.

[132] This commentary was approved by the Supreme Court in Blank, at para. 28.

[133] It is clear that, for there to be litigation privilege, the dominant purpose of the communication must be to “facilitate investigation and preparation of a case for trial by the adversarial advocate”: Sharpe, at p. 165; Blank, at paras. 59 and 60:

The question has arisen whether the litigation privilege should attach to documents created for the substantial purpose of litigation, the dominant purpose of litigation or the sole purpose of litigation. The dominant purpose test was chosen from this spectrum by the House of Lords in Waugh v. British Railways Board, [1979] 2 All E.R. 1169. It has been adopted in this country as well: Davies v. Harrington reflex, (1980), 1980 CanLII 2719 (NS SC), 115 D.L.R. (3d) 347 (N.S.C.A.); Voth Bros. Construction (1974) Ltd. v. North Vancouver School District No. 44 Board of School Trustees (1981), 1981 CanLII 506 (BC CA), 29 B.C.L.R. 114 (C.A.); McCaig v. Trentowsky reflex, (1983), 1983 CanLII 3070 (NB CA), 148 D.L.R. (3d) 724 (N.B.C.A.); Nova, an Alberta Corporation v. Guelph Engineering Co. (1984), 1984 ABCA 38, 5 D.L.R. (4th) 755 (Alta. C.A.); Ed Miller Sales & Rentals; Chrusz; Lifford; Mitsui; College of Physicians; Gower.

I see no reason to depart from the dominant purpose test.

c) Common Interest Privilege

[134] Where multiple parties have a common purpose in litigation, the law has developed the “common purpose or common interest privilege”. In Chruz, supra, Blair J.A. stated the following:

43 While solicitor-client privilege stands against the world, litigation privilege is a protection only against the adversary, and only until termination of the litigation. It may not be inconsistent with litigation privilege vis-à-vis the adversary to communicate with an outsider, without creating a waiver, but a document in the hand of an outsider will only be protected by a privilege if there is a common interest in litigation or its prospect.

[135] The application of the doctrine was summarized by Cumming J. in CC&L Dedicated Enterprise Fund (Trustee of) v. Fisherman, [2001] O.J. No. 637 (Sup.Ct.):

Privilege applies where parties with a common interest in anticipated litigation exchange facts, advice or other information regarding the litigation.

[136] Common interest privilege applies to both communications which are subject to litigation privilege and/or solicitor-client communication privilege.

[137] The party claiming the common interest privilege must show in relation to the communication:

a) That the communication is subject to solicitor client privilege or litigation privilege;

b) That the party with whom the communication was shared with or originated from, has a common objective or interest with the party who has solicitor client privilege over the communication; and

c) the privilege has not been lost through waiver, disclosure or otherwise at law by or with the consent of all the parties who hold privilege over the document(s).

[138] The existence of a joint retainer, or multiple parties retaining the same law firm for advice on the same issue or for the same litigation, can be an important factor in finding a common interest privilege. See Canadian Pacific Ltd. v. Canada (Competition Act, Director of Investigation and Research), [1995] O.J. No. 4148 (Gen. Div.) and Jetport v. Global Aerospace, 2013 ONSC 235 and Mendlowitz & Associates Inc v. Chiang, 2014 ONSC 2651.

d) Waiver of Privilege

[139] Privilege over a communication can be waived by the client entitled to the privilege provided that the waiver is clear and unambiguous. In S. & K. Processors Ltd. v. Campbell Ave. Herring Producers Ltd., 1983 CanLII 407 (BC SC), [1983] 4 WWR 762; 45 BCLR 218 the court described the requirements for waiver:

Waiver

[6] Waiver of privilege is ordinarily established where it is shown that the possessor of the privilege: (1) knows of the existence of the privilege; and (2) voluntarily evinces an intention to waive that privilege. However, waiver may also occur in the absence of an intention to waive, where fairness and consistency so require. Thus waiver of privilege as to part of a communication will be held to be waiver as to the entire communication. Similarly, where a litigant relies on legal advice as an element of his claim or defence, the privilege which would otherwise attach to that advice is lost Rogers v. Hunter, 1981 CanLII 710 (BC SC), [1982] 2 W.W.R. 189, 34 B.C.L.R. 206 (S.C.).

i) Waiver by putting at issue the legal advice

[140] Privilege over communication can also be implicitly waived where the party entitled to claim privilege makes the legal advice as a material issue in the proceeding. In Creative Career Systems Inc. v. Ontario, 2012 ONSC 649 Justice Perell set out the rationale and elements required for the waiver of privilege:

[29] But the materiality of the legal advice, while necessary to make questions about it relevant, is still not sufficient to justify the compelled disclosure of the legal advice. To justify a party being required to answer questions about the content of privileged communications, the party must utilize the presence or absence of legal advice as a material element of his or her claim or defence. The waiver of the privilege occurs when the party uses the receipt of legal advice as a material fact in his or her claim or defence. While the waiver is a deemed waiver, it requires the intentional act that the party makes legal advice an aspect of his or her case. In Simcoff v. Simcoff, Justice Steel made the point neatly at para. 27, where he stated:

27. However, a mere reference to the receipt of legal advice does not constitute waiver. Waiver must involve something more. It requires not simply disclosing that legal advice was obtained, but pleading reliance on that advice for the resolution of an issue.

[30] Thus, a deemed waiver and an obligation to disclose a privileged communication requires two elements; namely: (1) the presence or absence of legal advice is relevant to the existence or non-existence of a claim or defence; which is to say that the presence or absence of legal advice is material to the lawsuit; and (2) the party who received the legal advice must make the receipt of it an issue in the claim or defence.

[31] Justice Corbett in Guelph (City) v. Super Blue Box Recycling Corp., supra, at paras. 87, 88, 97, 100, and 101 made the useful observation that the deemed waiver occurs as a matter of the party’s choice. Waiver does not occur because the party discloses that he or she received legal advice, nor does it occur because the party admits that he or she relied on the legal advice; it occurs because the party chooses to use the legal advice as a substantive element of his or her claim or defence.....

ii) Waiver by putting state of mind at issue

[141] Privilege may also be lost where the party claiming privilege puts directly at issue his state of mind as a result of reliance on the legal advice. See Bank of Leu AG v. Gaming Lottery Corp. [1999] O.J. No. 3949 (S.C.J.) at paras. 5-11; Toronto Dominion Bank v. Leigh Instruments Ltd. (1997), 1997 CanLII 12113 (ON SC), 32 O.R. (3d) 575 (Gen. Div.); Woodglen & Co. v. Owens (1995), 1995 CanLII 7070 (ON SC), 24 O.R. (3rd) 261 (Gen. Div.); Lloyd’s Bank of Canada v. Canada Life Assurance Co. (1991), 47 C.P.C. (2d) 157 (Ont. Gen. Div.).

