Privilege Issues for In-house Counsel:
Top 10 Issues and the Current State of the Law
Paul F. Monahan and Vera Toppings
Toronto Symposium
June 5, 2014
Overview
• Categories of Privilege
• Top 10 Privilege Issues for In-House Counsel
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Categories of Privilege
• Solicitor-client privilege
• Litigation privilege
• Settlement privilege
• Confidentiality privilege
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Solicitor-Client Privilege
• Solicitor-client privilege applies where a communication is:
• made in the context of a solicitor-client relationship;
• made in the course of either requesting or providing legal
advice; and
• intended to remain confidential.
Solosky v. The Queen [1980], 1 SCR 821
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Solicitor-Client Privilege
• 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 ER 246 (CA)
• Solicitor-client privilege extends to records (e.g. a lawyer’s
working papers) directly related to the seeking, formulating or
giving of legal advice or legal assistance
Susan Hosiery v. Canada (M.N.R.), [1969] CTC 353 (Ex Ct)
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Litigation Privilege
• Covers documents created for the dominant purpose of
litigation, either actual or contemplated (e.g. surveillance,
witness statements, investigation reports).
• Barrister’s notes of a non-privileged interview of his client by
an audit committee consultant met test for litigation privilege
where litigation was anticipated
R. v. Dunn, 2012 ONSC 2748 at paras 53-59 (Nortel case)
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Litigation Privilege
• Litigation privilege ends when the litigation ends, but may
continue for closely related proceedings, including:
• litigation involving the same or related parties and arising
from the same or a related cause of action; and
• proceedings raising common issues.
Blank v. Canada [2006] 2 S.C.R. 319 at paras 36 and 39
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Settlement Privilege
• Settlement privilege protects confidential communications
made in the context of settlement discussions, including with
the opposing party.
• Most statements made in the course of settlement
negotiations are without prejudice – whether those words are
used or not – and are protected by privilege.
• Competing views about whether settlement privilege is a class
privilege or a case-by-case privilege
See Moore v. Bertuzzi, 2012 ONSC 3248
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Settlement Privilege – Mediation
• Recent decision from the Supreme Court in Union Carbide
Canada Inc. v. Bombardier Inc., 2014 SCC 35
• A mediation contract will not deprive parties of the ability to
prove the terms of a settlement by producing evidence of
communications made in the mediation context unless a court
finds, applying the appropriate rules of contractual
interpretation, that that is the intended effect of the agreement
• Parties must specifically contract out of their common law right
to rely on settlement communications to prove a settlement.
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Confidentiality Privilege
• The categories of privilege are not closed. For example,
pursuant to the Wigmore test, “confidentiality” can give rise to
a privilege in certain circumstances (e.g. tenured profession
discussions).
Slavutych v. Baker, [1976] 1 SCR 254
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Privilege and the Rules of Professional
Conduct
• Rule 2.03 (Confidentiality) of the LSUC Rules of Professional
Conduct prevents the disclosure of confidential information by
the lawyer unless, for example, required by law, charged with
a criminal offence, sued in a civil case for malpractice or there
is imminent risk of harm to someone
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Top Ten Privilege Issues for In-House
Counsel
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Coverage for in-house counsel
Privilege in a global world
The involvement of third parties
Investigations
Disclosure of underlying facts
Requests for access to privileged information
Common interest privilege
Joint defence privilege
Communications with experts
Privilege during e-discovery
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1. Coverage for In-House Counsel
• Lawyers employed by a corporation are covered by solicitorclient privilege, as long as they are performing the function of
a solicitor, not a “business counsellor”
Canada (Privacy Commissioner) v. Blood Tribe Department of Health, 2008 SCC 44 at para 10
Pritchard v. Ontario, [2004] 1 SCR 809
I.B.M. Canada Ltd. v. Xerox of Canada Ltd., [1978] 1 FC 513 (CA)
R. v. Shirose (sub. nom. R. v. Campbell) (1999), 171 DLR (4th) 193 (SCC)
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1. Coverage for In-House Counsel (cont’d)
• “Advice given by lawyers on matters outside the solicitorclient relationship is not protected. A comparable range of
functions is exhibited by salaried corporate counsel
employed by business organizations. …although (as in
government) the corporate context creates special problems:
see, …. No solicitor-client privilege attaches to advice on
purely business matters even where it is provided by a
lawyer.”
R v. Campbell [1999] 1 S.C.R. 565 at para 50
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1. Coverage for In-House Counsel (cont’d)
• 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.))
[Memo from “Secretary and General Counsel” not privileged]
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1. Coverage for In-House Counsel (cont’d)
• 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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1. Coverage for In-House Counsel (cont’d)
• In United States v. Philip Morris et al., Judge Kessler criticized improper
privilege claims:
• “At various times during which litigation and federal regulatory activities
were pending, Defendants improperly sought to conceal research
material behind the attorney-client privilege and the work product
doctrine in order to avoid discovery. To accomplish that purpose,
Defendants’ lawyers exercised extensive control over joint industry and
individual company scientific research and often vetted scientific
documents” at para 4001
• “B&W and BATCo also attempted to create improper attorney-client
privilege or work product protection over documents through various means,
including routing them through lawyers, maintaining scientific materials in
lawyers’ files, and indiscriminately marking them as ‘privileged and
confidential’ or with other similar designations” at para 4003.
