COURT FILE NO.: CV- 16-545443
MOTION HEARD: 20201124
ENDORSEMENT RELEASED: 20210325
B E T W E E N:
McMILLAN McGEE CORP.
Plaintiff
-and-
NORTHROP GRUMMAN CANADA (2004) INC., NORTHROP GRUMMAN CORPORATION and NORTHROP GRUMMAN SYSTEMS CORPORATION
Defendants
BEFORE: Master D. E. Short
COUNSEL: Kevin Richard Fax: 416-203-4485
for the plaintiff skelly@parlee.com
David R. Elliott Fax: (613) 783-9690
for the Defendants/Respondents david.elliott@dentons.com
HEARD: November 24, 2020
RELEASED: March 25, 2021
REasons for Decision
I. Preamble
“In July 1899, a Buffalo, New York inventor named Jesse Kester received U.S. Patent 628541 for "self-fluxing solder", wire and bar solder which contained its own flux. He started the Kester Electric Manufacturing Company the same year, renaming it the Chicago Solder Company in 1905. In the early days, the company hand-delivered solder to the Ford Motor Company. His solder eventually enabled the mass production of radios, TVs and telephones, with Chicago-based companies like Motorola and Zenith benefitting from the Kester invention. In 1929, the company was renamed Kester Solder. Two years later, they opened a manufacturing facility in Brantford, Ontario. Kester operated independently for nearly 40 years until its
acquisition by Litton Industries in April 1967. The Brantford facility continued under Litton control.
In 2001, Litton was purchased by Northrop Grumann, and Kester was spun off three years later to American Capital Strategies Ltd., which paid $60 million for the company. In 2006, Kester was acquired by Illinois Tool Works (ITW) for an undisclosed amount.”
“We used to make things in this country:
#14: Kester Solder Company of Canada, Limited,
Brantford, Ontario”
[1] Ironically, my ability to find this capsule relating to the property that is the subject matter was facilitated by Mr. Kester’s discovery of solder, and its manufacture in Brantford, over the past ninety years.
[2] The electronic age apparently contributed to the creation of Volatile Organic Compounds “VOC’s” which a Health Canada web site notes:
“Long-term exposure to high levels of some VOCs, however, may result in health effects.
For example, in industrial workers, exposure to high levels of some VOCs has been linked with increased cancer rates. These VOCs include:
benzene
formaldehyde ”
[3] Against this brief background, I turn to the nature of the dispute between the present parties.
II. Background
[4] The Plaintiff, McMillan McGee Corp. (“Mc2”), commenced this action on January 28, 2016 for unpaid thermal remediation services provided by Mc2 at the Former Kester Brantford Facility located at 68 Prince Charles Road in Brantford, Ontario (the “Site”).
[5] Mc2 sent information to ERM as requested by Northrop on several occasions, both by email and over the phone throughout September and October 2014. On October 22, 2014, Mr. Winder of Mc2 asked Mr. Batsel for an update and was informed that Northrop was just waiting for the ERM report and then would get back to Mc2 with their position. Again, there was no mention that this information was going to be privileged, or not shared with Mc2. In fact, at no time prior to litigation did Northrop ever advise Mc2 that the work being sought from ERM was going to be privileged.
[6] Through an invitation to tender in 2010, the Respondents Northrop Grumman Canada (2004) Inc., Northrop Grumman Corporation and Northrop Grumman Systems Corporation (collectively, “Northrop” or the “Respondent”) hired Mc2 to perform remediation of a certain property (the “Project”) located in Brantford, Ontario (the “Site”).
[7] Per Northrop’s request for proposal for the Project and the scope of work contained therein (the “Contract”), Mc2 was to design, construct and operate a soil heating system to reduce the amount of volatile organic compounds (“VOCs”) in the groundwater at a designated area of the Site. In 2011, Northrop expanded the designated area for remediation on the Site and agreed on further compensation to Mc2 to cover the cost of the expanded work.
[8] During the course of the litigation, the Northrop Defendants claimed privilege over a number of documents, some of which were inadvertently produced and subsequently withdrawn from production during examinations for discovery, and others which were not produced (the “Disputed Documents”). Apparently, these documents were created during the course of the work being done by Mc2, and more than a year before this litigation was commenced.
