Court File and Parties

COURT FILE NO.: CV-18-00599066 DATE: 20190424 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: LAW SOCIETY OF ONTARIO, Applicant AND: RASIK BEHARI MEHTA, Respondent

BEFORE: Madam Justice O’Brien

COUNSEL: S. Hutchison, J. Elcombe and M. Strychar-Bodnar, for the Applicant No one appearing for the Respondent S. Fenton, for the Court-Appointed Referee

HEARD: April 1, 2019

JUDGMENT

[1] This is an application by the Law Society of Ontario (the “Law Society”) pursuant to s. 49.13 of the Law Society Act, R.S.O. 1990, c. L.8 (the “Act”). Section 49.13 permits the Law Society to apply to this Court for an Order authorizing it to disclose otherwise confidential information to a public authority. In this case, the public authority is the Ontario Securities Commission (“OSC”) and, specifically, the OSC’s Joint Serious Offences Team (“JSOT”). The JSOT is an initiative between the OSC, the Ontario Provincial Police and the Royal Canadian Mounted Police.

Background

[2] The JSOT is conducting an investigation into apparent frauds by David Singh and two supposed mortgage investment corporations, Rockfort Mortgage Investment Corporation (“Rockfort”) and Greenview Capital Mortgage Investment Corporation. From the evidence available to the JSOT to date, it appears that Mr. Singh defrauded investors and disbursed over $800,000 of their money through the trust account of a lawyer, Rasik Behari Mehta. In the course of its own investigation into Mr. Mehta, the Law Society obtained certain financial records that provide some information regarding what happened to the investors’ funds once they were transferred into Mr. Mehta’s trust account. The Law Society is now seeking authorization to provide these financial records to the JSOT.

[3] Specifically, the Law Society is seeking authorization to provide the following to the JSOT:

(a) Twenty cancelled cheques, reflecting payments into Mr. Mehta’s trust account; (b) Four trust ledgers prepared by Mr. Mehta concerning his handling of funds received from Rockfort; and (c) Certified cheques, bank drafts, wire payment instructions and receipts reflecting Mr. Mehta’s disbursements of Rockfort’s funds (and funds co-mingled with Rockfort’s funds).

Information Provided by Referee

[4] Pursuant to an Order of Justice Dietrich dated August 15, 2018, several steps were implemented to protect any potential confidential or solicitor-client privileged information while this application was brought before the court. First, the Applicant publicly filed a redacted factum, in which it removed all references to the content of the records sought, including the individuals and entities named in them. The Applicant also filed an unredacted, sealed factum and application record. In addition, pursuant to Justice Dietrich’s Order, the Court appointed a Referee (the “Referee”) to assist in respect of any potential claim that any relief requested in the application may interfere with solicitor-client privilege. In particular, it was ordered that the Referee would be provided with a copy of the sealed application record and that he would:

(a) Provide or confirm notice to any potential privilege-holder whose interest might be affected by the order sought; and (b) Advance or defend any reasonable claim of potential privilege on behalf of any individual or entity not ascertainable or who could not be notified, or who did not appear on the hearing of the application.

[5] No individuals or entities, who might be impacted by this application, appeared at the hearing before me. In addition, the Referee provided me with a detailed account of the steps his office had taken to contact all individuals and entities with a potential interest in the order sought. This included all individuals/entities named in the financial documents, specifically: all individuals/entities referenced in the trust ledgers, all individuals/entities to whom cheques were made out, and all individuals/entities named in the wire payment instructions and bank receipts.

[6] The Referee advised that only two entities responded to his inquiries to raise concerns about privilege. These were both law firms. The Referee then provided the specific document in which they were named to them. Both law firms ultimately decided not to assert privilege.

[7] The Referee further advised that there were some individuals/entities for whom his office was not able to locate contact information. For all of these individuals/entities except one, the relevant financial record showed a payment out to the individual or entity, rather than a payment in (which could be a payment to retain counsel as part of a solicitor-client relationship). The remaining entity appeared to be a law firm, but may not have been legitimate, as the Referee’s office could not find any public record of it.

