Canadian Imperial Bank of Commerce v. The Queen

Canadian Imperial Bank of Commerce v. The Queen
Court (s) Database
Tax Court of Canada Judgments
Date
2015-12-02
Neutral citation
2015 TCC 280
File numbers
2010-1413(IT)G, 2010-1414(IT)G, 2010-2864(IT)G, 2013-4005(IT)G
Judges and Taxing Officers
Eugene P. Rossiter
Subjects
Income Tax Act
Decision Content
Citation: 2015 TCC 280
Date: 20151202
Dockets: 2010-2864(IT)G
2010-1413(IT)G
2010-1414(IT)G
2013-4005(IT)G
BETWEEN:
CANADIAN IMPERIAL BANK OF COMMERCE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Motion heard on July 15 and 16, 2015 at Toronto, Ontario
Before: The Honourable Eugene P. Rossiter, Chief Justice
Appearances:
Counsel for the Appellant:
Joseph Steiner
Al Meghji
Caroline D’Elia
Counsel for the Respondent:
Michael Ezri
Eric Noble
Craig Maw
ORDER AND REASONS FOR ORDER
Rossiter C.J.
Introduction. 6
Background: the underlying appeals. 6
Motion overview.. 7
Relief sought 8
Issues. 9
Rules engaged. 10
Principles governing discovery. 10
Issue 1: CIBC’s internal investigation documents. 15
Which investigations are in issue?. 16
Relevance of the internal investigations. 17
Privilege. 17
Criteria. 17
Were the investigations done or directed by counsel?. 18
Were the investigations done for the purposes of legal advice?. 19
Facts can exist independently from a privileged communication. 20
Conclusion. 22
Issue 2: Has CIBC waived, or should it be deemed to have waived, its right to claim privilege on certain questions?. 22
General principles governing waiver. 23
Implied waiver. 25
The test 25
Application of the implied waiver test 29
“Legally and commercially prudent to settle”. 30
Denying certain Respondent assumptions. 30
CIBC statements about its understanding of the source of its legal exposure in the Enron litigation 31
Partial waiver. 34
The test 34
Application of the test 36
CIBC statements about its understanding of the source of its legal exposure in the Enron litigation 36
Individual questions about redacted board minutes. 38
i. Questions 3462, 3470 and 3514. 38
ii. Questions 888 and 894. 39
CIBC’s understanding of its liability exposure under U.S. law.. 39
Conclusion. 40
Issue 3: Can CIBC rely on settlement privilege to protect information and documents arising from the negotiation and conclusion of the Newby and MegaClaim settlements?. 41
General principles governing settlement privilege. 41
Question 871: Production of the mediation agreement 42
Is there an applicable exception to the settlement privilege?. 44
The principles governing exceptions. 44
Application of the principles governing exceptions to this motion. 49
Question 3119. 49
Question 849. 50
Questions 845 and 848. 53
Questions 922 and 923. 53
Questions 927 and 928. 53
Question 5757. 54
Questions 866, 894 and 900. 55
Questions 911. 55
Issue 4: Can CIBC rely on litigation privilege that has its root in the Newby and MegaClaim litigation? 56
Can the claims of litigation privilege be re-evaluated for protection by solicitor-client privilege? 57
Issue 5: Can CIBC claim solicitor-client privilege over certain questions and documents? 59
Questions 877 and 878. 59
Question 3119. 62
Questions 927 and 928. 63
Questions 888 and 889. 63
Questions 866, 894 and 900. 64
Questions 2923 and 2924. 65
Issue 6: Is CIBC’s Schedule B deficient because the schedule does not contain enough identifying information for certain privileged documents?. 67
Which Schedule B should be used?. 67
Is CIBC’s Schedule B deficient?. 69
Insufficient description of documents. 69
What is the point of description?. 70
Is metadata a sufficient descriptor?. 71
Claims of privilege over documents that do not appear to be privileged. 73
Issue 7: CIBC’s refusals. 75
Questions about non-Enron litigation and settlements. 75
Questions about CIBC’s allocation of the Settlement Amounts and any potential tax motivation 77
Questions 1771 and 1772. 81
Question 2225. 82
Question 2296. 83
Questions 2297, 2298 and 2299. 84
Question 2356. 85
Question 2378. 85
Question 2388. 85
Questions 2390 and 2391. 85
Questions relating to a memo from the CIBC Chief Accountant 86
Question 2441. 86
Questions 2442 and 2443. 87
Question 2446. 87
Question 2449. 87
Questions 2480 and 2481. 88
Question 2491. 88
Questions about the decision to allocate the Enron settlement to CIBC.. 89