[9] Mc2 does not accept that the Disputed Documents are privileged and has brought this motion to compel their production.
III. The Project
[10] Mc2 was retained by Northrop to reduce the level of Volatile Organic Compounds (“VOCs”) using its thermal remediation technology within the specified thermal remediation treatment zone to 1000 micrograms per litre (the “Target Concentration”). The parties appear to be in agreement that Mc2 originally achieved the Target Concentration in September 2013.
[11] However, the Contract required that the Target Concentration had to be maintained for six months after it had been achieved. At the request of Northrop, however, Mc2 continued to operate its thermal remediation procedures after the Target Concentration had been met, thus continuing to heat the ground and pull VOC’s out of the ground (the “Extended Operations Period”).
[12] During the Extended Operations Period, in early 2014, a rebounding effect occurred whereby some of the concentrations of VOCs increased to above the Target Concentration. The parties disagreed about the cause of this rebounding effect.
[13] The plaintiff asserts that on September 15, 2014, in a phone call with Kurt Batsel, the project manager for Northrop, he advised Mc2 that he had reached out to Environmental Resources Management (“ERM”), another geotechnical consultant, in order to get another set of eyes on the project to better understand the cause of the rebounding effect.
[14] Mr. Batsel asked Mc2 to provide information directly to ERM. The plaintiff asserts that Mr. Batsel did not tell Mc2 that ERM was being hired at the direction of counsel or that the results of ERM’s investigation would be privileged. Mr. Batsel did not limit in any way the information that Mc2 sent to ERM.
[15] In this regard the Defendants’ factum points out, in part, (with references omitted), that:
“6. Conestoga-Rovers & Associates (“CRA”) was Northrop’s Environmental Consultant with respect to the Project.
CRA determined that Mc2 failed to achieve the Remediation Goal throughout the 6-month cool-down period that occurred between January and March 2014 [sic].
Accordingly, on June 18, 2014, Northrop advised Mc2 that it would not release further payment for the Project and that the parties would need to agree on a plan to achieve the Remediation Goal.
Mc2 emailed CRA on June 19, 2014 stating that sampling may be required on the exterior/perimeter of the remediation area to determine if there was another source of VOCs causing the increased level above the Remediation Goal. Mc2 also advised that it was preparing a memo about this issue. When CRA requested a call to be scheduled two weeks following receipt of the memo, Mc2 stated that it would like a call as soon as possible and it could not wait another 2 weeks given the circumstances.
As of June 19, 2020, Northrop’s Project Manager, Kurt Batsel (“Batsel”), believed that Mc2 was attempting to shift responsibility for not having met the Remediation Goal during the 6- month cool-down period and that it may not agree to resume operations per the Contract.”
[16] The Northrop factum continues:
- On August 29, 2014, despite Mc2 having not maintained the Remediation Goal, Brent Winder of Mc2 (“Winder”) emailed Batsel demanding payment from Northrop and requesting a meeting with Northrop’s Corporate Director of Environmental Remediation, Joe Kwan. In his email, Winder stated:
“…there are some elements outside our control that will make it very difficult to achieve all of the remedial goals across the site. Compounding this issue is the fact that we have not been paid since December 2013 for work on this project – and this invoice was sent in April of 2013. In essence, we have not been paid for nearly 18 months’ worth of work now but have continued to operate in good faith. This simply cannot go on.”
At this point, Batsel determined that litigation was likely between the parties and he alerted Northrop’s in-house legal counsel of the dispute on September 2, 2014 and, on that day, a conference call was scheduled with legal counsel on September 5, 2014 with respect to the dispute.
On September 3, 2014, Batsel emailed Winder to advise that the Remediation Goal had not been met and maintained through the 6-month cool-down Period and that amounts invoiced by Mc2 would not be paid until Mc2 achieved the contractual performance criteria.
On September 16, 2014, at the direction of Northrop’s in-house legal counsel, Northrop retained ERM to evaluate Mc2’s operations at the Site for purposes of providing information to be used by Northrop’s in-house counsel to provide legal advice concerning Mc2’s anticipated claim.
At that time, Batsel advised Mc2 that Northrop had retained ERM to review and assess the work done at the Site and requested that Mc2 provide data to ERM.
