Court File and Parties

COURT FILE NO.: 3413/13 DATE: 2019-06-07 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: BANK OF MONTREAL, Plaintiff AND: ROUFAT ISKENDEROV also known as ISKENDEROV ROUFAT also known as RODFAT ISKENDEROV also known as ISKENDEROV RODFAT also known as RUFAT ISKENDEROV also known as ISKENDEROV RUFAT also known as ROUFAT DEROV also known as DEROV ROUFAT also known as RODFAT DEROV also known as DEROV RODFAT also known as RUFAT DEROV also known as DEROV RUFAT and ELENA LAZAREVA, Defendants

BEFORE: Kurz J.

COUNSEL: Joshua J. Siegel, for the Plaintiff P. Bakos and M. Hochberg, for the Defendants

HEARD: April 25, 2019

Endorsement

[1] The defendants, Roufat Iskenderov (“Roufat”) and Elena Lazareva (“Elena”) move to prohibit the plaintiff, Bank of Montreal (“BMO”), from relying on any of the documents released to BMO by retired lawyer, Susan Ambrose (“the Ambrose documents”). The defendants say that Ms. Ambrose represented both of them in the January 2008 negotiation and preparation of a separation agreement. Thus, they argue that the Ambrose documents were subject to solicitor and client privilege. Although she was instructed to release the documents to the defendants’ former solicitor, Kenneth Page, she instead released them to BMO’s counsel, Michael Collis.

[2] BMO opposes this motion. It relies on the following arguments to justify its retention and reliance on the Ambrose documents:

• The Ambrose documents were released by Ms. Ambrose in response to a series of undertakings given by the defendants in this action.
• Ms. Ambrose acted only for Roufat in regard to his separation agreement with Elena. She did not act for Elena as well.
• Any privilege was waived by the inclusion of two of the Ambrose documents in the defendants’ October 8, 2016 affidavit of documents and document briefs.
• The defendants were dilatory in claiming a breach of solicitor-client privilege.
• In any event, no privilege applies to communications with a lawyer made for the purpose of covering up an illegal act, in this case a civilly fraudulent transaction made to defeat the claims of BMO.

[3] For the reasons that follow, I find that the Ambrose documents were originally privileged. That privilege was waived in regard to two of the Ambrose documents because of the defendants disclosed of them to BMO themselves. I do not find that the disclosure was merely inadvertent. Further, the Ambrose documents potentially demonstrate that the transaction in question was a fraudulent one. Accordingly, the privilege is lost. The Ambrose documents may be relied upon in this litigation for the purpose of determining whether the transfer of Roufat’s interest to Elena was a fraudulent one.

Background

[4] This motion comes within the context of BMO’s law suit against the defendants to reverse what it says is Roufat’s fraudulent transfer of his interest in a jointly-owned matrimonial home to Elena.

[5] Roufat and Elena are former spouses. They jointly held title to their former matrimonial home, located at 220 King High Drive, Thornhill, Ontario (“the home”). On March 7, 2008, Roufat transferred his interest in the home to Elena. The consideration for the transaction was listed in the land transfer tax affidavit as $2.00. It was further described in that document as a “ [t]ransfer from husband and wife to wife for natural love and affection".

[6] On April 28, 2009, Roufat defaulted on payment of a line of credit granted to him by BMO. On January 14, 2009, BMO obtained a judgment against Roufat for $483,449.89. Just over two months later, in March 2009, Roufat assigned himself into bankruptcy. He was discharged from that bankruptcy on April 11, 2014.

The Separation Agreement

[7] The defendants defend the transfer of Roufat’s interest in the home. They claim that it occurred under the terms of a separation agreement (“the separation agreement”) that they say they signed on January 10, 2008. The separation agreement was drafted by Susan Ambrose. The defendants say that Ms. Ambrose acted for both of them in preparing the separation agreement.

[8] The separation agreement is, from a family law perspective, problematic. It called for Roufat and Elena to share joint custody of their children, with their primary residence to be with Elena. Yet Roufat was not required to pay any child or spousal support. The separation agreement described his income as “$NIL”. It described Elena’s income as “UNDISCLOSED”.

[9] Most germane to this litigation, the separation agreement called for Roufat to transfer his interest in each of the home, a condominium unit and a business to Elena. Despite the fact that the separation agreement stated that Roufat had nil income, it described the transfer of his property to Elena as “lump sum child support” and a “special provision that benefits the children.” But it also says that “Elena can support the children without contribution from ROUFAT.”

[10] The separation agreement lacked either certificates of independent legal advice or a waiver of the defendants’ right to independent legal advice. The latter omission is relevant in light of the alleged dual representation by Ms. Ambrose. Furthermore, the separation agreement does not set out who witnessed its signing. The witness signatures were illegible, albeit identical for each defendant. No financial disclosure was provided for either defendant, a fact relevant to its validity from a family law perspective. (See Miglin v. Miglin, 2003 SCC 24, [2003] 1 S.C.R. 303 and Rick v. Brandsema, 2009 SCC 10, [2009] 1 S.C.R. 295).

Why BMO says that the Ambrose Documents are Relevant

[11] BMO says that the Ambrose documents in their possession contradict most of the defendants’ claims about the transfer of Roufat’s interest in the home to Elena. They say that the Ambrose documents demonstrate that:

1. Ms. Ambrose acted only for Roufat. Her reporting letter was addressed only to him. The only identification she had in her file was a copy of his driver’s licence.
2. The transfer of Roufat’s interest to Elena was not made pursuant to the separation agreement.
3. That is because the separation agreement was drafted months after Roufat transferred his interest in the home to Elena.
4. Ms. Ambrose warned Roufat about the weaknesses of the terms of the separation agreement. Those weaknesses include Elena’s lack of independent legal advice, the lack of financial disclosure and the failure to include a child support term in the agreement.

The defendants reject those claims.

The Defendants’ Undertakings Regarding Documents from Ms. Ambrose’s File

[12] BMO commenced this action on June 18, 2013. It later successfully moved for a certificate of pending litigation (“CPL”) against the home. In cross-examinations of each of Roufat and Elena prior to the hearing of the CPL motion, each of the defendants made undertakings to obtain certain documents from Ms. Ambrose.

[13] Elena undertook to:

1. Provide the invoice from Ms. Ambrose;
2. Ask Ms. Ambrose whether Elena was provided with a certificate of independent legal advice;
3. Contact Ms. Ambrose to obtain the financial disclosure that the parties obtained from each other and produce it.

[14] Roufat undertook to ask Ms. Ambrose:

1. Who paid her fee for the drafting of the separation agreement;
2. Whether there is a certificate of independent legal advice with regard to the separation agreement, and if so, produce it;
3. For all records of Roufat’s financial disclosure to Elena including assets, sources of income and liabilities, and to produce those records;
4. For all records of Elena’s financial disclosure to Roufat, including assets, sources of income and liabilities, and to produce those records;
5. For all records and results of the investigation by each defendant into the other’s financial circumstances, and to produce the results.

[15] On March 28, 2014, the defendants’ former counsel, Kenneth Page, informed Mr. Collis, that he was unable to locate Ms. Ambrose. She had retired from the practice of law because of illness. Three days later, Mr. Collis sent an email to what was then known as the Law Society of Upper Canada (now the Law Society of Ontario). He asked for its assistance in locating Ms. Ambrose in order to allow the defendants to answer their undertakings. He set out Mr. Page’s contact information. He attached a copy of the separation agreement and provided a list of the defendants’ undertakings.

[16] The Law Society then forwarded Mr. Collis’ email to Ms. Ambrose. She responded to Mr. Collis on March 31, 2014. She stated that she sold her practice and retired due to ill health in 2011. She promised to review her files, but stated that “…it might be more appropriate if Mr. Page made the request & I will address my response to him as the undertakings were given by his clients.”

[17] On April 1, 2014, Mr. Collis forwarded Ms. Ambrose’s response to Mr. Page, requesting that he contact her to obtain the undertakings. Mr. Page did so later that day.