Questions 2393 and 2394. 89
Question 2395. 89
Question 2513. 90
Question 2514. 90
Questions relating to the second version of a memo from the CIBC Chief Accountant 90
Questions 2497, 2498, 2499 and 2500. 90
Questions 1734 and 1735. 91
Questions 2611, 2627, 2632 and 2633. 92
Specific individual questions. 92
Question 3454. 92
Questions 2889 and 2891. 93
Questions 372 and 384. 94
Question 1698. 94
Questions 1451 and 2712. 95
Issue 8: Questions which the Respondent says CIBC did not answer at all 97
Questions 208, 211 and 227. 97
Question 404. 97
Questions 947 and 948. 97
Question 1383. 98
Question 1482. 98
Question 1688. 98
Question 2057. 99
Question 2063. 99
Question 2071. 99
Question 2311. 99
Questions 2539 and 2540. 100
Question 2810. 100
Question 2960. 100
Questions 3127, 3131, 3132, 3133, 3142, 3143, 3144, 3145. 100
Questions 3499 and 3500. 101
Question 3733. 101
Questions 3819, 3820, 3821 and 3822. 101
Question 5902. 101
Lack of specification on where privileged documents appear in the productions. 102
Conclusion. 102
Introduction
[1] This is a motion by the Respondent to:
• Compel answers to discovery questions that were refused or, in the Respondent’s view, not fully answered or not answered at all;
• Adjudicate various claims of privilege made by the Appellant (hereinafter referred to as “CIBC”) over questions and requests for documents from the Respondent; and
• Adjudicate issues with respect to CIBC’s list of documents.
Background: the underlying appeals [2] The appeals relate to CIBC’s attempt to deduct about $3 billion in settlement payments, interest on the payments and related legal expenses (the “Settlement Amounts”) from its business income in its 2005 and 2006 taxation years. The Settlement Amounts relate to litigation arising from certain CIBC transactions with Enron Corp. (“Enron”). After Enron filed for Chapter 11 Bankruptcy protection, CIBC and others were sued for allegedly improperly participating in transactions with Enron involving the sales of assets to special purpose entities. The plaintiffs in the litigation alleged that CIBC knew the sales were improperly represented on Enron’s financial statements. The two Enron‑related litigations in issue are known as the Newby Litigation and the MegaClaim Litigation.
[3] During its 2005 taxation year ended October 31, 2005, CIBC reached a settlement in the Newby and MegaClaim Litigations for approximately U.S. $2.6 billion, or about CDN $2.9 billion. CIBC also owed interest on the Newby settlement payments totalling about $48 million and incurred related legal expenses of about $56 million.
[4] CIBC then deducted almost all of the Settlement Amounts from its business income in its 2005 tax year. In its 2006 tax year, it then deducted from its business income the remaining available Settlement Amounts (which at this point only consisted of interest and legal expenses), totalling about $26.5 million. The 2005 deductions also led CIBC to incur a non-capital loss of $2.1 billion in 2005, leading CIBC to carry back about $2.04 billion of that loss to its 2003 taxation year and $41 million of that loss to its 2002 taxation year.
[5] The Minister of National Revenue (the “Minister”) denied the deductions for various reasons, stating they were offside with s. 3, s. 9 and paragraph 18(1)(a) of the Income Tax Act[1] (the “Act”) as they were not incurred to earn and produce income from business and did not conform to well-accepted business or accounting principles. The Minister says that the costs truly belonged to certain of CIBC’s subsidiaries and affiliates, not CIBC itself. The Minister also denied the deductions under additional heads of the Act, stating that:
• If the Settlement Amounts were indeed incurred to earn and produce income, they were only capital outlays under paragraph 18(1)(b) of the Act;
• The Settlement Amounts would have been reimbursed to CIBC if CIBC were dealing at arm’s length with its subsidiaries and affiliates, and therefore the deductions are offside with ss. 247(2)-(3) of the Act;
• The deductions were not reasonable and therefore violate s. 67 of the Act; and
• The settlement and interest costs were merely contingent liabilities in 2005 and therefore not deductible because of paragraph 18(1)(a) and paragraph 18(1)(e) of the Act.
