On March 6, 2018, the Federal Court of Appeal reversed the decision of the Federal Court of Canada in Iggillis Holdings Inc v Canada (National Revenue).
As we discussed in a previous post, the trial court decision in Iggillis Holdings had called into question the availability of common interest privilege in commercial transactions. The trial court found that privilege with respect to a memorandum prepared by purchaser's counsel (with input from seller's counsel) outlining the most tax-efficient way to structure a series of transactions had been waived when it was shared on a confidential basis with the seller.
On appeal, the Federal Court of Appeal noted that transactional common interest privilege is a firmly entrenched principle of Canadian law. Specifically, the Court found that the courts of Alberta and BC (the relevant jurisdictions for the transaction under consideration) recognize that a party to a transaction does not waive privilege by disclosing privileged advice on a confidential basis to another party having a sufficient common interest in the same transaction (at paragraphs 40-41):
These cases and the commentary in The Law of Evidence reinforce the conclusion of the Federal Court judge that common interest privilege "is strongly implanted in Canadian law and indeed around the common-law world" and in particular in Alberta and British Columbia which are the relevant provinces for the definition of solicitor-client privilege in subsection 232(1) of the Income Tax Act, in this case. It was therefore not appropriate for the Federal Court judge to rely on the decision of the New York Court of Appeals to effectively overturn the decisions of the Alberta and British Columbia courts.
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.
With respect to the sufficiency of the common interest, the Court of Appeal noted that, particularly where complex statutes such as the Income Tax Act are at issue, the application of the legislation will be of interest to all of the parties to a transaction and that the sharing of opinions may also lead to efficiencies in completing the transactions.
As noted in our previous blog entry, the trial court decision in Iggillis Holdings was not binding in provincial superior courts, where most commercial cases are litigated and where the courts have consistently recognized common interest privilege in this context. However, this reversal by the Federal Court of Appeal is welcome nonetheless, as it serves to re-establish a consistent approach to common interest privilege across Canada.
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