Kaddoura v. Hanson et al.,

• Judge: Martin,Slatter,Yamauchi
• Neutral Citation: 2015 ABCA 154
• Date: 09 April 2015
• Court: Court of Appeal (Alberta)

Kaddoura v. Hanson (2015), 600 A.R. 184; 645 W.A.C. 184 (CA)

MLB headnote and full text

Temp. Cite: [2015] A.R. TBEd. MY.043

Ali Kaddoura (respondent/defendant) v. Harris H. Hanson and Hanson Associates (appellants/third party defendants) and Royal Bank of Canada (not party to the appeal/plaintiff) and Law Society of Alberta (intervenor)

Travis Eade (respondent/plaintiff) v. Linda Anderson (appellant/defendant) and Perry Young, Kathy Young and Neil Barclay (not parties to the appeal/plaintiffs) and Royal Bank of Canada, Canada Mortgage and Housing Corporation, Duc Bao Lam, 1282350 Alberta Ltd., Taranjeet Aujla, George Georgeou, Remax House of Real Estate, Guy Rivard, Shaun Folk, Monica Maksymik Folk, John R. Condin, K. Grant Watson, Kevin Graham, Mirrella Desantis, Keith Worral, Tien Lam, Tri Lam (not parties to the appeal/defendants) and George Georgeou (not party to the appeal/third party defendant)

(1401-0203-AC; 1401-0204-AC; 2015 ABCA 154)

Indexed As: Kaddoura v. Hanson et al.

Alberta Court of Appeal

Martin and Slatter, JJ.A., and Yamauchi, J.(ad hoc)

May 6, 2015.

Summary:

"Straw buyers"/mortgagors claimed against their lawyers, seeking indemnity for the shortfalls they faced. They alleged that the lawyers knew, or ought to have known, that the underlying real estate transactions were not legitimate. The straw buyers applied for access to the lawyers' real estate files that involved the same alleged main fraudster and bank loans officer. The lawyers asserted that they were not required to disclose or produce those files.

A Master of the Alberta Court of Queen's Bench, in a decision reported at [2013] A.R. Uned. 637, concluded that the collateral client files were relevant and material, they were under the control of the lawyers, and they therefore had to be listed in the Affidavit of Records. The lawyers appealed.

The Alberta Court of Queen's Bench dismissed the appeal, but allowed the lawyers to list the files using a file number rather than the client's name. The lawyers appealed.

The Alberta Court of Appeal dismissed the appeals. "The Master's orders, which merely directed the disclosure of the related client files, and not their production, contained no reviewable errors. They were properly modified and affirmed by the chambers judge."

Practice - Topic 4152

Discovery - General principles - Purpose of discovery - The Alberta Court of Appeal commented on the "legitimate role of questioning in obtaining admissions about facts that are not in dispute. Rule 5.1(1)(b) confirms that one of the purposes of discovery is to narrow and define the issues between the parties. If a fact is not in dispute, it need not be proven at trial. Those facts are often admitted at trial, but if not the opposing litigant can simply read the question and answer containing the admission onto the trial record. It is no objection that the questioning litigant may already 'know' the answer to a question, because the objective of the question is to get the other side to admit the fact." - See paragraph 16.

Practice - Topic 4157

Discovery - General principles - Collateral use of discovery information (implied or deemed undertaking rule) - [See eleventh Practice - Topic 4632 ].

Practice - Topic 4572

Discovery - What documents must be produced - Documents in possession, power or control of a party - [See first Practice - Topic 4635 ].

Practice - Topic 4572.1

Discovery - What documents must be produced - Documents related to similar fact evidence - [See first Practice - Topic 4632 ].

Practice - Topic 4573

Discovery - What documents must be produced - Documents related to or relevant and material to matters in issue - [See second Practice - Topic 4632 ].

Practice - Topic 4577.1

Discovery - What documents must be produced - Privileged documents - Solicitor's files, notes, etc. - [See eleventh Practice - Topic 4632 ].

