Court File and Parties

COURT FILE NO.: CV-23-1425 DATE: 2024/11/04 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: CHADWICK E. NEVE, Plaintiff AND: JOHN G. ADAMS and GREGORY M. CRONIN, Defendants

BEFORE: K.A. GORMAN

COUNSEL: David Alderson, Counsel, for the Plaintiff Anna Matas, Counsel, for the Defendants

HEARD: October 21, 2024

Endorsement

Overview

[1] There are two motions before the court. The plaintiff brings a motion for particulars and seeks a court order that the defendants make various documents available for inspection and copying. The defendants bring a motion for the determination, before trial, of a question of law pursuant to Rule 21.01(1)(a) of the Rules of Civil Procedure.

[2] As the defendant's motion carries with it the possibility of disposing of the entire action, I made an order that it proceed first. In consultation with the parties, the plaintiff's motion was adjourned to a special appointment on January 29, 2025.

Factual Overview

[3] At all material times, the Defendants John G. Adams (“Mr. Adams”) and Gregory M. Cronin (“Mr. Cronin”), and the Plaintiff Chadwick E. Neve (“Mr. Neve”) were the shareholders of Vertical Access Solutions Inc. (“Vertical”) and VAS Inc. (“VAS”; collectively “the Companies”).

[4] On or around 19 April 2023, the Defendants’ lawyer Jennifer Siemon (“Ms. Siemon”), wrote to Teresa Lister of P & L Accounting, Taxation and Business Solutions Inc. (“Ms. Lister”) regarding a dispute between the parties. Ms. Lister was the long-standing bookkeeper/accountant for the companies.

[5] The relevant portion of the letter reads as follows:

Our clients are in the process of commencing a Court proceeding against Mr. Neve and intend to seek various Orders against him. The allegations against Mr. Neve relate to, amongst other things, payments and transactions improperly taken and entered into by him. Mr. Neve has denied our clients’ allegations.

[6] Mr. Adams and Mr. Cronin were served with a Libel Notice referring to the Letter and the Words Complained Of on 3 May 2023 and 5 May 2023, respectively. On 17 July 2023, Mr. Neve issued a Notice of Action. On 15 August 2023, Mr. Neve issued this Statement of Claim.

[7] The Defendants submit that the letter to the Parties’ accountant was sent in preparation of litigation, and as part of the Defendants’ investigation into the Plaintiff’s conduct. As such, the allegedly defamatory statement is a communication protected by absolute privilege. In the alternative, it is submitted that the communication is protected by qualified privilege as it was sent by a person with an interest or duty to communicate the information to a person with a corresponding interest in receiving the information.

[8] The Defendants submit it is plain on its face that the defamation action should be dismissed pursuant to Rule 21.01(1)(a).

Law and Analysis

[9] Rule 21.01 provides:

21.01(1) A party may move before a judge,

(a) for the determination, before trial, of a question of law raised by a pleading in an action where the determination of the question may dispose of all or part of the action, substantially shorten the trial or result in a substantial saving of costs; or

(b) to strike out a pleading on the ground that it discloses no reasonable cause of action or defence,

and the judge may make an order or grant judgment accordingly.

21.01(2) No evidence is admissible on a motion,

(a) under clause (1)(a), except with leave of a judge or on consent of the parties;

(b) under clause (1)(b).

[10] The parties are in agreement that under Rule 21.01(1)(a) the following principles apply:

1. The answer to the question of law must be "plain and obvious". Transamerica Life Canada Inc. v. ING Canada Inc., at para. 37.
2. The facts as planned in the statement of claim are assumed to be true, unless they are patently ridiculous or manifestly incapable of proof. Paton Estate v. Ontario Lottery and Gaming Corporation (Fallsview Casino Resort and OLG Casino Brantford), 2016 ONCA 458, at para. 12.
3. The statement of claim is to be read as generously as possible to accommodate any drafting inadequacies in the pleading. If the claim has some chance of success, it should be permitted to proceed. Beaudoin Estate v. Campbellford Memorial Hospital, 2021 ONCA 57, at para. 14.

