Legal Privilege and Regulatory Investigations · •Solicitor-client privilege has evolved from a...

Legal Privilege and

Regulatory Investigations

Stephen Schmidt

Member of the TELUS team

Ottawa, Ontario

January 25th, 2017

TELUS Public2

Disclaimer

The statements and opinions expressed in this presentation

represent the views of the author and do not necessarily

represent the views of TELUS Communications.

TELUS Public3

Contact Information

Stephen Schmidt

Vice-President, Regulatory Affairs &

Chief Regulatory Legal Counsel

TELUS Communications

215 Slater St, 8th Floor

Ottawa, Ontario

Canada, K1P 0A6

Tel 613.597.8363

[email protected]

TELUS Public4

Substantive Focus of Presentation

The presentation will focus on the following substantive

areas concerning privilege in investigations:

1. Solicitor-Client Privilege

2. Litigation Privilege

3. The Interaction of Privilege and Statutory Powers

4. Privilege and Investigation Reports and Audits

TELUS Public5

Session Objectives and Format

1. Provide an overview of case law relevant to privilege in

investigations – both the basic underpinning rules and new

and interesting jurisprudence;

2. Discuss some challenges that arise in claiming or

opposing privilege;

3. Identify some remedies for common challenges; and

4. Provided some scope for Q and A

TELUS Public6

The Concept of a “Privilege” - Explained

“As an evidentiary concept, a privilege allows a litigant to resist

the introduction of otherwise admissible evidence in court

proceedings. While a privilege may be asserted outside the

courtroom, for example in the course of discovery, the

touchstone of a privilege is the nexus between litigation and

the “privileged” information. Information that is protected by a

privilege is protected from disclosure in the course of legal

proceedings.” [emphasis added]

-Dodek, Adam. Solicitor-Client Privilege in Canada: Challenges for the

21st Century. Canadian Bar Association. February 2011 (“Dodek, 2011”).

TELUS Public7

Solicitor-Client Privilege: Evolution

Can be traced to the 16th Century.

Earliest case: Berd v. Lovelace, (1577), 21 E.R. 33

Linked to ‘”oath and honour”' of the lawyer, duty-bound to

guard closely the secrets of his client, and was restricted in

operation to an exemption from testimonial compulsion

[Solosky v. The Queen, [1980] 1 S.C.R. 821, p 834]

TELUS Public8


Changed in 19th Century to focus on functioning of the

justice system

Focus on more utilitarian justifications:

• allow “full and frank disclosure” by client

• well-functioning adversary system

• facilitates access to justice (wouldn’t hire lawyer

without privilege)

[Solosky v. The Queen, [1980] 1 SCR. 821, at p 835-836]

TELUS Public9


Important recent changes (late 20th Century and early 21st

Century):

• Solicitor-client privilege has evolved from a limited rule of

evidence into a constitutional right to communicate in

confidence with one’s counsel.

• Solicitor-client privilege is protected just as strenuously in the

administrative context as in a judicial context

• Since January 1, 2007, the Supreme Court of Canada has

decided 24 cases about solicitor-client privilege

TELUS Public10

Solicitor-Client Privilege: Modern View

The purpose of solicitor-client privilege is to protect the

relationship between the client and the solicitor.

The privilege belongs to the client, not the lawyer

Ensures a full and frank discussion of the facts of the case,

and the giving and receiving of sound legal advice

Fundamental to the proper functioning of our legal system

[Canada (Privacy Commissioner) v. Blood Tribe Department of

Health, 2008 SCC 44, at para 9].

TELUS Public11

Solicitor-Client Privilege: Requirements

Three criteria [Solosky v The Queen, [1980] 1 SCR 821]:

1. a communication between a professional legal advisor and

client;

2. which entails the seeking or giving of legal advice; and

3. which is intended to be confidential by the parties.

TELUS Public12

Solicitor-Client Privilege: Communication

1(a) Communication

[Maranda v Richer, 2003 SCC 67]

• The privilege protects the communication, not the

underlying facts or actions

• Very broad view of communication (winks, nods,

etc.)

