Executive Summary: Key Legal and Evidentiary Issues

• Appellants sued BLG for failing to withhold and remit $695,000 in non-resident taxes from the proceeds of a court-ordered sale of residential property under s. 116 of the Income Tax Act.

• Solicitor-client privilege was asserted by BLG over documents and discovery questions related to the lawyer's interpretation of the court order and internal communications.

• Application of the "common interest exception" to solicitor-client privilege was the central legal issue, requiring a fiduciary or fiduciary-like relationship between the parties.

• The associate judge upheld BLG's privilege claim, and the Supreme Court judge found no prima facie case for a trust or fiduciary relationship that would engage the common interest exception.

• Reliance on Dhillon v. Jaffer as a stand-alone basis to abrogate privilege was deemed misplaced, as that decision did not deal with solicitor-client privilege.

• Fresh evidence of the trial adjournment was admitted on review but did not alter the outcome, as the denial of leave remained supported by all other factors weighed together.

The underlying dispute

Jiukang Liu and Tony Liu Notary Corporation (the appellants) brought a civil action against the law firm Borden Ladner Gervais LLP ("BLG"), Steven Ping Li, and Royal Pacific Realty Corp. The case arose from a court-ordered sale of residential property over which BLG had conduct. Borden Ladner represented the creditor who obtained the order for sale; the appellants represented the purchasers. At the heart of the dispute is BLG's alleged failure to hold back and remit $695,000 in non-resident taxes from the sale proceeds, as the appellants contend was required under s. 116 of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.). BLG did not do so, and the appellants, who are plaintiffs by assignment from the purchasers, claim they have been unfairly left to cover that debt. They advanced various claims against BLG in search of indemnity or contribution, claiming the respondent breached its court-ordered and fiduciary obligations as trustee of the sale proceeds. They also claimed in negligence, alleging that in not withholding and remitting the non-resident taxes before payout to its client, BLG failed to meet the standard of care expected of a reasonably competent solicitor. Borden Ladner does not interpret the order for sale the same way as the appellants and defends the lawsuit by contending it did everything required of it in managing the proceeds.

The discovery dispute and solicitor-client privilege

During examinations for discovery, the appellants questioned the BLG lawyer with conduct of the file about his interpretation of the court order. He answered some of their questions but claimed solicitor-client privilege in respect of others. The appellants applied to an associate judge for an order requiring the lawyer to answer the remaining questions and BLG to produce all related documents. They identified three issues for which they most wanted answers: how the lawyer formed the view that the non-resident taxes were not covered by the court order; what steps he took to inquire into that matter; and who else at BLG (apart from a named paralegal) "touched on the issues." They argued this information was "relevant to [BLG's] state of knowledge of its obligations to withhold taxes … and therefore to the claim in breach of trust and negligence."

The associate judge's decision

With the parties' consent, the associate judge reviewed the documents over which BLG claimed solicitor-client privilege. She found that BLG properly asserted privilege and that disclosure of the documents could reveal legal advice provided to the creditor client. She sealed the documents. The associate judge also concluded BLG properly objected to the impugned questions and that answering those questions would "enable the [appellants] to know or infer the legal advice that may have been provided by BLG to its client." She dismissed the application.

The Supreme Court judge's decision

The appellants appealed the dismissal. The Supreme Court judge who heard the appeal (the "SCJ") approached it as a de novo hearing. The SCJ understood the appellants to argue that the associate judge erred by permitting solicitor-client privilege to "trump the specific rule of law relating to the right of beneficiaries to access legal advice given or obtained in the administration of their trust." The "specific rule of law" relied upon by the appellants is often described as the "common interest exception" to privilege, which recognizes that in some narrowly defined circumstances, the existence of a fiduciary or fiduciary-like relationship between parties that share a common interest in the subject matter of otherwise privileged communications justifies disclosure of that material as between them. The SCJ found the appellants did not establish a prima facie case that they or the purchasers were the beneficiaries of a trust, nor that any documents or communications between BLG and its client related to the alleged trustee carrying out duties as trustee of the appellants as beneficiaries. The appeal was dismissed. The SCJ did not consider it necessary to review the documents over which BLG claimed privilege, and those documents remained sealed as per the associate judge.

