CANADIAN IMPERIAL BANK OF COMMERCE, Appellant, v. HER MAJESTY THE QUEEN,, 2015 TCC 280

Citation: 2015 TCC 280 Date: 20151202 Dockets: 2010-2864(IT)G 2010-1413(IT)G 2010-1414(IT)G 2013-4005(IT)G BETWEEN: CANADIAN IMPERIAL BANK OF COMMERCE, Appellant, and HER MAJESTY THE QUEEN, Respondent . Motion heard on July 15 and 16, 2015 at Toronto, Ontario Before: The Honourable Eugene P. Rossiter, Chief Justice Appearances : Counsel for the Appellant: Joseph Steiner Al Meghji Caroline D’Elia Counsel for the Respondent: Michael Ezri Eric Noble Craig Maw ORDER AND REASONS FOR ORDER Rossiter C.J.

Introduction . 6 Background: the underlying appeals . 6 Motion overview .. 7 Relief sought 8 Issues . 9 Rules engaged . 10 Principles governing discovery . 10 Issue 1: CIBC’s internal investigation documents . 15 Which investigations are in issue? . 16 Relevance of the internal investigations . 17 Privilege . 17 Criteria . 17 Were the investigations done or directed by counsel? . 18 Were the investigations done for the purposes of legal advice? . 19

Facts can exist independently from a privileged communication . 20 Conclusion . 22 Issue 2: Has CIBC waived, or should it be deemed to have waived, its right to claim privilege on certain questions? . 22 General principles governing waiver . 23 Implied waiver . 25 The test 25 Application of the implied waiver test 29 “Legally and commercially prudent to settle” . 30 Denying certain Respondent assumptions . 30 CIBC statements about its understanding of the source of its legal exposure in the Enron litigation 31 Partial waiver . 34 The test 34 Application of the test 36 CIBC statements about its understanding of the source of its legal exposure in the Enron litigation 36 Individual questions about redacted board minutes . 38 i.

Questions 3462, 3470 and 3514 . 38 ii.

Questions 888 and 894 . 39 CIBC’s understanding of its liability exposure under U.S. law .. 39 Conclusion . 40 Issue 3: Can CIBC rely on settlement privilege to protect information and documents arising from the negotiation and conclusion of the Newby and MegaClaim settlements? . 41 General principles governing settlement privilege . 41 Question 871: Production of the mediation agreement 42 Is there an applicable exception to the settlement privilege? . 44 The principles governing exceptions . 44 Application of the principles governing exceptions to this motion . 49 Question 3119 . 49 Question 849 . 50 Questions 845 and 848 . 53 Questions 922 and 923 . 53 Questions 927 and 928 . 53 Question 5757 . 54 Questions 866, 894 and 900 . 55 Questions 911 . 55 Issue 4: Can CIBC rely on litigation privilege that has its root in the Newby and MegaClaim litigation? 56 Can the claims of litigation privilege be re-evaluated for protection by solicitor-client privilege? 57 Issue 5: Can CIBC claim solicitor-client privilege over certain questions and documents? 59 Questions 877 and 878 . 59 Question 3119 . 62

Questions 927 and 928 . 63 Questions 888 and 889 . 63 Questions 866, 894 and 900 . 64 Questions 2923 and 2924 . 65 Issue 6: Is CIBC’s

Schedule B deficient because the

schedule does not contain enough identifying information for certain privileged documents? . 67 Which

Schedule B should be used? . 67 Is CIBC’s

Schedule B deficient? . 69 Insufficient description of documents . 69 What is the point of description? . 70 Is metadata a sufficient descriptor? . 71 Claims of privilege over documents that do not appear to be privileged . 73 Issue 7: CIBC’s refusals . 75 Questions about non-Enron litigation and settlements . 75 Questions about CIBC’s allocation of the Settlement Amounts and any potential tax motivation 77 Questions 1771 and 1772 . 81 Question 2225 . 82 Question 2296 . 83 Questions 2297, 2298 and 2299 . 84 Question 2356 . 85 Question 2378 . 85 Question 2388 . 85 Questions 2390 and 2391 . 85 Questions relating to a memo from the CIBC Chief Accountant 86 Question 2441 . 86 Questions 2442 and 2443 . 87 Question 2446 . 87 Question 2449 . 87 Questions 2480 and 2481 . 88 Question 2491 . 88 Questions about the decision to allocate the Enron settlement to CIBC .. 89 Questions 2393 and 2394 . 89 Question 2395 . 89 Question 2513 . 90 Question 2514 . 90 Questions relating to the second version of a memo from the CIBC Chief Accountant 90 Questions 2497, 2498, 2499 and 2500 . 90 Questions 1734 and 1735 . 91 Questions 2611, 2627, 2632 and 2633 . 92

Specific individual questions . 92 Question 3454 . 92 Questions 2889 and 2891 . 93 Questions 372 and 384 . 94 Question 1698 . 94 Questions 1451 and 2712 . 95 Issue 8: Questions which the Respondent says CIBC did not answer at all 97 Questions 208, 211 and 227 . 97 Question 404 . 97 Questions 947 and 948 . 97 Question 1383 . 98 Question 1482 . 98 Question 1688 . 98 Question 2057 . 99 Question 2063 . 99 Question 2071 . 99 Question 2311 . 99 Questions 2539 and 2540 . 100 Question 2810 . 100 Question 2960 . 100 Questions 3127, 3131, 3132, 3133, 3142, 3143, 3144, 3145 . 100 Questions 3499 and 3500 . 101 Question 3733 . 101 Questions 3819, 3820, 3821 and 3822 . 101 Question 5902 . 101 Lack of specification on where privileged documents appear in the productions . 102 Conclusion . 102 Introduction [ 1 ] This is a motion by the Respondent to: • Compel answers to discovery questions that were refused or, in the Respondent’s view, not fully answered or not answered at all; • Adjudicate various claims of privilege made by the Appellant (hereinafter referred to as “CIBC”) over questions and requests for documents from the Respondent; and • Adjudicate issues with respect to CIBC’s list of documents.

Background: the underlying appeals [ 2 ] The appeals relate to CIBC’s attempt to deduct about $3 billion in settlement payments, interest on the payments and related legal expenses (the “Settlement Amounts”) from its business income in its 2005 and 2006 taxation years. The Settlement Amounts relate to litigation arising from certain CIBC transactions with Enron Corp. (“Enron”). After Enron filed for

Chapter 11 Bankruptcy protection, CIBC and others were sued for allegedly improperly participating in transactions with Enron involving the sales of assets to special purpose entities. The plaintiffs in the litigation alleged that CIBC knew the sales were improperly represented on Enron’s financial statements. The two Enron-related litigations in issue are known as the Newby Litigation and the MegaClaim Litigation.

[ 3 ] During its 2005 taxation year ended October 31, 2005, CIBC reached a settlement in the Newby and MegaClaim Litigations for approximately U.S. $2.6 billion, or about CDN $2.9 billion. CIBC also owed interest on the Newby settlement payments totalling about $48 million and incurred related legal expenses of about $56 million. [ 4 ] CIBC then deducted almost all of the Settlement Amounts from its business income in its 2005 tax year.

In its 2006 tax year, it then deducted from its business income the remaining available Settlement Amounts (which at this point only consisted of interest and legal expenses), totalling about $26.5 million. The 2005 deductions also led CIBC to incur a non-capital loss of $2.1 billion in 2005, leading CIBC to carry back about $2.04 billion of that loss to its 2003 taxation year and $41 million of that loss to its 2002 taxation year. [ 5 ] The Minister of National Revenue (the “Minister”) denied the deductions for various reasons, stating they were offside with s. 3 , s. 9 and paragraph 18(1) (

a) of the Income Tax Act [1] (the “ Act ”) as they were not incurred to earn and produce income from business and did not conform to well-accepted business or accounting principles. The Minister says that the costs truly belonged to certain of CIBC’s subsidiaries and affiliates, not CIBC itself. The Minister also denied the deductions under additional heads of the Act , stating that: • If the Settlement Amounts were indeed incurred to earn and produce income, they were only capital outlays under paragraph 18(1) (

b) of the Act ; • The Settlement Amounts would have been reimbursed to CIBC if CIBC were dealing at arm’s length with its subsidiaries and affiliates, and therefore the deductions are offside with ss. 247(2) - (3) of the Act ; • The deductions were not reasonable and therefore violate s. 67 of the Act ; and • The settlement and interest costs were merely contingent liabilities in 2005 and therefore not deductible because of paragraph 18(1) (

a) and paragraph 18(1)(

e) of the Act . [ 6 ] The Minister also assessed CIBC for instalment interest, arrears interest and overpaid refund interest, and added amounts to CIBC’s taxable capital for the purposes of Parts I.3 and VI of the Act , which added to CIBC’s tax payable. The entire outcome of all four appeals essentially turns on whether CIBC can deduct the Settlement Amounts as expenses. Motion overview [ 7 ] This motion is mostly about privilege and relevance. CIBC is claiming solicitor-client privilege, litigation privilege and settlement privilege over many of the questions and documents in issue in this motion.