• Includes dockets and accounts

TELUS Public13

Solicitor-Client Privilege: Communication

1(a) Communication

“In summary, a lawyer’s client is entitled to have all communications

made with a view to obtaining legal advice kept confidential. Whether

communications are made to the lawyer himself or to employees, and

whether they deal with matters of an administrative nature such as

financial means or with the actual nature of the legal problem, all

information which a person must provide in order to obtain legal

advice and which is given in confidence for that purpose enjoys the

privileges attached to confidentiality. ” [emphasis added]

[Descôteaux et al. v. Mierzwinski, [1982] 1 S.C.R. 860, p 892-893]

TELUS Public14

Solicitor-Client Privilege: Legal Advisor

1(b) From a professional legal advisor

(see Descôteaux c. Mierzwinski, [1982] 1 SCR 860)

Includes:

• notaries in Quebec [Canada (Attorney General) v. Chambre des

notaires du Québec, 2016 SCC 20]

• licensed paralegals [Chancey v Dharmadi (2007), 86 OR (3d)

612 (Ont SCJ)]

• staff employed by lawyers/notaries/licensed paralegals

[Descôteaux et al. v. Mierzwinski, [1982] 1 S.C.R. 860, privilege

attaches to communications with employees of lawyer]

• fraudster/impersonating lawyers [R v Choney (1908), 13 CCC

289 (Man CA)

TELUS Public15

Solicitor-Client Privilege: Legal Advisor

1(b) From a professional legal advisor

[Descôteaux et al. v. Mierzwinski, [1982] 1 S.C.R. 860]

Excludes:

• patent agents [Whirlpool Corp. v Camco Inc., 1997

CarswellNat 544 (FC TD)]

• tax accountants [Long Tractor Inc. v Canada (Deputy

Attorney General), 1997 CarswellSask 728 (QB)]

• unlicensed non-lawyer representatives/agents [Stone v

Stone, 2000 CarswellOnt 486 (SCJ)]

• retired/disbarred lawyers and judges [Calley v Richards

91854), 52 ER 406 (Eng. Rolls Ct.]

TELUS Public16

Solicitor-Client Privilege: Legal Advice

2. Protects legal advice

• Must have a solicitor-client relationship, but no formal retainer

required [Descôteaux et al. v. Mierzwinski, [1982] 1 S.C.R. 860]

• A broad view of “legal advice” - must fall within the “continuum of

communication in which the solicitor tenders advice” [Peaker v.

Canada Post Corp., 1995 CarswellOnt 4516 (Gen. Div.)]

• Includes drafts [R. v. Chan, 2002 Carswell Alta 1010 (Q.B.)]

• Includes invoices, but not fee/retainer agreements [Holmes v.

London Life Insurance, 2005 CarswellOnt 7421 (S.C.J.)]

TELUS Public17

Solicitor-Client Privilege: Legal Advice

2. Protects legal advice

• Does not include “legal information” – e.g. e-mailing an

interesting decision to a client or potential client [Trillium Motor

World Ltd. v. Cassels Brock & Blackwell LLP, 2013

CarswellOnt 3828 (S.C.J.)]

• Does not include “business advice” [Saturley v. CIBC World

Markets Inc, [2010] NSJ. No 511 -- certain emails from bank in-

house counsel held to not constitute the giving of legal advice

because they focused on a business response to problem; see

also: R v. Campbell, [1999] 1 S.CR 565, at para 50]

TELUS Public18

Solicitor-Client Privilege: Confidentiality

3. The communication was made in confidence

[XCG Consultants Inc. v. ABB Inc., 2014 ONSC 1111]

• Client must have a subjective intention of confidence

• Communications in the presence of a third party can lead to loss

of privilege [Zesta Engineering Ltd. v. Cloutier, [2008] O.J.

No.304]

• Communication through a third-party presents challenges:

• a “channel of communication”, or parent/relative, or

translator: OK

• work e-mail about a personal legal issue: the law in this

area is evolving.

TELUS Public19

Solicitor-Client Privilege: Confidentiality

3. The communication was made in confidence

Court refused to uphold claim of solicitor-client privilege where

information widely distributed inside a bank because of, inter

alia, an absence of intention to maintain confidentiality [TD

Bank v. Leigh Instruments Ltd. (Trustee of), 1997, 32 OR (3d)

575 (Gen.Div)]

TELUS Public20

Solicitor-Client Privilege:

Common Law Exceptions

1. Public Safety

Smith v. Jones, [1999] 1 SCR 455

2. Innocence at stake/wrongful conviction

R. v. McClure, [1999] 1 SCR 445

3. Existence or validity of a will

Goodman Estate v. Geffen, [1999] 2 SCR 353

There are three recognized common-law exceptions:

TELUS Public21

Solicitor-Client Privilege: Key Principles

Four key principles (see Descôteaux v Mierzwinski, [1982]

