The court said communications are not privileged in any kind of proceeding if they aim to further fraud
When a lawyer and their client communicate for the purpose of furthering fraud or defying a court order, that correspondence will not be considered privileged if its disclosure is later sought during a criminal or civil proceeding, the Ontario Court of Appeal ruled Wednesday.
However, the appellate court also clarified that this exception to solicitor-client privilege, called the crime-fraud exception, is “subject to strict preconditions.” The exception only applies if the party seeking it can prove that the client was not getting legal advice in good faith, the client was trying to engage in wrongful conduct, and the correspondence was about future conduct, the OCA said.
In its decision in Sakab Saudi Holding Company v. Al Jabri, the OCA noted that two lower courts had previously ruled that the crime-fraud exception to solicitor-client privilege can only apply in criminal cases – not civil cases or cases in which a party has been accused of breaching a court order.
But the OCA disagreed with the lower courts’ conclusion.
“The applicability of the [crime-fraud] exception turns on the nature and purpose of the communications between the client and the lawyer, not the nature of the proceeding in which privilege is claimed or challenged,” the OCA said.
“Put differently, a client who seeks advice from a lawyer as to how to carry out a future fraud, or enlists the lawyer as a conspirator in that fraud, or seeks to use the lawyer-client relationship to facilitate a breach of a court order, never enjoys privilege over the communications whether charged criminally or only pursued civilly,” the appellate court added.
The proceedings in Sakab Saudi Holding Company v. Al Jabri date back to 2021, when companies that had been launched to pursue counterterrorism activities in the Kingdom of Saudi Arabia filed a lawsuit in Ontario claiming they had been the victims of massive international fraud. The companies alleged the fraud, which they said took place between 2008 and 2017, had been orchestrated by Saad Khalid Al Jabri, a former high-ranking Saudi Arabian government official.
According to the companies’ lawsuit, Al Jabri had used his authority to siphon funds from them into his own pockets and those of others, including his son, Mohammed Saad KH Al Jabri.
Both Al Jabri and his son contested the claims, arguing that any funds he accessed from the companies had been used for state-sanctioned counterterrorism activities.
Shortly after the companies’ lawsuit was filed, the Ontario court ordered Al Jabri to stop dealing with any assets in his name or in which he had any type of interest, and was barred from instructing others to do so. Al Jabri was also ordered to produce a sworn statement detailing his assets across the world.
The court ordered a number of banks to freeze and disclose records of all his assets. Meanwhile, some Canadian and foreign banks were instructed to provide the bank records of Al Jabri and his son to the companies.
In August 2021, a court order with similar terms was issued against Al Jabri’s son.
The Canadian banks turned over unredacted copies of the defendants’ bank statements to the companies. However, the foreign bank statements that the companies received were redacted to remove references to transactions with law firms.
In 2023, the companies filed a motion to have Al Jabri and his son produce unredacted copies of the foreign bank statements, as well as trust ledgers from every law firm representing them.
However, a motion judge at the Ontario Superior Court of Justice dismissed the motion, ruling that law firms’ administrative records are privileged by default and that the redacted portions of the bank statements are privileged because information about lawyers’ bill payments is confidential.
The motion judge rejected the companies’ argument that the crime-fraud exception to solicitor-client privilege applied to the trust ledgers and bank statements, stating that the exception is only applicable in criminal, not civil, proceedings.
The Divisional Court of the Ontario Superior Court of Justice, an appellate branch of the court, largely upheld the motion judge’s ruling. However, the court ordered the motion judge to reconsider whether the redacted portions of the bank statements were privileged. The companies appealed the Divisional Court’s ruling.
The OCA ultimately dismissed the companies’ appeal. While the appellate court said the crime-fraud exception to solicitor-client privilege can apply in civil matters in addition to criminal matters, it does not apply in this specific case.
The OCA noted that the companies’ motion sought the production of records for a period after 2017, when the alleged fraud by Al Jabri had ended. “The appellants made a very broad, multi-year request for documents,” the OCA said, adding that the crime-fraud exception must be narrow to keep “solicitor-client privilege as close to absolute as possible.”
“In short, they did not demonstrate a prima facie case for access to all the records sought,” the appellate court added.
Counsel for the parties did not respond to requests for comment.