CIBC states the Respondent’s motion is an attempt to run roughshod over privilege by gaining access to information and documents that warrant protection. CIBC also says that various Respondent questions are irrelevant to the tax appeals and were properly refused. In particular, CIBC says the Respondent is attempting to retry the Enron litigation that led to the Newby and MegaClaim settlements, when instead the real issue is whether the Settlement Amounts are deductible.

Any refusals were therefore justified based on irrelevance or, alternatively, on the principle of proportionality. [ 8 ] The Respondent contends CIBC’s privilege claims are unfounded or that privilege has been impliedly waived.

The Respondent says waiver occurred either through CIBC putting its state of mind in issue in a manner that relies on legal advice, or through CIBC selectively disclosing some privileged material when fairness dictates that full disclosure should be made. [ 9 ] As for relevance, it is crucial to note again that the Respondent argues that the Settlement Amounts did not belong to CIBC but to certain subsidiaries and affiliates. In other words, the Respondent argues that CIBC should have allocated the Settlement Amount deductions to other related entities instead of taking the full deduction for itself.

The Respondent says it was these entities that were engaged in the transactions with Enron that led to the Newby and MegaClaim Litigations.

Many of the Respondent’s questions are aimed at pursuing this line of inquiry, and the Respondent says they are therefore relevant to the tax appeals and are reasonable given the appeals’ complexity and the amounts at stake. [ 10 ] Broadly speaking, the Respondent says CIBC is not answering basic questions about how CIBC booked certain litigation expenses, the advice it relied on in assessing the underlying litigation risk from the Enron litigation, and how it understood the sources of legal exposure for both it and its subsidiaries and affiliates.

This is key to the Respondent’s case on whether the Settlement Amounts were properly accounted for (including how and when the booking decisions were made), whose income-earning purpose they related to (CIBC’s or its subsidiaries’/affiliates’), whether the Settlement Amounts were on account of capital, and how much the subsidiaries would have contributed to the Settlement Amounts had they dealt at arm’s length with CIBC.

Relief sought [ 11 ] The Respondent is essentially seeking an order directing CIBC to: • Answer questions it refused, claimed were privileged, did not sufficiently answer or did not answer at all; • Provide certain documents CIBC undertook to provide but has yet to do provide; • Fulfill any unfulfilled undertakings; • Provide to the Court certain documents for which privilege is claimed, so that the Court may review them to determine if the

privilege claims are proper; and • Update its List of Documents to include more identifying information for certain documents for which privilege is claimed. Issues [ 12 ] The issues in this motion are as follows: a. Has CIBC substantiated its privilege claim with respect to documents recording its internal investigations into the Enron matter? b.

Has CIBC waived, or should it be deemed to have waived, its right to claim privilege, either by putting in issue its state of mind (in particular its legal knowledge) concerning the underlying Enron litigation and the resulting settlement or by selectively disclosing some privileged material? c. Can CIBC rely on settlement privilege to protect information and documents arising from the negotiation and conclusion of the Newby and MegaClaim settlements? d. Can CIBC rely on litigation privilege that has its root in the Newby and MegaClaim Litigations? e.

Can CIBC claim solicitor-client privilege over certain other questions and documents? f. Is CIBC’s

Schedule B deficient because the

schedule does not contain enough identifying information for certain privileged documents? g. Should CIBC be compelled to answer refused questions, including, but not limited to, questions on the circumstances under which CIBC allocated the Enron settlement outlays to itself? h. Should CIBC be compelled to answer questions and undertakings that the Respondent says CIBC did not fully answer or answer at all?

Rules engaged [ 13 ] This motion engages the following rules under the Tax Court of Canada Rules (General Procedure) [2] (the “ Rules ”): • Rule 82, which governs the List of Documents; • Rule 84, which governs the description of documents that must be provided in the List of Documents; • Rule 88, which deals with potential relief if an affidavit of documents is incomplete or privilege is wrongly claimed; • Rule 95, which governs the scope of an examination for discovery; • Rule 107, which governs objections to questions during an examination for discovery and how such questions are dealt with; and • Rule 110, which provides relief for default or misconduct of a person being examined.

Discovery Principles [ 14 ] In Burlington Resources Finance Company v The Queen , [3] Justice Campbell canvassed the case law on discovery principles and provided an excellent

summary. I note the decision in Burlington has been appealed to the Federal Court of Appeal, with the appeal still outstanding. I find the decision most helpful as a review of the relevant case law. I would place particular emphasis on the principles noted from Kossow v The Queen , [4] which were approved of by the Federal Court of Appeal, [5] and from HSBC Bank Canada v The Queen . [6] The following are excerpts of the principles from Burlington that are most relevant to this motion: [11] Caselaw is clear and abundant.

The core of discovery principles is that its scope should be wide, with relevancy construed liberally, without, however, allowing it to enter the realm of a fishing expedition. These basic principles are essential because the purpose of discovery is to enable parties to know the case they have to meet at trial, to know the facts upon which the opposing party relies, to narrow or eliminate issues, to obtain admissions that will facilitate the proof of matters in issue and, finally, to avoid surprise at trial ( General Electric Capital Canada Inc. v The Queen , 2008 TCC 668 , 2009 DTC 1186, at para 14 ).

This is all with a view to making the hearing of an appeal streamlined and to ensure that the parties are focussed on the appropriate issues. [12] In the decision of Baxter et al v The Queen , 2004 TCC 636 , 2004 DTC 3497, at paragraph 13 , Chief Justice Bowman, as he was then, summarized the principles concerning relevancy of questions in discoveries as follows: (

a) relevancy on discovery must be broadly and liberally construed and wide latitude should be given;

(

b) a motions judge should not second guess the discretion of counsel by examining minutely each question or asking counsel for theparty being examined to justify each question or explain its relevancy; (

c) the motions judge should not seek to impose his or her views of relevancy on the judge who hears the case by excluding questionsthat he or she may consider irrelevant but which, in the context of the evidence as a whole, the trial judge may consider relevant; (

d) patently irrelevant or abusive questions or questions designed to embarrass or harass the witness or delay the case should not bepermitted. [13] A

summary of the general principles gleaned from the caselaw was provided by Justice V. Miller at paragraph 60 of Kossow vThe Queen, 2008 TCC 422, 2008 DTC 4408, as follows: 1. The principles for relevancy were stated by Chief Justice Bowman and are reproduced at paragraph 50.[7] 2. The threshold test for relevancy on discovery is very low but it does not allow for a “fishing expedition”: Lubrizol Corp. v.Imperial Oil Ltd., (FCA), [1997] 2 FC 3, at para. 19. … 9. It is proper to ask questions to ascertain the opposing party’s legal position: Six Nations of the Grand River Band v.

Canada(Attorney General), (ON SCDC), [2000] OJ No. 1431, at para. 14. … [14] Justice C. Miller in HSBC Bank Canada v The Queen, 2010 TCC 228, 2010 DTC 1159, at paragraphs 14 and 15, after quotingthe Kossow principles, added the following to his review of the scope of discovery questions: [14] The following additional principles can be gleaned from some other recent Tax Court of Canada case authority: 1.

The examining party is entitled to “any information, and production of any documents, that may fairly lead to a train of inquiry thatmay directly or indirectly advance his case, or damage that of the opposing party”: Teelucksingh v. The Queen, 2010 TCC 94, 2010 DTC1085. 2. The court should preclude only questions that are “(1) clearly abusive; (2) clearly a delaying tactic; or (3) clearly irrelevant”: JohnFluevog Boots & Shoes v.

