Are documents prepared during an internal investigation always protected by litigation privilege?
This article is a modified version of a case comment originally published by Éditions Yvon Blais in June 2022 (EYB2022REP3463).
Litigation privilege is an exception to complete disclosure of the relevant facts in a pre-trial examination and may be invoked in respect of documents drawn up in preparation for litigation, including during an internal investigation. The distinction between an internal investigation conducted in relation to a company’s activities and an investigation conducted in preparation for litigation can sometimes be tenuous, as illustrated by the decision in Zurich Insurance Company Ltd. (Canadian Branch) c. A.H. Lundberg Systems Limited.1
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In that case, the plaintiff, Fortress Specialty Cellulose Inc. (“Fortress”), owned and operated a pulp and paper processing plant in Thurso, Quebec, where a major explosion occurred on September 20, 2017.
Nearly two years later, Fortress and six insurers instituted an action against the defendant, A.H. Lundberg Systems Limited (“Lundberg”), claiming that the explosion was caused by a construction defect that affected one of the components of a system designed by Lundberg.
In the course of that litigation, the parties held pre-trial examinations of several Fortress employees. Their testimony revealed that Fortress undertook an internal investigation immediately after the explosion, during which witnesses were interviewed, data was extracted from the system in question and certain documents were prepared.
Lundberg’s lawyers requested production of the documents prepared and used by Fortress as part of the investigation process. The plaintiffs objected, on the ground that the documents were covered by litigation privilege and, in the alternative, that they were protected by professional secrecy.
The Superior Court (the “Court”) dismissed the plaintiff’s objections and ruled that the documents prepared as part of Fortress’ internal investigation had to be disclosed. In light of the transcripts of the pre-trial examinations, the Court concluded that the purpose of the internal investigation and the related documents was to develop a solution to remedy the situation and modify Fortress’ future practices.
The Court relied on two additional facts revealed by the evidence to further illustrate that this was not an investigation whose main purpose was to prepare for litigation: Lundberg’s involvement in the investigation and the disclosure of the results to all Fortress employees. In the eyes of the Court, those facts tended to show that Fortress initiated the investigation in the normal course of business due to an incident, and not in order to prepare for litigation that Fortress wanted to keep confidential.2
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Comment: For the litigation privilege to apply, it is not sufficient to show that the documents whose disclosure is sought may be useful in preparing for litigation.3 At the time the documents were drawn up, their main purpose had to be to prepare for litigation.4
When an investigation is initiated in the normal course of the company’s business, its purpose may be to identify deficiencies to be corrected, to find a solution to a problem, or to shed light on the circumstances of an incident for purely administrative purposes. When one of those is the purpose – as in this case – the documents created in the course of the investigative process could be disclosed to the opposing parties if requested in connection with litigation, and their content would not be protected by litigation privilege.
The opposing party’s participation in the internal investigation, or the company’s waiver of the confidentiality of the results of that investigation, are also factors that support disclosure of the documents at the preliminary stage of the case and that clearly show that the purpose of the investigation was not preparation for future litigation.5
In Zurich Insurance Company Ltd. (Canadian Branch) c. A.H. Lundberg Systems Limited the Court pointed out that litigation privilege must be interpreted narrowly, because it confers immunity to disclosure of evidence and is a barrier to the most complete disclosure of evidence at the preliminary stage of the proceeding.
1 2022 QCCS 390.
2 Paragraph 52 of the decision in question.
3 Développements Limoges c. WSP Canada inc., 2016 QCCS 353, para. 72.
4 Paragraphs 36 and 37 of the decision in question. See also Développements Limoges c. WSP Canada inc., 2016 QCCS 353, para. 72.
5 Paragraphs 49 to 64 of the decision in question.