A-861-76
Canadian National Railway Company (Appellant)
v.
McPhail's Equipment Company Ltd. (Respond-
ent)
Court of Appeal, Pratte, Heald and Urie JJ.—
Vancouver, May 17; Ottawa, June 2, 1977.
Expropriation — Privileged document in action — Plan of
expropriation filed — Appraisal report received subsequent to
filing — Minimal legal advice to this point — Several months'
negotiation before action commenced — Whether appraisal
report falls within "anticipation of litigation" privilege.
The appellant filed a plan of expropriation on November 5,
1974 and received an appraisal report assessing the land's value
on December 17, 1974. Up to this time, the official in charge of
the expropriation had received minimal legal assistance. After
several months of negotiations action was commenced to deter
mine the value of the expropriated land. The appellant contends
that the appraisal report is privileged because it is a document
prepared in anticipation of litigation.
Held, the appeal is dismissed. While it could possibly be said
that all expropriations including this one are potentially liti
gious, and thus a possible future purpose for subject appraisal
report could be said to be litigation, nevertheless, the single
wider purpose for obtaining the appraisal was the ascertain-
ment of the value of respondent's property and to assist the
appellant in arriving at an opinion in this connection. The mere
fact that the appellant was aware that its opinion might be
challenged did not itself enable the appellant to claim privilege.
The report had first to be used by the appellant in the formula
tion of its opinion as to value before expropriation proceedings
became possible. To allow the appellant's claim for privilege
here would result in a "blanket privilege" being extended to
documents prepared in practically all expropriation cases when
it is common knowledge that perhaps the majority of those
cases are settled between the owner and the expropriating au
thority without the necessity of litigation.
Alfred Crompton Amusement Machines Ltd. v. Commis
sioners of Customs and Excise (No. 2) [1973] 2 All E.R.
1169, agreed with.
APPEAL.
COUNSEL:
Edward C. Chiasson and Vincent R. K.
Orchard for appellant.
D. Barry Kirkham for respondent.
SOLICITORS:
Ladner, Downs, Vancouver, for appellant.
Owen, Bird, Vancouver, for respondent.
The following are the reasons for judgment
rendered in English by
HEALD J.: In my view, the appellant has not
established its claim for the "anticipation of litiga
tion" privilege in respect of the Appraisal Report
dated December 17, 1974 prepared by Cunning-
ham and Rivard Appraisals Limited (hereafter the
"Cunningham Appraisal"). This was the only
basis for privilege advanced by the appellant.
The facts giving rise to this appeal are relatively
simple: The main line of the appellant's railway is
situate on the south bank of the Fraser River near
New Westminster, B.C. The expropriated property
is immediately to the south of the appellant's main
line and to the east of the Port Mann Bridge over
the Fraser River. The appellant had one of its
main switching yards to the west of the Port Mann
Bridge and in 1974, was considering expansion
east of the Port Mann Bridge. Such expansion
would require the acquisition of a substantial
amount of property adjacent to the existing rail
line, part of this property being owned by the
respondent.
On June 17, 1974, a meeting of appellant's
lower level management was held concerning the
possible purchase of the required property, includ
ing that belonging to the respondent. This meeting
recommended to senior management that subject
property be purchased by the railway. Final
approval from upper management was obtained
very shortly before the date of expropriation
(November 5, 1974). On October 2, 1974, appel
lant's real estate department under the supervision
of Ronald A. MacDonald, Real Estate Manager,
prepared an estimate for budget purposes entitled
"Capital Appropriation, Year 1974". That docu
ment recommended the purchase of the required
property at an estimated cost of some four million
dollars. As of that date, the appellant had not yet
sent its own employees to visit the property and
there was no attempt to place any evaluation on
the individual parcels involved (there were some
six different landowners). The stated purpose of
the October 2nd document was to estimate, for
budget purposes, the likely cost of purchasing the
needed land east of the Port Mann Bridge. On
November 12, 1974, the Cunningham Appraisal
was commissioned by Mr. MacDonald to help in
the decision on valuation of the property for
budget purposes. At that point in time, Mr. Mac-
Donald had not sought legal advice on the matter'.
Subsequently, on a date not established in evi
dence, but probably about December 30, 1974, a
third page was added to the October 2, 1974
memorandum reducing the budget estimate for
land acquisition from four million dollars to two
million dollars based partially on the two private
appraisals obtained (the Cunningham Appraisal
and the Penny Appraisal).
As stated supra, the plan of expropriation was
filed on November 5, 1974. No contact whatsoever
was made between the appellant and the respond
ent until many months later. The appellant com
menced subject action to determine the compensa
tion payable to the respondent on October 1, 1975.
Based on the two private appraisals and on an
in-house estimate, Mr. MacDonald on December
30, 1974, advised the appropriate budgetary offi
cial of the appellant to revise the budget for prop
erty acquisition in accordance with the informa
tion obtained from the two private appraisers and
the in-house appraiser, and in accordance with
page 3 of the October 2 memorandum referred to
supra.
According to Mr. MacDonald, the purpose in
obtaining the private appraisals was to enable him
to form an opinion as to the value of the respond
ent's property so that he could obtain a budgetary
allocation and could then negotiate with the
respondent for the purchase of the property 2 .
The evidence does not establish when appellant's
legal department was first consulted in connection
with the action but it is a fair inference from the
evidence that such consultation occurred very
shortly before October 1, 1975, the date the action
was commenced. The only involvement in this
matter in 1974 with appellant's legal department
was when one of appellant's Vancouver solicitors
reviewed the expropriation plan and attended to its
registration. There is no suggestion that this solici
tor gave any advice on possible litigation, nor that
the Cunningham Appraisal was ever placed before
him. The only evidence supportive of the appel
lant's claim for privilege is to be found in Mr.
