Court File and Parties

Court File No.: CV-21-00655128-00CL (related action CV-21-00655113-00CL)
Date: 2025-05-30
Court: Superior Court of Justice – Ontario – Commercial List

Plaintiff: Zurich Insurance Company Ltd.
Defendants: Deloitte LLP and PricewaterhouseCoopers LLP
Third Parties: John Aquino, Dominic Dipede, Ralph Aquino, Steven Acquino, Maria Bot, and Bondfield Construction Company Limited

Before: Peter Osborne

Counsel:

• Sam Dukesz and Aaron Kreaden, for the Plaintiff, Bondfield Construction Company Ltd., through its Litigation Trustee
• Kimberly Potter and Chris Casher, for the Defendant, PricewaterhouseCoopers LLP

Heard: 2025-05-21

Endorsement

The Motion

[1] This motion was brought and argued in these two companion actions. Accordingly, this Endorsement is made in both actions.

[2] At the time this hearing was scheduled, there were numerous issues with respect to document production between the Plaintiffs and the Defendants. To the credit of the parties, they resolved on consent prior to the hearing almost all of the issues, such that what proceeded on a contested basis was the request of the Plaintiffs that the Defendant, PricewaterhouseCoopers LLP (“PwC”) produce (subject to redactions of any advice from counsel):

a. a memorandum prepared by Ronald Jeffrey (Jeff) Bowen of PwC dated June 20, 2014 (the “Bowen Memo”);

b. the attachments to the Bowen Memo;

c. all drafts of the Bowen Memo; and

d. the documents identified in the Confidential Brief of PwC Productions at Tabs 3, 4 and 6, which consist of electronic mail communications with attachments sent and received by individuals within PwC in June, 2014.

[3] Defined terms in this Endorsement have the meaning given to them in the motion materials unless otherwise stated.

[4] PwC provided to the Court its Confidential Brief of PwC Productions for the purposes of the motion. It contains the actual documents over which privilege is claimed. The plaintiffs have been provided with the index to the Brief, so have knowledge of its contents. The parties are agreed that the Court is permitted to, and in fact should, review the documents to determine the issues on the motion. At the request and with the consent of the parties, that Brief shall remain confidential and not form part of the public Court record. Given that the contents are subject to claims of privilege, I directed PwC to file with the Commercial List office a copy of the Brief on a sealed and confidential basis for the purpose of ensuring that the record is complete.

The Actions

[5] These two actions against the auditors were commenced by Zurich Insurance and Bondfield Construction (through its Litigation Trustee) respectively, and are proceeding together.

[6] Generally, the Plaintiffs allege that the auditors were negligent in conducting their audits of Bondfield, and in failing to discover fraud and financial reporting misstatements by Bondfield, and that each auditor breached its duties with respect to the transition of the audit mandate from PwC to Deloitte in 2014. The allegation is that PwC suspected fraud and resigned but did not adequately advise Bondfield of its suspicions, and that Deloitte was negligent in assuming the audit in the face of red flags of fraud.

[7] The actions are vigorously defended and the auditors deny the allegations. PwC submits that it complied with all duties in resigning when it did, and Deloitte submits that it properly assessed the Bondfield mandate before assuming the role of auditor.

[8] The 2014 transition from PwC to Deloitte as Bondfield auditor is a central feature of this motion. PwC resigned as auditor on June 19, 2014. It sent a letter to Deloitte the next day, on June 20, 2014, in which it explained the reasons for its resignation as contemplated under section 151(4) of the Ontario Business Corporations Act and rule 302 of CPA Ontario’s Code of Professional Conduct.

[9] The Plaintiffs allege that the June 20 letter was intentionally drafted to provide “the bare minimum” of information to Deloitte. PwC maintains that the June 20 letter complied with all of its obligations applicable at the time.

[10] There was subsequent correspondence between the two audit firms as Deloitte requested further details and particulars, and PwC provided certain information.

