IN
THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20100528

Docket: S19580

Registry:
Chilliwack

Between:

Susanne Sauvé

Plaintiff

And

Insurance Corporation of British Columbia,

Shane Gregory Bowles and

ABCO Marine Developments Ltd.

Defendants

Before:
The Honourable Mr. Justice Joyce

Reasons for Judgment

1.         Introduction and Nature of the Application

[1]          
The plaintiff was injured when the car she was driving was involved in a
collision with another vehicle that was being driven by the defendant Bowles.
The plaintiff alleges that Bowles was negligent. She also alleges that the
driver of another vehicle was also negligent and caused or contributed to the
accident. The identity of that other driver is unknown and, as a consequence,
the plaintiff has sued The Insurance Corporation of British Columbia (“ICBC”)
as nominal defendant, under the provisions of the Insurance (Vehicle) Act,
R.S.B.C. 1996, c. 231.

[2]          
This application arises out of the plaintiff’s demand for discovery of documents.
ICBC has claimed privilege over and refused production of two reports prepared
by an independent adjuster, on the ground that they were prepared for the
dominant purpose of litigation and are subject to what is known as “litigation
privilege”.

[3]          
The plaintiff submits there are two reasons why the reports should be
disclosed: first, she says the reports were not prepared in circumstances that
attracted litigation privilege; and second, she says that even if the reports
were protected by litigation privilege when they were created, ICBC waived that
privilege when it disclosed the reports to the defendant Bowles.

[4]          
The defendant, on the other hand, asserts that it did not waive the privilege
by providing the reports to a co-defendant because Bowles and ICBC share a
common interest in the litigation and in the reports.

[5]          
The application, therefore, raises two issues:

(a)       Were
the reports subject to “litigation privilege” when they were prepared for ICBC?

(b)       Did ICBC waive the
privilege when it provided the reports to Bowles?

2.         Background Facts

[6]          
On January 27, 2008, the plaintiff was driving her vehicle northbound
across the Agassiz-Rosedale Bridge on Highway 9, in British Columbia. She alleges
that another vehicle, travelling southbound, came into her lane of traffic. In
order to avoid a collision with this vehicle, she swerved to the right, struck
the side rail on the bridge and careened across the roadway into the southbound
lane, where she then struck a vehicle being driven southbound by the defendant
Bowles. The plaintiff alleges that the driver of the vehicle that she swerved
to avoid failed to stop at the scene.

[7]          
The plaintiff and Mr. Bowles both independently reported this
accident to ICBC on January 28, 2008. The claim file was assigned to Claims
Adjuster, Sidney Taylor. On March 6, 2008, Mr. Taylor retained an
independent insurance adjuster, Ms. Cathy Webber, to obtain statements
from a number of witnesses who were identified on police reports concerning the
accident. Ms. Webber was also asked to provide “any further appropriate
commentary” (affidavit of Mr. Taylor, para. 24).

[8]          
Ms. Webber recorded the terms of her retainer on a form entitled
“New Loss Report”. Under the heading “Assignment”, she wrote:

Serious injuries. Driver Susanne Sauve

Head on collision crest of Rosedale Bridge

Alleged unknown responsible – liability issue

Assignment is to interview/statements from

witnesses (5 or 6) as per police report

supplied by CHWK RCMP.

Also supply photos of scene

[9]          
In accordance with her retainer, Ms. Webber interviewed a number of
witnesses and obtained written statements from them. She also took some photographs
of the scene of the accident.

[10]       
Ms. Webber prepared two reports, one dated March 17, 2008 and the
other dated April 2, 2008 (the “reports”), which she provided to Mr. Taylor,
along with the witness statements and the photographs she had taken. Ms. Webber
describes the content of the reports in her affidavit as follows:

… I used my expertise and
experience as an Insurance Adjuster to describe each of the Witnesses,
including their physical appearance, demeanor and presentation. I also provided
an analysis as to the likely performance of each witness in court. I further
provided analysis of the commonalities between various witness accounts for the
purpose of assessing credibility and preparing the case of the Defendant, ICBC
should litigation occur.

[11]       
In the meantime, on March 10, 2008, a solicitor retained by Ms. Sauvé
wrote to ICBC advising that he had been retained to represent the plaintiff in
connection with the accident. He requested various information from ICBC and
requested that all further communication be with him, rather than with the
plaintiff directly.

[12]       
On April 14, 2008, Mr. Taylor transferred his file to an ICBC
litigation adjuster; and, on May 5, 2008, the file was transferred to ICBC’s
Head Office Claims Centre.

