Legal Blog

Privilege

Privilege between lawyers and clients is very important. Lawyer and client cannot open up to each other if they think that, in the case of subsequent litigation, the opposing litigants will be delving into their communications and notes. However, privilege extends only to communications between the client and the lawyer for purposes of giving and receiving advice. Accordingly, in a run-of-the-mill real estate transaction, precious little is privileged and we routinely obtain the entire file of real estate solicitors. However, some real estate files are unusual and privilege not only exists, it is crucial. This was illustrated in 1824120 Ontario Limited v. Matich, 2023 ONSC 938 (Div. Ct).

Agreement

An elderly couple agreed to sell their land after a seemingly aggressive real estate agent persuaded them to list the family farm for $18.5 million. The ultimate sale price was $16.5 million. The vendors were elderly and ill, but they were not stupid. They inserted a clause by which the agreement was conditional for 3 days upon the solicitor of the couple approving the agreement terms. The condition was stated to be for the benefit of the vendors, but they could waive it at any time within the 3 days. If the condition was not met or waived, the agreement was “null and void.”

The vendors then retained a lawyer, who reviewed the agreement and provided an opinion. After discussing the opinion with the vendors, the lawyer informed the purchaser that the condition was not met and would not be waived. The lawyer gave no reason, at that time, for the vendors’ decision and specifically stated that the vendors were not waiving solicitor-client privilege.

The purchaser, smelling a rat, sued. It alleged that the vendors had a duty to exercise their rights under the condition reasonably, honestly, and in good faith. The purchaser’s suspicions were confirmed when it found that the vendors’ lawyer had known of a higher offer that the vendors had received for their property – before the lawyer gave the opinion.

The purchaser wanted the lawyer to produce the lawyer’s file so that the purchaser could demonstrate that the lawyer and vendors colluded to use the conditional clause merely to breach a perfectly valid agreement. The vendors and the lawyer refused and the purchaser brought a motion to force production. The motion judge refused to order production and the purchaser appealed the decision to the Divisional Court.

Argument

The purchaser argued that the vendors, in their statement of defence and affidavits in response to the motion, impliedly waived solicitor-client privilege.

The Supreme Court of Canada has held that that a client waives privilege if:

• the client knows of the privilege and voluntarily shows an intention to waive it, or
• fairness and consistency so require.

The first criterion was obviously not met. The lawyer had specifically informed the purchaser that the vendors did not waive privilege. Accordingly, the purchaser relied on the second criterion. It stated that it needed the information to enable it to explore the vendors’ conduct.

But fairness does not support a fishing expedition. And the purchaser could not, through its claim of bad faith, manufacture an implied waiver from the vendors’ mere denial of bad faith.

This case was not similar to prior cases in which a party has a duty to obtain the approval of a third party and, therefore, has to take all reasonable steps in good faith to do so. These cases did not deal with implied waivers of privilege.

Interpretation

Although the court did not need to decide the point, it went further. The purchaser argued that the conditional clause did not allow the lawyer to take the sale price into consideration when opining on the terms of the agreement. The court disagreed. The clause referred to the terms of the agreement and, since price was a term of the agreement, the lawyer had no constraints on the review of all terms of the agreement, including the price. Further the lawyer had no obligation to set out the lawyer’s concerns about the agreement and then allow the purchaser the right to address those concerns. This obligation was not contained in the agreement and the court found no reason to add it to the agreement by implication.

The court dismissed the purchaser’s appeal.

Image courtesy of webandi.

Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.