In Ontario, every estate trustee is obligated to keep accurate records of estate transactions under rule 74.17 of the Rules of Civil Procedure, RRO 1990, Reg 194. Not only is a statement of disbursements required, showing all outflows of cash from the estate during the accounting period, but an actual voucher for each disbursement should also be provided.
For estates involved in litigation with a party who has an interest in the estate, however, an accounting may give rise to a challenging question. Must invoices for legal services respecting the litigation be included in the accounting? Or is this information protected by solicitor-client privilege?
The amount of protection provided by solicitor-client privilege in the context of estate accounts can vary. In Barbieri v. White, 2024 BCCA 225, a recent decision of the British Columbia Court of Appeal, the court held that references to legal advice pertaining to estate litigation that was included in counsel's invoice to the estate remained privileged, despite disclosure during an estate accounting. Accordingly, the invoice could be redacted to remove information regarding legal advice provided to the estate. However, the amount charged for legal fees during the estate litigation was not privileged. Because the executor had entered a consent order with the opposing party in the litigation, who happened to be the estate's former co-executor, to provide an updated estate accounting every two months, the court found that privilege over the amount charged to the estate in legal fees had been waived.
The parties had entered the consent order years earlier as part of an agreement to have the former co-executor step down. After she was no longer administering the estate, the remaining executor commenced legal action against her on behalf of the estate, alleging that she had taken real property held in trust for the estate and taken estate funds for her own benefit. Pursuant to the consent order, the executor had been accounting to the former executor throughout the litigation, but did not realize until more than two years had passed that legal invoices billed to the estate related to the litigation had been produced to the former executor as part of the estate accounting.
The lower court found that as a result of the consent order, the executor had both expressly and implicitly waived solicitor-client privilege. On appeal, the Court of Appeal confirmed that the executor had expressly waived solicitor-client privilege by signing the consent order, emphasizing that before agreeing to be removed as executor, the opposing party had the same right as the executor to be cognizant of all estate trust accounting information that was or came into existence. Accordingly, the consent order essentially "[preserved] the former executor's pre-existing right to access the estate's accounts."
The court also addressed the circumstances under which an express waiver of solicitor-client privilege may be established – essentially where the possessor of the privilege:
- knows of the existence of the privilege, and
- voluntarily evinces an intention to waive that privilege.
However, if the party can prove that the disclosure was inadvertent, an express waiver of privilege may be avoided. Under such circumstances, the court must then consider:
- whether the disclosure was repeated, careless or reckless;
- whether an immediate attempt was made to retrieve the privileged documents, and
- whether preserving the privilege would cause unfairness to the receiving party.
In this case, not only did the consent order preserve the former executor's right to access the estate's accounts, but the waiver of privilege could not be avoided, since the disclosure had been repeated for more than two years.
In comparison, an implied waiver of solicitor-client privilege may be established where the party claiming privilege puts their state of mind in issue, or obtains legal advice regarding a transaction and then voluntarily injects the legal advice received or their understanding of the law into the litigation. On this point, the Court of Appeal held that the lower court had erred in finding that the executor had implicitly waived solicitor-client privilege. However, this finding had no practical impact on the court's decision in light of the express waiver of privilege.
Ultimately, this case demonstrates that if it is necessary to account during estate litigation, or if accounts are requested while litigation is ongoing, the amount of information that must be disclosed regarding legal services provided to the estate may depend on whether solicitor-client privilege has been waived. Further to that point, there may be waiver over two different types of information contained in a legal invoice – references to the nature of legal advice provided versus references to the amount charged for those legal services. Since an agreement or consent order to account may be interpreted as a waiver of solicitor-client privilege, such documents should be drafted carefully.
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