COURT FILE NO. : CV-22-00676809-0000 DATE : 20230713

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: 2177546 ONTARIO INC. Applicant AND: 2177545 ONTARIO INC. Respondent

BEFORE: Justice Chalmers

COUNSEL: D. Rosenbluth, C. Paliare, and J. Song, for the Applicant R. Campbell, for the Respondent

HEARD: June 21, 2023, by videoconference

ENDORSEMENT

OVERVIEW

[1] The Applicant 2177546 Ontario Inc. (546 Inc.) brings this motion for an order granting judgment in its favour. The Applicant argues that Paul Halyk (Halyk), the principal of the Respondent, 2177545 Ontario Inc. (545 Inc.) accessed confidential and privileged communications between Peter Labiris (Labiris), the principal of 546 Inc. and its legal counsel.

[2] Halyk had access to the e-mail account used by Labiris since at least 2021 when litigation between the two parties began. His access remained undetected by Labiris until March 2023. Halyk does not deny reviewing at least some of the e-mails in the e-mail account, including e mails from the Applicant’s legal counsel. He argues that this was a general e-mail account and Labiris could have had an expectation of privacy, and as a result, the e-mails found on the account were not privileged.

[3] Labiris argues that Halyk conceded he reviewed confidential e-mails and that there is a presumption of prejudice that has not been rebutted by Halyk. Labiris states that Halyk failed to disclose what e-mails he read over what time period, whether any of the e-mails were shared with his lawyer and what e-mails he preserved. In the absence of this evidence, Labiris argues that an adverse inference is to be applied that the e-mails Halyk reviewed were relevant and prejudicial. Because of the Halyk’s “exceptional” conduct, Labiris is seeking the “exceptional” remedy of judgment on the Application.

[4] For the reasons set out below, I find that Halyk accessed confidential communications between Labiris and/or his advisors and his lawyers. Halyk failed to rebut the presumption that his review of the material was prejudicial. Although I do not grant judgment on the Application, I order Halyk’s Notice of Appearance struck and that the matter proceed as an undefended Application.

FACTUAL BACKGROUND

The Application

[5] Halyk and Labiris are former brothers-in-law and longtime business partners who were involved in various real estate developments. There was a breakdown in their relationship in 2021. Labiris describes the current state of their relationship, as “toxic to the point where I do not have, and am not willing to have, any direct communication with [Halyk].”

[6] Following the breakdown in their relationship, several civil proceedings were commenced. There are currently three civil actions, in addition to this Application. The proceedings relate to the ownership of various assets, including the shares to the entities that make up the Zitia Group. The Zitia Group is an informal name applied to a number of related corporations in which Labiris and Halyk were equal owners. Labiris’ stated objective is to achieve a division of the properties that the two of them own and that the parties go their separate ways. Halyk states that he seeks the same outcome.

[7] This Application is brought pursuant to the Partition Act, R.S.O. 1990, c. P.4.. The subject matter of the Application is a piece of vacant development land at 227 Decou Road, Simcoe, Ontario (the Simcoe Property). The Simcoe Property is co-owned by Halyk and Labiris through their respective holding companies. According to Halyk, the property consists of 102 acres and the current estimated value is $80 million.

[8] In early 2021, an application was made to the local Committee of Adjustment for a severance of the Simcoe Property into two equal parcels such that they could later be conveyed as two separate pieces of land. On its face, the severance application was signed by both Halyk and Labiris. The Committee of Adjustments granted the severance application in April 2021. If not fully implemented by April 21, 2024, the severance will lapse.

[9] After the severance was granted, Halyk took the position that he had not signed or authorized the application for severance. He initiated an appeal to the Ontario Land Tribunal. Halyk has since withdrawn the appeal. He has not taken the remaining steps to implement the severance. It is for that reason that the Applicant commenced this Application for partition. The Application hearing is scheduled for September 14, 2023.

The E-mail Accounts

[10] In 2005, the Zitia Group created an e-mail account; zitia@zitiagroup.com. Halyk’s personal e-mail account is paul.halyk@zitiagroup.com. When the litigation between Labiris and Halyk began, Labiris created a separate account; p.labiris@zitia.ca. Labiris did not use the separate e-mail account and continued to use zitia@zitiagroup.com as his personal account. Halyk knew Labiris did not use the p.labiris@zitia.ca e-mail account. When Halyk sent messages to Labiris he would send them to the zitia@zitiagroup.com e-mail account.

[11] Halyk states that the zitia@zitiagroup.com e-mail account was not a private account. He states that he had access to the account since it was created in 2005. In his affidavit, he states that both he and Labiris would send e-mails from the Zitia general account, signing their own names to the e-mails. In September 2016, Francis Kopke, an IT consultant began providing consulting services to Zitia Group. He assisted with repairing and connecting computer equipment. In May 2017, he migrated Zitia’s computer system to Office 365. The e-mail addresses were migrated to Office 365 at that time. In his affidavit sworn April 17, 2023, Mr. Kopke deposed that he believed that the zitia@zitiagroup.com was a shared e-mail address.

[12] On April 29 or 30, 2021, Mr. Kopke attended at Mr. Halyk’s home to assist him in setting up a domain name and new e-mail accounts for his company, H3 Capital. Mr. Kopke ensured that Halyk continued to have access to the zitia@zitiagroup.com mailbox. This access was set up on Halyk’s Apple computer. On August 23, 2022, Mr. Kopke also added the zitia@zitiagroup.com e-mail to Halyk’s cell phone.

[13] Halyk states in his affidavit that he never denied that he “continuously used” the zitia@zitiagroup.com e-mail account.