[13]       
As a result of an application under the Freedom of Information and Protection
of Privacy Act, R.S.B.C. 1996, c. 165, the plaintiff obtained copies
of the witness statements and photographs that Ms. Webber had obtained,
but not the reports.

[14]       
ICBC has provided the reports to the lawyer acting for the defendant
Bowles.

3.         The law relating to litigation privilege and
waiver of privilege

(a)       The test for litigation privilege

[15]       
In Hamalainen (Committee of) v. Sippola (1991), 62 B.C.L.R. (2d)
254 (C.A.) (“Hamalainen”) at para. 17, the Court of Appeal set out
the test to be applied when determining whether privilege should apply to
documents in litigation. Wood J.A. first adopted the following from Grant v.
Downs (1976), 135 C.L.R. 674 at 677 (Aust. H.C.) (“Grant”) as an
accurate statement of the law in this Province:

Having considered the decisions,
the writings and the various aspects of the public interest which claim
attention, I have come to the conclusion that the court should state the
relevant principle as follows: a document which was produced or brought into
existence either with the dominant purpose of its author, or of the person or
authority under whose direction, whether particular or general, it was produced
or brought into existence, of using it or its contents in order to obtain legal
advice or to conduct or aid in the conduct of litigation, at the time of its
production in reasonable prospect, should be privileged and excluded from
inspection.

[16]       
Mr. Justice Wood then set out the following two-part test at para. 18:

Any attempt to apply the rule when determining a claim of
privilege with respect to a document necessarily requires that two factual
determinations be made:

(a)        Was
litigation in reasonable prospect at the time it was produced; and

(b)        if so, what was the dominant
purpose for its production?

[17]       
The party claiming privilege must satisfy both parts of the test on a
balance of probabilities.

[18]       
With regard to the first part of the test, Wood J.A. said at para. 20:

20 I am not aware
of any case in which the meaning of "in reasonable prospect" has been
considered by this Court. Common sense suggests that it must mean something
more than a mere possibility, for such possibility must necessarily exist in
every claim for loss due to injury whether that claim be advanced in tort or in
contract. On the other hand, a reasonable prospect clearly does not mean a
certainty, which could hardly ever be established unless a writ had actually
issued. In my view litigation can properly be said to be in reasonable prospect
when a reasonable person, possessed of all pertinent information including that
peculiar to one party or the other, would conclude it is unlikely that the
claim for loss will be resolved without it. The test is not one that will be
particularly difficult to meet. I am satisfied it was met in this case in
connection with all of the documents in issue. The circumstances of this
accident, and the nature of Mr. Hamalainen’s injuries, were such that
litigation was clearly a reasonable prospect from the time the claim was first
reported on December 1, 1986.

[19]       
With regard to the second part of the test, Wood J.A. commented at para. 24:

24 Even in cases
where litigation is in reasonable prospect from the time a claim first arises,
there is bound to be a preliminary period during which the parties are
attempting to discover the cause of the accident on which it is based. At some
point in the information gathering process the focus of such an inquiry will
shift such that its dominant purpose will become that of preparing the party
for whom it was conducted for the anticipated litigation. In other words, there
is a continuum which begins with the incident giving rise to the claim and
during which the focus of the inquiry changes. At what point the dominant
purpose becomes that of furthering the course of litigation will necessarily
fall to be determined by the facts peculiar to each case.

[20]       
The court must determine whether litigation privilege exists must be
made in respect of each individual document in dispute. Some closely related
documents may be privileged and others not: see Shaughnessy Golf &
Country Club v. Drake International Inc. (1986), 1 B.C.L.R. (2d) 309 (C.A.).

(b)       Waiver of privilege and the common interest
exception to waiver

[21]       
I accept as correct the following statements of law set out in ICBC’s
memorandum of argument regarding waiver of privilege:

12.       The
evidentiary burden to demonstrate waiver of privilege rests with the party
asserting waiver.

Hayes Heli-Log Services Ltd. v.
Acro Aerospace Inc., 2006 BCSC 61 at para. 38.

13.       The
test for waiver of privilege was described by Madam Justice McLaughlin (as she
then was) in S. & K. Processors Ltd. v. Campbell Avenues Herring
Producers Ltd. (1983), 45 B.C.L.R. 218 (S.C.) as follows:

Waiver of privilege is ordinarily
established where it is shown that the possessor of the privilege (1) knows of
the existence of the privilege, and (2) voluntarily evinces an intention to
waive that privilege.

