1. Introduction
Parties raise the issue of solicitor-client privilege regularly in litigation, also in cases in which one of the parties is an executor and is or may be in litigation with one or more of the beneficiaries. I have written about this issue in the past.[1] The issue arose again in the recent British Columbia case, Barbieri Estate v White.[2] In it Blake J. reviews the law on the issue extensively and therefore it is useful to consider the issue again.
2. Facts
The testator died in 2018, predeceased by her husband and survived by her three children, Rick, Teresa, and Steven. She named Rick and Teresa her executors and directed that the residue of her estate be distributed equally among the three children. Rick and Teresa were granted probate in 2019, but a few months later Rick applied for an order removing Teresa as executor, leaving him as the sole executor. In October 2019 the parties agreed to a consent order (the ‘Consent Order’). It removed Teresa as executor and trustee, named Rick as sole executor and trustee, and provided that Rick would provide Teresa and Steven with an up-to-date accounting of the estate every second month, beginning in October 2019. Rick did make the bi-monthly accounting from October to 2019 to May 2022.
However, in September 2019, 17 days after the Consent Order, Rick brought an action as executor of the estate against Teresa, and then, in June 2022, he brought an application in which he stated that he and his lawyers inadvertently disclosed 40 privileged documents during that period.
These consisted of invoices rendered by the lawyers to the estate, copies of cheques made payable to the lawyers, and other documents indicating payments made to the lawyers by the estate. Rick sought a number of orders that would, inter alia, prevent Teresa and her lawyers from making use of the documents, direct the return of the documents, disqualify Teresa’s lawyers from participating in this proceeding, and permanently expunging the documents from the court file. Rick’s counsel also took the position that the court should not review the privileged documents before it determined the application.
In December 2020 Teresa filed an application in the probate proceeding for an order, inter alia removing Rick as executor. In a supporting affidavit the affiant attached documents received from Rick in the course of the estate accounting, including some privileged documents. At no time between the entering of the Consent Order and the filing of his January 2021 application response to Teresa’s application did Rick or his lawyers claim privilege over any document provided to Teresa in the course of the estate accounting. Then, in April 2021 Rick’s wife emailed the estate accounting for the previous two months to Teresa’s lawyer and it included invoices rendered by Rick’s lawyers to the estate. Rick’s lawyers then contacted Teresa’s lawyer asking that the privileged documents be destroyed.
Teresa’s new lawyer then sought disclosure of the estate solicitor’s file, which request was refused. In fact, in subsequent bi-monthly accounts, there was further disclosure of invoices. The parties also commenced further proceedings.
3. Analysis and Judgment
Justice Blake began her analysis by agreeing with Rick that reviewing privileged information is a discretionary decision that should be exercised sparingly. The court should only review documents for which privilege is claimed if evidence or legal argument shows that review is necessary to decide the issue fairly. She reserved the right to review the privileged documents but concluded that it was appropriate to determine the application on the basis of the blanket solicitor-client privilege Rich claimed over the documents.
Thus, the main issue was whether, in all the circumstances, the privileged documents were protected by the blanket protection of solicitor-client privilege. If they were, the question arose whether Rick had expressly or implicitly waived that privilege. If he had not, the court had to determine the appropriate remedy in the circumstances raised in the case.
Justice Blake noted that the circumstances were highly unusual because Rick failed to disclose whether he engaged separate lawyers to act for him as executor and as beneficiary. Nor did he disclose whether the work done by his lawyers was part of the ongoing administration of the estate or was done to pursue or defend the ongoing adversarial litigation. Rather, he relied on the 2019 action to support his assertion that he was in an adversarial position toward Teresa and that, as such, he has blanket solicitor-client privilege over the whole of the estate file, despite his agreement to provide bi-monthly accounting.
Moreover, the disclosure was not a one-time accidental discloser of privileged information. Rather, it was a protracted disclosure of alleged privileged information that was made repeatedly by Rick, his wife, and his lawyer over a two-and-a-half-year period. Further, the disclosure continued even after the inadvertent disclosure was discovered.
