Canada: Solicitor-Client Privilege: The Quebec Securities Regulator Can Summon In-House Counsel To Testify In An Investigation

On July 16, 2015, the Supreme Court of Canada (SCC) denied leave to appeal to an in-house counsel (referred to as Ms. X to protect her identity) in the case of X v. Autorité des marchés financiers. The SCC thus maintained the decision of the Quebec Court of Appeal, which had ruled that an in-house counsel could not claim immunity from disclosure by relying on solicitor-client privilege to decline to appear before the investigators of the Quebec securities regulator (the Autorité des marchés financiers or AMF) when summoned by them in the context of an investigation.

BACKGROUND

Ms. X has been in-house counsel in the legal department of a public multinational company for a number of years. In December 2013, the AMF summoned her to appear before one of its investigators to "testify as to everything you known about the file" in the context of an investigation focusing on trades made by the company. The AMF also issues an order prohibiting Ms. X from divulging to anyone information relating to the investigation, except to her lawyer.

A few days later, Ms. X made an application to the Superior Court to have the summons and the confidentiality order issued by the AMF declared illegal. Ms. X argued that the summons could jeopardize the solicitor-client privilege she owed to the company and that the confidentiality order would prevent her from performing her duties as a lawyer within the company.

As a main argument, Ms. X relied on the SCC's 2004 decision in Foster Wheeler Power Co. v. Société intermunicipale de gestion et d'élimination des déchets (SIGED) inc. (Foster Wheeler). In this decision, the SCC held that there was a rebuttal presumption of confidentiality covering all communications between a client and his lawyer made in the context of a complex and prolonged engagement, as in the case of an in-house counsel.

The AMF responded by seeking a summary dismissal of Ms. X's application. The AMF argued that not all communications involving the in-house counsel inside the company were protected by privilege. For instance, pure business advice, as well as certain communications in the ordinary course of the company's business, was not privileged even if the in-counsel took part in them. The AMF also argued that the Quebec Act respecting the Autorité des marchés financiers contained a privative clause, which prevented courts from interfering with the exercise of the AMF's powers.

In first instance, the Superior Court found that Ms. X's allegations were serious, particularly when taking into account the risk that privilege could be violated given the vagueness of the summons, and that a trial on the merits was required to determine if the AMF's summons and confidentiality order were legal.

COURT OF APPEAL DECISION

The Quebec Court of Appeal reversed the Superior Court's decision and dismissed Ms. X's application. Without directly questioning the application of the presumption of confidentiality established in the Foster Wheeler case, the Court of Appeal was of the opinion that the potential for a violation of privilege was speculative because the AMF's investigator had yet to ask any specific question to Ms. X. The Court of Appeal considered that Ms. X's application was premature, if even valid, given the absence of concrete evidence.

With respect to the confidentiality order issued by the AMF, the Court of Appeal held that it was necessary to ensure the integrity of the AMF's investigation. Ms. X should raise the issue with the Bureau de décision et de révision, a specialized administrative tribunal, if she wants to have the order reviewed.

Ms. X unsuccessfully sought leave to appeal from the decision of the Court of Appeal before the SCC.

CONCLUSION

We can conclude from Ms. X's judicial saga that the AMF can legally summon an in-house counsel to appear before its investigators, despite the solicitor-client privilege owed by counsel to his employer. At best, in-house counsel could make a court application if he believes that specific questions from the investigator violate privilege. This process can be difficult since witnesses are not entitled to decline to answer questions asked by the AMF investigator who summoned him; he would otherwise be at risk of penal prosecution. In addition, caselaw established that a witness cannot apply to have the Superior Court rule on objections to the investigator's questions, unless the investigator were to exceed his mandate or his jurisdiction, or in case of a violation of the rules of natural justice or of procedural fairness.

In practice, these recent developments show why in-house counsel ought to segregate the legal advice he gives to his employer from other communications. The company should also engage external counsel when an investigation is ongoing or anticipated, requiring increased protection of solicitor-client privilege.

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.