legal privilege and regulatory investigations · •solicitor-client privilege has evolved from a...
TRANSCRIPT
Legal Privilege and
Regulatory Investigations
Stephen Schmidt
Member of the TELUS team
Ottawa, Ontario
January 25th, 2017
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Disclaimer
The statements and opinions expressed in this presentation
represent the views of the author and do not necessarily
represent the views of TELUS Communications.
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Contact Information
Stephen Schmidt
Vice-President, Regulatory Affairs &
Chief Regulatory Legal Counsel
TELUS Communications
215 Slater St, 8th Floor
Ottawa, Ontario
Canada, K1P 0A6
Tel 613.597.8363
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Substantive Focus of Presentation
The presentation will focus on the following substantive
areas concerning privilege in investigations:
1. Solicitor-Client Privilege
2. Litigation Privilege
3. The Interaction of Privilege and Statutory Powers
4. Privilege and Investigation Reports and Audits
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Session Objectives and Format
1. Provide an overview of case law relevant to privilege in
investigations – both the basic underpinning rules and new
and interesting jurisprudence;
2. Discuss some challenges that arise in claiming or
opposing privilege;
3. Identify some remedies for common challenges; and
4. Provided some scope for Q and A
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The Concept of a “Privilege” - Explained
“As an evidentiary concept, a privilege allows a litigant to resist
the introduction of otherwise admissible evidence in court
proceedings. While a privilege may be asserted outside the
courtroom, for example in the course of discovery, the
touchstone of a privilege is the nexus between litigation and
the “privileged” information. Information that is protected by a
privilege is protected from disclosure in the course of legal
proceedings.” [emphasis added]
-Dodek, Adam. Solicitor-Client Privilege in Canada: Challenges for the
21st Century. Canadian Bar Association. February 2011 (“Dodek, 2011”).
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Solicitor-Client Privilege: Evolution
Can be traced to the 16th Century.
Earliest case: Berd v. Lovelace, (1577), 21 E.R. 33
Linked to ‘”oath and honour”' of the lawyer, duty-bound to
guard closely the secrets of his client, and was restricted in
operation to an exemption from testimonial compulsion
[Solosky v. The Queen, [1980] 1 S.C.R. 821, p 834]
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Solicitor-Client Privilege: Evolution
Changed in 19th Century to focus on functioning of the
justice system
Focus on more utilitarian justifications:
• allow “full and frank disclosure” by client
• well-functioning adversary system
• facilitates access to justice (wouldn’t hire lawyer
without privilege)
[Solosky v. The Queen, [1980] 1 SCR. 821, at p 835-836]
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Solicitor-Client Privilege: Evolution
Important recent changes (late 20th Century and early 21st
Century):
• Solicitor-client privilege has evolved from a limited rule of
evidence into a constitutional right to communicate in
confidence with one’s counsel.
• Solicitor-client privilege is protected just as strenuously in the
administrative context as in a judicial context
• Since January 1, 2007, the Supreme Court of Canada has
decided 24 cases about solicitor-client privilege
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Solicitor-Client Privilege: Modern View
The purpose of solicitor-client privilege is to protect the
relationship between the client and the solicitor.
The privilege belongs to the client, not the lawyer
Ensures a full and frank discussion of the facts of the case,
and the giving and receiving of sound legal advice
Fundamental to the proper functioning of our legal system
[Canada (Privacy Commissioner) v. Blood Tribe Department of
Health, 2008 SCC 44, at para 9].
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Solicitor-Client Privilege: Requirements
Three criteria [Solosky v The Queen, [1980] 1 SCR 821]:
1. a communication between a professional legal advisor and
client;
2. which entails the seeking or giving of legal advice; and
3. which is intended to be confidential by the parties.
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Solicitor-Client Privilege: Communication
1(a) Communication
[Maranda v Richer, 2003 SCC 67]
• The privilege protects the communication, not the
underlying facts or actions
• Very broad view of communication (winks, nods,
etc.)
