Court File and Parties

NEWMARKET COURT FILE NO.: CV-13-113944-00 DATE: 20170410 ONTARIO SUPERIOR COURT OF JUSTICE

IN THE MATTER OF THE Construction Lien Act, RSO 1990, c.C.30, as amended

BETWEEN:

Yong Tai Construction Limited, Plaintiff – and – Unimac Group Ltd., and Trustees of the Mount Albert United Church Congregation of the United Church of Canada, Mount Albert, Ontario, Defendants

Counsel: No one appearing (for Plaintiff) Justin P. Baichoo, for the Defendants James W. MacLellan and Andrew Punzo, for added party Trisura Guarantee Insurance Company

Heard: March 14, 2017

DECISION FROM MOTION RE UNDERTAKINGS/REFUSALS

sutherland J.:

Overview

[1] This refusals motion engages an unusual issue: to what extent can an interested third party challenge a charging order motion?

[2] The unusual issue arises from the unusual circumstances of the ongoing litigation involving Unimac Group Ltd. (Unimac), BPR Litigation Lawyers (BPR), and Trisura Guarantee Insurance Company (Trisura). In my decision of July 26, 2016, I set out the factual context involving these three actors. A review of some of these facts is necessary to set the stage for this motion.

[3] Unimac worked as a general contractor on a construction project for Mount Albert United Church (Mount Albert). Trisura was Unimac’s surety insurer with respect to the project. Unimac executed an Indemnity Agreement in Trisura’s favour. Unimac brought on a number of subcontractors to complete the project; however, Mount Albert failed to make full payment. As a result, Unimac brought a claim against Mount Albert and a number of claims were brought against Unimac. Unimac retained BPR to handle these claims.

[4] Mount Albert posted a bond of $1,088,867.76 with the Superior Court of Justice to vacate the construction liens of Unimac and the subcontractors. Mount Albert later assigned and transferred any interest it may have in the bond to Unimac. After a number of settlements, court Orders, and payments, the amount posted was reduced to $757,318.40. These funds are at the root of the instant dispute between Unimac, BPR, and Trisura.

[5] BPR brought and obtained an ex parte charging order. BPR did not provide any notice to Trisura of its motion for a charging order. In my decision of July 26, 2016, I set aside the ex parte charging order without prejudice to BPR to bring its motion for a charging order on notice to Trisura. BPR accordingly seeks a charging order over the bond funds.

[6] Unimac consented to, and still consents to, a charging order in the amount of $879,646.96. Meanwhile, Trisura has commenced a separate action in Toronto claiming damages stemming from the Indemnity Agreement against Unimac, Leon Hui, and Mr. Hui’s group of companies. Here, Trisura challenges BPR’s charging order claim.

[7] In March 2016, Trisura cross-examined Leon Hui, a principal of Unimac, and Justin D’Aloisio, a lawyer for BPR, on their affidavits that BPR filed in support of its ex parte motion for a charging order. On the advice of BPR, Messrs. Hui and D’Aloisio refused to answer numerous questions posed to them on the grounds that the questions were irrelevant, already answered, or that the information sought was privileged. Trisura brings this motion to compel Messrs. Hui and D’Aloisio to answer many of these questions.

Charging Order Background

[8] As mentioned earlier, BPR initially sought a charging order over the funds by bringing a motion without notice to Trisura. Messrs. Hui and D’Aloisio filed affidavits in support of this motion. On February 2, 2016, Vallee J. granted BPR a charging order against the bond for the full amount sought of $879,646.96.

[9] On February 11, 2016, by order of Master Wiebe, Trisura was added as a party to the within action for the purpose of receiving notice of any steps to reduce the posted bond funds.

[10] On March 9 and 10 of 2016, Trisura’s counsel cross-examined Messrs. D’Aloisio and Hui on their affidavits, which resulted in the refusals that are the subject of this motion.

[11] On July 26, 2016, I set aside BPR’s charging order, finding that Unimac was obligated to provide notice to Trisura of its motion for a charging order against the bond.