[17] Mc2 asserts that it sent information to ERM as requested by Northrop on several occasions, both by email and over the phone throughout September and October 2014. On October 22, 2014. Their evidence is that:
“Mr. Winder of Mc2 asked Mr. Batsel for an update and was informed that Northrop was just waiting for the ERM report and then would get back to Mc2 with their position. Again, there was no mention that this information was going to be privileged, or not shared with Mc2. In fact, at no time prior to litigation did Northrop ever advise Mc2 that the work being sought from ERM was going to be privileged.”
[18] Apparently, on his cross-examination on an affidavit prepared with respect to this motion, Mr. Batsel gave evidence that he was the person who developed the scope of work with ERM; not in-house counsel. The plaintiff asserts:
“Mr. Batsel gave an undertaking during cross-examination to provide any communications with ERM whereby the scope of work was developed. In response, Mr. Batsel provided a number of emails with ERM as well as a Short Form Proposal. All of the emails are between Mr. Batsel and ERM; in-house counsel is not copied or involved. The Short Form Proposal is signed by Joe Kwan of Northrop, who is also not in-house counsel. None of the emails are marked as privileged or in contemplation of litigation and there is nothing to indicate that the work is considered privileged or is being requested by in-house counsel.
[19] The Plaintiff asserts that the emails from ERM demonstrate that ERM was asked to determine whether the system operated as it should and if there was evidence of outside contamination. The Short Form Proposal indicates that ERM’s scope of work included preparing a short memo summarizing its operational findings and providing recommendations for a path forward.
[20] Apparently, no report from ERM has been produced in this Action. There were various other pieces of correspondence involving ERM that were apparently inadvertently produced by Northrop in this Action, however, counsel for Northrop informed Mc2’s counsel during Questioning in January 2018, that they were taking the position that this documentation was also privileged.
[21] In October 2014, Northrop also retained Geosyntec to review the project and provide input into the potential source(s) of the rebounding effect. Mr. Batsel and Mr. Winder spoke by phone on November 5, 2014 and Mr. Batsel informed Mr. Winder that Northrop had retained Geosyntec in addition to ERM. Counsel asserts in this regard: “Again, Mr. Batsel did not indicate that this work was considered privileged.”
[22] Mr. Batsel indicated at his cross-examination that it was either him or the project manager, Conestoga-Rovers & Associates, who worked with Geosyntec to develop the scope of work.
[23] Mr. Batsel gave an undertaking to produce any communications with Geosyntec relating to Geosyntec’s scope of work. He provided one chain of emails regarding the scope of work (although failed to provide the proposal referred to within the email). Apparently, the email chain is between Mr. Batsel and Evan Cox of Geosyntec; in-house counsel is not involved or copied. “None of the emails are marked as privileged or in contemplation of litigation and there is nothing to indicate that the work is considered privileged or is being requested by in house counsel.”
[24] The Northrop factum further asserts:
Between September and October 2014, ERM and Geosyntec corresponded with Northrop by email with respect to their analysis of Mc2’s remediation work at the Site. While some of these emails and documents contained simply facts and data, others contained ERM and Geosyntec’s analysis, opinions and conclusions. The emails and/or documents provided to ERM and Geosyntec containing only facts and data have been disclosed to Mc2 by way productions and responses to undertakings. Emails containing opinions and conclusions of ERM and Geosyntec are listed in Schedule B of Northrop’s Affidavit of Documents protected by a claim of litigation privilege.
On November 5, 2014, Batsel informed Winder that the ERM report was not helpful or definitive and that a report has also been produced by Geosyntec (the “Reports”) and did not disclose to him the contents or findings of either report.
It was always Batsel’s understanding that the Reports were to be covered by privilege and he never disclosed the contents of the Reports to anyone at Mc2 or any other third party. Batsel never told Mc2 that it would receive a copy of the Reports.
On January 28, 2016, Mc2 filed the within action against Northrop claiming damages on the basis that Northrop withheld payment due to the VOC levels not being maintained at the required Remediation Goal on the Site. The facts and claims in the within action are the exact facts and claims that formed the basis of the litigation contemplated by Northrop when it retained ERM and Geosyntec.
