COURT FILE NO.: CV-19-00628878-0000
DATE: 20200304
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Stephen M. Moranis
Applicant
– and –
Lawrence M. Dale
Respondent
– and –
McCarthy Tétrault LLP
Respondent
– and –
Miller Thompson LLP
Respondent
Serge Kalloghlian, for the Applicant
No one appearing for the Respondent, Mr. Dale
Anul Koshal, for the Respondent, McCarthy Tétrault LLP
Paul Morrison, for the Respondent, Miller Thompson LLP
HEARD: February 13, 2020
O’Brien j.
REASONS FOR DECISION
Overview
[1] The issue before me on the continuation of this Application is whether I should order former counsel of the Respondent, Mr. Dale, to disclose information about ongoing litigation to the Applicant, Mr. Moranis. Mr. Moranis was entitled to this information from Mr. Dale pursuant to an agreement to assign his interest in the ongoing litigation. Mr. Moranis submits that counsel may disclose the information to him, as, to the extent it is subject to solicitor-client privilege, Mr. Dale implicitly waived privilege in it pursuant to the terms of the assignment agreement.
[2] On the return of the Application, Mr. Moranis also brought a motion to add Mr. Dale’s former counsel as Respondents. The affected law firms, McCarthy Tétrault LLP and Miller Thompson LLP opposed the motion and also opposed any order requiring them to disclose information.
[3] In 2000, Mr. Dale and Mr. Moranis jointly established and incorporated Realtysellers (Ontario) Limited (“Realtysellers”), a residential real estate brokerage. In 2009, Realtysellers, together with Mr. Moranis and Mr. Dale, commenced a civil proceeding against the Toronto Real Estate Board and others, Court File Number CV-09-374829 (the “Litigation”).
[4] On February 25, 2015, Mr. Moranis entered into an agreement with Mr. Dale in which Mr. Moranis assigned his interest in the Litigation to Mr. Dale (the “Assignment Agreement”). Pursuant to the Assignment Agreement, Mr. Moranis was entitled to a portion of any net proceeds from the Litigation. Related to that entitlement, the Assignment Agreement stated that Mr. Dale was required to provide Mr. Moranis with a monthly written update regarding developments in the progress of the Litigation. He also was required to provide Mr. Moranis with information regarding all settlement negotiations and/or documentation.
[5] This Application initially came before me on January 24, 2020. On that date, Mr. Moranis sought judgment against Mr. Dale for breach of the Assignment Agreement and an order requiring Mr. Dale to disclose the information provided for in the Assignment Agreement. He also sought an alternative order requiring Mr. Dale’s counsel in the Litigation to disclose the information to him. I granted judgment against Mr. Dale for breach of the Assignment Agreement and ordered him to disclose information as set out in my order, which was somewhat broader than as specifically described in the Assignment Agreement. However, I adjourned the portion of the Application in which Mr. Moranis sought an order requiring Mr. Dale’s counsel in the Litigation to disclose the information. I permitted Mr. Moranis to bring a motion adding the affected law firms as Respondents on the return of the Application.
[6] Mr. Moranis now has brought that motion, even though the Respondent law firms are no longer counsel for Mr. Dale. Following my order, Mr. Dale filed a Notice of Intent to Act in Person, so counsel at the law firms no longer represent him. In any event, I now need to determine (1) whether to add the responding law firms as parties to the Application; and (2) whether to order the law firms to disclose the information requested by Mr. Moranis.
[7] I conclude that the responding law firms should be added as parties to the Application, as their participation will assist the court in adjudicating effectively. I also conclude on the Application that the law firms are required to disclose the information set out in the Assignment Agreement. They are not required to disclose the broader information requested by Mr. Moranis, as it is subject to solicitor-client privilege. Finally, although the law firms did not raise this concern, if they become of the view that any of the information I have ordered disclosed raises concerns of settlement confidentiality or privilege, or litigation privilege, the parties may contact me to discuss next steps.
Law firms should be added as parties
[8] Rule 5.04(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 authorizes the court to add a party at any stage of a proceeding on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment. The proposed addition of a party also must comply with Rule 26, which deals with amendments of pleadings.