[11] It is common ground on this motion that, in the spring of 2014, and while completing the audit for the fiscal year 2013, the audit team of PwC began to suspect fraud at Bondfield. On June 3, 2014, PwC’s audit team engaged its forensic department (including Ms. Sarah McGregor and Mr. Jeff Bowen) to support it. This was approximately two weeks before the firm resigned.

[12] As noted above, the Bowen Memo (or at least the first version thereof) is dated June 20, 2014, the same day that PwC sent its resignation letter. Given the allegations about the transition of audit firms, the Plaintiffs seek production of the Bowen Memo and the related documents described above. PwC opposes production on the basis that the documents are protected by both solicitor-client privilege and litigation privilege.

Analysis

[13] Rule 30 of the Rules of Civil Procedure requires a party to produce non-privileged documents relevant to the matters in issue that are in their power, possession or control. Rule 29.2.03 codifies the proportionality requirement.

[14] There is no issue between the parties that the requested documents are relevant. One of the main issues in the actions is the knowledge that PwC had, or ought to have had, about the nature and extent of the fraud at Bondfield, as such knowledge informs a consideration of whether PwC should have taken more steps to warn Deloitte as the subsequent auditor or the innocent members of management within Bondfield.

[15] PwC pleads in its Defence (paras. 81–84 in the Bondfield Defence; paras. 88–91 in the Zurich Defence) that it was not required to withdraw or amend its audit reports for 2012 or prior years, and that it had no obligation to inform Zurich or others of the reasons for its resignation. PwC admits in its pleading that it suspected fraud, but maintains that it only suspected fraud and that it had been unable to obtain sufficient audit evidence to reach a definitive conclusion and Bondfield management had refused to permit PwC to carry out additional work. As a result, PwC did not know with certainty if fraud had been committed or, if it had, the individuals involved.

[16] The documents at issue have been properly disclosed and identified by PwC. The issue is whether they are protected by solicitor-client privilege or litigation privilege or both.

[17] Mr. Bowen gave evidence on this motion through his affidavit affirmed on May 1, 2025. He was not cross-examined.

[18] In his affidavit, Mr. Bowen stated, in relevant part, that:

a. on June 3, 2014, the lead audit engagement partner for Bondfield emailed Ms. McGregor, the GTA Forensic Leader within the firm, and him (Bowen) to advise that the audit team had concerns about the authenticity of marketable securities confirmations provided in connection with the Bondfield audit;

b. thereafter, Bowen worked with McGregor to independently attempt to obtain reliable confirmations for these marketable securities as support for the audit team;

c. on June 11, 2014, Bowen had a call with John Aquino (the de facto CEO of Bondfield) during which conversation Aquino threatened to sue Bowen for $100 million if he attempted to independently confirm one of Bondfield’s investments. Bowen advised McGregor and others within PwC about the threat, and assumed any litigation against him would involve PwC;

d. on June 12, 2014, McGregor advised Bowen that she had a meeting scheduled for the following day with the firm’s Office of the General Counsel (OGC), and others;

e. on June 19, 2014, PwC received a letter from Aquino accusing PwC of gross negligence and wilful misconduct and alleging that the actions of PwC had jeopardized Bondfield’s business;

f. PwC resigned as Bondfield’s auditor later that day;

g. since Bowen was going on vacation the following week, he “put together a memorandum to provide to the OGC”. It was marked “privileged and confidential” because it was for legal counsel. It was not Bowen’s usual practice to write a memorandum for the OGC after providing audit support. He would normally have contributed to a critical step in the audit file (i.e., a summary of the additional work performed and the conclusions). In this case, he wrote a memorandum “for the benefit of the OGC because of the threats of litigation”; and

h. Bowen emailed a draft of the Bowen Memorandum to Ms. Lisa Millman, in-house counsel at PwC, on June 25, 2014. Bowen sent Millman an updated version of the memorandum incorporating certain changes on July 23, 2014, and there were subsequent amended versions thereafter.

[19] Relying on that evidence, PwC maintains that the Bowen Memo (and related drafts and communications) is protected by solicitor-client privilege as the communication was between a lawyer and client, the communication was intended to be confidential, and was made for the purpose of seeking or receiving legal advice: Descoteaux c. Mierzwinski, [1982] 1 SCR 860; Goodman Estate v. Geffen, [1991] 2 SCR 353.

