In 2016, the Federal Court broke with its own precedents and other Canadian courts and held that parties to a commercial transaction who shared a privileged document waived privilege over that document. In IGGillis Holdings Inc. v. Canada (National Revenue), 2018 FCA 51, the Federal Court of Appeal overturned that decision and restored the longstanding rule that parties with a common interest in a commercial transaction who share privileged information do not waive privilege when they do so.

The case arose from a series of transactions where Abacus Capital Corporations Mergers and Acquisitions (“Abacus”) acquired shares owned by IGGillis Holdings Inc. and Ian Gillis (collectively, “Gillis”). Counsel for Abacus, with input from counsel for Gillis, drafted a memorandum (the “Memo”) that opined on the most tax-efficient way for Abacus to acquire the shares. The Memo was sent to Abacus and Gillis by their respective counsel. The Minister of National Revenue sought production of the Memo from Gillis. Abacus and Gillis argued that it was privileged despite the disclosure to both parties.

Confidential communications between a lawyer and a client that are made for the purpose of seeking or giving legal advice are protected by solicitor-client privilege. Intentionally disclosing a privileged document to another person typically waives privilege over the document. But parties with a common legal interest can share privileged documents without waiving privilege under the doctrine of common interest privilege.

Before the Federal Court’s 2016 decision, Canadian courts accepted that transactional counterparties could have a common interest in the completion of a transaction and could thus share privileged documents without losing privilege. The Federal Court judge acknowledged that transactional common interest privilege was well-established in Canada, but held that transactional common interest privilege was inconsistent with solicitor-client privilege and should not be recognized. As a result, the Federal Court judge ordered Gillis to disclose the Memo.

The Federal Court of Appeal (“FCA”) allowed the appeal and confirmed that transactional common interest privilege exists in Canada.

First, the FCA held that it did not matter that the Memo was prepared by counsel for Abacus with input from counsel for Gillis. The FCA noted that if the parties had written and then exchanged separate memos, the issue would remain whether the loss of confidentiality waived privilege. The FCA held that a more efficient collaborative approach should not be discouraged.

Second, the FCA dismissed the Federal Court judge’s concern that transactional common interest privilege reduces the evidence available for courts to consider (at least in this case). The FCA held that the Memo would not be admissible even if was not privileged because it contained, almost exclusively, opinions on the legal effect of the transactions.

Third, the FCA held that the Federal Court judge erred by relying on American authorities rejecting the existence of transactional common interest privilege. The FCA confirmed that transactional common interest privilege was well-established in Canada, particularly in Alberta and British Columbia (where Abacus and Gillis were located). The FCA 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. 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.

McCarthy Tétrault LLP represented The Federation of Law Societies of Canada, an intervener, in this appeal.

Date: December 7, 2016 File number: T-126-15 Citation: Iggillis Holdings Inc. v. Canada (National Revenue), 2016 FC 1352 (CanLII)