Vidcom Communications Ltd. v. Rattan

2022 BCSC 522 Vidcom Communications Ltd. v. Rattan

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Vidcom Communications Ltd. v. Rattan, 2022 BCSC 522 Date: 20220401 Docket: S204041 Registry: Vancouver Between: Vidcom Communications Ltd. Plaintiff And Sharina Sabna Rattan, Dharam Raj Rattan, Maya Wati Rattan, and Derek Kay Defendants Before: The Honourable Justice Norell Reasons for Judgment Counsel for the Plaintiff: D. Dahlgren Counsel for the Defendants: M. Magaril Place and Date of Hearing: New Westminster, B.C. February 1 and 22, 2022 Place and Date of Judgment: Vancouver, B.C. April 1, 2022 [1] These are reasons on two applications of the defendant Derek Kay ("Mr. Kay") seeking: a) an order for particulars of allegations made against him pursuant to Rule 3-7 of the Supreme Court Civil Rules; and b) a declaration of waiver of solicitor-client privilege with respect to a limitation period issue, and production of documents pursuant to Rule 7-1. Nature of claim [2] The plaintiff Vidcom Communications Ltd. ("Vidcom") is engaged in the business of integrating high-end hardware and software for businesses that operate in certain industries. [3] The defendant Sharina Sabna Rattan ("Ms. Rattan") was the former bookkeeper of Vidcom from 2005 to 2020. Mr. Kay is the common law spouse of Ms. Rattan. The other defendants, Dharam Raj Rattan and Maya Wati Rattan, are the parents of Ms. Rattan and did not participate in these

applications. [4] Vidcom alleges that Ms. Rattan misappropriated approximately $1.97 million of Vidcom's funds ("Funds") between 2009 and 2020. Vidcom claims misappropriation, conversion, fraud, breach of the employment agreement, and unjust enrichment against Ms. Rattan. Vidcom alleges that the misappropriation, conversion and fraud were carried out with the knowledge and participation of Mr. Kay and Ms. Rattan's parents by receiving, converting and hiding the Funds. [5] Mr. Kay has filed a response to civil claim ("RTCC") denying all the allegations against him and pleading that the action is barred by a limitation period. He has also filed a counterclaim alleging abuse of process. Application for particulars Pleadings against Mr. Kay [6] The notice of civil claim ("NOCC") was filed in April 2020 and Part 1 alleges the following. a) Paragraphs 11 to 13 allege that between 2009 and 2020, Ms. Rattan misappropriated and converted the Funds ("Misappropriation" and "Conversion"), and by doing so also committed fraud ("Fraud"). b) Paragraph 14 alleges that a significant component of the Misappropriation, Conversion and Fraud was carried out by Ms. Rattan forging the signature of Vidcom's principal on cheques made payable to Ms. Rattan, and that those transactions were covered up by creating false entries in Vidcom's accounting system to record the transaction as a legitimate

payment to third parties (e.g. a payment to a supplier for an invoice that did not actually exist). c) Paragraphs 15 and 16 allege that Mr. Kay and Ms. Rattan's parents had knowledge of and participated in the Misappropriation, Conversion and Fraud, and the "particulars" include "receiving, converting, and hiding the Funds". d) Paragraph 17 alleges that Ms. Rattan breached her employment agreement ("Breach") by committing the Misappropriation, Conversion and Fraud. e) Paragraph 18 alleges that Ms. Rattan diverted and converted the Funds ("Diversion") for the benefit of herself and the defendants, by purchasing, improving, or maintaining various assets owned by her or the other defendants. With respect to Mr. Kay, these are: a property on Hamilton St. in Vancouver, BC, registered in the name of Mr. Kay ("Property 4") (paragraph 18d); "other real property owned by the Defendants that the Plaintiff is not aware of at this time" ("Other Real Property") (paragraph 18e); and personal property including household items, jewellery, and recreational and motor vehicles ("Personal Property") (paragraph 18f). f) Paragraph 19 alleges that Mr. Kay and others have been unjustly enriched because they wrongfully took and converted the Funds for their own benefit and use, Vidcom suffered a corresponding deprivation, and as a result, good conscience requires the imposition of a constructive trust

for the benefit of Vidcom over all the assets listed in paragraph 18. g) Paragraphs 22 and 23 allege that as a result of the Misappropriation, Conversion, Breach, and Diversion, Mr. Kay holds "Property 4", the Other Real Property, and the Personal Property, in trust for Vidcom. h) Paragraph 24 alleges, similar to paragraph 19, that there should be a constructive trust imposed over Property 4, Other Real Property and Personal Property. i) Paragraphs 25 and 26 claim loss of the use and benefit of the Funds, "other damages to be proven at trial" and punitive and aggravated damages. Relevant procedural history [7] On December 2, 2020, Master Elwood (as he then was) made a third-party production order for banking information and records of Ms. Rattan. [8] On March 16, 2021, the parties entered into a consent order for production of bank records, income tax notices of assessment, charitable donations records, investment records, and mortgage documents of Ms. Rattan, including bank accounts with any third party or any of the defendants at the CIBC. [9] On August 13, 2021, Master Muir ordered Mr. Kay to produce all of his individual banking records and mortgage documents for the purchase of Property 4 for the period from January 2016 to May 2020 ("Document Order"). As of the hearing of this application, Mr. Kay had not yet fully complied with the Document Order. It appears 2016 is the