The Queen, 2009 TCC 345, 2009 DTC 1197. … [15] The Federal Court of Appeal in The Queen v Lehigh Cement Limited, 2011 FCA 120, 2011 DTC 5069, at paragraphs 34 and 35,described the general limits respecting discoveries: [34] The jurisprudence establishes that a question is relevant when there is a reasonable likelihood that it might elicit informationwhich may directly or indirectly enable the party seeking the answer to advance its case or to damage the case of its adversary, or whichfairly might lead to a train of inquiry that may either advance the questioning party’s case or damage the case of its adversary.

Whetherthis test is met will depend on the allegations the questioning party seeks to establish or refute. See Eurocopter 2010 FCA 142 ,[2010] F.C.J. No. 740, at paragraph 10, Eli Lilly Canada Inc. v. Novopharm Ltd. 2008 FCA 287, 381 N.R. 93 at paragraph 61 to64; Bristol-Myers Squibb Co. v. Apotex Inc. 2007 FCA 379 , [2007] F.C.J. No. 1597, at paragraphs 30 to 33. [35] Where relevance is established the Court retains discretion to disallow a question. The exercise of this discretion requires aweighing of the potential value of the answer against the risk that the party is abusing the discovery process.

See Bristol-Myers Squibb v.Apotex Inc. at paragraph 34. The Court might disallow a relevant question where responding to it would place undue hardship on theanswering party, where there are other means of obtaining the information sought, or where “the question forms part of a ‘fishingexpedition’ of vague and far-reaching scope”: Merck & Co. v.

Apotex Inc., 2003 FCA 438, 312 N.R. 273 at paragraph 10; Apotex Inc. v.Wellcome Foundation Ltd., 2008 FCA 131, 166 A.C.W.S. (3d) 850 at paragraph 3. [16] Finally, a party may be compelled to answer questions that relate to any issue contained in the pleadings, regardless of whether aparty has advised or undertaken that it will no longer place reliance on that position or provision (ExxonMobil Canada Hibernia Co. vThe Queen, 2014 FCA 168, 2014 DTC 5086). [17] The jurisprudence is comprehensive and the guidelines well established.

As many cases have noted, there is no formula that canbe applied in determining whether questions should be answered. The ultimate purpose is to fairly, reasonably and expeditiously movematters along to a hearing…. [15] Further to the issue of relevancy, other judgments of the Tax Court of Canada (“TCC”) have noted the role that pleadings play in defining relevancy. In Teelucksingh v The Queen,[8] the Court noted that: (

i) Examination for discovery is an examination as to the information and belief of the other party as to facts that are relevant to thematters in issue, as defined by the pleadings. … (vi) The examining party is entitled to have production of any documents that are relevant to the matters in issue as defined by the pleadings, but subject to proper claims of privilege.[9]

[16] In Shell Canada Ltd. v The Queen,[10] Christie A.C.J. cited the following[11] with approval when discussing pleadings’ role indefining relevancy: 10. See also Holmested & Watson, Ontario Civil Procedure, under the heading “SCOPE OF EXAMINATION: GENERAL, Rule31.06(1)” at 31–48: “What is relevant to the matters in issue, as defined by the pleadings, is extremely broad. The examining party is entitled to discover forthe purpose of supporting her own case and to put that case to the opponent to obtain admissions and to limit the issues.

She is entitled tointerrogate to destroy the adversary’s case or to find out the case she has to meet and the facts (and now the evidence) that are reliedupon by the adversary in support of his case. And it is not a valid objection that the examining party already knows those facts. Theexaminer is entitled—indeed, it is a major purpose of discovery—to obtain admissions that will facilitate the proof of that party’s case orwill assist in destroying the adversary’s case.

See generally Williston and Rolls, The Law of Civil Procedure (1970), 782–787.” And at page 31-49: “It is a cardinal rule that discovery is limited by the pleadings. Discovery must be relevant to the issues as they appear on therecord: Playfair v. Cormack (1913), (ON SC), 4 O.W.N. 817 (H.C.); Jackson v. Belzburg, (BC CA),[1981] 6 W.W.R. 273 (B.C.C.A.). The party examining has no right to go beyond the case as pleaded and to interrogate concerning acase which he has not attempted to make by his pleadings.

But “everything is relevant upon discovery which may directly or indirectlyaid the party seeking discovery to maintain his case or to combat that of his adversary”: McKergow v. Comstock (1906), 11 O.L.R. 637(C.A.). While clearly irrelevant matters may not be inquired into, relevancy must be determined by the pleadings construed with fairlatitude: ibid. The court should not be called upon to conduct a minute investigation as to the relevance of each question and where thequestions are broadly related to the issues raised, they should be answered: Czuy v. Mitchell (1976), 1976 ALTASCAD 161 , 2C.P.C. 83 (Alta.

C.A.). The tendency is to broaden discovery and the “right to interrogate is not confined to the facts directly in issue, butextends to any facts the existence or non-existence of which is relevant to the existence or non-existence of the facts directly inissue”: Marriott v. Chamberlain (1886), 17 Q.B.D. 154.” [17] The pleadings for the underlying tax appeals will therefore go a long way towards defining what is relevant. [18] The above principles governing discovery thus reveal the following salient points: • Relevancy is extremely broad and should be liberally construed.

The threshold for relevancy on discovery is very low but does notallow for a fishing expedition, abusive questions, delaying tactics or completely irrelevant questions; • Everything is relevant that may directly or indirectly aid the party seeking the discovery to maintain its case or combat that of itsadversary.

If the questions are broadly related to the issues raised, they should be answered; • Discovery is limited by the pleadings to some extent; and • The examining party conducting the discovery is doing so for the purposes of: supporting his or her own case; obtainingadmissions; attacking the opponent’s case; limiting the issues at trial; and revealing the case that he or she must meet at trial and thefacts that the opponent relies upon.

Issue 1: CIBC’s internal investigation documents [19] This issue involves questions 995, 996 and 1005. [20] CIBC’s productions referred to certain internal investigations in the wake of Enron’s collapse and to the CEO’s or othermanagement’s views of CIBC’s conduct in the Enron transactions. The Respondent has essentially asked whether any internal reviewswere done by CIBC or its subsidiaries and affiliates, and points in particular to reviews referenced in the minutes of CIBC board meetingsand one referenced in an email to a journalist. The Respondent also asked what the outcomes of any such reviews were.

CIBC is claimingsolicitor-client privilege and litigation privilege over any internal investigation documents.

Which investigations are in issue? [21] Aside from asking generally for any internal investigations related to the Enron transactions, the Respondent is particularlyasking for the details of investigations referenced in the following productions: • An Oct. 4, 2002, email to a Globe and Mail reporter from CIBC’s Senior Vice President for Corporation Communications saidCIBC had no reason to believe it did anything inappropriate involving Enron, and that the conclusion had been reached after conducting an extensive internal review of all of CIBC’s relationships with Enron over the years.[12] • The minutes of a CIBC board meeting on Aug. 7, 2003, say there were steps taken by CIBC management to investigate the Enronmatter, and that the results would be presented to the board so it could determine if it agreed with the conclusions and strategies of management, “including the appropriateness of CIBC’s employees in their dealings with Enron.”[13] • The minutes of a CIBC board meeting on Aug. 20, 2003, say that the CEO and the Chairman of the Board had agreed on the need

for the board to examine reputational issues and had asked an “independent evaluator” to look at these issues. [14] • The minutes of a CIBC board meeting on Oct. 9, 2003, record CIBC’s Executive Vice-President and General Counsel providing an update on several matters relating to Enron. The update is redacted in the productions.

The update is followed by the CEO expressing management’s view that it was in the best interest of CIBC to settle the Enron litigation. [15] (It appears the Respondent believes these minutes suggest a reference to an internal investigation; however, they simply appear to record an update on the Enron litigation.

Having said that, the expression of management’s view that it was in the best interest of CIBC to settle the Enron litigation could be a tie-in to the internal investigation.) • The minutes of a CIBC board meeting on Aug. 3, 2005, record CIBC’s Executive Vice-President and General Counsel reviewing the “internal investigations” that were done after Enron went bankrupt. [16] Relevance of the internal investigations [ 22 ] It is clear that investigations on various Enron-related actions by CIBC and related entities, including actions implicated in the litigation that led to CIBC deducting the Settlement Amounts, would be relevant to the Respondent’s arguments on which entity’s business incurred or should have incurred the Settlement Amounts, among other issues.

