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COURT FILE NO.: CV-21-00673296-00CP DATE: 20231103

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: DOMENIC MATTINA Plaintiff

and – VIRTUS CAPITAL MANAGEMENT INC., NICOLA SIMONE, MARTIN SIMONE, JOE TROZZA, COLLEEN ADAMS, PROGRESSIVE DEVELOPMENT FUND TRUST, 2558627 ONTARIO INC., COMPUTERSHARE TRUST COMPANY OF CANADA, BLANEY MCMURTRY LLP, GEORGE STREET (BROOKLIN) LIMITED PARTNERSHIP, 2541672 ONTARIO INC., MICARI CONSULTING INC., ROSEWATER BALDWIN STREET HOLDINGS LIMITED, RICHARD FAVA, ROSEWATER CAPITAL GROUP LIMITED, ROSEWATER DEVELOPMENTS LIMITED, STOCKWORTH DEVELOPMENTS INC., ROSEWATER BALDWIN INC., STOCKWORTH HOMES INC., MARIO BOTTERO, MARCO LORENTI, MARCELO PEREZ, TREVOR RABIE, ABRAHAM RABIE, STEVE THOMPSON, JOHN ALAN LENNOX, 2336495 ONTARIO INC., 8522146 CANADA INC., CVA REALTY HOLDINGS LIMITED, 1708567 ONTARIO INC., STOCKWORTH ROSEWATER GEORGE STREET LIMITED, ROBERT CAREY and THOMAS, EFRAIM LLP Defendants

Proceeding under the Class Proceedings Act, 1992

Counsel: Jeff Rosekat for the Plaintiff Angus T. McKinnon for the Defendant, Blaney McMurtry LLP Andrew Lundy, Eric S. Baum and Eni Eski, for the Defendants Progressive Development Fund Trust, 2558627 Ontario Inc., 2541672 Ontario Inc., and George Street (Brooklin) Limited Partnership Emilio Bisceglia for the Defendants Nicola Simone, Colleen Adams, Martin Simone, and Micari Consulting Inc.

HEARD: In writing

PERELL, J.

O, what a tangled web we weave, When first we practise to deceive! [1]

A. Introduction

1In this proposed class action pursuant to the Class Proceedings Act, 1992, [2] Domenic Mattina seeks to represent a class of persons who invested in what turned out to be a failed development project to build a condominium in Whitby, Ontario.

2Mr. Mattina alleges that the 40 defendants who promoted and established the investment deceived the investors, who are the putative Class Members. The Defendants were involved in selling units in a limited partnership (“LP Units”) or in selling trust units (“Trust Units”) in a trust that was holding LP Units in trust. Mr. Mattina alleges that the Defendants in sundry ways breached their statutory, contractual, and common law duties through negligence, breach of contract, breach of trust, breach of fiduciary duty, and that the “Rosewater Defendants” converted and misappropriated the investors’ funds.

3Amongst the defendants is Blaney McMurtry LLP, the law firm that prepared some of the investment instruments, including an Offering Memorandum. While Mr. Mattina’s Certification Motion is pending for next year, Blaney McMurtry LLP brings a motion for a declaration that any lawyer-client privilege it may have had with any of the co-Defendants has been waived.

4For the reasons that follow, Blaney McMurtry LLP’s motion is granted.

B. Procedural and Evidentiary Background

5On December 7, 2021, Domenic Mattina commenced a proposed class action against 40 defendants.

6It shall become important to note that in December 2021, Mr. Mattina’s lawyer of record was Greg Roberts PC (Professional Corporation). It, however, ought not to have taken the retainer because at the same time, the firm was also acting for Virtus Capital Management Inc. - one of the Defendants targeted in Mr. Mattina’s lawsuit. Virtus Capital Management Inc. was in fact already suing Nicola (Nick) Simone and Colleen Adams, who were also joined as Defendants in Mr. Mattina’s lawsuit.

7The Defendants in Mr. Mattina’s lawsuit are: Virtus Capital Management Inc., Nicola (Nick) Simone, Martin Simone, Joe Trozza, Colleen Adams, Progressive Development Fund Trust, 2558627 Ontario Inc., Computershare Trust Company of Canada, Blaney McMurtry LLP, George Street (Brooklin) Limited Partnership, 2541672 Ontario Inc., Mircari Consulting Inc., Rosewater Baldwin Street Holdings Limited, Richard Fava, Rosewater Capital Group Limited, Rosewater Developments Limited, Stockworth Developments Inc., Rosewater Baldwin Inc., Stockworth Homes Inc., Mario Bottero, Marco Lorenti, Marcelo Perez, Trevor Rabie, Abraham Rabie, Steve Thompson, John Alan Lennox, 2336495 Ontario Inc., 8522146 Canada Inc., CVA Realty Holdings Limited, 1708567 Ontario Inc., Stockworth Rosewater George Street Limited, Robert Carey and Thomas, Efraim LLP.

8In his proposed class action Mr. Mattina proposes two subclasses of investors in the failed condominium project; namely:

a. the Class Members who purchased Limited Partnership Units (“LP Units”) directly from George Street (Brooklin) Limited Partnership (“the LP Unit Class”); and

b. those Class Members who purchased trust units in Progressive Development Fund Trust, which purchased LP Units (“the Trust Unit Class”).

9On April 26, 2022, Mr. Matina filed an Amended Statement of Claim.