[12] On October 12, 2016, I heard two motions: (a) BPR’s new charging order motion, brought with notice to Trisura, and (b) Trisura’s motion for priority of Trisura’s Personal Property Security Act registration over any charging order of BPR. With the agreement of Unimac/BPR and Trisura, it was decided to deal with the priority motion first and adjourn argument on the motion to December 19, 2016.

[13] On February 8, 2017, I released my decision dismissing Trisura’s priority motion.

[14] On March 1, 2017, a conference call was held to deal with the scheduling of BPR’s charging order motion. On the call, the parties agreed to use the cross-examinations of Messrs. D’Aloisio and Hui already conducted to adjudicate the issue of undertakings and refusals, rather than to conduct cross-examinations again on the charging order motion of BPR. Trisura has brought this motion to compel answers to the impugned refusals from Messrs. D’Aloisio and Hui.

Issues

[15] The two major issues raised are:

(a) Whether Trisura is entitled to cross-examine the deponents regarding the quantum of the charging order. (b) To what extent is the information sought by Trisura protected by privilege?

Positions of the Parties

1. Quantum

[16] Counsel for Unimac/BPR conceded during oral argument that Trisura is entitled to cross-examine the deponents on the issues concerning BPR’s entitlement to a charging order, but maintained that the quantum sought is irrelevant to the charging order claim. In Morse v. Fancy, 2016 ONSC 3950, Wilson J. clarified that the quantum of a charging order is a separate issue from the entitlement to a charging order. Therefore, Unimac/BPR argue, the deponents may at this stage properly refuse questions regarding the quantum of the charging order.

[17] Conversely, Trisura contends that it is entitled to question the deponents regarding the quantum of the charging order. As Perell J. described in Ontario v. Rothmans Inc., 2011 ONSC 2504, deponents may be cross-examined on issues on the particular motion or matters raised in their affidavit. As the quantum of the accounts which BPR rendered to Unimac was raised by the affidavits of Messrs. D’Aloisio and Hui, it is a proper question for cross-examination.

[18] Trisura also notes, as Misener J. laid out in Siskind, Cromarty, Ivey & Dowler v. Ross, Bennett & Lake, 1994 CarswellOnt 555, at para. 22 (Ont. Gen. Div.), that the quantum “charged against the property should be confined to fees and disbursements reasonably incurred in the pursuit of the recovery or the preservation in that proceeding.” Therefore, the issue of quantum is relevant on the motion for a charging order.

[19] Further, Trisura argues that charging orders are discretionary and courts must balance the circumstances and equities of each case and client, per Weig v. Weig, 2014 ONSC 643.

2. Privilege

[20] Unimac/BPR argue that many of the questions asked of Mr. D’Aloisio concerned information that was protected by solicitor-client privilege. As Mr. D’Aloisio is a lawyer with the firm representing Unimac, he is not the holder of the privilege and thus cannot disclose the content of confidential communications between Unimac and BPR. Further, per the Supreme Court of Canada and the Ontario Court of Appeal, a solicitor’s accounts, retainer agreements, and other similar documents are presumptively privileged.

[21] Unimac/BPR further argue that absolute privilege and the business judgment rule apply to protect the communications between them. Unimac/BPR contend that due to these principles, they are not obliged to provide any answer to the questions refused and have provided answers to the relevant questions.

[22] In support of its claim that “Trisura cannot seek answers that either violate solicitor-client privilege and/or absolute privilege”, Unimac/BPR direct this Court to Salasel v. Cuthbertson, 2015 ONCA 115.

[23] Unimac/BPR note that they have already provided Trisura with redacted dockets in respect of all of the accounts for which the charging order is sought as well as a copy of a retainer agreement between Unimac and BPR, dated September 22, 2013. Unimac/BPR say that privilege prevents them from disclosing any further information.

[24] On the other side, Trisura invokes Master Sproat’s decision in Soobrian v. Belair Insurance Company Inc., in which it was held that information which goes to the heart of the Court’s determination of a charging order are not subject to privilege. And, as noted in the Rules of Professional Conduct, a lawyer may disclose confidential information in order to establish or collect the lawyer’s fees. Therefore, privilege does not necessarily attach to documents which are fundamental to the issues on a charging order motion.