• Includes dockets and accounts
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Solicitor-Client Privilege: Communication
1(a) Communication
“In summary, a lawyer’s client is entitled to have all communications
made with a view to obtaining legal advice kept confidential. Whether
communications are made to the lawyer himself or to employees, and
whether they deal with matters of an administrative nature such as
financial means or with the actual nature of the legal problem, all
information which a person must provide in order to obtain legal
advice and which is given in confidence for that purpose enjoys the
privileges attached to confidentiality. ” [emphasis added]
[Descôteaux et al. v. Mierzwinski, [1982] 1 S.C.R. 860, p 892-893]
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Solicitor-Client Privilege: Legal Advisor
1(b) From a professional legal advisor
(see Descôteaux c. Mierzwinski, [1982] 1 SCR 860)
Includes:
• notaries in Quebec [Canada (Attorney General) v. Chambre des
notaires du Québec, 2016 SCC 20]
• licensed paralegals [Chancey v Dharmadi (2007), 86 OR (3d)
612 (Ont SCJ)]
• staff employed by lawyers/notaries/licensed paralegals
[Descôteaux et al. v. Mierzwinski, [1982] 1 S.C.R. 860, privilege
attaches to communications with employees of lawyer]
• fraudster/impersonating lawyers [R v Choney (1908), 13 CCC
289 (Man CA)
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Solicitor-Client Privilege: Legal Advisor
1(b) From a professional legal advisor
[Descôteaux et al. v. Mierzwinski, [1982] 1 S.C.R. 860]
Excludes:
• patent agents [Whirlpool Corp. v Camco Inc., 1997
CarswellNat 544 (FC TD)]
• tax accountants [Long Tractor Inc. v Canada (Deputy
Attorney General), 1997 CarswellSask 728 (QB)]
• unlicensed non-lawyer representatives/agents [Stone v
Stone, 2000 CarswellOnt 486 (SCJ)]
• retired/disbarred lawyers and judges [Calley v Richards
91854), 52 ER 406 (Eng. Rolls Ct.]
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Solicitor-Client Privilege: Legal Advice
2. Protects legal advice
• Must have a solicitor-client relationship, but no formal retainer
required [Descôteaux et al. v. Mierzwinski, [1982] 1 S.C.R. 860]
• A broad view of “legal advice” - must fall within the “continuum of
communication in which the solicitor tenders advice” [Peaker v.
Canada Post Corp., 1995 CarswellOnt 4516 (Gen. Div.)]
• Includes drafts [R. v. Chan, 2002 Carswell Alta 1010 (Q.B.)]
• Includes invoices, but not fee/retainer agreements [Holmes v.
London Life Insurance, 2005 CarswellOnt 7421 (S.C.J.)]
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Solicitor-Client Privilege: Legal Advice
2. Protects legal advice
• Does not include “legal information” – e.g. e-mailing an
interesting decision to a client or potential client [Trillium Motor
World Ltd. v. Cassels Brock & Blackwell LLP, 2013
CarswellOnt 3828 (S.C.J.)]
• Does not include “business advice” [Saturley v. CIBC World
Markets Inc, [2010] NSJ. No 511 -- certain emails from bank in-
house counsel held to not constitute the giving of legal advice
because they focused on a business response to problem; see
also: R v. Campbell, [1999] 1 S.CR 565, at para 50]
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Solicitor-Client Privilege: Confidentiality
3. The communication was made in confidence
[XCG Consultants Inc. v. ABB Inc., 2014 ONSC 1111]
• Client must have a subjective intention of confidence
• Communications in the presence of a third party can lead to loss
of privilege [Zesta Engineering Ltd. v. Cloutier, [2008] O.J.
No.304]
• Communication through a third-party presents challenges:
• a “channel of communication”, or parent/relative, or
translator: OK
• work e-mail about a personal legal issue: the law in this
area is evolving.