10On July 11, 2022, Mr. Mattina filed a Fresh as Amended Statement of Claim.

11In December 2022, Mr. Matina brought a motion for: (a) certification of the action for settlement purposes as against the Defendants Virtus Capital Management Inc., Nicola (Nick) Simone, Colleen Adams, and Micari Consulting Inc.; (b) approval of a Mary Carter Agreement dated November 25, 2022 between Mr. Matina and Virtus Capital Management Inc.; (c) approval of a Pierringer Agreement dated November 25, 2022 among Mr. Mattina, Nicola (Nick) Simone, Colleen Adams, Micari Consulting Inc. and Joe Trozza; (d) certification of the proposed class action as against the non-settling Defendants; and (e) appointment of an Inspector.

12(This combined Consent Certification and Opposed Certification motion is scheduled for a hearing on April 22-24, 2024.)

13Mr. Mattina’s Certification Motion(s) were supported by:

a. The affidavit dated December 15, 2022 of Domenic Mattina.

b. The affidavit dated December 16, 2022 of Joel Ross. Mr. Ross was retained to give expert evidence as an expert in construction management.

c. The affidavit dated December 16, 2022 of Trevor Wolfe. Mr. Wolfe operated 2541672 Ontario Inc., which was the General Partner of George Street (Brooklin) Limited Partnership. It was units in that limited partnership that were sold to investors. In 2017, Mr. Wolfe joined Stevloc Management Inc., which subsequently was renamed Virtus Capital Management Inc. Mr. Wolfe is now Chief Compliance Officer of Virtus Capital Management Inc.

14It shall be important to keep in mind that Mr. Mattina’s Certification motion is supported by an affidavit dated December 16, 2022 from Trevor Wolfe, who is employed by one of the Defendants in Mr. Mattina’s lawsuit. Mr. Wolfe, in his affidavit, asserts that the legal services provided by Blaney McMurtry LLP in drafting an Offering Memorandum for the investors was deficient and negligent. He is extremely critical of the legal services provided by the law firm.

15On September 25, 2023, Blaney McMurtry LLP brings a motion for a declaration that any lawyer-client privilege that might have existed between it and Trevor Wolfe and any of the defendants has been waived.

16Blaney McMurtry LLP’s motion for a declaration is supported by:

a. The affidavit dated September 22, 2023 of Patrick Cummins. Mr. Cummins was a lawyer at the defendant law firm, Blaney McMurtry LLP at the time the Defendant Progressive Development Fund Trust was established. Mr. Cummins was one of the lawyers involved in the preparation of an Offering Memorandum and subscription agreement for the Progressive Development Trust Fund.

b. The affidavit dated September 28, 2023 of Narcissa Leon. Ms. Leon is the legal assistant to Angus McKinnon of the lawyers of record for Blaney McMurtry LLP.

17Blaney McMurtry LLP also included in its motion record the affidavit of Trevor Wolfe which had been filed in Mr. Mattina’s Certification Motion.

18Blaney McMurtry LLP’s motion for a declaration was opposed by the Defendants: (a) Progressive Development Fund Trust; (b) 2558627 Ontario Inc.; (c) 2541672 Ontario Inc.; and (d) George Street (Brooklin) Limited Partnership. They filed:

a. An affidavit dated October 13, 2023 from Nicola (Nick) Simone. Mr. Simone among other things was a director of: (a) the Defendant 2558627 Ontario Inc., which is the manager of the Defendant Progressive Development Trust Fund; and (b) the Defendant 2541672 Ontario Inc., which is the General Partner of the Defendant George Street Brooklin (Limited) Partnership. He is also one of the former principals of Stevloc Management Inc., which became Virtus Capital Management Inc.

b. The affidavit dated October 17, 2023 of Alexander Michel. Mr. Michel is an associate lawyer for lawyers for the Defendants, Progressive Development Fund Trust, 2558627 Ontario Inc., 2541672 Ontario Inc. and George Street (Brooklin) Limited Partnership.

19The motion was opposed by the Defendants Nicola (Nick) Simone and Colleen Adams. They filed:

a. The affidavit dated October 13, 2023 of Colleen Adams. Ms. Adams is also one of the former principals of Stevloc Management Inc., which became Virtus Capital Management Inc.

b. The affidavit dated October 13, 2023 of Nicola (Nick) Simone. In this affidavit, Mr. Simone testifies in his capacity as the sole director of Micari Consulting Inc., which was one of the co-owners of Rosewater Baldwin Street Holdings Limited, which was a 75% beneficial owner of the condominium development lands.

C. Facts

20The following facts are taken from the Fresh as Amended Statement of Claim and the affidavits filed for Blaney McMurtry LLP’s motion for a declaration.

21In 2015, Rosewater Capital Group Limited and Stockworth Developments Inc. agreed to develop an 89-unit condominium known as Prince George Landing on Baldwin Street in Whitby, Ontario. Mario Bottero, Marco Lorenti, Marcelo Perez, Abraham Rabie, and Trevor Rabie are the principals of Rosewater Capital Group Limited. Robert Carey is the principal of Stockworth Developments Inc.