year Mr. Kay states that his common law relationship with Ms. Rattan commenced (this is not admitted by Vidcom), and also the year Mr. Kay purchased Property 4. [10] On August 23, 2021, a forensic accountant retained by Vidcom, Mr. James Blatchford, provided a written expert report which opines on the Misappropriation and Conversion alleged to have been committed by Ms. Rattan. The report details the impugned transactions. The expert report addresses how the Funds were moved from Vidcom to Ms. Rattan. It does not address what happened to the Funds once they were in the hands of Ms. Rattan, and hence does not address the area of Mr. Kay's alleged involvement. The report was served on Mr. Kay. [11] Examinations for discovery have not yet been conducted. An examination for discovery of Mr. Kay had been set in October 2021, but was adjourned by Vidcom. [12] In December 2021, Mr. Kay's counsel wrote to Vidcom's counsel requesting further particulars which mirror the particulars sought in this application. Vidcom did not provide further particulars, and this application was brought. Orders sought [13] The particulars sought are: a) With reference to paragraph 12 of the NOCC, the amounts and dates of the Funds taken; b) With reference to paragraph 16 of the NOCC, the nature of the participation of Derek Kay in the Misappropriation and Conversion, including the: i. The dates of any

wrongful act or omission (including but not limited to receiving, converting, and hiding of a portion of the Funds) by Mr. Kay; ii. The precise nature of what wrongful act, omission, receipt, conversion Mr. Kay committed with any portion of the Funds; iii. The particulars of how much of the Funds were received, converted, hidden, or otherwise had any wrongful act or omission applied to them by Mr. Kay; c) with reference to paragraph 18 of the NOCC, the dates and quantum, in which the Diversion went to Property 4, the Other Real Property as it pertains to Mr. Kay, and the Defendants' Personal Property as it pertains to Mr. Kay; d) with further reference to paragraph 18 of the NOCC, the precise particulars of the Other Real Property and Personal Property belonging to Mr. Kay; e) with reference to paragraph 19 of the NOCC, the date and quantum of the unjust enrichment as received by Mr. Kay, and the amount of the Funds that are still wrongfully being held by Mr. Kay; f) with reference to paragraph 23 of the NOCC, the quantum of the funds that were taken by Mr. Kay by reason of the Misappropriation; and g) with reference to paragraph 25 of the NOCC, the nature, date and quantum of the Plaintiff's damages, losses and expenses. [14] Mr. Kay also seeks an order pursuant to this court's inherent jurisdiction, requiring Vidcom to file and serve an affidavit stating its grounds for

believing that Mr. Kay participated in the wrongful acts and omissions alleged against him in the NOCC, for any of the above demanded particulars for which Vidcom takes the position that it is unable to provide particulars. Legal principles [15] Rule 3-7 governs the content of pleadings. The relevant provisions for this application are: (1) A pleading must not contain the evidence by which the facts alleged in it are to be proved. (17) It is sufficient to allege malice, fraudulent intention, knowledge or other condition of the mind of a person as a fact, without setting out the circumstances from which it is to be inferred. (18) If the party pleading relies on misrepresentation, fraud, breach of trust, wilful default or undue influence, or if particulars may be necessary, full particulars, with dates and items if applicable, must be stated in the pleading. (20) Particulars need only be pleaded to the extent that they are known at the date of pleading, but further particulars (a) may be served after they become known, and (b) must be served within 10 days after a demand is made in writing. (22) The court may order a party to serve further and better particulars of a matter stated in a pleading. (23) Before applying to the court for particulars, a party must demand them in writing from the other party. [16] The purposes of particulars were summarized in Cansulex Ltd v. Perry,

[1982] B.C.J. No. 369, C.W.L.D. 1257 (C.A.) [Cansulex] at para. 15: (1) to inform the other side of the nature of the case they have to meet as distinguished from the mode in which that case is to be proved; (2) to prevent the other side from being taken by surprise at the trial; (3) to enable the other side to know what evidence they ought to be prepared with and to prepare for trial; (4) to limit the generality of the pleadings; (5) to limit and decide the issues to be tried, and as to which discovery is required, and (6) to tie the hands of the party so that he cannot without leave go into any matters not included. [17] There is a distinction between what are properly particulars and what evidence or information should be obtained through the discovery processes such as a demand for documents or an examination for discovery. As stated in Cansulex: [11] At the heart of the distinction between the two lies the question whether the material demanded is intended to, and does, delineate the issues between the parties, or whether it requests material relating to the way in which the issues will be proved. [18] In some cases, the particulars of an allegation are exclusively or almost exclusively within the knowledge of the defendant and not the plaintiff. In that case, the court may postpone the ordering of particulars until after discovery procedures: Cominco Ltd. v. Westinghouse

