Afs and Co. Ltd. v. Canada, 2001 FCT 422

Date: 20010501

Docket: T-1336-00

Neutral Citation: 2001 FCT 422

BETWEEN:

AFS AND COMPANY LIMITED PARTNERSHIP NO. 5,

AFS LIMITED PARTNERSHIP NO. 7, ALLIANCE

COMMUNICATIONS CORPORATION, ALLIANCE

DISTRIBUTION SERVICES NO. 5 INC., ALLIANCE

DISTRIBUTION SERVICES NO. 6 INC., ALLIANCE

EQUICAP CORPORATION, ALLIANCE FILM HOLDINGS

NO. 4 INC., ALLIANCE FILM HOLDINGS NO. 6 INC.,

ALLIANCE SERVICES (NO. 5) LIMITED PARTNERSHIP,

ALLIANCES SERVICES (NO. 6) LIMITED PARTNERSHIP,

ALLIANCE WESTVENTURES CORPORATION, BERNIE

ABRAMS, JOSEPH MILLER, MEDIAVENTURES

MANAGEMENT NO. 2 INC. and MEDIAVENTURES

MANAGEMENT NO. 4 INC.

Applicants

-and-

HER MAJESTY THE QUEEN

Respondent

                    REASONS FOR ORDER AND ORDER

HENEGHAN J.

[1]    The Applicants are a number of corporate bodies, partnerships and two individuals who were involved in transactions relating to the theatrical distribution of motion pictures owned by Warner Bros., a division of Time Warner Entertainment Co., LP or its affiliates.

[2]    AFS and Company Limited Partnership No. 5 and AFS Limited Partnership No. 7 are Canadian limited partnerships and are the "offering partnerships". They are the subject of an audit by Canada Customs and Revenue Agency (the "CCRA"). The offering partnerships obtained theatrical distribution rights in the United States for certain motion pictures. They incurred distribution expenses which were subsequently deducted. The CCRA is challenging the deductibility of those distribution expenses.

[3]    By letters dated March 25, 2000, the CCRA requested the production of documents by AFS and Company Limited Partnership No. 5, AFS Limited Partnership No. 7, Alliance Equicap Corporation, Bernie Abrams, Joseph Miller, Mediaventures Management No. 2 Inc., Mediaventures Management No. 4 and Heenan Blaikie, solicitors. The letters constitute a "requirement to produce" and were issued pursuant to section 231.4 of the Income Tax Act, R.S.C. 1976-77, c. 52 (the "Act"). These letters specified categories of documents to be produced by the offering partnerships concerning the transactions.

[4]    The law firm of Heenan Blaikie represented the moving parties in relation to the transactions.

[5]                On or about July 4, 2000, a representative of the CCRA went to the offices of Heenan Blaikie in Toronto to inspect and examine those documents in the firm's possession that were described in the requirement to produce. At that time, Heenan Blaikie asserted solicitor-client privilege on behalf of the Applicants concerning certain documents.

[6]                The CCRA officer did not examine those documents. They were placed in the custody of Heenan Blaikie on or about July 24, 2000. On that date, Subrata Bhattacharjee, a lawyer at Heenan Blaikie, and G. Vettese, an officer with the CCRA, signed an agreement to the effect that Heenan Blaikie had retained the documents for which solicitor-client privilege was asserted, under seal as custodian. All documents that had been circulated to parties other than the Applicants, their solicitors and agents were released to the CCRA pursuant to the requirement to produce.

[7]                It appears from the affidavit evidence filed by the Applicants that the retained documents have not been circulated beyond the clients, lawyers retained by Heenan Blaikie and non legal professional advisors whose advice was sought in connection with the transaction. The last group includes accountants engaged by the clients.

