Vendors' attack on purchasers' solicitor-client privilege fails in sinking house case

Kenna v. Fellman, 1996 CanLII 423 (BC S.C.)

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Date:1996-05-24
Docket:5179

Decisions cited

  • Rogers v. Bank of Montreal, (reflex-logo) reflex[1985] 4 W.W.R. 503 • (1985), [1986] 57 C.B.R. 251 • [1985] 61 B.C.L.R. 239
  • Rogers v. Bank of Montreal, 1985 CanLII 141 (BC C.A.) — [1985] 4 W.W.R. 508 • (1985), [1986] 57 C.B.R. 256 • [1985] 62 B.C.L.R. 387

Date of Release:  May 24, 1996                       No. 05179

                                             Nanaimo Registry

 

 

 

            IN THE SUPREME COURT OF BRITISH COLUMBIA

 

 

                                 )

BETWEEN:                          )

                                 )REASONS FOR JUDGMENT

   THOMAS WILLIAM KENNA          )  

   and JOSEPHINE KENNA           )

                                 )

                     PLAINTIFFS   )OF THE HONOURABLE

                                 )  

AND:                              )

                                 )

   KURT FELLMAN,                 )   MR. JUSTICE R.M.J. HUTCHINSON

   LYDIA FELLMAN,               )

   COAST REALTY GROUP LTD.,      )

   DARWIN MAHLUM                 )

                                 )(IN CHAMBERS)

                     DEFENDANTS   )

                                 )

 

 

 

 

Counsel for the Plaintiffs:      Donald E. Taylor

 

Counsel for the Defendants

Coast Realty Group and Mahlum:   Peter C.P. Behie

 

Date and Place of Hearing:May 6, 1996 at

Nanaimo, B.C.

 

 

 

1            The plaintiffs bought a house owned by the defendants Fellman in 1993.  The vendors' agent was the defendant Mahlum, employed by the defendant Coast Realty.  The plaintiffs issued this process, alleging that the defendants failed to disclose the house was built on pillars and was subsiding, causing damages.  The plaintiffs claim rescission or damages.  The defendants Mahlum and Coast Realty allege that during negotiations between the solicitors for the parties a compromise was reached.

 

2            This application was brought by the defendants to compel the solicitor for the plaintiffs to produce all documents in their possession prepared by their former solicitor, Robert Garrett, relating to an offer to settle made on November 28, 1994, including notes, memoranda or letters sent by Garrett to the plaintiffs, and memoranda prepared by Garrett for the plaintiffs' present solicitor, Donald Taylor.  The plaintiffs claim solicitor-client privilege and the defendants say the privilege was waived.  Garrett was examined for discovery and refused to answer questions relating to instructions received from his client and Taylor claimed the solicitor-client privilege.

 

3            The allegation of compromise arises from correspondence between Garrett and Cheryl Spratt, the former solicitor on the record for Coast Realty and Mahlum.  On November 28, 1994, Spratt wrote a letter to Garrett, headed "Without Prejudice", in which she set out certain facts, and then gave her opinion that the plaintiffs had no good cause of action.  She suggested that if the plaintiffs were to consent to an order dismissing the action and execute a full release, the defendants Coast Realty and Mahlum would waive all costs and disbursements.  On February 22, 1995, Garrett wrote a letter to Spratt offering to discontinue the action, on condition that those defendants forgo costs.  On February 28, 1995, Spratt wrote to Garrett the following letter:

 

 

We write further to the writer's telephone conversation with your secretary regarding your letter of February 22, 1995.  We confirm your clients are prepared to execute a consent dismissal order without costs to dismiss their claims against Darwin Mahlum and Coast Realty Group Ltd.

 

If this is the case, we are prepared to agree to this.  We enclose a consent dismissal order without costs for execution by you.  We look forward to receipt of this document at your earliest convenience.

 

4            After that letter was written, the plaintiffs instructed Taylor to take over conduct of the file and he wrote to Spratt on July 19, 1995, stating that his clients had not instructed Garrett to consent to the dismissal of the action.

 

5            The basis of this application is that where the pleadings put in issue facts that cannot be decided without evidence being admitted of the legal advice given, then the privilege is waived.  The authority for that proposition is Rogers et al. v. Bank of Montreal et al.  (reflex-logo) reflex, (1985), 61 B.C.L.R. 239; aff'd. 62 B.C.L.R. 387 (B.C.C.A.).  In his reasons for judgment on the original application, Taylor J. said at pp. 241-242:

 

 

 

     The receiver denies that the bank's instructions were given in reliance on its advice.  It says the bank took advice on the relevant matters from the bank's own solicitors and relied on that advice and that if the bank relied on the advice of accountants rather than on the advice given by solicitors retained for that purpose it acted unreasonably and cannot use such reliance as a defence.

