COURT FILE NO.: CV-19-00632504-0000
DATE: 2021 09 14
ONTARIO
SUPERIOR COURT OF JUSTICE
FRANCES SCANGA and SCANGACANN INC.
-and-
DANIEL J. BALENA
BEFORE: Associate Justice Ilchenko
COUNSEL:
Gregory Gryguc for the Plaintiffs Frances Scanga (“Frances”) and Scangacann Inc. (“Scangacann”)
Sean Torrie for Defendant Daniel J. Balena
HEARD: August 30, 2021
RELEASED: September 14, 2021
E N D O R S E M E N T
I) Nature of Relief Sought by Plaintiff
[1] The Plaintiffs have brought a motion to compel responses to Undertakings, Under Advisements and Refusals given at the Defendant’s Examination for Discovery conducted on October 8, 2020 (the “Discovery”) as set out in the Transcript of the Discovery filed on this Motion (the “Balena Transcript”).
[2] The specific relief sought by the Plaintiffs is an Order striking the Statement of Defence of the Defendant by reason of the Defendant’s failure to answer Undertakings, Under Advisements and Refusals given at the Discovery or, in the alternative, an Order to compel the Defendant to provide answers to the Undertakings, Under Advisements and Refusals given at his Discovery within 15 days of the hearing of this motion.
[3] Counsel for the Defendant has produced at Tab 1 (B-1-4 to B-1-12 in Caselines) of the Defendant’s Responding Motion Record a Refusals and Undertakings Chart in form 37C (the “Undertakings and Refusals Chart”), which I have attached at Schedule “A” to this Endorsement) that counsel for the Defendants prepared and advised is the most current summary of the Undertakings, Under Advisements and Refusals given at the Discovery of the Defendant, and the answers provided by the Defendant.
[4] There were 15 undertakings given, all of which have apparently been answered in some way by the Defendant, subject to further examination on those undertakings.
[5] Counsel for the Plaintiffs and the Defendants agreed that the Plaintiff was not seeking an order today compelling further answers to the Undertakings listed as issues 1-15 on the Undertakings and Refusals Chart (the “Answered Undertakings”) as some answers have been provided and will be dealt with on further examinations.
[6] Counsel for the Plaintiff also advised that the Under Advisements at Q306-p.85 and Q508-p. 135 do not require a determination by me as some answers have been provided and will be dealt with on further examinations (the “Answered Under Advisements”).
[7] The remaining 4 Refusals (Q24 p.11, Q75 p.26, Q75 p.27 and Q.96 p.31) and 2 Questions taken Under Advisement at the Discovery (Q126 p.43 and Q282 p.79) will require adjudication.
II) Context in which the Motion is Brought
[8] The Plaintiffs allege in their Statement of Claim issued December 10, 2019 (the “Statement of Claim”) in this Action (the “Action”) that they entered into an alleged contract in 1984 under which the Defendant, a lawyer practicing in Ajax, agreed to pay the Plaintiffs 10% of the total gross settlement/awards he obtained for the clients referred to him by the Plaintiffs (the “Alleged Contract”).
[9] The Plaintiff alleges that the Defendant has breached the Contract by refusing to pay outstanding referral fees. The Plaintiffs allege that they have referred more than 130 individual clients to the Defendant since 1984.
[10] The Plaintiffs allege in their Statement of Claim that the Defendant has obtained total gross settlements/awards in excess of $10 million but that they have only received payment of approximately $465,610.
[11] The Defendant in the Statement of Defence dated January 23rd, 2020 (the “Statement of Defence”) denies that he entered into a contract with the Plaintiffs for referral fees as claimed, and specifically denies he entered into the Alleged Contract with the Plaintiffs to pay 10% of the total gross settlement/awards he obtained for the clients referred by the Plaintiff, as the Plaintiffs have alleged.
[12] The identification of the referred clients, the quantification of the gross settlements or judgments awarded to the referred clients as a result of the referred clients retaining the Defendant, proving the existence of the Alleged Contract, and the quantification of the amounts allegedly owing to the Plaintiffs as damages for amounts payable under the Alleged Contract with the Defendant, appear to be the key issues to be determined in this Action.
