Court of Queen’s Bench of Alberta
Citation: Westra Law Office (Re), 2009 ABQB 391
Date:
20090625
Docket:
090083601X1
Registry:
Edmonton
In the Matter of a Search Warrant issued by the
Honourable Judge P.G. Sully on, December 23, 2008 authorizing a search of
the office of David Westra, better known as Westra Law Office, located at
300, 12120 - 106 Avenue, Edmonton, Alberta
And in the matter of an application by the Attorney
General of Alberta for a determination from this Honourable Court on the
issue of solicitor-client privilege in relation to the execution of the
said Search Warrant granted under section
487 of the Criminal Code of Canada
_______________________________________________________
Reasons for Judgment
of the
Honourable Madam Justice S.J. Greckol
_______________________________________________________
I.
Introduction
[1]
This case concerns an allegedly fraudulent real estate
transaction. The facts alleged are that Edmonton realtor Sanjay Sharma,
while acting in that capacity, sold a residential property that he owned
to Christopher and Roya Gour for an agreed price of $405,900.00, less a
$40,000.00 renovation allowance, effectively vitiating the need for a down
payment. ResMor Trust Company (“ResMor”) gave the Gours a mortgage for
$364,500.00, which it would not have done if it had known about the
renovation allowance. David Westra is the solicitor who acted for the
vendor, purchaser, and the mortgage company on this transaction.
[2]
Following a complaint by the Gours, an investigation
was commenced on May 22, 2008. On December 23, 2008, Constable Hayduk
swore an Information to Obtain a Search Warrant (“ITO”) in support of an
application for a warrant to search Westra Law Office on the basis that
there were reasonable grounds to believe that Mr. Sharma and Mr. Westra
had taken part in the furtherance of a mortgage fraud.
[3]
Under s.
487 of the Criminal Code, a search warrant was issued by the
Honourable Judge P.G. Sully authorizing a search on the offices of Mr.
Westra. On December 29, 2008, the search warrant was executed by the
Edmonton Police Service (EPS). The EPS seized documents relating to the
real property transaction involving 8004 - 15A Avenue, Edmonton, Alberta,
including trust account ledgers, other accounting records as well as
certain computer records.
[4]
On January 23, 2009, Hillier J. found that the Court of
Queen’s Bench had the jurisdiction to determine whether solicitor-client
privilege attached to any or all of the seized items.
[5]
The Crown now requests a review of the seized items,
with the exception of the computer records, to determine whether
solicitor-client privilege applies to the documents or whether that
privilege is displaced by the crime- fraud exception.
[6]
No issue has been taken with the seizure process nor
have counsel argued that there has been failure to observe or take into
account the stringent conditions appropriate to the issuance of a warrant
for the seizure of a solicitor’s file, as summarized by LeBel J. in
Maranda v. Richer
2003 SCC 67 (CanLII), (2003), 178 C.C.C. (3d) 321 at para.10.
II. Legislation
[7]
Rule 305 of the Rules of Court provides:
305(1) Affidavits shall
be confined to the statement of facts within the knowledge of the
deponent.
(2) In an action or
proceeding to which a corporation is a party any affidavit required by
these Rules to be made by a party may be made by an officer, servant or
agent of the corporation having knowledge of the facts required to be
deposed to, who shall state therein that he has that knowledge.
(3) On interlocutory
motions affidavits containing statements as to the belief of the deponent
with the source and grounds thereof may be admitted.
[8]
Section
487 of the Criminal Code states:
487(1) A justice who is
satisfied by information on oath in Form 1 that there are reasonable
grounds to believe that there is in a building, receptacle or place
(a) anything on or
in respect of which any offence against this Act or any other Act of
Parliament has been or is suspected to have been committed,
(b) anything that
there are reasonable grounds to believe will afford evidence with respect
to the commission of an offence, or will reveal the whereabouts of a
person who is believed to have committed an offence, against this Act or
any other Act of Parliament,
. . .
may at any time issue a
warrant authorizing a peace officer or a public officer who has been
appointed or designated to administer or enforce a federal or provincial
law and whose duties include the enforcement of this Act or any other Act
of Parliament and who is named in the warrant
(d) to search the
building, receptacle or place for any such thing and to seize it, and
(e) subject to any
other Act of Parliament, to, as soon as practicable, bring the thing
seized before, or make a report in respect thereof to, the justice or some
other justice for the same territorial division in accordance with section
489.1.
...
[9]
Section
488.1 of the Criminal Code states in part:
488.1(2) Where an
officer acting under the authority of this or any other Act of Parliament
is about to examine, copy or seize a document in the possession of a
lawyer who claims that a named client of his has a solicitor‑client
privilege in respect of that document, the officer shall, without
examining or making copies of the document,
(a) seize the
document and place it in a package and suitably seal and identify the
package; and
(b) place the
package in the custody of the sheriff of the district or county in which
the seizure was made or, if there is agreement in writing that a specified
person act as custodian, in the custody of that person.
(3) Where a document has
been seized and placed in custody under subsection (2), the Attorney
General or the client or the lawyer on behalf of the client, may
(a) within fourteen
days from the day the document was so placed in custody, apply, on two
days notice of motion to all other persons entitled to make application,
to a judge for an order
(i) appointing a place and a day, not later than twenty‑one days
after the date of the order, for the determination of the question whether
the document should be disclosed, and
(ii) requiring the custodian to produce the document to the judge
at that time and place;
(b) serve a copy of
the order on all other persons entitled to make application and on the
custodian within six days of the date on which it was made; and
(c) if he has
proceeded as authorized by paragraph (b), apply, at the appointed time and
place, for an order determining the question.