[18] On April 7, 2014, Ms. Ambrose sent a series of five emails directly to Mr. Collis. Her covering email to Mr. Collis stated:

I did not act for Elena. I opened a file for Roufat on Nov. 24, 2008. I received material & information from Roufat regarding his and her financial circumstances. As I felt that it was insufficient, I had Roufat execute an acknowledgement of this. I have attached copies of all of the documents in my file. Susan Ambrose

[19] At her cross-examination, Ms. Ambrose could not confirm that she produced her whole file in her five emails to Mr. Collis, but added that if that is what her email stated, she did it.

The Contents of the Ambrose Documents

[20] The Ambrose documents included:

1. Ms. Ambrose’s email to Mr. Collis of April 7, 2014, described above;
2. A reporting letter from Ms. Ambrose to Roufat, dated November 24, 2008 (“the reporting letter”). That document was dated more than eleven months after the separation agreement was purportedly signed and more than eight months after Roufat’s transfer of his interest in the matrimonial home to Elena. The reporting letter was addressed to Roufat at the matrimonial home (although the street address was misspelled). It stated: Dear Mr. Iskenderov: I enclose two copies of a separation agreement drafted according to your instructions to provide that: a) All property is given to your wife b) You and your wife will have joint custody and the primary residence of the children will be with your wife; and c) There will be no child support and no spousal support [sic, period missing] Please note that unless she receives independent legal advice on the separation agreement, your wife may attempt to have the agreement set aside and look to you for spousal and child support. Also, please keep in mind that judges do not like to give divorces where there is no provision for child support and if and when you decided to divorce, you and your wife will probably be required to make complete financial disclosure to the court. [1] [Salutation from Ms. Ambrose omitted] At the bottom of the reporting letter, Roufat signed an acknowledgment that: I have reviewed and acknowledge the caution set out above and have elected to proceed with the separation [sic] in its present terms.
3. Roufat’s driver’s license, which was used for client identification. Ms. Ambrose did not have a copy of any identification document for Elena.
4. Undated and unsigned handwritten notes, comprising two pages, of what appears to be a client interview (the “handwritten notes”). At her cross examination of February 14, 2019, Ms. Ambrose confirmed that the handwriting in the handwritten notes was hers. B she was unable to recall anything about those notes. In her words “And I don’t have a clue what - - what I was writing or why.” She repeated a similar answer a number of times to questions when asked about particular parts of her file. However, Ms. Ambrose did say that Roufat was the person who provided her with the information in her notes. She thought that the notes contained typical information that she would obtain from a client for a separation agreement. But she admitted that, at best, her answers were guesses.
5. Copy of a reporting letter from a lawyer, Harvey A. Swartz, to Elena, dated March 7, 2008. That letter confirmed the transfer of title to the home from Roufat and Elena jointly to her alone. It also spoke of the discharge of two previous mortgages and the placing of a new mortgage on the home.
6. A reporting letter addressed to Elena from another lawyer, Paul Krowchuk, dated July 2, 2008. That letter reported on her sale to a third party of a condominium property, 5100 Dorchester Road, Apartment 306, Niagara Falls (“Elena’s Niagara Falls condo”). Accompanying the letter were a statement of adjustments, account and trust ledger statement.
7. Copy of a reporting letter from Mr. Swartz to Roufat, dated May 31, 2007 for the purchase of Elena‘s Niagara Falls condo by Roufat alone.
8. Also included in the Ambrose documents was a BMO payoff statement for the first mortgage for Elena’s Niagara Falls condo. The figures in the payoff statement were identical to those in Mr. Krowchuk’s reporting letter, which referred to the payoff of a BMO first mortgage. The payoff statement had a fax header dated June 30, 2008.

Mr. Collis Reviews the Ambrose Documents without an Explicit Waiver of Privilege

[21] Ms. Ambrose never explained why she chose to send the five emails with the Ambrose documents directly to Mr. Collis when she earlier wrote that she felt it appropriate that she deal directly with Mr. Page. She was not cross-examined about her decision. But she did state that she could not recall receiving a waiver of any privilege or confidentiality from either of the defendants. I note though that two of the emails and attachments were also addressed to Mr. Page.

[22] At no time did Mr. Page ask Ms. Ambrose to communicate directly with Mr. Collis. Nor did the defendants explicitly instruct her that they waived any privilege to which they were entitled with regard to her records.

[23] For his part, Mr. Collis forwarded copies of Ms. Ambrose’s emails to Mr. Page. But he only did so on December 16, 2014, more than eight months after he received them. Mr. Page later said that he was never aware of having received that email from Mr. Collis. Only years afterward, in the context of this motion, did Mr. Page determine that Ms. Ambrose and Mr. Collis’ emails went directly to his spam folder. Until recently, he was unaware of the existence of the emails.

[24] There is no evidence that Mr. Collis attempted in any other way to contact Mr. Page in order to confirm his entitlement to review the contents of the five emails that he received directly from Ms. Ambrose. Mr. Collis brought no court application for leave to review and rely on them. Rather, he assumed his entitlement to do so because he received no response from Mr. Page to his December 16, 2014 email.

[25] Mr. Collis later explained that he felt entitled to that assumption for two reasons. First, he felt that the Ambrose documents answered the defendants’ undertakings (and thus were not privileged at all). Second, he felt that Mr. Page’s silence in the face of his December 16, 2014 email amounted to a waiver of any claim to solicitor-client privilege. Yet he never sent Mr. Page any correspondence that sought to confirm his understanding. I will have more to say about this below.

Ms. Ambrose’s Evidence

[26] At her cross-examination, Ms. Ambrose stated that she was a general legal practitioner for whom family law represented only five per cent of her practice. She did “quite a bit” of real estate law. She confirmed that Roufat and not Elena was her client. She did not witness the signing of the separation agreement. She has no idea when she and Roufat completed the separation agreement, although she “would suspect” that they did so around the time of the reporting letter (i.e. November 24, 2008). It should be recalled that is the letter which stated that Ms. Ambrose was providing Roufat with two copies of the agreement, “…drafted according to your instructions…”

[27] In her re-examination, Ms. Ambrose stated that she had no independent recollection of the contents of any of the Ambrose documents. She added that her answers were “…just based on what I’m looking at [i.e. the Ambrose documents] ... [m]y recollection is pathetic.” She stated that she wishes that she could remember things and wishes that she could still practice law.

[28] Ms. Ambrose did not recall how she received any of the correspondence or documents from real estate lawyers that were in her file. Nor does she have any specific recollection of when she provided the separation agreement to Roufat. She did not recognize him from the picture in the copy of his driver’s license that he provided to her in 2008.

[29] Ms. Ambrose’s cross examination answers are in line with the statement at para. 6 of her affidavit. There, Ms. Ambrose swore that she is “… unable to recall any detail [about her services in regard to the separation agreement] whatsoever …”

The Defendants’ Affidavits of Documents

[30] The defendants changed counsel on June 22, 2016. Under their new counsel, Mr. Bakos, each of the defendants swore identical affidavits of documents. Listed at Schedule “A” to those two affidavits of documents were documents that were described as relating to a second mortgage on the home.

[31] Those affidavits of documents were included in the defendants’ otherwise identical document briefs. Tab 2 of the document briefs was described as containing the documents set out in Schedule “A” of the affidavits of documents. That tab included two of the Ambrose documents: the reporting letter and the two pages of the handwritten notes (albeit not in order). In other words, the defendants themselves disclosed those two documents to BMO in their document briefs.

[32] Counsel for the defendants asserts that the Ambrose documents were inadvertently disclosed in the two document briefs. The defendants did not realize that the documents they included in the disclosure brief pile of second mortgage documents cited at Schedule “A” of their affidavits of documents were privileged.