[8]                Subsequently, an application was made to this Court pursuant to section 232(4) of the Act, for an Order determining the question whether solicitor-client privilege applies in relation to the retained documents. At the hearing of the application, counsel for the parties advised that this application would relate to four letters from the CCRA dated March 25, 2000, to Heenan Blaikie requesting documents relating to the offering partnerships and to Alliance Equicap Corporation, Media Ventures Management No. 2 Inc., Mediaventures Management No. 4 Inc. and Bernard Abrams.

[9]                Upon the hearing of this application, counsel for the Applicants advised that following discussions with counsel for the Respondent, agreement had been reached concerning the majority of the sealed documents. The number of documents left in dispute was reduced from some 486 to 89 documents.

ISSUE

[10]            The issue in this application is whether the retained documents are subject to solicitor-client privilege pursuant to section 232 of the Act.

APPLICANTS' SUBMISSIONS

[11]            The Applicants argue that all the documents which have not yet been produced are subject to the blanket privilege accorded to solicitor-client communications. The Applicants are not asserting any litigation privilege but rely solely upon the ground of legal advice privilege. They say that the outstanding documents fall under the following headings of solicitor-client privilege:

1.         solicitor and client communications;

2.         solicitor and agent communications, including solicitor and professional advisor communications;

3.         solicitor work product.

[12]            The Applicants submit that all they must show in order to establish solicitor-client privilege is that the documents were created in the continuum of the provision of legal advice by Heenan Blaikie. They rely on the affidavits of Bonnie Roberts sworn on July 26, 2000 and several affidavits of Mark Jadd, to establish the existence of the solicitor-client relationship with the Applicants.

[13]            The Applicants submit that they need only show that the documents were sealed in the continuum of the provision of legal advice by their solicitors, Heenan Blaikie. In this regard, the Applicants rely on General Accident Assurance Co. v. Chrusz, (1997), 34 O.R. (3d) 354.

[14]            The Applicants argue that the legal context here is the transaction involving the offering partnerships. They say no exception to the solicitor-client relationship has been pleaded and submit that, on the basis of the decision in Susan Hosiery Limited v. Canada (Minister of National Revenue), [1969] 2 Ex.C.R. 27, the privilege covers working papers and documents provided to counsel by professional third-parties, including accountants.

[15]            The Applicants also submit that, on the basis of the decision in R. v. Gruenke, [1991] 3 S.C.R. 263, the documents in issue here fall within the common-law or "class" privilege against production, in other words, that there is a presumption against the admissibility of the documents into evidence.

RESPONDENT'S SUBMISSIONS

[16]            On the other hand, the Respondent generally submits that none of the documents are the subject of privilege. However, at the hearing, the Respondent conceded that draft documents and solicitor and client communications would be subject to solicitor-client privilege. Counsel for the Respondent also acknowledged that correspondence between Heenan Blaikie and other lawyers retained by them in connection with the transaction are also subject to solicitor-client privilege. This means the communications between the Heenan Blaikie law offices in Toronto with Heenan Blaikie lawyers in California, and other law firms engaged on an agency basis in Yukon Territory, Manitoba and Alberta, are privileged against disclosure.

[17]            The Respondent submits that the Applicants have failed to establish the evidentiary foundation to support the claim for solicitor-client privilege. The Respondent relies upon the decision in Long Tractor Inc. v. Canada (Deputy Attorney General) (1997), 162 Sask. R. 161 and General Accident Assurance Co. v. Chrusz, supra, to support this argument.

[18]            The Respondent also argues that the issue of legal privilege in the present case must be assessed in the context of the Act and with regard to the purpose of the Act. The Respondent here relies on Gregory v. Minister of National Revenue (1992), 92 D.T.C. 6518.

[19]            Finally, the Respondent submits that if the solicitors have made notations on documents which would otherwise be admissible and not privileged, the notes should be removed and the documents admitted. Here, the Respondent relies on Re Sokolov (1968), 70 D.L.R. (2d) 325 (Man. Q.B.).