[142] Putting a party’s state of mind at issue includes pleading direct reliance on the legal advice as an explanation for the party’s conduct. Justice Gray in Leggat v. Jennings, 2015 ONSC 237 described this waiver of privilege:

[33] The 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 CanLII 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 CanLII 676 (SCC), [1999] 1 S.C.R. 565.

[143] The issue was discussed more extensively by Justice Winkler in Toronto-Dominion Bank v. Leigh Instruments Ltd., (1997) 1997 CanLII 12113 (ON SC), 32 OR (3d) 575:

In Woodglen, Ellen MacDonald J. considered the decision in Lloyd's, and stated the principle as follows:

Perhaps the issue is better expressed on the basis that a party may waive solicitor-and-client privilege by alleging reliance on an opposing party's conduct. The waiver may be actual or voluntary, or it may be deemed or by implication. The waiver is always by the client. The argument is that, if a plaintiff brings an action and states that he or she relied on the defendant's representations, and the defendant denies the plaintiff's reliance and alleges, in the alternative, that the plaintiff obtained his or her own legal advice and relied upon that, the party alleging reliance waives solicitor-and-client privilege and must disclose the legal advice received.

She concluded at p. 272:

A key determination in this lawsuit will be whether these instructions were such that it was reasonable for Mr. Owens to conclude, as he apparently did, that the matter of easements was not something that he was to be concerned with. While there has been no actual waiver of solicitor-client privilege by Mr. Manchester on behalf of the plaintiffs, there is a deemed waiver or a waiver by implication when the plaintiffs put in issue the nature of the legal advice that was received in this, an action for damages based on solicitor's negligence. In these circumstances, the sanctity of solicitor-client privilege as it has been traditionally known, cannot stand.

In my opinion, the decision of MacDonald J. is applicable to the issue before me, and I approve of and adopt her reasoning, as well as that of Van Camp J. in Lloyd's. 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.

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 defendants' 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 defendants Plessey and GEC assert, in paras. 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 the 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.

iii) Waiver of Common interest Privilege

[144] Where common interest privilege attaches to a communication, all the clients to the common interest privilege must waive the privilege. Otherwise, the privilege remains and is enforceable to prevent disclosure to third parties.

[145] However, the privileged documents, while privileged with regards to disclosure to third parties, may nevertheless be used in connection with subsequent litigation between the parties entitled to claim the privilege. Justice Mesbur in Chiang (Re), 2013 ONSC 653 described this as follows:

[16] Joint retainers present some different issues. Where two clients are represented by the same counsel, both clients enjoy solicitor client privilege. Neither can waive that privilege against third parties, unless both consent. As between the two of them, no privilege attaches to any communications between them and their lawyer.

[19] As set out in Wigmore, quoted in Horowitz v. Rothstein, above, where the same attorney acts for two parties having a common interest, those communications are clearly privileged. However, the communications are not privileged in a controversy between the two original parties themselves. The controversy on the removal motion is between the Trustee and KDS over whether KDS can continue to have BLG as its counsel. In this context, there can be no privilege. I therefore conclude that for the motion before Brown J on the removal issue, the Trustee’s entire motion record should be available.

(emphasis added)

[146] In Manthorne v Canadian Breast Cancer Network, 2015 ONSC 3799 Justice Beaudoin described the waiver as:

[23] Joint consultation with one solicitor by two or more parties for their mutual benefit poses a problem of relative confidentiality. As against others, the communication to the solicitor was intended to be confidential and thus is privileged. However, as between themselves, each party is expected to share in and be privy to all communications passing between either of them and their solicitor, and, accordingly, should any controversy or dispute subsequently arise between the parties, then, the essence of confidentiality being absent, either party may demand disclosure of the communication.

[147] See also R. v. Dunbar (1982), 1982 CanLII 3324 (ON CA), 138 D.L.R. (3d) 221 (Ont. C.A.), per Martin J.A., at p. 245; Western Canadian Place Ltd. v. Con-Force Forest Products Ltd., 1997 CanLII 14770 (AB KB), [1997] A.J. No. 354, 50 Alta.L.R. (3d) 131 (Q.B.).

[148] Neither party has suggested that the addition of Linda DiPaolo Smith as a defendant has any significance to the application of common interest privilege or its waiver.

Analysis on the Privilege Claim Generally

[149] For the reasons set out above regarding the failure to identify the specific documents or categories of documents sought to be protected by court order, it would be inappropriate for this court to make the order requested. Nevertheless, given the amount of time and expense the parties have expended on these motions, let me deal with the issue of privilege to the extent I am able to do so on the record before me.

[150] The Smith Defendants claim that the documents in the Joint Counsel’s Legal File are subject to solicitor-client privilege, litigation privilege and/or common interest privilege. I accept for the purpose of this motion that there are some documents in the Joint Counsel Litigation File which might fall into one or more of these categories of privilege.

[151] As between the joint clients, the Smith Defendants and Milicevic/Mazzone, and their joint counsel, Theall, there were no privileged communications. See Rule 2.04 (6) (b) of the Law Society of Upper Canada’s Rules of Professional Conduct. Theall owed a duty of loyalty to all its clients in that matter. Theall could not, as part of this joint retainer, withhold documentation or information from either of the clients. Both sets of clients were entitled to copies of all the communications with and received by joint counsel. Any privilege would only be privilege as against any third parties. In Lipson v. Cassels Brock & Blackwell, LLP, 2014 ONSC 6106, Perrell J. summarized the consequences on privilege where there is a joint retainer:

[98] From the perspective of Thorsteinssons and Davies Ward Phillips & Vineberg, they had joint retainers with the groups of investors and thus the communications between the law firms with their clients are confidential and privileged communications as against third parties. The law, however, is that the communications are neither confidential nor privileged as between the clients of a joint retainer.

