In Smith v. London Life Insurance Company, the Divisional Court reversed an order made by Superior Court Justice Gordon Thomson, who had directed the defendant London Life to produce “its entire claims file arising from a prior action between the parties, including documents authored by its in-house counsel and other employees”. The Court discussed the difference between solicitor-client privilege and litigation privilege and the circumstances in which documents subject to the latter will nevertheless be ordered to be produced. The Court ordered London Life to produce a more detailed affidavit of documents, listing each document with respect to which privilege is claimed, and virtually invited the plaintiff to bring a further motion to have a court review the documents and determine whether their production should be ordered because of “blameworthy” conduct on the part of the insurer. The reasons of the Divisional Court do not make clear just what has to shown before such a litigant can ask the court to inspect all of an opposing party’s privileged documents, to see if any of them should be ordered to be produced despite being subject to litigation privilege.
Smith had sued London Life in an earlier action, seeking reinstatement of disability insurance benefits. London Life ultimately did reinstate the benefits and that action was settled. While that litigation was still pending, the plaintiff brought another lawsuit against London Life, alleging that the insurer had breached its duty of good faith in terminating insurance benefits. Smith claimed damages, including punitive and aggravated damages.
London Life defended the second action, alleging in its pleading that its employees had acted in good faith.
On a motion brought following London Life’s examination for discovery, Justice Thomson ordered the insurer to produce “[i]ts entire file including all claims, notes and e-mails with respect to the first action, including anything authored by Vicky Ramsay [in-house counsel for London Life]”. The basis for his finding was that London Life had placed its state of mind in issue by pleading that it had acted in good faith and that, by so doing, it had waived privilege attaching to its documents.
Leave to appeal Justice Thomson’s ruling was granted by Justice Joseph Donohue. The Divisional Court panel hearing the appeal was made up of Justices Lee Ferrier, John Ground and Thomas Lofchik. The panel’s decision was unanimous.
The Court referred extensively to last year’s decision of the Supreme Court of Canada in Blank v. Canada (Minister of Justice) and the statements made by the Court in that case about solicitor-client privilege and litigation privilege. Relying on Blank, the Divisional Court in Smith held that litigation privilege that had arisen in the context of the earlier litigation between Smith and London Life continued to protect the documents in the second action, whose subject-matter was closely related. And it cited the Blank case for the proposition that documents protected by solicitor-client privilege (which Justice Thomson had ordered London Life to produce on the basis of waiver of privilege) “will remain clearly and forever privileged”.
Turning to the facts of this case, the Divisional Court held that London Life had not waived privilege, merely by pleading that it had acted in good faith, nor by reciting a chronology of its handling of the claims file.
However, the Court returned to the Blank case for the proposition that, in some circumstances, litigation privilege will not protect a party’s documents:
[T]he Supreme Court of Canada in Blank noted that litigation privilege:
… would not in any event protect from disclosure evidence of the claimant party’s abuse of process or similar blameworthy conduct. It is not a black hole from which evidence of one’s own misconduct can never be exposed to the light of day.
Even where the materials sought would otherwise be subject to litigation privilege, the party seeking their disclosure may be granted access to them upon a prima facie showing of actionable misconduct by the other party in relation to the proceedings with respect to which litigation privilege is claimed. Whether privilege is claimed in the originating or in related litigation, the court may review the materials to determine whether their disclosure should be ordered on this ground.
Unfortunately, neither the Supreme Court in Blank nor the Divisional Court in Smith articulated what evidence would suffice as “a prima facie showing of actionable misconduct” (although the Divisional Court did say that it was “something more than merely an allegation in the pleading”). Nor does either case explain just what is meant by “actionable misconduct…in relation to the proceedings”.
The Court in Smith said that the material before it did not enable it to determine whether privilege properly attached to any particular document in London Life’s file. So, it ordered London Life to deliver a further affidavit of documents, listing the documents over which privilege was claimed and providing a detailed description of the grounds for the assertion of privilege. Then, the Court seems to have invited the plaintiff to bring further proceedings for production of London Life’s documents:
Once such an Affidavit of Documents is produced any necessary decision about the privileged nature of documents can be more properly determined.
Thus, in summary, after a determination has been made as to whether or not litigation privilege applies to a particular document, a further review may be required of the privileged documents to determine whether or not the production of such documents may be required on the ground set out by the Court in Blank, referred to in paragraph 24, supra. We are of the view that “a prima facie showing of actual misconduct by the other party in relation to the proceedings with respect to which litigation privilege is claimed” requires something more than merely an allegation in the pleading.