[11] The issues before me are:

(a) Should the Statement of Claim be struck on the basis that the Words Complained Of were communicated during an occasion of absolute privilege? (b) In the alternative, should the Statement of Claim be struck on the basis that the Words Complained Of were communicated during an occasion of qualified privilege? (c) If required, should the Court admit the Affidavit of John Adams?

[12] I will turn first to the issue of the Affidavit of John Adams.

Should the court admit the Affidavit of John Adams?

[13] Mr Adams swore an Affidavit in support of these proceedings. It attests at paragraph 7:

Although we made the decision to sue Mr. Neve before Ms. Siemon sent the April 19 letter, that litigation was put on hold when we were served on May 2, 2023 with libel notices relating to the impugned statement […]

[14] The court has discretion to admit the Affidavit pursuant to Rule 21.01(2)(a).

[15] Evidence should not be admitted if the evidence sought to be tendered is in dispute. Goudie v. Ottawa (City), 2003 SCC 14, [2003] 1 SCR 141, at para. 32. However, I must assume that the contents of Mr. Adams’ Affidavit are not in dispute as the Plaintiff did not seek to cross-examine Mr. Adams, pursuant to the Timetable ordered for this motion.

[16] The Affidavit of John Adams contains information that directly supports the Defendants’ defence of absolute privilege, as it confirms the reason for pausing the planned litigation described in the Letter.

[17] I agree with the court in Beardsley v. Ontario (2001), 57 OR (3d) 1, that it would defeat the interests of justice to restrict the Defendants’ right to introduce the Affidavit.

[18] The Affidavit will assist the Court in determining whether the Words Complained Of were communicated during an occasion of privilege.

[19] It is accordingly admitted into evidence.

Absolute Privilege

[20] The letter sent by Ms. Siemon is the sole basis upon which the Plaintiff founds his defamation claim. The essence of the Plaintiff’s claim is found at paragraph 9 of the Statement of Claim:

On April 19, 2023, through the agency of their authorized solicitor, the Defendants, and each of them, falsely and maliciously wrote and published, by email a letter of Jennifer L. Siemon, Associate, at Torkin Manes LLP, sent on April 19, 2023, at approximately 10:36 a.m. Eastern Time (ET), via both registered mail by Jennifer L. Siemon and email, by Lisa Bleiwas, Legal Assistant to Jennifer L. Siemon to, inter alia, Teresa Lister of P & L Accounting, Taxation and Business Solutions Inc., and to P & L Accounting, Taxation and Business Solutions Inc., the longterm bookkeeper of Vertical and VAS (hereinafter “Bookkeeper”) and others, which first came to the knowledge of Chadwick E. Neve on April 19, 2023, containing the following words:

“The allegations against Mr. Neve relate to, amongst other things, payments and transactions improperly taken and entered into by him” (emphasis mine)

hereinafter described as the “Defamatory Publication”.

[21] “Absolute Privilege” has been defined to mean that:

No action lies, whether against judges, counsel, jury, witnesses or parties, for words spoken in the ordinary course of any proceedings before any court or judicial tribunal recognised by law. The evidence of all witnesses or parties speaking with reference to the matter before the court is privileged, whether oral or written, relevant or irrelevant, malicious or not. – The privilege extends to documents properly used and regularly prepared for use in the proceedings. Advocates, judges and juries are covered by this privilege. – However, a statement will not be protected if it is not uttered for the purposes of judicial proceedings by someone who has a duty to make statements in the course of the proceedings. – Halsbury’s Laws of England, vol 28, 4th ed. (London, UK:Butterworths, 1997) and adopted by the court in Amato v. Welsh, 2013 ONCA 258.

[22] In Wickham v. Hamdy, 2019 ONSC 169, at paras. 34-36, the court stated:

34 It is settled law that statements published on an occasion of absolute privilege are not actionable, see Admassu v. Macri, 2010 ONCA 99 (Ont. C.A.), at para. 19 and Big Pond Communications 2000 Inc. v. Kennedy. Lawyers, parties and witnesses, are all protected by the privilege.

