



COURT OF APPEAL FOR ONTARIO

CITATION: Philip
    Services Corp. v. Deloitte & Touche, 2015 ONCA 60

DATE: 20150130

DOCKET: C59046

Hoy A.C.J.O., Simmons and Tulloch JJ.A.

BETWEEN

Philip Services Corp. by its receiver and
    manager, Robert Cumming, High River Limited Partnership and Canadian Imperial
    Bank of Commerce

Appellants

and

Deloitte & Touche, Deloitte
    & Touche LLP, Deloitte Touche Tohmatsu, Deloitte Touche Tohmatsu LLP and
    Deloitte Touche Tohmatsu f/k/a Deloitte Touche Tohmatsu International

Respondents

Thomas Dunne and John Callaghan, for the appellants

Robb C. Heintzman, Michael Schafler and Mark Evans, for
    the respondents

Paul F. Farley and Brian Bellmore, for the Institute of
    Chartered Accountants of Ontario

Heard: December 15, 2014

On appeal from the order of Justice Paul M. Perell of the
    Superior Court of Justice, dated June 10, 2014.

Hoy A.C.J.O.:

[1]

The appellants  Philip Services Corp.
(Philip)
    by its receiver and manager, Robert Cumming, High River Limited Partnership and
    Canadian Imperial Bank of Commerce  appeal the June 10, 2014 order of the
    motion judge, dismissing their motion under rule 30.10(1) of the
Rules of
    Civil Procedure
, R.R.O. 1990, Reg. 194.

[2]

The appellants are the representative plaintiffs in a billion dollar
    class action involving allegations that the respondent, Deloitte & Touche (Deloitte),
    was negligent in preparing the 1995 and 1996 annual statements of Philip, a
    public company.

[3]

In 1998, about two years before the appellants commenced their action,
    the Institute of Chartered Accountants of Ontario (the Institute) commenced
    an investigation into Deloittes audits of Philip for 1995 and 1996. In 2007, the
    Institute brought charges against Noel Woodsford, the senior partner at
    Deloitte responsible for the audits, and in 2008 it found Mr. Woodsford guilty
    of professional misconduct.

[4]

In June 2014, the appellants sought an order under rule 30.10(1)
    requiring the Institute  a non-party to the litigation  to produce its
    investigators report, witness statements, notes of interviews conducted and
    other documentation concerning the Institutes investigation and discipline of
    Mr. Woodsford. The motion judge dismissed their application. He concluded that
    it would not be unfair for the appellants to proceed to trial without having
    discovery of the material sought and that, in any event, the materials need not
    be produced because they are subject to a Wigmore case-by-case privilege.

[5]

The appellants advance four arguments on appeal:

1.
    the motion judge erred in concluding that it would not be unfair for them to
    proceed to trial without discovery of the documents;

2.
    in
Canadian Imperial Bank of Commerce v. Deloitte & Touche
, 2014
    ONCA 89, 118 O.R. (3d) 508 (the Prior Decision), this court determined that
    material relating to the discipline proceedings against Mr. Woodford is
    admissible, and not privileged;

3. if
    the issue of privilege was not resolved by the Prior Decision,  the motion
    judge erred in any event in finding that the documents were privileged by
    case-by-case privilege; and

4. the
    motion judge erred in making his findings without inspecting the documents at
    issue.

[6]

Given the requirements of rule 30.10 (reproduced below), to  succeed on
    this appeal the appellants must establish both that the material at issue is
    not privileged and that it would be unfair to require them to proceed to trial
    without having discovery of the material. While I am not persuaded that the
    Prior Decision determined the issue of privilege, I agree with the appellants
    that the motion judge erred in finding that the documents were privileged by
    case-by-case privilege. However, there is no basis to interfere with the motion
    judges finding that it would not be unfair for the appellants to proceed to
    trial without discovery of the material at issue.  And the motion judge was not
    required to inspect the material.  I would accordingly dismiss this appeal.

[7]

Below, I first set out the text of rule 30.10 for reference. Then I
    briefly address the appellants argument that the motion judge was required to
    inspect the documents at issue before making his ruling. Next, I turn to the issue
    of whether it would be unfair to require the appellants to proceed to trial
    without having discovery of the documents. While that issue is dispositive, I
    also address both of the appellants arguments with respect to privilege as the
    motion judges finding of a case-by-case privilege may have ramifications at
    trial.

Text of Rule 30.10

[8]

Rule 30.10 addresses production by non-parties. It reads in relevant
    part:

Order for Inspection

30.10  (1)  The
    court may, on motion by a party, order production for inspection of a document
    that is in the possession, control or power of a person not a party and is
not
    privileged
where the court is satisfied that,

(a) the document is relevant to a material issue in the
    action; and

(b) it would be
unfair
to
    require the moving party to proceed to trial without having discovery of the
    document.