The application for leave to appeal and its denial

The appellants sought leave to appeal to the Court of Appeal for British Columbia. Leave was denied in unpublished reasons dated November 10, 2025. A three-week trial of the action was scheduled to start seven days later, on November 17. The chambers justice applied the criteria from Goldman, Sachs & Co. v. Sessions, requiring the appellants to show that: the points on appeal are of significance to the practice; those points are also significant to the action itself; the proposed appeal has prima facie merit or is not frivolous; and the appeal will not unduly hinder the progress of the action. The overarching question is whether leave is in the interests of justice. The chambers justice determined the primary issue, the applicability of the common interest exception, is of no significance to the practice because the parties do not disagree on the existence or nature of that exception but rather on whether it applies in the circumstances of this case. She accepted the proposed appeal carries "some" significance to the action but agreed with BLG that the rulings below do not prevent the appellants from substantively advancing their claims, and access to the sought-after information can be revisited at trial if necessary. She acknowledged that "some aspects" of the alleged errors "meet the relatively low merits threshold." With the trial only seven days away, she concluded that granting leave would result in an adjournment and the "inevitable delay involved in rescheduling a trial of this length" weighed "strongly in favour of dismissing the application." Leave to appeal was denied.

The application to review the denial of leave

The appellants applied under s. 29(1) of the Court of Appeal Act, S.B.C. 2021, c. 6 to review the chambers justice's denial of leave. The review attracts a deferential standard; to succeed, the appellants had to show that the denial of leave reflects an error of law, an error in principle, or a misconception of the facts. The appellants introduced fresh evidence showing that within days of leave being denied, the parties agreed for unrelated reasons to adjourn the trial scheduled for November 17, 2025. The Court admitted the fresh evidence, recognizing that the chambers justice had assigned considerable weight to the proximity of the trial and the adjournment could have affected the result.

The Court of Appeal's analysis and ruling

Despite admitting the fresh evidence, Justice DeWitt-Van Oosten, writing for the unanimous panel of three (concurred in by Justice Dickson and Justice MacNaughton), held that the denial of leave must stand. The Court found the appellants had not established reversible error. On significance to the practice, the Court noted the common interest exception to solicitor-client privilege has been the subject of much jurisprudence, is not novel or lacking definition, and the proposed appeal would likely not introduce new principles, develop first-instance frameworks, or provide needed clarity on existing ones. The outcome would largely turn on the application of already established principles to the factual matrix of the case. On the Dhillon v. Jaffer argument, the Court agreed with the chambers justice that Dhillon "did not deal with solicitor-client privilege, nor suggest that any opinions formed as to the proper interpretation of an order in [the context of this case] need to be shared with all stakeholders." The Court found this reliance misplaced, as Dhillon says nothing about a solicitor's duty to a non-client extending to the non-client obtaining full access to otherwise privileged communications for purposes of advancing a claim in breach of trust or negligence against the solicitor. The Court agreed with the chambers justice that the proposed appeal has "some, but very limited, significance to the action." The appellants acknowledged before the Court that they can continue with their lawsuit against BLG without answers to the contested questions or access to the contested documents. Through discovery, the appellants had already obtained admissions that BLG did not withhold and remit the non-resident taxes even though the issue was brought to its attention, did not consider itself obliged to do so, and did not return to court to seek clarification. The Court concluded it failed to see how the absence of more in-depth answers or access to BLG's communications would deprive the appellants of "meaningful discovery." On merit, the Court considered the proposed appeal not merely "weak" (as the chambers justice assessed) but concluded there was no realistic prospect of success. The application for review was dismissed, the sealed documents remained under a permanent sealing order, and the respondent BLG's privilege claims were upheld. No specific monetary amount was awarded in this decision, as it concerns a ruling on leave to appeal a discovery order; the underlying $695,000 non-resident tax claim remains the subject of the continuing action between the parties.