Justice R. Smith of the Ontario Superior Court recently reaffirmed that where a client relies on evidence about the legal advice he or she received, it may constitute an implied waiver of privilege.
The Defendant, Charles Lamoureux, brought a motion for an order declaring that the Plaintiff, André Lamoureux, had impliedly waived solicitor-client privilege, and for an order that André's previous lawyers re-attend to be examined and to answer questions previously refused on the basis of solicitor-client privilege.
Background
In 2007, André commenced an action against Charles. In 2010, an order setting out a case timetable was made, ordering that the action be set down for trial by October 31, 2011 (the "2010 Timetable Order"). André did not set down the matter for trial by the deadline, and in December 2012 the Registrar dismissed the action for delay (the "2012 Dismissal Order").
André's current lawyer brought a motion to set aside the 2012 Dismissal Order on the basis that André's previous lawyers had disregarded his instructions and failed to advise him of the 2010 Timetable Order.
In support of the motion, André swore an affidavit in which he deposed that:
Decision of Justice R. Smith
Charles submitted that André's affidavit impliedly waived solicitor-client privilege because his evidence put in issue André's instructions to and advice from his previous lawyers.
The motion was successful. Justice R. Smith held that André had impliedly waived solicitor-client privilege with respect to the instructions he gave to his previous lawyers concerning the advancement of his action against Charles, and the advice he received from them, including the advice (or lack thereof) he received respecting the 2010 Timetable Order.
Test for Waiver of Solicitor-Client Privilege
In his decision, Justice Smith cited 1225145 Ontario Inc. v. Kelly, 2006 CanLII 19425 (ON SC) at para. 12, where the court held that:
A client may waive the privilege, in whole or in part, voluntarily or by implication. A party who directly raises in a proceeding the legal advice that he or she received, or the instructions the client gave to the solicitor, thereby putting that advice or those instructions in issue, may be found to have waived the privilege insofar as it relates specifically to the issue concerning the advice received or the instructions given. (Law of Evidence in Canada, John Sopinka, Sydney M. Lederman, Q.C., Alan W. Bryant, Butterworths, 1992, pages 664-667.)
Waiver of solicitor-client privilege relies not only on the element of implied intention but also on fairness and consistency. Justice Smith found that the element of fairness applied in this situation because André raised the instructions he gave to his previous lawyers and the lack of advice with respect to the 2010 Timetable Order as the basis for his motion to set aside the 2012 Dismissal Order. It would be unfair to Charles, he held, for André to rely on evidence about those instructions and advice but not allow Charles to challenge that evidence through André's previous lawyers about those same instructions and advice.
As a result, Justice Smith ordered André's previous lawyers to re-attend to be examined and to answer questions related to:
Conclusion
This case emphasizes the need for caution when advancing a position in legal proceedings, by way of pleadings or evidence, that is related to legal advice. A party should be under no illusion that somehow they will be protected by privilege if legal advice is put into issue. Before doing so, any party is well advised to closely examine the evidence that might be disclosed if a judge finds that privilege has been waived (as it likely will be in whole or in part).
In a rare decision upholding an employer's termination of an employee for cause, the Nova Scotia Supreme Court recently dismissed the claims of investment advisor Frederick Saturley against CIBC Wood Gundy for wrongful dismissal. The judge highlighted the vulnerability of clients to advisors in the financial services sector and noted the importance of maintaining strong client protections in this type of industry.
The plaintiff, Mr. Saturley, was an experienced and successful investment advisor and had been a representative of CIBC for several years prior to the events underlying the claims. He had overseen impressive returns for his clients using a strategy he referred to as a "strangle", which involved coordinated selling of put and call options on the same security. All was well with this strategy until the particular emerging markets fund favoured by Mr. Saturley underwent a three-for-one stock split in July 2008. A third party retained by CIBC to calculate clients' margin failed to take the stock split into account, which resulted in inflated calculations of available margin for a number of Mr. Saturley's clients.
These inflated margins resulted in CIBC issuing margin calls later than it should have during the market decline of Fall 2008. This had disastrous results.
