COURT FILE NO.: CV-15-433-00
DATE: 2022-06-09
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Shelly Legault Plaintiff/ Defendant by counterclaim
– and –
TD General Insurance Company Defendant/ Plaintiff by counterclaim
COUNSEL:
Ashu Ismail & Peter Murray, Counsel for Ms. Legault
Arie Odinocki & Victoria Dale, Counsel for TD Insurance
HEARD: May 16-20, 24-27, 30, 31, June 1-3, June 6, 2022
REASONS FOR MID-TRIAL RULING
HEALEY J.
The Motion
[1] The plaintiff, Ms. Legault, brings this action to enforce the policy provisions of an insurance contract following a house fire. The defendant, TD General Insurance Company (“TD”), counterclaims for an order requiring the plaintiff to repay benefits paid out under that policy. TD alleges that the plaintiff sought and received additional living expenses under the policy under fraudulent pretenses. The fire occurred in 2014, and the plaintiff’s insurance claim was denied in 2015.
[2] The trial of the action was underway when the plaintiff’s counsel brought an oral motion to exclude the testimony of two of TD’s witnesses on the basis that they were being financially compensated by TD for their preparation time and trial attendance.
[3] I ruled orally that the witnesses would not be barred from testifying, with written reasons to be provided later. These are those reasons.
Positions of the Parties
[4] Precipitating the motion, TD’s counsel disclosed through his examination of the first witness in question, Trina Bourdignon, that TD had authorized that she be paid to prepare to give evidence and to attend at the trial. At the time of the investigation surrounding the allegations of fraud, Bourdignon was employed by TD as a senior investigator within its Special Investigations Unit. She was tasked with conducting the investigation into this alleged fraud. She left the employ of TD in 2018 and is currently working for a private investigation firm. Before working for TD, she spent six years working for the Toronto Police Services in Etobicoke as a police officer. Bourdignon testified that she was being paid $50 per hour, and that she spent approximately 30 hours reviewing TD’s file and preparing to give evidence.
[5] The other witness was Linda Roberts. Roberts’ involvement in this matter was as a senior property adjuster employed by Crawford & Company (Canada) Inc. (“Crawford”). Crawford was the independent adjustor retained by TD to handle the plaintiff’s claim. Roberts was the primary point of contact for the plaintiff up to TD’s denial of her claim. Roberts retired in 2018 and is not presently employed. She worked for Crawford for 12 years, and within the insurance industry for 20 years in total. Roberts requested that she be paid for her time associated with the trial, at a rate of $125 per hour. She testified that this was close to the hourly rate that she would have billed at Crawford at the time that she left in 2018. TD also authorized that payment.
[6] Ms. Ismail, the plaintiff’s counsel, submitted that the two witnesses are lay witnesses, and that it is an abuse of process to pay witnesses for the purpose of securing their participation. She argued that it is unfair that the economically superior party be permitted to pay its lay witnesses, and that doing so slants the trial process in favour of TD. She submits that both witnesses, even if they were still employed in their former capacities, are independent witnesses in whom TD cannot assert any proprietary interest, who should be treated in the same manner as any employee. For that proposition, she relies on r. 7.2-8 of the Rules of Professional Conduct regulating the conduct of lawyers licensed to practice by the Law Society of Ontario, titled “Communications with a Represented Corporation or Organization”, which provides:
7.2-8 A lawyer retained to act on a matter involving a corporation or organization that is represented by a legal practitioner shall not, without the legal practitioner's consent or unless otherwise authorized or required by law, communicate, facilitate communication or deal with a person
(a) who is a director or officer, or another person who is authorized to act on behalf of the corporation or organization;
(b) who is likely involved in decision-making for the corporation or organization or who provides advice in relation to the particular matter;
(c) whose act or omission may be binding on or imputed to the corporation or organization for the purposes of its liability; or
(d) who supervises, directs or regularly consults with the legal practitioner and who makes decisions based on the legal practitioner's advice.
[7] The commentary provided under that rule states, in part:
[1] The purpose of rule 7.2-8 and rules 7.2-8.1 and 7.2-8.2 is to protect the lawyer-client relationship of corporations and other organizations by specifying persons with whom a lawyer may not communicate, facilitate communication or deal if the lawyer represents a client in a matter involving a corporation or organization and the corporation or organization is represented by a legal practitioner. They apply to litigation as well as to transactional and other non-litigious matters. A lawyer may communicate with a person in a corporation or other organization, other than those referred to in rule 7.2-8, even if the corporation or organization is represented by a legal practitioner. These rules are intended to advance the public policy of promoting efficient discovery and favours the revelation of the truth by addressing the circumstances in which a corporation or organization is allowed to prevent the disclosure of relevant evidence. They are not intended to protect a corporation or organization from the revelation of prejudicial facts.