III) Law and Analysis
[13] Rule 30.02 sets out straightforward rules regarding the discovery of documents:
Rule 30.02 Disclosure - (1) 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 as provided in rules 30.03 to 30.10, whether or not privilege is claimed in respect of the document.
[14] Under Rule 31.06:
31.06 (1) A person examined for discovery shall answer, to the best of his or her knowledge, information and belief, any proper question relevant to any matter in issue in the action or to any matter made discoverable by subrules (2) to (4) and no question may be objected to on the ground that,
(a) the information sought is evidence;
(b) the question constitutes cross-examination, unless the question is directed solely to the credibility of the witness; or
(c) the question constitutes cross-examination on the affidavit of documents of the party being examined.
[15] Rule 34.15 states:
34.15 (1) Where a person fails to attend at the time and place fixed for an examination in the notice of examination or summons to witness or at the time and place agreed on by the parties, or refuses to take an oath or make an affirmation, to answer any proper question, to produce a document or thing that he or she is required to produce or to comply with an order under rule 34.14, the court may,
(a) where an objection to a question is held to be improper, order or permit the person being examined to reattend at his or her own expense and answer the question, in which case the person shall also answer any proper questions arising from the answer;
(b) where the person is a party or, on an examination for discovery, a person examined on behalf or in place of a party, dismiss the party’s proceeding or strike out the party’s defence;
(c) strike out all or part of the person’s evidence, including any affidavit made by the person; and
(d) make such other order as is just.
(2) Where a person does not comply with an order under rule 34.14 or subrule (1), a judge may make a contempt order against the person.
[16] On the issue of relevance of the documentation requested, the Plaintiffs cite Brand Name Marketing Inc. v. Rogers Communications Inc. 2010 ONSC 1159, [2010] O. J. N.O. 978. 2010 ONSC 1159 (ONT. S.C.J), paragraph 81 for the interpretation of R.31.06(1) that “The applicable standard is now whether the question is relevant to any matter in issue as defined by the Pleadings.”
[17] On this issue, the Defendant cites Romspen Investment Corp. v. Woods Property Development Inc. 2010 ONSC 30005 (Master) as standing for the proposition that the test to be applied to determine whether a question is relevant, subject to privilege, is whether the question could elicit a response that the trial judge could rely on to resolve a matter in issue.
[18] In Sycor Technology Incorporated v. Kiaer, 2012 ONSC 5285 Justice Morawetz (as the then was) (“Sycor”) similarly stated that:
“Relevance is determined by reference to the pleadings. A document is “relevant” if it is logically connected to and tending to prove or disprove a matter in issue.”
Issue #1: Type of Business of the Plaintiff Scangacann– Refusal Q24 p. 11 of Discovery
[19] At Paragraph 3 of the Statement of Claim the Plaintiffs allege:
“…Frances, individually and through Scangacann operated a referral business, specifically referring clientele to the Defendant.”
[20] In paragraph 5 of the Statement of Claim, the Plaintiff alleges that Scangacann was incorporated on the advice of the Defendant, “…to which Balena would pay the referral fees for tax purposes (“referral contract”), if not to Frances directly”.
[21] At paragraph 4 (stated in the Balena Transcript as paragraph “40”) of the Statement of Defence the Defendant states: “Mr. Balena denies Scangacann Inc. is a referral business as pled in paragraph 3 of the Statement of Claim.”
[22] Applying the tests of relevance in Brand Name Marketing Inc., Romspen and Sycor, supra, to the issues raised in these pleadings, the Defendant has denied that Scangacann is a referral business in the specific wording in the Statement of Defence, making evidence that would tend to prove or disprove that fact relevant to this Action, where the basis of the Plaintiffs’ case is the Alleged Contract with the Defendant, where referral fees were allegedly payable.
[23] The answer given by the Defendant Q21-24 p.11 of the Balena Transcript does not answer the question posed as to the knowledge of the Defendant of the business of Scangacann, and the basis for the denial that Scangacann Inc. is a “referral business”.
[24] The Defendant will provide a more fulsome answer for Q.21-24 p.11 as to the factual basis for the Defendant’s denial at paragraph 4 of the Statement of Defence that Scangacann Inc. is a referral business.
