T-627-76
New West Construction Co. Ltd. (Plaintiff)
v.
The Queen in right of Canada represented by the
Minister of Public Works (Defendant)
Trial Division, Mahoney J.—Edmonton, Septem-
ber 10; Ottawa, October 15, 1979.
Practice — Discovery — Action arising out of plaintiffs
performance of highway contract — Application by plaintiff
ordering defendant to file list of documents under Rule 448(1)
— Application by defendant for order to reattend examina
tions for discovery — Person being examined had been advised
by counsel not to answer because questions dealt with com
munications allegedly used to assist in preparation and pres
entation of litigation and because negotiation had been con
ducted without prejudice — Federal Court Rules 448(1), 451.
In an action arising out of the performance by plaintiff of a
highway construction contract, plaintiff seeks an order under
Rule 448(1) requiring defendant to file a list of documents.
Defendant seeks an order under Rule 465(18) directing the
reattendance of certain persons (Paron and Anselmo) to answer
further questions on discovery. Counsel had advised that the
person being examined refuse to answer questions respecting
communications between the plaintiff and the consultants who
had been hired to assist in the preparation of and presentation
of plaintiff's claim for extra compensation. Counsel based his
advice on the facts that the consultants' work involved the
preparation of reports for instruction of counsel in preparation
for litigation, and secondly, that the negotiations were conduct
ed without prejudice.
Held, the applications are allowed. As an order under Rule
448 is inappropriate, plaintiff's application will be treated as
one under Rule 451 with respect to particular documents
enumerated in Anselmo's affidavit. An order will go pursuant
to Rule 451 requiring defendant to file and serve an affidavit
with respect to those particular documents. Plaintiff is entitled
to discovery of original documents, where extant, notwithstand
ing previous production of copies. The order will be without
prejudice to the defendant's right to object to the production of
any such document as privileged. Once negotiations have been
completed as a result of without-prejudice interviews or letters,
a binding contract has been brought into existence and this may
be proved by means of the without-prejudice statements. When
an expert is retained to assist in preparing a claim, it is
reasonable to infer that, at that point, litigation is seen as a
distinct possibility and that one of the purposes of any report by
the expert is to instruct counsel. The purpose of submission to
the party's legal advisers in anticipation of litigation must be
the dominant purpose for its preparation in order for a claim of
privilege to overcome the public interest. The dominant purpose
of any work done by the consulting engineers, up to the time
that plaintiff determined that its claim was not likely to be
satisfactorily resolved by negotiation, was to further their own
function as the plaintiff's agent in those negotiations. Since that
time cannot be determined on the evidence, the date of the
instruction of counsel is the most reasonable one to choose.
Waugh v. British Railways Board [1979] 3 W.L.R. 150,
considered. R. v. Hawker Siddeley Canada Ltd. [1977] 2
F.C. 162, referred to.
APPLICATION.
COUNSEL:
W. G. Geddes for plaintiff.
I. Whitehall and J. Kennedy for defendant.
SOLICITORS:
William G. Geddes, Edmonton, for plaintiff.
Deputy Attorney General of Canada for
defendant.
The following are the reasons for order ren
dered in English by
MAHONEY J.: The motions here were heard in
Edmonton, Alberta, on September 10, 1979. Ma
terials tendered in support of one or the other of
them at the hearing, comprising volumes I to V
inclusive of the transcript of the examination for
discovery of Pacific Paron, volumes XIV to XVII
inclusive of the transcript of the examination for
discovery of Felix Gary Anselmo and the tran
scripts of the examination for discovery on
November 14 and 15, 1977, of James B. Coxford,
did not reach my chambers in Ottawa until Octo-
ber 10. I can only speculate on the causes of this
and regret that it necessarily led to a delay in my
dealing with the motions.
The action arises out of the performance by the
plaintiff of a highway construction contract with
the defendant and the cause of action is based on
alleged material differences between conditions
actually met on the site and those represented to
exist by the defendant in the tender documents.
The defendant now seeks an order under Rule
465(18) directing the reattendance of Pacific
Paron and Felix Gary Anselmo to answer further
questions on discovery. The plaintiff seeks an order
under Rule 448 (1) requiring the defendant to file
a list of documents.
