SUPREME
COURT OF CANADA
Between:
Canadian
Bearings Ltd.,
Farrokh
Khalili, Hossein Banijamali and
Canadian
Petroleum Processing & Equipment Inc.
Appellants
and
Celanese
Canada Inc. and
Celanese
Ltd.
Respondents
‑ and ‑
Advocates’
Society and
Canadian
Bar Association
Interveners
Coram:
McLachlin C.J. and Bastarache, Binnie, LeBel, Deschamps, Fish and
Charron JJ.
Reasons for
Judgment:
(paras. 1 to 71)
|
Binnie J. (McLachlin C.J. and
Bastarache, LeBel, Deschamps, Fish and Charron JJ. concurring)
|
______________________________
Celanese Canada Inc. v. Murray Demolition Corp., [2006] 2
S.C.R. 189, 2006 SCC 36
Canadian Bearings Ltd.,
Farrokh Khalili, Hossein Banijamali and
Canadian Petroleum Processing & Equipment Inc. Appellants
v.
Celanese Canada Inc. and
Celanese Ltd. Respondents
and
Advocates’
Society and
Canadian Bar Association Interveners
Indexed as: Celanese Canada Inc. v. Murray Demolition Corp.
Neutral citation: 2006 SCC 36.
File No.: 30652.
2005: December 12; 2006: July 27.
Present: McLachlin C.J. and Bastarache, Binnie,
LeBel, Deschamps, Fish and Charron JJ.
on appeal from the court of appeal for ontario
Civil procedure — Removal of
counsel — Plaintiffs’ lawyers seizing electronic documents from
defendants’ premises pursuant to Anton Piller order later found to include
documents subject to solicitor‑client privilege — Plaintiffs’
lawyers conducting partial review of documents — Defendants seeking
to remove plaintiffs’ lawyers as solicitors of record — Whether onus
on plaintiffs to rebut presumption of prejudice — Whether plaintiffs’
lawyers should be removed.
Civil procedure — Anton Piller
order — Requirements for order — Guidelines for preparation
and execution of order.
Celanese sued Canadian Bearings for alleged industrial
espionage. Following an ex parte application, a motions judge granted
Celanese an Anton Piller order against Canadian Bearings. The
order did not contain a provision dealing with privileged documents. It
was executed by an accounting firm. The search was overseen by an independent
supervising solicitor. The solicitors for Canadian Bearings, BLG, were also
present at the search, but given the volume of electronic materials and the
pace at which the search proceeded, BLG lawyers later complained that they were
not given time to review the material adequately. Frequently, entire folders
would be copied electronically without examination of individual
documents. However, material that could be identified as potentially
privileged was segregated into an electronic folder which was labelled “Borden
Ladner Gervais”. In the course of the search, about 1,400 electronic
documents thought to be relevant, but not then screened for potential solicitor‑client
privilege claims, were downloaded by the accounting firm onto a portable hard
drive and copied onto CD‑ROMs. These were placed in a plastic
envelope and sealed. The seal was initialled by a BLG lawyer and by the
supervising solicitor. The envelope was then given to the accounting firm.
Contrary to the express provision in the Anton Piller order, no complete
list of the seized documents was made prior to their removal from the searched
premises. A lawyer from the law firm of CBB, representing Celanese, later
directed the accounting firm to copy the envelope’s contents. The seal
was broken without the knowledge or consent of BLG or Canadian Bearings, and
the contents copied onto CBB’s computer. A copy was also provided to
Celanese’s U.S. counsel, KBTF. When BLG became aware that privileged
documents had been transferred to CBB and KBTF, it dispatched a letter
requesting their immediate return. CBB and KBTF, rather than returning the
documents as requested, advised BLG that the documents subject to the privilege
claim had been deleted from their respective systems. Canadian Bearings
then brought this motion to disqualify CBB and KBTF from continuing to act for
Celanese, but this was dismissed by the motions judge. The Divisional Court
allowed Canadian Bearings’ appeal and ordered that CBB and KBTF be removed.
The Court of Appeal set aside that decision, finding that neither of the courts
below had applied the correct test for removal. In its view, Canadian
Bearings bore the onus of demonstrating that there is a real risk that opposing
counsel will use information obtained from privileged documents to the
prejudice of Canadian Bearings and that such prejudice cannot realistically be
overcome by a remedy short of disqualification. The matter was therefore
remitted back to the motions judge for further consideration.
Held: The appeal should be allowed.
This dispute presents a clash between two competing
values — solicitor‑client privilege and the right of a party to
select counsel of choice. The conflict here must be resolved on the basis that
no one has the right to be represented by counsel who has had access to
relevant solicitor‑client confidences in circumstances where such access
ought to have been anticipated and, without great difficulty, avoided and where
the searching party has failed to rebut the presumption of a resulting risk of
prejudice to the party against whom the Anton Piller order was
made. [2]
It is procedurally unfair not only to subject the
defendant to the intrusion of a surprise search under the exceptional remedy of
an Anton Piller order in the course of which its solicitor‑client
confidences are disclosed to its opponent, but then to throw on it the onus of
clearing up the problem created by Celanese’s carelessness. The principal
source of the present difficulty lies in the post‑search conduct of
Celanese’s solicitors. Having created the problem, it should bear the
burden of resolving it. [51]
An Anton Piller order is not placed in the
hands of a public authority for execution, but authorizes a private party to
insist on entrance to the premises of its opponent to seize and preserve
evidence to further its claim in a private dispute. The only justification for
such an extraordinary remedy is that the plaintiff has a strong prima facie
case and can demonstrate that on the facts, absent such an order, there is
a real possibility relevant evidence will be destroyed or otherwise made to
disappear. The protection of the party against which an Anton Piller
order is issued ought to be threefold: (1) a carefully drawn order
which identifies the material to be seized and sets out safeguards to deal,
amongst other things, with privileged documents; (2) a vigilant court‑appointed
supervising solicitor who is independent of the parties; and (3) a sense
of responsible self‑restraint on the part of those executing the order
with a focus on its limited purpose namely to preserve relevant evidence not to
rush to exploit it. [1] [31]
Under a properly executed Anton Piller order,
the searching solicitors should be able to show with some precision what they
have seized, what they have seen, who has seen it and the steps taken to
contain the wrongful disclosure of confidences. If Celanese’s solicitors,
who were in frequent telephone contact with the supervising solicitor during
the search, had insisted on a proper listing at the site of all the materials
seized, the universe of potential confidences would as a starting point have
been established. Nevertheless, since the disputed electronic documents had
been isolated on a hard drive and on CD‑ROMs and placed in a sealed
envelope in the custody of the accounting firm, a complete listing could have
been made in the days following the search with BLG counsel present. This too
was foreclosed by the precipitous and unilateral conduct of CBB. There was no
pressing need to open the envelope. Neither CBB nor KBTF set out to obtain
access to, or to gain some advantage from privileged material. Their
problem stems from carelessness and an excessively adversarial approach in
circumstances that called for careful restraint in recognition of the
exceptional position of responsibility imposed by the unilateral and intrusive
nature of an Anton Piller order. Remedial action in cases such as this
is intended to be curative not punitive. [34] [52‑54]
Here, the Court of Appeal erred in placing on Canadian
Bearings’ lawyers the onus of establishing a real risk of prejudice.