Justice Blake was satisfied that by entering into the Consent Order and agreeing to provide the bi-monthly accounting Rick waived his right to claim solicitor-client privilege, at least to the extent of accounting for the expenses, including legal fees, he was paying from the estate. However, because of the lengthy arguments on the point, she did address the issue whether the privileged documents were covered by a blanket protection of solicitor-client privilege.
She took the view that issues of solicitor-client privilege are not the same across all civil and criminal matters. The jurisprudence holds that the amount of legal fees is presumptively privileged because it arises out of the solicitor-client relationship and while the presumption can be displaced, the onus rests on the party seeking to displace it.[3] However, she went on to note that the relationship of an executor and beneficiary is unique because the office of executor is a fiduciary one and imposes fiduciary obligations toward the beneficiaries. Thus the latter have some entitlement to information from the executor about the ongoing administration of the estate.
Justice Blake then went on to discuss the three theories about the entitlement of discretionary beneficiaries to information from executors or trustees:
(a) the proprietary right theory;
(b) the joint interest or common interest theory; and
(c) the modern theory.
She noted that the old proprietary right theory, which is based on the idea that a beneficiary is seeking access to documents that are her own,[4] led to difficulties as estates and trusts became more complex. Hence, it was replaced by the joint interest or common interest theory. Under it, beneficiaries are entitled to trust and estate information because: (a) trustees are required to act in the best interests of the beneficiaries; and (b) trust instruments are created for the purpose of administering the trust. This theory is based on the idea that since trustees or executors and beneficiaries have a shared or common interest in the administration of the estate, documents created to further that common interest should be made accessible to both.[5] Consequently, in those circumstances trustees and executors cannot assert a general claim of solicitor-client privilege.[6]
The modern theory was developed by the Privy Council in Schmidt v Rosewood Trust Limited.[7] In it Lord Walker also rejected the strict proprietary approach and based disclosure not on a joint or common interest but on the court’s inherent jurisdiction to supervise the administration of trusts (and by implication, the administration of estates). He noted that the court should focus on balancing the competing interests of the parties under the trust and in doing so, it should consider following factors:
(a) whether a discretionary beneficiary (or some other beneficiary with only a remote or wholly defeasible interest) should be granted relief at all;[8]
(b) what class of documents should be disclosed, either completely or in redacted form; and
(c) what safeguards should be imposed to limit the use which may be made of documents or information disclosed.
Justice Ballard noted that the analysis of whether the privileged documents were subject to the blanket presumption of solicitor-client privilege, and therefore whether the documents would not have been disclosable and would neither have been ordered to be disclosed by a court, is a hypothetical exercise, since they were already disclosed pursuant to the Consent Order. But the hypothetical analysis led her to conclude that Rick’s position was untenable.
Since Ballard has been followed widely in Canada, Justice Blake thought it appropriate to apply the joint interest theory to her analysis, but she also accepted that the court has the inherent jurisdiction to supervise the administration of trusts and estates.
Applying both theories to her analysis but bearing in mind that she was engaging in a hypothetical exercise, she concluded that Teresa might have been successful in obtaining disclosure in the unique circumstances of the case. In other words, a court might have concluded that the beneficiaries were entitled to be informed of the total amount of the legal fees paid by the executor. She held that the Consent Order was binding on Rick and that the fact that he had agreed to provide bi-monthly accounting and then went on to begin adversarial proceedings against Teresa, did not shield him from the court-ordered obligation to account to the beneficiaries. The fact that they are now in an adversarial relationship did not change or terminate the Consent Order.
Assuming for the purpose of the judgment that the privileged documents were subject to solicitor-client privilege, Justice Blake then went on to consider whether Rick expressly or implicitly waived the privilege. She noted that a waiver of solicitor-client privilege must be clear and unambiguous, whether it is express or implicit. Rick did expressly waive privilege when he entered into the Consent Order for which he was represented by legal counsel. And it contained no exceptions. As executor of the estate, he was bound by the Order, and the duty to account includes the duty to provide detailed information of all legal fees paid by the executor. And thus, Rick also implicitly waived his right to solicitor-client privilege over the legal fees he had been paying from the estate.
