Inadvertent Disclosure of Privileged Materials: Consequences and Best Practices for Counsel

When does the inadvertent disclosure of solicitor-client communications constitute a waiver of privilege? What can you do to prevent inadvertent disclosure of privileged documents and, if (when) it happens, preserve privilege despite the disclosure?

Tension between rules of evidence and the law of privilege

The rules of evidence minimize the risk that a trier of fact relies on untrustworthy evidence.[1] In contrast, the law of privilege prevents a trier of fact from reviewing trustworthy evidence, but only when the disclosure of such evidence would trench on the public interest in preserving relationships underpinned by confidentiality (e.g., the solicitor-client relationship).[2]

In Canada, protective class privilege is recognized for:

• Solicitor-client Privilege: communications between a lawyer and their client for the purpose of obtaining or providing legal advice;[3]
• Litigation Privilege: communications or information for the dominant purpose of preparing for actual or anticipated litigation;[4]
• Settlement Privilege: communications between parties for the purpose of settling a dispute;[5] and
• Confidential Informer Privilege: information about the identity of a confidential informant.[6]

Certain communications are protected as privileged based on statute, including spousal communications[7] and communications with journalistic sources.[8]

Solicitor-client privilege is a “principle of fundamental justice, and a civil right of supreme importance that forms a cornerstone of our judicial system.”[9] As observed in the Royal Commission Inquiry into Civil Rights, “If a lawyer is to give useful legal advice to his client, he must be free to learn the whole of his client’s case.”[10] Solicitor-client privilege limits the evidence that a trier of fact can receive, but that limit is acceptable because it enhances the fairness of our adversarial judicial system.

When is privilege lost?

A common litigation tactic is to review the other party’s list of privileged documents and challenge the privilege asserted over interesting or vulnerable documents. Successful challenges can sometimes give counsel and the trier of fact access to juicy evidence that would otherwise be withheld for privilege.

Privilege belongs to the client and can only be waived by the client.[11] This means that when assessing whether privilege has been lost, the focus of the analysis should not be on whether counsel waived the privilege, but rather on whether the client waived it and whether any person whose conduct purportedly waived the privilege had the authority to do so.[12]

Privilege can be waived voluntarily or by implication in certain circumstances:[13]

• Voluntary waiver of privilege “[i]s ordinarily established where it is shown that the possessor of the privilege (1) knows of the existence of the privilege, and (2) voluntarily evinces an intention to waive that privilege”.[14]
• Implied waiver of privilege may arise in the absence of an intention to waive privilege where “fairness and consistency so require”.[15] For example, if a party relies on legal advice to justify their conduct, waiver of privilege over the legal advice may be implied.[16] Similarly, where a party intentionally discloses part of a privileged communication, the party waives privilege over the whole communication.[17]

When does inadvertent disclosure constitute a waiver of privilege?

Courts look at the specific facts to decide whether an inadvertent disclosure of privileged information should be treated as a waiver. Generally, the question is whether fairness requires treating the mistake as if the client intentionally gave up privilege. The following factors often guide the analysis:[18]

• Circumstances of Disclosure: How did the document come to be shared with the other side? Was it truly accidental or was it deliberate?
• Promptness in Retrieving the Documents: Did the disclosing party act quickly to correct the error, including requesting the return or destruction of the documents?
• Timing of Discovery: When and how did the disclosing party realize the mistake?
• Extent of Awareness: How many people saw the documents, and who were they?
• Fairness to the Other Side: Would letting the disclosing party keep the privileged documents create real or perceived unfairness to the opposing party?
• Fairness of the Judicial Process: Would upholding privilege affect the overall fairness, or appearance of fairness, in the legal proceedings?

Examples where privilege was waived

There are two common examples in which Courts have found that privilege was waived:

• Inconsistent Positions on Privilege: For example, in Land v Kaufman,[19] the Court concluded that privilege had been waived when counsel filed an affidavit to support their client’s motion to withdraw admissions in the statement of claim and, in that affidavit, counsel relied on instructions that the plaintiff later claimed were privileged. The Court found it would be unfair to deny the defendant access to those instructions when they were central to the plaintiff’s attempt to withdraw admissions.
• Deliberate Disclosure with Authority: For example, in Nova Chemicals v CEDA-Reactor,[20] a “Division Manager” gave privileged documents to the opposing party in a meeting. The Court held this was a deliberate act within the manager’s authority, as they were “clearly charged and entrusted with a large measure of ‘damage control’ responsibility” relating to the issues in the litigation”.[21]