Celanese’s lawyers who undertook a search under the authority of an Anton
Piller order and thereby took possession of relevant confidential
information attributable to a solicitor‑client relationship, bear the
onus of showing there is no real risk such confidences will be used to the
prejudice of Canadian Bearings. Difficulties of proof compounded by
errors in the conduct of the search and its aftermath should fall on the heads
of those responsible for the search, not of the party being searched. The onus
was not met by the searching party in this case. [55]
The right of a plaintiff to continue to be represented
by counsel of its choice is an important element of our adversarial system of
litigation. In modern commercial litigation, mountains of paper are sometimes
exchanged. Mistakes will be made. There is no such thing, in these
circumstances, as automatic disqualification. If a remedy short of removing
the searching solicitors will cure the problem, it should be considered. In
this respect, a number of factors should be taken into
account: (i) how the documents came into the possession of the
plaintiff or its counsel; (ii) what the plaintiff and its counsel did upon
recognition that the documents were potentially subject to solicitor‑client
privilege; (iii) the extent of review made of the privileged documents;
(iv) the contents of the solicitor‑client communications and the
degree to which they are prejudicial; (v) the stage of the litigation;
(vi) the potential effectiveness of a firewall or other precautionary
steps to avoid mischief. [56‑59]
As to the first factor, the privileged documents came
into the hands of CBB and KBTF under the Anton Piller order in a way
that was unintended but avoidable. Inadequate precautions were taken and those
who fail to take precautions must bear the responsibility. As to the
second factor, CBB failed to have the electronic documents listed at the
search site as required by the order, ignored the obvious significance of BLG’s
initials on the sealed envelope containing the electronic documents and
declined to return to BLG the material over which privilege was claimed as
requested. Although, CBB did take steps, as did KBTF, to contain the resulting
damage, as a result of their errors the Court does not know, and Canadian
Bearings cannot know, the potential scale of that damage. As to the
third factor, CBB and KBTF deny any substantive review of the privileged
documents, but their review must have been sufficiently thorough for one of
KBTF’s lawyers to classify documents as “Relevant, Irrelevant, Proprietary, and
Hot”. Moreover, some of the documents initially read and classified as
“Relevant” turned out (on a second reading) to be potentially subject to a
claim of privilege. As to the fourth factor, CBB and KBTF failed to
discharge the onus of identifying the contents of the solicitor‑client
communications which they accessed in the course of classifying the
material. It is therefore not possible to determine the degree to which
they are prejudicial. Again, Celanese’s solicitors created this problem
by their failure to proceed with prudence. As to the fifth factor, the
litigation is at an early stage, and notice of the removal application was made
near the outset. Lastly, while CBB advised the court of a number of measures
taken, it seems apparent that appropriate firewalls were not in place prior to
the occurrence of the mischief. In view of all the circumstances, the
searching party did not produce sufficient evidence to demonstrate that the
public represented by the reasonably informed person would be satisfied that no
use of confidential information would occur. [60‑66]
Cases Cited
Applied: MacDonald
Estate v. Martin, [1990] 3 S.C.R. 1235; distinguished: Tilley
v. Hails (1993), 12 O.R. (3d) 306; Aviaco International
Leasing Inc. v. Boeing Canada Inc. (2000), 9 B.L.R. (3d) 99;
Coulombe v. Beard (1993), 16 O.R. (3d) 627; Nova
Growth Corp. c. Kepinski,
[2001] O.J. No. 5993 (QL), leave to appeal refused,
[2002] O.J. No. 2522 (QL), leave to appeal refused,
[2003] 1 S.C.R. xiv; Michel v. Lafrentz (1992),
12 C.P.C. (3d) 119; referred to: Grenzservice
Speditions Ges.m.b.H. v. Jans (1995), 15 B.C.L.R. (3d) 370; Ridgewood
Electric Ltd. (1990) v. Robbie (2005),
74 O.R. (3d) 514; Netbored Inc. v. Avery Holdings Inc.
(2005), 48 C.P.R. (4th) 240, 2005 FC 1405; Neumeyer v.
Neumeyer (2005), 47 B.C.L.R. (4th) 162,
2005 BCSC 1259; Anton Piller KG v. Manufacturing Processes Ltd.,
[1976] 1 Ch. 55; Nintendo of America, Inc. v. Coinex Video
Games Inc., [1983] 2 F.C. 189; Indian Manufacturing Ltd.
v. Lo (1997), 75 C.P.R. (3d) 338; Netsmart Inc. v.
Poelzer, [2003] 1 W.W.R. 698, 2002 ABQB 800; Pulse
Microsystems Ltd. v. SafeSoft Systems Inc. (1996),
67 C.P.R. (3d) 202; Ontario Realty Corp. v.
P. Gabriele & Sons Ltd. (2000), 50 O.R. (3d) 539; Proctor
& Gamble Inc. v. John Doe (c.o.b. Clarion Trading International),
[2000] F.C.J. No. 61 (QL); Adobe Systems Inc. v. KLJ
Computer Solutions Inc., [1999] 3 F.C. 621; Lavallee,
Rackel & Heintz v. Canada (Attorney General),
[2002] 3 S.C.R. 209, 2002 SCC 61; Thermax Ltd. v.
Schott Industrial Glass Ltd., [1981] F.S.R. 289; Descôteaux v.
Mierzwinski, [1982] 1 S.C.R. 860; Havana House Cigar
& Tobacco Merchants Ltd. v. Jane Doe (2000), 199 F.T.R. 12,
aff’d (2002), 288 N.R. 198, 2002 FCA 75; Columbia
Picture Industries Inc. v. Robinson, [1987] Ch. 38; Universal
Thermosensors Ltd. v. Hibben, [1992] 1 W.L.R. 840; Sulphur
Experts Inc. v. O’Connell (2000), 279 A.R. 246,
2000 ABQB 875.
Statutes and Regulations Cited
Civil
Procedure Act 1997 (U.K.), 1997, c. 12,
s. 7.
Civil
Procedure Rules 1998, S.I. 1998/3132,
r. 25.1(1)(h).
Criminal Code, R.S.C. 1985, c. C‑46 .
Federal Court Rules (Cth.), Order 25B.
Federal Courts Rules, SOR/98‑106, r. 374(1).
Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 40.02.
Authors Cited
Australia.
Federal Court. Practice Note No. 24, May 5, 2006.
Great
Britain. Civil Procedure, vol. 1, 2nd Supp., Part 25, Practice
Direction — Interim Injunctions. London: Sweet & Maxwell, 2005.
Sharpe, Robert J. Injunctions
and Specific Performance, loose‑leaf ed. Aurora,
Ont.: Canada Law Book, 1998 (updated 2005, release 13).
APPEAL from a judgment of the Ontario Court of Appeal
(Abella, Moldaver and Goudge JJ.A.) (2004),
73 O.R. (3d) 64, 244 D.L.R. (4th) 33,
190 O.A.C. 329, 1 C.P.C. (6th) 254,
[2004] O.J. No. 3983 (QL), setting aside a decision of the
Divisional Court (MacFarland, Macdonald and Campbell JJ.) (2004),
69 O.R. (3d) 632, 237 D.L.R. (4th) 516,
183 O.A.C. 296, 46 C.P.C. (5th) 285,
[2004] O.J. No. 372 (QL), setting aside a decision of
Nordheimer J. (2003), 69 O.R. (3d) 618,
[2003] O.J. No. 4211 (QL). Appeal allowed.
Robert B. Bell,
Douglas M. Worndl and Benjamin T. Glustein,
for the appellants.
Gavin MacKenzie
and Michelle Vaillancourt, for the respondent Celanese Canada Inc.
Alan J. Lenczner,
for the respondent Celanese Ltd.
C. Clifford Lax,
Q.C., and M. Paul Michell, for the intervener Advocates’
Society.
Mahmud Jamal and Derek Leschinsky,
for the intervener Canadian Bar Association.
The judgment of the Court was delivered by
1
Binnie J. — An Anton
Piller order bears an uncomfortable resemblance to a private search
warrant. No notice is given to the party against whom it is issued. Indeed,
defendants usually first learn of them when they are served and executed,
without having had an opportunity to challenge them or the evidence on which
they were granted. The defendant may have no idea a claim is even pending.
The order is not placed in the hands of a public authority for execution, but
authorizes a private party to insist on entrance to the premises of its
opponent to conduct a surprise search, the purpose of which is to seize and
preserve evidence to further its claim in a private dispute. The only
justification for such an extraordinary remedy is that the plaintiff has a
strong prima facie case and can demonstrate that on the facts, absent
such an order, there is a real possibility relevant evidence will be destroyed
or otherwise made to disappear. The protection of the party against whom an Anton
Piller order is issued ought to be threefold: a carefully drawn order
which identifies the material to be seized and sets out safeguards to deal,
amongst other things, with privileged documents; a vigilant court-appointed
supervising solicitor who is independent of the parties; and a sense of
responsible self-restraint on the part of those executing the order. In this
case, unfortunately, none of these protections proved to be adequate to protect
against the disclosure of relevant solicitor-client confidences. Inadequate
protections had been written into the order. Those which had been provided
were not properly respected. The vigilance of the supervising solicitor
appears to have fallen short. Celanese’s solicitors in the aftermath of the
search seem to have lost sight of the fact that the limited purpose of the
order was to preserve evidence not to rush to exploit it. In the
result, the party searched (Canadian Bearings) now seeks the removal of
Celanese’s solicitors (Cassels Brock & Blackwell LLP (“Cassels Brock”)) and
to bar Celanese from making further use of their U.S. counsel (Kasowitz,
Benson, Torres & Friedman LLP (“Kasowitz”)).
2
This appeal thus presents a clash between two competing values —
solicitor-client privilege and the right to select counsel of one’s choice.
The conflict must be resolved, it seems to me, on the basis that no one has the
right to be represented by counsel who has had access to relevant
solicitor-client confidences in circumstances where such access ought to have
been anticipated and, without great difficulty, avoided and where such counsel
has failed to rebut the presumption of a resulting risk of prejudice to the
party against whom the Anton Piller order was made.