22On December 15, 2015, (a) Rosewater Capital Group Limited; (b) Stockworth Developments Inc.; (c) Rosewater Developments Limited, the principals of which are Richard Fava, Mario Bottero, Marco Lorenti and Steve Thompson; (d) Rosewater Baldwin Inc., the principals of which are Messrs. Fava, Bottero, and Lorenti; (e) Stockworth Homes Inc., the principals of which are Messrs. Carey and John Lennox; and (f) Stockworth Rosewater George Street Limited (the “Bare Trustee”), the principals of which are Nicola (Nick) Simone, his nephew Martin Simone, and Messrs. Carey and Lennox, entered into a development agreement to develop the condominium project. Rosewater Baldwin Inc. and Stockworth Homes Inc. were the managers of the proposed condominium development.

23On March 1, 2016, Rosewater Capital Group Limited and Stockworth Developments Inc. incorporated Rosewater Baldwin Street Holdings Limited, the directors of which are Messrs. Bottero, Lorenti, Perez, Abraham Rabie and Trevor Rabie.

24The shareholder owners of Rosewater Baldwin Street Holdings Limited were: (a) Rosewater Developments Limited; (b) 2336495 Ontario Inc., the principal of which is Mr. Perez; (c) 8522146 Canada Inc., the principal of which is Trevor Rabie; (d) CVA Realty Holdings Limited, the principal of which is Mr. Bottero; (e) 1708567 Ontario Inc., the principal of which is Mr. Lorenti; and (f) Micari Consulting Inc., the principal of which is Nicola (Nick) Simone.

25It is alleged that Robert Carey, John Lennox, and Richard Fava are each the de facto controlling mind and de facto officer and director of Rosewater Baldwin Street Holdings Limited.

26On March 17, 2016, Stockworth Rosewater George Street Limited (the “Bare Trustee) as a trustee for Rosewater Capital Group Limited, Stockworth Developments Inc. and Rosewater Developments Limited purchased the Baldwin St. property for $3.5 million. Nicola (Nick) Simone was the controlling mind of the Bare Trustee.

27The purchase price was paid by $2.5 million in cash and a $1.0 million vendor-take back mortgage to the vendor 1419223 Ontario Inc. The $3.5 million dollar transaction was financed by a $4.5 million first mortgage to Goldy Metals Holdings Inc.

28On March 28, 2016, Rosewater Baldwin Street Holdings Limited, Rosewater Developments Limited, Stockworth Homes Inc. and Stockworth Rosewater George Street Limited (the “Bare Trustee”) entered into a joint venture agreement. Pursuant to this agreement the Bare Trustee would hold title to the condominium development property. The beneficial ownership was 75% to Rosewater Baldwin Street Holdings Limited and 25% to Stockworth Developments Inc.

29To finance the development of the property, the joint ventures established George Street (Brooklin) Limited Partnership with 2541672 Ontario Inc. as General Partner of the limited partnership. Nicola (Nick) Simone was the controlling mind of the limited partnership and of its General Partner.

30Rosewater Capital Group Limited, Stockworth Developments Inc., Rosewater Baldwin Street Holdings Limited, Rosewater Developments Limited, 2336495 Ontario Inc., 8522146 Canada Inc., CVA Realty Holdings Limited, 1708567 Ontario Inc., Micari Consulting Inc., Rosewater Baldwin Inc., Stockworth Homes Inc., Stockworth Rosewater George Street Limited and 2541672 Ontario Inc., are collectively the “Rosewater Corporations”.

31To capitalize the joint venture and to promote the development of the condominium project through the limited partnership, Nicola (Nick) Simone engaged Stevloc Management Inc. Stevloc Management Inc. carried on business as an “Exempt Market Dealer.” An Exempt Market Dealer is a licensed security dealer selling prospectus exempt securities to qualified exempt market clients.

32Nicola (Nick) Simone along with Colleen Adams were the principal owners of Stevloc Management Inc. Ms. Adams was CEO, Ultimate Designated Person, and Chief Compliance Officer. Nicola (Nick) Simone was Executive Vice-President.

33Nicola (Nick) Simone’s plan was to sell units in the limited partnership. Stevloc Management Inc. would earn commissions on the sale of the limited partnership units. The investment interest in the condominium development project would be sold in two ways. Investors could: (a) purchase limited partnership units (“LP Units”) directly from the limited partnership; or (b) purchase trust units (“Trust Units”) in Progressive Development Fund Trust. The trust would be holding “LP Units” in trust for the investors. Trust Units would be sold pursuant to an Offering Memorandum.

34In November 2016, Nicola (Nick) Simone, Colleen Adams, and Joshua Will, all of Stevloc Management Inc. and Trevor Wolfe, who was the operator of 2541672 Ontario Inc., the General Partner of the limited partnership met Blaney McMurtry LLP.

35The meetings were led by Paul Schnier, a tax lawyer. Mr. Cummins was also in attendance. The General Partner signed a retainer agreement for the limited partnership. The law firm was retained by the limited partnership (George Street (Brooklin) Limited Partnership) to prepare an Offering Memorandum, a Trust Agreement, and a Subscription Agreement for the sale of the Trust Units in the Progressive Development Fund Trust. Mr. Wolfe was the person instructing the law firm.

36On February 22, 2017, Stevloc Management Inc. signed a private placement agreement with George Street (Brooklin) Limited Partnership. Stevloc Management Inc. agreed to sell 430,000 LP Units to raise $4.3 million.

