Docket:
A-71-13
Citation: 2014 FCA 135
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CORAM:
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DAWSON J.A.
TRUDEL J.A.
NEAR J.A.
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BETWEEN:
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WEBASTO PRODUCT NORTH AMERICA, INC.
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Appellant
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and
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SHASTA EQUITIES LTD. AND LORNE SHANDRO
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Respondents
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REASONS FOR
JUDGMENT
NEAR J.A.
INTRODUCTION
[1]
The appellant, Webasto Product North America Inc., appeals from
the order of Justice Harrington (the motions judge), dated January 30, 2013,
and cited as 2013 FC 101 in which the Court found with respect to one document
from an underlying litigation case that it was subject to solicitor-client
privilege and that the remaining documents were subject to litigation
privilege. In doing so, the motions judge set aside the November 30, 2012 order
of Prothonotary Lafrenière (the prothonotary) which had found that none of the
documents were subject to litigation privilege.
[2]
For reasons that follow, I would allow the appeal in part.
I. FACTS
[3]
The following brief summary suffices for the purpose of this
appeal.
[4]
The respondents, Shasta Equities Ltd. and Lorne Shandro, own or
have an interest in the yacht Helios I. It was equipped with a heater
manufactured by the appellant, Webasto Product North America Inc.
[5]
On the morning of October 13, 2009 a fire broke out on the Helios
I while it was moored at a marina in Coal Harbour, Vancouver, British Columbia causing damage to surrounding vessels and property. Later that day, Paul
Mendham, the respondents’ insurance broker, learned of the fire and contacted
Timothy McGivney of Aegis Marine Surveyors Ltd. and Chris Reed of Sereca Fire Consulting
Ltd. He retained their services for the purposes of attending the scene and
investigating the facts related to the cause of the fire. He advised that
counsel would be retained shortly and that they were to take instructions from
and report to counsel with respect to their investigation.
[6]
On that same day, Mr. Mendham retained Kim Wigmore of Whitelaw
Twining Law Corporation to conduct the required investigations with respect to
the fire. Mr. Mendham was of the view that the owners of the third-party
vessels may be advancing claims given the apparent damage to their vessels. In
the course of the afternoon, the solicitor for certain third-party vessel
owners contacted Mr. Wigmore’s office to request a joint inspection of the Helios
I, to which Mr. Wigmore agreed.
[7]
On October 13, 2009, Mr. Wigmore retained Aegis
Marine Surveyors Ltd. to conduct an interim survey and draft a report for
him. During this survey, Mr. Shandro, other yacht owners, personnel from
Vancouver Police and Fire, representatives of the marina, representatives of
the Vancouver Port Corporation, and the Canadian Coast Guard were in attendance,
as was discussed by the motions judge in his reasons at paragraph 15. Mr.
Wigmore also retained the services of Sereca Fire Consulting Ltd. on October
13, 2009, to investigate the events concerning the fire and draft a report for
him.
[8]
On November 4, 2009, Mr. Wigmore retained Canadian Claims
Services Inc. to conduct an interview with Mr. Shandro and draft a report for
him.
[9]
The appellant seeks production of the various inspection reports
and related documents over which the respondents claim litigation privilege
and, with respect to one document, solicitor-client privilege. The documents
are described as the documents enumerated 3 through 20 and 22 of Schedule 2 of
the draft Revised/Third Supplemental Affidavit of Documents (the Disputed
Documents).
II. PROCEDURAL HISTORY
[10]
On May 18, 2011, several individuals, whose property had been
damaged by the fire originating on the Helios I, launched an action against
the respondents in the Federal Court.
[11]
On June 15, 2011, the respondents filed a third-party claim
against the appellant alleging that the heater aboard the Helios I had
“created, caused or exacerbated” the fire. Consequently, the appellant was added
as a defendant and third party in the action.
[12]
In the course of the proceedings, the respondents claimed
litigation privilege over the Disputed Documents. On September 19, 2012, the
appellant filed a motion requesting, inter alia, the production of all
Disputed Documents.
a.