(4) On an application
under paragraph (3)(c) the judge
(a) may, if the
judge considers it necessary to determine the question whether the
document should be disclosed, inspect the document;
(b) where the judge
is of the opinion that it would materially assist him in deciding whether
or not the document is privileged, may allow the Attorney General to
inspect the document;
(c) shall allow the
Attorney General and the person who objects to the disclosure of the
document to make representations; and
(d) shall determine
the question summarily and,
(i) if the judge is of the opinion that the document should not be
disclosed, ensure that it is repackaged and resealed and order the
custodian to deliver the document to the lawyer who claimed the
solicitor‑client privilege or to the client, or
(ii) if the judge is of the opinion that the document should be
disclosed, order the custodian to deliver the document to the officer who
seized the document or some other person designated by the Attorney
General, subject to such restrictions or conditions as the judge deems
appropriate,
and shall, at the
same time, deliver concise reasons for the determination in which the
nature of the document is described without divulging the details thereof.
(5) Where the judge
determines pursuant to paragraph (4)(d) that a solicitor‑client privilege
exists in respect of a document, whether or not the judge has, pursuant to
paragraph (4)(b), allowed the Attorney General to inspect the document,
the document remains privileged and inadmissible as evidence unless the
client consents to its admission in evidence or the privilege is otherwise
lost.
(6) Where a document has
been seized and placed in custody under subsection (2) and a judge, on the
application of the Attorney General, is satisfied that no application has
been made under paragraph (3)(a) or that following such an application no
further application has been made under paragraph (3)(c), the judge shall
order the custodian to deliver the document to the officer who seized the
document or to some other person designated by the Attorney General.
. . .
(8) No officer shall
examine, make copies of or seize any document without affording a
reasonable opportunity for a claim of solicitor‑client privilege to be
made under subsection (2).
. . .
(10) An application
under paragraph (3)(c) shall be heard in private.
III. Facts
[10]
The Crown relies on the ITO, sworn by Constable Hayduk,
alleging that the following events took place between April 20, 2007 and
July 19, 2007.
a. In April 2007, Christopher and Roya Gour began the process of
buying their first home and were referred to an Edmonton realtor, Sanjay
Sharma, who advised them to get pre-approved for a mortgage. After the
Gours obtained pre-approval for a mortgage loan worth $406,000.00 from a
mortgage specialist, Mr. Sharma showed the Gours several properties valued
from $450,000.00 to $475,000.00, which were beyond their price range.
b. On April 28, 2007, Mr. Sharma informed the Gours that he had
found a house located at 8004 - 15A Avenue valued at $405,900.00, owned by
a motivated seller who was moving to the United States. When the Gours
expressed concern that they would not be able to afford the cost for the
needed renovations on the property, Mr. Sharma informed the Gours that
they could receive from the seller a “renovation credit” of $40,000.00 on
the property. On May 1, 2007, the Gours agreed to the deal and signed the
paperwork, but did not receive a copy of their offer to purchase from Mr.
Sharma or Mr. Westra, the solicitor overseeing the transaction. Mr. Sharma
later informed the Gours that they would receive the renovation credit
money at the lawyer’s office. On May 18, 2007, Mr. Sharma faxed the Gours
a copy of an amendment to the purchase contract to extend the possession
date to June 30, 2007, and the Gours signed the document, noting that the
seller was listed as “C/O LB” (“care of listing broker”).
c. On June 29, 2007, the Gours were called in by Mr. Westra to
sign some papers. When the Gours asked about the renovation credit, Mr.
Westra informed them that he had made some arrangements and that the Gours
could simply keep the down payment instead of receiving a cheque. When the
Gours asked Mr. Westra for copies of certain documents including the offer
to purchase, they were informed that Mr. Sharma held all of the paperwork
and that Mr. Westra would mail out any documents in Mr. Westra’s
possession to the Gours within the next few days.
d. In the weeks following the amended possession date of June 30,
2007, the Gours noticed that mail addressed to Mr. Sharma was being
delivered to the property.
e. On July 16, 2007, Mr. Gour received paper work copies from Mr.
Westra, including a cover letter, statement of account, a statement of
receipts and disbursements and a statement of adjustments. The latter two
documents showed:
. . .
c. The statement of receipts and disbursements contained the
following information:
i. ResMor mortgage for $364,500.00
ii. Funds disbursed
1. Cash to close to Fraser Milner of $363,809.64
d. The statement of adjustments contained the following
information:
i. Vendor is SHARMA
ii. Purchaser is GOUR
iii. Sale price is $405,000.00
iv. Basement renovation credit is $40,000.00
v. Cash to close of $363,809.00
f. When the Gours confronted Mr. Sharma about his name appearing
as owner of the property in the paperwork from Mr. Westra, Mr. Sharma
stated that the seller wished to remain anonymous. The Gours then obtained
copies of the purchase contract and amendments from their mortgage
specialist and noticed that Mr. Sharma’s name was written in where “C/O
LB” was crossed out in the documents.
g. Constable Hayduk attended at the Real Estate Board office and
found that the house was listed by Mr. Sharma on August 31, 2006 for
$284,000.00. It was sold on September 17, 2006 for $265,000.00. Mr. Sharma
represented both the buyer and seller.
h. Constable Haydak formed the opinion that the MLS document that
Mr. Sharma provided to the Gours was a fake: the listing showed the list
price for the house at $405,900.00; there was no MLS number in the space
provided indicating that it had never been entered on the MLS system; and
the selling agent on the MLS listing was shown as Priya Sharma. Constable
Haydak formed this opinion in part because the format of the listing was
identical to the listing of August 2006, except for the price; there had
been no subsequent listing on the MLS system; Priya Sharma is Mr. Sharma’s
wife; and the MLS Manager advised him that realtors have the ability to
type over the MLS highlight sheets with a program called Design Tool.
i. The historical certificate of title showed that Mr. Sharma went
on title on January 10, 2007 and that on July 19, 2007 the property was
transferred to the Gours for $405,000.00. The documents registered on
title also showed that Mr. Westra represented the vendor Sharmas, the
purchaser Gours, and the mortgage company ResMor.
j. On receiving notification of the Gours’ complaint, ResMor
commenced an investigation and provided Constable Hayduk with documents
that were obtained from Mr. Westra. In comparing those documents with the
ones from the Gours, Constable Hayduk found that the statement of receipts
and disbursements sent to the Gours showed funds of $363,809.64 disbursed
to Mr. Westra as cash to close, whereas the same document sent to Mr.
