Litigation arose after a person part of planned joint venture decided to withdraw
In a case tackling privileged communications, an Ontario court found that one appellant was responsible for conducting and managing the litigation on his fellow appellants’ behalf. His access to the documents impacted the discussions surrounding the litigation, the court said.
The parties planned a joint venture to establish a new bank. In January 2015, one of the respondents advised that he no longer wanted to help fund the project. Litigation followed.
Several years later, the respondents learned that the appellants possessed privileged documents about the joint venture that belonged to them. The appellants stored these on a computer file server that they shared.
The motion judge granted the respondents a stay of proceedings. The judge found that Scott Penfound, one of the appellants, had the responsibility of managing the litigation on behalf of the other appellants and had access to privileged documents. These documents including the following:
- Legal opinions and strategy documents that the respondents’ external counsel – Norton Rose Fulbright Canada LLP, Stockwoods LLP, and Baker & McKenzie LLP – prepared for them
- Emails sent by the bank’s email address, including emails from in-house counsel and documents prepared for the purpose of the litigation
The judge held that a stay was the only appropriate remedy, given that the presumed prejudice to the respondent was serious.
Stay is viable: court
In Continental Currency Exchange Canada Inc. v. Sprott, 2023 ONCA 61, the Ontario Court of Appeal dismissed the appeal.
First, the appellate court ruled that the motion judge did not make inconsistent findings about whether the appellants accessed and reviewed privileged information. The judge had ample evidence to conclude that they had this access for a long period and that Penfound’s secretary reviewed some of the communications under his direction, the court said.
Second, the Court of Appeal held that the judge did not conflate the presumption of prejudice to the respondent with the imposition of a stay. The judge correctly set out the applicable test in Celanese Canada Inc. v. Murray Demolition Corp., 2006 SCC 36, the court added.
The appellate court upheld the judge’s finding, applying Celanese, that the appellants failed to rebut the presumption that the reviewed material was significant to the litigation and was capable of creating significant prejudice since the appellants gave no evidence explaining what information they actually reviewed.
Next, the Court of Appeal accepted that the judge improperly stated that the appellants had the onus of showing that there was another remedy, short of a stay, that would cure the problem. Despite this error, the court found that the judge did not reverse the burden of proof and did not impose a burden on the appellants to show that a lesser remedy was available. A stay of proceedings was the only viable solution, the court added.
Lastly, the appellate court determined that the judge did not commit an error by imposing a stay against all the appellants though only Penfound was presumed to have accessed and reviewed the privileged documents.