[]

Court may Inspect Document

(3)  Where
    privilege is claimed for a document referred to in subrule (1), or where the
    court is uncertain of the relevance of or necessity for discovery of the
    document, the
court may inspect
the document to determine the issue. [Emphasis
    added.]

Failure to Inspect the
    Documents

[9]

Rule 30.10(3) is discretionary. It does not require the motion judge to
    inspect the documents. The motion judge is also the case management judge for
    the class proceeding. Among the motions that he has heard is a motion for
    productions. He would clearly have understood the nature and significance of
    the documents at issue. His decision not to inspect the documents is entitled
    to deference.

Not Unfair to Proceed to Trial Without Documents

[10]

Rule
    30.10(1) is also discretionary.  The determination of the motion judge  who as
    I note above is also the case management judge for the class proceeding  was
    fact-specific and is entitled to deference. He applied this courts decision in
Ontario (Attorney General) v. Stavro
(1995), 26 O.R. (3d) 39 (C.A.),
    and considered the relevant factors in his analysis. As the motion judge wrote
    at para. 131:

The [appellants] have all the information that Deloitte
    provided to the Institutes investigators, and the [appellants] have and have had
    their own experts to evaluate and opine on the significance of that evidence.
    The [appellants] have and continue to have the benefit of extensive
    examinations for discovery where they can question the principal actors in the
    events that lead to the allegedly negligent and reckless audit of Philips
    accounts.

[11]

There
    is no basis to interfere with the motion judges conclusion that the appellants
    do not need the Institutes file or its investigators report  either to prove
    the technical elements of the issue estoppel they plead based on the
    Institutes finding of professional misconduct or to defend Deloittes summary
    judgment motion, which will turn on whether Deloitte owed Philips lenders a
    duty of care.

[12]

Further,
    as this court held in
Stavro
, Rule 30.10 assumes that it is not
per
    se
unfair to require a party to go to trial without the forced production
    of relevant documents in the possession of third parties. There is no basis to
    interfere with the motion judges conclusion that the appellants have failed to
    overcome this presumption.

Impact of the Prior Decision

[13]

I
    am not persuaded that the Prior Decision forecloses an argument that the
    material is privileged based on case-by-case privilege.

[14]

The
    Prior Decision was an appeal from the motion judges decision that s. 61 of the
Chartered Accountants Act, 2010
, S.O. 2010, c. 6, Sch. C. (the 
CAA,
    2010
) applied to discipline proceedings under the
Chartered
    Accountants Act, 1956
, S.O. 1956, c. 7 (the 
CAA, 1956
), and
    accordingly precluded the appellants from pleading issue estoppel based on the
    Institutes decision finding Mr. Woodsford guilty of professional misconduct.
    Section 61 of the
CAA, 2010
renders material relating to professional
    discipline proceedings involving the Institute inadmissible in most civil
    proceedings. It is a new provision: the
CAA, 1956
has no equivalent.

[15]

In
    the Prior Decision, this court engaged in an exercise of statutory interpretation.
    It considered whether s. 61 applied only to material relating to proceedings
    under the
CAA 2010
, or also applied to discipline proceedings under
    the legislative authority of the
CAA, 1956
, such as those against Mr.
    Woodsford. If s. 61 applied to proceedings under the
CAA, 1956
, the
    appellants could not amend their statement of claim to plead issue estoppel
    based on the Institutes decision finding Mr. Woodsford guilty of professional
    misconduct. This court concluded that s. 61 only applied to proceedings under the
CAA, 2010
and the appellants could therefore plead issue estoppel.

[16]

At
    para. 52 of the Prior Decision, Doherty J.A., writing for the court, refers to
    the possibility that a party in a civil proceeding might seek to introduce
    documents relating to a discipline proceeding under the
CAA, 1956
.
    Properly understood, he determined that s. 61 would not be a bar to the
    admission of such documents.  He did not determine that they are in all cases
    admissible.

Case-by-case Privilege

[17]

While
    the motion judge correctly articulated the appropriate test for determining
    case-by-case privilege, his conclusion resulting from his application of the
    test cannot stand.

[18]

The
    four elements examined in analyzing a case-by-case privilege  the Wigmore
    criteria
[1]
 are as follows:

1.

the
    communication must originate in a confidence that they will not be disclosed;

2.

the
    confidentiality must be essential to the full and satisfactory maintenance of
    the relation between the parties;

3.

the relation
    must be one which in the opinion of the community ought to be sedulously
    fostered; and

4.

the injury that
    would inure to the relation by the disclosure of the communications must be
    greater than the benefit thereby gained for the correct disposal of litigation.