Practice - Topic 4632

Discovery - Affidavit or list of documents - What documents must be listed - "Straw buyer" clients applied for access to real estate files of the defendant lawyers involving the same alleged main fraudster and bank loans officer - The lawyers asserted that they were not required to disclose or produce the collateral client files - The Alberta Court of Appeal stated that "the plaintiffs [respondents] essentially seek 'similar fact evidence' in the discovery process. While that sort of evidence is more common in criminal cases, it can be used in civil cases as well. ... If that sort of evidence can potentially be probative at trial, there is no reason in principle why it cannot be explored during the discovery process. At the production stage of the litigation, it is not necessary to decide whether the trial judge will or will not be prepared to draw the inferences from the circumstantial evidence put forward by the respondents. Nor must the respondents demonstrate conclusively that the discovered records will in fact contain any evidence of assistance to them. It may be that the client files will be produced, be examined, and be shown to have no probative value under any theory of the case. However, at this stage of the litigation the respondents need only show a plausible line of argument" - See paragraphs 13 and 14.

Practice - Topic 4632

Discovery - Affidavit or list of documents - What documents must be listed - "Straw buyer" clients applied for access to real estate files of the defendant lawyers involving the same alleged main fraudster and bank loans officer - An issue was whether the collateral client files were "relevant and material" (rules 5.2, 5.25(1)(a)) - The Alberta Court of Appeal stated that "[t]here is no fixed standard of what is 'material'. Production of records is not required just because some remote and unlikely line of analysis can be advanced, and it will not be ordered to support lines of pretrial discovery that are unrealistic, speculative, or without any air of reality. ... Discovery will not be permitted if its cost is grossly disproportionate to any likely benefit: R. 5.3(1)(b). Where the state of mind of the litigants is relevant, however, it is often only possible to prove that state of mind using circumstantial evidence. Describing such evidence as 'secondary' or 'tertiary' does not assist, because the underlying records might nevertheless 'significantly help determine one or more of the issues'." - See paragraph 15.

Practice - Topic 4632

Discovery - Affidavit or list of documents - What documents must be listed - The Alberta Court of Appeal stated that "the right to disclosure of records does not depend on the litigant proving with certainty that some relevant records exist. Rather, the onus is on the other litigant to review its own records and prepare an affidavit of records listing relevant records that do exist" - See paragraph 17.

Practice - Topic 4632

Discovery - Affidavit or list of documents - What documents must be listed - A Master concluded that the client files at issue were relevant and material, they were under the control of the defendant lawyers, and they therefore had to be listed in the Affidavit of Records - The Alberta Court of Appeal rejected the argument that the records should not be disclosed because the respondents had "other methods" of getting the same information - "The discovery process in Part 5 of the Rules is an efficient, structured, and comprehensive method of obtaining relevant and material information in litigation, and it is no answer to legitimate discovery inquiries that information in the hands of a litigant might also be available through other methods. In any event, if the information is contained in public registries, any privilege is likely lost, and any objection to disclosing the records disappears." - See paragraph 18.

Practice - Topic 4632

Discovery - Affidavit or list of documents - What documents must be listed - "Straw buyers"/mortgagors claimed against their lawyers, seeking indemnity for the shortfalls they faced - They alleged that the lawyers knew, or ought to have known, that the underlying real estate transactions were not legitimate - The straw buyers applied for access to the lawyers' real estate files that involved the same alleged main fraudster and bank loans officer - The lawyers asserted that they were not required to disclose or produce those files - A Master of the Alberta Court of Queen's Bench concluded that the collateral client files were relevant and material, they were under the control of the lawyers, and they therefore had to be listed in the Affidavit of Records - The lawyers appealed - A Court of Queen's Bench judge dismissed the appeal but allowed the lawyers to list the files using a file number rather than the client's name - The Alberta Court of Appeal held that the Master did not err in determining that the client files were "relevant and material" within the meaning of the applicable Rules - "The Master's orders, which merely directed the disclosure of the related client files, and not their production, contained no reviewable errors. They were properly modified and affirmed by the chambers judge." - See paragraphs 9 to 18.