[33] That being said, the defendants did not file any affidavit to support their claims and that of their counsel. Mr. Seigal, for BMO, pointed out that Mr. Collis did file an affidavit to explain his role in the disclosure of the Ambrose documents. As a result, Mr. Siegel argues that I have no evidence to contradict what he claims to be a waiver of privilege. Since I have been provided with no evidence that the disclosure of two of the Ambrose documents is inadvertent, I agree.

Issues

[34] This motion raises the three following issues:

1. Were the Ambrose documents subject to solicitor and client privilege?
2. If so, was the privilege waived by or on behalf of the defendants?
3. Was the privilege lost because Ms. Ambrose was retained for an illegal purpose?

Issue No. 1: Were the Ambrose documents subject to solicitor and client privilege?

Solicitor and Client Privilege is “Fundamental Policy”

[35] Solicitor and client privilege protects the fundamental right of citizens to communicate in confidence with their lawyers. The Supreme Court of Canada has repeatedly affirmed that it will not be lightly abrogated (Simcoff v. Simcoff, 2009 MBCA 80, 82 R.P.R. (4th) 22, at para. 19).

[36] Solicitor and client privilege is more than a rule of evidence. As Binnie J. wrote for the Supreme Court of Canada in Blood Tribe Department of Health v. Canada (Privacy Commissioner), 2008 SCC 44, [2008] 2 S.C.R 574, at para. 10:

While the solicitor-client privilege may have started life as a rule of evidence, it is now unquestionably a rule of substance applicable to all interactions between a client and his or her lawyer when the lawyer is engaged in providing legal advice or otherwise acting as a lawyer rather than as a business counsellor or in some other non-legal capacity.

[37] Binnie J. went on to describe solicitor and client privilege as “fundamental policy” (para. 11).

[38] As Arbour J. wrote for the majority of the Supreme Court of Canada in R. v. Lavallee, Rachel and Heintz, 2002 SCC 61, [2002] 2 S.C.R. 209, at para. 49, the centrality of the privilege to the administration of justice applies even in the face of unjustified and accidental infringements of the privilege.

[39] Arbour J. confirmed at para. 39 of Lavallee, following a long line of cases, that the privilege belongs to the client, not the lawyer. It can only be asserted or waived by the client or through his or her informed consent.

[40] Solicitor and client privilege extends to "all communication by a client to his solicitor or counsel for the purpose of obtaining professional advice or assistance in a pending action, or in any other proper matter for professional assistance" (R. v. McClure, 2001 SCC 14, at para. 37, citing M. Orkin, Legal Ethics: A Study of Professional Conduct (1957), at p. 84).

[41] In Dublin v. Montessori Day School of Toronto, 2007 ONSC 8923, 85 OR. (3d) 511 (Ont. S.C.) (“Dublin”), Perell J. of this court set out a three-part test to determine the existence of solicitor and client privilege. As he stated it at para. 27, the communication in question must be:

(1) between a client and his or her lawyer who must be acting in a professional capacity as a lawyer; (2) given in the context of obtaining legal advice; and (3) intended to be confidential.

(See: Descôteaux v. Mierzwinski, 1982 SCC 22, [1982] 1 S.C.R. 860; R. v. Campbell, 1999 SCC 676, [1999] 1 S.C.R. 565; Gower v. Tolko Manitoba Inc., 2001 MBCA 11, 196 D.L.R. (4th) 716 (Man. C.A.); Wigmore on Evidence, vol. 8 (McNaughten rev., 1961, para. 2292).

Roufat’s Right to Solicitor and Client Privilege

[42] Here there can be little dispute that Ms. Ambrose was retained in a manner described by Perell J. in Dublin. Her retainer was within her professional capacity as a lawyer who practices family law. Her services were performed in the context of providing legal advice and services; the drafting of a separation agreement. While there is no direct evidence about Roufat’s intention to maintain confidentiality, the court must not forget the centrality of confidentiality in the solicitor and client relationship.

[43] The confidentiality of solicitor and client communications is one of the cornerstones of our system of justice. For that reason, if parts 1 and 2 of Perell J.’s test are met, the intention of confidentiality can be presumed. Therefore the onus must shift to the person challenging the privilege to show that there is no intention to maintain confidentiality within the relationship. Here, there is no reason to find an absence of an intention to maintain confidentiality.

[44] It is therefore clear that solicitor and client privilege prima facie applies to all communications between Ms. Ambrose and Roufat. BMO challenges none of this, at least with regard to Roufat. Rather, BMO argues that his privilege was either waived or lost because it was used for an illegal purpose.

[45] Despite its concession regarding Roufat, BMO challenges the existence of solicitor and client privilege between Elena and Ms. Ambrose. One of the few things that Ms. Ambrose was clear about in her cross-examination (as well as her covering email to Mr. Collis) was that she was did not act for Elena. The reporting letter confirms that assertion. Nothing in Ms. Ambrose’s file, including the handwritten notes, alludes to the notion that she was jointly retained by Elena as well as Roufat. Elena herself has provided no evidence but her word that she jointly retained Ms. Ambrose.

[46] In short, there is no independent evidence that demonstrates that Elena retained Ms. Ambrose jointly with Roufat and compelling evidence to the contrary. I find that no solicitor and client relationship existed between Elena and Ms. Ambrose. Elena cannot claim solicitor and client privilege in regard to the Ambrose documents.

[47] That does not mean that Roufat lost his privilege by sharing any Ambrose documents with Elena. In fact, BMO did not make that argument. In any event, the defendants are entitled to claim common interest privilege arising out of their common front and joint defence of BMO’s claim. The fact that both defendants retained the same counsel buttresses any claim to common interest privilege (see: Supercom of California Ltd. v. Sovereign General Insurance Co., 1998 ONSC 14645, 37 O.R. (3d) 597 (Ont. C.J.), at paras. 36-37, citing Buttes Gas and Oil Co. v. Hammer (No. 3), [1981] Q.B. 223 (C.A.), varied for other reasons [1982] A.C. 888 (H.L.))

Issue No. 2: Was the privilege waived by or on behalf of the defendants?

[48] BMO argues that Roufat waived any solicitor and client privilege to which he was entitled. It says that the waiver occurred:

• Because the Ambrose documents were produced in response to the defendants’ undertakings;
• Through the defendants’ affidavits of documents and production briefs, all dated October 8, 2016;
• Because of the defendants’ counsel’s delay in asserting the privilege;
• Through the cross-examination of the defendants and their re-examination by their counsel.

[49] In considering whether Roufat has waived his claims to solicitor and client privilege, I am guided by the following principles:

1. Solicitor and client privilege must be as close to absolute as possible. The occasions when the solicitor-client privilege yields are rare, while the test to be met is a stringent one. The privilege should yield only in certain well-defined circumstances. The determination is not a balancing of interests on a case by case basis. (R. v. McClure, 2001 SCC 14, at paras. 5 and 35, see also Dublin, at para. 28).
2. As the privilege belongs to the client and not the solicitor, it can only be waived by the client. (R. v. McClure, 2001 SCC 14, at para. 37)
3. A solicitor has a duty to refrain from disclosing confidential information unless his client waives the privilege. No objection ought to be necessary, and the evidence in violation of the privilege should not be received by the court. (Simcoff v. Simcoff, 2009 MBCA 80, at para. 16)
4. It is the duty of the solicitor to insist upon this privilege. (R. v. McClure, 2001 SCC 14, at para. 37)
5. In deciding whether to admit “a classic solicitor and client communication” into court proceedings over the objection of the client, the onus should be on the person wishing to override the privilege to establish why the document should be admitted. (Eizenshtein v. Eizenshtein, 2008 ONSC 3822, at para. 44)
6. The former view, expressed in the British Court of Appeal case, Calcraft v. Guest, [1895-9] All E.R. 346 (C.A.), was that the mere loss of possession of privileged documents, even if it is inadvertent, amounts to a waiver of that privilege (see also Nova Growth v. Kepinski, 2001 ONSC 5993, at para. 21, citing Sopinka, Lederman and Bryant, The Law of Evidence in Canada, (Butterworths: Toronto, 1999)).
7. However this approach is no longer the law of Canada. As Wein J. of this court found in Airst v. Airst, 1998 ONSC 14647, 37 O.R. (3d) 654 (Ont. C.J.), at para 17: “…the rigid approach embodied in Calcraft v. Guest, supra, must be modified to reflect the fairness approach developed in more recent cases.” That approach includes the application of Charter values. Those values include the sanctity of solicitor and client privilege in civil cases. (Airst, at paras. 14-16).
8. Accordingly, the mere possession of privileged materials by a third party does not mean that privilege has been waived. The court is required to enquire into the circumstances by which the materials were obtained. They may have been inadvertently disclosed. (Eizenshtein v. Eizenshtein, 2008 ONSC 3822, at paras. 32, 34, and 37)
9. Whether deliberately or inadvertently released, the court must consider the intentions of the person who disclosed the materials and whether or not the client was aware of, or at least reckless to, the fact that the privilege may be lost. (Eizenshtein v. Eizenshtein, 2008 ONSC 3822, at para. 37)
10. If the materials were obtained by improper means, the privileged materials should not be disclosed. (Airst v. Airst, 1998 ONSC 14647, at para. 14)
11. The court’s inquiry into the admission of inadvertently released, otherwise privileged materials must be a fact specific one. (R. v. Ward, 2016 ONCA 568, at para. 35).

