Magnotta Winery Corporation v. The Alcohol and Gaming Commission of Ontario
COURT FILE NO.: CV-08-00361217-0000
DATE: 20200128
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
MAGNOTTA WINERY CORPORATION, MAGNOTTA VINTNERS LTD., MAGNOTTA VINEYARDS LTD., MAGNOTTA WINES LTD., MAGNOTTA WINERY ESTATES LTD., and MAGNOTTA CELLARS CORPORATION
Appellants/Plaintiffs
– and –
THE ALCOHOL AND GAMING COMMISSION OF ONTARIO, THE LIQUOR CONTROL BOARD OF ONTARIO and HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO
Respondents/Defendants
COUNSEL:
Ian Roher, David S. Altshuller and Eitan Kadouri, for the Appellants
Jill Dougherty and Debra McKenna, for the Respondent, The Liquor Control Board of Ontario;
Leonard Marsello, Tamara Barclay and Ananthan Sinnadurai, for the Respondents, The Alcohol and Gaming Commission of Ontario and Her Majesty the Queen in Right of Ontario;
Kimberly D. Pepper for the non-party witness Jean Major
Brendan van Niejenhuis and Andrea Gonsalves for the non-party witness Craig Slater
Megan Shortreed for the non-party witnesses Penny Wyger and Patrick Ford
HEARD: December 9, 2019
Koehnen, J.
Overview
[1] This is an appeal by the plaintiffs from an order of Master Abrams on a refusals motion brought by the plaintiffs in respect of a number of questions arising on examinations under rule 39.03.
[2] The plaintiffs submit that the Master made 14 separate errors of fact, law or mixed law and fact.
[3] I dismiss the appeal. What Magnotta alleges are errors are, in my view, examples of Magnotta misreading the Master’s reasons, taking legal authorities out of context and/or are matters that are without consequence to the underlying motion.
[4] The Master based many of the dismissals on concepts of relevance, privilege and waiver of privilege. Rule 39.03 examinations are limited to questions that are relevant on the pending motion. As a result, it will be useful to summarize the procedural history to establish a framework for relevance and privilege.
I. Procedural History
[5] The underlying dispute in this action centers on what is known as the “Made Policy”. It was designed by the Liquor Control Board of Ontario (the “LCBO”) and, by way of summary, provides that a winery may only sell its wines outside of LCBO outlets only if they are sold in retail facilities located at the particular winery in which the wine was made. The policy also defines the circumstances in which a wine will be regarded as having been “made” at the winery.
[6] The respondents submit that Magnotta operates its business in violation of this policy by manufacturing wine in a centralized facility and selling it at retail stores associated with what Magnotta claims are local wineries.
[7] Between 1996 and 2001, Magnotta commenced several actions and two judicial reviews against the LCBO attacking the Made Policy.
[8] In 2000, Magnotta and the LCBO settled their differences in minutes of settlement and a release which included what the LCBO says is typical language precluding Magnotta from commencing any actions against a party that may claim contribution and indemnity from the LCBO.
[9] In 2001, the LCBO transferred certain powers, including those relating to the Made Policy, to the Alcohol and Gaming Commission of Ontario (the “AGCO”). The AGCO adopted and continued to apply the Made Policy.
[10] In 2008, Magnotta commenced this and another action seeking relief against the Made Policy. The respondents submit that the claims are precluded by the minutes of settlement and the release.
[11] In 2015, the parties brought a first layer of motions. Magnotta brought a motion for partial summary judgment against the AGCO. The AGCO brought a motion for summary judgment. The LCBO brought a motion for an order striking out Magnotta’s claims as an abuse of process (the “Motion to Strike”).
[12] In its factum on its motion, the LCBO submitted that the Release barred all of Magnotta’s claims against AGCO because the Release prohibited Magnotta from asserting a claim against a party who might claim contribution or indemnity against the LCBO.
[13] In its responding factum, Magnotta stated that, the Minutes of Settlement preserved Magnotta’s rights against the AGCO. In addition, Magnotta stated that since: the AGCO had not made any claim against the LCBO, there was no evidence of a tolling agreement between the defendants, and the limitation period had long since expired; the issue of a claim over was moot.
[14] In response to Magnotta’s position, the LCBO disclosed a tolling agreement which had been executed by the LCBO and the AGCO in December 2012 and June 2013 respectively (the “Tolling Agreement”).
[15] This in turn prompted Magnotta to bring a second layer motion to strike out the statements of defence of the LCBO and AGCO for the allegedly late disclosure of the Tolling Agreement. Magnotta submits that the Tolling Agreement should have been disclosed both to the Court and to Magnotta immediately upon its execution and that the late disclosure constitutes an abuse of process pursuant to the principles set out by the Court of Appeal in Aecon Buildings v. Stephenson Engineering Limited, 2010 ONCA 898 and Handley Estate v. DTE Industries Limited, 2018 ONCA 324 (the “Aecon Motion”). I refer to this as a second layer motion because it is a motion brought within the LCBO motion to strike and within Magnotta’s motion against AGCO for partial summary judgment.