Can Ltd., 1978 CanLII 234 at paras. 13-16, 6 B.C.L.R. 25 (S.C.) [Cominco]. The court should consider whether particulars should be delivered now, following examinations for discovery, or whether sufficient particulars have already been given: Cominco at para. 16. [19] However, a plaintiff cannot make bald assertions and conclusions in a "fishing expedition" in the hope of discovering evidence to support a claim at an examination for discovery: Yewdale v. Insurance Corporation of British Columbia, 1994 CanLII 2553 at 43-44, B.C.J. No. 1892 (S.C.): The rule for this plaintiff is that she must state her claim with certainty and precision setting out the facts within her knowledge and upon which she bases her claim. She is not merely to plead the conclusions of negligence or other matters and then embark on a "fishing expedition" with respect to the conduct of the action to determine whether or not there are any facts to support those conclusions. [20] To resist an argument that particulars should be delivered prior to an examination for discovery, a plaintiff who makes serious allegations of misconduct "must adduce some evidence even if very little in order to require a defendant to answer": Proconic Electronics Ltd. v. Wong, 1985 CanLII 253 at paras. 22, 67 B.C.L.R. 237 (S.C.) [Proconic]. In Proconic, it was suggested that on the facts of that case, it might have been sufficient

to tender an affidavit from an officer of the plaintiff that they were unable to give particulars, and their belief of the wrongdoing and the grounds for their belief (at para. 13). [21] However, as held in Cambie Forming Ltd. v. Accuform Construction Ltd., 2016 BCSC 266 at para. 39 [Cambie Forming]: [39] there is no need for an affidavit of the kind contemplated by Proconic where the plaintiff has pleaded some particulars of the allegations of fraud and breach of fiduciary duty if those particulars are sufficient to satisfy the functions of particulars as outlined in Cansulex: Camfrey Resources Ltd. v. Werbes, [1993] B.C.J. No. 632, para. 30. [22] Expert evidence is not a substitute for particulars: The Owners, Strata Plan BCS 1348 v. WVC Phase III Limited Partnership, 2016 BCSC 1053 at para.

4. As stated in that case: "Particulars serve a different purpose. Expert evidence is the proof; the particulars define the issue". [23] Finally, counsel referred to a number of other case authorities including but not limited to Sidhu v. Hiebert, 2018 BCSC 401 and British Columbia (Director of Civil Forfeiture) v. PacNet Services Ltd., 2018 BCSC 2251, which I have considered. Positions of parties [24] Mr. Kay argues that: he has complied with Rule 3-7(23) and has not received a response required by Rule 3-7(20)(b); as the allegation is that he participated in fraud, the balancing of interests weighs in favour of those allegations being scrupulously and fully particularized; it is not enough for Vidcom to say the information is all within Mr. Kay's knowledge; Vidcom lacks any evidence that Mr. Kay received any of the Funds; the expert report produced does not have any findings that Mr. Kay received any Funds; there have been three sets of orders related to document production; the examinations for discovery of Mr. Kay and Ms. Rattan were cancelled; and Vidcom has not verified under oath that it has a reasonable belief for the allegations made against Mr. Kay. [25] Vidcom argues that: Mr. Kay has not yet fully complied with the Document Order; Vidcom has filed an affidavit setting out in detail the particulars of the claims and served a forensic accounting report detailing the

alleged misappropriation; and Vidcom has demonstrated sufficient evidence at this stage of the proceeding to show that Mr. Kay very likely had knowledge of the alleged wrongful acts that were being committed. Those facts include that: Mr. Kay is the common law spouse of Ms. Rattan, and Mr. Kay sold and purchased property and had a joint bank account with Ms. Rattan while she was engaged in the alleged wrongful acts; and in September 2018, Mr. Kay made a lump sum payment of $300,000 on the mortgage on Property 4. [26] Vidcom also argues that: a party is not permitted to plead evidence (Rule 3-7(1)); Vidcom is not required to plead how Mr. Kay had knowledge (Rule 3-17(17)); and a party is not required to provide particulars of matters or issues that are not yet known to them (Rule 3-7(20)). The purpose of particulars must be balanced against Vidcom's right to investigate its claim through the discovery process. Mr. Kay knows the case he has to meet and the information is in his hands because he need only read the pleadings and forensic expert report and ask himself whether he had knowledge of the alleged wrongful acts and if any of the Funds made their way to his hands. Mr. Kay is not seeking particulars but is attempting to compel Vidcom to produce the evidence it will ultimately rely upon, and to inappropriately hamper Vidcom in pursuing the claim. In the alternative, the court

should delay ordering particulars until after examinations discovery. Analysis [27] For the following reasons, except for the particulars sought with respect to paragraph 25 of the NOCC (the nature, date and quantum of the Plaintiff's damages, losses and expenses), Vidcom is not required to provide the requested particulars at this time and prior to examinations for discovery of Ms. Rattan and Mr. Kay. However, it may be that it is appropriate after examinations for discovery have taken place to require Vidcom to provide particulars. Mr. Kay has leave to bring a further application if Vidcom and Mr. Kay cannot resolve the matter of particulars at that time. [28] Rule 3-7(18) requires full particulars when fraud has been alleged or when particulars are necessary. The allegations against Mr. Kay are serious and he is entitled to particulars of the case against him to the extent they are known to Vidcom at this time, but without unfairly restricting Vidcom in pursuing its claim. [29] In my view, the NOCC sufficiently sets out the allegations at this stage of the proceeding to meet the purposes of pleadings in Cansulex, and for Vidcom to proceed to examinations for discovery. The material facts are pled. The NOCC sets out sufficient particularity for Mr. Kay to know the nature of the case he has to meet and the evidence he ought to prepare in his defence. Paragraphs 11 to 13 plead

