CIBC – Tax Court of Canada responds favourably to the dilemma of asserting that a damages payment was legally necessary without waiving privilege for the legal advice on that point

Issues in the appeal of CIBC respecting whether it could deduct the Cdn.$2.9 billion it paid to settle the Enron-related actions against it included whether the settlement amount should have been reimbursed to it by subsidiaries whose conduct may have been the primary basis for the actions.

Rossiter CJ rejected arguments that CIBC had waived solicitor-client privilege by putting its legal knowledge in issue including its position that “its most significant Enron-related liability exposure for the entire CIBC group of entities was created by the parent bank’s (CIBC’s) own conduct, and…not that of its subsidiaries or affiliates,” stating that merely indicating that legal advice informed its position did “not amount to putting its reliance on legal advice in issue in these appeals.” Moreover, the voluntary disclosure by CIBC of some privileged documents did not amount to waiver of the remainder of the privileged communications as the Crown had not shown that such disclosures were misleading in any way.

However, the report of a consultant hired in the Enron litigation by U.S. counsel to advise on damages and related strategy was not privileged, and numerous documents prepared in connection with the Enron litigation were no longer covered by litigation privilege, as the Enron litigation was finished, and it was quite different from the current tax litigation.

Large numbers of Crown discovery requests which CIBC tried to reject on the grounds of irrelevancy were accepted. Rossiter CJ stated:

This particular motion seems in large part to be the result of obstruction by CIBC...[which] not the proper way to litigate, and there are certainly consequences to that strategy that the Court should and will consider.

Neal Armstrong Summaries of CIBC v. The Queen, 2015 TCC 280, under s. 232(1) – solicitor-client privilege, Tax Court Rules 82(2), 84, 95(1), 86(1).