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1. Coverage for In-House Counsel (cont’d)
• Practice points for meetings:
• 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.))
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1. Coverage for In-House Counsel (cont’d)
• Practice points for documents (including emails and
attachments):
• Appropriately 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
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2. Privilege in a Global World
Canadian courts have applied domestic law to conflict of law
problems:
a) In Canadian cases privilege accorded to foreign lawyers
giving advice to foreign client or domestic client;
b) Legal advice by domestic lawyer to a foreign client should
be based on domestic law;
c) Disclosure of information abroad to be determined by
domestic waiver principles
Brandon Kain, Solicitor-client Privilege and the Conflict of Laws (2011), 90 C.B.R. 243
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2. Privilege in a Global World (cont’d)
• Privilege can extend to communications of legal advice
between counsel of parent corporation and employees of a
wholly-owned subsidiary
Mutual Life Assurance Co. of Canada v. Canada (Deputy Attorney General) (1988),
28 C.P.C. (2d) 101 (Ont. H.C.)
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2. Privilege in a Global World (cont’d)
• While you may be protected in Canada, the same may not be
true in Europe:
• “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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3. The Involvement of Third Parties
• 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, actuaries,
consultants, auditors, etc.
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3. The Involvement of Third Parties (cont’d)
• The “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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3. The Involvement of Third Parties (cont’d)
• Example of the functional approach where 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.
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3. The Involvement of Third Parties (cont’d)
• Examples of communications involving third parties that may
not be protected:
• third party gathers information from outside sources and
passes information on to the lawyer so the lawyer can advise
the client; and
• third party is retained to act on instructions from the lawyer.
• The function of the third party in the above examples is not
essential to the operation of the solicitor client relationship
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3. The Involvement of Third Parties (cont’d)
• Examples of communications involving third parties that will
not be protected:
• 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] OJ No. 3589 (SCJ)
• 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 CCPB 201 (FC)
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3. The Involvement of Third Parties (cont’d)
• 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:
• Court found limited waiver because documents were disclosed to
auditor to enable fulfillment of auditor’s statutory obligation
Philip Services Corp. (Receiver of) v. Ontario Securities Commission
(2005), 77 OR 3d 209 (Div Ct)
• Court viewed auditors as a third party vis-à-vis the client and
therefore stated that waiver could apply
Cineplex Odeon Corp. v. M.N.R. (1994), 114 DLR (4th) 141 (Ont Gen Div)
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4. Investigations
• Counsel often become involved in conducting investigations
(e.g. corporate or employee misconduct).
• Investigations often generate e-mails between non-lawyers,
statements of witnesses, outside expert’s reports, legal
opinions, and other documents.
• Privilege must be analyzed through the rubric of solicitor-client
privilege and litigation privilege.
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4. Investigations (cont’d)
• Third party reports may be privileged on two grounds:
• Generated for the purpose of allowing legal advice to be provided.
This point is uncertain and somewhat doubtful – 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.
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4. Investigations (cont’d)
• Be careful:
• Litigation privilege is not as sacrosanct as solicitor-client
privilege and ends when the litigation ends
• 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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5. Disclosure of Underlying Facts
• Alberta and Manitoba courts have distinguished between facts in
the party’s own knowledge and those gathered by counsel in the
course of an investigation: 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
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5. Disclosure of Underlying Facts (cont’d)
• Some Ontario Courts have rejected the approach of distinguishing between
how facts were obtained:
• Pearson v. Inco, [2008] OJ No. 3589 (SCJ): 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: “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.”
• Tiller v. St. Andrew’s College, [2009] OJ No. 2634 (SCJ): 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 SC)
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5. Disclosure of Underlying Facts (cont’d)
• R. v. Dunn 2012 ONSC 2748 (Nortel case): “Documents
protected by litigation privilege need not be disclosed. The facts
contained within those documents are often disclosable”. Notes
of counsel of a non-privileged audit committee investigation did
not have to be produced. Counsel who were witnesses were
ordered to refresh memory by reading notes and did not have to
produce notes notwithstanding the refreshing of memory
• But see Hart v AG Canada 2012 ONSC 6067 where counsel for
one party interviewed the other party, the notes of counsel were
ordered produced (distinguishing R v. Dunn)
• What constitutes “facts” and “material facts” in a document is not
always clear.
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6. Requests for Access to Information
• Be aware of potential for access requests pursuant to privacy
laws and freedom of information legislation
• Scenario 1:
• Pursuant to PIPEDA, a terminated employee requests
access to all personal information, including human
resources, investigation and legal department files.