[6] The Minister also assessed CIBC for instalment interest, arrears interest and overpaid refund interest, and added amounts to CIBC’s taxable capital for the purposes of Parts I.3 and VI of the Act, which added to CIBC’s tax payable. The entire outcome of all four appeals essentially turns on whether CIBC can deduct the Settlement Amounts as expenses.
Motion overview [7] This motion is mostly about privilege and relevance. CIBC is claiming solicitor-client privilege, litigation privilege and settlement privilege over many of the questions and documents in issue in this motion. CIBC states the Respondent’s motion is an attempt to run roughshod over privilege by gaining access to information and documents that warrant protection. CIBC also says that various Respondent questions are irrelevant to the tax appeals and were properly refused. In particular, CIBC says the Respondent is attempting to retry the Enron litigation that led to the Newby and MegaClaim settlements, when instead the real issue is whether the Settlement Amounts are deductible. Any refusals were therefore justified based on irrelevance or, alternatively, on the principle of proportionality.
[8] The Respondent contends CIBC’s privilege claims are unfounded or that privilege has been impliedly waived. The Respondent says waiver occurred either through CIBC putting its state of mind in issue in a manner that relies on legal advice, or through CIBC selectively disclosing some privileged material when fairness dictates that full disclosure should be made.
[9] As for relevance, it is crucial to note again that the Respondent argues that the Settlement Amounts did not belong to CIBC but to certain subsidiaries and affiliates. In other words, the Respondent argues that CIBC should have allocated the Settlement Amount deductions to other related entities instead of taking the full deduction for itself. The Respondent says it was these entities that were engaged in the transactions with Enron that led to the Newby and MegaClaim Litigations. Many of the Respondent’s questions are aimed at pursuing this line of inquiry, and the Respondent says they are therefore relevant to the tax appeals and are reasonable given the appeals’ complexity and the amounts at stake.
[10] Broadly speaking, the Respondent says CIBC is not answering basic questions about how CIBC booked certain litigation expenses, the advice it relied on in assessing the underlying litigation risk from the Enron litigation, and how it understood the sources of legal exposure for both it and its subsidiaries and affiliates. This is key to the Respondent’s case on whether the Settlement Amounts were properly accounted for (including how and when the booking decisions were made), whose income-earning purpose they related to (CIBC’s or its subsidiaries’/affiliates’), whether the Settlement Amounts were on account of capital, and how much the subsidiaries would have contributed to the Settlement Amounts had they dealt at arm’s length with CIBC.
Relief sought [11] The Respondent is essentially seeking an order directing CIBC to:
• Answer questions it refused, claimed were privileged, did not sufficiently answer or did not answer at all;
• Provide certain documents CIBC undertook to provide but has yet to do provide;
• Fulfill any unfulfilled undertakings;
• Provide to the Court certain documents for which privilege is claimed, so that the Court may review them to determine if the privilege claims are proper; and
• Update its List of Documents to include more identifying information for certain documents for which privilege is claimed.
Issues [12] The issues in this motion are as follows:
a. Has CIBC substantiated its privilege claim with respect to documents recording its internal investigations into the Enron matter?
b. Has CIBC waived, or should it be deemed to have waived, its right to claim privilege, either by putting in issue its state of mind (in particular its legal knowledge) concerning the underlying Enron litigation and the resulting settlement or by selectively disclosing some privileged material?
c. Can CIBC rely on settlement privilege to protect information and documents arising from the negotiation and conclusion of the Newby and MegaClaim settlements?
d. Can CIBC rely on litigation privilege that has its root in the Newby and MegaClaim Litigations?
e. Can CIBC claim solicitor-client privilege over certain other questions and documents?
f. Is CIBC’s Schedule B deficient because the schedule does not contain enough identifying information for certain privileged documents?
g. Should CIBC be compelled to answer refused questions, including, but not limited to, questions on the circumstances under which CIBC allocated the Enron settlement outlays to itself?
h. Should CIBC be compelled to answer questions and undertakings that the Respondent says CIBC did not fully answer or answer at all?
Rules engaged [13] This motion engages the following rules under the Tax Court of Canada Rules (General Procedure)[2] (the “Rules”):
• Rule 82, which governs the List of Documents;
• Rule 84, which governs the description of documents that must be provided in the List of Documents;
• Rule 88, which deals with potential relief if an affidavit of documents is incomplete or privilege is wrongly claimed;
• Rule 95, which governs the scope of an examination for discovery;
• Rule 107, which governs objections to questions during an examination for discovery and how such questions are dealt with; and
• Rule 110, which provides relief for default or misconduct of a person being examined.