[16] In addition, Magnotta brought a further second layer motion to prevent LCBO from filing a factum in Magnotta’s partial summary judgment motion against AGCO because it has no standing to do so.
[17] Magnotta examined four witnesses under rule 39.03 on the second layer motions. There were a number of refusals on those motions. Magnotta then brought a third layer motion within the Aecon and standing motions for answers to the refusals. This third layer motion on the refusals was disposed of by Master Abrams in reasons dated June 20, 2019. Magnotta now appeals from the rulings of Master Abrams.
[18] Master Abrams upheld most of the refusals on grounds of relevance and privilege.
[19] When assessing relevance, the issue before Master Abrams was therefore whether the questions Magnotta asked of the rule 39.03 witnesses were relevant either to:
(a) The ability of the LCBO to file a factum in Magnotta’s summary judgment motion against AGCO which would also include whether the LCBO is a party whose proprietary, economic or other interests are affected by the order.
(b) Whether the Tolling Agreement should have been disclosed sooner than it was. This is in turn depends on whether the terms of the Tolling Agreement alter the apparent relationship between any parties to the litigation that would otherwise be assumed from the pleadings or expected in the conduct of the litigation
II. The Standard of Review
[20] The parties appear to agree on the standard of review.
[21] The standard of review on questions of law, including relevance and privilege, is correctness: Leadbeater v. Ontario, 2004 CanLII 14107 (ONSC) at para. 29
[22] The standard of review with respect to findings of fact or inferences is that of “palpable and overriding error”: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 SCR 235, para. 23
[23] A “palpable” error is one that is obvious, plain to see or clear. Examples of “palpable” factual errors include findings made in the complete absence of evidence, findings made in conflict with accepted evidence, findings based on a misapprehension of evidence and findings of fact drawn from primary facts that are the result of speculation rather than inference: Waxman v. Waxman, 2004 CanLII 39040 (ONCA) at paras. 296-97, 300
[24] An “overriding” error is one that is “determinative in the sense that the error affected the result”: Perell, Paul M., Morden, John W., The Law of Civil Procedure in Ontario, 3rd ed (Markham: LexisNexis Canada, 2017), p. 1114, ¶ 12.219; Waxman, paras. 296-97, 300.
[25] Magnotta submits that the Master made 14 errors of fact and/or law. For ease of reference I will adopt the same heading for each alleged error that Magnotta adopted in its factum.
III. Alleged Errors
(i) The Timing of the Disclosure of the Tolling Agreement
[26] Magnotta submits that the Master made an error of fact by finding in paragraph five of her reasons, that the LCBO disclosed the Tolling Agreement because “the issue of the right to claim-over had been raised and so that the court would not be misled.” Magnotta submits that there was no evidence to support this conclusion. Instead, argues Magnotta, the finding was based on submissions of counsel.
[27] This does not constitute an error of fact and certainly does not amount to an overriding error.
[28] As I read the Master’s reasons, she made the statement in the context of setting out the background to the motion and the positions of the parties.
[29] The finding did not influence the Master’s rulings on any of the particular refusals that were before her and could therefore not be an overriding error even if it were a palpable one.
[30] Moreover, the issue of why the LCBO disclosed the Tolling Agreement when it did and whether it should have disclosed the Tolling Agreement earlier was not before her. That is the essence of Magnotta’s Aecon motion. Thus, even if the Master purported to make a finding in this regard (which I do not read her reasons as doing) the finding is of no significance because that was not the question before her. As case management judge, I will be hearing the Aecon and other motions which should give Magnotta sufficient comfort that the adjudicator on those motions will not be infected by any possible finding by the Master in this regard.
(ii) Communications were Created to Provide Legal Advice and For Purpose of Litigation
[31] Magnotta submits that the Master made an error of fact in paragraph 16 of her reasons by finding that certain documents and communications were privileged. Magnotta says this amounts to error because the finding is based on submissions of counsel, not on evidence.
[32] I read the Master’s reasons differently.
[33] Paragraph 16 is an introduction to a discussion about whether the LCBO had waived privilege over all documentation surrounding the creation of the Tolling Agreement by virtue of having disclosed the Tolling Agreement. In the context of that discussion, the Master set out a principled starting point which she took from LCBO’s submissions as follows:
I accept, as the LCBO submits, that the LCBO’s confidential communications with counsel and documents created so that legal advice might be provided and/or for the purpose of litigation are protected by solicitor-client and/or litigation privilege.
[34] There can be nothing controversial in that statement. That is the logical starting point of any discussion of privilege. Solicitor client privilege protects confidential communications between lawyer and client if the purpose of that communication is to obtain or provide legal advice: Barclays Bank PLC v. Metcalfe and Mansfield, 2010 ONSC 5519 at para. 7.