3
This Court’s decision in MacDonald Estate v. Martin, [1990] 3
S.C.R. 1235, makes it clear that prejudice will be presumed to flow from an
opponent’s access to relevant solicitor-client confidences. The major
difference between the minority and majority in that case is that while the
majority considered the presumption of risk of prejudice open to rebuttal in
some circumstances (pp. 1260-61), the minority would not have permitted even
the opportunity of rebuttal (p. 1266). In the MacDonald Estate
situation, the difficulty of dealing with the moving solicitor was compounded
by the fact the precise extent of solicitor-client confidences she acquired
over a period of years, was unknown, possibly unknowable, and in any event not
something that in fairness to her former client should be revealed. Thus
Sopinka J. wrote 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. This will be a difficult
burden to discharge” (p. 1260).
4
The Anton Piller situation is somewhat different because the
searching solicitors ought to have a record of exactly what was seized and what
material, for which confidentiality is claimed, they subsequently looked at.
Here again, rebuttal should be permitted, but the rebuttal evidence should
require the party who obtained access to disclose to the court what has been
learned and the measures taken to avoid the presumed resulting prejudice.
While all solicitor confidences are not of the same order of importance, the
party who obtained the wrongful access is not entitled to have the court assume
in its favour that such disclosure carried no risk of prejudice to its
opponent, and therefore does not justify the removal of the solicitors. For
the reasons that follow, I conclude, contrary to the view taken by the Court of
Appeal, with respect, that Celanese and its lawyers did have the onus to
rebut the presumption of a risk of prejudice and they failed to do so.
Accordingly, the appeal is allowed, the order of the Ontario Court of Appeal is
set aside and the order of the Divisional Court is restored removing Cassels
Brock as solicitors for Celanese and precluding the latter from continuing to
seek the advice of Kasowitz, in connection with any Canadian litigation arising
out of the facts alleged in the amended statement of claim.
I. Facts
5
The underlying litigation in this case, which does not directly affect
the disposition of this appeal, involves alleged industrial espionage.
Celanese operated a plant for the production of vinyl acetate in Edmonton. It
decided for business reasons to demolish the facility rather than sell it.
Celanese eventually retained the defendant, Murray Demolition, to undertake the
demolition. Precautions were put in place to prevent the unauthorized
disclosure during demolition of valuable proprietary information evident in the
plant’s design and processes. Celanese discovered in April 2003 that certain
of the defendants, including Canadian Bearings, were engaged in what appeared
to be an attempt, under the cover of the demolition, to copy in various ways
proprietary processes and equipment. As a consequence, Canadian Bearings and
others who had been given access to the site by Murray Demolition, were ordered
off the property. Celanese is now suing Canadian Bearings, among others, for
allegedly stealing technology discovered during the demolition and making
unauthorized use of it in the construction of a vinyl acetate facility in Iran.
6
On June 19, 2003, the motions judge granted Celanese’s ex parte
application for an Anton Piller order against Canadian Bearings and
others. The issue of how to deal with privileged documents was not considered
in the draft order placed before the motions judge and his formal order did not
contain such a provision. Nevertheless, all parties recognize that an Anton
Piller order provides no authority whatsoever for access to a defendant’s
privileged documents.
7
The order was executed on June 20 and 21, 2003, in the presence of two
police officers by an independent accounting firm, BDO Hayes Smith (“BDO”), and
was overseen by an independent supervising solicitor, Bernard Eastman, Q.C. At
the outset, Mr. Eastman spoke at the search site with a senior executive of
Canadian Bearings. He gave the executive a copy of the order and related
documents, and explained its terms. Mr. Eastman advised the executive that,
pursuant to the terms of the order, he would have one hour to seek legal
advice. Shortly thereafter, the solicitors for Canadian Bearings, Borden
Ladner Gervais LLP (“BLG”), arrived at the scene. The search was conducted over
a period of 18 hours in circumstances that could be described as mildly
chaotic. Cassels Brock was not present at the search, but members of the firm
were in frequent telephone communication with Mr. Eastman.
8
In the course of the search, privilege was claimed for certain paper
documents which were then placed in a sealed folder in the custody of BDO until
the merits of the claim could be resolved. The issue of privilege arises at
this stage only in connection with the electronic documents seized.
9
When it became apparent that some of the electronic documents might be
subject to solicitor-client privilege, the BDO representative enlisted the help
of BLG lawyers to facilitate their identification. The process was rushed.
Given the volume of electronic materials and the pace at which the search
proceeded, BLG lawyers later complained that they were not given time to review
the material adequately. Frequently, entire folders would be copied
electronically without examination of individual documents. However, material
that could be identified as potentially privileged was segregated into an
electronic folder which was labelled “Borden Ladner Gervais”.
10
In the course of the search, approximately 1,400 electronic documents
thought to be relevant, but not as yet effectively screened for potential
solicitor-client privilege claims, were downloaded by BDO onto a portable hard
drive and “burned” onto CD-ROMs. These were placed in a plastic envelope and
sealed. The seal was initialled by a BLG lawyer and by Mr. Eastman. The
envelope was given to BDO. Contrary to the express provision in the Anton
Piller order, no complete list of the seized records was made prior to
their removal from the searched premises.
11
On June 23, 2003, lawyers from Cassels Brock and Kasowitz went to BDO to
retrieve the seized documents. The Cassels Brock lawyer called the supervising
solicitor, Mr. Eastman, to enquire about the sealed envelope containing the
hard drive and CD-ROMs. Apparently satisfied there was no agreement that
Cassels Brock would have to deal directly with BLG on the issue, he opened the
envelope and directed BDO to copy the contents. After some delay, a CD
containing copies of various e-mails was copied onto Cassels Brock’s computer.
A copy of the CD was not sent to BLG. Subsequently, a Cassels Brock lawyer
e-mailed colleagues: “On June 24, 2003 representatives of Celanese, counsel
from Kasowitz . . . and I attended at the offices of BDO . . . and reviewed all
of the electronic documents seized from all of the defendants.”
12
The CD turned out to contain privileged communications. The Cassels
Brock lawyer admitted to having reviewed “a few dozen e-mail[s] in full”, but
said he did not recall reviewing “any e-mail that originated from or were sent
to BLG”.
13
A copy of the CD was also provided to Kasowitz and was reviewed by Todd
Colvard, a Kasowitz lawyer based in Houston. He was directed to classify the
electronic documents as “Relevant, Irrelevant, Proprietary, and Hot”. Colvard
noticed that some of the e-mails were addressed to or from BLG, and so saved
these in a separate fifth electronic folder which he marked “Privileged”. He
later found additional privileged documents in the folder marked “Relevant”,
thus evidencing a measure of misclassification. Other than for purposes of
segregation, Colvard says he did not review “the substance of those messages”.
14
When BLG discovered, on June 24, 2003, that the sealed envelope had been
opened, some heated correspondence ensued. Cassels Brock declined to provide
BLG with copies of the seized Canadian Bearings electronic documents until late
Friday, June 27, 2003, after the motions judge so ordered.
15
On July 11 or 12, 2003, BLG became aware that privileged documents had
been transferred to Cassels Brock and Kasowitz. BLG dispatched a letter dated
July 14, 2003, enclosing a list of some 82 “privileged documents which were
among those documents removed from my clients’ computer system and deleted
from my clients’ computer system by those individuals executing the order
of [Nordheimer J.] dated June 19, 2003” (emphasis added) and requesting the
immediate return of the privileged documents “whether in print form or
electronic” and identification of all individuals who may have reviewed them.
16
Eventually, Cassels Brock and Kasowitz, rather than returning the
privileged electronic material as requested, advised BLG that the documents had
been deleted from their respective systems. The Court of Appeal noted that “it
is common ground that 13 lawyers, 3 clerks and 2 law students from Cassels
[Brock] and 12 lawyers from Kasowitz would have been able to access the
privileged electronic documents in the two to three week period that they
remained in the possession of the law firms following the search”.
17
Canadian Bearings brought a motion to disqualify Cassels Brock and
Kasowitz from continuing to act for Celanese, which was dismissed by the
motions judge. Canadian Bearings appealed to the Divisional Court, which
allowed the appeal and ordered that Cassels Brock and Kasowitz be removed.
Celanese, Cassels Brock and Kasowitz appealed to the Ontario Court of Appeal,
which allowed the appeal, finding that neither of the courts below had applied
the correct test for removal and remitted the matter back to the motions judge
to be reconsidered on the basis of the appeal court’s reasons. The appeal thus
comes to this Court to determine the proper test and, in particular, which of
the parties bears the onus to show (or rebut) the prejudice arising from
disclosure of solicitor and client privileged documents.
