Cooke Aquaculture Inc. v. Continental Casualty Company
CITATION: Cooke Aquaculture Inc. v. Continental Casualty Company, 2017 ONSC 5073
COURT FILE NO.: CV-15-00530714
MOTION HEARD: 20170530, 20170731
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Cooke Aquaculture Inc. and True North Salmon Company, Plaintiffs
AND:
Continental Casualty Company carrying on business as CNA Canada, Defendant
BEFORE: Master B. McAfee
COUNSEL: C. Hammond (Day 1) and J. Manson (Day 2), Counsel for the Moving Parties, the Plaintiffs
A. Korottchenko, Counsel for the Responding Party, the Defendant
HEARD: May 30, 2017 and July 31, 2017
REASONS FOR DECISION
Nature of Motion
[1] This is a motion brought by the plaintiffs Cooke Aquaculture Inc. and True Salmon Company (collectively Cooke) for answers to refusals given on the examination for discovery of Mr. Randall, claims adjuster, a representative of the defendant Continental Casualty Company carrying on business as CNA Canada (CNA) held on June 21, 2016.
The Action
[2] The plaintiff Cooke Aquaculture Inc. is a corporation incorporated pursuant to the laws of Canada with offices in the Atlantic Provinces. The plaintiff True North Salmon Company (True North) is a subsidiary of Cooke. Cooke carries on business in fish farming in the Atlantic Provinces.
[3] CNA is a corporation incorporated pursuant to the laws of Canada and carries on business as an insurer providing property and marine insurance.
[4] At the material times CNA issued a policy of marine insurance to Cooke.
[5] Cooke alleges that it suffered a loss on or about June 21, 2013, when fish that were harvested from sea pens in the Atlantic Ocean being transported by vessel in refrigerated holds were exposed to contaminated ice flakes during transit. It is alleged that as a result of the contamination a loss of $298,876.11 was sustained. A claim to CNA was submitted under the policy for this amount less the deductible.
[6] CNA denied coverage on the basis that inter alia the loss was not covered under the policy pursuant to the following exclusion clause:
- Process Clause
This insurance remains in full force while the subject matter insured is under any process but in no case shall extend to cover loss and/or damage thereto solely caused by such process or resulting directly therefrom.
[7] The within action was commenced on June 18, 2015. The statement of defence is dated July 27, 2015.
The Refusals
Category No. 1: Robin Beckett Refusals - Refusal Nos.1, 2 (save with respect to the underwriting file), 3 and 10
[8] Refusal no. 1 asks that CNA advise who the underwriter at CNA would have discussed the policy with at Marsh in 2008, and to provide any notes made with respect to these discussions, specifically the voyage clause.
[9] On February 27, 2017, CNA’s counsel advised that the underwriter was Robin Beckett, who is no longer employed with CNA and that there are no further documents.
[10] A witness giving evidence at an examination for discovery on behalf of a corporation must make reasonable inquiries of fellow servants of the corporation, which could include individuals who were previous employees of the corporation unless it would be unreasonable to do so (Air Canada v. McDonnell Douglas Corp., 1995 7147 (ON SC), 1995 CarswellOnt 839 (Ont.S.C.J.–Master) at paras. 50-56).
[11] There is no evidence before me to satisfy me that it would be unreasonable for CNA to make inquiries of Mr. Beckett.
[12] In Sky Solar (Canada) Ltd. v. Economical Mutual Insurance Co., 2015 ONSC 4714 (Ont. S.C.J.) at para. 47, Justice Di Tomaso found that documents and information received in relation to the issuance of a policy of insurance are relevant to the court’s interpretation of the insured’s operations as underwritten by the insurer.
[13] The question is relevant based on the pleadings and in particular based on paragraphs 10, 12 and 16 of the statement of claim and paragraphs 10-15 of the statement of defence.
[14] With respect to refusal no. 1, CNA has not made inquiries of Mr. Beckett to determine who at Marsh Mr. Beckett would have discussed the policy or whether Mr. Beckett has any notes. Refusal no. 1 shall be answered.
[15] With respect to refusal no. 2, save for the underwriting file, and refusal nos. 3 and 10, the refusals shall be answered for reasons given with respect to refusal no. 1.
Category No. 2: Underwriting File - Refusal No. 2 (re: underwriting file)
[16] Following the first day of the motion, CNA confirmed that the underwriting file has been lost. This category was not pursued further.