37Also on February 22, 2017, pursuant to a Trust Agreement, 2558627 Ontario Inc. (whose principals are Nicola (Nick) Simone, his nephew, Martin Simone, and Joe Trozza as Manager) and Computershare Trust Company of Canada as Trustee established Progressive Development Fund Trust. The trust was established to facilitate the sale of Trust Units as qualified investments in RRSPs and tax-free savings accounts.

38In June 2017, Mr. Wolfe started his employment with Stevloc Management Inc. He started as Operations Manager, and subsequently he was promoted to Operations & Compliance Manager, (November 2017), then Vice-President, Compliance & Operations (May 2018), then to Chief Compliance Officer (May 2019).

39Blaney McMurtry LLP prepared the Offering Memorandum dated February 28, 2017.

40Although the law firm Thomas, Efraim LLP did not act for the investors, it prepared the documentation for their purchase of LP Units and Trust Units.

41Olympia Trust Company and Computershare Trust Company of Canada were the custodial trustees for the investors’ investment in Trust Units.

42Stevloc Management Inc. sold LP Units and Trust Units. The Trust Units were sold pursuant to the Offering Memorandum. $4.3 million was raised from the sale of the LP Units and the Trust Units and the funds were loaned to Stockworth Rosewater George Street Limited (the “Bare Trustee”).

43In August 2019, pursuant to a share purchase and sale transaction, Nicola (Nick) Simone and Colleen Adams sold their interest in Stevloc Management Inc. to Aurelio Baglione. Joshua Will, another shareholder, also sold his interest. Mr. Baglione paid $1.35 million for 9,002 shares (90% shareholding).

44At the time of Mr. Baglione’s acquisition of the shares of Stevloc Management Inc., the LP Units and the Trust Units had already been sold. Mr. Baglione had no prior knowledge of these investments. Mr. Baglione would later sue the vendors of the shares, amongst other things for fraud, and for exposing Stevloc Management Inc. to lawsuits from the investors.

45The condominium development never broke ground. The investors in the LP Units and the Trust Units recovered nada.

46On March 12, 2020, Stevloc Management Inc. changed its name to Virtus Capital Management Inc.

47The first mortgage of the condominium development property went into default, and on September 2, 2020, the first mortgagee commenced power of sale proceedings.

48On February 5, 2021, the first mortgagee sold the condominium development property.

49Early in 2021, Mr. Baglione and Virtus Capital Management Inc. sued Nicola (Nick) Simone, Colleen Adams, and Joshua Will. On February 24, 2021, Mr. Baglione and Virtus Capital Management Inc. delivered an Amended Statement of Claim in their action against Simone, Adams, and Will. Mr. Baglione’s and Virtus Capital Management Inc.’s lawyer of record was Greg Roberts PC. The Plaintiffs, among other things, alleged that they had been defrauded in the share purchase transaction.

50On October 28, 2021, Nicola (Nick) Simone and Colleen Adams, the Defendants in Mr. Baglione’s action, delivered a Statement of Defence, a Counterclaim, and a Crossclaim against Joshua Will. The Counterclaim was against Mr. Baglione and Virtus Capital Management Inc. The Counterclaim joined Trevor Wolfe, Virtus Financial Corporation, Winchester Financial Corporation, Joseph Robert Bergman, 963062 Ontario Inc., and Baldwin Street Holdings Inc. and Shrewsbury & Fourth Ltd.

51On December 7, 2021, Domenic Mattina commenced a proposed class action against the 40 defendants, listed above in the Procedural and Evidentiary Background. Mr. Mattina’s lawyer of record was Greg Roberts PC, who it may be noted was already acting for Mr. Baglione and Virtus Capital Management Inc. in their action against Simone, Adams, and Will.

52In his proposed class action, Mr. Mattina acknowledges that he and the Class Members were not clients of Blaney McMurtry LLP, but he pleads that the law firm had a duty of care to him and the Class Members and were negligent and breached their duty of care. Mr. Mattina alleges the Offering Memorandum was deficient disclosure and that the firm, among other things, failed to investigate the circumstances surrounding the purchase and the price paid for property, and failed to ensure that investors’ funds were used to pay down the mortgage debt.

53In the fall of 2022, Blaney McMurtry LLP’s counsel wrote the counsel for: (a) the limited partnership; (b) the General Partner; and (c) Progressive Development Trust Fund and inquired whether in light of Mr. Wolfe’s affidavit having been filed in Mr. Mattina’s Certification Motion, they waived solicitor and client privilege. The response was that privilege had not been waived and a proposal was made for a procedure to ascertain what information and documents Blaney McMurtry wished to have disclosed. Blaney McMurtry rejected this proposal.

54On October 7, 2022, in the Baglione and Virtus Capital Management Inc. action against Simone, Adams, and Will, the parties signed Minutes of Settlement. The Minutes of Settlement are signed by Mr. Baglione, Virtus Capital Management Inc., Nicola (Nick) Simone, Colleen Adams, Martin Simone, Trevor Wolfe, Joshua Will, Robin Anita Bergman for the Estate of Joseph Robert Bergman, Micari Consulting Inc., Winchester Financial Corporation, Virtus Financial Corporation, Shrewsbury & Fourth Ltd., and Baldwin Street Holdings Inc. Pursuant to the proposed settlement the individual defendants associated with what had been Stevloc Management Inc., will be released from the proposed class action and Virtus Capital Management Inc. will pursue the non-settling defendants including Blaney McMurtry. To the extent recovery is made from the non-settling defendants Virtus Capital Management Inc.’s settlement obligations will be reduced.

