Court File and Parties

CITATION: Lindsay v. Verge Insurance Brokers et al., 2016 ONSC 4005

COURT FILE NO.: 54590-13

DATE: June 16, 2016

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: RYAN LINDSAY Plaintiff

AND:

VERGE INSURANCE BROKERS LTD. and MARK SHERK Defendants

BEFORE: Turnbull, J.

COUNSEL: R. David House, for the Plaintiff, Ryan Lindsay

Stephen F. Gleave and Richelle M. Pollard, for the Defendants

HEARD: June 6, 2016

ENDORSEMENT

Overview of the motion

[1] The plaintiff has brought a motion to compel the defendants to answer certain questions posed on examination for discovery which the defendants refused to answer on advice of counsel. One of these questions related to production of documents from the defendants based on their purported waiver of solicitor and client privilege.

[2] The Plaintiff is a former employee of the defendant Verge Insurance Brokers Limited (Verge).

[3] Mark Sherk is the 100% shareholder of Verge.

[4] Mr. Lindsay (Lindsay) was employed by Verge as an insurance agent between August 2004 and June 2013. In November 2005, Mr. Lindsay signed an employment agreement with Verge (the employment agreement). That agreement provided him with the right to purchase all accounts or business procured by Lindsay during the course of his employment. Verge was required not to contact or solicit Lindsay’s clients, customers, or accounts for 2 years should Lindsay elect to purchase his book of business. Mr. Lindsay also signed a non-solicitation term in the contract.

[5] In 2013, Lindsay decided to resign and purchase his book of business from Verge according to the provisions of his employment agreement. The essence of his action is that the defendants Verge and Sherk actively frustrated his ability to be able to purchase his book of business. Lindsay alleges that as a result, he had no other choice but to abandon the negotiation process and he commenced this action for damages.

[6] The defendant vigorously disputes the action.

[7] In paragraph 23 of his statement of claim, the plaintiff alleges as follows:

23. “The efforts to purchase his book of business were frustrated by the commercially unreasonable actions, omissions and demands of Verge and Sherk during the negotiation and their breaches of the employment agreement including, without limiting the generality of the foregoing, the following:”

[8] The pleading thereafter contains 8 alleged actions undertaken by Verge and Mark to frustrate the closing of the transaction.

[9] In its statement of defence, at paragraph 37, the defendants plead as follows:

37. “In response to paragraph 23 of the statement of claim, the defendants state that Verge took all necessary steps that were commercially reasonable and in good faith and within the reasonable expectations of the parties, to complete the sale of the book of business pursuant to the employment agreement and governing legislative requirements. In this regard, Verge hired the leading commercial lawyer in the commercial brokerage industry to negotiate the completion of the sale. The defendants deny all of the allegations contained in paragraph 23(a) - (h) of the statement of claim.”

[10] In paragraph 40, the defendants allege that Lindsay wrongfully refused to exercise its contractual option to purchase the book of business.

[11] In due course, the parties exchanged affidavits of documents. The lawyer retained by Verge was Steve Borlack. In the productions of Verge and Sherk, they have included seven email exchanges in the period May 30, 2013 to June 4, 2013 between Mr. Borlack and Debbie Voth, a senior employee of Verge. Among them is an email dated June 4th, 2013 from Debbie Voth to Mr. Borlack in which Ms. Voth has written:

“Mark (Sherk) and I have talked and we are in agreement that we want to take the high road here as well. We are in agreement with Ryan assigning the right to purchase his book to All Risks.”

[12] At examinations for discovery, questions were asked with respect to the documents contained in the aforementioned email chain. At question 445 of the examination for discovery of Mark Sherk, he advised that it was Debbie Voth that was providing information to Mr. Borlack and Mr. Borlack was asking for information. Questioning on the documents took place through 6 pages of transcript to question 463. Finally Mr. House asked an undertaking of the defendants to disclose the totality of the communications between Mr. Borlack and Ms. Voth or anyone else at Verge concerning the transaction. At that point, counsel for the defendants stated that those communications were privileged and inadvertently disclosed.

[13] No motion has been brought to the court to have the documents returned to Verge and/or Mark Sherk or to have the question(s) and answers struck from the record.

Analysis

[14] The fundamental dispute between Lindsay and the defendants relates to the alleged unreasonable behaviour, bad faith and contractual breaches relating to Mr. Lindsay’s attempt to purchase his book of business. I note that the documents themselves have been produced with no attempt to retract the documents in advance of the discovery or to redact them. Secondly, Mark Sherk answered repeated questions relating to the emails between his solicitor and Verge as client.

[15] In the Law of Evidence in Canada (3rd Edition by Sopinka, Letterman and Bryant) at page 65, the learned authors have written:

“In other cases waiver was said to have taken place when documents over which privilege which was claimed had been disclosed in proceedings in another jurisdiction or were referred to in an affidavit of documents and had been inspected. Similarly, if a client testifies on his or her own behalf and gives evidence of a professional, confidential communication, he or she will have waived the privilege shielding all of the communications relating to the particular subject matter. Moreover, if the privilege is waived, then production of all documents relating to the facts contained in the communication will be ordered.”