• Is the organization required to give access to the individual?
To the Privacy Commissioner, if a complaint is filed?
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6. Requests for Access to Information
(cont’d)
• Scenario 1 (cont’d):
• Organizations are not required to give access to personal
information if the information is subject to privilege (PIPEDA, s.
9(3)(a))
• The Privacy Commissioner does not have the power to review the
documents over which privilege is claimed to determine whether
privilege claims are valid
Canada (Privacy Commissioner) v. Blood Tribe Department of Health, 2008 SCC 44
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6. Requests for Access to Information
(cont’d)
• Scenario 2:
• Situation involving passenger consuming beer on a flight that
was not served by the airline
• Passenger and flight attendant “agree that extreme rudeness
was displayed” by the other person. Each file a complaint
• Passenger is treated as disruptive, the Captain is notified,
and RCMP were called
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6. Requests for Access to Information
(cont’d)
• Scenario 2 (cont’d):
• A number of documents were subsequently prepared:
• an Incident Report prepared by the flight attendant;
• a report from a customer service representative who met the
plane on arrival;
• an Aeronautical Event Report prepared by the Captain;
• a follow-up Incident Report prepared by the flight attendant; and
• a witness statement prepared by a passenger on the flight.
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6. Requests for Access to Information
(cont’d)
• Scenario 2 (cont’d):
• Pursuant to PIPEDA, Passenger requests access to all
documents containing his personal information.
• Airline refuses the request, claiming solicitor-client and
litigation privilege over all of the documents.
• Privacy Commissioner requests an affidavit to support the
privilege claim
• Is the airline required to deliver an affidavit? Are the
documents in fact privileged?
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6. Requests for Access to Information
(cont’d)
• Privacy Commissioner of Canada v. Air Canada, 2010 FC 429:
• “the Privacy Commissioner had the right to inform Air
Canada that if it did not persuade her that its assertion was
well founded, she would come to this Court, as indeed she
has. However, since she could not make a decision, it
follows that she could not stipulate the steps Air Canada had
to take to satisfy her that the documents were truly
privileged.”
• “Air Canada could have refused without giving any
particulars whatsoever”.
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6. Requests for Access to Information
(cont’d)
• Privacy Commissioner of Canada v. Air Canada, 2010 FC 429:
• Not Privileged: a report from a customer service representative
who met the plane on arrival;
• Solicitor-client and Litigation Privileged:
• Incident Report prepared by the flight attendant;
• Aeronautical Event Report prepared by the Captain;
• follow-up Incident Report prepared by the flight attendant; and
• Litigation Privileged: witness statement prepared by a
passenger on the flight.
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7. Common Interest Privilege
• Requirements:
• Underlying privilege is established
• Communication is made by separate parties in context of a
matter involving their joint interest
• Communication is intended to further the joint effort
• Privilege has not otherwise been waived
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7. Common Interest Privilege (cont’d)
• 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 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 AR 198 (QB)
Pritchard v. Ontario, [2004] 1 SCR 809
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8. Joint Defence Privilege
• 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)
• But beware: see Jetpoint Inc. v Global Aerospace, 2013
ONSC 235 – litigation privilege was dissolved where one party
sued the other.
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8. Joint Defence Privilege (cont’d)
• Do you need a joint defence agreement?
• Put “subject to common interest privilege” on communications
with co-defendants
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9. 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
• Alfano v. Piersati (2009) CanLII 9462, aff’d 2012 ONCA 297:
• Where independence of an expert is challenged, the court may
have regard to “any relevant matters that bear on the expert’s
independence”
• Emails with counsel and clients
• Dockets
• Draft reports
• Delivery of the [expert’s] reports constitutes actual waiver of
litigation privileged documents
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9. Communications With Experts (cont’d)
• Justice Wilson in Moore v. Getahun 2014 ONSC 237 (para 5054) said the following:
• I conclude that counsel’s prior practice of reviewing draft
reports should stop. Discussions or meetings between
counsel and an expert to review and shape a draft expert
report are no longer acceptable.
• The practice of discussing draft reports with counsel is
improper and undermines both the purpose of Rule 53.03
as well as the expert’s credibility and neutrality. (emphasis
added)
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10. Privilege During e-Discovery
• E-discovery process poses special challenges due to the
nature of the document review
• 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 OR (3d) 48 (SCJ)
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10. Privilege During e-Discovery (cont’d)
• 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
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10. Privilege During e-Discovery (cont’d)
• 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] OJ No. 2877 (SCJ)
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10. Privilege During e-Discovery (cont’d)
• Inadvertent disclosure and the LSUC 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.
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10. Privilege During e-Discovery (cont’d)
• Recent decision in White v. 123627 Canada Inc., 2014 ONSC
2682
• Inadvertent disclosure is “not unlike the transmission of an
infection” – the more quickly it is contained, the better the
chances of eradicating its harmful effect
• Counsel removed from case due to failure to act in
accordance with obligations upon receipt of a privileged
document
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