Issue #2 Refusal to Consent to Order requiring answers to Questions Refused: Q75 p.27
[25] With respect to the refusal for Question 75 on page 27 listed in Schedule “A”, this was a request by the Plaintiff to consent to an order waiving objection to the refusals given at the Discovery:
MR. ZEPPIERI: Right, but so I'm asking you is it a consent application or will there be an objection to the application for a court to give that order? R/F MR. MOODIE: Based on my answers today, it will be not on consent. You'll have to bring an application.
[26] This “question” was really a discussion between counsel about the disposition of prior refusals at this future motion, and a request to consent to this future motion, and not an actual question of the Defendant. There is no basis to require an answer, as this was not a refused question. The Defendant will not be required to answer this “refusal” at Q75 p.27.
Issue #3: Relevance and Assertion of Solicitor and Client Privilege by Defendant with respect to accounts, settlement documentation, financial records, and diaries- Q75 p.26-27, Q96 p.31, Q126, p.43 and Q282. p.79
[27] The remaining Refusals and Under Advisement questions have all been refused on the basis of a denial of the relevance of the questions and a claim of solicitor and client privilege with respect to the documents requested by the Plaintiffs.
[28] In each case the Plaintiffs argue in their factum that the accounts, settlement documentation, financial records regarding settlements obtained by the Defendant for clients allegedly referred to the Defendant by the Plaintiffs and the diaries of the Defendant regarding meetings with the Plaintiff Frances, contain relevant information, and that without the information, it is impossible for the Plaintiffs to quantify their damages.
[29] The Defendants argue in their factum that the Defendant should not be required to answer the questions refused at the Discovery as:
i) the Plaintiffs have not established that every client claimed by the Plaintiffs was part of an alleged referral agreement and therefore documentation regarding clients that have not been proven by the Plaintiffs to have been referred are not relevant;
ii) the information in the documentation sought by the Plaintiff’s is subject to privilege, which has not been waived.
a) Relevance of Questions
[30] Employing the relevance tests in Romspen v. Woods, Brand Name Marketing Inc. v. Rogers or Sycor to the issues that are relevant in this action, would make questions relating to the following issues raised in these pleadings relevant:
i) what persons were referred by the Plaintiff to the Defendant;
ii) which of those persons actually became clients of the Defendant;
iii) what settlements or other judgments were obtained by the Defendant for the clients allegedly referred by the Plaintiff’s and their quantum;
iv) whether the Alleged Contract between the Plaintiff’s and the Defendant to pay a referral fee for these clients had been entered into; and
v) if the existence of the Alleged Contract is proven, what were the terms of that contract with respect to the calculation of the quantum of the referral fee agreed to between the Plaintiffs and the Defendant.
[31] Although not filed as exhibits to either the Plaintiffs’ or the Defendant’s Motion Records, it appears from the Balena Transcript at Q100 that the Defendant has included as Tab 1 to his Affidavit of Documents a list prepared by the Plaintiffs naming the clients that they allege were referred to the Defendant (the “Tab 1 List”).
[32] It also appears that the Defendant has created his own list at Tab 139 to his Affidavit of Documents that lists the clients that he believes were referred to him by the Plaintiffs (the “Tab 139 List”), and listing the settlement or judgment amounts for these particular clients.
[33] It appears that the Plaintiffs have also made a list of alleged referred clients that they have produced in their Affidavit of Documents at Tab 18 (the “Tab 18 List”), which may be the same document as the Tab 1 List.
[34] In each case in both the Balena Transcript of the Discovery and in the Discovery transcript of the Plaintiffs’ representative Frances, the names of the alleged clients appear to be known to the Plaintiffs, but the Defendant denies that all of the clients that the Plaintiffs allege they referred in the Tab 1 List (and/or the Tab 18 List) actually became clients of the Defendant, as listed on the Tab 139 List.
[35] Therefore, the identity of the clients allegedly referred by the Plaintiffs that actually became clients of the Defendant are relevant to the issues in this proceeding. Put another way, the fact that the Plaintiff’s cannot precisely name the referred clients at this point in the Discovery process makes questions posed to the defendant about which referred clients achieved settlements or judgments more relevant, not less relevant, and is not a bar to the Defendant answering questions relating to the clients allegedly referred by the Plaintiffs.
