Universal Sales Ltd. et al. v. Edinburgh Assurance Co. et al., 2009 FC 150

• Judge: Russell, J.
• Court: Federal Court (Canada)
• Case Date: December 17, 2008
• Jurisdiction: Canada (Federal)
• Citations: 2009 FC 150;(2009), 341 F.T.R. 175 (FC)

Universal Sales v. Edinburgh Assurance (2009), 341 F.T.R. 175 (FC)

MLB headnote and full text

Temp. Cite: [2009] F.T.R. TBEd. FE.056

Universal Sales Limited, Atlantic Towing Limited, J.D. Irving Limited, Irving Oil Company Limited and Irving Oil Limited (plaintiffs) v. Edinburgh Assurance Co. Ltd., Orion Insurance Co. Ltd., British Law Insurance Co. Ltd., English & American Ins. Co. Ltd., Economic Insurance Co. Ltd., Andrew Weir Ins. Co. Ltd., Insurance Co. of North America, London & Edinburgh General Ins. Co. Ltd., Ocean Marine Ins. Co. Ltd., Royal Exchange Assurance, Sun Insurance Officer Ltd., Sphere Insurance Co. Ltd., Drake Insurance Co. Ltd., Eagle Star Insurance Co. Ltd. and Stephen Roy Merritt, as Representative of Underwriters Subscribing to Lloyd's Policy No. 614/B94656-A/1582 (defendants)

(T-1148-01; 2009 FC 150)

Indexed As: Universal Sales Ltd. et al. v. Edinburgh Assurance Co. et al.

Federal Court

Russell, J.

February 12, 2009.

Summary:

The plaintiffs' ship sank in the Gulf of St. Lawrence in 1970, with a cargo of fuel oil. The federal government raised the ship in 1996, and sued the plaintiffs. As part of the settlement concluded in 2000, the plaintiffs agreed to pay $5 million without admission of liability. The plaintiffs sued the defendants in 2007 for indemnity under the relevant insurance policies. The plaintiffs' motion dealt with the defendants' refusal to produce documents or answer discovery questions related to when they determined there was no coverage. The defendants claimed solicitor-client privilege.

A Prothonotary of the Federal Court dismissed the motion. The plaintiffs appealed.

The Federal Court dismissed the appeal. There was nothing "clearly wrong" with the prothonotary's decision on the issues.

Courts - Topic 2583

Registrars and prothonotaries - Appeals from - Scope of review - The plaintiffs sought indemnity from the defendant insurers - The defendants refused to produce documents or answer discovery questions related to when they determined there was no coverage; they claimed solicitor-client privilege - The plaintiffs appealed an order of Prothonotary Lafrenière on the point at issue - The Federal Court concluded that the decision was based on findings of fact and the prothonotary's view of the principles of solicitor-client privilege - Therefore, the court was "required to consider, within the usual principles set forth in Merck and Aqua-Gem whether the order is clearly wrong in the sense that Prothonotary Lafrenière's discretion was based upon a wrong principle or upon a misapprehension of the facts" - The court was not convinced that it was dealing with a question vital to the final issue of the case or with a situation in which the standard ought to be correctness - However, even if it were to apply a standard of correctness, the court's conclusions would be the same - See paragraphs 13 to 17.

Evidence - Topic 4241

Witness - Privilege - Lawyer-client communications - Privilege - General - [See second Practice - Topic 4577 ].

Practice - Topic 4577

Discovery - What documents must be produced - Privileged documents - Attorney-client communications - As part of a federal claim settlement, the plaintiffs agreed to pay $5 million without admission of liability - The plaintiffs sought indemnity from the defendant insurers - The defendants refused to produce documents related to when they determined there was no coverage; they claimed solicitor-client privilege - At paragraph 21 of their Statement of Defence, the defendants pled that: "(t)he settlement entered into between the Plaintiffs and the Government of Canada was entered into without the knowledge and consent of the Pleading Defendant" - The plaintiffs submitted that they were "hamstrung" as the defendants had raised a defence that they could not counter without reviewing the advice counsel provided to the defendants about coverage - A prothonotary concluded that the mere fact that the plaintiffs might be hamstrung in responding to the allegation did not warrant breaching solicitor-client privilege - The Federal Court stated that, if the plaintiffs felt hamstrung, it was because they were seeking to breach privilege in search of evidence regarding the defendants' position on pre-claim coverage - They were not hamstrung as a result of anything the defendants had put in issue - Paragraph 21 did not place in issue the defendants' pre-claim state of mind regarding coverage - See paragraphs 30 to 33.

Practice - Topic 4577

Discovery - What documents must be produced - Privileged documents - Attorney-client communications - The Federal Court considered the leading jurisprudence and summarized the relevant legal principles relating to solicitor-client privilege, including the following - "1. Solicitor-client privilege should be interfered with only to the extent necessary to achieve a just result ... 2. Waiver of solicitor-client privilege may occur in the absence of an intention to waive, where fairness and consistency so require. Waiver of privilege as to part of a communication will be held to be waiver as to the entire communication. Similarly, where a litigant relies on legal advice as an element of his claim or defence, the privilege which would otherwise attach to that advice is lost ... 3. A party will waive the protection of solicitor-client privilege when it voluntarily injects into the proceeding the question of its state of mind, and, in doing so, uses as a reason for its conduct the legal advice that it has received ... 4. To displace solicitor-client privilege there must be an affirmative allegation which puts the party's state of mind in issue" - In this case, there was no affirmative allegation by the defendants that put their state of mind regarding a pre-claim position on insurance coverage at issue - In the result, the court upheld the decision of a prothonotary on that issue - See paragraphs 34 and 35.

