Canada: The Common Interest Privilege: An Unsung Ally

Last Updated: July 26 2018
Article by Catherine Bourget and Charles Lapointe

Introduction

The common interest privilege can be a useful ally in litigation proceedings or a complex commercial transaction. As its name indicates, it is intended to protect the confidentiality of information exchanged between parties who share a common interest. It can be raised when a person sends a document covered by another privilege to a person with whom the sender has a common interest. Thus, the document in question must initially be covered by either the litigation privilege or professional secrecy in order for the common interest privilege to apply.

The common interest privilege was introduced into English law in 19801 and subsequently introduced and applied in Canadian common law provinces2. It was expressly recognized in Quebec law in the matter of 3312402 Canada inc. v. Accounts Payable Chexs Inc.3 ("Chexs"). The privilege is also applied in connection with commercial transactions, although as we shall see, there was recently some judicial controversy in that regard.

The common interest privilege in Quebec

• The Chexs decision

In Quebec, the Superior Court recognized the application of the common interest privilege in the above-mentioned Chexs decision. Hitherto, the courts had dealt with this privilege indirectly in contexts where another privilege applied or had been waived, but without specifically identifying it4.

In the Chexs case, there were two related files instituted by the same plaintiff against two separate defendants. In one of the files, the plaintiff had asked to examine the lawyer of the defendant in the other file and to obtain a copy of all communications between the two defendants' lawyers. The question the Court had to decide was whether the transmission of privileged documents from one lawyer to the other caused the privilege to be forfeited.

The Court concluded that this common law privilege also applies in Quebec. Regarding the conditions for its application, the court must inquire into the nature of the relationship between the parties in order to ensure that the information or document in question was disclosed on a confidential basis5. It is not necessary that the two parties be represented by the same lawyer6.

The Superior Court concluded that the privilege applied to the communications between the two lawyers in the related files.

• The case law following Chexs

This privilege was subsequently applied in several instances, sometimes specifically by name and other times not.

It has thus been applied as follows in the case law:

  • In order to expand the confidentiality ambit of the litigation privilege to communications between employees and claims adjusters of a company related to one of the parties7.
  • In connection with an access to information request, in order to protect a report prepared by an accounting firm on behalf of one party and disclosed to another party having interests in common with the disclosing party8.
  • To uphold an objection made by Hydro-Québec on the grounds that disclosing a document to the premier of Quebec at the time did not constitute a waiver of the professional secrecy privilege9.
  • To protect exchanges between the defendant parties and their internal and external counsel before the proceedings were even instituted against them10.
  • To uphold objections made by the lawyer for a party during the examination of an expert pursuant to an application to disqualify the latter11.

The scope of application of the common interest privilege is thus fairly broad, and not limited to situations where a document is exchanged between co-defendants.

Application of the common interest privilege to commercial transactions

The common interest privilege can also apply in connection with commercial transactions, although this was recently contested in a controversial case that cast some doubt on the extent of its application in those settings. The Federal Court of Appeal however, in its decision in Iggillis Holdings Inc. v. Canada (National Revenue)12 ("Iggillis"), dispelled those doubts and reaffirmed the application of the privilege in such contexts.

Prior to the Federal Court's 2016 decision in Iggillis, the majority of provincial superior courts in Canada had applied the common interest privilege in commercial matters in accordance with the same criteria used in litigation cases. To the extent that the parties had a common interest in connection with a contemplated transaction, they could then raise this privilege in order to refuse to disclose documents covered by professional secrecy, particularly legal opinions obtained during the due diligence process and sent to a co-contracting party.

In 2016, in the Iggillis case, the Federal Court instead took the view that the transmission of privileged documents during the due diligence process in connection with a commercial transaction constituted, in the majority of instances, a waiver of professional secrecy. It concluded that the common interest privilege in connection with a commercial transaction could apply only in rare and exceptional situations. This was a marked departure from the established case law.

In that matter, the Canada Revenue Agency wanted to obtain a copy of a memorandum prepared by the lawyer of a party to the transaction that had been sent to the lawyer of the sellers. The memorandum, which had been prepared in collaboration with the sellers' lawyer, sought to determine the most advantageous way of proceeding with the transaction from a taxation standpoint.

