COURT FILE NOS.: CV-17-582560; CV-18-598782
MOTION HEARD: 20190503
INTERIM ENDORSEMENT RELEASED: 20190506
ADDITIONAL SUBMISSIONS MADE: 20190624
REASONS RELEASED: 20190924
SUPERIOR COURT OF JUSTICE – ONTARIO
In the Matter of the Construction Act, R.S.O. 1990, c. C.30, as amended
BETWEEN:
WALSH CONSTRUCTION COMPANY CANADA
Plaintiff
- and-
TORONTO TRANSIT COMMISSION, YORK UNIVERSITY, UNITED PARCEL SERVICE CANADA LTD., THE REGIONAL MUNICIPALITY OF YORK, HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO AS REPRESENTED BY THE MINISTER OF INFRASTRUCTURE, and CITY OF TORONTO
Defendants
BEFORE: MASTER M.P. McGRAW
COUNSEL: G. Smith and B. Halfin
Email: gsmith@goodmans.ca
-for Walsh Construction Company Canada (“WCC”)
E. Morgan and A. Reid
Email: emorgan@osler.com
-for Toronto Transit Commission (“TTC”)
REASONS RELEASED: September 24, 2019
Reasons For Endorsement
I. Background
[1] These Reasons for Endorsement relate to 14 of over 400 refusals in an ongoing dispute between WCC and TTC. These actions are 2 of over 20 involving over 40 parties arising from the construction of the Steeles West (Pioneer Village) Subway Station in Toronto (“SW”).
[2] The background to these proceedings and this motion is set out in my Reasons For Endorsement dated February 22, 2019 (Walsh Construction Company Canada v. Toronto Transit Commission, 2019 ONSC 1630)(the “Reasons”); my Endorsement dated March 6, 2019 (the “March Endorsement”); my Interim Endorsement dated May 6, 2019 (the “May Endorsement”); and my Case Conference Endorsement dated June 24, 2019.
[3] As set out in the Reasons, 9 motions involving 6 parties to compel answers to approximately 680 refusals proceeded before me over 3 days. Both WCC and TTC sought to compel the other to answer approximately 200 refusals.
[4] On this part of WCC’s motion, WCC seeks an order compelling TTC to produce an unredacted copy of the Spadina Subway Extension Project Assessment Report dated February 5, 2015 (the “Bechtel Report”) prepared by Bechtel Canada Co. (“Bechtel”). TTC claims litigation privilege over the redacted portions of the Bechtel Report (the “Redacted Portions”). This affects 13 other refusals related to the Bechtel Report which are currently adjourned pending the result of this motion.
[5] In the Reasons, I ordered TTC to advise within 30 days if it would produce an unredacted version of the Bechtel Report or a version with less redactions. As set out in the March Endorsement, TTC produced another version with fewer redactions, however, WCC maintained its request for a fully unredacted version. Therefore, 2 hours were scheduled before me on May 6, 2019 for the parties to seek further directions.
[6] As set out in the Reasons, TTC also claims litigation privilege over all documents (the “Review Documents”) related to TTC’s review of WCC’s “Claim for Adjustment of Contract Price and Extension of Time” dated August 14, 2014 (the “Red Book”) delivered pursuant to the claims process in its contract with TTC. In the Reasons, TTC was ordered to, within 60 days, review all documents which are relevant to the refusals regarding their assertion of litigation privilege over the Review Documents and produce a Supplementary Affidavit of Documents setting out the relevant documents at Schedules “A”, “B” and “C”. WCC is in the process of reviewing the Supplementary Affidavit of Documents.
[7] As described in the May Endorsement, given the potential overlap between TTC’s assertion of litigation privilege over the Bechtel Report and the Review Documents, at the commencement of the May 6, 2019 attendance, I raised the possibility of adjourning WCC’s motion for the Bechtel Report to be heard together with its motion for the Review Documents. With the parties’ agreement, I concluded that the most reasonable and efficient approach was to hear the parties’ submissions with respect to the Bechtel Report but not release a decision until it was determined if the privilege claims with respect to Bechtel Report and the Review Documents should be considered in one decision.
[8] The parties made submissions on the Bechtel Report and I reserved my decision. During a telephone case conference on June 24, 2019, counsel advised that there was some factual but no temporal overlap between the Bechtel Report and the Review Documents. Accordingly, the parties requested that I make a ruling with respect to TTC’s assertion of litigation privilege over the Bechtel Report independent of the Review Documents.
II. These Actions, Additional Actions, the Claims Process and the Bechtel Report
These Actions
[9] SW is part of the Toronto York Spadina Subway Extension, a $3.184 billion construction project comprised of 6 above ground stations and an 8.6 km subway tunnel running from Sheppard Avenue West in Toronto to the Vaughan Corporate Centre in York Region (the “TYSSE”).
[10] WCC was the successful bidder for the construction of SW (the “Project”). Pursuant to a Contract with TTC dated September 22, 2011, WCC, as general contractor, agreed to complete the Project for a contract price of $165,925,000 with a substantial performance date of November 4, 2014 (the “Contract”). However, as with the TYSSE as a whole, there were significant delays and the Project did not achieve substantial performance until June 15, 2017.
[11] In its Statement of Claim issued September 12, 2017, WCC alleges that TTC is responsible for the delays due to incomplete and uncoordinated design, delay by other contractors for whom TTC is responsible, inordinate changes and improper administration of the Contract. WCC claims $218,751,335 from TTC for amounts owing, breach of contract, negligence and failure to act in good faith. WCC alleges that TTC is responsible for 953 days of delay. TTC has acknowledged responsibility for 411 days.
[12] In its Statement of Defence and Counterclaim dated January 30, 2018, TTC alleges that WCC and its subcontractors are responsible for any delay and deficiencies. TTC claims liquidated damages of $22,381,666.34 from WCC, the maximum allowable under the Contract.
Additional Actions
[13] On February 25, 2013, Interborough Electric Inc. (“IEI”), a subcontractor of WCC, commenced an action against both WCC and TTC (the “First IEI Action”). On May 6, 2013, WCC crossclaimed against TTC in the First IEI Action (the “WCC Crosslcaim”). TTC delivered a defence to the WCC Crossclaim on October 1, 2013.
