In the recent decision in Soprema Inc. v. Wolrige Mahon LLP, 2016 BCCA 471, the British Columbia Court of Appeal confirmed the status of solicitor-client privilege as “nearly absolute” and clarified the test for determining whether a party has impliedly waived of solicitor-client privilege by making its state of mind a material issue in an action.
Soprema commenced an action against Wolrige Mahon LLP (“Wolrige”) claiming that Wolrige had made false representations about the accuracy of financial statements Soprema had relied on in deciding whether to exercise an option to purchase shares. Wolrige brought an interlocutory application seeking production of some of Soprema’s privileged documents, claiming Soprema had waived privilege over these by putting its state of mind at issue in the action. The chambers judge found that a waiver of privilege will be implied where a party has put its state of mind in issue in a manner that makes the privileged communications highly relevant to that state of mind, and where fairness and consistency require disclosure. He concluded that Soprema’s pleadings put its state of mind in issue because to succeed in its negligent representation claim it must have relied reasonably on the alleged misrepresentations and therefore Soprema’s understanding of its legal position was relevant to the issue of whether its reliance was reasonable. The chambers judge also found that Soprema would have an unfair litigation advantage if Wolrige had to defend the reliance claim without access to the privileged communications. As a result, the chambers judge ordered production of several categories of privileged communications between Soprema and its in-house and external counsel.
Soprema successfully appealed this decision. The Court of Appeal found that the test the chambers judge relied on did “not adequately give effect to the near absolute protection of solicitor-client privilege mandated by the Supreme Court” of Canada. The Court of Appeal held that waiver does not occur simply because a party’s state of mind as to its understanding of its legal position or advice it received was relevant to a material issue; if this were sufficient for waiver, the protection of solicitor-client privilege would be at risk any time a case involved reasonable reliance. The Court of Appeal found that before waiver can be implied, a party must voluntarily put into issue legal advice or its understanding of the law. In the circumstances, Soprema had not voluntarily put its understanding of its legal position in issue based on its pleadings.
In its decision, the Court of Appeal confirmed the importance of solicitor-client privilege and that it “must be as close as absolute as possible to ensure public confidence and retain relevance”. The Court recognized that it is inevitable that upholding privilege where legal advice may have influenced a party’s state of mind will give a litigation advantage to the party claiming privilege because the other side will not have access to potentially relevant information about that party’s state of mind. However, it found this advantage is not unfair because it arises from the protection of a fundamental principle of the legal system.
With thanks to articling student Rochelle Collette for her assistance.