A necessary part of the civil litigation process is the exchange of documents between parties, which normally occurs after all pleadings are filed. Privileged documents do not have to be produced. Privilege falls into two general categories—solicitor-client privilege and litigation privilege.
Solicitor-client privilege is communication between clients and their lawyers for the purpose of obtaining legal advice. Solicitor-client privilege protects the confidential relationship between clients and lawyers.
Litigation privilege exists for the purpose of fairness in an adversarial process, so that a party does not have to reveal its thoughts, strategies, or theories.
Whether litigation privilege applies to documents is a fact-based determination where the rationale for privilege is applied to the circumstances of the case.
Recently, the Court of Appeal in Hatch Ltd. v Factory Mutual Insurance Company, 2015 NSCA 60, looked at this issue on appeal from a motion court’s decision that litigation privilege attached to an expert engineer’s file.
On November 14, 2008, three years after it was built, a multi-million dollar wharf collapsed in Auld’s Cove, NS. The assigned adjuster hired an engineering firm on November 15, 2008, for an expert opinion on the collapse. The adjuster and engineer conducted a site visit on November 16, 2008. Counsel was retained on November 18, 2008. The engineering firm was instructed to report to counsel from that date forward. The motion was brought when the insurer refused to turn over the engineering firm’s file upon the request of one of the defendants. The insurer claimed litigation privilege.
The motion judge agreed that litigation privilege attached to the engineering file because the engineers were hired for the dominant purpose of aiding in the conduct of the litigation. The Court of Appeal in a 2-1 decision confirmed that the dominant purpose test is the benchmark in determining whether litigation privilege applies.
Whether litigation privilege attaches to a document, investigation, or expert requires a two-step test that:
1. Litigation was “in reasonable prospect” when the document was produced; and
2. The “dominant purpose” of the document was to obtain legal advice or was to conduct or aid in the conduct of the litigation.
The first part of the test is easily met, as the threshold for determining whether litigation is a “reasonable prospect” is a low one, although the person claiming privilege must show something more than speculation in the circumstances of the case. At the motion court level, Justice Boudreau said that given the circumstances of the case, it was clear that contemplation of litigation was immediate or practically immediate.
The second part of the test is more difficult to overcome as producing documents, conducting investigations, and hiring experts can be done for multiple purposes. At times, there is no single purpose behind any of these actions. Often litigation privilege does not attach to events immediately following a loss because the parties involved are simply trying to determine what happened. This position is the one that Beveridge, J.A. put forward in his dissent. He decided that litigation did not apply because hiring the engineering firm was part of the initial investigation.
Even if contemplation of litigation is one of the purposes behind producing the document, conducting the investigation, or hiring the expert, if it is not the dominant purpose, then litigation privilege does not apply. The Court also stated that counsel being retained is not a solid indication that litigation privilege applies. It is only one consideration.
So what does this mean for insurers and others who seek to have litigation privilege apply?
It means giving conscious thought to each activity on a claim as to the purpose behind the activity and the type of claim. You should ask yourself if liability is unclear or if the claim is likely to end in litigation.
Care especially has to be given to those claims where plaintiff counsel is retained and they indicate that the insurer should investigate and that no litigation is necessarily contemplated. Also if an action is commenced but no defence is required. In these situations and other similar ones you should be aware that your investigation will not be protected. Plaintiff counsel will then seek the results of the investigation, stating that the documents were produced or experts hired as part of the investigation process and not in contemplation of litigation.
To help protect the litigation privilege of an investigation make clear notes that state when the investigation is being done in contemplation of litigation and keep those documents separate from every day, common file materials. The same recommendation applies to large loss claims, claims with significant liability issues, and any claims where litigation is reasonably contemplated.
Litigation privilege will always be a contentious issue between parties, because parties want to keep their documents private, while opposing parties want access to those documents. Giving thought to the reason behind each activity on a file, however, will help determine the issue.