[50] The R. v. Ward inquiry into inadvertently disclosed privileged materials includes the following factors:

1. The way in which the documents came to be released;
2. Whether there was a prompt attempt to retrieve the documents after the disclosure was discovered;
3. The timing of the discovery of the disclosure;
4. The timing of the application;
5. The number and nature of the third parties who have become aware of the documents;
6. Whether maintenance of the privilege will create an actual or perceived unfairness to the opposing party; and
7. The impact on the fairness, both actual and perceived, of the processes of the court.

[51] There is no deemed waiver of solicitor and client privilege simply because a party discloses that he or she received legal advice or that he or she relied on that advice. But it does occur when the party relies on that advice as a substantive element of his or her claim or defence. (Creative Career Systems Inc. v. Ontario, 2012 ONSC 649, at para. 31, citing Guelph (City) v. Super Blue Box Recycling Corp., 2004 ONSC 34954, [2004] O.J. No. 4468 (Ont. S.C.).

Application of Principles to Claims of Waiver in this Case

Roufat and his Counsel did not waive his Privilege in 2014

[52] One of BMO’s claims is that the Ambrose documents were first released in answer to their undertakings in regard to the certificate of pending litigation proceedings. Thus any privilege was lost or waived (BMO is not explicit in saying which) because of those undertakings. I disagree with that argument.

[53] The undertakings themselves did not amount to a waiver of privilege. The documents that the defendants undertook to produce were not privileged even though they had been provided to Ms. Ambrose. Further, nothing that the defendant’s former counsel, Mr. Page, did or said represented a waiver of privilege on their behalf.

[54] Mr. Page was aware that Mr. Collis had, with the assistance of the Law Society, tracked down Ms. Ambrose. She had made it clear that she felt that it was appropriate to produce her records to Mr. Page, not Mr. Collis. Mr. Page asked her to do just that. Despite that instruction, Ms. Ambrose chose to disclose the entire contents of her file directly to Mr. Collis.

[55] I have been offered no explanation for Ms. Ambrose’s decision to release her records directly to Mr. Collis. But in reviewing the transcript of her cross-examination, excerpts of which are summarized above, it appears that Ms. Ambrose’s illness may have affected her cognition. She admitted as much when she stated that she wished that she could remember things and wishes that she could still practice law. She went so far as to describe her memory as “pathetic” as a result of her health issues.

[56] Ms. Ambrose suffered from a recurring form of lung cancer that resulted in the removal of one lung in 2010, and a finding of cancer in her other lung in 2016. She began chemotherapy for the cancer recurrence in 2016. She felt that her memory problems were due to her preoccupation with the cancer and her ongoing medical interventions. As a result of that preoccupation, Ms. Ambrose sought no treatment for her cognitive problems.

[57] It appears that the release of the Ambrose documents came about only because of a lapse in judgment by Ms. Ambrose.

[58] For the reasons set out above, I find that the release of the complete Ambrose documents to Mr. Collis was unauthorized. There was no clear, informed waiver of privilege by Roufat. The instructions that Ms. Ambrose received from Roufat through Mr. Page were clear. She just did not follow them. Further, Ms. Ambrose had no right to waive Roufat’s privilege on her own. She was not even his lawyer at the time.

[59] Put simply, nothing that Roufat or Mr. Page did in 2014 waived Roufat’s solicitor and client privilege regarding Ms. Ambrose. There was no way that they could have anticipated Ms. Ambrose’s error. They were not responsible in any way for the unauthorized disclosure.

Ms. Ambrose Entitled to State that she did not Represent Elena

[60] That being said, I do not find that Ms. Ambrose’s statement that she only represented Roufat violated either defendants’ privilege. If Elena did not retain her, she had no privilege to assert.

[61] I recognize that Roufat asserts that Ms. Ambrose acted for both defendants in drafting the agreement. Mr. Bakos for the defendants asserts that Ms. Ambrose had no right to deny that assertion as to do so would violate Roufat’s privilege. But that assertion cannot be correct.

[62] The mere allegation that a lawyer acted for an alleged client must not bind the lawyer. If that were the case, lawyers would be bound by any false claims of their retainer by putative clients. Lawyers would be unable to respond to fabricated assertions of a previous solicitor and client relationship. They could be removed from the record at any time if the party on the other side simply says that they had previously retained the lawyer for some purpose.

[63] In MacDonald Estate v. Martin, 1990 SCC 32, [1990] 3 S.C.R. 1235, the Supreme Court of Canada made clear that a lawyer has the right to respond to a claim that he or she had received solicitor and client privileged information from the other party. He or she may do so, even though, as Sopinka J. wrote at para. 47: “… the question of the use of confidential information we are dealing with a matter that is usually not susceptible of proof.” Further the burden is a steep one.

[64] If a lawyer’s client publicly lies about or misstates the nature of a retainer (such as falsely asserting that a retainer was a joint one), the lawyer cannot be bound by that untruth. That would be even more the case if the untruth could be used to cover up a form of criminal or civil illegality. I will have more to say about the latter point below.

Mr. Collis was not Entitled to Open the Attachments to Ms. Ambrose’s Five Emails Without Consent or Leave

[65] Mr. Collis did nothing improper to obtain the Ambrose records. But when he received the records directly from Ms. Ambrose, he should have known that he was not entitled to open them. The exchange of correspondence with Ms. Ambrose made clear that Ms. Ambrose was to release her records to Mr. Page, not Mr. Collis. The first covering email that Ms. Ambrose provided with her records made clear that she was not merely answering undertakings. She stated that she was producing her entire file. Why, in those circumstances, Mr. Collis felt that he had the authority to review those records without further authorization eludes me. The fact that she stated that she had represented Roufat only did not diminish his claim to privilege.

[66] In his affidavit of January 28, 2019, Mr. Collis explains that he sent Ms. Ambrose’s emails to Mr. Page on December 16, 2014. That was over eight months after he received them. In addition, Mr. Collis asserts that two of the five emails (with attachments) that he received directly from Ms. Ambrose contained “… email headers indicating that she sent them to Kenneth Page … on April 7, 2014”.

[67] Because he received no response to his December 16, 2014 email, and heard nothing from Mr. Page regarding the April 7, 2014 emails from Ms. Ambrose, Mr. Collis assumed that Mr. Page had waived any privilege. He assumed that silence is acquiescence and/or that the Ambrose productions merely answered the defendants’ undertakings. Neither answer is accurate or acceptable in the circumstances. Mr. Collis was not entitled to make those assumptions.