55On November 25, 2022, Nicola (Nick) Simone, Colleen Adams, Martin Simone, Joe Trozza, and Micari Consulting Inc., entered into a Pierringer Agreement with Mr. Mattina. For present purposes, the relevant provisions of the agreement are set out below:

PIERRENGER AGREEMENT

WHEREAS pursuant to the terms of Minutes of Settlement dated October 7, 2022 (the “Minutes of Settlement”), the defendants in this action: Virtus Capital Management Inc. (“Virtus”), Nicola Simone (“Simone”), Colleen Adams (“Adams”) and Micari Consulting Inc. (“Micari”) agreed to resolve action no. CV-21-00657465-00CL (the “Settled Action”) on the terms and subject to the conditions contained in the Minutes of Settlement;

AND WHEREAS pursuant to the terms of the Minutes of Settlement, Micari agrees to direct all fees or shares that it was to receive from the Other Transactions, as that term is defined in the Minutes of Settlement (the “Settlement Amount”) to Virtus, to be held by Virtus in trust and any cash proceeds received therefrom in a segregated bank account until the conditions in paragraph 2 of the Minutes of Settlement have been satisfied, and then apply the Settlement Amount to any loss that Virtus may suffer as a result of any damages and costs it agrees to or is ordered to pay in the Class Action, including any legal fees that Virtus has to pay its counsel in the Settled Action, and all reasonable expenses that Virtus incurs to manage the General Partnerships, as that term is defined in the Minutes of Settlement and report to the Limited Partners (i.e. the Class in this action);

AND WHEREAS Virtus has entered into a Mary Carter Agreement dated November 25, 2022 with the Plaintiff in this action, which requires Virtus to pay damages to the Plaintiff in this action on the terms and subject to the conditions therein that requires the Plaintiff in this action to dismiss this action against Simone, Adams, Micari, Martin Simone (“Martin”), and the plaintiff has agreed to dismiss this action as against Joe Trozza (“Trozza”) which dismissal must be approved by the Court;

The Plaintiff and the Defendants Simone, Adams, Micari, Martin and Trozza (hereinafter collectively, the “Settling Defendants”) have agreed to settle this action as follows:

The foregoing Recitals are hereby incorporated into and made part of this Agreement.

The Plaintiff will obtain an order that dismisses this action against the Settling Defendants and to amend his claim to clearly and unambiguously limit the relief sought to the non-settling defendants’ proportionate degree of fault.

The Plaintiff will limit his claim for recovery to the aggregate of the several extent of liability of the remaining defendants (the “Remaining Defendants”) and will not seek to recover against the Remaining Defendants, any portion of their losses which they have claimed or could have claimed from the Settling Defendants in this action and which a Court may attribute to the fault, tort, negligence, and/or the breach of any equitable, common law or statutory duty of the Settling Defendants.

In no event shall the Settling Defendants be liable to the Plaintiff for damages arising from or associated with this action or the claims for any amount.

The Plaintiff and the Settling Defendants agree that the Settling Defendants will provide the relevant documents in their possession to the Plaintiff and the Remaining Defendants.

The terms set out herein are conditional on the granting of an order attached in the form substantially similar to the order attached as Schedule "A". For greater clarity, the order granted must bar all claims or possible claims, including any claims by the Remaining Defendants, against the Settling Defendants relating to the matters at issue in this action and shall: (a) dismiss this action against the Settling Defendants; (b) grant leave to the Plaintiff to amend the Amended Fresh as Amended Statement of Claim in the form attached as Schedule “A” to the draft order to inter alia remove all the claims against the Settling Defendants and all allegations of wrongdoing made against the Settling Defendants and to limit the Plaintiff’s claim to only relief arising from the wrongdoing of the Remaining Defendants; (c) bar the Remaining Defendants from delivering or continuing a crossclaim or issuing a third party claim against the Settling Defendants; (d) […]; and (e) shall direct the Settling Defendants to produce relevant documents in their possession to the Plaintiff and the Remaining Defendants prior to discovery and to attend a discovery as a non-party if requested to do so by the Plaintiff or the Remaining Defendants.

The Plaintiff shall indemnify and save harmless the Settling Defendants with respect to any liability the Settling Defendants might be found to have with the Remaining Defendants for contribution and indemnity and to save harmless the Settling Defendants from any claims against them on account of indemnity, contribution, or costs awarded to the Remaining Defendants in connection with all matters arising from, or pertaining to, this action.

After executing this agreement: (a) the Settling Defendants upon request shall provide the Plaintiff with witness statements responding to the allegations made in the Fresh as Amended Statement of Claim; and (b) should the Plaintiff or the Remaining Defendants wish to obtain the Settling Defendants’ oral or documentary evidence they will seek to do so through the relevant rule for obtaining evidence from non-parties. The Settling Defendants will reasonably cooperate with all such requests including, producing relevant documents before an oral examination. The Settling Defendants agree they will not seek to quash any such summons and consents to service of any summons on their lawyer Emilio Bisceglia by email to EBisceglia@lawtoronto.com.