The Respondent notes that in the tax appeals, CIBC is emphasizing its own role in the Enron transactions to justify its deduction of the Settlement Amounts. Any internal reviews of the Enron transactions could include information on which employees and/or entities were involved in the impugned transactions, therefore making them highly relevant to the tax appeals. Privilege Criteria [ 23 ] CIBC is claiming solicitor-client privilege and litigation privilege over internal investigation documents. For reasons following, litigation privilege is not available.

Therefore, the only issue here is whether solicitor-client privilege applies to any of the internal investigations. [ 24 ] To fall within solicitor-client privilege, a document or communication must fit within the classic criteria.

It must be: 1) a communication between solicitor and client; 2) which entails the seeking or giving of legal advice; and 3) which is intended to be confidential by the parties. [17] [ 25 ] The party asserting the privilege bears the evidentiary burden to establish the claim on a balance of probabilities. [18] This means CIBC has the burden of justifying the privilege claim. [ 26 ] The issue turns on who was conducting or directing the internal investigations and whether they were done for the purposes of legal advice. CIBC says the investigations meet the criteria.

The Respondent says CIBC fails the test because the investigations were not done or requested by counsel for the purpose of providing legal advice, while in other cases, CIBC’s General Counsel was not acting in his capacity as a lawyer but in his role as a company officer and director of numerous subsidiaries. Were the investigations done or directed by counsel? [ 27 ] CIBC says the available information shows the investigations were conducted by or at the direction of CIBC’s internal and/or external counsel.

It also points to the fact that in the relevant board minutes, reporting on the internal investigations comes from CIBC’s general counsel. [ 28 ] However, counsel involvement in the investigations is not apparent from the productions: • The Oct. 4, 2002, email to the Globe and Mail reporter does not suggest any counsel involvement; • The board minutes from Aug. 7, 2003, specifically discuss the steps taken by CIBC management to investigate the matter.

The minutes further say that the assembled group would decide on whether it agreed with management’s conclusions and strategies – management, not counsel; • The investigation described in the Aug. 2, 2003, board minutes is described as being conducted by an “independent evaluator” of the Enron transactions and similar transactions that carry reputational and financial risk to CIBC. There is no indication that it was a counsel investigation; • The minutes from the Aug. 3, 2005, board meeting show that CIBC’s general counsel was leading the discussion on internal investigations that were done.

But this may only go to show how legal advice was given based on the investigations; it does not show that the investigations themselves were led or conducted by counsel. [ 29 ] Based on the above examples cited by the Respondent, there is no suggestion of counsel conducting investigations or requesting them for the purpose of providing legal advice. Of course, it is reasonable to ask: why else would investigations be done other than for legal advice? It seems apparent that CIBC was trying to figure out what happened, and such an investigation would likely be done, at least in part, to determine CIBC’s liability.

CIBC, however, has the onus of establishing privilege. I do not believe that it has been shown

that the investigations were done or directed by counsel, thus CIBC has failed to meet the burden to establish this aspect of privilege. [ 30 ] The Respondent also suggests that in some cases, CIBC’s General Counsel was not acting in his capacity as a lawyer but in his role as a company officer and director of numerous subsidiaries, and that solicitor-client privilege therefore does not apply. [19] There is not enough evidence to conclude that this was the case.

The minutes show the General Counsel providing an update on Enron-related matters, and there is no reason to believe he was doing so in any role other than as counsel to CIBC.

Were the investigations done for the purposes of legal advice? [ 31 ] The Respondent argues there is no evidence the investigations were done for the purposes of providing legal advice, saying there is no letter from CIBC to counsel asking for the investigations, nor are there affidavits indicating they were done by counsel for the purpose or providing legal advice. [ 32 ] CIBC says it is clear from the productions that the investigations were done in the wake of Enron’s collapse in relation to contemplated and actual litigation.

The only reasonable inference, it says, is that the investigations were done under in-house counsel’s supervision for the purpose of advising management and the board on matters relating to Enron. [ 33 ] Privilege cannot be established on inferences alone. CIBC has not produced any material that shows the investigations were done under counsel’s supervision for the purpose of providing legal advice.

As discussed above, while it does indeed seem reasonable to think that internal investigations would have at least some tie-in to providing legal advice, CIBC has not demonstrated how these specific investigations fall into the solicitor-client privilege criteria – it merely asks the Court to infer that the criteria are met. [ 34 ] That inference cannot be made without a reasonable basis to do so. CIBC has the onus of establishing, on a balance of probabilities, that solicitor-client privilege applies to the investigations. It has not done so.

There is insufficient evidence that the investigations were done or directed by counsel or that they were done for the purpose of giving legal advice. They certainly may have subsequently formed the basis for providing legal advice, and such advice would be privileged. But the investigations themselves do not carry the same protection.

Facts can exist independently from a privileged communication [ 35 ] Regardless of whether the investigations meet the solicitor-client privilege test, there are other reasons why the investigations themselves – or at least the parts of them that do not include legal advice – are not privileged. [ 36 ] The Respondent points to the Federal Court’s decision in Belgravia Investments Ltd. v Canada [20] for the principle that while certain documents may be privileged because they involve the provision of legal advice, facts contained in those documents that are otherwise discoverable will not be privileged. [21] The Federal Court added that no automatic privilege attaches to documents simply because they come into the hands of a party’s lawyer. [22] A legal opinion will be privileged, but the facts or documents that happen to be reflected in the opinion will not be privileged if they are otherwise discoverable. [ 37 ] CIBC responds that the internal investigations were done for the main purpose of obtaining legal advice, including getting recommendations based on the facts that were gathered.

It points to Gower v Tolko , [23] a Manitoba Court of Appeal case, to show that courts have recognized that legal advice also includes ascertaining or investigating the facts upon which the advice will be rendered and that investigation is an important part of legal service if it is connected to providing that legal service. [24] CIBC says its fact-gathering was inextricably linked to the provision of legal advice, and therefore solicitor-client privilege is established. [ 38 ] In Gower , however, the Court of Appeal was speaking of fact-gathering that is done as part of a lawyer ’s legal services ; [25] in other words, there is still a lawyer who is conducting or supervising the fact-gathering.

As already discussed, there is insufficient evidence that counsel for CIBC was conducting or directing the internal investigations referenced in the productions. [ 39 ] Moreover, courts have been known to divide a lawyer’s work product into legal and non-legal parts, with only the former being privileged. In College of Physicians of British Columbia v British Columbia (Information and Privacy Commissioner) , [26] a lawyer obtained four expert opinions to help a client assess a complaint against a doctor.

The lawyer then prepared memoranda summarizing the opinions of two of the experts and provided her own legal analysis. The B.C. Court of Appeal held that the lawyer was acting in a lawyer’s capacity when she obtained the facts necessary to give legal advice to her client, but her

summary of the experts’ opinions – the facts upon which the analysis was based – was not privileged because those opinions were not privileged on their own since they were communications from the experts to the client. The Court of Appeal concluded that while the lawyer’s legal analysis was privileged, the memoranda summarizing the expert opinions were not. [ 40 ] In Ross v Canada (Minister of Justice) , [27] a lawyer prepared an investigative report for the Minister of Justice that contained legal advice and recommendations as well as factual findings.

The factual findings of the report were produced, but the legal advice and recommendations were redacted on the basis of solicitor-client privilege. The court agreed with this manner of disclosure and upheld the claim for solicitor-client privilege. [ 41 ] It is evident that facts gathered as part of an investigation can be disclosed, while any legal advice arising from those facts remains privileged.

Not only is there insufficient evidence that the investigations were conducted or directed by counsel, but there is no reason why the facts gathered as part of the internal investigations cannot be separated from any legal advice given based on the factual findings. Conclusion [ 42 ] CIBC has failed to substantiate its broad claim of solicitor-client privilege over the internal investigations. Questions 995, 996

and 1005 must therefore be answered. It is important to note, however, that any portions of the investigations that involved the provisionof legal advice will remain privileged; any facts gathered or summaries written, however, must be disclosed.

