Summaries Sunday: OnPoint Legal Research

One Sunday each month OnPoint Legal Research provides Slaw with an extended summary of, and counsel’s commentary on, an important case from the British Columbia, Alberta, or Ontario court of appeal.

H.M.B. Holdings Limited v. Replay Resorts Inc., 2018 BCCA 263

AREAS OF LAW:  Practice & procedure; Solicitor-client privilege; Implied waiver; Abuse of process

~ A party must “voluntarily inject into the litigation” legal advice it received for there to be an implied waiver of privilege regarding that advice. ~

BACKGROUND:

The Appellant, H.M.B. Holdings Limited (“HMB”), is the former owner of the Half Moon Bay Resort in Antigua and Barbuda. That nation’s government expropriated the property in 2002. HMB has been attempting to obtain compensation for this for fifteen years. In May 2014, the Judicial Committee of the Privy Council ordered the government to pay USD $26.6 million plus interest in compensation. After this order was made, the government sold the property to the Respondent Freetown Destination Resort Limited for around USD $23 million. Freetown then made some payments to HMB. In October 2016, HMB commenced two actions in the BC Supreme Court. The first was against the Attorney General of Antigua and Barbuda, to enforce the remaining balance of the judgment. The second was against the Respondent Replay Resorts Inc., a BC affiliate of Freetown, seeking the equitable remedy of a Norwich order to obtain information from Replay in connection with the action against the Antiguan government. In March 2017, HMB filed a notice of civil claim in BC Supreme Court against the Respondents, based on an allegation of civil conspiracy between them and the Antiguan government. HMB indicated that it did this to preserve a limitation period, and had not yet decided whether it would proceed. In April 2017, HMB obtained ex parte orders in Florida and New York, compelling third parties to disclose confidential information relating to Replay. The Respondents characterized the conspiracy claim as an abuse of process, and filed an application to strike it at the same time they filed their response to civil claim and counterclaim against HMB and its Managing Director, the Appellant Natalia Querard. In support of their application to strike, the Respondents filed an affidavit with 193 pages of exhibits. On September 15, 2017, HMB applied to cross-examine the affiant. The same day, the Respondents filed an application seeking a declaration that HMB had waived privilege over documents and communications relating to the possible conspiracy claim, any limitation issue associated with the claim, and the use of a payment Freetown made into First Caribbean International Bank on December 23, 2015. These applications form the basis of this appeal. The chambers judge found that HMB had waived privilege over its consideration of a potential claim when Ms. Querard put on the record that she was compelled to file the action out of concern about the limitation period. In the chambers judge’s view this put her state of mind at issue. By justifying HMB’s conduct, Ms. Querard also voluntarily placed its mind at issue as to its consideration of the claim. The timing of the claim being filed was relevant to whether they had a claim and when, and this amounted to a legal question that the Appellants put into issue as a defence to the alleged abuse of process. The chambers judge also found that HMB had waived privilege over the question of the payment into First Caribbean because it had proffered a statement made by an Antigua solicitor regarding that payment. The judge went on to find no significant contradictions in the affidavit evidence that would justify the order the Appellants sought, for cross-examination of the affiant.

APPELLATE DECISION:

The appeal was allowed. The Court of Appeal noted that in Soprema Inc. v. Wolrige Mahon LLP, it held that a party must “voluntarily inject into the litigation” legal advice it received for there to be an implied waiver of privilege regarding that advice. This would normally require a pleading of reliance on legal advice. In the absence of pleadings, evidence or argument asserting reliance on legal advice, the trial judge’s invocation of fairness and consistency is insufficient to ground waiver. It was an error to conclude that, by asserting it filed the conspiracy claim when it did to protect the limitation period, HMB waived privilege. It was similarly in error to conclude that the inclusion of the Antigua solicitor’s statement resulted in a waiver of privilege regarding the subject matter of that statement. The test applied regarding the application to cross-examine was too strict. There were assertions in the affidavit that were central to the conspiracy claim, whether or not they were central to the application to strike. An assertion of facts was challenged and in issue. The chambers judge also mischaracterized the conflict as to whether HMB’s conduct had caused the Respondents loss and damage.

COUNSEL COMMENTS:

Lincoln Caylor and Jim Schmidt of (Counsel for the Appellants)

“Of the two decisions on appeal, the most interesting is the decision concerning waiver of solicitor-client privilege.

Since the early 1980s, there have been a large, possibly disproportionately large, number of decisions in the British Columbia courts about whether a party has impliedly waived privilege. The circumstances under which privilege can be impliedly waived vary but include where a party points to legal advice received as a justification for their conduct or disputes the competence of their legal advisors (these examples are taken from Soprema Inc. v. Wolrige Mahon LLP, 2016 BCCA 471 [Soprema] at para 29).

It is probably fair to say that British Columbia courts, both at the chambers and appellate levels, have been generally receptive to arguments that a party has impliedly waived privilege.

At the same time, the Supreme Court of Canada has elevated solicitor-client privilege to the most highly-protected of class privileges; it has disapproved of the practice of attempting to balance competing interests against the privilege on a case-by-case basis. See for example the discussion in Lizotte v. Aviva Insurance Company, 2016 SCC 52.

These streams of authority have never been adequately reconciled, although an attempt to do this was made in Soprema.

In the HMB decision, the Court affirmed the approach, or the tentative approach, in Soprema, which is to recognize that the authority from the Supreme Court of Canada on the “near absolute protection” to be afforded solicitor-client privilege must control the analysis as to whether a party should be considered to have impliedly waived the privilege.

Another aspect of the decision that merits comment is that the judge at first instance made the declaration of waiver without considering her jurisdictional basis to make such an order, especially at a very early stage in the litigation and in the absence of discovery having been given by any party. In those circumstances, none of the Supreme Court Civil Rules gave the judge the power to declare there had been a waiver.

The Court of Appeal clearly disapproved of the application having been brought on, and given effect to, at such an early procedural stage.

As to the judge’s jurisdiction to make the declaration of implied waiver, the Court commented that while a chambers judge has a broad inherent jurisdiction to make a declaration of waiver, it would only be in a rare and limited case that the approach taken by the judge at first instance here should be followed.”