In October 2008, Mr. Saturley became concerned with the high volume of margin calls on his client accounts and realized the margin calculation error. He immediately reported the error to his branch manager at CIBC. However, he then subsequently contacted a number of clients to explain the margin error and advised he would be willing to support them in a claim against CIBC if they chose to make a complaint.
In the investigation of Mr. Saturley's trading practices, CIBC discovered that Mr. Saturley had not been sufficiently diligent in obtaining client instructions before making trades on behalf of his clients. The court reviewed evidence in detail showing that based on the volume of trades, Mr. Saturley would have had to contact his clients to obtain instructions dozens of times over short periods. Mr. Saturley was not able to show that he had made many of the required contacts. In many cases, the transactions were made on days when CIBC could prove the clients were unavailable to provide instructions due to travel.
Effecting a transaction without explicit client authority is discretionary trading. Mr. Saturley did not have the requisite license for such trading. After discovering this pattern of trading without instructions, CIBC terminated Mr. Saturley's employment for cause.
Legal Arguments
Mr. Saturley first made the argument that he was not required to prove that all necessary client contacts had been made (and, in particular, that no adverse inference should be drawn due to his failure to call as a witness an assistant who allegedly accepted client instructions on Mr. Saturley's behalf), because the burden rested on CIBC as his employer to justify the termination. The court disagreed, finding that the lack of evidence of client instruction raised an inference that none was obtained, and that Mr. Saturley had a "practical" burden of proving why the adverse inference should not be drawn.
Mr. Saturley next asserted that CIBC had not adduced sufficient evidence to prove he had engaged in discretionary trading. However, the court undertook an in-depth review of the trades made on behalf of twelve of Mr. Saturley's clients and found that CIBC had discharged its burden to prove that Mr. Saturley had consistently failed to obtain instructions from seven of those clients. Three of them had in fact made complaints to CIBC about Mr. Saturley.
Mr. Saturley claimed in the alternative that CIBC had been aware of his discretionary trading and had condoned it. However, the evidence showed that CIBC reviewed Mr. Saturley's trading practices in 2007 and expressly found that he had not been engaged in discretionary trading. CIBC had also provided Mr. Saturley with a compliance bulletin describing discretionary trading as a "serious offence". The court accordingly rejected the condonation argument.
Mr. Saturley's argument that dismissal was too harsh a penalty for discretionary trading also failed. Mr. Saturley's failure to admit his culpability in engaging in discretionary trading, coupled with the seriousness of the misconduct (made known to him by CIBC via the compliance bulletin in 2007 as well as a letter or reprimand and a fine for discretionary trading in 2004) justified the employer's decision to sever the employment relationship. Again, this decision was made in the context of the need for client protection in the financial services industry.
Conclusion
This case is significant for its pro-employer result in an area of the law where employees typically have the advantage. Courts are reluctant to find justification for summary dismissal, often finding that other less-harsh penalties might have sufficed. The importance placed by the judge on the nature of industry and the level of trust and confidence expected was clearly an important factor. We have been advised that, surprisingly, no appeal of this decision has been filed and the appeal period has now expired.
Introduction
The Supreme Court recently released its decision in Hryniak v. Mauldin, providing guidance on the new summary judgment rules in Ontario. The Court addresses the difficult balancing act required to achieve fair and just adjudication on the one hand, and the elimination of unnecessary expense and delay on the other.
The primary issue before the Court was the correct interpretation of Rule 20.04(2.1) of the Ontario Rules of Civil Procedure, amended in 2010 in light of a report entitled "Civil Justice Reform Project: Summary of Findings and Recommendations" by Coulter Osborne Q.C. (the "Osborne Report"). The new rules were designed to expand the use of summary judgment by giving motion judges additional powers to weigh evidence, evaluate credibility and draw reasonable inferences.
Under Rule 20.04(2) of the Rules of Civil Procedure, the court shall grant summary judgment if:
(a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence; or
(b) the parties agree to have all or part of the claim determined by a summary judgment and the court is satisfied that it is appropriate to grant summary judgment.