Discovery Principles [14] In Burlington Resources Finance Company v The Queen,[3] Justice Campbell canvassed the case law on discovery principles and provided an excellent summary. I note the decision in Burlington has been appealed to the Federal Court of Appeal, with the appeal still outstanding. I find the decision most helpful as a review of the relevant case law. I would place particular emphasis on the principles noted from Kossow v The Queen,[4] which were approved of by the Federal Court of Appeal,[5] and from HSBC Bank Canada v The Queen.[6] The following are excerpts of the principles from Burlington that are most relevant to this motion:
[11] Caselaw is clear and abundant. The core of discovery principles is that its scope should be wide, with relevancy construed liberally, without, however, allowing it to enter the realm of a fishing expedition. These basic principles are essential because the purpose of discovery is to enable parties to know the case they have to meet at trial, to know the facts upon which the opposing party relies, to narrow or eliminate issues, to obtain admissions that will facilitate the proof of matters in issue and, finally, to avoid surprise at trial (General Electric Capital Canada Inc. v The Queen, 2008 TCC 668, 2009 DTC 1186, at para 14). This is all with a view to making the hearing of an appeal streamlined and to ensure that the parties are focussed on the appropriate issues.
[12] In the decision of Baxter et al v The Queen, 2004 TCC 636, 2004 DTC 3497, at paragraph 13, Chief Justice Bowman, as he was then, summarized the principles concerning relevancy of questions in discoveries as follows:
(a) relevancy on discovery must be broadly and liberally construed and wide latitude should be given;
(b) a motions judge should not second guess the discretion of counsel by examining minutely each question or asking counsel for the party being examined to justify each question or explain its relevancy;
(c) the motions judge should not seek to impose his or her views of relevancy on the judge who hears the case by excluding questions that he or she may consider irrelevant but which, in the context of the evidence as a whole, the trial judge may consider relevant;
(d) patently irrelevant or abusive questions or questions designed to embarrass or harass the witness or delay the case should not be permitted.
[13] A summary of the general principles gleaned from the caselaw was provided by Justice V. Miller at paragraph 60 of Kossow v The Queen, 2008 TCC 422, 2008 DTC 4408, as follows:
1. The principles for relevancy were stated by Chief Justice Bowman and are reproduced at paragraph 50.[7]
2. The threshold test for relevancy on discovery is very low but it does not allow for a “fishing expedition”: Lubrizol Corp. v. Imperial Oil Ltd., [1997] 2 FC 3, at para. 19.
…
9. It is proper to ask questions to ascertain the opposing party’s legal position: Six Nations of the Grand River Band v. Canada (Attorney General), [2000] OJ No. 1431, at para. 14.
…
[14] Justice C. Miller in HSBC Bank Canada v The Queen, 2010 TCC 228, 2010 DTC 1159, at paragraphs 14 and 15, after quoting the Kossow principles, added the following to his review of the scope of discovery questions:
[14] The following additional principles can be gleaned from some other recent Tax Court of Canada case authority:
1. The examining party is entitled to “any information, and production of any documents, that may fairly lead to a train of inquiry that may directly or indirectly advance his case, or damage that of the opposing party”: Teelucksingh v. The Queen, 2010 TCC 94, 2010 DTC 1085.
2. The court should preclude only questions that are “(1) clearly abusive; (2) clearly a delaying tactic; or (3) clearly irrelevant”: John Fluevog Boots & Shoes v. The Queen, 2009 TCC 345, 2009 DTC 1197.
…
[15] The Federal Court of Appeal in The Queen v Lehigh Cement Limited, 2011 FCA 120, 2011 DTC 5069, at paragraphs 34 and 35, described the general limits respecting discoveries:
[34] The jurisprudence establishes that a question is relevant when there is a reasonable likelihood that it might elicit information which may directly or indirectly enable the party seeking the answer to advance its case or to damage the case of its adversary, or which fairly might lead to a train of inquiry that may either advance the questioning party’s case or damage the case of its adversary. Whether this test is met will depend on the allegations the questioning party seeks to establish or refute. See Eurocopter [2010] F.C.J. No. 740, at paragraph 10, Eli Lilly Canada Inc. v. Novopharm Ltd. 2008 FCA 287, 381 N.R. 93 at paragraph 61 to 64; Bristol-Myers Squibb Co. v. Apotex Inc. [2007] F.C.J. No. 1597, at paragraphs 30 to 33.