II. Judicial History
A. Superior Court of
Justice (2003), 69 O.R. (3d) 618
18
The motions judge concluded that Cassels Brock had acted inappropriately
in failing to obtain the consent of Canadian Bearings’ counsel before opening
the sealed envelope. He was also critical of the supervising solicitor for
failing to fulfill his “important responsibility regarding this extraordinary
remedy”, a responsibility which continues beyond the actual removal of
documents from the defendant’s premises. Finally, he found that there had been
no pressing need to examine the documents in advance of sorting out the
privilege claims, since the order’s purpose of preserving the evidence had been
fulfilled.
19
Nordheimer J. held that while the documents were “forced” out of
Canadian Bearings’ hands through the execution of the Anton Piller
order, Cassels Brock’s possession of privileged documents nevertheless was
“unintended and inadvertent”. The failure of the formal order to contain a
provision regarding how claims of privilege were to be dealt with was a
“defect”.
20
As to the remedy of disqualification, Nordheimer J. held that an
affidavit from one of Canadian Bearings’ solicitors “deposing to the nature and
significance of the privileged material and its potential for prejudice” was
necessary. He rejected the submission that disclosure of privileged material
was itself sufficient to remove Cassels Brock and Kasowitz as counsel for
Celanese. Although acknowledging the “dilemma” faced by the moving party being
obliged to reveal the very information sought to be protected in order to
fulfill the affidavit requirement, the motions judge countered that
[n]evertheless, given the impact of the remedy sought, and the fact
that the motion is based on the contention that such information has already
found its way into the possession, and by implication the knowledge, of the
responding parties, it does not strike me as [an] unfair burden to place on the
moving parties. [para. 29]
21
Given his finding that the “serious mishandling” of the sealed envelope
was not “done deliberately to get at privileged documents” and “absent evidence
. . . [of] . . . a pressing and substantial prejudice”, Nordheimer J.
concluded that removal of Cassels Brock and Kasowitz was not warranted.
B. Divisional Court (MacFarland J. (now J.A.),
Macdonald and Campbell JJ.) (2004), 69 O.R. (3d) 632
22
The Divisional Court held that it was unnecessary for Canadian Bearings
to present evidence regarding the nature of the privileged material disclosed.
Here, “it is clear on the record that relevant privileged solicitor and client
documents were accessed, copied and reviewed” by lawyers at Cassels Brock and
Kasowitz. Counsel who obtain Anton Piller orders for their clients “are
obliged in all circumstances relating to such an order to conduct themselves in
a manner that is beyond reproach” and “[w]hen they do not, the court must act
swiftly and decisively where the terms and spirit of its order have not been
complied with”. The Divisional Court concluded that “where it is clear that
documents are relevant and privileged and they have been reviewed by counsel
and others, opposite prejudice should be assumed”. Citing MacDonald Estate,
the Divisional Court held that it would be inappropriate to require the moving
party to demonstrate prejudice, since this would defeat entirely the purpose of
the privilege.
23
Noting that the lawsuit was in its early stages, and in light of Cassels
Brock’s concession that in terms of the potential for prejudice to Celanese,
“other counsel could do the work”, the Divisional Court concluded that, in the
circumstances, the right to choose counsel had to yield, and the “only
appropriate remedy” was the removal of Cassels Brock and Kasowitz. Otherwise,
the “reasonable perception of the integrity of the administration of justice
would be adversely affected”.
C. Court of Appeal (Abella, Moldaver and
Goudge JJ.A.) (2004), 73 O.R. (3d) 64
24
The Court of Appeal described the key difference between the decisions
of the motions judge and the Divisional Court as a disagreement about which
party bears the onus of establishing relevance and prejudice. In its opinion,
the correct test is whether “upon consideration of the whole of the evidence,
the moving party satisfies the court that there is a real risk that opposing
counsel will use information obtained from privileged documents to the
prejudice of the moving party and the prejudice cannot realistically be
overcome by a remedy short of disqualification”.
25
Given the motions judge’s finding that the material at issue came into
the possession of Cassels Brock and Kasowitz through “inadvertence”, Moldaver
J.A. stated that the risk of prejudice must be “real”, i.e. there must be a
“realistic possibility” that the information will be used to the moving party’s
prejudice or “detriment”. The onus is on the moving party to establish: (i)
that opposing counsel received confidential information protected by
solicitor-client privilege; (ii) that the information is relevant to the matter
at hand; and (iii) that it is potentially prejudicial. Once these requirements
have been established, the onus shifts to the opposing side to rebut.
26
Moldaver J.A. found that the motions judge had erred in finding that the
moving party had failed to show that the information was relevant and
potentially prejudicial, since it would have had to meet a relevance test to
fall within the scope of the Anton Piller order. He also disagreed with
the motions judge’s view that the conduct of Cassels Brock and the supervising
solicitor “evidence[d] a lack of concern” to protect the confidentiality
interests of Canadian Bearings. In Moldaver J.A.’s view, on the contrary, “the
evidence shows that [Cassels Brock and Kasowitz] were mindful of [Canadian
Bearings’] confidentiality rights and concerned throughout that they be
respected”. Moldaver J.A. held that the motions judge had failed to make the
necessary findings with respect to whether the privileged documents had been
reviewed and if so, to what extent.
27
Moldaver J.A. also disagreed with the approach adopted by the Divisional
Court. First, he noted that the court appeared unwilling to accept Nordheimer
J.’s finding that the documents came into Celanese’s counsel’s possession
through inadvertence, and that this led it to introduce a “punitive element”
into the test. Second, he disagreed with the Divisional Court’s statement that
the extent of any review of the documents was irrelevant. Third, unlike the
Divisional Court, it considered the risk of prejudice would be greatly
alleviated if appropriate steps were taken to ensure that Colvard did not taint
others. In the result the appeal was allowed and the matter remitted to the
motions judge to make the additional factual determinations and to apply the
test laid down by the Court of Appeal.
III. Analysis
28
Anton Piller orders have been available in Canada for close to 30
years. Unlike a search warrant they do not authorize forcible entry, but expose
the target to contempt proceedings unless permission to enter is given. To the
ordinary citizen faced on his or her doorstep with an Anton Piller order
this may be seen as a distinction without a meaningful difference.
29
Originally developed as an “exceptional remedy” in the context of trade
secrets and intellectual property disputes, such orders are now fairly
routinely issued in ordinary civil disputes, Grenzservice Speditions
Ges.m.b.H. v. Jans (1995), 15 B.C.L.R. (3d) 370 (S.C.), in employment law, Ridgewood
Electric Ltd. (1990) v. Robbie (2005), 74 O.R. (3d) 514 (S.C.J.),
and Netbored Inc. v. Avery Holdings Inc. (2005), 48 C.P.R. (4th) 240,
2005 FC 1405, and even in matrimonial litigation, Neumeyer v. Neumeyer
(2005), 47 B.C.L.R. (4th) 162, 2005 BCSC 1259. In one egregious case, a
designated search team attempted to execute an Anton Piller order on the
10-year-old son of the defendant at a time when his parents were not at home: Ridgewood
Electric.
30
With easier access to such orders, there has emerged a tendency on the
part of some counsel to take too lightly the very serious responsibilities
imposed by such a draconian order. It should truly be exceptional for a court
to authorize the massive intrusion, without advance notice, of a privately
orchestrated search on the privacy of a business competitor or other target
party. As it was put by Lord Denning, M.R., in the original Anton Piller
case:
We are prepared, therefore, to sanction its continuance [i.e. of
the order], but only in an extreme case where there is grave danger of
property being smuggled away or of vital evidence being destroyed. [Emphasis
added.]
(Anton Piller KG v. Manufacturing Processes Ltd., [1976] 1 Ch.
55 (C.A.), at p. 61)
Anton
Piller orders, obtained ex parte, now regularly permit searches and
seizures not only from places of business but from residential premises. While
most Anton Piller orders are executed properly, they are capable of
giving rise to serious abuse, as in Ridgewood Electric, mentioned earlier,
where Corbett J. of the Ontario Superior Court of Justice protested the
unacceptable conduct of those executing the order:
Nigel Robbie arrived home on April 14, 2004, to
find a neighbour barricading his front door. His ten-year-old son had been
taken to another neighbour’s house, distraught. The neighbourhood was in an
uproar. A cadre in suits stood at the front of his house brandishing a thick
wad of papers, demanding to be let in.
.
. .
While everyone is taken to know the law, the Robbies
and their neighbours might be excused for not knowing about Anton Piller
orders. And so the Robbies and their neighbours were left to wonder what kind
of country we live in, where one’s former employer, acting secretly, may obtain
a court order and then enter and search one’s private residence. [paras. 1
and 4]
As Sharpe
J.A., writing in a scholarly mode, has pointed out, “excessive zeal in this
area is apt to attract criticism which will impair the ability of the courts to
use injunctions in innovative ways in other areas” (R. J. Sharpe, Injunctions
and Specific Performance (loose-leaf ed.), at para. 2:1300).
