Court File and Parties

COURT FILE NO.: CV-15-543551

MOTION HEARD: 20180612

REASONS RELEASED: 20180621

SUPERIOR COURT OF JUSTICE – ONTARIO

BETWEEN:

METROPOLITAN TORONTO CONDOMINIUM CORPORATION NO. 1033, TORGAN MANGEMENT INC. and 238755 ONTARIO INC.

Plaintiffs

• and-

TORONTO HYDRO-ELECTRIC SYSTEM LIMITED, TOROMONT INDUSTRIES LTD./INDUSTRIES TOROMONT LTEE, WINMAR FRANCHISE CORP., WINMAR MARKHAM/TORONTO EAST, ADRIAN CARTWRIGHT ELECTRIC LTD., A.N. C. ELECTRIC, CONTROL FIRE SYSTEMS LIMITED and JOHN DOE CONTRACTOR(S)

Defendants

BEFORE: MASTER M.P. McGRAW

COUNSEL: M. Mandelker E-mail: mmandelker@mcr.law -for the Plaintiffs

G. Mens E-mail: Geoff.mens@nortonfullbright.com -for the Defendant Toronto Hydro-Electric System Limited

REASONS RELEASED: June 21, 2018

Reasons For Endorsement

I. Background

Introduction

[1] This action arises from an explosion and fire on December 27, 2013 at 1466 Bathurst Street in Toronto, a commercial and residential property owned, operated and/or managed by the Plaintiffs (the "Property"). The Plaintiffs commenced this action by Statement of Claim issued on December 24, 2015.

[2] On or about June 6, 2016, the Plaintiffs brought an ex parte motion in writing and obtained the Order of Master Brott dated June 22, 2016 extending the time to serve their Statement of Claim to December 31, 2016 (the "Extension Order"). The Plaintiffs served the Statement of Claim on the Defendant Toronto Hydro-Electric System Limited ("TH") on December 20, 2016.

[3] On or about July 28, 2017, TH brought a motion to set aside the Extension Order (the "Set Aside Motion"). On this motion before me, the Plaintiffs seek to compel TH to answer refusals arising from cross-examinations on 2 affidavits filed in support of the Set Aside Motion. The refusals relate primarily to an inspection of the damaged equipment (the "Equipment") by Robert Glavonov of TH on the day of the explosion (the "Inspection") and a "Cause and Origin" engineering report prepared by TH dated March 4, 2014 (the "Report) together with related documents and correspondence.

[4] The Plaintiffs face serious consequences on the Set Aside Motion. If they are unsuccessful, their claim as against TH will be effectively barred. However, the Plaintiffs' motion before me is a refusals motion on cross-examinations within a service motion where the information sought by the Plaintiffs (some of which may not exist) relates to only 1 of numerous issues on the Set Aside Motion. Further, as with many refusals motions, it was apparent from the outset that the Plaintiffs were taking an overly broad approach to relevance and entitlement while the Defendants were taking a very narrow one. In this context, proportionality and the principles set out at Rule 1.04 have heavily influenced this Court's approach to this motion.

[5] Accordingly, significant case management was provided with a view to resolving and narrowing as many issues as possible. While these efforts, together with discussions between counsel, resulted in some narrowing of the issues, the parties were ultimately unable to resolve all disputed issues with respect to the information sought by the Plaintiffs. The agreements and narrowed issues are set out below.

The Action, the Extension Order and the Set Aside Motion

[6] In this action, the Plaintiffs claim damages of $500,000 for significant electrical damage and an extended power outage resulting from the explosion which occurred in the pull room at the Property (the "Pull Room") where the electrical equipment (the "Equipment") is located. The Plaintiff alleges that, among other things, TH failed to properly construct, operate, monitor and maintain the Pull Room and the Equipment.

