OSHAWA COURT FILE NO.: CV-19-142636 DATE: 20230417

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Marmak Holdings Inc., Plaintiff and Iris Capital Inc., Tiles and Stone Etc. Inc., Eddy Mastrogiuseppe And Robert Mastrogiuseppe

BEFORE: Justice S. J. Woodley

COUNSEL: Matthew Kersten for the Plaintiff/Moving Party Marco Drudi, for the Defendant/Responding Party Iris Capital Inc.

HEARD: April 6, 2023

RULING ON IMPLIED WAIVER MOTION

OVERVIEW

[1] This motion concerns refusals to answer questions on the grounds of solicitor-client privilege in the context of a summary judgment motion.

[2] The issue to be resolved is whether the Defendant’s lawyer, Enzo Salvatori (“Enzo”) is required to answer certain questions posed by the Plaintiff’s counsel at his Rule 39 examination conducted on November 10, 2022.

[3] The Plaintiff claims that the Defendants’ impliedly waived privilege by putting their counsel’s state of mind in issue by their pleadings at paragraph 4 and 6, by the Responding Affidavit of Eddy Mastrogiuseppe, at paragraph 8, and by the Sur-Reply Affidavit at paragraph 2.

[4] The Defendants submit that only in the clearest of circumstances, when necessity and fairness dictate, or where the client puts the contents of those communications at the heart of the issue to be determined, should the court pierce solicitor-client privilege. The Defendants submit that there was no implied waiver of privilege and the motion should be dismissed.

[5] For the reasons provided below, I find that there was no implied waiver of privilege and hereby dismiss the motion with costs fixed (as agreed) at $5,000 payable by the Plaintiff to the Defendant Iris Capital within 30 days of today’s date.

THE LAW AND ANALYSIS

[5] Solicitor and client privilege is recognized to be a paramount principle of fundamental justice. See Canada (National Revenue) v. Thompson, 2016 SCC 21 at para. 17.

[6] It is a fundamental principle of law that the privilege belongs to the client, not to counsel, and that only the holder of the privilege can waive it.

[7] A voluntary waiver of privilege is one that is deliberate and knowing. However, waiver can also be implied where fairness demands it.

[8] An implied waiver always requires some intent to waive the privilege, if only to a limited extent.

[9] Where privilege has been waived even to a limited extent, the law requires that in fairness and consistency, it is entirely waived.

[10] The reasoning behind waiver by implication and rejection of partial disclosure is that a party cannot be allowed to disclose only that portion of communication that could advance their position but mislead the other party. As such, full disclosure will be ordered in circumstances where fairness requires it.

[11] If a party wishes to assert waiver of the privilege, the onus is on the party asserting waiver. See Industrial Alliance Security Inc. v. Kunicyn, 2020 ONSC 3393, at para. 27 – 29.

[12] Before a judge can find that a witness has implicitly waived privilege, the opposing party must show that the witness intended to waive the privilege, at least to a limited extent. Where partial disclosure would be misleading, fairness and consistency require that the witness be deemed to have waived privilege over the entire document.

[13] The common rationale is best summarized by Brown J. in R. v. Fast, 2009 BCSC 1671, 202 C.R.R. (2d) 356, at para. 55, as follows:

[A]n accused cannot put privileged communications in issue and then attempt to prevent their disclosure by claiming that the communications are privileged. By relying on the privileged communications in some way, the accused has demonstrated an intention to waive that privilege to some extent. Trial fairness and disposition of the matter on its merits then entitle the opposing party to see the privileged document tor communications the witness has put in issue in or to assess the validity of the witness’s reliance on it through cross-examination.

[14] A witness can implicitly waive privilege through their conduct by putting the legal advice they received in issue, by relying on a privileged report in advancing their defense or by testifying about privileged communications during direct examination.

[15] The guiding principles in an inquiry about whether privilege has been waived must be fairness and consistency. See S. & K. Processors Ltd. v. Campbell Ave. Herring Producers Ltd., [1983] 4 W.W.R. 762 at para. 10; R. v. Fast, at paras. 39-43, 54-55; R. v. Chan, 2002 ABQB 753, 325 A.R. 208, at para. 102.

[16] In deciding when it is appropriate to disclose information protected by solicitor-client privilege, the Court should only disclose information that is an “absolute necessity” to dispose of the issues facing the court. The Supreme Court in Goodis v. Ontario (Ministry of Correctional Services), 2006 SCC 31, at para. 20, held that the principle of “absolute necessity” is as “restrictive a test as may be formulated short of an absolute prohibition in every case”.

