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International Trade & Investment Law Digest

Author(s): Malcolm Aboud

March 2014

Companies undertaking internal investigations must take a number of steps in order to ensure that documents produced in the course of those investigations will be subject to privilege. Not all internal investigations are privileged, even if carried out with the knowledge of corporate counsel. Only those undertaken for the dominant purpose of preparing for litigation or which entail the seeking or giving of legal advice benefit from solicitor-client or litigation privilege.

Canadian cases such as Saturley v. CIBC World Markets Inc. and Société Air France v. Greater Toronto Airports Authority have held that when the results of an investigation may have a bearing on business decisions or changes to internal procedures, even where the report is prepared with the involvement of in-house counsel, those alternate purposes may lead to a determination that the investigation was not undertaken for the dominant purpose of preparing for litigation. American cases such as U.S. ex rel. Baklid-Kunz v. Halifax Hospital Medical Centre have similarly suggested that correspondence with in-house counsel which copies non-lawyers may be deemed to have been for the purpose of business advice rather than to seek or provide legal advice.

Similarly, investigations undertaken by non-lawyer third parties such as auditors or private investigators will often not be privileged. Under General Accident Assurance Company v. Chrusz, solicitor-client privilege will attach to communications with non-lawyer third-parties only “[w]here the third party serves as a channel of communications between the client and solicitor” or where the third party is performing a function which is “essential to the existence or operation of the client-solicitor relationship.” Courts will similarly look to whether a report was prepared by or at the behest of legal counsel in determining whether it was undertaken for the dominant purpose of preparing for litigation.

Best practices in order to maintain privilege in internal investigations involve ensuring that investigations are requested or initiated by legal counsel, documenting the purpose of the investigation as it relates to the legal advice or litigation, marking documents as privileged and confidential, ensuring communications flow through counsel, avoiding dissemination of work product flowing from the investigation, and minimizing the involvement of non-lawyer employees and third parties.

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