Alberta Court of Appeal Addresses Privilege in Post-Incident Reports

On April 26th, the Court of Appeal of Alberta affirmed a lower court decision that privilege in two post-incident investigation reports had been waived, also opining on the law governing whether the reports were subject to litigation privilege.

The case arises out of 2015 pipeline failure. The operator initiated an investigation for multiple purposes, ultimately leading to the creation of several reports, including the two expert reports at issue. The operator relied on an affidavit sworn by its assistant general counsel in which she stated that she contemplated litigation soon after the incident and directed all investigations to be conducted on a privileged and confidential basis under the supervision of legal counsel.

The two reports were later produced by experts. The lower court judge did not review the reports, but held they were used to decide whether to repair or replace the pipeline and encompassed “too many other concerns” to have been prepared for the dominant purpose of litigation. The lower court judge also held the operator waived privilege in the reports by sharing them with the Alberta Energy Regulator and the Association of Professional Engineers and Geoscientists of Alberta and by mentioning the conclusion of the reports at a press conference.

The press conference statement is worth quoting:

Nexen has conducted comprehensive investigations into the pipeline failure in July 2015 and the January 2016 explosion at its Long Lake Oil Sands facility to determine the root cause for each incident. . . .

• Following the Long Lake pipeline rupture discovered on July 15, 2015, Nexen conducted a comprehensive, independent investigation using Nexen’s Event Recording and Analysis (ERA) Procedure to determine the root cause.

• Based on our investigation, the root cause of the rupture was a thermally-driven upheaval buckling of the pipeline and the subsequent cooldown during the turnaround. This was the result of using an incompatible pipeline design for the muskeg ground conditions. Steps that could have been taken to mitigate the potential for upheaval buckling were not addressed.

The Court of Appeal held that this revelation did not waive privilege as found by the lower court judge. The core of its reasoning is that the statement did not clearly reveal the content of the privileged reports: “It is difficult to see how privilege could be lost over a document that is no even mentioned.”

Privilege was nonetheless waived, the Court said, by the voluntary disclosure of the reports to the Regulator and the APEGA. Although the operator disclosed the reports to the Regulator with various stipulations, none precluded the Regulator from using the reports in a prosecution or from disclosing the reports to others as required by law. Likewise, disclosure to the APEGA for its use was incompatible with maintaining a privilege claim.

On the privilege claim itself, the Court applied its decision in Suncorp, which dictates that litigation privilege must be assessed on a document-by-document basis. It then stressed that the dominant purpose test applies to the creation of a document, not the investigation that preceeded the document’s creation or the use of the document after it was created. It questioned the lower court judge’s finding because the judge made it without reviewing the reports and because the judge placed too much emphasis on the reports’ use use rather than the purpose for their creation.

The creation and maintenance of a litigation privilege claim is very technical, and this decision is illustrative in many ways. The finding that the above-quoted press conference statement did not waive privilege is most notable. The statement does have a degree of vagueness about it, but also hints at the content of privileged documents in a way that begs a question about what they say. Ultimately, the Court’s finding suggests that drafters of such statements have some latitude to garner trust from expert investigations so long as they don’t refer to the content of privilege reports. This is helpful, though to be relied upon with caution.

CNOOC Petroleum North America ULC v ITP SA, 2024 ABCA 139 (CanLII).

Federal Court dismisses awkward solicitor-client privilege claim

Earlier this year, the Federal Court dismissed a claim that a column in a spreadsheet was subject to solicitor-client privilege because disclosure would reveal legal advice obtained prior to its development.

Solicitor-client privilege (literally) protects advisory communications between a solicitor and its client, and it can protect such communications if they find their way into other documents. For example, if two employees of a lawyer’s client discuss the (corporate) lawyer’s advice confidentially via e-mail, their description of the advice may be redacted in response to a production requirement because its disclosure would reveal the solicitor-client communication.

In this case, a corporate taxpayer argued that a column in a spreadsheet was protected by solicitor-client privilege based on the same rationale. It relied on an affidavit that explained that it received legal advice prior to the development of the column and that disclosure of the column would reveal it “by what is being computed, how the computation is done,” and “by associated text in the reacted column.” The Court exercised its discretion to review the prior legal advice and held that the column was simply the “operational outcome or end product of legal advice” and not protected.

This is a fact specific, though illustrative outcome. Even the fact of obtaining legal advice on a particular matter is sensitive and ought normally be kept secret because, once disclosed, inferences can be drawn about advice taken based on the “operational outcome” or “end product” of the advice. Of course, a lawyer’s legal advice can be either be accepted or rejected or followed precisely or loosely, but clients are often drawn to back the legitimacy of their actions by reference to their careful adherence to legal advice. That’s plainly a risk.

In this case, it is unclear whether something precipitated the (more basic) disclosure of an advisory relationship, but one can see how arguing the resulting inference can be very awkward and risky. The only way to do it is to “double down” and disclose more about the advisory relationship and the resulting inference. If not it inviting of waiver in the underlying advice (which the Court did not find here), it seems to be one step down a slippery slope to that outcome.

