SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Caruk-Hall Construction Inc. v. Andrew David Maciel and Jessica Kalynn Maciel;
BEFORE: MASTER C. WIEBE
COUNSEL: Jonathan Frustaglio and Rob Moubarak for Caruk-Hall Construction Inc.; Alexander Hora for Andrew David Maciel and Jessica Kalynn Maciel;
HEARD: March 18, 2021.
REASONS FOR DECISION
1The plaintiff, Caruk-Hall Construction Inc. (“CH”), brings this motion for an order requiring that the defendant Andrew Maciel comply with the undertakings he gave and answer the questions he refused to answer at his discovery on September 23, 2020, that the defendants produce a further and better affidavit of documents containing the additional documents to be produced, that leave be given to CH to complete the examination for discovery of Mr. Maciel, which Mr. Moubarak suspended before it was done, once the further documents are produced, and that my previous directions be amended to make this happen.
2The undertakings were not in issue in the end. The refusals were. They form the core of the motion. I noted four groups of refusals:
(a) the disclosure of documents and information concerning Mr. Kriwetz’s work for the defendants in negotiating, preparing and executing the Amending Agreement that was signed on August 10, 2017;
(b) the disclosure of documents and information concerning the defendants’ consultants;
(c) the disclosure of documents and information concerning the defendants’ financial means;
(d) the disclosure of documents and information concerning competing quotations.
3During the motion, another issue came up. Mr. Maciel admitted that he consulted Mr. Kriwetz after the Amending Agreement whenever CH applied for payment that Mr. Maciel considered was perhaps outside of the Amending Agreement or the original contract. He said that he would in that event check with Mr. Kriwetz “before making payment.” CH wants documents pertaining to that advice disclosed.
Kriwetz Amending Agreement work
4There were ten refusals concerning this issue: q. 632, p. 118; q. 637, p. 120; q. 641, p. 142; q. 642, p. 123; q. 643, p. 123; q. 643, p. 124; q. 644, p. 125; q. 645, p. 125; q. 646, p. 125. I will deal with them as a group.
5There is no issue that the documents and information CH seeks in these questions are subject to solicitor client privilege. There was no litigation at the time of the Amending Agreement. The documents and information sought concern the work Mr. Kriwetz did for the defendants concerning the Amending Agreement.
6CH’s position is that the defendants’ understanding of the Amending Agreement is in issue, and that Mr. Maciel confirmed in his evidence that the defendants relied upon Mr. Kriwetz’s advice to form their understanding of the Amending Agreement. Therefore, so the argument goes, Mr. Kriwetz’s advice is a material fact in this case, and the subject documentation and information must be disclosed as a matter of fairness. The argument is that there has been an implicit waiver of privilege.
7This argument is rooted in established authority on this point. Implicit waiver of solicitor client privilege requires two things: (1) the presence or absence of legal advice must be “material” to the claims or defences in the lawsuit; and (2) the party receiving the legal advice must make the receipt of the legal advice a material fact in the lawsuit; see Creative Career Systems Inc. v. Ontario, 2012 ONSC 649 at paragraphs 28 and 29. In the Creative Career decision, Justice Perell in paragraph 29 quoted Justice Steele in Simcoff v. Simcoff, 2009 MBCA 80, paragraph 27 as follows: “. . . a mere reference to the receipt of legal advice does not constitute waiver. Waiver must involve something more. It requires not simply disclosing that legal advice was obtained, but pleading reliance on that advice for the resolution of an issue.”
8In the case before me, the Maciels pleading makes no reference, explicitly or implicitly, to Mr. Kriwetz’s work for them on the Amending Agreement. It does put forward an interpretation of the Amending Agreement as a document that is rather narrow, namely that the Amending Agreement just amended certain aspects of the original contract between the parties. CH asserts that the Amending Agreement was a broader document that settled the issues between the parties.
9The real issue for me to determine is whether there is evidence that the Maciels implicitly waived the solicitor client privilege. Mr. Frustaglio argued that they have done so by putting their “state of mind” concerning the Amending Agreement in issue. He argued that Mr. Maciel at discovery and in this motion put forward evidence that ascribed the defendants’ state of mind about the Amending Agreement to Mr. Kriwetz’s advice. In short, he argued that the defendants made Mr. Kriwetz’s advice a material fact in this action.
10I do not agree. In his affidavit in this motion sworn December 21, 2020, Mr. Maciel states that the defendants retained Mr. Kriwetz on July 7, 2017 while the parties were involved in tense negotiation of the Amending Agreement and given CH’s threats of litigation and work stoppage. Mr. Maciel states clearly in this affidavit that Mr. Kriwetz was not involved in the negotiation process.
