Court File and Parties

COURT FILE NO.: CV-09-993-00 DATE: 2016-06-24

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

Carolina Caputo, Personally and as Estate Trustee for the Estate of Francesco Caputo, Silvio Caputo and Rosa Maria Caputo Applicants

Ava Hillier, for the Applicants

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Wayne Sydney Novak Respondent

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Lawyers Professional Indemnity Company Garnishee

Helder M. Travassos and Rachel Migicovsky, for the Garnishee

HEARD: July 13, 2016

REASONS FOR JUDGMENT

Barnes, J.

[1] Caroline Caputo, both personally and as Estate Trustee for the Estate of Francesco Caputo, Silvio Caputo and Rosa Maria Caputo (“the Applicants”) seek an order compelling the Garnishee (“LAWPRO”) to produce Lorne Shelson for further questioning and to disclose certain documents to the Applicants (the refusals motion).

[2] By way of cross-motion, LAWPRO seeks an order striking certain paragraphs of the Applicants’ Amended Notice of Motion (the motion to strike).

BACKGROUND FACTS

[3] The Applicants were in a car accident in 2008. They retained lawyer Wayne Sidney Novak (“Mr. Novak”) to do certain legal work for them. Mr. Novak failed to do so. The Applicants commenced a claim for solicitor’s negligence against Mr. Novak on March 5, 2009.

[4] Mr. Novak maintained professional liability insurance coverage with LAWPRO for the 2008 calendar year (“the Policy”). Mr. Novak is a lawyer practicing in the Province of Ontario. LAWPRO is the exclusive underwriter of professional insurance for all lawyers licensed to practice in the Province of Ontario.

[5] As an insured, Mr. Novak had certain duties under the policy, including:

a) the duty to inform LAWPRO of any claim made against him or of any circumstances that could lead to a claim against him, pursuant to Part IV General Condition F; and

b) pursuant to Part IV General Condition G, the duty to assist and cooperate with LAWPRO in the investigation and defence of any claim.

[6] In a letter dated September 29, 2009, counsel for the Applicants informed LAWPRO that the Applicants had commenced a legal action against Mr. Novak for negligence.

[7] On or about October 15, 2009, LAWPRO informed the Applicants’ counsel that it was the responsibility of Mr. Novak to notify them of the action. On that same date, LAWPRO notified Mr. Novak that they had been informed that the Applicants had commenced an action against him. Mr. Novak was instructed to provide formal notification to LAWPRO of this action.

[8] On or about January 15, 2010, Mr. Novak complied by filing a Claim Notice Report. After receiving Mr. Novak's formal notification, LAWPRO retained Mr. Kirk Boggs of Lerner’s LLP to defend him. Mr. Boggs filed a Notice of Intent to Defend.

[9] Between February and May 2010, LAWPRO and Mr. Boggs had difficulty contacting Mr. Novak in order to investigate the matter and prepare a defence.

[10] In a letter dated May 11, 2010, LAWPRO informed Mr. Novak that it had denied him both defence and indemnity coverage (“Coverage”) because he had failed to comply with his duty to assist and cooperate under Part IV General Condition G of the policy. Mr. Novak did not respond to this letter.

[11] In a letter dated June 21, 2010, LAWPRO informed Mr. Novak that it had closed his file on a “Situation Not Covered” basis.

[12] On September 9, 2010, Mr. Boggs brought a motion to be removed as lawyer of record for Mr. Novak due to the breakdown of the solicitor-client relationship. This motion was heard on October 5, 2010.

[13] Mr. Novak explained to Justice Corbett that he had failed to communicate with his counsel because of a series of health difficulties. Justice Corbett adjourned the matter to October 19, 2010, to enable Mr. Novak to file responding material and to determine if the solicitor-client relationship could be repaired. Justice Corbett ordered Mr. Novak to provide a copy of his endorsement to LAWPRO by October 8, 2010. Mr. Novak failed to do so.