[68] There is no evidence that Mr. Collis actually followed up with Mr. Page regarding either the disclosure of the Ambrose documents on April 7, 2014 or his own December 16, 2014 email. Mr. Collis neither wrote a letter to Mr. Page nor bothered to pick up the phone to confirm that he was entitled to review Ms. Ambrose’s file.

[69] Mr. Page swore an affidavit in which he professed ignorance about the Ambrose productions to Mr. Collis, her copy of two emails to him or Mr. Collis’ email to him. He checked, years later, and determined that Mr. Collis’ email went into his spam email folder.

[70] In Eizenshtein v. Eizenshtein, Wildman J., dealing with a different scenario of unauthorized disclosure of solicitor and client privileged documents, wrote at para. 43 of the importance of respecting relationships of trust. She stated that, short of recklessness, the message with regard to inadvertent disclosure of privileged materials should not be “if you can get your hands on it, we’ll take a look at it.” Rather, the message should be “Hands off – it’s private!” In other words the presumption of privacy is very strong. Mr. Collis should have known that.

[71] The steps that Mr. Collis should have taken were set out by Nordheimer J., as he then was, in Aviaco International Leasing v. Boeing Canada Inc., 2000 ONSC 22777, [2000] O.J. No. 2420 (Ont. S.C.). There, a letter by counsel for one of the defendants intended for his fellow defence counsel was inadvertently faxed to counsel for the plaintiff. That counsel informed defence counsel but refused to destroy the letter. Instead, he placed the letter in the court record.

[72] Nordheimer J., as he then was, saw that conduct as sharp practice. He was direct in setting out both the error of plaintiff’s counsel’s conduct and the proper manner of dealing with the inadvertent disclosure, in stating, at para. 11:

Once plaintiffs' counsel realized that the letters had been sent to them by mistake - something that ought to have been obvious to them as soon as they saw the letters - they were under a positive duty to advise both counsel of the mistake. They then should have returned the letters without keeping any copies of them or, if they reasonably thought that there was an issue as to whether they were entitled to retain the letters, then they ought to have taken immediate steps to seek a ruling from the court on that issue.

[73] Nordheimer J. found that anything less than expunging the documents from the court record would amount to an abuse of process and ruled accordingly.

[74] Nordheimer J.’s approach was approved by Farley J. in Nova Growth v. Kepinski, 2001 ONSC 5993, above, at para. 29. At para. 13, Farley J. pointed to the importance of doing the right thing when faced with inadvertently disclosed privileged documents:

I think it fair to observe that cases where privileged documents have been inadvertently disclosed to the other side in a dispute are always fraught with difficulty. Part of that difficulty arises from the fact that the recipient is not expecting the material and therefore is caught off guard even after coming to the appreciation (after some review as there is no light blinking and horn sounding a warning on the "cover" that the contents are privileged, at least in the "usual" situation). After appreciating that the material is or may be privileged, then the recipient is required to do something - namely the right thing.

[75] Farley J. understood that counsel in receipt of inadvertently disclosed privileged documents are placed in a very difficult position. In Nova Growth, counsel who received the inadvertently disclosed documents had its clients review them to assist in determining whether they were privileged. Farley J. found that process to be offside. Despite the difficulty in which counsel found themselves, they were required to act properly. As he put it at para. 15:

Lerners was faced with a very difficult decision. That decision must, for the integrity of the justice system and the public's reliance upon that system, be the right one. It matters not that Lerners was well intentioned. The passing grade is 100%, not 50.1% or best efforts.

[76] Even though he acted in error rather than in bad faith, Mr. Collis did not earn a passing grade with regard to the Ambrose disclosures. Once he received the first email from Ms. Ambrose, stating that she was producing “all of the documents in my file”, metaphorical warning bells should have sounded for Mr. Collis. He was alerted to the fact that he was likely receiving privileged documents. He should not have opened them. He should instead have taken an affirmative step. That would have involved him first contacting Mr. Page, and if he was unable to do so or unable to obtain what he felt to be a satisfactory answer, promptly applying to court for permission to review and rely on the Ambrose productions. He did neither.

[77] Forwarding Ms. Ambrose’s emails and attachments to Mr. Page eight months after the fact was not sufficient to meet Mr. Collis’ obligations with regard to the Ambrose records. Nor was the assumption that Mr. Page’s silence represented acquiescence. Nor was reliance on the fact that some of Ms. Ambrose’s emails were also sent to Mr. Page. Nor was a unilateral and self-interested (for his client) determination that the contents of the file of a lawyer for the other side were not privileged.

[78] The financier, Warren Buffet, is quoted as saying that one should always take the high road; it’s far less crowded. That is good advice for a lawyer in any circumstance but it is particularly apposite to the case of inadvertent disclosure of privileged materials. Here, Ms. Ambrose’s unauthorized disclosure of her entire file to Mr. Collis did not amount to a waiver of privilege. For that reason and because Mr. Collis failed to take the appropriate steps set out above, BMO would ordinarily not be entitled to rely on the contents of the Ambrose documents, other than her statement that she did not act for Elena.

[79] But that does not end the consideration of privilege here. There are further issues raised by the facts of this case. They arise from allegations of another form of waiver and the question of whether Ms. Ambrose’s services were utilized for an improper purpose.

Argument of Waiver through the Defendants’ Affidavit of Documents and Document Brief, dated October 8, 2016

[80] The defendants assert through counsel that the reporting letter and handwritten notes from Ms. Ambrose’ file were inadvertently included in their affidavits of documents and document brief. However they offer no sworn evidence explaining how that alleged inadvertence came to pass. They implicitly ask the court to assume inadvertence.

[81] In Chan v. Dynasty Executive Suites Ltd., 2006 ONSC 2877. Belobaba J. looked to whether solicitor and client privilege is waived in the face of allegedly unintentional disclosure. Citing Sopinka, Lederman and Bryant, The Law of Evidence in Canada, Belobaba J. stated that the determination of waiver in the face of allegedly inadvertent disclosure depends on the circumstances. It requires the court to consider three factors: “…whether the error was in fact inadvertent and thus excusable; whether an immediate attempt has been made to retrieve the documents; and whether preservation of the privilege in the circumstances would cause unfairness to the receiving party.” (See also Toronto Port Authority v. Toronto (City), 2008 ONSC 5274, at paras. 30-32 and Canada (Minister of National Revenue - MNR) v. Thornton, 2012 FC 1313, [2012] F.C.J. No. 1450, at paras. 60-61).

[82] In setting out this test, Belobaba J. was clear that at some level of carelessness beyond mere inadvertence, solicitor and client privilege may be lost. He did not say exactly how negligent a party must be to waive privilege.

[83] In Eizenshtein, Wildman J. set the bar for waiver at recklessness. She stated at para. 37:

In order for solicitor-client privilege to be lost by virtue of a disclosure, whether advertent or inadvertent, it is important to assess whether or not the client was aware of, or at least reckless to, the fact that the privilege may be lost.

[84] Farley J. made the same point in Nova Growth v. Kepinski, 2001 ONSC 5993. He states at para.22 that:

It would seem to me that the negligence here was understandable. It was inadvertence and not recklessness.

[85] The high bar for waiver reflects the importance of solicitor and client privilege to our system of law. It should not be easily lost. There must be a deliberate act or one that that so careless in the face of the risk of loss of the privilege that it can be fairly described as reckless. The court must also look to other relevant factors, including any delay in asserting the privilege and a general consideration of fairness to the litigants.

Was the Defendants’ Disclosure of two Privileged Documents Merely Inadvertent?

[86] The defendants changed counsel, from Mr. Page to Mr. Bakos, on June 22, 2016. Three and a half months later, on October 8, 2016, they swore their affidavits of documents in this action. Schedule “A” of each of those affidavits of documents refers generally to “Documents re second mortgage from RBC … May 31, 2007 to August 7, 2014.” The schedule does not list the particular documents. It makes no specific reference to any of the Ambrose documents.