Practice - Topic 4585

Discovery - What documents must be produced - Privileged documents - Waiver - As part of a federal claim settlement, the plaintiffs agreed to pay $5 million without admission of liability - The plaintiffs sought indemnity from the defendant insurers - The defendants refused to produce documents related to when they determined there was no coverage; they claimed solicitor-client privilege - A prothonotary rejected the plaintiffs' argument that the defendants made an allegation in paragraph 21 of their Statement of Defence that put privileged material directly at issue and thereby waived any privilege in that material - Paragraph 21 alleged that the settlement was not binding on the defendants because there was no liability for it under the policy and the defendants never consented to it - The Federal Court, on a review of the record, agreed that the defendants had not put at issue their position on coverage or the advice received by counsel on coverage, prior to receipt of the plaintiffs' claim - Paragraph 21 did not put in issue the defendants' state of mind before the claim was made and did not even raise the issue of prejudice as a result of a failure to obtain prior consent - See paragraphs 18 to 23.

Practice - Topic 4585

Discovery - What documents must be produced - Privileged documents - Waiver - As part of a federal government claim settlement, the plaintiffs agreed to pay $5 million dollars without admission of liability - The plaintiffs sought indemnity from the defendant insurers - A prothonotary rejected the plaintiffs' argument that paragraph 21 of the Statement of Defence put privileged material directly at issue and thereby waived any privilege in that material - That paragraph alleged that the settlement was not binding on the defendants because there was no liability for it under the policy and the defendants never consented to it - On appeal, the plaintiffs sought to expand the import of paragraph 21; specifically, the consent and prejudice issues, and their relationship to pre-claim positions on coverage were put at issue by the plaintiffs based upon their interpretation of clause 7 of the Excess Insurance Policies - The Federal Court held that the defendants had not put at issue their pre-claim state of mind regarding coverage in such a way that would justify a waiver - See paragraphs 24 to 29.

Practice - Topic 4585

Discovery - What documents must be produced - Privileged documents - Waiver - As part of a federal government claim settlement, the plaintiffs agreed to pay $5 million dollars without admission of liability - The plaintiffs sought indemnity from the defendant insurers - A prothonotary dismissed the plaintiffs' motion that dealt with the defendants' refusal to produce documents related to when they determined there was no coverage; the defendants claimed solicitor-client privilege - The plaintiffs submitted that the defendants waived privilege over the coverage issue by disclosing a document which contained solicitor-client advice (the Côté Letter) - A prothonotary found that the Côté Letter was disclosed because privilege had been waived when the letter was provided to third parties - The Federal Court agreed - The disclosure did not demonstrate an intention to waive privilege over the coverage issue - There was neither express nor implied waiver on these facts - The court had earlier rejected the plaintiffs' argument relating to the disclosure of the Côté Letter based on the allegation that the defendants had raised the issue of their opinion on coverage - See paragraphs 36 to 43.

Practice - Topic 4585

Discovery - What documents must be produced - Privileged documents - Waiver - The plaintiffs submitted that the defendant insurers waived privilege over the coverage issue by disclosing a document which contained solicitor-client advice (the Côté Letter) - The Côté Letter was disclosed because privilege had been waived when the letter was provided to third parties - It referred to reports dealing with pre-claim coverage issues - The plaintiffs' arguments for waiver over the reports were premised on the assertion that a coverage issue had been raised in the Statement of Defence - A prothonotary concluded that privilege had not been waived - The Federal Court found the plaintiffs' position to be untenable and concluded that there was nothing "clearly wrong" with the prothonotary's decision - The prothonotary made important findings of fact that had not been shown to be misapprehensions, including that the Côté Letter did not contain detailed information respecting the legal position of his client, and that its disclosure did not waive solicitor-client privilege in the remaining undisclosed letters or the legal advice itself - The defendants had not engaged in selective disclosure - See paragraphs 44 to 47.

Cases Noticed:

Merck & Co. et al. v. Apotex Inc., [2004] 2 F.C.R. 459; 315 N.R. 175; 2003 FCA 488, refd to. [para. 13].

Canada v. Aqua-Gem Investments Ltd., [1993] 2 F.C. 425; 149 N.R. 273 (F.C.A.), refd to. [para. 13].

Fraser v. Houston et al., [2002] B.C.T.C. 1378; 2002 BCSC 1378 (Master), refd to. [para. 34].

Letourneau et al. v. Clearbrook Iron Works Ltd. (2004), 263 F.T.R. 186; 36 C.P.R.(4th) 228; 2004 FC 1422, refd to. [para. 43].

Counsel:

Laura K. Fric and Jennifer Fairfax, for the plaintiffs;

Matthew Liben, for the defendants.

Solicitors of Record:

Osler, Hoskin & Harcourt, Toronto, Ontario, for the plaintiffs;

Stikeman Elliott, LLP, Montreal, Quebec, for the defendants.

This motion was heard at Toronto, Ontario, on December 17, 2008, by Russell, J., of the Federal Court, who delivered the following judgment and reasons for judgment dated February 12, 2009.