ANALYSIS

[20]            The commencement point for consideration of solicitor-client privilege within the context of the Act is found in section 232(1). That section defines "solicitor-client privilege" as follows:

[21]            The jurisprudence has established that there are two distinct branches of solicitor-client privilege: litigation privilege and legal advice privilege. The former protects all communications between the solicitor, client or third parties made in the course of existing or contemplated litigation. The latter protects all communications between a solicitor and client and third parties, that directly relate to the seeking, formulating or giving of legal advice.

[22]            These classes were recognized by the Federal Court of Appeal in Samson Indian Nation and Band v. Canada [1995] 2 F.C. 762 (C.A.) at page 769. With respect to the legal advice privilege, the Court said:

...it is not necessary that the communication specifically request or offer advice, as long as it can be placed within the continuum of communication in which the solicitor tenders advice; it is not confined to telling the client the law and it includes advice as to what should be done in the relevant legal context.

[23]            The hallmark of the solicitor-client relationship is confidentiality. The solicitor-client privilege applies to those communications, oral and written, made in the context of that relationship and for the purpose of obtaining legal advice. In [1982] 1 S.C.R. 860">Descôteaux et al v. Mierzwinski, [1982] 1 S.C.R. 860 Lamer J. (as he then was) said at pages 872-873

It should be pointed out that the substantive conditions precedent to the existence of the privilege, which the judges have gradually established and defined, are in fact the substantive conditions precedent to the existence of the right to confidentiality, the former being merely the earliest manifestation of the latter. There is no need to list those conditions exhaustively here or to review all the nuances that have been developed by the courts over the years. It will be sufficient to review them in broad outline and to emphasize certain aspects of particular relevance to this appeal.

The following statement by Wigmore (8 Wigmore, Evidence, para. 2292 (McNaughton rev. 1961) of the rule of evidence is a good summary, in my view, of the substantive conditions precedent to the existence of the right of the lawyer's client to confidentiality:

Where legal advice of any kind is sought from a professional legal adviser in his capacity as such, the communications relating to that purpose, made in confidence by the client, are at his instance permanently protected from disclosure by himself or by the legal adviser except the protection be waived.

Seeking advice from a legal adviser includes consulting those who assist him professionally (for example, his secretary or articling student) and who have as such had access to the communications made by the client for the purpose of obtaining legal advice.

There are exceptions. It is not sufficient to speak to a lawyer or one of his associates for everything to become confidential from that point on. The assistants in their professional capacity; the relationship must be a professional one at the exact moment of the communication. Communications made in order to facilitate the commission of a crime or fraud will not be confidential either, regardless of whether or not the lawyer is acting in good faith.

[24]            In Susan Hosiery Limited, supra, the Exchequer Court distinguished between documents and the facts contained in those documents, for the purpose of recognizing privilege. President Jackett expressed himself on this point as follows at page 35:

...the letter or statement itself is privileged but the facts contained herein or the documents from which those facts were drawn are not privileged from discovery if, apart from the facts having been reflected in the privileged documents, they would have been subject to discovery. For example, the financial facts of a business would not fall within the privilege merely because they had been set out in a particular way as requested by a solicitor for purposes of litigation, but the statement so prepared would be privileged.

[25]            This statement of principle means that although certain documents may be protected against disclosure, facts contained in those documents which may otherwise be discoverable are not protected.

[26]            Furthermore, no automatic privilege attaches to documents which are not otherwise privileged simply because they come into the hands of a party's lawyer. In General Accident Assurance Company et al v. Chursz et al (1998), 37 O.R. (3d) 790 at page 796, the Court said as follows:

An original document that is clothed with no privilege does not acquire privilege simply because it gets into the hands of a solicitor.

[27]            The party asserting the privilege carries the evidentiary burden. In the present case, the Applicants must show, on a balance of probabilities, that the documents in question are a communication between a solicitor and client, which involve the seeking or giving of legal advice, and which the parties intend to be confidential. In this regard, see Solosky v. The Queen (1979), 50 C.C.C. (2d) 495 at page 510.

