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Open Court - Solicitor-Client Privilege. Derenzis v. Gore Mutual Insurance Company
In Derenzis v. Gore Mutual Insurance Company (Div Court, 2024) the Divisional Court heard (and allowed) a 'sealing order' motion brought by the Licence Appeal Tribunal within a JR, which further required consideration of the open court doctrine with respect to solicitor-client privilege-governed affidavit material filed:[1] The Licence Appeal Tribunal (LAT) moves for an order sealing part of the record of proceedings in the underlying application for judicial review and seeks an order preventing further dissemination of the documents at issue pending the determination of the application for judicial review.
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[3] As set out in the Decision, the Adjudicator found that certain materials that had been put forward by that affiant were covered by the LAT’s solicitor-client privilege and by deliberative secrecy. In turn, the Adjudicator made certain orders about the use, distribution, dissemination and destruction of the specific documents covered by those privileges. The orders that are the subject of this application for judicial review prohibit dissemination, require destruction and require confirmation of compliance. Those orders extend to the affiant who put forward the documents, the former LAT adjudicator, who is participating in this motion as a non-party.
[4] The LAT seeks sealing and non-dissemination orders because, otherwise, the confidentiality that comes with solicitor-client privilege and deliberative secrecy will be lost before the application is even heard. The LAT relies on the leading case, Sherman Estate v. Donovan, 2021 SCC 25, at para. 38, providing the necessary criteria for a sealing order.
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[10] I conclude that the criteria in Sherman Estate are met. The privilege/secrecy that has been established in the documents at issue is recognized at law as an important public interest and is protected by confidentiality. To open them to the public before the ongoing proceedings have been decided would irreparably compromise that privilege/secrecy. I am not persuaded that an attempt at more fine-tuned redactions is a reasonable alternative. The order will be limited to the documents at issue and permit counsel access as needed to fully argue the application for judicial review. The sealing order is needed to preserve the ability of the court to do justice in this case. . S.E.C. v. M.P.
In S.E.C. v. M.P. (Ont CA, 2023) the Court of Appeal considers the open court doctrine contrasted with the inherent confidentiality of solicitor-client privilege, here where R7.08 requires a solicitor's affidavit for a judge to approve a litigation settlement for a person under disability. I think these quotes are key for anyone considering a R7.08 motion::(c) Solicitor-client privilege is an important public interest, but it is not at risk in these appeals
[84] Third and finally, the appellants argue that the public interest prong of the Sherman test is met by the intrusion of r. 7.08 motion records on solicitor-client privilege. The appellants argue that solicitor-client privilege is a principle of fundamental justice and a substantive right that warrants public protection, even where it interferes with the open court principle. They cite, for example, the decision in Law Society of Ontario v. Gupta, 2022 ONLSTH 14, where the Law Society Hearing Division Panel held that the “confidentiality of client information, and client identity, in the context of lawyer-client relationship” constituted an important public interest. The Panel added: “Notably, the Rules of Professional Conduct require maintenance of client confidentiality. Client confidentiality yields to professional regulation but must still be protected in regulatory proceedings in the public interest. Clients should not unnecessarily suffer loss of confidentiality in aid of professional accountability”: at para. 112.
[85] Neither motion judge in these appeals directly addressed the argument that a sealing order was warranted on the basis of solicitor-client privilege. It is unclear if that argument was put to either motion judge, but I note that neither factum on appeal addresses specific, privileged information disclosed as a result of the r. 7.08 motion records. Rather, the argument appears to be a general one with respect to the requirement that an affidavit from plaintiff’s counsel form part of the r. 7.08 motion materials.
[86] There is no question that solicitor-client privilege represents a fundamental right that is in the public interest to protect: Alberta (Information and Privacy Commissioner) v. University of Calgary, 2016 SCC 53, [2016] 2 S.C.R. 555, at para. 34. Because of this, it is clear that as a general principle, solicitor-client privilege constitutes an important public interest under the Sherman test.
[87] There is a question, however, as to whether the protection of that privilege is at serious risk because of the open court principle in the context of r. 7.08 motions. I would conclude that it is not.
[88] Pursuant to the Solicitors Act, in a motion under r. 7.08, the court must be satisfied that the CFA is fair and reasonable: s. 24. The fairness requirement “is concerned with the circumstances surrounding the making of the agreement and whether the client fully understands and appreciates the nature of the agreement that he or she executed”: Henricks-Hunter v. 814888 Ontario Inc. (Phoenix Concert Theatre), 2012 ONCA 496, 294 O.A.C. 333, at para. 20, quoting Raphael Partners v. Lam (2002), 2002 CanLII 45078 (ON CA), 61 O.R. (3d) 417 (C.A.), at para. 30. Reasonableness is determined by assessing: the time expended by the solicitor; the legal complexity of the matter at issue; the results achieved; and the risk assumed by the solicitor: Henricks-Hunter, at para. 22. Confirming reasonableness and fairness does not require infringing solicitor-client privilege such that public access to the r. 7.08 motion record always jeopardizes an important public interest.