[9] As stated by Horkins J. in Steel Tree Structures Ltd. v. Gemco Solar Inc., 2016 ONSC 955 (Div. Ct.), at para. 24, the starting point on a motion to add a party is to determine whether the responding party would suffer any prejudice from being added: “The initial question for the court to ask under Rules 26 and 5.04(2) is whether the proposed defendant would suffer non-compensable prejudice. While under Rule 5.04(2), the court has the discretion to deny the amendment in the absence of non-compensable prejudice, such discretion should not be invoked often. Added complication to the action and increased work and legal expense is not the type of non-compensable prejudice envisioned by Rules 26 and 5.04(2).”
[10] The test for adding a party under r. 5.04(2), as set out in Steel Tree Structures Ltd. at para. 23, endorsing Plante v. Industrial Alliance Life Insurance Co., 2002 CanLII 45521 (ON SC), [2002] O.J. No. 3034, includes a consideration of whether adding a party will allow the court to adjudicate effectively: “Adding a party will be particularly appropriate if … it is necessary that the proposed defendant be bound by the outcome of the proceeding or his or her participation is otherwise necessary to allow the court to adjudicate effectively (Rule 5.03(1)).”
[11] In this case, Mr. Moranis is seeking an order that impacts the rights and obligations of the responding law firms. Mr. Moranis served the law firms prior to the initial return date of the Application, but the law firms declined to participate. When Mr. Moranis brought the motion to add the law firms as parties, at my suggestion, the law firms then attended at the motion and Application. At the hearing, I asked the law firms to provide submissions on both the motion and Application before I reached my decision on the motion. Having heard their submissions on the Application, I am confident that their participation in the Application will assist the court to adjudicate effectively. Further, the law firms have not identified any prejudice that would prevent their being added as parties.
[12] The law firms’ primary submission was that they could not be added as parties on the basis that there was no reasonable cause of action pleaded against them. I agree that in order to add a party, the claim against the party must be legally tenable. In this case, I consider the addition of the law firms to be legally tenable. The Applicant is seeking equitable relief against the law firms as a remedy to Mr. Dale’s breach of contract. Further, the rights and professional obligations of the law firms to their former client are at stake. Adding them as parties has given them the opportunity to provide submissions to the court regarding their duties to their former client and the impact of Mr. Moranis’ proposed order. In these circumstances, I consider the addition of the law firms to be legally tenable and appropriate.
Disclosure of information other than information subject to solicitor-client privilege
[13] I further conclude that it is appropriate to order the law firms to disclose the information required by the Assignment Agreement, but not the broader description of the information sought by Mr. Moranis, which is subject to solicitor-client privilege.
Equitable order against law firms
[14] The law firms submit that they were not privy to the Assignment Agreement and, accordingly, it did not confer rights nor impose obligations on them. However, Mr. Moranis is not seeking to impose contractual liability on them. Instead, he is seeking an equitable remedy in the nature of a mandatory order. The need for this order arises from Mr. Dale’s breach of my court order. Mr. Dale did not appear at the hearing of the Application on January 24, 2020. I proceeded to hear the Application for the reasons set out in my endorsement of that date, including that Mr. Dale had a history of failing to comply with court proceedings and deliberately breaching court orders. Although following the initial hearing of the Application, I ordered Mr. Dale to provide information to Mr. Moranis on or before February 4, 2020, by the return of the Application before me on February 13, 2020, he had not done so. I understand that Mr. Dale had written an e-mail to indicate that he intended to appeal my order. However, by the return date of the Application, he had not filed a Notice of Appeal, nor sought to stay my order.
[15] I accept Mr. Moranis’ submission that I have equitable jurisdiction to make an order requiring the law firms to disclose information to him, even though they were not parties to the Assignment Agreement. There is no suggestion that the law firms have engaged in any wrongdoing. However, as set out in Google Inc. v. Equustek Solutions Inc., 2017 SCC 34, [2017] 1 SCR 824, relief can be ordered against parties (or non-parties) who have not engaged in and have not been accused of any wrongful act. For example, as set out in Google Inc., a Mareva injunction that requires a defendant not to dissipate its assets sometimes requires the assistance of a non-party. Banks and other financial institutions have, as a result, been bound by Mareva injunctions. Sometimes it is necessary to make an order against an innocent party in order to prevent the facilitation of another party’s ability to defy a court order: Google Inc., at paras. 32-35.