that Ms. Rattan misappropriated, converted and fraudulently obtained $2 million between January 2009 and April 2020. The fact that this is a large sum and covers a long period of time reflects the nature and length of time during which the alleged wrongful acts took place, not any vagueness in the pleading. The evidence filed on this application shows that the impugned transactions were a series of cheques in relatively small amounts, that were processed weekly if not every few days, over that period of time. Paragraph 14 details the main method by which Ms. Rattan allegedly obtained the Funds. Paragraphs 15 and 16 of the NOCC allege that Mr. Kay knew of these alleged wrongful acts and his participation included "receiving, converting and hiding" the Funds. Rule 3-7(17) provides that a party need not plead the circumstances from which knowledge is to be inferred. Paragraph 18 makes it clear that Vidcom alleges that the Funds were used toward Property 4 and other real and personal property. [30] Vidcom is not in a position where it is able to provide further particulars at this time without discovery procedures. While Vidcom has been able to obtain a forensic accountant expert report based on its own records and bank records, it is not privy to discussions and transactions between Ms. Rattan and Mr. Kay. Their relationship is that of common law spouses. Vidcom could not possibly

know the private conversations or transactions between them without doing an examination for discovery of both of them. The receipt, conversion and hiding of the Funds, if they took place, are something uniquely within the knowledge of Ms. Rattan and Mr. Kay. Vidcom does not yet have all of Mr. Kay's banking records, and even when it does, as Vidcom's counsel argues, given the nature and level of the alleged wrongful acts, it may not be as simple as Ms. Rattan giving funds to Mr. Kay and having them deposited into a bank account. [31] Vidcom has filed a sufficient evidentiary basis to show that this is not a situation of a bald assertion and a fishing expedition with no basis for making the allegations. Vidcom has served an expert forensic accounting report and an affidavit from its principal, which if accepted support its allegation that Ms. Rattan participated in a serious fraud. Mr. Kay is Ms. Rattan's common law spouse. Mr. Kay purchased property during the time Ms. Rattan was allegedly involved in the wrongful acts, and he made a $300,000 lump sum payment. Ultimately, the allegations may or may not be proven against Mr. Kay, but conclusive proof is not required at this point in time. [32] In my view, there is a sufficient basis in the pleadings and the material filed upon which to allow the discoveries to proceed. Further particulars are not necessary, at least at this

time, as Mr. Kay is able to know the case he has to meet, and ordering particulars at this time would unduly restrict Vidcom in pursuing its claim. The foregoing reasons apply to each of the orders for particulars sought in paragraphs (a) to (f) of the notice of application. [33] However, with respect to the particulars requested in paragraph (g) (the damages claimed) paragraph 25 of the NOCC makes it clear that the damages are at least the Funds. However, in my view, the pleading "other damages to be proven at trial" is too broad and does not provide Mr. Kay with sufficient information regarding the claim for damages made against him. I order that particulars be delivered of the "other damages" within the next two weeks. This should be within Vidcom's knowledge and ability to produce at this time. [34] Mr. Kay seeks an order that Vidcom must file an affidavit for its grounds for belief of the allegations against him. As discussed above, Vidcom has filed adequate evidence on this application to resist the order for particulars at this time. [35] My decision reflects that the pleadings are sufficiently particularized at this stage of the proceedings to proceed to examinations for discovery, and that Vidcom is not in a position at this time to provide further particulars. However, given the nature of the allegations and Rule 3-7(18), in my view particulars may be required once

examinations for discovery of Ms. Rattan and Mr. Kay have taken place. Except for the order sought in paragraph g), I dismiss Mr. Kay's application. Mr. Kay has leave to bring a further application if Vidcom and Mr. Kay cannot resolve the matter of particulars following the examinations for discovery. [36] I have considered whether it is appropriate to make an order now with respect to particulars that could conceivably be delivered following the examinations for discovery, but ultimately concluded that this would be better addressed once examinations for discovery are completed and the nature of the evidence is known. Application for documents Pleadings [37] Paragraph 11 of the NOCC states: 11. In or around March 2020, and while the Defendant Sharina Rattan was still on the Leave, the Plaintiff conducted a review of its financial accounting records (the "Review") and discovered, for the first time, that beginning in or around January of 2009, and ending in April 2020, the Defendant Sharina Rattan wrongfully misappropriated and converted corporate funds belonging to the Plaintiff for the personal benefit, gain and profit of herself and the other Defendants (the "Misappropriation and Conversion"). [Emphasis added.] [38] Paragraph 12 of Mr. Kay's amended response to civil claim states: 12. The defendant expressly pleads and relies upon the Limitation Act and says that this claim,

or a portion thereof, is brought outside of the applicable limitation period. Relevant procedural history [39] In September 2021, counsel for Mr. Kay wrote to counsel for Vidcom requesting certain documents. These mirror the orders for documents sought in this application. Following this, there was an exchange between counsel, setting out their positions regarding the production of those documents. Orders sought [40] Mr. Kay seeks the following orders: 1.A declaration that Vidcom has waived privilege in respect of all communications, advice, instructions, comments, research, and documents between itself and any current or former counsel as it relates in any way to the assertion at paragraph 11 of the NOCC as to when Vidcom discovered the misappropriation and conversion by Ms. Rattan.

