The author expresses his appreciation to Colin Holland, student-at-law, for his assistance with this paper.
In Canada, as in the United States, joint defence agreements ("JDAs") assist in coordinating a united front of defendants and extending common interest privilege to shared documents. There are, however, some small differences in the practical application of JDAs. This paper will provide an overview of Canadian practices and jurisprudence with respect to JDAs, highlighting the similarities and differences between Canadian and American law in this area.
I begin by providing an overview and comparison of common interest privilege in the two countries. I then discuss some of the practical considerations in drafting JDAs and provide some examples of how Canadian jurisprudence has shaped the use of JDAs.
Common Interest Privilege in Canada
There is substantial overlap in how JDAs operate in Canada and the United States. In both countries, a JDA is essentially an agreement of non-waiver of privilege. A communication made to a defendant outside of a lawyer-client relationship (usually referred to as "solicitor-client relationship" in Canada), where the communication is defined by a JDA as privileged, will not waive the document's underlying privilege. There is no distinct "joint defence privilege"; rather, JDAs permits communication between multiple parties and their counsel about common concerns while maintaining the existing privilege—either solicitor-client or litigation—of those communications. This is referred to Canada, as in the United States, as "common interest privilege."
The doctrine of common interest privilege was first enunciated in the Commonwealth in the 1980 English case, Buttes Gas and Oil Co v Hammer and others,1 in which Lord Denning stated:
There is a privilege which may be called a "common interest" privilege. That is a privilege in aid of anticipated litigation in which several persons have a common interest. It often happens in litigation that a plaintiff or defendant has other persons standing alongside him who have the selfsame interest as he and who may have consulted lawyers on the selfsame points as he but who have not been made parties to the action. [...]
In all such cases I think the courts should, for the purpose of discovery, treat all the persons interested as if they were partners in a single firm or departments in a single recovery. Each can avail himself of the privilege in aid of litigation. Each can collect information for the use of his or the other's legal adviser.
It is now well recognized that common interest privilege applies when (1) the originating communication is privileged in the first place and (2) where there is a common (or "selfsame") interest between the parties seeking the privilege. Once there is deemed common interest privilege, the privilege becomes that of all the parties to whom the privileged information is disclosed.2 Where communications consist of both privileged and non-privileged communications, common interest privilege will only extend to the privileged communications.3
What Constitutes a Common Interest?
Originally, Canadian courts set out a fairly strict threshold for establishing the existence of a "common interest". The more recent jurisprudence has elaborated a more relaxed standard.
In 1995, in Canadian Pacific Ltd v Canada (Director of Investigation and Research),4 the Ontario Court of Justice defined a common interest as an interest where it would be "reasonably possible for the same counsel to represent both [parties]" without a conflict of interest.5 The Court held that in order for information to remain protected, a third party receiving it must be on a "need to know" basis.6
This was followed in 1998 by the ruling by the Ontario Court (General Division) in Supercom of California v Sovereign General Insurance Co.7, in which the Court held that there was no common interest privilege, despite the fact that the defendants held a common interest in litigation:
[T]here are four or five different insurers representing the various defendants and third parties. They provide a united front to attempt to deny the plaintiff's claim. However, if the insurance policy is in force, they are battling each other to see which insurer is responsible for the plaintiff's loss. Not far beneath the surface veneer in this case are a series of insurers adverse in interest to each other. I conclude that the requisite dynamic of a shared, common front, or interest fundamental to a finding of common interest privilege is not present in the facts of this case.
These rulings suggested that common interest privilege could not generally be established in any situation where contingent claims might arise amongst the defendants.8
However, Canadian courts have relaxed the requirements in more recent cases. In 1999, the Ontario Superior Court9 adopted the US Court of Appeals, District of Columbia Cirit, view of common interest privilege, as set out in United States of America v American Telephone and Telegraph Company:10
"[C]ommon interests" should not be construed as narrowly limited to co-parties. So long as the transferor and transferee anticipate litigation against a common adversary on the same issue or issues, they have strong common interest in sharing the fruit of the trial preparation efforts.
