SCC - Litigation Privilege and Solicitor-Client Privilege Are Substantive Rights

The Supreme Court of Canada released two decisions last week dealing with the issue of privilege:  (1)  Lizotte v. Aviva Insurance Company of Canada 2016 SCC 52 which dealt with the issue of litigation privilege; and (2)  Alberta (Information and Privacy Commissioner) v. University of Calgary 2016 SCC 53 which dealt with the issue of solicitor-client privilege. 

 

In both cases, the court clearly emphasized the importance of both privileges as “substantive rights that are fundamental to the proper functioning of our legal system”.

 

In the Lizotte case, in the course of an inquiry into a claims adjustor, the assistant syndic of the Chambre de l’assurance de dommages (the "syndic”) asked an insurer to send her a complete copy of its claim file with respect to one of its insured.  The syndic based her request on section 337 of the Act respecting the distribution of financial products and services (“Act”).  In response, the insurer produced some documents but withheld others alleging that they were protected by either solicitor-client privilege or litigation privilege.

 

At a hearing, the syndic conceded that solicitor-client privilege could be asserted against her and therefore the issue before the court was limited to litigation privilege.  The Superior Court of Quebec concluded that litigation privilege cannot be abrogated absent an express provision and that the provision in the Act was not "express" in that sense.

 

The syndic’s appeal was dismissed by the Quebec Court of Appeal and further appeal to the Supreme Court of Canada was dismissed.  In an unanimous decision, the court held that litigation privilege is a common law rule that gives rise to an immunity from disclosure for documents and communications whose dominant purpose is preparation for litigation.  Litigation privilege differs from solicitor-client privilege in that litigation privilege is to ensure the efficacy of the adversarial process .  The purpose of solicitor-client privilege is to protect a relationship.  Solicitor-client privilege is permanent whereas litigation privilege is temporary and lapses when the litigation ends.  In addition, litigation privilege applies to unrepresented parties and to non-confidential documents.  

 

However, the court held that litigation privilege is a class privilege and gives rise to a presumption of inadmissibility for a class of communications – namely those whose dominant purpose is preparation for litigation.  Exceptions to litigation privilege include those relating to public safety, to the innocence of the accused and to criminal communications.  However, because it is a class privilege it has nothing to do with balancing competing interests on a case by case basis.   

 

In this case, none of the exceptions applied.  The court held that there is a robust line of authority according to which a party should not be denied the right to claim litigation privilege without clear and explicit legislative language to that effect.  Litigation privilege therefore cannot be abrogated by inference and the Act did not apply to do so. 

 

In the second case, in the context of a constructive dismissal claim, a delegate of the Information and Privacy Commissioner of Alberta ordered the production of records over which the University of Calgary had claimed solicitor-client privilege.  The delegate was acting in accordance with the Office of the Commissioner’s solicitor-client privilege adjudication protocol and issued a notice to produce the records.  Under section 56(3) of the Freedom of Information and Protection of Privacy Act (“Privacy Act”), a public body was required to produce required records to the Commissioner “despite…any privilege of the law of evidence”.  The University sought judicial review of the decision which upheld the Commissioner’s decision but on appeal to the Alberta Court of Appeal, it was found that “any privilege of the law of evidence” as used in the Privacy Act did not refer to solicitor-client privilege.  

 

The Supreme Court of Canada dismissed the appeal in three separate, partially concurring reasons.  In the first set of reasons written by Justice Côté (Justices Moldaver, Karakatsanis, Wagner and Gascon concurring), the court held that whether the relevant section of the Privacy Act allows a review of documents over which solicitor-client privilege is claimed is a question of central importance to the legal system as a whole and outside the Commissioner’s specialized area of expertise.  Therefore, the applicable standard of review was correctness for both the decision that the Commission had the authority to require production of the records over which solicitor-client privilege was asserted and for the decision to issue the notice to produce the records. 

 

The majority held that the phrase “any privilege of the law of evidence” does not require a public body to produce to the Commissioner documents over which the solicitor-client privilege is claimed.  Solicitor-client privilege is no longer merely a privilege of the law of evidence but a substantive right that is fundamental to the proper functioning of our legal system.