[36] In implementing the Sycor test, documents containing the names of what clients allegedly referred by the Plaintiffs actually retained the Defendant are “relevant”, as it is logically connected to and tending to prove or disprove a matter in issue, namely which clients retained the Defendant, giving rise to a possible claim to a referral fee under the Alleged Contract. This is the same result under the broader relevance tests in Romspen v. Woods, and Brand Name Marketing Inc. v. Rogers cited by the Parties.
[37] Also, the statements made by the Defendant in the Statement of Defence at paragraphs 5 and 6 that the Plaintiffs had referred clients to the Defendant, and that he had compensated the Plaintiffs for referrals at his “sole discretion”, make the identification of the clients allegedly referred by the Plaintiffs, and the clients that actually retained the Defendant, and for which clients the Defendant exercised his alleged “sole discretion”, relevant issues in this Action.
[38] Therefore, I find that the following questions refused Q75 p.26-27, Q96 p.31, Q126 p.43 and Q282 p.79 and the documentation requested in those questions by the Plaintiffs regarding clients that have not yet been proven by the Plaintiffs to have been referred, are relevant to the issues of identifying those clients, and with respect to the other issues itemized in paragraph 30 above and need to be answered, subject to proper claims to the protection of solicitor and client privilege.
b) Assertion of Solicitor and Client Privilege by Defendant
[39] Solicitor-client privilege attaches to communications between a lawyer and client for the purpose of seeking or giving legal advice which is intended by the parties to be confidential (Sky Solar (Canada) Ltd. v. Economical Mutual Insurance Co. et. al., 2015 ONSC 4714 at para. 78).
[40] This privilege is fundamental to the proper functioning of the legal system and should only be set aside when absolutely necessary (Alberta (Information and Privacy Commissioner) v. University of Calgary, 2016 SCC 53 at paras. 26 and 34).
[41] The party asserting privilege bears the onus of establishing an evidentiary basis for its privilege claim on a balance of probabilities (Skysolar at para. 73).
[42] The Defendant cites Re Kaiser (2012) 113 O.R. (3d) 308, 2012 ONCA 838 to support to the Defendant’s claim of protection regarding questions Q75 p.26-27, Q96 p.31, Q126, p.43 and Q282 p.79 refused and the documents requested containing “administrative information relating to the solicitor-client relationship under solicitor and client privilege”:
[43] At para 30-31 of Kaiser Blair, J.A states:
“[30] From these developments in the jurisprudence, I take the law to be that administrative information relating to the solicitor-client relationship -- including the identity of the person paying the lawyer's bills -- is presumptively privileged. The presumption may be rebutted by evidence showing:
(a) that there is no reasonable possibility that disclosure of the requested information will [page317] lead, directly or indirectly, to the revelation of confidential solicitor-client communications (Maranda, at para. 34; and Ontario (Assistant Information and Privacy Commissioner), at para. 9); or
(b) that the requested information is not linked to the merits of the case and its disclosure would not prejudice the client (Cunningham, at paras. 30-31).
[31] I note that the "confidential communication" and the "merits/prejudice" lines of reasoning from Maranda and Cunningham, respectively, do not necessarily define the same body of information. The reason is that not all information a client tells his lawyer in confidence will be relevant to the merits of the case for which the lawyer is retained: see Descôteaux, at p. 877 S.C.R.”
[44] Applying Kaiser to the issues in this Action it must be determined:
does requiring the Defendant to answer the questions refused regarding the “accounts”, other financial information and settlement documentation requested create a reasonable possibility that disclosure of the requested information will lead, directly or indirectly, to the revelation of confidential solicitor-client communications?
is the information that could be released from production of these documents linked to the merits of the client’s case to which the information relates?
will requiring the Defendant to answer the refused questions prejudice the client?
is the information requested relevant to the merits of the case for which the client retained the lawyer?