14.       The
transfer of a privileged document to a third party by the privilege holder does
not, without more, demonstrate an intent to waive privilege; there must be
deliberate and/or intentional acts, rather than mere inadvertence.

Hayes Heli-Log, supra,
at para. 38, citing Kamengo Systems Inc. v. Seabulk Systems Inc.
(1998), 86 C.P.R. (3d) 44 (S.C.) at para. 19, citing Sommerville Belkin
Industries Ltd. v. Brocklesby Transport and others (1985), 65 B.C.L.R. 260
(S.C.)

15.       There
is no waiver where the privilege holder discloses the document to a third party
pursuant to an understanding that the document will be held in confidence and
not disclosed to others.

Kamengo, supra; Merritt v. Imasco
Enterprises Inc., [1992] B.C.J. No. 2319 (S.C.); Kemp v. Wittenberg
(1997), 32 B.C.L.R. (3d) 268 (S.C.)

[22]       
The law recognizes an exception to waiver by disclosure to a third party
where the third party and the holder of the privilege have a common interest in
the litigation: see Wade v. Ray, [1997] B.C.J. No. 2877 (S.C.) (“Wade”),
citing Buttes Gas and Oil Co. v. Hammer (No.3), [1980] 3 All E.R. 475
(C.A.) and Emil Anderson Construction Co. v. British Columbia Railway Co.,
[1987] B.C.J. No. 615 (S.C.).

[23]       
Wade is instructive in determining what amounts to a common
interest in the litigation. The facts in Wade were briefly as follows. The
plaintiff was injured when a car driven by the defendant Ray, in which she was
a passenger, was in a collision with a car driven by another defendant Khan.
The defendant’s counsel had shared between them the statements of the
defendants and an expert engineering report over which they claimed privilege.
The plaintiff sought production of the documents, asserting that any privilege
had been waived. In holding that the defendants had not waived privilege,
Sinclair Prowse J. said at paras. 18 – 21:

18 In deciding if the persons that have exchanged
the information have a common interest, it is their interest in the litigation
rather than the fact that they have separate counsel that is determinative: Buttes
Gas and Oil Co. v. Hammer (No.3) (supra) [[1980] 3 All E.R. 475
(C.A.)].

19 Moreover, their common interest in the
litigation has to go beyond the fact that they are both defending against the
claims of the plaintiff, namely, that there is a commonality of some of the
specific defences presented: Joseph v. Charlie (1991), 57
B.C.L.R. (2d) 68 (S.C.).

20 In the present case, although the defendants
are adverse in interest to some extent (Mr. Khan is alleging that the
accident was caused by the negligence of Mr. Ray), there is also a
commonality of interest in that both are claiming that the plaintiff was
contributorily negligent in that he failed to wear a seat belt and further that
the proximate cause of his injuries, in any event, was not the accident.

21 Given the
commonality of some of the pleadings of the defendants, I have concluded that
they do have a common interest in the litigation and that consequently, their
privilege over the contested documents was not waived when they exchanged them
with each other.

[24]       
The factual situation in Joseph v. Charlie (1991), 57 B.C.L.R.
(2d) 68 (S.C.), was different from that in Wade in that in Joseph,
the plaintiff, who was injured in a single car collision, sued Mr. Charlie
and another defendant, Mr. Baker, both of whom denied liability and blamed
the other for causing the accident. ICBC asserted that both defendants were in
breach of their insurance and instructed two separate counsel to file third
party notices. The principal issue in the action was which of Baker and Charlie
was driving the vehicle. The plaintiff sought production of an expert report
that had been shared between counsel for the two defendants. In allowing the
application, Master McCallum held, at para. 18, that “the third parties
here have a common interest only to the extent that I.C.B.C. is a common
insurer and in terms of the doctrine [referring to Buttes Gas and Oil Co. v.
Hammer (No.3), supra] should, in my view, be treated as independent
and adverse in interest.”

[25]       
Maier v. Fischer, 2004 BCSC 196 (“Maier”) is another case
in which the court dealt with whether privilege was waived when defendants
shared documents between them. The defendants claimed they had a common
interest because both alleged contributory negligence as against the plaintiff.
Master Bolton appeared to distinguish Wade on the basis that, in Wade,
there was an underlying factual dispute as to whether the plaintiff was in fact
wearing a seat belt, whereas there was no such dispute in the case before him.
As I read his reasons, Master Bolton concluded that, even on the contributory
negligence issue, there were significant areas of difference between the two
defendants and that the degree of commonality was slight. Further, he concluded
that the documents in question did not relate to any common issues between the
defendants, but rather to matters where their interests were opposed to each
other. He therefore ordered production of the documents.