 

In separate concurring reasons Justice Cromwell held that the grammatical and ordinary meaning of the words “any privilege of the law of evidence” includes solicitor-client privilege.  Solicitor-client privilege is both an evidentiary privilege and a substantive principle and it was the evidentiary privilege that was at issue here. 

 

He held that in this case even though the Commissioner had the authority to compel production for review of records over which solicitor-client privilege was asserted and assuming, without deciding, that the correctness standard of review applied, she made a reviewable error to order production in the face of the evidence submitted in relation to the claim of privilege.  The University’s claim of privilege complied with the requirements of Alberta civil litigation practice at the time, and it was a reviewable error for the Commissioner’s delegate to impose a more onerous standard on the University in relation to its assertion of privilege than that applicable in civil litigation before the courts.

 

Justice Abella in further separate but concurring reasons held that that standard of review in this case should be reasonableness in accordance with the Supreme Court’s prior decisions.  However, she held that the Commissioner’s decision to order disclosure was unreasonable.  The Commissioner should have exercised her discretion in a manner that interfered with solicitor-client privilege only to the extent absolutely necessary to achieve the ends sought by her enabling legislation.  In ordering disclosure, she did not sufficiently take into account the fact that the University provided adequate justification for solicitor-client privilege particularly in light of the laws and practices applicable in the civil litigation context in Alberta. 

Regards,

Blair

Supreme Court Unwilling to Reject Canada Labour Code's Unjust Dismissal Scheme

The Supreme Court of Canada recently released its decision Wilson v. Atomic Energy of Canada Ltd. 2016 SCC29.  This case involved the question of whether an  federally regulated employer could terminate the employment of a non-unionized employee without just cause.

 

In this case, the appellant Joseph Wilson worked for Atomic Energy of Canada Ltd. (“AECL”) for 4½ years until he was dismissed in November of 2009.  He had a clean disciplinary record.  Wilson filed an unjust dismissal complaint under the Canada Labour Code (the “Code”) claiming that his dismissal was in reprisal for having filed a complaint of improper procurement practices on the part of AECL.  AECL said Wilson was terminated on a non-cause basis and was provided with a generous dismissal package.

 

A labour adjudicator was appointed to hear the complaint.  AECL sought a preliminary ruling on whether a dismissal without cause, together with a severance package, meant that the dismissal was just.  The adjudicator concluded that an employer could not resort to severance payments, no matter how generous, to avoid a determination under the Code about whether the dismissal was unjust.  Because AECL did not rely on any cause to fire him, Wilson’s complaint was allowed. 

 

On appeal to the Federal Court of Canada, a judge found that the adjudicator’s decision was unreasonable because in his view nothing in the Code prevented employers from dismissing non-unionized employees without cause.   The Federal Court of Appeal agreed but reviewed the issue on a standard of correctness. 

 

The appeal was heard by the Supreme Court of Canada.  In a 6 to 3 decision, the court held that the appeal should be allowed and that the adjudicator’s decision should be restored. 

 

The 6 judges of the majority wrote three separate reasons for their decision. 

 

Justice Abella wrote that at common law, a non-unionized employee could be dismissed without cause if he or she was given reasonable notice or pay in lieu of notice.  However, in 1978, Parliament added a series of provisions to Part III of the Code, i.e. an "unjust dismissal" scheme which consisted of protections like those available to employees covered by a collective agreement and which applied to non-unionized employees who had completed 12 consecutive months of continuous employment.  A dismissed employee could ask the employer for a written statement setting out the reasons for the dismissal.  The employer was required to provide the statement within 15 days.  If an adjudicator determined that the dismissal was unjust, he or she had broad authority to grant an appropriate remedy including requiring the employer to pay the person compensation or to reinstate the person. 

 

Both Wilson and AECL accepted that the standard of review of the adjudicator’s reasons was “reasonableness” because he was interpreting a statute within his expertise.  Applying that standard, Justice Abella found that the adjudicator’s decision was reasonable and consistent with the approach overwhelmingly applied to the unjust dismissal sections of the Code since they were enacted.  It made no sense, as the Federal Court of Appeal had done, to attempt to “calibrate” reasonableness by applying a potentially indeterminate number of varying degrees of deference within it.  Such an approach unduly complicated an area of law in need of greater simplicity.