[14] In a letter to Mr. Novak dated October 12, 2010, LAWPRO confirmed the following:

• that Mr. Novak had not responded to its efforts to contact him on October 6, 2010;

• that LAWPRO was no longer defending him because he remained in breach of his duty to cooperate and assist under Part IV Condition G of the policy; and

• that LAWPRO was prepared to revisit its denial of coverage if Mr. Novak met certain conditions described in the letter.

[15] Mr. Novak did not respond to LAWPRO’s letter of October 12, 2010. Mr. Novak did not dispute LAWPRO’s decision to deny him coverage. LAWPRO says the limitation period for him to do so expired in June 2012.

[16] On October 18, 2010, a Notice of Intention to Act in Person was filed for Mr. Novak. Mr. Boggs’ associate, Mr. Patenaude, signed this Notice on behalf of Mr. Novak.

[17] On May 25, 2012, Mr. Novak was noted in default. On April 24, 2014, after an uncontested trial, Justice Van Melle granted the Applicants judgment in the amount of $321,500, costs fixed at $10,000 and disbursements in the amount of $7,505 (the “judgment”).

[18] The Applicants obtained a Notice of Garnishment on January 13, 2015, and served this on LAWPRO on January 16, 2015.

[19] On January 28, 2015, LAWPRO filed a Garnishee Statement. In the statement, LAWPRO said it was not indebted to Mr. Novak and Mr. Novak was not entitled to indemnity under any policy of insurance issued by LAWPRO in respect of the claim that is the subject of the judgment.

[20] The basis for LAWPRO’s response in the Garnishment Statement is LAWPRO’s denial of coverage to Mr. Novak in 2010.

[21] On April 23, 2015, the Applicants served their motion record for a garnishment hearing. This hearing is set for July 16, 2016. LAWPRO filed its responding record on July 17, 2015. LAWPRO’s material included the affidavit of Lorne Michael Shelson, a representative of LAWPRO.

[22] On August 6, 2015, Mr. Shelson was cross-examined on his affidavit. Mr. Shelson refused to answer certain questions. These related to the issue of Mr. Novak’s coverage. LAWPRO refused to produce certain documents requested by the Applicants. These documents relate to the issue of Mr. Novak’s coverage.

[23] Mr. Shelson was asked to produce LAWPRO’s file on Mr. Novak (LAWPRO file) and Mr. Bogg’s file on Mr. Novak (defense counsel’s file), collectively described as the “documents”. LAWPRO refused to produce these documents on the basis that they are protected by solicitor-client privilege and litigation privilege.

[24] The Applicants filed an amended Notice of Motion for the garnishment hearing. The amended Notice of Motion is dated November 23, 2015. In the amendments, the Applicants seek the following additional relief:

• A declaration and determination that Wayne Sydney Novak is an insured person as defined in his Professional Liability Insurance Policy issued by the LAWYERS PROFESSIONAL INDEMNITY COMPANY as evidenced by LawPro Policy #2008-001 [Notice of Motion para. 1]; and

• A declaration that the said Wayne Sydney Novak is entitled to be indemnified by LAWYERS PROFESSIONAL INDEMNITY COMPANY for the amount of the judgment pronounced by Justice Van Melle in the within action together with post-judgment interest and costs pursuant to the terms of the Policy: [Notice of Motion para. 2].

[25] The Applicants amended the grounds in support of their original Notice of Motion as follows:

• At all material times, the Debtor, Wayne Sydney Novak was insured for professional negligence by a policy of insurance issued by the LAWYERS PROFESSIONAL INDEMNITY COMPANY as evidenced by LAWPRO Policy #2008-001 [Notice of Motion grounds para. 3]; and

• The said policy was and is in good standing and is available to answer the claim of the judgement creditors of Wayne Sydney Novak, towards CAROLINE CAPUTO, Personally and as Estate Trustee for the ESTATE OF FRANCESCO CAPUTO, SILVO CAPUTO and ROSA MARIA CAPUTO [Notice of Motion grounds para. 4].

SHOULD THE AMENDED PARAGRAPHS BE STRUCK?

[26] LAWPRO seeks an order striking the amended paragraphs in the Applicants’ Amended Notice of Motion. In a previous hand written endorsement, I dismissed LAWPRO’s motion to strike. These reasons modify and vary the reasons in that endorsement.