Order of the Prothonotary
[13]
The prothonotary ordered the production of all Disputed
Documents. Applying the two-part test for litigation privilege, he found that
the respondents had failed to demonstrate that: 1) litigation was reasonably contemplated
upon the creation of the Disputed Documents; and 2) the dominant purpose for
creating such documents was to prepare for litigation: Order of the
Prothonotary, Prothonotary Lafrenière, November 30, 2012, (Prothonotary Order)
at page 5.
[14]
With respect to the first criterion, although a prospect of
litigation by third-party claimants may have existed, the prothonotary observed
that neither the respondents nor their insurer were able to judge to what extent
that prospect would materialize until a preliminary investigation into the
cause of the fire was conducted: Prothonotary Order at page 5.
[15]
With regard to the second criterion, he concluded that there was
more than one identifiable purpose for the creation of the Disputed Documents
based on Mr. Wigmore’s affidavit: Prothonotary Order at page 5. In light of the
lack of precision and clarity in the evidence, the documents were found not to
have been “‘wholly or mainly’ created with litigation in mind”: Prothonotary
Order at page 6.
b.
Order of the motions judge
[16]
The motions judge allowed the appeal and concluded that one
document was subject to solicitor-client privilege and all other documents were
subject to litigation privilege, save with respect to surveys attached to one
of the Disputed Documents since they had been produced before the fire
occurred.
[17]
He first determined that the issue on appeal was whether certain
documents were immune from discovery on the grounds of privilege: Order of
Justice Harrington, dated January 30, 2013, 2013 FC 101 (Motions Judge Order)
at paragraph 1.
[18]
The motions judge held that the prothonotary’s order was not
discretionary in nature, and thus declined to apply the standard of review
applicable to discretionary orders from prothonotaries: Motions Judge Order at
paragraph 36. In arriving at this conclusion, he stated that both parties
proceeded before him on the basis that the prothonotary’s decision was
discretionary in nature.
[19]
In obiter, he added that if the order was discretionary in
nature, he would have to determine whether the potential effect of the order
was vital to the issue of the case: Motions Judge Order at paragraph 23. The
motions judge held that the issue was “not whether production of the documents
is vital to the outcome of the case, but rather whether it is vital to our
fundamental sense of justice”: Motions Judge Order at paragraph 27. I make no
finding on the correctness of this statement as it is not necessary to do so.
[20]
The motions judge applied the standard of review established in Housen
v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235. He first concluded that
the prothonotary erred in law by failing to find that one of the documents was
subject to solicitor-client privilege: Motions Judge Order at paragraph 37.
[21]
All other documents were found to be subject to litigation
privilege: Motions Judge Order at paragraph 38. The motions judge held that, by
failing to conclude that the parties were already in an adversarial situation
before any of the Disputed Documents were created, the prothonotary made a
palpable and overriding error in his findings of fact. He concluded that the
only purpose of Mr. Wigmore’s involvement was to defend the Helios I
against potential claims: Motions Judge Order at paragraph 41. The motions
judge was led to the conclusion that the dominant purpose for the creation of
these documents was to prepare for litigation.
III. ISSUE
[22]
These orders have given rise to the following issue: Did the
motions judge err by setting aside the prothonotary’s decision?
IV. ANALYSIS
a. Standard
of Review
[23]
The standard of review to be applied by this Court to the
decision of the motions judge was laid out in Z.I. Pompey Industrie v. ECU-Line N.V., 2003 SCC 27, [2003]
1 S.C.R. 450 at paragraph 18 as whether there “were no grounds to
interfere with the prothonotary’s decision or, if grounds existed, if the
decision of the motions judge was arrived at on a wrong basis or was plainly
wrong”.
[24]
Before turning to a review of the Disputed Documents and
determining whether the motions judge had any grounds to interfere with the
prothonotary’s decision or proceeded on a wrong basis or was plainly wrong, it
is necessary to briefly outline the general principles related to litigation
privilege.
b.
Litigation Privilege
[25]
Litigation privilege requires the party claiming the privilege to
establish, for each document, that:
(a)
litigation was ongoing or reasonably contemplated at the time the
document was created; and
(b)
the dominant purpose of creating the document was for that
litigation.