In the same year, in Almecon Industries Ltd v Anchortek Ltd,11 the Federal Court of Canada held that parties seeking to establish common interest privilege did not need to be represented by the same counsel, nor was the possibility that the parties might become adverse at some point be sufficient to deny the existence of common interest privilege.12
In a similar vein, the Saskatchewan Court of Queen's Bench extended common interest privilege to situations when the interest shared between the defendants was "parallel [...] in varying degrees."13
Finally, in 2001, the Ontario Superior Court in CC&L Dedicated Enterprise Fund (Trustee of) v Fisherman14 emphasized the public policy benefits of a broad definition of common interest as follows:
Complex litigation [...] requires that the parties and their counsel be able to share information and show their position to some but not all of the participants. This facilitates the refining and reduction of issues, achieves economy in research and expenses, is supportive of possible settlements or compromises and enables the litigation to progress with fairness and timeliness.
It therefore appears that Canadian courts have embraced a relatively liberal view of what is required to successfully establish a common interest.
When Does Adversity of Interest Break Common Interest Privilege?
There is no clearly defined standard in Canada as to what degree of adversity of interest will break common interest privilege. Clearly, some degree of adversity is permissible. However, there is general consensus that when parties are strongly adverse, such as to the point of cross-claiming against one another, common interest privilege will lapse.
In R v Dunbar and Logan, the Ontario Court of Appeal held:15
[T]he inapplicability of the privilege where a controversy has arisen between the parties is confined to situations in which the once jointly represented clients have become pitted against each other in litigation. No case was cited to us in which the privilege was held to be destroyed because the clients had a falling out in a proceeding at the suit of a third person. The American authorities appear to have uniformly held that in the latter situation the privilege continues.
There have been some cases where Canadian courts have found common interest privilege applied even where parties bore some adversity in litigation. For example, in Western Canadian Place Ltd v Con-Force Products Ltd,16 the Alberta Court of Queen's Bench held that common interest privilege continued between two co-defendants even though it appeared "that all is not well between [them]."17 Privilege was maintained because it was "equally plain that as against the applicants they shared and still share a common interest."18
However, when a court is satisfied that two parties have become sufficiently "pitted against each other," the common interest privilege comes to an end. An example is the case of Maritime Steel & Foundries Ltd v Whitman Benn & Associates Ltd,19 in which the Supreme Court of Nova Scotia found that common interest privilege was lost when the parties cross-claimed against one another.
Differences Between us and Canadian Common Interest Privilege
There are three notable differences in the application of common interest privilege in Canada as compared to its application in the United States.
a) The need for a formalized agreement
Canadian cases have held that a formalized agreement of the parties' intention to rely on common interest privilege is not necessary. Rather, it is sufficient that co-defendants make communications between themselves in the course preparing a joint defence.20 In contrast, cases in the United States suggest that, at least in certain states, it may be difficult to rely on common interest privilege absent an express agreement.21
b) Disclosure of facts underlying the privilege
In Canada, legal advice and analysis remain the subject of privilege, while the facts underlying these communications are not. Most rules of civil procedure in the Canadian provinces require the representative of a corporation being examined for discovery (the Canadian equivalent of the deposition stage) to provide the corporation's knowledge, information, and belief of any facts relating to any matter at issue. The corporation is generally obliged to disclose these facts, even if they are revealed throughout an investigation process by counsel.22 The same is generally not true in the United States.
c) Discoverability of the JDA
In GMAC Commercial Credit Corp v Lucas,23 the Ontario Superior Court of Justice considered a motion by the plaintiff to obtain production of a JDA. The Court denied, relying on an earlier decision of the Court in Aviaco International Leasing Inc v Boeing Canada Inc,24 which held that JDAs are entered into with a view to sharing information, documentation, and expenses in a united defence, and that common interest privilege extends to the agreements themselves.25
While this issue has not been the subject of much judicial consideration, it appears that there is some precedent for the proposition that the JDA cannot be produced when it is found to have been subject to common interest privilege
This view differs from that expressed in US cases such as Biovail Laboratories Intern SRL v Watson Pharmaceuticals, Inc to the effect that a party may successfully obtain production of a written JDA where it can demonstrate the relevance of the JDA's terms to the facts or issues in dispute.
Practical Considerations in Drafting JDAs in Canada
There exist a number of considerations co-defendants should take into account when drafting a JDA.