POSITION OF THE PARTIES

[27] LAWPRO submits that only parties to a contract are bound by or entitled under it, unless one of the exceptions to this general rule applies. No exception to the general rule applies. Therefore, the Applicants are not parties to the contract and are not entitled to any benefit stemming from the contract: see Brown v. Belleville (City), 2013 ONCA 148, 114 O.R. (3d) 561, at para. 73.

[28] LAWPRO explains that the Policy cannot be assigned. It says so in the policy. Neither LAWPRO nor Novak ever contemplated that the Policy would be assigned to anyone. Therefore, there are no exceptions to the doctrine of privity of contract that apply: see Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 7. LAWPRO submits that the Applicants have no standing to seek the relief described by the amendments.

[29] The Applicants rely on the decision of Justice Penny in Abuzour v. Heydary, 2014 ONSC 6229. At paras. 28 and 29 of Abuzour, Justice Penny explains:

I do not agree with counsel to LawPro that, simply because the insurance under the 2013 policy is payable on behalf of the insured as opposed to directly to the insured, the insurance cannot be a debt subject to garnishment under rule 60.08. If LawPro, contrary to the 2013 policy, refused to pay on behalf of the insured, the insured would have a cause of action against LawPro. LawPro admits the policy covers the very situation that has occurred in this case. There is no coverage dispute. There are no technical coverage defenses being advanced. It would, in my view, be placing form over substance to conclude that LawPro’s insurance obligations vis-à-vis Heydary and Heydary Hamilton do not constitute a debt subject to garnishment in these circumstances.

For these reasons, I find that LawPro’s obligations to indemnify Heydary and Heydary Hamilton under the 2003 policy constitute a debt subject to garnishment by the applicants, who are judgment creditors, under rule 60.08. [Emphasis added].

[30] In effect, LAWPRO’s obligation to indemnify the insured is what creates LAWPRO’s debt to the insured’s judgment creditors (the “Abuzour principle”): see Abuzour, at paras. 28 and 29.

[31] In Abuzour, the insured Heydary and Heydary Hamilton had absconded with settlement funds owed to their clients. It is agreed that the policy considered in Abuzour is identical in structure to the policy under consideration in this case.

[32] The Applicants submit that the Abuzour principle does not create a debt owed by LAWPRO on the basis of an assignment of the Policy or “stepping into the shoes of the insured [Novak]”. Rather, the Abuzour principle recognises that LAWPRO’s obligation to indemnify the insured creates a debt, which can be enforced by a judgment creditor at a garnishment hearing.

ANALYSIS

[33] The parties agree that a Notice of Motion is not an originating process. The applicable Rule in this motion is Rule 25.11 of the Rules of Civil Procedure: see George v. Harris, [2000] O.J. No. 1762, at para. 19.

[34] Rule 25.11 states:

25.11 The court may strike out or expunge all or part of a pleading or other document, with or without leave to amend, on the ground that the pleading or other document,

(a) may prejudice or delay the fair trial of the action;

(b) is scandalous, frivolous or vexatious; or

(c) is an abuse of the process of the court.

[35] A motion is a step in a proceeding whereby the moving party gives the responding party written notice of the relief sought from the court. Rule 25.11 provides the legal basis for LAWPRO’s motion to strike because “other document” under Rule 25.11 includes a Notice of Motion.

[36] Rule 37.06 specifies that ”Every notice of motion (Form 37A) shall, (a) state the precise relief sought; (b) state the grounds to be argued, including a reference to any statutory provision or rule to be relied on; and (c) list the documentary evidence to be used at the hearing of the motion.”

[37] Justice Epstein, in George v. Harris, at para. 22, refers to some instances where portions of a Notice of Motion may be struck under Rule 25.11:

a) where the Notice of Motion contains statements which are “scandalous”, “frivolous” or “vexatious”. Statements that fall in this category include conclusions, expressions of opinion with a non-existent or unspecified factual basis and statements that are completely irrelevant: see George v. Harris, at para. 20;

b) where the Notice of Motion goes beyond stating the facts relied on to seek the relief specified and strays into the impermissible arena of putting in evidence and drawing inferences: see George v. Harris, at para. 26;

c) where the Notice of Motion contains pure argument: see George v. Harris, at paras. 28 and 30; and

d) where the Notice of Motion constitutes an abuse of process. This refers to instances where the contents of the Notice of Motion indicate that the Motion was brought for purposes other than the moving party’s legitimate rights as a litigant.