[7] The grounds for the Set Aside Motion, as set out in TH's Notice of Motion, include the following:

(i) prior to serving their Statement of Claim, the Plaintiffs did not deliver a demand for payment to Toronto Hydro, nor was Toronto Hydro notified of the existence of any claim until on or about December 16, 2016;

(ii) at paragraph 6 of the affidavit of Valerie Stiso sworn June 6, 2016, filed in support of the Plaintiffs' motion in writing for the Extension Order, she states if the Extension Order is granted they "will serve the claim immediately upon the receipt of same." However, although the Plaintiffs obtained the Extension Order on June 22, 2017, they did not serve the Statement of Claim on TH until December 19, 2017;

(iii) the Plaintiffs failed to make full and fair disclosure in obtaining the Extension Order;

(iv) had full and fair disclosure been made, it would have had an impact on the granting of the Extension Order such that the Extension Order may not have been made;

(v) the Plaintiffs failed to show that the defendants would not be prejudiced if the Extension Order were granted;

(vi) unaware that any legal proceeding had been commenced or was pending, TH recycled the Equipment on or about March 17, 2016, over 28 months after the explosion and fire and this key evidence no longer exists;

(vii) due to the Plaintiffs' failure to serve or advise that a claim had been initiated, TH is unable to make full answer and defence;

(viii) the Extension Order does not advance the just resolution of the dispute without prejudice or unfairness to the parties.

[8] Another basis for prejudice arising from the Plaintiffs' delay cited by TH is the departure of 2 key employees.

Cross-Examinations, This Motion and Case Management

[9] In support of the Set Aside Motion, TH filed the affidavit of Carrie Dodson, TH's Supervisor of Claims, Legal Services Group, sworn July 28, 2017. Ms. Dodson was cross-examined on February 20, 2018.

[10] On the initial return of this motion before me on April 27, 2018, the Plaintiffs sought answers to 14 refusals arising from Ms. Dodson's cross-examination. The refusals related to the Inspection and the preparation and contents of the Report.

[11] The parties only scheduled 30 minutes for this first attendance. Further, four days prior this attendance, TH served the Affidavit of Michelle Baigorri sworn April 23, 2018 (the "Baigorri Affidavit"). Ms. Baigorri is currently Litigation Counsel at TH. In the Baigiorri Affidavit, Ms. Baigorri states that when she was a Student-at-Law at TH, on behalf of Conrad Sheppard, Director, Legal Services at TH, she made a request of TH's engineering group to "prepare a report with respect to the incident at issue in this proceeding" which was made "so that Mr. Sheppard could provide legal advice to Toronto Hydro. The report was intended to remain confidential at all times".

[12] As set out in my Endorsement dated April 27, 2018, I concluded that an adjournment was appropriate in the circumstances:

"... in my view, there was insufficient time to hear full and proper submissions and in any event, I was also of the view that case management and discussions with counsel may assist in narrowing or resolving the disputed issues, particularly given the apparent proportionality and efficiency considerations which this interlocutory motion within a motion raises.

As a result of case management and discussions with counsel, and efforts by counsel outside of court, it appears that some progress has been made which may at least narrow the matters at issue. In particular, the Defendants, 4 days ago have served a new affidavit on this motion. The Plaintiffs intend to cross-examine on this new affidavit by way of written interrogatories which may resolve issues on the motion before me. The parties shall also continue their discussions with respect to whether modified requests of the Plaintiffs for information and additional compromise by the Defendants may provide the Plaintiffs with sufficient information and evidence to properly and fully respond to the Set Aside Motion."

[13] By letter dated May 3, 2018, Plaintiffs' counsel delivered a list of 27 questions in writing (some with multiple sub-questions) constituting their cross-examination on the Baigorri Affidavit (the "Written Interrogatories"). These questions relate to the Report, Ms. Baigorri's instructions to the engineering group, the Inspection, TH's legal department and the legal advice.