On August 1, 2019, counsel for Mc2 wrote to Northrop’s external legal counsel demanding the ERM and Geosyntec Reports and related documents, alleging that “There was no indication that ERM’s work was being done at the direction of legal counsel or that the work was going to be considered privileged.”
[25] Northrop has filed a Counterclaim for costs that it says it incurred as a result of Mc2 allegedly not meeting the contractual goals, which include costs from ERM and Geosyntec. In discoveries in January 2018, Mr. Batsel gave an undertaking to provide a breakdown of these costs. His undertaking responses were put to him in cross-examination and marked as exhibits.
[26] Mr. Batsel was asked by way of undertaking to provide the invoices from ERM and Geosyntec that made up the Counterclaim. Counsel assets that “It is clear from the dates of these invoices that the costs from ERM and Geosyntec for their work in the fall of 2014 that is the subject of this application constitute part of Northrop’s Counterclaim.
[27] Mc2 continued to work at the Site until November 2015, more than a year after the work was requisitioned from ERM and Geosyntec. The Statement of Claim was filed in January 2016.
IV. Issues on Motion
[28] The Plaintiff-Applicant McMillan McGee Corp (“Mc2” or the “Applicant”) has brought this motion seeking orders for the production of:
(a) All data collected by Environmental Resources Management (“ERM”) and Geosyntec Consulting Inc. (“Geosyntec”) during July 2014 and December 2014 in any way related to the Claim or Counterclaim;
(b) All correspondence between the Respondents and ERM or Geosyntec during July 2014 and December 2014 in any way related to the Claim or Counterclaim; and
(c) Any reports delivered by ERM or Geosyntec to the Respondents during July 2014 or December 2014 in any way related to the Claim or Counterclaim.
[29] The issues on this motion from the plaintiff’s perspective are as follows:
(a) Are the documents involving ERM privileged, including results of any investigation done by or directed by ERM, correspondence between ERM and Northrop and any reports generated by ERM?
(b) Was privilege over any or all of these documents waived when Northrop asked Mc2 to correspond directly with ERM?
(c) Was privilege waived when Northrop claimed these costs for ERM’s work as part of its Counterclaim?
(d) Are the documents involving Geosyntec privileged including results of any investigation done by or directed by Geosyntec, correspondence between Geosyntec and Northrop and any reports generated by Geosyntec?
(e) Was privileged waived when Northrop claimed these costs for Geosyntec’s work as part of its Counterclaim?
[30] Conversely the Defendants submit that this motion should be dismissed on the basis that:
(a) Expert findings, opinions and conclusions created for the purpose of contemplated litigation are not subject to production unless the expert is being called, or their report is otherwise being relied upon at trial by the retaining party;
(b) The Applicant has already been provided, or has access to, all data collected by ERM and Geosyntec during July 2014 and December 2014;
(c) The correspondence between the Respondents, and ERM and Geosyntec that has not been disclosed was created for the purpose of contemplated litigation and contains expert findings and opinions, which are not being relied on by the Respondents at trial;
(d) The reports delivered to the Respondents by ERM on October 22, 2014 and by Geosyntec on October 29, 2014 were created for the purpose of contemplated litigation and contain expert findings and opinions, which are not being relied on by the Respondents at trial.
(e) Northrop has taken no action that constitutes waiver of privilege over the ERM and Geosyntec reports.
V. Discussion of Submissions
(a) Test for establishing litigation privilege
[31] The purpose for litigation privilege, as stated by the Supreme Court of Canada, Blank v Canada (Minister of Justice), 2006 SCC 39 at paragraph 27, is to ensure the efficacy of the adversarial process, as opposed to the protection of the solicitor-client relationship as is the case with solicitor-client privilege.
[32] Litigation privilege provides protection to communications between a lawyer and client as well as a lawyer and third parties in situations where the parties are preparing for litigation. Litigation privilege arises when:
a. litigation has been commenced or is anticipated, and
b. the communication was created with the dominant purpose of use in, or advice on, the litigation. [see Blank at paragraphs 27 & 60]
[33] I am particularly guided in this case by the Court of Appeal of Alberta’s decision in Canadian Natural Resources Limited v ShawCor Ltd., 2014 ABCA 289 (at para.82 &83). There court noted that the test for litigation privilege is whether the "dominant purpose" for the creation of the document or communication was contemplated (or pending) litigation.
