On October 17, 2022, the Québec Court of Appeal in Centre universitaire de santé McGill c. Lemay (Lemay) held that the voluntary disclosure of a solicitor-client privileged forensic accounting report to a police force in the context of a criminal investigation did not constitute a waiver of said privilege.
The Court’s ruling brings much-needed guidance for organizations faced with the dilemma of how to best protect the solicitor-client privilege that attaches to an investigation report when it is determined that such information should be shared with certain parties, such as independent auditors or law enforcement.
The dispute arose in the context of contracts that were awarded for the construction of the MUHC’s new hospital center. In September 2012, the Unité permanente anticorruption (UPAC), a specialized Québec police force tasked with fighting corruption, executed a search warrant at the MUHC offices following allegations of collusion and corruption in the awarding of such contracts.
An external lawyer was retained to provide legal advice to the MUHC in relation to these allegations. In the execution of his role, the external lawyer entrusted an accounting firm with a forensic accounting mandate, the whole for the purpose of allowing him to provide legal advice to his client. A preliminary forensic accounting report, which is at the heart of this dispute, was produced by the accounting firm as a result (the Report).
Once finalized, the Report was given to the external lawyer and to MUHC’s chief executive officer (CEO). It was then presented viva voce to the members of the MUHC’s Audit Committee, without such members receiving a copy of the Report. The members of the Audit Committee were informed of the confidentiality of the subject being discussed during the presentation.
At the end of said presentation, the CEO informed the Audit Committee members that he intended to transmit the Report to UPAC in the context of its ongoing investigation, for the purposes of collaborating with this police force in the interest of transparency.
The Report was then transmitted to UPAC by the MUHC’s external lawyer in November 2013.
In May 2014, an access request was made to the MUHC to obtain a copy of the Report. This request was denied in June 2014. The individual making the request then applied to the Commission de l’accès à l’information (CAI) for a review of this decision.
The CAI dismissed the application for review and this decision was subsequently upheld by the Court of Québec. The Superior Court of Québec allowed an appeal for judicial review of the Court of Québec’s decision, holding that the transmission of the Report to UPAC had constituted a waiver of solicitor-client privilege.
The MUHC subsequently appealed the Superior Court of Québec decision. The Québec Court of Appeal set aside the judgment of the Superior Court and restored the Court of Québec’s judgment.
The Québec Court of Appeal’s analysis
The Québec Court of Appeal (the Court) was faced with the following question: does the voluntary disclosure of a privileged report made to a police force in the course of a criminal investigation necessarily result in the loss of its privileged status?
As a reminder, an unwavering principle established in case law is that, as a general rule, the disclosure to a third party of privileged information leads to the loss of said privilege (“a secret once revealed is a secret no longer”).
The Court made it clear that this general principle is not absolute, and that the sharing of privileged information with a third party does not lead to the automatic loss of said privilege. Rather, it stated that the context of the disclosure must be assessed in every single case to determine whether privilege was clearly and unequivocally waived.
As applied to the facts, the Court’s contextual analysis centered around (i) the intention behind the transmission of the Report to UPAC; and (ii) the Report’s confidential treatment within the MUHC prior to its transmission.
- First, the Court focused on the intention underlying the Report’s disclosure to UPAC. This element was critical to the Court’s ruling, as it considered that the MUHC had not intended to waive solicitor-client privilege. Rather, it had shared the Report in view of collaborating and being transparent with UPAC, considering the ongoing criminal investigation.
- Second, the Court examined the circumstances surrounding the Report’s treatment prior to its transmission to UPAC. For example, the fact that the Report had been treated confidentially at the MUHC, that few people had access to it, that the MUHC’s board of directors was aware of its existence but not of its contents, and that the Report was labelled with a confidentiality warning, were altogether indicative of the intent to maintain the Report’s privileged status.
Lessons learned in Lemay
Lemay offers useful guidance for organizations faced with the thorny issue of whether to voluntarily disclose or not privileged information to law enforcement in the context of a criminal investigation. The Court considered several specific factors, all of which appeared to tilt the scales in favor of its conclusion that the intention of sharing the Report with UPAC was not to waive privilege. Among others, the following factors were considered:
- The Report was treated as confidential by the CEO and by all involved individuals at the MUHC. It was prepared by an accounting firm within the context of the external counsel’s legal mandate, and the distribution of the Report within the MUHC was deliberately limited to a select circle.
- The Report was labelled as “DRAFT Privileged and Confidential for Discussion Only”.
- The Report was only presented to the MUHC’s Audit Committee members, and its members were not provided with a copy of the Report. Confidentiality warnings were made to the members during this meeting.
- The MUHC’s board of directors did not see the Report, nor was it presented to it; it was only informed of its existence and of the meeting with the Audit Committee members.
The Court rejected the respondent’s argument that the failure to have explicitly reserved privilege when transmitting the report to UPAC must necessarily be construed as a waiver of privilege. Importantly, this clarifies that there is no specific formula that is required in these circumstances.
In our view, while the Court did not consider the omission of an explicit reservation of privilege fatal, implementing such a practice when transmitting a privileged report to certain third parties for a limited purpose in the context of an internal investigation is nonetheless good practice and could aid in dispelling ambiguity over whether privilege was intended to be preserved in the context of a third-party transmission.
Lemay demonstrates that courts should scrutinize the factual context surrounding the transfer of privileged information, not only with respect to the intention underlying the transfer, but also with a view to how the information was treated prior to the transmission. Thus, this case underscores the importance for an organization conducting an internal investigation to implement as many safeguards as possible to minimize the risk of parties disputing its intention down the road. For example, the following should be considered: restricting access to privileged material internally to those who are on a need-to-know basis, limiting the material’s access to key decision makers within the organization and explicitly detailing the very purpose of the analysis, in this case a forensic one, which is to allow an attorney to provide legal advice to its clients.
Final thoughts: Implicit recognition of the legitimacy of the “limited waiver” doctrine in Québec?
Lemay provides guidance surrounding what has become a common practice among legal practitioners; that is, the sharing of privileged information with certain third parties on an absolute necessity basis, but the whole on a confidential and limited purpose. For example, privileged information is frequently shared with accounting firms, independent auditors, and regulators, whether it be for the purposes of obtaining expert reports, complying with a client’s auditing requirements, or collaborating with an investigating authority. It appears that legal practitioners generally proceed in this manner under the protection of the “limited waiver” doctrine, according to which privileged documents can be provided to third parties for a limited purpose, without losing their privilege status to other third parties. This doctrine has been explicitly recognized in certain Canadian courts, which was adopted from British Coal, an English Court of Appeal decision.
This decision is important for corporate criminal practitioners, particularly when self-disclosure as well as the voluntarily transmittal of privileged information to law enforcement are being considered. However, it does not address the practical issue of the restrictions, if any, that would be placed on the use by law enforcement of privileged information voluntarily submitted in a self-disclosure context. It remains to be seen whether this decision will be challenged in the Supreme Court of Canada.