Court File and Parties

COURT FILE NO.: CV-14-00516951 MOTION HEARD: 20170317 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Gabriella Brockie, Renato Minuti, Pat Lamanna, Jessica Pastorek in her capacity as executor of the Estate of John Pastorek, Manuel Fiuza, Vince Scioli, Phil Dimeo, Elisa Rocca in her capacity as executor of the Estate of Lee Rocca and Joe Spagnolo, Plaintiffs

AND:

Continental Casualty Company (CNA), Temple Insurance Company, Aviva Insurance Company of Canada, XL Reinsurance America Inc. and Encon Group Inc., Defendants

BEFORE: Master B. McAfee

COUNSEL: Gaetana Campisi, for the Moving Parties, the Defendants, Continental Casualty Company (CNA), Temple Insurance Company, Aviva Insurance Company of Canada and XL Reinsurance America Inc. Rory Barnable, for the Responding Parties, the Plaintiffs

HEARD: March 17, 2017

Reasons for Decision

[1] This is a motion brought by the defendants for answers to questions refused on the examination for discovery of the plaintiff Gabriella Brockie. The plaintiffs refused to answer the questions on the basis of relevance, on the basis that one of the refusals had been answered and on the basis of solicitor-client, litigation and common interest privilege.

[2] Plaintiffs’ counsel confirmed that he provided a copy of the notice of the motion and the refusals chart to all other parties to the joint defence agreement in advance of the initial return date of this motion. No other parties to the joint defence agreement attended to oppose the motion or otherwise requested that the motion be adjourned.

[3] The action was commenced on November 26, 2014. The plaintiffs are current or past directors of an association known as the Residential Low-Rise Forming Contractors Association of Metropolitan Toronto and Vicinity (the Association). The Association is an association of forming contractors who are retained by builders and general contractors to pour basement foundation walls for low-rise residential buildings. The plaintiffs claim damages as a result of the defendants’ failure to pay legal fees with respect to a Competition Bureau investigation/inquiry.

[4] On or about April 11, 2011, Supreme Insurance Brokers Inc. arranged for a Non-Profit Entity Management Liability Insurance Policy issued by Encon Group Inc. as the duly authorized agent on behalf of four subscribing insurers: the defendants Continental Casualty Company (CNA), Temple Insurance Company, Aviva Insurance Company of Canada and XL Reinsurance America Inc.. The action against Encon was discontinued on or about June 23, 2016.

[5] The Association is the named insured entity under the terms of the policy. The policy covers claims for a D & O Wrongful Act. The policy excludes coverage for claims that arise outside of the director and/or officers’ discharge of duties in relation to the Association.

[6] The plaintiffs retained counsel to assist them with the Competition Bureau investigation/inquiry. The defendants indemnified the plaintiff Joe Spagnolo for 50% of his legal costs on the basis that the allegations in the Information did not exclusively relate to his activities as director and/or officer of the Association.

[7] The issue in this action is whether the balance of the legal fees incurred by the plaintiff Joe Spagnolo and the legal fees incurred by the other plaintiffs are covered under the policy.

[8] The defendants’ position is that legal fees at issue are not the result of a “claim” as defined in the policy, that the allegations against the plaintiffs Renato Minuti and Joe Spagnolo, relate to their involvement in other organizations and did not arise “in discharge of their duties solely in their capacity with the entity” and that the legal costs were costs that relate to the plaintiffs’ capacity outside of their director and/or officer roles with the Association. It is the defendants’ position that the legal costs at issue at not covered under the policy for these reasons.

[9] As set out in my endorsement dated February 8, 2017, I found that refusal numbers 3 to 11 are relevant. The plaintiffs took the position that refusal number 2 had been answered. I found that best efforts to answer refusal number 2 had not been made and ordered best efforts to be made. The issue of privilege was argued on March 17, 2017. What follows are my reasons on the issue of privilege.

[10] The plaintiffs argue that refusal numbers 3 to 11 are subject to solicitor-client privilege. The defendants are in agreement that refusal numbers 3 to 11 are subject to solicitor-client privilege but argue that solicitor-client privilege has been waived.

[11] In the recent decision of Leone v. Flexity Solutions Inc., 2017 ONSC 1536 (Ont. S.C.J.) Justice Kristjanson states as follows at paragraph 12:

The Supreme Court of Canada has repeatedly held that solicitor-client privilege is a substantive rule of law, and “must be as close to absolute as possible to ensure public confidence and retain relevance. As such, it will only yield in certain clearly defined circumstances, and does not involve a balancing of interests on a case-by-case basis”: R. v. McClure, 2001 SCC 14, 195 D.L.R. (4th) 513, at para 35. In Ontario (Ministry of Correctional Services) v. Goodis, 2006 SCC 31, 271 D.L.R. (4th) 407, at paras. 20-21, the court made it clear that communications protected by privilege should be disclosed only where “absolutely necessary”, applying “as restrictive a test as may be formulated short of an absolute prohibition in every case.” As a result, motions for production of solicitor-client privileged information based on discovery answers must be clearly evaluated.

