Upon separation, the wife brought an application for an ownership interest in the husband’s business, citing a constructive trust and joint family venture. In 2014, while participating in mediation, the parties agreed to Minutes of Settlement, which were then transferred to a Separation Agreement.
During the mediation, the husband represented that the business was worth about $8 million at the time the parties separated. Unbeknownst to the wife, the husband had been in the process of preparing to sell the business and had signed a letter of intent to sell the business for $30 million. About six days after the separation agreement was signed, the business was sold and the husband made about $18 million after tax.
Naturally, the wife brought a motion to have the Separation Agreement set aside based on material misrepresentation by the husband as to the valuation of the business. At the Motion, the Separation Agreement was set aside based on section 56(4)(a) of the Family Law Act, which states that a court may set aside an agreement based on a party’s failure to disclose significant assets at the time the contract was made. The Motion Judge also found that the husband had impliedly waived his solicitor client privilege and that he was required to have his matrimonial file produced by his lawyer. It was also found that the wife had not impliedly waived her solicitor client privilege. The husband appealed.
ANALYSIS AT APPEAL
The main issue to be dealt with at the appeal was whether the motion judge correctly applied or interpreted the test in determining whether the husband had impliedly waived solicitor client privilege.
At the appeal, the Judge found that the Motion Judge correctly set out the test for determining whether privilege should be deemed to be waived. There are two ways that waiver can be implicit. First, by disclosure. Second, by waiver based on reliance, which means relying upon the privileged communication as part of a position taken in legal proceedings. In this case, the husband did so rely on his lawyer’s legal advice and used that as a basis for his position in these proceedings.
The next step in the test is to determine whether the waiver has actually been waived by reliance. First, we look for the presence or absence of legal advice that is relevant to the existence of a claim of defence, basically that this advice was a key component used in the suit. Second, the party who used this advice must also make the receiving of the advice an issue in their claim.
Finally, a party will have waived their solicitor-client privilege where they have placed their state of mind at issue and given evidence that they received legal advice to form their state of mind.
By denying the allegation that the husband knowingly, recklessly and/or deliberately misled the wife, he put his state of mind at issue. This was because his pleadings submitted to the court went beyond simply denying, they went so far as to proclaim that his state of mind was formed by advice of counsel. By making his state of mind a material component to his case, he in fact opened the door to solicitor-client privilege.
Upon questioning, the husband admitted he intentionally did not disclose the sale of the business, implying his reliance on advice of counsel. The motion judge accurately relied on the case of Bank Leu AG v. Gaming Lottery Corp, which states that when a party puts their state of mind at issue, and received legal advice to form that state of mind, privilege will be deemed waived. ( O.J. No.3939 at para 5.)
Though this privilege was deemed waived, the only documents that needed to be produced from the Husband’s file from his lawyer were those that actually dealt with the sale of the business and could speak to his state of mind and legal opinion that he relied on.
Based on the above facts, the appeal was dismissed. The Separation Agreement was set aside and the husband was required to produce the privileged documents. The wife was entitled to costs paid by the husband in the amount of $15,000.
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