Executive Summary: Key Legal and Evidentiary Issues

• Scope of implied waiver of solicitor-client privilege where plaintiffs put their state of mind and reliance on legal advice directly in issue.
• Effect of detailed pleadings and selective production about advice from a separate lawyer (Mr. Beluli) on waiver of privilege and discoverability.
• Whether plaintiffs’ allegations of reliance, trust, and expectation toward the defendant law firm justify disclosure of otherwise privileged communications with another solicitor.
• Fairness and consistency concerns arising from plaintiffs using some privileged material to support their case while resisting broader disclosure about the same advisory relationship.
• Binding nature of an unqualified discovery undertaking and whether plaintiffs can later invoke solicitor-client privilege to resist producing documents promised under that undertaking.
• Limits placed by the court on the scope of deemed waiver, restricting production to advice about the LOI and SPI, and distinguishing between advice to the shareholders and advice to the corporation.

Factual background and the underlying transaction

This case arises from a dispute between Acenzia Inc. and its former shareholders (the plaintiffs) and their former lawyers at Perley-Robertson, Hill & McDougall LLP and several individual lawyers (the defendants). The claim centres on alleged solicitor’s negligence and breach of fiduciary duty in connection with the sale of all the issued and outstanding shares of Acenzia Inc. to a non-party purchaser, Eureka 93 Inc. (“E93”, formerly Livewell). The parties negotiated a letter of intent (LOI) that contemplated key commercial terms, including $2 million in cash on closing, repayment of up to $375,000 in shareholder loans, injection of working capital, and retention of board seats for two of the individual plaintiffs, Mr. Grant Bourdeau and Mr. Indrajit Sinha. These arrangements were later reflected—allegedly in altered form—in a share purchase agreement (the SPI). After the SPI closed, E93 failed to make the payments required under the SPI, which precipitated the broader commercial dispute and gave context to the plaintiffs’ malpractice allegations. The plaintiffs say that the defendant law firm and its lawyers effectively acted on both sides of the deal, representing Acenzia, E93, and the former Acenzia shareholders in relation to the LOI, the SPI, and related steps. They allege that this dual role created actual conflicts of interest and that the lawyers preferred the interests of E93 when the terms of the SPI were changed at E93’s direction to the plaintiffs’ detriment. The defendants deny there was ever a solicitor-client relationship with the individual former shareholders; they maintain their retainer was with Acenzia (and E93) and that they understood the former shareholders had their own separate personal lawyer, Mr. Jim Beluli, in Windsor, for advice on the transaction.

Allegations of negligence, fiduciary breach, and conflict

In their Third Amended Statement of Claim, the plaintiffs plead that the law firm drafted the LOI, participated in calls, offered advice, and knew the plaintiffs were relying on them. They further allege that the lawyers never recommended that any of the plaintiffs obtain independent legal advice (ILA) or independent legal representation (ILR) in respect of the LOI or the definitive agreements. Instead, after the LOI, the parties moved toward finalizing definitive documents and closing the deal, and the plaintiffs say they continued to rely on the defendants as their trusted advisers. Specific pleadings describe how the plaintiffs asked about legal costs associated with closing and who would pay for their independent legal review. A principal from the corporate side, Archambault, allegedly responded (copying defendant counsel) that having their own independent lawyer would be “overkill” and that any independent lawyer should only perform a limited review of the near-final agreement, not negotiate its wording. According to the plaintiffs, this response and the law firm’s apparent comfort with a joint retainer led them to proceed with the law firm alone. They emphasize that they were unsophisticated in such transactions, while the defendant lawyers were experienced corporate/M&A counsel. Against this backdrop, the plaintiffs plead that they trusted the defendant lawyer, Mr. Bouwer, to act in their best interests and to identify and address any conflicts of interest. They say they expected that if the law firm saw a problem, it would tell them and recommend ILA or ILR; instead, the firm proceeded without alerting them to any conflict or to the risks of acting for both vendor and purchaser and for a principal of the purchaser who also chaired E93. On these facts, the plaintiffs assert both negligence and breach of fiduciary duty against the defendants.