Issue 2: Has CIBC waived, or should it be deemed to have waived, its right to claim privilege on certain questions? [43] This issue involves the following questions: 655, 659, 866, 888, 889, 894, 900, 917, 922, 936, 937, 938, 939, 941, 2923, 2924,3462, 3470 and 3514. [44] The Respondent says that CIBC has waived solicitor-client privilege by pleading certain conclusions and taking certaindiscovery positions that put CIBC’s state of mind and legal knowledge in issue.

The Respondent argues that CIBC relied on legal adviceand other privileged communications to arrive at these conclusions. [45] In particular, the Respondent points to CIBC’s position that it was the activities of a CIBC employee, Dan Ferguson, and aCIBC credit committee that represented the source of its legal exposure in the Enron litigation. CIBC used this position to justify itsdeduction of the Settlement Amounts.

The Respondent argues that this position, which relied on legal advice and other privilegedcommunications, put CIBC’s understanding of the source of its legal exposure in issue and therefore constituted waiver of solicitor-clientprivilege. [46] The Respondent further contends waiver occurred when CIBC disclosed some documents that were partially redacted forprivilege. The Respondent says it was prejudiced by not receiving the full disclosure and that legal principles dictate that waiver befound over the remaining privileged portions.

General principles governing waiver [47] Although the test for claiming solicitor-client privilege has already been noted, it is imperative in the context of waiver tounderscore the importance of the privilege. [48] The Supreme Court of Canada (“SCC”) has held that solicitor-client privilege “must be as close to absolute as possible to ensurepublic confidence and retain relevance. As such, it will only yield in certain clearly defined circumstances, and does not involve a balancing of interests on a case-by-case basis.”[28] The privilege “is part of and fundamental to the Canadian legal system.

While its historical roots are a rule of evidence, it has evolved into a fundamental and substantive rule of law.”[29] It therefore goes without sayingthat given solicitor-client privilege’s importance, it will not yield easily. [49] The principles governing waiver are not as clear.

Canadian courts have applied various tests for implied waiver, which has led to inconsistent and unpredictable results.[30] This is certainly evident in the parties’ submissions in this motion: they cannot agree on theproper test for implied waiver. [50] The TCC recently dealt with the principles governing waiver in Gerbro Inc. v The Queen.[31] Justice Woods quoted Canada (Citizenship and Immigration) v. Mahjoub[32] to summarize the general principles on implied waiver: (

a) waiver of privilege as to part of a communication will be held to be waiver as to the entire communication. S. & K. Processors Ltd. vCampbell Ave. Herring Producers Ltd (1983), (BC SC), 35 CPC 146, 45 BCLR 218 (SC) (S & K); (

b) where a litigant relies on legal advice as an element of his claim or defence, the privilege which would otherwise attach to that adviceis lost. (S & K); (

c) in cases where fairness has been held to require implied waiver, there is always some manifestation of a voluntary intention to waivethe privilege at least to a limited extent. The law then says that in fairness and consistency, it must be entirely waived. (S & K); (

d) the privilege will deemed to have been waived where the interests of fairness and consistency so dictate or when a communicationbetween a solicitor and client is legitimately brought into issue in an action. Bank Leu AG v Gaming Lottery Corp., [1999] OJ No 3949(Lexis); (1999), 43 C.P.C. (4th) 73 (Ont. S.C.) at paragraph 5; (

e) the onus of establishing the waiver rests on the party asserting waiver of the privilege. (S & K at paragraph 10). [51] Furthermore, waiver may also occur in the absence of an intention to waive, where fairness and consistency so require.[33] [52] Notwithstanding the Mahjoub principle in (

d) above, I am not convinced that “fairness or consistency” alone are sufficient to lead to waiver.[34] In my view, however, the remaining Mahjoub principles are well-supported by the case law, including the fact that theparty asserting waiver (in this case the Respondent) has the onus of establishing waiver. [53] Here the Respondent argues waiver occurred through two separate avenues: first, through CIBC putting its state of mind inissue and relying on legal advice to do so; and second, through CIBC’s selective disclosure of privileged material.

In some of itssubmissions, the Respondent itself seemed to mix up these two avenues. It is important to distinguish between them and for the purposesof this decision, I will refer to the first avenue as “implied waiver” and the second avenue as “partial waiver.” Implied waiver The test [54] The Respondent and CIBC disagree on the test for implied waiver.

[ 55 ] The Respondent points to the above principles from Gerbro Inc. as well as Rogers v Bank of Montreal [35] to say that waiver can be implied where a party has pleaded or advanced its case in a way that makes any legal advice it received relevant in ascertaining what its state of mind was at the relevant time. It also points to Bank Leu AG v Gaming Lottery Corp. [36] for the principle that waiver will occur “where the interests of fairness and consistency so dictate or when a communication between a solicitor and client is legitimately brought into issue in an action.

When a party places its state of mind in issue and has received legal advice to help form that state of mind, privilege will be deemed to be waived with respect to such legal advice.” [37] [ 56 ] Rogers is a noteworthy case. The defendant bank asserted that it had relied on a receiver’s advice on the law, therefore putting in issue the state of its legal knowledge and, in turn, the nature of the legal advice it received from others in forming that legal knowledge. This led the court to find there was implied waiver over legal advice the bank received.

In comparing the bank’s defence to the defence in an American decision on waiver, the court focused on the supposed privilege-holder’s reliance on the legal advice: What underlines both that defense and the defense in this case is that the party claiming the privilege relied upon the advice, in one case of the Government, and in the other case of the Receiver, and acting on that reliance took certain steps. That necessarily involves an enquiry into the corporate state of mind of the Bank when it was induced and decided to act…. [38] [ 57 ] CIBC takes a different view of the test for implied waiver.

It says the Respondent must establish that: • CIBC has placed its state of mind in issue by raising an affirmative defence that makes its knowledge or understanding of the law relevant; [39] • CIBC relies on its knowledge or understanding of the law to support its state of mind defence by positively relying on the privileged communication as part of a substantive position taken in the legal proceedings; [40] and • Disclosure of the legal advice is “vital or necessary” to the Respondent’s ability to challenge CIBC’s assertions. [41] [ 58 ] In considering the first two steps in CIBC’s proposed test, CIBC emphasizes that a key to implied waiver is there must be reliance on legal advice to resolve an issue at trial.

Waiver does not simply occur once a party discloses the fact it received legal advice before taking a course of action; the privilege-holder must have taken a course of action, relied on legal advice to do so and somehow placed that reliance in issue at trial. [42] I agree with this

interpretation of the waiver jurisprudence. Again, reliance on legal advice in taking a course of action – and then putting that reliance in issue –is crucial. This is what occurred in Rogers . [ 59 ] This must be distinguished from a party who simply receives legal advice, forms a particular legal view and then acts. This alone will not lead to implied waiver. There must be reliance on the legal advice and the party must put that reliance in issue. Gerbro Inc. [43] is instructive on this point.

In that case, the Respondent said that the taxpayer had waived privilege because it pleaded that it had a certain understanding of a proposed legislative amendment. But the Court held that the element of reliance was missing: [44] In my view, paragraph 67 does not bring legal advice into issue. This paragraph brings knowledge of the effective date of proposed amendments into issue but it does not state, or even imply, that Gerbro intends to rely on legal advice to establish this knowledge. It appears that Gerbro has no intention of waiving privilege by relying on this legal advice at trial.

Of course, if Gerbro does not waive privilege it takes the risk that the trial judge may find that the evidence that was offered is insufficient. But as things currently stand, Gerbro has not brought legal advice into issue. [ 60 ] Justice D’Arcy took the same view of reliance in Imperial Tobacco Canada Limited v The Queen : [45] The state of mind waiver relates to the situation where a party relies, as part of a claim or defence, on legal advice it has received, where the claim or defence is based, at least in part, on its state of mind.

The state of mind waiver arises by implication. … Further, a state-of-mind implied waiver requires more than the fact that an appellant’s purpose for entering into certain transactions is at issue in an appeal.

The implied waiver requires the appellant to take the positive step of relying, in its pleadings or during trial, on legal advice it has previously obtained from its counsel…. [ 61 ] In short, there is no implied waiver without reliance. [46] A privilege-holder’s state of mind must be in issue in a way that makes any legal advice it received relevant, and the privilege-holder must place its reliance on that legal advice in issue as part of its position for trial. [ 62 ] The third step of CIBC’s proposed test brings an element of materiality into the implied waiver test.

