Kelsey v. Stockli, 2025 ONSC 1826

Court File No.: CV-23-00000086-0000
Date of Judgment: March 24, 2025
Heard: October 15, 2024, by video conference, at Peterborough
Ontario Superior Court of Justice
Between:
Michael Kelsey and The House Consulting Group Inc., Plaintiffs
– and –
Niklaus Stockli, Adriana Van Oudenaren and LLF Lawyers LLP, Defendants

Appearances:
Christine Carter, for the plaintiffs
Tim Gleason, for the defendant LLF Lawyers LLP

Judge: S.T. Bale

Introduction

1. In this action, the plaintiffs claim damages which they allege have been suffered as a result of the disclosure of confidential information by Adriana Van Oudenaren, an employee of the defendant LLF Lawyers LLP, to her spouse, Niklaus Stockli. The plaintiff Michael Kelsey alleges that Mr. Stockli then used a false version of the disclosed information to defame him.

2. On this motion, LLF Lawyers request an order dismissing the action as against them, on the ground that the statement of claim discloses no reasonable cause of action against them. They argue that the information alleged to have been disclosed by Ms. Van Oudenaren was not confidential and was therefore not protected by their duty of confidentiality to Mr. Kelsey and his wife, Brenda Berkin. In the alternative, they argue that if the information was confidential, the plaintiffs expressly or impliedly waived the firm’s duty of confidentiality.

3. For the following reasons, I find that the statement of claim, as supplemented by the plaintiffs’ response to demand for particulars, discloses a cause of action in favour of Michael Kelsey against LLF Lawyers. LLF’s motion for an order dismissing Mr. Kelsey’s action against them will therefore be dismissed.

Facts Pleaded by the Plaintiffs

4. In the statement of claim, the plaintiffs plead:

• (a) that Michael Kelsey is a former client of LLF;
• (b) that LLF is the purchaser or successor of the law practice of Robert Walker who acted for Mr. Kelsey and Ms. Berkin in relation to the purchase of 105 Main Street and 11 Prince Street in Bobcaygeon;
• (c) that LLF acted for Mr. Kelsey and Ms. Berkin on the sale of those properties;
• (d) that Adriana Van Oudenaren is a law clerk who was employed by Robert Walker, and subsequently by LLF, and who was involved in both the purchase and sale transactions;
• (e) that Nicklaus Stockli is the spouse of Ms. Van Oudenaren;
• (f) that when the properties were sold, Mr. Kelsey and Ms. Berkin discovered that there was a zoning issue which prevented them from being sold for their full value;
• (g) that they wrote to Mr. Walker, Ms. Van Oudenaren and Emily Whetung (a lawyer at LLF) setting out the nature of their dispute;
• (h) that ultimately, with the assistance of counsel acting for them and for LLF’s insurer, LawPro, the issue was settled and a full and final release entered into;
• (i) that Ms. Van Oudenaren later shared confidential information about Mr. Kelsey with her spouse;
• (j) that Mr. Stockli defamed them publicly “using false information about the nature of the dispute and the settlement between the parties”;
• (k) that the false information included that Mr. Kelsey is a “thief and a liar”, and that he “stole money from us in a real estate business”;
• (l) that the defamatory words were spoken in apparent retaliation for pursuing LLF for compensation relating to the dispute arising from the zoning issue;
• (m) that the defendants breached the plaintiffs’ common law right to solicitor-client privilege and confidentiality;
• (n) that LLF is vicariously liable for Ms. Van Oudenaren’s sharing of confidential information; and
• (o) that as a result, they suffered damages.

5. Following service of the statement of claim, LLF demanded particulars of the allegations made in paragraph 15 of the claim. In particular, they requested particulars of the confidential information alleged to have been shared by Ms. Van Oudenaren with her spouse (paragraph 15(d) of the claim), and particulars of the alleged breach of solicitor-client privilege (paragraph 15(f) of the claim).

6. In response to the demand for particulars, the plaintiffs pleaded the following facts:

Information alleged to have been shared by Ms. Van Oudenaren with her spouse (para. 15(d)):

• (a) that Ms. Van Oudenaren shared with her spouse the confidential information that Mr. Kelsey and his wife had made a claim for professional negligence against Mr. Walker and LLF Lawyers with respect to the purchase and sale of 105 Main Street and 11 Prince Street, Bobcaygeon;
• (b) that Ms. Van Oudenaren shared with her spouse the confidential information that the claim for professional negligence had been resolved by means of a payment to Mr. Kelsey and his wife; and
• (c) that Ms. Van Oudenaren’s spouse had then taken this confidential information and repeated a false version of it in public suggesting that Mr. Kelsey was a thief who stole money from the firm related to a zoning issue he and his wife raised.

Particulars of the alleged breach of solicitor-client privilege (para. 15(f)):

• (d) that the entire files of Mr. Kelsey and his wife relating to the purchase and sale of 105 Main Street and 11 Prince Street were solicitor-client privileged;
• (e) that the negotiations between Mr. Kelsey, LLF and LawPro, including the full and final release, were solicitor-client privileged; and
• (f) that the breach occurred when Ms. Van Oudenaren shared any information related to any of these transactions with her spouse, and when the defendant firm failed to ensure that it had proper protocols in place to prevent the breaches and the sharing of confidential solicitor-client privileged information.

