A-795-76
IBM Canada Limited-IBM Canada Limitée
(Appellant) (Defendant)
v.
Xerox of Canada Limited and Xerox Corporation
(Respondents) (Plaintiffs)
Court of Appeal, Urie J. and MacKay and Kelly
D.JJ.—Toronto, February 10; Ottawa, February
25, 1977.
Practice — Discovery Whether respondent can claim
solicitor-client privilege in respect of letter written by its own
salaried legal adviser Whether privilege waived when a
document is shown to a third party Permissibility of
questions seeking to elicit facts contained in privileged docu
ment — Whether questions relate to facts or to evidence in
support of those facts.
Appellant (defendant) is appealing from a refusal by the
Trial Division to compel the respondents (plaintiffs) to produce
certain documents and answer certain questions. The respond
ents contend that the two documents concerned are protected
by solicitor-client privilege and that the two questions are either
unanswerable or improper. The appellant claims that there was
no solicitor-client relationship involved in the first document
and that any privilege that might have attached to the second
document has been waived.
Held, the appeal is allowed in part. The first document, a
letter written by the respondent's in-house legal adviser to his
client through its patent agents, is not privileged. Although a
salaried legal adviser to a corporation is in the same position as
regards privilege as a lawyer in private practice he must have
been acting in that capacity when preparing the document for
which privilege is claimed and this must be clear on the face of
the document. In the case at bar, the corporation's lawyer was
writing as a representative of the company and as manager of
its patent department and therefore the document must be
disclosed. The second document, however, was privileged at the
outset, and once privilege has been established it cannot be
defeated by a technical waiver. Consequently questions requir
ing disclosure of its contents are improper.
The second question need not be answered since it seeks not
to elicit facts but to elicit evidence in support of those facts and
is therefore an improper question in proceedings for discovery.
Alfred Crompton Amusement Machines Ltd. v. Commis
sioner of Customs and Excise (No. 2) [1972] 2 All E.R.
353, applied; Minet v. Morgan (1873) L.R. 8 Ch. 361,
applied and Calcraft v. Guest [1898] 1 Q.B. 759, applied.
APPEAL on discovery.
COUNSEL:
James D. Kokonis, Q.C., for appellant.
Roger T. Hughes and Ronald E. Dimock for
respondents.
SOLICITORS:
Smart & Biggar, Ottawa, for appellant.
Donald F. Sim, Q.C., for respondents.
The following are the reasons for judgment
rendered in English by
URIE J.: This is an appeal from an order made
in the Trial Division' refusing to direct the produc
tion of certain documents and to direct that certain
questions be answered during the examination of
persons produced by the respondents for examina
tion for discovery. The appeal was disposed of in
its entirety during the argument of the appeal
except in respect of four questions, namely, num
bers 9802, 9814, 9817 and 9819, relating to
Canadian patent No. 518,430 upon which the
Court reserved judgment. It is the disposition of
the appeal relating to those questions which is the
subject of these brief reasons.
Question 9802 arose in the following way.
Among the documents produced by the respond
ents was a letter addressed to the respondent
Xerox Corporation in its former name, from its
New York patent agents, reading as follows:
MARKS & CLERK
220 Broadway
New York 38, N.Y.
April 7, 1955
The Haloid Company
Patent Department
Rochester 3, New York
Attention: Frank A. Steinhilper, Esq.
Re: ROLAND MICHAEL SCHAFFERT
CANADIAN PATENT APPLN. 586,750
CORRES. U.S.S.N. 21737
OUR CASE , - 44471
Gentlemen:
We thank you for your letter of March 2.
We have taken up the present matter with our Ottawa Office
and our Ottawa Office feel that it may possibly be of assistance
if they could have a copy of the U.S. patent which you state
gives you the necessary protection on the present subject matter
in the U.S.
' Court No. T-730-72, not reported.
We would be glad if you would let us know the number of
the U.S. patent involved, for the foregoing purpose.
Very truly yours,
"Marks & Clerk"
JB:ja
cc: William J. Mase, Esq.
The reply of the respondent dated April 13,
1955 enclosed a copy of U.S. patent No. 2,576,-
047. In relation to the April 7, 1955 letter, the
respondent, Xerox Corporation was asked the fol
lowing questions numbered 3817 and 3819:
3817. In the second paragraph there is a statement that
Battelle (sic) Haloid stated that a United States patent
gives the necessary protection on the present subject
matter in the United States. Can you tell me whether
such a statement was made in the written or oral form?
3819. And if it was in the form of a written statement, could
you provide us with the document please? (AB/App.