[2] Generally, rule 7.2-8 precludes contact only with those actively involved in a matter. For example, in a litigation matter, it does not preclude contact with mere witnesses. Further, communications with persons within the corporation or organization are not barred merely by virtue of the possibility that their information might constitute "admissions" in the evidentiary sense. To proscribe contact with any person within a corporation or organization on the basis that he or she may make a statement that might be admitted in evidence against the corporation or organization would be overly protective of the corporation or organization and too restrictive of an opposing counsel's ability to contact and interview potential witnesses. Fairness does not require the presence of a corporation's or organization's legal practitioner whenever a person within the corporation or organization may make a statement admissible in evidence against it.
[3] Rule 7.2-8 prohibits communications by a lawyer for another person or entity concerning the matter in question with persons likely involved in the decision-making process about the matter. These individuals are so closely identified with the interests of the corporation or organization as to be indistinguishable from it. They would have the authority to commit the corporation or organization to a position with regard to the subject matter of the representation. This person would have such authority as a corporate officer or because for some other reason the law cloaks him or her with authority, including making decisions affecting the outcome of the matter, including litigation decisions, or because their duties include answering the type of inquiries posed. These individuals include those to who the organization's legal practitioner looks for decisions with respect to the matter.
[4] Thus, subject to the exceptions set out in it, rule 7.2-8 would prohibit contact with those persons who exercise managerial responsibility in the matter, who are alleged to have committed the wrongful acts at issue in the litigation, or who have authority on behalf of the corporation to make decisions about the course of the litigation.
[5] A lawyer is not prohibited from communicating with a person in a litigation matter unless the person's act or omission is believed, on reasonable grounds, to be so central and obvious to a determination of liability that the person's conduct may be imputed to the corporation or organization. If it is not reasonably likely that the person is an active participant for liability purposes or a decision-maker respecting the outcome of the matter, nothing in rule 7.2-8 precludes informal contact with such a person.
[6] An individual who regularly consults with the corporation's or organization's legal practitioner concerning a matter will not necessarily be a person who also directs the legal practitioner. In some large corporations and organizations, some management personnel may direct or control counsel for some matters but not others. The mere fact that a person holds a management position does not trigger the protections of the rule.
[7] A person who is simply interviewed or questioned by a corporation's or organization's legal practitioner about a matter to gather factual information does not "regularly consult" with the legal practitioner. While a person's duties within a corporation or organization may include answering litigation-related inquiries, rules 7.2-8 to 7.2-8.2 do not prohibit an inquiry of this person by opposing counsel that is related to the person's knowledge of the historical aspects leading up to the alleged injury or damage which give rise to the subject matter of the representation.
[8] Ms. Ismail also relies on R v. Xenos, 1991 CanLII 3455 (QC CA), [1991] J.Q. No. 2200 (Que. C.A.), a case in which an insurance company, with police assistance, paid an informant/witness in exchange for testimony that led to a conviction. The Quebec Court of Appeal upheld the trial judge’s decision that this amounted to an abuse of process, and that the witness’ testimony be excluded. At para. 44 the basis of the court’s decision is set out, culminating with “[t]he promise of money in exchange for testimony leading to the conviction of an accused constitutes a direct invitation to perjury and the fabrication of evidence, even if that is not the purpose being pursued.”
[9] Additionally, Ms. Ismail stated that she too had summoned Bourdignon, but she was not responsive to her communications. Had she known that it was available to offer to pay Bourdignon, Ms. Ismail asserts that her client would have made the same offer of compensation and she would have prepared Bourdignon to testify on behalf of the plaintiff. Further, had she known that she could pay lay witnesses over and above the $50 plus mileage prescribed by the Tariff, she would have encountered less avoidance from potential witnesses who resisted becoming involved.