[14] Halyk argues that Labiris also allowed Catherine Cooper, a consultant occasionally employed by the various Zitia companies to access the zitia@zitiagroup.com e-mail account. Initially, Labiris stated that he allowed her access beginning roughly at the end of 2022. Halyk printed four e-mail threads from the zitia@zitiagroup.com e-mail account in which Ms. Cooper used the e-mail account. Halyk states that this demonstrates that Labiris was not being truthful when he claimed the account was for his exclusive and personal use. Halyk argues that this email account was never a private account and instead it was a shared account used by multiple people, including Halyk.

Discovery of Halyk’s Access of Labiris’ E-mails

[15] In March 2023, Labiris became concerned that Halyk was acting on confidential information. Labiris states that there were various suspicious and unexplained instances of conduct by Halyk that suggested that he was “one step ahead.”

[16] As an example, Labiris refers to an incident in late 2022 and early 2023. Halyk took steps to register notices and cautions on title to a property at 71 Dundas Street East, Paris, Ontario. The property was owned by one of their companies; Zitia Developments Inc. The property was sold with a closing date of March 23, 2023. The closing date was not disclosed to Halyk. On March 22, 2023, one day before the scheduled closing, Halyk served a motion for a certificate of pending litigation.

[17] Halyk denies that he brought the motion for the certificate of pending litigation because he learned of the sale of 71 Dundas Street through his access to the e-mail account. He states that the sale of the property was not a secret from him. He was aware that an attempt to sell the property had fallen through. Labiris refused to allow Halyk to purchase the property and it was for that reason that Halyk registered the cautions on title. Halyk suspected that Zitia would continue to try to sell the property. Halyk caused to be issued a new action in Kitchener in which he sought, among other things, a certificate of pending litigation. He learned on March 17, 2023 that the caution would be discharged by the Director of Titles. He states that at this point he gave instructions to his lawyers to bring a motion for a certificate of pending litigation.

[18] As a result of his suspicions that Halyk was viewing his private e-mails, Labiris contacted Mr. Kopke, on March 23, 2023. Mr. Kopke advised Labiris that he had granted Halyk full access to the zitia@zitiagroup.com e-mail account, when he attended at Halyk’s house to set up a new home office in April 2021. Labiris states in his affidavit that he was “shocked” by this discovery. Over the years he had sent and received thousands of e-mails through this e-mail account, including communications with his lawyers which were related to this Application and the other civil proceedings involving Halyk.

[19] On March 24, 2023, counsel for Labiris, Mr. Rosenbluth sent an urgent letter to Halyk’s lawyer at the time, Mr. Dunlop. Mr. Rosenbluth stated that he required Halyk to immediately submit to an examination under oath concerning the scope of his access to Labiris’ e-mail account and to turn over his electronic devices for review by independent forensic experts.

[20] Mr. Dunlop advised that he was unable to continue to act for Halyk citing medical reasons. Halyk retained his current counsel, Mr. Campbell. Mr. Campbell responded on March 27, 2023. He noted that the zitia@zitiagroup.com e-mail account was a shared general corporate e-mail address. Mr. Campbell advised that none of the communications in the zitia@zitiagroup.com e-mail had been used by Mr. Campbell and that no communications from the e-mail account shaped Halyk’s litigation strategy. Importantly, Mr. Campbell’s letter does not state that Halyk did not access the e-mail account or that he had not reviewed Labiris’ emails.

[21] Labiris had set up a separate e-mail account, p.labiris@zitia.ca. He argues that Halyk also gained access to that account. On April 4, 2023, Mr. Campbell sent an e-mail to Catherine Francis. She is a lawyer who represents Labiris and related companies in the other proceedings. Mr. Campbell made a wide-ranging proposal which included selling 72 Dundas Street, Paris, Ontario for $14 million. Labiris sent an e-mail from his personal account to Ms. Francis asking how the $14 million figure was arrived at. Although this question was not relayed to Mr. Campbell, Mr. Campbell sent an e-mail the next day explaining why the $14 million figure was used. Halyk denies ever having access to Labiris’ personal e-mail account.

[22] Halyk did not immediately turn over his electronic devices to be forensically examined. The Applicant scheduled a case conference. The parties attended before Justice Koehnen.

Case Conferences with Justice Koehnen

[23] The first case conference took place on April 24, 2023.

[24] In advance of the first case conference, the Applicant produced an affidavit from Kevin Lo, a forensic computer expert with Froese Forensic Partners, affirmed April 19, 2023. He deposed that if he were able to physically analyze Halyk’s computer and/or phone he expected to be able to determine whether Halyk saved any files to his hard drive. He would also be able to determine whether Halyk forwarded any messages from the account to any other e-mail. He expected that this information would likely be available through a forensic inspection even if Halyk had attempted to delete data from his devises.

[25] At the case conference, Justice Koehnen recommended to Halyk that he provide his devices for inspection. During the case conference, Mr. Campbell stated that he had received email correspondence that was privileged to Labiris, but that once he realized what it was, he did not read the e-mails.

[26] On April 28, 2023, Mr. Campbell e-mailed Mr. Rosenbluth a list of proposed conditions for the disclose of the devices. Mr. Campbell also stated that by May 8, 2023, Halyk would provide hard copies of the e-mails he printed from the zitia@zitiagroup.com e-mail account. This was the first time it was disclosed that Halyk had made hard copies of any of the e-mails he had accessed.

[27] The parties could not agree on the conditions for the disclosure of the devices and the parties attended a second case conference with Justice Koehnen, on May 1, 2023.