[28]            The party claiming the privilege must do more than baldly assert the privilege. As said by Dunnet, J. in R. v. Morra (1991), 68 C.C.C.(3d) 273 at page 276 (Ont. Gen. Div.):

In my view, once the documents have been seized, a lawyer cannot hide behind a code of silence and claim privilege with respect to all communications. At the very least, the lawyer must adduce reasonable evidence, either viva voce or by affidavit, from which the Court can infer a solicitor-client relationship and solicitor-client privilege. To meet the criteria for the privilege, it is necessary to show that: there were communications between the lawyer and client; those communications entailed the seeking or giving of legal advice, and the advice was intended to be confidential by the party.

[29]            In this case, the issue of privilege is to be decided in relation to the offering partnerships Alliance Equicap Corporation, Mediaventures Management No. 2 Inc., Mediaventures Management No. 4 Inc. and Bernard Abrams. The affidavit evidence presented in support of the assertion of solicitor client privilege consists of the following:

1.         the affidavit of Bonnie Roberts dated July 26, 2000;

2.         the affidavit of Mark Jadd dated September 11, 2000;

3.         the affidavit of Mark Jadd dated September 25, 2000;

4.         the affidavit of Mark Jadd dated September 26, 2000.

[30]            The Applicants rely upon the following statement in the first affidavit of Mr. Jadd to support their argument that all of the retained documents are subject to solicitor-client privilege:

4.     Heenan Blaikie acted for the following parties in the course of the Transactions, and by this motion, claims solicitor-client privilege on behalf of the following entities:

(a)            Offering Partnerships

(i)            AFS 5, being a Quebec limited partnership

(ii)           AFS 7, being an Ontario limited partnership

(b)           General Partners of Offering Partnerships

(i)            Mediaventures Management No. 2 Inc. being the General Partner of AFS 5

(ii)            Mediaventures Management No. 4 Inc. being the General Partner of AFS 7

(c)            California Subsidiary Partnerships

(i)            Alliance Services (No. 5) Limited Partnership, of which 100% of Class A limited partnership units are held by AFS 5

(ii)           Alliance Services (No. 6) Limited Partnership of which 100% of Class A limited partnership units are held by AFS 7

(d)           Alliance and Affiliates

Alliance Atlantis Communications Inc. (formerly Alliance Communications Corporation) and all of its affiliates, including:

(i)            Alliance Atlantis Equicap Corporation (formerly Alliance Equicap Corporation) which acted as lead agent to the Offering Partnerships;

(ii)           Alliance Distribution Services No 5 Inc., a California company that served as general partner of Alliance Services (No. 5) Limited Partnership;

(iii)          Alliance Distribution Services No. 6 Inc., a California company that served as general partner of Alliance Services (No. 6) Limited Partnership;

(iv)          Alliance Film Holdings No. 4, Inc., a California company that held options to acquire Class B limited partnership units of Alliance Services (No. 5) Limited Partnership;

(v)           Alliance Film Holdings No. 6 Inc., a California company that held options to acquire Class B limited partnership units of Alliance Services (No. 6) Limited Partnership;

(vi)          Alliance WestVentures Corporation, an Alberta corporation that entered into a participating loan agreement with both of Alliance Services (No. 5) Limited Partnership and Alliance Services (No. 6) Limited Partnership.

(e)            Individual Employees of the Above-noted Companies Including

Bernie Abrams

Joseph Miller

[31]            Although this is a sparse statement and makes no reference to the temporal limits of the retainer, there is nothing on the record nor any argument advanced by the Respondent to rebut or challenge the existence of a solicitor-client relationship between Heenan Blaikie and the Applicants.     I find that there is a solicitor-client relationship between Heenan Blaikie and the Applicants.

[32]            The enquiry now must be to determine what documents attract the solicitor-client privilege.

