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SOLICITOR-CLIENT PRIVILEGE CAN BE LOST!

ONCA FINDS “DEEMED WAIVER” IN SUBSTANCE OF PLEADINGS

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Solicitor-client privilege generally entitles clients to seek and obtain legal advice without fear that those communications will later be disclosed – a foundational doctrine in the Canadian legal system.

However, a recent case from the Ontario Court of Appeal (“ONCA”) shows that in some cases, privilege may be lost where a party relies on its understanding of its legal position in its court pleadings – even without expressly referring to the legal advice it has received.

We review that case – One York Street Inc. v. 2360083 Ontario Limited, 2026 ONCA 176 – below.

One York Street - Background

The dispute arose out of a commercial lease for premises in a Toronto shopping centre between One York Street Inc. (the “Landlord”) and two corporations operating a chain of supermarkets (the “Tenants”). When the Tenants fell into arrears, the Landlord commenced an action for unpaid rent and damages.

In their original statement of defence and counterclaim (“Original Pleadings”), the Tenants alleged that they had signed the lease in reliance on misrepresentations by the Landlord, including regarding foot traffic at the shopping centre. The Original Pleadings also stated they “did not understand the ramifications” of the lease extension and signed it “without legal advice” (although this was untrue).

After the Landlord sought production of documents related to the Tenants’ legal advice in relation to the lease (the “Legal Advice”), the Tenants refused on the basis of solicitor-client privilege and amended their pleadings by removing references to their lack of understanding of the lease and the absence of legal advice (the “Amended Pleadings”).

On the Landlord’s motion to produce the Legal Advice, the motion judge found that solicitor-client privilege had been waived. However, that decision was reversed at the Divisional Court, partially based on a finding that the motion judge relied on the Original Pleadings. The Landlord then appealed to the ONCA.

ONCA Decision – Implicit Waiver

At the ONCA, the Court held that (1) the motion judge had considered the Amended Pleadings, and (2) those pleadings still placed the Tenants’ understanding of their legal position in issue, resulting in a deemed waiver of privilege over the Legal Advice.

The ONCA held that the Tenants continued to rely on their understanding of their legal position in the Amended Pleadings as the misrepresentations in question were not merely factual but specifically pleaded as legal “guarantees” made by the Landlord.

In reaching that conclusion, the Court drew an important distinction between putting a party’s state of mind at issue generally and putting in issue one’s state of mind regarding one’s understanding of its legal position. The former, which might arise in many allegations of negligent misrepresentation, does not amount to a deemed (implied) waiver of privilege. However, in the latter case, it is unfair to permit a party to use their past legal understanding as a “sword”, while shielding the communications relevant to testing that position.

Takeaways

The One York Street decision highlights the importance of carefully framing pleadings. In tax, customs, and trade disputes, where candid legal advice is critical, inadvertently placing that advice in issue may result in the implicit loss of solicitor-client privilege. Best have Experienced Counsel involved early.

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