Analysis

Principles on a Motion to Strike

7. The principles to be applied on a motion under rule 21.01(1)(b) to strike out a pleading on the ground that it discloses no reasonable cause of action are summarized in Paul M. Perell and John W. Morden, The Law of Civil Procedure in Ontario, 5th Ed. (LexisNexis 2025), at ¶6.208-6.219. For the purposes of this motion, they include:

• (a) that the facts pleaded are taken to be true, unless they are patently ridiculous or incapable of proof;
• (b) that a pleading will be struck only where it is “plain and obvious” that it discloses no reasonable cause of action; and
• (c) that a pleading is to be read generously, and with fair allowance for drafting deficiencies.

Whether the Information Was Subject to a Duty of Confidentiality

8. LLF’s primary position is that the information alleged to have been disclosed was not subject to a duty of confidentiality. In the alternative, they argue that if the information was confidential, the plaintiffs waived LLF’s duty of confidentiality, either expressly or by implication. In particular, they argue:

• (a) that privilege was waived when Mr. Kelsey wrote to LLF requesting compensation for his loss resulting from the zoning issue; and
• (b) that the plaintiffs’ claim is barred by the release Mr. Kelsey provided to LLF and Mr. Walker when the claim was settled.

9. LLF argues that the facts pleaded in the statement of claim consist only of allegations that Ms. Van Oudenaren disclosed false information to her spouse, and disclosed that Mr. Kelsey made a claim against LLF that was resolved. They argue that none of the information alleged to have been disclosed was subject to a duty of confidentiality. I disagree, for the following reasons.

10. In making the argument that the plaintiffs have pleaded that Ms. Van Oudenaren disclosed only false information to her spouse, LLF relies on paragraph 10 of the statement of claim where it is pleaded that in 2022, the plaintiffs learned that Mr. Stockli “was defaming them publicly using false information about the nature of the dispute and the settlement between the parties.” However, as the heading immediately preceding paragraph 10 suggests, this fact is pleaded in support of the plaintiffs’ claim in defamation against Mr. Stockli. The argument that the claim should be interpreted to allege that Ms. Van Oudenaren gave only false information to her spouse, which he then used to defame Mr. Kelsey, makes no sense.

11. As the heading immediately preceding paragraph 14 of the statement of claim suggests, it is there that the allegations in support of the claim against LLF for breach of confidence are to be found. The allegations there include that Mr. Kelsey expected that LLF would keep his personal information confidential, that Ms. Van Oudenaren shared confidential information about him with her spouse, that the defendants breached the Law Society of Ontario’s Rules of Professional Conduct and that they breached the plaintiffs’ common law rights to solicitor-client privilege and confidentiality. As outlined above, those allegations were subsequently expanded in the plaintiffs’ response to demand for particulars.

12. In response to LLF’s demand for particulars of the information shared by Ms. Van Oudenaren with her spouse, the plaintiffs pleaded that she had shared:

• (a) the confidential information that Mr. Kelsey and his wife had made a claim for professional negligence against Mr. Walker and LLF Lawyers with respect to the purchase and sale of 105 Main Street and 11 Prince Street, Bobcaygeon; and
• (b) the confidential information that the claim for professional negligence had been resolved by means of a payment to Mr. Kelsey and his wife.

13. In response to the demand for particulars of the alleged breach of solicitor-client privilege, the plaintiffs pleaded:

• (a) that the entire files of Mr. Kelsey and his wife relating to the purchase and sale of 105 Main Street and 11 Prince Street were solicitor-client privileged;
• (b) that the negotiations between Mr. Kelsey, LLF and LawPro, including the full and final release were solicitor-client privileged; and
• (c) that the breach occurred when Ms. Van Oudenaren shared any information related to any of these transactions with her spouse, and when the defendant firm failed to ensure that it had proper protocols in place to prevent the breaches and the sharing of confidential solicitor-client privileged information.

14. In support of their argument that the information alleged to have been disclosed was not subject to a duty of confidentiality, LLF cites Solosky v. R., [1980] 1 S.C.R. 821, at para. 24, where the court says that solicitor-client privilege “does not apply to communications in which legal advice is neither sought nor offered, that is to say, where the lawyer is not contacted in his professional capacity.” They argue that the fact that Mr. Kelsey made a claim against them that was subsequently resolved was not confidential information, because it did not involve a communication in which legal advice was sought or offered.

15. However, in making that argument, LLF appears to conflate communications which are solicitor-client privileged with information that is subject to a duty of confidentiality. Rule 3.3-1 of the Rules of Professional Conduct provides that a lawyer “shall hold in strict confidence all information concerning the business and affairs of the client acquired in the course of the professional relationship ….” The second commentary to the rule goes on to provide that the rule “must be distinguished from the evidentiary rule of lawyer and client privilege … concerning oral or documentary communications passing between the client and the lawyer. The ethical rule is wider and applies without regard to the nature or source of the information or the fact that others may share the knowledge.”