However, while Justice Blake held that Rick had waived the right to solicitor-client privilege over the amount of the legal fees he paid from the estate, she was not satisfied that he had waived privilege over any legal advice he received in pursuing litigation in the name of the estate against Teresa. She noted that such advice may not have been properly redacted.
Justice Blake then went on to comment on the accusations made by Rick’s lawyer against Teresa’s lawyer. She concluded that the legal test to disqualify Teresa’s lawyer had not been met.
—
[1] See, e.g., http://welpartners.com/blog/2020/08/what-information-must-a-trustee-disclose-to-beneficiaries/, a blog on Whitell v Whitell, 2020 ONSC 2310.
[2] 2023 BCSC 1176.
[3] British Columbia (Attorney General) v Canadian Constitution Foundation, 2020 BCCA 238, paras 60-61.
[4] See O’Rourke v Darbishire, [1920] AC 581 at 626-27, [1920] All ER Rep 1, per Lord Wrenbury.
[5] See Ontario (Attorney General) v Ballard Estate (1994), 119 DLR (4th) 750 (Ont Gen Div) the leading Canadian case on this theory.
[6] See ibid., pp 755-56, per Lederman J.
[7] [2003] UKPC 26, [2003] 2 AC 709 (Isle of Man).
[8] The appellant in the case held only a prospective right to be appointed under a power of appointment. The Privy Council did not decide whether he was successful but remitted the case to High Court of the Isle of Man for that decision. However, it provided guidance to the High Court on their views of the appellant’s case and in it they made it clear that, in the particular circumstances, he had a powerful case for the fullest disclosure.
Menu
Written by: Albert Oosterhoff
Posted on: May 28, 2024
Categories: Commentary, WEL Newsletter
1. Introduction
Parties raise the issue of solicitor-client privilege regularly in litigation, also in cases in which one of the parties is an executor and is or may be in litigation with one or more of the beneficiaries. I have written about this issue in the past.[1] The issue arose again in the recent British Columbia case, Barbieri Estate v White.[2] In it Blake J. reviews the law on the issue extensively and therefore it is useful to consider the issue again.
2. Facts
The testator died in 2018, predeceased by her husband and survived by her three children, Rick, Teresa, and Steven. She named Rick and Teresa her executors and directed that the residue of her estate be distributed equally among the three children. Rick and Teresa were granted probate in 2019, but a few months later Rick applied for an order removing Teresa as executor, leaving him as the sole executor. In October 2019 the parties agreed to a consent order (the ‘Consent Order’). It removed Teresa as executor and trustee, named Rick as sole executor and trustee, and provided that Rick would provide Teresa and Steven with an up-to-date accounting of the estate every second month, beginning in October 2019. Rick did make the bi-monthly accounting from October to 2019 to May 2022.
However, in September 2019, 17 days after the Consent Order, Rick brought an action as executor of the estate against Teresa, and then, in June 2022, he brought an application in which he stated that he and his lawyers inadvertently disclosed 40 privileged documents during that period.
These consisted of invoices rendered by the lawyers to the estate, copies of cheques made payable to the lawyers, and other documents indicating payments made to the lawyers by the estate. Rick sought a number of orders that would, inter alia, prevent Teresa and her lawyers from making use of the documents, direct the return of the documents, disqualify Teresa’s lawyers from participating in this proceeding, and permanently expunging the documents from the court file. Rick’s counsel also took the position that the court should not review the privileged documents before it determined the application.
