Court File and Parties
Court File No.: CV-14-513318 Motion Heard: 30 November 2018 Superior Court of Justice - Ontario
Re: Rodolfo Arci, Plaintiff And: Joseph Miklavc, Defendant
Before: Master Jolley
Counsel: John Lo Faso, Counsel for the Moving Party Plaintiff Sonja Turajlich, Counsel for the Responding Party Defendant
Heard: 30 November 2018
Reasons for Decision
[1] The plaintiff brings this motion for an order to compel the defendant to answer certain questions refused on his examination for discovery. The decision with respect to the majority of the questions will rise or fall on whether the defendant has waived privilege by putting in issue legal advice he did or did not receive concerning a real estate waiver he signed.
Relevant Facts
[2] To determine whether the defendant has waived privilege, a recitation of the material paragraphs of the pleadings is required. The statement of claim contains the following allegations:
The parties agreed on the following terms which were reduced to writing in an Agreement of Purchase and Sale dated August 20, 2014 (the “APS”): (a) Sale price of $635,000 with a deposit of $15,000; (b) 5 year vendor take back mortgage in the amount of $317,500 at the interest rate of 3% per year, to be comprised of interest only payments; (c) Closing date of January 30, 2015; and (d) The offer is conditional upon the approval of the terms by the Seller’s solicitor and/or accountant by August 22, 2014 at 6:00 p.m.
The plaintiff inserted the condition in paragraph 15(d) above into the Agreement so that Mr. Miklavc’s accountant and/or lawyer can approve of the terms of the Agreement of Purchase and Sale. The Defendant told the Plaintiff that he did not require such a condition as any decision to sell the Property would be made by him and him alone.
However, the Plaintiff inserted the condition for Mr. Miklavc’s benefit so that the transaction would be completely “above reproach”. The Plaintiff did not wish to jeopardize his positive relationship with Mr. Miklavc and wanted him to feel that he had every opportunity to seek and obtain professional advice.
Upon presenting the APS to the Defendant, the Plaintiff asked the Defendant for his accountant and lawyer’s contact information so that the Plaintiff could forward a copy of the APS to their attention. The Defendant provided the Plaintiff with his accountant’s information but did not have his lawyer’s information handy. The Plaintiff forwarded the APS to the Defendant’s accountant on the same day.
The following day on August 21, 2014, the Defendant advised the Plaintiff that he spoke to his lawyer regarding the deposit but his accountant’s calculations for the interest payments were different from the calculations in the interest payment schedule in the APS.
The schedule for the APS for the interest payments were calculated on a semi-annual basis whereas the Defendant’s accountant calculated the interest on a monthly basis. The difference between the semi-annual versus monthly calculation is $4.92 per month or $295.20 over the five year term.
On August 22, 2014 at around 10:30 a.m., the Plaintiff met with the Defendant. The Plaintiff gave the Defendant $300 in cash to cover the difference between the semi-annual calculation versus the monthly calculation.
The Defendant advised the Plaintiff that he had consulted with his accountant and lawyer to his satisfaction and that he understood this was a “done deal”.
The Defendant signed the APS and the Notice of Fulfillment of Condition in satisfaction of the sole condition in the APS regarding the approval of the terms by the Seller’s solicitor and/or accountant.
Immediately after their meeting, the Plaintiff attended at the office of the Defendant’s solicitor to drop off the fully executed APS and Notice of Fulfillment of Condition, and the certified deposit cheque in the amount of $15,000.
At approximately 5:50 p.m. on August 22, 2014, the Defendant’s solicitor wrote to the Plaintiff’s solicitor and purported to terminate the contract.
[3] The pertinent paragraphs of the statement of defence are as follows:
The Defendant, denies the allegations contained in paragraphs 1(a) to (i), 2, 10, 11(a) to (k), 12, 13, 14, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, and 29 of the Statement of Claim and puts the Plaintiff to the strict proof thereof.
On or about the same date, namely August 20, 2014, Arci prepared and presented to Miklavc an Offer (the “Offer”). The Offer was conditional, as set out in the Schedule A, as follows (the “Condition”):
“This Offer is conditional upon the approval of the terms hereof by the Seller’s Solicitor and/or Accountant. Unless the Seller gives notice in writing delivered to the Buyer or to the Buyer’s address as hereinafter indicated personally or in accordance with any other provision for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto not later than 6 p.m. on Friday August 22, 2014, that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. This condition is included for the benefit of Seller and may be waived at the Seller’s sole option by notice in writing to the Buyer as aforesaid within the time period stated herein.”
Contrary to the allegations in paragraph 16 of the Statement of Claim, at no time did Miklavc advise the Plaintiff that he did not require any condition of approval by his solicitor with respect to the Agreement. To the contrary, Miklavc at all times advised Arci that any offer or agreement must first be reviewed and approved by his solicitor.
Contrary to the allegations in paragraph 17 of the Statement of Claim, at every opportunity Arci discouraged Miklavc from contacting a lawyer and advised him that there was no need to have lawyers involved. In this regard, Arci’s wife also stated that “lawyers just take your money and do nothing”.
