Legal Blog

Whoops

What happens when one lawyer sends privileged information to another lawyer in error? This was the issue in Fotwe v. Citadel General Insurance Co. [2004] O.J. No. 1209 (SCJ).

My Mistake

The plaintiff had commenced an action against his insurer for statutory accident benefits arising out of a motor vehicle accident. The solicitor of the defendant insurer drafted a wonderful opinion letter to his client. The only problem was that he faxed it to the plaintiff’s lawyer instead of his client. The lawyer’s clerk placed the letter in the file, but the plaintiff’s lawyer did not see it until four months later when he started to prepare for a mandatory mediation session.

The plaintiff’s lawyer read a portion of the letter and stopped reading it when he realised that he had received it in error. He then returned the letter without making copies. He informed the defendant’s solicitor that he had read enough to know that the defendant’s solicitor had told the defendant that it would have to pay for one of the issues. The plaintiff’s lawyer stated that, although the letter mentioned settlement amounts, he could not remember precise figures, whether the figures included interest, or to what the figures related.

The defendant’s solicitor was sufficiently grateful for the candour of the plaintiff’s lawyer that he brought a motion to remove the plaintiff’s lawyer from the record.

Then, to demonstrate how acute he was, the defendant’s solicitor included the opinion letter in an affidavit in support of the motion. The plaintiff’s lawyer spotted this and returned the entire package without reading further. Ultimately, the defendant’s solicitor delivered all documents to the plaintiff’s lawyer without the offending opinion letter; only the court received a copy of it.

Master

The Master granted the motion. She held that fault was irrelevant and that, even if it was relevant, the plaintiff’s lawyer should have read no further than the first paragraph. She held that since the plaintiff’s lawyer had information regarding the defendant’s settlement strategy for the mediation, this prejudiced the defendant.

Judge

The judge to whom the plaintiff appealed held that he had to consider both fault and prejudice, to balance prejudice with the right of the plaintiff to choose his lawyer.

Notwithstanding this statement of law, the judge focused almost exclusively on the concept of prejudice. He noted that because the plaintiff had some indication of the defendant’s strategy, this might well prejudice the defendant at the mediation. However, his reaction was, so what. If the defendant did not like the plaintiff’s offer, it did not have to accept it.

The judge held that the Master erred in basing her decision on whether the defendant would be prejudiced at a mediation. The real issue was whether the defendant would be prejudiced at trial. Since there would be no prejudice at trial, the judge allowed the appeal and dismissed the defendant’s motion.

New Law

The defendant appealed. Remember, this all happened because of the mistake that the defendant’s solicitor made.

Between the date of the judge’s decision and the hearing of the appeal, the Ontario Court of Appeal decided a similar issue in Celanese Canada Inc. v. Murray Demolition Corp. [2004] O.J. No. 3983. That case dealt with a situation in which the solicitors came into possession of privileged documents because of a botched execution of an Anton Pillar order. Although the receipt of the documents was inadvertent, the solicitors receiving them were not lily white.

In that decision, the Court set out the test to be used when one party obtains privileged documents of another through inadvertence.

It held that solicitors will be disqualified if there is a real risk that opposing counsel will use information from the privileged documents to the prejudice of the moving party and a remedy short of disqualification cannot overcome the prejudice.

In explanation, the Court noted that “prejudice” meant “detriment”. Prejudice had to be real, not fanciful, speculative, or imaginary. The remedy was also dependent on whether the detriment was substantial and pressing or minor and inconsequential. Finally, the moving party had the onus to establish the requisite risk of prejudice.

The actual decision in relation to the facts was of no help because there was no decision. The Court remitted the matter back to the motions judge, who had made his decision on different principles from those set out in the test, for a decision in accordance with the correct test.

Divisional Court

With these new rules in mind, the Divisional Court, with relatively short reasons for decision, concluded that the appeal judge had correctly determined that there was no real prejudice in the Fotwe case and, accordingly, the defendant had not proven a key element of the test to determine disqualification. The Divisional Court held that the document could not be used at trial because it was privileged and that the Master failed to consider the evidence of the plaintiff’s solicitor about his position on the merits before receiving the privileged letter, his lack of knowledge of the details of the letter, and the non-binding effect of mediation.

Costs

The victorious plaintiff requested costs on a substantial indemnity basis, but the Divisional Court felt that the defendant’s conduct did not warrant that scale of costs. Given that the motion and the appeals arose from the defendant’s mistake, we are not sure we agree with that statement.

The plaintiff’s lawyers had claimed costs on a substantial indemnity basis of $50,000. The Divisional Court awarded $25,000.

Sealing

The defendant had obtained an order sealing the factums of the parties and the entire motion record, including all affidavits. The Divisional Court agreed that the privileged document had to be sealed until the trial of the action and all appeals had taken place, but that there was no reason why the rest of the court file had to be sealed.

Result

The result in the case was correct. However, the law it set out, including the test set out in Celanese is disconcerting. It means that one party’s lawyer can knock another party’s lawyer out of the game simply by sending privileged material in error, even if the other solicitor acts appropriately. This does not seem to be a fair result to us.

We would hope that if the party who was not at fault had its solicitor disqualified, then the moving party would have to pay substantial costs to compensate the responding party for the inevitable costs it would incur in changing lawyers mid-stream.