Canadian Lawyer InHouse

Feb/Mar 2010

Legal news and trends for Canadian in-house counsel and c-suite executives

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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, inter- nationally and provincially, Debenham In writing the unanimous decision in the 1982 Supreme Court of Canada decision in Descôteaux et al. v. Mierzwinski, for- mer Supreme Court chief justice Antonio Lamer laid out a "substantive rule" for claiming privilege. The rule contained four parts: 1. The confidentiality of communica- tions between solicitor and client may be raised in any circumstanc- es where such communications are likely to be disclosed without the client's consent. 2. Unless the law provides otherwise, when and to the extent that the legitimate exercise of a right would interfere with another person's right to have his communications with his lawyer kept confidential, the resulting conflict should be resolved in favour of protecting the confidentiality. 3. When the law gives someone the authority to do something which, in the circumstances of the case, might interfere with that confiden- tiality, the decision to do so and the choice of means of exercising that authority should be determined with a view to not interfering with it except to the extent absolutely necessary in order to achieve the ends sought by the enabling leg- islation. 4. Acts providing otherwise in situa- tions under [part two] and enabling legislation referred to in [part three] must be interpreted restrictively. 24 • FEBRUARY 2010 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 investi- gation 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 bet- ter compliance. Therefore the very nature of the information Donegan generates is intended to be broadly circulated. "It requires you to be more of a dis- seminator 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 coun- sel may be able to level the shield because their advice is often to a specific client, the chief compliance officer could face dif- ficulties 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 poli- cies 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 scru- tiny by the relevant regulator. So it is very INHOUSE 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 protec- tive 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 gen- esis. 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 privi- lege 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 mat- ter 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 law- yers 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

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