Dealing first with the plaintiff's motion, the
defendant filed a list of documents on January 27,
1978. It did so pursuant to Rule 447. The list is
lengthy, containing 320 items for which privilege
was not claimed. Many of the 320 items consisted
of binders, files and other collections of numerous
individual documents. I am given to understand
that the documents so disclosed and made avail
able for inspection occupy several dozen cubic feet
of storage space. The plaintiff says that documents
it knows to exist have either not been disclosed or
cannot, after reasonable search, be located in that
plethora of paper. The defendant says that either
they have been produced or do not exist or, in
some cases, are the plaintiff's own documents
whose reproduction would involve substantial and
wasteful expense.
An order under Rule 448 is, in the circum
stances, inappropriate. I will treat this as an
application under Rule 451 with respect to the
particular documents enumerated in paragraph 14
of the affidavit of Felix Gary Anselmo filed Sep-
tember 4, 1979, in support of the motion. An order
will go, pursuant to Rule 451, requiring the
defendant, within 30 days of the date of the order,
to file and serve an affidavit with respect to those
particular documents. The plaintiff is entitled to
have discovery of original documents, where
extant, notwithstanding the previous production of
copies thereof. The order will be without prejudice
to the defendant's right to object to the production
of any such document as privileged.
On May 1, 1979, an order was made requiring
Paron and Anselmo to reattend for further discov
ery in respect of nine and four questions respec
tively which they had theretofore not answered on
discovery. The subsequent examination of Paron
occupied three days and that of Anselmo occupied
four days. At first blush, the plaintiff's contention
that their discovery has become oppressive has
apparent merit. The fact is that neither discovery
had been concluded prior to the May 1 order and
that the present application, in so far as it relates
to Anselmo's examination, deals with some areas
of inquiry not dealt with on that application or
explored prior to its being brought.
The new areas of questioning to which Anselmo,
on advice of counsel, refused answers arise out of
the following circumstances. The plaintiff per
ceived, early in its performance of the contract,
that there were serious problems and that a claim
for extra compensation would very likely be neces
sary. A firm of consulting engineers was retained
to assist in the preparation and presentation of the
anticipated claim. A series of letters dated over the
period from October 19, 1973 to April 15, 1975,
makes it clear that, in that period, the consultants
were acting as the plaintiff's agent in negotiations
with the defendant. Counsel was not instructed
until February, 1975, which would appear to be
about two years after the consultants were
retained. Negotiations to settle the claim were
conducted on a "without prejudice" basis. These
led to the payment of $334,769.32 in September
1975, by the defendant to the plaintiff. It is the
defendant's position, pleaded in paragraph 6 of the
amended defence that this payment included a
sum of $309,319.21 accepted by the plaintiff in
full settlement of certain items of its claim. The
plaintiffs reply to the defendant's demand for
particulars discloses that it is claiming further
compensation for those items. On advice of coun
sel, Anselmo has refused to answer questions
respecting communications between the consult
ants and the plaintiff on the basis that their work
was undertaken with a view to preparing reports,
as an expert, for the purpose of instructing counsel
in contemplation of litigation and has refused to
answer questions regarding the negotiations that
led to the $334,769.32 payment on the ground that
they were conducted without prejudice.
The latter objection cannot be sustained. The
governing principle can be stated concisely:'
Once negotiations have been completed as the result of
without-prejudice interviews or letters, a binding contract has
been brought into existence and this may be proved by means
of the without-prejudice statements.
Cross on Evidence, Fourth Edition, p. 263.
It is unnecessary to go beyond the textbook for
authority for that proposition.
As to the former objection, it seems to me that
when a person performing a contract sees that he
is likely to have a claim against the other party
and retains an expert to assist him in preparing
that claim, it is reasonable to infer that, at that
point, litigation is seen as a distinct possibility and
that one of the purposes of any report by that
expert must be to instruct counsel. That inference
is consistent with the stated reason for Anselmo's
refusal to answer the line of questions. At the same
time, it is not an overstatement to say that claims
by contractors against owners arising out of con
struction contracts are rather commonplace. It
cannot be inferred that most or even a significant
percentage of these are litigated. It is apparent
that the consultants' functions, even after counsel
was retained, included acting as the plaintiffs
agent in the negotiations. The defendant is not
pressing questions regarding the consultants'
reports and activities after counsel was retained.
In Canadian National Railway Company v.
McPhail's Equipment Company Ltd.,'- the Federal
Court of Appeal, dealing with real estate apprais
als made for an expropriating authority after filing
the plan of expropriation and before counsel was
retained, said [at page 598]:
Turning now to the legal principles applicable to a factual
situation of this kind, it seems clear that communications
between a party and a non-professional agent are only privi
leged if they are made both—(l) for the purpose of being laid
before a solicitor or counsel for the purpose of obtaining his
advice or of enabling him to prosecute or defend an action or
prepare a brief; and (2) for the purpose of litigation existing or
in contemplation at the time.
