Executive Summary: Key Legal and Evidentiary Issues

• Appellate focus on whether the tenants’ pleadings and litigation conduct created a deemed waiver of solicitor-client privilege over their leasing lawyer’s file.
• Standard of review for a deemed waiver finding was clarified as mixed fact and law, attracting deference absent palpable and overriding error.
• Characterization of alleged “guarantees” of foot traffic and extra-contractual representations was central to whether the tenants put their understanding of their legal position in issue.
• Amendments to the tenants’ pleading did not erase reliance on their legal state of mind, so they could not maintain privilege while asserting they relied on purported guarantees outside the lease.
• Distinction was drawn between merely putting “state of mind” in issue generally and specifically putting one’s understanding of legal rights in issue in a way that can waive privilege.
• The Court of Appeal restored the production order for the former solicitors’ file and awarded the landlord $35,000 in costs on the appeal, with substantive damages still to be determined at trial.

Factual background and lease structure

One York Street Inc. is the commercial landlord of a shopping centre in downtown Toronto. The corporate respondent, 2360083 Ontario Limited, operates a chain of supermarkets under the name Coppa’s Fresh Market, and the second respondent, LCIL Ltd., is the indemnifier on the lease. The business is family-run: Louis Coppa is the sole director of both corporations and the only officer of LCIL Ltd., while his son, John Coppa, is President of 236. In May 2017, 236 and LCIL entered into a commercial lease with One York Street Inc. for large supermarket premises. The initial written lease term was three years commencing July 1, 2018, but it included four options to renew, for a possible additional 17 years, yielding a potential 20-year occupation. A critical clause required that the tenant “shall exercise its options to extend for the First Extension Term, Second Extension Term, Third Extension Term and Fourth Extension Term, respectively, contemporaneously with the execution of this Lease”. The day after the lease was signed, the parties executed a lease extension agreement that immediately committed the tenants to the full 20-year term. Louis Coppa signed both the lease and the extension on behalf of both respondent corporations. At the time of negotiation and execution of both documents, the respondents were represented by the law firm Fogler Rubinoff LLP, which advised them on the terms of the long-term commercial commitment.

Emergence of the rent dispute and allegations of misrepresentation

Beginning in 2019, problems arose in the respondents’ payment of rent. The landlord alleged chronic non-payment culminating in abandonment of the premises. In October 2021, One York Street Inc. commenced an action seeking unpaid rent and damages for abandonment under the lease. In their statement of defence and counterclaim, the respondents did not simply deny default; they alleged that they had been induced to enter into the lease and extension by misrepresentations made by the landlord. They asserted that the landlord had misrepresented the level of pedestrian traffic that would be generated in the shopping centre and described those statements as a “guarantee” and a “promise” of certain foot traffic. They claimed that, but for these representations, they would not have signed the lease and extension, thereby attempting to undermine the enforceability of the 20-year commitment. Importantly, the original pleading went further and alleged that the respondents “did not understand the ramifications” of the lease extension and that they signed it “without legal advice.” Those assertions later proved to be factually incorrect, as the respondents had in fact been advised by Fogler when the lease and extension were negotiated and executed.

The privilege dispute and motion judge’s ruling

The landlord quickly took the position that, by alleging both inducement through supposed guarantees and a lack of understanding and legal advice at the time of signing, the respondents had waived solicitor-client privilege over the legal advice they received from Fogler on the lease and extension. During discovery of John Coppa in March 2023, counsel for the landlord sought production of documents from Fogler’s file and asked questions about the legal advice given in 2017. Counsel for the respondents refused, asserting solicitor-client privilege, and also refused to produce Louis Coppa for discovery as LCIL’s representative. The landlord responded with a motion seeking, among other relief, production of the Fogler file relating to negotiation and execution of the lease and extension, and an order that John Coppa complete his discovery. Before that motion was heard, the respondents discharged Fogler and retained new counsel. They then brought a motion to amend their statement of defence and counterclaim, removing the explicit allegations that they had not received legal advice and had not understood the lease extension’s ramifications. The amendment motion was unopposed and granted. In support, John Coppa swore an affidavit acknowledging that Fogler had in fact acted for the respondents in 2017 but explaining that he had not recalled this when he reviewed the original defence, even though he had seen that pleading before it was served. The production and privilege issues proceeded before a Superior Court motion judge who, as case management judge, was familiar with the litigation. She recognized the centrality of solicitor-client privilege but applied the established two-part test for deemed waiver from Creative Career Systems Inc. v. Ontario: first, whether the presence or absence of legal advice is material to a claim or defence; and second, whether the party who received the advice has made it an issue in its claim or defence. She found that both branches were met. The respondents’ defence and counterclaim, even as amended, rested on alleged extra-contractual representations characterized as guarantees of foot traffic which supposedly induced them to commit to a 20-year lease. That position, in her view, necessarily placed their understanding of their legal rights under the lease at issue, particularly whether they believed the landlord was legally guaranteeing a given level of traffic despite the written lease terms. Because it was undisputed by then that they had received legal advice from Fogler at the time of the lease and extension, she held that fairness required disclosure of the Fogler file. It would be “manifestly unfair” to allow the respondents to assert a particular legal understanding of the lease based on alleged guarantees while shielding contemporaneous advice from their own solicitors about those precise issues. She ordered production of Fogler’s file relating to negotiation and execution of both the lease and lease extension, and directed that the discovery obligations be completed.