[14] By reply correspondence dated May 5, 2018, TH provided limited answers to the Written Interrogatories (the "Answers"). As set out in the cover letter and the Answers, similar to their positions on the previous refusals, TH takes the position that many of the questions seek privileged information related the Report, are irrelevant to the Set Aside Motion or are outside the scope of the Biagorri Affidavit. TH also argues that some of the questions effectively function as a second cross-examination of Ms. Dodson.

II. The Law and Analysis

[15] As a result of the answers provided on cross-examinations, the Written Interrogatories and the Answers and additional information provided by counsel, and case management provided on the second return of the motion, the Plaintiffs now only seek answers to 1 refusal from Ms. Dodson's cross-examination and/or 3 refusals from the Written Interrogatories as follows:

i.) Question 121 from Ms. Dodson's Cross-Examination: What were the findings, opinions and conclusions of the person who prepared the report regarding the cause and origin of the explosion?;

ii.) Questions 18, 19 and 20 from the Written Interrogatories: These questions ask if Mr. Glavonov prepared any notes or took any pictures of the Equipment and if so, on what date(s), to advise where they are stored and to produce them, and to advise who, if anyone, directed Mr. Glavonov to inspect the Equipment.

[16] The Plaintiffs submit that if TH will answer Questions 18, 19 and 20, then they do not require a response to Question 121. The Plaintiffs submit that it would be unfair to permit TH to argue the Set Aside Motion without providing the information requested.

[17] In the Answers, TH submits that it is not obligated to answer these questions and produce the information requested largely on the basis of solicitor-client privilege. TH argues that privilege attaches to the Report, the Inspection and any related documents including correspondence and notes.

[18] Perrel J. provides a comprehensive summary of the scope of cross-examinations on affidavits in Ontario v. Rothmans Inc., 2011 ONSC 2504. Questions on cross-examination must be relevant to the matters at issue on 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 (even if those issues are irrelevant to the motion) and/or the credibility and reliability of the deponent's evidence (Rothmans at paras. 142-143).

[19] In determining relevance, I am also guided by the law applicable to the Set Aside Motion. The law with respect to extending the time for service of a Statement of Claim and setting aside an ex parte order was summarized by Master Dash in Firmax Investment Group Ltd. v. Grossman, 2012 ONSC 2436:

3 A statement of claim is to be served within six months after it is issued in accordance with rule 14.08. Pursuant to rule 3.02(1) the court may extend any time prescribed by the rules, including the deadline to serve a statement of claim. The test to be applied on a motion to extend the time for service of a statement of claim has been set out by the court of appeal in Chiarelli v. Wiens as follows:

The basic consideration is whether the extension of time for service will advance the just resolution of the dispute, without prejudice or unfairness to the parties. And, the plaintiff has the onus to prove that extending the time for service will not prejudice the defence.

4 With respect to the onus the court in Chiarelli held:

Although the onus remains on the plaintiffs to show that the defendant will not be prejudiced by an extension...the plaintiffs cannot be expected to speculate on what witnesses or records might be relevant to the defence and then attempt to show that these witnesses and records are still available or that their unavailability will not cause prejudice. It seems to me that if the defence is seriously claiming that it will be prejudiced by an extension it has at least an evidentiary obligation to provide some details.

5 Further, the "prejudice that will defeat an extension of time for service must be caused by the delay".

10 The test under rule 39.01(6) to set aside an ex-parte order obtained where there has been failure to make full and fair disclosure is not whether the order would or would not have issued had proper disclosure been made but rather whether or not disclosure to the Master of the omitted or misstated information "might have had an impact on the original granting of the order" in that it could be said that "the order may well not have been made if proper disclosure had been given."

[20] I must also be mindful of the role of the Court on interlocutory motions, particularly a motion within a motion such as this one. This was considered by Master MacLeod (as he then was) in Allianz Global Risks US Insurance Co. v. Canada Attorney General, 2016 ONSC 29:

"18.......Where a different master or judge is hearing the main motion, the concern must be that the judicial officer hearing the preliminary motion not usurp the role of the judicial officer hearing the merits. If the same person is hearing both then the concern must be not to inappropriately form opinions about the weight to be given to evidence that may bias the hearing on the merits. In addition, treating the preliminary motion as a separate motion opens the possibility of two sets of appeals, one an appeal of the preliminary motion and the other an appeal on the merits. This should generally be avoided in my view.