[17] The Plaintiff argues that the following statements, with particular emphasis on those portions noted below in italics, are sufficient to give rise to a waiver of privilege:

Statement of Defence

a. Paragraph 4: On or about August 20, 2019, a representative of Marmak apparently executed the Agreement alleging and/or purporting to have the authority to do so on behalf of Miletta. It was subsequently learned this was false.

b. Paragraph 6: Shortly thereafter, Iris performed the necessary due diligence but received information from Miletta that Miletta had not consented to the execution of the Agreement on its behalf, would not cooperate to provide for inspection, would not cooperate with the closing of the transaction and would not cooperate with respect to the formal Lease and/or the occupancy of the premises.

Responding Affidavit

c. Paragraph 8: Almost immediately after the Waiver was signed and sent, I received further information about the ongoing dispute so I spoke with my lawyer about the Agreement, the problems with completing the transaction and the ongoing litigation between Marmak and Miletta and I decided that I would not pursue the matter any further as I did not want to entangle Iris in the ongoing litigation between the two of them. Iris therefore refused to provide the second deposit and Iris walked away from the “deal”.

Sur-Reply Affidavit

d. Paragraph 2: I did have a general understanding of the dispute but did not have the details until my current lawyer was able to obtain the documentation through this litigation.

[18] The issue is whether the Defendant has opened an inquiry into whether the legal advice effected his state of mind, thereby waiving his privilege in that legal advice.

[19] The jurisprudence is clear; generally speaking, placing state of mind at issue will not amount to waiver. However, where a party has placed its state of mind at issue and given evidence that it received legal advice which, in part, formed the basis of that state of mind, the distinction between state of mind and the legal advice cannot be maintained. See Leggat v. Jennings, 2015 ONSC 237, 65 C.P.C. (7th) 410, aff’d 2015 ONSC 6363, 2015 CarswellOnt 15710 (Div. Ct.), at paras. 33-34, 41 and 44.

[20] As Perell J. held in Creative Career Systems Inc. v. Ontario, 2012 ONSC 649, 27 C.P.C. (7th) 172, at para. 30:

[A] deemed waiver and an obligation to disclose a privileged communication requires two elements; namely: (1) the presence or absence of legal advice is relevant to the existence or non-existence of a claim or defence; which is to say that the presence or absence of legal advice is material to the lawsuit; and (2) the party who received the legal advice must make the receipt of it an issue in the claim or defence.

[21] I find that those portions of the Statement of Defence relied upon by the Plaintiff do not satisfy the test set out in Creative Career Systems as the impugned paragraphs do not make the receipt of legal advice an issue in the defence.

[22] It is not the receipt of legal advice that is material to the defence – it is the receipt of information that Miletti failed to consent to the transaction that is at the core of the defence.

[23] With respect to paragraph 8 of the Responding Affidavit, the fact that the Defendant obtained legal advice after receiving information also does not put the legal advice in issue nor is such legal advice relevant to any issue in dispute.

[24] With respect to paragraph 2 of the Sur-Reply Affidavit, the fact that the Defendant obtained details of the dispute between Marmak and Miletti from his “current lawyer” also does not put the legal advice in issue nor is such legal advice relevant to any issue in dispute.

[25] The relevant issue is whether the information relied upon by the Defendant to resile from the Agreement was accurate and correct.

[26] Simply stated, the issue is whether Miletti consented to the transaction.

[27] Either Marmak had authority to sign on Miletti’s behalf, or they did not.

[28] If Marmak had authority to sign on Miletti’s behalf - any legal advice provided to the Defendant is irrelevant.

[29] If Marmak did not have authority to sign on Miletti’s behalf - any legal advice provided to the Defendant is also irrelevant.

[30] This information, whether Marmak had authority to sign on Miletti’s behalf, and/or whether Miletti consented to the transaction, is and has always been within the knowledge of the Plaintiff and/or may be subject to the Plaintiff’s own claim of solicitor and client privilege.

[31] The court will decide whether the Defendant was authorized to resile from the transaction.

[32] The lawyer’s information and/or advice to the Defendant is not relevant to determination of this issue.

[33] The guiding principles in an inquiry about whether privilege has been waived must be fairness and consistency based upon absolute necessity.

[34] In the present case, the information and/or legal advice provided to the Defendant by their lawyer has no bearing on determination of the issues and as such absolute necessity is not made out.

DISPOSITION OF MOTION

[35] For all the above noted reasons, I find that there was no waiver of solicitor client privilege. The motion is dismissed with costs fixed at $5,000.00 payable by the Plaintiff to the Defendant Iris Capital within 30 days of the date herein.

Justice S. J. Woodley