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Stays - Privilege Leak

. Continental Currency Exchange Canada Inc. v. Sprott

In Continental Currency Exchange Canada Inc. v. Sprott (Ont CA, 2023) the Court of Appeal considered the test for staying proceedings where (a bunch of) solicitor-client privileged information had been received by an opposing party to litigation:

THE LAW OF STAYING PROCEEDINGS where there is unauthorized access of privileged information

[31] The test to decide the appropriate remedy where privileged information is received by an opposing party (in this case, the appellants) or its counsel is set out in Celanese Canada Inc. v. Murray Demolition Corp., 2006 SCC 36, [2006] 2 S.C.R. 189, and MacDonald Estate v. Martin, 1990 CanLII 32 (SCC), [1990] 3 S.C.R. 1235. The focus of the analysis is on trial fairness and the integrity of the adjudicative process. In Celanese, at para. 34, the Supreme Court noted that 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”.

[32] There are three stages to the analysis.

The First Stage: The respondents must establish that the appellants obtained access to relevant privileged material

[33] At the first stage, the moving party (in this case, the respondents) must prove that the opposing party (in this case, the appellants) obtained access to their privileged materials

The Second Stage: The appellants must rebut the presumption of prejudice

[34] At the second stage, once the respondents establish that the appellants obtained access to privileged material, there is a rebuttable presumption of prejudice: Celanese, at paras. 42-43, 48. The respondents need not prove the risk of significant prejudice or “the nature of the confidential information” that was disclosed beyond the requirement to prove access by the appellants: Celanese, at paras. 42, 48. Instead, the appellants bear the onus to rebut the presumed prejudice flowing from receipt of the privileged information: Celanese, at para. 48.

[35] The presumption of prejudice can be rebutted by identifying to the court “with some precision” that: (i) the appellants did not review any of the privileged documents in their possession; or (ii) they reviewed some documents, but the documents reviewed were not privileged; or (iii) the privileged documents reviewed were nevertheless “not likely [to] be capable of creating prejudice”: Celanese, at para. 53.

[36] The evidence adduced must be “clear and convincing” such that “[a] reasonably informed person would be satisfied that no use of confidential information would occur”: MacDonald Estate, at pp. 1260 to 1263; see also, Celanese, at para. 42. “A fortiori undertakings and conclusory statements in affidavits without more” do not suffice: MacDonald Estate, at p. 1263.

[37] Any “[d]ifficulties of proof” in rebutting the presumption of prejudice “should fall on the heads of those responsible for the search [in this case, the appellants], not of the party being searched”: Celanese, at para. 55.

[38] In MacDonald Estate, the precise extent of solicitor-client confidences acquired over a period of years was unknown and possibly unknowable. Justice Sopinka wrote, at p. 1290, that:

“once it is shown by the client that there existed a previous relationship which is sufficiently related to the retainer from which it is sought to remove the solicitor, the court should infer that confidential information was imparted unless the solicitor satisfies the court that no information was imparted which could be relevant.”

[39] 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:

i. Requiring the respondents 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 appellants who have 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 respondents should not have to bear “the onus of clearing up the problem created by the [appellants’] carelessness”.

The Third Stage: The respondents must show that a stay is the only appropriate remedy

[40] The third stage of the analysis is to fashion an appropriate remedy.

[41] By the time the court reaches the remedy stage, the appellants have failed to rebut the presumption of prejudice. Because prejudice is a necessary precursor, the question at the remedy stage is not whether there is prejudice but how to rectify it to ensure fairness.

[42] A party seeking a stay (namely, the respondents) has the burden to show “special circumstances” to justify a stay as a stay is only granted where there is (i) prejudice to the right to a fair trial or the integrity of the justice system and (ii) 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, 367 D.L.R (4th) 575, at para. 32.

[43] Before imposing a stay, remedies that are less serious must first be considered as a stay is an extraordinary remedy that should be reserved for the clearest of cases: Celanese, at para. 56. It is a remedy of last resort to be imposed only to prevent ongoing prejudice, unfairness to a party or harm to the administration of justice: Law Society of Saskatchewan v. Abrametz, 2022 SCC 29, 470 D.L.R. (4th) 328, at paras. 83-85.

[44] In Celanese, at para. 59, the Supreme Court set out a number of non-exhaustive factors to be considered in determining the appropriate remedy. Celanese contemplated whether to remove counsel for the appellants who gained access to the respondents’ privileged documents in executing an Anton Piller order. While in this case, the appellants, not their counsel, were in receipt of the respondents’ privileged materials, the factors from Celanese nonetheless remain helpful. Those factors include:

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.

[45] Where the appellants who were in receipt of privileged documents fail to identify the documents they 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. The court will, thus, presume that the third and fourth factors weigh against the appellants: Celanese, at paras. 62-63; MacDonald Estate, at p. 1263. This adverse presumption can be drawn even though the burden at the remedy stage shifts to the respondents to show that a stay is the appropriate remedy.