IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20160309

Docket: M155635

Registry:
Vancouver

Between:

David Paul Plenert

Plaintiff

And

Viktor Melnik, Deceased,
The Estate of Viktor Melnik, Deceased,

Spirit Trucking
LLC, Keybank National Association,

Donald Michael
Wood, TD Auto Finance Services Inc./Services

De Financement
Auto TD Inc., formerly known as Daimler Chrysler

Truck Div. of
Daimler Chrysler Financial Services Canada

Inc./Services Financiers
Daimler Chrysler Canada Inc., and

Key West Express
Ltd.

Defendants

And

Donald Michael
Wood and Emil Anderson Maintenance Co. Ltd.

Third
Parties

Before:
Master Muir

Reasons for Judgment

INTRODUCTION

[1]            
This is an application by the defendants, Donald Michael Wood, TD Auto
Finance Services Inc./Services De Financement Auto TD Inc., formerly known as
Daimler Chrysler Truck Div. of Daimler Chrysler Financial Services Canada Inc./Services
Financiers Daimler Chrysler Canada Inc., and Key West Express Ltd., (collectively
“the Wood Defendants”) for an order that the third party, Emil Anderson
Maintenance Co. Ltd. (“Emil Anderson”) provide copies of documents 4.1 to 4.10
on its first amended list of documents.

[2]            
The documents sought are claimed as privileged in the Emil Anderson’s
list of documents.

[3]            
In their response to the application, the other defendants, Spirit
Trucking LLC, Viktor Melnik, Deceased, the Estate of Viktor Melnik, Deceased,
and Keybank National Association, consent to the order sought.

[4]            
The plaintiff did not file a response and I understand he takes no
position.

Background

[5]            
This action was commenced on November 13, 2012. It arises from a
motor vehicle accident that occurred on November 26, 2010 on Highway 1
near Spuzzum, B.C.

[6]            
The accident was a very serious one, involving several vehicles and
resulting in one death. As I understand it, a southbound tractor-trailer lost
control at or near the Spuzzum Creek Bridge and flipped onto its side. Another
southbound tractor-trailer collided with the first tractor-trailer, and one or
both of the tractor-trailers hit the plaintiff’s northbound vehicle. One or
both of the tractor-trailers ended up off the road. One plummeted down a bank
into the creek and the driver was killed.

[7]            
There have been at least five actions commenced. In addition to the
injuries and vehicular damage, there was apparently damage to the rail line.

[8]            
Emil Anderson was the contractor responsible for maintenance of the
section of the highway involved. It is alleged that slippery conditions on the
highway caused or contributed to the collision.

[9]            
At the time of the accident, Continental Casualty Company (“Continental”)
was the liability insurer for Emil Anderson in its capacity as a road
maintenance contractor. The Province of British Columbia was named as an
additional insured.

[10]        
The policy required Continental to defend and indemnify Emil Anderson
and the Province with respect to claims arising from Emil Anderson’s road
maintenance work.

[11]        
Mr. Bonar, an employee of Continental received an email from Mark
DeVoss, the Litigation and Claims Services Manager for the B.C. Ministry of
Transportation and Infrastructure (“MOTI”) on December 15, 2010. The email
was also copied to Emil Anderson’s excess insurer.

[12]        
The email referred to the accident and the policy and attached a news
article about the accident and several photographs and referred to the fact
that an independent adjuster had asked for the schedule for sanding of the
highway where the accident occurred.

[13]        
Mr. DeVoss stated:

To ensure the Ministry meets its reporting requirements of
the policies noted below, please find enclosed electronic copies of event
information to a major accident which involves Emil Anderson.

I am reporting this to you in an
over-abundance of caution, as well as to advise you that a Linda Belfry of SCM
has asked for the schedule for sanding of the highway where the accident
occurred.

[14]        
Continental provides evidence from Mr. Duncan, the Vice President
of Claims, who states that in cases of serious incidents, Continental requires
that a Large Loss Summary Report Notification be produced. That report
notification was prepared by Mr. Bonar and sent to Mr. Duncan on December 15,
2010.

[15]        
Further, Mr. Duncan deposes that where claims staff expect
litigation against an insured, they are required to open a file, retain an
independent insurance adjuster to conduct an investigation, and obtain
statements of witnesses in anticipation of litigation.

[16]        
On December 15, 2010, Mr. Bonar retained Mr. Porter of
Advance Claims, an independent adjuster. In his email, Mr. Bonar says, “we
require a full investigation from you.”

[17]        
Mr. Duncan’s evidence is that the only reason Continental retains
insurance adjusters to conduct investigations and interview witnesses in
circumstances such as those here is in order to prepare for litigation and that
there is no other reason.

[18]        
Mr. Porter, the independent adjuster, prepared a preliminary report
to Continental dated December 15, 2010. He also took witness statements
from Emil Anderson employees on January 17, 2011.

[19]        
Mr. Porter’s evidence is that the sole reason he prepared the December
15, 2010 report and took witness statements was because, based on the
seriousness of the accident and the fact that an independent adjuster had been
retained by Continental, he anticipated litigation against Emil Anderson. He
says there was no other reason.