1 SCR 860):

1. The confidentiality of communications between solicitor and

client may be raised in any circumstances where such

communications are likely to be disclosed without the client’s

consent

2. Unless a statute provides otherwise, when and to the extent

that the legitimate exercise of a right would interfere with

another person’s right to have his communications with his

lawyer kept confidential, the resulting conflict should be

resolved in favour of protecting the confidentiality

TELUS Public22

Solicitor-Client Privilege

Four key principles (see Descôteaux c. Mierzwinski, [1982]

1 S.C.R. 860):

3. When the law gives someone the authority to do something

which might interfere with that confidentiality, it can only do so

if absolutely necessary in order to achieve the ends sought

by the enabling legislation

4. Statutes limiting solicitor-client privilege must be interpreted

restrictively

TELUS Public23

Litigation Privilege:

Another Form of Privilege

Litigation privilege is:

“related to the needs of the adversarial trial process. Litigation

privilege is based upon the need for a protected area to facilitate

investigation and preparation of the case for trial by the

adversarial advocate. In other words, litigation privilege aims to

facilitate a process (namely, the adversary process), while

solicitor-client privilege aims to protect the relationship (namely,

the confidential relationship between a lawyer and the client)”

[emphasis added]

[Blank v. Canada (Minister of Justice), 2006 SCC 29]

TELUS Public24


Another Form of Privilege

Context: litigation privilege arises in context of actual or apprehended litigation.

Scope of protected communications: Solicitor-client privilege applies only to

confidential communications between the client and his solicitor. Litigation

privilege, on the other hand, applies to communications of a non-confidential

nature between the solicitor and third parties

Litigation privilege applies to all litigants, whether or not they are represented by

counsel.

Duration: the common law litigation privilege comes to an end upon the

termination of the litigation that gave rise to the privilege. Unlike solicitor-client

privilege, it is not permanent in duration.

Rationale: litigation privilege is intended to create a “zone of privacy” to permit a

party to prepare for litigation.

[See Blank v. Canada (Minister of Justice), 2006 SCC 39 , at paras.27-41, for a

discussion of these points]

TELUS Public25

Litigation Privilege: Examples

What are common situations in which litigation privilege will be invoked

by parties under investigation?

Answer:

This form of privilege will often be invoked to protect communications with

third parties that fall outside of traditional solicitor-client privilege – which is

focused on communications between a client and a lawyer. Litigation

privilege creates a “zone of privacy” to prepare for litigation – by interviewing

third parties, conducting investigations, engaging outside experts, etc.

Because of this wider reach, it should not automatically be assumed that

public authority investigators can access 3rd party communications.

Example: R. v. Bruce Power Inc, 2009 ONCA 573 (investigation report

prepared by company, after accident, seized by inspectors, protected, inter

alia, by litigation privilege)

TELUS Public26


Consequences for Investigations

What consequences does the nature of litigation privilege have for

investigators and parties under investigation?

Answer:

This form of privilege is both broader and more limited than traditional

solicitor-client privilege.

There will be communications between counsel for a company under

investigation and third parties (these might be experts, outside auditors, or

what have you) that will also enjoy a protection from production and

disclosure provided that they fall within the terms of this form of privilege.

BUT, the immunity from disclosure is time-bounded. If the relevant litigation

has come to an end, the party under investigation may not be able to

successfully rely on litigation privilege

TELUS Public27

The Interaction of Privilege

and Broadly Worded Statutory Powers

In 2016, the Supreme Court released a number of decisions

concerning the interaction of privilege and broadly-worded

statutory powers:

Alberta (Information and Privacy Commissioner) v. University of

Calgary, 2016 SCC 53 (“Alberta IPC”)

Lizotte v. Aviva Insurance Company of Canada, 2016 SCC 52

(“Lizotte”)

Canada (National Revenue) v. Thompson, 2016 SCC 21

(“Thompson”)

Canada (Attorney General) v. Chambre des notaires du Québec,

2016 SCC 20 (“Notaires”)

TELUS Public28



Broadly speaking, these cases deal with two questions:

1. Does the statutory provision contain language capable of

displacing the privilege? (Alberta IPC, Lizotte)

2. If yes, is the statutory provision unconstitutional?

(Thompson, Notaires)

TELUS Public29



Alberta (Information and Privacy Commissioner) v. University of

Calgary, 2016 SCC 53

Alberta Information and Privacy Commissioner wished to verify

that privilege claimed over documents was properly asserted.

