Audio tracks of lawyer-client chats accidentally exposed

Privilege was not waived, court says

Audio tracks of lawyer-client chats accidentally exposed
Veronica Marson says the decision is an important reminder of the importance of organizing information in a digital environment

A lawyer’s “failure” to retrieve a CD of privileged audio recordings does not mean a client has waived solicitor client privilege, the Ontario Superior Court of Justice said in a recent decision.

“While counsel for the plaintiff failed to act promptly to retrieve the documents,” wrote Justice Robert Charney in the decision, “the fault for this failure lies exclusively with counsel.”

Quoting Justice Ian Nordheimer, Charney added, “This is not sufficient reason to punish …. ‘the blameless client to whom, it should be remembered, the privilege actually belongs.’”

As lawyers face the prospect of organizing more and more digital information, the decision is an important reminder of the importance of organizing information with the digital environment in mind, says Veronica Marson, an associate at Singer Kwinter who represented the plaintiff in the case and the respondent on the motion.

“In this day and age, with all the information people need to keep track of, it’s entirely not unexpected that people will want to tape things. It’s important for lawyers to figure out how to organize audio recordings and video recording in a way that’s not too cumbersome for litigation. So, in this particular case, rather than the judge having to sit down for three hours listening to the audio recordings, defence counsel had a great suggestion to transcribe the recordings, and that ultimately cut down on the amount of time amount of time the judge needed to use to deal with the recordings,” she says. “Similarly, if you were dealing with video recordings, sometimes you have surveillance can last for hours. To make things easier for yourself and opposing counsel, you have to think about taking screenshots or putting it in a format that’s more useful for everyone involved.”

The June 7 decision, 1778077 Ontario Limited (Chili’s Grill & Bar) v. The Economical Insurance Group, 2019 ONSC 3548, explores whether a restauranteur, Heath Everett, waived solicitor client privilege of 24 audio recordings of conversations with his former lawyers, Ross & McBride LLP.

The recorded conversations with the lawyers were part of a case involving a Chili’s restaurant in Woodbridge, Ont. that was flooded on July 27, 2014. Chili’s sued the insurance companies, insurance brokers, insurance adjuster, and the restoration companies. The restaurant claimed that the broker was negligent and offered “inadequate business interruption insurance,” while the restoration companies contributed to a delay in the restaurant’s re-opening. The restaurant never re-opened and was ultimately sold.

The principal of the restaurant location retained Ross & McBride to deal with the issues that came out of the flood, such as rent abatement, and alleged business interruption insurance errors, while Singer Kwinter was retained to seek damages for losses to its business and lost profit, and for negligence and breach of contract.

During the discovery process, recordings of conversations with Ross & McBride were listed as documents the plaintiff “objected to producing on the grounds of privilege.” However, in 2017, Singer Kwinter sent the opposing counsel a CD of 233 audio recordings, including the 24 Ross & McBride conversations.

Jeff Van Bakel, the lawyer for one of the restoration companies, Belfor Restoration Services, emailed Singer Kwinter, letting them know that “the audio recordings produced include a number of the recordings of conversations between Mr. Everett and lawyers from Ross & McBride.”

“As a result, we presume that you are no longer asserting privilege with respect to these recordings, or the Ross & McBride file, and therefore look forward to receipt, at your earliest convenience, of a copy of the Ross & McBride file,” the email said. The lawyer for the restoration company followed up twice but received no reply.

“At this point, counsel for the plaintiff finally woke up, and on September 29, 2017, wrote to counsel for the defendants, apologizing for the delay in responding to the defendant’s earlier correspondence, explaining ‘our office has been going through some changes of late and as a result, some of our communications have been delayed,’” wrote Charney. “She confirmed that the Ross & McBride audio recordings had been sent to the defendants in error and maintained the claim to privilege with respect to the Ross & McBride file.”

Belfor argued that the restaurateurs’ conversations with lawyers might reveal that the “decision to sell Chili’s to Shoeless Joe’s was unrelated to the flood or delayed repairs.”

“Belfor wants disclosure of the Ross & McBride file for one purpose only: to find out when Mr. Everett made his decision to sell the assets of his business,” wrote Charney. “In making this argument, Belfor skips over the first step of the deemed waiver analysis: the presence or absence of legal advice must be relevant to the existence or non-existence of a claim or defence. In this case, there is no suggestion that the presence or absence of legal advice had any bearing on the plaintiff’s claim that Belfor’s failure to complete the remediation and repairs of the restaurant in a reasonable time led to the closure of Chili’s.”

The judge also reviewed sealed transcripts of the conversations between the restaurateur and the Ross & McBride lawyers.

“Having reviewed these transcripts, I am satisfied that Mr. Everett was at all times seeking legal advice and the lawyers at Ross & McBride were at all times providing legal advice in their capacity as lawyers. They were not acting as business counsellors or in some other non-legal capacity. As such, all of these transcripts are protected by solicitor client privilege,” Charney wrote.

Van Bakel declined to comment to Law Times. Beau Chapman, who represented some of the insurance-related defendants, was not immediately available to comment.

Marson says that the judge’s decision also highlights the importance of pleadings. She says the judge’s decision noted that the statement of claim “makes no reference to the plaintiff obtaining or relying on any legal advice or to the plaintiff’s state of mind.” Charney also wrote Belfor’s position “would mean that every time a plaintiff claimed that it relied on the defendant to comply with a term of an agreement and suffered damages as a result of the defendant’s failure to comply, the plaintiff would be deemed to put his state of mind in issue and to have waived solicitor client privilege.”

“Ideally, your pleadings should reflect what the theory of the case is. You have to go back to basics and analyze whether you really, really need certain pieces of information. Here, the judge ended up finding that the information defence counsel was seeking was available by other means,” says Marson. “Obviously, in modern litigation, we are a lot of times dealing with a high volume of information. A lot of documents. Mistakes will be made. It’s important to make sure you are particularizing a lot of the information so you can deal with problems before they arise.”

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