Under the new Rule 20.04(2.1):
In determining under clause (2)(a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:
1. Weighing the evidence.
2. Evaluating the credibility of a deponent.
3. Drawing any reasonable inference from the evidence.
Finally, under the new Rule 20.04(2.2):
A judge may, for the purposes of exercising any of the powers set out in subrule (2.1), order that oral evidence be presented by one or more parties, with or without time limits on its presentation.
The Facts
In June 2001, a group of American investors decided to invest US$1.3 million in an investment opportunity with the appellant, Hryniak. The money disappeared and the investors brought an action for civil fraud against Hryniak. Hyrniak defended by arguing that the money had in fact been stolen by the offshore bank with which it had been deposited. The investor group brought a motion for summary judgment.
Decisions of the Superior Court of Justice and the Court of Appeal
In considering the group's motion for summary judgment, the motion judge elected to exercise the new powers given to him by the new Rule 20.04(2.1) and found that a trial against Hryniak was not required.
The Court of Appeal, in its first consideration of the new rule, disagreed with the motion judge. It held that the case was not an appropriate candidate for summary judgment. The "interest of justice" requirement meant that the motion judge could only exercise his new powers and order summary judgment where it was possible to achieve the "full appreciation" of the evidence and issues required in order to do so.
The motion judge should have assessed whether the benefits of the trial process were necessary in order to fully appreciate the evidence in the case. Given the factual complexity and voluminous record in Hryniak, the interest of justice required a trial.
Notwithstanding its disagreement with the motion judge, the Court dismissed the appeal, finding that the record supported the finding that Hryniak had committed civil fraud against the American investors.
Decision of the Supreme Court of Canada
Hryniak appealed to the Supreme Court. In its decision, the Court took the opportunity to consider the issue of access to justice and to offer guidance on summary judgment motions and the application of the new rules in Ontario.
The New Summary Judgment Rules and Access to Justice
In discussing the issue of access to justice in general, the Court noted that "the full trial has become largely illusory because, except where government funding is available, ordinary Canadians cannot afford to access the adjudication of civil disputes". In order to find a fair process that is able to resolve disputes justly, the Court opined that a shift in culture is required.
The Court observed that the reforms in the Osborne Report "embody the evolution of summary judgment rules from highly restricted tools used to weed out clearly unmeritorious claims or defences to their current status as a legitimate alternative means for adjudicating and resolving legal disputes." In some ways, the Court commented, the new Rule 20 in Ontario is actually more extensive than other rules throughout the country.
The Court noted that, after the amendments, the summary judgment test is no longer whether the case presents a "genuine issue for trial", but whether there is a "genuine issue requiring a trial". This indicates that a full trial is not the default procedure. The new rules also eliminate the presumption of substantial indemnity costs against a party that brings an unsuccessful motion for summary judgment, in order to avoid deterring the use of the procedure.
The new powers permitting motion judges to weigh evidence, evaluate credibility and draw reasonable inferences should expand the number of cases in which there will be no genuine issue requiring a trial. These fact-finding powers are discretionary and may be exercised unless it is in the interest of justice for them to be exercised only at a trial.
The court stressed that proportionality is a guiding principle for the new rules. Even those rules of civil procedure which do not expressly mention proportionality should be considered in light of "the appropriateness of the procedure, its cost and impact on the litigation, and its timeliness, given the nature and complexity of the litigation" (quoting Szeto v. Dwyer, 2010 NLCA 36, 297 Nfld. & P.E.I.R. 311, at para. 53).
The Court also commented on the ways in which the new rules could be used to increase the efficiency of summary judgment motions. In particular, the Court noted that the new rules provide for early judicial involvement through Rule 1.05, allowing a motion for directions to manage the time and cost of the motion for summary judgment. The motion judge can give directions concerning the timelines for filing affidavits, and the extent of cross-examination and evidence to be filed. A motion for directions also provides the responding party with the opportunity to seek an order to stay or dismiss a premature or improper motion for summary judgment.