[34] Almost 25 years ago the Alberta Appeal Court held specifically that it is not enough that litigation be one of several purposes for which the record or communication was created; litigation must be the dominant purpose for the document's creation. [see Moseley v Spray Lakes Saw Mills, 1980 Ltd., 1996 ABCA 141, at paragraph 24).
[35] In determining whether litigation was in reasonable prospect when a document was created, courts are far less interested in what the person creating the document thought, than what the circumstances demonstrate. In Hamalainen (Committee of) v. Sippola, the BC Appellate Court stated that the test will be met “when a reasonable person, possessed of all pertinent information including that peculiar to one party or the other, would conclude it is unlikely that the claim for loss will be resolved without [litigation]”.[see Hamalainen (Committee of) v. Sippola, (BCCA), 1991 440 (BC CA), [1991] B.C.J. No. 3614, [1992] 2 W.W.R. 132, at paragraph [22]](https://www.canlii.org/en/bc/bcca/doc/1991/1991canlii440/1991canlii440.html)]
[36] In Spenst v. Reemeyer, the BC Supreme Court considered whether two reports created by an ICBC claims adjuster could be protected under litigation privilege. Although the adjuster argued that she thought that litigation was imminent at the time she created the two reports, the Court disagreed. The Court examined the circumstances and found that not only had no court action been commenced, but ICBC had not even taken a position on liability.
[37] There the Court held that the two reports were not protected by litigation privilege and had to be produced for the opposition as the Court stated “the mere arbitrary assertion that this file is likely to go to litigation because this adjuster handles only litigation files and she had decided it would go to litigation is not objectively defensible on the evidence before me” [see Spenst v. Reemeyer, 2013 BCSC 1394 at paragraph 17.
[38] Further, in Merritt v. Imasco Enterprises Inc., the defendant created various documents and communications relating to suggestions that its withdrawal of $42 million in surplus funds from a pension plan may have been improper. Although the court found that the possibility of litigation was always present as a consequence of the withdrawal, the documents had not been created for the dominant purpose of contemplated litigation. Despite the court accepting that litigation was in reasonable prospect, the evidence indicated that the documents and communications were not prepared for the dominant purpose of litigation and privilege could not be maintained. [See Merritt v. Imasco Enterprises Inc., (BCSC), [1992] B.C.J. No. 2319, 1992 1369, at paragraphs [15-20]](https://www.canlii.org/en/bc/bcsc/doc/1992/1992canlii1369/1992canlii1369.html)]
(b) Litigation was not contemplated at the time that the ERM documents were created
[39] Mr. Batsel has stated in his Affidavit that he contacted Northrop’s in-house counsel in June 2014, after receiving an email from Brent Winder of Mc2 regarding a possible source of contamination outside of the treatment zone, which could be causing the rebounding effect. Mr. Batsel stated in his Affidavit that “it was clear that Mc2 was attempting to shift responsibility to other factors unrelated to the criteria requirements under the contract”. When questioned on this paragraph and whether a mass outside of the treatment zone would affect the performance criteria, as Mc2 had alleged in its email which led Mr. Batsel to contact in-house counsel, Northrop’s counsel refused to let Mr. Batsel answer the question.
[40] We are dealing with reports by experts in this very specific and narrow field. An unexpected fresh contamination arose after the initial clean-up had been declared complete. No one has provided any evidence that either party had threatened a lawsuit. Rather, it appears to me that a joint co-operative effort to cure a real time problem, was the central purpose for bringing in “fresh minds”.
[41] Notably, the June 19, 2014 email from Mr. Winder says nothing about litigation; it merely says that Mc2 would like to have a call to discuss a path forward as soon as possible and that waiting another two weeks did not work, given the circumstances. Mr. Batsel further indicates in his Affidavit that he was instructed to continue to work with Mc2 to find a solution to achieve the Remediation Goal. Similarly, to the case of Spenst, there was no position taken by either side in the June 29, 2014 email that would lead a reasonable person to expect that litigation was even being contemplated, let alone imminent.