Practice - Topic 4632

Discovery - Affidavit or list of documents - What documents must be listed - "Straw buyers"/mortgagors claimed against their lawyers, seeking indemnity for the shortfalls they faced - A Master concluded that collateral client files were relevant and material, they were under the control of the lawyers, and they therefore had to be listed in the Affidavit of Records - The Alberta Court of Appeal held that the lawyers' arguments about breaches of privilege were premature - "The concerns of the appellants and the Law Society are addressed by the structure of the Rules. The Master did not order the production of any records, only their disclosure or listing. The Master specifically declined ... to consider any issue of privilege, recognizing that the review of the claim for privilege under R. 5.11(1)(b) would follow later. The formal order specifically states that issues of privilege are left for future consideration." - See paragraph 22.

Practice - Topic 4632

Discovery - Affidavit or list of documents - What documents must be listed - "Straw buyers"/mortgagors claimed against their lawyers, seeking indemnity for the shortfalls they faced - A Master concluded that collateral client files were relevant and material, they were under the control of the lawyers, and they therefore had to be listed in the Affidavit of Records - The Alberta Court of Appeal held that the lawyers' arguments about breaches of privilege were premature - "It can be argued that the mere listing of the client files involves some inroad into privilege. ... That may be so, but the Rules of Court nevertheless require that they be disclosed, even if not eventually produced because of a valid claim of privilege. Exceptions to solicitor and client privilege are not easily recognized, but when an enactment specifically calls for disclosure, the enactment prevails. The chambers judge modified the Master's order to the extent of allowing the files to be disclosed anonymously, a modification which effectively mitigated any objection that might be made on this ground." - See paragraph 23.

Practice - Topic 4632

Discovery - Affidavit or list of documents - What documents must be listed - "Straw buyers"/mortgagors claimed against their lawyers, seeking indemnity for the shortfalls they faced - A Master concluded that collateral client files were relevant and material, they were under the control of the lawyers, and they therefore had to be listed in the Affidavit of Records - The Alberta Court of Appeal held that the lawyers' arguments about breaches of privilege were premature - "No court has yet ordered that the respondents are entitled to see these files. Likewise, the clients have not been effectively deprived of their claim to privilege or confidentiality, or notice of the application. When an application is brought for production of the files, it will probably be prudent to give the clients notice. Any dispute about the need for, method of, or extent of notice can be resolved at that time. Whether disclosure of the files is eventually adjudicated by an application under R. 5.11(1)(b) or R. 5.13 makes little difference if the clients are given notice either way." - See paragraph 24.

Practice - Topic 4632

Discovery - Affidavit or list of documents - What documents must be listed - "Straw buyers"/mortgagors claimed against their lawyers, seeking indemnity for the shortfalls they faced - A Master concluded that collateral client files were relevant and material, they were under the control of the lawyers, and they therefore had to be listed in the Affidavit of Records - The Alberta Court of Appeal stated that "[a] lawyer has an obligation to protect the client's rights of confidentiality and privilege. When preparing an affidavit of records in cases like this, it is open to the litigant lawyer to flag documents under his or her control that may not be producible, at least not until the clients have been heard. That does not amount to any impermissible 'asserting' of the privilege of others." - See paragraph 26.

Practice - Topic 4632

Discovery - Affidavit or list of documents - What documents must be listed - "Straw buyers"/mortgagors claimed against their lawyers, seeking indemnity for the shortfalls they faced - A Master concluded that collateral client files were relevant and material, they were under the control of the lawyers, and they therefore had to be listed in the Affidavit of Records - The chambers judge dismissed the appeal - The Alberta Court of Appeal held that the procedure adopted by the Master and chambers judge was appropriate - "There has as yet been no order allowing the respondents to see the files. The privilege is intact. Nothing prevented the lawyers from giving the clients notice that the order was being applied for, or that it had been made. The lawyers could have advised the clients of the Master's order, and that they were appealing the order. The clients could then have intervened to the extent they thought it advisable. Alternatively, the clients can be given notice of any subsequent application for production of the files. The long standing procedure in the Rules is designed to protect the claim for privilege, while providing an orderly method of determining if the claim is valid." - See paragraphs 29 and 30.