In terms of the agreement itself, the JDA should clarify that each party is represented exclusively by its retained counsel, and that no solicitor-client or fiduciary relationship extends beyond the existing relationship pre-agreement. This limits what might otherwise be a significant expansion of a lawyer's ethical duties. Parties may also choose to stipulate remedies in the JDA for breach of privilege and establish a process to allow parties to withdraw from the JDA. The agreements also frequently allow co-defendants to pool discovery, work product, and resources in order to cut expenses, and to coordinate theories, tactics, and arguments.26
Canadian case law on JDAs is limited, but the courts have made some rulings that could impact on whether and how a Canadian JDA is drafted.
a) JDAs and Res Judicata
In Britannia Airways Ltd v Royal Bank27, a plaintiff brought an action in Texas against one defendant, Air Routing, and subsequently in Ontario against another defendant, the Royal Bank of Canada ("RBC"). The actions related to substantially the same matters. A Texas court heard and dismissed the first claim against Air Routing in its entirety. The plaintiff brought a motion for leave to amend its Ontario statement of claim against RBC. RBC brought a cross-motion for an order striking out or dismissing the action on the grounds of cause of action estoppel, a form of res judicata.
The Court held that cause of action estoppel would bar the claims in Ontario against RBC if RBC were found to enjoy privity of interest to the matters raised or which could have been raised in the Texas action.28 The Court also held that privity of interest could be established on the basis of vicarious liability and on the basis that both parties shared an identical interest in the substance and outcome of the first action.29
The Court found that both bases were applicable. In demonstrating why the interests of both parties were identical, the Court relied on the JDA between RBC and Air Routing, which provided RBC with a contractual right to participate in Air Routing's defence of its lawsuit in Texas. Furthermore, the JDA provided a list of non-exhaustive common issues shared between the parties, including the plaintiff's allegation that one or more of the defendants owed an obligation to the plaintiff to validate certain invoices. (One of the claims that the plaintiff brought against RBC in Ontario was that it owed this obligation, which had been breached.)
In Canada, a JDA may therefore provide strong evidence that the parties to it share a privity of interest. The existence of a JDA may therefore be a relevant consideration in advancing a defence of res judicata where two defendants are sued separately but subsequently in relation to the same matter.
b) JDAs and Conflicts of Interest
Simmonds v Prince Edward Island30 concerned a motion by the defendants for a declaration that the plaintiffs' law firm was in a conflict of interest and should be removed as lawyers of record. One of the plaintiffs' lawyers, Mr. Lutz, had been retained earlier by a co-defendant in the same action. The defendants argued that in his previous relationship he had received confidential information from that co-defendant which could be used to gain an unfair advantage in the current action. The Prince Edward Island Trial Division held that to succeed, the moving defendants would have to prove three things: a) the existence of a previous solicitor-client relationship or a "near client relationship" with the current defendants; b) that there was a presumption Mr. Lutz received confidential information from the government defendants via their counsel; and c) that Mr. Lutz owed the Government defendants a duty of confidentiality.31
The Court held that that there was no presumption of an implied duty of confidentiality between one defendant's counsel and other co-defendants. However, the Court held that such presumption would exist where the parties had entered into a JDA with respect to all or part of their case and had shared information for the goal of defeating the plaintiff.32 This suggests that a JDA could arguably create a presumption of a "near client" relationship between a lawyer and co-defendant.
Joint defence agreements operate substantially the same way in both Canada and the US. They act as useful tools for lawyers preparing a united front against a plaintiff, shielding documents and communications created for that purpose. They serve to formalize and ensure the non-waiver of common interest privilege.
Many of the same practical concerns are shared across the border: that a lawyer's ethical duty to one defendant not be extended to all parties to the agreement; that there be clearly defined remedies for breach of the privilege; that expenses and resources be shared; and that parties retain the option to terminate the JDA if necessary.
There are some differences in the two jurisdictions. In Canada, a formal, written agreement is generally not required to create common interest privilege, whereas it appears that in some states common interest privilege may be difficult to assert otherwise. The facts underlying privileged communications in Canada do not generally enjoy the same level of protection as they do in America. Finally, a US plaintiff may be successful in obtaining production of parts of the written JDA, while Canadian defendants would seem to be protected from such relief.