Freedom of Information and Protection of Privacy Act:

56(3) Despite any other enactment or any privilege of the law

of evidence, a public body must produce to the Commissioner

within 10 days any record or a copy of any record required under

subsection (1) or (2).

TELUS Public30



The Court stated that:

“To give effect to solicitor-client privilege as a fundamental

policy of the law, legislative language purporting to abrogate

it, set it aside or infringe it must be interpreted restrictively

and must demonstrate a clear and unambiguous legislative

intent to do so. The privilege cannot be set aside by

inference.”

[Alberta IPC, para 28]

TELUS Public31



The IPC was “not an impartial adjudicator” like a court,

because it exercises adjudicative and investigatory functions

Solicitor-client privilege is not just a rule of evidence,

therefore statute referring to “privilege of the law of evidence”

not referring to solicitor-client privilege

TELUS Public32

Litigation Privilege and

Broadly Worded Statutory Powers

Lizotte v. Aviva Insurance Company of Canada, 2016 SCC 52

The regulatory body in Quebec for insurance (the Chambre de

l’assurance de dommages) was investigating an adjuster and

requested that Aviva produce a complete copy of its claim file.

Aviva refused to do so on the basis that some of the documents

were protected by litigation privilege.

After the lawsuit settled Aviva sent over the entire file (because

litigation privilege expired when the lawsuit was settled), but the

parties decided to keep fighting on a point of principle all the way

up to the Supreme Court of Canada.

TELUS Public33

Statutory Override of Litigation Privilege

The Court stated that:

“litigation privilege, like solicitor-client privilege, cannot be

abrogated by inference and that clear, explicit and

unequivocal language is required in order to lift it.”

[Lizotte, para 64]

TELUS Public34

Statutory Override of Privilege –

Constitutional Considerations

In Canada (National Revenue) v. Thompson, 2016 SCC 21, the

Supreme Court found that s. 232(1) of the Income Tax Act was an

example of language sufficiently clear and express to displace

privilege.

232(1) solicitor-client privilege means the right, if any, that a person

has in a superior court in the province where the matter arises to

refuse to disclose an oral or documentary communication on the

ground that the communication is one passing between the person

and the person’s lawyer in professional confidence, except that for

the purposes of this section an accounting record of a lawyer,

including any supporting voucher or cheque, shall be deemed not

to be such a communication.

TELUS Public35


Charter compliance

But, the Supreme Court also said in a companion case Canada

(Attorney General) v. Chambre des notaires du Québec, 2016

SCC 20 that section s. 232(1) was unconstitutional under s. 8 of

the Charter

Section 8 of the Charter protects against search and seizure

TELUS Public36


Charter compliance

Two-part test under s. 8 of Charter:

1. whether the government action intruded upon an

individual’s reasonable expectation of privacy, and

2. whether the seizure was an unreasonable intrusion

on that right to privacy within the meaning of s. 8

Any legislative provision that interferes with privilege more than

is absolutely necessary is unreasonable

TELUS Public37


Charter compliance

Four main defects in Income Tax Act provision:

1. Absence of notice to the client: the notice was sent

directly, and only, to the notary or lawyer. Privilege belongs

to the client, not the lawyer.

2. An inappropriate burden is placed solely on the notary

or lawyer: the lawyer has the burden of raising the

objection. The lawyer may not always raise the objection,

through negligence or through fear of prosecution.

TELUS Public38


Charter compliance

Four main defects in Income Tax Act provision:

3. The disclosure is not absolutely necessary: “[Law] firms

must not be turned into archives for the tax authorities.” The

regulatory authorities should obtain the information from

other sources first.

4. The scheme could have been easily mitigated: e.g. by

going to taxpayer first, going to Court for declaration that

documents are not privileged, and promising not to

prosecute if privilege asserted in good faith.

TELUS Public39

Internal Investigation Reports

And Privilege

Do investigation reports enjoy any special status or immunity

from disclosure, whether in litigation or in processes before

public authorities?

Answer:

At this time, there is no standalone category of privilege for

investigation reports in Canada. In general, the ability to resist

disclosure will depend on traditional categories of privilege (such as

solicitor-client privilege or litigation privilege).

TELUS Public40


And Privilege: Cases

A key Canadian case:

Gower v. Tolko Manitoba Inc., 2001 MBCA 11

Entire investigation report prepared by external counsel protected from

disclosure, both as to facts and legal advice, on the basis of legal

advice privilege. The relevant question is not whether counsel was

retained to conduct an investigation, but rather whether the

investigation was related to the rendering of legal services: Gower, at

paras. 39-40. Retainer letter was key evidence that the mandate

included the provision of legal advice.