[38] The difficulty with LAWPRO’s argument is LAWPRO’s characterisation of the issue for me to decide in this motion. According to the analytical lens used by LAWPRO, the issues on this motion must be resolved on the basis of the Applicants’ standing to seek relief in a garnishment hearing.

[39] A resolution of the issue of standing at this motion would in effect be a resolution of the very issue that must be resolved at the already scheduled garnishment hearing. This is not the garnishment hearing. Instead, this motion to strike must be resolved within the context of the issues to be addressed at the garnishment hearing.

[40] The Applicants rely on the Abuzour principle to argue that LAWPRO owes the Applicants a debt that can be enforced in a garnishment hearing. Within that context, a non-exhaustive list of the issues to be determined at the garnishment hearing includes:

a) Whether the Abuzour principle applies in this case;

b) Whether the premise of the Abuzour principle requires an assessment of whether the insured had coverage under the policy at the time of the tort (although, on the current record, it appears to me that this should be answered in the affirmative);

c) Whether the premise of the Abuzour principle makes the issue of whether coverage has been properly denied a relevant consideration at a garnishment hearing;

d) Whether the issue of coverage arises only after there is some reason to believe that LAWPRO has improperly denied the insured coverage; and

e) Whether the material disclosed by LAWPRO makes coverage an issue.

[41] The Applicants have described the facts in support of the relief they seek in their Notice of Motion and amended Notice of Motion. These descriptions are neither inflammatory, without foundation nor speculative. None of the factors which warrant striking paragraphs in a Notice of Motion are present: see George v. Harris.

[42] LAWPRO’s argument that the motion to strike should be decided without reference to evidence gleaned from the cross-examination of Mr. Shelson is untenable. Absent some sufficiently articulable prejudice to the party opposing the amendment, the mere fact that a party has amended a Notice of Motion on the basis of evidence obtained at a cross-examination should not lead to the automatic striking of the amended paragraphs. On the facts of this case, I see no reason why LAWPRO will be prejudiced by these amendments.

[43] It is in the best interests of the proper administration of justice for litigants to expect that lawyers who represent them will be properly insured, thus protecting their interests. In the absence of the “offending” George v. Harris factors, it is not in the interests of the proper administration of justice to adopt an overly technical approach in scrutinizing a Notice of Motion that will prevent litigants from determining whether there is a legal basis for them to access the protection provided by the Policy.

[44] For all the foregoing reasons, LAWPRO’s motion is dismissed.

THE REFUSALS MOTION

[45] The Applicants seek production of the documents outlined above and to continue the cross-examination of Lorne Shelson on the issue of the denial of coverage for Mr. Novak. The basis for the Applicants’ position is the Abuzour principle.

[46] The coverage of Heydary and Heydary Hamilton was never an issue in Abuzour. The Applicants submit that coverage became an issue in this case once LAWPRO filed its responding motion record. This responding motion record included the July 16, 2015, affidavit of Lorne Michael Shelson.

[47] LAWPRO refuses the Applicants’ request on the basis of relevance and asserts litigation and solicitor-client privilege in respect of the documents.

[48] The issues on the Applicants’ motion are:

(a) Are the questions posed and documents requested by the Applicants relevant?

(b) Are the questions posed and the documents requested by the Applicants shielded by solicitor-client privilege or litigation privilege?

Are the questions posed and documents requested by the Applicants relevant?

POSITION OF THE PARTIES

[49] The Applicants rely on the Abuzour principle and explain that the original garnishment motion was brought on the basis that LAWPRO’s obligation to insure Mr. Novak constituted a debt subject to garnishment by the Applicants.

