Fridays With Rogers Partners

At our weekly firm meeting, Matthew Umbrio addressed the Divisional Court decision of Industrial Alliance Securities Inc. v. Kunicyn, 2020 ONSC 3393. The appellant, Ms. Kunicyn, appealed the Order of Justice Stewart dismissing her motion seeking answers to certain questions that were refused and disclosure of certain documents.

The refusals concerned communications between Industrial Alliance (IA) and their lawyers. The issue before the motion judge was whether the future fraud/crime exception to solicitor-client privilege should be invoked to order the requested production. Justice Stewart declined to order production, which led to the appeal.

The action arose out of a complicated history between Ms. Kunicyn and IA. Initially, Ms. Kunicyn worked as an associate at several investment dealers as part of Mr. Vitug’s investment advisory practice.

The Investment Industry Regulatory Organization of Canada (IIROC) investigated Mr. Vitug and found him guilty of professional misconduct. He was fined and permanently barred from registering as an investment representative. In anticipation of this finding, he transferred his book of business to Ms. Kunicyn, who then signed an Agency Agreement with IA.

Ms. Kunicyn ran her IA practice from an office space that she subleased from Mr. Vitug, and although she alleged that she took steps to ensure that Mr. Vitug did not have access to her files and was not involved in her practice, IIROC commenced an investigation into her as well. IIROC also commenced an investigation into IA over concerns that Ms. Kunicyn had continued contact with Mr. Vitug. The investigation into Ms. Kunicyn was eventually dropped, while IA settled with IIROC.

During the investigation against IA, the Vice-President of IA told IIROC that he and the President were both aware of Ms. Kunicyn’s office arrangements. Later, however, IA’s counsel wrote to IIROC to correct this testimony, stating that the Vice-President’s recollection was inaccurate and the President was not aware of the arrangement until the IIROC investigation revealed it to her.

Following the settlement with IIROC, IA commenced a claim against Ms. Kunicyn, seeking repayment of a loan that made up part of the Agency Agreement. Ms. Kunicyn counterclaimed against IA for breach of contract, breach of duty of good faith, and malicious prosecution.

According to her pleading, IA procured the prosecution of Ms. Kunicyn by IIROC by providing false evidence. This false evidence was allegedly that the President did not know about the office-sharing agreement until IIROC commenced its investigation.

The President and Vice-President (who had since been terminated by IA) were discovered as part of the action. Counsel for the President refused questions and production requests about the circumstances leading to the sending of the correction e-mail, citing solicitor-client privilege.

The Vice-President testified that he had been coerced to change his IIROC testimony by the President of IA and that the contents of the correction e-mail were false.

All requests for productions concerning the communications between IA and their counsel in relation to the correction e-mail were denied due to privilege.

The Divisional Court reviewed the issue of solicitor-client privilege and the future crimes and fraud exception. The Court noted that solicitor-client privilege is one that is jealously guarded and should only be set aside in the most unusual circumstances.

The future crimes and fraud exception constitutes such an unusual circumstance. As stated by the Supreme Court of Canada, confidential communications lose their confidential character to the extent that those communications were made to obtain legal advice for the purpose of committing a crime or if the communication itself is the material element of the crime.

To establish the exception, the party relying on the exception must demonstrate (1) that the challenged communications relate to proposed future conduct; (2) that the client must be seeking to advance conduct which they know or should know is unlawful; and (3) the wrongful act being contemplated must be clearly wrong.

The Divisional Court then reviewed the case law to determine whether this exception applies to civil wrongs, or if it only exists in the criminal context.

The case law is somewhat divided on this point – one side of the debate held that the exception should be extended to encompass communications that perpetrate any tortious conduct, while the other side felt that the exception should be construed narrowly, such that blameworthy conduct or abuse of process is insufficient to lift solicitor-client privilege.

Despite the jurisprudential division, the Divisional Court noted that the motion judge did not make her decision based on the exception. Instead, she focused her analysis of whether Ms. Kunicyn had made out a prima facie case that the exception should apply, holding that she did not.

The Divisional Court upheld the motion judge’s reasoning, finding that there was no evidence amounting to a prima facie case that it was virtually impossible for IIROC to exercise any professional independent discretion or judgment in relation to the prosecution of Ms. Kunicyn, nor that the correction e-mail procured the institution of the prosecution against Ms. Kunicyn.

IIROC investigated her because of her conduct in entering into an arrangement with Mr. Vitug that allowed him to act as an investment representative when he was barred from doing so. When the President of IA learned of the office-sharing agreement did not factor into whether she was guilty of the conduct alleged or whether the investigation by IIROC would be commenced.

The Divisional Court also held that there was no evidence that meets the prima facie standard that the communications were made in furtherance of a criminal or civil wrong. There was no evidence that the communications were made to injure Ms. Kunicyn or that her injury would be the natural consequence of the correction e-mail. The Vice-President did not depose that his purpose was to obstruct, pervert, or defeat the ability of IIROC to conduct its investigation by sending the correction e-mail.

Essentially, the allegation that the lie to the regulator had anything to do with harming Ms. Kunicyn or protecting IA was simply a bald pleading, with no evidence to support same such that the privilege should be lifted.

As a result, the Divisional Court dismissed the appeal and awarded costs to the Respondent.