In December 2020 Teresa filed an application in the probate proceeding for an order, inter alia removing Rick as executor. In a supporting affidavit the affiant attached documents received from Rick in the course of the estate accounting, including some privileged documents. At no time between the entering of the Consent Order and the filing of his January 2021 application response to Teresa’s application did Rick or his lawyers claim privilege over any document provided to Teresa in the course of the estate accounting. Then, in April 2021 Rick’s wife emailed the estate accounting for the previous two months to Teresa’s lawyer and it included invoices rendered by Rick’s lawyers to the estate. Rick’s lawyers then contacted Teresa’s lawyer asking that the privileged documents be destroyed.
Teresa’s new lawyer then sought disclosure of the estate solicitor’s file, which request was refused. In fact, in subsequent bi-monthly accounts, there was further disclosure of invoices. The parties also commenced further proceedings.
3. Analysis and Judgment
Justice Blake began her analysis by agreeing with Rick that reviewing privileged information is a discretionary decision that should be exercised sparingly. The court should only review documents for which privilege is claimed if evidence or legal argument shows that review is necessary to decide the issue fairly. She reserved the right to review the privileged documents but concluded that it was appropriate to determine the application on the basis of the blanket solicitor-client privilege Rich claimed over the documents.
Thus, the main issue was whether, in all the circumstances, the privileged documents were protected by the blanket protection of solicitor-client privilege. If they were, the question arose whether Rick had expressly or implicitly waived that privilege. If he had not, the court had to determine the appropriate remedy in the circumstances raised in the case.
Justice Blake noted that the circumstances were highly unusual because Rick failed to disclose whether he engaged separate lawyers to act for him as executor and as beneficiary. Nor did he disclose whether the work done by his lawyers was part of the ongoing administration of the estate or was done to pursue or defend the ongoing adversarial litigation. Rather, he relied on the 2019 action to support his assertion that he was in an adversarial position toward Teresa and that, as such, he has blanket solicitor-client privilege over the whole of the estate file, despite his agreement to provide bi-monthly accounting.
Moreover, the disclosure was not a one-time accidental discloser of privileged information. Rather, it was a protracted disclosure of alleged privileged information that was made repeatedly by Rick, his wife, and his lawyer over a two-and-a-half-year period. Further, the disclosure continued even after the inadvertent disclosure was discovered.
Justice Blake was satisfied that by entering into the Consent Order and agreeing to provide the bi-monthly accounting Rick waived his right to claim solicitor-client privilege, at least to the extent of accounting for the expenses, including legal fees, he was paying from the estate. However, because of the lengthy arguments on the point, she did address the issue whether the privileged documents were covered by a blanket protection of solicitor-client privilege.
She took the view that issues of solicitor-client privilege are not the same across all civil and criminal matters. The jurisprudence holds that the amount of legal fees is presumptively privileged because it arises out of the solicitor-client relationship and while the presumption can be displaced, the onus rests on the party seeking to displace it.[3] However, she went on to note that the relationship of an executor and beneficiary is unique because the office of executor is a fiduciary one and imposes fiduciary obligations toward the beneficiaries. Thus the latter have some entitlement to information from the executor about the ongoing administration of the estate.
Justice Blake then went on to discuss the three theories about the entitlement of discretionary beneficiaries to information from executors or trustees:
(a) the proprietary right theory;
(b) the joint interest or common interest theory; and
(c) the modern theory.
She noted that the old proprietary right theory, which is based on the idea that a beneficiary is seeking access to documents that are her own,[4] led to difficulties as estates and trusts became more complex. Hence, it was replaced by the joint interest or common interest theory. Under it, beneficiaries are entitled to trust and estate information because: (a) trustees are required to act in the best interests of the beneficiaries; and (b) trust instruments are created for the purpose of administering the trust. This theory is based on the idea that since trustees or executors and beneficiaries have a shared or common interest in the administration of the estate, documents created to further that common interest should be made accessible to both.[5] Consequently, in those circumstances trustees and executors cannot assert a general claim of solicitor-client privilege.[6]
The modern theory was developed by the Privy Council in Schmidt v Rosewood Trust Limited.[7] In it Lord Walker also rejected the strict proprietary approach and based disclosure not on a joint or common interest but on the court’s inherent jurisdiction to supervise the administration of trusts (and by implication, the administration of estates). He noted that the court should focus on balancing the competing interests of the parties under the trust and in doing so, it should consider following factors:
(a) whether a discretionary beneficiary (or some other beneficiary with only a remote or wholly defeasible interest) should be granted relief at all;[8]
(b) what class of documents should be disclosed, either completely or in redacted form; and
(c) what safeguards should be imposed to limit the use which may be made of documents or information disclosed.