The role of the separate lawyer, Mr. Beluli

A central feature of this motion is the plaintiffs’ separate relationship with a generalist Windsor lawyer, Mr. Jim Beluli. In their pleading, they expressly allege that, even though the defendant law firm did not urge them to obtain ILA, they nonetheless sent the LOI to Mr. Beluli for review. The pleadings go further: they say that at one point, before the deal closed, Beluli had told them he was unsure how the defendant law firm could properly act for both sides of the definitive agreement. Despite this, the plaintiffs ultimately decided to proceed without him, in reliance on the assurances and conduct of the law firm and E93’s representatives. In their productions, the plaintiffs disclosed a series of emails between the former shareholders and Mr. Beluli. These communications show that as early as September 2018, the plaintiffs were sending draft LOIs and SPI documents to him, receiving detailed written comments, and scheduling calls about the “heating up” deal. In one key email, Beluli warns that he is “not sure” how one law firm can represent both sides and “strongly advise[s]” the plaintiffs to have their own counsel. Later correspondence refers to his work on redlining the SPI, advising about the transaction, and tracking his time for billing. A January 2019 letter from Beluli confirms that on November 8, 2018 the plaintiffs instructed him to cease all work related to the sale transaction. It records that he had reviewed the first draft of the purchase agreement and discussed schedules but did not review any schedules because they were never provided. It also states that the plaintiffs advised he was not involved in the signing of the final SPI, that they had not retained other counsel to represent them, and that they were relying on the purchaser’s lawyers for all legal advice. The letter cautions that signing without independent counsel may have bound them to terms more favourable to the purchaser and strongly advises them to retain independent counsel before signing closing documents. This body of evidence shows that Beluli did more than incidental corporate housekeeping; he was actively engaged on the sale transaction for at least part of the relevant period.

The discovery refusals and the motion

During oral discovery, the defendants sought further information and documents relating to Beluli’s retainer, invoices, and file. They asked the plaintiffs to produce invoices referenced in emails, any engagement or retainer letters between Beluli and any of the plaintiffs, and any additional communications about the LOI and SPI. They also requested production of Beluli’s entire file for the transaction and, if privilege was asserted, a description of the subject matter over which privilege was claimed. The defendants argued that because the plaintiffs had pleaded Beluli’s involvement, produced some of his emails, and were asserting reliance, trust, and expectations vis-à-vis the defendant firm, the presence or absence of advice from Beluli was relevant and privilege had been at least partially waived. The plaintiffs refused many of these requests, asserting solicitor-client privilege over advice received from Beluli and resisting production of the full file. They also attempted to limit the invoices they had undertaken to provide by redacting narrative descriptions, invoking privilege only after an unconditional undertaking had already been given in discovery. As a result, the defendants brought this motion to compel answers to the refused questions and compliance with the outstanding undertaking. The core issues for the court were: whether the existence or non-existence of other legal advice was relevant to the claims and defences; whether the plaintiffs had put their state of mind and the receipt of that advice in issue so as to trigger implied or deemed waiver of privilege; whether fairness and consistency demanded that the plaintiffs not be allowed to rely selectively on parts of their communications with Beluli; and whether the undertaking to produce invoices could be unilaterally withdrawn on the basis of privilege.

Relevance of legal advice and state of mind

Justice Papageorgiou first considered whether the presence or absence of other legal advice was relevant to the claims of negligence and breach of fiduciary duty. The claim turns in part on whether the defendant lawyers acted for the former shareholders at all, whether a solicitor-client relationship existed, and whether any duty of care or ad hoc fiduciary duty was owed. The court noted that the test for the existence of a solicitor-client relationship looks to whether a reasonable person in the plaintiff’s position would believe the lawyer was acting for them, considering such factors as whether a retainer was signed, whether instructions were given and followed, what statements were made, whether legal advice was given and acted upon, and the parties’ reasonable expectations. Concepts of trust, reliance, and vulnerability are woven into both the negligence and fiduciary analyses. In that context, the plaintiffs’ pleaded reliance on the defendant lawyers, their assertion that they trusted the defendants to protect their interests and flag conflicts, and their simultaneous references to having consulted Beluli about the same LOI and SPI inevitably put their own state of mind and knowledge into issue. That in turn made the nature and extent of advice received from Beluli relevant to assessing whether they actually and reasonably relied on the defendants and how they understood the role of each lawyer during the transaction.

Implied waiver of solicitor-client privilege and fairness

The court then applied the law on implied (or deemed) waiver of solicitor-client privilege, drawing on authorities such as Roynat Capital v. Repeatseta Ltd. and The Law of Evidence in Canada. When a party voluntarily injects its state of mind into the litigation—for example, by pleading reliance on an opposing party’s representations—the extent and nature of legal advice that party received on the same subject can be put in issue. Justice Papageorgiou stressed that mere mention of a factual state of affairs that might have been the subject of legal advice is not enough to override privilege; the key is whether the party has truly put its state of mind and reliance at the forefront of the case. Here, the plaintiffs did more than allege background facts. They pleaded that they brought the LOI to Beluli, that he raised concerns about a single firm acting for both sides, and that they then decided, in reliance on statements from Archambault and the law firm’s apparent comfort with a joint retainer, to proceed with the defendants alone. They also disclosed selected emails and the January 2019 letter, which they did not seek to withdraw, despite learning by at least 2021 that unredacted communications had been produced. On the motion, their new counsel confirmed that they would not seek to retract or exclude those documents. In these circumstances, the court found that the plaintiffs had voluntarily chosen to maintain production of some privileged communications, to use them as part of their narrative, and to press a claim centred on trust and reliance. This selective approach, in which they wished to rely on some aspects of what Beluli said (for example, to show limited involvement or to support their account of when he stopped acting) while shielding the rest of his advice, was held to be unfair. Fairness and consistency, as articulated in Roynat, required that the defendants be entitled to a fuller picture of Beluli’s involvement on the LOI and SPI during the relevant time.