31
The search in the present case was conducted by reputable and
responsible people, under the supervision of a senior member of the Ontario
bar. The disclosure of solicitor-client confidences came about not by
egregious misconduct, but through a combination of carelessness,
overzealousness, a lack of appreciation of the potential dangers of an Anton
Piller order and a failure to focus on its limited purpose, namely the preservation
of relevant evidence.
32
Experience has shown that despite their draconian nature, there is a
proper role for Anton Piller orders to ensure that unscrupulous
defendants are not able to circumvent the court’s processes by, on being
forewarned, making relevant evidence disappear. Their usefulness is especially
important in the modern era of heavy dependence on computer technology, where
documents are easily deleted, moved or destroyed. The utility of this
equitable tool in the correct circumstances should not be diminished. However,
such orders should only be granted in the clear recognition of their
exceptional and highly intrusive character and, where granted, the terms should
be carefully spelled out and limited to what the circumstances show to be
necessary. Those responsible for their implementation should conform to a very
high standard of professional diligence. Otherwise, the moving party, not its
target, may have to shoulder the consequences of a botched search.
33
Much of the argument before us about privileged documents turned on a
supposed “spectrum” of situations. At one end of the spectrum, it was said,
lie the “inadvertent disclosure” cases, where one party’s counsel receives a
privileged document due to an error of opposing counsel, for example a letter
is faxed or e-mailed to the wrong party. In such cases, the remedy is often
limited to an order requiring the document, which is clearly identified, to be
deleted or returned and a direction that no use is to be made of it. At the
other end of the spectrum is said to be the “moving solicitor” or “merging
firm” cases, where counsel who has acted for a client ends up at a law firm
that is acting for an opposing party — as in MacDonald Estate itself.
In the latter cases, the precise confidences seen or heard by the moving
solicitor may not be readily determined. Unless adequate measures have been
taken (usually in advance) to avoid “tainting” the new firm, the remedy is
frequently disqualification. I agree with the intervener Advocates’ Society
that the emphasis on “inadvertence” is overly simplistic. As the Society submits:
The notion of “inadvertence” is also analytically
unhelpful because it conflates two questions that should be distinct: (a) how
did the documents come into the possession of [Celanese] or its counsel; and
(b) what did [Celanese] and its counsel do upon recognition that the documents
were potentially subject to solicitor-client privilege.
34
Whether through advertence or inadvertence the problem is that
solicitor-client information has wound up in the wrong hands. Even granting
that solicitor-client privilege is an umbrella that covers confidences of
differing centrality and importance, such possession by the opposing party
affects the integrity of the administration of justice. Parties should be free
to litigate their disputes without fear that their opponent has obtained an
unfair insight into secrets disclosed in confidence to their legal advisors.
The defendant’s witnesses ought not to have to worry in the course of being
cross-examined that the cross-examiner’s questions are prompted by information
that had earlier been passed in confidence to the defendant’s solicitors. Such
a possibility destroys the level playing field and creates a serious risk to
the integrity of the administration of justice. To prevent such a danger from arising,
the courts must act “swiftly and decisively” as the Divisional Court
emphasized. Remedial action in cases such as this is intended to be curative
not punitive.
A. Requirements for an Anton Piller Order
35
There are four essential conditions for the making of an Anton Piller
order. First, the plaintiff must demonstrate a strong prima facie
case. Second, the damage to the plaintiff of the defendant’s alleged
misconduct, potential or actual, must be very serious. Third, there must be
convincing evidence that the defendant has in its possession incriminating
documents or things, and fourthly it must be shown that there is a real
possibility that the defendant may destroy such material before the discovery process
can do its work: Nintendo of America, Inc. v. Coinex Video Games Inc.,
[1983] 2 F.C. 189 (C.A.), at pp. 197-99; Indian Manufacturing Ltd. v. Lo
(1997), 75 C.P.R. (3d) 338 (F.C.A.), at pp. 341-42; Netsmart Inc. v. Poelzer,
[2003] 1 W.W.R. 698, 2002 ABQB 800, at para. 16; Anton Piller KG, at pp.
58-61; Ridgewood Electric, at para. 27; Grenzservice, at para.
39; Pulse Microsystems Ltd. v. SafeSoft Systems Inc. (1996), 67 C.P.R.
(3d) 202 (Man. C.A.), at p. 208; Ontario Realty Corp. v. P. Gabriele &
Sons Ltd. (2000), 50 O.R. (3d) 539 (S.C.J.), at para. 9; Proctor &
Gamble Inc. v. John Doe (c.o.b. Clarion Trading International), [2000]
F.C.J. No. 61 (QL) (T.D.), at para. 45; Netbored, at para. 39; Adobe
Systems Inc. v. KLJ Computer Solutions Inc., [1999] 3 F.C. 621 (T.D.), at
para. 35.
36
Both the strength and the weakness of an Anton Piller order is
that it is made ex parte and interlocutory: there is thus no
cross-examination on the supporting affidavits. The motions judge necessarily
reposes faith in the candour and complete disclosure of the affiants, and as
much or more so on the professional responsibility of the lawyers participating
in carrying out its terms. We are advised that such orders are not available
in the United States (Transcript, at p. 70).
37
A troubling example in Canada is the Adobe Systems case, where a
computer software company was tipped off that a small advertising firm in
Halifax was using unlicensed versions of some of its software. The affiant
swore that, in his opinion, the firm was likely to destroy its unlicensed
copies of the software if it became aware of the pending litigation against
it. The target firm was well established and its principals had an excellent
reputation in the community. On subsequent cross-examination it was revealed
that the source of the informant’s opinion that the defendant was likely to
destroy unlicensed copies was his “observation of human nature” and not any
observation of that particular defendant. Upon a review of the order, Richard A.C.J.
(now C.J. of the Federal Court of Appeal) found that the plaintiffs had not
made sufficient inquiries of the facts before obtaining the order. Citing Adobe
Systems, the Federal Court recently reiterated that “[i]n all proceedings
taken ex parte, and particularly in Anton Piller situations,
there is a heavy obligation upon the moving party to make full and frank
disclosure of all relevant facts to the Court” (Netbored, at para. 41).
38
At this stage, the challenge to the decision of Nordheimer J. to grant
the Anton Piller order is not before the Court.
B. Terms of the Anton Piller Order
39
In Grenzservice, a case which dealt with an application to remove
counsel who had seen privileged documents in the course of an Anton Piller
execution, Huddart J. (later J.A.) observed: “This case suggests that
safeguards cannot remain implicit in the supervision order. They must be
specified” (para. 84). I agree. In Lavallee, Rackel & Heintz v. Canada
(Attorney General), [2002] 3 S.C.R. 209, 2002 SCC 61, Arbour J. for the
majority set out at para. 49 a number of relevant concerns in the criminal law
context, which may have some application by analogy. Notwithstanding the
general recognition of the need for standard terms, many safeguards which one
would expect to have become customary (such as a provision dealing with claims
of privilege) are frequently omitted. Corbett J. commented in Ridgewood
Electric that the Anton Piller order “has been with us for nearly 30
years, [yet] its ‘standard terms’ still vary considerably across the province”
(para. 3). In the United Kingdom, a set of standardized rules and a model
order have been developed. In Australia, Order 25B of the Federal Court
Rules and Practice Note No. 24 (May 5, 2006) set out a number of standard
safeguards for Anton Piller orders. See also Thermax Ltd. v. Schott
Industrial Glass Ltd., [1981] F.S.R. 289 (Ch. D.).
40
Anton Piller orders are often conceived of, obtained and
implemented in circumstances of urgency. They are generally time-limited
(e.g., 10 days in Ontario under Rule 40.02 (Rules of Civil Procedure,
R.R.O. 1990, Reg. 194) and 14 days in the Federal Court, under Rule 374(1) (Federal
Courts Rules, SOR/98-106)). Despite the urgency, the more detailed and
standardized the terms of the order the less opportunity there will be for
misunderstandings or mischief. As noted by Lamer J. in Descôteaux v.
Mierzwinski, [1982] 1 S.C.R. 860, at p. 889:
Searches are an exception to the oldest and most fundamental principles
of the common law, and as such the power to search should be strictly
controlled.
