Be careful what you plead for: Ontario Court of Appeal clarifies when solicitor-client privilege has been waived

Solicitor-client privilege protects confidential communications between a lawyer and client made for the purpose of giving or receiving legal advice. Absent waiver of the privilege, it protects such communications from disclosure in litigation. In One York Street Inc. v. 2360083 Ontario Limited¹, the Ontario Court of Appeal clarified when a party’s pleadings and litigation conduct can give rise to a deemed waiver of solicitor‑client privilege. The decision is an important reminder that careful preparation of pleadings and witnesses is essential to avoid the possibility of a deemed waiver.

What you need to know

• A deemed waiver can arise when a party relies on its understanding or misunderstanding of its legal rights and obligations with respect to an issue in the litigation. It does not arise where a party merely puts its general state of mind in issue.
• A waiver can occur even without explicitly pleading reliance on legal advice (or a lack thereof). Courts may look to the substance of the position being advanced. Removing overt references to legal advice from a pleading may not avoid a deemed waiver if the underlying claim or defence still relies on the party’s understanding or misunderstanding of its legal position.
• Courts may consider a party’s pleadings and its litigation conduct. Discovery answers, affidavit statements, and positions taken throughout the litigation may reinforce a deemed waiver if they rely on the party’s understanding or misunderstanding of its legal position.

Background

In May 2017, an independent grocery chain entered into a commercial lease and an accompanying extension that, together, created a 20‑year commitment. Within two years, rent arrears began to accumulate, and the tenant ultimately vacated the premises.

When the landlord sued for unpaid rent and abandonment, the tenant responded with a defence and counterclaim, alleging that it had been induced into the lease by misrepresentations about high foot traffic in the shopping centre. The tenant also pleaded that they did not understand the consequences of the lease extension and signed it without the benefit of legal advice, which was later shown to be untrue.

The landlord sought production of the legal advice the tenant had received. It argued that by grounding its defence in a misunderstanding of its rights under the lease, the tenant had put its legal state of mind in issue and thereby waived solicitor‑client privilege.

Before the production motion was heard, however, the tenant amended its pleadings to remove explicit statements about misunderstanding the lease terms and not having received legal advice.

Court of Appeal concludes that a deemed waiver occurred in the circumstances

The Ontario Court of Appeal held that the tenant’s allegations in its amended pleading resulted in a deemed waiver of solicitor-client privilege. The tenant continued to ground its defence on a misunderstanding of its legal rights under the lease. It would be unfair and inconsistent for a party to advance such a position while simultaneously shielding contemporaneous legal advice it received that may contradict its alleged misunderstanding.

General misrepresentation allegations do not give rise to a deemed waiver

The Court emphasized that not all misrepresentation claims give rise to a deemed waiver; the analysis is case-specific. General allegations of misrepresentation and reliance should not result in waiver of privilege; however, a waiver may arise where the misrepresentation claim turns on the party’s understanding or misunderstanding of its legal rights or obligations, and it received legal advice on that issue at a relevant time.

Applying that principle, the Court found that by advancing a defence and counterclaim based on alleged foot traffic guarantees, the tenant relied on its understanding of or state of mind about its legal position under the lease. Thus, the tenant’s litigation position went beyond putting its general state of mind in issue and triggered a deemed waiver of privilege over the legal advice it received when negotiating the lease.

A deemed waiver may arise even without explicit references to legal advice

The Court declined to decide whether amending pleadings can “undo” a deemed waiver by removing explicit reliance on the receipt or non-receipt of legal advice. Instead, it found that explicit references to legal advice are not necessary for a waiver to result. When applying the test, courts should ask: Is the party relying on its understanding or misunderstanding of its legal position on an issue in the litigation?

In this case, even after amending its defence, the tenant continued to allege that it misunderstood the legal effect of the landlord’s alleged foot traffic guarantees. Because the tenant had received legal advice that could prove or disprove this allegation, the pleading was sufficient to find a deemed waiver of solicitor‑client privilege.

Litigation conduct can cement a deemed waiver

The Court underscored that determining whether privilege has been waived requires a case‑by‑case assessment of the pleadings and the party’s conduct in the litigation. This can include answers given during examinations for discovery. For example, the tenant’s representative reiterated during discovery that the landlord made “guarantees” of foot traffic outside the written terms of the lease. These discovery answers confirmed that the tenant was not alleging mere factual misrepresentations but rather an understanding of its legal position under the lease.

Implications

This decision is a reminder that parties must carefully frame their pleadings and consider their conduct throughout litigation to avoid unintentionally waiving solicitor‑client privilege. When a claim or defence relies—explicitly or implicitly—on the party’s misunderstanding of its legal position, the party may be required to disclose contemporaneous legal advice it received on that issue. To reduce this risk, allegations of misrepresentation should focus on factual issues and avoid suggesting that a party misunderstood its legal rights. Witnesses and counsel should also be prepared to handle questioning, during discovery or at trial, that seeks to elicit a party’s reliance on its legal understanding. Solicitor-client privilege remains a core fundamental protection of our legal system, but this decision demonstrates how its protections are not absolute.