[50] The Applicants submit that the continuing coverage of Mr. Novak was always assumed until LAWPRO filed its responding motion record. The Applicants explain that LAWPRO’s motion record put coverage in issue, including whether coverage was improperly denied for Mr. Novak. The reasons advanced for this assertion are:

a) in the letter dated October 12, 2010, LAWPRO informed Mr. Novak that it was prepared to resume coverage if he satisfied the conditions stipulated in the letter by October 8, 2010. The letter was sent on October 12, 2010, so due to LAWPRO’s actions it was impossible for Mr. Novak to satisfy the conditions by the October 8, 2010, deadline; and

b) during cross-examination, Mr. Shelson said coverage of an insured is always an ongoing issue.

[51] LAWPRO submits that the issue of coverage under the insurance policy is outside the scope of a garnishment hearing under Rule 60.08 of the Rules of Civil Procedure. LAWPRO explains that Rule 60.08 permits a creditor to enforce an order for the payment or recovery of money by garnishing debts payable to the debtor by other persons. In Abuzour, there was no question of coverage. The only question was whether LAWPRO’s coverage obligation amounted to a debt payable. Justice Penny found that it did. However, in this case, there was no debt owing to Mr. Novak because coverage was denied. If there is no debt payable, then Rule 60.08 does not provide an avenue to the relief sought by the Applicants.

[52] LAWPRO submits that, in practical terms, the Applicants are attempting to “step into the shoes” of Mr. Novak and challenge LAWPRO’s decision to deny Mr. Novak coverage. LAWPRO reiterates that coverage is not properly the subject of a garnishment hearing.

[53] LAWPRO further submits that even if coverage were the subject of a garnishment hearing, the Applicants’ motion must fail for a number of reasons:

• Mr. Novak did not assign the policy to the Applicants;

• the Applicants are not agents of Mr. Novak under the policy; and

• Mr. Novak failed to challenge LAWPRO’s decision to deny him coverage within the two year limitation period. In effect, Mr. Novak could not challenge LAWPRO’s coverage decision himself at this time even if he so desired.

[54] For all these reasons, LAWPRO argues that the Applicants have no standing to challenge LAWPRO’s decision on coverage.

DISCUSSION

[55] The main issue at the garnishment hearing is whether LAWPRO owes a debt to the Applicants that can be the subject of a Rule 60.08 garnishment hearing. The Applicants’ motion is based on a debt created in favour of the Applicants as judgment creditors on the basis of LAWPRO’s obligation to insure Mr. Novak: see Abuzour, at paras. 28 and 29. The Applicants rely on the Abuzour principle. I have previously described some of the issues to be considered at the garnishment hearing.

[56] Based on the Abuzour principle, a termination of the obligation to insure means LAWPRO does not owe a debt to Mr. Novak capable of garnishment by Mr. Novak’s judgment creditors. The effect of a cancelation of an insurance policy is described in Couch on Insurance 3d, looseleaf (St. Paul, Minn.: Thomson West, 1995), at § 30:24, as follows:

The cancellation of the policy, when effectively [properly] made, terminates the liability of the insurer not only with respect to the insured but also with respect to third persons who are creditors of the insured and who bring attachment or garnishment proceedings against the insurer. Similarly, a beneficiary’s rights under the cancelled policy are no greater than those of the insured.

Where a third party’s claim had not matured or even been reported at the time of cancellation, and the cancellation was effective retroactive to the date of termination of a prior policy and resulted in the refund of any premium paid, such cancellation was valid even though it took place after the occurrence of an otherwise covered accident. [Emphasis added].

[57] Abuzour vests LAWPRO with a debt to the judgment creditor on the basis of LAWPRO’s obligation to insure the insured. As noted in Couch on Insurance, the obligation of the insurer to insure is terminated when the policy is properly cancelled. Thus when LAWPRO’s obligation to insure is properly terminated, LAWPRO owes no debt to the judgment creditors and the judgment creditors have no debt to enforce against LAWPRO at a garnishment hearing.

[58] I conclude that cross-examination on the issue of coverage is relevant to the issues that the judge must consider at the garnishment hearing. However, the Applicants do not seek to discover Mr. Shelson. Their intent is to cross-examine him on his affidavit. The scope of such an exercise is more limited.