[16] In Chan v. Dynasty Executive Suites Limited, 2006, Carswell Ont. 4318 (Ont. S.C.J.), Belobaba, J. of this court dealt with the disclosure of 14 documents which were said to be subject to solicitor client privilege. They were contained in schedule “A” to an affidavit of documents. It was argued that the disclosure was inadvertent. As soon as the error was realized an immediate demand was made for return of the 14 privileged documents. Belobaba, J. at paragraph 31 found that there were three factors which the court should take into consideration in considering the issue of whether or not privilege had been waived:

1. Was the error in fact inadvertent and thus excusable?
2. Was an immediate attempt made to retrieve the documents?
3. Whether preservation of the privileged documents, in the circumstances, would have caused unfairness to the receiving party?

[17] In the case before the court, I find that disclosure of the documents was not inadvertent at all. The documents were listed in the affidavit of documents and no effort has been made to have the documents returned, redacted or removed from the record.

[18] In Langret Investments S.A. v. McDonnelle, 1995 Carswell BC 960 (BCCA), citing Wigmore On Evidence (1961), confirmed that where partial disclosure is made, fairness requires that privilege shall cease. The excerpts cited from Wigmore are instructive.

“He cannot be allowed, after disclosing as much as he pleases, to withhold the remainder. He may elect to withhold or to disclose, but after a certain point his election must remain final.”

[19] In the case at bar, the defendants have urged me to apply the decision of Lofchik, J. of this court in 1225145 Ontario Inc. v. Kelly [2006] O.J. 2292. In that particular case the defendant landlord brought an action in 1999 for termination of a commercial tenancy. After 7 years had passed, the plaintiff tenant counterclaimed for damages for failure of the defendants to allow him to exercise his right of first refusal. In 2006, the plaintiff sought to amend his claim to include a claim for specific performance. In support of that motion, he delivered an affidavit disclosing solicitor and client information to explain the delay. The defendant served a request to inspect those documents and the plaintiff claimed privilege. As a result the defendants brought a motion for production of the documents and the motion was granted in part. The court found that the plaintiff waived privilege with respect to the communications concerning a claim of specific performance and the reasons for delay in seeking to amend their counterclaim. However the court ordered the plaintiff could redact irrelevant or privileged portions with sufficiently detailed description to allow the defendant to assess whether to challenge the claim of privilege. The principle that was relied on by Lofchik, J. was articulated in paragraph 12 of his endorsement.

12. “A client may waive the privilege, in whole or in part voluntarily or by implication. A party who directly raises in a proceeding the legal advice that he or she received, or the instructions the client gave to the solicitor, thereby putting that advice or those instructions an issue, may be found to have waived the privilege in so far as it relates specifically to the issue concerning the advice received or the instructions given.” (Law of Evidence in Canada, John Sopinka, Sidney M. Lederman, Q.C., and Alan W. Bryant, Butterworth’s, 1992, pages 664 – 667).

[20] The principle that a party cannot choose to disclose certain privileged communications in order to help establish his case and at the same time to be able to refuse or disclose other privileged communications was considered by Spence, J. in Leadbeater v. Ontario 2004 CanLII 14107 (ON SC), [2004] O.J. 1228 at paragraph 75. Spence, J. noted in that case wherein he found there was a voluntary waiver of privilege by production, “the waiver in this case is not limited to a particular issue or period of time.” I find that the same principle applies to the issue before me.

[21] I find that the same principle applies to the case before this court. The central issue in this litigation is whether or not the defendants did act in good faith and within the reasonable expectations of the parties to complete the sale of the book of business. The defendants produced documents to support their position that they were acting in good faith and “taking the high road.” They have pleaded that they have hired a top commercial lawyer to advise them with respect to the closing of the transaction with Mr. Lindsay. They have specifically waived privilege over those communications and cannot pick and choose what they want to produce and those documents over which they want to claim privilege. The waiver of privilege in this case, in my view, constitutes a waiver of privilege with respect to the entire issue as to whether or not the defendant Verge has acted in good faith and attempted to comply with the contractual obligations imposed on it.

Conclusion

[22] It is ordered that the defendants shall produce all communications between Mr. Borlack and Verge, Ms. Voth, Mark Sherk or any other responsible employee of Verge relating to the attempted closing of this transaction. The defendants shall serve and file a further and better affidavit of documents and Mark Sherk shall attend on a further examination for discovery, if requested, to answer all relevant questions relating to the documents so produced.

Costs

[23] The plaintiff has been successful on this motion and is entitled to his costs. If counsel cannot work out a reasonable order with respect to costs, written submissions can be forwarded to my office on or before July 1st, 2016 by Mr. House. Mr. Gleave and Ms. Pollard may file reply written submissions with my office on or before July 21st, 2016.

Turnbull, J

Date: June 16, 2016