Sharma showed funds disbursed as “Balance to you (Sanjay) $150,000; and
Balance to you (Sanjay) $6,674.40.” The copy of the real estate purchase
contract showed Mr. Sharma as the buyer representative, displayed an
illegible seller’s signature, and did not contain the $40,000 renovation
credit. The addendum to the contract sent to Mr. Sharma, which was not
received by ResMor, did not identify the vendor, displayed an illegible
seller’s signature, appeared to show Mr. Sharma’s signature as the
witness’ signature, and included the $40,000 renovation credit.
k. In the documents provided by Mr. Westra to ResMor, the cash to
close was shown as payable to Mr. Westra, while the cash to close was
shown in the documents provided to the Gours as payable to Fraser Milner.
Further, the seller was not shown as Mr. Sharma even though he was the
seller of the house.
l. ResMor advised Constable Hayduk that it would not have provided
the Gours with mortgage funding for this house had it received all of the
documents that it later did, because with the renovation credit there was
no down payment, and ResMor essentially financed 102.46 percent of the
value of the house, assuming the sale price was not inflated.
m. Constable Hayduk had an appraisal of the house done as of
December 18, 2007. The house was valued at $290,000.00 less the cost to
cure the deficiencies, including mould, in the sum of $5,000.00 to
$8,000.00. The appraiser concluded that the value of the house at the time
of purchase was between $320,000.00 and $335,000.00.
n. Constable Hayduk asserted that some of the necessary documents
could only be attained at the Westra Law Office, such as trust account
ledgers and other accounting materials that would show who had benefited
from the transaction, as well as Mr. Westra’s notes and other recordings
by him.
[11]
The Crown submits that there are reasonable and probable
grounds to believe Mr. Sharma and Mr. Westra took part in the furtherance
of a mortgage fraud based on the following analysis of the alleged facts:
a. Mr. Sharma, in his capacity as real estate agent, made a
misrepresentation to the Gours when he failed to tell them that he was the
owner of 8004 - 15A Ave.;
b. Mr. Sharma, in his capacity as real estate agent, facilitated a
fraud on ResMor by advising the Gours that they could receive a
“renovation credit” of $40,000.00 on the property from “the seller” if
they applied for a mortgage of $373,977.00 and made a down payment of
$40,500.00 (this amounts to a mortgage given for the full amount of the
purchase price with no down payment made by the borrower);
c. Mr. Westra, in his capacity as the Gours’ solicitor, made a
misrepresentation to them when he provided them with documents that
indicated funds had been disbursed to “Fraser Milner Casgrain” when in
truth the funds had been disbursed to “Westra Law Office,” acting as
solicitor for Sanjay Sharma, as evidenced by the documents Mr. Westra
provided to ResMor (two sets of legal documents exist, the ones sent to
the Gours and the ones sent to ResMor);
d. Mr. Westra made a further misrepresentation to his clients, the
Gours, when he had them sign a copy of the purchase contract which did not
list Sanjay Sharma as the seller, later altering or facilitating an
alteration to the contract to list “Sanjay Sharma” as the seller;
e. Mr. Westra made a misrepresentation to the financial lending
institution, ResMor, when he initially withheld the addendum to the
purchase agreement which referenced the $40,000.00 renovation credit
(although he did provide this document when it was specifically requested
by ResMor);
f. Mr. Westra, in his capacity as Gours’ solicitor, facilitated
the fraud on ResMor by advising the Gours that it was legal for them to
receive a “renovation credit” of $40,000.00 on the property from “the
seller” if they applied for a mortgage of $373,977.00 and made a down
payment of $40,500.00 (this amounts to a mortgage for the full amount of
the purchase price with no down payment by the borrower);
g. Mr. Westra indicated to the Gours that instead of getting the
renovation credit, they could simply keep their down payment cheque; and
h. A representative from ResMor indicated that if agents for
ResMor had had accurate information from Mr. Westra from the beginning,
specifically, information regarding the agreed on “renovation credit,” the
loan on the address 8004 - 15A Ave. would not have been funded.
[12]
The search warrant was executed on December 29, 2008 and
the following items were seized by the Edmonton Police Service:
a. documents relating to the real property transaction involving
8004 - 15A Avenue, Edmonton, Alberta;
b. trust account ledgers and other accounting records relating to
this same transaction; and
c. computer equipment, including magnetic or other machine
readable storage equipment, digital cameras or other recording devices,
programs or software associated with the said equipment, or any other
device and associated software and manuals, used or capable of being used
to create, store or manipulate electronic documents, records, electronic
mail or graphic files related to the property transaction regarding 8004 -
15A Avenue, Edmonton, Alberta and financial records related thereto.
[13]
Mr. Sharma has provided a letter from his tenant asserting
that during the last week of April 2007, Mr. Sharma advised him that he
would be showing the house and introduced the Gours to him as his tenant.
The tenant says the property was not listed on MLS and there was no
realtor sign or lock box. The tenant asserts that on the Gours’ second
visit to the house, the conversation made it clear that Mr. Sharma was the
owner of the house.
[14]
Mr. Sharma also provided a letter from ResMor stating that
had the Gours given the mortgage company a copy of the addendum to the
sale showing the $40,000.00 cash back for the renovation, ResMor would
never have funded the sale.
[15]
Mr. Sharma provided an appraisal of the property, effective
May 15, 2007, showing its value as $360,000.00 to $370,000.00.
[16]
Mr. Sharma argued that the reference to Fraser Milner in
the statement of adjustments was nothing more than a typographical error,
a logical explanation in the age of computer generated precedents.
IV. Issues
[17]
There are three issues that arise on this application:
A. Whether the real
estate transaction file and related documents are privileged.
1. Whether real estate transaction documents and related records
(accounts and ledgers) are communications directly related to the seeking,
formulating or giving of legal advice.
2. Whether the real estate transaction documents and related
records here were communications of a confidential nature, given that Mr.
Westra represented all parties and the Gours have waived their
solicitor-client privilege.
B. Whether the Crown has adduced reliable evidence on which a
determination can be made, on a balance of probabilities, that the
crime-fraud exception applies to any solicitor-client privilege.