[59] The purpose of cross-examination is succinctly summarised by Justice Perell in Ontario v. Rothmans Inc., 2011 ONSC 2504, at paras. 142 and 143:

Case law has determined what are proper questions for a cross-examination on an affidavit. Once again, relevancy is a key determinant of a proper question, and relevancy is determined by reference to the matters in issue in the motion in respect of which the affidavit has been filed and by the matters put in issue by the deponent's statements in the affidavit. The scope of the cross-examination for an application or motion only coincidentally will be commensurate with the scope of an examination for discovery. [Emphasis added.]

The questions must be relevant to: (a) the issues on the particular application or motion; (b) the matters raised in the affidavit by the deponent, even if those issues are irrelevant to the application or motion; or (c) the credibility and reliability of the deponent’s evidence……

[60] As a result of the Abuzour principle, the question of whether the circumstances of LAWPRO’s coverage or denial of coverage has any place in a garnishment hearing is an issue for the garnishment hearing. Cross-examination on the issue of coverage is relevant to that determination.

[61] Mr. Shelson’s affidavit refers to the issue of coverage and he can be cross-examined on a matter he has raised in his affidavit. Even if the issue of coverage were irrelevant, Mr. Shelson could be cross-examined on coverage because he raised the coverage issue in his affidavit and, within that context, cross-examination on the subject of coverage is also a basis to test Mr. Shelson’s credibility: see Rothmans, at para. 143.

[62] LAWPRO will not be prejudiced if Mr. Shelson re-attends for cross-examination. His re-attendance will be subject to my decision on the issue of privilege.

[63] The documents LAWPRO refuses to disclose or produce on the basis of privilege and relevancy are LAWPRO’s file on Mr. Novak (LAWPRO file) and Mr. Bogg’s file on Mr. Novak (defense counsel’s file).

[64] The disclosure of documents in a civil proceeding is described in Rule 30.02(1) of the Rules of Civil Procedure:

Every document relevant to any matter in issue in an action that is or has been in the possession, control or power of a party to the action shall be disclosed as provided in rules 30.03 to 30.10, whether or not privilege is claimed in respect of the document.

[65] The key consideration for disclosure is whether the document is relevant. Relevance is determined in reference to the pleadings. A document is relevant if it is logically connected to a matter in issue: see Sycor Technology Inc. v. Kiaer, 2012 ONSC 5285, at para. 23. For the purposes of this motion, relevance is determined in relation to the contents of the Notice of Motion.

[66] Pursuant to Rule 30.02, any document relevant to a matter in issue and in the possession of a party to the action shall be produced for inspection unless privilege is claimed in respect of the document. The documents sought by the Applicants are in LAWPRO’s possession. LAWPRO resists the production of these documents on the basis of privilege.

[67] The documents requested relate to the issue of coverage. As previously discussed, the Abuzour principle makes the question of whether the circumstances of LAWPRO’s coverage or denial of coverage has any place in a garnishment hearing an issue for the garnishment hearing.

[68] Therefore, the documents requested are relevant to the issues to be decided at the garnishment hearing.

Are the questions posed and the documents requested by the Applicants shielded by solicitor-client privilege or litigation privilege?

POSITION OF THE PARTIES

[69] I conclude that portions of the LAWPRO file that relate to communications between LAWPRO, Mr. Novak or other parties who are not defense counsel are not protected by either solicitor-client privilege or litigation privilege and, therefore, shall be produced to the Applicants forthwith.

[70] I also conclude that LAWPRO and Mr. Novak had a joint retainer with defence counsel Mr. Boggs; therefore, solicitor-client privilege protects all communications between these parties and Mr. Boggs.

[71] Within this context, Mr. Shelson shall re-attend for cross-examination to be cross-examined on the coverage issue.

[72] LAWPRO claims that the LAWPRO file and defence counsel’s file are shielded from disclosure and production by solicitor-client privilege.

