[co-author: Katie Duke – Student-at-Law]
An internal investigation into whistleblower allegations was privileged, thus protected from disclosure, the Alberta Court of Queen’s Bench recently held in Talisman Energy Inc v Flo-Dynamics Systems Inc, 2015 ABQB 561 [Talisman]. Master Prowse found that documents collected in an internal investigation, headed by in-house counsel, were protected by legal advice privilege. The Court also found that an independent privilege over whistleblower investigations could exist in an appropriate case, but was not made out here.
Documents that are privileged do not have to be disclosed to the other side in a lawsuit or in a freedom of information response. In Talisman, Talisman claimed that over 550 documents collected as part of an internal fraud investigation were privileged. The Court considered whether several different types of privilege—including legal advice, litigation and case-by-case privilege—protected the documents from disclosure.
The internal investigation started after a confidential whistleblower alleged that one of Talisman’s former employees had caused Talisman to contract with certain companies that the former employee had undisclosed financial interests in. Talisman appointed an in-house lawyer to head the investigation. The internal investigation lasted 20 days before Talisman formally retained external lawyers to continue the investigation and start legal action. The documents collected during these intermediate days were the ones that were in dispute.
The Court held that the documents were not protected under litigation privilege because Talisman had not established that the investigation’s dominant purpose was to assist with contemplated litigation. Litigation privilege only covers records created for the dominant purpose of existing or contemplated litigation.
But the Court held that the documents were protected under legal advice privilege because one of the purposes of the internal investigation was to gather the facts necessary to get legal advice from Talisman’s in-house counsel and, if necessary, outside counsel. Legal advice privilege attaches to communications between lawyers and clients made for the purpose of obtaining legal advice. The Court emphasized that the process of gathering the key facts before a lawyer gives legal advice is an important part of the lawyer-client relationship protected under legal advice privilege. In this case, the privilege only commenced following the formal communication setting the investigation in course. Since the initial communication with the whistleblower was received earlier, it appears that the whistleblower’s identity was not protected.
The Court also considered whether the documents were privileged under case-by-case privilege. Documents may be privileged in a particular set of circumstances that don’t fall into one of the traditional categories of privilege if: (1) the communication originated in a confidence that it would not be shared; (2) the confidentiality element was essential to the parties’ relationship; (3) the community at large believes that the relationship is one that should be closely protected; and (4) the injury to the relationship would be greater than the benefit to the litigation process if the communication was disclosed.
In Talisman, the Court indicated that privilege over whistleblower communications could be recognized in the right circumstances. The Court emphasized that the possibility of retaliation if a whistleblower’s identity is disclosed is a relevant factor in considering the privilege. Ultimately, there was insufficient information to find that the privilege existed. Although Talisman had put forward some evidence about its whistleblower policies, it had not given the Court enough information about the whistleblower program and how it was applied in this case.
Talisman demonstrates the importance of having, and following, formal internal investigation policies and procedures to make it clear that investigations are being made to ascertain facts in order to obtain legal advice. Having the investigation focused and directed by a lawyer as soon as possible is also important. Having external counsel is even better (no one challenged the existence of privilege once external counsel was hired), as this readily demonstrates that the purpose of an investigation is legal rather than business-related. The decision also signals that Alberta courts may be open to protecting communications emanating from a whistleblower, especially if the whistleblower could face retaliation if his or her identity is revealed.
Finally, if the decision survives any appeal, it broadens and strengthens the ability to keep internal investigations confidential. Typically, it is litigation privilege that is asserted to keep internal investigations protected. But litigation privilege requires that the dominant purpose of the investigation be for litigation. Often that is where such claims fail, since it is difficult to prove that associated business purposes—e.g., whether to fire the person, how to prevent future loss, etc.—was not an equal or more important purpose of the investigation than preparing for litigation. Here, the Court held that legal advice privilege applies when only “a purpose” of the investigation was to obtain legal advice. That will be much easier to establish for a standard internal investigation. Note, however, that the cases the Court relied on required a high degree of lawyer involvement with the investigation and that careful procedures must be put in place to successfully assert privilege.