Note: the terms of the retainer are key.

TELUS Public41


And Privilege

For a contrary outcome (investigation report prepared by

external counsel not protected from disclosure) see:

North Bay General Hospital v Ontario Nurses’ Association, 2011 CanLII

68580 (ON LA).

Arbitrator found that the hospital’s purpose in hiring an external lawyer

was not to obtain legal advice, but to investigate events in order to make

findings of fact. The mere fact that the investigator was a lawyer did not

mean that his communications to the hospital, including the investigation

report, were protected by solicitor-client privilege. The arbitrator ordered

the hospital to produce the report.

TELUS Public42

Privilege and Internal Investigations: Key Points

Solicitor-client privilege can be available – but not automatic

just because you hire a lawyer [Howard v. London (City), 2015

ONSC 156]

• not available when lawyer retained to investigate and report on

facts instead of legal advice

• make sure the retainer specifies for legal advice

Litigation privilege may be available when investigation is for

dominant purpose of anticipated litigation [Durham Regional

Police Association v. Durham Regional Police Services Board, 2015

CanLII 60920 (ON LA), and R. v. Bruce Power Inc., 2009 ONCA 573]

The wording of the retainer is crucial.

TELUS Public43

Privilege in Regulatory Investigations

What about investigations by the regulator – when are

they privileged?

Solicitor-client privilege applies to government lawyers as well

• Goodis v. Ontario, 2006 SCC 31: in a freedom of information

request, should not provide copy of privileged document to

counsel of requester for purpose of assessing whether privilege

applies, short of “absolute necessity”

Litigation privilege also applies to governments

• freedom of information legislation referring to “solicitor-client

privilege” includes litigation privilege: Blank v. Canada, 2006

SCC 39

TELUS Public44

Privilege and Audits

Voluntarily giving a document to a third-party waives the

privilege in that document

Exception: when disclosure is legally compelled, the

“waiver” is limited to that particular disclosure

TELUS Public45


Auditors are “third parties”, so privilege is waived when documents

provided to auditors [Professional Institute of the Public Service of Canada v.

Canada ( Director of the Canadian Museum of Nature ), [1995] 3 FCR 643, 1995

CanLII 3534 (FC)]

Exception: if the auditor is entitled to the document by statute or

regulation, the waiver is limited (because it is involuntary) [Philip Services

Corp. v. Ontario Securities Commission, 2005 CanLII 30328 (ON SCDC)]

Post Blood Tribe, Courts have taken a more narrow view on when

statutes can genuinely require the disclosure of privileged documents [British Columbia (Auditor General) v. British Columbia (Attorney General), 2013

BCSC 98 (CanLII)]

TELUS Public46


Best practice: “If the doctrine of limited waiver is to be relied on in

future in similar circumstances, it would appear to me to be the

prudent course of action to set forth in writing the client's intent

regarding limited waiver in any disclosure to its auditors of solicitor-

client privileged information and in the formal arrangement between

the client and its auditors.” [Interprovincial Pipe Line Inc. v. M.N.R.,

[1996] 1 FC 367 (Fed TD)]

In other words:

1. Make it clear that the information is privileged

2. Make it clear that the disclosure is involuntary

TELUS Public47

Key Conclusions

1. The various forms of common law privilege condition and limit the reach of

investigative powers. General words in a statutory grant of power permitting

access to information are not sufficient to pierce the veil of privilege . However, not

all forms of privilege are created equal. In all cases, all of the requisite conditions

must be satisfied to sustain a claim of privilege.

2. Investigation reports to do not benefit from a standalone category of privilege.

However. they may be protected from disclosure under traditional categories of

privilege, such as litigation privilege and solicitor-client privilege

3. The fact that an investigation report was prepared by outside counsel is not

sufficient to protect the report from disclosure. In general, the ability to resist

disclosure will depend on traditional categories of privilege (such as solicitor-client

privilege or litigation privilege).

4. Auditors are third parties. Disclosure of privileged information to audits can

result in a waiver of privilege. The exception to this is if the auditor is entitled to

the document by statute or regulation. Then, the waiver is limited (because it is

involuntary)

Legal Privilege and Regulatory Investigations · •Solicitor-client privilege has evolved from a...

Documents

Transcript of Legal Privilege and Regulatory Investigations · •Solicitor-client privilege has evolved from a...