' Appeal Book, pp. 46 and 47.
2 Appeal Book [Annex], p. 148 and pp. 179 to 180.
MacDonald's affidavit and is to the effect that the
appellant treats expropriations from their incep
tion as potentially litigious and has developed rou
tine expropriation procedures over the years and
that such routine procedures include the obtaining
of independent appraisals with respect to expro
priations like the expropriation in the case at bar.
Turning now to the legal principles applicable to
a factual situation of this kind, it seems clear that
communications between a party and a non-profes
sional agent are only privileged if they are made
both—(1) for the purpose of being laid before a
solicitor or counsel for the purpose of obtaining his
advice or of enabling him to prosecute or defend
an action or prepare a brief; and (2) for the
purpose of litigation existing or in contemplation
at the time. Both these conditions must be fulfilled
in order that the privilege may exist'. At page 916
of Williston and Rolls, it is stated:
All documents and copies thereof prepared for the purpose,
but not necessarily the sole or primary purpose, of assisting a
party or his legal advisers in any actual or anticipated litigation
are privileged from production.
And at page 917:
Documents existing before litigation was conceived and not
brought into existence for the purpose of obtaining legal advice
are not free from the duty to produce ... merely because it was
handed to a solicitor for the purposes of an action. ... There
must be a real expectation of litigation before there is a
privilege from production. [The underlining is mine.]
In the case at bar, the Cunningham Appraisal
was ordered on November 12, 1974, and received
on December 17, 1974. According to the evidence,
the purpose for the appraisal was to enable the
appellant to form a considered opinion as to value
upon which it could base a budgetary item thus
enabling it to negotiate the purchase of the prop
erty from the respondent. The expropriation had
only occurred on November 5, 1974. Appellant's
real estate department had not consulted the legal
department. Negotiations had not been com
menced nor had the respondent as yet been con
tacted. On these facts, surely it cannot be said that
there was a "reasonable expectation of litigation"
3 See: Williston and Rolls, The Law of Civil Procedure,
1970, vol. 2 at p. 827 quoting Halsbury's Laws of England (3rd
ed.) vol. 12, p. 45.
on November 5, 1974. Until the appellant had
formed a realistic and objective opinion as to value
and had the funds with which to negotiate, it could
not approach the respondent to open negotiations.
Only after negotiations had begun would the
appellant ascertain respondent's reaction to the
appellant's offer. Respondent might well accept
the offer made to it by the appellant in the first
instance or agreement might be reached after pro
tracted negotiations over a period of many months.
Only after all attempts at settlement had failed
could it be said that there was a "reasonable
expectation of litigation". Actually, in this case,
there was a period of negotiation lasting several
months because the action was not begun until
October 1, 1975.
I am supported in my view of this matter by the
House of Lords' decision in Alfred Crompton
Amusement Machines Ltd. v. Commissioners of
Customs and Excise (No. 2) 4 . In that case, the
Commissioners sought to claim privilege for (1)
correspondence and reports, etc., passing between
the Commissioners and their officers, servants and
agents which had been prepared for the purpose of
obtaining information for an arbitration during a
period, when in the Commissioners' views, the
arbitration was contemplated or pending, and (2)
documents received from third parties in confi
dence as information and evidence for the purposes
of the arbitration. It was held that neither catego
ry of documents was privileged because the two
purposes for which the documents had come into
existence were parts of a single wider purpose, i.e.,
the ascertainment of the wholesale value of the
appellant's goods, the sole immediate purpose
being to help the Commissioners to fix what in
their opinion was the true value. The mere fact
that the Commissioners knew that their opinion
might be challenged did not itself enable them to
claim that the documents were the subject of
privilege. The documents had first to be used by
the Commissioners to enable them to form an
opinion as to value before arbitration proceedings
became possible and before their solicitor would
use them for the purpose of defending their opin
ion in the anticipated arbitration 5 .
4 [1973] 2 All E.R. 1169.
5 See judgment of Lord Cross, particularly at pp. 1182-1184
where the conflicting authorities are discussed and reviewed.
Likewise, in the case at bar, while it could
possibly be said that all expropriations including
this one are potentially litigious, and thus a possi
ble future purpose for subject Appraisal Report
could be said to be litigation, nevertheless, the
single wider purpose for obtaining the appraisal
was the ascertainment of the value of respondent's
property and to assist the appellant in arriving at
an opinion in this connection. The mere fact that
the appellant was aware its opinion might be chal
lenged did not itself enable the appellant to claim
privilege. The Report had first to be used by the
appellant in the formulation of its opinion as to
value before expropriation proceedings became
possible.
In the Crompton case (supra), Lord Kilbran-
don, who concurred in the judgment of Lord Cross
said at page 1185:
In my opinion, any practice of "blanket" classifying of docu
ments, especially when they concern, as they normally do,
claims arising out of accidents, is to be discouraged.
I would agree with that statement and applying it
to the instant case, have no hesitation in expressing
the view that to allow appellant's claim for privi
lege here would result in a "blanket privilege"
being extended to documents prepared in practi
cally all expropriation cases when it is common
knowledge that perhaps the majority of those cases
are settled between the owner and the expropriat
ing authority without the necessity of litigation.
For the foregoing reasons, I would dismiss the
appeal with costs.
* * *
PRATTE J.: I concur.
* * *
URIE J.: I concur.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.