Litigation privilege may continue to protect documents created for one lawsuit from being disclosed in a second, related lawsuit, the Alberta Court of Appeal recently reminded us in Pederson v Allstate Insurance Company of Canada, 2020 ABCA 65 [Pederson]. Whether litigation privilege continues to survive depends on whether the two lawsuits are "closely related proceedings", which requires an examination of the parties, the alleged wrongdoing (the cause of action or juridical source), any common issues and the essential purpose of the two lawsuits. 

Documents that are privileged do not have to be disclosed to the other side in a lawsuit or a freedom of information response. Several different types of privilege can apply to protect records, the most common of which are litigation privilege and solicitor-client privilege (legal advice privilege). Litigation privilege covers records created for the dominant purpose of existing or contemplated litigation, while solicitor-client privilege attaches to communications between lawyers and clients made in the course of obtaining legal advice. We have previously blogged on various aspects of privilege before (see our previous blogs written in  July 2019, July 2017, June 2017 and  October 2016). For litigation privilege, a question often arises as to whether records created for the dominant purpose of one proceeding continue to be privileged for a second, related lawsuit. For example, are records created in the context of a criminal or regulatory matter privileged for a second civil suit pertaining to the same underlying facts? Are records in a first tort action privileged for a second insurance action? The issue becomes particularly acute when the first proceeding has concluded, as normally its associated litigation privilege expires once the proceeding is over.

In Pederson, the plaintiff was injured in a motor vehicle collision and successfully brought a claim for $1.5 million in damages against certain defendants, including the registered owner of a vehicle who claimed it had been stolen. The plaintiff succeeded in establishing liability on the part of the registered owner's adult son, "who did not have a driver's license, was operating the vehicle at the time of the collision and was residing with his mother (the registered owner) and was therefore deemed to be driving the vehicle with the owner's consent at the time of the collision." Some of these facts were only discovered during the course of the litigation. In a subsequent action, the plaintiff brought a claim pursuant to a provision of Alberta's Insurance Act to recover these damages from the registered owner's insurer, the Allstate Insurance Company of Canada ("Allstate"). In this second suit, the plaintiff sought disclosure of records from the first lawsuit that Allstate claimed litigation privilege over. 

After identifying the leading Supreme Court of Canada decision on litigation privilege in Blank v. Canada (Minister of Justice), 2006 SCC 39, the Court noted that "[t]he purpose of litigation privilege is to create a 'zone of privacy' in relation to current or apprehended litigation" in order "to permit parties to litigation to prepare their positions in private without adversarial interference and without fear of premature disclosure." It encompasses both "communications between solicitor-client but also communications between solicitor and third parties or in the case of an unrepresented litigant, between litigants and third parties." While the privilege typically ends with the conclusion of the litigation, an exception exists for "closely related proceedings". The Court set out four "minimum factors to consider and balance" in "determining when separate proceedings are closely related" (as stated by the Court):

  • whether the parties are the same or related;
  • whether the issues arise from the same or a related cause of action (or juridical source);
  • whether the issues are common in both actions; and
  • whether the proceedings share the same essential purpose.

In considering this test, the Court indicated that the real issue before it was the application of the test to the facts. In the Court below, a chambers judge of the Alberta Court of Queen's Bench, 2019 ABQB 531, after properly articulating the legal test, indicated that the parties in the two actions were closely related (though not identical), which pointed in favour of continuation of the privilege. However, the two actions did not have the same juridical source—the personal injury action was a tort action, while the second action was a statutory claim for payment under Alberta's Insurance Act—a significant factor militating against the continuation of the privilege. Further, there were no common issues, as the first action involved questions of liability and damages, while the second concerned insurance coverage issues. Finally, the fourth factor was neutral, since the two actions could be described as having the same purpose of compensating the plaintiff, though could also be described as permitting the plaintiff to prove liability and damages in the first action, while balancing rights between an injured motorist and an insurance company in the second. In the result, the chambers judge concluded that the two actions were not "closely related proceedings" and thus, litigation privilege did not apply, emphasizing that "the purpose of the two actions is not the same because the juridical sources differed." 

On appeal, Allstate argued that there were common issues, as "all of the issues in the [statutory action] were apprehended or anticipated at the outset of the motor vehicle action" and that "its concerns about whether to deny coverage based on ... misrepresentations and conduct of its insured would have been apparent to the plaintiff during the motor vehicle litigation." It further submitted that the "the chambers judge viewed the issues between the two actions too narrowly: one as a tort action and one as a statutory claim." The Court of Appeal disagreed. In its view "[o]n this record, and given the unusual facts presented, we cannot accept Allstate's submission that the coverage issues that now form part of the [statutory] action were notorious in the motor vehicle action." No reviewable error was made by the chambers judge.

The Court of Appeal took pains to say that this holding does not necessarily mean that litigation privilege from a first action will have expired in every subsequent case against a register owner's insurer. Nonetheless, the finding in this case, plus the Court's overruling of previous Queen's Bench authority countenancing a more tenuous "remotely connected" test, indicates an increased willingness by the Courts to find that litigation privilege has come to an end once the original litigation has ended. 

The Court's decision in Pederson reminds us that there are important differences between legal advice and litigation privilege. Unlike legal advice privilege, litigation privilege generally ends with the litigation. Nevertheless, litigation privilege may continue to apply in certain circumstances, and Pederson helps to provide a roadmap for litigants in Alberta to anticipate when this may occur. 

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