[45] It should be noted that there is a crucial factual difference between this case and Kaiser, where a Trustee in Bankruptcy was attempting to compel Counsel to reveal the source of funding for the Bankrupt’s legal counsel, to obtain evidence from Counsel against their bankrupt client to prove that the Bankrupt had hidden assets from the Trustee in Bankruptcy and was using those hidden assets to pay counsel.
[46] In Maranda v. Richer 2003 SCC 67, [2003] 3 S.C.R. 193 (cited in Kaiser) the issue was the scope of a search warrant for the office of a lawyer to obtain evidence relating to the fees and disbursements billed to and paid by the client, to obtain evidence against the client to assist in the prosecution of the client for suspected drug trafficking and money laundering.
[47] In both of those cases, the information that the Court was being ask to compel Counsel to produce was information relating to the merits of a client’s case, and could prejudice that client’s legal position if the Court compelled Counsel to reveal it, whether to determine whether the Bankrupt was utilizing hidden assets that had not been provided to the Trustee (Kaiser) or to facilitate the prosecution of the client for drug trafficking and money laundering (Maranda).
[48] In summary, the party seeking the information from the solicitor in both Kaiser and Maranda cases was seeking to obtain the information from Counsel to advance their cases against the client of that Counsel.
[49] That is not the case here. Counsel for the Plaintiffs at the hearing confirmed that he is not interested in the actual solicitor and client communications contained in any of the “accounts”, financial records or settlement documentation, between the clients and the Defendant, but rather the financial information that the accounts and other documents may contain relating to the settlements or judgments obtained on behalf of the clients allegedly referred by the Plaintiffs, and for which the Plaintiffs allege they have a contractual entitlement to a referral fee from the solicitor Defendant, not the client.
[50] The Plaintiffs are not seeking the information that may be contained in the requested documentation that was refused by the Defendant to advance their cases against the clients they allegedly referred to the Defendant, but against the Defendant solicitor.
[51] In Lokhandwala v. Khan, 2021 ONSC 2006 Lemay J. of the Ontario Superior Court reviewed the jurisprudence relating to claims of protection of solicitor and client privilege for a lawyer’s accounts detailing amounts paid by a client for legal fees in a family law context. After specifically reviewing the “presumptive privilege” test in Kaiser and Maranda Justice Lemay states:
“[100] The passages from these reasons show that there is an obvious tension between privilege and disclosure. This tension exists because solicitor-client privilege is one of the most jealously guarded safeguards in our legal system. I am mindful of the central role that solicitor-client privilege plays in our legal system. However, there are cases where it does not apply or, as noted in Kaiser, where the privilege can be rebutted.
[101] For example, requiring the fact that Cellicon is (or was) paying the bills for the legal work being done for Zarinataj and Ishaq will not result in any legal advice being disclosed. Similarly, identifying the amounts that were paid on behalf of Zarinataj and Ishaq by either Cellicon or the other company will also not result in any legal advice being disclosed.”
[52] In Lokhandwala, the information being sought as to the amounts paid on behalf of the clients did go to the merits of the case of the clients, and Lemay J. ordered that information disclosed. In this case before me the information being sought to be disclosed does not appear to go the merits of the client’s case, only to the merits of the case against the Defendant solicitor.
[53] With respect to the “accounts”, as it appears that from the documents described in the Balena Transcript that the names of the alleged clients referred to in the Tab 1 List and the Tab 139 List have been produced by the Defendant, and that may also appear on the Plaintiffs’ Tab 18 List, so the production of confidential information regarding the names of the clients is not an issue in this Action.
[54] I have referred to the “accounts” throughout this judgment because the Defendant advised in his factum at paragraphs 24 and 25 that the “accounts” requested to be produced by the Defendant for clients on the Tab 18 List (which may correspond to the Tab 1 List) may no longer exist as some of those accounts may be greater than 10 years old, and that trust ledger pages may be the only documentation that is available. The Plaintiffs state in the Statement of Claim at paragraph 5 that the Alleged Contract goes back to 1984.
[55] This lends further comfort for the issue of prejudice for the clients, as it appears that for many of these matters, whatever services were provided to the clients allegedly referred by the Plaintiffs to the Defendant, the matters have been completed long ago.
