Privilege Issues For In-House Counsel:
The Current State of the Law
FM Panelists: Robert S. Harrison, Paul Monahan, Vera Toppings
Toronto Fasken Martineau Symposium
Wednesday, April 27, 2011
Categories of Privilege
• Solicitor-client privilege
• Litigation privilege
• Settlement privilege
• Confidentiality privilege
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Solicitor-Client Privilege
• A communication will be protected by solicitor-client privilege
if it meets the following criteria:
• it is made in the context of a solicitor-client relationship;
• in the course of either requesting or providing legal
advice; and
• it is intended to remain confidential.
Solosky v. The Queen [1980], 1 S.C.R. 821
The Continuum of Communication
• Communications that do not specifically request or provide
legal advice are still privileged where they are a “part of a
continuum aimed at keeping both [parties] informed so that
advice may be sought and given as required.”
Balabel v. Air India, [1988] 2 All E.R. 246 (C.A.).
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Necessary or Essential Communications
• Though no bright line test exists defining which
communications fall within the privileged continuum, it has
been held that the communication must be a necessary or
essential part of the request for/receipt of legal advice.
Mitsui & Co. (Point Aconi) Ltd. v. Jones Power Co. (2000), 10 C.P.C. (5th) 28 (N.S.C.A.)
Litigation Privilege
• Covers communications between counsel and outside
consultants/experts retained to assist in the litigation.
• Covers documents created for the dominant purpose of
litigation, either actual or contemplated (e.g. surveillance,
obtaining witness statements, investigation reports).
R.J. Sharpe, "Claiming Privilege in the Discovery Process", in Law in Transition:
Evidence, [1984] Special Lect. L.S.U.C. 163
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Settlement Privilege
• Not true solicitor-client privilege as it deals with
communications with the opposing party.
• However, the common law recognizes a settlement privilege
for confidential communications made in the context of
settlement discussions.
Settlement Privilege
• Most statements made in the course of negotiations towards
settlement are without prejudice – whether those words are
used or not – and are protected by privilege
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Confidentiality Privilege
• While this presentation does not permit a detailed review of
the subject, the case law is clear that the categories of
privilege are not closed.
• For example, “confidentiality” can give rise to a privilege in
certain circumstances.
Slavutych v. Baker, [1976] 1 S.C.R. 254
Confidentiality Privilege
•
The four part Wigmore conditions apply:
1) The communications must originate in a confidence that they
will not be disclosed.
2) This element of confidentiality must be essential to the full and
satisfactory maintenance of the relation between the parties.
3) The relation must be one which, in the opinion of the
community, ought to be sedulously fostered.
4) The injury that would inure to the relation by the disclosure of
the communications must be greater than the benefit thereby
gained for the correct disposal of litigation.
Sopinka, et al. The Law of Evidence in Canada (2nd ed) at para 14.15
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Privilege and In-House Counsel
• Lawyers employed by a corporation are covered by solicitorclient privilege, as long as they are performing the function of
a solicitor.
I.B.M. Canada Ltd. v. Xerox of Canada Ltd., [1978] 1 F.C. 513 (C.A.);
R. v. Shirose (sub. nom. R. v. Campbell) (1999), 171 D.L.R. (4th) 193 (S.C.C.)
Other Jurisdictions
Watch out!
• September 2010 decision from the European Court of
Justice regarding privilege in the European Communities:
• “An in-house lawyer cannot, whatever guarantees he has in
the exercise of his profession, be treated in the same way as
an external lawyer, because he occupies the position of an
employee which, by its very nature, does not allow him to
ignore the commercial strategies pursued by his employer,
and thereby affects his ability to exercise professional
independence.”
Akzo Nobel Chemicals and Akcros Chemicals - September 2010, European Court of Justice
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Dual Roles of In-House Counsel
• If a lawyer also has an official role in the management of the
company for which she works, her activities relating to the
management role do not attract solicitor-client privilege
• Similarly, no privilege attaches to work performed by a lawyer
in her capacity as a director
Presswood v. International Chemalloy Corp. (1975), 11 O.R. (2d) 164
See also Toronto-Dominion Bank v. Leigh Instruments Ltd. (1997), 32 O.R. (3d) 575 (O.C. (Gen.Div.))