2. An order under Rule 7-1(13) requiring Vidcom to, within 10 days of this Order being granted, amend its list of documents, serve said amended list of documents, and make the originals of the newly listed documents available for inspection and copying in accordance with subrules 7-1(15) and 7-1(16), in respect of the following class of documents: a. A copy of all written training programs, procedures, and policies related to the Plaintiff's bookkeeping, reconciliation practices, and engagement of external auditors from 2009 to 2020; b. A copy of all requests for an audit by a governmental agency or program, including but limited to EI, WSBC, GST, CRA etc. in the calendar years 2009 to 2020; c. A copy of all documents pertaining to external accounting or bookkeeping engagements either sought, or obtained, by Vidcom for the calendar years 2009 to 2020 - whether as a result of an audit or otherwise; d. Production of the solicitor file and both privileged and non-privileged documents that relate to: i. the assertion that Vidcom only discovered the misappropriation and conversion by Ms. Sharina Rattan in March 2020; ii. when Vidcom knew or suspected any misappropriation, conversion, fraud, embezzlement, or accounting/ bookkeeping discrepancies, by Ms. Sharina Rattan or any of the Plaintiff's employees, contractors, or agents; and e. A copy of Vidcom's financial statements, T2

filings, Notices of (Re)Assessment for the calendar years 2009 to 2020 that were filed or received prior to the commencement of this proceeding, and all accompanying correspondence with any accountant in the preparation, execution, and submission of such documents. Legal principles Waiver of solicitor-client privilege [41] Solicitor-client privilege is "fundamental to the proper functioning of our legal system" and must be "as close to absolute as possible": Canada (Privacy Commissioner) v. Blood Tribe Department of Health, 2008 SCC 44 at para. 9; R. v. McClure, 2001 SCC 14 at para. 35. [42] Solicitor-client privilege may be expressly or impliedly waived. In S. & K. Processors Ltd. v. Campbell Ave. Herring Producers Ltd., 1983 CanLII 407 para. 6, 45 B.C.L.R. 218 (S.C.) [S. & K.] McLachlin J. (as she then was) stated: 6 Waiver of privilege is ordinarily established where it is shown that the possessor of the privilege: (1) knows of the existence of the privilege; and (2) voluntarily evinces an intention to waive that privilege. However, waiver may also occur in the absence of an intention to waive, where fairness and consistency so require. Thus 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: Rogers v. Hunter, [1982] 2 W.W.R. 189, 34 B.C.L.R. 206 (S.C.). [43] With respect to implied waiver, McLachlin J. further stated: 10 As pointed out in Wigmore on Evidence (McNaughton revision (1961)) vol. 8, pp. 635-36, relied on by Meredith J. in Rogers v. Hunter, supra, double elements are predicated in every waiver - implied intention and the element of fairness and consistency. In the cases where fairness has been held to require implied waiver, there is always some manifestation of a voluntary intention to waive the privilege at least to a limited extent. The law then says that in fairness and consistency it must be entirely waived. In Rogers v. Hunter, the intention to partially waive was inferred from the defendant's act of pleading reliance on legal advice. In Harich v. Stamp (1979), 27 O.R. (2d) 395, 11 C.C.L.T. 49, 14 C.P.C. 247, 59 C.C.C. (2d) 87, 106 D.L.R. (3d) 340 (C.A.) [leave to appeal to S.C.C. refused [1980] 1 S.C.R. xii], it was inferred from the accused's reliance on alleged inadequate legal advice in seeking to explain why he had pleaded guilty to a charge of dangerous driving. In both cases, the plaintiff chose to raise the issue. Having raised it, he could not in fairness be permitted to use privilege to prevent his opponent exploring its validity. [44] Finally, counsel referred to a number of additional authorities including

but not limited to Araya v. Nevsun Resources Ltd., 2019 BCCA 205 [Araya]; Do Process LP v. Infokey Software Inc., 2015 BCCA 52 [Do Process]; Soprema Inc. Wolrige Mahon LLP, 2016 BCCA 471 [Soprema]; and Doman Forest Products Ltd. v. GMAC Commercial Credit Corp., 2004 BCCA 512, all of which refer to S.& K. In addition, I have considered H.M.B. Holdings Limited v. Replay Resorts Inc., 2018 BCCA 263. Document production [45] Rule 7-1 governs the production of documents. There is a two-stage process for production of documents. At the first stage, parties are required to list all documents that are or have been in the party's possession or control and that could, if available, be used by any party of record "at trial to prove or disprove a material fact", and all other documents to which the party intends to refer at trial: Rule 7-1(1). [46] If a party believes another party's list omits documents or a class of documents which should have been listed under Rule 7-1(1), the party may, by written demand, require the party who prepared the list to amend the list: Rule 7‑1(10). [47] If a party believes another's party's list should include documents or a class of documents that are within the listing party's possession, power or control and "relate to any or all matters in question in the action", that party may by written demand request those documents be listed: Rule 7-1(11). A party