[73] LAWPRO submits that Mr. Novak agreed that, under the Policy, LAWPRO would retain defence counsel to defend him in an action arising out of his work as legal counsel. Therefore, there is a joint retainer with defence counsel, with both Mr. Novak and LAWPRO as clients. This creates a solicitor-client relationship between defence counsel and Mr. Novak, as well as between defence counsel and LAWPRO. LAWPRO relies on Chersinoff v. Allstate Insurance Co., [1968] B.C.J. No. 197 (S.C.), at para. 27.

[74] LAWPRO submits that defence counsel provided legal advice to LAWPRO as well as to Mr. Novak. The advice was with respect to the action and LAWPRO and Mr. Novak expected the communication to remain confidential. Therefore, defence counsel’s file is shielded from discovery by solicitor-client privilege.

[75] LAWPRO further submits that the contents of the LAWPRO file were prepared in contemplation of and during litigation and, therefore, they are protected from discovery by litigation privilege.

[76] The Applicants submit that Mr. Boggs was LAWPRO’s lawyer, not Mr. Novak’s and, therefore, there is no solicitor-client relationship between defence counsel and Mr. Novak. Defence counsel’s file is relevant, admissible and should not be shielded from discovery. The Applicants rely on the Ontario Court of Appeal’s decision in Dwyer v. Cavalluzzo, Hayes, Shilton, Mclntyre & Cornish, [2000] O.J. No. 2556, at para. 5.

[77] The Applicants argue the LAWPRO file is not shielded by litigation privilege because its contents were prepared as part of an investigation of Mr. Novak’s claim under the policy and not in contemplation or for the purpose of litigation. The Applicants submit, in the alternative, that litigation privilege has been waived by partial disclosure of the LAWPRO file.

DISCUSSION

[78] Solicitor-client privilege protects the communications between a lawyer and his or her client from disclosure. The client may waive the privilege. The communication must meet these three criteria to be protected by solicitor-client privilege:

(i) the communication must be between the client and his or her lawyer;

(ii) it must be in the context of the lawyer giving legal advice; and

(iii) there must be an intent to keep the communication confidential: see Descôteaux v. Mierzwinski, [1982] 1 S.C.R. 860.

[79] Solicitor-client privilege applies to communications between a lawyer and a third party who is an agent for their client where the purpose of the communication is to provide legal advice to the client: see Hydro-One Network Services Inc. v. Ontario (Ministry of Labour), [2002] O.J. No. 4370 (Ont. C.J.).

[80] In Dwyer v. Cavalluzzo, Hayes, Shilton, Mclntyre & Cornish, Dwyer was employed by Canada Post. Dwyer was a member of a Union. Dwyer’s employment was governed by a collective agreement. Canada Post dismissed Dwyer. The Union commenced a grievance on his behalf. The Union retained counsel, Hayes, to represent him. One of the issues was whether the communications between Dwyer and Hayes were protected by solicitor-client privilege. The Ontario Court of Appeal in Dwyer wrote, at paras. 4-5:

The processing of grievances is clearly an aspect of the collective agreement and the appellant’s contact and relationship with Hayes and his law firm came about as a direct result of the terms of the collective agreement governing the resolution of grievances.

Given that Hayes was retained by the Union, the solicitor/client relationship was between Hayes and the Union, not between Hayes and the appellant. Accordingly the only duty owed to the appellant was that of the Union to provide him with fair representation in accordance with s. 37 of the Canada Labour Code. As the Union’s agent, Hayes bore the responsibility of discharging that duty in the presentation of the appellant’s grievance.

[81] In Dwyer, the scope and ambit of the retainer was defined by the collective agreement. Within those parameters, the solicitor-client relationship was between the Union and Hayes. Dwyer did not deal with a retainer arising in the context of an insurance policy. In Liability Insurance in Canada, 5th ed (Markham, ON: LexisNexis Canada, 2011), at pp. 161-162, Gordon Hilliker wrote:

The relationship of insurer, insured and defence counsel is unique. Although to the world at large it will appear that counsel is representing only the insured in the action, the fact is that in the course of that representation counsel will give advice to and take instructions from the insurer. Thus most American courts considering the question have held that defense counsel appointed by the insurer to defend the insured has two clients, the insurer and the insured…