35 The privilege seeks to create a zone of protection for lawyers acting in pursuit of their clients' interests. Lawyers are to be free to present their clients' cases without fear of a lawsuit. The privilege is not simply confined to statements made in court. It also extends to all preparatory steps taken with a view to judicial proceedings so long as the step in question is directly concerned with actual or contemplated proceedings, see Dingwall v. Lax, at para. 16. The privilege extends to statements that are incidental or preparatory to judicial proceedings, see Salasel v. Cuthbertson, 2015 ONCA 115 (Ont. C.A.), at para. 36. Determining whether a statement is preparatory to or intimately connected with a judicial proceeding involves an assessment of remoteness. A statement that is only remotely connected to a judicial proceeding may fall outside the scope of absolute privilege.

[23] At this stage it is important to review the contents of Ms. Siemon’s letter in a more fulsome manner. She wrote:

We are litigation counsel for John Adams and Greg Cronin, registered shareholders of VAS, and 2671803 Ontario Inc. and 2671720 Ontario Inc., registered shareholders of Vertical.

We are writing in respect of an ongoing dispute between our clients and Chadwick Neve who takes the position that he is the sole director and president of each of the Companies. Our clients are in the process of commencing a Court proceeding against Mr. Neve and intend to seek various Orders against him. The allegations against Mr. Neve relate to, amongst other things, payments and transactions improperly taken and entered into by him. Mr. Neve has denied our clients’ allegations.

We understand that you have been the bookkeeper and accountant for each of the Companies since in or around May 2017. We are writing to remind you that you have been engaged by each of the Companies and that your duties and obligations are owed to the Companies and not any one specific shareholder.

[24] In Salasel v. Cuthbertson, 2015 ONCA 115, at para. 36 the court summarized the law as follows:

At issue in this case is a communication made by counsel for the respondent physicians before the actual commencement of legal proceedings. As noted by Cullity J. in Moseley-Williams v. Hansler Industries Ltd. (2004), 38 C.C.E.L. (3d) 111 (Ont. S.C.J.), aff'd [2005] O.J. No. 997 (Ont. C.A.), Ontario has adopted a broader application of the rule of absolute privilege to such pre-suit statements than jurisdictions such as British Columbia, Alberta and England. The scope of the Ontario rule was summarized comprehensively by the Divisional Court in 1522491 Ontario Inc. v. Stewart, Esten Professional Corp., 2010 ONSC 727, 100 O.R. (3d) 596 (Ont. Div. Ct.), at paras. 37 and 39 to 44:

[37] In Ontario, absolute privilege may extend to communications by a party's solicitor made before the actual commencement of proceedings.

[39] As Cullity J. points out in Moseley-Williams, the following statement from Fleming has been referred to with approval in Ontario decisions:

The privilege is not confined to statements made in court, but extends to all preparatory steps taken with a view to judicial proceedings.... But the statement or document must be directly concerned with actual contemplated proceedings.

[40] However, Cullity J. also found that the authorities do not appear to support an extension of the privilege to all occasions when the possibility of litigation is contemplated, or even when a threat of litigation is made, or when a lawyer is endeavouring to assert and protect a client's rights.

[41] Thus, when a defendant in these circumstances moves to dismiss the claim on the ground of absolute privilege, the decision the court has to make is whether the communication was made "for the purpose of, or preparatory to, the commencement of [judicial] proceedings".

[42] Something more than merely a contemplation of the possibility of litigation is required. The court must decide whether the occasion is "incidental" or "preparatory" or "intimately connected" to judicial proceedings and not one that is too remote.

[43] It is in this sense that Cullity J. accepted that "... some inquiry into the purpose of their publication would appear to be unavoidable"... That case dealt with a motion for judgment under rule 20. On a rule 21.01(1)(b) motion, the "inquiry" is made on the assumed truth of the facts pleaded in the statement of claim.

