Tactical Ploy Cannot Cloak Documents in Case-by-Case Privilege – By Alan Melamud

In Philip Services Corp. v. Deloitte & Touche, 2015 ONCA 60, the Ontario Court of Appeal considered the application of case-by-case privilege to documents gathered by the Institute of Chartered Accountants of Ontario (the “Institute”) in the course of an investigation of one of its members. The Court held that the documents were not privileged where confidentiality had been maintained by the tactical cooperation between the regulator and its member. Instead, the Court examined the general policies and procedures of the regulator, and found that because those procedures generally favour disclosure in the circumstances, the documents were not privileged.

Overview

The Appellants were the representative plaintiffs in a billion dollar class action against Deloitte & Touche (“Deloitte”), alleging that Deloitte had been negligent in its audit of Philip Services Corp. Prior to the commencement of the class action, the Institute had investigated Deloitte in connection with its audits of Philip. The Institute later laid charges against Noel Woodsford, the senior partner of Deloitte responsible for the audits, and found him guilty of professional misconduct.

The Appellants brought a Rule 30.10 motion to have the Institute, a non-party to the litigation, disclose the documents in its possession in connection with its investigation. The case management judge denied the motion, finding that (1) it would not be unfair for the Appellants to proceed to trial without discovery of the documents and (2) the documents were subject to case-by-case privilege.

The Court of Appeal ultimately upheld the case management judge’s dismissal of motion, finding that the Appellants had failed to demonstrate that it would be unfair to require them to proceed to trial without discovery of the documents held by the Institute. The Court, however, disagreed with the case management judge that the documents were subject to case-by-case privilege.

Case-By-Case Privilege Analysis

Case-by-case privilege is determined by the application of the Wigmore criteria, which includes the following four elements:

  1. the communications must originate in a confidence that they will not be disclosed;
  2. the confidentiality must be essential to the full and satisfactory maintenance of the relation between the parties;
  3. the relation must be one which in the opinion of the community ought to be sedulously fostered; and
  4. the injury that would inure to the relation by the disclosure of the communications must be greater than the benefit thereby gained in the correct disposal of the litigation.

The Court of Appeal found that case-by-case privilege did not apply for two principal reasons: (1) the Institute’s assurances of confidentiality only applied until charges were laid and, here, charges had been laid against Mr. Woodsford; and (2) the only reason the documents gathered by the Institute had not been disclosed in the course of Mr. Woodsford’s disciplinary hearing was because of a unique agreement entered into between the Institute and Mr. Woodsford. In an effort to keep the investigation confidential, Mr. Woodsford and Deloitte had refused to receive this disclosure and then entered into an agreement with the Institute that limited the evidence that would be presented at the disciplinary hearing.

The Court was not persuaded by the fact that disclosure had not occurred in the particular case. The fact that the Institute’s policy was to provide disclosure and make documents obtained in the course of an investigation public once charges were laid meant that neither the first nor second elements of the Wigmore criteria had been satisfied. Clearly, under ordinary circumstances, the Institute was of the view that confidentiality was not “essential to the full and satisfactory maintenance of the relation between the parties” once charges were laid.

Indeed, the Court was critical of the unique agreement between Mr. Woodsford and the Institute, referring to it as a “tactical ploy”. Given that the confidentiality had arisen from tactical cooperation between Mr. Woodsford and the Institute, the Court was not prepared to support that type of relationship with the cloak of privilege:

Nor do I accept that this type of tactical cooperation between the regulator and a member is something that, in the opinion of the community, should be “sedulously fostered”, or that the injury to the relation between the Institute and Mr. Woodsford by the disclosure of the materials at issue would be greater than the benefit thereby gained for the correct disposal of the litigation.

Implications

The implication of the Court of Appeal’s decision is that absent clear statutory authority, parties should not assume that investigations by self-regulatory bodies are necessarily confidential, even where the individual’s cooperation is required. A Court will take a close look at whether confidentiality was reasonably contemplated based on the self-regulatory body’s usual practice. The corollary of this is that where the ordinary practice mandates disclosure, the Court will not allow a party to shield documents by turning away disclosure in an effort to keep the documents confidential.

 

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