[33]            The Applicants have classified the disputed documents under four headings of privilege as follows:

           1)         Solicitor/Client

           2)         Solicitor/Agent

           3)         N/A

           4)         Solicitors' Work Product

For the purpose of this motion, only 1, 2 and 4 are relevant.

[34]            As noted above, the Respondent concedes that solicitor/client and solicitor/agent communications, and solicitor's work product are subject to privilege. Some documents are described as belonging to two groups, that is solicitor/client communications and solicitor's work product, and solicitor/client and solicitor/agent communications combined. It remains to be determined which of the disputed documents fall within these groups.

[35]            I propose to deal with the privileged documents under the various headings identified above. I will begin with the identification of those documents described by the Applicants as being solicitor/client communications, that is the classification number 1 used by the Applicants. In my opinion, the following documents are privileged under that heading:

a)    document 80, a fax cover sheet from Nurhan Aycan, Heenan Blaikie to Bernard Abrams, Media Ventures No. 4 Inc. dated November 3, 1995;

b) document 89, fax cover sheet from Nurhan Aycan, Heenan Blaikie to Bernard Abrams, Media Ventures No. 4 Inc., with transmission report, November 6, 1995;

c) document 136, letter from Adam Kardash, Heenan Blaikie to Linda Rosenthal, Alliance Equicap Corporation dated November 17, 1995 with copy of Montreal Trust cheque in the amount of $831,070.00 to Alliance Equicap Corporation;

d) document 141, complimentary slip from Allen Garson, Heenan Blaikie to Norm Bacal, Mark Jadd, Adam Kardash, Heenan Blaikie with attached letter from Linda Rosenthal, Alliance Equicap to Allen Garson dated December 4, 1995 with handwritten notes, slip dated December 6, 1995;

e) document 176, fax cover sheet from Michelle McCarthy, Alliance Equicap to Adam Kardash, Heenan Blaikie with attached Statement of Disclosure for Loan Agreement dated February 28, 1996;

f)    document 188, fax cover sheet from Bernie Abrams to Adam Kardash, Heenan Blaikie dated March 3, 1996;

g) document 426, fax cover sheet from Linda Rosenthal Freeman to Adam Kardash, Heenan Blaikie with attached letter from Linda Rosenthal Freeman to Norman Bacal, Heenan Blaikie dated July 11, 1995 with handwritten notations, fax cover page dated July 11, 1995;

h) document 428, letter from Alan Baldachin, Heenan Blaikie to Linda Rosenthal, Alliance Equicap Corporation, July 12, 1995;

i)    document 444, fax cover sheet from Adam Kardash, Heenan Blaikie to Bernard Abrams without attachment, dated October 11, 1995;

j)    document 463, fax from Linda Rosenthal to Norman Bacal, Heenan Blaikie with attached schedule, March 3, 1996;

k) document 467, fax cover sheet from Mark S. Wilder, Alliance Equicap Corp., to Norman Bacal, Heenan Blaikie, with handwritten notes, with attached tables re: term sheet;

l)    document 470, fax cover sheet from Joseph Miller, Alliance, to Linda Rosenthal, Alliance, Norman Bacal, Heenan Blaikie (Toronto) and Jeff Berkowitz, Heenan Blaikie (LA), with attached draft financial statements of Alliance Services (No. 10) Limited Partnership for the period ended September 6, 1996.

[36]            The following documents will be exempt from production on the basis that they represent communications between the Applicants' solicitors and agents, including other lawyers engaged to represent the interests of the Applicants in connection with the transaction, and non-legal agents, classification number 2:

a) document 65, fax cover sheet from Nurhan Aycan, Heenan Blaikie to Mickey Rosenberg, Filmore & Riley, with attached letter from Filmore & Riley, to Alliance Equipcap Corporation, Heenan Blaikie, Limited Partners of AFS Limited Partnership No. 7, Internationale Nederlanden Bank N.V. and Warner Bros. dated November 7, 1995, fax cover sheet dated November 1, 1995;

