National Bank Financial Ltd. v. Potter; Knowledge House Inc. v. Stewart McKelvey Stirling Scales

National Bank Financial Ltd. v. Potter; Knowledge House Inc. v. Stewart McKelvey Stirling Scales Court Supreme Court Date 2007-01-24 Citation 2007 NSSC 22 Docket 270311, SH 206429 Judge/Registrar/Adjudicator Scanlan, J. Edward (Honourable Justice) (SC) Document Type Decision Decision Content IN THE SUPREME COURT OF NOVA SCOTIA Citation: National Bank Financial Ltd. v. Potter; Knowledge House Inc. v. Stewart McKelvey Stirling Scales, 2007 NSSC 22 Date: 20070124 Docket: SH 206439/270311 Registry: Halifax 2003 SH 206439 Between: National Bank Financial Ltd. Plaintiffs - and - Daniel Potter, Starr’s Point Capital Incorporated, Fiona Imrie, Gramm & Company Incorporated, 2532230 Nova Scotia Limited, 3020828 Nova Scotia Limited, Ronald Richter, Donald Snow, Meg Research.Com Limited, 3027748 Nova Scotia Limited, Calvin Wadden, Raymond Courtney, Bernard Schelew, Blois Colpitts, Stewart McKelvey Stirling Scales, Bruce Clarke, 2317540 Nova Scotia Limited and Knowledge House Inc. Defendants And Between: Bruce Clarke, Fiona Imrie, Gramm & Company Incorporated, 2532230 Nova Scotia Limited, 3020828 Nova Scotia Limited, Calvin Wadden, Bernard Schelew, Daniel Potter, Knowledge House Inc., Starr’s Point Capital Incorporated, Donald Snow, Meg Research.Com Limited, 3027748 Nova Scotia Limited and Raymond Courtney Plaintiff’s by Counterclaim - and - National Bank Financial Ltd., National Bank of Canada, Real Raymond, Jean Turmel, Michael LaBonte, Lorie Haber, Guy Roby, Eric Hicks, Barry Morse, David Mack and Bruce Clarke Defendants by Counterclaim - and - Daniel Potter, Blois Colpitts, Stewart McKelvey Stirling Scales and Bruce Clarke Defendants by Crossclaim AND 2006 SH 273011 Knowledge House Inc., and Daniel Potter Plaintiffs - and - Stewart McKelvey Stirling Scales, Andrew W. Burke, R. Blois Colpitts and James K. Cruickshank Defendants DECISION Judge: The Honourable Justice J. E. Scanlan Heard: January 15 & 16, 2007, in Halifax, Nova Scotia Counsel: James D. G. Douglas/Kara L. Beitel Solicitors for R. Blois Colpitts David G. Coles Solicitor for National Bank Financial Ltd. Dan Potter On behalf of himself and KHI John Rook Solicitor for Stewart McKelvey Stirling Scales, Andrew W. Burke and James K. Cruickshank J. Walter Thompson, Q.C. Solicitor for the defendants/plaintiffs by counterclaim, Fiona Imrie, Gramm & Company Incorporated, 2532230 Nova Scotia Limited and 3020828 Nova Scotia Limited Peter D. Nathanson Solicitor for Ronald Richter Dwight J. W. Rudderham Solicitor for Donald Snow, Meg Research.Com Limited and 3027748 Nova Scotia Limited W. Dale Dunlop Solicitor for FutureEd.com, Kenneth MacLeod, 3027748 Nova Scotia Limited and Calvin Wadden Timothy W. Hill Solicitor for Raymond Courtney Robert G. Belliveau, Q.C. Solicitor for Bernard Schelew Bruce Clarke By the Court: [1] On January 15th and 16th, 2007, the Court dealt with a series of applications in relation to the above two noted actions. In the first hearing on January 15, 2007, Stewart, McKelvey, Stirling and Scales (SMSS) and Blois Colpitts (Colpitts) applied to strike the statement of claim as filed by Knowledge House Inc. (KHI) and Daniel Potter (Potter), or in the alternative to strike portions of the statement of claim. At the conclusion of the hearings on January 15th, I indicated to counsel that I was prepared to render a partial oral decision on the issue as to whether or not I was satisfied that any part of the statement of claim should survive. I indicated the substantive reasons would follow. In the oral ruling I indicated the claim related to an alleged breach of fiduciary duty would be allowed to stand. One of the issues arising from that ruling was whether or not Daniel Potter and KHI , by implication or operation of law, waived the solicitor/client privilege as regards communications between Potter, KHI and their solicitors at SMSS including Colpitts, Andrew Burke and James Cruickshank. [2] At the hearings on January 16th, I indicated to counsel that I would release my ruling on the issue of waiver of privilege and the extent of waiver of privilege as soon as possible so the parties could continue in their preparation of pleadings and preparations for discovery. This is the ruling on the issue of waiver of privilege. [3] In his submissions to the court Mr. Potter, on his own behalf and on behalf of KHI, acknowledges that as