The waiver of Solicitor/Client privilege by a bankrupt company is a difficult matter and one distinct from the waiver of such privilege by an individual bankrupt. As there is nothing in the BIA that either gives or denies a trustee the right to waive solicitor/client privilege on behalf of a company,Hahaha yes with a lot of candles! the courts have had to turn to the common law for guidance on the issue.
The case law is very clear that the right to waive privilege in relation to pre‐bankruptcy legal advice given to a bankrupt company is not a right conferred on the trustee.19 In St. Anne, the Court highlighted the fact that the legislature chose to give a trustee very wide powers under the BIA, but made no mention anywhere of the right to waive privilege on behalf of the bankrupt.20 Additionally, the Court pointed out that a corporate bankrupt still exists post‐bankruptcy and so would be able to waive privilege if it wanted to do so.21 Most importantly, the Court recognized that a trustee acts for the creditors and not the bankrupt, and is often in conflict with the bankrupt.22 As such, the Court refused to permit the trustee to waive privilege.
In Bre‐X, the Court determined that the trustee was not permitted to waive privilege on behalf of the company, regardless of the fact that all the directors of the company had resigned.23 The Court stated that the resignation of all the directors and officers of the company did not make waiver of privilege impossible, as a meeting of the remaining shareholders could be called to deal with the issue, such as by electing new directors.
Confirming the decision in Bre‐X, the Court in Ultra Information Systems Inc. v. Pushor Mitchell LLP (2008), 45 C.B.R. (5th) 108 (“Ultra”) held that only current directors have the ability to waive privilege on behalf of the company. Former directors of a bankrupt company are not permitted to waive privilege on behalf of the company, regardless of whether they were directors at the time the privileged communication was created.24
While some cases prior to Bre‐X appeared to indicate that a trustee would be able to waive privilege in certain circumstances, the most recent cases on the issue have not given the trustee such a right. The Court in Bre‐X mentions that those cases that did permit the waiving of privilege dealt with fraudulent or criminal behaviour, which is an exception to the privilege rule.25
In the event that privileged information is required by the trustee, attempts should be made to ask the directors of the company to waive privilege on behalf of the company. If there are no directors of the company, the trustee should attempt to deal with the matter through a shareholders’ meeting to either elect directors or deal directly with the issue. A solicitor faced with a request for privileged materials by a trustee should ensure that privilege has been waived by the current directors of the company before disclosing such information.