[99] Where two or more persons, each having an interest in some matter, jointly consult a solicitor, their confidential communications with the solicitor, although not confidential and known to each other, are privileged against the outside world. However, as between themselves, each client is expected to share in and be privy to all communications passing between each of them and should any dispute arise between the clients, the privilege is inapplicable, and either client may demand disclosure of the communication. See R. v. Dunbar, 1982 CanLII 3324 (ON CA), [1982] O.J. No. 581 at para. 57 (C.A.); Pritchard v. Ontario, 2004 SCC 31.

[152] I fail to see how the privilege claim can be maintained regarding the Joint Counsel Litigation File by the Smith Defendants in the Milicevic/Mazzone Brampton Action since it is a proceeding between the “joint clients”, a recognized exception to common interest privilege.

Analysis on the Privilege Claim: Exhibits “ii” to “nn” in the Smith Affidavit

[153] The Smith Defendants, at para 60 of the Smith Affidavit, identified a number of documents, attached as exhibits “ii” to “nn”, which the Smith Defendants claim are privileged documents but were disclosed in the Milicevic/Mazzone Affidavit of Documents.

[154] The parties in the Milicevic/Mazzone Brampton Action exchanged Discovery Plans. Both parties exchanged Affidavit of Documents. A number of the documents which might be privileged were produced by one or the other party. The Smith Defendants sought the disclosure of the subject documents in the Discovery Plan.

[155] Further, the Smith Defendants included, in their Affidavit of Documents, the very same documents which they now clam are privileged. There is no evidence explaining why these alleged privileged documents were included in their Affidavit of Documents or that it was inadvertent disclosure.

[156] To the extent that a party has requested that the other side produce its own privileged documents or has included those documents in their Schedule A, then, absent some evidence that disclosure was done inadvertently – of which there is none - then privilege has been waived with respect to those documents.

[157] Clearly, any privilege, which might have existed in the documents at Exhibits (ii) to (nn) in the Smith Affidavit, has been expressly or implicitly waived by the Smith Defendant’s conduct.

The Claim the Deemed Undertaking Rule Applies

The Law

[158] The relevant portion of the deemed undertaking rule in the Rules of Civil Procedure provide:

30.1.01 (1) This Rule applies to,

(a) evidence obtained under,

(i) Rule 30 (documentary discovery),

(ii) Rule 31 (examination for discovery),

(iii) Rule 32 (inspection of property),

(iv) Rule 33 (medical examination),

(v) Rule 35 (examination for discovery by written questions); and

(b) information obtained from evidence referred to in clause (a).

(2) This Rule does not apply to evidence or information obtained otherwise than under the rules referred to in subrule (1).

(3) All parties and their lawyers are deemed to undertake not to use evidence or information to which this Rule applies for any purposes other than those of the proceeding in which the evidence was obtained.

[159] The court has jurisdiction to remedy a breach by means of a stay, dismissal, striking a defence or contempt. See Juman v. Doucette, 2008 SCC 8 at paras 26-29.

Analysis Of Deemed Undertaking Rule Claim

[160] The Smith Defendants submit that the unspecified documents:

“were only produced to joint counsel by TSEI and BFI in the course of the Rochon Action to satisfy the disclosure obligations imposed on them as parties to both the main action and the counterclaim in the Rochon Action and on the understanding they were protected by the deemed undertaking rule ....”

[161] To repeat the above, not every document in the Joint Counsel’s Legal File would fall within the ambit of the deemed undertaking rule even if applicable. Some documents may have also been produced by Rochon. Some documents may have been known to Milicevic/Mazzone from their employment at Rochon. Some documents may be public. Some may fall within the exceptions in the deemed undertaking rule. Again, given the lack of any specificity of the documents sought to be protected, no order can issue.

[162] However, there is a more fundamental flaw in the Smith Defendants’ position that the documents in the Joint Counsel Legal File are subject to the deemed undertaking rule.

[163] The Smith Defendants submit that the deemed undertaking rule applies to all parties to a proceeding, even to co-defendants. There is no dispute that co-defendants who receive documents through the discovery process are bound by the deemed undertaking rule.

[164] The disclosure protected by the deemed undertaking rule is the disclosure legally required to be produced to another party by virtue of the Rules of Civil Procedure. The deemed undertaking rule ensures that the recipients of the documents under the discovery process, which are not subject to an exception, are not used by the recipient for some other collateral purpose.

[165] What takes this case outside the application of the deemed undertaking rule is that the documents produced by the Smith Defendants in the BFI Toronto Action and Rochon Counterclaim were not produced to Milicevic/Mazzone as part of the discovery process.

[166] In these circumstances, this claim has no merit.

The Claim the Protection Order Applies

[167] Like the deemed undertaking rule, the Protection Order appears to have been granted to protect the party disclosing the “protected documents” by ensuring that the opposing party does not make those “protected documents” public. The Protection Order specifies which documents are subject to the order.

[168] Milicevic/Mazzone have not included in their Affidavit of Documents any of the documents specified in the Protection Order. They have not threatened to produce any documents subject to the Protection Order.

[169] At this time, this claim has no merit.

Privilege with Respect to the Conflict Opinion Letter

a) Is the Conflict Opinion Letter privileged?

[170] The Smith Defendants submit that the Conflict Opinion Letter and the surrounding circumstances are not privileged or privilege has been waived.

[171] Milicevic/Mazzone submit that the Conflict Opinion Letter is privileged and deny that privilege was waived.

[172] I do not accept Milicevic/Mazzone’s submission that they did not place any reliance on the Conflict Opinion Letter but rather they simply relied on the tendering of the Conflict Opinion Letter to trigger the indemnification. It may very well be that at trial, the tendering of the Conflict Opinion Letter was sufficient to trigger the indemnification. It may not. That will depend on the interpretation of the Indemnity Agreements by the trial judge.

[173] Milicevic/Mazzone’s submission that “McLean’s opinion letter was not “advice” to the Plaintiffs”, makes little sense. Milicevic/Mazzone requested the Conflict Opinion Letter. Milicevic/Mazzone provided McLean with the facts and documents. The Conflict Opinion Letter dealt with Milicevic/Mazzone’s alleged conflict of interest with the Smith Defendants. The Conflict Opinion Letter provided a legal opinion relied on by Milicevic/Mazzone. The Conflict Opinion Letter dealt with the rights of Milicevic/Mazzone under the Indemnity Agreements. Milicevic/Mazzone sought to obtain the benefits of the Conflict Opinion Letter by calling upon indemnification under the Indemnity Agreements. Clearly, it is a legal opinion letter obtained by Milicevic/Mazzone expressly for the purpose of providing it to BFI for the purpose of triggering the Indemnification Agreements.