Justice Ballard noted that the analysis of whether the privileged documents were subject to the blanket presumption of solicitor-client privilege, and therefore whether the documents would not have been disclosable and would neither have been ordered to be disclosed by a court, is a hypothetical exercise, since they were already disclosed pursuant to the Consent Order. But the hypothetical analysis led her to conclude that Rick’s position was untenable.
Since Ballard has been followed widely in Canada, Justice Blake thought it appropriate to apply the joint interest theory to her analysis, but she also accepted that the court has the inherent jurisdiction to supervise the administration of trusts and estates.
Applying both theories to her analysis but bearing in mind that she was engaging in a hypothetical exercise, she concluded that Teresa might have been successful in obtaining disclosure in the unique circumstances of the case. In other words, a court might have concluded that the beneficiaries were entitled to be informed of the total amount of the legal fees paid by the executor. She held that the Consent Order was binding on Rick and that the fact that he had agreed to provide bi-monthly accounting and then went on to begin adversarial proceedings against Teresa, did not shield him from the court-ordered obligation to account to the beneficiaries. The fact that they are now in an adversarial relationship did not change or terminate the Consent Order.
Assuming for the purpose of the judgment that the privileged documents were subject to solicitor-client privilege, Justice Blake then went on to consider whether Rick expressly or implicitly waived the privilege. She noted that a waiver of solicitor-client privilege must be clear and unambiguous, whether it is express or implicit. Rick did expressly waive privilege when he entered into the Consent Order for which he was represented by legal counsel. And it contained no exceptions. As executor of the estate, he was bound by the Order, and the duty to account includes the duty to provide detailed information of all legal fees paid by the executor. And thus, Rick also implicitly waived his right to solicitor-client privilege over the legal fees he had been paying from the estate.
However, while Justice Blake held that Rick had waived the right to solicitor-client privilege over the amount of the legal fees he paid from the estate, she was not satisfied that he had waived privilege over any legal advice he received in pursuing litigation in the name of the estate against Teresa. She noted that such advice may not have been properly redacted.
Justice Blake then went on to comment on the accusations made by Rick’s lawyer against Teresa’s lawyer. She concluded that the legal test to disqualify Teresa’s lawyer had not been met.
—
[1] See, e.g., http://welpartners.com/blog/2020/08/what-information-must-a-trustee-disclose-to-beneficiaries/, a blog on Whitell v Whitell, 2020 ONSC 2310.
[2] 2023 BCSC 1176.
[3] British Columbia (Attorney General) v Canadian Constitution Foundation, 2020 BCCA 238, paras 60-61.
[4] See O’Rourke v Darbishire, [1920] AC 581 at 626-27, [1920] All ER Rep 1, per Lord Wrenbury.
[5] See Ontario (Attorney General) v Ballard Estate (1994), 119 DLR (4th) 750 (Ont Gen Div) the leading Canadian case on this theory.
[6] See ibid., pp 755-56, per Lederman J.
[7] [2003] UKPC 26, [2003] 2 AC 709 (Isle of Man).
[8] The appellant in the case held only a prospective right to be appointed under a power of appointment. The Privy Council did not decide whether he was successful but remitted the case to High Court of the Isle of Man for that decision. However, it provided guidance to the High Court on their views of the appellant’s case and in it they made it clear that, in the particular circumstances, he had a powerful case for the fullest disclosure.
Author
View all posts