When Will A Lawyer’s Presence at a Meeting
Render the Subject of the Meeting Privileged?
• The mere fact of a lawyer’s involvement does not establish
privilege
• Courts have held that privilege attaches to those portions of
board meeting minutes that record counsel’s advice.
Nova Scotia Power Corp. v. Surveyer, Nenniger & Chenevert Inc. (1986), 74 N.S.R. (2d)
327 (N.S. T.D.), aff’d (1987) 78 N.S.R. (2d) 217 (C.A.)
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Protecting Privilege Internally
– Practice Points –
Meetings
• Consider having in-house counsel call and chair the meeting
• Consider keeping notes made by the participants with inhouse counsel
• Limit attendance to those actually required to be there
• Be careful regarding the content and circulation of minutes
and other documents
• See Toronto-Dominion Bank v. Leigh Instruments Ltd., where
excessive internal circulation was a factor in finding a lack of
privilege; (1997), 32 O.R. (3d) 575 (O.C. (Gen.Div.))
Protecting Privilege Internally
– Practice Points –
Documents (including e-mails and attachments)
• Mark documents as being “privileged and confidential”
• Limit the circulation of legal advice to necessary recipients
• Communicate legal advice separately from the
communication of business advice
• When acting as counsel (as opposed to acting in some
business capacity) identify that capacity clearly in
communications
• Consider having all communications flow through counsel,
but…
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Limits to Protecting Privilege
• It has been held that a process of routinely submitting copies
of documents to a lawyer in the hope of shielding relevant and
non-privileged documents is improper
Guelph (City) v. Super Blue Box Recycling (2004), 2 C.P.C. (6th) 276 (Ont. S.C.J.)
Cusson v. Quan (2004), 10 C.P.C. (6th) 308 (Ont. S.C.J.)
Three Concepts Relating to the Protection
of Privilege Vis-à-Vis Third Parties
1. Joint Defence Privilege
2. Common Interest Privilege
3. Limited Waiver
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Joint Defence Agreements
• Privilege is not waived where documents are disclosed to a
party having a common interest in anticipated or ongoing
litigation
Canadian Pacific Ltd. v. Canada (Competition Act, Director of Investigation and Research), [1995] O.J.
No. 4148 (Gen. Div); General Accident Co. v. Chrusz (1999), 124 O.A.C. 356; Anderson Exploration
Ltd. v. Pan-Alberta Gas Ltd. (1998), 61 Alta. L.R. (3d) 38 (Q.B.); Archean Energy Ltd. v. Canada
(Minister of National Revenue) (1997), 202 A.R. 198 (Q.B.); Almecon Industries Ltd. v. Anchortek Ltd.,
[1998] F.C.J. No. 1664 (Trial Division)
• Do you need a joint defence agreement? When?
• Put “subject to common interest privilege” on communications
with co-defendants
2. Common Interest Privilege
• Common interest privilege extends to legal opinions provided
in the context of a corporate transaction (i.e. without litigation)
• Examples:
• Advice from a law firm shared by a group of companies
remains privileged even though it is distributed to the whole
group
• A legal opinion given to a purchaser by vendor’s counsel
regarding the transaction with the vendor remains
privileged because there is a common interest in getting
the deal done
Archean Energy Ltd. v. Canada (Minister of National Revenue) (1997), 202 A.R. 198 (Q.B.)
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Potential or Unrelated Adversity
• The possibility that parties may at a later point become
adverse in interest does not vitiate the existence of common
interest privilege
Almecon Industries Ltd. v. Anchortek Ltd., [1998] F.C.J. No. 1664 (T.D.)
Western Canadian Place Ltd. v. Con-Force Products Ltd. (1997), 31 B.L.R. (2d) 97 (Q.B.)
3. Limited Waiver
• Limited waiver means the privilege is waived only to the
extent it has been disclosed to the particular recipient, but not
otherwise
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Limited Waiver: Third Party as Channel of
Communication
• Where the third party acts as a channel of communication
between lawyer and client, communications with the third
party will be protected by privilege (as long as the privilege
exists in the first place!)
Susan Hosiery v. Canada (M.N.R.), [1969] C.T.C. 353 (Ex. Ct.)
• This has implications for the role of accountants and
actuaries.