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Solicitor-Client Privilege: Confidentiality
3. The communication was made in confidence
Court refused to uphold claim of solicitor-client privilege where
information widely distributed inside a bank because of, inter
alia, an absence of intention to maintain confidentiality [TD
Bank v. Leigh Instruments Ltd. (Trustee of), 1997, 32 OR (3d)
575 (Gen.Div)]
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Solicitor-Client Privilege:
Common Law Exceptions
1. Public Safety
Smith v. Jones, [1999] 1 SCR 455
2. Innocence at stake/wrongful conviction
R. v. McClure, [1999] 1 SCR 445
3. Existence or validity of a will
Goodman Estate v. Geffen, [1999] 2 SCR 353
There are three recognized common-law exceptions:
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Solicitor-Client Privilege: Key Principles
Four key principles (see Descôteaux v Mierzwinski, [1982]
1 SCR 860):
1. The confidentiality of communications between solicitor and
client may be raised in any circumstances where such
communications are likely to be disclosed without the client’s
consent
2. Unless a statute 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
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Solicitor-Client Privilege
Four key principles (see Descôteaux c. Mierzwinski, [1982]
1 S.C.R. 860):
3. When the law gives someone the authority to do something
which might interfere with that confidentiality, it can only do so
if absolutely necessary in order to achieve the ends sought
by the enabling legislation
4. Statutes limiting solicitor-client privilege must be interpreted
restrictively
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Litigation Privilege:
Another Form of Privilege
Litigation privilege is:
“related to the needs of the adversarial trial process. Litigation
privilege is based upon the need for a protected area to facilitate
investigation and preparation of the case for trial by the
adversarial advocate. In other words, litigation privilege aims to
facilitate a process (namely, the adversary process), while
solicitor-client privilege aims to protect the relationship (namely,
the confidential relationship between a lawyer and the client)”
[emphasis added]
[Blank v. Canada (Minister of Justice), 2006 SCC 29]
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Litigation Privilege:
Another Form of Privilege
Context: litigation privilege arises in context of actual or apprehended litigation.
Scope of protected communications: Solicitor-client privilege applies only to
confidential communications between the client and his solicitor. Litigation
privilege, on the other hand, applies to communications of a non-confidential
nature between the solicitor and third parties
Litigation privilege applies to all litigants, whether or not they are represented by
counsel.
Duration: the common law litigation privilege comes to an end upon the
termination of the litigation that gave rise to the privilege. Unlike solicitor-client
privilege, it is not permanent in duration.
Rationale: litigation privilege is intended to create a “zone of privacy” to permit a
party to prepare for litigation.
[See Blank v. Canada (Minister of Justice), 2006 SCC 39 , at paras.27-41, for a
discussion of these points]
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Litigation Privilege: Examples
What are common situations in which litigation privilege will be invoked
by parties under investigation?
Answer:
This form of privilege will often be invoked to protect communications with
third parties that fall outside of traditional solicitor-client privilege – which is
focused on communications between a client and a lawyer. Litigation
privilege creates a “zone of privacy” to prepare for litigation – by interviewing
third parties, conducting investigations, engaging outside experts, etc.
Because of this wider reach, it should not automatically be assumed that
public authority investigators can access 3rd party communications.
Example: R. v. Bruce Power Inc, 2009 ONCA 573 (investigation report
prepared by company, after accident, seized by inspectors, protected, inter
alia, by litigation privilege)
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Litigation Privilege:
Consequences for Investigations
What consequences does the nature of litigation privilege have for
investigators and parties under investigation?
Answer:
This form of privilege is both broader and more limited than traditional
solicitor-client privilege.
There will be communications between counsel for a company under
investigation and third parties (these might be experts, outside auditors, or
what have you) that will also enjoy a protection from production and
disclosure provided that they fall within the terms of this form of privilege.
BUT, the immunity from disclosure is time-bounded. If the relevant litigation
has come to an end, the party under investigation may not be able to
successfully rely on litigation privilege
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The Interaction of Privilege
and Broadly Worded Statutory Powers
In 2016, the Supreme Court released a number of decisions
concerning the interaction of privilege and broadly-worded
statutory powers:
Alberta (Information and Privacy Commissioner) v. University of
Calgary, 2016 SCC 53 (“Alberta IPC”)
Lizotte v. Aviva Insurance Company of Canada, 2016 SCC 52
(“Lizotte”)
Canada (National Revenue) v. Thompson, 2016 SCC 21
(“Thompson”)
Canada (Attorney General) v. Chambre des notaires du Québec,
2016 SCC 20 (“Notaires”)
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The Interaction of Privilege
and Broadly Worded Statutory Powers
Broadly speaking, these cases deal with two questions:
1. Does the statutory provision contain language capable of
displacing the privilege? (Alberta IPC, Lizotte)
2. If yes, is the statutory provision unconstitutional?
(Thompson, Notaires)
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The Interaction of Privilege
and Broadly Worded Statutory Powers
Alberta (Information and Privacy Commissioner) v. University of
Calgary, 2016 SCC 53
Alberta Information and Privacy Commissioner wished to verify
that privilege claimed over documents was properly asserted.