[28] At the case conference, Mr. Campbell agreed to recommend that Halyk make his electronic devices available to be imaged. Mr. Campbell stated that he would report back in a day or two with instructions. Justice Koehnen directed that Halyk produce hard copies of the e-mails he printed from the zitia@zitiagroup.com account. An element of Justice Koehnen’s endorsement was that Mr. Campbell would have an opportunity to review the Applicant’s expert’s report before it was provided to Applicant’s counsel in order to make any objections to the dissemination of privileged or confidential information belonging to Halyk.

[29] The hard copies of the e-mails were not produced, and a third case conference was scheduled for May 11, 2023.

[30] On May 10, 2023, the day before the case conference, Halyk delivered an affidavit affirmed the same day. In the affidavit, Halyk deposed at paragraph 32, that he “never accessed anything which was in the nature of legal advice from any of Labiris’ lawyers to him, in my opinion.” Halyk did not provide particulars about which e-mails in the account he had reviewed, when, or over what period of time.

[31] On May 10, 2023, Halyk also produced the four e-mails threads that he printed from the zitia@zitiagroup.com e-mail account. Halyk stated that the e-mails were the hard copies he was able to locate. Halyk confirmed in cross-examination that he read the e-mails that he had printed. He testified that he did not discuss the contents of the e-mails with his lawyer. He does not state in his affidavit that the four e-mails were the only e-mails he accessed and read from the zitia@zitiagroup.com e-mail account.

[32] The four e-mail threads are dated November 30, 2022, January 16, 2023, January 30, 2023, and March 17, 2023. The e-mails include Ms. Cooper as either a recipient or sender of emails from the zitia@zitiagroup.com e-mail account.

[33] The e-mail thread dated January 16, 2023, involves communications to and from Labiris’ lawyers. The lawyers were responding to the suggestion made by Mr. Dunlop to schedule a meeting of the experts who had filed reports in the proceeding. The meeting was to be without clients or lawyers. The content of this e-mail thread appears to be fairly innocuous.

[34] The e-mail thread dated January 30, 2023, also involves communications to and from Labiris’ lawyers. The thread began with an e-mail from Ms. Cooper enquiring into the proposed meeting of the experts. Mr. Rosenbluth advised that there had been no progress on the meeting. He stated that a potential alternative to proceeding to a settlement meeting would be to deliver a formal offer to settle. In the e-mail, he set out the basic terms of the offer, which included compelling Halyk to sign the consents necessary to implement the severance, that each party will take sole ownership over one lot, that Halyk would get to choose the one he wants, a joint servicing plan would be implemented and if the parties could not agree on the terms of the plan that the disagreements would be resolved by expediated mediation-arbitration, and finally that Halyk would pay an amount for the costs of the application. Ms. Cooper responded using Labiris’ e-mail and stated that she will leave it up to Labiris and the lawyers to determine the merits of an offer.

[35] The e-mail thread dated March 17, 2023, began with an e-mail from John Ariens to Ms. Cooper, copying Mr. Dunlop. The e-mail was in reference to the meeting that took place on March 8, 2023. Mr. Ariens had been retained by Halyk with respect to this matter and was his planning consultant. He referenced the proposal in the January 30, 2023 thread whereby Halyk may choose which of the two parcels he would like to retain. Mr. Ariens stated that Halyk was considering which of the two parcels he would choose. The e-mail thread includes Ms. Cooper’s report to Mr. Rosenbluth regarding her discussions with Mr. Ariens. Ms. Cooper used Labiris’ email to send the report. She states that Halyk is looking for a reason to delay. She also states that if there is no agreement soon, the term of the offer that he could choose the parcel should be removed.

[36] On May 11, 2023, the parties returned before Justice Koehnen to address the issue of Halyk’s failure to turn over his devices. Justice Koehnen’s endorsement gave Halyk until May 15, 2023 to give the Applicant’s expert access to all of his electronic devices for the purpose of imaging them, failing which he will be deemed to have refused access to his devices. He will also be deemed to have refused to make any further disclosure. On the case conference on May 19, 2023, Justice Koehnen ordered that the evidentiary record for this motion was closed.

Imaging Halyk’s Electronic Devices

[37] The parties arranged for Froese Forensic to attend at Mr. Campbell’s office for the purpose of imaging Halyk’s devices on May 15, 2023. Mr. Vranesh of Froese attended, as well as Halyk, Mr. Campbell and Mr. Warren, the technical expert retained by the Respondents. Mr. Vranesh was given access to an Apple iMac desktop computer and an Apple iPhone. Mr. Vranesh created a forensic copy of the hard drive of the iMac computer. However, the iPhone was damaged and would not stay on for longer than one minute. As a result, the phone could not be imaged. The iPhone had obvious and significant damage to the body of the phone. Haylk later advised that he got a new iPhone in early May 2023 but had not loaded Outlook. The new iPhone was not provided to Mr. Vranesh for imaging.

[38] With respect to the imaging of Halyk’s e-mail account, paul.halyk@zitia.com Mr. Vranesh required access via the Outlook application. Mr. Warren deposes in his affidavit that Halyk provided the password to his e-mail account and Mr. Vranesh attempted to “drain” (download a copy of) the emails. The process was not successful. According to Mr. Warren this was because the volume of e-mails was too significant. Mr. Vranesh’s stated that he was not provided with the correct password to enable access to the Outlook. According to Mr. Vranesh, Mr. Warren returned with the proper Outlook password. However, it became apparent to Mr. Vranesh that he needed to log into the app version of Outlook to access the emails. It required a different password, which was not provided to Mr. Vranesh. According to Mr. Vranesh, Mr. Warren said he would rectify the problem the following day at which time access would be provided over Zoom or Microsoft Teams video conference.