[14] On June 23, 2014 and June 25, 2014, IEI commenced two additional actions against WCC but did not name TTC. In August 2014, WCC advised TTC that it intended to commence a Third Party Claim against TTC in the third action commenced by IEI (the “Third IEI Action”). TTC refused to consent and on November 5, 2014, WCC served its motion materials in support of a motion seeking leave to commence a Third Party Claim. WCC’s motion to add TTC as a Third Party to the Third IEI Action was heard on February 9, 2015 and WCC was granted leave on May 12, 2015.
[15] On May 5, 2014, Obrascon Huarte Lain (“OHL”), a contractor retained by TTC to perform tunneling and excavation work on the TYSSE including SW, commenced an action against TTC for over $205,000,000 (the “OHL Action”). TTC delivered its Statement of Defence and Counterclaim in the OHL Action on August 15, 2014. The OHL Action was dismissed on May 3, 2018.
[16] On December 15, 2014, C-Core Metal Inc. commenced an action against WCC but did not name TTC (the “CCMI Action”).
[17] As set out in the Reasons, additional actions were commenced by WCC’s subcontractors with respect to SW, however, only those set out above are relevant to the issues on this part of the motion.
Claims Process
[18] General Condition 31 of the Contract sets out a process (the “Claims Process”) by which WCC could submit claims against TTC (the “Contract Claims”). Pursuant to General Condition 31.5 of the Contract, if WCC did not submit the Contract Claims, it would give up its right to do so.
[19] On August 14, 2014, pursuant to General Condition 31.4, WCC submitted the Red Book for all Contract Claims related to SW up to and including December 31, 2013. In the Red Book, WCC sought an increase in the Contract Price of $136,959,126.34 and an extension of 694 days. On September 19, 2017, four days after commencing this action against TTC, WCC delivered an updated claim entitled “Claim #2 For Adjustment of Contract Price and Extension of Time” for all claims up to an including December 31, 2016 (the “Blue Book”, collectively with the Red Book, the “Books”). Pursuant to General Condition 31.7, TTC was required to respond to the Books within 60 days.
[20] In addition, in 2013 and 2014, WCC submitted multiple Notices of Intent to Claim under the Contract. Pursuant to the Contract, if no settlement of these claims was reached, WCC was free to pursue the claims by way of arbitration or an action upon completion or alleged completion of its work under the Contract.
[21] Further, section SC21 of the Contract provides that disputes between TTC and WCC could be heard by a 3-member Dispute Resolution Board (“DRB”). WCC and TTC could agree that any decisions by the DRB would be binding. In May 2014, the DRB heard a dispute with respect to delays related to the electrical power substation at SW. The DRB released an interim decision on June 13, 2014 and a final decision on February 16, 2015.
The Bechtel Report
[22] In 2014, TTC engaged numerous third parties, including Bechtel, to conduct reviews of the TYSSE.
[23] In Summer 2014, TTC retained Parsons Brinckerhoff (“PB”) to conduct a schedule review of the TYSSE. PB recommended a rebaseline of the TYSSE, developed detailed schedules for each station and concluded that based on current progress, the TYSSE would be completed in early 2019. PB’s conclusions were presented to Andy Byford, then-Chief Executive Officer of TTC and the TYSSE Executive Task Force (the “ETF”).
[24] Mr. Byford subsequently engaged the American Transportation Association (“APTA”) to have a team of experts from numerous transit agencies across North America conduct a peer review of the TYSSE (the “APTA Peer Review”). APTA’s conclusions were presented to the ETF on November 20, 2014. APTA recommended a “reset” including contractor partnering, resolution of outstanding contract changes and claims, incentivizing contractor schedule acceleration and enhanced project scheduling and controls.
[25] Bechtel was retained by TTC pursuant to a Consulting Services Agreement dated December 4, 2014 (the “CSA”). The scope of Bechtel’s retainer is set out at Schedule A of the CSA:
“Schedule A – Scope of Services
Services
The Consultant [Bechtel] shall perform the services referenced in the document prepared by Bechtel dated December 3, 2014 entitled “Spadina Subway Extension Project Assessment” and as further described below from 8 December 2014 – 30 January 2015 (or such other period as the Parties may agree in writing) using such means and methods as it deems appropriate:
• A two-person team will undertake a 2 week data gathering in Toronto including site visits.
• The up to six person core review team will review the documents to get a common understanding of the status of the project.
• The core review team will undertake a 2 week evaluation of information, including pre-arranged interviews with key TTC staff and the contractors.
• Preparation of recommendation measures.
Anticipated Deliverables
• A recommendation report will be peer reviewed by Bechtel rail leaders and then anticipated to be issued to TTC by 30 January 2015.”
[26] WCC requested a copy of the “Spadina Subway Extension Project Assessment” (the “SSEPA Document”) referred to in Schedule A during cross-examinations on this motion. TTC took the question under advisement and has not produced the SSEPA Document.
[27] By letter dated December 19, 2014, TTC advised WCC that Bechtel had been retained and was reviewing the “opportunities, challenges, processes, and issues and concerns over the progress in construction.” TTC requested that WCC meet with Bechtel on January 7, 2015 to present its “perspective of the status, progress, challenges, issues and concerns (progress and financial) over construction progress, in a generally open dialogue with the Bechtel expert team members.” TTC also requested that WCC’s schedulers meet with Bechtel on January 12, 2015 to provide Bechtel’s schedulers with an understanding of WCC’s schedules, restraints, logic and sequence.
[28] By letter dated December 23, 2014, WCC advised TTC that it was prepared to meet with Bechtel however, requested “confirmation that Bechtel is not a claims consultant and will not perform the role of claims consultant”. By email dated January 5, 2015, TTC confirmed that “Bechtel is not a claims consultant and the meeting will be conducted without prejudice.”
[29] In his Chief Executive Officer’s Report dated January 21, 2015 (the “CEO Report”), Mr. Byford stated “Bechtel Ltd., a consulting firm, was also retained at the CEO’s specific direction to conduct a thorough, in-depth analysis of the project and likewise is expected to present its findings at the end of January.”
[30] On February 5, 2015, Bechtel delivered the Bechtel Report to Mr. Byford. Under Section 1.1, “Introduction”, the Bechtel Report states:
“Various technical, commercial, and safety issues have resulted in significant delays to the completion of the Project. As part of their plan for the Project, TTC has requested that Bechtel provide an assessment of the most expeditious delivery of the works into operation, with an objective of meeting a delivery date of 31 December 2017.”