In Canada the issue was dealt with in Chersinoff v. Allstate Insurance Co., in which the Court held that counsel appointed to defend a wrongful death action on behalf of the insured must be regarded as having been jointly retained, the scope of the retainer being the defence of the insured in respect of the claim for damages…

[82] In Chersinoff, counsel was retained under an insurance policy to defend the insured in a wrongful death action. The Court concluded that a joint retainer was in place and reasoned as follows, at para. 27:

…The starting point now must be that the solicitors were acting as solicitors for both insurer and insured in respect to the claims for damages brought against the latter. Although the insured did not select the solicitors himself but was represented by them and became their client because of the contractual right of the insurer to conduct the defence and select the solicitors, the insured agreed as a condition of being indemnified that the insurer should have the right to select solicitors so I think the insured may properly be taken to be a party to employment of the solicitors selected. While the employment of the same solicitors for both parties came about because of the condition, the position of the solicitors in my view is that they must be regarded as having been jointly retained to represent both parties on the issues of whether or not the insured was liable to pay damages in respect to the motor accident and the amount of the damages…

[83] The purpose of solicitor-client privilege is to permit unfettered communication between lawyers and their clients. This is an essential component of the proper administration of justice. To hold that a client cannot expect the same protection because counsel was retained by his or her insurer and not directly by him or her would be inconsistent with the public policy rationale for solicitor-client privilege and detrimental to the proper administration of justice.

[84] I agree with the reasoning in Chersinoff and conclude that LAWPRO and Mr. Novak jointly retained defence counsel. In a joint retainer, the clients’ communications with counsel that meet the solicitor-client privilege criteria can be asserted against the outside world but not between the clients: see R. v. Dunbar, [1982] O.J. No. 581 (Ont. C.A.).

[85] The primary purpose for retaining defence counsel was to defend Mr. Novak. The practical effect of the Policy was that LAWPRO and Mr. Novak were both clients of defence counsel. There is no reason to conclude that the communications between the parties did not contain legal advice provided by defence counsel, or that it was not the intention of LAWPRO and Mr. Novak to keep the communications confidential.

[86] The contents of defence counsel’s file are protected by solicitor-client privilege. Neither Mr. Novak nor LAWPRO have waived this privilege. In a joint retainer, both clients must waive the privilege before defence counsel’s file can be produced.

[87] While Mr. Shelson must re-attend for cross-examination, he is not required to answer questions related to defence counsel’s file. The Applicants’ request for disclosure and production of the contents of defence counsel’s file is denied.

[88] The portions of LAWPRO’s file on Mr. Novak which do not involve communications with defence counsel are not protected from disclosure by solicitor-client privilege. Those communications do not involve or trigger a lawyer-client relationship. Simply put, LAWPRO’s communications which do not involve defence counsel do not meet the three Descôteaux criteria and must be produced forthwith.

[89] A party seeking to assert litigation privilege must establish: a) that litigation was contemplated and b) that the documents for which the privilege is sought were created for the dominant purpose of litigation: see Intact Insurance Co. v. 1367229 Ontario Inc., 2012 ONSC 5256, at para. 26, and Sky Solar (Canada) Ltd. v. Economical Mutual Insurance Co., 2015 ONSC 4714, at para. 80.

[90] I do not accept LAWPRO’s characterisation of the communications in the LAWPRO file. It is clear that the communications were created in the course of investigating the action against Mr. Novak, in the context of his recourse under the Policy and his compliance or non-compliance with the terms of the Policy. The communications in the LAWPRO file were not prepared for the dominant purpose of litigation: see Sky Solar, at para. 100. The LAWPRO file is not shielded by litigation privilege.

[91] Portions of the LAWPRO file that relate to communications between LAWPRO, Mr. Novak and any other party not defence counsel are not protected by either solicitor-client privilege or litigation privilege and, therefore, shall be produced to the Applicants forthwith. As outlined above, Mr. Shelson shall re-attend for cross-examination on the coverage issue in accordance with this ruling.

[92] The costs of this motion are reserved for the Judge hearing the garnishment motion.

Barnes, J.

Released: June 24, 2016