a result of his commencing an action against the defendant law firm and the named lawyers he has waived his right to solicitor/client privilege over communications as between he and his counsel. Mr. Potter suggests however, that the waiver is limited and applies only to S.H. No. 273011. The defendants in action S.H. No. 273011 suggest that the waiver is not limited and they join with a number of parties in S.H. No. 206439 in suggesting the waiver applies to S. H. 273011 but to S.H. No. 206439 as well. [4] Mr. Potter and KHI have joined with National Bank Financial Limited in suggesting that actions S.H. No. 273011 and S. H. No. 206439 should be consolidated. Mr. Potter indicates, on his own behalf and on behalf of KHI, that if the actions are consolidated then the waiver of privilege applies not just to S. H. No. 273011 (“Potter” action) but also to the “main” action S. H. No. 206439. He suggests in the absence of consolidation the waiver is limited to the “Potter” action. [5] I deal first with the issue of the extent of the waiver of privilege. Mr. Potter and KHI have made a claim as against SMSS and a number of lawyers with that firm alleging, in summary, that there were breaches of fiduciary duties owing by the lawyers within the SMSS firm to both Potter and KHI. In summary they further claim that, as a firm, SMSS is vicariously liable for the actions of the named lawyers in terms of the alleged breaches of fiduciary duties. [6] I am satisfied that by filing that action against the law firm and the named lawyers the plaintiffs have put in issue their state of mind and their reliance on the defendants advice. The claim for breach of fiduciary duty is very broad in nature and covers a lengthy period of time. It brings into issue both the advice that was given and the complex nature of the relationship as between the plaintiffs and various counsel with the defendant firm. Having regard to the complex series of events that existed throughout the relevant time it is hard to envisage how defendants would be able to fairly maintain a defence without exploring the entire history of the relationship as between the plaintiffs and the named defendants. Even though the statement of claim raises a number of specific transactions, the defendants are entitled to place in evidence more than just the communications surrounding those specific events. In fairness they must be entitled to bring all relevant information which will shed light on the entire relationship as between the parties. In this case, where the allegations are a breach of fiduciary duty, it would be impossible for the defendants to defend that claim unless they are able to present a full picture as to the nature and extent of the communications as between the plaintiffs and defendants on all issues relevant to the legal and business relationship. In saying that I keep in mind that the pleadings as filed in the various actions suggest the defendant Colpitts was acting not just as a solicitor for KHI and Potter. He was a director and an active participant in the business side of the KHI operations. The claims now made by KHI and Potter suggest that Mr. Colpitts was less than forthright in terms of disclosure of conflicting interests. Mr. Potter and KHI allege those conflicting interests impacted or influenced the advice he gave to Potter and KHI. To defend on those issues it will be necessary that the defendants have full access to all solicitor/client communications so they can explain the relationship, who knew what and when and what, if any, impact conflicting interests may have had on the advice given to the plaintiffs. I am satisfied that privilege has been waived in the action SH No. 273011 throughout the entire history of the solicitor/client relationship. In saying this I refer to Froates v. Spers, [1999] O.J. No. 77 (Gen. Div.) at para. 13. The Court said: I am satisfied, that where one party chooses to sue his solicitor for advice given to the party, that very action constitutes a waiver of the solicitor/client privilege for all matters going to the issue of what caused the loss suffered by the client and to what extent the loss may be attributed to the solicitor in question. In this case, I am satisfied that it would be difficult for the Court to judge the issue of breach of fiduciary duty or extent of breach of fiduciary duty without understanding and appreciating the full extent of the relationship between the