Court File and Parties
COURT FILE NO.: CV-21-3072-00
DATE: 20221215
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: J.D. Buote Professional Corporation, Plaintiff/Responding Party
AND:
Randy S. McLeod, Defendant/Moving Party
BEFORE: Rahman, J.
COUNSEL: Kris Borg-Olivier and Nick Ranieri, for the Plaintiff/Responding Party
Nadia Chiesa and Max Skrow, for the Defendant/Moving Party
HEARD: August 2, 2022
ENDORSEMENT
[1] A client retains a lawyer to act for him on a tax matter. After the lawyer does work for the client, they disagree over how the fee should be calculated according to the retainer agreement. The client refuses to pay the fee. The lawyer sues. He files a statement of claim that includes information subject to solicitor-client privilege. The issue on this motion is whether the client’s refusal to pay the fee constitutes an implied waiver of solicitor-client privilege, and whether those portions of the statement of claim containing privileged information should be struck.
[2] The defendant/moving party, Randy McLeod, is the client. He moves to strike out paragraphs of the plaintiff/responding party, J.D. Buote Professional Corporation’s, statement of claim under Rule 25.11. The plaintiff is suing the defendant for legal fees. The plaintiff has filed a statement of claim detailing the retainer agreement itself, and also detailing the discussions between himself[^1] and the defendant, and the advice that he gave to the defendant in the course of their relationship. The defendant argues that several paragraphs in the plaintiff’s statement of claim disclose privileged communications between himself and the plaintiff. The defendant asserts that he never waived solicitor-client privilege, either explicitly or implicitly. The defendant argues that most of the privileged information in the statement of claim is unnecessary for the plaintiff to properly plead the claim and should be struck. Alternatively, if the paragraphs are not struck, the defendant asks that the court file be sealed to protect the privileged information.
[3] The plaintiff counters that the privileged information is necessary to properly advance the action. The plaintiff says that he must disclose the privileged information to pursue the claim. The privileged information set out in the claim is essential to understanding the retainer agreement’s payment term, and the parties’ understanding of it. The plaintiff takes no position on the defendant’s alternate requested relief to have the court file sealed.
[4] The defendant’s motion is allowed in part. Much of the information contained in the statement of claim is subject to solicitor-client privilege. The defendant did not waive the privilege. However, I do not consider it appropriate to strike the paragraphs from the statement of claim. The plaintiff must be allowed to include the privileged information in the pleading. Lawyers must be able to collect fees that they say are owed to them. Collecting those fees may require instituting civil proceedings. The plaintiff is entitled to put privileged communications in his pleadings to the extent that the communications are necessary to plead the claim. To the extent those pleadings contain privileged information, they should not be available to the public. Therefore, the court file should be sealed to protect the privileged information within the statement of claim and to permit the defendant to respond without worrying about revealing privileged information to anyone outside the circle of privilege.
The nature of the privilege
[5] Solicitor-client privilege is a class privilege. Once information falls within the scope of the privilege, a court has no discretion to conduct a balancing of interests on a case-by case basis (R. v. McClure, 2001 SCC 14, at para. 35). Although no privilege is absolute, “solicitor-client privilege must be as close to absolute as possible to ensure public confidence and retain relevance” (McClure, at para. 35). The privilege belongs to the client, not the lawyer. Only the client can waive the privilege. The waiver can be express or implied. An implied waiver may occur “where fairness requires it and where some form of voluntary conduct by the privilege holder supports a finding of an implied or objective intention to waive it” (R. v. Youvarajah, 2011 ONCA 654, at para. 147). A court may infer a waiver, “where the holder of the privilege takes some action or position inconsistent with the maintenance of the privilege” (Armstrong v. Penny, 2021 ONSC 6646 at para. 32).
[6] A finding of implied waiver must be consistent with the almost absolute nature of the privilege. As Harris J.A. observed in Soprema Inc. v. Wolrige Mahon LLP, 2016 BCCA 471 at para. 50:
The starting point of an articulation of the test for implied waiver must recognize what the Supreme Court of Canada has made clear about the importance of solicitor-client privilege. In R. v. McClure, at para. 35, the Court said that solicitor-client privilege “must be as close to absolute as possible to ensure public confidence and retain relevance. As such, it will only yield in certain clearly defined circumstances, and does not involve a balancing of interests on a case-by-case basis” (emphasis added). Furthermore, the Court said (at para. 17) that solicitor-client privilege “is part of and fundamental to the Canadian legal system. ... [I]t has evolved into a fundamental and substantive rule of law.” This view was affirmed in Goodis v. Ontario (Ministry of Correctional Services), 2006 SCC 31 at paras. 20‑21, where the Supreme Court of Canada made clear that communications protected by privilege should be disclosed only where “absolutely necessary”, applying “as restrictive a test as may be formulated short of an absolute prohibition in every case.” [emphasis in the original]
[7] Given the almost absolute nature of the privilege, a court must exercise caution not to “treat implied waiver as ultimately a discretionary call about trial fairness” (Soprema, at para. 51).
Did the defendant waive his privilege?