[19]

At
    para. 145 of his reasons, the motion judge concluded that:  the Institute gave
    assurances of confidentiality; the confidentiality was essential for the
    maintenance of the relationship between a regulator of a self-governing and
    self-disciplining profession and its members; it is in the public interest to
    sedulously foster that relationship and the role of the regulator; and
    impairing the relationship by the disclosure of confidential communications is
    more injurious to the public interest than the advantages to the court in its
    pursuit of truth and accuracy. At para. 148 of his reasons, the motion judge considered
    that s. 61 of the
CAA, 2010
was some evidence that it is in the
    public interest to have a case-by-case privilege that keeps the members
    communications with the Institute about discipline proceedings confidential.

[20]

With
    respect, the motion judges conclusion that the Wigmore criteria are established
    in this case flows from a reversible error. Understood in context 
    particularly in light of the Institutes practice to produce the material at
    issue to the affected member at or before the time charges are laid  the
    Institutes assurance as to confidentiality only applied until charges were
    laid.

[21]

By
    letter dated May 12, 1998, the Institute advised Mr. Woodsford that it was
    commencing an investigation and required a reply. The Institute enclosed a copy
    of its Complaints Investigation and Disciplinary Procedures. That document
    indicated that [m]atters under investigation and information gathered by the
    professional conduct committee are confidential to the committee
except to the extent necessary to carry out a prosecution where
    charges are laid
 (emphasis added).

[22]

Subsequently,
    in its decision of May 31, 1999 denying Mr. Woodsfords request that the
    Institute defer its investigation because it could prejudice Deloitte in the
    parallel U.S. civil proceedings alleging negligence, the Institute wrote:

The professional conduct committee is aware of the risk that a
    court may order production of material, including investigators reports, which
    the committee views as confidential and subject to qualified privilege. The
    committee has, in the past, successfully argued against court ordered
    production of investigators reports. The committee fully intends to resist any
    future applications for production of materials gathered as a result of an
    investigation brought by the committee
that have not been
    made public through a discipline prosecution. This assurance of confidentiality
    that has been given to members in the past
, who are the subject of an
    investigation, is extended to Messrs. McNeill
[2]
and Woodford [
sic
] (emphasis added).

[23]

In
    this case, charges were laid against Mr. Woodsford, but  in a departure from
    the Institutes normal practice, involving what counsel for the Institute
    characterized in oral argument as a unique settlement agreement  the
    materials were not delivered to Mr. Woodsford before charges were laid or made
    public in the subsequent discipline prosecution.

[24]

Importantly,
    as counsel for the Institute acknowledges, since
Howe v. Institute of
    Chartered Accountants (Ontario)
(1994), 19 O.R. (3d) 483 (C.A.), leave to
    appeal to S.C.C refused, [1994] S.C.C.A. No. 348, was decided, the Institutes practice
    is to provide disclosure to the subject of the complaint when charges are laid,
    in fulfillment of its
Stinchcombe
disclosure obligations. Indeed, but
    for seemingly tactical decisions by Mr. Woodsford and Deloitte not to accept
    the disclosure available to them and to conclude an agreement with the
    Institute that ensured the investigators report and other contentious
    materials would not be led in evidence at the discipline hearing, the material
    at issue would have been in the hands of Mr. Woodsford and Deloitte and
    compellable on discovery and would have been made public through the discipline
    process.

[25]

The
    discipline committees decision of October 16, 2008 indicates that the parties
    agreed that the professional conduct committee would only call one witness, who
    would not be cross-examined, and that counsel for Mr. Woodsford would not call
    evidence with respect to the question of guilt or innocence. The witness was
    one of the investigators retained by the professional conduct committee. He
    provided an opinion as to Mr. Woodsfords conduct, with reference to a brief of
    documents and a brief of authorities. The investigators report was not filed
    in evidence before the discipline committee.

[26]

The
    actual agreement between the Institute and Mr. Woodsford has not been
    disclosed. However, the most reasonable inference from the record is that it
    was not entered into until
after
the assurances at issue had been
    made,
after
the allegedly confidential communications had been made to
    the Institute, and
after
Mr. Woodsford was notified that charges would
    be drafted.

[27]

By
    January 2005, the Institute had completed its investigation. At the beginning
    of February 2005, the Institute held a disclosure meeting with Mr. Woodsford or
    his counsel. Within the week, counsel for the Institute notified counsel for
    Mr. Woodsford that he had been instructed to draft charges against Mr.
    Woodsford. A delay of nearly two years ensued before, on January 21, 2007,
    charges were finally laid against Mr. Woodsford. And the discipline committee
    did not hear the matter until October 16, 2008. Presumably, this delay was
    occasioned by the negotiation of the agreement between Mr. Woodsford and the
    Institute.

