Parties to litigation can expect that particulars of the advice they have received from counsel will remain privileged in most instances. However, there are times when a party, through its actions or its pleadings, might waive this privilege. One York Street Inc. v. 2360083 Ontario Limited, 2026 ONCA 176, is a recent case where the Ontario Court of Appeal deemed a party to have waived privilege over legal advice it received based on assertions within the party’s pleadings.

The Applicant in this case, One York Street Inc., brought an action for unpaid rent three years after it had entered a three-year lease with the Respondent, 2360083 Ontario Limited. The day after the lease was signed, the parties entered into 20-year extension agreement. The Respondent leaseholder, in its original Statement of Defence, claimed that the Applicant Lessor had made extra-contractual representations regarding the nature of the property, specifically about the foot-traffic the Respondent could expect. The Respondent alleged that these representations induced them to sign the extension agreement.

Importantly, the Respondent included in its Statement of Defence that it had not sought legal advice about potential legal consequences of the extension agreement. This assertion was later admitted as being a lie; the Respondent had received legal advice at the time of negotiations for the lease and the extension agreement. Thus, the Applicant brought a motion seeking production of the Respondent’s solicitor’s file.

The Respondent changed counsel and amended its Statement of Defence to remove reference to their lack of obtaining legal counsel and lack of understanding of its legal position regarding the extension agreement. What remained in the amended Statement of Defence was the allegation of extra-contractual misrepresentations, which the Respondent categorized as “guarantees,” that had induced the Respondent to enter into the agreement. The lower courts grappled with whether the Respondent’s pleaded reliance on the extra-contractual misrepresentations constituted a deemed waiver of solicitor-client privilege.

In the first instance court, the motions judge decided that the legal file of the Respondent at the time of the extension agreement ought to be produced because the Respondent brought their state of mind regarding a relevant issue of the litigation into the dispute. The Respondent appealed to the Divisional Court, who decided that the motion judge had erred in treating original defence as the basis of their decision. As the Amended Statement of Defence did not contain reference to the Respondent’s state of mind regarding the legal consequences of the extension agreement, the Divisional Court decided that the Respondent no longer relied on its lack of understanding of its legal position.

Court of Appeal Decision

The Appellant lessor appealed the Divisional Court’s decision to the Ontario Court of Appeal. The issue, as the Court saw it, was whether the Respondent’s original defence asserted a lack of understanding of their legal position regarding the extension agreement, and whether pleading this position resulted in a deemed waiver of privilege over records of the legal advice they inevitably obtained at the time.

The Court held that the Respondent, even by amending their Statement of Defence, still placed their understanding of their legal rights under the extension agreement at issue by maintaining allegations of misrepresentation within its amended Statement of Defence. By keeping these allegations in their pleadings, the Respondent had voluntarily relied on their understanding of their legal position on an issue central to the litigation and could not shield advice they had been given to inform this position. Therefore, the Court restored the motion judge’s decision and provided useful clarification as to the test for the finding of a deemed waiver of privilege.

Placing One’s State of Mind at Issue is What Matters

The Court’s decision clarified that there is little difference between a scenario where: 1) party relies on legal advice they have received on an issue and subsequently makes this a live issue in their pleadings and; 2) a scenario where a party makes their lack of understanding of their legal position, despite receiving counsel, an issue in their pleadings. In both instances, the party pleads as to its understanding of a relevant legal issue, and in both instances the party must not be able to shield how it informed itself of its legal position.

Conduct During Litigation May Lead to Implied Waiver

The Court made clear that a deemed waiver of privilege over a solicitor’s file can occur in the absence of an express or explicit intention to do so. The Court will assess each case on its own factual matrix, absent any express or implied waivers of privilege, to determine whether a party has relied on its understanding regarding its legal position. If the result of this inquiry is in the affirmative, the Court may deem that a party waived privilege.

Guide for Motion and Trial Judges

The Court provided the following summary to assist judges in their determination of whether a deemed waiver of privilege over a solicitor’s file has occurred:

1. On its own, receiving legal advice on a relevant issue or at a relevant time does not automatically lead to a deemed waiver of privilege.
2. (General allegations of misrepresentation, or other general forms of putting a party’s state of mind in issue, are not sufficient to lead to the finding of a deemed waiver of privilege.
3. A party must, in its pleadings, rely on its understanding or lack of understanding of its legal position about a relevant issue in the litigation. This reliance need not be explicit.
4. Where a party has done (3), it should not be able to maintain privilege over relevant legal advice that it sought.

Key Takeaway

In essence, the Court’s decision holds that parties cannot shield their solicitors’ files if the parties’ pleadings and conduct assert either an understanding or a lack of understanding of their legal position in relation to legal advice that was obtained to inform this understanding and that constitutes a live issue in the litigation. To do so would unfairly place the other party in a situation where they could not properly challenge a party’s state of mind regarding their purported legal position because that information would be guarded by privilege. This case serves as a reminder that solicitor-client privilege is not absolute, and that parties must carefully consider when and how their pleadings may introduce their state of mind towards an issue live in the litigation.