Freedom of Information and Protection of Privacy Act:
56(3) Despite any other enactment or any privilege of the law
of evidence, a public body must produce to the Commissioner
within 10 days any record or a copy of any record required under
subsection (1) or (2).
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The Interaction of Privilege
and Broadly Worded Statutory Powers
The Court stated that:
“To give effect to solicitor-client privilege as a fundamental
policy of the law, legislative language purporting to abrogate
it, set it aside or infringe it must be interpreted restrictively
and must demonstrate a clear and unambiguous legislative
intent to do so. The privilege cannot be set aside by
inference.”
[Alberta IPC, para 28]
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The Interaction of Privilege
and Broadly Worded Statutory Powers
The IPC was “not an impartial adjudicator” like a court,
because it exercises adjudicative and investigatory functions
Solicitor-client privilege is not just a rule of evidence,
therefore statute referring to “privilege of the law of evidence”
not referring to solicitor-client privilege
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Litigation Privilege and
Broadly Worded Statutory Powers
Lizotte v. Aviva Insurance Company of Canada, 2016 SCC 52
The regulatory body in Quebec for insurance (the Chambre de
l’assurance de dommages) was investigating an adjuster and
requested that Aviva produce a complete copy of its claim file.
Aviva refused to do so on the basis that some of the documents
were protected by litigation privilege.
After the lawsuit settled Aviva sent over the entire file (because
litigation privilege expired when the lawsuit was settled), but the
parties decided to keep fighting on a point of principle all the way
up to the Supreme Court of Canada.
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Statutory Override of Litigation Privilege
The Court stated 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.”
[Lizotte, para 64]
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Statutory Override of Privilege –
Constitutional Considerations
In Canada (National Revenue) v. Thompson, 2016 SCC 21, the
Supreme Court found that s. 232(1) of the Income Tax Act was an
example of language sufficiently clear and express to displace
privilege.
232(1) solicitor-client privilege means the right, if any, that a person
has in a superior court in the province where the matter arises to
refuse to disclose an oral or documentary communication on the
ground that the communication is one passing between the person
and the person’s lawyer in professional confidence, except that for
the purposes of this section an accounting record of a lawyer,
including any supporting voucher or cheque, shall be deemed not
to be such a communication.
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Statutory Override of Privilege –
Charter compliance
But, the Supreme Court also said in a companion case Canada
(Attorney General) v. Chambre des notaires du Québec, 2016
SCC 20 that section s. 232(1) was unconstitutional under s. 8 of
the Charter
Section 8 of the Charter protects against search and seizure
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Statutory Override of Privilege –
Charter compliance
Two-part test under s. 8 of Charter:
1. whether the government action intruded upon an
individual’s reasonable expectation of privacy, and
2. whether the seizure was an unreasonable intrusion
on that right to privacy within the meaning of s. 8
Any legislative provision that interferes with privilege more than
is absolutely necessary is unreasonable
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Statutory Override of Privilege –
Charter compliance
Four main defects in Income Tax Act provision:
1. Absence of notice to the client: the notice was sent
directly, and only, to the notary or lawyer. Privilege belongs
to the client, not the lawyer.
2. An inappropriate burden is placed solely on the notary
or lawyer: the lawyer has the burden of raising the
objection. The lawyer may not always raise the objection,
through negligence or through fear of prosecution.
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Statutory Override of Privilege –
Charter compliance
Four main defects in Income Tax Act provision:
3. The disclosure is not absolutely necessary: “[Law] firms
must not be turned into archives for the tax authorities.” The
regulatory authorities should obtain the information from
other sources first.
4. The scheme could have been easily mitigated: e.g. by
going to taxpayer first, going to Court for declaration that
documents are not privileged, and promising not to
prosecute if privilege asserted in good faith.
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Internal Investigation Reports
And Privilege
Do investigation reports enjoy any special status or immunity
from disclosure, whether in litigation or in processes before
public authorities?
Answer:
At this time, there is no standalone category of privilege for
investigation reports in Canada. In general, the ability to resist
disclosure will depend on traditional categories of privilege (such as
solicitor-client privilege or litigation privilege).