who receives such a demand must either comply with the demand or respond: Rule 7-1(12). In this case, the parties have complied with the provisions of the Rules with respect to demand and response. [48] Pursuant to Rule 7-1(13) a party may apply to the court for an order for production of documents requested under sub-rule (10) or (11). Positions of parties [49] Mr. Kay argues that there is an implied waiver of privilege with respect to the limitation period issue because Vidcom has put its state of mind in issue, and fairness and consistency require that Vidcom cannot maintain that privilege. A party does not need to explicitly state that they relied on legal advice in order to find implied waiver, and reliance on legal advice can be implied. [50] Mr. Kay argues that "as a matter of procedure" Vidcom should not have pled in its NOCC the date it alleges it discovered its claim, and instead waited for a limitation defence to be asserted, and filed a reply under Rule 3-6 alleging postponement or late discovery. However, the end result is the same. There is an assertion by Vidcom that it did not have sufficient knowledge of alleged wrongful acts prior to March 2020. [51] Mr. Kay argues that if there are documents relating to legal advice which suggest an earlier date of knowledge of the alleged wrongful acts, or accounting documents which suggest that Vidcom had reason to suspect

or investigate accounting discrepancies earlier in time but elected not to do so, then that would be relevant to a limitation defence. Discoverability or postponement of the limitation period has both a subjective and objective component, and the legal and accounting records are relevant to these components. These are material facts in issue. The claim is large and the request is proportional. [52] Vidcom disagrees that it has put its mind in issue. Vidcom simply pleads a fact - the date the alleged misappropriation was first discovered, and does not assert anything akin to "based on legal advice received, Vidcom first realized in or around March 2020 that the conduct of Ms. Rattan constituted misappropriation and was actionable in law". There is nothing in the pleadings or any affidavit that makes express or implied reference to legal advice sought or obtained or relied upon by Vidcom. A mere allegation of the state of affairs on which a party may have received legal advice does not warrant setting aside solicitor-client privilege. There must be a nexus between the party's state of mind and the privileged communications and usually, a pleading of reliance on legal advice or a pleading of the absence of legal advice. Vidcom disagrees that pleading the date on which it first discovered the misappropriation is the equivalent of arguing a postponement of a limitation period. The

fact that it discovered the misappropriation on a certain date, does not mean that it must have received legal advice at or before then. [53] Vidcom argues that in order to succeed on an application under Rule 7-1(11), an applicant must provide some evidence to support a connection between the documents sought and the matters in issue between the parties. Pleadings alone are not sufficient, although they may be for an application under Rule 7-1(10). Mr. Kay has not provided that evidence. The accounting records sought are overly broad and Vidcom does not have some of the classes of documents requested. [54] Vidcom argues that there is no pleading by Mr. Kay that with due diligence Vidcom would have discovered the misappropriation earlier than March 2020. Further, there are special discovery rules for fraud which do not contain an objective component of when the wrongful act "ought" to be discovered. The limitation period begins when Vidcom was "fully aware". Failure to exercise due diligence is not a defence to fraud. [55] Vidcom argues that examinations for discovery have not been done and at the discovery, Mr. Kay will be free to ask Vidcom questions regarding the circumstances that resulted in Vidcom learning of the alleged misappropriation. Depending on the answers to those questions, a basis might be established to request the production of specific documents. However, at

this time there is no basis to suggest that Vidcom knew or ought to have known about the misappropriation. The application is premature. If the Court does order production, it should be limited to March 26, 2018, which is two years before this action was commenced plus the one-year extension of the limitation period during the Covid-19 pandemic under the Covid-19 Related Measures Act, S.B.C. 2020, c.

8. Analysis Limitation period issue [56] Both of the orders sought: for declaration of a waiver of solicitor-client privilege; and for production of privileged communications and accounting records, revolve around the limitation defence. [57] The pleadings of both parties with respect to the limitation defence are somewhat vague. There are two limitations acts that potentially apply to this proceeding: the current Limitation Act, S.B.C. 2012, c. 13 [Current LA], and the former Limitation Act, R.S.B.C. 1996, c. 266 [Former LA]. [58] Mr. Kay has not pled which Limitation Act applies, nor which section and therefore what he says the limitation period is and when it commenced. Similarly, Vidcom has not filed a reply to the limitation defence plea and identified its position on which Act applies, which section, and whether it alleges discoverability or postponement of the limitation period, or that time did not begin to run until it was "fully aware". Vidcom has alleged that it "discovered, for the first time" the alleged misappropriation in March 2020, which appears to relate to a limitation period. There are a number of sections in each Act which are potentially applicable, and which would result in different limitation periods and different tests with respect to when the limitation period commenced. [59] Counsel outlined their positions on the limitation issue during the hearing,