[8] The plaintiff argues that the defendant’s refusal to pay the plaintiff’s fee is an implied waiver of solicitor-client privilege. The plaintiff likens his claim to a claim by a client against a lawyer. When clients sue their lawyers, there is usually an implied waiver of privilege. The plaintiff says that the situation should be no different when lawyers must sue their clients to collect their fees. The plaintiff cites Professor Adam Dodek’s text, Solicitor-Client Privilege (Markham: LexisNexis Canada Inc.) in which the author states (at §8.124) that, “[t]he general rule is that a client's refusal to pay a lawyer's bill constitutes a waiver of the client's right to confidentiality.” In support of this proposition, the plaintiff also cites Rule 3.3-5 of the Law Society of Ontario’s Rules of Professional Conduct, which allows a lawyer to “disclose confidential information in order to establish or collect the lawyer’s fees.” Finally, the plaintiff argues that he should be able to plead some privileged communications in the interests of “fairness and consistency." He supports this argument by pointing to the defendant’s testimony (when the defendant was cross-examined on his affidavit) that he disagrees with the plaintiff’s characterization of the terms of his retainer. The plaintiff says that “any privilege that might exists should be made subservient to the public policy interest in seeing the terms of [the retainer] … enforced.” The plaintiff asserts that he has only disclosed what is necessary for him to enforce his contractual rights.
[9] I cannot accept the plaintiff’s position that the defendant impliedly waived privilege by refusing to pay the plaintiff’s fee. I say that for the following reasons.
[10] First, it is important to distinguish between those authorities, and professional rules, that permit disclosure of confidential information, and the law surrounding the waiver of solicitor-client privilege. Confidential information and solicitor-client privilege are not the same thing. A lawyer’s requirement to keep information confidential is broad. It covers a wider scope of information than solicitor-client privilege. It applies to information even if that information does not come directly from the client while obtaining legal advice. The commentary to Rule 3.3-1 explains that confidentiality and privilege are not synonymous:
This rule must be distinguished from the evidentiary rule of lawyer and client privilege, which is also a constitutionally protected right, concerning oral or documentary communications passing between the client and the lawyer. The ethical rule is wider and applies without regard to the nature or source of the information or the fact that others may share the knowledge.
[11] In short, while all privileged information is confidential, not all confidential information is privileged.
[12] Solicitor-client privilege is not just an evidentiary rule but is a substantive legal right. It is a principle of fundamental justice (McClure, at paras. 17, 24, and 41). It is important not to let the exceptions to ethical rules respecting the disclosure of confidential information dictate what a court will regard as an implied waiver of solicitor-client privilege. To the extent that courts have used the Law Society rule permitting disclosure of confidential information to justify finding implied waiver of solicitor client privilege, those authorities do not seem consistent with the nearly absolute nature of the privilege. As Professor Dodek observed at §8.127, “In this area, courts and Law Societies completely ignore all of the high-minded rhetoric regarding the privilege being a fundamental right attracting constitutional protection.” Indeed, the fee collection exemption to confidentiality/privilege has been criticized for creating a convenient and self-interested way for lawyers to get around one of the most important characteristics of the solicitor-client relationship. As Professor Dodek writes (citing former Law Society Treasurer Gavin MacKenzie) (Solicitor-Client Privilege §8.126):
[T]he justification for the exception [to confidentiality] is that “fairness should prevent clients from using the confidentiality rule to their lawyers’ disadvantage. But the rule may inflict on non-lawyers harm that is often immeasurably greater than the harm inflicted on lawyers who may be unable to prove how much work they have done to earn their fees… the public may be forgiven for suspecting that the legal profession may not be free of self-interest.
[13] Second, assuming there is no general rule that a client waives privilege by not paying a lawyer’s fee, I also cannot find that “fairness and consistency” dictate a waiver of privilege here. While the defendant intentionally withheld payment, he may have done so legitimately. The situation in the case at bar differs from one where clients take issue with their lawyers’ conduct and accuse them of negligence or some other shortcoming in a public pleading or proceeding. Where a client initiates a claim, and relies on information about the solicitor-client relationship in the claim, fairness dictates that the lawyer be able to respond with privileged information where necessary. In those circumstances, it is easier to see why fairness would permit lawyers to be able to use a client’s privileged communications to defend themselves. Fairness will generally only ground an implied waiver where there is “some manifestation of a voluntary intention to waive the privilege at least to a limited extent” (S. & K. Processors Ltd. v. Campbell Ave. Herring Producers Ltd., 1983 CanLII 407 (BC SC), [1983] 45 B.C.L.R 218 [S.C.] at para. 10). Where a lawyer initiates a claim, it is harder to see why the client’s actions constitute implied waiver. Where a lawyer sues, it is the privilege protector, rather than the privilege holder, who has made some aspect of the relationship an issue.
