Share Purchase Transactions, Solicitor-Client Privilege and Multiple Representations: A Cautionary Tale for Corporate Counsel Case Commentary: NEP ULC v MEC Op Co LLC, 2013 ABQB 540

by Bennett Jones LLP

An interesting set of questions arises from share purchase transactions regarding the existence of, and parties to, the solicitor-client privilege over the correspondence between the parent, subsidiary and corporate counsel. Solicitor-client communications arise when the parent and corporate counsel obtain information from the target in the context of making the necessary disclosures and representations in the transaction to the purchaser.

The situation is even further complicated if the target incurs obligations as part of the share purchase transaction. If no other corporate counsel is retained to represent the interests of the target in negotiating the share purchase agreement, it is arguable that the parent's corporate counsel was in effect advising the target. As a result, corporate counsel may find himself or herself in an unintended joint retainer.

The potential existence of a joint retainer can pose problems for the parent in protecting solicitor-client privilege over the negotiation correspondence if a dispute arises between the parent and the target (or even the buyer depending on the corporate reorganization of the buyer and the target post-closing) regarding the transaction. After the transaction closes and the parent loses control over the target, the buyer may have a different appreciation of decisions or representations made during the negotiation process.

This article will review the recent decision of Madam Justice Horner in NEP Canada ULC v MEC Op LLC, 2013 ABQB 540 [NEP] which appears to be the only Canadian decision to consider a claim by the parent of solicitor-client privilege over confidential information shared with the target during a share purchase transaction.

The NEP Decision

The facts in NEP were as follows: the defendant, Merit Energy Company LLC was the parent of a wholly-owned subsidiary, MEC Operating Company ULC. The plaintiff, NEP Canada ULC purchased all of the outstanding shares of MEC from Merit. Immediately after closing the share purchase transaction, NEP and MEC amalgamated and carried on business as NEP.

The share purchase agreement contained numerous representations by Merit regarding MEC's finances, liabilities, obligations, and compliance with federal and provincial laws and regulations. NEP claimed that Merit misrepresented certain aspects of MEC's business as part of the negotiations. NEP, MEC and Merit were all parties to the share purchase transaction.

In preparing to close the transaction, Merit transferred electronic data and computers to MEC to allow for its ongoing operations post-closing. This data contained e-mails of numerous MEC and Merit employees. Once the litigation arose, Merit claimed solicitor-client privilege over many e-mails which were in the possession of NEP.

The bundle of e-mails at issue in the application concerned communications to or from Merit's internal and external legal counsel in relation to the share purchase agreement, the representations and other matters.

NEP argued that MEC was party to a common interest with Merit as part of negotiating the share purchase agreement and, as a result, the solicitor-client privilege was shared between MEC and Merit. Based on first principles, neither could claim privilege over the e-mails as against the other. In addition, since NEP and MEC amalgamated post-closing, the privilege remained intact and continued to exist within the amalgamated form – NEP.

Merit denied that such common interest existed and stated that such solicitor-client privilege belonged to it alone. It also advanced an argument based on Tekni-Plex v Meyner and Landis, 674 NE 2d 663, which suggested that if there was a common interest that common interest vanished upon closing when MEC became adverse in interest to Merit.

Madam Justice Horner rejected all of Merit's arguments and held that it was clear to the court that both Merit and MEC sought and received legal advice from the internal and external counsel and shared information between themselves in the common interest of negotiating the share purchase agreement. As such, Merit could not exclude MEC from the e-mails. Further, as NEP was successor in interest by amalgamation, the disputed e-mails were producible to and by NEP.

Implications for Corporate Counsel

Prudent corporate counsel would be wise to turn their attention to the separate legal relationships that may arise as part of share purchase transactions. Special rules of solicitor-client privilege and conduct apply if a lawyer finds him or herself in a joint retainer.

It is a well-established principle that once parties to a joint retainer become pitted against one another in litigation, the confidential communications as between themselves are not privileged and each party is expected to share in and be privy to all communications passing between each of them and their lawyer.1

Additionally, the Professional Code of Conduct has a number of specific rules that govern joint retainers. For instance, no information received in connection with the matter from one client can be treated as confidential as against the others.

Going forward, corporate counsel may consider employing a number of strategies to address the joint retainer concern. For example, communications between the target and corporate counsel could be curtailed to preserve the parent's solicitor-client relationship. Or perhaps the share purchase agreement ought to include a provision to address ownership of the solicitor-client privilege and confidential negotiation information post-closing. The most extreme strategy would be to hire independent counsel for the target as part of the transaction, although this would not be practical for most transactions.


  1. While Madam Justice Horner used the term "common interest" throughout her decision, it is clear that she found an actual solicitor-client relationship between MEC and the internal and external counsel. As a result, the situation was akin to a joint retainer.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Bennett Jones LLP | Attorney Advertising

Written by:

Bennett Jones LLP

Bennett Jones LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.