[89] In Descôteaux v. Mierzwinski, 1982 CanLII 22 (SCC), [1982] 1 S.C.R. 860, at p. 875, the Supreme Court established the following principles that are applicable when determining whether there is an attempt to interfere with solicitor client privilege:1. The confidentiality of communications between solicitor and client may be raised in any circumstances where such communications are likely to be disclosed without the client’s consent.
2. Unless the law provides otherwise, when and to the extent that the legitimate exercise of a right would interfere with another person’s right to have his communications with his lawyer kept confidential, the resulting conflict should be resolved in favour of protecting the confidentially.
3. When the law gives someone the authority to do something which, in the circumstances of the case, might interfere with that confidentiality, the decision to do so and the choice of means of exercising that authority should be determined with a view to not interfering with it except to the extent absolutely necessary in order to achieve the ends sought by the enabling legislation.
4. Acts providing otherwise in situations under paragraph 2 and enabling legislation referred to in paragraph 3 must be interpreted restrictively. [90] In Burns Estate v. Falloon, 2007 CanLII 38558 (Ont. S.C.), Pierce J. commented on the tension between r. 7.08 and solicitor-client privilege:[19] The court relies on counsel to adequately describe an infant settlement. It may refuse to approve a settlement because of insufficient evidence. While local practice has developed such that defence counsel is not usually concerned with the particulars of the infant settlement, nonetheless the clear wording of the rule requires service of the entire motion record on opposing counsel.
[20] An infant settlement represents a unique incursion on solicitor-client privilege.…
[21] In this case there is limited encroachment on the solicitor and client privilege in order to meet the policy concern of protection of infants. Interference with that privilege is circumscribed and occurs when the case has been settled. It does not form part of the discovery process and does not, at the end of the case, prejudice the prosecution or defence of an action. Disclosure is limited to the extent necessary to approve the settlement and does not open to view the rest of the client’s communications with her solicitor. Thus, service of documents required by Rule 7.08(4) must be a true copy. [Emphasis added.] [91] It is worth noting that in Burns Estate, Pierce J. found a sealing order was not warranted. While Pierce J. characterized r. 7.08 as an “incursion” into solicitor-client privilege, I would adopt the caveat on this statement offered by Corthorn J. in Boone v. Kyeremanteng, 2020 ONSC 198.
[92] In Boone, at para. 21, Corthorn J. stated, “I find that the disclosure of privileged information is neither mandated nor inevitable on a motion or an application for court approval of a settlement.” Corthorn J. came to this conclusion in dismissing a constitutional challenge to r. 7.08 on the basis that it lacked a factual foundation. Reflecting specifically on Pierce J.’s comment in Burns Estate, she clarified that r. 7.08 may require an incursion into solicitor-client privilege, but there is nothing in the rule itself requiring it: at paras. 55-64. Rather, what the rule requires is full and frank disclosure of the merits of a settlement. I agree.
[93] In her decision in Rivera v. Leblond, (2007), 44 C.P.C. (6th) 180 (Ont. S.C.), Thorburn J. (as she then was) discussed the type of evidence required to meet the requirement of full and frank disclosure:[23] Rule 7.08(4) and the obligations of the court pursuant to its parens patriae jurisdiction require a party seeking approval to submit sufficient evidence to make a meaningful assessment of the reasonability of the proposed settlement of the claims of a person under a disability.
[24] This is a serious and substantial requirement which cannot be satisfied by the provision of conclusory statements. It requires full disclosure of evidence regarding the material issues. Where there is a conflict in the evidence the conflicting evidence must be disclosed to the court. [94] The evidence required depends on the facts of the case but generally, the moving party must show on the evidence in the record that:a) An appropriate investigation with respect to both liability and damages has been completed;
b) An appropriate assessment of liability issues has been made;
c) An appropriate assessment of damages issues has been made; and
d) The fees and disbursements which the plaintiff’s lawyers propose to charge are reasonable in all the circumstances (Rivera, at paras. 26-28). [95] The OTLA points out MacDonald v. OSPCA, 2023 ONSC 2445, at para. 32, where Broad J. found that legal advice was an important public interest worth of protection under the Sherman test. There, the court accepted that a temporary sealing order was required over pleadings where there was a dispute as to whether the pleadings disclosed communications covered by solicitor-client privilege. The temporary sealing order was justified to preserve the ability of the affected client to make the argument that the solicitor-client privilege had not been waived and would be infringed by including the pleadings in the court record of the action. That serious risk scenario is distinct from the settlement approval context of this appeal.