C. Whether the Crown has met its onus of showing, on a balance of
probabilities, that there has been the commission of a crime so that the
crime-fraud exception applies to any solicitor-client privilege.
V.
Analysis
[18]
ResMor and the Gours have waived their potential claim to
solicitor-client privilege over materials seized and have done so freely
and voluntarily with a full appreciation of their right to claim privilege
and the consequences of waiving that right.
[19]
Mr. Westra acknowledges that if the documents are
privileged, the privilege does not belong to him. Therefore, he takes no
position with respect to that issue. However, he adopts Mr. Sharma’s
position that there is no evidence before the Court on this application,
in any event, since there are no affidavits from the parties who have
evidence to provide. Mr. Westra also takes issue with the Crown making
factual assertions in the absence of proven facts. He contends that the
ITO contains nothing more than hearsay on hearsay.
[20]
The realtor and vendor, Mr. Sharma, claims the seized
documents are subject to solicitor-client privilege. The onus of
establishing a privilege lies on the party asserting it: Steeves
(Guardian ad litem of) v. Rapanos
1982 CanLII 509 (BC C.A.), (1982), 41 B.C.L.R. 312 (C.A.).
[21]
Mr. Sharma emphasizes the fundamental role that
solicitor-client privilege plays in the legal system. He submits that in
approaching the issues in this case, the Court must be mindful that the
privilege has become a fundamental civil and legal right and the Court
must adopt “...stringent norms to protect it:” Lavallee, Rackel &
Heintz v. Canada (Attorney General),
2002 SCC 61 (CanLII), 2002 SCC 61 at paras. 16 and 36,
2002 SCC 61 (CanLII), [2002] 3 S.C.R. 209; Solosky v. The Queen,
1979 CanLII 9 (S.C.C.), [1980] 1 S.C.R. 821 at 839. The full
protection of the privilege is particularly critical when an individual is
the target of a criminal investigation: Lavallee at para.
23.
[22]
The rationale for the existence of solicitor-client
privilege is set out in the following passage from Canada (Director
of Investigation & Research) v. Shell Canada Ltd., (1975), 22 CCC
(2d) 70 at 78-79 (F.C.A.), cited with approval in Solosky at
para. 21:
... the protection,
civil and criminal, afforded to the individual by our law is dependent
upon his having the aid and guidance of those skilled in the law
untrammelled by any apprehension that the full and frank disclosure by him
of all his facts and thoughts to his legal advisor might somehow become
available to third persons so as to be used against him.
A. Whether the Real Estate Transaction File and Related
Documents are Privileged?
[23]
Four conditions must be established in order for
solicitor-client privilege to apply:
(a) there must be a communication, whether oral or written;
(b) the communication must be of a confidential character;
(c) the communication must be between a client or his agent and a
legal advisor; and
(d) the communication must be directly related to the seeking,
formulating or giving of legal advice.
(Canada (Minister
of National Revenue ‑ M.N.R.) v. Reddy,
2006 FC 277 (CanLII), 2006 FC 277 at paras. 12 to16 (F.C.(T.D.)),
citing B. v. Canada
1995 CanLII 2007 (BC S.C.), (1995) 3 B.C.L.R. (3d) 363 at para. 22
(S.C.), citing the Report of the Special Committee of the Canadian Bar
Association ‑ Ontario, Regarding Solicitor‑Client Privilege (1985);
Pritchard v. Ontario (Human Rights Commission),
2004 SCC 31 (CanLII), [2004] 1 S.C.R. 809 at para. 15, citing
Solosky at p. 834).
[24]
Section
488.1(4)(a) of the Criminal Code provides the Court with
authority to examine the solicitor’s files that have been seized for the
purpose of determining the application for disclosure.
[25]
The documents contained in the files seized from the Westra
Law Office include the following:
(a) Envelope 1:
This envelope
includes computer hardware.
(b) Envelope 2:
This envelope
includes a file for Mr. Sharma regarding the real estate transaction. It
contains accounting records and the real estate transaction documents:
land titles documents, statements of receipts and disbursements, mortgage
documents, the transfer of land and associated documents, statements of
adjustments, taxation documents, residential real estate purchase
contract, and correspondence from ResMor to Westra.
(c) Envelope 3:
This envelope
includes a file for the Gours regarding the real estate transaction. It
contains accounting records and the real estate transaction documents: the
certificate of title, the real property report, statement of account,
statement of adjustments, transfer of land, residential real estate
purchase contract and addendum, solicitor’s final report, mortgage
documents, and instructions to solicitor from ResMor.
1. Whether the real estate transaction documents and related
records (accounts and ledgers) are communications directly related to the
seeking, formulating or giving of legal advice?
[26]
The Reddy decision (at para. 14) suggests
that real estate documents on a solicitor’s file are not clothed with
privilege since they are actions by the solicitor rather than
communications related to the seeking, formulating or giving of legal
advice and, therefore, one of the four conditions for establishing
privilege is not met. In Ontario (Securities Commission) v. Greymac
Credit Corp. (1983), 41 O.R. (2d) 328 (Ont. Div. Ct.), the
court stated:
Evidence as to whether a
solicitor holds or has paid or received moneys on behalf of a client is
evidence of an act or transaction, whereas the privilege applies only to
communications. Oral evidence regarding such matters, and the solicitor's
books of account and other records pertaining thereto (with advice and
communications from the client relating to advice expunged) are not
privileged, and the solicitor may be compelled to answer the questions and
produce the material.
... The fact that a
client has paid to, received from, or left with his solicitor a sum of
money involved in a transaction is not a matter to which the client
himself could claim the privilege, because it is not a communication at
all. It is an act.
[27]
According to the Ontario Superior Court of Justice in
R. v. Serfaty, [2004] O.T.C. 401 at para. 47‑54, transactions
in solicitor's trust account do not attract solicitor‑client privilege as
they "relate to questions of objective fact, independent of communications
between the solicitor and client..."