This suggested step says disclosure of the legal advice must be “vital or necessary” to the Respondent’s ability to challenge CIBC’s assertions. [ 63 ] CIBC points to two cases in particular to substantiate this proposal.

In Creative Career Systems Inc. v Ontario , [47] the Court said that the test for implied waiver requires that: 30 … (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. [48]

[ 64 ] It then points to Gerbro Inc. , which said: The parties referred me to a great many judicial decisions regarding implied waiver of privilege. Each case appears to depend on its own particular facts, and the general approach that the courts have taken recognizes the importance of upholding solicitor-client privilege.

In my view, these judicial decisions generally follow the approach described by the British Columbia Court of Appeal in Procon Mining & Tunnelling Ltd. v McNeil , 2009 BCCA 281 at para 19 : ‘[t]o establish waiver, the disclosure sought must be “vital” or necessary to the opposing party’s ability to answer an allegation. The bar is set high for a court to require disclosure when the legal advice has not been put in issue by a party.

In this motion, the Crown has not established that the legal communications are so important to their case that they should be divulged. [49] [ 65 ] The Respondent says there is no such third step, and that Procon Mining & Tunnelling Ltd. , which Gerbro Inc. relied on to say that disclosure must be “vital or necessary,” represented a misreading of the jurisprudence. [50] [ 66 ] In The Queen v. Superior Plus Corp ., 2015 FCA 241 , the Federal Court of Appeal addressed this issue.

The Court held that the “vital or necessary” aspect is examined, but it does not represent a unique or separate relevance test: [18] In Procon , the British Columbia Court of Appeal came to the conclusion that the legal advice sought did not have to be disclosed because it was not in any way relevant to the state of mind which had been plead by the plaintiff and which had allegedly given rise to an implied waiver ( Procon at para. 17).

That is the context in which the Court said: “[t]o establish waiver, the disclosure sought must be “vital” or necessary to the [requesting[ party’s ability to answer an allegation.” ( Procon at para. 19) [19] To be clear, this test does not operate as a different and more demanding standard for determining whether a disclosure of privileged information has given rise to an implied waiver, but as a way of ensuring that an implied waiver not be pronounced unless and until it becomes necessary to do so in order to prevent the unfairness and inconsistency which the doctrine of implied waiver is intended to guard against. [ 67 ] The “vital or necessary” aspect therefore does not operate as a separate step of the implied waiver test, but it can be used to inform the relevance analysis.

In my view, this fits within the existing principles governing the threshold for finding implied waiver, which I have outlined above and will use to determine whether implied waiver can be found. [ 68 ] I will turn now to the application of the implied waiver test.

Application of the implied waiver test [ 69 ] The Respondent says CIBC has put its state of mind in issue in a manner that leads to waiver in three broad ways. “Legally and commercially prudent to settle” [ 70 ] In its pleadings for the tax appeals in issue, CIBC pleaded that after being sued over the Enron transactions, CIBC concluded “it would be legally and commercially prudent” for it to settle the Newby and MegaClaim litigations. [51] [ 71 ] The Respondent says these pleadings amount to putting CIBC’s state of mind in issue on whether settlement was legally prudent.

The Respondent says that this assertion in the pleadings has not been admitted and is still in issue, and the legal advice behind CIBC’s understanding of its legal exposure is relevant and should be accessible to the Respondent so that the Respondent can examine the state of CIBC’s legal knowledge. It adds that it would be unfair to not allow the Respondent access to information or communications that bear on CIBC’s understanding. [ 72 ] CIBC responds that this pleading is not tantamount to putting its state of mind in issue for the purposes of implied waiver.

All CIBC has done is plead as a fact that it was legally and commercially prudent to settle. CIBC has not raised an affirmative defence that makes its state of mind relevant to resolving an issue at trial, and the pleadings do not in any way rely on legal advice CIBC received in reaching this conclusion about settlement. It adds that the test for implied waiver is not about fairness. [ 73 ] I do not believe that this pleading leads to implied waiver. It appears to me that CIBC is pleading as a fact that was legally and commercially prudent to settle.

Also, I believe that CIBC has placed no reliance on legal advice it received in forming this conclusion, and it has certainly not put any such reliance in issue in this case. Denying certain Respondent assumptions [ 74 ] In its pleadings, the Respondent pleaded assumptions that CIBC did not assume certain risks through providing some credit risk analysis services, nor did CIBC assume any risk through the credit committee’s functions. [52] CIBC denied those assumptions.

The Respondent now says that CIBC’s denial of these assumptions leads to CIBC putting its state of mind in issue, since CIBC is taking a view of whether it incurred specific risks. [ 75 ] CIBC says that denying assumptions does not lead to the inference that CIBC is relying on legal advice. It further says that it will not be relying on any legal advice received during the Enron litigation in order to demolish these assumptions. [ 76 ] Again, I do not believe that this pleading leads to implied waiver.

I believe that CIBC has placed no reliance on legal advice it received in forming this conclusion, and it has not put any such reliance in issue. CIBC statements about its understanding of the source of its legal exposure in the Enron litigation

[ 77 ] This is the most significant of the statements that the Respondent says leads to implied waiver. In essence, the Respondent argues that in CIBC’s notice of objection and at discovery, CIBC said 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 that the focus of the Enron litigation was CIBC’s own conduct, not that of its subsidiaries or affiliates. This position is central to the issue of whether CIBC properly allocated the deduction of the Settlement Amounts.

CIBC says it was proper for it to deduct the Settlement Amounts because it was its own conduct that was at issue, while the Respondent suggests that other CIBC subsidiaries and affiliates were actually the entities involved in the conduct that led to the Enron litigation. [ 78 ] The Respondent says CIBC relied on privileged communications to demonstrate its understanding of the source of its legal exposure. As such, it says there is implied waiver over these privileged communications.

CIBC obviously denies that any implied waiver occurred. [ 79 ] As a preliminary issue, CIBC says that statements in its notice of objection and at discovery cannot lead to waiver because they are not in the pleadings. This is incorrect. A party’s state of mind can be put in issue through affidavit evidence, discovery statements or in other ways; the pleadings are not the only venue where state of mind can be put in issue. [53] [ 80 ] The waiver issue here is whether CIBC, in stating its position on the source of its legal exposure, has put in issue its reliance on legal advice to justify its position.

It is clear from the notice of objection and statements at discovery that CIBC’s position is that it was its own conduct, and in particular the role of the credit committee and Dan Ferguson, that resulted in the most significant exposure or liability in the Enron litigation and that this was the focus of the litigation. [ 81 ] The Respondent says that it is evident from minutes of various board meetings that legal advice and other privileged communications contributed to CIBC’s state of mind in coming to this conclusion on its liability exposure and the focus of the litigation.

These minutes involve various discussions, mostly led by counsel, of various aspects of the litigation and eventual settlements. The minutes, many of which were disclosed during the audits that led to the tax appeals, clearly show discussions of legal options and considerations. [ 82 ] At this point, it is important to mention that prior to settling the Newby and MegaClaim Litigations, CIBC had entered an agreement with the U.S. Department of Justice (“DOJ”) related to the Enron transactions.

That agreement placed certain restrictions on possible defences CIBC could use in the subsequent Enron litigation. [ 83 ] At discovery in these appeals, at question 5591, the Respondent asked CIBC’s nominee if, with respect to CIBC’s view of Dan Ferguson’s conduct, there was any evidence besides the board minutes and the U.S. DOJ agreement about the constraints that the DOJ agreement created in defending the Newby litigation.

CIBC’s counsel answered no: it was the counsel briefings in the board minutes and the DOJ agreement that informed CIBC’s views of Dan Ferguson’s conduct and of any impact the agreement had on defending the Newby litigation. [ 84 ] The Respondent says it is this answer in particular that shows that CIBC is relying on legal advice, being counsel briefings to the board, in forming its state of mind regarding the source of its liability exposure and the focus of the Enron litigation. [ 85 ] CIBC says that all of these statements do not put its state of mind in issue, nor do they refer to legal advice or signal any intention to rely on legal advice at trial.

The statements are merely factual statements about the status and focus of the Enron litigation and about how CIBC saw its legal exposure. CIBC adds that certain facts will be used at trial to justify its position (including the DOJ agreement itself), but that legal advice will not be relied upon. There can therefore be no waiver arising from the statements in the notice of objection and at discovery. [ 86 ] I agree with the position taken by CIBC.

