Heather and Sheldon Sittler (collectively, the “Sittlers”) became engaged in litigation around a $4 million debt owed to the Canada Revenue Agency. Initially, Milot Law became involved with the Sittlers as their tax counsel, but subsequently assumed the role of their trustee in bankruptcy. In a prior Appeal hearing (2024 ABCA 39), the Sittlers asserted that Milot Law breached solicitor/client confidentiality during the bankruptcy proceedings, contending that privileged information should remain shielded. In that underlying proceeding, Milot Law sought to vary an Order that ruled on the scope of confidentiality, which, in their view, should have incorporated certain findings made by the chambers judge at the oral hearing.

At the first Appeal hearing, Feehan J.A. adjourned the matter for a period of three months to allow the parties time to file an amended Order which would include the impugned omitted provisions.

In the comeback hearing, Feehan, J.A dealt with proposed Appeals and cross-Appeal addressing the Sittlers claims for breach of solicitor/client privilege and confidentiality, and the Chambers Judge’s Decision not to review his earlier Order respecting confidentiality.

Feehan J.A. turned to Rule 14.5(1)(f), which requires permission to Appeal if that is required by enactment, which, in this case, was found in 193(e) of the Bankruptcy and Insolvency Act. It was found that the test for leave to Appeal under s 193(e) is whether: (a) the point on the proposed appeal is of significance to the bankruptcy practice; (b) the point on the proposed Appeal is of significance to the underlying Action itself; (c) the proposed Appeal is prima facie meritorious or, on the other hand, frivolous; (d) the proposed Appeal will unduly hinder the progress of the Action itself; and (e) the Judgment from which an Appeal is proposed to be taken appears contrary to law, amounts to an abuse of judicial power, or involves an obvious error causing prejudice for which there is no remedy.

In applying these factors, Feehan J.A. granted leave to Appeal and cross-Appeal the Order of confidentiality.

In considering Milot Law’s adjacent Application for C (Rules 4.22 and 14.67), Feehan J.A. noted that the test for granting Security for Costs is set out in Poole v City Wide Towing and Recovery Service Ltd., 2020 ABCA 102. Among other things, the applicant bears the burden of establishing, on a balance of probabilities, that it is just and equitable to order Security for Costs or that the respondent would be unable to pay Costs that may be awarded. On the facts of this case, it was found that although the Sittler’s would likely be unable to pay Costs should they be awarded against them, “[a]llowing the Milot Law appeal to proceed but potentially preventing the broader discussion of solicitor/client privilege and confidentiality over the whole disclosure by Milot Law to the trustee in bankruptcy would not be equitable or reasonable”.