Law Times

Page 2 NEWS December 10, 2012 Law Times • Source of high-flying bankrupt's legal support privileged, appeal court rules Justice Robert Blair, the court disagreed with Newbould's conclusion because it didn't take into account the full context of he Ontario Court of Appeal's deci- the dispute between the trustee and Kaiser. sion to uphold the right of a bank"Mr. Solmon is not simply retained for rupt Toronto man not to reveal the removal motion," wrote Blair. "He is rethe source of his legal expenses tained to represent Mr. Kaiser in the banksets the record straight when it comes to ruptcy proceedings in general. In those solicitor-client privilege, proceedings, the real according to his legal dispute is about whethcounsel. er Kaiser, a bankrupt, is In a case involving hiding assets from the a trustee doubtful of its trustee through a straw debtor's penury, the apman. peal court set aside a De"Should it turn out cember 2011 ruling that that Mr. Bergman is ordered Morris Kaiser, a the person paying Mr. bankrupt, to identify the Solmon's fees on the person financing his legal removal motion, the matters. trustee will have a signifThe identity of that icant piece of circumperson must have been stantial evidence for use part of the discussions The case 'is likely to have ramifications in the receivership and when Kaiser retained his beyond the bankruptcy context,' says Adam related proceedings that counsel and is therefore Dodek. there is a straw man." subject to client-solicitor Blair also said Newprivilege, the appeal court determined in its bould's conclusion that the identity of the Nov. 29 ruling. alleged straw man isn't privileged commu"The court provided needed clarifica- nication stems from an incorrect application and guidance to the profession of the tion of related jurisprudence. application of solicitor-client privilege pro"The prevailing law now appears to be tection to the source of payment for legal that administrative information related fees," says Kaiser's lawyer, Melvyn Solmon to the establishment of a solicitor-client of Solman Rothbart Goodman LLP. relationship — including a lawyer's bill "The implications of this decision ex- and a client's ability to pay, and by extentend beyond the bankruptcy context to all sion, the source of the lawyer's fees — is retainers where clients are assisted finan- presumptively privileged," wrote Blair. cially by a third person  in obtaining legal That means a party can rebuff the procounsel," he adds. tection if it can prove the information Kaiser has been bankrupt for three doesn't reveal confidential solicitor-client years, but his frequent visits to U.S. casinos communication. to gamble away thousands of dollars have In Kaiser's case, "the information is proleft his trustee doubting that he's penniless, vided in the context of Mr. Solmon's need to the appeal court noted. know how his fees will be paid and in order The trustee, Soberman Inc., suspects to decide whether to act," wrote Blair. Kaiser is hiding his assets and accessing "In the words of Supreme Court, it is them through a third party, Cecil Bergman. therefore 'information which a person must But when Soberman applied for the provide in order to obtain legal advice and appointment of a receiver over Bergman's which is given in confidence for that purproperty, Kaiser cried foul and launched pose,' and accordingly 'enjoys the privileges a motion to have the trustee's legal counsel attached to confidentiality.'" removed. He argued Milton Davis, managSolmon lauds the decision as "vigilant ing partner at Davis Moldaver LLP, couldn't protection of the right to confidentiality represent the trustee since he has previously with respect to information arising from acted for litigants who sued him. the commencement of the solicitor-client But a judge struck Kaiser's removal mo- relationship." tion, deeming it a tenuous excuse to delay For University of Ottawa law professor the case, and ordered Kaiser to pay $50,000 Adam Dodek, the case in an unusual one to the trustee for the cost of it. When he that "is likely to have ramifications beyond failed to pay the amount, the trustee asked the bankruptcy context." to have Kaiser identify the person taking "The Court of Appeal's decision is concare of the costs of his legal battle. sistent with the generally expansive definiWhen he ordered Kaiser to reveal who tion of what is covered by solicitor-client was paying for his lawyer, Superior Court privilege in Canada," he says. "The specific Justice Frank Newbould said the informa- issue of lawyers' fees is a very confusing area tion is neither privileged communication of the law and I'm not sure that the Court nor an important fact for the case brought of Appeal's decision is able to provide the before him. much-needed clarity because it is stuck "I fail to see how the amount of fees paid with attempting to make sense of and apby the third person to Mr. Solmon could re- ply challenging Supreme Court precedent veal any communication between Mr. Kai- in this area." ser and Mr. Solmon protected by solicitorIn fact, Dodek notes court rulings have client privilege," he said. gone the other way in other areas of law. "The identity of the person who paid Mr. "The Court of Appeal's decision that the Solmon's fees is not relevant to the merits of source of funding a lawyer's fees is prewhat was before the court, namely, whether sumptively privileged clashes with lower Mr. Davis' firm should be removed as a so- court decisions in class actions where prolicitor for the trustee. Nor could it be preju- spective class representatives have to disdicial to that issue or cause any other legal close the identity of third-party funders. It prejudice to Mr. Kaiser," he added. is not clear how this decision will be applied In the appeal court ruling written by to those types of cases in the future." LT BY YAMRI TADDESE Law Times T CONGRATULATIONS dON STUART ReCIpIeNT Of The G. ARThUR MARTIN CRIMINAL JUSTICe MedAL We are pleased to congratulate Don Stuart on receiving the G. Arthur Martin Criminal Justice Medal for his outstanding contribution to criminal justice. A long-time professor of criminal law at Queen's University School of Law, Don is also the Editor-in-Chief of both Criminal Reports and the National Judicial Institute's Criminal Law Essentials eletter. Additionally, he has authored numerous books on a variety of criminal law topics, including Canadian Criminal Law: A Treatise, Charter Justice in Canadian Criminal Law, Learning Canadian Criminal Law, and Evidence: Principles and Problems. www.lawtimesnews.com

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