Category No. 3: Legal Opinion - Refusal Nos. 6, 7, 8 and 9
[17] In this category of refusals, Cooke seeks production of a coverage opinion/legal advice received by CNA from its legal counsel. If refusal no. 7 is ordered to be answered, refusal nos. 6, 8 and 9 are subsumed in refusal no. 7.
[18] As part of Mr. Randall’s examination of the claim, he obtained a legal opinion on the definition of processing. The claim was denied because CNA determined that the loss was a result of the processing which was excluded under the policy.
[19] CNA refuses to answer the refusals on the basis of relevance and solicitor and client privilege.
[20] CNA’s counsel confirms that CNA is not relying on the legal opinion at trial.
[21] In Creative Career Systems Inc. v. Ontario, 2012 ONSC 649 (Ont.S.C.J.) the plaintiffs sued the Provincial government for refusing to register private career colleges under the relevant statute. The plaintiffs alleged negligence, misfeasance of public office and bad faith. The government officials responsible for making the decision received legal advice before deciding on the applications for registration. The plaintiffs sought production of the legal advice received by the government. Justice Perell held that solicitor and client privilege had not been waived and set out the following analysis:
A party will be deemed to have waived privilege on grounds of fairness and consistency when he or she makes their communication with a lawyer an issue in the proceeding: 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 (Ont.Div.Ct.); Leadbeater v. Ontario, supra at para. 32; Guelph (City) v. Super Blue Box Recycling Corp., 2004 34954 (ON SC), [2004] O.J. No. 4468 (Ont.S.C.J.) at paras. 77-100.
Thus, if a party places its state of mind in issue with respect to its claim or defence and has received legal advice to help form the state of mind, privilege will be deemed to be waived with respect to such legal advice: Bank Leu AG v. Gaming Lottery Corp., [1999] O.J. No. 3949 (Ont.S.C.J.) at paras 5-11; Toronto Dominion Bank v. Leigh Instruments Ltd. (Trustee of) (1997), 1997 12113 (ON SC), 32 O.R. (3d) 575 (Ont.Gen.Div.[Commercial List]); Woodglen & Co. v. Owens (1995), 1995 7070 (ON SC), 24 O.R. (3d) 261 (Ont.Gen.Div.); Lloyds Bank Canada v. Canada Life Assurance Co. (1991), 47 C.P.C. (2d) 157 (Ont.Gen.Div.).
There is, however, a subtle and profound point here about when a party must answer questions about the occurrence of legal advice in the factual narrative of a case. The subtle and profound point is that there is no waiver of the privilege associated with lawyer and client communications from the mere fact that during the events giving rise to the claim or defence, the party received legal advice, even if the party relied on the legal advice during the events giving rise to the claim or defence. For a party to have to disclose the legal advice more is required.
In Doman Forest products Ltd. v. GMAC Commercial Credit Corp. – Canada, 2004 BCCA 512 (B.C.C.A.), a case about whether privilege associated with legal advice had been waived, Justice Smith points out at para. 28 that it is not enough to constitute waiver that a pleading puts a party’s state of mind in issue and that its state of mind might have been influenced by legal advice, there must be the further element that the state of mind involves the party understanding its legal position in a way that is material to the lawsuit. In other words, the presence or absence of legal advice itself must be material to the claims or defence to the lawsuit. The materiality of the legal advice to the claims or defences in the law suit makes questions about it relevant.
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 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, 2009 MBCA 80 (Man.C.A.), Justice Steel made the point neatly at para. 27, where he stated:
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.
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.
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. Justice Corbett stated:
[M]ere disclosure of the receipt and reliance upon legal advice in the discovery process is not sufficient to give rise to waiver of privilege. Where the reliance on the legal advice will be relied upon at trial in respect to a substantive issue between the parties is another matter. That is covered by “waiver by reliance.” But mere disclosure, by itself, of that legal advice was received and followed to explain why a party did something should not be sufficient, by itself, for a waiver of privilege. …
However, solicitor-client privilege is not waived by disclosing that a solicitor’s advice was obtained. It is waived when the client relies upon the receipt of advice to justify conduct in respect of an issue at trial. …
Privilege can be claimed regardless of the opposite party’s allegations. However, when faced with a claim of bad faith, a party who responds by relying on good faith conduct as a result of following legal advice will thereby waive its privilege: Sovereign General Insurance Co. v. Tanor Industries, 2002 ABQB 101, [2002] A.J. No. 107; where a party attempts to justify its position “on grounds of detrimental reliance upon the legal advice received,” it waives privilege associated with that legal advice; Davies v. American Home Assurance Co. (2002), 2002 62442 (ON SCDC), 60 O.R. (3d) 512 (Div.Ct.).
