Ontario Court of Appeal weighs in on the bounds of solicitor-client privilege

The saga over whether a party can compel the production of a lawyer’s trust ledgers continues with the Ontario Court of Appeal’s decision in Sakab Saudi Holding Company v. Al Jabri¹. As explained in our previous bulletin, the Ontario Superior Court of Justice held that such records were presumptively protected by solicitor-client privilege, and that the narrow crime-fraud exception to privilege did not apply in a civil (as opposed to criminal) proceeding. The Ontario Divisional Court largely upheld that decision. Now, the Court of Appeal has confirmed that a lawyer’s trust ledgers are presumptively privileged. However, unlike the decisions below, the Court of Appeal recognized that the crime-fraud exception could apply in a civil case (but not on these facts).

What you need to know

• A lawyer’s trust ledgers are presumptively privileged. A lawyer’s administrative and accounting records, including their trust ledgers, are presumptively privileged. The onus is on the party seeking disclosure to rebut that presumption.
• Procedural context is irrelevant to the presumption. The presumption is not limited to instances of compelled seizures (e.g., by police or government agencies). It applies even on a contested civil motion where the party asserting privilege will have an opportunity to make submissions. The point of the presumption is to avoid the need to disclose the privileged information in order to establish the claim of privilege.
• The crime-fraud exception can apply in civil proceedings. Under the crime-fraud exception, solicitor-client communications lose the protection of privilege if they are criminal or are made to further a criminal purpose, including fraud. The focus is on the nature of the communication—not the procedural context. The exception can be engaged in civil proceedings involving quasi-criminal conduct like breach of a court order, as well as those involving allegations of fraudulent misrepresentation or deceit.

Background: courts below protect trust ledgers from disclosure

The Court of Appeal’s decision arose in the context of a multi-billion-dollar civil fraud case. The appellants, private companies established to conduct counterterrorism activities in Saudi Arabia, alleged that the two respondents, a former government official and his son, fraudulently directed large sums of money from the companies into their own pockets or those of other defendants in the action. Mareva orders were issued against the former official and his son, preventing them from dealing with any of their assets while the action was pending.

The companies then sought an order requiring the former official and his son to produce trust ledgers from any law firm that represented them globally. These productions were sought to show all funds sent or received for both legal and non-legal purposes, as well as all funds currently held in trust for the official and his son. In essence, the companies wanted to know who was paying the legal fees. The companies argued that this disclosure was relevant not only to their claims in the fraud action, but also to monitoring compliance with the Mareva orders.

The Ontario Superior Court of Justice denied the companies’ motion, holding that the trust ledgers were presumptively protected by solicitor-client privilege, and that the companies had failed to rebut this presumption. The Superior Court also held that the crime-fraud exception to privilege did not apply because this was a case of civil, as opposed to criminal, fraud. The Divisional Court upheld this result on appeal.

The companies appealed to the Ontario Court of Appeal.

Ontario Court of Appeal affirms, with some disagreement

The Ontario Court of Appeal upheld the dismissal of the companies’ motion, concluding that the trust ledgers were presumptively privileged, and this presumption had not been rebutted. However, the Court of Appeal disagreed with the courts below on the crime-fraud exception, holding that it could apply in a civil fraud proceeding, but that the requirements were not met here.

Trust ledgers are presumptively privileged

The Court of Appeal emphasized the breadth of solicitor-client privilege, reiterating that it must be “as close to absolute as possible”². Privilege applies to all confidential communications within the solicitor-client relationship that are made for the purpose of obtaining legal advice, even those dealing with administrative (e.g., financial) matters. A lawyer’s administrative records, including accounting records, are presumptively privileged because, even if the information within them appears neutral, it could be used to deduce privileged information. That presumption applied to protect the trust ledgers in this case.

The Court of Appeal rejected the companies’ argument that the presumption should only apply in cases of compelled seizures (e.g., by police or government agencies) where the client has no opportunity to argue about privilege before the documents are examined. The court held that the presumption applies even on a contested motion where there is an opportunity to make submissions, because the purpose of the presumption is to avoid the need for a client to disclose privileged information in order to substantiate their privilege claim.

The companies could not rebut the presumption of privilege. To do so, they needed to show either (i) that there was no reasonable possibility that disclosure of the requested information would, directly or indirectly, reveal confidential solicitor-client communications; or (ii) that the requested information was not linked to the merits of the case and would not prejudice the client if disclosed. The companies failed on both branches.

The crime-fraud exception could apply, but not on these facts

Under the crime-fraud exception, solicitor-client communications are automatically not privileged if they are criminal or intended to further a criminal purpose. Both the Ontario Superior Court and Divisional Court reasoned that civil proceedings involving fraud or breach of a court order are not sufficiently criminal to engage the exception.

The Court of Appeal disagreed. It emphasized that, while the exception remains narrow, its applicability depends on the nature and purpose of the communication, not on the type of proceeding. The exception is engaged by criminal conduct or a criminal purpose. Communications intended to facilitate quasi-criminal offences, including the breach of a court order, would be sufficiently criminal to fall within the exception. The same is true for communications to facilitate a fraud, even if the client is only sued civilly, because the concept of “fraud” is broadly defined in criminal law³. Given that the exception focuses on the nature of the communication, whether or not criminal proceedings are later commenced is irrelevant.

However, the Court of Appeal concluded that the exception was not available on the facts of this case. To negate privilege, the companies needed to establish on a prima facie basis that the former official and his son duped their lawyers into advising them how to perpetrate a future fraud or breach of the Mareva orders. The companies failed to meet this burden.

Implications

The Court of Appeal’s decision reinforces the foundational importance of solicitor-client privilege to the administration of justice. Clients and their counsel should be mindful of the broad protections that apply to a lawyer’s administrative records, including trust ledgers. And while exceptions to privilege will be interpreted narrowly, the court’s decision is also a reminder that these exceptions are intended to operate purposively. They are not meant to be governed by procedural technicalities.