Pleading Ignorance Has a Price: How a Commercial Tenant's Defence Triggered Deemed Waiver of Solicitor-Client Privilege

Solicitor-client privilege occupies a near-constitutional status in Canadian law. However, litigants can lose that protection where their own litigation strategy places their legal understanding at the centre of their claim or defence. In One York Street Inc. v. 2360083 Ontario Limited and LCIL Ltd., 2026 ONCA 176, the Ontario Court of Appeal considered whether a commercial tenant had triggered a deemed waiver of privilege by alleging it did not understand the legal consequences of a 20-year lease extension.

Background and Facts

The dispute arose from a commercial tenancy in a shopping centre located in downtown Toronto. The landlord, One York Street Inc., and the tenant, 2360083 Ontario Limited, executed a commercial lease for an initial three-year term. The following day, the parties entered into a further extension agreement that expanded the total leasing term to 20 years.

The Relationship Breaks Down

Approximately three years into the tenancy, the relationship deteriorated entirely. The landlord commenced a civil claim alleging that the tenant had ceased paying rent and had abandoned the premises. The landlord thus advanced claims commonly seen in Ontario commercial leasing disputes, while the tenant responded with a broader theory directed to the circumstances in which the lease and extension agreement had been made.

The Tenant’s Misrepresentation Allegations

The tenant did not simply dispute the facts. It filed a statement of defence and counterclaim advancing a more complex theory: that it had been wrongfully induced into signing both the original lease and the 20-year extension agreement through extra-contractual representations made by the landlord.

Specifically, the tenant alleged that the landlord had made verbal guarantees regarding the volume of foot traffic the shopping centre would generate — representations that, according to the tenant, never materialized. This framing transformed a straightforward rent recovery action into a dispute implicating misrepresentation, fraudulent or negligent inducement, and potentially rescission of a long-term commercial lease.

The Original Pleadings

Critically, the tenant went further in its original pleadings. It explicitly alleged that it had signed the 20-year extension agreement without understanding its legal ramifications and without the benefit of legal advice. This was the pleading that set off the privilege trap.

As the landlord subsequently discovered — and as the courts at every level accepted — the allegation was factually incorrect. The tenant had retained and received legal advice during the negotiation and execution of the lease extension. Upon learning this, the landlord brought a motion demanding production of the tenant's solicitor's file, arguing that by placing its state of legal understanding squarely at issue in its defence, the tenant had effected a deemed waiver of solicitor-client privilege over all communications with counsel relating to the lease extension.

The Pleading Amendment

Recognizing the exposure, the tenant moved in June 2023 to amend its statement of defence and counterclaim, excising the explicit references to an absence of legal advice and a failure to understand the lease. The tenant took the position that once those references were removed, the basis for any deemed waiver evaporated.

That argument set the stage for a three-level judicial journey.

The Motion Judge's Decision

The motion judge sided with the landlord, finding that deemed waiver had occurred and ordering production of the legal file. The motion judge reasoned that even with the amendments, the core of the tenant's defence continued to rest on its subjective understanding of its legal position as shaped by the landlord's extra-contractual representations — an analysis that inherently implicated what legal advice the tenant had or had not received.

The Divisional Court's Decision

The Divisional Court reversed. It held that the motion judge had erred by anchoring the analysis to the original pleadings rather than the operative amended ones, and concluded that the amendments had successfully severed the defence from any reliance on the absence of legal advice.

The Ontario Court of Appeal’s Decision

The Ontario Court of Appeal disagreed with the Divisional Court and restored the motion judge's order, allowing the landlord's appeal in full.

The Legal Issues

The central legal question before the Court of Appeal was whether the tenant had effected a deemed waiver of solicitor-client privilege by the conduct of its litigation, notwithstanding the subsequent amendment of its pleadings.

Solicitor-client privilege protects confidential communications between a client and their lawyer made for the purpose of obtaining or giving legal advice. As affirmed in Descôteaux v. Mierzwinski, [1982] 1 SCR 860, and reinforced in Lavallee, the privilege belongs to the client and is not lightly displaced. It applies broadly and is not limited to litigation contexts.

The doctrine of deemed waiver — sometimes called implied waiver — operates as a qualification on that protection. Canadian courts have consistently held that a party may waive privilege not only by expressly disclosing privileged communications, but also by conduct that is inconsistent with maintaining confidentiality.

A frequently cited articulation appears in S. & K. Processors Ltd. v. Campbell Avenue Herring Producers Ltd. (1983), 45 BCLR 218 (BCSC), and the doctrine has been applied and refined in Ontario in decisions including Riopelle v. Riopelle and cases addressing the interplay between pleadings and privilege.

The key formulation is this: waiver is deemed to have occurred when a party's conduct in litigation is inconsistent with an intention to maintain the confidentiality of the privileged communication, and — critically — an actual subjective intention to waive is not required.

A subsidiary legal issue was the effect of pleading amendments on a deemed waiver analysis. The Rules of Civil Procedure, RRO 1990, Reg 194, permit parties to amend pleadings, and the general principle is that an amended pleading supersedes the original.