Arci was aware that the offer indicated that the deposit would be paid to Miklavc’s lawyers.
Accordingly, at Miklavc’s request, on August 21, 2014, at 3:47 p.m., Vincent Tucci, solicitor for Miklavc, sent an email to Miklavc advising that the deposit cheque should be made payable to “RQ Partners LLP, in trust”. Mr. Tucci had not yet received a copy of the Offer from Arci by this time.
On or about August 22, 2014, Arci attended at the Defendant’s business premises and asked Miklavc to sign the Agreement of Purchase and Sale he had prepared (the “Agreement”). Miklavc signed the Agreement at approximately 10:30 a.m. on August 22, 2014 and Arci witnessed his signature. At this time, Arci took back Miklavc’s copy of the MLS Agreement.
Miklavc believed that what Arci had presented to him was an Agreement of Purchase and Sale based on the Offer to purchase dated August 20, 2014 and which Offer was conditional on the approval of the terms by Miklavc’s solicitor and/or accountant by August 22, 2014 at 6:00 p.m.
In accordance with the terms of the Agreement, Miklavc believed that he had until 6:00 p.m. on August 22, 2014 to waive the Condition, as set out above.
At no time did Arci advise nor was Miklavc made aware that the documents that Arci presented to him for signature included a Notice of Fulfilment of Condition. In fact, Arci represented to Miklavc that the paperwork was “standard procedure” and did not advise Miklavc that it contained a Notice of Fulfilment of Condition.
At no time did Miklavc agree to nor was he aware that he was executing a Notice of Fulfilment at the very same time that he was entering into an Agreement of Purchase and Sale conditional upon the approval by his solicitor by August 22, 2014 at 6:00 p.m.
Miklavc advised Arci at that time that he would deliver a copy of the Agreement to his solicitor, Vincent Tucci of RQ Partners LLP; however, Arci insisted that he (Arci) do so and advised Miklavc there was no need to Miklavc to go to Vincent Tucci’s office. Arci advised Miklavc that he would drop off the Agreement of Purchase and Sale with the cheque for the deposit to Vincent Tucci, Miklavc’s lawyer, directly.
On or about August 22, 2015, Arci delivered a copy of the Agreement of Purchase and Sale along with the cheque for the deposit to the law offices of RQ Partners, the solicitors for Miklavc.
Upon receiving the document, Vincent Tucci of the law firm of RQ Partners contacted Miklavc and advised him that there was a problem with the transaction and that Miklavc should attend at his offices immediately.
Prior to attending at the law offices of RQ Partners, Miklavc contacted Arci to advise him that he received a call from his solicitor indicating that there was a problem. Arci immediately attended at the Miklavc House to discuss the matter.
At no time did Miklavc tell Arci that his accountant had approved the Agreement of Purchase and Sale nor that he had reviewed its terms and conditions, save and except for the calculations representing the Vendor Take Back Mortgage.
Contrary to paragraph 22 of the Statement of Claim, Miklavc advised Arci that the Agreement of Purchase and Sale needed to be reviewed by his solicitor; and, for this purpose, he required an extension of the Condition.
While it appears that Miklavc signed a document titled “Notice of Fulfilment” and that his signature was witnessed by Arci, at no time did Miklavc understand that he was signing a purported Notice of Fulfilment or Waiver of the Condition.
Further, the Defendant pleads that at no time did he intend to sign a Notice of Fulfilment or Waiver of the Condition. Miklavc would not have signed an Agreement of Purchase and Sale that was conditional upon review by his solicitor at the same time as waiving that very Condition.
The Defendant pleads and the fact is that Arci misrepresented the documents that he prepared and put before Miklavc for signature as simply an Agreement of Purchase with the Condition open until 6:00 p.m. on August 22, 2014, rather than an Agreement of Purchase and Sale and a Notice of Fulfilment of that Condition.
The Defendant pleads that he had no knowledge of nor any intention to deliver a Notice of Fulfilment or Waiver of the Condition; and, in fact, advised Arci in accordance with the terms of the Agreement of Purchase and Sale, and specifically Schedule “A”, that the Condition had not been fulfilled and that the Agreement of Purchase and Sale was terminated as a result.
[4] Lastly, the reply and defence to counterclaim contains the following relevant paragraphs:
On August 22nd, 2014, Miklavc advised Arci that he spoke to his lawyer and accountant and that he was satisfied with the offer and wanted to finalize the transaction.
Contrary to Paragraph 32 of Miklavc’s pleading, Miklavc was fully aware that the Notice of Fulfilment of Condition was in fact waiving the time to have his accountant and lawyer review the Agreement of Purchase and Sale mainly because the accountant and the lawyer had already reviewed the Agreement of Purchase and Sale, and were satisfied with the provisions.