but I must decide the application on the pleadings as they currently stand and the evidence on the application. Without detailing the provisions of each Act, it is sufficient to highlight the main point of contention between Vidcom and Mr. Kay. Mr. Kay contends that the limitation period began when Vidcom "knew or ought to have known" of the alleged wrongful acts of Ms. Rattan (e.g. s. 8 of the Current LA). Hence, he argues that all of Vidcom's accounting procedures and any audits prior to April 2020 are relevant. Vidcom contends that the limitation period commenced when it became "fully aware" of the alleged wrongful acts (e.g. s. 12 of the Current LA), and hence none of that is relevant. Vidcom also argues, apart from the limitation period, that there is no due diligence obligation on Vidcom to discover the alleged fraud. Even if Vidcom were negligent in not discovering the alleged fraud, a plaintiff's own negligence is not a defence to such a claim: Sanghera v. Danger Figure Centre (Burnaby) Ltd., 2007 BCSC 1308. It is unnecessary and inappropriate for me to resolve these issues on this application. Waiver of solicitor-client privilege [60] For the following reasons, I find that there is no waiver of Vidcom's solicitor-client privilege. [61] Vidcom's NOCC does not plead, expressly or impliedly, that it relied upon legal advice, or that legal advice informed the timing of its

decision to commence this action. It pleads only an alleged fact: that on a certain date it discovered the alleged misappropriation. The NOCC does not plead that it did not or could not understand its legal rights until prior to that date or until it consulted counsel. The NOCC does not in any way refer to legal advice. [62] While acknowledging there are some distinguishing features, Mr. Kay argues that this case is similar to Araya. In that case, the plaintiffs were found to have waived privilege by a plea of postponement in relation to a limitation defence. Araya is distinguishable. There, the plaintiffs had pled that "the start of any limitation period is postponed until after they had met with Canadian counsel because prior to that date, they did not have the requisite understanding of their legal rights against" the defendant (at para. 2). Further, the plaintiffs admitted waiver, except for their first meeting with counsel and the issue was whether that meeting should be included in the waiver. [63] Other cases cited by Mr. Kay where there was found to be waiver are also distinguishable. Again, Mr. Kay acknowledges there are differences between these cases and this case. For example, in Do Process, the plaintiff alleged that a software agreement was signed under duress and without legal advice, but there was evidence that he had some years earlier received advice on the

same central issue in the litigation. In Cheung v. 518402 B.C. Ltd., 1999 CanLII 2654, B.C.J. No. 2415 (S.C.), the plaintiff relied upon an affidavit sworn by its counsel attesting to substantive facts in dispute. In 0782484 B.C. Ltd. v. E-Pro Enterprises Inc., 2017 BCSC 2245 [E-Pro], the plaintiff claimed that it was only when they received late disclosure and advice of counsel that they became aware of a potential action against the defendants. In Pacific Concessions Inc. v. Weir, 2004 BCSC 1682, the defendant attached an email to his lawyer to his affidavit and relied upon it as evidence that certain documents did not reflect the entire transaction in dispute. [64] Mr. Kay argues that once Vidcom put its state of mind in issue, even without injecting legal advice into its pleadings, fairness and consistency require waiver. Mr. Kay argues that he should be able to challenge Vidcom's assertion that it first discovered the alleged misappropriation in March 2020 by looking at any privileged communications which touch on that issue. [65] In answer, Vidcom refers to Soprema. In that case, the plaintiff made a claim for negligent misrepresentation. Since reasonable reliance is an element of the cause of action, the plaintiff's state of mind was in issue. The plaintiff's understanding of its legal position was arguably relevant to whether the reliance was reasonable. The chambers

judge concluded that there had been an implied waiver of privilege (quoted at para. 13) because: [122] On the specific facts of this case, I am satisfied that an implied waiver does arise, and is required by fairness and consistency. This is because by alleging reliance on the representation of Wolrige, which of necessity must be reasonable reliance, Soprema has put its state of mind in issue "in such a way" as to make the privileged communications it received concerning its decision highly relevant. The question is not its understanding about its legal position per se, but rather upon what basis it decided to act when it was allegedly induced to act. The plaintiff had not pled that it had relied upon the representations as a result of legal advice, or that the representations affected its understanding of its legal position. [66] The Court of Appeal overturned the finding of waiver of privilege. Justice Harris reviewed the leading authorities and concluded: [49] In my view, the authorities in this province do not clearly preclude the approach taken by the judge, although on balance I think the weight of authority supports the proposition that a party must voluntarily inject into the litigation legal advice it received or its understanding of the law before waiver can be implied. [67] Harris J.A. then stated he would "reach the same conclusion based on principle" and went on to

review the importance of solicitor-client privilege and that there should be abrogation only in clearly defined circumstances (at para. 50). He noted that negligent misrepresentation will always put a party's state of mind in issue, and that other causes of action may raise the same issue. If a party received legal advice on the transaction, its understanding of the law will be relevant. However, the test used by the chambers judge "calls into question whether solicitor-client privilege would ever be protected" in such a case (at para. 52). [68] In E-Pro, Justice Voith (as he then was) discussed Soprema and Harris J.A.'s conclusion at para. 49 quoted above. He emphasized that Soprema was addressing a specific situation where the "cause of action advanced, as opposed to any conduct on the part of a plaintiff, brings into play the plaintiff's "state of mind" and its reasonable reliance on a representation made to it" (at para. 34). Soprema did not detract from the ongoing validity of S. & K. and did not "obviate the need to consider both fairness and consistency when addressing implied waiver of privilege" (at para. 39). [69] In my view, Vidcom has simply pled that it discovered the alleged misappropriation on a certain date. It has not voluntarily injected into the litigation the legal advice it may have received, or taken a position that is inconsistent with the maintenance of