Practice - Topic 4632

Discovery - Affidavit or list of documents - What documents must be listed - "Straw buyers"/mortgagors claimed against their lawyers, seeking indemnity for the shortfalls they faced - A Master concluded that collateral client files were relevant and material, they were under the control of the lawyers, and they therefore had to be listed in the Affidavit of Records - The lawyers and the intervenor Law Society raised concerns about the confidentiality of lawyers' files - The Alberta Court of Appeal stated that "the Rules of Court do not limit the obligation of litigants to produce relevant and material documents based on general assertions of confidentiality, although terms may be imposed to reflect legitimate concerns. ... The Rules recognize that many produced records are confidential, and therefore they are subject to the 'implied undertaking' that the documents will not be used for collateral purposes: R. 5.33. The Master did not rule on any issues of confidentiality that the clients (assuming they are third parties with an interest in the files) may assert when the time comes." - See paragraph 31.

Practice - Topic 4635

Discovery - Affidavit or list of documents - Duty respecting documents in party's possession, power or control - "Straw buyers"/ mortgagors claimed against their lawyers, seeking indemnity for the shortfalls they faced - A Master concluded that collateral client files were relevant and material, they were under the control of the lawyers, and they therefore had to be listed in the Affidavit of Records - The lawyers and the intervenor Law Society argued that the client files were not within the "control" of the lawyers, a precondition of the obligation to disclose - The Alberta Court of Appeal stated that "[t]he word 'control' is a wide one, going beyond mere legal ownership or possession. The Rules do not imply that a document cannot be under the 'control' of more than one party at any one time. The term 'control' must be interpreted in the context of the purposes of the discovery process set out in R. 5.1, and the overriding philosophy of wide pretrial disclosure in Part 5." - See paragraph 34.

Practice - Topic 4635

Discovery - Affidavit or list of documents - Duty respecting documents in party's possession, power or control - "Straw buyers"/ mortgagors claimed against their lawyers, seeking indemnity for the shortfalls they faced - A Master concluded that collateral client files were relevant and material, they were under the control of the lawyers, and they therefore had to be listed in the Affidavit of Records - The lawyers and the intervenor Law Society argued that the client files were not within the "control" of the lawyers, a precondition of the obligation to disclose - The Alberta Court of Appeal stated that "[o]n the face of it, the lawyers have control of the client files, because they have them in their possession. In a physical sense, they could produce them for inspection at any time. The appellant's argument is rather that since the files are in some respects the property of the clients, the lawyers are not entitled or authorized to disclose them. The Rules of Court, however, distinguish between the obligation to disclose the files, and a second obligation to produce them for inspection. Questions about entitlement to view the files are more properly examined in the context of claims of privilege and confidentiality. The appellants' arguments about 'control' are, in the present context, merely another version of their arguments about privilege, confidentiality, and the related duty of the lawyer to maintain privacy over the client's business." - See paragraph 35.

Practice - Topic 4635

Discovery - Affidavit or list of documents - Duty respecting documents in party's possession, power or control - "Straw buyers"/ mortgagors claimed against their lawyers, seeking indemnity for the shortfalls they faced - A Master concluded that collateral client files were relevant and material, they were under the control of the lawyers, and they therefore had to be listed in the Affidavit of Records - The lawyers and the intervenor Law Society argued that the client files were not within the "control" of the lawyers, a precondition of the obligation to disclose - The Alberta Court of Appeal stated that "the files are physically under the control of the lawyer. They may also be under the 'control' of the client, in the sense that the client could direct the lawyer to deliver up the file. As a litigant, the lawyer is nevertheless required to list the relevant files in the affidavit of records. If the client objects to production of his or her file in litigation involving his or her lawyer, notwithstanding the lawyer's possession of the file, that issue should be determined at the production stage of the discovery process. If the lawyer asserts a professional obligation not to disclose the client's file, and asserts that obligation overrides the legal duty to produce relevant documents, that dispute can be adjudicated under R. 5.11." - See paragraph 37.

