Court docket upholds solicitor-client privilege in $16.5M actual property deal

An Settlement of Buy and Sale (APS) for an actual property transaction might generally have a situation that enables for assessment of the APS by a lawyer.

Relying on the wording of the situation, the client or vendor (or each) might have a time-limited proper to terminate a transaction if their lawyer just isn’t glad with the phrases of the APS.

If one facet terminates the transaction underneath this situation, the opposite facet might understandably want to know why the celebration’s lawyer beneficial that the situation not be waived. 

Ordinarily, nonetheless, communications between a celebration and their very own lawyer are protected by solicitor-client privilege and should not have to be disclosed.

In 1824120 Ontario Restricted v. Matich, the Ontario Divisional Court docket addressed an attraction of a call upholding a celebration’s refusal to reveal their lawyer’s file in relation to an actual property transaction.

Property sale

The litigation motion arose from a transaction for the sale of 37 acres of land that was once the sellers’ household farm. Two of the sellers have been of their 80s after they have been approached by an actual property agent to promote the farmland. They signed an inventory settlement and finally agreed to promote the property for $16.5 million.

The APS included a lawyer’s approval clause stating: “This Provide is conditional upon the approval of the phrases hereof by the Vendor’s Solicitor.” 

The sellers have been required to provide the client discover in writing inside three days that the situation was fulfilled; in any other case, the supply was null and void. 

Solicitor-client privilege

The situation was expressly acknowledged to be for the advantage of the sellers and could possibly be waived at their sole possibility by discover in writing to the client inside three days.

The sellers retained a lawyer who reviewed the APS. After discussing the APS with their lawyer, the sellers weren’t ready to waive the situation. In an e mail notifying the client’s lawyer that the situation was not waived, the sellers’ lawyer acknowledged that they weren’t waiving solicitor-client privilege.

The client sued, alleging that the sellers had an obligation to train their rights underneath the approval situation moderately, actually and in good religion and that their actions have been the other—unreasonable, dishonest and in unhealthy religion. 

The sellers’ assertion of defence pleaded that they retained an actual property lawyer to assessment the APS in good religion per the approval clause after which determined to not waive the situation.

The client introduced a movement for an order requiring the sellers to supply their attorneys’ file on the idea that they impliedly waived their solicitor-client privilege. The motions decide concluded that privilege had not been waived. 

The client obtained go away to attraction to the Divisional Court docket on the problems regarding privilege and the actual property lawyer’s file. The client argued that the movement decide erred within the software of the authorized rules relating to the implied waiver.

“Quasi-constitutional significance”

Solicitor and shopper privilege in Canada is considered having quasi-constitutional significance to the administration of justice. It’s a precept of basic justice and a cornerstone of the justice system. 

The Supreme Court docket of Canada has acknowledged that solicitor-client privilege “should be as near absolute as doable to make sure public confidence and retain relevance. As such, it is going to yield in solely sure, clearly outlined circumstances.”

Waiver of privilege could also be established the place it’s proven that the possessor of the privilege (i) is aware of of the existence of the privilege and (ii) voluntarily evinces an intention to waive that privilege.

Waiver of solicitor-client privilege

Within the case at hand, the client argued that there was an implied waiver ensuing from the sellers’ acknowledged place that they sought, obtained, and relied upon authorized recommendation in good religion. 

Waiver of privilege might happen within the absence of an intention to waive, the place equity and consistency so require. The client argued that the sellers had crossed the road and that their statements amounted to an implied waiver. 

The Divisional Court docket didn’t agree. Reasonably, the sellers’ pleadings and different statements amounted to saying, in response to an allegation of dishonesty and unhealthy religion regarding using their lawyer’s approval clause, that they took the steps required to train their rights underneath the approval clause, did train that proper, and did so in good religion. 

Within the appellate courtroom’s view, this didn’t quantity to implied waiver over their communications with their lawyer.

It was the client who raised the problem of the sellers appearing in unhealthy religion, and the sellers have been entitled to reply to these allegations with out waiving privilege.

Different arguments

One of many points raised by the client was the revelation that the sellers’ lawyer had obtained a better supply from a 3rd celebration earlier than giving his opinion. 

Nevertheless, whereas the details about receiving one other supply could possibly be utilized by the client within the declare, it didn’t result in a requirement for the sellers to supply their lawyer’s file.

The client additionally argued that the lawyer’s assessment clause didn’t permit for the consideration of different gives as a cause to not waive the situation. Subsequently, the client argued the the reason why the sellers waived the situation have been related. 

Nevertheless, the appellate courtroom didn’t agree because the approval clause within the APS referred to the lawyer’s approval of “phrases” and didn’t expressly exclude the consideration of the agreed-upon value as being one such time period.

Lastly, the client argued that the responsibility of fine religion outlined by the Supreme Court docket of Canada in Bhasin v. Hyrnew required the sellers to reveal the considerations that induced their lawyer to not approve the transaction and provides the client a possibility to deal with these considerations. 

No implied waiver of privilege

The Divisional Court docket famous, nonetheless, that the wording of the approval clause didn’t require such steps. Bhasin requires good religion efficiency of contractual obligations however doesn’t require further obligations to be added to an APS by implication.

The Divisional Court docket, due to this fact, concluded that there was no implied waiver of privilege and dismissed the attraction. The client should still pursue the unhealthy religion argument in opposition to the sellers, however not with the manufacturing of their actual property lawyer’s file. 

The underlying dispute between the events relating to whether or not or not the sellers have been entitled to terminate the transaction stays to be decided on one other day.

James Prepare dinner is a associate at Gardiner Roberts in Toronto and has been with the agency since he articled there in 2002. As a litigator within the agency’s Dispute Decision Group, he has expertise in a broad vary of economic, actual property {and professional} legal responsibility litigation. Telephone 416-865-6628; e mail [email protected]. This text is supplied for academic functions solely and doesn’t essentially mirror the views of Gardiner Roberts LLP.