 

Justice Abella then provided what she called "general comments" on the need for greater simplicity with respect to the standards of review of the decisions of administrative bodies.  However, Justices McLachlin, Karakatsanis, Wagner and Gascon, held that although Justice Abella’s efforts to stimulate a discussion on how to clarify or simplify the standard of review jurisprudence was appreciated, it was unnecessary to endorse any particular proposal to redraw the current standard of review framework at this time. 

 

In separate reasons, Justice Cromwell agreed that the standard of review in the case was reasonableness and that the adjudicator’s decision was reasonable but held that reasonableness is a single standard and must be assessed in the context of the particular type of decision making involving all relevant factors.  He held that the standard of review jurisprudence does not need yet another overhaul and he disagreed with the approach developed by Justice Abella in obiter. 

 

Justices Moldaver, Cote and Brown dissented.   They held in a dissenting opinion written by Justice Moldaver, that in the specific context of this case, a correctness review was justified.

The respondent's case was valiantly argued by my colleagues Ronald Snyder and Eugene Derenyi.

Regards,

Blair

 

Supreme Court Enlarges Public Interest Powers of Provincial Securities Commissions

Patricia McLean served as a director of Hucamp Mines Ltd., a reporting issuer registered in Ontario under the Ontario Securities Act, from March of 1996 to June of 2001.   Beginning in July of 2001, McLean began cooperating with the Ontario Securities Commission ("OSC") in respect of certain possible improper actions at Hucamp.  Although the OSC announced in July of 2005 that it would hold a hearing under its public interest powers to sanction McLean and others for their alleged misconduct at Hucamp, McLean did not enter into a settlement agreement with the OSC until September 8, 2008.  In the settlement agreement, McLean consented to the making of an order against her which barred her for 5 years from trading in securities, with some exceptions, and banned her for 10 years from acting as an officer or director of certain entities registered under the Ontario Securities Act.  

It was not until 15 months latter - January 14, 2010 - that the executive director of the British Columbia Securities Commission notified McLean that he was applying to that commission for a "public interest" order against her in British Columbia.   The BC Commission relied on McLean's settlement agreement with the OSC in bringing the proceeding.  However, section 159 of the BC Securities Act provides that all proceedings under that Act "must not be commenced more than 6 years after the date of the events that gave rise to the proceedings".   The BC Commission issued an order adopting the same prohibitions that were set out in the OSC's order.  In doing so, it interpreted that "the event" that had triggered the 6 year limitation period was McLean's entering into a settlement agreement with the OSC and not the misconduct that occurred in 2001 or earlier.  The BC Court of Appeal applied a correctness standard of review and upheld the commissions implied decision.  

McLean appealed to the Supreme Court of Canada.  The court dismissed her appeal.  

Justice Moldaver, writing for the majority of the court, held that that issue before the court was whether "the event" that triggered the 6 year limitation period, was the underlying misconduct that gave rise to McLean's settlement agreement with the OSC or the settlement agreement itself.  

Justice Moldaver found that in reviewing the ordinary meaning, the context and the purpose of the relevant provisions of the BC Securities Act, the Commission's conclusion that the event giving rise to the proceeding was McLean's settlement agreement was reasonably supported. 

He further held that the appropriate standard of review of the Commission's decision was "reasonableness", not correctness as the BC Court of Appeal had held.  Justice Moldaver held that both parties, i.e. the Commission and McLean, had proposed reasonable interpretations of the British Columbia Securities Act.  However, under the reasonableness review, the courts will defer to any reasonable interpretation adopted by an administrative decision maker, even if other reasonable interpretations may exist.  Because the Commission'`s interpretation was not shown to be an unreasonable one, there was no basis to interfere on judicial review. 

Justice Moldaver held that the modern approach to judicial review recognizes that courts may not be as qualified as an administrative tribunal to interpret that tribunal's home statute.  In particular, the resolution of unclear language in a home statute is usually best left to the administrative tribunal because the tribunal is presumed to be in the best position to weigh the policy considerations often involved in choosing between multiple reasonable interpretations of such language. 