(ii) The Tolling Agreement was Disclosed in Accordance with its Terms
[35] Magnotta submits that the Master erred in fact by finding that the Tolling Agreement “was disclosed in accordance with its terms, and in circumstances contemplated by the agreement itself.”
[36] Magnotta submits that this finding is based on a misapprehension of evidence because there was no evidence of consent by AGCO to release the Tolling Agreement and the agreement provides that it can be used to demonstrate the tolling of a limitation period in a proceeding between LCBO and AGCO.
[37] While Magnotta does not indicate how this finding affected any of the Master’s rulings on particular refusals, presumably Magnotta wishes to argue that a lack of consent by AGCO demonstrates that there is no common interest between LCBO and AGCO as a result of which any privilege based on common interest privilege has been waived.
[38] I do not find that argument persuasive. The Tolling Agreement was disclosed after Magnotta specifically referred to the absence of a tolling agreement in its factum on the first layer motions. Once Magnotta had put in issue the existence or nonexistence of that document, an opposite party had a duty to disclose the document if it did exist. The fact that a Tolling Agreement or other document may contain restrictions on disclosure does not override a party’s legal obligation to disclose a document in litigation.
[39] In approaching the analysis in this way, I underscore that I am not in any way passing judgment on the underlying issue in the Aecon motion which is whether the Tolling Agreement ought to have been disclosed earlier. I have formed no view on that issue. I merely indicate that once a party has put the existence or nonexistence of a specific document into question, any argument that an opposing party might have had to withhold production go by the wayside and the party has an obligation to the court to indicate whether such a document exists. That does not address the question of whether the document should have been produced earlier.
(iii) Finding That Plaintiffs Are Required to Plead Affirmative Defences
[40] Magnotta submits that the Master erred in law in paragraph 3 of her reasons by holding that the Plaintiffs had not pleaded that potential claims-over as between the LCBO and the AGCO were statute-barred, and that a limitations defence must be specifically pleaded.
[41] Magnotta says it had no reason to plead a limitations defence because it had no knowledge of any issue surrounding claims over until the LCBO filed its factum in May 2018. Before that, the statement of defence had simply alleged that the settlement barred Magnotta’s claims against the defendants without any facts to support that assertion.
[42] The LCBO suggests that the Master’s statement is a definitive finding that binds Magnotta and precludes Magnotta from making arguments based on the limitations period. LCBO points out that both it and the AGCO, pleaded reliance on the 2001 settlement in their statements of defence. In particular, LCBO pleaded as follows:
[…] the settlement of that previous litigation was intended to fully and finally resolve all claims by Magnotta relating to the winery retail store policies and conditions at issue and had the effect of fully and finally releasing the claims which Magnotta now advances, both as against the LCBO and as against AGCO.
[43] LCBO argues that since AGCO was not a party to the 2001 settlement, the only basis upon which the Release could bar a claim against AGCO was a claims-over provision. If Magnotta wanted to advance another version of events and rely on the limitations period to avoid the claim-over argument to it should have done so by filing a reply.
[44] I find no reversible error on the Master’s part but, at the same time, cannot accept the LCBO’s submission on this point.
[45] As I read the Master’s reasons, the statement in paragraph 3 of her endorsement was made in passing as part of the general background before her. She was not, in my view, making a definitive statement that was intended to bind Magnotta on the level 2 motions or in the main actions.
[46] Given that I am case manager, the failure to plead limitations in the past will not be held against Magnotta on any of the outstanding motions.
[47] As noted above, I cannot accept LCBO’s submission that Magnotta’s failure to plead a limitations period at this stage of the proceeding should somehow be held against it.
[48] The fundamental purpose of a pleading is to prevent surprise to an opposing party. To give meaning to that purpose requires parties to plead with clarity. While I can understand how LCBO may read the excerpt quoted in paragraph 42 above as referring to claims over, the concept does not jump off the page. One would only understand the excerpt to refer to claims over if one had a great deal more background information (as I had after reading LCBO’s factum on the appeal before me) or by conducting a forensic analysis of every word in the statement of defence and analyzing the implications of each. That is not an appropriate burden to place on the recipient of a pleading. Pleadings are received at the outset of an action when lawyers have limited knowledge of the issues. The individuals instructing lawyers on behalf of corporations are often equally limited in their knowledge of events that gave rise to the proceeding. Given those limitations and given the objective of preventing surprise, parties are expected to plead more explicitly than LCBO did if they intend to use the pleading to limit the arguments available to an opponent.
(iv) Not Appealing a Decision Means Acceptance of Ruling Applying in Different Circumstances
[49] In paragraph 15 of her reasons, the Master found that, in not appealing a prior decision by Master McAfee in these proceedings (the “McAfee Decision”), the parties are deemed to have accepted its application. In the McAfee Decision, the Court found that rule 39.03 witnesses could be asked only about their personal knowledge, were not obliged to inform themselves of information from others before being examined and were not obliged to undertake to make inquiries of others after the examination.