56Also on November 25, 2022, Mr. Mattina, represented by Greg Roberts PC, and Virtus Capital Management Inc., represented by Kevin MacDonald signed a Mary Carter Agreement. For present purposes the relevant provisions of that agreement are set out below.

MARY CARTER AGREEMENT

AND WHEREAS the Plaintiff and Virtus have reached a settlement of the issues between them in this Action; AND WHEREAS Virtus agrees to transfer units in a Virtus real estate investment trust (“REIT') with net asset value equivalent to each George Street Investor’s principal investment in Units (purchased directly or indirectly through ownership in units of the Trust). If this transfer does not occur within six months of the date of this Agreement, Virtus shall repay the George Street Investors’ loss up to XXXX plus prejudgment interest in accordance with the Courts of Justice Act (Ontario), that the Plaintiff or Virtus (by crossclaim) cannot recover from the other parties to this action, payable after the trial or other resolution of this Action, including any appeals plus legal and professional fees/costs including expert’s fees (the “Investors’ Loss”).

AND WHEREAS the Plaintiff and Virtus acknowledge that the total amount of the claims of the Plaintiff exceeds the consideration agreed to be paid by Virtus;

AND WHEREAS the Plaintiff did reach a settlement with the following Defendants in accordance with the Pierringer Agreement made between the Plaintiff and the Defendants Nicola Simone, Colleen Adams, Martin Simone, Joe Trozza and Micari Consulting Inc. dated November 25, 2022 (collectively, the “Settling Defendants”) but not with the other Defendants in this Action (the “Remaining Defendants”). In this Agreement, the term “Remaining Defendants” shall also include any party that may be added to the Action subsequent to the execution of this Agreement;

AND WHEREAS Virtus desires to settle all claims that the George Street Investors may have against Virtus related to the issues raised in this action pursuant to the terms and conditions outlined in this Agreement;

Virtus agrees to transfer units in a Virtus real estate investment trust (“REIT”) with net asset value equivalent to each George Street Investor’s principal investment in Units (purchased directly or indirectly through ownership in units of the Trust) (the “REIT Settlement”). If this transfer does not occur within six months of the date of this Agreement, Virtus agrees to repay the George Street Investor’s loss claimed in this Action by the Plaintiff up to XXXX plus prejudgment interest in accordance with the Courts of Justice Act, that the Plaintiff or Virtus (by crossclaim) cannot recover from the other parties to this action, payable after the trial or other resolution of this action, including any appeals (the “Cash Settlement”). In either the REIT Settlement or the Cash Settlement, Virtus will indemnity and pay all legal and professional fees and disbursements, including expert’s fees plus H.S.T. that the Plaintiff may incur in this Action forthwith as they become due regardless of the result of the trial or any appeal.

The Plaintiff will not actively prosecute this Action as against Virtus or seek to impose liability upon Virtus at any trial of this Action.

The Plaintiff will not claim from Virtus any amount other than XXXX plus prejudgment interest in accordance with the Courts of Justice Act and costs (the “Investors’ Loss”), after the trial or other resolution of this action, including any appeals, nor is the Plaintiff interest owing to the Plaintiff. The Plaintiff understands that if any Remaining Defendant is awarded more than the Inventors’ Loss in any crossclaim against Virtus, the Plaintiff will not be entitled to collect more than the Investors’ Loss from Virtus.

Virtus will not take any adversarial position against the Plaintiff in this Action.

The solicitor for the Plaintiff and the solicitor for Virtus will in their written and oral submissions, which includes opening and closing addresses, affirmatively state that it is their respective positions that liability for the Investors’ Loss ought to be found on a 100% basis as against the Remaining Defendants, and that there is no contributory negligence on the part of the Plaintiff.

[…] Virtus shall co-operate in providing affidavit evidence as requested by Plaintiff’s lawyer, to be submitted to the Judge hearing the confirmation motion.

57In November 2022, redacted copies of the settlement documents were disclosed to the non-settling Defendants.

58In December 2022, Mr. Mattina brings his motion for among other things a consent certification for settlement purposes, with respect to the Settling Defendants, approval of the settlement agreements, and a contested certification with respect to the non-settling defendants.

59In the spring of 2023, Dickinson Wright LLP (Jeff Rosekat) became lawyer of record for Mr. Mattina.

60On September 25, 2023, Blaney McMurtry LLP brings a motion for a declaration that any lawyer-client privilege that might have existed between it and Trevor Wolfe and any of the defendants has been waived. Further to my direction, notice is given to Trevor Wolfe of Blaney McMurtry’s motion.

61Mr. Wolfe filed no material for the motion in writing.

D. Discussion and Analysis

62It is a very tangled web in the immediate case, but it is clear that the Plaintiff, Mr. Mattina, places some of the blame for the financial disaster that was to be the Prince George Landing condominium project on Baldwin Street in Whitby, Ontario on Blaney McMurtry LLP. Mr. Mattina did not have a solicitor-client relationship with Blaney McMurtry, but some of the co-Defendants in Mr. Mattina’s proposed class action did receive solicitor and client communications from Blaney McMurtry LLP.