[20] PwC submits that the present situation is analogous to that in Royal Bank v. Société Générale (Canada), [2005] O.J. No. 4383, where the court upheld the bank’s claim of solicitor-client privilege over a report and related documents prepared by a committee investigating an issue concerning forged bank drafts and provided to RBC’s General Counsel. The court held there that the committee was performing a function essential to the operation of the solicitor-client relationship between RBC and its General Counsel in that the report was prepared for the purpose of the General Counsel giving legal advice. PwC submits that this is exactly the context in which the Bowen Memo was prepared.

[21] PwC also claims litigation privilege on the basis that the Bowen Memo was prepared because Aquino had threatened to sue Bowen personally, Bowen assumed any legal action would involve PwC, and then subsequently, Aquino alleged that PwC had been negligent.

[22] The Plaintiffs submit that, subject to redactions for any advice from counsel, the documents are not privileged since solicitor-client privilege applies to communications that entail the seeking or receiving of legal advice, and litigation privilege applies only where the dominant purpose of the work product is litigation, and the documents here do not meet either test.

[23] The Plaintiffs submit that the forensic team within PwC was engaged in or around June 3, 2014 by the audit team for the purpose of supporting the latter, and that there was no mention of counsel or any threat of litigation at that time. Counsel (the OGC) became involved only on June 12, 2014, roughly 10 days after the forensic work had begun. Accordingly, the Plaintiffs submit that much of the forensic work was completed before counsel was involved.

[24] In addition, the Plaintiffs submit that PwC’s position is inconsistent since it has produced internal analyses of Bowen completed after that date, which presumably would also have been privileged if the entire mandate became privileged by that date (June 12, 2014). The submission is to the effect that if the analysis is not privileged, the conclusions resulting therefrom cannot be privileged.

[25] The Plaintiffs also submit that in a draft memo issued on July 8, 2014 to explain PwC’s reasons for resigning as auditor (which is marked “privileged and confidential” but which has been produced), the audit team acknowledged that it had retained a forensic team and was relying on the Bowen Memo to explain the steps taken to investigate concerns of fraud. That July 8, 2014 memo explains that: “As a result of this issue and the investment confirmation described below, PwC had requested support from the PwC Forensic Services team. A more detailed summary of subsequent procedures performed is summarized in the memo prepared by Jeff Bowen on June 20, 2014”. That is a reference to the Bowen Memo.

[26] In further addition, the Plaintiffs challenge the statement by Bowen in his affidavit that the Bowen Memo was prepared “at the request of in-house counsel” since there is no evidence that the OGC instructed Bowen (or McGregor) to prepare the Bowen Memo for OGC and that such an instruction from in-house counsel within a highly sophisticated professional services firm would reasonably be expected to have been clearly documented. Here, while the evidence is to the effect that McGregor told Bowen on June 12 that she was meeting the next day with OGC, there is no evidence that the meeting occurred nor that the result thereof was that “the OGC purportedly co-opted the forensic process for its own benefit”.

[27] In addition to the absence of any evidence that the OGC had input into the Bowen Memo, the Plaintiffs submit that Bowen’s own evidence is to the contrary effect since he confirmed that he prepared the document to record his conclusions which would otherwise have been recorded in the audit file in the normal course.

[28] Finally, the Plaintiffs submit that the forensic team was not retained by the OGC and the Bowen Memo was not prepared at the request of the OGC or for the purpose of seeking legal advice from the OGC. Instead, Bowen was supporting the audit team, and his conclusions would ordinarily be in the audit file where the Plaintiffs would be entitled to review them. The Plaintiffs submit that PwC ought not to be permitted to protect those conclusions here simply because they were sent to the OGC. Non-privileged materials are not protected, they submit, simply because they were later communicated to a lawyer, particularly when there is no evidence that the documents were requested by or prepared at the request of the lawyer for the purpose of providing legal advice.