The Law on the Availability of Charging Orders

[25] The requirements for a charging order help define the appropriate scope of cross-examination on affidavits in support of a charging order motion. Charging orders may be granted in two instances: (a) under the Solicitors Act or (b) as an exercise of a Superior Court’s inherent jurisdiction.

[26] Section 34(1) of the Solicitors Act outlines when a solicitor’s charging order is available:

Charge on property for costs

34. (1) Where a solicitor has been employed to prosecute or defend a proceeding in the Superior Court of Justice, the court may, on motion, declare the solicitor to be entitled to a charge on the property recovered or preserved through the instrumentality of the solicitor for the solicitor’s fees, costs, charges and disbursements in the proceeding.

[27] Aside from statutory authority, superior courts have the inherent jurisdiction to grant a charging order over assets recovered or preserved through the instrumentality of a lawyer for a client and, further, the right to assess that the amounts charged are fair and reasonable.

Analysis

1. Quantum

[28] For the reasons that follow, I find that questions regarding the quantum of the charging order sought were, generally, properly put to the deponents, Messrs. D’Aloisio and Hui. The questions where refusals were given on the grounds that quantum is irrelevant and should be answered, subject to my comments on privilege below.

[29] I agree with Wilson J. that the entitlement to a charging order is a distinct issue from the issue of quantum; however, I find that quantum is a relevant issue in the circumstances of this case.

[30] As the Court of Appeal said in Taylor v. Taylor, and which was later applied by this court in Weig, courts are required to balance the equities of each case when considering whether to grant a charging order. Normally, the balancing considers only the equities of the client and the claiming solicitor, as they are the only interested parties; however, as I found in my decision of July 26, 2016, the third party Trisura has an interest in the funds. This interest, and the fairness owed to it, should be considered.

[31] Even if BPR is entitled to a charging order in some amount, this entitlement should not be stretched to cover any amount BPR wishes. As Unimac has transferred its interest in the funds to Trisura through the Indemnity Agreement, granting a blanket charge over the funds would tie up any funds of which Trisura is entitled to a pay-out. Unlike a simple dispute between a lawyer and client, Trisura is not responsible for paying BPR, and, therefore, its interest should not be infringed because Unimac chose not, or was unable, to pay BPR and that Unimac chose not to contest BPR’s request for a charging order. Though proof that the quantum claimed is reasonable is not a requirement to establishing entitlement to a charging order; fairness requires that Trisura be able to challenge the quantum of the charging order sought by BPR in the circumstances.

[32] I am inclined to agree with Misener J., and find that any quantum charged in the present case should be confined to reasonably incurred fees and disbursements. Moreover, as Perell J. stated in Thomas Gold Pettinghill LLP v. Ani-Wall Concrete Forming Inc., 2012 ONSC 2182, “a superior court has an inherent jurisdiction to review lawyers’ accounts entirely apart from any statutory authority and that inherent jurisdiction is not subject to a time limit.” Given the unique circumstances of this case and Trisura’s interest based on the Indemnity Agreement, Trisura is entitled to question whether the $879,646.96 claimed by BPR was reasonably incurred.

2. Privilege

[33] While Trisura is entitled to question BPR’s entitlement to a charging order and the appropriate amount to be charged, they are not able to compel Messrs. D’Aloisio and Hui to disclose information protected by solicitor-client privilege. However, despite Unimac’s/BPR’s position to the contrary, that privilege does not extend to protect all the information found in its work in progress reports (WIP reports).

[34] As laid out by the Supreme Court of Canada in R. v. McClure, 2001 SCC 14, solicitor-client privilege only attaches to confidential communications between lawyer and client where the latter seeks legal advice. Therefore, for example, the fact that a lawyer filed a factum with a court is not privileged because its existence was not meant to be confidential. Where the cost of creating such a factum is included in a charging order sought, a party challenging the charging order motion is entitled to obtain information on the work performed and the time spent to do such work.