The Functional Approach
“Functional approach”:
• The key question is whether the function of the third party
is essential or integral to the operation or existence of the
solicitor-client relationship
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Example: Protected Communication Because
Third Party Acts as Channel of Communication
• Financial advisors in Susan Hosiery were “translators” who
were presenting the client’s affairs in a way that could be
understood by the lawyer. They acted as conduits of advice
and instructions.
Communications That May Not Be
Protected
• Where third party merely gathers information from outside
sources and passes information on to the lawyer so the
lawyer can advise the client
• Where third party is retained to act on legal instructions from
the lawyer
In both situations, the third party’s function is not
essential to the operation of the solicitor-client
relationship
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Case Examples: Communications That
Will Not/May Not Be Protected
• No protection given: Documents prepared by a consulting
firm at the lawyer’s request to assist in giving advice. Court
was not satisfied that third party was a channel of
communication, or interpreting information given by the client.
Pearson v. Inco Ltd., [2008] O.J. No. 3589 (S.C.J.)
• No protection given: Files of an actuarial firm (containing
reports, notes and communications with lawyers) which
prepared actuarial valuations that were given to the lawyers,
who used the valuations to give tax liability advice to the
clients.
Canada (Min. of Nat. Revenue) v. Welton Parent Inc. (2006), 50 C.C.P.B. 201 (F.C.)
Limited Waiver: Disclosure to
Auditors/Accountants
Our Court of Appeal has not dealt with this issue, but the
better view is that sharing legal opinions with auditors
will amount to only a limited waiver
Philip Services Corp. (Receiver of) v. Ontario Securities Commission
(2005), 77 O.R. 3d 209 (Div. Ct.)
• Court found limited waiver because documents were disclosed to
auditor to enable fulfillment of auditor’s statutory obligation
But see: Cineplex Odeon Corp. v. M.N.R. (1994), 114 D.L.R. (4th) 141
(Gen. Div.)
• Court viewed auditors as a third party vis-à-vis the client and
therefore stated that waiver could apply.
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Issues Arising In Practice
1. Experts
2. Investigations
3. Inadvertent Disclosure
1. Communications With Experts
• This is an evolving area of the law, but most counsel assume that
nothing will be privileged if the expert report is produced
• See, for example:
• Browne (Litigation Guardian of) v. Lavery, [2002] O.J. No. 564
(S.C.J.)
• Horodynsky Farms Inc. v. Zeneca Corp., [2006] O.J. No. 3012
(C.A., in chambers), rev’d [2006] O.J. No. 3716 (C.A), leave to
appeal refused [2006] S.C.C.A. No. 451 (sub. nom. Conceicao
Farms Inc. v. Zeneca Corp)
• Bookman v. Loeb, [2009] O.J. No. 2741 (S.C.J.)
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2. Investigations
• The requirements of the dominant purpose test and the
narrowing of litigation privilege
Investigations, continued
• It often occurs that in-house counsel will become involved in
conducting investigations. These investigations generate emails between non-lawyers, statements of witnesses, outside
expert’s reports, legal opinions, and other documents.
• Whether these documents are privileged must be analyzed
through the rubric of solicitor-client privilege and litigation
privilege.
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Investigations, continued
•
Opinions and communications from legal counsel to the
client representatives will be privileged as solicitor-client
communications.
Third party reports may be privileged on two grounds:
•
i.
ii.
Where it was generated for the purpose of allowing legal advice
to be provided. This point is uncertain – see McCarthy Tétrault
v. Ontario (1992), 95 D.L.R. (4th) 94 (Ont. P. Div.), and General
Accident Assurance Co. v. Chrusz, [1999] 45 O.R. (3d) 321
(C.A.)
Alternatively, if the report was generated for the dominant
purpose of reasonably contemplated litigation, then it will be
subject to litigation privilege – this will not always be an easy
hurdle to meet.
Investigations, continued
Be careful:
• Litigation privilege is not as sacrosanct as solicitor-client
privilege
• Even if a report is subject to privilege, it may be that the
“underlying facts” contained in the report have to be
disclosed
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Disclosure of Underlying Facts
This is an evolving area of the law
• Susan Hosiery - The facts or documents that happen to be
reflected in the privileged working papers or communications
are not privileged from discovery if, otherwise, the party would
be bound to give discovery of them.