[10] Counsel for the Defendant, Mr. Odinocki, agreed that it is entirely inappropriate to pay a lay witness for the purpose of encouraging them to provide testimony at a civil trial. His submission is that Bourdignon and Roberts are not lay witnesses, but rather a former employee and agent who were direct and key participants in the events at issue in this trial. He characterized them as professional witnesses. TD has not paid to ensure their cooperation and attendance at trial—characterized by Ms. Ismail as “paying for their testimony”—but rather to ensure that they were compensated for fully reviewing the voluminous documents in this matter and refreshing their memories on events in which they have not been involved for many years. The payments were made, he submits, with a view to ensuring that this court received evidence from properly informed witnesses. Each witness spent 20-30 hours of her own time reviewing the documents and in associated preparation, and they should not be asked to do so without appropriate compensation. The amount paid was commensurate with what each witness would be earning if they were still in the positions that they held in 2014/15, and paying them now is no different than if they were providing testimony while still employed by TD and Crawford. He submits that exclusion of the witnesses’ testimony because they were paid would render it nearly impossible for corporations such as insurance companies to provide helpful evidence at trial in situations where former employees or agents have changed employers or retired.
Analysis
[11] Counsel agree, as does the court, that if Bourdignon and Roberts can be characterized as lay witnesses they should not have been paid to provide testimony.
[12] I disagree with Ms. Ismail’s characterization of these two witnesses, and her interpretation of the Rules of Professional Conduct as it relates to them. Both are individuals who, in their former capacities, were involved in decision-making for TD and/or who provided advice in relation to this insurance claim. I reach this conclusion because during the testimony of prior witnesses, documents were entered into evidence from joint exhibit books and otherwise which demonstrated that Bourdignon was actively involved in the investigation of the alleged fraud. Similarly, evidence received during the testimony of prior witnesses demonstrated that Roberts was not just a conduit for information flowing between the plaintiff and TD, but that she in fact she evaluated information and made recommendations to TD through its claims examiner, Robert Gulag. Roberts and Bourdignon had a direct line of communication with one another, and Roberts attended Bourdignon’s questioning of the plaintiff, her partner Darin Roy, and the complainant Wendi Ogden, during the early stages of the investigation.
[13] Accordingly, both witnesses are captured by the prohibition against communication set out by r. 7.2(8), by virtue of one or both of subrule (b) or (c). Both can be characterized as an employee or agent who, up to the point of the denial of the claim, were actively involved in the matter, and involved in decision-making with respect to adjusting, investigating and ultimately denying the claim. While they may not have been the ultimate decision maker, and certainly Roberts could not have been, they were both key individuals whose actions contributed to dictating the course taken by TD. The conduct of both, acting on behalf of TD, forms much of the basis of the plaintiff’s claim for breach of contract—by virtue of acts or omissions for which she asks TD be held liable. Both are “active participants for liability purposes”, thus precluding contact. Further, the action was commenced before the claim was denied, so some of their involvement is covered by litigation privilege.
[14] In short, Ms. Ismail did not have the option to contact or pay these witnesses on behalf of the plaintiff. These witnesses can be distinguished from an employee of TD who the plaintiff was permitted to summons and communicate with, Thomas Pellegrino. He testified about the contract existing between TD and one of its preferred vendors (contractors) who was involved in this matter, but Pellegrino had no involvement in the plaintiff’s claim.
[15] But the question remains, are Bourdignon and Roberts lay witnesses? Counsel for TD characterized them as “professional” witnesses who, in TD’s view, should be paid for their time and trouble.
[16] These witnesses cannot be characterized as participant or non-party experts as outlined in Westerhof v. Gee Estate, 2015 ONCA 206, at para. 6. The court in Westerhof makes clear, at para. 60, that expert witnesses falling into such classifications must not have been engaged by or on behalf of a party to the litigation. If they are so engaged by a party, they must comply with r. 53.03. (See Heyworth v. Doyle Plumbing Heating and Cooling, 2022 ONSC 677 at paras. 35-36). Further, neither of them were called to provide opinion evidence.
[17] However, I agree that they can be classified as “professional” witnesses. This designation has historically been reserved for lawyers, doctors, accountants and those in other white collar professions. The main rationale for paying professional witnesses is to compensate them for the loss of other remunerative work as they prepare for and attend at trial.
[18] Case law does not offer much guidance on the question of the appropriateness of paying such professionals for review, preparation and trial attendance. The issue appears to be primarily addressed in costs decisions, in the context of whether disbursements incurred for their fees are recoverable. Typically, such witnesses have been treating physicians or lawyers, and their fees were ordered to be paid by the losing party. See for example: Keam v. Caddey, 2009 CarswellOnt 5817 (S.C.J.), at para. 18; Arpy-Ara Co. v. A.R. Manufacturers & Distributors Ltd., 2015 ONSC 6175, at paras. 11-16; Hanis v. University of Western Ontario, 2006 CanLII 23155 (ON SC), [2006] O.J. No. 2763 (S.C.J.); and Geffen v. Gaertner, 2020 ONSC 992, at paras. 27-32.
