Canada: A Lawyer's Prior Files May Be Producible

Last Updated: November 14 2013
Article by Justin R. Seitz

Whether information is relevant and material, and therefore producible to opposing parties, is a question every litigator must grapple with when preparing for trial. When lawyers are named defendants in an action few of them would consider prior files, with little connection to the matter at hand, as producible; however the recent decision by the Honourable Master J.T. Prowse in Royal Bank of Canada v Kaddoura, 2013 ABQA 630 ("RBC v Kaddoura") has left the door open for placing an obligation on lawyers who are parties to an action to produce information from prior files.

The Decision

According to the Alberta Rules of Court, AR 124/2010, (the "Rules") a question, record or information is relevant and material if it could reasonably be expected to significantly help determine one or more of the issues raised in the pleadings, or to ascertain evidence that could reasonably be expected to significantly help determine one or more of the issues raised in the pleadings (rule 5.2(1)). In RBC v Kaddoura the Court considered whether, in the case of two separate mortgage fraud matters involving "straw buyers," the defendant lawyers' prior files were producible.

The Court held that the defendant lawyers should be required to disclose the existence of previous purchase and mortgage transaction files which involve either the same mastermind or agent of the mastermind or loans officer, subject to solicitor and client privilege (at para. 27). Consequently, the defendant lawyers' counsel were directed to cause their clients to file supplemental affidavits or records.

Reasoning

The Court conceded that in certain straw buyer cases there may be an innocent explanation as to why a lawyer may not have been put on a heightened duty of enquiry: Perhaps the vendor selling the recently acquired property was lucky to acquire the property for far less than what it is currently being sold for; or perhaps the purchaser is simply receiving help from a friend or relative when the down payment is provided by someone other than the purchaser. The point is however, that if the same circumstances involving the same parties repeat themselves then the chances of an innocent explanation diminish (at para. 24).

A key issue in any straw buyer trial is what was known between the lawyer and the straw buyer regarding the true nature of the transaction. The Court held that a defendant lawyer's prior files involving the same mastermind or agent of the mastermind or loans officer are relevant as they may "establish a pattern which distinguishes the transaction in question from a bona fide transaction and therefore relevant to the issue of whether the lawyer ought to have made enquiries of the straw buyer to ascertain the true nature of the transaction" (at para. 1).

The Court did acknowledge that such disclosure is subject to solicitor and client privilege, but declined to consider the topic "in abstract" as it related to the parties in RBC v Kaddoura (at para. 31).

Comment

It will be interesting to see if and how this decision is applied in subsequent decisions. Of particular interest is whether this decision will be applied to cases other than mortgage fraud matters involving straw buyers. With its broadest interpretation and application the decision could be used to compel defendant lawyers to produce information from prior files involving clients that are a party to the litigation in question simply to determine whether the client's previous dealing with that lawyer should have triggered a heightened duty of enquiry. The danger is that this could lead to a "fishing expedition."
 

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