b) document 68, fax cover sheet from Jeffrey Berkowitz, Heenan Blaikie to Adam Kardash, Heenan Blaikie with attached draft letter dated November 2, 1995 from Price Waterhouse LLP to Alliance Services (No. 6) Limited. Partnership, Heenan Blaikie and AFS Limited Partnership No. 7, dated November 2, 1995;

c) document 84, fax cover sheet from Nurhan Aycan, Heenan Blaikie to Dan Leon, Heenan Blaikie, November 3, 1995;

d) document 87, letter from M.L. Rosenberg, Fillmore Riley to Nurhan Aycan, Heenan Blaikie with attached fax cover sheet from Jeffrey Berkowitz, Heenan Blaikie to Mark Jadd, Heenan Blaikie dated November 6, 1995; opinion letter from Heenan Blaikie to Alliance Services (No. 6) Limited Partnership and AFS Limited Partnership No. 7, with handwritten notations, dated November 7, 1995; and letter from Filmore and Riley to Alliance Equicap Corporation, Heenan Blaikie, Limited Partners of AFS Limited Partnership No. 7, Internationale Nederlanden Bank N.V. and Warner Bros., dated November 7, 1995, letter dated November 6, 1995;

e) document 118, fax cover sheet from Daniel B. Leon, Heenan Blaikie to Nurhan Aycan, Heenan Blaikie, with attached letter from Alliance Services (No. 6) Limited Partnership to Internationale Nederlanden Bank N.V., dated November 7, 1995;

f)    document 177, fax cover sheet from Paul Lackowicz, Preston, Willis & Lackowicz to Adam Kardash, Heenan Blaikie with attached Order Exempting Compliance with Part III, dated February 28, 1996;

g) document 239, fax from Jeffrey Berkowitz, Heenan Blaikie to Mark Jadd, Heenan Blaikie, with attached letter from Jeffrey Berkowitz to Joseph Miller, Houlihan, Lokey, Howard & Zukin, dated May 17, 1999;

h) document 240, fax cover sheet from Jeffrey Berkowitz, Heenan Blaikie to Mark Jadd, Heenan Blaikie and Linda Rosenthal, with attached letter from Jeffrey Berkowitz to Joseph Miller, Houlihan, Lokey, Howard & Zukin, dated June 8, 1999;

i)    document 402, fax cover page from Nurhan Aycan, Heenan Blaikie, to Martin Johnston, Heenan Blaikie - Beverly Hills, with attached fax transaction report dated June 27, 1995; draft opinion letter of Heenan Blaikie, General Partnership, to George S. Mohammed, c/o Cattormole Timber, dated June 26, 1995, fax cover page dated June 27, 1995.

[37]            The next category of documents which I find are subject to the asserted claim of solicitor/client privilege are those designated as solicitor's work product, classification number 4 according to the Applicants. However, it is to be noted that for some of these documents, I find that solicitor-client privilege attaches to the notations on the documents but not to the documents themselves, on the ground that it has not been established that the documents were created by the solicitors and did not emanate from sources other than the clients. That limitation is apparent from the following list:

a) document 9, handwritten notes only, various dates;

b) document 10, handwritten notes only, various dates;

c) document 11, handwritten notes only, various dates;

d) document 13, handwritten notations only, various dates;

e) document 14, handwritten notes only, various dates;

f)    document 16, handwritten notes only, various dates;

g) document 17, handwritten notes only, various dates;

h) document 18, Heenan Blaikie Corporate Summary Sheet; fax cover sheet dated February 4, 1996 from Danielle Lindholm, Media Ventures to Adam Kardash, Heenan Blaikie with attached Personal Indemnity Agreement with handwritten notes, June 23, 1994;

i)    document 38, fax cover sheet from Adam Kardash, Heenan Blaikie to Linda Rosenthal, Alliance Equicap and Danielle Lindholm, Abrams Consultants Inc., without attachments, fax cover sheet dated October 18, 1995;