[50] Magnotta submits that the facts before Master Abrams differed significantly from those before Master McAffee as a result of which it was unfair to bind the parties to the McAffee Decision simply because they had not appealed it.
[51] In my view, this issue is a bit of a red herring. Whether the parties will be bound by a prior decision in the case turns on the specific facts of the situation. The bigger question is not whether the decision of Master McAffee applies because no one appealed it, but whether it applies because it is legally correct. I find that the McAfee decision is legally correct, as a result of which the Master did not err in applying it.
[52] It is generally accepted that a witness who appears pursuant to a summons under Rule 39.03 is only required to provide information that is within their personal knowledge. Unlike an examination for discovery, Rule 39.03 does not require witnesses to take steps to inform themselves of matters about which they have no personal knowledge, nor does it require them to undertake to make inquiries of others regarding such matters: Magnotta Winery Corporation v. The Alcohol and Gaming Commission of Ontario, 2016 ONSC 3174 at para. 9; George Forrest International Afrique S.P.R.L. v. Forsys Metals Corp., 2010 ONSC 5670, [2010] O.J. No. 4546 (S.C.J.) at paras 12, 28-29, Georgian Windpower Corp. v. Stelco Inc., [2007] O.J. No. 5762 (S.C.J.) at paras 4, 28; Romcan Ltd. v. Martini, [2018] O.J. No. 4088 (ONSC) at para 30.
[53] The policy reasons for this were set out in the McAffee Decision at para. 12-13:
[12] If Magnotta were permitted to require Ms. Klas and Mr. Hackbush to answer questions about which they have no personal knowledge, it would circumvent the well-established requirement that a Rule 39.03 witness must be in a position to offer relevant evidence. A witness is only in a position to offer relevant [evidence] for the purpose of Rule 39.03 when he or she has personal knowledge of the matters in issue. If the requirement could be met by virtue of the ability of the witness to inform himself or herself or make enquiries of others, anyone employed by or associated with a party could be summonsed for a Rule 39.03 examination even if they had no personal knowledge of the matters in issue and were unable to provide direct relevant evidence. This interpretation would unduly broaden the scope of Rule 39.03 examinations by compelling individuals who had no involvement in or knowledge of the events or matters in issue to make extensive efforts to inform themselves and make enquiries of others.
[13] It would also be contrary to the principle of proportionality to require Ms. Klas and Mr. Hackbush to engage in an exercise of informing themselves of the matters at issue on the main motions and making enquiries of others when Magnotta already has the opportunity to cross-examine affiants on their affidavits pursuant to Rule 39.02.
[54] Magnotta has advanced no policy reasons to show why these principles are incorrect.
[55] Magnotta argues that the McAfee Decision should not apply because the facts here are her “significantly different” in that: (1) there was no affidavit from a person with knowledge of the issues on the motion; and (2) few undertakings were sought.
[56] Magnotta’s argument that the Defendants’ affiant here was a person with no knowledge of the issues in the motion is of no moment. The LCBO filed an affidavit on behalf of the corporation. That affiant can be cross-examined and can be asked to give undertakings, make inquiries of others and produce relevant documents from the Corporation as a whole if necessary.
[57] Whether the number of undertakings in this case was larger, smaller or the same as in the McAfee Decision is irrelevant. The well-established legal principle that a Rule 39.03 witness is limited to testify about his or her personal knowledge and is not required to make inquiries of others is not based on the number of undertakings asked of the witness but on the principle that, in Ontario, an opposing party has the right to examine only one representative of a corporate party for discovery.
[58] A particular issue arises with respect to documents and rule 39.03 witnesses who are employees of a party. To what extent can such witnesses be compelled to bring documents to their examination? The conventional answer is that employees can be compelled to bring to the examination, documents in their “possession power or control.” What, however, does that mean where the witness is an employee of a corporate party? It cannot mean that the witness is obliged to conduct a search of corporate records. That would be imposing on a rule 39.03 witness, the obligations of a corporate litigant. It clearly does mean that the witness is obliged to bring with them documents that are purely personal to them and which do not belong to the corporation. The more difficult question is the extent to which the witness must bring documents that are property of the corporate litigant but that are in their “possession power or control” in the sense that the documents are kept in the witness’s workspace at the corporation, the documents were created by or worked on by the witness.
[59] In a case like this where there is an issue between the parties about the extent of their discovery obligations, it might be appropriate to require the witness to bring to the examination documents located in their personal office or in paper or electronic filing cabinets dedicated to the witness or to retrieve documents from corporate storage that the witness either created or worked with.
[60] I do not, however, have to answer that question. Nor did the Master. Both LCBO and AGCO have produced to the court, under seal, all documents in the possession, power or control of both corporations that were responsive to the requests contained in the summonses to witness. The documents were produced under seal because both LCBO and AGCO asserted privilege over them. Both the Master and I have reviewed those documents. As a result, on the facts before me the resolution of the issue really turns on the question of privilege and not on whether the parties should or should not be bound by the McAfee Decision.
