Court File and Parties

Court File No.: 2675/09 Date: 2019 07 12

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Frances M. Viele, Applicant

AND:

Gargan Investments Limited, Respondent

Counsel: R. Lepore, Counsel for the Solicitor M. Roefe, Counsel for the Client

Heard: In Writing

Reasons for Decision

LEMAY J

[1] This is an ongoing action relating to the assessment of a solicitor’s account. I have been case managing the action for some time, and some of the history of the action is reported in other decisions (see 2017 ONSC 6685 and 2019 ONSC 2112).

[2] A trial in this action is approaching in the fall of this year. However, a further issue relating to production has arisen. Specifically, Gargan Investments Ltd. and the various other parties represented by Mr. Roefe (“the Clients”) have claimed privilege over portions of some of the documents that they have produced. Ms. Viele (“the Solicitor”) opposes these claims of privilege, and argues that the complete documents should be disclosed to her.

[3] In the sections that follow, I will outline the documents in issue and then analyze each of the claims for privilege. First, however, it is useful to set out some basic background facts relating to the claims in issue in this case.

Background Facts

[4] The underlying proceeding concerns the assessment of the Solicitor’s account. The factual summation that I am providing here is set out for the purposes of understanding my ruling on the privilege issues. As some (if not all) of the facts may be in dispute at the hearing of the assessment, I wish to be clear that none of my comments in this section are intended to bind, in any way, the judge hearing the assessment.

[5] According to the Client, the Solicitor provided the Client with a valuation of the shares of Gargan Investments Ltd and AS Gargarella Investments Ltd. These were companies that owned and operated a strip mall in Etobicoke.

[6] The beneficial interest in these shares appears to have been owned by Rose Gargarella, who died in 2007. A tax return was completed on behalf of the Estate of Rose Gargarella in 2008, and this tax return set out a taxable capital gain.

[7] Counsel for the Client alleges that there was no supporting documentation to explain the calculation of the taxable capital gain. As a result, the Client alleges that it was exposed to risks in relation to the tax return that was filed with the Canada Revenue Agency (“CRA”). In addition, Counsel for the client has alleged that the Solicitor has not provided proper advice throughout this proceeding.

[8] The Solicitor disputes this claim, and asserts that her advice has been proper throughout. The Solicitor also asserts that she is entitled to collect the fees that she charged in this case.

The Documents In Issue

[9] Redactions in the following documents have been made by the Client, and challenged by the Solicitor:

a) A draft report from SB Partners Corporate Finance that was prepared for Mr. Roefe during the course of this litigation. b) A memorandum from a Mr. W. Grant Buchan-Terrell, who is a lawyer that provides business advice. The memorandum is dated November 15th, 2010. c) Accounts of Ray Niejadlik rendered to AS Gargarella and to Gargan Investments Limited.

[10] There is another claim for privilege over a communication between Mr. Roefe and Gunarsons on May 28th, 2009. The Solicitor makes no further submissions on the basis that no set-off is sought for the Gunarsons’ account, and the Solicitor has not requested the invoices of the Client’s lawyer. Given the Solicitor’s position, I will not address this claim of privilege.

[11] In addressing the three claims set out at paragraph 9, it should be noted that parts of all of these documents have been disclosed.

Issue #1- The Draft SB Partners Report

[12] The Client argues that the redactions in this document are covered by both solicitor-client and litigation privilege. In support of this position, the Client refers me to the decisions in General Accident Assurance Co. v. Chrusz, 45 O.R. (3d) 321 and A.M. v. Ryan, [1997] 1 S.C.R. 157.

[13] I start with the claim for litigation privilege. This claim is based on the fact that the SB Partners report was prepared in order to potentially provide an evidentiary response in contemplation of possible litigation with CRA on the issue of the valuation of the shares in one of the companies.

[14] The problem with the Client’s litigation privilege claim is twofold. First, there is no indication of any potential litigation with CRA, even more than ten years after the tax return in question was filed. Second, the claim for litigation privilege acts only against the adversary, and only until the conclusion of the litigation (see Chrusz, supra). Either way, the claim of litigation privilege as against CRA cannot apply in this case to prevent disclosure to the Solicitor.