1  2 All ER 475 at 483 (CA)
2 Vancouver Hockey Club Ltd v National Hockey League (1987), 18 BCLR (2d) 91 at paras 8-9 (SC).
3 International Minerals and Chemical Corp (Canada) v Commonwealth (1990), 47 CCLI 196 (Sask QB) [International Minerals].
4  OJ No 4148 (QL)
5 Ibid at para 27.
6 Ibid at para 22. This is similar to the strict standard defined emerging from Leader Technologies, Inc v Facebook, Inc as described by my co-panelist Randy Sellers: "[F]or a communication to be protected, the interests must be 'identical, not similar, and legal, not solely commercial.'"
7 (1998) 37 OR (3d) 597.
8 Randal T Hughes and Jeanne L Pratt, "Limitations on the Protection Afforded to Joint Defendants in Canadian Litigation: Factors to Consider in Joint Defence Arrangements" (Paper delivered at the American Bar Association, Section on Antitrust Law, 5-6 February, 2004).
9 General Accident Assurance Co v Chrusz (1999), 45 OR (3d) 321 (Ont CA)
10 642 F (2d) 1285 at 1299-1300 (1980) (SCCA).
11  1 FCR 507 (TD) [Almecon].
12 Ibid at para 9. This relatively relaxed standard is similar to that described by Sellers as emerging from re Teleglobe Communications Corporation, et al: the common interest element is satisfied if "members of the community of interest [...] share at least substantially similar legal interest."
13 International Minerals, supra note 3 at para 56.
14 6 CPC (5th) 281 at para 32,  CarswellOnt 514, aff'd 149 OAC 337, 55 OR (3d) 794.
15 (1982), 138 DLR (3d) 221 at para 83, 69 CCC (2d) 13 [Dunbar]. Justice Martin referred to the American cases State v Archuleta 217 P 619, 29 NM 25s (1923); Re Grand Jury Subpoena, 406 F Supp 381 at 393-94 (1978) (USDC); People v Abair, 228 P (2d) 336 (1951) (CA); and People v Kor, 277 P (2d) 94 (1955) (CA) to support this proposition.
16 (1997), 50 Alta LR (3d) 131, 202 AR 19 (QB).
17 Ibid at para 25.
19 (1994), 114 DLR (4th) 526 at 535-536.
20 Dunbar, supra note 16; Almecon, supra note 12.
21 See R G Morvillo, "Modernizing Joint Defence Agreements", (1999) NYLJ 3. There is some debate on this, however. See United States v LeCrow, 348 F Supp (2d) 375 at 381 (2004): "Although 'privileges should be narrowly construed and expansions cautiously extended,' [...] courts have held that an oral joint defense agreement may be valid." See also US v Gonzalez, 669 F (3d) 974 at 981 (2012). There is also some debate about the value of written JDAs in states where common interest privilege will clearly apply in the absence of a written agreement. The discoverability of a JDA may make for poor optics to a jury.
22 See Canadian Pacific Ltd v Canada (Competition Act, Director of Investigation and Research),  OJ No 4148 at para 3 (QL): "Merely because facts are recited in a privileged communication does not render the facts as privileged and therefore immune from being revealed in an examination. [...] As a practical matter it would seem that if such facts were to be so produced, there would have to be an expurgated or a reconstructed-sanitized document."
23 2005 CarswellOnt 160 (Westlaw) [GMAC].
24  OJ No 2420.
25 GMAC, supra note 24 at para 6.
26 There is no jurisprudence in Canada on whether a party not involved in an action can be included in a joint defence agreement alongside parties who are involved in an action. However, common interest privilege extends to non-parties so long as their interest in the matter is the same as the litigant, so there is no obvious reason to deny the entrance of a non-party to a JDA. It would seem prudent in this situation, however, to draft the provisions of the agreement to consider the differing positions of each member.
27 5 CPC (6th) 262,  CarswellOnt 1 (WL Can).
28 Ibid at para 51.
29 Ibid at para 57.
30  PESCTD 9,  Carswell PEI 76 (WL Can).
31 Ibid at para 19. The other requirements were establishing (a) a presumption that counsel received confidential information, and (b) that counsel owed the defendant a duty of confidentiality.
32 Ibid at para 38.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.