Law Times

Law Times • January 14, 2019 Page 11 www.lawtimesnews.com SCC ruling on common interest privilege welcomed BY JULIUS MELNITZER For Law Times W ith its denial of the Crown's applica- tion for leave to appeal in Minister of National Revenue v. Iggillis Holdings Inc., et al., a tax case, the Supreme Court of Canada has restored normalcy to the law regarding common interest privilege, say lawyers. For at least a decade, Canada's transactional lawyers have been operating under the assumption that confidential information al- ready protected by privilege that they had agreed to share with colleagues on the other side of a deal or with others who had a common interest, would not lose its privileged status. Then came the lengthy, rea- soned 2016 Federal Court judg- ment from Justice Peter Annis, who refused to recognize CIP in the transactional context. On application by the Canada Revenue Agency, he ruled that privilege had been waived and or- dered production of a legal mem- orandum addressed to the tax implications of a sale transaction. "That was a shock because it was contrary to existing case law and created enormous uncer- tainty about sharing privileged opinions with the other side in a deal," says Jeff Galway, a partner with Blake, Cassels & Graydon LLP's Toronto office, who was not involved in the case. The Federal Court of Appeal saw it differently, reaffirming and clarifying the traditional view of parties' ability to share privileged communications in order to advance a commercial transaction. "Everybody across the coun- try was waiting for this decision, because if Annis' ruling had been upheld, it would have changed the practice around how deals are done," says Joel Nitikman, a partner in the tax group in Den- tons Canada LLP's Vancouver office, who represented Iggilis. "It certainly would have severely restricted discussions between deal lawyers on tax issues." Had Iggillis been decided differently, perhaps the only way to protect privilege in the deal context would have been to have all the clients involved sign joint retainers with all the lawyers retained. "That's the opposite of what the practice is now, where each party has a separate team," ex- plains Nitikman. "In any case, I don't know how the joint re- tainer approach would work, because the duties of loyalty and full disclosure would apply even if the lawyers were giving differ- ent advice to different clients." As it turns out, the FCA's rea- sons may extend CIP further than any Canadian court has taken it before. "Iggillis is the broadest state- ment of common interest privi- lege yet, because the Federal Court of Appeal has extended its application from pure com- mercial cases — where the legal opinions in issue tend to deal with such matters as good title to property or how to handle litiga- tion — to the tax law context," says David Outerbridge, a partner in litigation at Torys LLP in Toronto. Because the FCA's reasons are such a strong endorsement of the doctrine in the commercial con- text generally, CIP may now go as far as protecting communi- cations in the lobbying context, where companies are pursuing common interests by joining forces to seek legislative or rule changes that benefit them. "The public interest pro- tected in the transaction context is the interest in getting trans- actions done," says Alexander Cobb, a commercial litigator at Osler, Hoskin & Harcourt LLP in Toronto. "But the public inter- est in ensuring that lawmakers have the benefit of a thought-out analysis from their constituents is probably worthy of equal pro- tection." Caution, however, will still be the order of the day in cross- border transactions involving American jurisdictions, where the law on CIP differs from state to state, says Outerbridge. "Counsel, particularly those involved in commercial trans- actions, should understand the very important distinctions be- tween our laws on this issue," says Dalton McGrath, a partner in Blakes' Calgary office. Generally speaking, disclo- sure of communications protect- ed by solicitor-client privilege to a third party results in a waiver of the privilege. The CIP doctrine, an exception to the waiver rule, seeks to avoid that result where parties have the same interests, share common goals, or are seek- ing similar remedies. "Common interest privilege agreements are intended to en- able parties to communicate frankly between themselves without waiving a privilege that any one of the parties may enjoy," says McGrath. Historically, common inter- est privilege applies to the shar- ing of information that takes place for the purpose of (or in contemplation of ) litigation, arbitration or dispute resolu- tion proceedings. But Canadian courts have taken it further. "Some Canadian cases have entrenched that protection in the commercial context in order to allow parties to pursue similar common interests in commer- cial transactions," says McGrath. The British Columbia Court of Appeal's decision in Maxi- mum Ventures Inc. v. De Graaf in 2007 is generally regarded as having set the tone for Canadi- an courts. The court ruled that where sufficient commonality exists, the privilege applies even in the absence of actual or con- templated litigation. "Other Canadian cases have echoed that view," says McGrath. But the law can be different in the United States. While some federal courts of appeal have taken a position similar to the Canadian one, most U.S. courts have applied the privilege only where the shared communications relate to pend- ing or anticipated litigation, says FOCUS © 2018 Thomson Reuters Canada Limited 00255HK-94640-NK Your portable source for fully annotated municipal legislation Print + ProView eBook Order #L7798-8511BE-65203 $167 Softcover + eBook approx. 1300 pages December 2018 978-0-7798-8511-4 Annual volumes supplied on standing order subscription Multiple copy discounts available ProView eBook only Order #A00406-19ON-65203 $139 Print only Order #L7798-8511-65203 $139 Shipping and handling are extra. Price(s) subject to change without notice and subject to applicable taxes. For many years, Ontario municipalities, municipal officers, and lawyers have relied on annual editions of Ontario Municipal Law: A User's Manual for answers to complex issues. 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