[19] However, in Eastern Power Ltd. v. Ontario Electricity Financial Corp. 2008 CarswellOnt 7357 (S.C.J.), the successful defendant sought to recover amounts paid to five former employees in the amount of $175,970.79. The former employees testified at trial, but “OEFC also paid for their time in identifying and reviewing extensive documentation, attending examinations-for-discovery, reviewing and answering undertakings, assisting with responses to the Request to Admit and a host of other activities that Cassels Brock maintains was critical to the preparation and delivery of OEFC's defence of this action” (at para. 38). The plaintiff opposed any amount paid above the attendance money prescribed by the Tariff, arguing that all five witnesses were fact witnesses at trial. The court ordered that a portion of the expense be paid. Included in the reasons cited were that the plaintiff could not be surprised that the defendant would have to pay for the attendance and preparation of witnesses who, as the plaintiff knew, were no longer employees, and that the disbursement was reasonably necessary for the conduct of the proceeding.
[20] In D.W. Matheson & Sons Contracting Ltd. v. Canada (Attorney General), 2000 NSCA 44, the trial judge disallowed the successful plaintiff’s claim for fees paid to two engineers it called to testify as fact witnesses about their supervision of the plaintiff’s work. He did so on two bases: he considered that they were fact witnesses, as opposed to expert witnesses, who had a duty to testify without payment of such fees; and second, he thought that the assistance the engineers rendered to Matheson's counsel could be reflected in the counsel fee awarded and that allowance of this disbursement might lead to double recovery.
[21] On appeal, Cromwell J.A. (as he then was) delivered the judgment of the court. He found that the Rules and Tariff applicable in Nova Scotia provided the trial judge with sufficient discretion to allow the cost of preparation time, although not payment for attendance beyond that prescribed by the Tariff (at paras. 78-80). However, in his view, the key question was not whether the trial judge had this discretion—he “clearly” did—but whether it should be exercised (at para. 81). After considering the law addressing the duty of a lay witness to testify without compensation beyond that permitted by the Tariff, Cromwell J.A. determined that it is not contrary to basic principles of our system of the administration of justice to allow recovery of an allowance for preparation time of fact witnesses (para. 87).
[22] Paragraphs 84 and 85 of his Reasons are instructive to the question before me:
The trial judge noted, however, that there are arguments of principle which favour allowing witness preparation fees as disbursements. Where the witness has been involved in complex matters, extensive trial preparation will not only be desirable but, in practical terms, essential. Such preparation time may far exceed the burden imposed by the civic duty to give evidence. While everyone with relevant information has a duty to testify pursuant to a subpoena, there is generally no legal duty to meet with counsel for preparation to give evidence. However, duty or no, thorough and proper preparation of witnesses is highly desirable for the orderly conduct of trials. While, in theory, witnesses such as these engineers could simply be served with a subpoena and attend at the trial to be questioned, such an approach would be unworkable in practice. It would significantly diminish the efficiency of the trial process and the comprehensibility of the evidence. As Professor Mewett points out, preparation of witnesses is the mark of good trial lawyer. It is to be commended because it promotes a more efficient administration of justice and saves court time: A. W. Mewett, Witnesses (looseleaf, updated to release 2, 1999) at 6-1, quoting from State v. McCormick, 259 S.E.2d 880 (U.S. N.C., 1979), at 882. Such preparation should be encouraged, not sanctioned.
The possibility of allowing recovery of a disbursement of this nature is also consistent with the purpose of awarding party and party costs. A costs order is intended to provide a significant contribution to, but not full indemnity for, reasonable expenses necessarily incurred on behalf of the party awarded costs. Failure to prepare witnesses such as these would seriously impede the efficient trial of the action; it is necessary as a practical matter. Where extensive preparation far exceeding the routine is, practically speaking, necessary, where it is reasonable to compensate the witness and liability to do so is incurred by the party calling the witness, it is consistent with the purpose of awarding costs to recognize this reality by an appropriate allowance.
[23] In reaching his decision that the Rules and Tariff permitted additional recovery for preparation time for witnesses, Cromwell, J.A. considered r. 63.04 of the Civil Procedure Rules of Nova Scotia and s. 2(13) of Tariff D to those Rules, the latter of which gives a broad discretion to allow all other reasonable expenses necessarily incurred, when allowed by the taxing officer.