20 In summary, with respect to interlocutory motions for production of documents, a preliminary motion will generally not be the preferable approach. Any issues of admissibility, relevance or weight should generally be dealt with by the judicial officer hearing the main motion.."

[21] Rule 1.04 and the proportionality principles also weigh heavily on an interlocutory motion of this nature. Accordingly, I have considered and applied Rule 1.04(1) which provides that the Rules of Civil Procedure shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits and Rule 1.04(1.1) which requires the court to make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding. The proportionality factors in Rule 29.2.03(1) also apply to this motion.

[22] As a result of the answers provided on cross-examinations, the Written Interrogatories and the Answers and additional information provided by counsel, TH has confirmed the following regarding the Inspection and the Report:

i.) the Inspection was conducted by Mr. Glavonov on December 27, 2013, the day of the explosion and fire;

ii.) the purpose of the Inspection was to determine the extent of the damage to the Equipment;

iii.) the purpose of the Report was to determine the cause and origin of the explosion;

iv.) TH recycled the Equipment on March 17, 2016;

v.) TH has delivered a list of 56 email messages, some with attachments, over which it claims solicitor-client privilege (the "Privilege List").

[23] With respect to Question 121, TH asserts solicitor-client privilege over the Report and any related documents or information. The Plaintiffs submit that the Report is not subject to solicitor-client privilege or that privilege has been waived.

[24] In the Answers, TH took the position that Questions 18-20 were not relevant. TH now concedes that these questions are relevant. However, TH now also asserts solicitor-client privilege over the information and documentation sought on the basis that since the Inspection forms the basis for the Report, any documentation related to the Inspection is also privileged.

[25] Solicitor-client privilege is a long established indisputable principle that is fundamental to the proper functioning of the legal system which should only be set aside when absolutely necessary (Alberta (Information and Privacy Commissioner) v. University of Calgary, 2016 SCC 53 at paras. 26 and 34).

[26] Solicitor-client privilege attaches to communications between a lawyer and client for the purpose of seeking or giving legal advice which is intended by the parties to be confidential. (Skysolar (Canada) Ltd. v. Economical Mutual Insurance Co., 2015 ONSC 4714 at para. 78). Solicitor-client privilege attaches to communications with in-house counsel as long as that counsel is acting in a legal capacity for the purposes of giving legal advice and not in another capacity (Humberplex Developments Inc. v. TransCanada Pipelines Ltd., 2011 ONSC 4815 at para. 24).

[27] TH relies on the Divisional Court's decision in Currie v. Symcor, [2008] O.J. No. 2897 (Div. Ct.). At paragraph 46 of Currie, L.K. Ferrier J. states:

".....the application of solicitor-client privilege is very broad and includes not just the provision of "legal advice" but also the protection of factual, financial and administrative information provided to legal counsel, for the purpose of allowing legal counsel to give legal advice (so long as the advice is not purely business advice). It is not necessary that the communication specifically request or offer advice, as long as it can be placed within the continuum of communications in which the solicitor tenders advice. The privilege applies when a lawyer negotiates a commercial transaction (such as a share structuring agreement), draws up contracts or communicates with a client in the course of a transaction."

[28] The Plaintiffs cite Humberplex where Master Short held at paragraphs 49 and 52:

"In my view, an operational communication cannot be cloaked with privilege by copying it to a lawyer. Confidential documents containing facts and information relevant the company's business, that, in the ordinary course of business would not be considered privileged in the hands of TransCanada, cannot become privileged simply because they were sent to a lawyer involved in the matter. The question TransCanada must ask in respect of each document is whether it is an operational report, or is in "pith and substance" a request for, or the provision of, legal advice.