[35] Where relevance is established the Court retains discretion to disallow a question. The exercise of this discretion requires a weighing of the potential value of the answer against the risk that the party is abusing the discovery process. See Bristol-Myers Squibb v. Apotex Inc. at paragraph 34. The Court might disallow a relevant question where responding to it would place undue hardship on the answering party, where there are other means of obtaining the information sought, or where “the question forms part of a ‘fishing expedition’ of vague and far-reaching scope”: Merck & Co. v. Apotex Inc., 2003 FCA 438, 312 N.R. 273 at paragraph 10; Apotex Inc. v. Wellcome Foundation Ltd., 2008 FCA 131, 166 A.C.W.S. (3d) 850 at paragraph 3.
[16] Finally, a party may be compelled to answer questions that relate to any issue contained in the pleadings, regardless of whether a party has advised or undertaken that it will no longer place reliance on that position or provision (ExxonMobil Canada Hibernia Co. v The Queen, 2014 FCA 168, 2014 DTC 5086).
[17] The jurisprudence is comprehensive and the guidelines well established. As many cases have noted, there is no formula that can be applied in determining whether questions should be answered. The ultimate purpose is to fairly, reasonably and expeditiously move matters along to a hearing….
[15] Further to the issue of relevancy, other judgments of the Tax Court of Canada (“TCC”) have noted the role that pleadings play in defining relevancy. In Teelucksingh v The Queen,[8] the Court noted that:
(i) Examination for discovery is an examination as to the information and belief of the other party as to facts that are relevant to the matters in issue, as defined by the pleadings.
…
(vi) The examining party is entitled to have production of any documents that are relevant to the matters in issue as defined by the pleadings, but subject to proper claims of privilege.[9]
[16] In Shell Canada Ltd. v The Queen,[10] Christie A.C.J. cited the following[11] with approval when discussing pleadings’ role in defining relevancy:
10. See also Holmested & Watson, Ontario Civil Procedure, under the heading “SCOPE OF EXAMINATION: GENERAL, Rule 31.06(1)” at 31–48:
“What is relevant to the matters in issue, as defined by the pleadings, is extremely broad. The examining party is entitled to discover for the purpose of supporting her own case and to put that case to the opponent to obtain admissions and to limit the issues. She is entitled to interrogate to destroy the adversary’s case or to find out the case she has to meet and the facts (and now the evidence) that are relied upon by the adversary in support of his case. And it is not a valid objection that the examining party already knows those facts. The examiner is entitled—indeed, it is a major purpose of discovery—to obtain admissions that will facilitate the proof of that party’s case or will assist in destroying the adversary’s case. See generally Williston and Rolls, The Law of Civil Procedure (1970), 782–787.”
And at page 31-49:
“It is a cardinal rule that discovery is limited by the pleadings. Discovery must be relevant to the issues as they appear on the record: Playfair v. Cormack (1913), 4 O.W.N. 817 (H.C.); Jackson v. Belzburg, [1981] 6 W.W.R. 273 (B.C.C.A.). The party examining has no right to go beyond the case as pleaded and to interrogate concerning a case which he has not attempted to make by his pleadings. But “everything is relevant upon discovery which may directly or indirectly aid the party seeking discovery to maintain his case or to combat that of his adversary”: McKergow v. Comstock (1906), 11 O.L.R. 637 (C.A.). While clearly irrelevant matters may not be inquired into, relevancy must be determined by the pleadings construed with fair latitude: ibid. The court should not be called upon to conduct a minute investigation as to the relevance of each question and where the questions are broadly related to the issues raised, they should be answered: Czuy v. Mitchell (1976), 2 C.P.C. 83 (Alta. C.A.). The tendency is to broaden discovery and the “right to interrogate is not confined to the facts directly in issue, but extends to any facts the existence or non-existence of which is relevant to the existence or non-existence of the facts directly in issue”: Marriott v. Chamberlain (1886), 17 Q.B.D. 154.”
[17] The pleadings for the underlying tax appeals will therefore go a long way towards defining what is relevant.