[174] In order to establish that solicitor client privilege over the Conflict Opinion Letter, Milicevic/Mazzone must establish that:

(i) the communication was between solicitor and client;

(ii) the communication entails the seeking or giving of legal advice; and

(iii) the communication was intended to be confidential.

[175] It would appear that the communication was intended not only between solicitor and client (McLean and Milicevic/Mazzone) but also for BFI.

[176] It is clear that the Conflict Opinion Letter was not intended to be confidential from third parties. It was intended, right from the beginning, to be delivered and was delivered to BFI. It was delivered to BFI to be relied upon for establishing indemnification under the Indemnity Agreements.

[177] There is no solicitor client privilege over the Conflict Opinion Letter. If there ever was, it was waived when it was sent to the Smith Defendants.

[178] The Conflict Opinion Letter is not privileged.

b) The background to the Conflict Opinion Letter?

[179] The Conflict Opinion Letter was put at issue in this proceeding:

a) By Milicevic/Mazzone as the basis for the claim for indemnification for legal fees under the Indemnity Agreements. The essence of the claim for legal fees under the Indemnity Agreements is entirely based on the Conflict Opinion Letter;

b) by the Smith Defendants alleging that the Conflict Opinion Letter was obtained in bad faith; and

c) By Milicevic as the basis for his constructive dismissal claim.

[180] Clearly, Milicevic/Mazzone require the Conflict Opinion Letter as evidence at trial to support their various claims.

[181] It would be unfair to prevent the Smith Defendants from fully and properly dealing with the background, basis and circumstances surrounding the Conflict Opinion Letter. The facts and circumstances surrounding the production of the Conflict Opinion Letter are relevant. Prohibiting the Smith Defendants from exploring the facts and circumstances which gave rise to the Conflict Opinion would let Milicevic/Mazzone shield behind a claim for privilege (which has been found not to be privileged) and deny the Smith Defendants to explore the circumstances leading to the Conflict Opinion Letter and whether reliance on it was reasonable or not.

[182] Where there is a waiver of the legal advice, the waiver will include background communications necessary to place the advice in context. See Guelph (City) v. Super Blue Box Recycling Corp. 2004 CanLII 34954 (ON SC), [2004] O.J. No. 4468 (S.C.J.) at para 101.

[183] I am satisfied the Smith Defendants are entitled to the background of and circumstances leading to the Conflict Opinion Letter, not only to put the Conflict Opinion into context but also to deal with their claim that the Conflict Opinion was not bona fide.

[184] The Smith Defendants also submit that Milicevic/Mazzone have put their state of mind at issue by their reliance on the Conflict Opinion Letter. Having found that there is no privilege in the Conflict Opinion Letter and the circumstances leading to the Conflict Opinion Letter are admissible, I need not deal with this issue.

c) Should McLean be removed?

[185] Having determined that the background facts and circumstances to the Conflict Opinion Letter are admissible, the prospect that Tyler McLean will become a witness increases. Does this require a reconsideration of the decision to remove McLean? In my view, the answer remains no at this time.

[186] The primary basis that Milicevic/Mazzone seek to attack the Conflict Opinion remains the same as the issues discussed above: the Conflict Opinion Letter was “manufactured”; the Conflict Opinion Letter was not from independent counsel; and the Conflict Opinion is wrong. Each of these submissions were dealt with above and, in my view, do not provide a basis for the removal of McLean.

[187] As stated above, the Conflict Opinion Letter solely relates to the “relationship” between Milicevic/Mazzone on the one hand and Theall and Rapley as joint counsel on the other hand. The basis of the legal opinion is Milicevic/Mazzone’s exclusion from the file; Smith’s exclusive/confidential dealings with and instructions to joint counsel; and Theall and Rapley’s refusal to provide to Milicevic/Mazzone information and documentation in the litigation file. The bases for the legal opinion is largely on communications are set out in writing between Milicevic/Mazzone and the joint counsel from May 21, 2013 to March 3, 2014.

[188] As for other possible issues, there is simply no evidence before me which suggests that there are other circumstances surrounding or leading up to the Conflict Opinion Letter which might reasonably bear upon its issuance by McLean and/or the reliance by Milicevic/Mazzone. This would be mere speculation at this point and counsel of choice should not be removed based on mere speculation.

[189] I do leave open the opportunity for the Smith Defendants to renew this motion should specific evidence comes to light during the discovery process which then makes McLean’s possible evidence of significance to the issues to be decided.

Conclusion on the Conflict Opinion Letter

[190] The Conflict Opinion Letter, including the background facts and circumstances to put the Conflict Opinion Letter into context, are not privileged.

THE MILICEVIC/MAZZONE DOCUMENT MOTIONS

[191] Milicevic/Mazzone seek:

i. An order that Milicevic/Mazzone can produce and rely upon documents produced in the Smith Defendant’s Affidavit of Documents in the BFI Toronto Action and Rochon Counterclaim; and

ii. An order requiring the Smith Defendants to expunge from the record and destroy communications retrieved from the TSEI server between Milicevic/Mazzone and McLean where legal advice was sought and received.

a) Documents in the Smith Defendant’s Affidavit of Documents

[192] The documents in the Smith Defendant’s Affidavit of Documents are not privileged documents since they were produced by the Smith Defendants to the opposing party, Rochon.

[193] For the reasons set out above, these documents are not subject to the deemed undertaking rule as they came into the possession of Milicevic/Mazzone not as the result a party receiving production but rather receiving the Joint Counsel Litigation File.

[194] I find no reason why these documents cannot be produced and relied on by Milicevic/Mazzone in the Milicevic/Mazzone Brampton Action.

[195] As a result, the Smith Defendants’ documents referred to in its Affidavit of Documents in the BFI Toronto Action and Rochon Counterclaim can be produced and relied on by Milicevic/Mazzone in the Milicevic/Mazzone Brampton Action.

b) Documents retrieved by the Smith Defendants from the TSEI server

[196] As set out above, Milicevic/Mazzone sought and obtained legal advice from McLean from approximately 2012 until early 2014. Some of these communications were sent by or received from Milicevic/Mazzone using their computers at TSEI, which communications flowed through the TSEI server.