See Blank v. Canada (Minister of Justice), 2006 SCC 39, [2006] 2 S.C.R. 319 at paragraph 60.
[26]
In order to ascertain whether material was prepared for the
dominant purpose of litigation, various considerations have been formulated by
the courts. In Jordan et al. v. Towns Marine Electronic Ltd. et
al. (1996), 113 F.T.R. 226 at paragraph 12, Justice Marc Noël held that
relevant considerations included:
1)
the author and the authority upon whose direction a report is
prepared;
2)
the dates on which the reports were produced;
3)
the date on which the insurers appointed counsel;
4)
the identity of the parties to whom the reports were addressed;
and
5)
the content of the reports themselves.
[27]
Both criteria for finding litigation privilege, namely, that
litigation was ongoing or reasonably contemplated at the time the document was
created and that the dominant purpose of creating the document was for
litigation must be met in order to conclude that a document is protected under
litigation privilege. The grounds establishing privilege need to be
demonstrated by the party claiming the privilege in respect of each document.
c.
Application to the Case
[28]
In my view, it is necessary to conduct a review of the Disputed
Documents. Bearing in mind the general legal principles set out above, I now
turn to each of the documents. For ease of reference, I have reproduced a list
of them here:
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No.
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Date
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Description
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3
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October 14, 2009
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Report from Aegis
Marine Surveyors Ltd. to Kim Wigmore
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4
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October 20, 2009
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Report from Sereca Fire
Consulting Ltd. to Kim Wigmore
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5
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November 15, 2009
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Report from Canadian
Claims Services Inc. to Kim Wigmore with attached Statement by Lorne Shandro
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6-20
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January 6, 2010
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Emails from Aegis
Marine Surveyors Ltd. to Ginelle Hocaluk (Whitelaw Twining) with attached
photographs
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22
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March 19, 2011
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Report from Canadian
Claims Services Inc. to Kim Wigmore
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Document 3
[29]
The prothonotary concluded that Document 3 was not protected by
litigation privilege. Based on the record, he held that litigation was not
ongoing nor was it reasonably contemplated at the time the document was
created. Before this Court, the question is whether there were grounds for the
motions judge to interfere with the prothonotary’s decision. Document 3 was the
initial report from Aegis Marine Surveyors Ltd. On the day of the fire, the
company was first contacted and retained by the insurance broker, Mr. Mendham.
He advised Aegis Marine Surveyors Ltd. that later in the day he would be
retaining counsel.
[30]
Document 3 was issued to Mr. Wigmore on October 14, 2009. Although there
may have been a possibility of litigation, as a possibility almost always
exists when a loss is caused by fire, neither party was in a position to assess
the nature of and the situation surrounding the incident. The parties were
investigating the facts and circumstances in relation to the cause and origin
of the fire and resulting damage. Further, the report is described as an
interim report and its contents are consistent with the conclusion that it was
a preliminary examination of what took place the day of the fire. This supports
a conclusion that the parties were in the preliminary stage of investigation.
[31]
In my view, the record supports the findings of the prothonotary that
litigation was not ongoing nor was it reasonably contemplated at the time the
document was created. The prothonotary’s factual assessment and conclusion
should have been left undisturbed.
Document 4
[32]
Based on the record before him, the prothonotary concluded that Document
4 was not protected by litigation privilege as litigation was not ongoing nor
was it reasonably contemplated at the time it was created. Document 4 is a
report from Mr. Reed of Sereca Fire Consulting Ltd. dated October 20, 2009, one
week after the fire. Sereca was also initially contacted and retained by the
insurance broker, Mr. Mendham, on the day of the fire. The evidence is that Mr.
Reed spoke to counsel, Mr. Wigmore, later on the day of the fire and he was
advised that solicitors for a number of third-party yacht owners had requested
a joint inspection of the Helios I.
Mr. Reed was instructed to co-operate with the investigation in this regard.
[33]
The motions judge concluded that this request for a joint inspection on
the day of the fire clearly signified that the parties were in an adversarial
position and that the prothonotary had made a factual error in concluding
otherwise: Motions Judge Order at paragraph 41. However, in my view, the mere
contact by third-party solicitors to co-operate in the initial investigation of
the fire scene on the day of the fire does not change a preliminary
investigation into an adversarial situation.