[31] At paragraph 1.2 of the Bechtel Report, Bechtel confirms that the APTA Peer Review was the starting point for its assessment. The APTA Peer Review concluded that improving the effectiveness of the delivery of the TYSSE to the best possible completion date would depend largely on implementing a “reset” of the management approach. As set out in the Executive Summary of the Bechtel Report, Bechtel recommended that the TYSSE be reset by: i.) rebaselining the schedule; ii.) mitigating delivery barriers caused by continuing design change; iii.) addressing adversarial relationships among contractors and construction teams and realigning them for effective delivery; iv.) improving tools and processes for costs, contracts, and claims to provide more responsive and informative commercial management; and v.) establishing a collaborative ethos around the reset to align objectives and grow trust among TYSSE partners.
[32] In a Staff Action Report to the TTC Board dated March 26, 2015 written by Mr. Byford (the “Staff Action Report”), he states:
“Summary
The purpose of this report is to provide the Board with a comprehensive summary of the TYSSE project from conception to present and the impact to both schedule and budget.
The TYSSE project is currently 70 per cent complete. However, it has been determined that the publicly stated opening date of the end of 2016 and the approved budget are not achievable. This report recommends that a comprehensive project “reset” involving a new third-party project manager be undertaken to deliver the project by December 31st, 2017 at an estimated budget increase of $150M.
Background
It has been determined that a project opening date of December 31, 2016 is not achievable. Three separate third-party consultants have been retained with the objective of providing the TTC CEO and the project’s Executive Task Force (ETF) with advice on measures to ascertain possible mitigations to recoup project schedule. The project options as presented in this report are consistent with the recommendations of those third-party consultants.”
[33] In setting out 4 options for the Project at pp. 2-3 of the Staff Action Report, Mr. Byford states: “None of the options detailed below address current contractor claims. These will be addressed with a further report to the Board by the end of 2015.”
[34] Mr. Byford further states at pp. 12-13 of the Staff Action Report:
Bechtel Review
The TTC CEO then retained Bechtel, a large multi-national construction company with significant experience in large project management and delivery, to review the present project status. This included APTA’s findings and to provide their view on how the TTC could deliver TYSSE at the earliest schedule completion date with minimum additional costs. Their report was presented to the TTC and ETF in early February 2015. That report concurred with APTA’s findings of a “reset”, and further added that a change in project management would be required, to deliver an end of 2017 completion date. The report outlined implementation of a new project schedule and contractor incentives, resolve of adversarial contractor relationships, and improvement of processes for cost/contract/claims resolution.
Both APTA and Bechtel agree that the TTC should:
Incentivize contractors and obtain agreements for an end of 2017 opening date.
Develop a process/timeline to resolve outstanding claims.
Establish a collaborative environment to develop a common goal and im prove project relationships.
(a) Claims Impact
Contractor claims on large projects are not unique to the TTC. They are common in the industry and all big projects must continually work to resolve and settle claims through the life of a project, and beyond.
To date, the TTC has received a significant number of claims from contractors, the values of which will change throughout the life of a contract. The TTC contract allows contractors to submit and adjust claims – up or down – until 60 days after the date of “Contract Substantial Completion” and, therefore, the value of various claims fluctuates throughout the life of the contract before it is set.
Contractors are required to provide a detailed claims analysis to the TTC describing:
• Event, action, inaction by the TTC that caused a claim to arise
• Entitled under the contract for additional time or cost, or both
• Analysis of the cost or time resulting from TTC action or inaction
The TTC believes it will require until the end of 2015 to review the claims to a reasonable degree and provide an estimate of their expected value. Staff will provide the Board with an updated report at the time, indicating the project’s expected final costs based on this analysis.
The project will undertake this task with the assistance of an external claims consultant.”
[35] In April 2015, TTC engaged Bechtel as an independent third party project manager to carry out the reset and deliver the TYSSE to completion by December 31, 2017.
[36] On February 12, 2016, WCC made a request to TTC pursuant to the Municipal Freedom of Information and Protection of Privacy Act (Ontario)(“MFIPPA”) for a copy of the Bechtel Report. On February 26, 2016, TTC issued a decision letter providing a redacted version of the Bechtel Report, declining to disclose certain redacted portions on the basis of ss. 7, 11 and 12 of MFIPPA as they included records prepared for use in providing legal advice or in contemplation of or use in litigation.
III. The Law and Analysis
[37] The only issue on this motion is whether the Redacted Portions are subject to litigation privilege.
[38] G.P. DiTomaso J. set out the test for litigation privilege in Sky Solar (Canada) Ltd. v. Economical Mutual Insurance Co., 2015 ONSC 4714 at para. 80:
“As for litigation privilege, once again, the onus rests on the party seeking litigation privilege. That party is required to establish two elements: (a) that litigation was contemplated; and (b) that the documents for which privilege is sought were created for the dominant purpose of litigation. This is a conjunctive test. As such, courts have refused to accept the claim of litigation privilege over the documents prepared after the time of litigation was contemplated, where there was no evidence that the subject documents were prepared for the dominant purpose of litigation.”
[39] The Supreme Court recently provided guidance in Lizotte v. Aviva Insurance Company of Canada, 2016 SCC 52 at para. 53:
“In my opinion, litigation privilege is a class privilege. Once the conditions for its application are met, that is, once there is a document created for "the dominant purpose of litigation" (Blank, at para. 59) and the litigation in question or related litigation is pending "or may reasonably be apprehended" (para. 38), there is a "prima facie presumption of inadmissibility" in the sense intended by Lamer C.J. in R. v. Gruenke, 1991 CanLII 40 (SCC), [1991] 3 S.C.R. 263:
The parties have tended to distinguish between two categories: a "blanket", prima facie, common law, or "class" privilege on the one hand, and a "case-by-case" privilege on the other. The first four terms are used to refer to a privilege which was recognized at common law and one for which there is a prima facie presumption of inadmissibility (once it has been established that the relationship fits within the class) unless the party urging admission can show why the communications should not be privileged (i.e., why they should be admitted into evidence as an exception to the general rule). [Emphasis deleted; p. 286]”
[40] Previously, in Blank v. Canada (Minister of Justice), 2006 SCC 39, the Supreme Court held that litigation privilege is a fundamental principle of the administration of justice which serves an overriding public interest to ensure the efficacy of the adversarial process by protecting communications and documents created for the dominant purpose of use in, or advice concerning, actual, anticipated or contemplated litigation (Blank at paras. 4 and 27-28; Barclays Bank PLC v. Devonshire Trust (Trustee of), 2010 ONSC 5519 at para. 8). To achieve this purpose, parties to litigation must be left to prepare their contending positions in private without adversarial interference or fear of premature disclosure by creating a “zone of privacy”, a protected area to facilitate investigation and preparation of their case for trial (Blank at paras. 27-28, 34 and 40; Barclays at para. 8). Litigation privilege is a limited exception to the principle of full disclosure which is narrower than solicitor-client privilege, the boundaries of which are limited to the purpose for which the exception is granted (Blank at paras. 40, 60-61).
