[co-author: Nathan Fournier - Articling Student]

Construction projects are often complex and involve many different parties and moving parts. This often necessitates a continued investigation of facts and assessment of legal rights and obligations to ensure that the owner or contractor properly understands its risks and options so that it can make informed decisions. The importance of doing so is heightened where disputes may be on the horizon in respect of common project issues such as change orders, delays, increases in cost, defects, force majeure and mechanical completion.

The purpose of this article is to outline the benefits of creating a structured format, or committee, within an organization to facilitate investigations during projects, and to provide guidelines for establishing such a committee. These committees can be instrumental in creating and maintaining legal privilege over sensitive documents and investigations.

1. What information of the committee does legal privilege protect?

One of the main benefits of creating such a committee is that it enhances the protection of legal privilege. While investigating project issues, a company may create documentation that may be missing context and be interpreted as adverse to its legal position, or that might otherwise contain sensitive information. Rather than avoid the creation of such documentation or avoid having the full and frank sharing of information, a committee can provide the mechanisms to create privilege and protect such information from disclosure.

A detailed review of privilege is outside the scope of this article. More generally, privilege is the legal right to refuse to disclose a document or communication. For the type of privilege that is the subject of this article, solicitor-client privilege and litigation privilege are the most applicable categories.

The types of documents that enjoy the protection of legal privilege are often misunderstood. In a claims committee context, the privilege is intended to protect records created to advance the purpose of the committee. Beyond the more obvious records (such as advice from legal counsel) such records can include:

• A chronology of facts prepared (or requested) by a committee member for the purpose of providing it to legal counsel to obtain legal advice.
• Committee meeting minutes and presentations.
• Emails among the committee's members.
• A project member's recollection of events obtained at the request of the committee.
• A preparation of strategic options and an evaluation of each option.
• Reports prepared by consultants at the request of the committee on issues such as causes of delay and increased cost. It is important for legal counsel to retain the consultant and that the retainer letter is worded properly so that privilege over the consultant's work can be maintained. Otherwise, courts may not consider communications with them to be privileged,¹ making their work product subject to disclosure in a legal proceeding.

Legal privilege generally does not protect pre-existing documents from disclosure that were created for a purpose that would not invite the protection of privilege.² These can include typical project records (monthly reports, schedules, meeting minutes), or third-party reports obtained by business units outside the auspices of the committee or legal involvement. Courts tend to frown on attempts by parties to clothe records in privilege by simply sending them to their legal counsel after they have been created.³ Courts similarly discourage blanket claims of privilege over multiple categories of records.⁴ Where possible, it is better to have a defensible demarcation between documents over which privilege is claimed and not claimed to help satisfy the court that the privilege claims are reasoned and supported.

Related to this is the recognized principle that in-house legal counsel can have both a legal and business function,⁵ and that privilege may not apply when the latter function is exercised.^6. It is important, therefore, to ensure that in-house legal counsel is exercising its legal function when acting on the committee or that external legal counsel has been retained.

If an actual dispute arises, and claims of privilege are challenged, courts or arbitrators will look to the contemporary evidence to determine the underlying purpose for which the impugned documents were created. Creating a claims or legal review committee in the manner suggested in Section 3 below can be instrumental in providing such evidence to maintain privilege. A committee also mitigates the risk of waiver of privilege—by having an established set of protocols around the creation, storage, and dissemination of records, there is less likelihood that privilege over a document will be waived through disclosure to a third party, for example.

2. Other Benefits of a Committee

In addition to increasing the protections of legal privilege, establishing a claims or legal review committee can have other benefits. For example, it can:

• Free up the project team to focus on the project. The project team is typically focused on project execution and may not have the capacity to effectively assess outstanding claims on its own.
• Provide company personnel with better understanding of contractual rights. A claims committee will assist in developing a shared understanding across project teams of the key contractual terms governing the project.
• Help develop strategies for dealing with disputes. A claims committee will allow you to develop an informed strategy for dealing with disputes.
• Ensure external counsel is ready to act quickly if needed. A claims committee will allow you to instruct external counsel efficiently should the need arise.

3. Establishing the Committee

While there is no "one-size fits all" approach to establishing the committee, the following guidelines should be considered:

• The committee should be established at the direction of legal counsel (in-house or external).
• The purpose of the committee should be clear and shared with committee members in writing at the time it is created, and when new members are added. As an example, the purpose of the committee might include the following language:
  • The purpose of the committee is to investigate and analyze issues as they arise on the project for the purpose of obtaining and providing legal advice and to prepare for any disputes that may be forthcoming.
• The committee should be established early in the project. While it may not seem necessary at the time, problems often arise unexpectedly.
• Documents that are created by the committee should be stored separately on the company's network and marked "confidential and privileged".
• Committee communications should be limited to the members of the committee where possible.
• Members of the committee should include a representative from each department that is actively involved in the project.
• There should always be at least one legal representative present at each committee meeting. Similarly, correspondence among committee members should include legal counsel.

Concluding Thoughts

A "legal review" or "claims" committee provides a structured platform to efficiently assess legal positions and strategy as problems on the project arise while building a solid foundation for claiming privilege.

There can be complicating factors that require unique considerations. For example, owners and contractors will often engage in a "lessons learned" exercise after a project to improve their own performance on future projects raising questions of whether associated documents are protected by privilege.⁷ Another example is the disclosure of reports to regulators pursuant to applicable legislation and whether there has been waiver of privilege.⁸ For a review of this issue in particular please see this article on a recent decision from the Alberta Court of Appeal. These types of issues require careful consideration should an organization wish to claim and maintain privilege.