[16] The British Columbia Court of Appeal upheld such an order in Wong v. Luu, 2015 BCCA 159. In that case, the Court of Appeal upheld an order requiring the law firm representing the bankrupt defendant to provide information to the trustees in bankruptcy to assist them in determining the bankrupt’s assets.
[17] Here, as found in my endorsement dated January 24, 2020, Mr. Dale has been in breach of the requirement to provide information under the Assignment Agreement since at least April 2018. He also is in breach of my court order to provide the information set out therein. An order requiring the law firms to provide the information set out in the Assignment Agreement to Mr. Moranis would limit the impact of Mr. Dale’s defiance of my court order and his contractual obligations.
Solicitor-client privilege
[18] The law firms’ second argument is that I should not compel them to disclose privileged information. I agree. Solicitor-client privilege is a substantive legal right considered fundamental to the justice system in Canada: R. v. McClure, 2001 SCC 14; [2001] 1 S.C.R. 445, at para. 2; Pritchard v. Ontario (H.R.C.), 2004 SCC 31, [2004] 1 S.C.R. 809, at para. 17. As set out by the Supreme Court of Canada: “The privilege is jealously guarded and should only be set aside in the most unusual circumstances, such as a genuine risk of wrongful conviction”: Pritchard, at para. 17.
[19] However, on close examination, I have concluded that the information required to be disclosed by the terms of the Assignment Agreement is not privileged. Not all communications between a lawyer and his or her client are privileged. In order for the communication to be privileged, it must arise from communications between a lawyer and client where the client seeks lawful legal advice: R. v. McClure, at para. 36.
[20] In this case, the information Mr. Dale was supposed to disclose was described as follows in the Assignment Agreement:
In furtherance of this paragraph, Dale shall provide to Moranis a monthly written update, commencing on April 1, 2015, with reasonable detail on any and all developments in the progress of the Action and Assigned Claims. In addition to monthly updates, any information in reference to all settlement negotiations and/or documentation shall be reasonably and promptly disclosed to Moranis, in writing, with the intent to have [sic] Moranis full knowledge of any and all settlement terms. Written updates may include emails or such further and other detail, including copies of correspondence etc., as reasonably required, with both parties acting reasonably and in good faith.
[21] It does not appear that any of the information described in this paragraph is subject to solicitor-client privilege. It covers factual information as to the progress of the action, as well as the status of settlement negotiations or a settlement agreement. It does not appear to require the disclosure of communications between Mr. Dale and his lawyers for the purpose of seeking legal advice.
[22] Indeed, the law firms did not assert before me that the paragraph set out above would require the disclosure of privileged information. They were concerned instead with the scope of the order sought by Mr. Moranis, which would go beyond the strict requirements of the Assignment Agreement. Mr. Moranis now seeks an order requiring the law firms to disclose additional information not strictly set out in the Assignment Agreement, including “the plaintiff’s litigation strategy” and “strategy regarding [settlement] discussions or negotiations.” I agree that this broader request implicates privileged information.
[23] Mr. Moranis justifies his request for privileged information on the basis that, in his submission, through the paragraph reproduced above from the Assignment Agreement, Mr. Dale, has impliedly waived solicitor-client privilege in the information he seeks. Mr. Moranis relies on Frenette v. Metropolitan Life Insurance Co., 1992 CanLII 85 (SCC), [1992] 1 S.C.R. 647 to submit that an implicit waiver of confidentiality pursuant to a contract can operate as a basis for compelling parties to disclose information.
[24] Frenette involved the question of whether a hospital was required to disclose the medical records of an insured person to allow his insurance company to investigate the cause of his death. I consider it to be distinguishable for a number of reasons, including that, in that case, the insurance contract contained an express provision by which the insured authorized any hospital to release his medical information to the insurer. In this case, there is no such express provision authorizing Mr. Dale’s lawyers to disclose solicitor-client privileged information. More importantly, I do not accept that the Assignment Agreement shows that Mr. Dale evinced an intention to waive privilege.