[61] As set out later in these reasons, the documents are clearly privileged. They all reflect communications to or from a lawyer for the purpose of giving or seeking legal advice or advice about the current litigation.
(v) The Decision in Cimtel Inc. v. TSV Holdings Applies to Rule 39.03 Witnesses
[62] Magnotta submits that Master Abrams erred in law by holding in paragraph 15 of her reasons that Cimtel Inc. v. TSV Holdings Ltd. 2018 ONSC 894 was applicable to this case. Magnotta submits that this is erroneous because Cimtel did not involve Rule 39.03 but dealt with the obligations of corporate representatives on an examination for discovery.
[63] The Master did not “find” that Cimtel “applied” to this case as Magnotta asserts. She simply noted that Cimtel draws
“… a like distinction involving an examination for discovery -- with a corporate representative not being required to answer relevant and otherwise proper questions within his personal knowledge if he acquires that knowledge in a capacity other than as an officer or director of the Corporation.”
[64] In other words, she is merely pointing out that in other contexts Courts have based the ability to ask questions of the witness on the capacity in which the witness acquired the information.
(vi) Finding Litigation Privilege in Absence of, or Contrary to the Evidence
[65] Magnotta submits that the Master erred in law in paragraph 16 of her reasons by finding that litigation privilege applied to certain questions and documents.
[66] Magnotta submits that for litigation privilege to apply, the party claiming privilege “must provide a sufficient description of the documents, the circumstances of their creation and the dominant purpose therefore”: Kennedy v. McKenzie, 2005 CarswellOnt 2109, [2005] O.J. No. 2060 (Ont. S.C.J.), para. 23. Instead, Magnotta submits, the Master simply concluded that litigation privilege applied without addressing the evidence or the absence of evidence to find, as Magnotta puts it, “that the Tolling Agreement was executed when a reasonable contemplation of litigation existed.”
[67] In my view, the Master made no error in finding that privilege existed.
[68] There was existing litigation in which both the LCBO and the AGCO were defendants. The allegations against them were similar. They clearly had a common interest in resisting those allegations. The Tolling Agreement is a way of managing the existing litigation in which the LCBO and the AGCO we already embroiled.
[69] To the extent the Master required further evidence, the tolling agreement itself constitutes evidence and clearly articulates the desire of LCBO and AGCO to manage the existing litigation in a particular way. By way of example, it provides:
AND WHEREAS the Defendants are now amending their pro forma defences to file more detailed Amended Statements of Defence, but do not currently wish to assert any claims against each other at this time in their Amended Statements of Defence, with respect to the matters raised in or related to the Actions;
AND WHEREAS the Defendants each wish to continue to preserve their rights pursuant to the Limitations Act; 2002; S.O. 2002, c.24, Sched. B (the “Limitations Act”) and to continue to, toll the limitation period for asserting any such claims against each other and ensure that no such claim sought to be asserted by them becomes statute barred between August 6, 2010 (when the pro forma defences were filed) and the termination of this Agreement.
[70] Magnotta ignores the existing litigation and focuses on the likelihood of a cross claim arising between LCBO and AGCO to undercut the claim to common interest privilege. Magnotta says it is highly unlikely that one branch of government like the AGCO would sue another branch of government like the LCBO. In my view, Magnotta misses the point. The common interest privilege arises out of the fact the both parties are already caught up in litigation and want to manage that litigation in a particular way. The common interest arises by virtue of the existing litigation, not by virtue of the possibility of future litigation.
[71] The probability of a cross-claim may go to the bona fides of the Tolling Agreement but that is not the issue on the motions for which the Rule 39.03 witnesses were examined. The issue on the motions in respect of which the examinations occurred is whether the tolling agreement should have been disclosed earlier and whether LCBO has standing to make submissions on Magnotta’s summary judgment motion against AGCO.
[72] To the extent that the probability of cross-claims arising in the future is relevant, there was sufficient evidence before the Master of this to support a claim for litigation privilege and common interest privilege based on the possibility of a future claim over.
[73] Peggy Wyger, the LCBO’s former General Counsel testified during her Rule 39.03 examination that she was aware of previous instances in which provincial government agencies had entered into tolling agreements with each other. When asked about the purpose of the Tolling Agreement between LCBO and AGCO, she answered:
In case any issues arose through the course of litigation that may generate potential cross claims or claims against each other. This is going on for many, many years. That would be a prudent thing to do for all parties.
[74] Ms. Wyger’s reference to the length of time the litigation had been going on is salient. It has already been going on for 10 years. It is likely to go on for many more. During the past 10 years there has been a regular discussion about the possibility of privatizing the LCBO. If that occurred, the cross claim would not be between government agencies (which Magnotta thinks improbable) but between a private actor and a government agency. In my view, Ms. Wyger is correct. Given the length of time the litigation has taken, it would be “prudent” for all parties to reserve their rights in a Tolling Agreement.