It is true that CIBC will likely advance the position at trial that the focus of the Enron litigation, and the source of CIBC’s liability, was CIBC’s own conduct, not that of its subsidiaries and affiliates. But this is largely a factual issue. CIBC is not placing its reliance on legal advice in issue in order to justify its position. It seems obvious that its views on its liability exposure and the focus of the Enron litigation were informed by legal advice, but simply taking a position based on legal advice does not mean that the legal advice can be accessed.

CIBC’s answer to question 5591 merely states that, among other things, legal advice informed its position. But that answer does not amount to putting its reliance on legal advice in issue in these appeals, nor do any of the other statements the Respondent impugns here. CIBC has not said or shown in any way that it is relying on legal advice to justify its positions regarding liability exposure and the focus of the litigation.

There can therefore be no implied waiver. [ 87 ] I believe that CIBC did not impliedly waive its privilege over any of the documents and communications in issue. [ 88 ] On a further point, certain board minutes (which appear to be from 2005 board meetings) were disclosed by CIBC during the audit but then later redacted during discovery. These minutes must remain fully disclosed to the extent they were disclosed during the audit.

I understood from the Respondent’s counsel that CIBC’s only issue was it did not want the audit disclosure to lead to waiver over other privileged documents, hence the subsequent redactions. CIBC’s counsel did not dispute this point, and I have now found that there was no waiver over other privileged documents. Since CIBC did disclose these minutes during the audit, they must remain disclosed to this extent. To the extent that any claim of privilege over the disclosed minutes is being made after the fact, that claim cannot stand.

Partial waiver The test [ 89 ] This is the second avenue by which the Respondent says that CIBC waived privilege over certain documents and communications. It points to, among other cases, a decision of this court [54] for the principle that if a party voluntarily discloses and seeks to rely on parts of privileged communications, there will be waiver over the remainder of the communications. [ 90 ] CIBC says no such waiver occurred. To establish partial waiver, CIBC says the Respondent must show that: without the

additional information, the information disclosed is somehow misleading and the party seeking disclosure will be prejudiced if theprivilege is upheld; unfairness or inconsistency has resulted from the disclosure that has been made in the absence of additionaldisclosure; and it is vital or necessary that the additional disclosure be ordered. [91] Waiver of privilege for part of a communication can be held to be waiver for the entire communication.[55] What will then leadto partial waiver? [92] In Bone v Person,[56] the Manitoba Court of Appeal said that a party is allowed to waive solicitor-client privilege on a limitedbasis: 10. … However, a reasonable balance must be struck so that the court and the other parties are not misled.

The party making thedisclosure cannot pick and choose between the favourable and the unfavourable. In Transamerica Life Insurance Co. of Canada v.Canada Life Assurance Co. (1995), (ON SC), 46 C.P.C. (3d) 110 (Ont.C.J.,G.D.) Sharpe J., as he then was, put thematter this way, at paras. 41-42: It is plainly not the law that production of one document from a file waives the privilege attaching to other documents in the same file. Itmust be shown that without the additional documents, the document produced is somehow misleading….

The waiver rule must be applied if there is an indication that a party is attempting to take unfair advantage or present a misleading pictureby selective disclosure. [93] This holding was endorsed by the Federal Court of Appeal in Slansky v Canada (Attorney General),[57] which added that“[p]rivilege is not a swinging door, open when there is information to communicate, but slammed shut when information is sought. . . .

A party may not cherry-pick privileged communications, disclosing what is helpful to it and withholding the rest…”[58] [94] It is important to note that partial waiver will only occur when the privileged communications relate to the same subject matter as the formerly privileged but now-disclosed communications.[59] This Court has previously held that a narrow view should be taken ofwhether the subject matter is the same: 25. Phipson suggests that the waiver principle is to be applied narrowly. At para. 26-29: What constitutes “the issue in question” will always be a question of fact.

It is necessary to identify the purpose of the waiver, and to seewhat fairness demands in the circumstances. The case law shows that without exception the courts have not extended the ambit of thewaiver beyond what is necessary and if in doubt have taken a relatively restrictive view of “the issue in question”. … 28. I would also note that a narrow application of the waiver rule is consistent with the general approach that Canadian courts havetaken with respect to solicitor-client privilege: Descoteaux v. Mierwinski, (SCC), [1982] 1 S.C.R. 860 and Philip Services Corp. v.

Ontario Securities Commission (2005), (ON SCDC), 77 O.R. (3d) 209 (ON S.C.).[60] [95] From the foregoing it can be seen that simply disclosing some privileged information will not automatically lead to waiver overclosely related information.

If the information over which privilege has been waived can stand alone, severed from the remaining documents or file, then the remaining privilege will stand.[61] Application of the test CIBC statements about its understanding of the source of its legal exposure in the Enron litigation [96] These statements are the same statements dealt with above in the implied waiver analysis. The Respondent points to CIBC’sdisclosure of the privileged board minutes to say that such disclosure leads to partial waiver over other privileged communications.

Itsays that if CIBC is going to rely on privileged material that it voluntarily disclosed during the audit, then it should not get to pick andchoose which privileged material it can rely on. The Respondent says it is unfair to limit the Respondent’s exploration of the veracity ofCIBC’s claim to only the documents that CIBC discloses. Any additional privileged material on the same subject matter should thereforebe disclosed based on the principles governing partial waiver. [97] CIBC says that providing the board minutes was not selective disclosure that leads to partial waiver.

Instead, the minutes wereprovided in response to an audit query that asked CIBC to make arrangements for the Canada Revenue Agency (“CRA”) to review board minutes from CIBC’s 2005 tax year. CIBC adds that this scenario is more akin to that in MIL (Investments) S.A. v The Queen.[62] [98] In MIL, the taxpayer made some voluntary disclosure in response to a CRA request during the audit. The disclosure includedcorrespondence where lawyers gave advice on the issue the auditor was asking about (the validity of a trust) as well as proposedtransactions in a planning memorandum.

The planning memorandum appeared to have been prepared in connection with the transactionsthat were the subject of the tax appeal. The taxpayer waived privilege over the correspondence but not the planning memorandum. TheRespondent argued the voluntary disclosure led to waiver over the planning memorandum. [99] The Court held that it was not unfair for the taxpayer to maintain privilege over the planning memorandum.

The only purpose ofthe voluntary disclosure, the Court ruled, was to provide information on another issue that the auditor had asked about, not to provideinsight into the legal advice on the proposed transactions. Moreover, the taxpayer voluntarily waived privilege in response to a specificrequest from the auditor. The legal advice in the correspondence was only disclosed because it happened to be in the same correspondence as the issue the auditor was asking about.[63] The Court concluded:

The respondent suggests that the planning memorandum might reveal why the validity of the trust was the subject of such scrutiny in the first place. Although this is possible, there is nothing on the face of the material before me that would suggest it. Unless the respondent can provide some basis for the suggestion that the appellant is hiding something, I do not think that it is appropriate to apply the waiver principle, which is founded on the basis of fairness.

If there were a real doubt as to whether the appellant was hiding something, the respondent could have suggested that I review the planning memorandum. There is precedent for this in one of the earlier cases that was referred to me but the respondent did not suggest it.” [64] [ 100 ] The Respondent has made no similar review request in this motion. [ 101 ] I agree with CIBC’s submissions on this point. CIBC disclosed the board minutes for a specific purpose in response to a specific query. There is certainly some similarity to MIL , but not entirely.

In MIL , the Respondent said that even though CRA had asked for disclosure relating to one subject area (a trust’s validity), it should get disclosure relating to another subject area (advice on the proposed transactions). Here, the Respondent says disclosure relating to one subject area (counsel briefings in the board minutes) entitles it to the information that led to the development of those briefings.

Still, the point is well-taken that CIBC’s disclosure was a response to a specific question. [ 102 ] Moreover, and perhaps most crucially, the Respondent has not shown that the disclosures are misleading in any way. They have only asserted that it would violate the principles of fairness and consistency to require waiver over the remaining documents. But simply because CIBC opened the door to some disclosure does not mean that the Respondent gets to kick the door down. There is insufficient evidence of selective disclosure that is misleading in any way.