[28]
In R. v. Tysowski
reflex, (1997), 120 Man. R. (2d) 37, [1997] 8 W.W.R. 493, the Court
examined whether files pertaining to various real estate transactions
seized from a lawyer’s office attracted solicitor‑client privilege. The
files that were seized included agreements covering the sale and purchase
of certain properties, instructions from the mortgage lenders,
correspondence with the lawyer for the vendors, statements of adjustment,
tax certificates, zoning memoranda, and reporting letters. After
considering the general principles pertaining to solicitor‑client
privilege, the court found (at paras 23 and 24) that the documents seized
were not protected by the privilege as all of the files related to the
sale and/or purchase of real estate and not with the obtaining of legal
advice, and the trust ledger sheets and cancelled cheques were evidence of
an accounting nature. In addition, the court concluded (at para. 25) that
the advice given by way of reporting letters to the clients on the closing
of a real estate transaction was not subject to solicitor‑client privilege
as it was of a factual nature and not legal advice in the strict sense of
the word. In any event, the court concluded that no evidence had been
tendered in support of the claim for solicitor‑client privilege and,
therefore, the documents seized could be disclosed.
[29]
In Eastwood & Co. v. Canada (Minister of National
Revenue ‑ M.N.R.), [1993] B.C.J. No. 3105 (B.C.S.C.) (QL), the
court considered conveyancing documents and statements of account to be
documents of fact that did not attract solicitor‑client privilege, whereas
documents containing elements of advice given to or sought by the client
were considered privileged.
[30]
In Re Wirick,
2005 BCSC 1821 (CanLII), 2005 BCSC 1821, 51 B.C.L.R. (4th) 193,
the issue before the court was whether a cheque payable out of a
solicitor’s trust account was subject to solicitor-client privilege or
confidentiality such that its production should not be ordered or it
should be ordered produced in a redacted or altered form. Some of the
relevant points articulated by the court included the following:
· In the context of the solicitor/client relationship, not all
confidential information is privileged and confidentiality alone is not
sufficient to attract privilege;
· Documents such as cheques, ledgers, and deposit slips form a
part of the solicitor’s records and are not ordinarily privileged because
they are a report of acts, not communications;
· There is a distinction between “facts” which may be in a
solicitor’s file and “confidential communications,” as it is clear that
regarding matters of fact no privilege attaches to documents and that they
are not confidential;
· Evidence as to whether a solicitor paid moneys on behalf of a
client is evidence of an act or transaction, whereas the privilege applies
only to communications. As “acts” are not privileged, a solicitor may be
compelled to produce transaction records; and
· The privilege does not apply to documents merely held by the
lawyer, including accounting records and trust reconciliations,
conveyancing documents and documents relating to the sale of property
where no advice was sought or given in respect of them.
[31]
In Canada (Minister of National Revenue ‑ M.N.R.) v.
Vlug,
2006 FC 86 (CanLII), 2006 FC 86, the court considered whether a
solicitor could be compelled to disclose certain documents related to a
purchase and sale agreement executed by the solicitor’s former client.
Having examined the documents in question, the court determined that the
statement of adjustment, as an act of communication between the solicitor
and the client, and the other party and its solicitor, could not be
considered a privileged communication and the cheques that were issued in
relation to the transaction were principally an act, not a communication.
Accordingly, the documents related to the real estate agreement did not
have the character of privileged communication.
[32]
Ontario (Securities Commission) v. Greymac Credit
Corp.
reflex, (1983), 146 D.L.R. (3d) 73 (Ont. H.C.J.) was a receivership
case in which the receivers were unable to determine the whereabouts of
large payments of money made by Greymac to two law firms. The law firms
stated they no longer had the money and refused to provide information
about where it went on the basis that to do so would breach the
solicitor-client privilege claimed on behalf of Greymac by its president,
who was out of the country and refused to return. After considering the
basis for the protection, Southey J., for the court, suggested at para. 24
that it is helpful to ask whether the client in such a case, if
testifying, could refuse to disclose particulars of the transactions
directed by him through his solicitor’s trust account. He concluded that
the fact the client has left money with his solicitor is an act rather
than a communication and, therefore, not subject to a claim of
solicitor-client privilege.
[33]
Greymac has been followed in Alberta. In
Matthison v. Odishaw,
1999 ABQB 207 (CanLII), 1999 ABQB 207, Ritter J., as he then was,
considered an application by the plaintiff for an order directing that
certain questions relating to the amount of outstanding legal fees, the
actual accounts, and security documents signed by the defendant lawyer’s
client, be answered. The lawyer raised the privilege asserted by his
client. Ritter J. agreed (at para. 11) that the evidence relating to the
movement of funds in and out of the solicitor’s trust account was factual
and existed independent of any communication between the solicitor and his
client and, therefore, was not the subject of privilege. He held that
questions relating to the flow of money in and out of the solicitor’s
trust account did not constitute an inquiry which would breach a
privileged communication, as no communication existed.
[34]
I conclude in the present case that documents pertaining to
the real estate transaction and related documents, including accounts and
ledgers, are not clothed with solicitor-client privilege as they are
actions rather than communications directly relating to the seeking,
formulating or giving of legal advice. For this reason, the documents in
the files seized from the Westra Law Office must be disclosed.
[35]
In case I am wrong in this conclusion, I have gone on to
consider the other two issues.
2. Whether the real estate transaction documents and related
records were communications of a confidential nature, given that Mr.
Westra represented all parties and the Gours have waived their
solicitor-client privilege?
[36]
As noted, ResMor and the Gours have waived their potential
claim to solicitor-client privilege over materials seized and have done so
freely and voluntarily with a full appreciation of their right to claim
privilege and the consequences of waiving privilege. The realtor and
vendor, Mr. Sharma, claims the seized documents are subject to
solicitor-client privilege.
[37]
The Crown submits that where a lawyer represents both
purchaser and seller in a transaction, and the seller is aware of that
fact, the seller cannot later claim solicitor-client privilege over any
communications or documents, trust ledgers or any other accounting records
relating to the property transactions as between seller and buyer. It
maintains that both the Gours and Mr. Sharma are the true owners of the
client file relating to the real estate transaction, the Gours have waived
privilege over those communications, and Mr. Sharma has not proved they
are privileged.