[26]       
In Lessard (Public Trustee of) v. Canosa, [1995] B.C.J. No. 3054,
12 B.C.L.R. (3d) 78 (S.C.) (“Lessard”), Stewart J. also dealt with the
common interest exception to waiver. Lessard involved a claim on behalf
of an infant, eight years after a motor vehicle accident. The plaintiff sued
two defendants, each of whom was alleged to be at fault in the accident. The
plaintiff sought production of statements that had been shared between the
defendants. At first instance, the master held that the documents remained
privileged. In dismissing an appeal, Stewart J. referred to the pleadings and,
while he noted that the positions of the two defendants were not identical, he
concluded there was sufficient commonality of interest to maintain the
privilege. At para. 13, he said:

13 The issue in
law, as I understand it, is not whether the position of the two defendants is
identical, it is whether there was a sufficient common interest between them to
preserve the privilege regardless of the sharing. In this case, on the face of
the pleadings, I accept the proposition that the fundamental proposition by
each of the defendants is adverse to the plaintiff. It is only in a secondary
sense that they point the finger at one another. There is a significant common
interest between them in defeating the plaintiff’s case before they turn to
pointing the finger at one another.

4.         Analysis

(a)       Do the reports meet the test for litigation
privilege?

[27]       
The plaintiff submits that the evidence fails to establish that litigation
was in reasonable prospect when the reports were prepared, let alone that the
dominant purpose in preparing the reports was for use in litigation. The
plaintiff refers to the following three circumstances to argue that the case
was merely at the investigation stage when the independent adjuster was
retained:

(a)       the plaintiff had not
made any mention of a tort claim;

(b)       the
adjuster had not secured a statement from the plaintiff about the accident; and

(c)        the adjuster was not aware the
plaintiff had retained a lawyer.

[28]       
The plaintiff submits that the following circumstances described by Mr. Taylor
in his affidavit are not sufficient to meet the test that litigation was in
reasonable contemplation. Mr. Taylor deposed that from the initial
reporting of the claim he expected it would be transferred promptly to a
litigation adjuster. He further deposed that he retained Ms. Webber
because he was of the opinion that the claim would almost certainly be
litigated for the following ten reasons:

(a)       liability for the
accident was contentious;

(b)       it
involved an alleged unknown driver;

(c)        the
insurance limits were $200,000.00;

(d)       there
was evidence of a possible traumatic brain injury;

(e)       there
appeared to be contributory negligence on the part of Ms. Sauvé;

(f)        there
were significant factual issues;

(g)       the
accident was significant involving multiple vehicles and high material damage;

(h)       Ms. Sauvé
suffered serious injury;

(i)         the claim
involved an excess insurer and a subrogated claim; and

(j)         there was the potential for a
substantial loss of income claim.

[29]       
The plaintiff refers to Snow v. Friesen, 2008 BCSC 1664 (“Snow”),
and argues that even though the circumstances in that case were similar to
those in the present case, the chambers judge was not satisfied litigation was
in reasonable contemplation when the documents in issue were created. In Snow,
the adjuster deposed that when he received the file, ICBC was already aware
that the plaintiff had been in an accident, had suffered significant injuries,
was in intensive care, a senior litigation lawyer had reported the claim on the
plaintiff’s behalf, there was media attention surrounding the incident, the
file was immediately transferred to ICBC’s bodily injury department and breach
and coverage issues were identified. The learned chambers judge found that the
affidavit material failed to establish that the adjuster had personal knowledge
of those facts. He held, further, that those facts did not meet the first
branch of the test and ordered the production of documents predating the
commencement of the action. The precise nature of those documents does not
appear from the reasons, no doubt because of the failure to meet the first
branch of the test.

[30]       
Obviously, the court must consider the particular circumstances of each
case when applying the legal test. As was stated in Hamalainen, the
first part of the test will often not be hard to meet. “Reasonable prospect” does
not mean certainty. It does not require the commencement of an action. The
essential question is this: would a reasonable person being aware of the
circumstances conclude that the claim will not likely be resolved without
litigation?

