Lawyer-client administrative information, including payments into and out of trust accounts, is presumptively and rebuttably privileged. Justice Cavanagh of the Ontario Superior Court of Justice reaffirmed this principle in Sakab Saudi Holding Company et el. v. Saad Khalid S. Al Jabri et al., 2024 ONSC 1601.1
Citing Supreme Court of Canada and Ontario Court of Appeal decisions from the past two decades, Justice Cavanagh denied the plaintiffs' request for the trust ledgers of the lawyers for some of the defendants, finding that (1) the ledgers were presumptively protected by solicitor-client privilege and (2) the plaintiffs had failed to rebut the presumption.
Complex Facts and International Intrigue
Sakab v. Al Jabri involves a dizzying set of complex facts and international intrigue.
The plaintiff companies are Saudi Arabian. They operate in strategic sectors, including aerospace and cybersecurity. They were also commercial fronts for counterterrorism operations, funding covert operations.
One of the principal defendants, Dr. Saad Khalid S. Al Jabri, was a Minister of State and Special Advisor to Mohammed Bin Nayef (MBN), the former Crown Prince of Saudi Arabia. However, the political landscape shifted dramatically in 2017 when MBN was replaced in a palace coup as Crown Prince by his cousin, Mohammed Bin Salman (MBS).
Dr. Al Jabri has not found favour in MBS's eyes. The Saudi regime accused Dr. Al Jabri of fraud and corruption linked to the plaintiff companies. Fearing for his life, Dr. Al Jabri fled the country, ending up in Toronto where the plaintiff companies sued him (and others), seeking billions of dollars of — they alleged — misappropriated funds linked to Dr. Al Jabri.
Lawyers' Trust Ledgers: Presumptively Privileged
In one of many interlocutory matters in the ongoing litigation, the plaintiffs brought a motion to compel the production of trust ledgers from the lawyers for Dr. Al Jabri and the other principal defendant, his son Mohammed.
The plaintiffs argued that the records were needed to determine the nature, value, and location of the defendants' assets and to ensure that they were complying with earlier Mareva injunctions.
The plaintiffs relied on the decisions of the British Columbia Court of Appeal in Wong v. Luu, 2015 BCCA 159 and the Ontario Court of Appeal in R. v. Serfaty, 2004 CanLII 9060. In both cases, the courts concluded that documents relating to the possession and movement of lawyers' trust funds were not privileged.
The responding defendants argued that Wong did not reflect Ontario law and that Serfaty was no longer good law, given the later Supreme Court companion decisions of Canada (Attorney General) v. Thompson, 2016 SCC 21 and Canada (Attorney General) v. Chambre des notaires du Québec, 2016 SCC 20.
Justice Cavanagh agreed with the defendants. Wong is not the law in Ontario, and the ruling in Serfaty has been superseded by Thompson and Chambre des Notaires.
In Thompson and Chambre des Notaires, the Supreme Court unanimously rejected a categorical approach to solicitor-client privilege. The facts (not privileged) versus communications (privileged) distinction does not depend on the document type (e.g., accounting records) but rather on the document's content and what it might reveal about the lawyer-client relationship.
Viewed in this light of content versus form, administrative information — including accounting records and trust ledgers— may be seen to harbour revealing information about the client's legal affairs and should, therefore, be presumed to be privileged.
The defendants also relied on Kaiser (Re), 2012 ONCA 838, where the court held that administrative information such as a lawyer's bill is presumptively and rebuttably privileged.
The plaintiffs asserted that the trust ledger transactions were not legal advice-related but, like any bank account, would reflect the trust accounts' use as a conduit for moving the allegedly misappropriated funds. They argued that they were not seeking disclosure of privileged information such as individual bills, but only the aggregate quantum for each transaction, including dates, sender and recipient identities.
Justice Cavanagh disagreed and concluded that trust ledgers are accounting records with administrative information relating to the lawyer-client relationship. Therefore, per Kaiser, they are presumptively privileged.
Failing To Rebut the Presumption
Faced with the finding of presumptive privilege, the plaintiffs bore the onus of rebutting the presumption.
In Kaiser, the court identified two ways to rebut the presumption, by evidence showing either (1) no reasonable possibility that disclosure will lead, directly or indirectly, to the revelation of confidential solicitor-client communications, or (2) that the information is not linked to the merits of the case and disclosure would not prejudice the client.
The plaintiffs failed on both alternative Kaiser rebuttal criteria.
Justice Cavanagh found that the plaintiffs did not establish that disclosing information in the trust ledgers would not directly or indirectly reveal privileged communications.
Further, the plaintiffs could not demonstrate that the trust ledgers would not be linked to the present case and subsequently prejudice the respondent defendants. The ledgers would disclose the identity of law firms the defendants had consulted and the interactions' timing.
Justice Cavanagh also held that partial disclosure of the trust ledgers was unavailable to the plaintiffs. Redacted versions showing payments for non-legal purposes could reveal amounts used and held for payments made for legal purposes.2 These amounts could be readily calculated and thereby disclose privileged information.
The Crime/Fraud Exception Does Not Apply to Civil Offences
Under the crime/fraud exception, privilege does not attach to communications with a lawyer where the client seeks to facilitate the commission of a crime or fraud.
The plaintiffs argued that the defendants' privilege claim over the trust ledgers was being used to conceal the movement of fraudulently misappropriated funds, unlawful conduct that triggered the crime/fraud exception. They also argued that (1) alleged breaches of the Mareva injunctions by the defendants could attract quasi-criminal sanctions via contempt of court findings and (2) the crime/fraud exception could be applied to civil wrongs, including civil fraud.
Justice Cavanagh rejected all these arguments.
Justice Cavanagh held that the crime/fraud exception was not available in this case, adopting Justice Glustein's ruling in Wintercorn v. Global Learning Group Inc., 2022 ONSC 4576 that the crime/fraud exception does not apply to civil wrongs.
Takeaway
Justice Cavanagh's ruling in Sakab v. Al Jabri confirms that, in Ontario, parties seeking disclosure of a lawyer's trust ledgers must overcome the presumption of solicitor-client privilege. It also illustrates the ruling in Kaiser that administrative information is clothed in presumptive privilege.
The lawyer-client relationship is cemented in trust. This is reflected in solicitor-client privilege, the hermetic seal that envelops lawyer-client communications and information. The Supreme Court has described solicitor-client privilege as "a rule of substance and, now, a principle of fundamental justice... indispensable to the continued existence and effective operation of Canada's legal system".3
Sakab v. Al Jabri is another instance in the evolution of solicitor-client privilege over the past four decades from a mere rule of evidence to the substantive law principle the Supreme Court articulates above.4
We expect this more protective trend to continue.
Footnotes
1. On Friday June 7, 2024, the Ontario Divisional Court granted the plaintiffs leave to appeal Justice Cavanagh's decision.
2. This finding on partial disclosure is consistent with the ruling in Bergmanis v. Diamond, 2021 ONSC 2375, at para 39, leave to appeal dismissed October 4, 2021 (Ont. C.A.) which Justice Cavanagh did not cite in his decision.
3. Canada (National Revenue) v. Thompson, 2016 SCC 21, [2016] 1 SCR 381, at para 17.
4. See generally Robert W. Hubbard and Katie Doherty, Law of Privilege in Canada, Thomson Reuters, 2024 (online), chapter 11.
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