Date 2000302
Dockets: 91-1811-IT-G; 92-1567-IT-G
BETWEEN:
Dr. BERNARD C. SHERMAN,
Appellant/Applicant on the motion
and
HER MAJESTY THE QUEEN,
Respondent/Respondent on the motion.
Bowie. JTCC
Appearances
Counsel for the Appellant/Applicant: D.H Jack
Counsel for the Respondent: Susan Tataryn
Counsel for Albert Title, Peter Browning Lonny Rosen
and Orenstein & Partners:
Order
Upon motion made by the Appellant, Dr. Bernard C. Sherman, for
Orders permitting the use of documents initially obtained in
non-party discovery examinations of Albert Title and Peter
Browning, on behalf of Orenstein & Partners, chartered
accountants, in these proceedings (“the documents”)
in a separate proceeding commenced by Dr. Bernard C. Sherman in
the Ontario Court of Justice, Court File No. 96-CU-116411,
(“the Ontario Court action”) in which Albert Title,
Peter Browning and Orenstein & Partners have been named as
Defendants;
And upon reading the affidavit of Jennifer Pink sworn the
8th day of February, 2000, together with the exhibits
attached thereto;
And upon hearing counsel for the Appellant, counsel for the
Respondent, and counsel representing Albert Title, Peter Browning
and Orenstein & Partners, and it appearing that the motion is
not opposed by the Respondent, Albert Title, Peter Browning or
Orenstein & Partners;
IT IS HEREBY ORDERED THAT the Appellant/Applicant is relieved
of the implied undertaking to the Court in respect of the
documents to the extent necessary for the proper conduct of the
Ontario Court action.
There shall be no Order as to costs.
Signed at Ottawa, Ontario, this 10th day of March, 2000.
J.T.C.C.
Date: 20000310
Docket: 91-1811(IT)G
92-1567(IT)G
BETWEEN:
Dr. BERNARD C. SHERMAN,
Appellant/Applicant on the motion
and
HER MAJESTY THE QUEEN,
Respondent/Respondent on the motion
REASONS FOR ORDER
Bowie J.T.C.C.
[1] Dr. Sherman appealed to this Court from his assessments
for income tax for the taxation years 1985, 1986, 1987 and 1988.
The appeals were settled in 1996, and Notices of Discontinuance
were filed, but not before Orders had been made permitting the
examination for discovery of a firm of chartered accountants,
Orenstein & Partners, represented by two of its partners,
Albert Title and Peter Browning. Orenstein & Partners were
the accountants for two limited partnerships in which the
Appellant had made substantial investments as a limited partner.
The only other partner was Overseas Credit and Guaranty
Corporation (OCGC), the general partner. A number of documents
(which for convenience I shall refer to simply as "the
documents") were produced from the files of Orenstein &
Partners during the course of the examinations of Mr. Title and
Mr. Browning. Dr. Sherman has begun proceedings in what is
now the Superior Court of Ontario, and he wishes to use those
documents in support of his case. The present motions are brought
to obtain Orders permitting that.
[2] It has long been settled under English law,[1] and more recently in
most of the provincial superior courts[2] and the Federal Court of Canada,[3] that documents
whose production is compelled in the course of litigation are
taken by the party to whom they are produced subject to an
implied undertaking of that party and its counsel that they will
be used only for the proper conduct of the litigation in which
they were produced. Subject to certain well-defined exceptions,
any other use of the documents by the party receiving them may
either be enjoined or punished as a contempt.[4] The same rule applies to
information obtained orally in the course of an examination for
discovery.
[3] I am not aware of a case in which the question has arisen
whether the implied undertaking rule applies to documents or
other information produced in the course of a proceeding before
this Court. The existence of the rule was recognized by Bowman
J., as he then was, in The Promex Group Inc. v. The
Queen.[5] He
was dealing there, however, with documents produced and ordered
to be kept sealed, in proceedings in the Ontario Court, where the
implied undertaking rule had been established as part of the law
of Ontario by the judgment of the Ontario Court of Appeal in
Goodman v. Rossi, and subsequently codified.[6] I am in no doubt,
however, that the rule should be applied in this Court in the
same way that it has developed in other jurisdictions, in order
to protect the same public interests in privacy and the integrity
of the litigation process.[7] The documents are, therefore, subject to an implied
undertaking which outlives the discontinuance of the appeals.
[4] As these appeals were discontinued following the
settlement between the parties, the documents have never been put
into evidence, or otherwise produced in open Court. Without the
consent of the producing party, then, the documents may only be
used in the Ontario action if this Court makes an Order relieving
Dr. Sherman and his counsel of the implied undertaking. On
these motions, the party moving has the burden of showing that
the prejudice he will suffer if he is not permitted to put the
documents to use in the Ontario action outweighs the prejudice
that the producing party, Orenstein & Partners, will suffer
if he is permitted to use them in that action.[8]
[5] The only evidence before me on these motions is the
affidavit of Jennifer Pink. Paragraphs 5 to 12 of that
affidavit read as follows:
5. I am informed by D.H. Jack, counsel for Dr. Bernard Sherman
in the Ontario Proceeding, and verily believe, that the Documents
from the Tax Court Actions are highly relevant to and essential
for the proper conduct of the Ontario Proceeding, as they relate
to Orenstein and Partners' activity while acting as
accountants for the limited partnership, and the information
which was available to them in that capacity.