"....operational reports and documents containing discoverable factual information must be disclosed."

[29] A party seeking to claim privilege over documents has the onus of establishing, on a balance of probabilities, an evidentiary basis for the claim (Sky Solar at para. 76). The party seeking to claim privilege should provide sufficient particulars to permit the court to make a proper determination of privilege, including identifying the documents, describing their nature and setting out the privilege claimed and grounds, and the function, role, status of the receiver and sender of the documents, their relationship to the party in the action, the grounds for the claim and description of each document consistent with the law which renders it privileged (Sky Solar para. 75; Ansell Canada Inc. v. Ions World Corp., [1998] O.J. No. 5034 (Gen. Div.) at para. 10.)

[30] The sufficiency of the description must be governed by the circumstances so that enough information is given to enable the court to make a prima facie decision as to whether the claim for privilege has been established (Segnitz v. Royal & Sun Alliance Insurance Co. of Canada, [2004] O.J. No. 1376 at para. 14). The party asserting privilege is not required to provide particulars or descriptions which would undermine or compromise the communications over which privilege is being asserted (Waxman v. Waxman (1990), 42 C.P.C. (2d) 296 (Ont. Master) at paras. 6-7).

[31] With respect to Question 121, the Plaintiffs seek "the findings, opinions and conclusions of the person who prepared the report regarding the cause and origin of the explosion". As such, the Plaintiffs are seeking the contents of the Report itself. I am satisfied that the evidence and particulars before me establish that the Report was requested by TH's in-house legal counsel for the purpose of providing legal advice to its client, TH. Therefore, I conclude that the Report is subject to solicitor-client privilege. Since the purpose of the Report was to determine the cause and origin of the explosion, the author's conclusions contained in the Report in this regard are also privileged.

[32] The Plaintiffs submit that privilege over the Report has been waived or that it should otherwise be produced on the basis of fairness. The Plaintiffs rely on S & K Processors Ltd. v. Campbell Ave. Herring Producers Ltd., [1983] B.C.J. No. 1499 (B.C.S.C.) and Warren et al. v. Insurance Exchange Ltd. et al., (1982) 37 O.R. (2d) 717 (S.C.O.). I reject these submissions. These cases do not stand for the proposition or conclude that privileged documents should be produced or that privileged is waived because privileged communications have simply been relied on by a party in informing their positions or that in certain circumstances, fairness on its own is sufficient to justify production. In my view, these cases, though not of a recent vintage, are not inconsistent with the development of the law regarding waiver of privilege over the last 35 years which provides that more is required.

[33] Deemed waiver of privilege and an obligation to disclose a privileged communication, as summarized by Perell J. in Creative Career Systems Inc. v. Ontario, 2012 ONSC 649, requires two elements: i.) the presence or absence of legal advice is material to the lawsuit; and ii.) the party who received the legal advice must make the receipt of it an issue in the claim or defence (Creative at para. 30).

[34] Citing the decision of Corbett J. in Guelph (City) v. Super Blue Box Recycling Corp., [2004] O.J. No. 4468 (S.C.J.), Perell J. states:

"....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" (Creative, at para. 31).

[35] In my view, there is no basis to conclude that deemed waiver of privilege has occurred with respect to the Report or the information sought in Question 121. The Plaintiffs have not demonstrated that TH has used the receipt of legal advice as a substantive element of their claim, whether by reference to the pleadings, affidavits, transcripts, the Answers, or positions taken in the proceedings.

[36] Accordingly, I conclude that TH is not required to produce the Report.

[37] Moving to Questions 18-20, the difficulty in determining whether or not the information sought by the Plaintiffs is protected by solicitor-client privilege is twofold: i.) TH does not know if Mr. Glavonov took any photographs or made any notes during the Inspection; and ii.) TH has not provided sufficient particulars with respect to the circumstances related to the Inspection to permit the Court to make the privilege determinations requested.