[8] The Referee concluded by advising that, in his view, there was nothing in the records that the Law Society seeks to disclose that gave rise to any concern that solicitor-client privilege would be breached by the disclosure.

Statutory Provisions

[9] Section 49.12(1) of the Act prohibits the Law Society from disclosing information obtained as a result of an investigation, subject to exceptions set out in subsection (2) which do not apply here. It provides:

49.12(1) A bencher, officer, employee, agent or representative of the Society shall not disclose any information that comes to his or her knowledge as a result of an audit, investigation, review, search, seizure or proceeding under this Part.

[10] However, the legislation also expressly permits the Law Society to disclose information to public authorities with leave of this Court, subject to certain protections. Section 49.13 provides:

49.13(1) The Society may apply to the Superior Court of Justice for an order authorizing the disclosure to a public authority of any information that a bencher, officer, employee, agent or representative of the Society would otherwise be prohibited from disclosing under section 49.12.

(2) The court shall not make an order under this section if the information sought to be disclosed came to the knowledge of the Society as a result of:

(a) the making of an oral or written statement by a person in the course of the audit, investigation, review, search, seizure or proceeding that may tend to criminate the person or establish the person’s liability to civil proceedings; (b) the making of an oral or written statement disclosing matters that the court determines to be subject to solicitor-client privilege; or (c) the examination of a document that the court determines to be subject to solicitor-client privilege.

(3) An order under this section that authorizes the disclosure of information may also authorize the delivery of documents or other things that are in the Society’s possession and that relate to the information.

(4) An order of the court on an application under this section is not subject to appeal.

Application to This Case

[11] The questions before me, then, are: (1) whether the restrictions in s. 49.13(2) apply to the financial records the Law Society now seeks to disclose to the OSC; and, if not, (2) is it otherwise appropriate to grant an Order permitting disclosure under s. 49.13.

Do the s. 49.13(2) restrictions apply?

[12] In my view, the restrictions set out in s. 49.13(2) do not apply to the financial records sought to be disclosed in this case. The financial records do not constitute “oral or written statement[s],” within the meaning of subsections (a) and (b). They are financial records that exist independently of the Law Society’s investigation. The wire payments and cheques exist in the bank’s records. Further, the fact that Mr. Mehta is otherwise required to maintain financial documentation, like trust ledgers, as part of his professional obligations, does not constitute “making an oral or written statement” that may be self-incriminating, as required by subsection (a). Records that are statutorily required are not the same as compelled testimony of the kind that is taken during an investigation into wrongdoing. They are instead analogous to pre-existing business records: R. v. Fitzpatrick, [1995] 4 S.C.R. 154 at para 50.

[13] In addition, I am satisfied that none of the records are subject to solicitor-client privilege, nor do they reveal information subject to solicitor-client privilege, and thus are not prohibited from disclosure by subsections (b) or (c). The documents show only wire transfers, cheque payments, receipts, and payments and withdrawals in trust ledgers. While, as set out by the Supreme Court of Canada, information contained in a lawyer’s financial records may be solicitor-client privileged, the existence of the privilege depends on the nature of the case, the content of the financial records, and what they might reveal about the relationship and communications between the client and the lawyer: Canada (Attorney General) v. Chambre des notaires du Québec, 2016 SCC 20, [2016] 1 S.C.R. 336 at para 73; Maranda v. Richer, 2003 SCC 67, [2003] 3 S.C.R. 193, at para 30. In this case, none of the records make any reference to the nature of the payments nor to any work done. In addition, as indicated by the Referee, almost all of the payments are payments from Mr. Mehta’s firm to another individual/or entity, other than payments to Mr. Mehta’s firm by Rockfort. I am not able to identify any information in or arising from the documents that appears to reveal any solicitor-client communications or relationship. As set out above, none of the individuals/entities contacted by the court-appointed Referee raised any objection and the Referee also indicated that he did not consider any of the records to be subject to solicitor-client privilege.

Is it otherwise appropriate to permit disclosure under s. 49.13?