 

     The bank does not say whether it received relevant advice from the solicitors.  It says that its communications with its own solicitors are privileged and that it has done nothing to waive that privilege.

 

     In Nowak v. Sanyshyn (1979), 23 O.R. (2d) 797, 9 C.P.C. 303 (H.C.), Grange J., was faced with a somewhat similar situation.  The plaintiff there sought to avoid a mortgage and guarantee which she signed after consulting solicitors on the ground that she had not properly understood the documents.  On examination for discovery she refused on grounds of privilege to say what she was told about the documents by her solicitors.  Observing that it was "a matter of vital importance whether and in what manner the plaintiff was advised", Grange J. directed her to answer.  He rejected the contention that the defendants should wait until trial for the plaintiff to waive the privilege by giving evidence about her legal advice.

 

     Counsel for the bank says the Nowak decision stands alone and that it turns in any event on the fact that counsel conceded in that case that the plaintiff would testify at the trial about the advice she received while in this case the bank has made no such disclosure of its intentions.

 

     I think the Nowak decision stands for a broader proposition.  I think it says that a party may waive privilege by a pleading as well as by actually giving evidence of a privileged communication.  It shows that where a party makes a plea which cannot be tried in the absence of evidence of the legal advice which that party received a court will not necessarily deny discovery concerning such advice simply because the client has not yet testified about it.  The pleading of such claim or defence may in certain circumstances itself be enough to waive privilege so that the discovery of solicitor-client communications may then be ordered.

 

                                (Emphasis added)

 

6            In the Court of Appeal, at 1985 CanLII 141 (BC C.A.), (1985), 62 B.C.L.R. 387, Hutcheon J.A., for the Court, said at p. 392:

 

 

     The issue is whether the bank was induced to take certain steps in reliance upon the advice from the receiver on legal matters.  To take one instance, the receiver, according to the bank, advised the bank that it was not necessary to allow Abacus time for payment before the appointment of the receiver.  A significant legal decision had been rendered some months earlier to the opposite of that advice.  The extent to which the bank had been advised about that decision, not merely of its result, is important in the resolution of the issue whether the bank relied upon the advice of the receiver.

 

7            The privilege was not waived there because the issue was raised in the pleadings, but because the legal advice given the bank caused it to take certain steps.  By raising the issue of its corporate state of mind, the court held it became necessary to determine whether the bank had relied on the advice it had been given, so the court held the privilege to have been waived.

 

8            In Vance v. Peglar et al., [1991] B.C.J. No.2877, Trainor J. came to a similar conclusion.  He said:

 

 

This is not a failure to recognize the existence of the solicitor-client privilege, but it is a decision that in the circumstances of this case where the Plaintiff has elected to put those matters in issue he made the decision at that time, not only that he could be asked about his state of mind, his knowledge, and his means of knowledge, but also he put in issue the documents which were in his solicitor's file which are relevant to that very issue.  The fact that this can be done is recognized by the British Columbia Court of Appeal in the Rogers v. Bank of Montreal case for a different reason there, not only with respect to the state of mind insofar as the waiver is concerned and the possibility that a waiver can take place in this fashion.

 

 

9            That is not the situation here.  On the face of the correspondence, there was no compromise.  The plaintiffs did not accept the defendants' offer, but advanced a counter-offer.  This in turn was not accepted.  The defendants plead a compromise and, in that way, suggest the plaintiffs' state of mind is in issue.  I do not agree.

 

10           The plaintiffs claim their privilege, and have not put in issue their own state of mind to justify their conduct.  At all times they have asserted their right to keep confidential advice given them by their solicitors.  By raising the issue in its pleadings, the defendants cannot compel production of documents or advice given to the plaintiffs by their solicitor.  It is only if the plaintiffs raise the issue of their state of mind that the privilege can be found to have been waived: that is not the case here.

 

11           In these circumstances, I find they have not expressly or implicitly waived the privilege.  I dismiss the application with costs on Scale 3 to the plaintiffs in any event of the cause.

 

 

 

 

 

 

 

 

 

 

 

                     Signed:  "Mr. Justice R.M.J. Hutchinson"

 

 

 

 

 

Nanaimo, British Columbia

May 24, 1996