Simon's Megalomaniacal Legal Resources

Evidence - Privilege - Remedies for Breach

. 2177546 Ontario Inc. v. 2177545 Ontario Inc.

In 2177546 Ontario Inc. v. 2177545 Ontario Inc. (Ont CA, 2023) the Court of Appeal considered (and dismissed) an appeal of an application judge's orders that - as a remedy for a breach of the other side's legal privilege - "struck the appellant’s Notice of Appearance in an Application to Partition the parties’ land (the “Partition Application”), barred the appellant from filing evidence, and ordered that the Partition Application proceed undefended".

In these quotes, the court considers the useful issue of breach of privilege and remedies thereto:

[5] The appellant claims, however, that the application judge erred by (1) imposing a remedy that was neither pleaded nor proven by the respondent, and (2) failing to consider that lesser remedies such as appointing another director or officer of the appellant to instruct counsel, or appointing a litigation trustee to act on behalf of the appellant, could cure the prejudice.

[6] The appellant claims that in imposing the remedy he did, the application judge ignored the fact that the respondent had the onus to demonstrate that striking the Notice of Application was the only available remedy: Continental Currency Exchange Canada Inc. v. Sprott, 2023 ONCA 61, at para. 42, leave to appeal refused, [2023] S.C.C.A. No. 142. The appellant further claims that this remedy imposes new obligations on non-lawyers and creates a “risk of prejudice to the integrity of the justice system.”

[7] The respondent submits that the application judge correctly articulated the legal principles and exercised his discretion in applying them. The respondent notes that an application judge’s exercise of discretion attracts significant deference on appeal and there are no grounds to interfere in this case: National Organized Workers Union v. Sinai Health System, 2022 ONCA 802, at para. 28.

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THE LEGAL TEST TO DECIDE THE APPROPRIATE REMEDY

[10] The test to decide the appropriate remedy where privileged information is received by an opposing party (in this case, the appellant) or its counsel is set out in Celanese Canada Inc. v. Murray Demolition Corp., 2006 SCC 36, [2006] 2 S.C.R. 189, and more recently, in Continental Currency. A breach of privilege “creates a serious risk to the integrity of the administration of justice” and, to prevent this, the courts must act “swiftly and decisively”: Celanese, at para. 34.

[11] This court in Continental Currency, citing Celanese, set out a three-part test for resolving issues of unauthorized access to privileged documents.[1]

[12] At the first stage, the moving party (in this case, the respondent) must establish that the opposing party (in this case, the appellant) obtained access to relevant privileged material.

[13] At the second stage, the risk of significant prejudice is presumed and the respondent does not have the onus of proving “the nature of the confidential information” disclosed: Celanese, at paras. 42 and 48. Rather, the appellant has the onus to rebut the presumed prejudice flowing from receipt of privileged information: Celanese, at para. 48.

[14] The presumption of prejudice can be rebutted by identifying “with some precision” that: (i) the appellant did not review any of the privileged documents in their possession; (ii) the appellant reviewed some documents, but they were not privileged; or (iii) the privileged documents reviewed were nevertheless “not likely [to] be capable of creating prejudice”: Celanese, at para. 53. The evidence must be “clear and convincing” such that “[a] reasonably informed person would be satisfied that no use of confidential information would occur”: MacDonald Estate v. Martin, 1990 CanLII 32 (SCC), [1990] 3 S.C.R. 1235, at pp. 1260-63; see also, Celanese, at para. 42. “A fortiori undertakings and conclusory statements in affidavits without more” do not suffice: MacDonald Estate, at p. 1263.

[15] Where the precise extent of privileged information is unknown and possibly unknowable, “the court should infer that confidential information was imparted unless the solicitor satisfies the court that no information was imparted which could be relevant”: McDonald Estate, at p. 1290. As summarized in Celanese, at paras. 49-51, there are compelling reasons for the presumption of prejudice and the reverse onus on the appellants in receipt of privileged information including:

i. Requiring the respondent whose privileged information has been disclosed or accessed to prove actual prejudice would require them to disclose further confidential or privileged materials;

ii. Placing the burden on the appellant who has access to the privileged information is consonant with the usual practice that “the party best equipped to discharge a burden is generally required to do so”; and

iii. The respondent does not have to bear “the onus of clearing up the problem created by the [appellants’] carelessness”.

[16] The third stage of the analysis is to fashion an appropriate remedy. At this stage, the respondent has the burden to show “special circumstances” where a stay is sought.

[17] A stay is only granted where there is prejudice to the right to a fair trial or the integrity of the justice system and there is no alternative remedy to cure the prejudice: Etco Financial Corp. v. Ontario, [1999] O.J. No. 3658 (S.C.), at para. 3; R. v. Babos, 2014 SCC 16, [2014] 1 S.C.R. 309, at para. 32.

[18] A number of non-exhaustive factors should be considered in determining the appropriate remedy including:

i. How the documents came into the possession of the appellants or their counsel;

ii. What the appellants and their counsel did upon recognition that the documents were potentially subject to solicitor-client privilege;

iii. The extent of review of the privileged material;

iv. Contents of the solicitor-client communications and the degree to which they are prejudicial;

v. The stage of the litigation; and

vi. The potential effectiveness of a firewall or other precautionary steps to avoid mischief: Celanese, at para. 59.

[19] Where the party in receipt of privileged documents fails to identify what documents were reviewed, they put the court in an “invidious position” of being unable to determine the extent of the actual review of the material and the degree of resulting prejudice: Continental Currency at para. 45; Celanese, at paras. 62- 63; MacDonald Estate, at p. 1263.

In the balance of the case [paras 31-54] the court continues to apply this doctrine to the facts, including the burden of addressing prejudice:

[51] I note that while lesser remedies were ordered in some cases cited by the appellant, in all of those cases, the person who accessed the confidential information disclosed what documents were reviewed such that the court was able “to consider the documents inappropriately accessed in the context of the issues in the litigation, to assess the potential harm” and tailor an appropriate remedy: See O’Dea v. O’Dea, 2019 NLSC 206, at paras. 68-69; Morneault v. Dynacorp Acquisition Ltd., 2006 ABQB 831; and Dixon v. Lindsay, 2021 ONSC 1360.

[52] As this court in Bruce Power observed in upholding a stay of proceedings, the court may presume that “if the [party in receipt of privileged material] had been able to lead evidence to rebut the presumption of prejudice, it would have done so”: R. v. Bruce Power Inc., 2009 ONCA 573, 90 O.R. (3d) 272, at para. 63. In the absence of such evidence, the appellant must “shoulder the consequences” at the remedy stage: Celanese, at paras. 62-63.