Examples where privilege was preserved

There are three common examples in which the Courts have upheld the privilege, concluding that the privileged documents had been inadvertently produced:

• Purely Accidental Disclosure: Privilege remained intact where a lawyer’s correspondence was accidentally included in materials sent to a third-party valuator.[22]
• Unauthorized Disclosure by Staff: Courts have found no waiver when privileged information was mistakenly sent by an employee or assistant who lacked the client’s permission (for example, a receptionist handing over a privileged document by mistake).[23]
• Internal File Management Errors: Privilege was not waived when a plaintiff’s insurer’s investigator unintentionally shared privileged materials with another investigator by failing to keep them in a separate file. The client knew nothing of the error, and it was “pure inadvertence.”[24]

What are the consequences to the party receiving the privileged documents?

If counsel receives inadvertently disclosed privileged material and handles that material in such a way that prejudices the other side, the court may disqualify that counsel. In Chan v Dynasty Executive Suites Ltd.,[25] the court removed plaintiffs’ counsel who refused to return accidentally produced privileged documents. The court emphasized:

1. The disclosure was clearly inadvertent: a law clerk inadvertently included copies of privileged documents that should have been listed on the Schedule B list of privileged documents.
2. The disclosing party immediately tried to retrieve the documents.
3. Maintaining privilege did not unfairly harm the receiving party’s case.[26] The Court noted that this was not a case where a party “had taken positions which would make it inconsistent to maintain the privilege”.[27]

Because plaintiffs’ counsel continued to use the privileged documents, and did not take steps to isolate or remove from the file those who had reviewed the privileged documents, the Court found disqualification was necessary to protect the defendants from prejudice.[28]

Considerations for in-house counsel

Corporations receive legal advice from both their in-house and external counsel. That advice is disclosed to management and, sometimes, the Board of Directors. Maintaining privilege over advice that is shared, sometimes repackaged (think summaries in Board packages), or recorded in otherwise non-privileged minutes can be a challenging task. The best practice is to segregate privileged information, mark it as privileged, clearly state that the summary is privileged, or flag in the minutes that the Board received and discussed privileged legal advice.

This approach of guarding privilege when legal advice is received and discussed becomes even more important in the context of a deal. Deal teams often include external advisors and can require disclosure of privileged information to the potential deal counterparty. While disclosure to third parties normally constitutes a waiver of privilege, if the parties can support a claim for common interest privilege, solicitor-client privilege will be preserved. Papering that common interest privilege properly helps, including through a common interest agreement.[29]

Best practices when privileged communications have been inadvertently disclosed

In the event of an inadvertent disclosure of privileged materials:

• If you are the party who disclosed the privileged information: Notify opposing counsel immediately once you discover that the privileged documents were disclosed. Call counsel and send a written notice asking counsel to return or destroy the privileged documents.[30]
• If you are the recipient of potentially inadvertently disclosed privileged material: Notify the sender immediately and inquire if the documents are in fact privileged. Disclose how much of the privileged material you or your team reviewed and promptly return or destroy the inadvertently disclosed privileged materials.[31] This process is also codified in the Law Society of Ontario Rules of Professional Conduct.[32]
• Generally: Segregate and clearly label privileged information to minimize the chances that it is inadvertently disclosed. In your document production checklist, include a step to confirm that no privileged documents are included in your Schedule A or loadfile. Advise your clients about privilege and the importance of preserving it.

Waiver of privilege engages counsel’s professional obligations at every step, from managing the privileged information in a manner to preserve privilege, to challenging privilege improperly claimed, to returning privileged information inadvertently received.

 

[1] Sopinka, Lederman & Bryant: The Law of Evidence in Canada, 6th Ed. (Lederman, Fuerst, Stewart) Chapter 14 Privilege; § 14.01 Introduction; Evidence: Principles and Problems, 13^th Ed. (Stuart, Tanovich, Dufraimont) Privilege at p. 666.

[2] The Law of Evidence in Canada, Chapter 14 Privilege, § 14.01 Introduction.

[3] R. v McClure, 2001 SCC 14 at para 28.

[4] Lizotte v Aviva Insurance Company of Canada, 2016 SCC 52 at paras 34 and 36.

[5] Sable Offshore Energy Inc. v Ameron International Corp., 2013 SCC 37 at para 12.

[6] R. v Basi, 2009 SCC 52 at para 22; R. v Durham Regional Crime Stoppers Inc., 2017 SCC 45 at para 14.