11/1,2)
The respondent's reply was embodied in ques
tions 9802 and 9803, reading as follows:—
BY MR. CAMPBELL:
9802. Q. Next is 3817, 18, 19 and 20.
"Response: The statement is set out in Mr. Steinhilper's
letter to Marks and Clerk of March 2, 1955."
Would you produce a copy of that letter from Mr.
Steinhilper to Marks and Clerk of June [March] 1955,
please?
MR. HUGHES: Sorry. Has it already been produced?
9803. MR. CAMPBELL: No, it has not.
MR. HUGHES: I don't know if that is a letter for which we
have made a claim for privilege or not. Let me look into
that matter and advise you. (AB/App. 11/71)
Respondent, Xerox Corporation, refused to pro
duce the letter of March 2, 1955 on the ground
that it was a privileged communication in that it
was written by a qualified lawyer, who was a house
counsel for the respondent Xerox Corporation
(under its former name) and manager of its patent
department, to his client through its patent agents
in New York, Marks & Clerk, whose services as
patent agents had had to be retained under
Canadian patent regulations to prosecute its
application for patent in Canada.
The ruling of the learned Judge in the Trial
Division is as follows:
That in the rather odd circumstances of this communication
between Marks & Clerk and the man who is Steinhilper, that
the document is privileged and I am confining my ruling to the
particular facts of this case. When we get it up in some other
patent case, it is quite clear, it depends on these particular
facts. After reviewing the letter, the two letters, I am convinced
Mr. Steinhilper was writing in perhaps his dual capacity, but
certainly not in his capacity as an employee or as Haloid
Company. He was writing, I think, as primarily a solicitor and
perhaps wearing part of his other hat; and secondly, the
peculiar circumstance in which independent advice was referred
to, I think, would raise a claim of privilege which would not be
present in some other cases.
The basic principle upon which the respondents
rely in asserting their claim of privilege is that a
client cannot be compelled and a legal adviser will
not be allowed, without the consent of the client, to
disclose communications or to produce documents
passing between them in professional confidence.
Further, documents obtained by a legal adviser for
the purpose of preparing for litigation, actual or
anticipated, are privileged. The question here then
is, was Mr. Steinhilper's letter written by him in
his capacity as a lawyer to his client?
As did the Trial Division, we examined the
letter of March 2, 1955 without disclosing the
contents thereof to the appellant. Having done so,
we are, with respect, unable to agree with the
learned Judge that Mr. Steinhilper was writing in
the dual capacity of lawyer and patent attorney
but not in his capacity as an employee of The
Haloid Company (now Xerox Corporation).
There appears to be no doubt that salaried legal
advisers of a corporation are regarded in law as in
every respect in the same position as those who
practise on their own account. They and their
clients, even though there is only the one client,
have the same privileges and the same duties as
their practising counterparts. (See Alfred Cromp-
ton Amusement Machines Ltd. v. Commissioner
of Customs and Excise (No. 2). 2 )
However, there may be occasions when the legal
privileges inherent in solicitor-client relationships
may not be claimed. As Lord Denning M.R. said
at page 376 of the Crompton case:
2 [1972] 2 All E.R. 353 at p. 376.
I have always proceeded on the footing that the communica
tions between the legal advisers and their employer (who is
their client) are the subject of legal professional privilege; and I
have never known it questioned. There are many cases in the
books of actions against railway companies where privilege has
been claimed in this way. The validity of it has never been
doubted. I speak, of course, of their communications in the
capacity of legal advisers. It does sometimes happen that such a
legal adviser does work for his employer in another capacity,
perhaps of an executive nature. Their communications in that
capacity would not be the subject of legal professional privilege.
So the legal adviser must be scrupulous to make the distinction.
Being a servant or agent too, he may be under more pressure
from his client. So he must be careful to resist it. He must be as
independent in the doing of right as any other legal adviser.
There is nothing whatsoever in the March 2
letter which would indicate that Mr. Steinhilper
was writing to Marks & Clerk in his capacity as
an attorney. On the contrary, the dual capacity in
which he apparently wrote was that of an author
ized representative of The Haloid Company and as
"Manager, Patent Department". That is how he
signed the letter. There is nothing therein to indi
cate that he wrote as a legal adviser. If he did so,
he was not scrupulous, as Lord Denning warned,
to indicate to the persons to whom he wrote that it
was in that capacity that he wrote. It was not Mr.
Steinhilper's letter, as was alleged in the answer
given by the respondents to question 9802, but
clearly from the way in which it was expressed it
was the letter of The Haloid Company. In our
opinion, therefore, the assertion that the March 2,
1955 letter was privileged and did not have to be
produced by the respondents must fail and the
appeal in respect of question 9802 will thus be
allowed and, the letter will be ordered to be
produced.