Scope of the deemed waiver and protection for corporate advice

While finding that implied waiver had occurred, the court was careful to cabin its scope. Justice Papageorgiou emphasized that deemed waiver is not unlimited: it extends only to communications relevant to the particular issue—here, the plaintiffs’ state of mind and alleged reliance on the defendant lawyers. The court therefore restricted the required disclosure and answers to communications between Beluli and the former shareholders that related to the LOI and SPI in the specific period when the alleged negligence and fiduciary breaches occurred. It drew a clear distinction between advice to the individual shareholders in their capacity as vendors and advice to Acenzia the corporation. Because there was an admitted solicitor-client relationship between Acenzia and the defendant law firm, and duties to the corporation were not in dispute in the same way, the corporation’s own state of mind was not similarly put in issue. Accordingly, communications constituting legal advice given by Beluli to Acenzia about the LOI or SPI did not have to be produced. The defendants were entitled only to explore and obtain advice and communications to the individual former shareholders relevant to their subjective understanding, reliance, expectations, and decision to proceed without independent counsel at the closing stage. The court also signalled that if, after the plaintiffs answer the specific refusal dealing with claimed privilege over items in Beluli’s file, the parties cannot agree on what else must be produced, they may return to court. In that scenario, some or all of the file may need to be reviewed by the court to determine which documents fall within the properly implied waiver and which remain privileged.

The binding nature of the discovery undertaking

A separate but related issue concerned an unqualified undertaking given by the plaintiffs during discovery. One email from November 8, 2018 contained an itemized breakdown from Beluli distinguishing corporate work (to be billed to the corporation) from his services on the sale of shares (to be billed to the individual shareholders). At discovery, plaintiffs’ counsel undertook, without any reservation, to produce all invoices that followed this email. Later, the plaintiffs tried to honour this undertaking only in part: they produced an unredacted $4,000 invoice to Acenzia for corporate work, but provided the $8,900 invoice to the shareholders with its narrative description redacted, citing solicitor-client privilege. The court reaffirmed that undertakings are binding and are not subject to unilateral withdrawal or qualification after the fact. Their integrity is central to the discovery process. Relying on authorities such as Nelson and Lavoie, Justice Papageorgiou held that where an undertaking is not expressly made subject to privilege or other reservations, a party cannot later invoke privilege to avoid compliance. Because the plaintiffs had given an unconditional undertaking to produce all invoices following the email, they were ordered to produce the $8,900 invoice in unredacted form. This holding underscores that parties must be cautious when giving undertakings in discovery if they intend to preserve privilege; they cannot retroactively rewrite the terms once the other side has relied on the promise.

Outcome of the motion and costs

In the result, the motion succeeded. Justice Papageorgiou ordered that the plaintiffs answer the refused questions and comply with the production requests as narrowed by the court’s ruling. They must provide information and documents concerning advice and communications from Mr. Beluli to the former Acenzia shareholders about the LOI and SPI during the relevant time frame, subject only to the limits protecting advice given to Acenzia as a corporation. They must also honour their undertaking by producing the unredacted invoice for $8,900 issued to the individual shareholders. On costs, the defendants sought full indemnity but the court held that there was no basis for that scale, given the nature of the motion and the parties’ conduct on timing. Applying the usual partial indemnity scale and comparing the costs outlines, the court found the defendants’ partial indemnity claim of $10,454.10 to be reasonable and within the plaintiffs’ contemplation. Accordingly, the Ontario Superior Court of Justice granted the defendants’ motion, ordered the plaintiffs to answer the refusals and produce the unredacted invoice, and awarded the defendants partial indemnity costs in the amount of $10,454.10. The defendants (Perley-Robertson, Hill & McDougall LLP/S.R.L. and the individual lawyers) were thus the successful party on this procedural motion, and the total quantified amount ordered in their favour in this decision was limited to these motion costs of $10,454.10, with no damages on the underlying negligence and fiduciary duty claims determined at this stage.