[12] In Woodglen & Co. v. Owens, [1995] O.J. No. 1941 (Ont. Gen. Div.) Justice E. Macdonald discusses waiver of privilege and at paragraph 31 cites Sopinka, Lederman, Bryant, The Law of Evidence in Canada (Markham: Butterworths Canada Ltd., 1992) at pp. 666-68:

It has also been said that clear intention is not in all cases an important factor. In some circumstances, waiver may occur even in the absence of any intentions to waive the privilege. There may be waiver by implication only.

As to what constitutes waiver by implication, Wigmore [Wigmore on Evidence (McNaughton rev., 1961), vol. 8 at para 2327, pp. 635-36, quoted in Hunter v. Rogers, [1982] 2 W.W.R. 189 at p. 191, 34 B.C.L.R. 206, sub nom. Rogers v. Hunter (S.C.)] said:

Judicial decision gives no clear answer to this question. In deciding it, regard must be had to the double elements that are predicated in every waiver, i.e., not only the element of implied intention, but also the element of fairness and consistency. A privileged person would seldom be found to waive, if his intention not to abandon could alone control the situation. There is always also the objective consideration that when his conduct touches a certain point of disclosure, fairness requires that his privilege shall cease whether he intended that result or not. 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.

Whether intended or not, waiver may occur when fairness requires it, for example, if a party has taken positions which would make it inconsistent to maintain the privilege…

The notion of fairness has also been invoked as a basis for waiver when the party directly raises in a pleading or proceeding the legal advice that he or she received, thereby putting that advice in issue. Similarly, if a client denies that he or she gave instructions to the lawyer to settle a debt, the other party who is seeking to enforce the settlement is free to examine the lawyer on what was said between the lawyer and the client.

The extent and nature of legal advice received by a party can be put in issue when that party alleges that he or she possessed a particular state of mind as, for example, reliance upon the defendant’s representations. If the defence is that the plaintiff had relied upon his or her own legal advice on the question, then such legal advice must be disclosed…

Professor Gary D. Watson has suggested that future cases may view the issue differently:

It seems reasonably clear that the “fairness” test has emerged as the relevant principle for determining when solicitor and client privilege is waived by conduct in the course of litigation. While the courts have not yet clearly embraced the view that unilateral assertion of an issue by one party can lead to compulsory disclosure of the adverse party’s solicitor-client communications, do not be surprised if the law moves in this direction; ultimately, the fairness test may be interpreted as meaning that solicitor-client privilege is waived whenever the communications between the solicitor and the client are legitimately brought in issue in the action.

[13] In Leadbeater v. Ontario, [2004] O.J. No. 1228 (Ont. S.C.J.) at paragraphs 32 and 51, Justice Spence states as follows with respect to waiver of solicitor-client privilege:

[32] Waiver of solicitor-client privilege may occur even in the absence of any intention to waive the privilege. Privilege will be deemed to have been waived where the interests of fairness and consistency so dictate or when a communication between a solicitor and client is legitimately brought into issue in an action. Ground J. stated the following in Bank Leu AG v. Gaming Lottery Corp. (1999), 43 C.P.C. (4th) 73 (Ont. S.C.J.) at p. 77, affd (2000), 132 O.A.C. 127 (Div.Ct):

Privilege may be waived expressly or impliedly. In the case at bar it is not disputed that there was no express waiver of privilege by GLC. When determining whether privilege should be deemed to have been waived, the court must balance the interests of full disclosure for purposes of a fair trial against the preservation of solicitor client and litigation privilege. Fairness to a party facing a trial has become a guiding principle in Canadian law. Privilege will be deemed to have been waived where the interests of fairness and consistency so dictate or when a communication between a solicitor and client is legitimately brought into issue in an action. When a party places its state of mind in issue and has received legal advice to help form that state of mind, privilege will be deemed to be waived with respect to such advice.

[51] The principle that solicitor-client privilege is deemed waived when a party has placed its state of mind of knowledge in issue is a particular application of the broader principle that waiver may occur when fairness requires it. Courts have recognized that the issue of fairness to the party facing a trial has become one of the guiding principles that determine what constitutes waiver by implication or deemed waiver: Woodglen & Co. v. Owens (1995), 24 O.R. (3d) 261, 38 C.P.C. (3d) 361 (Gen. Div.) at pp. 270-71; Froates v. Spears, [1999] O.J. No. 77 (QL), 88 O.T.C. 395 (Gen. Div.) at paras 11-12; J. Sopinka, S.N. Lederman and A.W. Bryant, The Law of Evidence in Canada, 2nd ed. (Toronto: Butterworths, 1999) at p. 758, 14.102.