Allowing secondary jurisdictions (British Columbia in this case) to wait until the conclusion of a primary proceeding (the OSC proceeding) obviates the need for parallel and duplicative proceedings that will overburden securities commissions and the targets of proceedings.  The Commission's interpretation of its statute therefore furthered the legislative goal of improving inter-jurisdictional cooperation between provinces and territories.

Finally, Justice Moldaver found that although the Commission's interpretation significantly extended the duration of time for which a person might be subject to regulatory action, of itself, that was not offensive to the purpose of limitation periods.  Limitation periods are always driven by policy choices in an attempt to balance the interests of the parties.  The Commission's interpretation struck a reasonable balance between facilitation of inter-provincial cooperation and the underlying purposes of limitation periods.  

Regards,

Blair

Court Rules That Bikers Can Operate Strip Joints

The Ontario Court of Appeal recently considered whether being a member of a motorcycle club that is recognized as a criminal organization, is sufficient to disentitle a person from holding a liquor licence in Ontario.

 

Robert Barletta is a "full patch" member of the Hells Angels.  He is a founding member of the London, Ontario chapter of the Hells Angels and was its President for at least 5 years.  Mr. Barletta has no record of criminal convictions or infractions of the Liquor Licence Act ("Act").   Since 2001 he has owned and operated a well known strip joint in London called Famous Flesh Gordon's and has done so since 2001. 

 

In 2010, the Registrar of the Alcohol and Gaming Commission of Ontario ("Commission") applied to the Board of the Commission to revoke Mr. Barletta's liquor licence for Flesh Gordon's.  The sole issue before the Board was whether Mr. Barletta's membership in the Hells Angels was in itself sufficient to strip him of the privilege of holding a liquor licence. The Hells Angels meet the definition of a "criminal organization" under the Criminal Code.

 

The Board concluded that membership in the biker gang was not enough to revoke Mr. Barletta's liquor licence. The Divisional Court dismissed the Registrar's appeal from the Board's decision.  The Registrar appealed to the Court of Appeal. 

 

The Court of Appeal allowed the Registrar's appeal and referred the application back to the Board to be dealt with in accordance with its reasons.

 

There were 3 issues before the Court of Appeal.

 

First Issue - Did the Board Apply the Proper Standard of Proof?

 

The standard of proof provided by the Act is that of "reasonable grounds for belief":

 

The Act provided that an applicant is entitled to be issued a liquor licence unless his past or present conduct affords reasonable grounds for belief that he will not carry on business in accordance with the law and with honesty and integrity.

 

"Reasonable grounds for belief" is a lower standard of proof than "balance of probabilities".  The Supreme Court of Canada has held the reasonable grounds to believe" standard requires something more than mere suspicion, but less than the standard applicable in civil matters of proof on the balance of probabilities.  In essence, reasonable grounds will exist where there is an objective basis for the belief which is based on compelling and credible information.  

 

The Court of Appeal held that there was no doubt that the Board had applied a higher standard of proof than the Act called for.  Requiring proof on the balance of probabilities, rather than on reasonable grounds to believe, was an error of law.   Moreover, it was an error on a question of law of general importance to the legal system, one which is outside the area of expertise of the Board as an administrative decision maker.  Accordingly, the Board's choice of standard proof cannot attract any deference by the Court of Appeal.

 

Second Issue - Did the Board Apply the Test Called for by the Act?

 

The Act provides that an applicant is entitled to be issued a liquor license except if "the past or present conduct of the person affords reasonable grounds for belief that the applicant will not carry on business in accordance with the law and with integrity and honesty." 

 

The Court of Appeal found that the Board had misconstrued this test by limiting its examination of Mr. Barletta's conduct to his conduct in operating Flesh Gordon's.  The Court of Appeal held that there was no such limiting language in the Act.  The words of the Act are not limited to conduct in operating a strip joint or in any other way.  In addition, there was no requirement that Mr. Barletta must have engaged in past criminal activity.  The Court of Appeal held that past conduct that was not criminal could also provide necessary grounds for belief.  Finally, the Court of Appeal held that the Board can look beyond Mr. Barletta's past or present observation of the regulatory laws for his strip joint.  The requirement that he carry on business in the future in accordance with law and with integrity and honesty is not limited to complying with the regulatory laws applicable to licenced establishments.  