However, motion judges should be wary of adding unnecessary costs through these administrative measures. Judges can use their trial management powers provided by Rule 20.05 and the court's inherent jurisdiction to minimize the costs of failed summary judgment motions.
Standard of Review
The Court was of the opinion that the determination of whether there is a genuine issue for trial after the new fact-finding powers have been used is a question of mixed fact and law, and so should not be overturned "absent palpable and overriding error". It reached the same conclusion in relation to the question of whether it is in the "interest of justice" for the motion judge to exercise the new fact-finding powers in Rule 20.04(2.1).
The Application 33of the Rules
In discussing the application of the new rules, the Court was careful to focus on the underlying goals and principles of the rules in order to let their application evolve organically.
On a motion for summary judgment under Rule 20.04, the judge should first determine if there is a genuine issue requiring trial based only on the evidence before her, without using the new fact-finding powers. There will be no genuine issue requiring a trial if the summary judgment process provides her with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure. If there appears to be a genuine issue requiring a trial, she should then determine if the need for a trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2). Summary judgment must be granted if there is no genuine issue requiring a trial; however, the decision to use either the expanded fact-finding powers or to call oral evidence is discretionary, provided that their use is not against the interest of justice. This allows the motion judge to prevent abuse of the new powers.
(1) When is There no Genuine Issue Requiring a Trial?
The Court stated that there will be no genuine issue requiring a trial when "the judge is able to reach a fair and just determination on the merits on a motion for summary judgment". To reach such a finding the judge must be able to (1) make the necessary findings of fact and (2) apply the law to the facts. Thirdly, summary judgment must be a proportionate, more expeditious and less expensive means to achieve a just result than a full trial.
(2) The Interest of Justice
Where it is in the "interest of justice" for the new fact-finding powers to be exercised only at a full trial, the motion judge may not use them. The "interest of justice" is not defined in the Rules.
When the Court of Appeal considered the "interest of justice" question, it found that a motion judge should ask whether he could achieve "the full appreciation of the evidence and issues that is required to make dispositive findings" at summary judgment. Only if this question was answered in the affirmative could the case be summarily decided.
However, the Supreme Court found that "focusing on how much and what kind of evidence could be adduced at a trial, as opposed to whether a trial is 'requir[ed]' as the Rule directs, is likely to lead to the bar being set too high. The interest of justice cannot be limited to the advantageous features of a conventional trial, and must account for proportionality, timeliness and affordability. Otherwise, the adjudication permitted with the new powers — and the purpose of the amendments — would be frustrated."
The evidence need not be equivalent to that available at trial, but must be such that the judge is confident that she can fairly resolve the dispute. A documentary record is often sufficient to resolve matters fairly and justly, while the new powers available to motion judges can provide an equally valid, if less extensive, manner of fact-finding.
Proportionality is a key concern when inquiring into the interest of justice, and the relative efficiencies of summary judgment versus a full trial should be considered, along with the availability of evidence at either procedure and the opportunities to evaluate it. The Supreme Court noted that "in practice, whether it is against the 'interest of justice' to use the new fact-finding powers will often coincide with whether there is a 'genuine issue requiring a trial'".
(3) The Power to Hear Oral Evidence
The Court also commented on the new power to hear oral evidence given to motion judges under Rule 20.04(2.2) in order to assist them in making findings under Rule 20.04(2.1). The Supreme Court agreed with the Court of Appeal that the power should only be exercised where: (i) the oral evidence can be obtained from a small number of witnesses and gathered in a manageable period of time; (2) any issue to be dealt with by presenting oral evidence is likely to have a significant impact on whether the summary judgment motion is granted; and (3) any such issue is narrow and discrete.
However, the Supreme Court stressed that these rules are not absolute.
Application of the new Rules in Hryniak
After applying the new rules to the facts in Hryniak, the Supreme Court found that the motion judge had been entitled to grant summary judgment against Hryniak. As the motion judge had found no credible evidence to support Hryniak's defence, he concluded there was no issue requiring a trial. The Supreme Court found no palpable and overriding error in granting summary judgment.
