What's The Deal With Privilege?

Overview

The Federal Court of Canada ("FC") judgment in Minister of National Revenue v. Iggillis Holdings Inc. and Ian Gillis (2016 FC 1352) ("Iggillis") is a recent and important decision concerning common interest privilege ("CIP") - also known as deal/advisory or "allied lawyer" privilege. CIP is likely a misnomer, since it is not a separate privilege, but rather an exception to the general rule that disclosure of otherwise privileged information to a third party results in a waiver of privilege. The CIP exception to waiver is intended to apply when privileged legal advice is shared amongst parties who share a common goal or seek a common outcome (for previous FC authority in a tax context, see Pitney Bowes of Canada Ltd v. R (2003 FCT 214) ("Pitney Bowes")).

While the FC affirmed that deal/advisory CIP was an established component of solicitor-client privilege ("SCP")1 supported by copious case law, it was swayed by a recent academic article and US case, concluding that deal/advisory CIP is contentious because it evolved under a cloud of confusion with joint client privilege ("JCP")2 and litigation privilege.3The FC rejected deal/advisory CIP and adopted a restrictive approach inconsistent with not only with well-established CIP case law, but recent Supreme Court of Canada guidance affirming the quasi-constitutional strength of SCP. It is a perplexing result in the sense that Canadian case law was disregarded in favour of a piece of writing from an American law professor, Grace Giesel, and a US case. While in the short term the FC judgment may have ramifications for transactional work and the free exchange of information between lawyers, the judgment is under appeal to the Federal Court of Appeal ("FCA"), so the last chapter on deal/advisory CIP has yet to be written.

Briefly putting the case in context: the Minister of National Revenue ("Minister") served requirements for information on the respondents pursuant to ss. 231.2(1) of the Income Tax Act (Canada) ("ITA"), which sought copies of a document defined in the judgment as "Abacus Memo" or "Memo" and which the respondents refused to turn over. The refusal to disclose the Abacus Memo led to the Minister bringing a compliance order application. Abacus Capital Corporations Mergers and Acquisitions ("Abacus") intervened and argued the Memo was subject to SCP. The Abacus Memo described the sale of shares of the respondents' corporations (including pre and post sale transaction steps)...