It remains Guelph’s choice as to whether it will rely upon the legal advice it sought and received as evidence of its lack of bad faith, its good faith, and/or its acting in the public interest. …
…[I]t is irrelevant whether Guelph received and followed legal advice on these issues. It is only to the extent that Guelph relies upon the fact that it received legal advice on these topics to establish its good faith that privilege will be waived on the basis of reliance. Mere disclosure that legal advice was received on the topic, by itself, does not give rise to waiver on the subject matter at hand. … The fact that [the legal department] was fully involved in the “process” establishes relevance, but not a waiver of privilege. The fact that legal advice was sought, obtained and relied upon, as a matter of fact, is not sufficient to give rise to waiver. …
[22] I am not satisfied that the legal advice is relevant or material. The issue in this action is whether the facts giving rise to the loss fall within the exclusionary clause. The legal advice received by CNA does not tend to prove or disprove any fact about how the fish came into contact with the ice, or the oil, and subsequently became damaged. The legal advice received by CNA does not tend to prove or disprove whether the interpretation of the process clause was correct or incorrect. What a lawyer may have advised CNA about how the clause should be interpreted or how processing is defined, does not tend to prove or disprove any material fact. The facts as proven and the court’s interpretation of the policy will show whether CNA was right or wrong. The fact that CNA received legal advice about whether Cooke’s loss was solely caused or resulted directly from processing is not relevant to the issue of whether, in fact, Cooke’s loss was solely caused or resulted directly by the processing (see Creative Career at paras. 33-35).
[23] There are no allegations of bad faith. CNA does not rely on the legal advice as a substantive element of its defence. CNA will not be relying on the legal advice at trial.
[24] In my view there has been no waiver of solicitor and client privilege in the case before me.
[25] The refusals in this category need not be answered.
Category No. 4: External Cause/Adjuster’s Knowledge - Refusal Nos. 4 and 5
[26] Cooke is no longer pursuing refusal no. 4.
[27] I am satisfied that refusal no. 5 is relevant based on the pleadings and in particular based on paragraphs 10 and 16 of the statement of claim and paragraphs 10 and 11 of the statement of defence. The question does not call for a legal conclusion. It goes to Mr. Randall’s understanding of what is needed to trigger clause 19, which was CNA’s basis for denying the claim. Refusal no. 5 shall be answered.
Category No. 5: Other Claims – Refusal Nos. 11 and 12
[28] I am satisfied that refusal nos. 11 and 12 are relevant based on the pleadings and in particular based on paragraphs 10 and 16 of the statement of claim and paragraphs 10 and 11 of the statement of defence. CNA’s coverage positions taken on similar claims inform the court as to the proper interpretation of the policy, demonstrate CNA’s knowledge of the insured’s operations and the scope of the policy and exclusionary clauses.
[29] Refusal no. 12 was partially answered on January 6, 2017:
The cargo/fish was damaged while on board the vessel Pia Jose due to refrigeration failure during transit. There was a certificate showing that cargo was sound prior to loading and damages were noted/cargo tested after discharge. The loss was covered as per policy wording.
[30] Refusal no. 12 has not been fully answered. The answer does not address the difference between the two claims.
[31] Refusal no. 11 and refusal no. 12, to the extent refusal no. 12 has not been answered, shall be answered.
Costs
[32] If any party seeks costs and, if after reasonable attempts to resolve the issue of costs, the parties are unable to agree on costs, any party seeking costs shall serve and file written submissions on costs of three pages or less, together with copy of the party’s costs outline, on or before October 16, 2017. Any responding submissions shall also be three pages or less and served and filed, together with a copy of the party’s costs outline, on or before October 27, 2017. Any reply submissions shall be one page or less in length and served and filed on or before November 1, 2017. All submissions shall be filed at 393 University Avenue, 6th floor by hand (not fax) and shall be accompanied with an affidavit of service.
Summary of Order
[33] Order to go as follows:
Refusal nos. 1, 2 save with respect to the underwriting file, 3, 10, 5, 11 and 12, to the extent that refusal no. 12 has not been answered, from the examination for discovery of a representative of CNA held on June 21, 2016, shall be answered.
Refusal nos. 6, 7, 8, 9 from the examination for discovery of a representative of CNA held on June 21, 2016, need not be answered.
Master B. McAfee
Date: September 11, 2017