[38] Relying on Currie, TH submits that since the Inspection forms the basis for the Report, which is privileged, and the Inspection was not in the ordinary course, any documents or communications related to the Inspection are also privileged. The Plaintiffs, relying on Humberplex, submit that the Inspection and any related documentation are not communications for the purpose of obtaining legal advice but rather operational communications related to Mr. Glavonov's assessment of the extent of the damage to the Equipment. I am unable to reconcile these two positions without further particulars from TH.

[39] The only determination I am able to make based on the record before me is with respect to the Plaintiffs' request that TH advise who directed Mr. Glavonov to conduct the Inspection. In my view, these particulars are necessary to enable this Court to assess TH's privilege claim over information and documentation related to the Inspection. This information has already been produced with respect to the Report. In the Baigorri Affidavit, Ms. Baigorri states that it was her, on behalf of Mr. Sheppard, who requested the Report. In providing this evidence, TH properly disclosed this information in support of its claim for privilege over the Report. Similarly, TH should also disclose these particulars with respect to the Inspection. I conclude that this information is necessary and would not undermine or compromise TH's privilege claims.

[40] In order to make any further determinations regarding Questions 18-20, TH must provide this Court with accurate and updated evidence as to what documents exist over which it is claiming privilege. Therefore, TH shall make inquiries and advise if Mr. Glavonov took any notes or pictures with respect to the Inspection. I also conclude, based on my findings above, that if TH is able to determine who provided Mr. Glavonov with directions regarding the Inspection, TH shall make inquiries to determine if there are any documents, correspondence or notes regarding such directions, excluding any documents set out on the Privilege List.

[41] To the extent to which TH identifies any documents which are responsive to these directions, and to the extent to which the parties are unable to agree on terms for production (including redaction or confidentiality terms), in my view, these are appropriate circumstances for the Court to conduct a review or inspection of any such documents to determine if privilege attaches (Toronto-Dominion v. Leigh Instruments (Trustee of), [1997] O.J. No. 1177 (O.C.J.) at para. 5). I am mindful that, as summarized in Bradley v. Guarantee Co. of North America, 2011 ONSC 5712, the inspection of documents by the Court to make privilege determinations is not the preferred approach.

[42] However, in these circumstances, the issues and scope related to the potential documents are narrow and the number of potential documents for review limited. Further, the area of inquiry is relevant to issues of prejudice on the Set Aside Motion as conceded by TH, and insufficient particulars were provided or available on the return of this motion. Therefore, I am satisfied that an inspection by the Court is reasonable and appropriate, if necessary. Having considered all of the factors and circumstances, I also conclude that dealing with any documents in this manner is reasonable, efficient, proportionate and consistent with Rule 1.04.

[43] If any documents are identified and counsel are unable to resolve the disputed issues, counsel may contact me through the Masters Administration Office to schedule a case conference to speak to a process by which the documents shall be filed with me under seal for the purpose of making any determinations with respect to TH's assertion of solicitor-client privilege.

III. Disposition

[44] Order to go as follows:

i.) TH shall advise the Plaintiffs who directed Mr. Glavonov to conduct the Inspection within 30 days;

ii.) TH shall advise if there are any documents, correspondence or notes with respect to any directions provided to Mr. Glavonov regarding the Inspection, excluding any documents set out on the Privilege List, and whether Mr. Glavonov took any notes or pictures with respect to the Inspection;

iii.) if TH identifies any documents, correspondence, notes or pictures which are responsive to paragraph 49(ii), and to the extent to which the parties are unable to agree on terms pursuant to which any such documents can be produced, the parties shall contact me through the Masters Administration Office to arrange a case conference to speak to a process by which the documents shall be filed with me under seal for the purpose of making any determinations with respect to TH's assertion of solicitor-client privilege.

[45] If the parties are unable to agree on the costs of this motion, they may file written costs submissions not to exceed 3 pages (excluding costs outlines) with me through the Masters Administration Office on or before August 7, 2018.

Released: June 21, 2018

Master M.P. McGraw