[41] It is not necessary for the party asserting litigation privilege to establish that documents or communications were created for the sole purpose of pending or apprehended litigation. In Mamaca (Litigation Guardian of) v. Coseco Insurance Co., 2007 CanLII 54963 (ON SC), [2007] O.J. No. 4899, J. MacDonald J. held as follows at para. 6:
“If an investigation and the reports about it have a dual purpose, one of which is to assist in anticipated litigation, the duality of purpose does not mean that litigation privilege cannot exist. A document may be prepared for a multitude of purposes and, if the dominant purpose is to assist in anticipated litigation, then litigation privilege applies to the document: Waugh v. British Railways Board [1979] 2 AII E.R. 1169 (H.L.) at pp. 1173-74.”
[42] TTC bears the onus of establishing an evidentiary basis or foundation for its privilege claim on a balance of probabilities (Sky Solar at para. 73). Master Dash explained this evidentiary burden in Mamaca (Litigation Guardian of) v. Coseco Insurance Co., 2007 CanLII 9890 (ON SC), [2007] O.J. No. 1190, reversed on other grounds, Mamaca (Litigation Guardian of) v. Coseco Insurance Co., 2007 CanLII 54963 (ON SC), [2007] O.J. No. 4899; leave to appeal to Div. Ct. denied, 2008 CanLII 30312 (ON SCDC), [2008] O.J. 2508 (Div. Ct.):
“The onus is on the party claiming litigation privilege to lay an evidentiary foundation for that privilege. The best evidence would be an affidavit from the claims handler as to when she reasonably anticipated that litigation was likely and why and that her ongoing investigation and document creation was to assist in the defence of that litigation. It would however not be sufficient evidence for the adjuster to make general assertions that all documents created after litigation was reasonably anticipated were prepared for purposes of that litigation. The evidence must be specific and speak to the content of each document. The court could also look to the circumstances and the chronology of events to help in determining the dominant purpose for creation of the documents. It may also "inspect the document for the purpose of determining ... the validity of a claim of privilege" pursuant to rule 30.06(d).”
[43] Blanket claims and bald assertions of litigation privilege or merely asserting that the privilege attaches are insufficient (SkySolar at paras. 73-75; Corner Brook Pulp & Paper Ltd. v. Geocon, [2000] N.J. No. 446 at para. 46). Such bald assertions are particularly insufficient in the absence of firsthand evidence of a dominant litigation purpose from the creator of the documents in question (Corner Brook at para. 46).
[44] In McNally International Inc. v. Toronto Transit Commission, [2005] O.J. No. 1011, Master Dash considered litigation privilege in circumstances similar to the present case, including a contractual claims process and a DRB involving TTC:
“5. None of the items in the group were refused on the basis of relevance. It is therefore first necessary to determine when litigation was reasonably contemplated, and secondly whether communication was made or documents were created for the dominant purpose of assisting the Defendant in defence of that litigation, as opposed for example for the purpose of investigating and assessing the Plaintiff's claim for extras. With respect to the first question it is not necessary that litigation be certain, or even probable, but rather whether there was a reasonable prospect of litigation. This must be more than a mere suspicion or speculative possibility.
6 In my view there could be no reality to the reasonable prospect of litigation on March 30, 1998 when the Plaintiff advised it would be making a claim for excess costs or even March 23, 1999 when the Plaintiff's formal detailed and documented claim was made. Actions taken from then until May 20, 1999 when the claim was denied in my view were for the dominant purpose of investigating the claim for extras and determining whether to accept it, although possibly with a secondary purpose of considering that a claim, if denied, may have to be defended. Claims for extras are a regular part of most construction projects and it could not be said that each time a claim is presented there is a reasonable prospect of litigation.
9 In my view there was a reasonable prospect of litigation on May 25, 1999 when the dispute as to the Engineer's decision was made and the DRB hearing requested. There is a divergence of jurisprudence on whether commencement of a mandatory mediation process, such as to FSCO for accident benefits, provides a date for the reasonable prospect of litigation and clearly it is dependent on the facts or circumstances of the case. In any event the DRB hearing is quite different from the FSCO mediation. It appears both parties treated the DRB hearing seriously and presented documentary evidence and argument over two days. The DRB provisions of the Contract provide a right to be heard and present evidence and there are detailed provisions for the conduct of the hearing. At the conclusion the Board makes non-binding Recommendations to help resolve the dispute.
10 I note that the claim advanced by the Plaintiff before the DRB is virtually identical to the Claim advanced in this litigation. The types of strategies and decisions in preparation for and at the DRB are akin to a form of litigation. It would be most unfair if the Plaintiff could access the Defendant's notes and documentation made in preparation for the DRB hearing, which essentially deals with the same claims as advanced in this action, under the guise of preceding the reasonable contemplation of litigation. In my view, even though there was no certainty litigation would follow an unfavourable Board recommendation, there was a reasonable prospect of litigation from the time the DRB hearing was requested.
11 Therefore all documents requested and questions asked dealing with events prior to May 25, 1999 will be produced. Documents from after that date need not be produced if they were made for the dominant purpose of defending the claims advanced herein (including at the DRB). Since I do not have the detailed Schedule B or the documents themselves, no decisions can be made on individual post May 25, 1999 documents. If, after a detailed Schedule B is provided, issues remain whether any specifics document was created for the dominant purpose of litigation, this can be addressed at a future motion.”