[38] Rule 2,
Chapter 6 of the Alberta Law Society’s Professional Code of Conduct
states:
A lawyer must not act
for more than one party in a conflict or potential conflict situation
unless all such parties consent and it is in the best interests of the
parties that the lawyer so act.
[39]
The rationale supporting this Rule is explained in
Commentary C.2.2 to the Rule regarding “Disclosure and consent.”
If a lawyer determines
that multiple representation is permissible, the consent of the parties
must then be obtained. See the definitions of “consent” and “disclosure”
in Interpretation. Consent in this context will be valid only if
full and fair disclosure has been made by the lawyer (to all parties
together unless completely impractical) of the advantages and
disadvantages of, first, retaining one lawyer and, second, retaining
independent counsel for each party. Such disclosure must include the fact
that no material information received in connection with the matter
from one party can be treated as confidential so far as any of the other
parties is concerned. [Emphasis added.]
[40]
The Crown relies on Southerland v. D.A. Townley and
Associates Ltd., 1997 CarswellBC 444 at para. 20 for the
proposition that when two or more parties consult with one solicitor for
their mutual benefit, communications between either party and the
solicitor are not privileged as against each other since there is no
expectation of privacy.
[41]
The Crown also argues that the situation is akin to a
“common interest waiver,” where a partial waiver of privilege is made as
between two parties with joint interest in future potential litigation,
relying on Pritchard v. Ontario (Human Rights Commission)
2004 SCC 31 (CanLII), 2004 SCC 31,
2004 SCC 31 (CanLII), [2004] 1 S.C.R. 809 and R. v. Dunbar
reflex, (1982), 138 D.L.R. (3d) 221 at para. 80 (Ont. CA).
[42]
There were three parties to the transaction in question
here; Mr. Sharma as seller, the Gours as purchasers, and ResMor as
mortgage company. Mr. Westra represented all parties to the transaction.
The Gours and ResMor waive solicitor-client privilege with respect to the
transaction documents. The commentary to the Alberta Law Society’s
Professional Code of Conduct Rule concerning joint representation is
clear that “ ... no material information received in connection with the
matter from one party can be treated as confidential so far as any of the
other parties is concerned.” Any materials received by Mr. Westra from any
of the three parties is not confidential as between them. Each party is
expected to share in and be privy to all communications passing between
each of them and their solicitor. There is no expectation of
confidentiality between the parties. Mr. Sharma cannot assert privilege to
prevent disclosure of the documents to the Gours or ResMor, and the Gours
and ResMor have waived their privilege over those materials.
[43]
I find the Sutherland case, and the
authorities on which it is based, authoritative on this point: Mr. Sharma
has not demonstrated solicitor-client privilege over the documents held by
Westra Law office pertaining to this real estate transaction as against
the Gours or ResMor. The parties to the real estate transaction all used
the services of Mr. Westra to effectuate the deal and each is entitled to
be privy to the information he had respecting the arrangements pertaining
to the others. The communications are not confidential as between the
parties, so as to meet that condition of solicitor-client privilege,
although they are confidential vis a vis the outside world.
However, the Gours and ResMor have waived any privilege that did exist as
against the outside world. Documents that are communications between Mr.
Westra and any of the three parties must be disclosed on that basis.
B. Whether the Crown has Adduced Reliable Evidence on which a
Determination Can be Made, on a Balance of Probabilities, that the
Crime-Fraud Exception Applies to any Solicitor-Client Privilege?
[44]
Mr. Sharma argues that the Crown has not adduced reliable
evidence on which a determination can be made, on a balance of
probabilities, that the crime-fraud exception to the privilege applies. He
argues that what is sought is a final order and contends that the ITO only
contains information based on belief, rather than facts within the
knowledge of the deponent as required by Rule 305 of the Alberta Rules
of Court. He says the ITO contains substantial information from the
Gours that is hearsay and is incapable of submission to cross examination.
Mr. Sharma maintains that, in any event, the Crown has not met its onus of
showing on a balance of probabilities that there has been the commission
of a crime so as to rely upon the crime-fraud exception to the
solicitor-client privilege. He notes that no charges have yet been laid.
[45]
Mr. Sharma relies on the Lavallee decision
and submits that where there is any equivocation about the evidence
submitted by the Crown, that evidence ought to be rejected and the
application rejected.
[46]
Constable Hayduk asserted in the ITO that he had reasonable
and probable grounds for believing that Mr. Sharma and Mr. Westra took
part in the furtherance of a fraudulent real estate transaction. Constable
Hayduk was the lead investigator on the case and it is clear that he was
thorough in his investigation. In the ITO, he reviewed various records
that were maintained in the course of the transaction. These documents
included:
(a)
Documents provided by Mr. Sharma and/or Mr. Westra to the Gours: a
cover letter; statement of account; statement of receipts and
disbursements; purchase contract and amendments and a copy of the MLS
document listing.
(b) Records or registered documents related to the property: MLS
documents provided by the Edmonton Real Estate Board office; historical
certificate of title for the property; transfer of land documents
(registered on title); Dower Act form (registered on title);
affidavit of transferee (registered on title); mortgage loan (registered
on title);
(c) Resmor’s file on the transaction, including documents provided
by Mr. Westra to Resmor: statement of adjustments; statement of receipts
and disbursements from Mr. Westra to the Gours; statement of receipts and
disbursements from Mr. Westra to Mr. Sharma; copy of the Residential real
estate purchase from Mr. Westra to Mr. Sharma; addendum to the real estate
purchase contract from Mr. Westra to Mr. Sharma; amendment to the real
estate purchase contract from Mr. Westra to Mr. Sharma; notice of waiver
of conditions.
[47]
Constable Hayduk also made further inquiries and spoke to
various individuals who provided additional information in relation to the
transaction. Those individuals included a representative of ResMor, a
representative from Fraser Milner Casgrain, an appraisal company
representative, and an investigator from the Law Society of Alberta. As a
result of the investigation, Constable Hayduk identified discrepancies
between the Sharma, Gours, and Wesmor real estate and mortgage documents
and found grounds for believing that an offence had been committed by Mr.
