Common Interest: Litigation context – Ordinarily, the protection of solicitor-client privilege is considered waived when a lawyer, with the client’s authorization, discloses privileged information to outsiders. However, if litigants have a common interest that makes it beneficial for them to share privileged information, the waiver will not be assumed.
In Canada, any privileged information shared between parties who have a “common interest” will continue to be protected by solicitor-client privilege.
The general principle was first described in the often cited case Buttes Gas & Oil v. Hammer (#3).8 In that case, Lord Denning found that the adversarial system would benefit when parties who seek a common outcome or share a common, but not necessarily identical, goal, could unify in their “selfsame interest”.
When a third party has a common interest in the subject matter of a privileged communication between a litigant and the litigant’s solicitor, the communication may be shared with the third party without being considered a waiver of the privilege. To qualify as a third party with a common interest:9 it is not necessary to establish a particular kind of relationship, as long as the relationship is one created by joint interest: “the courts should, for the purpose of discovery, treat all the persons interested as if they were partners in a single firm or departments in a single company. Each can avail himself of the privilege in aid of litigation.”10
Common Interest: Commercial context – Originally, the extension of solicitor-client privilege to parties with a “common interest” was applied only in the context of litigation. It has since been expanded in Canada to apply to some commercial transactions “in the corporate family.”11 The rationale underlying the “common interest exception” in litigation is the promotion of the proper functioning of the adversarial system. In the context of commercial transactions, the philosophical underpinning is different: the parties’ common interest in the successful and efficient completion of a financial transaction is recognized as a benefit to them, and to the economy and society as a whole.
The mere existence of a commercial transaction is not, however, sufficient to insulate all shared solicitor-client communications. In some cases, the circumstances will suggest that there has indeed been a loss or waiver of privilege. Cases have said that a merger or other business transaction that shows a clear adverse interest between the parties is an example of a commercial transaction in which the necessary spirit of sharing for a greater common interest does not exist. On the other hand, courts have held that in many commercial transactions, the parties will want to negotiate on the footing of a shared understanding of each other's legal position and that the expectation, whether express or implied, will be that the opinions are in aid of the completion of the transaction and, in that sense, are for the benefit of all parties to it.12
For the “common interest exception to operate and extend solicitor-client privilege to a third party, the intention of the parties exchanging information must be clearly voluntary and in contemplation of a shared benefit.”13
A signed agreement between the parties, outlining their common commercial interest and their intention to protect privileged communications which they will share, may serve to provide important evidence of these intentions.
Is the “common interest” privilege” exception the same in the U.S. as it is in Canada? – In the United States, the “common interest exception” to solicitor-client privilege applies only in litigation matters. In the Third Circuit Court of Appeal decision, In re Teleglobe Communications Corp.14, the court found that the common interest privilege takes effect “when clients with separate attorneys share otherwise privileged information in order to coordinate their legal activities” in the context of litigation.15 This is consistent with the U.S. Uniform Rule of Evidence section 502(b)(3), which requires that there be actual pending action before the common interest defence against the waiver of privilege can be utilized. 16
As noted above, in Canada, courts have extended the “common interest exception” to some commercial transactions. A Canadian court has been willing to apply the common interest privilege in the context of a cross-border commercial transaction. In the British Columbia Supreme Court 2002 decision, Fraser Milner Casgrain LLP v. Minister of National Revenue,17 the court applied the common interest exception to communications between parties in both Canada and the United States, explaining that “[i]t is the parties’ common interest in the successful completion of the transaction that is the element that gives rise to the privilege. The rationale is the preservation of confidentiality.”18 The trans-border nature of these communications did not factor into the court’s decision.
The “joint retainer” – Joint privilege is recognized in both Canada and the United States and refers to the situation where one lawyer represents multiple clients in a matter.
In conducting cross-border transactions, privileged communications ought to be clearly marked as such and communicated only through a jointly-retained counsel to attract the protection of “joint privilege”.
Disclosure outside a joint retainer would constitute a waiver of solicitor-client privilege in the United States, so care must be taken to direct communications through protected channels.
Footnotes