6. I am further advised by D.H. Jack, and verily I believe,
that Mr. Jack has requested from the counsel for the Defendants,
Nina Perfetto, a number of documents from Orenstein &
Partners, and that Ms. Perfetto has refused to produce same on
that basis that Orenstein & Partners no longer has the
documents in their possession.
7. I am further informed by D.H. Jack, and I verily believe,
that the position taken by Ms. Perfetto in the Ontario Proceeding
is that the Defendants will not resist a motion to have the
documents in question produced from the Tax Court Actions. Mr.
Jack has advised me, and I verily believe, that Ms. Perfetto, on
behalf of the Defendants, has specifically stated that the
Defendants would not be opposing a motion to obtain court
approval to use documents from the Tax Court Actions in the
Ontario Proceeding.
8. I am further informed by D.H. Jack, and I verily believe,
that in the Ontario Proceeding it was the position of Orenstein
& Partners that Revenue Canada, as it then was, had taken
possession of the Documents upon completion of the third party
examinations for discovery of Title and Browning on behalf of
Orenstein & Partners.
9. I am further advised by D.H. Jack, and I verily believe,
that the documents from the Tax Court Actions, which actions were
conducted by David C. Nathanson of McDonald & Hayden, on
behalf of Dr. Sherman, have been kept segregated in the offices
of McDonald & Hayden, and have not to date been used in the
Ontario Proceeding, although they are available for such use
should this Honourable Court so permit.
10. OCGC is no longer in existence. Its Certificate of
Incorporation/Amalgamation was cancelled under
section 240(3) of the Business Corporations Act,
1982, by an order dated March 18, 1991. Now produced and
shown to me and marked as Exhibit "C" to this my
Affidavit is a true copy of a Notice of Dissolution of OCGC,
dated April 2, 1991. Consequently, OCGC can no longer provide the
relevant documents for use in the Ontario Proceeding. As
Orenstein & Partners no longer has possession of the
Documents, the only apparent source is the segregated documents,
referred to above, kept by McDonald & Hayden.
11. I am unaware of any prejudice which could be suffered by
OCGC were the requested order to be made, as OCGC is no longer in
existence. Further, I am unaware of any prejudice which could be
suffered by the Canada Customs & Revenue Agency (previously
Revenue Canada) if the order sought by the Applicant were
granted, as their action against Dr. Bernard Sherman was fully
settled on June 13, 1996.
12. The principals of OCGC, Einar Bellfield & Osvaldo
Minchella, were convicted of fraud in the Ontario Superior Court
of Justice on December 9, 1999. Now produced and shown to me and
marked as Exhibit "D" to this my Affidavit is a
true copy of the Indictment of Einar Bellfield and Osvaldo
Minchella, dated December 9, 1999. The fraud conviction related
to OCGC being a sham operation and not the business it purported
to be.
[6] Paragraphs 5 through 9 of that affidavit consist of
statements made by the affiant on the basis of information
supplied to her by Mr. Jack, who appeared as counsel for the
Applicant on this motion. Those paragraphs are crucial to the
application. It has been held time and again that a member of the
bar ought not to appear as witness and as counsel in the same
proceeding.[9] The
same rule applies whether the evidence is given orally in Court
or by affidavit,[10] and in the case of an affidavit it applies where the
affiant recites information obtained from the lawyer who later
appears as counsel on the motion.[11] An exception may be made where the
contents of the affidavit are not in dispute.[12]
[7] Mr. Rosen who appeared before me on behalf of Orenstein
& Partners and Mr. Title and Mr. Browning, and Ms. Tataryn
who appeared for the Crown, were invited either to consent to the
Order sought or, alternatively, to agree to treat the affidavit
of Jennifer Pink as an agreed statement of facts for the purposes
of the motion. They both declined to do either. However, neither
of them took issue with any part of the affidavit, and there was
no cross-examination on it. Nor was any affidavit filed by either
of them, either to controvert or to add to the facts deposed to
by Ms. Pink. In these circumstances no issue of credibility could
possibly arise, and so I accepted the affidavit as being an
accurate statement of the facts, and permitted the motion to
proceed with Mr. Jack as counsel. However, I wish to make it
quite clear that I did so only because the only parties who could
have an interest in these documents were represented before the
Court, and by their counsel they tacitly accepted that the facts
were fully and accurately stated. Had they not done so, I would
have adjourned the hearing of the motion to permit Mr. Jack to
make his own affidavit in support of it, and to engage other
counsel to appear.
[8] The evidence of the prejudice which Dr. Sherman would
suffer if he is not permitted to use the documents in support of
the Ontario action is far from overwhelming. However, Orenstein
& Partners and Mr. Title and Mr. Browning have not challenged
the statement that the documents are highly relevant to and
essential for the proper conduct of that action. Nor have they
asserted that they might be prejudiced in any way if I were to
make the Order sought. Moreover, my examination of the pleadings
in these appeals and those in the Ontario action tends to confirm
that the documents would be relevant to that proceeding. An Order
will therefore go to relieve Dr. Sherman and his counsel of their
implied undertaking in respect of the documents, to the extent
necessary for the proper conduct of the Ontario action. There
will be no Order as to costs.
Signed at Ottawa, Canada, this 10th day of March, 2000.
"E.A. Bowie"
J.T.C.C.
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