New Angles on Privilege, Causation

A recent decision by the Supreme Court of Canada in Blank v. Canada 2006 SCC 30 settles certain points regarding litigation privilege, Ted Bock, a partner at Aikins, MacAulay & Thorvaldson LLP, told attendees during at seminar the Canadian Independent Adjusters’ Association (CIAA)’s general meeting and conference in Winnipeg, Manitoba.

But the decision also opens up exceptions to privilege rules that may affect insurers that are involved in separate legal actions associated with the same matter. The decision may also grant privilege to adjusters’ notes, even though counsel may not be appointed at the time the notes were created.

HOW PRIVILEGE WORKS

Litigation privilege protects both the documents and communication between lawyers and their clients concerning matters that are in litigation, or in matters in which litigation is a likely possibility.

Privilege means a client can keep confidential any documents or communications that are used for the purpose of advising on litigation in progress or potential litigation.

“Litigation privilege is based upon the need for a protected area to facilitate investigation and preparation of a case for trial by the adversarial advocate,” Bock said, reading from Claiming Privilege in the Discovery Process by R.J. Sharpe. “In other words, litigation privilege aims to facilitate a process (namely, the adversarial process).”

In order for litigation privilege to be applicable to a document, two conditions must be met, Bock notes:

* there must be a reasonable prospect of litigation at the time it was produced; and

* the dominant purpose for its production must be for the conduct of the litigation in question.

Litigation privilege is intended to be a narrow test — a zone of privacy as it were, Bock noted. It “isn’t intended to be a ballroom — it’s intended to be a storage room or a broom closet.” He said most agree there ought to be full disclosure, but courts realize that there needs to be a zone of privacy in which counsel can collect information for the case.

Only the client — the party to the litigation — can waive litigation privilege, not the lawyer, Bock said. However, recent decisions by the Supreme Court of Canada suggest documents and conversations are not permanently cloaked in litigation privilege. One of those decisions is Blank v. Canada.

BLANK V. CANADA

The case concerned Sheldon Blank, who was the director of Gateway Industries, a Winnipeg manufacturer, when he was charged in the mid-1990s with various federal environmental regulatory offences. The charges involved Red River pollution and associated reporting requirements. All of the charges against Blank and the company were overturned and/or stayed, Bock noted. But it didn’t happen before lengthy and expensive litigation resulted in the failure of the company. Blank won the battle, but not the war: his company was now defunct.

Blank sued the federal government, alleging it had abused prosecutorial powers by attempting to obtain documents prepared by the [provincial?] government against him. These documents had been protected by litigation privilege in the original trial. He claimed the [provincial?] government’s baseless charges had ruined him and that he would need to look at the information collected by the federal government’s lawyers in order to prove his case.

The question before the Supreme Court of Canada was whether or not the privilege over the documents survived the termination of the initial criminal proceedings, and carried forward to the new set of proceedings.

After expensive and lengthy litigation, the Supreme Court of Canada sided with Blank. It ruled Blank should have access to documents, and that the litigation privilege ended when the initial proceedings terminated.

The court’s finding entitled Blank to take a walk through the files to see what the federal government had been doing, and allowed Blank some insight into what motivated the government’s prosecution against him in the first place, Bock said.

According to the Supreme Court, the litigation period ends “on the termination of the litigation that gave rise to the privilege,” Bock said. “Somewhat unhelpfully, the court then said that that of course would be subject to exception.”

The exception relates to whether the claim of privilege involves the same or related parties, and the same or related source. In other words, the litigation privilege will continue if the same or related parties are involved in a case involving the same or related source.

“I say it’s an unhelpful exception because one would have thought if it were ever going to apply it would have applied to the Blank case,” Bock said. “Because we’re dealing with exactly the same people and they’re (arguing) exactly the same thing and yet the courts said, ‘No, this is a different case.'”

APPLICATION OF BLANK

The case does not elaborate on how this exception is going to apply. This could have an impact on insurance companies because plenty of cases within the insurance industry involve the same party, Bock noted. For example, very frequently the same insurer has a connection with similar losses, such as in product liability cases.

The Supreme Court also found litigation privilege applies whether or not counsel represents a litigant, which Bock said was of importance to adjusters. Adjusters frequently create documents that they feel ought to be protected by litigation privilege, even though counsel has not yet been retained, Bock said.

However, Bock notes that writing “in contemplation of litigation” at the top of the page is not enough. An adjuster must be able to tell why they believe there was a reasonable prospect of litigation, which is why careful notes are vital.

“It’s not enough simply to invoke the magic words at the top of the report ‘in contemplation of litigation,'” Bock said. “You have to be able to explain why did you use those words. These aren’t magic words. This is not Harry Potter invoking a spell: ‘Well, now that [the document is] privileged, I can go on to my next file.'”

Bock recommends that adjusters should take the time to write out the factors that led them to conclude why there was a reasonable prospect of litigation at the time. They should spell out why they thought the other side was going to make a claim for compensation, or why they thought there was a reasonable prospect of subrogation.

It is best to determine early on if there is a potential for litigation, Bock suggested.

TAKING THE ‘CAUSE’ OUT OF CAUSATION?

Over the last decade, the Supreme Court of Canada has introduced a more plaintiff-friendly standard for cause-in-fact, Anthony Fletcher, lawyer, Filmore Riley LLP, told attendees during a CIAA seminar in Winnipeg.

Causation is the link that must be established between a defendant’s wrong and the plaintiff’s loss. The plaintiff must prove that “but for” the defendant’s negligence, any harm would not have occurred, Fletcher explained.

The Supreme Court’s has introduced a new standard, Fletcher argues, in which it must be shown that a defendant ‘materially contributed’ to a plaintiff’s injury. The new standard is not intended to replace the “but for” test, Fletcher said, but it is “uniquely positioned to subsume the traditional measure.”

Fletcher said whereas the “but for” test “may prevent the plaintiff from establishing causation, they might still succeed by meeting a lower standard requiring only that the defendant materially contributed to the creation of their injury.”

Three relatively recent cases that have dealt with causation at the Supreme Court level: Athey v. Leonati (1996), Walker Estate v. York-Finch General Hospital (2001) and Resurfice Corp. v. Hanke (2007).

In Hanke, Chief Justice McLachlin reiterated the basic test for determining cause was the “but for” test. “This fundamental rule has never been displaced and remains the pr
imary test for causation in negligence actions,” she wrote.

But she went on to say that there are special circumstances in which the law sees exceptions to the “but for” test, and therefore a material contribution test is applied.

Cases in which the material contribution test is applied correctly entail two requirements, she wrote:

* It must be impossible for the plaintiff to prove negligence on the part of the defendant using the “but for” test “due to factors that are outside the plaintiff’s control.”

* “It must be clear that the defendant breached a duty of care owed to the plaintiff, thereby exposing the plaintiff to an unreasonable risk of injury, and the plaintiff must have suffered that form of injury. In other words, the plaintiff’s injury must fall within the ambit of the risk created by the defendant’s breach. In those exceptional cases where these two requirements are satisfied, liability may be imposed, even though the “but for” test is not satisfied, because it would offend basic notions of fairness and justice to deny liability by applying a “but for” approach.”

Fletcher said the meaning of “material contribution” is still unclear. “It is arguable that this test makes causation as we know it under the “but for” standard entirely redundant,” Fletcher said.