In the course of an inquiry into the conduct of a claims adjuster working for Aviva, the syndic of the Chambre de l’assurance de dommages (the “Syndic”) asked Aviva to produce the complete copy of the claim file pertaining to a specific claim handled by the adjuster. The Syndic based its request on s. 337 of the Act respecting the distribution of financial products and services, which creates an obligation to produce “[…] at the request of a syndic, […] any required document or information concerning the activities of a representative.”
The insurer produced a number of documents, but withheld some on the basis that they were covered by litigation privilege. The Syndic responded to this refusal by filing a motion for declaratory judgment, the purpose of which was to compel Aviva to produce the documents which were subject to litigation privilege. Both the Superior Court of Québec and the Québec Court of Appeal dismissed the Syndic’s motion and held that even though litigation privilege is distinguishable from solicitor-client privilege, it is, to the same extent, a fundamentally important principle which could not be overridden, by anyone, absent express statutory language.
While the Supreme Court of Canada agreed that litigation privilege and solicitor-client privilege are to be distinguished, it also recognized that both privileges “serve a common cause: the secure and effective administration of justice according to law.” Litigation privilege serves that cause by “ensur[ing] the efficacy of the adversarial process” and maintaining a “protected area to facilitate investigation and preparation of a case for trial by the adversarial advocate.” Both privileges thus serve an overriding “public interest.”
Litigation Privilege = Class Privilege
The Court put an end to years of conflicting case law and doctrine on this issue. It is now clear that litigation privilege is a class privilege and therefore, “Once the conditions for its application are met, that is, once there is a document created for ‘the dominant purpose of litigation’ and the litigation in question or related litigation is pending ‘or may reasonably be apprehended,’ there is a ‘prima facie presumption of inadmissibility.’”
Any document that meets the conditions for the application of litigation privilege will de facto be protected by an immunity from disclosure “unless the case is one to which one of the exceptions to that privilege applies. As a result, the onus is not on a party asserting litigation privilege to prove on a case-by-case basis that the privilege should apply in light of the facts of the case and the ‘public interests’ that are at issue.”
No Case-by-Case Balancing Exercise
The Syndic argued that the Court should adopt the balancing test such as the one developed by Justice Doherty J.A. of the Ontario Court of Appeal in General Accident Assurance Co. v. Chrusz (1999), 45 O.R. (3d) 321, namely that litigation privilege should be lifted if in given circumstances, the harm flowing from non-disclosure clearly outweighs the benefit accruing from the recognition of the privacy interest flowing from the privilege.
The Supreme Court disagreed, citing the uncertainty that would be caused by a case-by-case approach of balancing the advantages and disadvantages of applying the privilege: “What must be done therefore is to identify, where appropriate, specific exceptions to litigation privilege rather than conducting a balancing exercise in each case.”
Assertion Against Third Parties
At the hearing, the Syndic submitted that litigation privilege could not be asserted against third parties and that it should apply only vis-à-vis the parties to the litigation in question. In the alternative, the Syndic proposed the adoption of an exception to the effect that the privilege could not be asserted against third-party investigators who have a duty of confidentiality.
The Supreme Court dismissed these arguments and ruled “that litigation privilege can be asserted against anyone, including administrative or criminal investigators, not just against the other party to the litigation.”
If the arguments of the Syndic were adopted there would be nothing to prevent a third party, to whom documents subject to litigation privilege are disclosed, from subsequently disclosing them to the public or to the other party, the Court explained.
Express Statutory Language
In the Syndic’s view, the words “any document” in s. 337 ADFPS should be interpreted in light of the statute’s purpose, namely the protection of the public, and therefore litigation privilege cannot be asserted against the Syndic, because that would interfere with its investigations.
The Court disagreed and ruled that “litigation privilege, like solicitor-client privilege, cannot be abrogated by inference and that clear, explicit and unequivocal language is required in order to lift it.”
In conclusion, this case has deep ramifications on the investigations carried out by any regulated entity. It is now clear that failing clear and explicit statutory language setting aside litigation privilege, regulators may not compel production of documents or communications subject to litigation privilege.
It is therefore important for regulated entities to ensure that the documents and communications subject to solicitor-client and/or litigation privilege are properly identified, segregated and excluded from production to regulators.
Karine Lizotte, in her capacity as assistant syndic of the Chambre de l’assurance de dommages, was represented by Claude Leduc and Olivier Charbonneau-Saulnier of Mercier Leduc LLP.
Aviva Insurance Company of Canada and Traders General Insurance Company were represented by Éric Azran, Patrick Girard, and Patrick Desalliers of Stikeman Elliott LLP.