[29] Finally, the Plaintiffs submit that, at a minimum, and even if parts of the Bowen Memo are determined to be privileged, the Plaintiffs should be entitled to the non-privileged portions of the Memo, particularly as they relate to the factual findings of Bowen and/or McGregor and the work done before the involvement of PwC’s OGC on or around June 13, 2014.

[30] I have reviewed the materials and considered the positions of the parties.

[31] Solicitor-client privilege is fundamental to the justice system in Canada. At the heart of this privilege lies the concept that people must be able to speak candidly with their lawyers and so enable their interests to be fully represented: R. v. McClure, 2001 SCC 14 at para. 2.

[32] The privilege can be invoked where the three-part test is met regarding the document in question: 1) it is a communication with counsel; 2) involving the seeking or giving of legal advice; and 3) was intended by the parties to be confidential. Accordingly, solicitor-client privilege does not apply to all communications sent to lawyers: the communication must involve the seeking and receiving of legal advice and must be confidential: Intact Insurance Company v. 1367229 Ontario Inc., 2012 ONSC 5256 at paras. 14-15.

[33] Litigation privilege (or adversarial privilege, as opposed to relationship privilege such as solicitor-client privilege) is intended to ensure the efficacy of the adversarial process. Parties must be able to prepare their contending positions in private, without adversarial interference and without fear of premature disclosure: Blank v. Canada (Minister of Justice), 2006 SCC 39 at para. 27.

[34] While litigation privilege does not require a particular relationship, it often overlaps with solicitor-client privilege. The issue is what the dominant purpose was for the communication or the creation of the document. Litigation must be ongoing or reasonably contemplated so that a document could be said to be created for the dominant purpose of that litigation.

[35] Where a document would have been created even without the prospect of litigation, it will not be litigation privileged, since it was not created for the dominant purpose of that litigation: TransAlta Corporation v. Market Surveillance Administrator, 2015 ABQB 180 at paras. 17-19.

[36] In his affidavit, Bowen confirms at para. 2 that beginning on June 3, 2014, he worked with McGregor to independently attempt to obtain reliable confirmations for the marketable securities about which the audit team had expressed authenticity concerns, and did so as support for the audit team. There is no reference in Bowen’s affidavit to the involvement of the OGC or any other counsel until June 12, 2014 when McGregor advised him that she had a meeting scheduled for the following day (i.e., June 13) with the OGC.

[37] Bowen’s evidence is to the effect that there was no interaction or communication between him and the OGC until June 19, 2014. It was on that day that Bowen says PwC received a letter from Aquino accusing the firm of gross negligence and wilful misconduct, and that following the firm’s resignation as auditor “later that day” he “put together a memorandum to provide to the OGC”. Bowen also says that he wrote the memorandum for the benefit of the OGC because of the threats of litigation (from Aquino).

[38] It follows, in my view, that no solicitor-client privilege could arise at least with respect to Bowen and his work before June 19, 2014, since there was no solicitor-client relationship until that date at the earliest.

[39] It also follows, in my view, that no litigation privilege could arise at least with respect to Bowen and his work before June 11, 2014 at the earliest, since that is the date on which Bowen states that Aquino threatened him with litigation.

[40] It further follows, in my view, that litigation privilege could conceivably attach to the Bowen Memo given Bowen’s evidence that the dominant purpose for the creation of the document was to provide it to the OGC. He states it was marked “privileged and confidential” specifically for that reason, contrary to his usual practice of summarizing additional work performed and the conclusions, for the purposes of the audit file.

[41] I accept the submission of the Plaintiffs that there is no evidence in the record of any request from the OGC for the Bowen Memo, nor any statement in Bowen’s affidavit that the Bowen Memo was prepared for the purpose of seeking or obtaining legal advice from OGC. For that reason, the situation in this case is not completely analogous to that in Royal Bank of Canada v. Société Générale since there, the internal report was the result of an investigation requested by RBC’s General Counsel so that they could provide legal advice to the bank.