[42] In correspondence from Northrop to Mc2 on September 14, 2014, Mr. Batsel indicates that he had contacted ERM to provide an evaluation of the project. Mr. Batsel confirmed under cross-examination that Northrop had retained ERM because Mc2 had put forth a number of theories as to why the rebounding effect had occurred and Northrop and Mc2 both wanted to get another set of eyes on the project. Again, no parties were taking a position at that point in time. I see some logic if the plaintiff’s submission that: “they were simply conducting further investigations as a means of trying to find a path forward.”
[43] Mr. Batsel was the person who developed the scope of work with ERM, not in-house counsel. The Short-form Proposal from Northrop to ERM confirms that ERM was to provide a memo on its findings and recommendations for a path forward. I see no indication in any of the communications that the work that they are doing was privileged or in contemplation of litigation.
[44] I agree with the Plaintiff’s submission that “On an objective test”, it is not reasonable to expect that litigation would be considered imminent simply from a comment from one party requesting a phone conference and indicating that the current situation could not continue. At that point, the parties were still working together trying to determine the cause of the rebounding effect. I am not convinced that such a conversation would be sufficient to give rise to a contemplation of litigation to a reasonable person, particularly when the work continued on the Site for another 15 months.
[45] Moreover, it appears that Mr. Batsel admitted in his correspondence to his superior and in-house counsel that if there was an outside source of contamination, this would be a reason to consider further payments to Mc2 under the Contract.
[46] By the time that Mc2 was advised that this information was considered privileged, which was well into the litigation, it was too late for Mc2 to retain its own expert to review whether there was an outside mass a year before.
(c) Has any privilege been waived by Northrup’s actions
[47] I am also troubled by the decision of the defendants to not make the independent research reports available to the court. The desire to “deep six” the findings made by the independent agencies and then to seek to recover the costs of those findings suggests they may not have been helpful to the defendants’ case.
[48] Rule 1.04 directs that I am to consider the overall circumstances of civil cases:
General Principle
1.04 (1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.
Proportionality
(1.1) In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.
[49] In my view, the just and most expeditious route to determine this litigation, on the merits, is to make available equally to both, all the findings of the independent experts who were consulted prior the commencement of this action. The plaintiff sought to be paid an appropriate amount for the work performed by its forces. The contract should govern the extent of entitlement and be interpreted based all available, contemporary, information.
[50] If there is doubt in the correctness of my coming to this conclusion and if there was an initial right to privilege on the basis facts, I feel that there is further support in the plaintiff’s additional submission:
“If privilege is found to exist, then Northrop implicitly waived this privilege through its actions of requesting Mc2’s insight into the preparation of the ERM Report by directing that Mc2 correspond directly with ERM.”
[51] Implied waiver refers to a situation where a party does not explicitly waive the privilege, but takes some action that is inconsistent with maintaining the privilege. In these circumstances, “fairness and consistency” require that waiver be implied. This concept of implied waiver is open-ended and there are various circumstances that may constitute implied waiver. The Courts will perform a fact-based inquiry in order to determine whether privilege was implicitly waived based on an objective inquiry and will consider whether allowing privilege to continue is in accordance with the principles of fairness and consistency. [see S & K Processors Ltd. v Campbell Avenue Herring Producers Ltd., (BCSC), 1983 407 (BC SC), [1983] BCJ No 1499, [1983] 4 W.W.R. 762, at paragraph 6}
[52] In Solicitor-Client Privilege, Adam M. Dodek in his “distinctly Canadian law textbook” analyses the exceptions to privilege, conditions where privilege is unclear, and situations of competing interests that might bring into question the application of privilege.
[53] In that work (at pages 227-229) the author observes that Canadian Courts have applied multiple tests for implied waiver, which has led to inconsistent and unpredictable results. Despite the unpredictability, Mr. Dodek has stated that the best way to understand implied waiver is to identify three key principles:
a) The voluntary disclosure by the privilege holder that they sought or received legal advice;
b) An outstanding issue between the parties; and
c) An attempt by the privilege holder to rely on that legal advice in order to justify a particular course of action.
[54] Once the foregoing principles are established, Dodek states that the Court will have discretion to determine whether implied waiver has occurred. In exercising this discretion, the Court should have recourse to fairness and consistency.
