Morris Kaiser’s trustee in bankruptcy, Soberman Inc., thought it smelled a rat: while claiming to be impecunious, Kaiser appeared to be living a life of ‘some means’, which included trips to casinos in the US. Kaiser claimed he was drawing advances on the credit card of a buddy, Cecil Bergman, but the trustee suspected the whole thing was a front to shield Kaiser’s assets from his creditors. Soberman applied for the appointment of a receiver over the property of Bergman and his company, on the grounds that their property was actually Kaiser’s and should form part of his estate for bankruptcy purposes. The trustee also sought an order for disclosure of the source of all funds Kaiser had received since entering bankruptcy. Kaiser then moved to have the trustee’s counsel removed from the record, a motion that was found to be purely tactical. When Kaiser failed to pay the costs of that motion, the judge ordered him to reveal the identity of the party who had been paying his legal bills. That information was, in the judge’s view, presumptively but not permanently privileged, and the presumption had been rebutted because it had been shown that privileged information that was relevant to the case would not be revealed to the prejudice of Kaiser.
The Ontario Court of Appeal agreed and disagreed: Re Kaiser, 2012 ONCA 838. Although the law was once that ‘administrative’ information about the advice provided by a lawyer (including information about payment of the lawyer’s bill) would be permanently protected from disclosure, the law has moved away from a categorical approach to this kind of ‘peripheral’ information. As the motion judge held, it is only presumptively privileged, and the presumption may be rebutted. Where the motion judge got things wrong, however, was in concluding that the presumption of privilege had been displaced on the facts at issue, having taken ‘too narrow a view’ of the potential prejudice to Kaiser and the impact of disclosure on his right to confidentiality. The identity of the person fronting Kaiser’s litigation was not merely tangential but central to the merits of the main issue between the trustee and the bankrupt – the shielding of assets. The removal motion and the order for disclosure were but a ‘skirmish in that theatre of battle’. The trustee could perhaps have framed its motion on the basis that the communication with the lawyer was being used to perpetrate a crime or fraud, but did not. The presumptive privilege remained intact.
[Link available here].