[20]        
Evidence is also provided by Mr. Miles, another independent
adjuster from Advance Claims, who was instructed by Mr. Porter to conduct
a full investigation into the accident.

[21]        
Mr. Miles says, based on the seriousness of the accident and the
fact that an independent adjuster had been retained by Continental, he thought
litigation was likely. He says that his only purpose in investigating the
accident, interviewing witnesses, and providing reports to Continental and to
counsel was to defend potential litigation against Emil Anderson.

[22]        
Mr. Miles provided reports to Continental dated March 16,
2011, July 1, 2011 and September 28, 2011 and to counsel dated June 13,
2012, February 7, 2013 and May 29, 2013.

[23]        
Emil Anderson takes the position that the reports and witness statements
are protected by litigation privilege and has disclosed them only on part 4 of
its list of documents.

Legal Basis

[24]        
The parties agree that the test with respect to the production of
documents for which litigation privilege is claimed is set out in Hamalainen
(Committee of) v. Sippola (1992), 62 B.C.L.R. (2d) 254 at p. 260 – 261 (C.A.)
as follows:

 Regardless of the terminology used to apply it,
the correct rule, as adopted in Voth, is that stated by Barwick C.J. of
the Australian High Court in Grant v. Downs (1976), 135 C.L.R. 674 at
p.677:

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.

 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?

[25]        
Both parts of the test require a factual investigation and both must be
satisfied for the privilege to apply.

[26]        
In the recent decision of the Court of Appeal in Raj v. Khosravi,
2015 BCCA 49, the court revisited the test and noted:

[10]      The threshold for determining whether litigation is
“in reasonable prospect” is a low one. It is an objective test based on
reasonableness. It does not require certainty but the claimant must establish
something more than mere speculation. A bare assertion of “in reasonable
prospect” will not be sufficient. As noted by Wood J.A. in Hamalainen:

[20]      … 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.
[Emphasis added.]

[17]      A claim of privilege will succeed when a party can
establish that a document produced for dual or multiple purposes, one of them
being litigation, was produced for the dominant purpose of litigation. There is
no absolute rule for determining whether litigation was the dominant purpose
for the document’s production (Hamalainen at para. 25). A finding
of dominant purpose involves an individualized inquiry as to whether, and if so
when, the focus of the investigation/inquiry shifted to litigation. This is a
factual determination to be made based on all of the circumstances and the
context in which the document was produced. As Wood J.A. explained in Hamalainen:

[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. [Emphasis added.]

Analysis

Reasonable Prospect of Litigation

[27]        
Here, there was a very serious accident and the litigation and claims
services manager of MOTI had contacted Continental, the liability insurer, to
give notice under the policy and to provide background information and photographs
that clearly showed the severity of the collisions.

[28]        
The Wood Defendants argue that litigation was not a reasonable prospect
at this time. They say Continental did not know who was involved in the
accident, there was no evidence from Emil Anderson at all and there was no
information as to the road conditions or Emil Anderson’s potential involvement.
The Wood Defendants submit that the insurer was clearly embarking on an
investigation that would determine if litigation was in prospect.

[29]        
The Wood Defendants submit that this is emphasized by the statement of Mr. DeVoss
that he was reporting out of an over-abundance of caution.

[30]        
I agree it was early days, but given the type and severity of the
accident and the fact that another adjuster was making inquiries about road
maintenance, I am satisfied that litigation involving Emil Anderson was in
reasonable prospect at the time the claim was reported to Continental.

Dominant Purpose

[31]        
Emil Anderson argues that Continental is purely a third party insurer
and the only purpose in involving them is in contemplation of litigation and
for payment of third party loss. They argue that anytime Continental starts an
investigation, litigation is the only purpose and the only reason documents are
created.

[32]        
The Wood Defendants submit that the investigation undertaken here was at
the outset of the continuum identified in Hamalainen (Committee of). They
submit it is clear that one of the purposes of the investigation and, hence, of
the documents produced must have been to investigate the facts of the accident.
They say until those facts were determined, it could not be said that
litigation was the dominant purpose for the inquiry.

[33]        
The Wood Defendants relied on Snow v. Friesen, 2008 BCSC 1664 at para. 9,
which in turn references Blank v. Canada, 2006 SCC 39 to point out that
litigation privilege is a limited exception to the principle of full disclosure
and that the onus is on the defendants to establish the claim. The Wood
Defendants say that a blanket determination that documents created by liability
insurers are privileged is contrary to the trend to increased transparency and
disclosure.

[34]        
The Wood Defendants point to the decision in Buettner v. Gatto,
2015 BCSC 1374, where Master Caldwell considered the circumstances created by a
denial of liability by the Insurance Corporation of British Columbia (“ICBC”).
In that decision, Master Caldwell noted:

[30]      The difference put forward by the defence, in
support of their claim of litigation privilege, is that Ms. Hilliam
determined as soon as she was assigned the file, albeit unilaterally,
arbitrarily and without any reasons provided in the evidence, to deny liability
and thus virtually ensure the prospect of litigation. They say that by this
creation of a self-fulfilling prophesy she was free to commission
investigations and reports while protecting them from disclosure.