It was recognized that an expropriation is poten
tially litigious from its inception. I should think
that, if anything, a much higher proportion of
expropriation disputes than construction contract
claims actually reach litigation. The privilege
claimed by the C.N.R. was not sustained.
2 [1978] I F.C. 595.
In The Queen in right of Canada v. Hawker
Siddeley Canada Ltd., 3 the following textbook
statement was accepted by the Federal Court of
Appeal as the applicable law°:
All documents and copies thereof prepared for the purpose,
but not necessarily the sole or primary purpose, of assisting a
party or his legal advisers in any actual or anticipated litigation
are privileged from production.
The Court of Appeal went on, at pages 165 and
166:
The respondent would insist, in view of certain authority, that if
such purpose be not the sole or primary one it must at least be a
substantial purpose for which the document is prepared, but
this emphasis would not appear to be important in the present
case. It is not essential ... that the document be prepared at
the request of a legal advisor; it is sufficient if it be prepared for
such purpose by a party on his own initiative.
The Court of Appeal concluded [at page 166] that
Her Majesty had not discharged the burden of
"clearly showing that one of the purposes for
instituting the inquiry" under section 42(1) of the
National Defence Act 5 had been to "[prepare] a
report that would be submitted to legal advisors to
assist them in anticipated litigation" although it
did conclude that "at the time the Board of Inqui
ry was established, the possibility of litigation was
contemplated".
I cannot, with the greatest respect, agree with
the conclusion by Lord Simon of Glaisdale, in the
very recently reported decision in Waugh v. British
Railways Board, 6 that this Court of Appeal deci
sion is authority for the proposition that
... such a report need not be disclosed if one of its purposes
(even though subsidiary) was to inform the solicitor with a view
to litigation contemplated as possible or probable.
On the contrary, it seems clear that the Court of
Appeal expressly left open the question, "since the
emphasis would not appear to be important in the
present case", whether, if that was only one of its
purposes, it had to be a substantial purpose.
The ratio of the House of Lords in the Waugh
case is accurately set forth in the headnote
3 [1977] 2 F.C. 162.
4 Williston & Rolls, The Law of Civil Procedure, Vol. 2, p.
916.
5 R.S.C. 1970, c. N-4.
6 [1979] 3 W.L.R. 150 at 156.
... the due administration of justice strongly required that a
document such as the internal inquiry report, which was con
temporary, contained statements by witnesses on the spot and
would almost certainly be the best evidence as to the cause of
the accident, should be disclosed; that for that important public
interest to be overridden by a claim of privilege the purpose of
submission to the party's legal advisers in anticipation of
litigation must be at least the dominant purpose for which it
had been prepared; and that, in the present case, the purpose of
obtaining legal advice in anticipation of litigation having been
no more than of equal rank and weight with the purpose of
railway operation and safety, the board's claim for privilege
failed and the report should be disclosed ....
I am disposed to adopt the test prescribed in the
Waugh case and I do not regard myself as preclud
ed from doing so by the Hawker Siddeley decision.
In the present instance, the dominant purpose of
any work done by the consulting engineers up to
the point in time that the plaintiff determined that
its claim was not likely to be satisfactorily resolved
by negotiation was to further their own function as
the plaintiffs agent in those negotiations. I cannot
determine, on the evidence, when that point in
time was reached and therefore, bearing in mind
that the consultants continued in that function
even after counsel was instructed, feel that the
date of such instruction is the most reasonable one
to choose. It is unlikely that, prior to that date, the
purpose of instructing counsel was of greater
weight than that of carrying out their agency
functions; it is possible that, thereafter, it became
of greater weight. The selection of that date, I
think, gives the plaintiff the benefit of any doubt
that might reasonably be entertained in disposing
of its assertion of privilege.
An order will go requiring Felix Gary Anselmo
to again reattend for further examination for dis
covery with respect to the "without prejudice"
negotiations and the work undertaken by the con
sulting engineers prior to February 1975, and the
reports that resulted from that work.
As to the other areas of questioning for which
the defendant seeks the reattendance of Paron and
Anselmo, the motion will be dismissed. Costs of
both motions will be in the cause. The transcripts
and exhibits will be returned to the parties who
tendered them provided no appeal is taken from
this order within the time limited therefor.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.