[14] As I find that there is no issue of solicitor-client privilege, the only remaining question is whether the records should be disclosed. In my view, it is appropriate to disclose the records in this case.

[15] I am told that this is the first time that the Law Society has applied to the Court under s. 49.13. Therefore, there is no case law interpreting this section. The Law Society has argued that it would be appropriate, under s. 49.13, to apply the test used by the OSC and endorsed by the Supreme Court of Canada in Deloitte & Touche LLP v. Ontario (Securities Commission), 2003 SCC 61, [2003] 2 S.C.R. 713. That case considered a provision of the Securities Act that authorizes the OSC to disclose information that otherwise would be confidential. Although that case did not involve disclosure to a public authority, I agree that the test there is appropriate under s. 49.13. Specifically, the Supreme Court endorsed the OSC’s application of the following test:

(a) Identify the purposes for which disclosure is sought and the extent to which these purposes serve the policies of the applicable legal and regulatory scheme; (b) Identify the harm to confidentiality interests that would result from the disclosure of the information; and (c) Balancing these competing interests to determine whether the public interest favours disclosure: Deloitte & Touche LLP, at paras. 13 and 22.

[16] The purpose of disclosure in this case is to provide information to the JSOT to assist in investigating and prosecuting alleged offences under the Securities Act, R.S.O. 1990, C. S.5. I am told that a trial of the allegations against Mr. Singh is scheduled for September 2019. Disclosing the material will advance the public interest, including the purposes of the Law Society. The Law Society has a duty to protect the public interest and to maintain and advance the cause of justice and the rule of law: s. 4.2 of the Law Society Act. It therefore has an interest in ensuring that lawyers’ trust accounts are not used as vehicles for fraud. It is appropriate for the Law Society to provide assistance in proceedings that may prevent this from occurring. If criminals are able to use lawyers to perpetrate crimes, public confidence in the integrity of the legal profession and the administration of justice will be undermined. The public interest here also includes the importance of the work of the other provincial regulator, the OSC, which is seeking to investigate and prosecute alleged offences that may seriously impact members of the public.

[17] Turning to the second step of the test, Mr. Mehta and Mr. Singh do not have a valid interest in keeping the financial information confidential. The funds at issue belong to investors, who are entitled to have an accounting of the funds they provided to Rockfort. In addition, with respect to any other individuals or entities involved, there is no solicitor-client information at issue. None of the parties contacted by the Referee objected to disclosure.

[18] With respect to the third part of the test, the value in disclosing the information to the OSC outweighs any confidentiality concerns. In addition to the Law Society’s interest in lawyers not acting as conduits for fraud, it is also important to consider that the allegations of fraud in this case are serious. They involve hundreds of thousands of dollars allegedly belonging to individual investors who entrusted their money to Rockfort. The public interest in providing the information to the JSOT for regulatory and criminal investigation and prosecution outweighs any remaining confidentiality issues, given that the records at issue are not solicitor-client privileged.

[19] I should note that the Law Society argued that the test under s. 49.13 should be whether the Law Society’s decision to seek to disclose the documents is reasonable, relying on Deloitte & Touche. In that case, the court was reviewing an order of the OSC to disclose the documents, whereas in this case, Law Society staff made an internal decision to seek the court order. While I recognize the Law Society’s mandate includes protecting the public interest, I do not need to decide whether reasonableness is the appropriate standard here, as in my view this is clearly a case in which the information may be disclosed.

Final Comments

[20] Given that s. 49.13 has not previously been interpreted, counsel for the Law Society indicated that it would be helpful to have the Court’s guidance with respect to the procedure followed by the Law Society in this case. To that end, I can comment that it was very helpful to have a court-appointed Referee, charged with raising any reasonable claim of potential privilege. In addition, it was helpful and appropriate that the Law Society applied what was described as a “surgical” approach to its request for disclosure – that is, not seeking to disclose all information in its possession relevant to Mr. Mehta and Rockfort. Instead, the Law Society helpfully limited the order it sought to the most necessary records, which raised the most minimal concerns in terms of confidentiality.

O’Brien, J. Date: April 24, 2019