63Solicitor-client privilege concerns communications between a lawyer and his or her client. It is a fundamental right and a substantive rule of law. [3] To ensure public confidence in the legal system and the effectiveness of the privilege, solicitor-client privilege approaches an absolute right, rather than one that is decided on a case-by-case basis. [4]

64To qualify for solicitor-client privilege, a communication must be: (1) between a client and his or her lawyer who must be acting in a professional capacity as a lawyer; (2) given in the context of obtaining legal advice; and (3) intended to be confidential. [5] For the solicitor-client privilege to attach, the lawyer must be acting in his or her role of a lawyer, and solicitor-client privilege does not protect advice on purely business matters even where the advice is provided by a lawyer. [6]

65Putting aside the identification of whom precisely was the client, in the immediate case, Blaney McMurtry LLP was acting in its professional capacity as a lawyer, and it was communicating to its client(s) purely legal advice that was intended to be confidential. It is beyond doubt that Blaney McMurtry LLP’s communications in the immediate case associated with its preparation of the Offering Memorandum are subject to solicitor and client privilege.

66It is clear that the limited partnership (George Street (Brooklin) Limited Partnership) and its general partner (2541672 Ontario Inc.) were Blaney McMurtry LLP’s clients.

67In my opinion, in the circumstances of the immediate case, for the purposes of solicitor-client communications, although perhaps not for billing purposes, the following entities were the clients of the firm: (a) Progressive Development Trust Fund; (b) the Fund’s manager (2558627 Ontario Inc.); (c) Nicola (Nick) Simone; (d) Colleen Adams, (e) Stevloc Management Inc. (now Virtus Capital Management Inc.); and (f) Trevor Wolfe, certainly insofar as there being an occasion of solicitor-client privilege.

68In the Law Society of Ontario’s Rules of Professional Conduct, Section 1.1 defines client as follows:

"client " means a person who: (a) consults a lawyer and on whose behalf the lawyer renders or agrees to render legal services; or (b) having consulted the lawyer, reasonably concludes that the lawyer has agreed to render legal services on their behalf and includes a client of the law firm of which the lawyer is a partner or associate, whether or not the lawyer handles the client's work;

Commentary

[1] A solicitor and client relationship may be established without formality.

[2] When an individual consults a lawyer in a representative capacity, the client is the corporation, partnership, organization, or other legal entity that the individual is representing.

[3] For greater clarity, a client does not include a near-client, such as an affiliated entity, director, shareholder, employee, or family member, unless there is objective evidence to demonstrate that such an individual had a reasonable expectation that a lawyer-client relationship would be established.

69Although at first blush the above group of entities would appear to be “near-clients”, there is objective evidence that each of these entities had a reasonable expectation that a lawyer-client relationship had been established with Blaney McMurtry LLP.

70The issue then becomes whether the solicitor-client privilege in the immediate case has been waived.

71An evidentiary privilege may be waived. A waiver of privilege may be express or implied. Implicit waiver may arise in two circumstances: (i) waiver by disclosure – once the privileged communication has been disclosed, the privilege attached to it is said to be lost; or (ii) waiver by reliance – by pleading or otherwise relying upon the privileged communication as part of a substantive position taken in the legal proceedings. [7]

72Privilege may be waived intentionally or inferentially or as a matter of fairness. [8] In S & K Processors Ltd. v. Campbell Avenue Herring Producers Ltd., 1983 BCSC 407, [9] which was followed in Ontario in Browne (Litigation Guardian of) v. Lavery (2002), 2002 ONSC 49411, [10] Justice McLachlin, as she then was, stated:

Waiver of privilege is ordinarily established where it is shown that the possessor of the privilege (1) knows of the existence of the privilege, and (2) voluntarily evinces an intention to waive the privilege. However, waiver may also occur in the absence of the intention to waive, where fairness and consistency so require. Thus, waiver of privilege as to part of a communication will be held to be a waiver as to the entire communication.

73Lawyer-and-client privilege is waived when a litigant makes an issue in the litigation whether it relied on legal advisers, in which case the presence or absence of legal advice would, in turn, be relevant. In these cases, privilege may be impliedly waived because it would be unfair and inconsistent for a party to raise the issue of its reliance of legal advice and then to refuse to disclose the particulars of that advice on the grounds of privilege. [11]

74An implied waiver is inferred from actions inconsistent with the intent to maintain the privilege. [12] Where a client makes allegations of misconduct or professional negligence against his or her lawyer, the client by implication waives lawyer-and-client privilege to the extent necessary for the lawyer to defend himself or herself. [13]

75For the privilege to have been waived, the party must utilize the presence or absence of legal advice as a material element of his or her claim or defence; for a deemed waiver, there must be both: (1) the presence or absence of legal advice being relevant to the existence or non-existence of a claim or defence; and (2) the party who received the legal advice making the receipt of the advice an issue in the claim or defence. [14]

76In the immediate case, the parties to the Settlement Agreement, the Mary Carter Agreement, and the Pierrenger Agreement include Mr. Mattina and Blaney McMurtry LLP’s co-defendants; namely: Nicola (Nick) Simone, Colleen Adams, Martin Simone, Joe Trozza, Micari Consulting Inc., and Virtus Capital Management Inc. In the immediate case, these parties make common cause and: (a) they make relevant the issue of the quality legal advice provided by Blaney McMurtry LLP; and (b) they raise allegations of misconduct or professional negligence against Blaney McMurtry LLP.

77Mr. Mattina makes the allegations that Blaney McMurtry were professionally negligent through his allies amongst the co-Defendants of Blaney McMurtry, most particularly through the affidavit of Trevor Wolfe, who harshly criticizes the law firm’s legal work. The evidentiary record reveals that Mr. Mattina and Virtus Capital Management from the outset of the litigation intended to point some of the blame for the Class Members’ financial disaster on the law firm.