[39] Mr. Warren states that he and Mr. Vranesh discussed using a program called Magnet Axiom to drain the e-mails. Mr. Warren apparently expressed the concern that Axiom could download more than simply the e-mails. Mr. Warren states that he arranged with Mr. Vranesh that Mr. Vranesh could conduct the e-mail drain and Mr. Warren would observe the entire process by Zoom link. Mr. Vranesh was not prepared to allow Mr. Warren to observe the process by Zoom. Mr. Vranesh stated that it was not practical or workable to make a screen recording of the entirety of the imaging process because it was likely going to be a lengthy period during which he would be working on unrelated maters. Mr. Warren did not provide Halyk’s e-mail password.

[40] Halyk affirmed a supplementary affidavit on May 17, 2023. He deposed that he did not permit the imaging of his e-mail account because he wanted Mr. Warren to review the complete process. Halyk does not state in his supplementary affidavit what e-mails he reviewed or when. He deposes that he “regrets” that he reviewed Labiris’ e-mails but maintains that he did not review anything that impacted his strategy in any of the current litigation.

[41] Mr. Vranesh, in his affidavit affirmed May 23, 2023, deposed that he successfully created a forensic copy of the iMac computer. However, he was unable to make a forensic copy of the iPhone because it had been damaged. Also, he was unable to conduct the downloading of the entire e-mail account. Froese Forensic prepared a report with respect to the imaging of Halyk’s iMac Apple computer. The report was inconclusive as to what e-mails Halyk may have reviewed from the zitia@zitiagroup.com e-mail account.

THE ISSUES

[42] The parties agree that the analysis appropriate to this situation is as set out by the Court of Appeal in Continental Currency Exchange Canada Inc. v. Sprott, 2023 ONCA 61. In accordance with the test set out in that case, the following issues will be addressed in this endorsement:

i) Did Halyk obtain access to privileged materials?

ii) If so, is the presumption of prejudice rebutted? and

iii) If the presumption of prejudice is not rebutted, are there special circumstances such that the only appropriate remedy is judgment on the Application?

ANALYSIS AND DISCUSSION

[43] In Continental Currency, the Court of Appeal upheld a decision granting a stay of proceedings in circumstances where the plaintiff had obtained copies of the defendants’ privileged e-mail correspondence. The Court of Appeal articulated the three-part test:

i) the applicant must establish that the respondent obtained access to relevant privileged material;

ii) the onus shifts to the respondent to rebut the presumption of prejudice; and

iii) if the respondent fails to rebut the presumption of prejudice, the applicant must show that a stay or equivalent relief is the only appropriate remedy: Continental Currency, at para. 33.

Did Halyk Obtain Access to Relevant Privileged Material?

[44] It is conceded by Halyk that he reviewed e-mails that were sent or received by Labiris on the zitia@zitiagroup.com e-mail account. Mr. Campbell, in his letter to Mr. Rosenbluth dated March 27, 2023, does not deny that e-mails were reviewed by Halyk. Mr. Campbell states that he “assures you” that the none of the communications have been used to shape the litigation strategy. Halyk, in his affidavit dated May 10, 2023, states that what he reviewed was not privileged, and that what he reviewed did not include any legal advice from Labiris’ lawyers, “in his opinion”. In his affidavit dated May 17, 2023, Halyk states that he “regrets” that he reviewed Labiris’ e-mails but maintains that he did not review anything that impacted his litigation strategy.

[45] Although Halyk concedes he reviewed the e-mails, he argues that “it seems doubtful” that the materials were privileged. It is his position that the e-mails were on a general e-mail account to which Halyk had access. Halyk argues that there could have been no expectation of privacy with respect to the communications.

[46] Halyk argues that the e-mail address was not a confidential e-mail because Labiris allowed Ms. Cooper to use the e-mail account. Labiris states that Ms. Cooper would use the account under supervision and on his personal laptop computer. Halyk argues that by allowing Ms. Cooper to access his e-mail account, Labiris could not have had an expectation of privacy.

[47] Halyk also argues that he had used the e-mail account in the past. He states that he understood it to be a general corporate account and not Labiris’ private e-mail. Halyk states that he received and signed many e-mails from the general account. Mr. Vranesh, the IT expert retained by the Applicant, states in his affidavit that he reviewed the zitia@zitiagroup.com e-mail account and could not find any e-mails which had been sent from the account and were signed by Halyk. Mr. Vranesh was not cross-examined on this point.

[48] Halyk states that he had unfettered access to the e-mail account and that he made no secret of the fact that he looked at e-mails in the account. He notes that this is not a situation where he stole a password or otherwise hacked into the e-mail. Halyk argues in his factum that no remedy is required because Labiris made a conscious decision to begin corresponding with his lawyers using a general e-mail account that he knew other individuals, including Halyk, had access. He argues that any privilege attached to the e-mails has been lost.

[49] I do not find this argument to be persuasive. The evidence is clear that there had been a breakdown in the relationship of the parties, and they were engaged in acrimonious litigation. Counsel for the Respondent conceded in argument that the parties were involved in “very contentious litigation” that was being “bitterly fought”. Halyk knew that Labiris and his advisor, Ms. Cooper were using the zitia@zitiagroup.com e-mail address to communicate about the case with counsel retained by Labiris and his company. Counsel for Halyk conceded in argument that Halyk should not have read e-mails between the Applicant and its lawyers.

[50] I am of the view that the fact Labiris provided access to Ms. Cooper does not result in a waiver of privilege. She was his advisor with respect to the litigation. It is clear from the e-mail threads that were downloaded that she was acting on Labiris’ behalf. I am satisfied that Labiris’ solicitor and client privilege extended to Ms. Cooper who was authorized to assist him with the litigation: Wintercorn v. Global Learning Group Inc., 2022 ONSC 4576, at paras. 149-153. Although Labiris allowed Ms. Cooper to use the e-mails, this does not mean he waived privilege to all, particularly to Halyk against whom he was involved in contentious litigation.