Divisional Court’s intervention and view on the amended pleadings

The respondents appealed to the Divisional Court. That court accepted that the motion judge had correctly recited the Creative Career test, but held that she erred in applying it. The Divisional Court reasoned that the motion judge effectively relied on the original pleading, which had explicitly claimed that the respondents did not understand the lease extension and had no legal advice, rather than the amended version in place at the time of the motion. It held that once the June 2023 amendments removed the express references to lack of legal advice and understanding, the basis for deemed waiver tied to those specific allegations fell away. The court treated the question of privilege and relevance as one of law reviewed on a correctness standard. On that basis, it concluded that by amending their defence, the respondents had “effectively removed their reliance on lack of legal advice,” so there was no longer a sufficient foundation for deemed waiver. It quashed the production order, thereby preserving the respondents’ privilege over the Fogler file.

Court of Appeal’s analysis of waiver and standard of review

On further appeal, the Ontario Court of Appeal disagreed with the Divisional Court on both the applicable standard of review and the waiver analysis. The Court of Appeal held that questions of deemed waiver of privilege are issues of mixed fact and law: they require the correct legal test but demand a fact-specific assessment of litigation conduct, pleadings, and fairness. As such, while the legal framework is reviewed for correctness, a motion judge’s application of that framework to the facts attracts deference and can only be overturned for palpable and overriding error. The Court of Appeal found that the motion judge had applied the correct legal principles, drawing on Creative Career, Roynat Capital Inc. v. Repeatseat Ltd., and other authorities, and had properly focused on whether the respondents relied on their understanding of their legal position as a substantive element of their defence and counterclaim. The appellate court emphasized the distinction between (a) merely putting general state of mind in issue, for example in a standard misrepresentation pleading, and (b) specifically relying on one’s understanding (or claimed lack of understanding) of legal rights under an agreement. Only the latter can, in appropriate circumstances, give rise to deemed waiver. Here, the court held that the respondents’ remaining pleadings, even after amendment, continued to assert that the landlord’s extra-contractual “guarantees” of foot traffic formed part of their legal rights under the lease and extension and induced them to bind themselves to a 20-year term. Coupled with the admitted fact that they had received legal advice at the relevant time, their defence still turned on their asserted understanding of their legal position. The Court of Appeal also reviewed key comparative authorities. Decisions such as Rogers v. Bank of Montreal and Roynat show that a party can waive privilege not only by expressly invoking legal advice, but also by relying on a legal state of mind in circumstances where legal advice was clearly obtained. Conversely, Soprema Inc. v. Wolrige Mahon LLP illustrates that a bare allegation of negligent misrepresentation, without tying it to legal understanding, does not amount to waiver. Applying these principles, the Court of Appeal concluded that the respondents had injected their understanding of their legal rights into the litigation, and that permitting them to maintain privilege over Fogler’s advice about the lease terms, the extension clause requiring contemporaneous exercise of all options, and the legal significance of alleged guarantees of foot traffic would be inconsistent and unfair. It rejected any notion that a party can “unwaive” privilege simply by deleting explicit references to lack of legal advice if, in substance, the defence continues to rely on an asserted legal understanding formed at a time when counsel was actively involved.

Outcome across the decisions and financial consequences

The Court of Appeal therefore allowed One York Street Inc.’s appeal and restored the motion judge’s order compelling production of the Fogler Rubinoff file relating to negotiation and execution of the lease and the 20-year lease extension, along with the associated discovery relief. In doing so, it clarified that deemed waiver may arise where a party relies on its understanding of its legal position, even without explicitly mentioning legal advice, and confirmed that such determinations are highly fact-specific and reviewed deferentially. Substantive damages and unpaid rent under the lease remain to be determined at trial; this appellate decision does not fix any amount for rent arrears or damages flowing from abandonment. The only quantified financial order in this Court of Appeal decision is a costs award in favour of the successful party, One York Street Inc., in the amount of $35,000 inclusive of taxes and disbursements for the appeal and the leave motion, and no overall total for damages or other monetary relief can yet be determined from the record.