[197] After this litigation commenced, TSEI reviewed its server and discovered the communications between Milicevic/Mazzone and McLean. Copies of these communications were retrieved by TSEI. Smith included in his affidavit, at Exhibits Q, R and S, emails found on the TSEI server, between Milicevic/Mazzone and McLean where legal advice was sought or given. These documents were first disclosed by the Smith Defendants when Smith filed his affidavit on these motions.

[198] The Smith Defendants submit that:

“Where an employee sends emails from a workplace computer, which an employer owns and can access at any time, there is no basis, in a civil dispute with the employer for the employee to claim any type of privilege or reasonable expectation of privacy.”

[199] The Smith Defendants rely, in support of this submission, on Zesta Engineering Ltd. v. Cloutier [2000] O.H. No. 1060.

[200] I do not read Zesta as establishing the proposition advanced.

[201] This court was advised that there was no other legal authority on point with respect to this issue.

[202] There is no evidence before this court of any written or verbal policy at TSEI that:

a) TSEI could or would access the personal communications of the employees on the TSEI servers; or

b) Use of the TSEI computers by the employees would result in the employees losing any confidentiality/privilege the sender/recipient might have in the communications.

[203] Such a policy or knowledge by the employees might have been some evidence that Milicevic/Mazzone did not intend the communications to be privileged. But, no such evidence exists in this case.

[204] In this electronic age, communications are transmitted through the internet by computers and other electronic devices such as cell phones where the electronic communications go through cell towers, the cloud, routers and/or servers. Copies of these communications are, in many cases, stored in electronic devices accessible by third parties such as server providers, internet providers, electronic equipment suppliers and cell phone providers. It would be unreasonable to expect that a person explicitly or implicitly waived privilege over the communications simply because a person’s communication was made using an electronic device which is accessible by a third party.

[205] This is no implied waiver simply because Milicevic/Mazzone sent their communications through the TSEI servers. Implied waiver requires more. It requires some act(s) by the person which permits the court to conclude that the person, by his acts or statements, intended to waive any privilege or confidentiality of the communication. In my view, it is reasonable to expect that persons could and would use their personal computers or electronic devices to send and receive confidential or privileged communications and, absent something more, the employer’s retrieval of an electronic copy of the said communication on the company computers/servers without the consent of the employee would not, by itself, amount to an implied waiver of privilege. There is no evidence that Milicevic/Mazzone knew or ought to know that TSEI could or would access their confidential communications. There is no evidence of implied waiver of Milicevic/Mazzone’s privileged communications.

[206] I am satisfied that any and all communications between Milicevic/Mazzone and McLean where legal advice was sought or given (except the Conflict Opinion Letter) are and remain privileged. All such communications (and any copies) should be destroyed. If there is any dispute regarding whether a particular communication is a confidential communication for the purpose of seeking or receiving legal advice, either party may arrange to make submissions to me regarding the specific document(s).

AMENDMENTS TO THE PLEADINGS

[207] Given the nature of the indemnity claim sought to be withdrawn in the Milicevic/Mazzone Brampton Action and the indemnity cross-claim sought to be advanced in the BFI Toronto Action and Rochon Counterclaim, I will deal with these motions together.

The Position Of The Parties

[208] The existing indemnification claim in the Milicevic/Mazzone Brampton Action is by Milicevic/Mazzone against BFI for legal costs of defending the Rochon Counterclaim. There is no claim for indemnification against BFI for any judgment which might be obtained by Rochon in the Rochon Counterclaim. There is no claim for indemnification by Milicevic/Mazzone from TSEI or Smith personally. It is solely a claim for indemnification for legal costs under the Indemnity Agreements between Milicevic/Mazzone and BFI.

[209] Initially, Milicevic/Mazzone sought to include a claim under the Indemnity Agreements in the BFI Toronto Action and Rochon Counterclaim. However, now Milicevic/Mazzone have withdrawn any proposed cross-claim under the Indemnity Agreements.

[210] The proposed Fresh as Amended Statement and Cross claim in the BFI Toronto Action and Rochon Counterclaim seeks:

a) A declaration that BFI and TSEI indemnify Milicevic/Mazzone from any liability or expense incurred in the defence of the Rochon Counterclaim (para 16(a) and 35); and

b) The claim for indemnity is based on an implied term of their contract or employment with TSEI as work done in the relation to or in the course of their employment with TSEI (paras 18, 19 and 34);

The Law

[211] Rule 26.01 provides as follows:

On motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.

[212] Rule 26.01 is mandatory, but contemplates an exception where prejudice would result which could not be compensated for by costs or an adjournment. As was stated by Moldaver J. A. in Andersen Consulting Ltd. v. Canada (Attorney General) 2001 CanLII 8587 (ON CA), [2001] O.J. No. 3576 (C.A.), at para. 37, the test for granting leave to amend a pleading is one of presumptive approval rather than presumptive refusal.

Analysis

a) Withdrawal of Indemnity Claim in the Brampton Action

[213] As stated above, Milicevic/Mazzone seek to remove the claim for indemnification of legal fees under the Indemnity Agreements from the Milicevic/Mazzone Brampton Action. Initially, they had proposed to advance this claim in the cross-claim in the Rochon Counterclaim. This proposed amendment has now been withdrawn by Milicevic/Mazzone but, since withdrawing this proposed cross-claim from the Rochon Counterclaim, it is unclear where this claim would be made but would no doubt require a third proceeding.

[214] It is clear that Milicevic/Mazzone have not abandoned this claim for legal costs under the Indemnity Agreements. It is only a question as to where this claim will be made.

[215] The Smith Defendants oppose the withdrawal of the indemnity claim for legal fees in the Milicevic/Mazzone Brampton Action on the basis that:

a) The claim under the Indemnity Agreements was made in May 2014, one and a half years ago. Removal of this claim at this stage would delay the Milicevic/Mazzone Brampton Action;

b) Any issue regarding the Indemnity Agreements is more properly dealt with between the parties in the Milicevic/Mazzone Brampton Action rather than in the BFI Toronto Action and Rochon Counterclaim, where the Rochon has no interest in the indemnification issues;

c) The claim under the Indemnity Agreements is much more interconnected with the constructive dismissal action (and to some extent the other claims) in the Milicevic/Mazzone Brampton Action and has no connection with the issues in the BFI Toronto Action and Rochon Counterclaim;

d) Having the claim under the Indemnity Agreements dealt with in the BFI Toronto Action and Rochon Counterclaim raises difficulties with respect the “privileged” or confidential documents (including documents subject to common interest privilege). For example, while common interest privilege documents may be produced and used in the Milicevic/Mazzone Brampton Action (since it is essentially between the same parties) but the BFI Toronto Action and Rochon Counterclaim is not. This, the Smith Defendants submit, is non-compensable prejudice; and

e) The rationale for moving this claim from the Milicevic/Mazzone Brampton Action to the BFI Toronto Action and Rochon Counterclaim was done solely for the purpose of creating a conflict of interest for Rapley so that Milicevic/Mazzone could bring a motion to remove Rapley from the BFI Toronto Action and Rochon Counterclaim.

