The British Columbia Court of Appeal’s decision in Lamarche v. British Columbia (Securities Commission) highlights the critical importance of regulators protecting privileged documents during an investigation. The judgment reads as a cautionary tale: regulators that pursue records without adequate privilege-protection protocols in place may face civil liability.
Background
As part of an investigation into alleged unregistered trading and advising, the British Columbia Securities Commission (the Commission) obtained more than three years of email records belonging to Jean Andrew Lamarche. The Commission requested and obtained these records from Shaw Communications Inc., exercising its broad powers under the Securities Act to compel document production.
Mr. Lamarche subsequently brought an action against the Commission, alleging it breached both the Charter and Privacy Act in its investigation. Mr. Lamarche claimed that many of the seized emails were subject to solicitor-client privilege and that the Commission failed to implement any safeguards to protect such privileged communications.
While both the BC Supreme Court and the BC Court of Appeal stayed the constitutional claims, the Court of Appeal set aside the chambers judge’s order striking Mr. Lamarche’s claims under the Privacy Act.
The BCCA decision: alleged failures of the Commission
While the Securities Act grants the Commission partial immunity for any act done in good faith, Mr. Lamarche argued that a sufficient degree of recklessness by a public actor can ground an inference of bad faith to overcome these immunity provisions.
Mr. Lamarche alleged that the Commission knew, or ought to have known, that the data obtained from Shaw contained communications subject to solicitor-client privilege, and that the Commission failed to implement an effective protocol to ensure the protection of these communications. This failure — coupled with the deliberate and intentional acts of seizing, searching, retaining, accessing, and using the privileged communications — constituted actions and omissions that were not done in good faith.
While these allegations have not been proven, the Court of Appeal held that Mr. Lamarche’s claim was not bound to fail, as Mr. Lamarche pleaded material facts that, if true, could support a finding of bad faith. The failure to have a privilege-protection protocol in place could amount to a reckless disregard for the relevant legal standards and the importance of solicitor client privilege. As the Court noted:
“Given the legal — and indeed cultural — significance that attaches to solicitor-client privilege, I cannot say that this argument is “bound to fail; it seems that there is, at least, an argument to be made on this point.”
Accordingly, the Court found that the chambers judge had erred in striking Mr. Lamarche’s claims under the Privacy Act, although the Court opted to stay Mr. Lamarche’s constitutional and privacy claims pending the conclusion of the Commission’s enforcement proceedings.
Takeaways
While the Commission enjoys broad investigative powers, it must nonetheless exercise those powers with care. The Lamarche decision underscores the need for an effective privilege-protection protocol when there is a risk that solicitor-client communications may be captured.
The Court of Appeal found the following pleading was sufficient to ground a claim, namely that the Commission should at minimum
- seal the records that are subject to examination
- notify the privilege holder that potentially privileged documents may have been obtained
- seek a court determination on privilege claims before accessing or using the material
A sound protocol not only protects individual rights, but also preserves the integrity of regulatory processes. This is especially vital where document production is compelled under statutory authority. A failure to safeguard privilege erodes public trust in the legal system — and may expose regulators to civil liability.
This is the second recent decision from the BC Court of Appeal involving allegations of misuse of investigative powers and procedure by the BC Securities Commission, as discussed in our previous blog post. These decisions come in the face of the expanded enforcement powers granted to the BC Securities Commission as discussed in our previous blog post. It remains to be seen whether these decisions will result in a curtailing of what has been aggressive enforcement by the BC Securities Commission in recent years.