Unless and
until model orders are developed by legislation or recommended by law societies
pursuant to their responsibility for professional conduct, the following
guidelines for preparation and execution of an Anton Piller order may be
helpful, depending on the circumstances:
(1) Basic Protection for the
Rights of the Parties
(i) The order should appoint a
supervising solicitor who is independent of the plaintiff or its solicitors and
is to be present at the search to ensure its integrity. The key role of the
independent supervising solicitor was noted by the motions judge in this case
“to ensure that the execution of the Anton Piller order, and everything that
flowed from it, was undertaken as carefully as possible and with due
consideration for the rights and interests of all involved” (para. 20). He or
she is “an officer of the court charged with a very important responsibility
regarding this extraordinary remedy” (para. 20). See also Grenzservice,
at para. 85.
(ii) Absent unusual circumstances the
plaintiff should be required to provide an undertaking and/or security to pay
damages in the event that the order turns out to be unwarranted or wrongfully
executed. See Ontario Realty, at para. 40; Adobe Systems, at
para. 43; Nintendo of America, at pp. 201-2; Grenzservice, at
para. 85; Havana House Cigar & Tobacco Merchants Ltd. v. Jane Doe
(2000), 199 F.T.R. 12, aff’d (2002), 288 N.R. 198, 2002 FCA 75.
(iii) The scope of the order should
be no wider than necessary and no material shall be removed from the site
unless clearly covered by the terms of the order. See Columbia Picture
Industries Inc. v. Robinson, [1987] Ch. 38.
(iv) A term setting out the procedure
for dealing with solicitor-client privilege or other confidential material should
be included with a view to enabling defendants to advance claims of
confidentiality over documents before they come into the possession of the
plaintiff or its counsel, or to deal with disputes that arise. See Grenzservice,
at para. 85; Ontario Realty, at para. 40. Procedures developed for
use in connection with search warrants under the Criminal Code, R.S.C.
1985, c. C-46 , may provide helpful guidance. The U.K. practice direction on
this point provides as follows:
Before permitting entry to the premises by any person other than the
Supervising Solicitor, the Respondent may, for a short time (not to exceed two
hours, unless the Supervising Solicitor agrees to a longer period) —
(a) gather together any documents he [or she] believes may be . . .
privileged; and (b) hand them to the Supervising Solicitor for [an
assessment of] whether they are . . . privileged as claimed.
If the Supervising Solicitor decides that . . . any of the documents
[may be] privileged or [is in any doubt as to their status, he or she] will
exclude them from the search . . . and retain [them] . . . pending further
order of the court [(if in doubt as to whether they are privileged), or return
them to the Respondent and retain a list of the documents (if the documents are
privileged)].
[A] Respondent [wishing] to take legal advice and gather documents as
permitted . . . must first inform the Supervising Solicitor and keep him [or
her] informed of the steps being taken.
(Civil Procedure, vol. 1 (2nd Supp. 2005), Part 25, Practice
Direction — Interim Injunctions, p. 43, at paras. 11-12)
Experience has shown that in general this is a workable procedure.
Counsel supporting the appellants suggested the basic “two-hour” collection period
permitted in the U.K. is too short. This is a matter to be determined by the
judge making the order, but it must be kept in mind that unnecessary delay may
open the door to mischief. In general, the search should proceed as
expeditiously as circumstances permit.
(v) The order should contain a
limited use clause (i.e., items seized may only be used for the purposes of the
pending litigation). See Ontario Realty, at para. 40; Adobe Systems,
at para. 43; Grenzservice, at para. 85.
(vi) The order should state explicitly
that the defendant is entitled to return to court on short notice to (a)
discharge the order; or (b) vary the amount of security. See Adobe Systems,
at para. 43; Grenzservice, at para. 85; Nintendo of America, at
pp. 201-2.
(vii) The order should provide that
the materials seized be returned to the defendants or their counsel as soon as
practicable.
(2) The Conduct of the Search
(i) In general the order should
provide that the search should be commenced during normal business hours when
counsel for the party about to be searched is more likely to be available for
consultation. See Grenzservice, at para. 85; Universal Thermosensors
Ltd. v. Hibben, [1992] 1 W.L.R. 840 (Ch. D.).
(ii) The premises should not be
searched or items removed except in the presence of the defendant or a person
who appears to be a responsible employee of the defendant.
(iii) The persons who may conduct the
search and seize evidence should be specified in the order or should specifically
be limited in number. See Adobe Systems, at para. 43; Grenzservice,
at para. 85; Nintendo of America, at pp. 201-2.
(iv) On attending at the site of the
authorized search, plaintiff’s counsel (or the supervising solicitor), acting
as officers of the court should serve a copy of the statement of claim and the
order and supporting affidavits and explain to the defendant or responsible
corporate officer or employee in plain language the nature and effect of the
order. See Ontario Realty, at para. 40.
(v) The defendant or its
representatives should be given a reasonable time to consult with counsel prior
to permitting entry to the premises. See Ontario Realty, at para. 40; Adobe
Systems, at para. 43; Grenzservice, at para. 85; Sulpher Experts
Inc. v. O’Connell (2000), 279 A.R. 246, 2000 ABQB 875.
(vi) A detailed list of all evidence
seized should be made and the supervising solicitor should provide this list to
the defendant for inspection and verification at the end of the search and
before materials are removed from the site. See Adobe Systems, at para.
43; Grenzservice, at para. 85; Ridgewood Electric, at para. 25.
(vii) Where this is not practicable,
documents seized should be placed in the custody of the independent supervising
solicitor, and defendant’s counsel should be given a reasonable opportunity to
review them to advance solicitor-client privilege claims prior to release of
the documents to the plaintiff.
(viii) Where ownership of material is
disputed, it should be provided for safekeeping to the supervising solicitor or
to the defendant’s solicitors.
(3) Procedure Following the Search
(i) The order should make it clear
that the responsibilities of the supervising solicitor continue beyond the
search itself to deal with matters arising out of the search, subject of course
to any party wishing to take a matter back to the court for resolution.
(ii) The supervising solicitor should
be required to file a report with the court within a set time limit describing
the execution, who was present and what was seized. See Grenzservice,
at para. 85.
(iii) The court may wish to require
the plaintiff to file and serve a motion for review of the execution of the
search returnable within a set time limit such as 14 days to ensure that the
court automatically reviews the supervising solicitor’s report and the
implementation of its order even if the defendant does not request such a
review. See Grenszervice, at para. 85.
See also: Civil
Procedure Act 1997 (U.K.), 1997, c. 12, s. 7; Civil Procedure Rules
1998, S.I. 1998/3132, r. 25.1(1)(h), and Part 25, Practice Direction —
Interim Injunctions; Sharpe, at paras. 2:1100 et seq.
41
It is evident that the draft order placed before the motions judge in
this case was deficient in many respects. At issue here is the absence of any
provision to deal with solicitor-client confidences. The absence of specific
terms in the Anton Piller order does not relieve the searching
solicitors from the consequences of gaining inappropriate access. Such
consequences may include removal. A precisely drawn and clearly thought out
order therefore will not only protect the defendant’s right to solicitor-client
privilege, but also protect the plaintiff’s right to continue to be represented
by counsel of choice by helping to ensure that such counsel do not stumble into
possession of privileged information.
C. The Governing Authority for Removal of
Counsel for Possession of Confidential Information Is MacDonald Estate
42
In MacDonald Estate, the Court held, in the context of a moving
solicitor, that once the opposing firm of solicitors is shown to have received
“confidential information attributable to a solicitor and client relationship
relevant to the matter at hand” (p. 1260), the court will infer “that lawyers
who work together share confidences” (p. 1262) and that this will result in a risk
that such confidences will be used to the prejudice of the client, unless the
receiving solicitors can show “that the public represented by the reasonably
informed person would be satisfied that no use of confidential information
would occur” (p. 1260). Only where there is “clear and convincing evidence”
(p. 1262) to the contrary will the presumption be rebutted. Thus “[a] fortiori
undertakings and conclusory statements in affidavits without more”
(p. 1263) will not suffice to rebut the presumption of dissemination. For
the purposes of the present case, it is important to note that Sopinka J.
imposed no onus on the moving party to adduce any further evidence as to the
nature of the confidential information beyond that which was needed to
establish that the receiving lawyer had obtained confidential information
attributable to a solicitor and client relationship which was relevant to the
matter at hand.
43
There is no doubt Canadian Bearings has discharged this onus. The
motions judge noted “the admission by [Celanese] that some privileged material
found its way into the possession of both the Cassels Brock and Kasowitz firms”
(para. 3). The material must be taken to be relevant to the pending claim,
otherwise it would not have been within the scope of the seizure laid down in
the Anton Piller order.
44
We do not know, and the courts below were not told, the nature of the
privileged information. On this point, the motions judge stated:
The privileged information that found its way into the hands of the two
firms here might be mundane, or may even be irrelevant to the underlying
issues. Conversely, of course, it might also be crucial to the defence of
the claim. I have no way of knowing. [Emphasis added; para. 28.]
