In Sakab Saudi Holding Company v. Al Jabri, the Ontario Court of Appeal (ONCA) clarified the scope of solicitor-client privilege and the crime-fraud exception to the privilege. In doing so, the ONCA also provided important guidance that will inform some practical issues for parties seeking to optimize the efficacy of Mareva injunctions. The ONCA unanimously found:
- solicitor-client privilege presumptively applies to lawyers’ trust ledgers, but it does not presumptively apply to bank statements.
- The crime-fraud exception exempts communications for a criminal purpose from solicitor-client privilege.
- This exception may apply in civil cases.
Link to Factual Background Factual Background
The underlying case is a multi-billion-dollar civil fraud action. Private corporations established for counterterrorism activities in Saudi Arabia allege that they were the victims of an international fraud by a former Saudi-Arabian government official and associated individuals and entities. Ontario courts had granted the following orders related to the action:
- A Mareva order requiring the former government official to disclose his worldwide assets, seek court authorization before using them for living and legal expenses, and directing banks to freeze those assets;
- A similar Mareva order against the former government official’s son; and
- A Norwich order requiring certain foreign and Canadian banks and financial institutions to produce documents, including bank records related to the respondents.
While the domestic bank statements were provided in unredacted fashion, foreign bank statements were only produced in a redacted manner to refrain from disclosing redacted transactions with law firms. The appellants then brought a motion to produce:
- trust ledgers from any law firm worldwide that represents the former government official and his son, disclosing all funds received and sent for legal and non-legal purposes. This would include details about the quantum, the date of the transaction, and the identity of the sender or recipient; and
- unredacted bank statements.
The appellants sought to trace fund movements before and after the Mareva orders, explaining that the former related to the action and the latter to compliance with the orders.
Link to Procedural History Procedural History
The motion judge determined that solicitor-client privilege presumptively applies to trust ledgers and bank statements. The motion judge found that the crime-fraud exception applies to criminal communications only.
The Divisional Court agreed that the trust ledgers are presumptively privileged and that the crime-fraud exception only applies to criminal communications. Alternatively, the Court concluded that even if the crime-fraud exception applied to civil fraud, the appellants had not established a prima facie case of communications that furthered the fraud as a precondition to the exception.
The Divisional Court allowed the appeal regarding the bank statements, deciding that these documents are not presumptively privileged. The Court remitted the issue of whether solicitor-client privilege applies to the bank statements back to the motion judge for redetermination. The parties subject to the Mareva order eventually produced the unredacted foreign bank statements pursuant to a consent order, which explicitly noted that the disclosure did not constitute a waiver of privilege. However, this did not result in the ONCA considering the issue moot because “[t]he disclosure under the Consent Order did not resolve the privilege issues that are the subject of this appeal.”
Link to The Ontario Court of Appeal Decision The Ontario Court of Appeal Decision
The ONCA agreed with the courts below that trust ledgers are presumptively privileged in all procedural contexts. The Court rejected the argument that privilege should not apply to a motion for production in a civil case. The appellants argued that a client may make its case for privilege before disclosing the documents in the civil context, unlike in compelled seizures by police or administrative agencies. Supreme Court of Canada cases have established that solicitor-client privilege should be as close to absolute as possible. It was also noted that without disclosing the records, it is difficult to determine whether records are neutral or could disclose privileged information. For these reasons, trust ledgers must be presumptively privileged regardless of the procedure pursued.
Unlike the lower courts, the ONCA found that the crime-fraud exception may apply to civil fraud. Criminal conduct or a criminal purpose is required to apply this exception. The Court noted that, given the broad scope of criminal fraud, it would be difficult to imagine seeking advice from a lawyer about fraud that could only be civil. A client would never enjoy privilege over communications with a lawyer regarding future fraud or while using the lawyer-client relationship to facilitate fraud, whether charged criminally or pursued civilly. As the Court noted:
[10] I agree with the courts below that binding Supreme Court of Canada jurisprudence holds that the nature of the crime-fraud exception is extremely limited in nature and removes, from the ambit of privilege, any communication between a client and lawyer that is criminal in itself or is intended to further criminal purposes. But I disagree with the courts below to the extent that they held that the exception could not be applied in a civil action for fraud or where breach of a court order is or may be alleged. The exception focuses on the nature and purpose of the communication, not the nature of the legal proceeding ultimately brought. Fraud has a very broad meaning in criminal law. Where a communication is intended to further a fraud within that broad meaning, the communication is not privileged no matter the type of proceeding, civil or criminal, in which disclosure of the communication is later sought. And contempt, even in a civil context, is “quasi-criminal”. A communication intended by a client to use the lawyer-client relationship to facilitate contemptuous disregard of a court order is not privileged.
However, the ONCA confirmed that the crime-fraud exception is inapplicable to the appellants’ motion. The party relying on the exception must establish the following preconditions:
- The communications do not include good-faith legal advice;
- The client seeks to advance conduct which is clearly wrong, or which it knows or ought to know is unlawful;
- The communications must be about future conduct; and
- There is a prima facie case that the communication falls within the exception.
Applying these criteria, the ONCA found that the exception should not apply on the facts of this case. The appellants submitted a broad, multi-year request for trust ledgers. The exception does not apply to trust ledgers in the time before the Mareva orders because this relates to past conduct, instead of future conduct. Producing trust ledgers after the Mareva orders were granted may disclose the respondents’ legal advice and strategy. The appellants did not show evidence that the respondents breached the Mareva orders in the way their legal expenses were funded. The appellants conceded no wrongdoing by any of the law firms, despite requesting trust ledgers from any law firm that represents two defendants.
However, the ONCA agreed that solicitor-client privilege may apply to bank statements. Bank statements may reveal legal advice because the fact that a client paid a lawyer, the quantum paid, and what the lawyer advised are connected. The Court concluded that when privilege does not presumptively apply, the content of the document dictates whether privilege applies. The Court decided to remit the contextual question of whether privilege applies to the respondents’ bank statements back to the motion judge.
Link to Key Takeaways Key Takeaways
- Solicitor-client privilege presumptively applies to lawyers’ trust ledgers in all procedural contexts. This aligns with the near-absolute protection of solicitor-client privilege.
- The crime-fraud exception may apply in civil cases. The exception depends on the nature and purpose of the communication, not the type of proceeding in which privilege is claimed.
- The crime-fraud exception is narrow. Overbroad requests for trust ledgers may fail where the requesting party does not specify particular law firms or transactions connected to advancing criminal conduct or a criminal purpose.
- It does not take much imagination to consider scenarios where massive amounts of money could be funnelled through a lawyer’s trust account in a jurisdiction with different levels of legal ethics and banking secrecy, raising concerns regarding the redaction of foreign bank statements.
- Ultimately, victims of fraud still need evidence of some evidence (at least on a prime facie basis) to rebut the presumption of privilege in these types of records, recognizing that solicitor-client privilege is nearly absolute.
With thanks to Hannah Beltran for her assistance with this blog post.