Rhino Legal Finance Inc. v. Salmon, 2012 ABQB 169

Court of Queen ’ s Bench of Alberta Citation: Rhino Legal Finance Inc. v. Salmon, 2012 ABQB 169 Date: 20120309 Docket: 1103 02910 Registry: Edmonton Between: Rhino Legal Finance Inc. Plaintiff - and - David Salmon Defendant _______________________________________________________ Memorandum of Decision of W. S. Schlosser, Master in Chambers _______________________________________________________ [ 1 ] This is an application to compel production of records that would otherwise be privileged or confidential. [ 2 ] In this case, a lender sues the borrower ’ s lawyer.

The client had a lawsuit for injuries suffered in a motor vehicle accident. He obtained a loan from Advance Express Canada Inc. (now “ Rhino Legal Finance Inc. ” ). The funds were to be repaid from the recovery in the action. Unfortunately, the action was struck and could not be restored on appeal. [ 3 ] Rhino first sued the client and, was able to obtain default judgment.

[4] The interest provisions of the loan agreement made the debt obligations expand at a rate that could only be described asmalignant. Two net advances totalling approximately $17,000.00 became $87,710.83 when the agreed interest rate of 49.3% and theannual review cost of 10% were taken into account. The advances themselves were net of an initial 10% broker’s fee. [5] Rhino did not collect these funds from the client and has now sued the lawyer. [6] The lawyer has sworn an Affidavit of Records.

The Affidavit lists some 40 records, all of which consist of documentsexchanged with Rhino. [7] Rhino wants the entire lawyer’s file but the lawyer has objected that these records are privileged and confidential. A blanketobjection to production was given as follows:

Schedule 2 Relevant and material records under my control for which there is any objection to produce: (

a) Without prejudice communications. (

b) Communications and copies of communications between solicitor and client. (

c) Solicitors’ work product, including all interoffice memoranda, correspondence, notes, memoranda and other records by thesolicitors or their assistants. (

d) Records made or created for the dominant purpose of litigation, existing or anticipated: Nil. (

e) Records which are covered by statutory privilege: Nil (

f) Records that fall into two or more of the categories described above. [8] I note that this portion of the Affidavit falls short of the requirements in Rule 5.8, which, as I understand it, essentiallycodifies Dorchak v. Krupka (1997) 1997 ABCA 89 , 196 AR 81 (CA). The Rule requires categorization and numbering;categorization so that the type of objection can be identified and numbering, so we can say categorically whether a given record isdisclosed. [9] The lawyer’s objection is based on privilege and confidentiality.

Quite outside the aspect of privilege, which belongs to theclient, there is an ethical obligation of confidentiality (Code 2.03(1), (2)), as well as an implied (now imputed) undertaking imposedupon the recipient of information in one lawsuit not to use it in another (Rule 5.33). Generally speaking the threshold for disclosure ofinformation subject to this undertaking is quite high: the interest in disclosure must outweigh the relevant privacy value sought to beprotected by the undertaking. Doucette (Litigation Guardian of) v.

Wee Watch Day Care Systems Inc. 2008 SCC 8 , 2008, 1SCR 157. [10] Rhino argues that the privilege has been waived. In the promise to pay and assignment of settlement proceeds, the clientagreed: 7. The [illegible] hereby acknowledges that any and all communications with its Lawyer is protected by a solicitor/client privilege.Notwithstanding, and, in consideration of the Lender making an Advance to the Borrower, the Borrower hereby directs and authorizestheir Lawyer to release to the Lender any and all information in relation to or arising from the Action when requested by the Lender.

[11] The lawyer was not a party to this agreement in any ordinary sense. [12] There is also a very high threshold for disclosure of privileged records: Re Bre-X Minerals Ltd. 2001 ABCA 255 (at para.69); Bell v. Smith (SCC), [1968] SCR 664. The waiver must be clear and unequivocal: Histed v. Law Society (Manitoba) 2005 MBCA 106 , 2005 18 CPC (6th) 230 (Man. CA). The waiver must be made clearly and conscientiously with afull understanding of its consequences. [13] Waiver can be for a limited purpose. If there is any uncertainty, the extent of the waiver can be construed. Refco Alberta Inc.v.

Nipsco Energy Services Inc. et al, (2002) 2002 ABCA 312 , 317 AR 316. Typically, the protection afforded bysolicitor/client privileged is close to absolute and does not require balancing interests on a case by case basis. Refco at paragraph 6,referring to R. v. McClure (D.E.) 2001 SCC 14 , [2001] 1 SCR 445 at p. 450. [14] I am not convinced that the waiver given by the client for the limited purposes of allowing Rhino to examine the lawsuitagainst the defendant in the underlying motor vehicle action can be construed as an absolute waiver for all purposes.

In other words, thewaiver relied upon by Rhino appears to be for a limited purpose in a defined context. At the very least, it is not clear that the waiver wasintended to apply to these circumstances. [15] There is another reason as well. The terms of the loan suggest that the borrower was desperate. In effect, the loan agreementwould likely have consumed the entire proceeds of the action up to the extent of recovery after the deduction of legal costs.

To my mind,there is at least some doubt whether the client considered the implications of the agreement beyond the immediate goal of obtainingfunds (Histed, above). I raise this only in the context of interpreting the waiver and I make no comment about whether the loan wasillegal or, in effect, champertous. [16] Rule 5.11 governs the procedure for ordering a record to be produced.

The claim of privilege can be tested (Rule 5.11(1)(b)).In order to do this the court may inspect the record, or permit cross examination on the Affidavit. (Rule 5.11(2)). [17] At the start of the application, Rhino sought an adjournment to adduce further evidence in response to some of the argumentsmade by the Defendant.

However, neither an adjournment for further evidence nor the procedure available to the Court in Rule 5.11(2) ispreferable in terms of efficiency or expediency. [18] To my mind, the most direct route to dealing with the issue is one that appears, at first, to be indirect. [19] The records on the lawyer’s file are physically in his possession but, arguably, not within his “control” for the purposes ofRule 5.6(2). In the context of this application, the control depends on privilege and belongs to the client. So the most direct approach isto go straight to the source.

Rather than tendering further evidence, examining on the Affidavit of Records, or having the Court inspectthe records, the Plaintiff, if it wishes production of these records, should apply pursuant to Rule 5.13 to have the client release controldirectly. That way, Rhino can go straight to the source of the confidentiality and the privilege and we are not left to speculate aboutintent. I note that this approach was used in a somewhat different context in Sobeski v. Mano, 2011 ONSC 2153 , 2011 105 OR(3d) 532 (Ont SCJ). [20] Accordingly, Rhino’s application for production is dismissed.

The Defendant is directed to provide a further and betterAffidavit that complies with Rule 5.8. Until then, we can only deal in generalizations. [21] As this is a somewhat novel situation and the results are mixed, each side will bear its own costs. Heard on the 22nd day of February, 2012.

Dated at the City of Edmonton, Alberta this 9 th day of March, 2012. W. S. Schlosser M.C.C.Q.B.A. Appearances: Paul Greep Reynolds Mirth Richards & Farmer LLP for the Plaintiff Corinne Petersen and J. Faye Armfield Chomicki Baril Mah LLP for the Defendant