j)    document 40, fax cover sheet from Adam Kardash, Heenan Blaikie to Linda Rosenthal, Alliance Equicap and Danielle Lindholm, Abrams Consultants Inc. without attachments, dated October 19, 1995;

k) document 42, handwritten notes only re: "Warner's", October 26, 1995;

l)    document 46, draft opinion letter from Brian D. Evans to Internationale Nederlanden Bank N.V. re: Berkshire (1995) Financial Services No. 4 Inc., with handwritten notations and attached schedules, October 26, 1995;

m) document 52, draft letter from Heenan Blaikie to Warner Bros., a division of Time Warner Entertainment Company, L.P. and Heenan Blaikie, with handwritten notations, dated November 6, 1995;

n) document 62, draft closing agenda re: AFS Limited Partnership No. 7, November 1, 1995;

o) document 63, draft closing agenda re: Alliance Services (No. 6) Limited Partnership closing agenda, November 1, 1995;

p) document 67, handwritten note to Mark Jadd and Allen Garson, Heenan Blaikie re: prepaid interest, November 2, 1995;

q) document 74, draft closing agenda for AFS Limited Partnership No. 7, November 3, 1995;

r)    document 75, Alliance Services (No. 6) Limited Partnership draft closing agenda, with handwritten notations, November 3, 1995;

s) document 96, draft letter from Warner Bros. apparently drafted by Heenan Blaikie, a division of Time Warner Entertainment Company, L.P. to Alliance Film Holdings No. 6 Inc. re: option funding commitment, November 7, 1995;

t)    document 97 draft letter from Warner Bros. apparently drafted by Heenan Blaikie, a division of Time Warner Entertainment Company, L.P. to Alliance Film Holdings No. 6 Inc. re: option funding commitment, November 7, 1995;

u) document 122, draft opinion letter from Heenan Blaikie to Internationale Nederlanden Bank N.V. and Berkshire (1995) Financial Services No. 4 Inc., November 7, 1995;

v) document 124, draft letter from Heenan Blaikie to Internationale Nederlanden Bank N.V., November 7, 1995;

w) document 130, handwritten notes;

x) document 143, complimentary slip from Allen Garson, Heenan Blaikie to Adam Kardash, Heenan Blaikie with attached letter from Linda Rosenthal, Alliance Equicap to Allen Garson dated December 4, 1995 with handwritten notes, December 8, 1995;

y) document 159, complimentary slip from Adam G. Kardash, Heenan Blaikie to Allen Garson, Heenan Blaikie re: 1996 P & A transaction, February 8, 1996;

z) document 339, Draft #1, Unwind Agreement between Alliance Services (No. 5) Limited Partnership, Warner Bros. and Riverside Avenue Distributing Inc., 1995;

aa)             document 346, Draft #2, Alliance Services (No. 5) Limited Partnership Agreement between Alliance Distribution Services No. 3, Inc., Michael Weisbarth and AFS and Company, Limited Partnership No. 5, February 24, 1995;

bb)             document 413, Berkshire (1995) Financial Services No. 4 Inc. and AFS and Company Limited Partnership No. 5 - Financials, with handwritten notations, June 28, 1995;

cc)             document 418, unsigned letter from Heenan Blaikie to Alliance Equicap Corporation and AFS and Company, Limited Partnership No. 5, June 30, 1995;

dd)             document 419, unsigned letter from Heenan Blaikie to Internationale Nederlanden Bank N.V. and Berkshire (1995) Financial Services No. 4 Inc., June 30, 1995;

ee)             document 420, unsigned letter from Heenan Blaikie to Alliance Equicap Corporation and Limited Partners of AFS and Company, Limited Partnership No. 5, June 30, 1995;

ff) document 460, draft letter from Warner Bros., a division of Time Warner Entertainment Company, L.P., to Jeff Rayman, Alliance Equicap Corporation, without handwritten notations; November 22, 1995.