[28]

In
    my view, the communications could not have originated in a confidence that they
    would not be disclosed after charges were laid, and after Mr. Woodsford would,
    in the normal course, be in possession of the materials and could himself be
    compelled to disclose them. Nor  given the Institutes normal practice  could
    Mr. Woodsfords communications have originated in a confidence that they would
    not be disclosed at the discipline hearing. The Institute says that the
    agreement as a result of which the investigators report and other materials
    were not disclosed at the hearing is unique. The assurance that the Institute
    extended to Mr. Woodsford in its decision of May 31, 1999 was the assurance of
    confidentiality that has been given to members in the past. Those past
    assurances did not involve a unique agreement, such as that entered into with
    Mr. Woodsford.

[29]

In
    my view, the first element of the Wigmore test is not made out. Further, the
    motion judges palpable and overriding error in relation to this first element
    taints the balance of his Wigmore analysis.

[30]

With
    respect to the second Wigmore criterion, the motion judge rejected the
    appellants argument that where, as here, a member is compelled to cooperate
    with a regulator,
[3]
and the governing statute does not provide assurances as to confidentiality,
    confidentiality is not essential to the full and satisfactory maintenance of
    the relation between the parties. The motion judge wrote, at para. 147, the
    Institute [gave] the assurances of confidentiality because
its policy
was that proceeding in this way was the
    appropriate way to maintain
the relationship
between the regulator and the member being regulated (emphasis added).

[31]

However,
    not providing disclosure to the member to be charged and entering into an
    agreement such as the unique agreement it entered into in this case were
    contrary to the Institutes normal practices, and not consistent with the
    Institutes policy. While the motion judge did not articulate the nature of the
    particular relationship that was sought to be maintained, presumably he was referring
    to the Institutes argument on this appeal: while a member under investigation
    is obligated to cooperate with the Institute, he or she will be more
    cooperative if the Institute provides an assurance of confidentiality. But, as
    I explain above, the assurances were given, and the communications to the
    Institute made, before the agreement between Mr. Woodsford and the Institute was
    formed. The Institute had obtained the disclosure it required to fulfill its
    regulatory function before it entered into the agreement.

[32]

While
    the Institute did not provide specific submissions to this effect, I suspect that,
    as a result of the agreement, Mr. Woodsford cooperated at the discipline
    hearing and the hearing was more efficient than it would have otherwise been.
    Efficiency should generally be encouraged. However, I have inferred that the
    negotiation of the agreement also had a role in the delay in laying the charges
    and proceeding with the hearing. Hence, it is not clear that the agreement 
    and the additional assurances of confidentiality through the agreement 
    resulted in overall efficiency in this case.

[33]

In
    my view, where a member is required to cooperate with its self-regulating body,
    where the self-regulating body has an obligation to provide disclosure to the
    member at or before the time charges are laid, and where the governing framework
    does not provide an assurance as to confidentiality, confidentiality after
    charges are laid would usually not be found to be essential to the full and
    satisfactory maintenance of the relation between the parties.

[34]

As
    I note above, after charges were laid in this case, but for a tactical ploy,
    Mr. Woodsford would have had possession of the materials, and could have been
    compelled to disclose them. Further, those materials would have been made public
    through the discipline process. In my view, after charges were laid, confidentiality
    was not essential to the full and satisfactory relationship between the
    Institute (qua regulator, with a public duty to investigate, to promote and
    protect the public interest and maintain the credibility of the profession as a
    self-regulatory body) and Mr. Woodsford. Confidentiality  in this case and at
    this stage  is not essential to the full and satisfactory maintenance of the
    relation between the parties.

[35]

Nor
    do I accept that this type of tactical cooperation between the regulator and a
    member is something that, in the opinion of the community, should be
    sedulously fostered, or that the injury to the relation between the Institute
    and Mr. Woodsford by the disclosure of the materials at issue would be greater
    than the benefit thereby gained for the correct disposal of the litigation.

[36]

The
    Institutes claim for case-by-case privilege therefore fails.

Disposition and Costs

[37]

I
    would accordingly dismiss this appeal. As agreed by the parties, I would award
    costs, as between the appellants and Deloitte, in the cause and would order the
    appellants to pay the Institute costs in the amount of $20,000, inclusive of
    disbursements and applicable taxes.

Alexandra Hoy A.C.J.O.

Released: January 30, 2015
    (A.H.)                         I agree Janet Simmons J.A.

I
    agree M. Tulloch J.A.





[1]
The four Wigmore criteria were recognized by the Supreme Court of Canada in
Slavutych
    v. Baker
, [1976] 1 S.C.R. 254.



[2]
Following the investigation, charges were not laid against Mr. McNeill.



[3]
Members are compelled by the Institutes by-laws and rules to co-operate with
    an investigation by the Institute, including by complying with requests for information,
    documents and interviews.