[45] TTC relies on the Federal Court’s recent decision in PMG Technologies Inc. c. Canada (Transports), 2018 FC 344 in which Peter Annis J. held at paras 18-19:
“18 The British Columbia Court of Appeal recently set out the parameters required for a claim to privilege in Gichuru v. British Columbia (Information and Privacy Commissioner), 2014 BCCA 259 at para 32 [Gichuru], citing Keefer Laundry Ltd v. Pellerin Milnor Corp et al, 2006 BCSC 1180 at paras 96-99, which the Court also adopts, as follows:
[96] Litigation Privilege must be established document by document. To invoke the privilege, counsel must establish two facts for each document over which the privilege is claimed:
1.that litigation was ongoing or was reasonably contemplated at the time the document was created; and
2.that the dominant purpose of creating the document was to prepare for that litigation.
(Dos Santos (Committee of) v. Sun Life Assurance Co. of Canada (2005), 40 B.C.L.R. (4th) 245, 2005 BCCA 4 at paras. 43-44.)
[97] The first requirement will not usually be difficult to meet. Litigation can be said to be reasonably contemplated when a reasonable person, with the same knowledge of the situation as one or both of the parties, would find it unlikely that the dispute will be resolved without it. (Hamalainen v. Sippola, supra.)
[98] To establish "dominant purpose", the party asserting the privilege will have to present evidence of the circumstances surrounding the creation of the communication or document in question, including evidence with respect to when it was created, who created it, who authorized it, and what use was or could be made of it. Care must be taken to limit the extent of the information that is revealed in the process of establishing "dominant purpose" to avoid accidental or implied waiver of the privilege that is being claimed.
19 In Gichuru, the Court also recognized at paragraphs 38 and 39 that these requirements were not necessary if the dominant purpose is plain and obvious on the face of the documents.”
[46] WCC referred me to numerous cases (none of them from Ontario) in support of its position that it is not useful or appropriate for this Court to review the Redacted Portions in order to determine if litigation privilege applies. These cases held that it is preferable for the court to resolve privilege disputes on the basis of affidavit evidence and that the court will not generally examine or review the documents in question (Keefer Laundry Ltd. v. Pellerin Milnor Corp., 2006 BCSC 1180 at paras. 74-75; Corrier v. Seely, 2009 NBCA 3 at para. 36; Corner Brook at para. 49).
[47] In Ontario, Corbett J. provided guidance in Guelph (City) v. Super Blue Box Recycling Corp., 2004 CanLII 34954 (ON SC), [2004] O.J. No. 4468, with respect to redacting portions of documents in support of privilege claims and the court’s role in reviewing them to make privilege determinations:
“119 The practice of "redacting" documents has been in wide use in commercial litigation in Ontario for at least two decades. It follows a practice developed in American jurisdictions to balance the goals of full disclosure and protection of privilege. It is very common for documents that are otherwise producible to contain a portion that deals with receipt of legal advice on the topic at hand. For example, the minutes of a board meeting might contain twelve business items, one of which concerned receipt of legal advice pertaining to litigation. An "all or nothing" approach to disclosure would see the document entirely produced (thus breaching solicitor client privilege in respect to the advice given concerning the litigation), or entirely suppressed (depriving the opposing party with the record of the balance of the document). The proper solution is to produce the portion of the document that is not privileged, delete the portion that is privileged, and show the deletion on the face of the document to alert the opposing party that privileged material has been removed.
121 Master Dash followed this procedure in SNC-Lavalin & Constructors Inc. v. The Citadel General Assurance Co., 2003 CanLII 64289 (ON SC), [2003] O.J. No. 310, supp. reasons [2003] O.J. No. 528. In Casey v. Blake, Cassels & Graydon, [2002] O.J. No. 3240 (Master Brott), the parties did not contest that redacting was an appropriate technique, but clashed over what ought to be subject to redaction. In Bouchard Paradis Inc. v. Markel Insurance Co. of Canada, [2000] O.J. No. 5210, Case Management Master MacLeod approved redaction on the basis of irrelevance, rather than privilege, where the parties were business competitors. The learned Master directed:
The party seeking to withhold part of a document shall provide a sufficiently detailed description of the redacted portion that the opposing party may assess its relevance or the basis for privilege if privilege is claimed. (para. 4)
In Currie v. Alliance Communications Corp., [1999] O.J. No. 4413, the parties agreed to a process for claiming and challenging redactions. This agreement was accepted by Molloy J., and incorporated into her order. These cases confirm what the courts know to be a matter of general practice today: that in certain cases it is appropriate to redact documents for privilege. This is sound practice which balances the goals of full disclosure and protection of privilege.
122 As was done in this case, where documents have been redacted, the redactions should be included in the list of privileged documents in Schedule "B" of the affidavit of documents. If a party wishes the court to review redactions, to ensure that the redactions are proper, then the process used in this case for review of contested Schedule "B" documents should be observed. Justice Nordheimer has recently described in detail an appropriate process for reviewing redactions, and I agree with his observations entirely: (Mandeville v. Manufacturer's Life Insurance Co. (unreported, November 1, 2004).”
[48] In making privilege rulings in that case, Corbett J. conducted a document review. Similar reviews were conducted by Labrosse J. in University of Guelph Central Student Assn. v. University of Guelph, 2016 ONSC 3189, Myers J. in Whitty v, Wells, 2016 ONSC 7716 and more recently, Master Muir in Atomic Energy of Canada Ltd. v. Allianz Global Risks US Insurance Co., [2019] O.J. No. 453. In Barclays, Newbould J. conducted a document review in which he concluded that one redacted sentence was subject to litigation privilege (Barclays at para. 43).
[49] In support of its assertion of litigation privilege over the Redacted Portions, TTC relies on the affidavit of Tony Baik, TTC’s Deputy Chief Project Manager, sworn March 18, 2019 (the “Baik Affidavit”). In the Baik Affidavit, Mr. Baik states:
Beginning in 2013 and certainly by late August 2014 at the latest, TTC was concerned about both ongoing and anticipated litigation related to the TYSSE project, as set out below, including the scale of the claims for additional compensation being submitted by Walsh and and other of the TYSSE contractors. TTC, including TTC legal counsel, was at that time engaged in ongoing discussions with the TYSSE contractors and the TYSSE contractors’ legal counsel regarding the claims for additional compensation, which included without prejudice meetings between TTC and the General Counsel of Walsh.
In 2013, Walsh’s external litigation counsel (Goodmans LLP) engaged with TTC’s legal department regarding potential claims and disputes, including regarding issues that are now the subject of this litigation. TTC also worked with external litigation counsel (Osler, Hoskin & Harcourt LLP) beginning in mid-2013 to advise on the claims and disputes with Walsh, among other things.