[75] Common interest arises out of the existence of an underlying privilege being made out and provides a basis under which the otherwise privileged document can be shared with certain third parties without constituting a waiver of privilege: Barclays Bank PLC v. Metcalfe and Mansfield, 2010 ONSC 5519 at para. 8.
[76] The circumstances set out in paragraphs 68 to 75 above provided an ample basis on which the Master could conclude that the Tolling Agreement was entered into for the predominant purpose of reasonably contemplated (or more particularly, existing) litigation and provided an ample basis to find common interest privilege between LCBO and AGCO.
(vii) Finding No Waiver of Litigation Privilege
[77] Magnotta submits that disclosure of the Tolling Agreement waived privilege about the circumstances surrounding its formation, the initial decisions not to disclose it and the later decision to disclose it. Magnotta submits that the Master erred in failing to find that privilege had been waived.
[78] In my view, the Master made no error in this regard.
[79] The onus is on the party seeking to set privilege aside to justify the need to do so: Barclays, at para. 7.
[80] The most common underlying reason to set privilege aside is fairness.
[81] By way of example, if a party takes a position that is inconsistent with the assertion of privilege or where the disclosure of privileged information would reveal the falseness of the party’s position, privilege is set aside. Common examples include a party who asserts that it did something in reliance on legal advice but then refuses to disclose the advice or plaintiffs who purport to have relied on an oral representation but refuse to disclose whether they obtained legal advice on the ability to rely on oral representations.
[82] The claim of privilege does not arise out of any inconsistency in the positions taken by either LCBO or AGCO. Instead, it arises out of a position taken by Magnotta. Magnotta put the existence of a Tolling Agreement in question by specifically referring to it and the expiry of limitation periods. It was only in response to this that LCBO produced the Tolling Agreement. LCBO did so because it believed it was under an obligation to. That does not raise the same fairness concerns as those raised by a situation in which a party is taking a position in litigation which privileged documentation may reveal to be factually incorrect.
[83] Magnotta has not pointed me to any compelling grounds of fairness that it put to the Master to justify the disclosure of otherwise privileged information related to the creation of the Tolling Agreement or the decision to disclose it. Nor has Magnotta pointed me to any such fairness grounds beyond the bald assertion that disclosure was “deliberate and tactically done in order to advance LCBO’s position”
[84] I have also reviewed the documents filed under seal which LCBO and AGCO say are responsive to the refusals. I am completely satisfied that the documents are privileged, that disclosure of the Tolling Agreement in no way waives privilege over the documents and that no possible unfairness arises to Magnotta in the court declining to waive privilege over the documents.
(viii) Finding that Common Interest Privilege Exists in the Absence of Establishing Litigation or Solicitor-Client Privilege
[85] Common interest is not a separate class of privilege. Rather, it operates to protect privilege from waiver. Therefore, an underlying privilege must exist: Trillium Motor World v. General Motors, 2014 ONSC 4894, para. 14.[^1]
[86] Magnotta submits that the Master found common interest privilege as a standalone privilege in the absence of finding that there was litigation or solicitor client privilege. I disagree.
[87] It is clear from the face of the Tolling Agreement that it is subject to litigation privilege. The whole purpose of entering it was to address the manner in which existing litigation was to be managed. It is equally clear from a review of the documents that are responsive to Magnotta’s request that they are subject to both litigation privilege and to solicitor-client privilege. The Master found standalone litigation privilege and solicitor client privilege. She refers to both on numerous occasions in her reasons.
(ix) Common Interest Privilege Determined by Facts
[88] Magnotta submits that it is the reason for the creation of a document or the exchange of documents that determines whether common interest privilege arises, not the document itself. As a result, Magnotta submits that the Master erred by finding common interest privilege based on a review of the Tolling Agreement and in the absence of an affidavit or other evidence that explains why the Tolling Agreement was entered into.
[89] Magnotta cites Sable Offshore Energy Project v. Ameron International Corporation, 2015 NSCA 8 in support of this proposition. In Sable, the Nova Scotia Court of Appeal stated at para. 68:
The chambers judge’s requirement that the privilege be founded in the content of the document itself, would in some instances, create an injustice. Although shared documents may very well reference a joint position against a common adversary, such is not a determining factor to finding a common interest privilege. Rather, the law, properly applied, would require the party claiming common interest privilege to establish that the document was shared for the clear intent of pursuing a common adversary. It is the reason the document is exchanged which should be determinative as to whether a common interest privilege arises, not its particular contents.
[90] The court is not saying there that common interest privilege cannot be established by looking a document. It is saying that requiring the privilege to be founded on the document alone would, in some cases, create an injustice. In, Sable the court was speaking about a situation in which parties exchanged documents with each other. A simple review of those documents would make it difficult to determine whether common interest privilege existed. As a result, the court required evidence about the reason for the exchange of documents. That makes good sense. The reason for the exchange may not be self-evident on the face of the document.