11What Mr. Kriwetz did assist with, according to Mr. Maciel, was the drafting of the Amending Agreement to capture the intentions of the defendants already formed or independently formed. This is clear from paragraph 78 of the affidavit where Mr. Maciel states that on July 20, 2017 he instructed Mr. Kriwetz to draft the agreement document to capture what the defendants believed they had discussed with CH. In paragraph 87 of the affidavit Mr. Maciel states that after further discussion with CH he had Mr. Kriwetz revise his earlier draft to incorporate the results of the further discussions the defendants had with CH. Neither of these paragraphs ascribes to Mr. Kriwetz, explicitly or implicitly, the defendants’ understanding of the meaning of the Amending Agreement, namely their “state of mind.”
12In his factum Mr. Moubarak and his argument Mr. Frustaglio referred to many areas of the transcript of the cross-examination of Mr. Maciel on his December 21, 2020 affidavit. All of these involve Mr. Maciel’s discussion of his understanding of the Amending Agreement. In none of these references does Mr. Maciel attribute his or his wife’ understanding of the Amending Agreement to the advice they received from Mr. Kriwetz. The most that Mr. Maciel said was that his lawyer “may” have drafted one note in Schedule A to the Agreement and that he, Mr. Maciel, was not sure whether he discussed that note with Mr. Caruk. I was not made aware of the importance of this note to the case. In any event, this equivocal statement is not of the kind that, in my view, amount to a statement that Mr. Kriwetz’s advice formed a material fact in this case.
13Mr. Frustaglio relies on the decision of Justice Nishikawa in Laliberte v. Monteith, 2021 ONSC 14. In this case, there was a settlement of a marital dispute. Then there was an application by the wife to set aside the agreement on the grounds that the husband had materially misrepresented his financial circumstances concerning two asset sales when the settlement took place. The husband did not deny the misrepresentation in his Answer. He just stated that he did not “knowingly, recklessly or deliberately” misled his wife, and said that the parties both “received independent legal advice.” The judge found in paragraphs 31 to 33 that the husband had implicitly made the legal advice a material fact in the case by asserting as a defence a state of mind that emanated from the legal advice. The judge found that the husband had implicitly asserted that he received legal advice that either he had no obligation to disclose or that did not adequately inform him of his obligation to disclose.
14In my view, the Laliberte case is distinguishable from this part of the case before me. In the Caruk-Hall case there is no issue of material misrepresentation or malfeasance in the drafting of the Amending Agreement. That is understandable because CH retained Mr. Moubarak towards the end of July, 2017 to assist CH in the finalization of the Amending Agreement. The issue is the understanding the Maciels had of the Amending Agreement. The evidence indicates that, according to Mr. Maciel, they acquired that understanding independent of the advice they received from Mr. Kriwetz. As a result, that advice is not a material fact in the case.
15I make another point concerning the materiality of the defendants’ understanding of the Amending Agreement. Under the rules of contract interpretation, the parties differing understanding of a contract only becomes material if the court finds that the contract, viewed objectively, is vague or unclear in a material way. Therefore, it is an open question whether the Maciels’ understanding will itself in the end be a material fact in this case. At present, it is only a contingent material fact.
16In the CH factum and in oral argument, Mr. Moubarak pointed out that CH released the opinion letter Mr. Moubarak wrote to his client dated July 28, 2017, which letter advised against signing the Amending Agreement. Mr. Moubarak acknowledged that this probably lifted the solicitor client privilege attaching to his work for CH on the Amending Agreement. He argued that as a matter of fairness, the defendants should be required to do the same with the entirety of Mr. Kriwetz’s file concerning his work on the Amending Agreement. There was no authority for this proposition, and I do not accept. One party’s decision to waive solicitor client privilege should impose on the other party an obligation to do the same.
17Solicitor client privilege is guarded zealously by the courts. In Guelph (City) v. Super Blue Box Recycling Corp., 2004 34954 (ON SC), 2004 34954 (SCJ) Justice Corbett outlined in paragraph 76 the principles to be applied to the issue of requiring disclosure of solicitor client information and documentation. He stated that this privilege goes to the heart of our legal system as it concerns the obtaining of independent legal advice. Once the privilege is established, the onus rests on the person seeking the disclosure of the information and documentation to establish that the privilege has been waived.
18I have determined that CH has not met its onus concerning these refused questions, and I dismiss the motion in this regard.