See also Roynat Capital Inc. v. Repeatseat Ltd., 2015 ONSC 1108 (Ont. Div.Ct.) at paragraphs 1, 32-84 and Leone v. Flexity Solutions Inc., 2017 ONSC 1536 at paragraphs 20 and 21).

[14] I have considered the plaintiffs’ claim of solicitor-client privilege with the above principles in mind.

[15] The plaintiffs argue there are alternative means to obtain the information without waiving solicitor-client privilege, such as bringing a WAGG motion or asking further questions on discovery. I disagree. The plaintiffs are claiming that all of their legal costs are covered under the insurance policy. The Competition Bureau file would not contain all of the information sought. Further, the plaintiffs refused to answer the questions on the basis of relevance and privilege. Given the position taken by the plaintiffs on this motion, I am not satisfied that asking further questions would result in answers being provided without objection.

[16] I am satisfied that in the circumstances of this particular case, solicitor-client privilege has been waived. The plaintiffs are taking a position that is inconsistent with the maintenance of solicitor-client privilege. The plaintiffs are seeking reimbursement of legal costs on the basis that all of the legal costs incurred are covered under the policy. The plaintiffs have directly put in issue in this action the nature of the legal costs incurred and whether such legal costs fall within coverage. As a matter of fairness, in these circumstances, solicitor-client privilege has been waived.

[17] In the event that solicitor client privilege is found to have been waived, the plaintiffs refuse to answer refusal numbers 3 to 11 on the basis of litigation privilege. The plaintiffs also refuse make best efforts to answer refusal number 2 on the basis of the litigation privilege.

[18] In Blank v. Canada (Minister of Justice), 2006 SCC 36 (S.C.C.) the following is stated at paragraph 36:

I therefore agree with the majority in the Federal Court of Appeal and others who share their view that the common law litigation privilege comes to an end, absent closely related proceedings, upon the termination of the litigation that gave rise to the … privilege…

[19] The Competition Bureau investigation/inquiry ceased on or about January 9, 2014. I was not referred to any evidence concerning any ongoing investigation/inquiry. The underlying proceeding concerned possible conspiracy breaches for price fixing under the Competition Act, R.S.C., 1985, c.C-34. The present action is brought for indemnity for legal costs relating to the Competition Bureau investigation/inquiry. The litigants do not remain “locked in what is essentially the same legal combat” and the within action does not raise issues common to the Competition Bureau investigation/inquiry nor share its essential purpose (see Blank at paragraphs 34-39). I am not satisfied that refusal numbers 2 to 11 are subject to litigation privilege.

[20] The plaintiffs also assert common interest privilege over the answers to the refusals as a result of a joint defence agreement that was in place with respect to the Competition Bureau investigation/inquiry. The plaintiffs rely on GMAC Commercial Credit Corp. Canada v. Lucas, [2005] O.J. No. 133 (Ont. Master) in support of their position that the refusals are subject to common interest privilege. In GMAC the plaintiff sought an order for production of a joint defence agreement between the defendants to that action. In the within action, the defendants take no position with respect to the Competition Bureau investigation/inquiry that was jointly defended by the plaintiffs. The defendants are not adverse to the plaintiffs’ joint defence of the Competition Bureau investigation/inquiry. As noted above, the other parties to the joint defence agreement who are not plaintiffs did not respond to this motion. I am not satisfied that refusal numbers 2 to 11 are subject to common interest privilege.

[21] As noted above, I previously determined that refusal numbers 3 to 11 are relevant and determined that best efforts to answer refusal number 2 had not been made. Having now determined that solicitor-client privilege has been waived and that litigation or common interest privilege are not applicable, the refusals shall be answered.

[22] In the event that the refusals were ordered to be answered, the plaintiffs seek a sealing order with respect to the answers. The plaintiffs request that the answers not be filed in a public court file without being sealed. The defendants do not oppose. On an unopposed basis, an order shall go that if any answers to the refusals are required to be filed with the court, the answers shall be sealed, subject to further order of the court. If answers to the refusals are to be filed with the court, the parties shall bring this order to the attention of the filing clerk at the time of filing.

[23] If any party seeks costs and if after reasonable attempts to agree on costs the parties are unable to agree, the parties may schedule a re-attendance before me. Any re-attendance shall be scheduled, not necessarily heard, on or before August 1, 2017.

Master B. McAfee Date: May 30, 2017