When Do Pleadings Waive Solicitor-Client Privilege? Lessons from the Ontario Court of Appeal

In complex commercial transactions, parties often rely on legal advice when making important business decisions. Such advice helps parties understand their legal rights and is ordinarily protected by solicitor-client privilege. However, a recent decision of the Court of Appeal for Ontario in One York Street Inc. v. 2360083 Ontario Limited, 2026 ONCA 176 illustrates circumstances in which solicitor-client privilege may be deemed waived and the privileged communications ordered to be produced in litigation.

Background

The underlying action arose from a commercial lease dispute. The landlord (the appellant) sued the tenant and the indemnifier under the lease (the respondents) for failing to pay rent and for abandoning the leased premises. The appellant brought a motion seeking production of the respondents’ counsel’s file relating to the negotiation and execution of the lease and the extension.

In their defence and counterclaim, the respondents alleged that they entered into the lease and the lease extensions in reliance on misrepresentations made by the landlord. In particular, they pleaded that they “did not understand the ramifications” of the lease extension and that they signed it “without legal advice.”  Subsequently, that pleading was withdrawn, but the respondents continued to maintain that they had understood the misrepresentations to constitute a guarantee.

These pleadings led to the central issue on the motion and the subsequent appeal: whether the respondents had waived solicitor-client privilege by putting their understanding of their legal rights at issue in the litigation.

Procedural History

The motion judge granted the landlord’s motion. The Divisional Court of Ontario allowed the respondents’ appeal and set aside that order. The Court of Appeal restored the motion judge’s decision.

The Legal Test for Deemed Waiver

The Court of Appeal confirmed that the motion judge applied the correct legal framework based on a two-part analysis derived from Creative Career Systems Inc. v. Ontario, 2012 ONSC 649, namely: (1) the presence or absence of legal advice is relevant to the existence or non-existence of a claim or defence; which is to say that the presence or absence of legal advice is material to the lawsuit; and (2) the party who received the legal advice must make the receipt of it an issue in the claim or defence. When both elements are satisfied, fairness may require disclosure of otherwise privileged communications

Application in This Case

The motion judge concluded that any legal advice received by the respondents at the time of the lease execution was directly relevant to their pleading that they relied on the landlord’s alleged misrepresentations. In particular, the respondents pleaded that they did not understand the legal ramifications of the lease extension and relied on statements by the landlord that were not contained in the lease. Their defence therefore depended in part on their state of mind and understanding of their legal rights at the time of signing.

The Court of Appeal held that the same principles governing deemed waiver apply where a party relies on its lack of understanding of its legal rights as an element of its claim or defence, while having in fact received legal advice on that issue. In such circumstances, fairness and consistency prevent a party from injecting a particular understanding of its legal position into the claim or defence while simultaneously shielding legal advice that may affect that assertion.

Amended Pleadings Did Not Avoid Waiver

An additional complication arose after the landlord brought its motion. The respondents amended their statement of defence and counterclaim to remove the explicit allegations that they did not understand the lease extension and had not received legal advice at the time of signing.

Despite the amendments, the motion judge did not change her conclusion. The remaining pleadings still relied on the respondents’ understanding of their legal position and therefore continued to place their state of mind in issue. The Court of Appeal agreed with this conclusion.

This shows that, to establish waiver of solicitor-client privilege, it is not necessary for a pleading to contain an express reference to a party’s understanding of its legal rights, or to the receipt or absence of legal advice. The critical question is whether the party has relied on its knowledge or understanding of its legal position as an element of its claim or defence.

Key Takeaway

The decision underscores an important principle: a party cannot rely on its understanding of its legal rights as part of its claim or defence while simultaneously shielding legal advice that may bear on that understanding.

Where a party’s state of mind or legal understanding becomes an element of the lawsuit, courts may find that solicitor-client privilege has been deemed waived by the party’s litigation conduct.