78These are precisely the circumstances where there is an implied waiver of solicitor and client privilege.

79Notwithstanding the responding parties’ submissions that it is premature to make a declaration at this juncture, now is the time to make the requested declaration.

80Blaney McMurtry LLP is contesting certification, and I understand that the non-settling Defendants, which include Blaney McMurtry LLP, may also be contesting the uncontested motion for certification for settlement purposes. It would not be fair and just to postpone making a declaration until after the Certification Motion. It is only fair that Blaney McMurtry be able to rebuff, if it can, the allegations made against it, which allegations indicate that any solicitor-client privilege has been waived in the circumstances of the immediate case.

E. Conclusion

81For the above reasons, Blaney McMurtry LLP’s motion for a declaration is granted.

82If the parties cannot agree on the matter of costs, they may make submissions in writing beginning with Blaney McMurtry LLP’s submissions within twenty days of the release of these Reasons for Decision followed by the submissions of Progressive Development Fund Trust, 2558627 Ontario Inc., 2541672 Ontario Inc., George Street (Brooklin) Limited Partnership, Nicola (Nick) Simone, and Colleen Adams within a further twenty days.

Perell, J.

Released: November 3, 2023

COURT FILE NO.: CV-21-00673296-00CP DATE: 20231103

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

DOMENIC MATTINA Plaintiff

and – VIRTUS CAPITAL MANAGEMENT INC., NICOLA SIMONE, MARTIN SIMONE, JOE TROZZA, COLLEEN ADAMS, PROGRESSIVE DEVELOPMENT FUND TRUST, 2558627 ONTARIO INC., COMPUTERSHARE TRUST COMPANY OF CANADA, BLANEY MCMURTRY LLP, GEORGE STREET (BROOKLIN) LIMITED PARTNERSHIP, 2541672 ONTARIO INC., MICARI CONSULTING INC., ROSEWATER BALDWIN STREET HOLDINGS LIMITED, RICHARD FAVA, ROSEWATER CAPITAL GROUP LIMITED, ROSEWATER DEVELOPMENTS LIMITED, STOCKWORTH DEVELOPMENTS INC., ROSEWATER BALDWIN INC., STOCKWORTH HOMES INC., MARIO BOTTERO, MARCO LORENTI, MARCELO PEREZ, TREVOR RABIE, ABRAHAM RABIE, STEVE THOMPSON, JOHN ALAN LENNOX, 2336495 ONTARIO INC., 8522146 CANADA INC., CVA REALTY HOLDINGS LIMITED, 1708567 ONTARIO INC., STOCKWORTH ROSEWATER GEORGE STREET LIMITED, ROBERT CAREY and THOMAS, EFRAIM LLP Defendants

REASONS FOR DECISION

PERELL J. Released: November 3, 2023.

1Marmion: A Tale of Flodden Field in Six Cantos by Sir Walter Scott

2S.O. 1992, c. 6.

3 R. v. McClure, 2001 SCC 14, [2001] 1 S.C.R. 445; Smith v. Jones, 1999 SCC 674, [1999] 1 S.C.R. 455; Descôteaux v. Mierzwinski, 1982 SCC 22, [1982] 1 S.C.R. 860; Goodman Estate v. Geffen, 1991 SCC 69, [1991] 2 S.C.R. 353; Canada v. Solosky, 1979 SCC 9, [1980] 1 S.C.R. 821.

4 Pritchard v. Ontario (Human Rights Commission), 2004 SCC 31, [2004] 1 S.C.R. 809, affg (2003), 2003 ONCA 8701, 63 O.R. (3d) 97 (C.A.); Lavallee, Rackel & Heintz v. Canada (Attorney General), 2002 SCC 61, [2002] 3 S.C.R. 209; R. v. McClure, 2001 SCC 14.

5 Wintercorn v. Global Learning Group Inc., 2022 ONSC 4576; Canada (Privacy Commissioner) v. Blood Tribe Department of Health, 2008 SCC 44; Gower v. Tolko Manitoba Inc., 2001 MBCA 11, [2001] M.J. No. 39 (C.A.); R. v. Campbell, 1999 SCC 676, [1999] 1 S.C.R. 565; Descôteaux v. Mierzwinski, 1982 SCC 22, [1982] 1 S.C.R. 860.

6 R. v. Campbell, 1999 SCC 676, [1999] 1 S.C.R. 565.

7 Laliberté v. Monteith, 2021 ONSC 4133 (Div. Ct.); Leitch v. Novac, 2017 ONSC 6888; Guelph (City) v. Super Blue Box Recycling Corp., 2004 ONSC 34954, [2004] O.J. No. 4468 (S.C.J.).

8 Lepan v. Lofranco, 2023 ONSC 1766; Browne (Litigation Guardian of) v. Lavery (2002), 2002 ONSC 49411, 58 O.R. (3d) 49 (S.C.J.); Glegg v. Smith & Nephew Inc., 2005 SCC 31, [2005] 1 S.C.R. 724 at para. 19.

9 1983 BCSC 407, [1983] B.C.J. No. 1499 (S.C.).

10(2002), 2002 ONSC 49411, 58 O.R. (3d) 49 (S.C.J.).