[91] Here, however, we are dealing with the creation of a document the sole purpose of which is to have two parties to existing litigation agree on how to manage a key aspect of the litigation. The reason for the document is self-evident on its face. In those circumstances, to call for an affidavit that explains why a tolling agreement was entered into would put form over substance. That said, as noted in paragraphs 69-74 above, the Master had an evidentiary basis for which to find common interest privilege.
[92] Under this heading of error, Magnotta also submits that privilege over documents associated with the Tolling Agreement was waived because “the Defendants’ claimed relationship may have broken down given the LCBO’s unilateral disclosure of the Tolling Agreement.”
[93] An opposing party’s bald assertion that the relationship between the parties claiming common interest privilege “may have broken down” cannot, without much more, be a basis on which to dissolve common interest privilege.
[94] Magnotta complains that it was prevented from examining this alleged breakdown by a number of refusals during the examination. Magnotta misses the point. The easiest way to determine whether there was an alleged breakdown was to look at whether the parties mounted cross-claims against each other. There have been no such cross-claims.
[95] The questions Magnotta asked and was refused answers to during the examinations all went to exploring potential unhappiness by AGCO about the disclosure. Common interest privilege does not require that the parties be in complete agreement on each and every issue in the litigation, but merely that there is a degree of common interest to pursue.
[96] The cases on which Magnotta relies for the proposition that common interest privilege can be lost by conduct of the parties are factually distinguishable. In Jetport v. Global Aerospace, 2013 ONSC 235, for example, the party who refused production on the basis of common interest privilege had in fact brought an action against the party with whom it claimed common interest privilege. In Supercom of California Ltd. v. Sovereign General Insurance Co., 1998 CanLII 14645 (ON SC), [1998] O.J. No. 711, (Ont. C.J. [Gen. Div.]) The document at issue was an investigative document prepared by an insurer. The insurer had produced the document to the Insurance Crime Prevention Bureau. The insurer submitted that there was common interest privilege between itself, the Bureau and all other insurer members of the Bureau in reducing crime and fraud. The court rejected this argument at para. 40 saying:
The ICPB is requesting a very broad extension of the principles of common interest privilege. They suggest that the ICPB and all member insurers be embraced as a group sharing a common interest, entitled to the benefits of common interest privilege. I accept on one hand that insurance fraud is a serious social problem that adversely affects the public. There are plaintiffs that abuse and attempt to deceive for advantage. So too the reality is that the insurance industry is big business with the overriding objective of making a profit. Unfortunately, all too often that profit is at the expense of a deserving plaintiff that does not have the tenacity or the resources to litigate when their claim has been denied. Abuse exists on both sides of the equation. The issue is not whether the ICPB is entitled to conduct their activities to protect their members. The issue is whether in the context of litigation, as a consequence of the pooling of information, the plaintiff is entitled to production of investigative documents submitted to the ICPB in relation to their claim.
[97] In other words, the court had a fairness concern. Having reviewed the documents at issue here, I am completely satisfied that there is no fairness concern that applies.
(xi) Ignoring Relief Sought in the Notice of Motion
[98] Magnotta submits that the Master ignored the relief for production of a further and better affidavit of documents that Magnotta sought in its notice of motion by stating at paragraph 22 of her reasons that:
“in respect of the documentary lacunae that the plaintiffs say exist, I agree that…the proper procedure is to bring a motion for an Order compelling the [Defendants] to produce a further and better affidavit of documents.”
[99] Magnotta reads this passage out of context. The Master is not making this statement in ignorance of the fact that Magnotta seeks production of a further and better affidavit of documents. The full context of the passage quoted is that the Master is quoting from Mr. Major’s counsel to the effect that, if Magnotta believed documents were missing from the productions, they should have moved for a further and better affidavit of documents before examining Rule 39 witnesses rather than asking Rule 39 witnesses to supplement the allegedly deficient productions of the LCBO or the AGCO. Given that both the Master and I have reviewed the documents and concluded they were privileged, no further or better affidavit of documents is required.
(xii) Directions Were Warranted
[100] Magnotta submits that counsel improperly interfered with its examination and that the Master erred by refusing to give directions for the continued examination.
[101] Rule 34.14 (2) provides that the “court may order” directions. The rule is discretionary as a result of which the Master’s rulings are entitled to deference absent an error in principle.
[102] The Master made no error in principle. She referred to the same tests in paragraph 23 of her reasons that Magnotta refers to in its factum before me. The Master then applied those principles and explained why, on the basis of those principles, she did not feel directions were appropriate. That does not amount to an error in principle. It is simply that Magnotta does not agree with the way in which the Master applied the principles.