[51] Halyk argues that Labiris denied that anyone else used the e-mail account and therefore he perjured himself when he denied that Ms. Cooper had access and was using the e-mail account. The e-mails that apparently show Ms. Cooper had access to the e-mail account several years ago are not properly before the court. Regardless, I am of the view that nothing turns on this fact. As noted above, the fact that Labiris may have allowed his advisor, Ms. Cooper to use the e-mail account does not mean that he waived privilege to Halyk.

[52] Halyk argues that the communications could not be privileged because Labiris deliberately began communicating in an e-mail account which he knew others were using. I am of the view, that Labiris would not have engaged in communications with his lawyers about this litigation unless he had an expectation of privacy. The e-mail thread dated March 17, 2023, includes communications from Mr. Rosenbluth in which he discusses the form of an offer that could be presented to Halyk. I find that this was a communication for the purpose of receiving legal advice and was intended to be confidential by the parties: Leroux v. Proex Inc., 2022 ONSC 319, at paras. 12 and 15.

[53] Even if Halyk believed that he could access the e-mail account, he would have known when he saw e-mails between Labiris and his lawyers about litigation involving him, that the emails were confidential and not intended for his review. As noted above, at the time Halyk accessed the e-mails, the parties were involved in bitterly fought litigation. It strains credibility that Halyk believed that Labiris had waived privilege over these communications. Halyk seems to concede this point. In his second affidavit, Halyk states that he, “regrets” having reviewed the e-mails. There would be no “regret” if he believed had a valid right to review the e-mails.

[54] I conclude that Halyk accessed relevant privileged and confidential information. I find that the first stage of the test is satisfied.

Has Halyk Rebutted the Presumption of Prejudice?

[55] To rebut the presumption of prejudice Halyk must identify to the court with, “some precision” the following:

i) He did not review privileged documents in his possession;

ii) He received some documents, but the documents reviewed were not privileged; and

iii) The privileged documents were not likely to create prejudice: Continental Currency, at para. 35.

[56] The evidence required to rebut the presumption must be clear and convincing such that a “reasonably informed person would be satisfied that no use of confidential information could occur”. The evidence required is more than mere conclusory statements in an affidavit without more. Any difficulties of proof in rebutting the presumption falls on the head of the person responsible: Continental Currency, at paras. 36 and 37.

[57] Halyk filed two affidavits; May 10, 2023, and May 17, 2023. Halyk deposed that he “never accessed anything which was in the nature of legal advice from any of Labiris’ lawyers to him, in my opinion”. Although he states that the e-mails were not in the nature of legal advice, he does not identify which e-mails he reviewed. As noted by counsel for the Applicant, Halyk is required to set out, with a degree of specificity, what he read, over what time period, what was shared with his lawyers and what he preserved. Although Halyk disclosed the four e-mail threads that he downloaded, he does not state in his affidavits that these were the only e-mails on the zitia@zitiagroup.com e-mail account that he reviewed.

[58] Halyk also states in his affidavit that the e-mails he accessed did not influence his litigation strategy. Again, he does not identify the e-mails he reviewed so that the court could make its own determination as to whether his litigation strategy may have been influenced.

[59] Based on the evidence before me, I am satisfied that Halyk reviewed more than simply the hard copy e-mail threads which were produced. Halyk was involved in acrimonious litigation with Labiris. Given the nature of their relationship and the fact they were involved in multiple civil proceedings, it strains credibility that Halyk would have only reviewed the four e-mail threads that have been produced.

[60] Halyk argues that he complied with his obligation to rebut the presumption by producing the four e-mail threads. The e-mails produced by Halyk all referenced Ms. Cooper. The e-mails were either sent to her or were from her. She was apparently sending and receiving e-mails on behalf of Labiris. It appears that Halyk printed and produced those e-mails to respond to Labiris’ claim that the e-mail account was a private account. In his affidavit dated May 10, 2023, Halyk states that Ms. Cooper had used the e-mail account “as evidenced by the emails which I will be providing to opposing counsel.” In cross examination, Halyk stated that the reason he printed the e-mail threads was to protect his economic position. I am satisfied that Halyk reviewed additional emails and only printed the four e-mail threads to show that Ms. Cooper had access to Labiris’ email account.

[61] Halyk also argues that he complied with the disclosure requirements set out by Justice Koehnen in his endorsements. Halyk provided access to his computer, and the computer was successfully imaged. The phone was not imaged because it was damaged and not working properly. Halyk did not disclose that he had a new phone because it did not have any e-mails on it. Halyk states that he was prepared to allow for the downloading of the e-mails from the Outlook account but only if the downloading could be observed by Mr. Warren. It was only because Mr. Vranesh did not agree to this term that he refused to permit the e-mails to be downloaded.

[62] Halyk argues that it is not his fault that the e-mails are not before the court. He states that he was prepared to allow for the e-mail drain, but Mr. Vranesh was not prepared to agree to his conditions. This argument does not take into account the fact that Halyk has the onus of rebutting the presumption of prejudice with clear and convincing evidence.

[63] I am not satisfied that Halyk was transparent with respect to the information contained on his electronic devices. Although imaging was conducted of his computer, it was of limited value. The imaging could not identify the e-mails reviewed by Halyk unless the e-mails were downloaded to his computer or forwarded to someone else. I am also of the view there is no reasonable explanation for Halyk to not allow the e-mail drain from his Outlook account. There were safeguards in place. The report generated by the Applicant’s expert was to first be provided to Mr. Campbell to ensure it did not include any non-relevant private material.