45
The courts below seemingly agreed that if the privileged confidences
were “crucial to the defence of the claim” removal of the searching solicitors
would be called for. They also agreed (as I do) that on this record, as the
motions judge said, we “have no way of knowing”. The appeal, therefore, turns
on whether Celanese had the onus of rebutting a presumption of prejudice (as MacDonald
Estate held) or the onus should be shifted to Canadian Bearings to
establish “a real risk of prejudice” (as required in this case by the Court of
Appeal).
46
Kasowitz submits that “[t]he facts of this case do not raise the
concerns whatsoever addressed by the Court in MacDonald Estate [because]
Kasowitz had no relationship whatsoever with the Appellants.” I do not agree.
The relevant elements of the MacDonald Estate analysis do not depend on
a pre-existing solicitor-client relationship. The gravamen of the problem here
is the possession by opposing solicitors of relevant and confidential
information attributable to a solicitor-client relationship to which they have
no claim of right whatsoever.
D. The Court of Appeal Erred in Placing the
Onus of Proof on Canadian Bearings
47
Moldaver J.A. and his colleagues took the view that MacDonald Estate
must be read in the context of a moving solicitor who clearly had substantial
exposure to important solicitor-client confidences, whereas the present
context, in their view, can raise no such inference. The privileged documents,
while relevant, could be of such negligible significance that there is
no real risk such privileged material could be used to the detriment of
Canadian Bearings.
48
I accept, as mentioned earlier, that a distinction may be drawn between
the moving solicitor situations and the inadvertent disclosure situation on the
basis that in the latter cases, but not the former, the content and extent of
the confidential information at issue is (or ought to be) identifiable. I do
not agree that this distinction switches the onus to the defendant to prove the
risk of significant prejudice, rather than leave the onus with Celanese to
rebut a presumption of prejudice.
49
Firstly, in an Anton Piller situation, as in MacDonald Estate,
to “require the very confidential information for which protection is sought to
be revealed . . . would have the effect of defeating the whole
purpose of the application” (p. 1260). Placing the onus on Celanese accords
with the usual practice that the party best equipped to discharge a burden is
generally required to do so. Celanese’s lawyers know what they looked at.
Canadian Bearings’ lawyers do not. The latter should not have to reveal the
universe of potential confidences to the former who, at this point, refuse (or
have rendered themselves unable) to identify precisely what they have seen.
50
Secondly, putting the onus on the party in receipt of the confidential
information rather than on the party being searched, increases the incentive
on its part to take care to ensure that privileged information is not reviewed
in the first place.
51
Thirdly, it seems to me procedurally unfair not only to subject the
defendant to the intrusion of a surprise search under an exceptional order in
the course of which its solicitor-client confidences are disclosed to its
opponent, but then to throw on it the onus of clearing up the problem created
by the plaintiff’s carelessness. The principal source of the present
difficulty lies in the post-search conduct of Celanese’s solicitors. Having
created the problem, the searching party should bear the burden of resolving
it.
52
Celanese and its solicitors argue that they are ill-equipped to rebut
any such presumption of prejudice. If that is so they have only themselves to
blame. Under a properly executed Anton Piller order, the searching
solicitors should be able to show with some precision what they have seized,
what they have seen, who has seen it and the steps taken to contain the
wrongful disclosure of confidences. If Celanese’s solicitors, who were in
frequent telephone contact with the supervising solicitor during the search,
had insisted on a proper listing at the site of all the materials seized, the
universe of potential confidences would as a starting point have been
established. The motions judge found this was not done. Nevertheless, the
parties sensibly isolated the hard drive and CD-ROMs containing the now
disputed electronic documents in a sealed bag and gave it into the custody of
BDO. A complete listing could therefore have been made in the days following
the search with BLG counsel present (as BLG had been present at the search
site). This too was foreclosed by the precipitous and unilateral conduct of
Cassels Brock. It is apparent, as the motions judge found, that “[t]here can
be only one reason for seals to be applied to a container and signed by parties
opposite in interest and that is to ensure that the container will not be
opened except in the presence of both parties or, at a minimum, with the
consent of both parties” (para. 19). The motions judge also expressed his
view, which goes to the heart of the appeal, that
[t]here was also no pressing need to open the
envelopes such as would have justified the rather precipitous action which
[Cassels Brock] directed be taken. The fundamental purpose of an Anton Piller
order is to preserve evidence, not to use it. The material was in the
safekeeping of BDO and was going to be available to [Celanese] in the fullness
of time. There was therefore no reason to rush to deal with the documents as
opposed to taking a careful and considered approach to them. In other words,
there was plenty of time for inquiries to be made of Mr. Hendell, or others
within Borden Ladner, regarding the handling of this material. Had that
cautious approach been taken, it is likely that the issue which I must resolve
would never have arisen. [para. 21]
53
It is quite possible that if Cassels Brock and Kasowitz had been able to
show the court what privileged material they had seen, such material might on
the face of it have appeared to the court mundane or insignificant. A
privileged document, for example, could be a lawyer’s letter to his or her own
client simply enclosing a draft contract in terms virtually the same as a
contract subsequently executed and publicly available. Disclosure of the
lawyer’s communication, while privileged, would in that case not likely be
capable of creating prejudice. Where the significance of the privileged
documents accessed by the searching solicitors is more difficult to evaluate,
the motions judge might properly call on the defendant (in the absence of the
lawyers for the searching party if appropriate) to explain why such material
could lead to significant prejudice. That cannot be done, of course, unless
the searching solicitors can indicate with some precision what they have looked
at. Because of the way the search was conducted in this case, Celanese’s
solicitors could not do so and that stage was never reached.
54
In my view, the present proceeding should not be seen as punitive in any
way. I accept, as did the courts below, that neither Cassels Brock nor
Kasowitz set out to obtain access to, or to gain some advantage from privileged
material. Their problem stems from carelessness and an excessively adversarial
approach in circumstances that called for careful restraint in recognition of
the exceptional position of responsibility imposed by the unilateral and
intrusive nature of an Anton Piller order. The protection of
solicitor-client confidences is a matter of high importance. On the present
state of the record, Canadian Bearings can have no confidence that the privileged
material to which Cassels Brock and Kasowitz obtained access will not be used
to their prejudice.
55
In summary, I agree with the Divisional Court that lawyers who undertake
a search under the authority of an Anton Piller order and thereby take
possession of relevant confidential information attributable to a
solicitor-client relationship, bear the onus of showing there is no real risk
such confidences will be used to the prejudice of the defendant. Difficulties
of proof compounded by errors in the conduct of the search and its aftermath
should fall on the heads of those responsible for the search, not of the party
being searched. The onus was not met by the respondents in this case.
E. The Appropriate Remedy
56
I agree with the courts below that if a remedy short of removing the
searching solicitors will cure the problem, it should be considered. As the
intervener Canadian Bar Association (“CBA”) puts it in its factum, the task “is
to determine whether the integrity of the justice system, viewed objectively,
requires removal of counsel in order to address the violation of privilege, or
whether a less drastic remedy would be effective”. The right of the plaintiff
to continue to be represented by counsel of its choice is an important element
of our adversarial system of litigation. In modern commercial litigation,
mountains of paper are sometimes exchanged. Mistakes will be made. There is
no such thing, in these circumstances, as automatic disqualification.
57
Nordheimer J. cited a number of inadvertent disclosure cases which, in
his view, leaned against removal. The first, Tilley v. Hails (1993), 12
O.R. (3d) 306 (Gen. Div.), was not a motion to remove counsel, but rather an
application for an injunction enjoining the respondents from using an
inadvertently disclosed privileged document. Similarly, Aviaco
International Leasing Inc. v. Boeing Canada Inc. (2000), 9 B.L.R. (3d) 99
(Ont. S.C.J.), was a motion to expunge from the record various privileged
documents inadvertently faxed to the plaintiffs’ counsel, which the plaintiffs’
counsel attempted to use and of which copies were made and retained. The
documents were expunged from the record. Coulombe v. Beard (1993), 16
O.R. (3d) 627 (Gen. Div.), was also relied on by Nordheimer J. for the
“reluctance” of courts to impose the “drastic” remedy of removal where the
nature of the privileged material inadvertently disclosed is not significant.
In that case, Salhany J. had access to the letter disclosed and so was able to
make an assessment of its significance. In all of these cases, the court knew
with precision what the opposing lawyer had seen and what had been done about
it. What the Coulombe case shows is that even where a confidential
document is inflicted on a surprised opponent, the court will still take care
to review the document to assess the risk of prejudice (as well, no doubt, as
to assess whether the apparently inadvertent disclosure was a tactical
gambit). In these cases, counsel avoid disqualification by demonstrating both
that they were blameless in receiving the material, and that they did the
“right thing” upon recognition that the material was potentially privileged.