 

Third Issue - Was Revocation the Only Reasonable Conclusion that the Board Could Have Reached?

 

The Court of Appeal held that revocation of the licence for Flesh Gordon's was not the only possible result of the application.  There was no doubt that the evidence about the Hells Angels as a criminal organization however, it was a fact that while he was a member, Mr. Barletta had apparently acted lawfully, with honesty and integrity and operated the strip joint properly for almost 10 years.  Accordingly, the court held that the proper remedy in the appeal was to remit the Registrar's application to revoke Mr. Barletta's license back to the Board for reconsideration in accordance with the court's reasons.  

 

Regards,

 

Blair

Supreme Court Restricts Random Drug and Alcohol Testing of Unionized Employees

Irving Pulp & Paper Limited operates a craft paper mill in Saint John, New Brunswick. In the 15 year period between 1991 and 2006, Irving had no formal policy with respect to alcohol and drug use at the mill. In 2006, it unilaterally adopted a "Policy On Alcohol And Other Drug Use" under the management rights clause of the collective agreement with its workers' union  (Communications, Energy and Paperworkers Union of Canada, Local 30) but without any negotiations with the union. The policy imposed drug or alcohol testing for employees holding positions designated by Irving as "safety sensitive".

The policy contained a random alcohol testing component, whereby 10 per cent of the employees in safety sensitive positions were to be randomly selected for unannounced breathalyser testing over the course of a year. A positive test for alcohol attracted significant disciplinary action, including dismissal. Failure to submit to testing was grounds for immediate dismissal.

One of the employees randomly tested was Perley Day, a member of the Union. Mr. Day was a teetotaler who had not had a drink since 1979. His breathalyser test revealed a blood alcohol level of zero. The Union filed a grievance on his behalf challenging only the random alcohol testing aspect of the policy. The Union did not challenge the rest of the policy which required employees to be subject to mandatory testing if there was reasonable cause to suspect alcohol or other drug use in the workplace.

There were only 8 documented incidents of alcohol consumption or impairment at the workplace over a 15 year period, from April 1991 to January 2006. By December of 2008 (when the arbitration was heard), the testing policy had been in effect for 22 months and not a single employee had tested positively in either a random test or a test for reasonable cause.

The absence of evidence of any real risk related to alcohol led a majority of a labour arbitration board to conclude that there was little benefit to Irving in maintaining the random testing policy. The board measured the employer's interest in random alcohol testing as a workplace safety measure against the harm to the privacy interest of the employees.  The board allowed the grievance and concluded that random testing was unjustified.

On judicial review, a New Brunswick court set aside the board's award as unreasonable because of the dangerousness of the workplace. The New Brunswick Court of Appeal dismissed the union's appeal.

By a 6 - 3 majority, the Supreme Court of Canada allowed the union's appeal. Justice Abella, writing for the majority, held as follows:

The scope of management's unilateral rule-making authority under a collective agreement is that any rule or policy unilaterally imposed by an employer, and not subsequently agreed to by the union, must be consistent with the collective agreement and be reasonable. Under a balancing of interests and the collective bargaining tenet that an employee can only be disciplined for reasonable cause, an employer can impose a rule with disciplinary consequences only if the need for the rule outweighs the harmful impact on the employee's privacy rights. For example, an employer can test an individual employee if there is reasonable cause to believe that the employee was impaired while on duty. However, a unilaterally imposed policy of mandatory random testing is an unjustified affront to the dignity and privacy of employees unless there is evidence of enhanced safety risks such as evidence of a general problem with substance abuse in the workplace.

In this case, the expected safety gains to the employer ranged from uncertain to minimal while the impact on employee privacy was severe. The number of alcohol related incidents in the 15 year period did not reflect the requisite problem with workplace alcohol use. Consequently, the employer had not demonstrated the requisite safety concerns that would justify universal, random testing. As a result, the employer exceeded the scope of its rights under the collective agreement.

Justice Abella held that the applicable standard for reviewing the decision of the labour arbitrator is reasonableness. She held that the board's decision "must be approached as an organic whole, not as a line by line treasure hunt for error". In this case, based on the findings of fact and the relevant jurisprudence, the decision was a reasonable one.

Regards,

Blair