• E.g. letter to lawyer is privileged; facts contained in the
letter are not.
Disclosure of Underlying Facts
• Pearson v. Inco, [2008] O.J. No. 3589 (S.C.J.): Facts in a
summer student’s notes, obtained for the purpose of litigation,
ordered to be disclosed. These included names and
addresses of the student’s informants, pursuant to Rule
36.06(2)
• Tiller v. St. Andrew’s College, [2009] O.J. No. 2634 (S.C.J.):
Facts in the statement of a school’s chief engineer following
an accident at the school ordered to be disclosed
• For a somewhat contrary view, see Kennedy v. McKenzie,
2005 CanLII 18295 (Ont. S.C.)
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Alberta and Manitoba’s Different Approach
• Alberta and Manitoba courts have distinguished between facts in the
party’s own knowledge and those gathered by counsel in the course
of counsel’s investigation.
• Decisions from these provinces have held that facts gathered by
counsel, other than those necessary for pleadings, are subject to
litigation privilege.
• “Facts, not otherwise privileged, are those facts that a party knows of
its own account, in the ordinary course of affairs or from its own
involvement in the events…The facts acquired by counsel or agents,
acting on behalf of counsel … are not discoverable because they are
covered by litigation privilege, i.e., they are facts which are otherwise
privileged.”
Sovereign General Insurance Co. v. Tanar Industries Ltd., [2002], 3 W.W.R. 340 (ABQB), quoting Blair v. Wawansea Mutual
Insurance Co. et al. (2000), 265 A.R. 50 (QB); Chmara v. Nguyen, [1993] M.J. No. 274
Some Ontario Courts Have Rejected the Approach of
Distinguishing Between How Facts Were Obtained
Pearson v. Inco, [2008] O.J. No. 3589 (S.C.J.):
• “Decisions of the Court of Queen’s Bench of Alberta and the
Court of Appeal of Manitoba are in favour of the extension of
the litigation privilege to facts that a party being discovered
has obtained only from documents prepared by counsel or
their agents for the purpose of litigation.”
• “I am satisfied that the authorities in Ontario do not endorse
that proposition.”
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Investigations: Scenarios
• The law firm has retained the investigator and paid for the
report
• The lawyer receives the report from the investigator and gives
it to the CEO for discussion with the Board
Investigations: The Key Points
• Know that you cannot artificially protect a document by
claiming privilege where it does not exist
• Involving a lawyer does not change whether the document is
privileged
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3. Inadvertent Disclosure of Privileged Documents
• Recent decision of the Ontario Superior Court:
• Barclay’s Bank PLC v. Devonshire Trust, 2010 ONSC 5519
Protecting Privilege During Electronic Discovery
• Process for identifying privileged documents in electronic
database has to protect against disclosure of privilege
• A party cannot solely rely on electronic search to identify
privileged documents and then expect that inadvertent
production will not be construed as waiver
• Privilege is too important for court to approve a process that
has very large potential for disclosure of privileged material
Air Canada v. WestJet Airlines Ltd., (2006) 81 O.R. (3d) 48 (S.C.J.)
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Reciprocity Agreements
• It is common in major document cases to enter into reciprocity
agreements with other parties to cover inadvertent disclosure
• However, the obligation applies even in the absence of such
an agreement
What If You Receive Inadvertently
Disclosed Privileged Documents?
• You must alert the other side if you believe they may
inadvertently have produced privileged documents and send
the documents back
• “The case law on this point is clear…If there is any issue as to
whether privilege is properly asserted, the obligation of the
receiving counsel is to seal the documents, and any notes
made in respect of the documents, and seek further direction
from the court.”
Chan v. Dynasty Executive Suites Ltd., [2006] O.J. No. 2877 (S.C.J.)
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Inadvertent Disclosure and The Rules of
Professional Conduct
• Rule 6.03(3): A lawyer shall avoid sharp practice and shall not
take advantage of or act without fair warning upon slips,
irregularities, or mistakes on the part of other legal
practitioners not going to the merits or involving the sacrifice
of a client’s rights.
Remember…
• The ultimate arbiter is the court
• Judges will review documents for which privilege is claimed
and will determine to what extent, if at all, privilege will be
maintained
• This determination can be made at discovery or at trial – or
both
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