We see some problems with this decision. There is no indication in the reasons that the plaintiff had ever challenged the sufficiency of London Life’s affidavit of documents (although it is probably implicit in these reasons, that Schedule B of London Life’s affidavit of documents, listing the privileged documents, did not contain the level of detail required by subrule 30.03(2)). The Court seems to have taken it upon itself to make an order under subrule 30.06(b), for service of a further and better affidavit of documents.
The Court felt that once a further and better affidavit of documents had been delivered by London Life, a determination could be made (by counsel for the plaintiff, presumably) as to whether, in relation to any particular document, privilege had been validly claimed. This part of the decision is still relatively uncontroversial, since the caselaw has held that it should be possible to determine from the affidavit of documents itself, whether a claim for privilege has been properly advanced.
It is the last part of the decision that, we think, may have very far-reaching consequences: the Court explicitly contemplates “a further review” of London Life’s privileged documents, to determine whether production of those documents should be ordered on the basis laid down in Blank: “actionable misconduct by the other party in relation to the proceedings with respect to which litigation privilege is claimed”.
As we have already said, it is not clear (to us, at least) what is meant by “actionable misconduct”. It would seem to us though, that such misconduct must relate to the proceedings between the parties and not, for example, to the claims administration process that led to the litigation.
So far as we can see, there is no suggestion in the reasons of the Divisional Court, that London Life had engaged in any “actionable misconduct” in the litigation with the plaintiff, nor that such misconduct had even been alleged by the plaintiff. That being so, what would be the basis for having London Life’s privileged documents reviewed by a court, to see whether privileged documents should nevertheless be produced because of “misconduct” on the part of London Life? What kind of “misconduct” would warrant such relief?
Blank seems to say that the party seeking production must provide prima facie evidence of “actionable misconduct” (whatever that means). But the Divisional Court’s decision in Smith would appear to permit the plaintiff to proceed directly from London Life’s delivery of a detailed affidavit of documents to a court inspection of those documents. It is not clear whether the Court thought that the prima facie evidence of actionable misconduct would come from the detailed affidavit of documents, the court inspection of those documents, or some extrinsic affidavit evidence from the plaintiff.
The Rules of Civil Procedure contemplate inspection of a party’s privileged documents where it is alleged that the claim for privilege has been improperly made:
30.06 Where the court is satisfied by any evidence that a relevant document in a party’s possession, control or power may have been omitted from the party’s affidavit of documents, or that a claim of privilege may have been improperly made, the court may,
(d) inspect the document for the purpose of determining its relevance or the validity of a claim of privilege.
Thus, the inspection of documents by a court that the Divisional Court seems to be anticipating here, would presumably take place under the authority of subrule 30.06(d), on the basis that an otherwise-proper claim of litigation privilege has been invalidated by “actionable misconduct” on the part of London Life.
It is the following sentence from paragraph 26 of the reasons in Smith that suggests that the prima facie evidence of actionable misconduct might come from the privileged documents themselves:
Thus, in summary, after a determination has been made as to whether or not litigation privilege applies to a particular document, a further review may be required of the privileged documents to determine whether or not the production of such documents may be required on the ground set out by the Court in Blank.
We find it hard to imagine a litigant will be required to deliver its privileged documents to a judge or master and then sit on its hands while a determination is made, on the basis of the documents themselves, that the litigant has been guilty of “blameworthy” conduct, sufficient to warrant the production of the documents to the opposing party. And yet, it would be impossible to make submissions to the court about the conduct disclosed by the documents without effectively disclosing their contents.
We think that the Court must have intended (even though it did not say so), that something more is required before a court review of privileged documents will be ordered. There must be a requirement that the party seeking production provide some extrinsic prima facie evidence of “actionable misconduct” before being entitled to have a court inspect the privileged documents.
Finally, when a court inspects a party’s privileged documents, what is it supposed to be deciding at that stage? Will it already have determined that there is evidence of actionable misconduct sufficient to warrant production of privileged documents? Is it expected that before there is court review of the privileged documents, there will already have been a preliminary finding of misconduct based on prima facie evidence but a final decision as to whether misconduct has occurred is to be done on the basis of teh privileged documents themselves? If the latter, how are the parties supposed to make submissions in relation to the court’s inspection of the documents?
It would have been helpful if the Divisional Court had spelled out, in greater detail, (a) what is meant by “actionable misconduct” in this context; (b) exactly what conditions must be present to entitle a party to a court inspection of the opposing party’s privileged documents; and (c) when the court does undertake an inspection of a party’s privileged documents, what is it supposed to be deciding and how are the parties supposed to make submissions bearing on that decision?
It seems to us that future decisions (perhaps in this litigation!) will have to address these issues.