Canada (National Revenue) v. BMO Nesbitt Burns Inc., 2022 FC 157.

ABCA decision on defending allegations about privileged communication

On April 12th, the Court of Appeal of Alberta held that a defendant waived solicitor-client privilege by affirmatively pleading that its counsel had no instructions to agree to a time extension for filing a prospectus.

The defendant faced a lawsuit that alleged its counsel gave a time extension and had the actual authority to do so. The majority judges explained that a party faced with such an allegation about a privileged communication can make a bald denial and safely rest on its privilege. The defendant went further, thereby putting its privileged communications in issue.

PetroFrontier Corp v Macquarie Capital Markets Canada Ltd, 2022 ABCA 136 (CanLII).

BCCA gives broad protection to e-mail communications with inside counsel

It is inappropriate to closely parse solicitor-client communications in assessing the scope of privilege; the entire “continuum of communications” must be protected. This is the principle articulated in a June 8th decision of the Court of Appeal for British Columbia.

The Court allowed the appeal of a chambers judge order to produce parts of a series of e-mails between a government lawyer and staff at an administrative tribunal. The content ordered to be produced included:

two paragraphs and two sentences of a ten paragraph advisory e-mail in which the chambers judge suggested the lawyer stepped beyond his role as legal advisor and impinged upon the tribunal’s decision-making authority;
a follow-up e-mail that the chambers judge held was not privileged for similar reasons; and
follow-up correspondence between (internal) clients discussing the lawyer’s advice.

The Court held that all this communication was part of the “continuum of communications” that supported the solicitor-client relationship and was therefore privileged. It held there was no basis for a finding that the lawyer usurped the tribunal’s decision making authority, also stating:

In my view, it is in the nature of legal advice that it may influence the decision-making of the client. The purpose of legal advice is normally to advise the client on the best course of action to comply with the relevant law. Advice provided to a statutory decision-maker as to what should be done in order to be legally defensible is still legal advice.

The dispute arose after the above communications were inadvertently disclosed in response to a freedom of information request made by a law firm. The receiving lawyer obtained the communications as part of a disclosure package in which government made a number of exemption claims. She believed government to have waived privileged and used the communications in a proceeding, which led government to assert its privilege claim and claim its disclosure was inadvertent. The Court held there was no waiver. It wasn’t highly critical of the receiving lawyer given these facts, but reminded lawyers of their duty to give notice when they receive communications that are apparently privileged.

British Columbia (Attorney General) v. Lee, 2017 BCCA 219 (CanLII).

BCCA issues decision on implied waiver of privilege

On November 29th, the Court of Appeal for British Columbia held that a party must voluntarily inject into the litigation legal advice it received or its understanding of the law before waiver of solicitor-client privilege can be implied. It is not enough, according to the Court, for the privilege holder’s state of mind to be relevant. The Court therefore held that a party had not waived privilege over legal advice obtained that related to a misrepresentation by another that it pleaded it had reasonably relied upon.

Soprema Inc. v. Wolrige Mahon LLP, 2016 BCCA 471 (CanLII).

When employees use business systems to communicate with their lawyers

I just read Universal Sales, Limited v. Edinburgh Assurance Co. Ltd., a November 2008 judgement of the Federal Court that deals with inadvertent disclosure of solicitor-client communications.

The case is about a transcript of a telephone conversation containing solicitor-client communications that was inadvertently produced to an opponent in litigation. The judgement has a nice summary of the law on inadvertent disclosure of privileged information:

As the Plaintiffs point out, the mere physical loss of custody of a privileged document does not automatically end privilege, especially in the context of modern litigation where large quantities of documents, such as the electronic production of a CD in this case, are exchanged between counsel and accidental disclosure is bound to occur from time to time.

In cases of inadvertent disclosure, the waiver question turns more on the conduct of the privilege holder after it discovers its disclosure and also on any special prejudice that might be faced by the recipient (e.g. by bona fide reliance that does not conflict with any professional duty to immediately seal the communication).

I found Universal Sales in preparing to make some comments on whether employees waive privilege when they communicate with their solicitors on employer e-mail systems at today’s Osgoode PDP program on electronic evidence. The question is whether the waiver is intentional as opposed to inadvertent and will turn on the facts. The most authoritative Canadian case on the issue is the Daniel Potter decision by Mr. Justice Scanlan of the Nova Scotia Supreme Court.

Scanlan J. found that the CEO of a company had not waived privilege by sending solicitor-client communications through his employer’s computer system. He did consider argument based on the employee privacy cases (see my last post), but held that solicitor-client communications deserve special treatment. He also noted, however, that Mr. Potter was CEO and had “day to day executive control over policies which may have threated his expectation of privacy.”

My view on the issue is (1) that Daniel Potter does not close the debate, (2) that Canadian courts will demand very special facts to find waiver because they are staunch defenders of solicitor-client privilege and (3) the occasions when it makes tactical sense to engage in a dispute over the waiver issue are likely rare.

Looking forward to speaking to this later this morning. I’ll live blog the event at #oseev and @michaluk_live.

See ya!