Given the numerous actions listed above and the ongoing threat of additional proceedings by TYSSE contractors, beginning in 2013, throughout 2014 when the Report was commissioned, (as set out below), and in 2015 when it received the Report, TTC was both defending litigation and preparing for and assessing risk associated with expected litigation proceedings arising from the TYSSE project.
I am advised by Michael Atlas, TTC’s Associate General Counsel, that on or about December 3, 2014, Andy Byford (who was at the time TTC CEO) approached Mr. Atlas and Jim Lee, TTC’s Head, Materials Procurement, advising that he needed their assistance in engaging Bechtel because of concerns being raised relating to TTC’s potential legal exposure to ongoing and threatened litigation with, and ongoing and threatened contractual claims by TYSSE contractors, and to assess project management issues. I am advised by Mr. Atlas that the driver at the time to have Bechtel do its assessment was the ongoing claims and litigation described above in paragraphs 7-9 and anticipated additional related claims. I am advised by Mr. Atlas that the decision to retain Bechtel was on the heels of Walsh submitting the Red Book. When it received the Red Book, TTC expected Walsh to start a lawsuit on the basis of some or all of the Red Book claiming possibly over $136 million (the amount demanded in the Red Book) in damages at some point in the future (which in fact it did). Attached as Exhibit “S” is Walsh’s Statement of Claim in this litigation.
I am advised by Mr. Atlas that the redacted portions of the Report over which TTC claims privilege were prepared by Bechtel to help TTC prepare for expected and ongoing litigation by the TYSSE contractors (including Walsh).”
[50] Mr. Baik was cross-examined on April 5, 2019. Mr. Baik admitted on cross-examination that the redacted portions referred to in paragraph 26 of the Baik Affiavit are the redactions made to the Bechtel Report in 2016 in response to WCC’s request under FIPPA. Mr. Baik stated that he participated in responding to claims or litigation with respect to the TYSSE in 2014. Mr. Baik further stated that Bechtel’s review of the TYSSE was “all-encompassing: The schedule, the issues, challenges, the budget, the claims. All of it put together.” (Questions 111-117). Mr. Baik further stated:
A. So there are concerns with ongoing potential threatened litigations. Numerous claims. All that adds up to a big risk from the organization’s point of view. And as a CEO, he made arrangements to have Bechtel brought on board to assess and give advice on litigation matters and claim matters”. (Questions 70-71)
[51] Mr. Baik also admitted on cross-examination that: he was not involved in engaging Bechtel for the purpose of preparing the Bechtel Report (Question 37); the decision to retain Bechtel was solely Mr. Byford’s (Question 44); he does not know the identity of the individuals who prepared, checked and approved the Bechtel Report (based on the initials on the Bechtel Report)(Question 24); he did not have any discussions with Mr. Byford or Bechtel prior to swearing the Baik Affidavit (Questions 21 and 25); he was not involved in preparing the Bechtel Report or the Redacted Portions, had never seen the Redacted Portions before swearing the Baik Affidavit, does not know who from TTC was involved in redacting the Redacted Portions and does not know what if any process was used by TTC to redact the Redacted Portions (Questions 8-10, 21 and 25).
[52] Although substantive parts of the Baik Affidavit are based on advice from Mr. Atlas, Mr. Baik further admitted on cross-examination that he did not know if Mr. Atlas had any: communications with Bechtel regarding the purpose of the Bechtel Report (Question 100); involvement with Bechtel during the preparation of the Bechtel Report (Question 99); or involvement in redacting the Bechtel Report (Questions 12-13). Mr. Baik also admitted that he has no information or evidence that Bechtel’s descriptions of the purpose of the Bechtel Report are inaccurate or incomplete (Question 92) and agreed that Mr. Byford’s description of Bechtel’s retainer in the CEO Report was accurate (Questions 112-116).
[53] Turning to a consideration of the applicable two-step test, the Redacted Portions comprise approximately 4-and-a-half pages of the 82-page Bechtel Report, all under Section 5 entitled “Cost, Contracts and Commercial”. It is important to reiterate that although the issue on this motion is whether the Redacted Portions are subject to litigation privilege, the larger context and circumstances of the Bechtel Report and its preparation are relevant. This includes the unredacted portions of the Bechtel Report, which shed light and provide context with respect to the Redacted Portions and the applicable legal test.
[54] With respect to the first step, WCC did not make any substantive submissions with respect to whether the Redacted Portions were prepared in contemplation of litigation such that litigation was reasonably apprehended at the time they were prepared. Based my review of the relevant factors and circumstances, particularly the timing of actual and potential litigation against TTC and the Contract Claims, I am satisfied that the Redacted Portions were prepared in reasonable contemplation of actual and anticipated litigation.
[55] Bechtel states at page 1-2 of the Bechtel Report that its inquiries and analysis were completed between December 8, 2014 and January 30, 2015. By that time, IEI had commenced the First IEI Action against TTC, WCC had brought the WCC Crossclaim and TTC had defended it. In addition, IEI had commenced two additional actions against WCC and WCC had brought its motion seeking leave to add TTC as a Third Party. The OHL Action and the CCMI Action had also been commenced.
[56] As set out in McNally, because contractual claims are a regular part of most construction projects there is not a reasonable prospect of litigation each time a claim is filed. This is particularly true in the present case where the stated purpose of the DRB is to avoid litigation. However, as in McNally, given that the Contract Claims, specifically those set out in the Red Book, are substantially similar to the claims being advanced by WCC in these proceedings, this further supports the conclusion that the Redacted Portions were created when litigation was reasonably contemplated. In short, it was reasonable to conclude at the time that more litigation might follow, which it did.
[57] Turning to the second part of the test, TTC bears the evidentiary burden of establishing on a balance of probabilities that the Redacted Portions were created for the dominant purpose of litigation. Have considered all of the relevant factors, on the record before me, I conclude that TTC has not met its evidentiary burden. While I am satisfied that the Redacted Portions were prepared for multiple purposes, I cannot conclude that TTC has established on a balance of probabilities that litigation was one of them. Even if claims review or litigation was one of multiple purposes, it was not the dominant one.
[58] In considering the second part of the test, I again adopt the reasoning of Master Dash in McNally such that in addition to considering actual litigation already commenced before the preparation of the Redacted Portions, I have also considered the effect of contract claims, including the Red Book. More specifically, I have considered Bechtel’s involvement in assessing or addressing contract claims in the process of preparing the Bechtel Report and the Redacted Portions, particularly given the similarities between the Contract Claims and this litigation.
