Morris Kaiser's trustee in bankruptcy, Soberman Inc.,
thought it smelled a rat: while claiming to be impecunious, Kaiser
appeared to be living a life of 'some means', which
included trips to casinos in the US. Kaiser claimed he was drawing
advances on the credit card of a buddy, Cecil Bergman, but the
trustee suspected the whole thing was a front to shield
Kaiser's assets from his creditors. Soberman applied for the
appointment of a receiver over the property of Bergman and his
company, on the grounds that their property was actually
Kaiser's and should form part of his estate for bankruptcy
purposes. The trustee also sought an order for disclosure of the
source of all funds Kaiser had received since entering bankruptcy.
Kaiser then moved to have the trustee's counsel removed from
the record, a motion that was found to be purely tactical. When
Kaiser failed to pay the costs of that motion, the judge ordered
him to reveal the identity of the party who had been paying his
legal bills. That information was, in the judge's view,
presumptively but not permanently privileged, and the presumption
had been rebutted because it had been shown that privileged
information that was relevant to the case would not be revealed to
the prejudice of Kaiser.
The Ontario Court of Appeal agreed and disagreed: Re
Kaiser, 2012 ONCA 838. Although the law was once that
'administrative' information about the advice provided by a
lawyer (including information about payment of the lawyer's
bill) would be permanently protected from disclosure, the law has
moved away from a categorical approach to this kind of
'peripheral' information. As the motion judge held, it is
only presumptively privileged, and the presumption may be rebutted.
Where the motion judge got things wrong, however, was in concluding
that the presumption of privilege had been displaced on the facts
at issue, having taken 'too narrow a view' of the potential
prejudice to Kaiser and the impact of disclosure on his right to
confidentiality. The identity of the person fronting Kaiser's
litigation was not merely tangential but central to the merits of
the main issue between the trustee and the bankrupt – the
shielding of assets. The removal motion and the order for
disclosure were but a 'skirmish in that theatre of battle'.
The trustee could perhaps have framed its motion on the basis that
the communication with the lawyer was being used to perpetrate a
crime or fraud, but did not. The presumptive privilege remained
The Canadian bankruptcy regime was designed with two key purposes in mind – provide options to ‘honest but unfortunate' debtors struggling with an unmanageable financial load and create an orderly means for creditors to recover amounts owed them.
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