[87] Those affidavits of documents were included as a tab in each defendant’s documents brief and served on BMO. Tab 2 of each document brief purported to contain the Schedule “A” documents. While Tab 2 contained a variety of documents that could be said to be directly or indirectly related to the second mortgage on the home, it also included a variety of documents that are not related to the second mortgage placed on the home. They include copies of:

a. a reporting letter from a lawyer, Harvey A. Swartz, to Elena, dated May 31, 2007 regarding her purchase of Elena’s Niagara Falls condo; b. a reporting letter from Mr. Swartz, to Elena, dated April 22, 2008 regarding a first mortgage on Elena’s Niagara Falls condo; c. the handwritten notes from the Ambrose records, out of order, with its two pages separated by a copy of the separation agreement and the reporting letter; d. the separation agreement; e. the reporting letter (i.e. by Ms. Ambrose, dated November 24, 2008) f. a reporting letter from Mr. Swartz, to Elena, dated March 7, 2008, regarding her first mortgage on the home; g. a reporting letter from another lawyer, Paul Krowchuk, to Elena, dated July 2, 2008, regarding the sale of Elena’s Niagara Falls condo; h. the account of Mr. Krowchuk, to Elena, dated July 2, 2008, regarding the sale of Elena’s Niagara Falls condo; i. the trust ledger statement of Mr. Krowchuck dated July 2, 2008, regarding the sale of Elena’s Niagara Falls condo; j. The statement of adjustments regarding the sale of Elena’s Niagara Falls condo; k. A mortgage statement from RBC faxed to Kenneth Page on June 23, 2014 regarding the first mortgage on the home; l. Three invoices by Faig Construction to Elena for repairs and or renovations to the home, dated April 3, 2006, January 25, 2008 and January 4, 2008.

[88] How those documents, including two documents from the Ambrose file and the separation agreement made it into the defendants’ document briefs is an open question that the defendants have failed to directly answer. Out of concern that I may have missed pertinent evidence on the point while preparing this decision (a large volume of materials have been filed in this case), I wrote an endorsement seeking the assistance of counsel. I requested that counsel for the defendants point me to any sworn evidence that explains the inclusion of two of the Ambrose documents in the defendants’ document briefs. I specifically stated that I did not grant leave to provide new evidence on this motion.

[89] In response, the defendants, through counsel, referred to the transcript of Roufat’s cross-examination. They pointed to the surprise that they and their counsel expressed when BMO counsel attempted to cross-examine them about some of the Ambrose documents. They also point to the fact that the documents were not in order in their document briefs (which, they say, demonstrates the inadvertence of the disclosure). They pointed to no other evidence.

[90] The defendants have also failed to offer any evidence to explain how they first obtained the two Ambrose documents in question. Their previous counsel, Mr. Page, swore that he never received any of the Ambrose documents. In fact, he swore that he never saw any of the Ambrose documents until November 27, 2018. Mr. Bakos obtained Mr. Page’s file before his firm prepared the affidavits of documents and document briefs. So how and when did the defendants and their new counsel obtain the documents that ended up in their document briefs? They have provided no answer.

[91] Yet despite all of the gaps in their evidence, the defendants ask the court to accept that those documents were inadvertently disclosed. The defendants ask a great deal of the court.

High Level of Care Required for Affidavits of Documents

[92] An affidavit of documents is more than a pleading. It is a document that demands a high level of care and attention from both the deponent and the lawyer who commissions it.

[93] The deponent of an affidavit of documents is required to swear that:

I have conducted a diligent search of my records and have made appropriate enquiries of others to inform myself in order to make this affidavit. This affidavit discloses, to the full extent of my knowledge, information and belief, all documents relevant to any matter in issue in this action that are or have been in my possession, control or power.

[Emphasis added]

[94] Each of Roufat and Elena swore that they conducted that diligent search and engaged in appropriate enquiries prior to swearing their affidavit documents. That affidavit is supposed to represent the fullest extent of their knowledge, information and belief. It is obviously not a document to be slapped together.

[95] Further, paragraph 2 of every affidavit documents is explicit with regard to any claims to privilege. Having conducted the diligent search described above, the deponent adds that:

I have listed in Schedule A those documents that are in my possession, control or power and that I do not object to producing for inspection.

[Emphasis added]

[96] The point is further made at Schedule “A” to each affidavit of documents, which instructs the deponent to identify “… each document in my possession, control or power that I do not object to producing for inspection.” The deponent is then required to number the documents and “[s]et out the nature and date of the document and other particulars sufficient to identify it.” Again, care is required of the person swearing the affidavit.

[97] That level of care extends to the lawyer who commissions the affidavit of documents. He or she has a role in ensuring the accuracy of the document. The form within the affidavit of documents that the lawyer is required to sign states:

LAWYER’S CERTIFICATE

I CERTIFY that I have explained to the deponent,

(a) the necessity of making full disclosure of all documents relevant to any matter in issue in the action;

(b) what kinds of documents are likely to be relevant to the allegations made in the pleadings; and

(c) if the action is brought under the simplified procedure, the necessity of providing the list required under rule 76.03.

Date........................................ ...............................................................

(Signature of lawyer)

[98] Here, one is entitled to expect that the defendants reviewed the documents which they said related to the second mortgage before swearing their affidavits of documents and including them in the document brief. A careful solicitor should have done so as well.

[99] The latter point is made in Dublin, above. There, Perell J. wrote the following about the care that a civil litigation lawyer must take in preparing an affidavit of documents, particularly in regard to the balance between safeguarding privilege and ensuring proper disclosure:

1 Perhaps the most excruciating duty of a civil litigation lawyer is preparing an affidavit of documents. …

2 In our contemporary world of information excess, apart from the ever more onerous burden of collecting documents from their myriad of technological resting places, when preparing an affidavit of documents, a lawyer is confronted with many difficult questions. Does the document have a semblance of relevance to the action as pleaded? If the document is relevant to the issues in the proceedings, then is it subject to a privilege? And there are many privileges, including lawyer and client privilege, litigation privilege, a special relationship or Wigmore privilege, settlement communication privilege, spousal privilege, self-incrimination privilege, public interest immunity, informant privilege, judicial privilege, and privilege granted by statute. And the categories of privilege are not closed: Smith v. Jones, 1999 SCC 674, [1999] 1 S.C.R. 455. If the document is privileged then is it caught by an exception to privilege; for example, the crime or fraud exception, or the innocence at stake exception, or the public safety exception? Or, if the document is privileged, has the privilege been waived advertently or inadvertently? And if the privilege has been waived inadvertently, can the privilege be reasserted?

3 The lawyer has a duty to ensure that his or her client makes the disclosure required by the Rules of Civil Procedure, but at the same time, the lawyer has a duty to maintain the confidences and to protect and not disclose the privileged communications and documents of his or her client. Thus, in a context of an adversary system, where the lawyer has a duty to the client and a duty to the administration of justice, the lawyer is simultaneously under the excruciating pull of a duty of disclosure and a duty of non-disclosure.

The Defendants Fail to Prove that their Disclosure is merely Inadvertent

[100] The defendants and their counsel clearly had the Ambrose documents that they disclosed in their possession on October 8, 2016, when they swore their affidavits of documents and prepared their document briefs. Someone must have provided those documents to Mr. Bakos. Someone must have reviewed the productions in their document briefs. Those briefs were created to disclose the documents cited in Schedule “A” of the defendants’ affidavits of documents. Yet no one on behalf of the defendants has offered any sworn evidence to explain how the purportedly inadvertent disclosure occurred. I only have the unsworn word of counsel and the expressed surprise of Roufat (and Mr. Bakos) at a cross-examination, as well as the non-consecutive placement of the documents in a disclosure brief. I also have the placement of a number of other documents unrelated to the second mortgage in the brief.