Nor had the motion judge erred in using his fact-finding powers. He had seen "sufficient evidence…on all relevant points to allow him to draw the inferences necessary to make dispositive findings under Rule 20". The amount of evidence involved was significant but the issues pertinent to the defence were straightforward. This was in spite of the fact that the case against the two other defendants was proceeding to trial.
The motion judge's findings were clearly supported by the evidence. It was not against the interest of justice for the motion judge to use his fact-finding powers, nor was his discretionary decision to do so tainted with error.
The Supreme Court therefore dismissed the appeal.
Conclusion
The Supreme Court has attempted to encourage and promote the use of summary judgement, in the spirit of the new rules. It remains to be seen, however, whether this decision, like that of the Court of Appeal, is sufficient to make a real difference in how lower courts approach summary judgment. The language used by the court is of course susceptible to a very wide range of application.
In this appeal, the Appellant (Plaintiff), Helen McLean, both in her personal capacity and as executrix of her late husband's estate, sought rectification of a vendor take-back mortgage she and her husband entered into with the Respondents (Defendants), Ms. McLean's son and daughter-in-law, Melville and Maureen McLean.
The Facts
In 1989, the Appellant and her husband sold their farming business to the Respondents. They signed a memorandum of agreement in May, and a transfer and vendor take-back mortgage in October. The fair market value of the real property was assessed as $337,444 but the consideration recorded on the transfer and the principal amount recorded on the mortgage was only $222,444.
In 2005, the Respondents separated. Shortly thereafter, the Applicant realized for the first time that the amounts recorded in the transfer and mortgage were incorrect.
The Appellant brought a claim for rectification against the Respondents. Melville did not oppose the claim and summary judgment was issued against him. Maureen did oppose the claim and was successful at trial.
The Trial
Documentary Evidence
At trial, a number of documents were entered into evidence that suggested that the parties intended the purchase price to be fair market value. These included, among other things:
1. A draft of Schedule "E" to the memorandum of agreement, which the memorandum referred to as containing the purchase price (Schedule "E" indicated the purchase price was $337,444);
2. An opening balance sheet showing the value of the business to be $396,311 (approved by Maureen); and
3. Maureen's application to the Ministry of Agriculture for a farm grant wherein she reported that the farm real estate was acquired for $337,444.
Oral Evidence
The Applicant testified at trial that the fair market value for the business and the agreed-upon purchase price was $733,255.
Maureen, however, testified that she believed the agreed-upon purchase price was $625,000, even though she could not remember where this number came from.
Decision of the Trial Judge
The trial judge found that the parties agreed to the following facts:
1. Melville and Maureen were buying all of the farm assets and that the farm assets included the stone farmhouse located on the lands;
2. There were no gifts expressed or intended;
3. The transaction was to take place at fair market value;
4. The fair market value of the land and buildings, including the farm house, was $337,444;
5. The fair market value of the personal property was $395,811; and
6. The fair market value of all assets was $733,755.
The trial judge held that the Applicant had the onus of providing "convincing proof" that the parties had agreed on the purchase price.
In reviewing the documentary evidence, the trial judge found that there was no evidence that the "fair market value" listed in the Schedule was also the "transfer value". He did find that while the memorandum of agreement was an inaccurately written document and therefore a candidate for rectification, it was not possible to ascertain the intentions of the parties from that document alone.
In considering the balance of the documents, the trial judge held that they could not provide assistance in determining the intentions of the parties. He therefore based his decision on Maureen's testimony and held that she had not agreed to a purchase price of $733,255.
The Appeal
Standard of Proof
The first issue addressed by the Court of Appeal was whether the trial judge held the Applicant to an improper standard by requiring her to provide "convincing proof". This issue was dealt with quickly as the Court, relying on F.H. v. McDougall, 2008 SCC 53, reiterated that there is only one civil standard of proof: the balance of probabilities.
The second issue (which took up the majority of the analysis) was whether or not the trial judge erred in finding that the parties did not have a common intention with regards to the total purchase price of the farm.
Should Rectification be Granted in this Case?