[31]       
In the present case, I would answer that question in the affirmative. I am
satisfied that the circumstances that were known to Mr. Taylor justify his
conclusion that litigation was a reasonable prospect. The seriousness of the
injuries alone might support the belief that litigation was a reasonable
prospect (see Wade at para. 14). But, here, there was more. Mr. Taylor
was aware that there were allegations of an unknown driver in addition to the
involvement of Mr. Bowes and Ms. Sauvé in the events that led to the
collision. In my view, the circumstances in this case satisfy the first part of
the test.

[32]       
In any event, I am satisfied that the proper time to consider whether
the test is met is when the particular documents that are in issue, namely the
reports that accompanied the witness statements and photographs, were created.
As was stated in Grant and adopted in Hamalainen at para. 17:

17 … [A] document
which was produced …either with the dominant purpose of its author, or of the
person or authority under whose direction … it was produced … of using it
or its contents in order to … conduct or aid in the conduct of litigation, at
the time of its production in reasonable prospect, should be privileged.

[33]       
The documents in question in this case are not the witness statements or
photographs. Those documents have been produced. The documents in question are
the reports that Ms. Webber created on March 17 and April 2, 2008, which
she provided when she forwarded the witness statements and photographs. By the
time she created the reports Ms. Webber knew what the witnesses had to say,
and had concluded that, litigation of the plaintiff’s claim was “a near
certainty”. She not only knew at that time, the severity of the accident, the
severity of the injuries and the involvement of an unidentified driver, but she
also knew what the witnesses had to say. I am satisfied that when Ms. Webber
wrote her reports, litigation of the plaintiff’s claim was in reasonable
prospect.

[34]       
I turn to the second part of the test: were the documents created for
the dominant purpose of assisting the defendant in the conduct of the
anticipated litigation by Ms. Sauvé?

[35]       
Once again in answering that question, it is important to focus on when
the reports were created and to consider them separate from any consideration
of whether the witness statements and photographs would meet the dominant
purpose test. I can certainly accept that the witness statements and
photographs may well have come into existence for two purposes:

(1)       to
investigate the circumstances of the accident, and

(2)       to
assist in the conduct of litigation.

[36]       
Therefore, whether those documents would satisfy the second part of the
test might have been a difficult question to answer. The defendant might not
have been able to meet the test for the first group of documents on a balance
of probabilities, but that is not the question that I have to decide.

[37]       
In my view, when deciding whether the reports were prepared for the
dominant purpose of litigation I have to consider not only what was known by Mr. Taylor
and communicated to Ms. Webber; I also have to consider what Ms. Webber
knew when she prepared the reports, as well as the nature of the reports. Ms. Webber
has deposed that when she prepared the reports, she believed that the dominant
purpose for their creation was litigation. She came to that conclusion being
aware of the information that the witnesses could give with respect to the
circumstances of the accident. According to Ms. Webber, the reports
consist of her descriptions of the witness, her impressions or opinions
concerning their credibility and her own analysis of how the evidence of the
various witnesses matched or conflicted. While it might be possible that such
information might assist ICBC at the investigation stage, I am of the view that
any such use of the documents would clearly be secondary to their use in assisting
counsel in the conduct of the action. I am, therefore, satisfied that the
reports were created for the dominant purpose of litigation and attracted
litigation privilege.

(b)       Has privilege
been waived?

[38]       
In my view, sharing the reports in this case was intentional and
privilege was waived unless the defendant can establish the common interest
exception.

[39]       
To determine whether there is a common interest, I must have regard to
the pleadings. The defendant ICBC denies there was an accident, but goes on to
plead that the plaintiff was negligent for whatever injury and loss she
suffered. The defendant Bowles admits there was an accident, denies that he was
negligent and alleges that the accident was caused in whole or in part by an
unidentified driver. Bowles also alleges that the accident was caused by the
plaintiff’s own negligence.

[40]       
The plaintiff submits that the commonality of the claim of negligence on
the part of the plaintiff by the two defendants in this case is not sufficient
to support the common interest exception to waiver. She suggests that the
positions of the two defendants are essentially opposed to one another.

[41]       
It is my view that this case is similar to both Wade and Lessard.
Bowles’ claim that the accident was caused by the negligence of the plaintiff
is not simply alternative to his claim of negligence on the part of an
unidentified driver. Those allegations stand on an equal footing. In my
opinion, there is sufficient commonality of interest between the two defendants
in their assertion that the accident was caused by the negligence of the
plaintiff to support the common interest exception to waiver. Further, I am
satisfied the reports in issue relate to that common issue. I conclude,
therefore, that privilege over the reports has not been lost and they need not
be produced.

“B.M. Joyce J.”