Practice - Topic 4635

Discovery - Affidavit or list of documents - Duty respecting documents in party's possession, power or control - "Straw buyers"/ mortgagors claimed against their lawyers, seeking indemnity for the shortfalls they faced - A Master concluded that collateral client files were relevant and material, they were under the control of the lawyers, and they therefore had to be listed in the Affidavit of Records - The intervenor Law Society argued that its Code of Conduct placed an obligation on a lawyer to protect the confidentiality of clients' files - The Alberta Court of Appeal stated that "[s]uch provisions do not, however, automatically exempt a lawyer from any competing legal obligations to disclose information. ... General requirements of confidentiality do not necessarily excuse disclosure otherwise required by the Rules. ... Rule 2.03(1)(b) of the Code of Conduct of the Law Society recognizes that by allowing disclosure when 'required by law or a court'. ... The issue is not whether lawyers have an obligation to keep their clients' files confidential, but whether the competing obligation to disclose documents under the Rules of Court prevails. The Rules provide a two-step process for resolving such issues. The first step requires that the lawyer list the relevant files in the Affidavit of Records, to create a platform for resolution of the ultimate issue." - See paragraph 38.

Cases Noticed:

Mood Music Publishing Co. v. De Wolfe Ltd., [1976] Ch. 119; [1976] 1 All E.R. 763 (C.A.), refd to. [para. 12].

Greenglass v. Rusonik, [1983] O.J. No. 40 (C.A.), refd to. [para. 13].

Dow Chemical Canada ULC et al. v. Nova Chemicals Corp. (2014), 577 A.R. 335; 613 W.A.C. 335; 2014 ABCA 244, refd to. [para. 14].

Weatherill Estate v. Weatherill et al. (2003), 337 A.R. 180; 2003 ABQB 69, refd to. [para. 14].

Myers v. Elman, [1940] A.C. 282 (H.L.), refd to. [para. 17].

Spencer v. Canada (Attorney General) et al. (2000), 199 Sask.R. 127; 232 W.A.C. 127; 7 C.P.C.(5th) 280; 2000 SKCA 96, refd to. [para. 17].

Alberta et al. v. C.H.S. et al. (2005), 385 A.R. 119; 55 Alta. L.R.(4th) 168; 2005 ABQB 695, refd to. [para. 17].

Blood Tribe Department of Health v. Privacy Commissioner (Can.) et al., [2008] 2 S.C.R. 574; 376 N.R. 327; 2008 SCC 44, refd to. [para. 19].

Federation of Law Societies of Canada v. Canada (Attorney General) (A.G.) (2015), 365 B.C.A.C. 3; 627 W.A.C. 3; 2015 SCC 7, refd to. [para. 19].

University of Calgary v. J.R., 2015 ABCA 118, refd to. [para. 19].

Thompson v. Minister of National Revenue (2013), 448 N.R. 339; 2013 FCA 197, refd to. [para. 23].

Rhino Legal Finance Inc. v. Salmon (2012), 535 A.R. 191; 2012 ABQB 169 (Master), refd to. [para. 30].

Reichmann et al. v. Toronto Life Publishing Co. (1990), 71 O.R.(2d) 719 (H.C.), refd to. [para. 31].

Price v. Lambrinos, [2012] O.T.C. Uned. 4856; 2012 ONSC 4856 (Master), refd to. [para. 36].

783783 Alberta Ltd. v. Canada (Attorney General) et al. (2010), 482 A.R. 136; 490 W.A.C. 136; 29 Alta. L.R.(5th) 37; 2010 ABCA 226, refd to. [para. 38].

D. v. National Society for the Prevention of Cruelty to Children, [1978] A.C. 171; [1977] 1 All E.R. 589 (H.L.), refd to. [para. 38].

Authors and Works Noticed:

Law Society of Upper Canada, Professional Conduct Committee, A Lawyer's Authority Over Documents on Termination of Retainer (1981), 15 L.S.U.C. Gaz. 103 [para. 36].

Counsel:

J.D. Poole and M.S. Parsons, for the respondents, Ali Kaddoura and Travis Eade;

C. Jensen, Q.C., and E.J. Baker, for the appellants, Harris H. Hanson and Hanson Associates and Linda Anderson;

S.E. Borgland, for the intervenor, Law Society of Alberta.

These two consolidated appeals were heard on April 9, 2015, before Martin and Slatter, JJ.A., and Yamauchi, J.(ad hoc), of the Alberta Court of Appeal. The Court delivered the following memorandum of judgment, filed at Calgary, Alberta, on May 6, 2015.