[18] The above principles governing discovery thus reveal the following salient points:
• Relevancy is extremely broad and should be liberally construed. The threshold for relevancy on discovery is very low but does not allow for a fishing expedition, abusive questions, delaying tactics or completely irrelevant questions;
• Everything is relevant that may directly or indirectly aid the party seeking the discovery to maintain its case or combat that of its adversary. If the questions are broadly related to the issues raised, they should be answered;
• Discovery is limited by the pleadings to some extent; and
• The examining party conducting the discovery is doing so for the purposes of: supporting his or her own case; obtaining admissions; attacking the opponent’s case; limiting the issues at trial; and revealing the case that he or she must meet at trial and the facts that the opponent relies upon.
Issue 1: CIBC’s internal investigation documents
[19] This issue involves questions 995, 996 and 1005.
[20] CIBC’s productions referred to certain internal investigations in the wake of Enron’s collapse and to the CEO’s or other management’s views of CIBC’s conduct in the Enron transactions. The Respondent has essentially asked whether any internal reviews were done by CIBC or its subsidiaries and affiliates, and points in particular to reviews referenced in the minutes of CIBC board meetings and one referenced in an email to a journalist. The Respondent also asked what the outcomes of any such reviews were. CIBC is claiming solicitor-client privilege and litigation privilege over any internal investigation documents.
Which investigations are in issue?
[21] Aside from asking generally for any internal investigations related to the Enron transactions, the Respondent is particularly asking for the details of investigations referenced in the following productions:
• An Oct. 4, 2002, email to a Globe and Mail reporter from CIBC’s Senior Vice President for Corporation Communications said CIBC had no reason to believe it did anything inappropriate involving Enron, and that the conclusion had been reached after conducting an extensive internal review of all of CIBC’s relationships with Enron over the years.[12]
• The minutes of a CIBC board meeting on Aug. 7, 2003, say there were steps taken by CIBC management to investigate the Enron matter, and that the results would be presented to the board so it could determine if it agreed with the conclusions and strategies of management, “including the appropriateness of CIBC’s employees in their dealings with Enron.”[13]
• The minutes of a CIBC board meeting on Aug. 20, 2003, say that the CEO and the Chairman of the Board had agreed on the need for the board to examine reputational issues and had asked an “independent evaluator” to look at these issues.[14]
• The minutes of a CIBC board meeting on Oct. 9, 2003, record CIBC’s Executive Vice-President and General Counsel providing an update on several matters relating to Enron. The update is redacted in the productions. The update is followed by the CEO expressing management’s view that it was in the best interest of CIBC to settle the Enron litigation.[15] (It appears the Respondent believes these minutes suggest a reference to an internal investigation; however, they simply appear to record an update on the Enron litigation. Having said that, the expression of management’s view that it was in the best interest of CIBC to settle the Enron litigation could be a tie-in to the internal investigation.)
• The minutes of a CIBC board meeting on Aug. 3, 2005, record CIBC’s Executive Vice-President and General Counsel reviewing the “internal investigations” that were done after Enron went bankrupt.[16]
Relevance of the internal investigations
[22] It is clear that investigations on various Enron-related actions by CIBC and related entities, including actions implicated in the litigation that led to CIBC deducting the Settlement Amounts, would be relevant to the Respondent’s arguments on which entity’s business incurred or should have incurred the Settlement Amounts, among other issues. The Respondent notes that in the tax appeals, CIBC is emphasizing its own role in the Enron transactions to justify its deduction of the Settlement Amounts. Any internal reviews of the Enron transactions could include information on which employees and/or entities were involved in the impugned transactions, therefore making them highly relevant to the tax appeals.
Privilege
Criteria
[23] CIBC is claiming solicitor-client privilege and litigation privilege over internal investigation documents. For reasons following, litigation privilege is not available. Therefore, the only issue here is whether solicitor-client privilege applies to any of the internal investigations.
[24] To fall within solicitor-client privilege, a document or communication must fit within the classic criteria. It must be: 1) a communication between solicitor and client; 2) which entails the seeking or giving of legal advice; and 3) which is intended to be confidential by the parties.[17]
[25] The party asserting the privilege bears the evidentiary burden to establish the claim on a balance of probabilities.[18] This means CIBC has the burden of justifying the privilege claim.