plaintiffs and defendants in this case. [7] Mr. Potter, on his own behalf and on behalf of KHI, acknowledged that the action against the defendants does result in a waiver of privilege in the “Potter” action. I am not prepared to rule at this juncture that the suit as launched by KHI and Potter waives privilege for all things. For example, there is currently an RCMP investigation and a Nova Scotia Securities Commission proceeding. It is not my intention at this juncture to rule on the issue as to whether the suit by Potter and KHI would result in a waiver of privilege in those matters. [8] I have been asked by National Bank Financial Limited (NBFL) to rule on the issue of waiver of privilege as it relates to S.H. No. 206439 the “main” action. I am satisfied the solicitor/client privilege has been lost in S.H. No. 206439 as a result of KHI and Potter suing the lawyers in S.H. No. 273011. In saying that I point out that the underlying purpose for the protection of solicitor/client privilege is the important right of an individual to communicate with his or her lawyer in confidence. Potter and KHI have waived the right and acknowledged that those communications will not remain confidential in the action S. H. No. 273011. Many of the issues in the Potter , KHI action are identical or at least similar to some of the issues which are raised in the NBFL action. The defendants in the “Potter” action, together with NBFL’s solicitors in the “main” action, suggest the “Potter” action should more properly have been framed as a cross-claim in the “main” action. I am aware of the fact that at one point in time there was a cross-claim by Potter and KHI as against SMSS in the NBFL action. That cross-claim was withdrawn by Potter and KHI but the issues are substantially the same in this new action. If the “Potter” action was taken as a cross-claim then certainly privilege would have been lost in the “main” action. [9] Counsel for Mr. Colpitts and SMSS point out that as the “Potter” action proceeds privilege will be lost as the various communications are introduced into evidence. That applies not only to the documents themselves but also for all related documents. In the “Potter” action it is not only the documents but the entire nature of the relationship which has been brought into issue. In order for the defendants to fairly represent themselves it is only fair and just that reference be made to all communications. It would be manifestly unjust for the defendants in one action to have access to all documents relating to the relationship as between the parties but not be entitled to rely on those same documents in a substantially related proceeding. While allegations of breach of fiduciary duty are not in the “main” action they would be if a cross claim was used as it was originally. [10] I am satisfied waiver of privilege in the Potter KHI action extends to the NBFL action as well. That loss of privilege exists whether the actions are consolidated or not. Fairness and consistency dictate that privilege be waived for both actions. This is consistent with what occurred in Frind v. Sheppard [1940] O.W.N. 135 where the Court held that a client had waived privilege which attached to letters passing between himself and his counsel because they had been read into the record in a previous proceeding. [11] I caution counsel that before email boxes are opened, viewed, or disseminated, in this action the named holders of the mail boxes should be notified and be given an opportunity to raise any issue of solicitor/client privilege or other concerns. There may well be other privileged communications not relevant to any of the issues raised in the “Potter” action or the “main” action. The parties should be given a chance to raise those concerns. [12] I have reserved on the issue as to whether or not the “Potter” action and the NBFL action should be consolidated. I will render judgement on that issue in due course. Even if they are not consolidated it may well be that the two matters will be tried by the same trial judge, one right after the other or, alternatively, the “Potter” action may well proceed prior to the NBFL action. No matter what occurs in that regard, I am satisfied, given the overlap of issues and parties in the “main” action and the requirement for fairness and consistency, that in suing SMSS and the named lawyers in SH No. 273011, Potter and KHI have waived privilege in both actions. J. 01/24/07