[216] In my view, this is one of those unusual cases where leave to amend the pleading to delete the claim for legal fees under the Indemnity Agreement should be denied:

a) Given the remaining claims in the Milicevic/Mazzone Brampton Action, the issue surrounding the Indemnity Agreements and Conflict Opinion Letter will still loom large and will have to be dealt with by the court at trial;

b) If the amendment is granted, and because Milicevic/Mazzone no longer seek to include the claim for legal fees under the Indemnity Agreements in the Rochon Counterclaim, a third proceeding will have to be brought. This is contrary to the rule of avoiding a multiple proceedings involving the same subject matter or evidence;

c) Maintaining the claims under the Indemnity Agreements in the Milicevic/Mazzone Brampton Action will avoid potential issues of documentary disclosure regarding the Joint Counsel Legal File since common litigation privilege does not apply in the Milicevic/Mazzone Brampton Action; and

d) This indemnity claim was advanced almost 2 years ago. Considerable time and expense has already been incurred in this proceeding. If granted, delay and additional costs will have to be incurred by the parties.

[217] The motion to withdraw the indemnification claim for legal fees in the Milicevic/Mazzone Brampton Action is hereby dismissed.

b) The originally proposed cross-claim in the Toronto Action

[218] Let me first comment on the originally proposed cross-claim by Milicevic/Mazzone.

[219] Had Milicevic/Mazzone not withdrawn the proposed cross-claim for indemnification of the legal fees in the Rochon Counterclaim, this amendment would not have permitted.

[220] Despite the fact there that are some differences between an indemnity claim for legal fees under the Indemnity Agreements and an indemnity claim for liability under the Indemnity Agreements, the result would have been a multiplicity of proceedings (see s. 138 of the Courts of Justice Act) or an abuse of process (see Toronto Dominion Bank v. Shuter, [2003] O.J. No. 1019 and Montesano v. Montesano [2006] O.J. No. 2639). To permit an indemnity claim amongst the same parties in two separate actions relating to the same factual basis and the same Indemnity Agreements would clearly have been an abuse of process.

[221] I agree with the Smith Defendants that all issues regarding the Indemnity Agreements between these parties are best dealt with and most efficiently dealt with in the Milicevic/Mazzone Brampton Action.

c) The Proposed Fresh as Amended Statement of Defence and Cross-claim

[222] There is no issue with respect to the Statement of Defence portion of Milicevic/Mazzone’s Fresh as Amended Statement of Defence and Cross-claim. Milicevic/Mazzone deny liability, deny any wrongdoing and plead that there were only employees of TSEI acting in the course of their employment during the relevant time period.

[223] The issue is with the cross-claim. With respect to the cross-claim portion of the Fresh as Amended Statement of Defence and Cross-claim, Milicevic/Mazzone have claimed indemnification against BFI and TSEI for any liability and/or expenses to defend (see para 16). In paragraph 18, Milicevic/Mazzone plead that their claim for indemnity is based on an “implied term of their contract of employment and/or contract with Smith Inc...” In paragraph 19, Milicevic/Mazzone plead that the claims in the Rochon Counterclaim “are exclusively based upon alleged actions or omissions that occurred during their employment or contract with Smith Inc.” The nature of this claim is for indemnification solely against TSEI and is re-affirmed in paragraph 34.

i) The claim for indemnification against BFI

[224] Having removed the claim under the Indemnity Agreements and removed paragraphs 20 through 33, there are no alleged facts entitling Milicevic/Mazzone to claim indemnification against BFI. Notwithstanding, in paragraphs 16 and 35, Milicevic/Mazzone make a general claim for indemnity against BFI and TSEI.

[225] In all likelihood, having removed facts in support of the indemnity claim against BFI under the Indemnity Agreements in paragraphs 20-33, it appears that the corresponding changes were not made to paragraph 16 and 35. The motion was argued on the basis that the cross-claim was only against TSEI based upon master-servant indemnification.

[226] If the intention of Milicevic/Mazzone was to proceed with the indemnification claim against BFI, the pleading fails to comply with Rule 25.06 to plead the material facts in support of the claim for indemnification against BFI. I see no basis in the proposed pleading to advance a claim indemnity against BFI except under the Indemnity Agreements.

[227] Further, for the reasons set out above, all claims by Milicevic/Mazzone against BFI for indemnification under the Indemnity Agreements are more properly dealt with in the Milicevic/Mazzone Brampton Action.

[228] If necessary, the proposed cross-claim against BFI is denied. The Smith Defendants will amend paragraphs 16 and 35 accordingly to delete the reference to BFI.

ii) The claim for indemnification against TSEI

[229] The Rochon Counterclaim contains various allegations against Milicevic/Mazzone including a claim of breach of fiduciary duty owed to Rochon relating to the alleged improper retention of confidential information and wrongful solicitation of business while employed by TSEI.

[230] It is important to note that the Indemnity Agreements, if enforceable and applicable, only provide Milicevic/Mazzone indemnification by BFI for any liability found in the Rochon Counterclaim and legal fees incurred for McLean. The proposed cross-claim in the Fresh as Amended Statement of Defence and Counterclaim is a claim for indemnification from TSEI arising from Milicevic/Mazzone’s employment with TSEI based on the allegations they were acting in the course of their employment in accordance with the instructions of TSEI.

[231] A determination whether Milicevic/Mazzone are entitled to indemnification from TSEI for any liability to Rochon subsequent to their departure from Rochon will be highly dependent on the facts determined by the trial judge in the Rochon Counterclaim and the defence. In particular, if there is any liability by Milicevic/Mazzone to Rochon, the trial judge will have determined what acts of Milicevic/Mazzone created such liability and, in particular, whether such actions are independent tortious conduct creating personal liability to Milicevic/Mazzone. To the extent that Milicevic/Mazzone were acting lawfully and in accordance with their employment duties and instructions from their employer, TSEI, the liability would be that of TSEI and not personal liability of Milicevic/Mazzone.

