Challenges to Privilege in the Internal Investigation Context

  • March 13, 2019
  • Paul Le Vay, Gerald Chan and Carlo Di Carlo

Challenges to Privilege in the Internal Investigation Context

Consider the following scenario: Several employees have made allegations of financial irregularities against a senior officer of the corporation. The General Counsel (or Board of Directors) determines an internal investigation is warranted. External counsel is retained to conduct it, and they interview dozens of witnesses. Is the investigative brief privileged?

The first question is whether the witnesses interviewed are employees or external third parties. In the former, solicitor-client privilege may apply on the basis that counsel are gathering facts from the client for the purpose of providing legal advice. In the latter, solicitor-client privilege would not apply because the communications are not between solicitor and “client,” but litigation privilege may apply if the investigation is conducted for the dominant purpose of preparing for anticipated or existing litigation. A recent case out of the U.K. (Director of the Serious Fraud Office v. Eurasian Natural Resources Corporation Ltd.) found the dominant purpose test was met even though the authorities were still investigating and had not yet commenced a criminal prosecution. It was enough that there was a “real likelihood” of litigation.

A thornier issue concerns the scope of solicitor-client or litigation privilege where it applies. Privilege clearly protects any legal advice given or legal strategy recorded. But does it protect counsel’s notes of a witness interview if those notes simply summarize what was said? What if counsel hired a court reporter? Does privilege protect the audio recordings and transcripts of the interviews? Canadian courts have struggled to answer these questions with consistency and clarity.

In Alberta v. Suncor Energy Inc., the Court of Queen’s Bench of Alberta found litigation privilege applied to witness statements taken as part of an internal investigation (in that case, an investigation into a workplace accident resulting in the death of an employee). While the Court of Appeal altered the ruling on appeal, it did so on other grounds.

By contrast, in R. v. Assessment Direct Inc., the Ontario Superior Court of Justice ruled litigation privilege did not apply to audio recordings of witness interviews that were conducted in anticipation of civil and criminal litigation. In coming to this conclusion, the court appeared to draw a bright line between documents containing facts and documents revealing counsel’s “observations, thoughts and opinions,” placing the recordings in the former category.

It is hard to reconcile this bright-line approach with the rationale underlying litigation privilege. A witness might never have been interviewed but for counsel’s analysis and judgment. In addition, the contents of that interview, its focus and the structure of the questions are all shaped by counsel’s judgment. And so even audio recordings of a witness interview (or a transcript thereof) can reveal counsel’s observations and opinions—exactly what litigation privilege is intended to protect.

A large part of the confusion stems from the axiom, “Facts are not privileged.” This should not prevent counsel from claiming privilege over a document created in the course of an investigation just because it summarizes facts. Rather, this should simply mean other parties are free to approach the same witnesses to elicit the same facts. Unfortunately, that was not the approach taken in Assessment Direct.

The scope of privilege in the internal investigation context is an issue sorely in need of guidance from the Supreme Court of Canada. However, until such guidance is provided, in-house counsel need to be sure external counsel are aware of the potential pitfalls awaiting privilege claims and take the appropriate steps to structure the investigation to maximize the likelihood these claims will be successful.

Paul Le Vay, Gerald Chan and Carlo Di Carlo are lawyers at Stockwoods LLP (, a litigation boutique with expertise across the spectrum of civil, regulatory and criminal litigation. They have conducted investigations on behalf of clients ranging from large financial institutions to publicly traded companies and governmental entities. These include investigations in the areas of workplace harassment, whistleblower intimidation and financial irregularities.