The Second Opinion: Absolute Privilege For Lawyers Not So Absolute

Amato v. Welsh, 2013 ONCA 258 marks an interesting development in the law - it suggests the previously inviolable doctrine of absolute privilege which protects lawyers from suit may admit an exception. The Court of Appeal upheld the decision of the lower court, saying that it is possible that a court could find that the duty of loyalty trumps the doctrine of absolute immunity.

The centuries old doctrine of absolute privilege permits lawyers, judges and other players in legal proceedings to shield themselves from suit for words spoken during such proceeding, provided the words were uttered for the purposes of the proceeding and by someone under duty to make such statements.

This case has interesting wrinkles regarding the application of the doctrine of absolute privilege. The first is whether the doctrine applies so as to bar claims against a lawyer by a client for statements made by the lawyer in another proceeding. The second is whether the doctrine applies, not to a statement of a lawyer, but the alleged failure to make a statement.

Facts

Peter Welsh, Julia Dublin and their law firm, Aylesworth LLP (collectively, "Dublin et al") represented Robert Mander, Peter Sbaraglia, and their several affiliated corporations (collectively, the "Mander Group") in connection with allegations the Mander Group was, in essence, a Ponzi scheme.

The OSC commenced an investigation of Mander and others. As part of that investigation, OSC representatives examined Mander and Sbaraglia. Dublin represented both men at their OSC examinations.

Prior to the OSC examinations, S.A. Capital had also retained Dublin because it had invested more than $10 million in the Mander Group and sought Dublin's opinion on whether the existing arrangements between S.A. Capital, its clients and the Mander Group complied with applicable securities laws.

In its Statement of Claim, S.A. Capital alleges that Dublin et al were obliged to tell the OSC about S.A. Capital's involvement as investors in the Ponzi scheme and that the failure to do so amounted to misrepresenting the facts to the OSC. S.A. Capital contends that if Dublin et al had disclosed, the OSC would have realized that the Ponzi scheme was larger than represented and might have chosen to act. If this had occurred, S.A. Capital says, its chances of recovering its investment would have been much greater. S.A. Capital also claims that, but for Dublin et al's breach of their duties, S.A. Capital would have taken steps to...