Canada: Internal Investigations

In a world of heightened sensitivity to breaches of duty and a statutory and regulatory regime which establishes extensive and detailed standards governing conduct, it is not at all unusual that corporations which suspect that there may have been a lapse of duty and consequential harmful impact may wish to be proactive and move to investigation of the matter on their own accord prior to any involvement by governmental authorities. In such circumstances, it is not unusual for corporations to engage counsel for the purpose of undertaking investigation and reporting on same to the appropriate executive or committee of the corporations for the purpose of addressing the failure of duty. In an effort to protect the fruit of that investigation and ensure that it does not become a ready sword to be seized and wielded by the governmental authorities, such investigations should be properly structured so as to attract solicitor-client privilege or work product (litigation) privilege and thereby be beyond the reach of governmental investigators.

The fundamental characteristics associated with solicitor-client privilege are that the communications were confidential communications between a lawyer and client for the purpose of providing legal advice. Of course, the corporation is entitled to the same protection and confidentiality as an individual client. Communications with in-house, as well as outside, counsel may be privileged, but the role needs to be clearly defined as providing legal advice. Privilege can extend to confidential communications with any corporate employee or agent concerned with the matter for which legal advice is required. Privilege can also extend to communication with a lawyer’s agents if the lawyer is actively directing and supervising the work and is employing the agent to facilitate provision of legal advice. If the communications meet the test of solicitor-client privilege, they will remain protected from mandatory disclosure to investigative authorities, save where the privilege has been waived. Waiver of the privilege can occur by way of disclosure to third parties. Communications which are shared for the purposes of a joint or common defence amongst the parties are not necessarily communications where privilege has been waived. Even disclosure to government agencies does not necessarily constitute a waiver if the disclosure is the result of some form of legal compulsion.

Disclosure of privileged information in the context of "settlement" negotiations may nonetheless preserve the privilege but asserting a claim or defence that puts otherwise privileged communication in issue clearly waives the privilege over those communications. Information that attracts litigation (work product) privilege is material which is prepared in anticipation of litigation. This applies equally to criminal or regulatory prosecutions as well as civil litigation. In order to qualify, the material must be prepared at counsel’s request but people other than lawyers can prepare protected work product.

For a lawyer in these circumstances, certain ethical considerations come into play. Firstly, the lawyer should make clear that the client is the corporation and the lawyer should not be giving legal advice to individuals other than those through whom advice is being given to the corporation. As well, the lawyer must have regard for the obligations to report misconduct pursuant to the Rules of Professional Conduct of the Law Society of Upper Canada (Rule 2) and to any statutory requirements which may be at play concerning the matter at hand.

Finally, the lawyer must be mindful of the provisions in Section 139 of the Criminal Code in order to avoid contravention of that provision in the form of conduct that can amount to an attempt to impede an investigation. The conduct comprehended by Section 139 of the Criminal Code can apply to investigation by regulatory or disciplinary authority as well as a criminal investigation. Any steps taken to destroy or conceal evidence, or to provide false or incomplete evidence to an authority, are unlawful. While impeding an investigation may be a criminal offence, there is no statutory or common law obligation to assist authorities in their undertaking of an investigation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.