While the Federal Court determined that the memorandum was a legal opinion initially protected by professional secrecy, it concluded that the benefit of the professional secrecy privilege had been waived by agreeing that the memorandum be disclosed to the sellers' lawyer.

In a unanimous decision, the Federal Court of Appeal overturned the decision at first instance and confirmed that the common interest privilege applies in commercial matters.

The Court found that the analysis of the privileges invoked by the sellers should be done in light of the provincial law applicable to the matter, i.e. that of British Columbia and Alberta. The Court thus concluded that the memorandum was initially covered by professional secrecy and that the common interest privilege applied in each of those provinces, such that it should apply in the case under appeal.

The Federal Court of Appeal also pointed out that this privilege is widely recognized by the courts and doctrinal authorities in other Canadian provinces13. It consequently found that the Federal Court erred in refusing to apply this privilege, broadly recognized in Canada, on the basis of an American decision and American doctrinal opinion14.

Conclusion

Recent case law has confirmed that the common interest privilege applies in Quebec law, including in commercial matters. The privilege applies to the extent that the documents in question were protected by the litigation privilege or professional secrecy before they were sent to the other party. The parties must also prove that the transmission of the documents was done on the basis of a common interest, for example a contemplated commercial transaction, or common defence interests in connection with litigation.

If parties wish to exchange documents protected by the litigation privilege or professional secrecy, they should consider signing an agreement identifying the documents to be exchanged and specifying that the common interest privilege applies to them. Such an agreement is not necessary for the privilege to apply however.

Footnotes

1 Buttes Gas and Oil Co. v. Hammer (No. 3) [[1980] 3 All E.R. 475 (C.A.); appeal allowed on other grounds [1982] A.C. 888, [1981] 3 All E.R. 616 (H.L.).:

"The privilege applies where a person sends a document which is privileged in his hands to another who has a common interest in the receipt of the privileged document. In such circumstances, the document will be privileged in the hands of the recipient so that he can neither be required to produce it on a witness summons in the litigation to which the sender of the document is party nor in subsequent litigation he may be involved in as a party himself."

2 R. v. YBM Magnex International Inc., [2000] A.J. No. 1231 (Alta C.A.); General Accident Assurance Company v. Chrusz, 1999 CanLII 7320 (ON CA), [1999] 45 O.R. (3d) 321 (Ont. C.A.); Hospitality Corp. of Manitoba Inc. v. American Home Assurance Co., [2002] M.J. No. 479 (Man. Q.B.); Supercom of California Ltd. v. Sovereign General Insurance Co., [1998] O.R. (3d) 597 (Ont. Gen. Div.); Lehman v. Insurance Corp. of Ireland, [1984] 1 W.W.R. 615 (Man. Q.B.).

3 [2005] R.J.Q. 2343 (S.C.)

4 Bergeron v. Jung, 2000 CanLII 18101 (QC CS) and Axor Construction Canada Inc. v. McCormick Rankin Corp, REJB 2003-45465 (S.C.)

5 [2005] R.J.Q. 2343 (S.C.) para. 36

6 [2005] R.J.Q. 2343 (S.C.) para. 35

7 Groupe Intersand Canada inc. v. Schenker du Canada ltée (Schenker International), 2013 QCCS 1444

8 Groupe TVA Inc. v. Investissement Québec, 2014 QCCAI 41

9 Hydro-Québec v. Churchill Falls (Labrador) Corporation Ltd, 2014 QCCS 3969

10 Evidence of the start of the period when litigation was apprehended was submitted to the judge at the hearing: Lalande v. Compagnie d'arrimage de Québec ltée, 2017 QCCS 2622, application for leave to appeal granted. The appeal did not concern this aspect, however.

11 Sopropharm c. Jean-Coutu (PJC) inc. 2017 QCCS 1935, application for leave to appeal denied 2017 QCCA 1883.

12 Iggillis Holdings Inc. v. Canada (National Revenue), 2018 FCA 51

13 See in this regard paras. 38 and 40 of the decision.

14 Para. 40 of the decision

This article is a modified version of an article published in French by Éditions Yvon Blais in May 2018 (EYB2018REP2471).

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.

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