The Principles of Rectification
As an equitable remedy, rectification is dependent on the trial judge's exercise of discretion. As such, the grounds for review by an appellate court are limited to situations where the trial judge:
1. Misdirected himself/herself;
2. Came to a decision that is so clearly wrong that it amounts to an injustice;
3. Gave no or insufficient weight to relevant considerations; or
4. Exercised his or her discretion based on a wrong principle.
The Court identified the basis for rectification in this case to be common mistake as the amount of the vendor take-back mortgage was incorrectly recorded as $222,444 (as opposed to $337,444). On this basis, the Applicant was required to demonstrate:
1. That the parties had a common continuing intention prior to the making of the document alleged to be deficient;
2. That this intention remained unchanged or existed at the time when the document sought to be rectified was signed; and
3. By mistake, the parties signed a document that did not accurately reflect their common intention.
In order to provide guidance to lawyers and trial judges dealing with the issue of rectification, the Court made three additional comments that can be considered and applied generally:
1. The party seeking rectification can introduce oral or written evidence that there was a common intention between the parties that is not reflected in the written contract due to error and the court can decide whether to rectify the document to give effect to the true agreement;
2. When a party is required to show a common intention, the exact form of words expressing the common intention is immaterial if the common intention can be ascertained in substance and detail; and
3. If a party intends a particular form of words mistakenly thinking that it is achieving his or her intention, this does not prevent the court from giving effect to the true common intention.
The Test for Rectification
In applying these principles to the decision of the trial judge, the Court of Appeal found that the question the court must answer is "whether the totality of the evidence supports the conclusion on a balance of probabilities that an agreement was in place but that an error was made in recording it."
This is to be an objective inquiry; however, the "totality of the evidence" can include testimony of the party or parties as to what (s)he understood the terms to be. The weight the court should give to testimonial evidence will vary depending on the documentary and other evidence available.
In applying this test to the case on appeal, the Court found that the trial judge relied almost exclusively on Maureen's testimony. This was an error in principle, a failure to give sufficient weight to all the documentary evidence and a failure to consider all the evidence as a whole.
Specifically with respect to the documentary evidence, the Court held that where there are several documents executed to effect a commercial transaction, the interpretation of the document in issue is informed by related documents. Therefore, only when the other documents are considered as a whole does the intention of the parties emerge.
The Court went on to conduct a detailed review of the evidence and concluded that in this case, when the documentary and oral evidence is considered together, the only reasonable conclusions are that:
1. The parties intended to enter into a transaction at fair market value;
2. The fair market value of the business was $733,255;
3. The transfer value of the real property was correctly stated in the memorandum of agreement but was incorrectly stated in the vendor take-back mortgage; and
4. Schedule E and the transfer incorrectly stated the transfer value of the properties and therefore did not reflect the intention of the parties.
Based on these conclusions, a reasonable third party bystander would conclude that the common intention of the parties was to purchase and sell the real property for $337,444 and this was not reflected in the memorandum of agreement, the transfer, or the mortgage.
Mistake
In finding that the type of mistake between the parties was "common mistake", the Court addressed each of the claims by Maureen that the mistake was mutual, or in the alternative, unilateral.
A mutual mistake is one where the parties misunderstand each other and are at cross purposes (both parties are mistaken about different things), whereas a common mistake is one where both parties make the same mistake (each party knows what the other wants but they are both mistaken about some underlying fact). The Court dismissed this, summarily stating that the parties agreed to a sale at fair market value that was simply not reflected in the documentation.
A unilateral mistake exists where one party knew or ought to have known of the other party's mistake (based on an objective inquiry), sought to take advantage of it, and where permitting that party to take advantage would amount to unfair dealing. Where, as here, there is no evidence of one party seeking to take advantage of the other's mistake, the mistake cannot be unilateral.
Conclusion
This case emphasizes yet again the importance of documentary evidence in contractual disputes. While many clients are instituting strict paperless and minimal document retention policies in an effort to reduce the costs associated with electronic discovery, this case suggests that they should carefully consider retaining evidence (handwritten notes, correspondence, drafts of agreements) of the parties' intentions at the time the contract is entered into.