[31]      If this argument is
correct, all that any or all adjusters must do in any or all motor vehicle cases
is determine, at the instant that the incident is reported, that he or she is
going to deny liability and/or the presence of damages without the need to show
any basis or accountability for such decision. Having done so, that will
virtually ensure that litigation will be required to resolve any claim for
loss. Thereafter, having created the virtual certainty of litigation, the
defence will be able to reasonably argue that any and all investigations done
from the instant that the incident is reported is for the dominant purpose of
the conduct of the litigation which they ensured by the arbitrary denial of
fault or damage.

[35]        
The Wood Defendants say that, similarly here, if Emil Anderson’s
position is accepted, all a party would have to do is to refer an investigation
to its liability insurer to ensure that the investigation attracts privilege.

[36]        
It is the position of the liability insurer combined with the factual
circumstances here that support the privilege. Emil Anderson and Continental
did not take any unilateral action that made litigation any more likely. There
is certainly nothing wrong with Emil Anderson having liability insurance,
indeed it would be very imprudent of it not to do so. There is no suggestion
that the referral to Continental was a sham and certainly the very circumstances
of the accident were such as would alert a reasonable person to the prospect of
some kind of litigation.

[37]        
Counsel for Emil Anderson distinguished the cases relied upon by the
Wood Defendants, including Hamalainen (Committee of), on the basis that
those cases involved ICBC, a universal insurer and one that is charged with
resolving many issues including fault, coverage, part 7 claims and liability. Here,
they argue, there are no such investigations required.

[38]        
A similar proposition was considered in Hamalainen (Committee of) at
p. 260 as follows:

The second argument advanced by
the appellant is that the Master erred in applying the “adjusting stage”, “litigation
stage” analysis, used by this Court in Pound v. Drake
(1984), 8 C.C.L.I. 108, (and referred to by Esson J.A. in the
Shaughnessy Golf Club case), to this case, in an effort to determine the
point at which privilege could properly be claimed with respect to the
documents before him. Such analysis is said to apply only to those cases where
an insured sues an insurer for indemnification under a contract of insurance
and to be inappropriate in an action where the plaintiff seeks damages for loss
suffered as a result of the tortious conduct of another. Pound v. Drake
was a suit for indemnification, and the appellant suggests that in such a case,
where the parties do not generally start out in an adversarial position, there
is a clear line between the adjusting and the litigation stage which is marked
by the insurer’s decision not to indemnify. Thus use of the adjusting stage
analysis is appropriate in such a case. But in a case such as this, where
litigation was viewed as inevitable from the outset, no “adjusting stage” could
be defined as such or would be relevant to the dominant purpose test.

[39]        
I am satisfied that the court in Hamalainen (Committee of) turned
its mind to this issue, at least as it involved the facts of that case, and
resolved that the two part test remained apt.

[40]        
As noted, counsel for Emil Anderson conceded that the test from Hamalainen
(Committee of) was the test to be met. He referred me, however, to the
Ontario Superior Court of Justice decision of Panetta v. Retrocom Mid-Market
Real Estate Investment Trust, 2013 ONSC 2386 at paras. 61 and 62:

[61]      I think that, in third-party or tort claims
(as opposed to claims by an insured against his or her own insurer), there is
no preliminary investigative phase where privilege does not attach to notes,
reports and files of adjusters. In third-party insurance claims, the sole
reason for any investigation by or on behalf of an insurer is because of
the prospect of litigation. It is naive to think otherwise; and the fact that
the investigation may be used to arrive at a pre-lawsuit settlement does not
detract from the point that I make. The prospect of litigation inherently
includes the prospect of settlement.

[62]      I agree with the
submissions of Wahlman that there is no purpose for the creation of documents
by an insurer in a tort context other than: (1) for anticipated litigation; (2)
for setting reserves; or (3) for seeking legal advice. For completeness,
I would add, as a corollary to (1): for the purpose of settlement, which
I see as inextricably entwined with “anticipated litigation.”

[41]        
Here, as in Panetta, Emil Anderson argues that there is no
investigative stage. There is no other conceivable purpose for the production
of the reports and documents other than defending the claim. Further, the
evidence of all involved was that contemplated litigation was the only purpose
for the investigation from the outset.

[42]        
I do not go so far as to say that in all circumstances the
investigations of liability insurers will be privileged, but I am
satisfied that the documents in issue in this case are protected by litigation
privilege. There is no evidence that they were created for multiple purposes. The
evidence is that the only reason for the investigation was to defend against
potential litigation, which I have found was reasonably in contemplation. That
evidence is supported by the limited role of the liability insurer in this
matter, which was to defend and indemnify Emil Anderson and the Province.

conclusion

[43]        
The application of the Wood Defendants is denied with costs to Emil
Anderson in the cause.

“Master Muir”