[64] More importantly, if Halyk was concerned about the manner in which the e-mail drain took place, he could have instructed Mr. Warren to carry this out. Mr. Warren testified in cross-examination that he had the ability to conduct the e-mail drain, but it was not part of his retainer. Halyk has the onus to rebut the presumption and therefore it was incumbent upon him to provide the court with a report of all e-mails on his Outlook account.

[65] I find that Halyk failed to rebut the presumption that he reviewed privileged communications. In fact, the evidence is to the contrary. Halyk concedes that he reviewed documents that were on the zitia@zitiagroup.com e-mail account. The documents included communications between Labiris and/or Ms. Cooper and counsel. One of the hard copies of the e-mails produced included private communications from Labiris’ lawyer which set out a strategy with respect to making an offer to settle. Halyk concedes that he read this privileged document.

[66] Halyk argues that although he reviewed the e-mails, the e-mails did not impact his litigation strategy. With respect to the hard copies of the four e-mail threads, he notes that only the e-mail from Mr. Rosenbluth in which he reviews the terms of a possible offer was of any consequence. He argues that the fact an e-mail with proposed settlement terms may be “sensational”, the content was not significant. The offer is basically what the Applicant is seeking in the Notice of Application, with the exception of the term that Halyk could choose the parcel. The offer was made shortly after the e-mail was sent. The offer was not accepted. As a result, the exchange had little or no impact on the conduct of the litigation.

[67] I am not satisfied that the e-mail from counsel with respect to a settlement offer has no significance to the litigation. There is reference in the e-mail as to the next steps that could be taken to create pressure on Halyk. This may affect how future offers may be perceived by Halyk. In addition, Halyk has not disclosed with appropriate specificity the other e-mails that he accessed. Even if the e-mail with respect to the terms of a possible offer to settle may not result in a significant degree of prejudice, other e-mails he reviewed and which have not been disclosed, may have been more prejudicial. Without any specificity from Halyk with respect to all e-mails he reviewed and when, I am left guessing whether the e-mails were prejudicial and may have impacted his litigation strategy.

[68] During his submissions, counsel for Halyk stated that one option may be for me to assume that all e-mails from zitia@zitiagroup.com e-mail account had been reviewed by Halyk. The fact that all e-mails may have been reviewed does not assist Halyk in rebutting the presumption of prejudice. The court requires specificity about the content of the e-mails to determine whether the e-mails were prejudicial. As noted above, Halyk could have had Mr. Warren do a drain of all his e-mails from the Outlook account and put that information before the court. Halyk could have provided some details about the contents of the e-mails he accessed, but other than the hard copies of the four e-mail threads, he failed to do so.

[69] The test is whether a reasonably informed person would be satisfied that no use of confidential information could occur. Here, Halyk accessed Labiris’ e-mail account for about two years after there had been a breakdown in their relationship and when the two parties were involved in multiple civil proceedings. Over that period, Halyk accessed e-mails between Labiris and his consultant, Ms. Cooper and his lawyers. I am unable to conclude that a reasonable person would be satisfied that no use of confidential information could occur through Halyk’s access to the zitia@zitiagroup.com e-mail account.

[70] I find that Halyk failed to rebut the presumption of prejudice.

Has the Applicant Shown that Judgment on the Application is the Only Appropriate Remedy?

[71] At the third stage of the analysis, the question is not whether there has been prejudice, but what remedy is to be ordered to rectify the prejudice to ensure fairness: Continental Currency, at para. 41.

[72] The Applicant argues that judgment on the Application is the only way the prejudice can be rectified. In Continental Currency, the plaintiff was found to have accessed confidential information. The relief sought (and granted) in that case was a stay of proceedings. The Applicant argues that where the defendant or respondent has accessed the confidential information the equivalent relief is to grant judgment.

[73] In Continental Currency, the Court of Appeal stated that a party seeking a stay has the burden to show “special circumstances” to justify a stay. A stay is only granted where there is:

(i) prejudice to the right to a fair trial or the integrity of the justice system, and

(ii) there is no alternative remedy to cure the prejudice: Continental Currency, at para. 42.

[74] Like a stay, judgment on the Application is an “extraordinary remedy”. It is a remedy of “last resort” that is to be imposed only to prevent ongoing prejudice, unfairness to a party, or harm to the administration of justice: Continental Currency, at para. 43.

[75] The Court of Appeal set out a number of non-exhaustive factors to be considered in determining the seriousness of the prejudice and the appropriate remedy. The factors include:

i) How the documents came into the possession of the respondent;

ii) What the respondent did upon recognition that the documents were potentially subject to solicitor-client privilege;

iii) The extent of the review of the privileged material’s contents of the solicitor-client communications;

iv) The degree to which the privileged material is prejudicial;

v) The stage of the litigation; and

vi) The potential effectiveness of a firewall or other precautionary steps to avoid mischief: Continental Currency, at para. 44.

How the documents came into Halyk’s possession

[76] Halyk states that the zitia@zitiagroup.com e-mail account was a shared account which he had a right to access. He had a valid password. He states that he made no secret of the fact that he accessed the e-mail account. Counsel for Halyk argues that this is a distinguishing feature from Continental Currency. Here, Halyk had been provided access to the e-mail account and did not steal a password or hack into a computer. He argues that this is less culpable conduct on his part.