Kriwetz “payment certifier” work
19This issue is a different one. In cross-examination, when asked as to whether he continued to seek Mr. Kriwetz’s advice after the Amending Agreement, Mr. Maciel stated that, “if I felt that Caruk-Hall was asking for payment outside of what was in the contract, before making payment, did I want to check with my counsel, yes.” In answer to the next question about whether he continued to obtain Mr. Kriwetz’s advice about the implementation of the Amending Agreement concerning the payments, Mr. Maciel said, “if I had a question about the amending agreement, or the construction agreement, I would ask him, yes.”
20In paragraph 6 of the Statement of Claim, CH pleads that it has not been paid for all of the services and materials CH provided to the Maciels. In paragraphs 21 and 22 of their Amended Statement of Defence and Counterclaim the Maciels plead that they complied with their obligations under the Construction Act and the contract. Clearly, the payments to CH are material issues.
21I do not see any difference between this issue and Laliberte. Implicitly, Mr. Maciel made Mr. Kriwetz’s advice to the defendants after the Amending Agreement about payments to CH material in this case. The defendants are implicitly stating that they received legal advice about questionable payments and that the payments or non-payments were as a result proper. This is usually the advice a payment certifier would give to the owners, and it would be material and not privileged.
22There was no explicit reference to this material in the notice of motion, but that was not made an issue by Mr. Hora. I, therefore, order that the defendants deliver all documents in their power, possession and control concerning the advice they received from Mr. Kriwetz about payments to CH after the Amending Agreement.
Consultants
23There were four questions about the disclosure of documents and information concerning the defendants’ consultants: q. 77, p. 19; q. 79, p. 23; q. 647, p. 126. These were broad questions about describing the scope of the duties of the consultants, the production of the entire file of communication and contracts between the owners and their designer and architect, the disclosure of the existence of a dispute between the defendants and their architect, David Small, and the disclosure of the David Small permit application file.
24Rule 30.02(1) requires that every document “relevant to any matter in issue in an action that is or has been in the possession, control or power of a party to the action shall be disclosed.” Rule 31.06 (1) specifies that a person being discovered must answer to his or her ability within her knowledge, information and belief “any proper question relevant to any matter in issue in the action.”
25It is well established that the rule concerning relevance has been narrowed from the “semblance of relevance” test that used to prevail. Relevance is established by the pleadings. A document or question is relevant if it is logically connected to or tends to prove or disprove a matter in issue; see Sky Solar (Canada) Ltd. v. Economical Mutual Insurance Co., 2015 ONSC 4714 (SCJ) at paragraph 25. I must also be mindful of the doctrine of proportionality; see Rule 1.04(1.1).
26The problem with the questions in issue is that they are overbroad and there is no clear connection to the issues in this case as pleaded. The major issues in this case are the payments to CH, extras and the alleged deficiencies in and lack of completion of CH’s work. The questions in issue are in the nature of “fishing expeditions.”
27I make the following specific comments. The permit drawings have been produced. I was not advised as to any design issues. Furthermore, if there are design issues, I am not sure how the permit application would be relevant. Describing the scope of what the consultants were to do is overbroad, when the issues are payment, extras and performance. A dispute between the defendants and Mr. Small could pertain to many things that are not relevant. Producing an entire consultants file of contracts and communication is overbroad. These files may contain many documents that are irrelevant.
28I, therefore, have decided to deny this part of the motion.
Defendants’ financial means
29There are three questions about the defendants’ financial means: q. 493, p. 91; q. 495, p. 92; q. 523, p. 96. These concern what the defendants had available in their line of credit for the project, what savings they had available for the project, and whether the defendants had funds available to them in excess of the original construction contract.
30I have examined the pleadings and cannot find anything that would make this information relevant. There are references to construction budgets in the pleadings, but these do not make the defendants’ wherewithal to pay for the project relevant.
31I, therefore, deny this part of the motion.
Competing quotations
32There were seven questions concerning the other quotations the defendants received from other contractors for the project: q. 94, p. 27; q. 96, p. 27; q. 96, p. 27; q. 96, p. 28; q. 97, p. 28; q. 98, p. 29. These questions concern the identity of the competing contractors and the delivery of their quotations. I initially found these questions dubious as to relevance, as there is no pleaded issue of underbidding and as Mr. Maciel advised that the competitors’ quotations were structured differently.
33But then in their factum and in argument, Mr. Moubarak pointed out that Mr. Maciel admitted in cross-examination that the defendants prepared a list of items to discuss with CH before initially retaining them, and that this list came from the other quotations. Extras are an issue in this case. Therefore, what the parties agreed to in the scope of the original contract is in issue.