[34]
The report from Sereca is brief, with more than half of the short report
simply consisting of pictures of the scene of the fire. The report speculates
as to various possible causes of the fire, concludes that these possible causes
warrant further analysis, and notes that Sereca awaits further direction.
[35]
As with Document 3, in my view, there were no grounds for the motions
judge to interfere with the prothonotary’s decision. The record supports the
findings of the prothonotary, namely, that litigation was not ongoing nor was
it reasonably contemplated at the time the document was created. The
prothonotary’s factual assessment and conclusions should have been left
undisturbed.
Document 5
[36]
Document 5 is a report from Canadian Claims Services Inc. to Mr.
Wigmore. Attached to the report is a lengthy and detailed statement from Mr.
Shandro. Canadian Claims Services was retained directly by counsel, Mr.Wigmore,
on November 4, 2009 and the interview with Mr. Shandro took place on November
13, 2009 in Edmonton where Mr. Shandro resided.
[37]
The motions judge concluded that Document 5 was protected by
solicitor-client privilege: Motions Judge Order at paragraph 37. There is no
explanation from him as to how Document 5 would be covered by solicitor-client
privilege other than a general statement that, in his view, the parties were in
an adversarial relationship from the date of the fire.
[38]
Solicitor-client privilege was not claimed by the respondents with
respect to Document 5. In my view, the motions judge erred in concluding that
Document 5 was protected by solicitor-client privilege when such privilege was
not asserted.
[39]
Document 5 differs from Documents 3 and 4 in several ways:
1)
the investigator was directly retained by counsel;
2)
it was prepared some further time after the date of the fire and
subsequent to the receipt of the preliminary reports contained in Documents 3
and 4 when litigation could more clearly be contemplated; and
3)
the interview is much more detailed and extensive and more in the nature
of interviewing a possible witness.
[40]
The prothonotary found that there was more than one purpose for the
creation of the Disputed Documents, including Document 5. Given these multiple
purposes, he concluded that litigation privilege had not been established. In
my view, here the motions judge had grounds to interfere with this aspect of
the prothonotary’s decision. While a document may be prepared for multiple
purposes, the dominant purpose of its creation can be in preparation for
litigation. In light of this and the additional factors above, Document 5 is
protected by litigation privilege given those additional factors above that
distinguish it from Documents 3 and 4.
Documents 6-20
[41]
Documents 6 through 20 are very brief emails from Aegis Marine Surveyors
Ltd. to the Whitelaw Twining law firm with attached photographs, all of which
are dated January 6, 2010. The photographs were previously disclosed in the
discovery process. The emails provide updates from the surveyors as to damage
sustained by the other boats and a statement as to whether repairs were
economically feasible. By January 6, 2010, litigation was reasonably
contemplated and the dominant purpose of creating Documents 6 through 20 was to
assist in the preparation of litigation. In my view, the record supports the
motions judge’s finding that based on the contents of the documents, they would
be covered by litigation privilege. However, it is worth noting the comments of
the motions judge at paragraph 43 of his reasons where he wrote, “[t]he parties
are well aware that a fact is not immune from disclosure because it was
ascertained by a surveyor, or even a lawyer. When a representative of a party
on discovery is asked what his or her information, knowledge or belief is on a
certain point, the facts and information must be disclosed irrespective of
source.”
Document 22
[42]
Lastly, Document 22 is a very brief report from Canadian Claims Services
Inc. to Mr. Wigmore, dated March 19, 2011. It is simply an update as to the
current status of this matter and the company’s account status. I agree with
the motions judge that it is also covered by litigation privilege for the same
reasons outlined above with respect to Documents 6 though 20.
CONCLUSION
[43]
For these reasons, I would allow the appeal in part, with costs
to the appellant, and set aside the order of the motions judge. Documents 3 and 4 are not privileged and must be disclosed
within 30 days from the date of the judgment
which accompanies these reasons. The remaining documents are protected by
litigation privilege.
"David G. Near"
“I agree
Eleanor R. Dawson J.A.”
“I agree
Johanne Trudel J.A.”
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