Canada: Supreme Court Of Canada – Litigation Privilege: An Obstacle To Investigative Powers

The authors wish to thank Daniel-Nicolas El Khoury, Marketing Intern, for his contribution

The Supreme Court of Canada rendered on November 25th, 2016 an awaited judgment, bringing distinctions between the notion of litigation privilege and solicitor-client privilege. In Lizotte v. Aviva Insurance Company of Canada 1, the Court rules that a law must be clear to set aside the privilege. The decision confirms the application of litigation privilege to third party investigators, such as a syndic, despite their duty of confidentiality and their oath of discretion.

After a fire damaged a residence, the Respondent, Aviva, Insurance Company of Canada, assigned one of its claim adjusters to investigate the loss. The syndic of the Chambre de l'assurance de dommages ("ChAD") received information alleging that the claims adjuster failed to carry out his duty adequately, and consequently launched an investigation on the adjuster's conduct in handling the insured's claim. In the course of the investigation, the syndic requested from Aviva a complete copy of its claim file with respect to the insured's loss and identification of the employees who worked on the file pursuant to section 337 of the Act respecting the distribution of financial products and services ("ADFPS"). Aviva complied with the request but removed from its file documents it considered to be privileged under solicitor-client and litigation privileges with its insured.

The syndic of ChAD brought an action for declaratory judgement alleging that she was not in a position to continue her investigation on the claims adjuster's behaviour without the documents withheld by Aviva, for which litigation privilege is claimed. Meanwhile, the litigation between Aviva and its insured was settled out of court, and following such settlement, Aviva provided the syndic with a copy of the complete claim file. Despite the fact that Aviva complied with the syndic's request for production of documents, the issue was disputed up to the Supreme Court because the matter raised a genuine problem.

Both the Superior Court and the Court of Appeal decided in favour of Aviva. The insurer had the right to refuse the production of privileged documents based on professional secrecy and litigation privilege, all the more so when the provision relied upon by the syndic did not include any express exception to the privileges.

Nonetheless, the judgments rendered by both previous Courts showed that some ambiguity regarding the scope of litigation privilege remains. On one side, the Superior Court reiterates notably that litigation privilege is absorbed into the concept of professional secrecy, and as a result, the principles and exceptions regarding the latter concept also applied to litigation privilege. On the other side, the Court of Appeal stated that both privileges are to be differentiated from one another, as established by the Supreme Court in Blank2. Since the scope of litigation privilege was still vague, the syndic brought the matter up to the highest court in the country.

Immunity from disclosure to ensure the secure and effective administration of justice

The Supreme Court stated that Aviva was right to withhold from production documents that were protected under the institution of litigation privilege. In the words of the Court, "[l]itigation privilege gives rise to an immunity from disclosure for documents and communications whose dominant purpose is preparation for litigation."3 While it reiterated the distinction between solicitor-client privilege and litigation privilege stated in Blank, the Court emphasized that both privileges share a common cause, the secure and effective administration of justice according to law.

It is important to note that the Court confirmed that litigation privilege is a class privilege giving rise to a presumption of non-disclosure when the party asserting it establishes that the documents subject to it are those whose dominant purpose is preparation for litigation, whether litigation is pending or may be reasonably apprehended. In this regard, the privilege infers a presumption of immunity from disclosure.

Exceptions to the privileges

In order to the determine whether an exception applied, the Court stated that litigation privilege, as a class privilege, is subject to clearly defined exceptions, and thus rejected the exercise of balancing competing interests associated with case-by-case privileges. The exceptions that are applicable to solicitor-client privilege, such as those relating to public safety, the innocence of the accused and to criminal communications, also apply to litigation privilege. The Court also added the exception pertaining to the "evidence of the claimant party's abuse of process or similar blameworthy conduct"4.

Further, with regard to Aviva's suggestion for the creation of a new exception based on urgency and necessity, the Court considered that this particular matter did not reveal any facts "that might be presented as concrete examples of circumstances that could justify the application of such an exception."5 As a result, although it greets the possibility of additional exceptions to litigation privilege when a serious prejudice occurs during the lifetime of the privilege, the Court decided not to adopt the one proposed by Aviva.

The Court also acknowledged that litigation privilege has a larger scope than that of professional secrecy, because it applies to "communications between a solicitor and third parties or, in the case of an unrepresented litigant, between the litigant and third parties."6 Consequently, although it is temporary, litigation privilege is enforceable against third party investigators who have a duty of confidentiality and not only against the parties to the dispute. The Court is of the opinion that the duty of confidentiality, like in the case of a third party investigator, does not sufficiently ensure the respect of litigation privilege.

Clear, explicit and unequivocal language required to lift litigation privilege

Finally, in light of the above and pursuant to the judgment in Parry Sound7 following which common law rules, such as litigation privilege, can only be lifted or modified by a clear provision to that effect, the Court assessed the scope of the powers conferred to the syndic pursuant to section 337 of the ADFPS. In this respect, the Court indicated that requirements and principles set in Blood Tribe8, where it had decided "that any legislative provision capable of interfering with solicitor‑client privilege must be read narrowly and that a legislature may not abrogate that privilege by inference, but may only do so using clear, explicit and unequivocal language9" applied to litigation privilege, even if the latter privilege does not have the same status as solicitor-client privilege and is less absolute than the latter.

In this particular case, the terms "any [...] document" found in section 337 of the ADFPS do not meet the criteria of clarity and precision. The Court thus dismissed the syndic's appeal and concluded that Aviva was justified in refusing to produce documents subject to litigation privilege.

Despite the important lessons learned in this judgment, the Supreme Court has not closed the doors to further debates relating to litigation privilege and investigative powers. Indeed, the Barreau du Québec intervened in this matter with the purpose of specifying the scope of section 192 of the Professional Code. This latter section explicitly abrogates professional secrecy in the context of a disciplinary inquiry, but without any reference to litigation privilege. The Barreau du Québec submitted that section 192 should be read as also abrogating litigation privilege. The Court chose not to rule on this issue without full argument in an adversarial context. Thus, the question regarding the applicability of litigation privilege to syndics subject to the Professional Code remains unresolved.

Footnotes

1.  2016 SCC 52.

2. Blank v. Canada (Minister of Justice), [2006] 2 S.C.R. 319.

3. Lizotte v. Aviva Insurance Company of Canada,  note 1, par. 19.

4. Blank v. Canada (Minister of Justice), note 2, para. 44.

5. Lizotte v. Aviva Insurance Company of Canada, note 1, para. 45.

6. Blank v. Canada (Minister of Justice), note 2, para. 27.

7. Parry Sound (District) Social Services Administration Board v. O.P.S.E.U., Local 324, 2003 SCC 42, [2003] 2 S.C.R. 157.

8. Canada (Privacy Commissioner) v. Blood Tribe Department of Health, [2008] 2 S.C.R. 574.

9. Lizotte v. Aviva Insurance Company of Canada, note 1, para. 1.

Supreme Court Of Canada – Litigation Privilege: An Obstacle To Investigative Powers

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