[96] As Corthorn J. stated in Dickson v. Kellett, 2018 ONSC 4920, at para. 34, in the settlement approval motion context, a statement in counsel’s supporting affidavit that disclosure of the supporting materials would infringe on solicitor-client privilege is generally insufficient to support a sealing order being made. She added that for the majority of settlement approval motions, counsel are in a position to provide the court with the requisite evidence without an unwarranted incursion into either solicitor-client or litigation privilege (para. 42). In part, this is because the issues in a case, and the relative strengths and weaknesses of each party’s case, are typically well understood by the parties and their respective counsel by the time a settlement is reached. Corthorn J. concluded that, “Something more than the potential incursion into solicitor-client or some other form of privilege is required to support a request for an order dispensing with service of the relevant documents on the opposing party.” (para. 43).
[97] OTLA urges this court to recognize that, while r. 7.08 may not technically require the infringement of solicitor-client privilege, as a matter of practice counsel on a r. 7.08 motion will need to share their appraisal of the strengths and weaknesses of the case, and in so doing, disclose privileged communications with the client. OTLA also observes that at the time the r. 7.08 motion record is filed, and thereby made subject to public access, the litigation has not yet settled. As a result, the potential for prejudice against the plaintiff in disclosing such privileged assessments could be very real.
[98] While this concern strikes me as well-founded, it does not lead to the conclusion that motion records under r. 7.08 should be presumptively sealed. Rather, it speaks to the need for counsel to be guided by this concern in how they prepare affidavits for r. 7.08 motions, so as to minimize the disclosure of privileged information, and the basis on which they may seek specific redactions in the context of specific cases where such disclosure is viewed as necessary to obtain judicial approval. Further, where there is a basis for a concern that a settlement may not be finalized in the circumstances of a particular case, a motion judge has the option of ordering a temporary sealing order, which would end once the settlement is finalized.
[99] The appellants also highlight the privileged nature of lawyer’s fees, which also must be disclosed and approved in the context of r. 7.08 motions. The amount and breakdown of legal fees are presumptively privileged: Kaiser (Re), 2012 ONCA 838, 113 O.R. (3d) 308, at paras. 21-30. However, that presumption does not operate in the context of settlement approval motions, where the privilege may be waived by the party to permit judicial oversight and approval of the reasonableness of the fees charged. Where necessary to meet the requirements of judicial approval, litigation guardians may instruct counsel, on behalf of the parties, that they waive the privilege or seek to redact privileged information. In either scenario, neither the rule nor the open court principle leads inevitably to reducing a party’s right to solicitor-client privilege.
[100] Even if solicitor-client privilege were not waived in this context, the rationale for the presumption of privilege (that by knowing the amount and breakdown of fees, the party seeking the information could infer or discover privileged communications between the lawyer and their client) generally does not arise once a settlement has been reached. Consequently, I would not accept that the disclosure of legal fees in the r. 7.08 context, in and of itself, constitutes an infringement of solicitor-client privilege that would justify sealing the record.
[101] Here again, the appellants emphasize the alleged unfairness of the requirement to disclose legal advice and legal fees in the r. 7.08 context, as parties who are not minors or under disability are not compelled to waive solicitor-client privilege to settle their litigation. In the Dr. C appeal, for example, the appellants argue that the court should recognize that Dr. C. should not enjoy a “lesser form of privilege” because he must bring a motion under r. 7.08, instead “[h]e has a substantive right not to be compelled to waive his privilege in favour of public disclosure.”
[102] Again, I would reject this characterization of the effect of the open court principle in the context of r. 7.08 motions. First, no party is compelled to bring a r. 7.08 motion. Plaintiffs (or, in this context, litigation guardians) choose to initiate litigation, and may choose to settle. Rule 7.08 is a protective provision to ensure settlements are in the interests of the minors or parties under disability. Rule 7.08, properly construed, is a benefit to the parties to the litigation, not a burden on litigation guardians and counsel.
[103] Solicitor-client privilege is raised by the appellants both as an aspect of the Sherman test, and as a separate basis for a sealing order. For the same reasons that solicitor-client privilege does not meet the Sherman test’s serious risk to an important public interest threshold, it also does not constitute a separate basis for a presumptive sealing order in the r. 7.08 context. In short, fulfilling the requirements of settlement approval under r. 7.08 and the Solicitors Act generally does not compel the infringement of solicitor-client privilege, and where the specific circumstances of a settlement do necessitate the sharing of otherwise privileged communications, this may be resolved either through the waiver of the privilege by the client, or by the partial redaction of the record as a discretionary remedy by the judge hearing the motion.
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