[56] With respect to specifically answering the components of the Kaiser test, with respect to the “accounts” and other financial information and documentation requested:
requiring the Defendant to answer the questions refused regarding the “accounts”, other financial information and settlement documentation requested will not create a reasonable possibility that disclosure of the requested information will lead, directly or indirectly, to the revelation of confidential solicitor-client communications, as the Plaintiffs are not interested in these communications and any such communications can be redacted from these documents as an additional safeguard.
The information that could be released from production of these documents is not linked to the merits of the client’s case to which the information relates, as the only purpose for the productions is to determine issues against the Defendant in this Action, not the clients, who, in many cases, have obtained their judgments or settlements long ago.
Requiring the Defendant to answer the refused questions will not prejudice the clients, as the Plaintiffs are not seeking evidence against the clients, and in any event, solicitor and client communications can be ordered redacted out to preserve the privileged communications.
The information requested by the Plaintiffs is not relevant to the merits of the case for which the client retained the Defendant, but rather is only relevant to the Plaintiffs’ case against the Defendant and the existence of the Alleged Contract and, if found to exist, the calculation of the amounts owing under the Alleged Contract.
[57] As a result, in the unique circumstances of this case, for the reasons set out in paragraph 56 above, based on the evidence filed by the Parties on this Motion, the “presumptive privilege” described in Kaiser has been rebutted.
IV) Summary of Order Granted
[58] The following Refusals and Under Advisements shall be answered within 60 days of the date of the issuance of these Reasons:
No order is required for the Answered Undertakings;
No Order is required for the Answered Under Advisements;
Q21-24 p.11: The Defendant will provide a more fulsome answer for as to the factual basis for the Defendant’s denial at paragraph 4 of the Statement of Defence that Scangacann Inc. is a referral business;
Q75 p.27: The Defendant will not be required to answer this refusal at regarding the request to undertake to consent to this motion;
Q75 p.26: This question is to be answered and to the extent that they exist, the Defendant is to produce any existing accounts in his possession or control for the clients named on the Tab 18 List (and/or the Tab 1 List to the extent the lists differ), however any solicitor and client communications in the docket entries are to be redacted out prior to production to preserve solicitor and client privilege, leaving the financial information;
Q126 p. 43: This question is to be answered and to the extent that only trust ledger pages exist with respect to the clients named on the Tab 18 List (and/or the Tab 1 List to the extent the lists differ) the Defendant is to produce those corresponding Trust Ledger pages, or other similar documentation, indicating the amount paid to the client for any settlements or judgments obtained, and the quantum of any fees charged, however any solicitor and client communications in the Trust Ledger pages are to be redacted out prior to production to preserve solicitor and client privilege, leaving the financial information.
Q126 p. 43: This question is to be answered, and to the extent that other financial records exist, other than the trust ledger pages, with respect to the clients named on the Tab 18 List (and/or the Tab 1 List to the extent the lists differ), the Defendant is to produce those other financial records, or other similar documentation indicating the amount paid to the client for any settlements or judgments obtained, and the quantum of any fees charged, however any solicitor and client communications in the these other financial records pages are to be redacted out prior to production to preserve solicitor and client privilege, leaving the financial information.
Q96 p.31: This question is to be answered and to the extent that the Defendant used settlement documentation to produce the financial information set out in the Tab 139 List, the Defendant is to produce any existing settlement documentation in his possession or control where the financial information was summarized in the Tab 139 List, however any solicitor and client communications in the settlement documentation, or terms of the settlement not relevant to the financial aspects of the settlement, are to be redacted out prior to production to preserve solicitor and client privilege, leaving the financial information.
Q282 p.79: This question is to be answered and with respect to the inspection of the “diaries” requested, the Defendant is to produce the diaries with all information redacted out, other than the references to meeting with the Plaintiff Frances, the dates of those meetings, and the subject matter of those meetings, which was the subject matter of the actual question posed at the Discovery.
Given the divided success, and the uniqueness of some of the issues raised, there shall be no costs of this motion payable to any party.
[59] If counsel have any questions about the implementation of my order, they may schedule a Case Conference with me to obtain further clarification.
Associate Justice Ilchenko
Superior Court of Justice
September 14, 2021