[7] Canada Evidence Act, R.S.C., 1985, c. C-5, s. 4(3). 

[8] Canada Evidence Act, R.S.C., 1985, c. C-5, s. 39.1(2). 

[9] The Law of Evidence in Canada, Chapter 14 Privilege, § 14.02 Confidential Communications within Special Relationships; Lavallee, Rackel & Heintz v Canada (Attorney General), 2002 SCC 61 at para 16; R. v McClure, 2001 SCC 14 at para 2;  Pritchard v Ontario (Human Rights Commission), 2004 SCC 31 at para 17; Canada (National Revenue) v Thompson, 2016 SCC 21 at para 17; Canada (Privacy Commissioner) v Blood Tribe Department of Health, 2008 SCC 44 at para 9; Evidence: Principles and Problems, pp. 670-671

[10] Evidence: Principles and Problems, Privilege, p. 671.

[11] R. v McClure, 2001 SCC 14 at para 37.

[12] See e.g., Guelph (City) v Super Blue Box Recycling Corp., 2004 134 ACWS (3d) 787 — [2004] OTC 961 at para 84; Masse v TerraFarma Inc., 2024 ONSC 789 at paras 14-16.

[13] R. v Youvarajah, 2011 ONCA 654 at paras 146-147.

[14] S & K Processors Ltd. v Campbell Ave. Herring Producers Ltd., [1983] 4 W.W.R. 762, 45 B.C.L.R. 218 (S.C.), at para 6. See also e.g., 1824120 Ontario Limited v Matich, 2023 ONSC 938 at para 13.

[15] Pacific Concessions, Inc. v Weir, 2004 BCSC 1682 at para 13.

[16] See, e.g., R. v Campbell, [1999] 1 SCR 565 at paras 67-68, 74 where the Supreme Court of Canada held that the RCMP waived privilege by relying on consultations with the Department of Justice to support the legality of their reverse sting operation. See also Roynat Capital Inc. v Repeatseat Ltd., 2015 ONSC 1108 at para 87; R. v Meer, 2015 ABCA 141 at para 35 (aff’d R. v Meer, 2016 SCC 5).

[17] Lee at para. 55; Soprema at paras 22, 49–50; Ebrahim v Continental Precious Minerals, 2012 ONSC 1123 at para 38; Guelph (City) v Super Blue Box Recycling Corp., 2004 134 ACWS (3d) 787 — [2004] OTC 961 at para at paras 87–88.  See also The Law of Evidence in Canada at §14.164 “Waiver by Implication” (quoting Wigmore (McNaughton rev., 1961), at § 2327).

[18] R. v Ward, 2016 ONCA 568 at para 35; Airst v Airst, [1998] O.J. No. 2615.

[19] Land v Kaufman, [1991] O.J. No. 1658; See also; Simcoff v Simcoff, 2009 MBCA 80 at para 26 citing Toronto-Dominion Bank v Leigh Instruments Ltd. (Trustee of) (1997), 32 O.R. (3d) 575 (Gen. Div.), R. v Smithen-Davis, 2021 ONCA 731 at paras 8-9.

[20] Nova Chemicals et al. v CEDA-Reactor Ltd. et al., 2014 ONSC 3995.

[21] Nova Chemicals at paras 52-54.

[22] Airst v Airst, [1998] O.J. No. 2615.

[23] Tilley v Harris (1993), [1993] O.J. No. 333.

[24] Agrico Canada Ltd v Northgate Insurance Brokers Inc., [1994] O.J. No. 2334 (Gen. Div.)

[25] Chan v Dynasty Executive Suites Ltd., 2006 CanLII 23950 (ON SC).

[26] Chan at para 31 citing The Law of Evidence in Canada, supra at 14.122.

[27] Chan at para 33.

[28] Chan at para 94.

[29] Canadian Bar Association, “5.1. FAQ - Privilege and Confidentiality for In-House Counsel”, available online: .

[30] Chan at para 31 citing The Law of Evidence in Canada, supra at 14.122.

[31] Celanese Canada Inc. v Murray Demolition Corp., 2006 SCC 36 at para 62.

[32] Law Society of Ontario, Rules of Professional Conduct, r. 7.2-10 “A lawyer who receives a document relating to the representation of the lawyer's client and knows or reasonably ought to know that the document was inadvertently sent shall promptly notify the sender.” See also the Federation of Law Societies of Canada, Model Code of Professional Conduct (as Amended April 2024), Inadvertent Communications, 7.2-10.