Ontario Court of Appeal Clarifies Crime-Fraud Exception

• The Ontario Court of Appeal has clarified that communications between lawyers and clients are not privileged if they aim to further fraud.
• The crime-fraud exception applies in both civil and criminal cases, where previously privileged communications can be disclosed.
• To invoke the crime-fraud exception, parties must meet strict preconditions, including proof that the client was attempting to engage in wrongful conduct.

The applicability of the [crime-fraud] exception turns on the nature and purpose of the communications between the client and the lawyer, not the nature of the proceeding in which privilege is claimed or challenged.

The Ontario Court of Appeal has clarified that communications between lawyers and clients are not privileged if they aim to further fraud, even in civil cases or when a party is accused of breaching a court order. This ruling applies to both criminal and civil proceedings, where the crime-fraud exception can be invoked to disclose previously privileged communications. The decision was made in the case of Sakab Saudi Holding Company v. Al Jabri, which dates back to 2021 and involves allegations of massive international fraud orchestrated by Saad Khalid Al Jabri, a former high-ranking Saudi Arabian government official.

The crime-fraud exception is subject to strict preconditions, which must be met before previously privileged communications can be disclosed. To invoke the exception, the party seeking disclosure must prove that the client was not receiving legal advice in good faith, but rather attempting to engage in wrongful conduct. Additionally, the correspondence must be about future conduct and not mere legal advice. This nuanced approach ensures that the crime-fraud exception is only applied when necessary, protecting the integrity of the solicitor-client relationship while also upholding the rule of law.

This ruling has significant implications for lawyers advising clients on matters related to fraud or breach of court orders. Communications with clients may not be privileged under the crime-fraud exception, and lawyers should take steps to ensure they are not facilitating wrongful conduct. By understanding the strict preconditions for invoking the crime-fraud exception, lawyers can better navigate complex cases and protect their clients' interests while also upholding their professional obligations.

Lawyers advising clients on matters related to fraud or breach of court orders should be aware that communications with their clients may not be privileged under the crime-fraud exception, and should take steps to ensure they are not facilitating wrongful conduct.

Source: Original reporting via Ontario Court of Appeal