There is a common refrain amongst those in the in-house bar; they are either lawyers first and businesspeople second or the other way around.
Hydro One Networks Inc. senior counsel Sanjeev Dhawan says he is always quick to remember what capacity he is working in when he enters the room, businessman or lawyer, and if need be tell everyone in the room to avoid confusion in contentious situations. It is the sort of church and state of the in-house bar, the separation of which is key for counsel who want to cite their role as a lawyer when calling upon the privilege shield. The distinction is also important for others in a company; many employees may also believe what they tell their company’s in-house lawyer is always protected under solicitor-client privilege or try to use counsel to hide what they are doing. Those who attempt to break through the claimed privilege shield are quick to point out in these types of situations that in-house lawyers have to consider who their client actually is.
“I’m the enemy,” says David Debenham. “I’m the litigation enemy who tries to break the privilege shield that [an] in-house counsel claims.” The Ottawa-based Lang Michener LLP partner and forensic accountant spends his time looking for the “Bernie Madoffs” of the world; white-collar crooks trying to hide behind corporate structures and in-house lawyers. “Privilege is, in my view, a bit of an illusion, in the sense that people think . . . and say, privilege is this sacrosanct cloak of invisibility that allows you to do whatever you want and that is sort of the mythology.”
In an article Debenham wrote for Law Times, Ontario’s weekly legal newspaper, he pointed out a few common misconceptions of what can be claimed as privileged information. All legal advice is not privileged, he wrote, arguing the shield would not cover advice given by a patent agent or an accountant. Legal advice widely disseminated is also not covered by privilege, but legal advice given to a specific client in private would likely qualify. E-mail, press releases, or responses to demand letters could also be cited to pierce the privilege shield. Those are only some of the Canadian rules. When a company crosses borders, internationally and provincially, Debenham says there is “a whole panoply” of rules that could potentially strip away privilege.
A common misconception would be the subject of internal investigations. Specific solicitor-client advice stemming from the investigation may be considered privileged, however, the investigation itself would not be covered and solicitor-client correspondence during the investigation may also be open.
One of the keys, says William Donegan, chief compliance officer with Scotia Securities Inc., is the role the in-house lawyer performs within the company. The object of his role is to cast a light on the way regulations are being followed, and give advice so all employees can be in better compliance. Therefore the very nature of the information Donegan generates is intended to be broadly circulated.
“It requires you to be more of a disseminator of information than one who can operate behind a shield,” he says. “So when you are looking at the issue of when you may be interpreting a rule or regulation, often when you are doing it as a compliance officer, you are doing it with the intent of disseminating the point widely within the organization.”
For this reason Donegan favours a legal department set up so the chief compliance officer and the general counsel are never the same person. The privilege shield covers members of a legal department in varying degrees. While the general counsel may be able to level the shield because their advice is often to a specific client, the chief compliance officer could face difficulties doing the same. The problem is inherent in the role each lawyer plays; one is responsible for specific legal advice to the corporate leadership, where the other is responsible for wide broadcasts of policies the company should be following.
“If you do combine the roles . . . the counsel in the role needs to be able to compartmentalize what information is privileged from information that isn’t privileged and have restrictions on how it is disseminated . . . who it goes to, and make sure people don’t send it around,” Donegan says.
Another issue is the specific regulatory rules governing the business. “Under many regulatory regimes any sort of internal investigation is subject to scrutiny by the relevant regulator. So it is very tough if a compliance department does an internal investigation, again it depends on your regulatory regime and the rules of your individual regulator, but it can be very tough for a compliance department to assert any type of privilege over the work product from an investigation . . . it can be done, but typically the response that one might face is they are failing to co-operate with the regulator,” he says.
“The bar is still very, very protective of the privilege clause,” says Dhawan, who also fulfils a business function at the Ontario power transmission network. He is quick to point out in Canada solicitor-client privilege has a constitutional genesis. Section 7 of the Charter of Rights and Freedoms under the principles of fundamental justice, effectively protects information given by a client to his or her lawyer. When dealing with a one-on-one situation this principle is easy for most to follow; a criminal lawyer speaking to his or her client doesn’t turn around and tell the police or prosecutor everything the client said or the advice the lawyer gave the client. However, confusion can arise when the lawyer is in-house counsel and everyone in the company believes privilege can extend to them.
“I also have a business role in the company,” Dhawan says. “I am very, very careful that before I walk into a room I’ve got in my hand what hat I’ve got on and if I think it is going to be a contentious matter I announce it to everyone what role I am in. Especially if I am in a legal role only, I would let everyone in the room know that I am here as a lawyer only.”
One issue the bar faces is in the United States where a new era of regulation has brought regulators trying to entice lawyers to waive privilege. “In the United States, especially because of Enron and WorldCom . . . the regulators will try and get you to waive your privilege, perhaps with the . . . promise that they will go easy on you. That may be a trend that gets picked up [in Canada],” Dhawan says. “If you are part of a regulated industry I would really guard against that because I can see a regulator in the future wanting to somehow pierce your privilege, again using the United States as a model, by enticing you to waive your privilege.”
While privilege may be under attack in the U.S., the Ontario Court of Appeal decision in R. v. Bruce Power Inc. may point to how the rule is being upheld in Canada. Norm Keith, a partner with Gowling Lafleur Henderson LLP in Toronto, wrote for Canadian Lawyer InHouse in September “a unique set of circumstances” led to the appeal court upholding the company’s right to solicitor-client privilege.
The case involved the prosecution of three defendants who were alleged to have contravened the Occupational Health and Safety Act leading to a worker being injured at a nuclear power plant in Tiverton, Ont. A member of the Power Workers’ Union gave an internal investigation report, marked confidential, to the Ministry of Labour inspector. The Ontario Court of Appeal agreed with the trial judge that prejudice to the defence would be presumed when the Crown comes into possession of a document protected by solicitor-client privilege. This presumption hinges on whether or not the Crown could bring evidence to the contrary. In this case the Crown did not bring evidence to the contrary and privilege prevailed.
“The Bruce Power case was favourable to the corporation and demonstrates the importance of standing up to aggressive regulators in the face of potential and actual prosecution,” wrote Keith. “This decision validates solicitor-client privilege, the protection provided to internal investigations are intended to obtain legal advice, and secure information for potential litigation. The case also identifies the value of in-house counsel during such investigations.
“These lessons apply not only to Occupational Health and Safety Act investigations by the Ministry of Labour, but to Ministry of Environment investigations, and other regulatory authorities who, in their enthusiasm to investigate, may cross the line from a good faith investigation to a breach of the Charter.”
Cases like Bruce Power serve as a reminder of how privilege can be used, especially, as Keith said in the face of “aggressive regulators.” It also shows the value of thinking about privilege as part of actions and not trying to use the defence in response to them. “Lawyers having privilege is a tremendous privilege in itself, and it’s easy to lose, it is very easy to lose,” Dhawan says. “The consequences of losing it can be very significant and we are very protective of how we operate in making sure that the right protocol is followed and privilege is always protected. It becomes part of your subconscious that this is something that needs to be dealt with every time you take on a new issue.”