Canada: Appellate Court Recognizes And Protects Litigation Privilege In A Regulatory Investigation

An appellate court recently concluded that litigation privilege may be appropriately claimed by a target of a regulatory investigation. The Court in TransAlta Corporation v Market Surveillance Administrator reaffirmed the importance and protection afforded to litigation privilege claims, recognizing there is the need for both legal advice and the protection of an associated zone of privacy when a party is facing an investigation that could result in a prosecution with serious consequences.

Background

In 2011, Alberta's independent electricity market regulator, the Market Surveillance Administrator (MSA), notified TransAlta Corporation that it was commencing an investigation under the Alberta Utilities' Commission Act (Act) into whether TransAlta had, among other things, artificially influenced the price of electricity by timing the required maintenance shutdowns of some of its power plants to take place during periods of high demand.

As part of its investigation, the MSA issued formal document production requests to TransAlta. Although TransAlta produced over 250,000 documents in response to the MSA's formal document production requests, it withheld fewer than 1,000 documents on the basis that they were subject to the common law claim of either solicitor-client or litigation privilege. The MSA challenged TransAlta's privilege claims, and section 50 of the Act, which governed the seizure of records for which there was a claim of solicitor-client privilege, was invoked. In accordance with the process set out in the Act, TransAlta sought a judicial order that it had properly claimed privilege over the documents at issue and, therefore, the documents were properly withheld and did not need to be produced.

The motions judge concluded that (i) section 50 of the Act was limited to solicitor-client privilege claims; and (ii) neither section 50 nor any other section of the Act permitted or recognized a claim for litigation privilege as a basis on which to withhold documents. TransAlta appealed.

The Appellate Decision

A three-judge panel of the Alberta Court of Appeal unanimously overturned the motions judge's decision. The appellate court concluded that (i) even though it was "abundantly clear" that solicitor-client and litigation privileges are driven by different policy considerations and generate different legal consequences, the term solicitor-client privilege in section 50 of the Act included litigation privilege; and (ii) in the alternative, nothing in the Act excluded litigation privilege claims.

Statutory Interpretation: In his analysis for the Court, Justice O'Brien reviewed the nature and evolution of litigation privilege and then turned to interpret the statutory meaning of "solicitor-client privilege" within the context of the particular regulatory regime established by the Act. Referring to the Supreme Court of Canada's decision in Blank v Canada (Minister of Justice), Justice O'Brien determined that when section 50 of the Act was introduced, the common law treated litigation privilege as a subset of solicitor-client privilege (even though the scope and duration differed), and the legislature would have had that understanding in mind at the time section 50 was drafted. He concluded, therefore, that the proper interpretation of solicitor-client privilege in section 50 included litigation privilege.

Absence of Clear and Explicit Language: Although he was not required to do, Justice O'Brien also analyzed TransAlta's alternative argument that the express use of the term solicitor-client privilege in section 50 did not prohibit claims for litigation privilege. Justice O'Brien determined that section 50 was merely procedural and that nothing in section 50 or any other section of the Act justified an interpretation that excluded claims for litigation privilege or any other type of privilege. Of critical importance, Justice O'Brien recognized that any other interpretation would deny investigated parties the right to claim litigation privilege in the absence of clear and explicit legislative language to that effect.

Scope of Litigation Privilege: After concluding that section 50 either included or did not explicitly exclude a claim for litigation privilege, Justice O'Brien considered whether TransAlta could advance a claim for litigation privilege in the context of the MSA's investigation. Justice O'Brien reaffirmed that, due to the potential serious consequences that may follow, an investigation by regulatory authorities may give rise to a claim for litigation privilege from the outset of the investigation. In addition, Justice O'Brien noted that, although unlikely, litigation privilege may arguably apply to records prepared in connection with prior investigations or litigation involving other parties.

Implications

The decision is significant for a number of reasons, the first of which is that the Court recognized the appropriateness of litigation privilege claims in the context of the regulatory investigations. In addition, the Court's decision should therefore reduce some uncertainty about the scope of documentary production pursued by regulators under their statutory powers of investigation. Further, the Court affirmed the importance of litigation privilege to the administration of justice and the adversarial process, asserting that if the legislature intends to remove a party's ability to assert a claim of litigation privilege, the legislation must use clear and express language. The Court also gave some guidance as to the breadth of litigation privilege: it stated that a party may claim litigation privilege from the outset of the regulatory litigation, and it recognized (referring to the Supreme Court of Canada's definition of "litigation" in Blank) that litigation privilege may also apply to records prepared for other investigations and proceedings. In this context, the procedural decision should provide comfort for companies and individuals seeking to protect documents and information over which a claim for litigation privilege is asserted in the course of regulatory investigations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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