[55] In the case of Do Process LP, the court purported to summarize the law regarding implied waiver with respect to privilege as follows:
• The foregoing passages are settled law and have been applied in numerous cases. These were reviewed recently in Brown v. Clark Wilson LLP 2014 BCCA 185 at paras. 23–32. As we summarized the principle on that occasion, a court will deem privilege to be waived where a litigant “voluntarily takes a position in litigation that is inconsistent with the maintenance of the privilege” (see Halsbury’s Laws of Canada (1st ed., 2010) at HEV 178) or makes legal assertions that “make it unfair for the holder of the privilege to retain the benefit of the privilege.” (citations removed). [Do Process LP v. Infokey Software Inc.,2015 BCCA 52}
[56] I see merit in the Plaintiff’s submission that Northrop’s actions are inconsistent with maintaining privilege over the Disputed Documents and therefore, if privileged, come within the exception of implied waiver. More specifically, the Disputed Documents were created partially by using information from Mc2. Asking a party to provide the documents and data to your expert, failing to tell them that the reports and information from that expert are privileged and not giving Mc2 a timely opportunity to hire its own expert or to temper the information it provided to ERM, is manifestly unfair.
[57] Mr. Batsel knew that Mc2 was providing more than just data to ERM , but did not believe this was an issue. He had not given any instructions to Mc2 that it needed to limit the information it sent to ERM.
[58] In the factually analogous decision of Walsh, the plaintiff in an action related to the construction of a Subway Station in Toronto (the “Subway”) sought an order compelling the defendant to produce an unredacted copy of an assessment report completed by Bechtel (the “Bechtel Report”) over which the defendant claimed litigation privilege. In Walsh, the plaintiff was the successful bidder for the construction of the Subway as the general contractor. Contract price and completion date were agreed to but substantial performance of the contract was ultimately delayed by three years until 2017. The plaintiff commenced an action that the defendant was responsible for the delays. In 2014, the defendant engaged numerous parties including Bechtel to conduct reviews of the Subway project. The defendant advised the plaintiff that Bechtel had been retained in December 2014 in order to review the “opportunities, challenges, processes, and issues and concerns over the progress in construction”. Further, the defendant requested that the plaintiff meet with Bechtel in January 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. The defendant also requested that the plaintiff’s schedulers meet with Bechtel on January 12, 2015 to provide Bechtel’s schedulers with an understanding of the plaintiff’s schedules, restraints, logic and sequence.
Walsh Construction Company Canada v. Toronto Transit Commission, 2019 ONSC 5537 (“Walsh”) at paragraphs 42-44
[59] In February 2016, the plaintiff requested a copy of the Bechtel Report and the defendant provided a redacted copy, on the basis that the Bechtel Report included records prepared for in providing legal advice or in contemplation of or use in litigation. The only issue on the application was whether the redacted portions of the Bechtel Report were subject to litigation privilege. After reviewing the general law surrounding litigation privilege, the Court stated that the defendant bore the onus of establishing an evidentiary basis or foundation for its privilege claim on a balance of probabilities. The Court went on to note that blanket claims and bald assertions of litigation privilege or merely asserting litigation privilege was insufficient. In support of its position, the defendant relied on an Affidavit which stated that the Bechtel Report was prepared after there were concerns about ongoing and anticipated litigation related to the Subway. The Court ultimately found that the redacted portions of the Bechtel Report were not privileged and noted in part, that contractual claims are a regular part of most construction projects and there is not a reasonable prospect of litigation each time a claim is filed.
[60] Further, in Walsh, the Court stated:
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.
[61] Mc2’s provision of documents and information directly to ERM, with no knowledge of Northrop’s purported claim of privilege, is very similar to the factual circumstances in Walsh, where a party complied with requests which they believed were for the good of the project as opposed to preparation for litigation. Northrop requested that Mc2 provide ERM with information to assist in the preparation of an opinion. There was no indication that this work would later be considered privileged or that it had been done at the request of legal counsel. While the Court in Walsh considered a number of factors that led to the report not being covered by litigation privilege, it noted that the most “compelling evidence” was the actions of the defendant in organizing meetings between the plaintiff and the expert for the preparation of the report in order to obtain the plaintiff’s perspective on the project.