[38]            Next, I will deal with the hybrid documents, that is those classified under two headings by the Applicants. The first group I will address are those classified as being both solicitor/client communications and solicitor's work product, that is those belonging to 1 and 4. These documents are privileged because they fall into the categories of solicitor/client communications and solicitor's work product:

a) document 34, fax cover sheet from Linda, Alliance Equicap Corporation to Adam Kardash, Heenan Blaikie, with attached Theatrical Distribution Transaction Investment Summary, with handwritten notations, dated October, 1995, fax cover sheet dated October 10, 1995;

b) document 35, complimentary slip from Allen Garson to Adam Kardash and Anne Marie Montague, Heenan Blaikie, with attached letter from Linda Rosenthal, Alliance Equicap to Daniel Leon, Heenan Blaikie, dated September 14, 1995, slip dated October 12, 1995;

c) document 38, fax cover sheet from Adam Kardash, Heenan Blaikie to Linda Rosenthal, Alliance Equicap and Danielle Lindholm, Abrams Consultants Inc., with attached spreadsheet re: financial statement of "Natural Enemy", dated October 17, 1995.

d) document 40, fax cover sheet from Adam Kardash, Heenan Blaikie to Linda Rosenthal, Alliance Equicap and Danielle Lindholm, Abrams Consultants Inc., with attached post it note; spreadsheet re: financial statement of "Visitors of the Night", dated October 19, 1995.

e) document 208, fax cover sheet from Adam Kardash, Heenan, Blaikie to Linda Rosenthal, Alliance Equicap with attached transaction report, fax cover sheet dated May 13, 1996, but without other attachment;

f)    document 228, fax cover sheet from Linda Rosenthal to Mark Jadd, Heenan Blaikie, with handwritten notations, March 19, 1999, but without the attachment;

g) document 317, fax cover sheet from Mark Jadd, Heenan Blaikie to Linda Rosenthal, Alliance Equicap Corporation, with attached transmission sheet, dated March 12, 1997 and excerpt re: Income Tax Act.

[39]            The next hybrid group of documents are those which are described as being both solicitor/agent communications and solicitor's work product. The following documents are classified in that manner:

a) document 116, fax cover sheet from Adam Kardash, Heenan Blaikie to Jeff Berkowitz, Heenan Blaikie with attached transaction report; draft letter from Price Waterhouse LLP to Alliance Services (No. 6) Limited Partnership, Heenan Blaikie, AFS Limited Partnership No. 7 with handwritten notes, November 7, 1995;

b) document 154, fax cover sheet from Adam Kardash, Heenan Blaikie to Jeff Berkowitz, Heenan Blaikie, with attached letter from Price Waterhouse LLP to Alliance Service No. 7, AFS Limited Partnership No. 8 and Heenan Blaikie, with handwritten notations, dated February 29, 1996, fax cover sheet dated February 8, 1996.

[40]            The final document in the hybrid class is document 187 which is classified as being both solicitor/client and solicitor/agent communications. This document is a:

      fax cover sheet from Adam Kardash, Heenan Blaikie to Bernie Abrams, with attached fax from Daniel B. Leon, Heenan Blaikie to Allen Garson, Heenan Blaikie, dated February 29, 1996; declaration, dated March 5, 1996, and continuing non-corporate authorization, dated March 5, 1996, fax cover sheet dated March 3, 1996.

[41]            In conclusion, the documents identified above are subject to solicitor-client privilege and are exempt from disclosure. For the protection of the parties, all documents in issue in this proceeding shall remain under seal and in the possession of the custodian until the expiry of the applicable appeal period.

                                               ORDER

The application is allowed. It is hereby declared that the Applicants have a valid claim for solicitor-client privilege for the documents identified in the preceding reasons.

All documents shall remain under seal and in the possession of the custodian until the expiry of the applicable appeal period.

                                                                                      "E. Heneghan"                     

                                                                                               J.F.C.C.                      

Ottawa, Ontario

May 1, 2001