[232] There is a serious question whether an employee has a right of indemnification by an employer based on their having acted in accordance with their employment duties. No authorities in support of this point were provided. Perhaps, the reason is that the employee is not liable to the third party if acting lawfully and in accordance with their employment duties.

[233] However, I cannot conclude that this is a frivolous claim to advance that if personal liability to Milicevic/Mazzone arises as a result of their employment duties, such indemnification against TSEI might be possible. This is for the trial judge to decide.

[234] From a practical matter, I fail to see how this claim for indemnification at law by Milicevic/Mazzone against TSEI could be dealt with in a separate proceeding. The evidence of the Rochon Counterclaim and the Milicevic/Mazzone defence would have to be repeated virtually in its entirety in the separate proceeding and the likelihood of inconsistent findings would loom large in a separate proceeding.

[235] I am satisfied that the amendment of the cross-claim be granted to permit Milicevic/Mazzone to claim indemnification against TSEI on the basis that, if they are liable on the Rochon Counterclaim, they are entitled to indemnification from TSEI.

THE MOTION TO REMOVE RAPLEY

The Position Of The Parties

[236] The remaining issue is Milicevic/Mazzone’s motion to remove Rapley as solicitor of record in the BFI Toronto Action and Rochon Counterclaim.

[237] Milicevic/Mazzone rely on several grounds for the removal of Rapley:

a) Ms. Bawolska of Rapley received confidential/privileged information being the “settlement position” of Milicevic/Mazzone and received a copy of Joint Counsel Litigation File which contains confidential and privileged documents;

b) Ms. Bawolska is a material witness to or “counselled” the execution of Milicevic’s 2014 Indemnity Agreement; and

c) Ms. Bawolska acted for Milicevic/Mazzone in the same proceeding having acted for Milicevic/Mazzone from February 10, 2014 until March 17, 2014 in the Rochon Counterclaim.

[238] The Smith Defendants submit that, even if the cross-claim is permitted to proceed, Rapley should not be removed as counsel of record because:

a) This motion was brought for tactical reasons;

b) Rapley did not receive any confidential information or privileged documentation from Milicevic/Mazzone;

c) In these highly unusual circumstances, it would NOT be contrary to the interests of justice if Ms. Bawolska were to continue to represent the Smith Defendants.

Analysis

a) execution of the Milicevic Indemnity Agreement

[239] Having found that the re-execution of the Milicevic Indemnity Agreement was done on the exact same terms as the 2010 Indemnity Agreement (which everyone believed existed, but couldn’t be found) and done without any legal advice from Ms. Bawolska, this submission has no merit.

b) confidential information or documentation from Milicevic/Mazzone

[240] Milicevic/Mazzone do not point to any specific confidential information or documentation which Rapley received from them. They make bald statements that Ms. Bawolska received confidential information or documentation without any supporting evidence.

[241] At best, Milicevic/Mazzone point to two areas:

i) Milicevic/Mazzone’s settlement position

[242] Again, Milicevic/Mazzone provide no detail except that the “settlement positions” were discussed at the February 10, 2014 meeting with Ms. Bawolska.

[243] Notably, their evidence does not describe why Milicevic/Mazzone would have settlement positions in the Rochon Counterclaim given that: they had had no involvement in the Rochon Counterclaim for 3 ½ years; they had no documents except for the pleadings and they had Indemnity Agreements which indemnified them for any legal costs and any liability in the Rochon Counterclaim. Most notably, Milicevic/Mazzone do not expressly say they advanced any settlement position themselves.

[244] Even if settlement positions were discussed at the meeting, their settlement positions could not have been confidential from the Smith Defendants since the Smith Defendants were present at the same meeting and heard the settlement discussions. This is similar to the situation described by Justice Campbell in Amcam Consolidated Technologies Corp. v. Connell Limited Partnership, [2001] O.J. 3213 (SCJ) at paras 27, 39 and 40.

[245] This submission has no merit.

ii) the Joint Counsel Litigation File

[246] The Smith Defendants were entitled to a copy of the Joint Counsel Litigation File. Whether the Smith Defendants provided a copy of the Joint Counsel Litigation File to Ms. Bawolska or the subsequently the next counsel for the Smith Defendants appears to make no difference. Ms. Bawolska and the subsequent counsel would be in exactly the same position. This is not a basis for the removal of Ms. Bawolska.

[247] Milicevic/Mazzone’s lawyer, McLean, also received a copy of the same Joint Counsel Litigation File that they complain about that Ms. Bawolska received. The same documents were and are available to both parties since both parties were clients of Theall. Surely, if having a copy of the Joint Counsel Litigation File disqualifies Rapley then it must also disqualify McLean.

[248] Besides, without specifying which documents from the Joint Counsel Litigation File raise or potentially raise a concern, this motion cannot succeed.

Conclusion on confidential information

[249] The Smith Defendants have not established that there was confidential information or documentation provided by Milicevic/ Mazzone to Rapley or that Rapley received privileged/confidential documents not available to both parties during the brief period of time that Rapley represented them in the Rochon Counterclaim or which justifies the removal of Rapley.

c) Rapley’s prior representation of Milicevic/Mazzone

[250] The facts in this case are highly unusual.

[251] In this case, there is no dispute Rapley acted, albeit for a short time, for Milicevic/Mazzone in the BFI Toronto Action and Rochon Counterclaim.

[252] Milicevic/Mazzone’s position is simple – there should be an automatic removal of Rapley. In most cases, there would be little discussion necessary. But, I repeat, the facts of this case are highly unusual.

[253] The removal of counsel is not automatic as Milicevic/Mazzone suggest. It will generally be granted when counsel has acted for one party in a proceeding and then attempts to act for the opposing parties in the same proceeding. The breach of the counsel’s duty of loyalty would appear to be clear and unquestionable. However, when faced with such a motion to remove counsel and the facts are as unique as in this case, this court must return to the fundamental consideration of the purpose for such orders.

[254] The fundamental purpose of removing counsel is to avoid the impact, if any, on the public’s perception of and confidence in the legal profession and administration of justice. This is balanced against the removal of the client’s choice of counsel.