[25] The test for establishing waiver is set out by McLachlin J., then of the British Columbia Supreme Court, in S. & K. Processors Ltd. v. Campbell Avenue Herring Producers Ltd., 1983 CanLII 407 (BC SC), [1983] B.C.J. No. 1499 at para. 6, 45 B.C.L.R. 218 as follows:
Waiver of privilege is ordinarily established where it is shown that the possessor of the privilege: (1) knows of the existence of the privilege; and (2) voluntarily evinces an intention to waive that privilege. However, waiver may also occur in the absence of an intention to waive, where fairness and consistency so require. Thus, waiver of privilege as to part of a communication will be held to be waiver as to the entire communication. Similarly, where a litigant relies on legal advice as an element of his claim or defence, the privilege which would otherwise attach to advice is lost. [citation omitted]
[26] Here, in my view, the terms of the Assignment Agreement do not evince an intention to waive solicitor-client privilege. As set out above, the Assignment Agreement covers information known to Mr. Dale’s solicitors, but it does not cover communications to Mr. Dale’s solicitors for the purpose of seeking legal advice. Therefore, I am not persuaded that Mr. Dale evinced an intention to waive privilege, nor that fairness and consistency would require that it be waived.
[27] I conclude, then, that the law firms are required to disclose to Mr. Moranis the non-privileged information described in the paragraph from the Assignment Agreement reproduced above, but are not required to disclose the further information sought by Mr. Moranis.
Settlement Privilege and Litigation Privilege
[28] Although the law firms did not raise either settlement privilege or litigation privilege as a concern, I also have considered whether an order requiring them to disclose the information as described in the Assignment Agreement could violate any settlement confidentiality or privilege or litigation privilege. As these issues were not raised before me, I do not have any submissions, nor specific information, on which to base an analysis of them. However, settlement privilege is a rule of evidence. It is entirely different from solicitor-client privilege and would require a distinct analysis. Litigation privilege also is distinct from solicitor-client privilege and must be considered under a separate analysis. Given that the law firms did not raise these concerns, I assume they do not consider them to be in issue. However, if my order requiring the law firms to provide the information in their possession as described in the Assignment Agreement does raise a concern about settlement confidentiality or privilege, or about litigation privilege, the parties may contact my assistant to schedule a case conference in order to determine steps to address that issue. She can be reached by e-mail at annamaria.tiberio@ontario.ca.
Disposition
[29] The motion to add the law firms as Respondents to the Application is allowed. With respect to the Application, I order the law firms, or either of them, to disclose to Mr. Moranis, providing reasonable detail, the most current information in their possession, as to any developments in the Litigation since April 2018. The law firms also shall provide Mr. Moranis with information regarding all settlement negotiations and any related documentation. My order is subject to the law firms’ right to raise concerns with me about settlement confidentiality or privilege or litigation privilege. In addition, for certainty, the law firms are not required to provide any information that is captured in the description in this paragraph that reveals communications with Mr. Dale wherein Mr. Dale’s purpose was to seek legal advice. The law firms are required to provide Mr. Moranis with the information in this paragraph within 14 days of the date of this decision.
Costs
[30] At the conclusion of the hearing in this matter, the parties indicated that they would like the opportunity to discuss costs. I encourage the parties to come to an agreement on costs, particularly given that I consider success on the motion and Application to be divided. If they are not able to agree, the law firms may provide me with their submissions on costs within 14 days of the date of this decision and Mr. Moranis will then have 7 further days to provide responding submissions. The submissions should not be longer than four pages, not including attachments. They may be sent to my judicial assistant at the e-mail address provided above.
O’Brien, J.
Released: March 4, 2020
COURT FILE NO.: CV-19-00628878-0000
DATE: 20200304
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Stephen M. Moranis
Applicant
– and –
Lawrence M. Dale
Respondent
– and –
McCarthy Tétrault LLP
Respondent
– and –
Miller Thompson LLP
Respondent
REASONS FOR DECISION
O’Brien, J.
Released: March 4, 2020