The question was whether that procedural principle altered the waiver analysis where the operative amended pleading continued to advance substantially the same theory, particularly where the alleged inconsistency with privilege was said to persist notwithstanding the amendment.

A further issue, cutting across both of the above, was the correct standard of review applicable to the Divisional Court's reversal of the motion judge's production order — a question bearing on whether the appellate court was entitled to substitute its own analysis.

The Court's Analysis

The Court of Appeal's analysis proceeded in three stages:

1. The correct legal framework for deemed waiver;
2. The proper role of amended pleadings in that framework; and
3. The application of both to the facts.

On the deemed waiver framework, the Court confirmed that the inquiry is not whether a party has explicitly referenced legal advice or its absence in the pleadings. The analysis is fundamentally one of fairness and consistency.

The Court articulated that deemed waiver does not arise from the mere fact that a party received legal advice — that fact alone cannot strip a party of privilege. Nor does it arise from general allegations of misrepresentation or broad assertions about a party's state of mind.

The threshold is meaningfully higher: deemed waiver arises when a party relies, as an integral part of its claim or defence, on its understanding — or lack of understanding — of its own legal position. At that point, allowing the party to simultaneously shield the actual legal advice received from production would create an unacceptable asymmetry in the litigation, enabling a party to deploy a sword in its favour while maintaining a shield against the opposing party's legitimate inquiry.

The Court was equally clear that actual intention to waive is irrelevant to this analysis. The test is objective and conduct-based. A litigant who structures a defence around their legal understanding at the time of signing a commercial agreement cannot escape the consequences of that strategic choice by insisting, after the fact, that they never meant to open the privilege.

On the pleading amendment issue, the Court rejected the Divisional Court's reasoning. While it accepted as a general procedural matter that amended pleadings govern over originals, it held that, on the pleadings before it, the amendments did not eliminate the basis for deemed waiver.

The Court examined the amended statement of defence and found that, stripped of the explicit references to absent legal advice, the tenant's counterclaim still advanced the core proposition that the landlord's extra-contractual foot traffic representations had shaped the tenant's understanding of what it was agreeing to. On that basis, the Court concluded it was unnecessary to decide any broader question whether an amendment could ever undo an earlier waiver, because the amended pleading itself continued to implicate the tenant's understanding of its legal position at the time of execution.

The Court's reasoning here is analytically significant: it focused on the substance of the theory advanced in the operative pleading, rather than on the mere deletion of particular phrases. On the Court's reading, the amendments did not remove the feature of the case said to create the inconsistency with maintaining privilege, because the amended counterclaim still relied on the respondents' understanding of their legal position.

Applying this framework, the Court found that the motion judge had correctly identified the inconsistency between the tenant's litigation conduct and any plausible intention to maintain confidentiality over the very legal advice that went to the heart of what the tenant claimed to have understood — or misunderstood — when it signed the 20-year extension. The production order was restored.

What This Means for Real Estate Practice

The implications of this decision extend well beyond the parties to this litigation. Commercial real estate transactions, by their nature, generate extensive legal advice at every stage — letter of intent, initial lease, extension and renewal, assignment, and termination. When those transactions subsequently become the subject of litigation, the content of that advice becomes intensely relevant to numerous standard defences and counterclaims.

For Real Estate Litigators Acting for Tenants

The primary lesson is one of pleading discipline. Before advancing any defence that touches on the client's subjective understanding of a lease term — whether under a theory of non est factum, misrepresentation, unconscionability, or failure of consideration — counsel should confirm precisely what legal advice the client received during the transaction and when.

If legal advice was received, a pleading framed around the client's state of legal understanding at execution may give rise to a deemed waiver argument. That does not mean such a defence is unavailable; it means the client should be advised at the outset that the retainer file from the original transaction may become the subject of a production motion.

For Real Estate Litigators Acting for Landlords

This decision may be a useful tool. In rent recovery actions, abandonment claims, and proceedings where the tenant raises a misrepresentation-based counterclaim, counsel should scrutinize the defence with this framework in mind.

If the tenant's pleading — whether in its express language or in its functional legal theory — relies on the tenant's understanding of its legal rights or obligations at the time of contracting, this authority may support a motion for production of the solicitor's file. The timing and merits of any such motion will, however, remain case-specific.

For Commercial Landlords and Tenants Negotiating Lease Extensions

This decision underscores the value of documenting legal advice received during transaction negotiations. Paradoxically, thorough documentation of the advice received — while not itself a protection against waiver — creates a contemporaneous record that makes it far more difficult for a party to later claim misapprehension of their legal position. It also ensures that the legal file, if it does become producible, accurately reflects a process of informed negotiation.

For Real Estate Solicitors Advising Clients During Transaction Negotiation

The practical implication is a heightened duty to document not merely the content of the advice given, but the specific legal questions addressed, the client's instructions, and the matters the client confirmed as understood. In an environment where that file may become producible in future litigation, the quality of the contemporaneous record matters.