Maintaining Legal Privilege in Commercial Transactions

A decision was released today by the Federal Court of Appeal that will give comfort to parties involved in commercial transactions: Iggillis Holdings Inc. v. Canada (National Revenue), 2018 FCA 51.

This case deals with the question of whether solicitor-client privilege applies to a legal opinion that is shared with other parties to a commercial transaction. In the past, these kinds of memos have been protected under common interest privilege (a subset of solicitor-client privilege). However, the decision of the Federal Court in Iggillis Holdings Inc. v. Canada (National Revenue), 2016 FC 1352, brought that into question.

In this case, a legal opinion on tax consequences of a corporate transaction was shared between parties to the transaction. The memo had been prepared primarily by counsel for one party with contribution from counsel for the other party. Following completion of the transaction, the Minister of National Revenue sought production of the memo.

The Federal Court ordered production of the memo on the basis that common interest privilege should not apply between parties on the opposite sides of a commercial transaction. In so deciding, the Federal Court departed from the “strongly implanted” principle of common interest privilege in Canada in favour of permitting disclosure to the court of all of the relevant evidence. The Federal Court relied strongly on a 2016 decision by the New York Court of Appeals in which it was held that common interest privilege did not apply to commercial transactions.

In the decision released today, the Federal Court of Appeal overturned the Federal Court’s decision on the basis that it was inappropriate for the Federal Court to rely on a decision of the New York Court of Appeals in favour of established Canadian law (at para. 40). The Federal Court of Appeal summarized the law as follows (at para. 41):

[41] Based on the decisions of the courts in Alberta and British Columbia, solicitor-client privilege is not waived when an opinion provided by a lawyer to one party is disclosed, on a confidential basis, to other parties with sufficient common interest in the same transactions. This principle applies whether the opinion is first disclosed to the client of the particular lawyer and then to the other parties or simultaneously to the client and the other parties. In each case, the solicitor-client privilege that applies to the communication by the lawyer to his or her client of a legal opinion is not waived when that opinion is disclosed, on a confidential basis, to other parties with sufficient common interest in the same transactions.