[26] The issue turns on who was conducting or directing the internal investigations and whether they were done for the purposes of legal advice. CIBC says the investigations meet the criteria. The Respondent says CIBC fails the test because the investigations were not done or requested by counsel for the purpose of providing legal advice, while in other cases, CIBC’s General Counsel was not acting in his capacity as a lawyer but in his role as a company officer and director of numerous subsidiaries.
Were the investigations done or directed by counsel?
[27] CIBC says the available information shows the investigations were conducted by or at the direction of CIBC’s internal and/or external counsel. It also points to the fact that in the relevant board minutes, reporting on the internal investigations comes from CIBC’s general counsel.
[28] However, counsel involvement in the investigations is not apparent from the productions:
• The Oct. 4, 2002, email to the Globe and Mail reporter does not suggest any counsel involvement;
• The board minutes from Aug. 7, 2003, specifically discuss the steps taken by CIBC management to investigate the matter. The minutes further say that the assembled group would decide on whether it agreed with management’s conclusions and strategies – management, not counsel;
• The investigation described in the Aug. 2, 2003, board minutes is described as being conducted by an “independent evaluator” of the Enron transactions and similar transactions that carry reputational and financial risk to CIBC. There is no indication that it was a counsel investigation;
• The minutes from the Aug. 3, 2005, board meeting show that CIBC’s general counsel was leading the discussion on internal investigations that were done. But this may only go to show how legal advice was given based on the investigations; it does not show that the investigations themselves were led or conducted by counsel.
[29] Based on the above examples cited by the Respondent, there is no suggestion of counsel conducting investigations or requesting them for the purpose of providing legal advice. Of course, it is reasonable to ask: why else would investigations be done other than for legal advice? It seems apparent that CIBC was trying to figure out what happened, and such an investigation would likely be done, at least in part, to determine CIBC’s liability. CIBC, however, has the onus of establishing privilege. I do not believe that it has been shown that the investigations were done or directed by counsel, thus CIBC has failed to meet the burden to establish this aspect of privilege.
[30] The Respondent also suggests that in some cases, CIBC’s General Counsel was not acting in his capacity as a lawyer but in his role as a company officer and director of numerous subsidiaries, and that solicitor-client privilege therefore does not apply.[19] There is not enough evidence to conclude that this was the case. The minutes show the General Counsel providing an update on Enron-related matters, and there is no reason to believe he was doing so in any role other than as counsel to CIBC.
Were the investigations done for the purposes of legal advice?
[31] The Respondent argues there is no evidence the investigations were done for the purposes of providing legal advice, saying there is no letter from CIBC to counsel asking for the investigations, nor are there affidavits indicating they were done by counsel for the purpose or providing legal advice.
[32] CIBC says it is clear from the productions that the investigations were done in the wake of Enron’s collapse in relation to contemplated and actual litigation. The only reasonable inference, it says, is that the investigations were done under in-house counsel’s supervision for the purpose of advising management and the board on matters relating to Enron.
[33] Privilege cannot be established on inferences alone. CIBC has not produced any material that shows the investigations were done under counsel’s supervision for the purpose of providing legal advice. As discussed above, while it does indeed seem reasonable to think that internal investigations would have at least some tie-in to providing legal advice, CIBC has not demonstrated how these specific investigations fall into the solicitor-client privilege criteria – it merely asks the Court to infer that the criteria are met.
[34] That inference cannot be made without a reasonable basis to do so. CIBC has the onus of establishing, on a balance of probabilities, that solicitor-client privilege applies to the investigations. It has not done so. There is insufficient evidence that the investigations were done or directed by counsel or that they were done for the purpose of giving legal advice. They certainly may have subsequently formed the basis for providing legal advice, and such advice would be privileged. But the investigations themselves do not carry the same protection.
Facts can exist independently from a privileged communication
[35] Regardless of whether the investigations meet the solicitor-client privilege test, there are other reasons why the investigations themselves – or at least the parts of them that do not include legal advice – are not privileged.
[36] The Respondent points to the Federal Court’s decision in Belgravia Investments Ltd. v Canada[20] for the principle that while certain documents may be privileged because they involve the provision of legal advice, facts contained in those documents that are otherwise discoverable will not be privileged.[21] The Federal Court added that no automatic privilege attaches to documents simply because they come into the hands of a party’s lawyer.[22] A legal opinion will be privileged, but the facts or documents that happen to be reflected in the opinion will not be privileged if they are otherwise discoverable.