[44] It must be stressed that "it is the occasion, not the communication, that is privileged. The privilege belongs to the occasion by reason of the setting." [Citations omitted; emphasis in original.]

Determining whether an occasion is preparatory to, or intimately connected with, judicial or quasi-judicial proceedings involves, as Cullity J. aptly put the matter in Moseley-Williams, at paras. 57 and 58, an exercise of ascertaining where a line is to be drawn so that the degree of connection between the occasion and the judicial proceeding is not too remote.

[25] When considering an out of court statement delivered by a lawyer, courts consider five factors for determining if the occasion was one of absolute privilege:

(i) Steps had been taken to prepare for litigation when the communication was delivered: Moseley-Williams, supra, at para. 44 (ii) The decision to litigate had already been made: Moseley-Williams, supra, at para. 44 (iii) The defendant commenced legal action shortly after the publication of the alleged libelous statements: Moseley-Williams, supra, at para. 44; G.W.E., supra, at para. 35 (iv) The defamatory statements were made for the purpose of obtaining evidence: Moseley-Williams, supra, at paras. 43-44; G.W.E. supra, at para. 33 (v) The communications were made in the course of a solicitor's investigation of a client's case with a view to litigation, and were directed to a limited audience from whom the solicitor anticipates obtaining relevant or potentially relevant information: Moseley-Williams, supra, at para. 48; G.W.E., supra, at para. 33; Dingwall, supra, at para. 26; Fuss v. Fidelity Electronics of Canada Ltd., [1996] O.J. No. 161 (Ont. Gen. Div.), per MacKinnon J., at para. 7; Lubarevich v. Nurgitz, [1996] O.J. No. 1457 (Ont. Gen. Div.), per G.D. Lane J., at para. 22.

[26] In considering the aforementioned five factors, I conclude as follows:

(i) Steps had been taken to prepare for litigation. The Defendants had retained Ms. Siemon to assist them in the ongoing dispute with the Plaintiff; (ii) The decision to litigate had already been made. The letter states: Our clients are in the process of commencing a Court proceeding against Mr. Neve and intend to seek various Orders against him. (iii) The Defendants had not commenced the legal proceeding. They made a decision to “pause” the litigation when they were served with libel notices on May 3, 2023. The evidence before me is that the underlying issues remain outstanding. In the circumstances, this was no doubt, the prudent course of action. (iv) The defamatory statements were clearly made for the purpose of obtaining evidence. Ms. Siemon’s letter contains a list of documentary evidence being sought:

We request that you provide our clients with the following documents:

1. All bank statements that are in your possession, power or control for the Manulife account which is used exclusively by Mr. Neve, from the date the account was opened to present;
2. All bank statements that are in your possession, power or control for the RBC business credit card which is used exclusively by Mr. Neve, from the date the account was opened to June 2019;
3. All corresponding invoices/receipts for charges which appear on the above-referenced bank statements;
4. Financial Statements for Vertical for each of the years 2016 through 2018;
5. Financial Statements for VAS for each of the years 2018 and 2019; and
6. Copies of all source documents provided to you to prepare the Financial Statements for each year and for each of the Companies.

(v) The communication was obviously made in the course of counsel’s investigation of the client’s case, with a view to litigation. The letter was addressed and directed only to Ms. Lister. It was further copied to Mr. Alderson. Clearly two persons constitutes a “limited audience”.

[27] I am satisfied that the contents of the letter and the circumstances in which it was sent, cause the communication to be protected by absolute privilege. As such, it is plain and obvious that the within action cannot succeed.

Conclusion

[28] There will be an order to go, striking the Statement of Claim without leave to amend on the basis that the Words Complained Of were communicated on an occasion of absolute privilege.

[29] The Defendants are entitled to their costs. If the parties are unable to come to an agreement as to quantum, I will receive brief costs submissions from the Plaintiff within 20 days.

Justice K.A. Gorman Date: November 4, 2024