See also Nova Growth Corp. v. Kepinski, [2001] O.J. No. 5993 (QL)
(S.C.J.), at paras. 13 and 18, leave to appeal refused, [2002] O.J. No. 2522
(QL) (Div. Ct.), leave to appeal refused, [2003] 1 S.C.R. xiv.
58
Both Nordheimer J. and Moldaver J.A. distinguished the present case from
Grenzservice which removed from the record solicitors who had botched
execution of a Mareva injunction with elements of an Anton Piller
order. In that case, it was held that counsel had behaved “egregiously”.
While Huddart J. (now J.A.) did make that finding, she also relied upon the
principles laid down in MacDonald Estate as the governing authority. I
would certainly not describe the conduct of the solicitors here as “egregious”,
but as MacDonald Estate itself shows, a violation of privilege that is
not the result of “egregious” misconduct may nonetheless give rise to
disqualification.
59
In helpful submissions, the interveners Advocates’ Society and the CBA
suggest a number of factors to be considered in determining whether solicitors
should be removed: (i) how the documents came into the possession of the
plaintiff or its counsel; (ii) what the plaintiff and its counsel did upon
recognition that the documents were potentially subject to solicitor-client
privilege; (iii) the extent of review made of the privileged material; (iv) the
contents of the solicitor-client communications and the degree to which they
are prejudicial; (v) the stage of the litigation; (vi) the potential
effectiveness of a firewall or other precautionary steps to avoid mischief.
Other factors may, of course, present themselves in different cases, but I
agree that the foregoing list of factors is appropriate and seems to me
sufficient to dispose of the present appeal.
60
As to the first factor, the privileged documents came into the hands of
Cassels Brock and Kasowitz under the exceptional Anton Piller order in a
way that was unintended but avoidable. Inadequate precautions were taken.
Those who fail to take precautions must bear the responsibility. As mentioned
earlier, Mr. Colvard testified that quite apart from the as yet
unclassified electronic documents he segregated into a “Privileged” file, he
found other potentially privileged documents in reviewing material earlier
classified as “Relevant”. Those, at least, Mr. Colvard agreed he
“reviewed in some detail in order to decide where to put them”. We do not know
the contents of even these documents.
61
As to the second factor, Cassels Brock failed to have the electronic
documents listed at the search site as required by the order and thereafter
ignored the obvious significance of BLG’s initials on the sealed envelope
containing the electronic documents and then declined to return the material
over which privilege was claimed to BLG “whether in print form or electronic”
as requested. Cassels Brock did take steps, as did Kasowitz, to contain the
resulting damage, but as a result of their errors the Court does not know (and
Canadian Bearings cannot know) the potential scale of that damage.
62
As to the third factor, the CBA submits that the plaintiff’s counsel
should not only promptly return the inadvertently disclosed privileged
materials, but also “advise the adversary of the extent to which those
materials have been reviewed”. I agree. Here, Cassels Brock and Kasowitz deny
any “substantive review”, but the review must have been sufficiently thorough
to classify documents as “Relevant, Irrelevant, Proprietary, and Hot”. How
could anyone classify a document as “Hot” or “Relevant” without reading it?
And, to repeat, some of the documents initially read and classified as
“Relevant” turned out (on a second reading) to be potentially subject to a
claim of privilege. In the absence of knowing what Celanese’s solicitors and
counsel looked at we are left in the dilemma anticipated by Sopinka J. in MacDonald
Estate, at p. 1263:
. . . conclusory statements in affidavits without more are not
acceptable. These can be expected in every case of this kind that comes before
the court. It is no more than the lawyer saying “trust me”. This puts the
court in the invidious position of deciding which lawyers are to be trusted and
which are not.
63
As to the fourth factor, Cassels Brock and Kasowitz failed to discharge
the onus of identifying the contents of the solicitor-client communications
which they accessed in the course of classifying the material. It is therefore
not possible to determine “the degree to which they are prejudicial”. As
stated, Celanese’s solicitors and counsel created this problem by their failure
to proceed with prudence and they and Celanese will now have to shoulder the
consequences.
64
As to the fifth factor, the litigation is at an early stage. At
advanced stages of complex litigation, an order removing counsel can be
“extreme” and may have a “devastating” effect on the party whose counsel is
removed (Michel v. Lafrentz (1992), 12 C.P.C. (3d) 119 (Alta. C.A.), at
para. 4). That is not the case here. No doubt substantial costs have been
incurred by all parties, but BLG advised Cassels Brock by letter dated July 15,
2003, i.e. within less than a month after commencement of the litigation, and a
few days after learning of the privilege controversy, that “[t]his is a most
serious matter and we intend to bring it to the attention of the Court at the
earliest opportunity.” The removal motion was launched July 24, 2003. There
was therefore ample early notice that removal was being sought.
65
Sixth, and finally, with respect to “the potential effectiveness of a
firewall or other precautionary steps”, Cassels Brock advised the court of a
number of measures taken (although, in the defendant’s view, too little and too
late). The motions judge held that “an affidavit from the attorney in charge
of this matter for the Kasowitz firm ought to have been filed confirming that
such [privileged] material had been deleted and that no one at that firm had
accessed the information prior to such deletion (with the obvious exception of
Mr. Colvard, who has been isolated from the case)” (para. 30). I agree. In a
matter of such sensitivity the court and the defendant are entitled to the best
available evidence. It seems apparent that appropriate firewalls were not in
place prior to the occurrence of the mischief.
66
In view of all the circumstances, I agree with the Divisional Court that
Cassels Brock and Kasowitz have not produced sufficient evidence to satisfy the
MacDonald Estate test, namely “that the public represented by the
reasonably informed person would be satisfied that no use of confidential
information would occur” (p. 1260).
67
I also agree with the Divisional Court that the right of Celanese to
choose counsel yields to what occurred in the execution of the Anton Piller
order in this case and its aftermath, and that “the reasonable perception of
the integrity of the administration of justice would be adversely affected were
Cassels, Brock . . . permitted to remain solicitors of record for [Celanese]”
(para. 42). As to future role of Kasowitz however, I think the Divisional
Court went too far in holding that “[Celanese] should be precluded in this
litigation or any related proceeding from receiving advice or
information directly and/or indirectly from the firm” (para. 40 (emphasis
added)). Celanese has worldwide interests and Kasowitz is its primary legal
advisor. As the vinyl acetate plant is to be built in Iran, there may well be
related litigation outside Canada. I think Canadian Bearings will be
sufficiently protected if Celanese is ordered not to seek or receive advice or
information directly or indirectly from Kasowitz in connection with any
litigation in Canada arising out of the matters referred to in the
amended statement of claim, or related thereto, provided Kasowitz files
affidavit(s) satisfactory to the case management judge confirming that the
firewalls it had undertaken to install were and are in place, and sworn
confirmation that all of the material for which privilege is claimed that came
into Kasowitz’s possession as a result of the Anton Piller order has
been returned or destroyed.
IV. Disposition
68
The appeal is allowed with costs in this Court. Cassels Brock are
removed as solicitors of record for the respondents in these proceedings. They
are not to act for or advise the respondents, directly or indirectly, with
respect to this proceeding or with respect to any related proceedings arising
out of the facts pleaded in the amended statement of claim.
69
Neither the respondents nor anyone on their behalf is to communicate
with or receive advice or information directly or indirectly, from Kasowitz
with respect to this proceeding or any related proceedings in Canada arising
out of or related to the facts pleaded in the amended statement of claim.
70
Any and all materials subject to the claim of privilege still in the
possession of the respondents, Cassels Brock or Kasowitz seized from the
premises of Canadian Bearings on June 20 and 21, 2003, pursuant to the Anton
Piller order shall be returned forthwith to Canadian Bearings without
retention of copies whether printed, electronic or of any other type.
71
Kasowitz is to file affidavits satisfactory to the case management judge
confirming the existence of adequate firewalls and the destruction or return of
all allegedly privileged material that came into its possession as a result of
the Anton Piller order made in this case.
Appeal allowed with costs.
Solicitors for the appellants: Borden Ladner Gervais,
Toronto.
Solicitors for the respondent Celanese Canada
Inc.: Heenan Blaikie, Toronto.
Solicitors for the respondent Celanese Ltd.: Lenczner
Slaght Royce Smith Griffin, Toronto.
Solicitors for the intervener Advocates’ Society: Lax
O’Sullivan Scott, Toronto.
Solicitors for the intervener Canadian Bar
Association: Osler, Hoskin & Harcourt, Toronto.