In Wong v. Luu, the British Columbia Court of Appeal upheld an order requiring the production of a redacted trust ledger to the bankruptcy trustees for Luu Hung Viet Derrick (“Luu”) on the grounds that the trust ledger was not presumptively privileged and that production would not violate the bankrupt’s right to communicate in confidence with his lawyers.

In 2012, Luu had been adjudged bankrupt in Hong Kong and his bankruptcy trustees had been hunting for his assets when the trustees became aware of more than $3 million dollars paid into the trust account of Luu’s lawyers in British Columbia in 2013. This had not been disclosed by Luu. When the bankruptcy trustees sought information from Luu’s lawyers about the monies received, they refused to provide any information on grounds of legal privilege.

The trustees successfully sought an order from the British Columbia Supreme Court compelling Luu’s lawyers to produce accounting records of the amount of trust funds held for or at the direction of Luu, and records showing the receipt of any trust funds and any payments made from trust to Luu or anyone at Luu’s direction. Luu’s lawyers appealed the order requiring production of the trust ledger.

Principles of Solicitor Client Privilege

The Court of Appeal summarized the principles of solicitor-client privilege set out by the Supreme Court of Canada in the 2003 decision Maranda v. Richer (“Maranda”):

  1. solicitor-client privilege is a fundamental substantive right of the client founded upon the unique relationship of solicitor and client;
  2. at a minimum, Maranda establishes that lawyers’ bills, in the criminal law context, are presumptively subject to solicitor-client privilege;
  3. this presumption flows from the connection between lawyers’ bills and the nature of the relationship between lawyers and clients ‒ the account reflects work done on behalf of the client which involves communications that are privileged;
  4. the presumption may be rebutted if it is established that there is no reasonable possibility that disclosure will directly or indirectly reveal any communications protected by privilege;
  5. Maranda did not do away with the distinction between evidence of communications, which is privileged, and evidence of facts, which is not;
  6. financial records of lawyers other than records of bills are not presumptively subject to solicitor-client privilege insofar as they merely represent records of actions or facts, but they should not be produced automatically solely for that reason;
  7. Maranda mandates that it is necessary to consider such records in order to determine whether they arise out of the solicitor-client relationship and what transpires within it, that is, communications to obtain legal advice; and
  8. if it is concluded that the records do arise out of that relationship and what transpires within it, they are presumed to be privileged, but the privilege can be rebutted and the document produced if it is established that production will not permit the deduction or acquisition of communications protected by solicitor-client privilege.

British Columbia’s Court of Appeal clarified that although the 1984 Ontario Court of Appeal decision in Re Chilcott and Clarkson Co. Ltd. stands for the proposition that a trustee cannot waive the privilege that attaches to communication between the bankrupt and his solicitors, it does not stand for the broader proposition that any and all information in the hands of the bankrupt’s solicitors, with respect to the bankrupt’s affairs, is privileged.

Court of Appeal’s Analysis

The Court of Appeal determined that the chambers judge correctly applied the law of privilege and upheld the determination that there is no presumption that the information in a solicitor’s trust ledger is privileged. The entries in a trust account record, the possession of, and movement of funds, is information which the bankrupt may be compelled to disclose. The Court of Appeal accordingly held that, insofar as the entries record the payment of funds to parties who do not owe a duty of confidence to the bankrupt, the bankrupt cannot have expected the fact of payment to remain confidential.

Having established that the trust ledger was not presumptively privileged, the Court of Appeal considered whether the entries on the ledger would contain information ancillary to the provision of legal advice that ought to be protected. The Court of Appeal acknowledged that in some cases, knowledge of the amount spent on legal services in relation to a particular matter or issue will give the recipient of that information insight into the solicitor-client relationship. However, in the case at bar, production of the trust ledger was found not to violate the client’s right to communicate with his lawyers.

The bankrupt’s lawyers were entitled to redact entries in the trust ledger showing the amounts paid towards legal fees and were also not required to produce records of funds held on behalf of agents of the bankrupt on the basis that production of this information would require disclosure of privileged communications.

Key Takeaways:

  1. Solicitor-client privilege is not lost by a bankrupt and it cannot be waived by a trustee in bankruptcy, even where doing so might reveal the whereabouts of some of the bankrupt’s property.
  2. A trustee cannot waive the privilege that attaches to communication between the bankrupt and his solicitors; however, not all information in the hands of the bankrupt’s solicitors, with respect to the bankrupt’s affairs, is privileged.
  3. Financial records of lawyers other than records of bills, including trust ledgers, are not presumptively subject to solicitor-client privilege.
  4. Only in particular cases, where knowing the amount spent on legal services in relation to a particular matter or issue will give the recipient of that information insight into the solicitor-client relationship, will the court consider trust records to be privileged.
  5. Privilege can be rebutted and the document will be produced if it is established that production will not permit the deduction or acquisition of communications protected by solicitor-client privilege.