[59] My conclusions on the second part of the test are largely based on the significant amount of evidence from at or around the time when the Redacted Portions were created. This includes the CSA and the Bechtel Report; TTC’s and Bechtel’s representations; and the Staff Action Report and the CEO Report. In my view, this evidence is more probative and compelling than the evidence advanced by TTC, in particular the Baik Affidavit, sworn 4 years after the fact by a TTC official not directly involved in retaining Bechtel, the preparation of the Bechtel Report or the Redacted Portions.
[60] The CSA and the Bechtel Report do not support TTC’s submission that the Redacted Portions were created for the dominant purpose of litigation.
[61] The Scope of Services in the CSA does not make reference to the review, determination or investigation of claims. However, TTC’s refusal to produce the SSEPA Document makes it difficult to draw any further conclusions and TTC has provided no explanation for its refusal to do so.
[62] The unredacted portions of the Bechtel Report provide more guidance. The Bechtel Report states that the purpose was to “provide an assessment of the most expeditious delivery of the works into operation, with an objective of meeting a delivery date of December 31, 2017”. There is no reference to the review, assessment or investigation of claims or litigation. The Bechtel Report also states that its starting point was the APTA Peer Review which ultimately recommended a reset, a conclusion with which Bechtel concurred. This is supported by other excerpts from the Bechtel Report, including the following unredacted paragraphs at page 5-9 under the heading “Claims” immediately before one of the Redacted Portions:
“Based on Claims Registers provided as at the end of November 2014, 358 claims have been notified and/or submitted to the Project across the six stations. As part of this assessment, the claim registers were reviewed for data and completeness and verified or corrected against actual submitted claims made available to the Project Assessment Team.
The following valuations are intended to provide an order of magnitude of financial exposure but are not to be misconstrued or considered as the Project Assessment Team’s recommendation of actual entitlement, nor a validation of either Parties (sic) current position or the entitlements therein forming the basis of the notification of intent to claim or the Project determinations.”
[63] At page 5-2 of the Bechtel Report under the heading “Project Exposure Forecast”, immediately prior to another Redacted Portion, it states:
“The changes and claims assessment performed during this Assessment period focused only on the station cost components of the project. Table 5.2 summarizes Bechtel’s view of the Project’s potential project cost exposure for station construction only. This is a Rough Order of Magnitude assessment and is based upon information collected and reviewed during the assessment period.”
[64] Of the 6 paragraphs under Section 5.6, “Dispute Resolution/Litigation”, only the first is unredacted:
“Due to the confidential nature of the DRB and some Contractors’ reluctance to discuss DRB determinations or rulings, it was difficult to conclude the parties’ behaviors of abiding by the non-binding decisions. Feedback from various members of the Project and Contractors indicated a general feeling that there was an unwillingness to abide by any decision, particularly if it was not in one party’s interest.”
[65] Under section 5.7 entitled “Recommendations” (at pages 5-15 and 5-17 of the Bechtel Report), Bechtel makes numerous recommendations regarding the processes for managing changes and claims, including additional staffing and the establishment of a claims team.
[66] Under Section 1.4, “Limitations”, Bechtel further states that information regarding the DRB was not made available and is not considered in its assessment.
[67] In my view, the above excerpts are consistent with the stated purpose of retaining Bechtel to conduct a status review of the TYSSE with respect to scheduling and costs. They do not support a finding that the Redacted Portions were created for the dominant purpose of litigation. Although Bechtel addressed contract claims in the Redacted Portions and the Bechtel Report, it did not assess or evaluate claims on their merits or make any determinations as to entitlement. Rather, Bechtel reviewed the TYSSE claims registers for completeness and verification and to prepare valuations estimating TTC’s financial exposure including costs arising from changes and claims. Bechtel also assessed the impact of the claims process and the DRB on relationships between TTC and its contractors. In the context of Bechtel’s mandate, the stated purpose and the other evidence, in my view, this suggests that the dominant purpose was to assess the TYSSE to provide its recommendations with respect to how the TYSSE could be delivered in the shortest time for the least cost. Even if these valuations were or may have been useful for claims determination or litigation, this is a dual, additional or alternate purpose and not a dominant one.
[68] Bechtel’s ultimate recommendations further support this finding. The recommendations address scheduling, design change, adversarial relationships among contractors and TYSSE construction teams and the establishment of a collaborative ethos around the reset. The only reference to claims is with respect to “improving tools and processes for costs, contracts and claims”, and not the substance, determination or assessment of claims for the purposes of entitlement or preparing for litigation.
[69] The Staff Action Report, prepared by Mr. Byford shortly after he received the Bechtel Report, is consistent with the Bechtel Report and supports the conclusions above. In the Staff Action Report, Mr. Byford states that Bechtel was retained to review “present project status” and “to provide their view on how the TTC could deliver TYSSE at the earliest scheduled completion date with minimum additional costs”. He further states that none of the 4 options for the TYSSE set out in the Staff Action Report address current contractor claims, which TTC will complete by the end of 2015 with estimates of expected value with the assistance of an external claims consultant. Mr. Byford also states in the Staff Action Report that APTA and Bechtel agree that TTC should “deliver a preliminary timeline to resolve outstanding claims”. The CEO Report, written by Mr. Byford shortly before the Bechtel Report was delivered, reiterates that the purpose of retaining Bechtel was to obtain “a thorough, in-depth analysis of the project”.
[70] Perhaps the most compelling evidence in support of WCC’s position are the representations made by TTC in arranging contractor meetings with Bechtel. As set out in the correspondence excerpted above, in coordinating meetings between representatives of WCC and Bechtel in the process of Bechtel preparing the Bechtel Report, TTC expressly represented that Bechtel was not a claims consultant and that the purpose of the meetings was to obtain WCC’s “perspective of the status, progress, challenges, issues and concerns (progress and financial) over construction progress, in a generally open dialogue.” This is consistent with Section 1.3 of the Bechtel Report where Bechtel explains that the process for the preparation of the Bechtel Report included meeting with contractors, stating: “the Contractors were also very keen to participate, once they were clear on Bechtel’s role as limited to fact-finding and assessment for TTC”. This is direct evidence that at the time the Redacted Portions were created and as part of the process in preparing the Redacted Portions, TTC and Bechtel represented to WCC and other contractors that Bechtel was not a claims consultant and that its role was to assess status, progress, financial issues and other concerns.
