When undertaking an investigation in preparation for litigation, there’s always a danger it could fall into the other party’s hands through discovery. Litigation privilege doesn’t automatically apply to all investigative reports commissioned by a party.
Instead, in order to benefit from litigation privilege, a party must undertake an investigation with the dominant purpose of preparing for litigation.
According to Malcolm Aboud, a litigation associate with Osler Hoskin & Harcourt LLP, privilege claims for investigative reports often fail because the courts will find there was an alternative purpose to the probe.
In Société Air France v. Greater Toronto Airports Authority, the Ontario Superior Court found a report wasn’t privileged because it had other purposes. “In that case, they had put together a number of reports after the crash and their privilege claim failed on the basis that they circulated their reports to Air France employees to improve flight safety,” says Aboud.
“So on that basis, the court found that it wasn’t undertaken for the dominant purpose of preparing for litigation.”
Aboud says there are several ways lawyers can ensure investigations remain privileged. The first is to keep a paper trail. “The main theme you find as you look through the case law is the importance of keeping an evidentiary record of the investigation and the basis of the privilege claim.”
“You’re going to want legal counsel to be the ones requesting this investigation, stating the specific purpose for it, saying we need to undertake an investigation for this purpose to make sure that it’s clear that the purpose for the investigation relates to upcoming litigation,” he says.
Another way to protect privilege is to hire external counsel.
“In certain cases, it may be advisable to go with external counsel rather than internal because you’re going to have a better basis for claiming that this was not simply a business decision, that you were seeking legal advice,” says Aboud.
“If you’re going to your external counsel, then I would think it would provide some sort of basis for arguing that you were actually worried about litigation.”
Another theme that comes up in the case law, according to Aboud, is any investigations undertaken on a regular basis or that are routine are unlikely to pass the dominant purpose test.
If a company is hiring a third-party investigator, the issue can become more complex.
“One of the other interesting ones people run into is the decision whether to go internal or with a third party and whether to have the investigation undertaken by a lawyer or a non-lawyer employee,” says Aboud.
To qualify for litigation privilege, there’s no formal requirement that a lawyer undertake the investigation. “As long as it was prepared for the dominant purpose of preparing for litigation, then it should be subject to litigation privilege,” says Aboud.
“But obviously, it’s going to be a lot easier to establish that something was prepared for the dominant purpose of litigation if it was prepared by a lawyer.”
And if a lawyer didn’t prepare it, communications should flow through counsel. Aboud notes the more non-lawyers involved in commissioning a report, the less likely it is to qualify for privilege.
If an audit committee or senior management commissions a report, it’s more likely the courts will reject a litigation privilege claim, says Aboud.
In some cases, the courts will uphold a claim for litigation privilege simply because the party marked the documents themselves as privileged. In Saturley v. CIBC World Markets Inc., a 2010 case argued in front of the Supreme Court of Nova Scotia, Justice Gerald Moir considered whether a report labelled “In Anticipation of Litigation — Privileged and Confidential” was actually subject to litigation privilege. Moir found he was “unable to readily see” why it should be subject to privilege since it dealt with a compliance issue.
Despite that, he accepted the privilege claim. “Although it is unclear to me precisely why this report was prepared for counsel, the fact that it was, and its extensiveness, lead me to conclude that it was either to be considered by counsel for advising on a specific issue or to inform counsel generally so counsel would be in a position to give advice from time to time,” he wrote.
Aboud says that when in doubt, a good option is to use a red stamp. “If you’re planning on claiming privilege, stamp it.”