[37] CIBC responds that the internal investigations were done for the main purpose of obtaining legal advice, including getting recommendations based on the facts that were gathered. It points to Gower v Tolko,[23] a Manitoba Court of Appeal case, to show that courts have recognized that legal advice also includes ascertaining or investigating the facts upon which the advice will be rendered and that investigation is an important part of legal service if it is connected to providing that legal service.[24] CIBC says its fact-gathering was inextricably linked to the provision of legal advice, and therefore solicitor-client privilege is established.
[38] In Gower, however, the Court of Appeal was speaking of fact-gathering that is done as part of a lawyer’s legal services;[25] in other words, there is still a lawyer who is conducting or supervising the fact-gathering. As already discussed, there is insufficient evidence that counsel for CIBC was conducting or directing the internal investigations referenced in the productions.
[39] Moreover, courts have been known to divide a lawyer’s work product into legal and non-legal parts, with only the former being privileged. In College of Physicians of British Columbia v British Columbia (Information and Privacy Commissioner),[26] a lawyer obtained four expert opinions to help a client assess a complaint against a doctor. The lawyer then prepared memoranda summarizing the opinions of two of the experts and provided her own legal analysis. The B.C. Court of Appeal held that the lawyer was acting in a lawyer’s capacity when she obtained the facts necessary to give legal advice to her client, but her summary of the experts’ opinions – the facts upon which the analysis was based – was not privileged because those opinions were not privileged on their own since they were communications from the experts to the client. The Court of Appeal concluded that while the lawyer’s legal analysis was privileged, the memoranda summarizing the expert opinions were not.
[40] In Ross v Canada (Minister of Justice),[27] a lawyer prepared an investigative report for the Minister of Justice that contained legal advice and recommendations as well as factual findings. The factual findings of the report were produced, but the legal advice and recommendations were redacted on the basis of solicitor-client privilege. The court agreed with this manner of disclosure and upheld the claim for solicitor-client privilege.
[41] It is evident that facts gathered as part of an investigation can be disclosed, while any legal advice arising from those facts remains privileged. Not only is there insufficient evidence that the investigations were conducted or directed by counsel, but there is no reason why the facts gathered as part of the internal investigations cannot be separated from any legal advice given based on the factual findings.
Conclusion
[42] CIBC has failed to substantiate its broad claim of solicitor-client privilege over the internal investigations. Questions 995, 996 and 1005 must therefore be answered. It is important to note, however, that any portions of the investigations that involved the provision of legal advice will remain privileged; any facts gathered or summaries written, however, must be disclosed.
Issue 2: Has CIBC waived, or should it be deemed to have waived, its right to claim privilege on certain questions?
[43] This issue involves the following questions: 655, 659, 866, 888, 889, 894, 900, 917, 922, 936, 937, 938, 939, 941, 2923, 2924, 3462, 3470 and 3514.
[44] The Respondent says that CIBC has waived solicitor-client privilege by pleading certain conclusions and taking certain discovery positions that put CIBC’s state of mind and legal knowledge in issue. The Respondent argues that CIBC relied on legal advice and other privileged communications to arrive at these conclusions.
[45] In particular, the Respondent points to CIBC’s position that it was the activities of a CIBC employee, Dan Ferguson, and a CIBC credit committee that represented the source of its legal exposure in the Enron litigation. CIBC used this position to justify its deduction of the Settlement Amounts. The Respondent argues that this position, which relied on legal advice and other privileged communications, put CIBC’s understanding of the source of its legal exposure in issue and therefore constituted waiver of solicitor-client privilege.
[46] The Respondent further contends waiver occurred when CIBC disclosed some documents that were partially redacted for privilege. The Respondent says it was prejudiced by not receiving the full disclosure and that legal principles dictate that waiver be found over the remaining privileged portions.
General principles governing waiver
[47] Although the test for claiming solicitor-client privilege has already been noted, it is imperative in the context of waiver to underscore the importance of the privilege.
[48] The Supreme Court of Canada (“SCC”) has held that solicitor-client privilege “must be as close to absolute as possible to ensure public confidence and retain relevance. As such, it will only yield in certain clearly defined circumstances, and does not involve a balancing of interests on a case-by-case basis.”[28] The privilege “is part of and fundamental to the Canadian legal system. While its historical roots are a rule of evidence, it has evolved into a fundamental and substantive rule of law.”[29] It therefore goes