CIBC is entitled to keep the remaining information privileged, and any redactions based on privilege are allowed to stand. Individual questions about redacted board minutes [ 103 ] The Respondent also seeks an order to compel answers to certain individual questions related to the redacted board minutes. i. Questions 3462, 3470 and 3514 [ 104 ] While there is no waiver of privilege related to these questions, CIBC is claiming litigation privilege over these questions.

For reasons discussed below, I find that the litigation privilege claim cannot be sustained. [ 105 ] In response to question 3462, CIBC says that it “appears likely that the discussion is informed by legal advice.” This answer is not sufficient to claim solicitor-client privilege, if that is indeed what CIBC is claiming. If a claim of solicitor-client privilege is being made, CIBC must make it more thoroughly. I agree with the Respondent that any conclusions reached by the board are not covered by solicitor-client privilege.

Any legal advice, however, is privileged. [ 106 ] Therefore, to the extent that these questions are not asking for legal advice, CIBC must answer these questions. ii. Questions 888 and 894 [ 107 ] There is no waiver for these questions, but it remains in issue whether these questions are privileged in the first place. I will deal with this issue further below.

CIBC’s understanding of its liability exposure under U.S. law [ 108 ] This involves questions 917, 936 and 939. [ 109 ] In its pleadings, CIBC referred to its possible status as a “control person,” which could have potentially led to liability under U.S. law for the actions of its subsidiaries. [65] The Respondent then asked for CIBC’s risk assessment but says that CIBC only partially disclosed the litigation risk analysis.

It says that if CIBC is going to rely on that risk analysis, the Respondent is entitled to see the rest of the analysis that is protected by privilege. [ 110 ] I find that there is no partial waiver here for the same reasons as above. The Respondent has not shown that the disclosure that was made is misleading without the remaining privileged material. [ 111 ] In the event that the Respondent is claiming that there was implied waiver over this litigation risk analysis, that claim also does not hold water. CIBC has not placed any reliance on legal advice in issue in taking a position on potential U.S. liability.

No implied waiver can therefore be found. [ 112 ] There is one further note on question 917. This question asks for CIBC’s position as to its true financial exposure on certain claims in the Enron litigation. The Respondent takes issue with CIBC’s response that if CIBC intends to rely on these points of law to support its argument, it will deliver an expert report in keeping with the Rules . I see no reason to take issue with CIBC’s answer. CIBC may file an expert report, and the Respondent can question CIBC on that report and fit these questions into the Respondent’s view of where CIBC’s legal exposure resided.

This question therefore requires no further response. Conclusion [ 113 ] Questions 3462, 3470 and 3514 must be answered to the extent that they are not asking for legal advice. There is no waiver of

privilege for any of the remaining questions related to this issue. Issue 3: Can CIBC rely on settlement privilege to protect information and documents arising from the negotiation and conclusion of the Newby and MegaClaim settlements? [ 114 ] This issue involves questions 845, 848, 849, 866, 871, 894, 900, 911, 922, 923, 927, 928, 3119 and 5757. [ 115 ] Most, if not all, of these questions are about CIBC’s representations to the Newby plaintiffs about which CIBC entities had the ability to pay any settlement. The Respondent generally wants to know more about these representations.

CIBC intends to lead expert evidence at trial on the ability to pay issue, and the Respondent says that since the issue is in play, the Respondent should have access to related materials. The Respondent also asked questions about: material CIBC relied on during mediation; communications between CIBC and the Newby plaintiffs; production of certain materials used during mediation; and production of a

summary of the mediation. [ 116 ] CIBC claims settlement privilege over all material arising from the negotiation and conclusion of the Newby and MegaClaim settlements. It says that if a third party (the Respondent) can attack the privilege and access information from the settlement negotiations, then the idea of settlement privilege providing a safe space to conduct negotiations is an illusion. [ 117 ] As will be seen below, the real issue is not whether settlement privilege applies on its face, but whether there is an exception to the privilege that allows the Respondent to access the information it seeks.

General principles governing settlement privilege [ 118 ] Settlement privilege is a class privilege that applies even after a settlement is reached. [66] It is clear that generally, documents prepared to assist with mediation fall under settlement privilege. [67] So, too, do negotiations undertaken for the purpose of settlement. [68] [ 119 ] The rationale for settlement privilege is important to remember: settlement discussions and conclusions must be protected in order to allow for full and frank exchanges between parties. [69] The privilege “is intended to encourage amicable settlements and to protect parties to negotiations for that purpose.

It is in the public interest that it not be given a restrictive application....” [70] Question 871: Production of the mediation agreement [ 120 ] In this question, the Respondent seeks production of a mediation agreement with the Newby plaintiffs. It says this question arises because of CIBC’s claims that any waiver of privilege required the Newby plaintiffs’ consent.

The Respondent says CIBC has not substantiated that claim or approached the Newby plaintiffs for their consent, therefore the mediation agreement should be produced to see if legitimate confidentiality concerns exist. [ 121 ] The Respondent points to a decision of this Court that dealt with a similar situation. In Fink v Canada , [71] the taxpayers were shareholders of a company that had negotiated a settlement in separate litigation with the Ontario Securities Commission. At issue in the tax appeals was the taxability of payments the taxpayers received as shareholders.

The Respondent sought the disclosure of settlement communications from the prior separate litigation; the taxpayers argued that settlement privilege protected the communications. Justice Bonner wrote: [72] … [W]hen the ambit of the [settlement] privilege is properly understood, it is evident that the privilege does not attach to cases where the discussion or settlement document is relevant to establish not the liability of a party to the settlement for the conduct which gave rise to the dispute but rather to arrive at a proper

interpretation of the agreement itself…. [ 122 ] Since the Respondent in this motion indeed wants an

interpretation of the settlement document, it argues that Justice Bonner’s decision allows disclosure of the mediation agreement. The Respondent further says Justice Bonner’s decision is consistent with a recent Ontario decision, [73] which held that if information will not be used to cause prejudice or risk to the party whose information it is, then there is no rationale for maintaining settlement privilege. [74] [ 123 ] It is certainly true that Fink provides a basis for producing the mediation agreement in order to interpret it.

But generally speaking, overruling settlement privilege requires a “competing public interest” to outweigh the public interest in encouraging settlement. [75] There is no competing public interest in interpreting the agreement when the only reason for

interpretation is to see if confidentiality concerns exist. It is already apparent that settlement privilege protects the mediation agreement. CIBC is clearly not waiving its privilege over the document, therefore even if for some reason the Newby plaintiffs consented to disclosure, the issue is moot because CIBC offers no such consent. [ 124 ] While Nestlé Canada Inc. does support the principle the Respondent suggests, it is not an analogous case.

The Court there found that the parties who were contesting disclosure would not suffer any prejudice from that disclosure since they were not involved in the subsequent litigation.

In this case, CIBC could certainly be prejudiced by disclosure. [ 125 ] Moreover, the mediation agreement itself does not go to issues that are at the “heart of this litigation” and “crucial to a proper resolution of the matters,” as one decision ruled in ordering production of settlement documentation, [76] nor does the mediation settlement change the landscape of the litigation. [77] [ 126 ] The mediation agreement therefore remains privileged and CIBC is not required to answer this question.

Is there an applicable exception to the settlement privilege? The principles governing exceptions [127] The Respondent says that the mediation materials and questions fall into an exception to settlement privilege. It says thisexception allows documents used in a settlement between Party A (the Newby/MegaClaim plaintiffs) and Party B (CIBC) to be used in unrelated litigation between Party B (CIBC) and Party C (the Respondent).

It points to cases in Ontario[78] that reference Sopinka, Lederman and Bryant’s The Law of Evidence[79] to come up with the following exception: The exceptions to the rule of privilege find their rationale in the fact that the exclusionary role was meant to conceal an offer ofsettlement only if an attempt was made to establish it as evidence of liability or a weak cause of action, not when it is used for otherpurposes.

Where documents referable to the settlement negotiation or the settlement document itself have relevance apart fromestablishing one’s liability, and apart from showing the weakness of one party’s claim in respect of those matters, the privilege does notbear production. [128] In other words, if material ordinarily covered by settlement privilege is not going to be used as evidence of either CIBC’s liabilityin the Enron litigation or of a weak defence in the Enron litigation, then the material can be disclosed.

The Respondent also points again to the decision in Nestlé Canada Inc.,[80] which held that if information will not be used to cause prejudice or risk to the party whose information it is, then there is no rationale for maintaining settlement privilege.[81] [129] CIBC’

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