[255] The impact of the public’s perception and confidence in the legal profession and administration of justice requires a consideration of all relevant factors including:

i. Did the lawyer have direct dealings with the client in connection with the legal proceeding? If so, how extensive were they? What did the dealings involve? In other words, was the client engaged with the lawyer and to what extent?

ii. Did the lawyer provide the client with legal advice in connection with the legal proceeding?

iii. Did the lawyer receive confidential information and/or privileged documentation from the client?

iv. How long did the lawyer represent the client?

v. Are the client’s interests adverse to the opposing party and to what extent?

vi. What were the circumstances which caused the change in counsel?

vii. Why was the motion brought to remove counsel? Was it for tactical reasons?

viii. Was the motion brought promptly? If not, was the delay explained?

[256] Having considered the unusual circumstances in this case, I decline to exercise my discretion to remove Rapley as counsel of record in the BFI Toronto Action and Rochon Counterclaim for the following reasons:

a) There was a significant delay in bringing this motion. Milicevic/Mazzone knew that Rapley was the counsel for Milicevic/Mazzone in the BFI Toronto Action and Rochon Counterclaim since February 2014. This motion was brought in August 2015. There was no explanation for this delay. The considerable delay in bringing this motion is a significant factor against removing Rapley at this late stage;

b) The circumstances arise because Milicevic/Mazzone decided to retain separate counsel for the Rochon Counterclaim. Milicevic/Mazzone had no cross-claim between them for years, including for almost two years after Milicevic/Mazzone decided to change counsel. The parties had a common position and interest for almost two years defending the Rochon Counterclaim being represented by separate counsel without concerns of prejudice or threats of the removal of counsel;

c) Milicevic/Mazzone point to the meeting on February 10, 2014 (which is before Rapley was formally retained). However, at this point, Milicevic/Mazzone admit they had little or no involvement in the BFI Toronto Action and Rochon Counterclaim. Milicevic/Mazzone state that after the Indemnity Agreements were signed in the middle of 2010, they “heard next to nothing from Theall Group or Terry Smith with respect to the within action”. Smith was dealing with and instructing Theall. Milicevic/Mazzone had done nothing and, for a considerable period of time, didn’t care because they knew they were being fully indemnified by BFI;

d) Rapley acted on behalf of Milicevic/Mazzone only for a short period of time. By March 2, 2014 Ms. Bawolska of Rapley had not received the Joint Counsel Litigation File from Theall. By March 3, 3014 Milicevic/Mazzone had already sought the opinion of McLean as to the alleged conflict of interest. By March 17, 2014 Milicevic/Mazzone had obtained the Conflict Opinion Letter and had advised they were retaining new counsel. It is also clear that Milicevic/Mazzone already had concerns about Theall representing them before February 10, 2014 and to suggest that Milicevic/Mazzone relied on Rapley as their counsel for legal advice in those few days is not accepted;

e) Rapley appeared to have little involvement with Milicevic/Mazzone during her brief retainer by Milicevic/Mazzone. During this same time, it does not appear that Rapley took any steps in furtherance of the Rochon Counterclaim;

f) Aside from the execution of the Milicevic Indemnity Agreement, Milicevic/Mazzone do not point to any specific legal advice they sought or obtained from Rapley;

g) Milicevic/Mazzone only met with Rapley on February 10, 2014. They declined to have any further meetings with Rapley. They simply continued to request information and documentation from Rapley. Clearly, Milicevic/Mazzone’s dealings with Rapley were minimal at best;

h) Milicevic/Mazzone have not pointed to any prejudice that would or potentially would occasion to them if Rapley were permitted to continue to represent the Smith Defendants in the Rochon Counterclaim. They have failed to articulate any real or potential concerns. Milicevic/Mazzone simply point to the fact Rapley acted for them in the Rochon Counterclaim for the short period of time. Their position is a technical position and appears to be for tactical purposes;

i) Milicevic/Mazzone point to the fact Rapley has a complete copy of the Theall’s Joint Counsel Litigation file. So does McLean! McLean was given a copy of the Joint Counsel Litigation file on March 26, 2014. Any counsel retained by the Smith Defendants in the future will also be provided with a copy of the same file;

j) Milicevic/Mazzone point to the fact that they signed a joint retainer with Rapley. But keeping in mind the timing and the lack of any evidence of dealings between Milicevic/Mazzone and Rapley regarding the procedure, merits or other aspects of the BFI Toronto Action and Rochon Counterclaim, I fail to see how this is a factor in favour of the removal of Rapley;

k) Milicevic/Mazzone submit that Smith and Ms. Bawolska had a private conversation which they were not told about until later. Ms. Bawolska explained later, in writing, that it was with respect to the re-execution of the Mazzone Indemnity Agreement. That agreement was subsequently signed. I see no harm or prejudice to Milicevic/Mazzone arising from this conversation or why this would weigh in favour of the removal of Rapley;

l) I accept Ms. Bawolska’s affidavit that she “did not receive any confidential or privileged information from either Mr. Milicevic or Mr. Mazzone.” She was not cross-examined on her affidavit. I do not find that there are the contradictions in her affidavit;

m) The Smith Defendants have chosen to be represented by Rapley. No doubt they have incurred considerable legal expenses and would incur significant additional legal expenses if forced to retain new counsel;

n) Milicevic/Mazzone now seek to bring a cross-claim against TSEI on the basis of their employer/employee relationship. Clearly, this had never been discussed during the brief few days that Ms. Bawolska acted for Milicevic/Mazzone. For Milicevic/Mazzone to split their indemnity claims between two proceedings in two judicial districts seems to have been created by the litigation manoeuvring which has considerably complicated the issues to be tried. A significant portion of the responsibility for this is that of Milicevic/Mazzone; and

o) The BFI Toronto Action and Rochon Counterclaim would be delayed to permit new counsel for the Smith Defendants to become familiar with this large and dated proceeding.

Conclusion On The Removal Of Rapley

[257] Weighing these factors, I am not persuaded that the public confidence in the integrity of the legal profession will suffer and neither would there be a negative impact on the effective and just administration of justice if Rapley were permitted to continue to act for the Smith Defendants in the BFI Toronto Action and Rochon Counterclaim to deal with the cross-claim against TSEI now brought.

[258] This motion is dismissed.

COSTS

[259] Any party seeking costs shall serve and file written submission on entitlement and quantum within four weeks of the release of these reasons. Written submissions shall be limited to 10 pages, with attached Costs Outline and any authorities.

[260] Any responding party shall have two weeks thereafter to serve and file responding submissions. Written submissions shall be limited to 10 pages with attached authorities.

[261] There shall be no reply submissions without leave.

Ricchetti, J.

Date: April 1, 2016