In view of this disposition of the question it is
unnecessary for us to decide in this case whether
even if the letter was written by a lawyer acting in
that capacity privilege could attach since it was
written, not to the client, but to the patent agents
employed by it for the prosecution of a patent
application. Neither do we have to decide whether
or not the letter was written in anticipation of
litigation or whether the lawyer was advising in
respect of laws upon which he was not qualified to
advise since he was an American attorney and may
have been, in part, giving his views on the prosecu
tion of Canadian patent applications.
With regard to question 9814, the reasons for
judgment of Collier J. dated October 25, 1976
quite concisely set forth the problem and his
ruling. He said:
By motion dated October 8, 1976 and heard October 15,
1976 at Ottawa, the defendant sought an order compelling the
plaintiffs to produce certain documents and to answer certain
questions objected to on examination for discovery. Other relief
was, as well, asked for.
I reserved judgment in respect of one particular matter
arising out of questions 9814-9817 of the continued examina
tion for discovery of Paul Catan. The point arose in questioning
on the Schaffert patent. Haloid, the plaintiffs' predecessor, was
directing the prosecution of that patent application. It was
being applied for in the name of Battelle with whom Haloid
had financial and research arrangements. Haloid sought and
obtained a legal opinion. A copy of the opinion was given to
Battelle. The plaintiffs refuse to produce the document, relying
on solicitor-client privilege. The defendant contends the privi
lege was waived by the client when the copy of the attorney's
letter was given to a third party, Battelle. The defendant relies
on Electric Reduction Co. of Canada Ltd. v. Crane [(1959) 31
C.P.R. 24].
There are in this case, however, further facts. Subsequently,
but before this litigation, a number of patents (including Schaf-
fert) were assigned to the American plaintiff. A term of the
agreement provided that all documents and other materials in
respect of the patents and research were, on the plaintiffs
request, to be turned over or assigned to Haloid. In earlier
motions in this litigation (arising out of the examination for
discovery of the plaintiffs) it was agreed (for the purpose of
those motions) that it should be deemed Haloid had in fact
requested the turn-over of the documents and materials
described in the assignment agreement and that those materials
had in fact gone back to Haloid.
In my view, even if solicitor-client privilege was at one time
lost or waived, it has been regained by the client. I rule the
document is privileged and need not be produced.
We have not been persuaded that the learned
Judge erred in his ruling. The letter in question
when originally received was clearly a privileged
communication to The Haloid Company and it is
doubtful that its privileged character was lost by
giving a copy thereof to Battelle, if in fact that was
ever done, in view of the relationship which existed
between the two companies. The general rule
respecting professional communications is, as we
understand it, that once privilege is established in
respect of a document, - that privilege continues and
is not to be defeated by a technical waiver, if one
in fact took place, such as is claimed by the
appellant here. Even if there was such a waiver,
the privilege was surely regained when all patents
and documents relating to them were assigned to
the respondent Xerox Corporation. The judgments
in Minet v. Morgan' and Calcraft v. Guest 4 sup
port this view.
The appeal, in so far as this question is con
cerned, will, therefore, be dismissed.
Questions 9817 and 9819 read as follows:
9817. In relation to what facts was that interpretation of
U.S. law made by Fish, Richardson and Neave?
9819. For what reason did Haloid instruct Marks & Clerk
that the interpretation of U.S. patent 2576047 was not to
be brought to the attention of the Canadian Patent
Office?
It appears that question 9817 as framed is inca
pable of being answered. It appears to require the
disclosure of facts referred to in the letter of
opinion for the purpose of laying the factual basis
for the opinion. If that is so, it is clearly improper
since the letter has been held to have been privi
leged. If it is not so, then the question is so
imprecise in form as to render it unanswerable
without preparing a foundation for it. The appeal
in so far as it is concerned will be dismissed.
In so far as question 9819 is concerned, it is not
a question attempting to elicit facts as is permissi
ble on examinations for discovery but one that
may require, for a proper answer, the disclosure of
evidence necessary to establish facts. Therefore, in
our opinion, it is not a proper question for discov
ery and the appeal from its rejection will be
dismissed.
Since the appellant was successful only on half
of the questions at issue in this appeal, as well as
half of the questions at issue in appeal A-681-76
and since counsel for the appellant conceded that
he would be seeking only one set of costs for both
appeals due to the fact that they were argued
together, the successful party or parties in the
cause will be entitled to one half of its or their
taxed costs.
' (1873) L.R. 8 Ch. 361.
4 [1898] i Q.B. 759.
MACKAY D.J.: I have read the reasons for
judgment of Urie J., with which I agree.
* * *
KELLY D.J.: I have read the reasons for judg
ment of Urie J., with which I agree.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.