Sharma and Mr. Westra.
[48]
Rules 305(1) and (3) are rules of procedure. Rule 305(3)
does provide that affidavit evidence based on information and belief may
be adduced in interlocutory applications. Rule 305(1) does not go so far
as to proscribe evidence based on information and belief in every other
type of application. The authorities indicate that hearsay evidence is
admissible in the ITO to show reasonable and probable grounds, and that
the question is whether there is reliable evidence on which the issue of a
crime-fraud exception to solicitor-client privilege can be determined.
[49]
In R. v. Leibel
reflex, (1993), 111 Sask. R. 107 at para. 23, 7 W.W.R. 407 (Q.B.), the
court noted that hearsay evidence, in the form of affidavits sworn in
support of search warrants, may be used to establish the requisite proof
to displace or disallow the claim of privilege by alleging fraud. The
court cited Borden & Elliot v. R. (1975), 13 O.R. (2d) 248
at 249, 70 D.L.R. (3d) 579 (H.C.J.), aff’d (1975) 13 O.R. (2d) 248, 70
D.L.R. (3d) 579 (C.A.), in which Southey J. stated:
In order to
displace the solicitor-and-client privilege on the ground that… the
documents are a part of a crime or a fraud, … there must be an
intelligible, specific allegation to that effect. The information on which
the search warrant is based must… clearly state reasonable grounds for
believing in a specific crime or fraud. A vague or ambiguous information,
which leaves the reader to guess at the precise nature of the charges
alleged would not be sufficient to give jurisdiction to issue a search
warrant in respect of documents which otherwise be covered by the
solicitor-and-client privilege.
[50]
The Court in Leibel noted (at para. 24) that
the issuance of a search warrant must be accompanied by reasonable and
probable grounds for believing that there has been the commission of a
crime, as well as sufficient information to show that the documents sought
will afford evidence with respect to the offence. The court found that
where the factual background is sufficient for the affiant peace officer
to reasonably form an opinion that an offence has been committed, a
prima facie case of criminal activity is established such that any
solicitor-client privilege attached to the seized documents is displaced.
[51]
Ritter J., as he then was, considered this question in
R. v. Bastidas (1993), 140 A.R. 294 (Q.B.). Mr. Bastidas
applied to the Court for an order directing that documents seized pursuant
to a search warrant from the office of his solicitor were privileged and
should be returned to his solicitor. The documents were trust records, a
bank statement, a cancelled cheque and a solicitor’s file. Mr. Bastidas
was the controlling mind of two corporations, a management company and a
janitorial company. The Crown alleged a loan was obtained from the Royal
Bank of Canada on the basis of a false statement regarding a contract of
the janitorial company. The Crown maintained that the loan purportedly was
obtained for the purpose of purchasing a piece of equipment but, instead,
the proceeds of the loan were transferred to the account of the management
company and from there to the solicitor’s trust account. A search warrant
was obtained and the materials removed to the Court for consideration of
the privilege issue.
[52]
Ritter J. decided (at para. 19) that the communications
which dealt with the question of the utilization of the money by the
solicitor were not privileged as such communications had a criminal
purpose attached to them. It was not relevant that the solicitor was
wholly unaware of such purpose - a person who surreptitiously involved
another in criminal activity is not entitled to have his activities kept
confidential by that person.
[53]
As to the process to be undertaken, Ritter J. indicated at
paras. 23 to 26 that the onus on the Crown was beyond a mere suspicion but
less than proof beyond a reasonable doubt. He referred to Re Romeo's
Place Victoria Ltd.
reflex, (1981), 128 D.L.R. (3d) 279, in which Collier J. of the
Federal Court Trial Division held that proof of fraud should be on a
balance of probabilities where proof of that offence is required to
circumvent solicitor-client privilege. In terms of what can constitute
such proof for the purposes of this type of application, he was of the
that each matter must be determined on its unique circumstances. However,
where the communications have been seized pursuant to a search warrant,
the fact that issuance of the warrant followed a judicial decision-making
process is something that should be considered as tending to establish
proof of the offence. If issuance of the warrant is to be challenged, that
challenge should precede or be coupled with the application for an order
directing that the documents are privileged.
[54]
On the question of whether there must be direct evidence to
properly support a determination that the privilege does not attach,
Ritter J. found that the question was reliability of the information (at
paras. 37 and 38):
It is my view that what
is in question is the reliability of the information before the Court. The
reliability of information obtained by information and belief can, in some
circumstances, be as great or greater than direct evidence. Surely the
reliability of information obtained from financial records, which are
obtained from persons who have a duty to maintain such records, is as
great or greater than the reliability of direct evidence of an accomplice
who has just been offered a deal by the Crown in exchange for that
evidence.
I note also the
provisions of ss. 24, 25, 29, and 30 of the Canada Evidence Act and
that it is unlikely that virtually any of the information contained in the
"grounds for belief" could be advanced other than pursuant to one of those
sections. I cannot imagine that having a bank officer swearing that he is
producing a bank record makes it more reliable than having a police
officer advance it in his grounds for belief. It remains the same record,
the bank officer is not likely to have been involved in its making, and is
not likely to have any greater personal knowledge with respect to it than
does the police officer who has just reviewed it.
[55]
The Court in Bastidas was dealing with bank
records referred to in the ITO and that appeared to have been made in the
course of the business of the record maker (at paras. 42-43). They were
directed to be disclosed.
[56]
In this case, the Crown has gathered information comprised
of documents papering a real estate transaction and a mortgage, as well as
interviews of the purchasers and of the mortgage lender. The Judge who
issued the warrant here found the information contained in the ITO met the
reliability threshold. While not based on personal knowledge, the material
in the ITO, particularly the documentary evidence, is sufficiently
reliable to warrant consideration of whether the Crown has met its onus to
establish the crime-fraud exception to solicitor-client privilege.
[57]
It is not clear to me that the Rules of Court apply
to this proceeding. It is an application that originated under s.