[35] However, in my opinion, Trisura is not entitled to any information that falls within solicitor-client privilege, such as instructions received by the solicitor from the client. BPR is permitted to redact its dockets in order to protect solicitor-client privilege, but the redactions on the version provided to Trisura were too extensive. The redactions that remove the description of the work performed, in my opinion, do not fall within the solicitor-client privilege that mandates redaction for the purposes of this motion, being the obtaining of a charging order. Having reviewed the Ontario Court of Appeal decision in Salasel v. Cuthbertson, 2015 ONCA 115, I fail to understand Unimac’s/BPR’s submission on how absolute privilege applies in the circumstances of this case. The facts of this case revolve around a charging order request of BPR and the accounts rendered and services charged to Unimac. Brown J.A. in Salasel defined absolute privilege as follows:

[36] The doctrine of absolute privilege contains several basic elements: no action lies whether against judges, counsel, jury, witnesses or parties, for word spoken in the ordinary course of any proceedings before any court or judicial tribunal recognised by law…

[37] There is no action in the present case that falls within the definition of absolute privilege. I consequently find that absolute privilege does not apply in the circumstances of this case.

[38] Turning to Unimac’s/BPR’s submissions on the business judgment rule, I adopt the definition of the rule as described by Blair J. in CW Shareholdings Inc. v. WIC Western International Communications Ltd. [Commercial List]):

[39] This rule is an extension of the fundamental principle that the business affairs of a corporation are managed by or under the direction of its board of directors. It operates to shield from court intervention business decisions which have been made honestly, prudently, in good faith and on reasonable grounds. In such cases, the board’s decisions will not be subject to microscopic examinations and the court will be reluctant to interfere and to usurp the board of director’s function in managing the corporation.

[40] Insofar as any questions of Trisura concern business judgment decisions of Unimac or Leon Hui, they will not be permitted.

[41] I will now turn to the refused questions.

3. The Refused Questions

[42] Trisura contends that there are 131 refused questions from the cross-examination of Justin D’Aloisio and 33 refused questions from the cross-examination of Leon Hui. I do not intend to review each question. I will adopt the approach put forth by Trisura that the subject areas of the questions will be examined to determine if these areas can be questioned on by Trisura.

[43] On the different actions that form part of the amounts being claimed in the charging order, Trisura can ask questions concerning the work involved, the time spent, the amounts charged, the disbursements incurred, accounts rendered and if any payments were received on the accounts rendered for the actions which from part of the charging order request, either from Unimac directly or through any third party sources, such as payment of any cost awards.

[44] Trisura can also ask questions concerning the entitlement of the charging order which includes the instrumentality of the services provided to preserve the bond funds paid into court for the benefit of Unimac and any retainer agreements executed by Unimac for the services to be provided by BPR that for part of the charging order request.

[45] The questions pertaining to what work was not done, I find, are irrelevant to the issue of the work claimed that forms part of the charging order request.

[46] For clarity, questions relating to communications between solicitor and client on instructions by Unimac or on the accounts themselves are not permitted because such questions, in my opinion, contravene solicitor-client privilege.

[47] Any question that seeks answers to the decision made by Unimac to defend an action, to settle or not settle an action, or to bring or defend a motion, I find, are irrelevant and violate the business judgment rule.

Disposition

[48] Therefore, I find that many of the questions refused are to be answered as described in the general findings on the scope of the areas and questions that may be asked by Trisura. The WIP reports submitted by Unimac/BPR are overly redacted and do not indicate the work performed. These WIP reports are to be sent to Trisura within 10 days of this decision with only redacted matters that may from part of solicitor-client privilege that is confidential communication between solicitor and client or client information that is not already public. The description of the services performed on the WIP report I do not find violates solicitor and client privilege.

[49] Any and all retainer agreements executed by Unimac and/or Leon Hui that form part of the services requested in the charging order are to be provided to Trisura. The accounts rendered are to be provided to Trisura, redacted of any solicitor and client communication, instructions or client information that is not already public.

[50] If further clarification on my decision is required by either party, a conference call for such clarification may be scheduled through my judicial assistant with a description of the purpose of the call and any questions that need to be clarified or answered.

[51] Costs of this motion reserved to me to determine with the charging order motion.

Justice P.W. Sutherland

Released: April 10, 2017