[42] In contrast here, there is no evidence that the OGC requested the Bowen Memo, relied on it, or that the OGC was asked to provide, or in fact did provide, legal advice related to or based on the Bowen Memo. Moreover, the forensic team was engaged by the audit team on June 3, 2014, well before litigation was threatened on June 11. The purpose for the engagement on June 3 was to assist with validating the authenticity of marketable securities confirmations, not to assist with any litigation or threatened litigation.

[43] I pause to observe that the work product of the forensic team has been produced by PwC. In addition, PwC confirms in its factum that it does not take the position that Bowen’s audit support work is privileged. The Plaintiffs are agreed to be free to ask questions about those issues, specifically as summarized in the Bowen Memo, on examinations for discovery.

[44] PwC maintains, however, that the Bowen Memo itself is privileged, given that it was prepared specifically for the OGC, as Bowen attests and as is corroborated by the covering emails (which have been produced) in which Bowen forwards the Bowen Memo to the audit partner, describing it as his “draft memo for Lisa [Millman, of the OGC]”. That is what the emails state, and that is consistent with Bowen’s evidence that he prepared the Bowen Memo for the OGC.

[45] I do accept, however, the submission of the Plaintiffs that there is no evidence of any request by Bowen for legal advice from the OGC, or that the OGC itself requested the Bowen Memo for the purpose of providing any legal advice. The evidence in this regard is limited to Bowen’s statement that, as he was preparing to go away on vacation, he prepared the Bowen Memo for the OGC.

[46] Having reviewed all of the evidence and considered the submissions of the parties, I am unable to conclude that the documents requested are protected by solicitor-client privilege or litigation privilege.

[47] First, I am not persuaded that the documents were created for the purpose of seeking or giving legal advice. The Bowen Memo was prepared by Bowen following the work he and his Forensics colleagues did precisely in furtherance of the original purpose for which they were engaged: to validate the authenticity of marketable securities transactions. That engagement commenced on June 3, 2014, and the work summarized in the Bowen Memo was done virtually all before there was any involvement or communication whatsoever between Bowen and the OGC on June 19, 2014 (one day preceding the date of the first version of the Bowen Memo).

[48] Second, the Plaintiffs submit, and PwC agrees, that the Plaintiffs would be entitled in any event to the summaries of the work that Bowen and his Forensics colleagues did to support the audit team. In my view, and consistent with this factor, the documents should be produced and no redactions are required.

[49] Third, this result is consistent with that July 8, 2014 PwC memo explaining that: “As a result of this issue and the investment confirmation described below, PwC had requested support from the PwC Forensic Services team. A more detailed summary of subsequent procedures performed is summarized in the memo prepared by Jeff Bowen on June 20, 2014”.

[50] In other words, the audit team requested and received support from the Forensics team, and the Bowen Memo consists of a detailed summary of the subsequent procedures performed as requested. That summary should be produced. Questions about the subsequent procedures undertaken are conceded to be proper questions for discovery in any event, and the subsequent procedures would, by the admission of Bowen himself, ordinarily be included in the audit file and readily produced.

[51] Fourth, there is no principled basis on which subsequent drafts of the Bowen Memo ought not to be produced, for the same reasons, since the evidence is to the effect that the revisions added additional details with respect to the authenticity verification procedures undertaken. I cannot conclude that the revisions were made at the request or for the benefit of OGC for the purpose of seeking or providing legal advice.

[52] Fifth, and while I accept the unchallenged evidence of Bowen to the effect that Aquino threatened him with litigation and that he assumed that any litigation would involve PwC, I am unable to conclude that the dominant purpose for the preparation of the Bowen Memo was related to litigation or threatened litigation. On the contrary, in my view, the dominant purpose was to summarize the subsequent procedures (i.e., the validation of the authenticity of marketable securities confirmations).

Result and Disposition

[53] For all of these reasons, the motion is granted (to the extent not already resolved on consent), and the requested documents should be produced by PwC to the Plaintiffs without redaction.

[54] At the conclusion of argument, the parties advised the Court that they were all of the view that costs of the motion should be in the cause. I agree with that approach in the circumstances of this matter.

[55] Order to go in accordance with these reasons.

Peter Osborne