[24] Unlike Nova Scotia’s r. 63.04, which requires that the costs between parties be fixed by the court in accordance with the Tariffs unless the court otherwise orders, r. 57(3) of Ontario’s Rules of Civil Procedure requires the court, when awarding costs, to fix them in accordance with r. 57(1) and the Tariffs. However, r. 57(1)(i) permits the court, in exercising its discretion under s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43, to consider “any other matter relevant to the question of costs.” Also, r. 58.05(2) provides “no other fees, disbursements or charges shall be assessed or allowed unless the court orders otherwise.” Further, s. 35 of Tariff A allows “where ordered by the presiding judge or officer, any other disbursement reasonably necessary for the conduct of the proceeding, a reasonable amount in the discretion of the assessment officer.” This is comparable to s. 2(13) of the Tariff considered by Cromwell J.A., which gives a broad discretion to allow “all other reasonable expenses necessarily incurred, when allowed by the taxing officer” (at para. 78). Accordingly, I find that there is a discretion for courts in Ontario to award additional costs for non-expert witness preparation time where warranted. I will leave to another day whether this could also include an elevated attendance fee beyond that prescribed by the Tariff.
[25] While the question of costs is not before me, Cromwell J.A.’s reasons in D.W. Matheson & Sons Contracting Ltd. provide a clear rationale for why it may be desirable in the interests of justice to permit testimony from witnesses who have been paid for their preparation time. In short, in non-criminal cases in which the facts make it reasonable to pay the witness for their time, it will not be an abuse of process for the court to receive their testimony. While this is not an exhaustive list, the relevant factors that may be considered are:
Whether the witness is in the employment of the party seeking the testimony. Compensating a witness who is already a paid employee is likely inappropriate, unless it can be established that there is some basis for the employer or employee incurring significant, additional expense for preparation time;
The amount of preparation time actually required. This will depend on the nature of the case, the degree of the witness’ involvement, the volume of the potential evidence, and the length of time since the witness has had access to the documents related to the subject matter of the litigation and/or contact with the party calling that witness. Payment for preparation not required or exceeding that which would be normal or expected for the witness’ involvement in the case may call into question the reason for the payment;
Whether the payment to a witness is likely to enhance the quality of their preparation and thus enhance trial efficiency and/or advance the search for the truth; and
Whether the witness is already receiving compensation for services that includes an allowance for testifying, calling into question the reason for the payment.
[26] There may be other relevant factors arising in other circumstances, but the idea is that payment to witnesses for preparation must be warranted in the circumstances and should not be a regular occurrence. The court must be alive to whether the payment is being made for a purpose other than preparation. And such payment should always, as Mr. Odinocki has done, be disclosed to the opposing party. Preferably this disclosure should be made well in advance of trial so that objections can be discussed at the pretrial, or in enough time to seek a ruling on the admissibility of the witness’ evidence prior to trial.
[27] Payment to a witness in circumstances in which it is reasonable to pay them for their preparation time does not raise a presumption that their credibility or the reliability of their evidence is tainted. It is potentially a factor to be considered in assessing their testimony, but in my view courts should not rush to the conclusion that there is something unseemly about paying a professional witness for their time, or that doing so will give some advantage to the paying party.
[28] This is entirely different than paying a witness in a criminal matter, as the jeopardy facing an accused person should never be impacted, or even be seen to be impacted, by payment to a witness.
[29] Roberts testified on the voir dire related to this motion that she requested the payment. That alone would be an unsatisfactory reason for payment, as she has a duty to respond to a summons and testify to the facts within her knowledge.
[30] However, in the circumstances of this case Bourdignon and Roberts had to review an extensive affidavit of documents from TD. While I have not seen the entirety of the affidavit, during the trial both counsel have made reference to the extensive volume of documents. The joint exhibit books alone are three large volumes plus a supplementary volume, and another 900+ pages of telephone notes were reviewed by Roberts to some extent. Neither of these witnesses has had access to these documents for many years. Roberts’ involvement ended seven years ago when the claim was denied, and Bourdignon’s involvement ended, at the latest, four years ago.
[31] I do not place any significance on whether either of these witnesses was forgoing other remunerative work in order to prepare. If TD was barred from incentivizing these witnesses through money, it would be relegated to relying on the goodwill of a former employee and agent to spend hours of their own time reviewing this material. TD’s case could potentially be compromised by an unprepared witness, not to mention the inefficiencies at trial—it is not helpful to the court to hear from a witness who is unfamiliar with the facts in issue. One can foresee considerable trial time wasted by the unprepared witness who has not seen business records and other material for years, who tries to wade their way through volumes of material while on the witness stand. And wasted trial time is not something for which our civil justice system has any more tolerance.
[32] For the foregoing reasons, the plaintiff’s oral motion was denied.
HEALEY J.
Released: June 9, 2022