[15] This brings me to a claim that there is either litigation privilege or solicitor-client privilege as against the Solicitor in this case. The problem with this claim is twofold. First, one of the purposes for preparing the SB Partners report was identified in the Client’s submissions as “in aid of demonstrating what Ms. Viele ought to have done and provide the client to support Ms. Viele’s share valuation and capital gains quantification.”

[16] In other words, at trial the Client will attempt to use the disclosed portions of this document to challenge the Solicitor’s position on this litigation. If the Client is going to use portions of the document in this litigation, then it is difficult to see how a claim of privilege over the rest of the document can be sustained. It would seem that the privilege (which may very well have existed when the document was created) has been waived. The report is being used, and the whole report should be produced.

[17] This concern leads directly to the second problem with the Client’s claim of privilege. Specifically, the claim is asserted over only part of the document. As noted above, the portions of the document that have been disclosed will be used to challenge the Solicitor’s position at trial. Counsel for the Client argues that this is completely appropriate, as the Courts have supported partial disclosure in other cases.

[18] As noted in Ryan, supra, (at para. 33), editing, partial disclosure and the imposition of conditions on who may see and copy documents are all techniques which may be used by the Courts in limiting disclosure of particular documents.

[19] However, the facts of Ryan must be remembered. Ryan was a case where Dr. Ryan had provided psychiatric treatment to the Plaintiff, and had allegedly sexually assaulted her. Dr. Ryan was seeking full disclosure of the records from the Plaintiff’s psychotherapist, who provided treatment to her after the alleged incidents of sexual assault. The disclosure of those records was opposed on the basis that it would substantially interfere with, if not completely wreck, the relationship between the Plaintiff and her therapist.

[20] The limiting techniques described at paragraph 33 of Ryan were designed to protect that relationship. In this case, the only relationship to be protected is the solicitor-client relationship. I acknowledge the primacy of the relationship in the law. However, it is different than a relationship between a therapist and a complainant. The full disclosure of a document is not, in and of itself, going to substantially impair the solicitor-client relationship in this case. The reasons for limiting disclosure in Ryan are not present in this case.

[21] In any event, there is another concern with the Client’s argument in this case. Specifically, the Client seeks to rely on part of the SB Partners valuation, without disclosing the entirety of the valuation. This report, as I have noted at paragraph 15, will likely be used to challenge the Solicitor’s work.

[22] The Solicitor has to be able to fully and fairly defend herself from the Client’s challenge to her work. It would be unfair to permit the Client to disclose and rely upon part of a report without giving the Solicitor access to the full report so that the Solicitor can consider both whether the redacted portions of the report permit her to challenge the report’s underlying methodology and whether the redacted portions of the report show that the Solicitor’s work was actually done properly.

[23] This is not a case where a party retained an expert to provide an opinion, and does not now want to share (or rely upon) that opinion. In this case, the Client wants to “cherry pick” the portion of the opinion that will be shared with the Solicitor and, ultimately, the trier of fact. That is not an approach that is permissible in these circumstances. The Solicitor (and, ultimately the trier of fact) are entitled to know the complete opinion.

[24] For these reasons, the entirety of the SB Partners draft report is to be disclosed to the Solicitor’s counsel within seven (7) calendar days of the release of these reasons.

[25] I should briefly address the Client’s assertion that these records should be sealed to “avoid undue prejudice which could arise from the disclosure of their private dealings”. I see no basis for providing such an Order for two reasons. First, no specific prejudice has been identified. Second, the Courts operate on the “open Courts” principle, which means that Court records and proceedings are generally open to the public. This principle is an important cornerstone of our democracy, and should not be interfered with lightly. I decline to make the sealing Order requested by the Client.

Issue #2- The Buchan-Terrell Report

[26] Mr. Buchan-Terrell prepared a memorandum dated November 15th, 2010. That memorandum was headed as a “Privileged and Confidential Legal Memo” and was directed to a Mr. Niedjadlik [presumably Mr. Niejadlik] as well as to a number of the Clients.

[27] Part of the memorandum was produced, while other portions of the memorandum were not disclosed. The Client asserts privilege over the parts of the memorandum that were not disclosed for two main reasons, as follows:

a) The redacted portions of the communication relate to the share valuation, and are privileged comments. b) The communications were provided to Mr. Roefe, as counsel to the Client and are therefore also subject to privilege.

[28] In addition to claiming privilege over portions of the memorandum, privilege is also claimed over portions of the accounts rendered by Mr. Buchan-Terrell.

