The court said allowing privilege in such situations would be ‘inconsistent,’ ‘unfair’
When a litigant’s arguments rely on their understanding or lack of understanding about their legal rights or obligations, the litigant effectively waives solicitor-client privilege because it would be unfair for them to bar access to evidence that could verify their arguments, the Ontario Court of Appeal clarified for possibly the first time this week.
Wednesday’s ruling in One York Street Inc. v. 2360083 Ontario Limited restored a lower court order, which requires the operator of an Ontario supermarket chain, Coppa’s Fresh Market, to disclose the advice it received from a law firm when it was negotiating a lease and lease extension with a commercial landlord.
The operator said it agreed to sign the lease for the space, which was located in a downtown Toronto shopping centre, because the landlord had promised a certain level of foot traffic. When the operator stopped paying rent and abandoned the space, the landlord sued for damages.
The operator responded that the landlord had misrepresented the amount of foot traffic in the space, affecting the operator’s understanding of its legal rights under the lease. During the discovery process, the operator refused to disclose the legal advice it had received when entering into the lease agreement, citing solicitor-client privilege. The operator has since changed lawyers.
In its decision, the OCA ruled that the operator could not claim that the promise regarding foot traffic affected its understanding of its legal rights and simultaneously refuse to disclose evidence that could help verify that claim.
“It is common ground that the respondents received legal advice at the time of the negotiation and execution of the lease and the extension,” the appellate court said.
“Allowing the respondents to maintain privilege over the legal advice they received from their own lawyers at the time they entered into the lease would be inconsistent with their reliance in their statement of defence and counterclaim that the alleged misrepresentations by the appellant affected their understanding of their legal rights under the lease,” the appellate court added.
Matthew Lerner, a partner at Lenczner Slaght who represented the landlord in the case, says to his knowledge, the appellate court’s decision represents the first time the OCA has shed light on this issue.
“For many years, there was confusion and inconsistency arising from past decisions, both nationally and within Ontario, about where waiver of solicitor-client privilege would be deemed due to the position or plea that a party took in the litigation,” Lerner says.
In its ruling, the OCA clarifies that when a court is assessing whether there is a deemed waiver of solicitor-client privilege, it should not consider whether a party has explicitly referred to legal advice or to a lack of legal advice in its argument. Lerner says previous decisions, including those issued by Ontario courts, had required such an explicit reference to legal advice for a waiver to be deemed.
Instead, the OCA said that courts should consider “whether the party relies in its claim or defence on its understanding of its legal position.” The OCA added that if a party’s arguments rely on such an understanding, it is only a “matter of fairness” that the party be barred from maintaining “privilege over legal advice received regarding the issue on which it injected its understanding of its legal position into the litigation.”
During the discovery process, a motion judge ruled that the operator’s solicitor-client privilege was deemed waived and ordered it to disclose its correspondence with the law firm that provided legal advice during the lease negotiations. However, another court allowed the landlord’s appeal, finding that the motion judge had made legal errors.
The OCA restored the motion judge’s ruling.
Lerner says the appellate court’s ruling sets an important precedent.
“It clarifies confusion in the law, but it also serves as a cautionary notice to counsel about being careful when you are invoking your client’s understanding of their legal rights at the relevant time in your claim or defence,” he says.
However, Lerner says some questions remain.
The decision does not address whether there is a deemed waiver of privilege “where a party invokes its understanding of fact as opposed to of a legal position, and there’s privileged material that would reveal the truth of that pleaded understanding of facts,” he says. “There are other cases that deal with that issue, [but] some would say in a way that’s unresolved.”
Counsel for the operator declined to comment on the decision.