privilege, nor has it made legal assertions that make it unfair to maintain that privilege. Mr. Kay's argument is essentially that there might be something in the solicitor's file and it would be unfair if he did not get to explore that. I do not agree. Solicitor-client privilege must be as close as to absolute as possible, and Mr. Kay has not demonstrated any pleadings or circumstances on which fairness and consistency would require waiver of privilege. Production of documents [70] As I have dismissed Mr. Kay's application for a declaration that Vidcom has waived privilege with respect to any legal advice it obtained with respect to the assertion in paragraph 11 of the NOCC, it follows that I dismiss Mr. Kay's application for production of documents related to that. I turn to the accounting documents sought. [71] Mr. Kay seeks various accounting-related records to challenge the assertion by Vidcom that it "discovered, for the first time" the alleged misappropriation in March 2020, and to argue that Vidcom ought to have known of the alleged misappropriation earlier. Although the pleadings are not precise, they are sufficient at this point to raise that discoverability, or postponement, or as Vidcom argues when it became "fully aware", are issues in the action. [72] The application is brought under Rule 7-1(13), which concerns documents that could be used at trial "to prove or

disprove a material fact" or that "relate to any or all matters in question". The date of discovery or discoverability of the alleged wrongful acts is a material fact. In my view, there is also sufficient evidence on this application to consider the lower threshold. The forensic expert report and the affidavit of the principal of Vidcom, Mr. Vasandani, detail how the alleged wrongful acts took place. [73] Turning to the specific documents sought, Mr. Kay seeks: a copy of all written training programs, procedures and policies related to Vidcom's bookkeeping, reconciliation practices, and engagement of external auditors; and all requests for an audit by a governmental agency or program, including but not limited to Employment Insurance, WorkSafeBC, Goods and Service Tax ("GST"), and the Canada Revenue Agency. Vidcom's counsel has responded in correspondence attached to an affidavit that there are no such policies and procedures and that there was only one audit, being a GST audit. These alleged facts were not in a sworn affidavit, but counsel do not object to that. [74] I decline to order something be produced that apparently is not in existence. However, even if they were in existence, on the material filed on this application I would not order that they be produced. It has not been established for example, how a policy to do an external audit every three years (if such a

document existed) would be relevant to determining when Vidcom knew or ought to have known of the alleged misappropriation. Rather, it appears to be an attempt to obtain documents to argue that Vidcom should have had such a policy or if it had such a policy and did not follow it, it was responsible for not discovering the wrongful acts earlier. That has not been raised in the pleadings. Similarly, in my view, it has not been established how a GST audit would be relevant to determining whether Vidcom knew or ought to have known of the alleged misappropriation. Perhaps questioning at the examination for discovery will establish some basis for relevance, but it was not established on the evidence and arguments presented on this application. I do not order production of the GST audit. [75] Mr. Kay requests a copy of all documents pertaining to external accounting or bookkeeping engagements either sought, or obtained by Vidcom, whether as a result of an audit or otherwise. Accounting records could be relevant to discovery of the alleged misappropriation, but this is too broad. This should be limited to documents concerning any actual engagement or retainer of an external accountant or bookkeeper, and correspondence or notes of discussions but only with respect to any irregularities, discrepancies, or unusual increase in expenses. [76] Finally, Mr. Kay requests a copy of Vidcom's

financial statements, T2 filings, Notices of (Re)Assessment that were filed or received prior to the commencement of this proceeding, and all accompanying correspondence with any accountant in the preparation, execution and submission of such documents. Again, this is too broad. In my view, the income statement will show any changes in expenses year over year and given the evidence in the expert report this is relevant, but nothing has demonstrated that all the financial statements (e.g. the balance sheet) or the tax returns and assessments are relevant. The income statements should be produced, but not the other documents requested. Further, the phrase "all accompanying correspondence" is too broad. This should be limited to the documents concerning the engagement or retainer, and correspondence or notes of discussions only with respect to any irregularities, discrepancies, or unusual increase in expenses. [77] Since the relevance of these documents is with respect to the limitation issue only, the relevant time period is from 2009 to 2018 (assuming the most favourable limitation period to Mr. Kay, being a two-year time period), and any orders are restricted to this time period. This accounts for the one-year suspension of limitation periods due to the COVID-19 pandemic. Orders and costs [78] Mr. Kay's application for particulars and an affidavit from Vidcom is dismissed

except for the particulars sought of the "other damages" claimed in paragraph 25 of the NOCC. However, Mr. Kay has leave to bring a further application if Vidcom and Mr. Kay cannot resolve the matter of particulars at that time. [79] Mr. Kay's application for a declaration of waiver of solicitor-client privilege and production of related privileged documents is dismissed. Mr. Kay's application for production of accounting records is allowed in part within the limitations discussed above. [80] These applications were heard separately on two different days. With respect to the first application, Vidcom was largely successful and is awarded its costs in the cause. With respect to the second application, most of the time was spent on the issue of waiver of solicitor client privilege. Vidcom was successful on that issue. There was divided success on the production of the accounting records. Considering the time spent and the result, I award Vidcom its costs in the cause. "Norell J."