Federal Court of Appeal Quells Concern over Transactional Common Interest Privilege

Written By Christiaan A. Jordaan

A December 2016 a decision of the Federal Court caused chills for corporate lawyers across Canada when it held that common interest privilege does not apply in the transactional context where otherwise privileged material is shared between parties to the transaction. That decision has now been reversed by the Federal Court of Appeal in Iggillis Holdings Inc v Canada (National Revenue), 2018 FCA 51.

The reasoning in the now-overturned lower court decision was that the existence of transactional common interest privilege was still an open question at law. The lower court judge held its acceptance in the transactional context was an extension of principles recognized in other circumstances—either the joint defence of litigation, or where two clients retain the same lawyer to represent them (rather than two clients with their own lawyers collaborating)—but made without any meaningful analysis. As a result, the court felt free to consider the issue afresh. After a lengthy analysis of policy issues, it held that common interest privilege should not apply in the transactional context where the parties have separate representation.

By contrast, the decision of the Federal Court of Appeal side-stepped the thicket of policy issues by reliance on the wording of the statutory provision at issue. The case involved the production of documents compelled by the Minister of National Revenue under the Income Tax Act. The statutory power to compel production excluded documents over which solicitor-client privilege could be asserted “in a superior court in the province where the matter arises”. And although the lower court decision had considered prior Federal Court case law, it had not considered whether the privilege issue was already decided in the provinces connected with the transaction.

The Federal Court of Appeal held that the issue had been decided, so that the lower court did not have a free hand. It concluded:

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. (Para. 41)

Although the Federal Court of Appeal’s decision did not frontally engage with the policy issues raised below, which therefore could still be argued in the provincial superior courts, it does appear likely to quell anxiety on that front. The Court agreed that common-interest privilege “is strongly implanted in Canadian law and indeed around the common-law world”, and it even offered up a policy reason that can be advanced in its favour: “when dealing with complex statutes such as the Income Tax Act, sharing opinions may well lead to efficiencies in completing the transactions and the clients may well be better served as the application of the Income Tax Act will be of interest to all of the parties to the series of transactions” (paras. 40 and 42). For the time being, therefore, it is back to business as usual.

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