What Happens in the Special Committee, Stays There: Ontario Court Upholds Confidentiality of Special Committee Reports Amid Shareholder Litigation

Published on: March 2024 | What's Trending

Desk with confidential envelopes

Can Special Committee reports provided by legal counsel remain privileged in the face of class action shareholder litigation on the very same subject matter?

A recent decision from the Ontario Superior Court of Justice appears to strengthen the law on privilege over internal corporate investigations, affirming companies’ ability to maintain privilege over Special Committee reports – even in the face of serious allegations and subsequent litigation.


Vecchio Longo Consulting Services Inc. v. Aphria Inc., 2023 ONSC 6336 concerned a securities class action against Aphria Inc. (“Aphria”), a cannabis company, and its directors and officers, relating to alleged misrepresentations in its public disclosures about acquisitions of cannabis companies in Europe and Latin America (“LATAM”) in 2018. The misrepresentations allegedly caused a significant decline in Aphria’s stock price, harming shareholders.

During the course of the LATAM transactions, Aphria conducted due diligence including procuring legal opinions from counsel in Argentina, Colombia, and Jamaica to ensure compliance with local laws. The transaction was announced in July 2018, but its validity was later challenged in a report by Hindenburg Research and Quintessential Capital Management (“Shortseller Report”), leading to a significant drop in Aphria’s stock price.

In response to the Shortseller Report, Aphria formed a Special Committee to investigate. Legal counsel was engaged for advice, and the Special Committee’s investigation concluded with the resignation of certain directors and executives and the adoption of new corporate governance practices.

Vecchio Longo Consulting Services Inc. (“Vecchio”) brought a refusals motion seeking, among other things, production of the Special Committee’s report on the LATAM Transaction and the due diligence legal opinions obtained by Aphria.

The Report to the Special Committee

Aphria (as Defendants) declined to disclose the Report to the Special Committee (“SC Report”) prepared by legal counsel, citing both solicitor-client privilege as well as litigation privilege. The court agreed with Aphria, recognizing that both forms of privilege applied to the SC Report. The engagement with the law firm involved legal work—not private investigation—and was undertaken in response to serious allegations and pending litigation against Aphria.

The court acknowledged that the report included a blend of factual findings and legal analysis, demonstrating the legal nature of the services provided. It emphasized the role of factual investigation as a fundamental part of legal services (as opposed to private investigation), as highlighted in Gower v. Tolko Manitoba Inc. Additionally, the court rejected Vecchio’s argument that the report was not privileged because it was the Special Committee’s report, reaffirming that the communication was intended to be confidential legal advice between Aphria and its lawyer.

Similarly, the court determined that the SC Report was also subject to litigation privilege, given the circumstances of impending litigation surrounding Aphria. The SC Report’s dominant purpose was responding to the pending litigation against Aphria, and the court found no waiver of either solicitor-client privilege or litigation privilege.

Due Diligence & Legal Opinions

Aphria also asserted solicitor-client privilege regarding three due diligence legal opinions (“Due Diligence Opinions”) obtained from law firms in Argentina, Colombia, and Jamaica, concerning the legality of the marijuana businesses of the corporations being acquired in the LATAM Transaction. However, Aphria did not claim privilege for legal opinions (“TSX Opinion”) provided by the same law firms to the Toronto Stock Exchange (“TSX”) regarding compliance with domestic law. Vecchio attempted to argued that, because Aphria also engaged the same law firms to provide opinions to the TSX for regulatory compliance as they did for the Due Diligence Opinions, privilege over the latter documents was waived (and, therefore, should be accessible to them).

The court disagreed, finding that the opinions were obtained as part of Aphria’s own assessment for the transaction (therefore meeting the requirements for solicitor-client privileged communications), and privilege over the Due Diligence Opinions was not waived simply because the same law firm also provided the TSX Opinions to the TSX for domestic regulatory compliance purposes. The TSX Opinions were created at the TSX’s insistence to address specific questions, distinct from the LATAM Transaction Due Diligence Opinions. To address the argument that if Aphria was pleading the due diligence defence then the Due Diligence Opinions need to be produced as they are the essence of such defence, the court made the technical distinction that Aphria did not rely on the substance of these legal opinions in its due diligence defence, but rather on the fact that it conducted due diligence (of which the Due Diligence Opinions were but one part). Therefore, there was no waiver of privilege, as Aphria did not use the legal advice as a substantive element of its claim or defence.


This decision reaffirmed the notion that courts will interpret solicitor-client and litigation related privileges very expansively in favour of the client claiming them – even where it may appear to have been waived in certain contexts. Should you have any questions about how you can ensure that communications and correspondences are structured to enjoy the protection of privilege, a member of our business law group would be happy to discuss.

The author would like to thank our Student-at-Law, Guneet Saini, for her assistance in writing this blog.