[62] In addition to Mc2 not being advised that the information they were providing was going to be used in a report that would be covered by litigation privilege, Northrop has also claimed for the costs from ERM and Geosyntec as part of its Counterclaim. If the Disputed Documents truly were meant to be expert fees covered by litigation privilege, this work would not properly be considered part of a Counterclaim.
[63] I accept Mc2’s position that “it would be inconsistent with the principle of fairness to allow Northrop to operate in this manner. Mc2 relied on Northrop’s representations that the information was going to be used to do a review of the Project, with the expectation that the parties would use that information to help move forward. As Mc2 was not told that this information would be privileged, it was not given the opportunity to temper its communications with ERM.
[64] Whatever Northrop’s subjective intent may have been, their objective actions strongly suggest there was no privilege. As in Walsh, Mc2 was unaware the Disputed Documents would not be shared and thus, provided information in a good faith attempt to resolve the issues and complete the project.
(d) It would be contrary to the principles of fairness to allow Northrop to assert privilege over the Disputed Documents
[65] Northrop’s objective actions, the evidence and their testimony given on cross- examination indicate that they were just attempting to gather information to help determine what was causing the rebounding effect. It would be inconsistent with the principle of fairness to allow Northrop to operate in this manner. Mc2 relied on Northrop’s communications and actions and provided information freely to ERM. Provides:
[66] Further, by the time that Mc2 was informed that the report, investigations and information from ERM and Geosyntec were privileged, it was years later, and therefore well past the time when Mc2 could have retained its own expert in this regard.
[67] Northrop’s actions of requesting that Mc2 provide information directly to ERM, failing to advise that the information from either Geosyntec or ERM would be privileged, and claiming that Mc2 was responsible for paying for ERM and Geosyntec’s work as part of its Counterclaim, is inconsistent with an assertion of privilege.
[68] Further, at no time did Northrop tell Mc2 that any investigation or report from ERM would be privileged, which would have allowed Mc2 the opportunity to consider the information it sent to ERM and whether its legal rights could be affected. It would be contrary to the principles of fairness to allow Northrop to maintain its claim of privilege over the Dispute Documents in these circumstances.
[69] Similarly, when Mr. Batsel advised Mc2 that Northrop had also retained Geosyntec to review the Project, without advising that this work was considered privileged, Mc2 was led to believe that this information would be shared and thus it did not need to retain its own expert.
(e) Rule 31 Interpretation
[70] Rule 31.06, with my emphasis added, provides in part:
(3) A party may on an examination for discovery obtain disclosure of the findings, opinions and conclusions of an expert engaged by or on behalf of the party being examined that are relevant to a matter in issue in the action and of the expert’s name and address, but the party being examined need not disclose the information or the name and address of the expert where,
(a) the findings, opinions and conclusions of the expert relevant to any matter in issue in the action were made or formed in preparation for contemplated or pending litigation and for no other purpose; and
(b) the party being examined undertakes not to call the expert as a witness at the trial.
[71] The test is conjunctive. In my view it is clear from the evidence of both sides that the investigations of both experts were being undertaken to solve a real problem with the de-contamination of this site. In my view, applying proportionality, the attempt to withhold the reports relating to the cause of the new contamination is unfair and not in keeping with the determination of this dispute on the merits.
VI. Disposition
[72] I am satisfied based upon the foregoing analysis, and my review of the parties’ submissions, that the relief sought in the Plaintiff’s motion ought to be granted.
[73] The Plaintiff-Applicant McMillan McGee Corp is granted the orders sought for the production of:
(a) All data collected by Environmental Resources Management (“ERM”) and Geosyntec Consulting Inc. (“Geosyntec”) during July 2014 and December 2014 in any way related to the Claim or Counterclaim;
(b) All correspondence between the Respondents and ERM or Geosyntec during July 2014 and December 2014 in any way related to the Claim or Counterclaim; and
(c) Any reports delivered by ERM or Geosyntec to the Respondents during July 2014 or December 2014 in any way related to the Claim or Counterclaim.
[74] Costs of this motion awarded to Plaintiff on a partial indemnity basis.
[75] I am obliged to all counsel for the quality and assistance of their submissions.
Master D. E. Short
DATE: March 25, 2021
DS/ R.375