16. The information that Mr. Kelsey alleges was disclosed by LLF may be understood to include that he was a client of LLF (which itself is confidential information), that LLF acted for him on certain real estate transactions, that he suffered a loss for which he sought to hold LLF liable, and that his claim against them was resolved by a payment to him from LLF. It would be open to a trial judge to find that all of this was “information concerning the business and affairs of the client.” While LLF may plead by way of defence that the professional relationship terminated before the settlement, I do not accept that just because a client requests their lawyer to compensate them for a loss, the professional relationship is necessarily terminated. One of the reasons for a lawyer agreeing to compensate a client may be to retain them as clients.

Whether Privilege Was Waived When Mr. Kelsey Wrote to LLF Requesting Compensation

17. LLF argues that in making the complaint, Mr. Kelsey must have anticipated that LLF would report the claim to LawPro. While that may be, it does not follow that he should have anticipated that a law clerk at the firm would pass the information on to her spouse. The information did not lose its confidential nature because a claim was made to LawPro.

18. Citing Hodge v. Neinstein, 2014 ONSC 4503, at para. 172, LLF argues that Mr. Kelsey waived any privilege by making allegations of misconduct or professional negligence against LLF. However, I note that in Neinstein, the court was dealing with issues of solicitor-client privilege rather than confidentiality, and the waiver of privilege was said to be only “to the extent necessary for the lawyer to defend him or herself” (citations omitted). If LLF wants to plead by way of defence that Ms. Van Oudenaren disclosed the confidential information to her spouse for the purpose of defending herself or LLF they can do so. However, because the disclosure is alleged to include the fact of the settlement of the claim, it is difficult to understand how the disclosure could have been for the purpose of defending it.

19. On this issue, LLF also relies on Mathews, Dinsdale & Clark LLP v. 1772887 Ontario Limited, 2021 ONSC 2563. In that case, the law firm had sued the defendant for nonpayment of legal fees and the defendant had counterclaimed for breach of fiduciary duty, alleging that the law firm had pleaded privileged solicitor and client communications in its statement of claim. The court held that the defendant had waived privilege over its communications with the law firm, but again, only to the extent necessary to allow the firm to advance its claim for fees and defend the counterclaim. It is also of note that the court expressed a concern that the solicitor and client communications might contain sensitive corporate information relative to the defendant’s employees and collective bargaining strategies. As a result, the order was made without prejudice to the parties seeking further relief in relation to measures to preserve the confidentiality of the communications from the public.

20. While the plaintiffs may have waived LLF’s duty of confidentiality by bringing this action, it was initiated after the damages were alleged to have been suffered. The issue is whether the information was confidential at the time it was disclosed, not after an action alleging breach of confidence has been commenced.

Whether the Plaintiffs’ Claim Is Barred by the Terms of the Release

21. LLF argues that the release signed by Mr. Kelsey is a complete answer to his breach of confidence claim in this action. I disagree.

22. The release provides that it is “to conclude all issues arising from the Matter” and that “it is understood and agreed that [it] is intended to cover … injuries, losses and damages not now known or anticipated but which may later develop or be discovered ….” “Matter” is defined as all obligations arising from LLF’s retainers, and any damages or injuries arising, or arising in the future from them.

23. In support of their position, LLF cites Corner Brook (City) v. Bailey, 2021 SCC 29, at para. 27 where the court says:

• (a) that a release can cover an unknown claim with sufficient language, and does not necessarily need to particularize with precision the exact claims that fall within its scope; and
• (b) that in entering into a release the parties bargain for finality – to wipe the slate clean – with the releasor risking the value of the claims they might have had, and the releasee paying for a guarantee that no such claims will be made.

24. However, in the present case, the damages are not alleged to have been suffered because of LLF or Walker’s negligence in their real estate work for the plaintiffs, but rather because of a subsequent breach of confidence by LLF. On the facts pleaded by Mr. Kelsey, a trial judge could find that at the time the release was signed, it was not contemplated that if LLF later breached the plaintiffs’ confidence, LLF would be released from any resulting claims. It would seem unlikely that the parties contemplated that once the real estate claim was settled, LLF would be entitled to disclose the plaintiffs’ confidential information without recourse on Mr. Kelsey’s part.

The House Consulting Group Inc.

25. The plaintiffs do not plead a lawyer and client relationship between LLF and the corporate plaintiff, The House Consulting Group Inc., nor do they plead that any confidential information of the corporate plaintiff was disclosed. Accordingly, I agree that the statement of claim does not disclose a reasonable cause of action by the corporate plaintiff against LLF.

Disposition

26. For the reasons given, the action of The House Consulting Group Inc. as against LLF Lawyers LLP will be dismissed, but LLF’s motion will otherwise be dismissed.

27. At the conclusion of the hearing, it was agreed that the successful party would be entitled to costs of $8,645.00. The defendant LLF Lawyers LLP will therefore pay Michael Kelsey his costs in that amount.

Released: March 24, 2025

S.T. Bale