[29] In my view, the arguments advanced by the Client on this issue and set out at paragraph 27, above, are unsustainable. They are, in essence, the same arguments that were advanced with respect to the SB Partners report. The problem with these arguments is twofold. First, part of the document has been produced. As a result, it becomes substantially more difficult to claim privilege over the rest of the report. In addition, Mr. Buchan-Terrell prepared an opinion on this case. As a result, the Solicitor is entitled to test that opinion, and is entitled to consider whether there are any observations in the memorandum that could be used to challenge that opinion.

[30] Second, the issue of the valuation is again raised by many of these redactions. The question of whether the valuation was properly done by the Solicitor is a question that appears to be relevant to the issues that will be decided on the assessment. As a result, the comments in the memorandum respecting the valuation are going to be relevant as well. In light of that conclusion, the reasoning at paragraph 22 applies. The Solicitor is, therefore, generally entitled to review these redactions.

[31] However, having had an opportunity to review all of the redactions, I am of the view that some of them remain appropriate as they relate to litigation strategy in this case and are therefore subject to litigation privilege at a minimum. They may also be covered by solicitor-client privilege, as Mr. Buchan-Terrell appears to have provided advice that addressed issues that were not related to the issues covered in his opinion, or the issues covered by this litigation.

[32] As a result, some of the redacted excerpts remain covered by privilege, and need not be disclosed. Those excerpts are as follows:

a) Paragraph 4 and everything else to the end of page 72. b) The list from (a) to (e) at the top of page 73 of the disclosure. c) Paragraph 7(c) on page 73 of the disclosure. d) The April 1, 2011 docket entry on page 78 of the disclosure. e) The July 3rd and 4th, 2012 and August 10th and 13th, 2012 docket entries on page 79 of the disclosure. These docket entries appear to be matters unrelated to the memorandum that has been partially disclosed. f) The second half of the docket entry for February 14th, 2011. g) The redacted portions of the docket entry for February 16th, 2011.

[33] The items listed in the previous paragraph do not have to be disclosed. The remaining redactions in the Buchan-Terrell materials must be disclosed within seven (7) calendar days of the release of these reasons.

The Records of Ray Niejadlik

[34] Mr. Niejadlik used to be a lawyer. He was given permission to resign his membership in the Law Society of Upper Canada in 1982. Therefore, at the relevant times the Client concedes that he was not acting as a lawyer for the Client. Instead, the Client claims that Mr. Niejadlik was acting as an agent to the Client in managing legal services and that any communications with the Client’s counsel should be treated as covered by solicitor-client privilege. In the alternative, the Client asserts that these communications are covered by litigation privilege. Finally, if I do not accept either of these claims of privilege, the Client asserts that the relationship between Mr. Niejadlik and the Client should be covered by the principles articulated in R. v. Gruenke, [1991] 3 S.C.R. 263 and the Wigmore Criteria should be applied to his relationships.

[35] None of these claims of privilege succeeds in this case except in relation to Mr. Niejadlik’s April 1-30, 2009 invoice. I start with the solicitor-client privilege claim. The records relating to Mr. Niejadlik go back to 2007. The first mention of Mr. Roefe in these records is in the April 2009 account, which is the last month for which I have redacted records. As a result, none of the records prior to April of 2009 could possibly be protected by a claim of solicitor-client privilege in respect of Mr. Roefe. No other lawyer has been identified as being involved in this case, except for the Solicitor. Therefore, the claim of solicitor-client privilege over the bulk of these accounts fails.

[36] The records from April 1-30, 2009, which are set out from pages 176 to 181 of the Client’s disclosure are a different matter. It is clear that Mr. Niejadlik was in communication with Mr. Roefe during this time period. Counsel for the Solicitor argues that Mr. Niejadlik was not in any sort of relationship that would attract a privileged protection. Further, counsel submits that, if Mr. Niejadlilk was acting as the Client’s agent, or there was a special relationship between the two, it is up to the Client to adduce evidence to support that conclusion.

[37] While I accept the Solicitor’s argument that it is up to the Client to produce evidence to support the assertion that Mr. Niejadlik was acting as the Client’s agent, I conclude that this evidence has actually been adduced on this motion. Specifically, the Client has adduced two years of invoices that demonstrate that Mr. Niejadlik has been providing the Client with significant services throughout that time period. I make no finding as to whether those services amount to legal services.

