The Alberta Court of Queen’s Bench recently released its decision in TransAlta Corporation v. Market Surveillance Administrator (TransAlta v. MSA), ordering TransAlta Corporation (TransAlta) to produce hundreds of documents over which it claimed litigation privilege to the Market Surveillance Administrator (MSA). Although the decision is under appeal to the Alberta Court of Appeal, the court’s finding that the use of litigation privilege had been done capriciously in some cases, along with the large number of records ordered to be produced, acts as a strong reminder that prudence should be used from the outset of a dispute to ensure litigation privilege will protect the disclosure of records created for the dominant purpose of litigation.

BACKGROUND

The MSA is a body charged with monitoring Alberta’s electricity market to ensure that it is operated in a fair, efficient and openly competitive manner and, among other roles, investigates potential violations of the Alberta Utilities Commission Act (AUC Act). The MSA had been investigating whether TransAlta coordinated various discretionary plant outages at peak electric usage times to artificially inflate power prices in the Alberta market, and whether it and certain of its then traders traded using non-public outage information.

In May 2013, TransAlta applied to the Court of Queen’s Bench under section 50 of the AUC Act for an order declaring certain records seized by the MSA as being subject to privilege and not producible to the MSA. The Court of Queen’s Bench concluded that the relevant provisions of the AUC Act granted protection only for solicitor-client privileged materials and not litigation privileged materials. Accordingly, the court ordered production of all records over which TransAlta claimed only litigation privilege and certain records over which TransAlta claimed solicitor-client privilege.

On appeal, the Court of Appeal concluded that litigation privilege was also protected by section 50 of the AUC Act, and remitted the matter back to the Court of Queen’s Bench for a determination of which records TransAlta claimed to be litigation privileged were, in fact, litigation privileged.

LITIGATION PRIVILEGE

Litigation privilege can arise outside of the circumstances in which solicitor-client privilege applies. Therefore, litigation privilege can shield records that are not otherwise protected by solicitor-client privilege, such as communications between a lawyer and an expert or between non-lawyers addressing a dispute. The privilege exists to protect the ability for parties to prepare their cases in private without fear that their preparations will be prematurely disclosed.

For litigation privilege to arise, litigation must be anticipated and the communication or record must be generated for the dominant purpose of litigation; it is not sufficient that litigation be only one of several purposes for which a communication or record is created. Unlike solicitor-client privilege, the privilege generally expires with the end of the litigation. Where a party claims litigation privilege, it bears the evidentiary onus of proving that the privilege applies.

COMPELLED DISCLOSURE

In TransAlta v. MSA, Justice M.C. Erb individually reviewed hundreds of records over which TransAlta claimed litigation privilege, and required a large number of them to be produced to the MSA. TransAlta’s privilege claims failed either because the court found no merit to the claim or because TransAlta failed to discharge its burden to establish that litigation privilege was applicable to the record. The court borrowed heavily from, and applied by analogy, the procedural requirements in the Alberta Rules of CourtTransAlta v. MSA should be taken to apply equally to investigations by the MSA under the AUC Act as well as general litigation.

BEST PRACTICES

To ensure litigation privilege will attach to records created for the dominant purpose of litigation, the court’s decision suggests that certain practices should be followed once litigation is anticipated or arises (Dispute) including:

  • A privilege protocol should be created to document the steps to be taken to ensure litigation privilege will apply and create an evidentiary trail to support the argument that records were created for the dominant purpose of litigation.
  • Thereafter, future work done in connection with the Dispute should ideally be at the request of or directed by either in-house or external legal counsel and be for the dominant purpose of potential litigation.
  • Non-lawyers directed by counsel to do work in connection with the Dispute may participate in meetings without the involvement of counsel so long as any meetings are confined to the scope of work directed by counsel and again for the dominant purpose of potential litigation.
  • Non-lawyers directed by counsel to do work in connection with the Dispute may communicate with other non-lawyers regarding the Dispute without the involvement of counsel so long as any such communications are confined to the scope of work directed by counsel. Any such communications should disclose only information necessary to elicit any information or facts required and no discussions should take place with any party concerning confidential information including legal strategy, non-public facts or views in connection with the Dispute.
  • All communications should be marked “Privileged and Confidential.”
  • All communications and records should ideally be segregated from other materials not related to the Dispute.
  • Information in connection with the Dispute should not be shared with anyone without counsel’s authorization, especially third parties, to avoid waiver of privilege.

The assistance of capable counsel is critical to ensuring not only that the appropriate steps are taken to protect litigation privilege and tailor an appropriate privilege protocol, but also to develop the important evidentiary trail to support a privilege claim. The involvement of counsel enhances a claim that communication was for the dominant purpose of litigation. Where litigation arises or is possible, in-house or external counsel should be immediately consulted.