[103] I would, in any event, have come to the same decision the Master did. The majority of the questions Magnotta posed are protected by privilege and/or were irrelevant. The Master ordered a small number of questions to be answered. Those questions are focused and call for short answers. She also called for those questions to be answered in writing as a result of which directions would not be necessary even if the Master had thought directions would have been necessary on an oral examination.
(xiii) Counsel Need Not State an Examination is “Adjourned” to Obtain Directions
[104] Magnotta submits that the Master erred in paragraph 24 of her reasons by requiring that an examination had to be adjourned to obtain directions before directions could be sought.
[105] The paragraph in respect of which Magnotta appeals states:
Further, and as counsel for the LCBO has pointed out, no adjournment of any examination so that directions might be sought was requested by the plaintiffs (counsel for the plaintiffs’ frustration notwithstanding), with there being a reservation of rights only in respect of Mr. Majors’s examination as related to documents not brought to the examination. (Emphasis added)
[106] I read that as the Master referring to an additional point raised by one of the respondents, not as establishing a mandatory precondition that Magnotta has failed to meet. The issue is in any event subsumed by my findings on appeal ground (xii) where I find that the Master applied the applicable test and that I would have applied the relevant test in the same manner and reached the same conclusion.
(xiv) Witnesses May Not Answer Questions in Writing at Their Request and Against Objection of Examining Party
[107] Magnotta submits that the Master erred by allowing 39.03 witnesses to provide answers in writing because the rules provide for written answers to questions on examination for discovery but do not make similar provisions for answers on a rule 39.03 examination.
[108] The Master committed no error in this regard.
[109] The Master found in paragraph 25 of her reasons that questions could be answered in writing based on the principle of proportionality. In doing so she cited from an earlier endorsement of Myers J. in this proceeding in which he expressed concern that the refusals motion was “being expanded to a disproportionate, inefficient, massive exercise as has typified these proceedings to date.” She then stated that proportionality dictates that the answers be provided in writing.
[110] I wholeheartedly agree.
[111] Rule 1.04 mandates that the Rules of Civil Procedure be “liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.” This and the proportionality principle inform the interpretation of all rules.
[112] Moreover, Rule 34.15 provides sanctions for among other things, the refusal to answer proper questions on examinations, including rule 39.03 examinations. The rule is discretionary. In addition to allowing the court to order the witness to re-attend, a pleading to be struck out or evidence to be struck out, it also allows the court to “make such other order as is just.” That would include requiring written answers.
[113] The questions the Master ordered answered are narrow and focused. They call for specific answers, often in the form of a simple yes or no. Calling for written answers in those circumstances poses no prejudice to the examining party. The analysis may be different if the questions were ones that called for more expansive explanations of circumstances or the reasons for which a party or witness engaged in certain conduct. In those circumstances, an examining party may be prejudiced by having answers in writing because a witness would have more time to analyse how the answer impacts their position in the litigation, removes the element of surprise, allows for those other than witnesses to have an input into the answer and because the examiner would be deprived of the ability to ask follow-up questions on the spot: Botiuk v. Campbell et al., 2011 ONSC 1632, para. 44-48.
[114] In some cases, the Master ordered that answers to questions be limited to a yes or no. Magnotta objects to this limitation.
[115] The Master accorded Magnotta a fairly broad range of permissible questions. By way of example, the Master ordered the witnesses to answer questions like: “Were there oral communications directly between AGCO and LCBO about the need for a Tolling Agreement?” She then limited the answer to a yes or no.
[116] The answers to questions like that do not, strictly speaking, relate to the issues on the motion namely: (i) the ability of the LCBO to file a factum in Magnotta’s summary judgment motion against the AGCO; (ii) whether the Tolling Agreement should have been disclosed sooner than it was; and (iii) if so, what sanction that should be imposed for the failure to make timely disclosure.
[117] Having already granted Magnotta leeway to go beyond what was strictly relevant to the motion, the Master made no error in limiting the scope of answers to those questions.
[118] For the reasons set out above I dismiss the appeal.
[119] Any respondent who seeks costs may make written submissions within two weeks of the issuance of these reasons. The appellant will have one week to respond. The respondents will have three days to reply.
Koehnen J.
Released: January 28, 2020
COURT FILE NO.: CV-08-00361217-0000
DATE: 20200128
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
MAGNOTTA WINERY CORPORATION, MAGNOTTA VINTNERS LTD., MAGNOTTA VINEYARDS LTD., MAGNOTTA WINES LTD., MAGNOTTA WINERY ESTATES LTD., and MAGNOTTA CELLARS CORPORATION
Appellants/Plaintiffs
– and –
THE ALCOHOL AND GAMING COMMISSION OF ONTARIO, THE LIQUOR CONTROL BOARD OF ONTARIO and HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO
Respondents/Defendants
REASONS FOR JUDGMENT
Koehnen J.
Released: January 28, 2020
[^1]: An exception to this general rule exists for common interest privilege as it arises in commercial transactions. That exception is not relevant here.