[14] Despite the nearly absolute nature of solicitor-client privilege, a lawyer who has a legitimate claim against a client must be able to pursue it. And in circumstances like the case at bar, where there is a dispute over the retainer (which itself is privileged), the lawyer will often need to disclose privileged communications within the pleadings. Because the lawyer knows the communications’ content, there is no need to regard the client’s refusal to pay a fee as waiver of privilege. The lawyer may rely on the privileged information necessary to plead the claim as long as the lawyer takes steps to protect the information from being disclosed to others. This approach is concisely captured by former Law Society treasurer Malcolm Mercer in his Canadian Bar Review (vol. 92) article titled Professional Conduct Rules and Confidential Information Versus Solicitor-Client Privilege: Lawyers’ Disputes and the Use of Client Information, 2015 CanLIIDocs 229:
Whether by an assessment of accounts or otherwise, lawyers are rightly entitled to seek payment of their accounts and clients are rightly entitled to dispute the amounts claimed. There is no issue of confidentiality inter se, since both the lawyer and the client know, or are entitled to know, all of the information relevant to the dispute. Given that privilege is the client’s right, it is illogical to treat a claim for payment by a lawyer as waiver. It would be wrong in principle to require a client to waive privilege in order to dispute the amount claimed.
To summarize, lawyers and clients ought to be able to access the courts to resolve disputes between them in respect of their confidential relationships without the client thereby being forced to give up fundamental privilege rights. Applying the principle of a limited waiver effectively addresses this problem in respect of claims by the client but not where the lawyer is the claimant. It is coherent and principled to see lawyer-client disputes as not raising the issue of privilege and therefore not giving rise to the issue of waiver at all.
[emphasis added]
[15] Where a lawyer decides to sue a client, and it is necessary for the lawyer to include privileged information, the lawyer should request that the document containing privileged communications be filed under seal. The lawyer may also seek directions from the court, especially if the claim will be served on anyone outside the circle of privilege (see, for example, Mathews, Dinsdale & Clark LLP v. 1772887 Ontario Limited et al., 2021 ONSC 2563).
[16] A lawyer should still avoid disclosing any more information than is necessary in the pleadings even if the document is sealed. The rule that applies to limiting disclosure of confidential information – only what is necessary – applies with equal force to using confidential information, even in a non-public pleading. Though judges are within the circle of privilege (since it is, ultimately, up to a court to adjudicate claims of privilege), the importance of the privilege means that privileged communications should not be unnecessarily disclosed, even to the court.
[17] I will next consider whether the plaintiff has only pleaded those communications that are necessary to make out the claim.
Are the communications here necessary to plead the claim?
[18] Although the defendant sought to strike most of the paragraphs that he says are subject to privilege, he acknowledges that the plaintiff was entitled to plead privileged information if it was necessary to advance his claim. The defendant’s main objection was that many of the paragraphs are unnecessary to advance the claim. I will not detail all of the passages with which the defendant takes issue. His position is essentially that the plaintiff only needs to plead the agreement, and explain the work that was actually done. He says that there is no reason for the plaintiff to give details about discussions that took place between them, or the specific legal advice that the plaintiff gave him.
[19] The plaintiff counters that all of the paragraphs that the defendant seeks to have struck are necessary to plead the claim. The plaintiff argues that the details in the claim are necessary because the pleadings govern almost every dispute that will take place from now until trial, including what questions can be asked at discovery, and which witnesses can be called. The plaintiff also says that it is too early in the action for the court to determine what is and is not necessary.
[20] I agree with the plaintiff that privileged communications that are in the statement of claim are necessary to plead the claim.
[21] The plaintiff must establish what the agreement was between himself and the defendant. Because both parties agree that the plaintiff’s fee would be based on some percentage of the difference that the plaintiff’s work made to the defendant, the plaintiff must be able to plead those communications that would demonstrate the difference between the tax that the defendant would originally have paid, and the tax that he did pay. It is also necessary for the plaintiff to include any discussions between himself and the defendant that would explain what each party’s understanding of the retainer agreement was. Indeed, in many ways, the inclusion of these communications serves the purpose of putting the defendant on notice about the precise nature of the plaintiff’s factual allegations. I cannot find that the plaintiff has disclosed more of the privileged communications than is necessary.
Conclusion
[22] The defendant’s motion is granted in part. The motion to strike portions of the statement of claim is dismissed. The motion to seal documents filed in this proceeding is granted. It is necessary to depart from the open court principle in these circumstances. Because I have found that the defendant has not waived his privilege, protection of the privilege is mandatory, and the court cannot, in its discretion, override that privilege by engaging in a balancing of interests (see Named Person v. Vancouver Sun, 2007 SCC 43, at paras. 38-44). All documents filed in this proceeding that contain privileged information shall be sealed and shall not form part of the public record, subject to a further order of this court. It is further ordered that the defendant has 30 days from the release of these reasons to file his statement of defence.
[23] I encourage the parties to resolve the issue of costs on their own. If they cannot do so, the defendant may file his costs submissions (two pages, double-spaced), costs outline, and any offers to settle by 4:30 pm by December 30, 2022. The plaintiff may respond by January 9, 2023 (two pages, double-spaced), costs outline, and any offers to settle. If I do not receive submissions within these time limits, I will assume the parties have resolved the issue and will make no costs order.
Rahman, J.
Date: December 15, 2022
[^1]: Although Mr. Buote’s corporation is the plaintiff, I will refer to the plaintiff as if it were Mr. Buote suing, as the parties have in their submissions.