[101] In the face of the failure of the defendants to offer evidence to explain the disclosure, the court cannot assume mere inadvertence. The disclosure was not to random mistaken release of documents. It occurred within the context of a formal process for the disclosure of relevant documents; one requiring great care and which had significant consequences. The defendants swore oaths attesting to their having reviewed the documents. Counsel signed the certificate attesting to his having explained their obligations to the defendants. Yet documents upon which privilege is claimed, as well as others were produced.

[102] Of course, those facts, in themselves, are not determinative of the issue of waiver. But having disclosed the documents within the context of a process demanding great care, the onus must clearly fall on the defendants to offer evidence demonstrating that their disclosure was merely inadvertent.

[103] This situation is different than that in Chan v. Dynasty Executive Suites Ltd., 2006 ONSC 2877, where the disclosure was found to be inadvertent and the privilege was not waived. In Chan, the affidavit of documents produced was a draft one only. Further, an explanation was provided for the inadvertent disclosure (a mistake by a law clerk in compiling the document brief). In addition, the volume of disclosure offered in Chan (17 bound volumes of productions, containing some 1123 documents) was far greater than the disclosure in this case.

[104] The defendants offer no evidence to explain their possession of the two documents over which they claim privilege or their disclosure. It was open to them to explain under oath how the disclosure occurred and why the release of the documents was merely inadvertent. Yet they failed to do so.

[105] More is required in the face of what the court would have to assume was intentional or at least reckless disclosure within the context of a document whose express purpose is the disclosure of all relevant documents. The court cannot ignore the fact that the defendants swore affidavits of documents and released the documents in question through their counsel and had legal advice throughout the process of disclosure.

[106] Accordingly, I find that the defendants and their solicitors were deliberate or careless to the point of reckless in disclosing the reporting letter and the handwritten notes in the Ambrose documents to BMO.

[107] I deal below with the issues of whether counsel’s delay in attempting to retrieve the documents was fatal to the claim of privilege and whether it would be unfair to BMO to prevent it from relying on the disclosed documents. In short, any delay would not otherwise be fatal to a privilege claim. But in light of my finding below in regard to illegal purpose, it would be unfair to BMO to prevent it from relying on the Ambrose documents.

Effect of Delay in Asserting the Privilege

[108] BMO argues that the chronology below shows that the defendants did not act immediately to enforce their claim to privilege after the issue arose on August 2, 2018:

• The Ambrose documents were first produced on April 7, 2014.
• Mr. Collis sent an email to Mr. Page with the Ambrose documents on December 16, 2014.
• Privilege was first asserted on behalf of the defendants during cross-examinations that took place on August 2, 2018. Yet the defendants took no immediate steps to bring this motion;
• Mr. Collis wrote to counsel for the defendants more than two months later, on October 16, 2018, to state that BMO intended to rely on the Ambrose documents in response to the defendants’ motion for summary judgment. Mr. Collis reminded defendants’ counsel that if they intended to assert privilege, they had to bring a motion to obtain an order confirming that privilege claim.
• The defendants did not serve their notice of motion seeking that relief until November 8, 2018, and did not serve their motion record until January 11, 2019.

[109] The defendants say that their counsel first attempted to convince BMO’s counsel not to use the privileged documents until after their summary judgment motion, scheduled for October 30, 2018, was completed. The defendants sought summary judgment because of a limitation issue, not the merits of the action. For that reason, they felt that it was unnecessary to deal with the privilege issue until the limitation defence was resolved. BMO did not agree.

[110] However, BMO did agree to adjourn the summary judgment motion to accommodate this one. The defendants then followed up with Ms. Ambrose to obtain her evidence regarding the disclosure of her file.

[111] In short, the defendants and their counsel did not act as expeditiously as possible after August 2, 2018, but they were not dilatory either. It was reasonable to attempt to persuade counsel for BMO to hold off on the use of the privileged documents until the summary judgment motion was heard. [2] After BMO’s counsel made it clear that it would not back down, the defendants brought this motion. It was served well in time for the adjournment date.

[112] Further, as set out above, BMO had its own obligations to act promptly in dealing with the original inadvertent disclosure of the Ambrose documents in the manner described by Farley J. in Nova Growth v. Kepinski, 2001 ONSC 5993.

[113] For those reasons, the factor of delay, in itself, does not weigh against the defendants’ claim of privilege. But that finding does not save the claim of privilege either.

Unfairness in allowing the Privilege Claim

[114] With regard to the issue of whether it would be unfair to prevent BMO from relying on the two disclosed documents, I rely on my analysis on issue no. 3, illegal purpose, below. There, I find that the Ambrose documents as a whole may allow BMO to argue that Roufat’s transfer of his interest in the home was a fraudulent transaction. To exclude the Ambrose documents at this stage would prejudice BMO’s ability to make that argument.

[115] I see no corresponding prejudice to Roufat and Elena other than the fact that the Ambrose documents may not assist their defence. That does not justify withholding the documents. Elena does not even have, as set out above, a claim to solicitor and client privilege regarding Ms. Ambrose.

Argument of Waiver by Allowing Cross-Examination of the Defendants about the Ambrose Documents

[116] I note that BMO also raises an issue as to whether the cross-examination of the defendants by its counsel about the Ambrose documents amounted to a waiver of privilege. That circular argument has no merit.

[117] The whole point of this motion is to determine whether the defendants are entitled to claim privilege with regard to the Ambrose disclosures. BMO properly sought to cross-examine the defendants in regard to the disclosure of the Ambrose documents and their affidavits in opposition to their admission into evidence. In the context of the issues in this motion, they were entitled to ask a broad range of questions about the documents. Had the defendants refused to attend for cross-examinations or to answer questions, BMO’s counsel would have rightly stated that the refusal was improper. Having cooperated in accord with the Rules, they cannot be said to have waived privilege.

[118] Further the defendants’ counsel articulated the view that the materials for these motions should not be part of the record in this matter unless they lose this motion. Otherwise opposing the admission of the Ambrose productions would have been self-defeating.

[119] With regard to the re-examination of the defendants by counsel, I see nothing there that involved a waiving of solicitor and client privilege. BMO’s counsel asked Roufat questions about where he was living at the time of and following the signing of the agreement. That is because Ms. Ambrose’s reporting letter was addressed to Roufat at the home and the handwritten notes seem to allude to his address as being the home. In re-examination, the defendants’ counsel asked Roufat some follow-up questions about where he told Ms. Ambrose he lived. Nothing in that exchange amounted to a waiver of privilege.

Conclusion re Waiver

[120] In conclusion, in considering all factors set out above, I find that in disclosing two of the Ambrose documents in their document brief, the defendants waived their claim to solicitor and client privilege over them.

Issue No. 3: Was the privilege of the Ambrose documents lost because Ms. Ambrose was retained for an illegal purpose?

[121] A line of authorities holds that any solicitor and client privilege is lost when a client communicates with a lawyer in aid of an illegal or improper purpose. That purpose could be either criminal or in the case of fraud, tortious. It is immaterial whether the lawyer is a knowing participant or an unwitting dupe (see Dublin at para. 29 and R. v. Church of Scientology (No. 3), 1984 ONSC 3264 at para. 8).

[122] In Rocking Chair Plaza (Bramalea) Ltd. v. Brampton (City), 1988 ONSC 1286, O’Driscoll J. of the Ontario High Court of Justice adopted a statement about communications with a solicitor for an improper purpose that goes back to a nineteenth century English case, Tichborne v. Lushington (1872), Notes of Proceedings, p. 5212, as cited in Crescent Farm (Sidcup) Sports Ltd. v. Sterling Officers Ltd. and another [1967] 1 Ch. D. 553, 566. That statement held as follows:

...Then the principle on which we proceed is this: that where anything is done, any communication made from a client to an attorney, with reference to a fraudulent purpose, the privilege does not exist; the fraudulent character of the communication takes away the privilege.