487 of the Criminal Code and is in furtherance of a criminal
investigation. Second, even if the Rules do apply, when the entire
context of this matter is considered, it is apparent that this is a step
along the way towards possible criminal charges. In that sense, this is an
interlocutory application. The Rules were not intended to be
roadblocks, but rather to be facilitative of efficient process. Finally,
as found in Bastidas, the question is one of the reliability
of the evidence. I conclude that the evidence contained in the ITO,
particularly the documentary evidence created in the ordinary course of
business, is sufficiently reliable to support this application.
C. Whether the Crown has met its onus of showing, on a
balance of probabilities, that there has been commission of a crime so
that the crime-fraud exception applies to any solicitor-client privilege?
[58]
The Crown and Mr. Sharma agree that solicitor-client
privilege does not arise in the commission of a crime. The Crown bears the
onus of showing, on a balance of probabilities, that the crime-fraud
exception applies to the solicitor-client privilege: Serfaty
at para 23; Bastidas at para 23; F.H. v. McDougall,
2008 SCC 53 (CanLII), 2008 SCC 53, [2008] 3 S.C.R. 41.
[59]
The crime alleged to have been committed is described in
the ITO as:
CC 368(1)(a)#2 -
uttering a forged document
Between the dates 20 day
of April, 2007 and 19 day of July, 2007, at or near Edmonton, Alberta,
did, knowing that a document, to wit: statement of adjustments and
statement of disbursements, was forged, unlawfully use, deal with or act
upon the said document as if it were genuine, contrary to section
368(1)(a) of the Criminal Code of Canada. (Sic)
CC 380(1)(a)#4 - fraud
over $5000 (money)
Between the 20 day of
April, 2009 and 19 day of July 2008, at or near Edmonton, Alberta, did by
deceit, falsehood or other fraudulent means, unlawfully defraud
christopher and roya gour of $30,000.00 of a value exceeding $5000.00,
contrary to section
380(1)(a) of the Criminal Code of Canada.
[60]
In Descôteaux v. Mierzwinski,
1982 CanLII 22 (S.C.C.), [1982] 1 S.C.R. 860 at para. 20, Lamer J.,
speaking for the Court, adopted the following passage from Wigmore (8
Wigmore on Evidence, para. 2292 (McNaughton rev. 1961)) :
Where legal advice of
any kind is sought from a professional legal adviser in his capacity as
such, the communications relating to that purpose, made in confidence by
the client, are at his instance permanently protected from disclosure by
himself or by the legal adviser, except the protection be waived.
[61]
He then discussed the exceptions to the privilege at para.
22:
There are exceptions. It
is not sufficient to speak to a lawyer or one of his associates for
everything to become confidential from that point on. The communication
must be made to the lawyer or his assistants in their professional
capacity; the relationship must be a professional one at the exact moment
of the communication. Communications made in order to facilitate the
commission of a crime or fraud will not be confidential either, regardless
of whether or not the lawyer is acting in good faith.
[62]
On receiving notification of the Gours’ complaint, ResMor
commenced an investigation and provided documents that were obtained from
Mr. Westra to Constable Hayduk. In comparing those documents with the ones
from the Gours, Constable Hayduk found that:
1. The statement of receipts and disbursements sent to the Gours
showed funds disbursed to Mr. Westra as cash to close for $363,809.64,
whereas the same document sent to Mr. Sharma showed funds disbursed as
“Balance to you (Sanjay) $150,000; and Balance to you (Sanjay) $6,674.40”;
2. The copy of the real estate purchase contract showed Mr. Sharma
as the buyer representative, displayed an illegible seller’s signature,
and did not contain the $40,000 renovation credit; and
3. The addendum to the contract sent to Mr. Sharma, which was not
received by ResMor, did not identify the vendor, displayed an illegible
seller’s signature, appears to show Mr. Sharma’s signature as the witness’
signature, and includes the $40,000 renovation credit.
[63]
In addition, there is information in the ITO from the Gours
and ResMor. The identity of the realtor as vendor may not have been
disclosed, at least initially. The documentation confirms that the
renovation credit back from the vendor was promised, and the addendum
confirming that arrangement was not provided to ResMor. The information
from ResMor shows that a mortgage would not have been extended to the
Gours had the true facts been presented. As Mr. Westra acted on all sides
of this real estate transaction, and would have known the mortgagor did
not have the information about the renovation allowance, there are
reasonable and probable grounds to conclude that he facilitated the
obtaining of the mortgage based on a false premise. The real estate
transaction and mortgage documents establish the grounds.
[64]
While the actual articulation of potential charges is poor,
Constable Haydak is clear in the ITO about the basis on which he finds
reasonable and probable grounds to conclude mortgage funds have been
obtained by fraud and this has been facilitated by the solicitor. This
allegation alone establishes the crime-fraud exception so that it is
unnecessary to go further and consider whether there are grounds to
conclude a fraud has been perpetrated in relation to the Gours concerning
the value of the property.
[65]
The Crown has met its onus of showing, on a balance of
probabilities that a fraud has been perpetrated on ResMor, so that the
crime-fraud exception applies to any solicitor-client privilege.
IV. Conclusion
[66]
The real estate transaction file and related records
(accounts and ledgers) are not clothed with solicitor client privilege.
The Crown has adduced reliable evidence on which a determination can be
made, on a balance of probabilities, whether the crime-fraud exception
applies to any solicitor-client privilege. The Crown has met its onus of
showing, on a balance of probabilities, that there has been the commission
of a crime so that the crime-fraud exception applies to any
solicitor-client privilege.
[67]
The files seized from the Westra Law Office should be
disclosed. In accordance with s.
488.1(4)(d)(ii) of the Criminal Code, I direct the Clerk of the
Provincial Court to deliver the Westra Law Office files to M. Duckett, QC
who seized the files pursuant to the authority vested in her.
Heard on the 8th day of April, 2009.
Dated at the City of Edmonton, Alberta this 25th
day of June, 2009.
Appearances:
Tamara Friesen
Alberta Justice -
Special Prosecutions
for the Crown
Joseph M. Shafir
for Sanjay Sharma
Mr. Baker
for Mr. Westra
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reflex — (1983), 146 D.L.R. (3d)
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