34Therefore, I have decided to order that these questions be answered.
Further and better affidavit of documents
35Rule 30.06(b) specifies that where a party has omitted relevant documents in an affidavit of documents or where a claim for privilege has been improperly made, a court may order that the party produce a further and better affidavit of documents containing the documents. As a result, I order that the defendants produce such a further and better affidavit of documents that contains the documents they will be producing as a result of this ruling.
36The notice of motion refers to other documents, such as an “original budget” presented to the defendants in February, 2016 and a “second meeting” between the parties. But I do not understand the basis for these claims. Therefore, I will not make an order in that regard.
Completion of the discoveries
37On June 23, 2021 I authorized examinations for discovery on terms which included the right given to the plaintiff to examine each of the defendants for a total of no more than 14 hours. I ordered that the discoveries be completed on or before September 30, 2021. On September 23, 2021 Mr. Moubarak commenced the examination of Mr. Maciel but ended the examination after all of the Maciel refusals but before he had completed the discovery. Mr. Kriwetz started and completed his examination of the plaintiff within the ordered deadline. It is now six months past the deadline I gave for completion of discoveries.
38I do not understand why Mr. Moubarak did this. He said it was more efficient to have all documents produced in advance of the discoveries no doubt expecting that his client would be successful on this motion. With that risky assumption, he decided unilaterally to have his client not complete the discovery of the defendants in contravention of my directions.
39In my view, the course of action that would have been consistent with my directions would have been to complete the rest of the discovery of the defendants reserving the plaintiff’s right to have a further discovery on the documents ordered produced by me in this motion, if any. I do not understand why this was not done. I do not understand the “efficiency’ point. Questions affected by any ordered further disclosure could be revisited. This case has been dragging on much too long and it is the responsibility of the parties to move it forward to trial expeditiously.
40The question is whether I grant the plaintiff leave to complete their discovery since the deadline for completion of discoveries has long passed. The plaintiff opposes on the grounds I have articulated.
41Reluctantly, I have decided to grant the plaintiff the right to complete its discovery of the defendants as this is a significant case where the defendants’ counterclaim is the driver of the litigation. The plaintiff needs full disclosure of the defendants’ case.
42But I grant this leave only for the time Mr. Moubarak did not spend out of the 14 hours I gave to the plaintiff to discover the defendants. Also, this discovery must take place after the defendants further and better affidavit of documents and productions are done.
Costs
43Concerning costs, the parties submitted costs outlines. The CH costs outline shows partial indemnity costs of $29,446.24, substantial indemnity costs of $37,748.35 and actual costs of $46,050.46. The Maciels’ costs outline shows partial indemnity costs of $18,100 and actual costs of $25,050.
44Given the nature of the motion, I have decided to award costs now without further submissions. There is also a need to move this reference forward.
45I have decided to award CH partial indemnity costs of $6,500 to be paid in 30 days. This reflects the level of CH’s success on this motion and what the Maciels could reasonably expect to pay given the result and the work that was done. $6,500 is 22% of the CH partial indemnity costs and 35% of the Maciels’ partial indemnity costs.
46In general, I found the CH claim of waiver concerning the Kriwetz work on the Amending Agreement a “long shot” at best given the authorities and the evidence. The one waiver point on which the plaintiff succeeded arose in the middle of this motion almost by accident. CH also had success on one of the three other groups of refusals. There was criticism of the use of a law clerk to swear the affidavit. I do not share that criticism as the focus of this motion was on the conduct of the defendants.
47The defendants, on the other hand, must now produce more documents and a further and better affidavit of documents. They must now produce some of their lawyer’s file.
48I also bring to bear the doctrine of proportionality. While the motion had complexity, I am not sure in hindsight whether its subject matter of this motion merited the time and effort put into it. For instance, as stated earlier, if the Amending Agreement turns out to be objectively clear, the defendants’ understanding of it may not be material.
49CH also wants costs thrown away for the aborted examination for discovery of the defendants. Given the result and my above comments about the conduct of the discoveries of the Maciels, I am not prepared to give such costs.
Directions
50The following are my directions for the completion of the ordered steps:
The defendants must comply with my order and produce the ordered documents and the further and better affidavit of documents on or before April 9, 2021; and
The examination for discovery of the defendants, as ordered, must be completed on or before April 23, 2021.
51The next trial management conference in this matter is scheduled to take place by teleconference with me on April 26, 2021 at 12 noon. I fully intend to schedule the trial hearing at that time and expect the witness lists and trial time estimates to be prepared, served and filed as ordered.
DATE: March 29, 2021
MASTER C. WIEBE