[77] I am of the view that this argument does not assist Halyk. The confidential documents did not fall into his lap. They were not sent to him inadvertently. Halyk made the decision to go into the zitia@zitiagroup.com e-mail account. When he saw documents what were privileged and confidential, such as communications between Labiris and/or Ms. Cooper and their lawyers, he chose to read the documents. In the case of the January 30, 2023 e-mail thread between Ms. Cooper and Mr. Rosenbluth about the proposed offer to settle, Halyk chose to print and retain a copy. He appears to have attempted to provide at least some of the e-mails to his lawyer. Although Halyk may not have stolen a password or hack into a computer, his conduct was intentional.

[78] I find that this factor does not favour Halyk.

What Halyk did upon recognizing that the documents were potentially subject to solicitor-client privilege

[79] When Halyk recognized that he had come across privileged documentation did not advise his lawyer, or the Applicant that he had access to confidential e-mails. He had access to the emails for a two-year period when the parties were involved in acrimonious civil proceedings. He did not immediately exit the e-mail account. Instead, he read the e-mails and printed hard copies of some of the e-mails, including the January 30, 2023 e-mail thread that includes the email from the Applicant’s lawyer about the offer to settle. Halyk concedes in his affidavit that he, “regrets” reviewing the documents. In argument, counsel for Halyk conceded that Halyk should not have reviewed the e-mails.

[80] I am satisfied that Halyk recognized that the e-mails were confidential and potentially subject to solicitor-client privilege. He reviewed the confidential e-mails. I am satisfied that a reasonable person, when realizing that he was accessing confidential a-mails, would have disclosed this fact to his lawyer. Instead, Halyk continued to access the e-mails without disclosing this fact to anyone.

[81] I find that this factor does not favour Halyk.

The Extent of the Review and the Degree to which the Privileged Material is Prejudicial

[82] If the party in receipt of the privileged documents fails to identify the documents that were reviewed, the court will be unable to determine the extent of the actual review of the material and the degree of resulting prejudice. In those circumstances, the court will apply an adverse presumption that the third and fourth factors weigh against the party in receipt of the privileged documents: Continental Currency, at para. 45.

[83] As noted above, I have very little evidence before me as to the extent of the review of privileged materials and whether the material reviewed was truly prejudicial. Halyk did not specify in his material what e-mails he reviewed. He did not “drain” the e-mails from his Outlook account although Mr. Warren states that he could have done so if asked. Although he produced hard copies of four e-mail threads, he does not state in his affidavit or on cross-examination that these were the only four e-mails he reviewed.

[84] As noted in Continental Currency, the onus is on Halyk to identify with precision the privileged information reviewed. He failed to do so. Halyk’s counsel invited me to presume that Halyk reviewed all of the e-mails in that e-mail account including e-mails to and from counsel for the Applicant. Without knowing the content of the e-mails reviewed, I also presume that the e-mails included confidential information with respect to the prosecution of the Application.

[85] The hard copy of the e-mail thread dated January 30, 2023, includes communication from the Applicant’s lawyer to Ms. Cooper setting out a settlement strategy. I am satisfied that this an example of the type of communications that would have been sent from the Applicant’s lawyer to his client or his client’s advisor. I am also satisfied that an e-mail about litigation strategy involving a settlement offer is at the high end of the continuum of serious prejudice.

[86] Counsel for the Applicant states that during the relevant time period there may have been e-mails between his office and Labiris and/or Ms. Cooper with respect to preparation for cross-examinations, the drafting of affidavits and litigation strategy. I am of the view that access to confidential communications between a lawyer and client is, on its face, prejudicial.

[87] Counsel for the Respondent argues that the Applicant ought to have put evidence before me that the e-mails contained such prejudicial content that the extraordinary remedy of judgment is required. This argument was advanced and rejected by the Court of Appeal in Continental Currency:

[39] As summarized in Celanese, at paras. 49-51, there are compelling reasons for the presumption of prejudice and the reverse onus on the appellants in receipt of privileged information:

(i) Requiring the respondents whose privileged information has been disclosed or accessed to prove actual prejudice would require them to disclose further confidential or privileged materials;

(ii) Placing the burden on the appellants who have access to the privileged information is consonant with the usual practice that “the party best equipped to discharge a burden is generally required to do so”; and

(iii) The respondents should not have to bear “the onus of clearing up the problem created by the [appellants’] carelessness.

[88] I conclude that Halyk failed to satisfy the burden as to what material was reviewed and that the material reviewed did not create prejudice to the Applicant. In the absence of evidence as to the specific e-mails reviewed, when the e-mail account was accessed, and over what period of time, I must presume that Halyk extensively reviewed privileged material and that the review of the privileged material is prejudicial.

[89] As stated by the Court of Appeal in Continental Currency:

[45] Where the appellants who were in receipt of privileged documents fail to identify the documents they reviewed, they put the court in an “invidious position” of being unable to determine the extent of the actual review of the material and the degree of resulting prejudice. The court will, thus, presume that the third and fourth factors weigh against the appellants: Celanese, at paras. 62-63; MacDonald Estate, at p. 1263. This adverse presumption can be drawn even though the burden at the remedy stage shifts to the respondents to show that a stay is the appropriate remedy.

[90] The Court of Appeal went on to state as follows:

[67] … Because the appellants adduced no evidence as to the information reviewed, [the motion judge] concluded that, “I am unable to find that the material that was reviewed is not significant to the litigation and not capable of creating significant prejudice.” There is no error in this analysis.

[87] The appellants did not produce any evidence to indicate the nature and scope of the privileged communications they accessed and reviewed, or take any measures to adduce such evidence. As this court in Bruce Power aptly observed in upholding a stay of proceedings, at para. 63, “if the [party in receipt of privileged material] had been able to lead evidence to rebut the presumption of prejudice, it would have done so.” I arrive at the same conclusion. In the absence of such evidence, the appellants “will now have to shoulder the consequences” of having adverse inferences drawn against them at the remedy stage: Celanese, at paras. 62-63.

