Law Times

Page 12 January 14, 2019 • Law Times www.lawtimesnews.com Gavin MacKenzie of MacKenzie Barristers in Toronto. Somewhat ironically, it was a decision of the New York Court of Appeals that led to An- nis' refusal to recognize CIP in Iggilis. The decision, Ambac Assurance Corp v. Country- wide Home Loans Inc., arose in the context of a merger be- tween Countrywide and Ambac Assurance in 2008. The transac- tion featured a common interest agreement intended to protect communications between the companies regarding matters affecting the merger, including documents relating to employee benefit plans and legal advice on tax issues. Ambac had insured some of Countrywide's residential mort- gage-backed securities. When the securities failed during the financial crisis, Ambac sued, alleging that Countrywide had fraudulently misrepresented the loans' quality. Ambac also sued Bank of America as the succes- sor to Countrywide. Bank of America claimed that certain communications between itself and Countryside were protected by attorney- client privilege because they related to a number of legal is- sues the companies needed to resolve jointly in pursuance of the merger. Ambac countered that the voluntary sharing of the confidential material waived the attorney-client privilege. Two lower courts upheld the privilege, but the Court of Ap- peals reversed, noting that New York precedent had for over two decades required "pend- ing or reasonably anticipated litigation" as a pre-condition to invoking CIP. "As an exception to the gen- eral rule that communications made in the presence of or to a third party are not protected by the attorney-client privilege our current formulation of the com- mon interest doctrine is limited to situations where the benefit and the necessity of shared com- munications are at their highest, and the potential for misuse is minimal," the court stated. As the court saw it, the com- mercial context, which differed markedly from the litigation context, did not meet these criteria. "When two or more parties are engaged in or reasonably anticipate litigation in which they share a common legal in- terest, the threat of mandatory disclosure may chill the parties' exchange of privileged informa- tion and therefore thwart any desire to coordinate legal strat- egy," the court stated. "In that situation, the common interest doctrine promotes candor that may otherwise have been inhib- ited. The same cannot be said of clients who share a common legal interest in a commercial transaction or other common problem but do not reasonably anticipate litigation." MacKenzie also points out that U.S. courts are much less likely to imply that a common interest privilege exists. "Courts in many states are not inclined to apply the privi- lege unless it has been evidenced by a formal agreement that in- cludes reference to the privileged communications and to the fact that there is no intent to waive the privilege by virtue of the documents' disclosure to the parties involved," he says. LT are commercially rational," says Steeves. "And I think that's quite favourable to taxpayers." So is Owen's ruling that BEPS forms no part of Canadian tax law. "The court was clear that the ITA looks to the legal rights and obligations that contracts have created, not some sort of amorphous economic analysis as to who's managing risk and performing value-adding activi- ties," says Suarez. "BEPS may be great econom- ics, but it's not in our statute, and departing into that netherworld would leave us quite unsure of where we are." However that may be, the 700 pages of concluding arguments filed with the TCC in the $2.1 billion dispute could well mark a new era of complexity for corpo- rate tax litigation in Canada. In June 2016, the Liberal gov- ernment increased the budget for the historically underfunded the CRA by about $90 million annu- ally over the next five years. The CRA promptly claimed that its half-billion dollar bonanza would yield $2.6 billion in recovered tax- es through increased targetting of tax havens, stepped-up audits of large foreign transfers of money, and more intense investigation of consultants selling shelters. In pursuit of that objective, the agency hired 100 new auditors, increased its audits of high-risk taxpayers fivefold to 3,000 annu- ally from 600, and ramped up its review of tax shelters tenfold to include 200 promoters a year. The stakes also keep increas- ing. Some fifteen years ago, Can- ada's largest tax disputes were in the $200 million range. "Now we're seeing billion- dollar cases docketed or in the works," says Jacques Bernier, a partner in Baker & McKenzie LLP's Toronto office. "Cases involving at least $100 million are becoming routine enough so that four weeks of trial is not uncommon." LT FOCUS Continued from page 10 Continued from page 11 Stakes increasing U.S. courts can be different Joel Nitikman says a recent Supreme Court of Canada ruling was highly anticipated across the country, due to its implications. Al Meghji says a recent decision at the Tax Court of Canada 'affirmed that principles that have informed Canadian tax law for decades are still a fundamental part of our system.' The Canadian Lawyer InHouse Innovatio Awards is the pre-eminent award program recognizing innovation by members of the in-house bar within the Canadian legal market. These awards celebrate in-house counsel, both individuals and teams, who show leadership by becoming more efficient, innovative and creative in meeting the needs of their organizations. The Innovatio awards program draws on a panel of in-house counsel judges to determine the winners, based on a range of criteria. NOMINATIONS NOW OPEN NOMINATE AN INDIVIDUAL OR TEAM IN THE FOLLOWING CATEGORIES: • Law department leadership • Law department management • Legal operations • Diversity • Best practices in compliance systems • In-house M&A/Dealmakers • Working with external counsel • Litigation management • Risk management • Tomorrow's leader in innovation Accepting nominations from large, small and public sector/non-profit legal departments. NOMINATIONS CLOSE MARCH 29, 2019 For more information or to nominate visit www.innovatio-awards.com SAVE THE DATE September 26th | Arcadian Court, Toronto Questions? Contact Jennifer Brown | jen.brown@tr.com THE E B O L G AND MAIL SIGNATURE SPONSOR BRONZE SPONSOR MEDIA PARTNER GOLD SPONSOR PLATINUM SPONSOR COCKTAIL SPONSOR Untitled-1 1 2019-01-11 12:27 PM

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