[5] I do not agree with the plaintiff that a party opposite may raise the issue of the other party’s legal advice and thereby cause the other party’s privilege to be waived. The allegations in the statement of claim are included above for context but cannot form the basis of a waiver of the defendant’s privilege. Only a client may waive his or her privilege (Leggat v. Jennings 2015 ONSC 237 at paragraph 31). As stated by Master Sugunasiri in Palinkas v. Pass 2018 ONSC 3332 at paragraph 29:
In my view, the test for waiver and the principles underlying the test lead to the conclusion that one party cannot strip the protective cloak of the other party’s solicitor-client privilege by simply raising the other party’s state of mind as an issue in the pleading and tendering evidence that it was informed by legal advice.
[6] As stated in S. & K. Processors Ltd. v. Campbell Avenue Herring Procurers Ltd., cited in Lederman, Bryant & Fuerst, The Law of Evidence, 4th ed. at 14.148 “In the cases where fairness has been held to require implied waiver, there is always some manifestation of a voluntary intention to waive the privilege at least to a limited extent.” That supports the proposition that the party opposite cannot effect a waiver of the other side’s privilege.
[7] Perell, J. discussed what that would constitute that “manifestation of voluntary intention of waiver” in Creative Career Systems v. Ontario 2012 ONSC 649:
29 … “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.”
- 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.
[8] I find that the defendant has put in issue the advice he was - or was not - given concerning the Notice of Fulfilment of Condition when he pleaded in paragraphs 33 and 46 of his statement of defence that he was not aware and did not understand that he was executing a Notice of Fulfilment when he signed the document. Whether he obtained legal advice about the Notice of Fulfilment of Condition before he signed it would be relevant to this defence about what he knew the import of signing such a Notice to be. He has deposed in his affidavit in opposition to this motion that he did not receive legal advice prior to signing the Notice of Fulfilment of Condition (see paragraphs 13, 15 and 19). He also confirmed that he did speak to his lawyer the morning prior to signing the offer and told him an offer was coming, outlined the topics that he and his lawyer did not discuss and advised that the conversation was five minutes long. I find, relying on Leggat, supra at paragraph 32 and Creative Career Systems, supra at paragraph 29, that the defendant impliedly waived privilege where he put in issue the legal advice he had or did not have about the Notice of Fulfilment of Condition prior to signing it.
[9] While this defence does not automatically waive the privilege, I find it fair that the defendant be required to answer the questions refused that relates what legal advice he had at the time he signed the Notice of Fulfilment of Condition. Fairness does not mean that the entire legal file is open to review. This was also the approach taken in Roynat Capital Inc. v. Repeatseat Ltd. 2015 ONSC 1108 at paragraph 83 where the court held that “deemed waiver of privilege to allow a party to defend is not waiver of all privileged communications, but only those communications relevant to the issue of reliance” and limited the permitted questions to discussions between the plaintiffs and their counsel at the time the alleged misrepresentation was made by the defendant Blakes relevant to the issue of reliance.
[10] Here, the defendant’s state of mind and the legal advice that he had or did not have at the time he signed the Notice of Fulfilment of Condition is in issue. He signed the Notice at 10:30 a.m. on 22 August 2014 so only the discussions he had with his lawyer up to that time are relevant to his position that he did not have legal advice before he signed the Notice. The defendant shall answer Question 762, limited to conversations up to 10:30 on 22 August 2014 within 30 days of this decision.
[11] The remaining questions need not be answered as they are not related to what legal advice the defendant had when he signed the Notice of Fulfilment of Waiver. Paragraphs 36, 42 and 43 of the statement of defence relate to events after 10:30 on 22 August 2014. As such the questions on those paragraphs, namely Questions 775, 776, 788, 864 and 865 need not be answered as they cannot relate to a discussion that took place before the defendant signed the Notice.
[12] Similarly, Question 772 need not be answered as paragraphs 23 and 24 of the reply with which the question deals, also consider events that postdate the signing of the Notice of Fulfilment of Condition.
[13] The last remaining refusal deals with the defendant’s telephone records. The defendant initially refused to produce his cell phone records of calls made between August 20 and 22, 2014. Nonetheless, he inquired of his service provider and was told the records for that time could not be retrieved. The plaintiff telephoned and obtained different information, namely that a list of incoming and outgoing phone numbers dialed in 2014 is available, if requested.
[14] The plaintiff argues that he is entitled to obtain evidence that will either corroborate or contradict the defendant’s answer about if and when he spoke to his lawyer before August 22, 2014 at 10:30. I note that the defendant was prepared to make the inquiry and, presumably, had he been told that the telephone numbers and times were available, would have provided them. I am prepared to order that this question be answered for that limited time period. The defendant shall make a written request to his service provider for his cell phone records between 20 August 2014 and 10:30 am on 22 August 2014.
[15] The plaintiff may require the defendant to re-attend to answer any follow up questions, if necessary.
[16] There has been divided success on the motion. The defendant has been ordered to answer only one question relating to his dealings with his lawyer and the refusal was maintained on the remaining six questions. He was ordered to make a further request for the telephone records. In light of the mixed success on the motion, each party shall bear their own costs.
Master Jolley Date: 20 December 2018