[123] In Crescent Farm (Sidcup) Sports Ltd., cited above, Goff J. added the following comment to clarify the extent and limits of the fraud exception to solicitor and client privilege:

I agree that fraud in this connection is not limited to the tort of deceit and includes all forms of fraud and dishonesty such as fraudulent breach of trust, fraudulent conspiracy, trickery and sham contrivances, but I cannot feel that the tort of inducing a breach of contract or the narrow form of conspiracy pleaded in this case come within that ambit.

[124] After citing these quotes in Rocking Chair Plaza, O’Driscoll J. concluded that they reflected the law of Ontario.

[125] In Dublin, Perell J. saw the exception as one broader than fraud. It included an illegal purpose. Perell J. included torts such as intentional infliction of emotional harm and breach of trust in the illegal purpose exception. He stated that for the illegal purpose exception to apply:

… it must be shown that the client had an illegal purpose in mind and that the lawyer either shared that illegal purpose or was deceived as to the client's purpose. In other words, the exception applies only where the client knows or should have known that the intended conduct was unlawful: R. v. Campbell, 1999 SCC 676 paras. 55-61.

[126] In looking to the onus and level of proof required to bring that exception into play in a civil matter, Perell J. stated at para. 43:

… a mere assertion that the lawyer's advice was sought in furtherance of an illegal purpose would not be sufficient; some convincing evidence of the illegal purpose is required … The party challenging lawyer-and-client privilege on the grounds of fraud or criminal activity must make out a prima facie case of fraud before the privilege is lost…

[Citations omitted]

[127] Perell J. found that to fit within the illegal purpose exception, it is only necessary to prove that the communications with the solicitor may show that the client intended to perform the illegal act (para. 45).

[128] The fact that fraud need not be actually proven to lose privilege was also discussed in Boroudjerdi v. Lam, 1993 BCSC 1452, where Leggatt J. stated at para. 17:

Mere allegation of fraudulent conduct in the pleadings will not be enough - there must be something which gives colour to the charge. See K. West Estates Ltd. v. Linemayer, 1984 BCSC 892.

[129] In Boroudjerdi, Leggatt J. was “… satisfied that the plaintiffs have presented sufficient information to give ‘colour’ to the charge of fraud.” Accordingly, he allowed the Plaintiff to inspect otherwise privileged documents.

[130] Here, the Ambrose documents may be somewhat ambiguous, particularly in light of the evidentiary problems that BMO may face with the limited recollections of Ms. Ambrose. However they do at least offer, in Leggatt J.’s words, some colour to BMO’s allegations of a fraudulent conveyance by Roufat.

[131] The defendants’ defence to BMO’s claims, other than a limitation defence, is that the transfer of Roufat’s interest in the home was effected in accord with a previously signed separation agreement. The Ambrose documents cast doubt on that claim and raise a prima facie case of civil fraud because:

a. Ms. Ambrose’s reporting letter is dated November 24, 2008, over eight months after the transfer of Roufat’s interest in the home to Elena, and over ten months after the agreement was allegedly signed. b. The reporting letter refers to providing two copies of the separation agreement to Roufat. It is at least ambiguous as to whether Ms. Ambrose provided Roufat with unsigned, draft or signed copies of the separation agreement. BMO wishes to argue that the reporting letter implies that the two copies of the agreement provided to Roufat are drafts only, which had yet to be signed. If that view is accepted, the court will implicitly reject the claim that the separation agreement was signed on January 10, 2008. c. The reporting letter is addressed to Roufat only. It makes clear that it was Roufat alone who instructed Ms. Ambrose. There is no similar letter to Elena in the Ambrose documents. Recall that Ms. Ambrose has stated, both orally and in writing, that she was not retained by Elena. All of those facts, if accepted, diminish the credibility of each of the defendants. They argue that the retainer of Ms. Ambrose was a joint one. d. Roufat signed an acknowledgment at the bottom of the reporting letter. It acknowledges the deficiencies in the separation agreement because of his lack of disclosure and Elena’s lack of independent legal advice. The fact that Ms. Ambrose asked Roufat to sign an acknowledgement in November, 2008, nine months after the separation agreement was purportedly signed, may be telling. If Ms. Ambrose wanted Roufat to acknowledge her advice about the weaknesses of the separation agreement, it would be reasonable for her to make the request at the time that she drafted it. It is less reasonable to make the request nine months later. Thus the timing of the acknowledgment may speak to the timing of the signing of the separation agreement. e. The reporting letter is addressed to Roufat at the home. However he claimed in his cross examination to have moved out not long after the separation agreement was signed (purportedly in January, 2008, or about ten months earlier). f. The handwritten notes are undated. But they speak to Roufat still living in the home at the time that the notes were taken. They also speak in the past tense to “N.F. property” being transferred to the “W[ife] who sold and kept the proceeds.” That is just what Elena did with regard to Elena’s Niagara Falls condo. g. The various letters and accounts from other lawyers are dated well after the date that the separation agreement was purportedly signed. The Harvey Swartz reporting letter and documents were dated March 7, 2008. The Paul Krowchuk reporting letter and documents were dated July 2, 2008. Why would Ms. Ambrose have these documents in her file when her work of preparing the separation agreement was presumably completed with the execution of the separation agreement on January 10, 2008?

[132] The Ambrose documents are not definitive proof that Roufat and Elena engaged in a fraudulent conveyance. BMO may have trouble putting some, if not all of it into evidence. They may not, in themselves be determinative of the issue. The contents of Ms. Ambrose’s file offer only circumstantial evidence that could be relied on by BMO to argue fraud.

[133] But they do allow an evidentiary basis for BMO to argue that there has been a fraudulent conveyance. They may prove that the transfer of Roufat’s interest was intended to defraud BMO of its rights to collect on his debt. If the documents are excluded at this stage, BMO will lose that legitimate opportunity.

[134] For the reasons set out above, I see no corresponding prejudice to Roufat and Elena other than the fact that the Ambrose documents may not assist their defence.

Conclusion

[135] In conclusion, I find that:

a. Ms. Ambrose was not retained by Elena. She cannot assert solicitor and client privilege regarding the Ambrose documents. b. Any privilege regarding the reporting letter and the handwritten notes in the Ambrose documents was waived by Roufat. c. Further, no privilege applies to the Ambrose documents, the correspondence of Ms. Ambrose to Mr. Collis and the transcripts of the cross-examinations of Ms. Ambrose and the defendants. The privilege was lost because the evidence raises a prima facie case that Roufat may have used the separation agreement drafted by Ms. Ambrose as cover for a fraudulent transaction. d. My broader finding in regard to loss of privilege applies only to the argument that Roufat’s transfer of his interest in the home was a fraudulent transaction. That is because that argument is the justification for the loss of privilege. Accordingly, the Ambrose documents for which privilege has not been waived shall not be used for any other purposes. I add, without deciding, that the deemed undertaking rule appears to apply to all of the Ambrose documents.

[136] Nothing in this decision should be seen as a comment on the admissibility (other than privilege) or weight to be placed on the Ambrose documents. That is a decision for another day.

Summary Judgment Motion

[137] The parties have agreed that they will deal with the defendants’ summary judgment motion on a full day before me on a date to be fixed by the trial office, in coordination with counsel. The summary judgment motion is adjourned to that date.

Costs

[138] If the parties are unable to agree on the costs of this motion, they may submit their written costs submissions to me upon the following terms:

a. The submissions will be no more than three pages, double spaced, 12 point font, 1” margins, plus any offers to settle and costs outline/bill of costs. b. BMO may file their submissions within 14 days, the defendants 14 days later. c. There will be no reply unless I request it.

Kurz J. Date: June 7, 2019

[1] Ms. Ambrose is likely referring to s., 11(b) of the Divorce Act, which requires the court to satisfy itself that “… reasonable arrangements have been made for the support of the children of the marriage…” before granting a divorce.

[2] In saying this, I am not commenting on the merit of inclusion of the Ambrose documents in the summary judgment motion or the merits of the motion itself, just the reasonableness of attempting to resolve the privilege issue in advance of the motion.