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Internal Investigation Reports
And Privilege: Cases
A key Canadian case:
Gower v. Tolko Manitoba Inc., 2001 MBCA 11
Entire investigation report prepared by external counsel protected from
disclosure, both as to facts and legal advice, on the basis of legal
advice privilege. The relevant question is not whether counsel was
retained to conduct an investigation, but rather whether the
investigation was related to the rendering of legal services: Gower, at
paras. 39-40. Retainer letter was key evidence that the mandate
included the provision of legal advice.
Note: the terms of the retainer are key.
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Internal Investigation Reports
And Privilege
For a contrary outcome (investigation report prepared by
external counsel not protected from disclosure) see:
North Bay General Hospital v Ontario Nurses’ Association, 2011 CanLII
68580 (ON LA).
Arbitrator found that the hospital’s purpose in hiring an external lawyer
was not to obtain legal advice, but to investigate events in order to make
findings of fact. The mere fact that the investigator was a lawyer did not
mean that his communications to the hospital, including the investigation
report, were protected by solicitor-client privilege. The arbitrator ordered
the hospital to produce the report.
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Privilege and Internal Investigations: Key Points
Solicitor-client privilege can be available – but not automatic
just because you hire a lawyer [Howard v. London (City), 2015
ONSC 156]
• not available when lawyer retained to investigate and report on
facts instead of legal advice
• make sure the retainer specifies for legal advice
Litigation privilege may be available when investigation is for
dominant purpose of anticipated litigation [Durham Regional
Police Association v. Durham Regional Police Services Board, 2015
CanLII 60920 (ON LA), and R. v. Bruce Power Inc., 2009 ONCA 573]
The wording of the retainer is crucial.
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Privilege in Regulatory Investigations
What about investigations by the regulator – when are
they privileged?
Solicitor-client privilege applies to government lawyers as well
• Goodis v. Ontario, 2006 SCC 31: in a freedom of information
request, should not provide copy of privileged document to
counsel of requester for purpose of assessing whether privilege
applies, short of “absolute necessity”
Litigation privilege also applies to governments
• freedom of information legislation referring to “solicitor-client
privilege” includes litigation privilege: Blank v. Canada, 2006
SCC 39
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Privilege and Audits
Voluntarily giving a document to a third-party waives the
privilege in that document
Exception: when disclosure is legally compelled, the
“waiver” is limited to that particular disclosure
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Privilege and Audits
Auditors are “third parties”, so privilege is waived when documents
provided to auditors [Professional Institute of the Public Service of Canada v.
Canada ( Director of the Canadian Museum of Nature ), [1995] 3 FCR 643, 1995
CanLII 3534 (FC)]
Exception: if the auditor is entitled to the document by statute or
regulation, the waiver is limited (because it is involuntary) [Philip Services
Corp. v. Ontario Securities Commission, 2005 CanLII 30328 (ON SCDC)]
Post Blood Tribe, Courts have taken a more narrow view on when
statutes can genuinely require the disclosure of privileged documents [British Columbia (Auditor General) v. British Columbia (Attorney General), 2013
BCSC 98 (CanLII)]
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Privilege and Audits
Best practice: “If the doctrine of limited waiver is to be relied on in
future in similar circumstances, it would appear to me to be the
prudent course of action to set forth in writing the client's intent
regarding limited waiver in any disclosure to its auditors of solicitor-
client privileged information and in the formal arrangement between
the client and its auditors.” [Interprovincial Pipe Line Inc. v. M.N.R.,
[1996] 1 FC 367 (Fed TD)]
In other words:
1. Make it clear that the information is privileged
2. Make it clear that the disclosure is involuntary
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Key Conclusions
1. The various forms of common law privilege condition and limit the reach of
investigative powers. General words in a statutory grant of power permitting
access to information are not sufficient to pierce the veil of privilege . However, not
all forms of privilege are created equal. In all cases, all of the requisite conditions
must be satisfied to sustain a claim of privilege.
2. Investigation reports to do not benefit from a standalone category of privilege.
However. they may be protected from disclosure under traditional categories of
privilege, such as litigation privilege and solicitor-client privilege
3. The fact that an investigation report was prepared by outside counsel is not
sufficient to protect the report from disclosure. In general, the ability to resist
disclosure will depend on traditional categories of privilege (such as solicitor-client
privilege or litigation privilege).
4. Auditors are third parties. Disclosure of privileged information to audits can
result in a waiver of privilege. The exception to this is if the auditor is entitled to
the document by statute or regulation. Then, the waiver is limited (because it is
involuntary)