[71] The evidence above in support of WCC’s position is first-hand, contemporaneous evidence from Mr. Byford, who retained Bechtel and reported on the retainer and the Bechtel Report internally, and Bechtel itself, the author of the Bechtel Report and the Redacted Portions. By contrast, Mr. Baik’s evidence as set out in the Baik Affidavit and on cross-examination is based largely on advice and provided over 4 years after the preparation of the Redacted Portions.
[72] TTC has not provided any evidence from Mr. Byford other than what he stated in the Staff Action Report and the CEO Memo. Neither Mr. Baik nor anyone else has spoken to Mr. Byford regarding any of the issues or facts on this motion. The only direct evidence before this Court related to Mr. Byford is the Staff Action Report and the CEO Report, both of which are inconsistent with TTC’s position that the Redacted Portions were prepared for the dominant purpose of litigation.
[73] While Mr. Baik has spoken with Mr. Atlas, there is no evidence that Mr. Atlas was involved with Bechtel during the preparation or redaction of the Bechtel Report. Further, some of Mr. Baik’s evidence from Mr. Atlas at paragraph 17 of the Baik Affidavit is double hearsay namely that Mr. Atlas advised him that Mr. Byford advised Mr. Atlas and Mr. Lee that he required assistance in retaining Bechtel due to concerns about actual and potential litigation. Although I do not reject this evidence outright, I give this and other evidence advanced by Mr. Baik less weight. TTC could have elected to file evidence from Mr. Atlas and/or Bechtel or made inquiries of Mr. Byford. In this regard, I adopt Master MacLeod’s (as he then was) comments in Glassjam Investments Ltd. v. Freedman, 2014 ONSC 3878 at para. 33 such that evidence from an uninformed witness swearing what they believe an assertion made by someone else is of little to no probative value. Accordingly, I reject TTC’s assertion that paragraph 17 of the Baik Affidavit is evidence directly supporting the conclusion that the Redacted Portions were prepared to defend, prepare for and assess risks associated with ongoing and anticipated litigation.
[74] Even giving Mr. Baik’s evidence full weight, it is insufficient to establish that the Redacted Portions were prepared for the dominant purpose of litigation. At paragraph 23 of the Baik Affidavit, he states that Mr. Atlas advised him that the Redacted Portions were prepared to “help TTC prepare for expected and ongoing litigation by the TYSSE contractors (including Walsh)”. If in fact the Redacted Portions were prepared to “help” TTC prepare for litigation this, in my view, only demonstrates that litigation may have been one purpose and is insufficient to establish a dominant purpose, particularly in the face of the substantial evidence to the contrary. This is consistent with Mr. Baik’s answer on cross-examination that the purpose of the Bechtel Report was “all-encompassing: The schedule, the issues, challenges, the budget, the claims. All of it put together.” Assuming these were all purposes for the Bechtel Report and the Redacted Portions, it does not lead to the conclusion that litigation was the dominant purpose. At best, litigation may have been one of multiple purposes. Similarly, with respect to paragraph 17 of the Baik Affidavit, even if, as Mr. Baik states that Mr. Atlas advised him, the filing of the Red Book was the “driver” for retaining Bechtel, this also does not establish that litigation was the dominant purpose of the Redacted Portions.
[75] TTC further submits that it can be “inferred” from the circumstances (including the active litigation, the delivery of the Red Book, the NOICs, WCC’s participation in the DRB process, Mr. Atlas being consulted to engage Bechtel, meetings between WCC and TTC’s legal counsel and the retention of external litigation counsel) that the dominant purpose of the Redacted Portions was litigation. It is not for this Court to infer whether a dominant purpose has been established, it is TTC’s evidentiary burden to satisfy on a balance of probabilities and it has not done so. This argument reflects a consistent theme in TTC’s submissions, namely that the existence of these circumstances before or around the time when the Redacted Portions were created is sufficient to establish a dominant purpose. While these circumstances are, as I concluded above, sufficient to satisfy the first part of the test, that litigation was reasonably contemplated, they are not, without more evidence, also sufficient to establish that litigation was the dominant purpose.
[76] TTC, citing PMG, submits that in filing evidence with respect to dominant purpose on this motion, it was required to exercise due care and caution to avoid accidental or implied waiver of privilege. While I agree that such caution is necessary, I am not satisfied that this is an adequate explanation for TTC’s failure to file more direct, timely and probative evidence including evidence from Mr. Byford, Mr. Atlas and/or Bechtel. TTC could have filed additional evidence using the same precautions without inadvertently waiving privilege.
[77] In making my determinations, I have also reviewed the unredacted version of the Bechtel Report filed with the Court by TTC in order to examine the Redacted Portions. WCC submits that it is not appropriate or useful for me to review the unredacted version given that TTC has not met its evidentiary burden. TTC submits that since it has met its evidentiary burden it is not necessary for me to review the unredacted version but does not take issue if I do. Given that I must determine whether the specific Redacted Portions are subject to litigation privilege, I conclude that it is appropriate and consistent with Rule 30.06(d) and the relevant case law that I do so. Having reviewed the Redacted Portions, I am satisfied that they do not alter any of my conclusions set out above.
[78] Having considered all of the relevant factors and circumstances, I am unable to conclude that the Redacted Portions are subject to litigation privilege. As held in PMG, and as is the case here, satisfying the first part of the test is not usually difficult. However, with respect to the second part, the fact that Bechtel addressed claims in the Redacted Portions and the Bechtel Report was for other purposes, namely to assess the TYSSE with respect to status, scheduling and budget in order to provide its recommendations as to the most expeditious way to deliver the TYSSE to completion at minimum cost. Even if I had concluded that one of the purposes of the Redacted Portions was to assess, investigate and/or determine claims, which I cannot on the evidence, litigation was not the dominant purpose. In my view, this result is also consistent with the premise that litigation privilege is a limited exception to the principle of full disclosure.
IV. Disposition and Costs
[79] Order to go directing TTC to produce an unredacted copy of the Bechtel Report to WCC within 30 days.
[80] If the parties are unable to resolve the 13 related refusals, they may speak to them at the next attendance on this matter.
[81] If the parties are unable to agree on the costs of this motion, they may speak to a process and timetable for the filing of written costs submission at the next attendance.
Reasons Released: September 24, 2019
Master M.P. McGraw