[38] However, it is clear that Mr. Niejadlik had communication on a number of legal issues over the time he provided services to the Client. These communications continued when Mr. Roefe became counsel on this matter. As a result, it is reasonable to infer that Mr. Niejadlik was acting as an agent of the Client in communicating with counsel. Given the significant protections that our law affords to solicitor-client communications, I am not prepared to have the redactions on the April 1-30, 2009 account disclosed.

[39] This brings me to the second claim for privilege, which is litigation privilege. Again, on the records I have, there is no evidence in the accounts prior to April 1, 2009 that there was any contemplated litigation against the Solicitor. Indeed, in most of the accounts, there is specific reference to discussions with the Solicitor about next steps in the work that she was doing for the Client. As a result, there cannot be a claim for litigation privilege for any of the accounts prior to April 1st, 2009. This claim for privilege also fails.

[40] This brings me to the final claim for privilege, which is that the relationship between the Client and Mr. Niejadlik should be covered by the confidentiality described in Gruenke, supra. In Gruenke, McLachlinn J. set out the four parts of the Wigmore test as follows (at page 284):

a) The communications must originate in a confidence that they will not be disclosed. b) This element of confidentiality must be essential to the full and satisfactory maintenance of the relation between the parties. c) The relation must be one which in the opinion of the community ought to be sedulously fostered. d) The injury that would inure to the relation by the disclosure of the communications must be greater than the benefit thereby gained for the correct disposal of litigation.

[41] In my view none of these criteria are met in this case. I start by observing that some of Mr. Niejadlik’s invoices have already been produced. As a result, it becomes difficult to see how these invoices were generated in the confidence that they wouldn’t be disclosed, that their non-disclosure was essential for the maintenance of the relationship between Mr. Niejadlik and the Client or that there would be any significant injury as a result of their disclosure.

[42] In addition, on all three of these points, I note that these were invoices that were submitted from a third party for payment. There is nothing special or unusual about those invoices that would result in them being confidential or in criteria 1, 2 or 4 being triggered.

[43] Then, there is the question of whether this is a relationship which should be sedulously fostered. I do not see it as that type of relationship. If Mr. Niejadlik was a lawyer, then his activities might be covered by solicitor-client privilege as there does appear to be a legal activities component to the work that Mr. Niejadlik is performing. However, in this case, he is not a lawyer and neither he nor the Client are entitled to the protection of solicitor-client privilege.

[44] Further, many businesses have business advisors who provide them with a variety of services. The provision of those types of services is not the type of relationship where confidence should be sedulously fostered. When businesses become involved in litigation over contracts and other issues, their non-lawyer business advisors can become compellable witnesses. Indeed, if the business advisor is an actual employee of the business, then they could be compellable at examinations for discovery on behalf of the company.

[45] Given those observations, it is up to the Client to provide sufficient detail to demonstrate that the relationship with Mr. Niejadlik is worthy of special protection. There is no information to support a special relationship in the record. As a result, the claim of privilege under the Wigmore criteria also fails.

[46] As a result, the Client is to disclose the entirety of all of Mr. Niejadlik’s invoices except for the April 2009 invoice, which is subject to solicitor-client privilege as a result of the potential involvement with Mr. Roefe.

Conclusion

[47] For the foregoing reasons, I order as follows:

a) The redacted excerpts from the SB Partners report are to be produced within seven (7) calendar days of the release of these reasons. b) The redacted excerpts from the materials relating to Grant Buchan-Terrell are to be produced within seven (7) calendar days of the release of these reasons, except for the items listed in paragraph 32, which do not have to be produced. c) With the exception of Mr. Niejadlik’s April 2009 account, all of the redactions in his account are to be produced within seven (7) calendar days of the release of these reasons.

[48] The parties are encouraged to agree on the issue of costs. If the parties cannot agree, then the Solicitor may make submissions of no more than two (2) single-spaced pages exclusive of offers to settle, bills of cost and case-law within ten (10) calendar days of the release of these reasons.

[49] The Client may then file reply submissions, again of no more than two (2) single-spaced pages exclusive of offers to settle, bills of cost and case-law within ten (10) calendar days of the receipt of the Solicitor’s costs submissions.

[50] There are to be no reply submissions on costs. There are also to be no extensions of time for the completion of the costs submissions, even on consent, without my leave.

LEMAY J

Released: July 12, 2019