[91] I find that the third and fourth factors do not favour Halyk.

The Stage of the Litigation

[92] With respect to the fifth factor, counsel for Halyk argues that the case is in its infancy. Pleadings have just closed. There have not been any examinations. He argued that the case is “barely off the ground”. I am not satisfied that that is the case. The Application is scheduled to be heard on September 14, 2023.

The Potential Effectiveness of a Firewall or other Precautionary Steps to Avoid Mischief

[93] The Applicant argues that there is ongoing prejudice from Halyk’s access to privileged material. Although the access to the e-mail stopped in late March 2023, the information was accessed by the client and not the lawyer. As a result, there cannot be a “firewall”, to insulate the client from the information that may been accessed by the lawyer. Because the information is known by the litigant, he cannot disabuse himself of the knowledge. As noted in Continental Currency:

[50] In imposing a stay of proceedings, the motion judge noted that “even if the [appellants] had new lawyers”, the presumed prejudice to the respondents and the harm to the administration of justice would not be cured as the client, not the lawyer, obtained access to privileged information belonging to the opposing party.

[94] The Applicant argues that judgment on the Application is the only appropriate remedy in the circumstances of the case. Any other remedy would allow the action to continue and permit the Respondent to use to his benefit any confidential and prejudicial information he may have accessed through the zitia@zitiagroup.com e-mail account. This would provide the Respondent with a potentially unfair advantage in the litigation.

DISPOSITION

[95] In Continental Currency, the breach was by the plaintiffs. The court held that the only appropriate remedy was to stay the plaintiffs’ action. As noted by the motion judge in Continental Currency:

In the absence of a stay, the [respondents] will be forced to defend the litigation brought against them by adverse parties who have had access to and reviewed all of their emails about the transaction at issue, including privileged emails. In my view, to allow the [appellants’] action to proceed in these circumstances would be manifestly unfair to the [respondents] and would bring the administration of justice into disrepute. If the litigation were to continue, even if the [appellants] had new lawyers, the public represented by the reasonably informed person would not be satisfied that no use of confidential information would occur. The [appellants] have not shown that there is a remedy, short of a stay, that will cure the problem: Continental Currency, at para. 76.

[96] It is my view, that to allow the Respondent to oppose the Application, when Halyk has had access to the Applicant’s privileged e-mails, including e-mails with its counsel, would be unfair. It would effectively give Halyk an advantage in the litigation and reward him for accessing and reading e-mails that he would have known were privileged communications and not intended for him.

[97] The Applicant argues that when the breach is by the Respondent, the equivalent remedy to a stay of proceedings is to grant judgment on the Application. The Respondent argues that the relief sought in the Application is complicated and that it would be inappropriate for this court to grant judgment on this motion.

[98] When granting judgment, the court is required to consider the evidence that is put before it and determine whether the evidence is sufficient to support the relief sought. Rather than simply staying an action, the court, in granting judgment, must make an adjudication of the matter, based on all of the evidence.

[99] The material before me on this motion does not include all of the documentation that is required before granting judgment on the Application. Labiris deposes in his affidavit that he and Halyk jointly applied to the local Committee of Adjustment to sever the property into two equal parcels. The severance was granted in April 2021. After the severance was granted, Halyk appealed the successful application to the Ontario Land Tribunal. He subsequently withdrew that appeal. The severance application, the decision of the Committee of Adjustment, the subsequent appeal and withdrawal of the appeal and the correspondence between the parties is not currently before the court.

[100] It is my view that in the case of a defendant or respondent accessing confidential and privileged material, the appropriate remedy is to strike the statement of defence or, in the case of an application, to strike the notice of appearance. I am satisfied that the appropriate remedy in the circumstances of this case is to strike the Respondent’s Notice of Appearance.

[101] I direct that the Application proceed to the hearing scheduled for September 14, 2023. The Respondent’s Notice of Appearance is struck and as a result, the matter will proceed as an undefended Application. The Respondent is not entitled to:

a. receive notice of any step in the Application,

b. receive any further document in the Application, unless the court orders otherwise, or the further document is an amended Notice of Application that changes the relief sought,

c. file material, examine a witness or cross-examine on an Affidavit on the Application.

d. be heard at the hearing of the Application, except with leave of the presiding judge: Rule 38.07(2), Rules of Civil Procedure, RRO 1990, Reg. 194.

[102] There are three other civil proceedings involving Labiris and Halyk. Those matters are not before the court. Counsel for Labiris argued that this is a stand-alone motion that does not relate to the other civil proceedings. I agree. The findings made on this motion will not apply to the other proceedings. In each case, the court will be required to consider the three-part analysis set out in the Continental Currency case. Here, Halyk failed to rebut the presumption of prejudice. He failed to provide any evidence as to what e-mails he reviewed and over what time period. He failed to provide to the court an e-mail download drain from his Outlook account. In the other proceedings, Halyk may be able to rebut the presumption of prejudice. Also, the relief sought in the other proceedings is different from his matter. Here the relief sought on the Application is a partition of jointly owned property. The remedy of striking Halyk’s pleading may not be appropriate given the relief sought in the other matters.

[103] The Applicant is successful on this motion and is entitled to its costs. If the parties are unable to agree on costs, the Applicant may deliver written cost submissions of no more than 5 pages, excluding bills of costs, offers to settle or caselaw, within 15 days of the date of this endorsement. The Respondent may deliver written cost submissions in response and on the same basis within 15 days of receiving the Applicant’s cost submissions.

Date: July 13, 2023

Chalmers J.