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SCC removes counsel from espionage case

|Written By Helen Burnett

In a recent decision, the Supreme Court of Canada has ruled that counsel who have been given access to another party''s confidential documents must also take steps to uphold their solicitor-client privilege even if there''s no solicitor-client relationship.

Mahmud Jamal says Celanese

In Celanese Canada Inc. v. Murray Demolition Corp., Celanese had sued Canadian Bearings Ltd. for alleged industrial espionage, after which a motions judge granted an Anton Piller order against Canadian Bearings. The main case, which doesn't directly affect this appeal, revolves around Celanese suing Canadian Bearings, among others, for allegedly stealing technology discovered during the demolition of its Edmonton vinyl acetate plant and making unauthorized use of it in the construction of a vinyl acetate facility in Iran.

When the Anton Piller order was being carried out, it was alleged that a sealed envelope was opened, and a CD that turned out to contain privileged emails was copied onto the computer of Celanese's lawyers, Cassels Brock & Blackwell. The decision says that Celanese's U.S. counsel, Kasowitz Benson Torres & Friedman, also received a copy of the CD.

After the initial incident, Canadian Bearings's counsel, Borden Ladner Gervais LLP, brought a motion to prohibit the two firms from acting for Celanese. It was dismissed by the motions judge. Canadian Bearings appealed to the Divisional Court, which allowed the appeal and ordered that Cassels Brock and Kasowitz be removed. Celanese, Cassels Brock, and Kasowitz appealed to the Ontario Court of Appeal, which allowed the appeal, arguing that neither of the courts had applied the correct test for removal of counsel.

The case ended up before the Supreme Court in order to determine the proper test for removal of counsel and "which of the parties bears the onus to show (or rebut) the prejudice arising from disclosure of solicitor and client privileged documents."

"This appeal thus presents a clash between two competing values -- solicitor-client privilege and the right to select counsel of one's choice. The conflict must be resolved, it seems to me, on the basis that no one has the right to be represented by counsel who has had access to relevant solicitor-client confidences in circumstances where such access ought to have been anticipated and, without great difficulty, avoided," noted Supreme Court Justice Ian Binnie in his July 27 decision.

Binnie added, however, that he agrees with the lower courts that "if a remedy short of removing the searching solicitors will cure the problem, it should be considered." He added that there is no such thing as automatic disqualification.

In the decision, it was noted that the Advocates' Society and the Canadian Bar Association, which acted as interveners in the case, had suggested that several factors should be considered before determining whether to remove solicitors from this type of case. These include how the documents came into the possession of the plaintiff or its counsel, what the plaintiff and its counsel did when they recognized the documents were potentially subject to solicitor-client privilege, and the extent of review made of the privileged material.

Other suggestions were that the court should consider the contents of the solicitor-client communications and the degree to which they are prejudicial, the stage of the litigation and the potential effectiveness of a firewall or other precautionary steps to avoid mischief.

Binnie noted that neither firm in this case set out to gain access to privileged material.

"The disclosure of solicitor-client confidences came about not by egregious misconduct, but through a combination of carelessness, overzealousness, a lack of appreciation of the potential dangers of an Anton Piller order, and a failure to focus on its limited purpose, namely the preservation of relevant evidence."

The court ruled that the appeal be allowed and that Cassels Brock be removed as solicitors for Celanese Canada Inc.

In addition to setting out a framework for determining whether to remove solicitors from this type of case, the court also emphasized that the onus is on the searching firm to prove that "no use of confidential information would occur".

Paul Michell, a partner at Toronto's Lax O'Sullivan Scott LLP who represented the Advocates' Society, said "much of the focus of this case was about establishing procedural protections to ensure that in obtaining and executing an Anton Piller order, that as much is done as is reasonably possible to make sure that you don't come into possession of another party's solicitor-client privilege material."

As Binnie noted, "putting the onus on the party in receipt of the confidential information rather than on the party being searched increases the incentive on its part to take care to ensure that privileged information is not reviewed in the first place.

"Nevertheless, all parties recognize that an Anton Piller order provides no authority whatsoever for access to a defendant's privileged documents," he said.

Derek Leschinsky of Osler Hoskin & Harcourt LLP, who represented the CBA, said that "the CBA sought protection for privilege in the execution of Anton Piller orders, because there was a lack of this, a lack of clear standards in the jurisprudence before this. There was a series of different cases, but no clear global framework, and I think that has now been provided."

Mahmud Jamal, who also represented the CBA, added that "it affirms, in unequivocal terms, that the protection of solicitor-client privilege is a matter of high importance.

"The court also, for the first time, shares that when the party receives privileged information of another, it has a duty to return the privileged information, and to advise the party of the extent of review made," he said.

"The CBA was very pleased that the court adopted that, because otherwise what happens is material is returned, and there is no ability of the courts or the other side to know what was reviewed and what was not reviewed and what the information contains," he said.

The court put the onus squarely on the party that receives privileged information to return it, and explain the extent of the review made, said Jamal. "That is already an ethical obligation in a number of provinces and what Justice Binnie does in the decision is adopt the CBA's position that that should be a national legal standard, effectively."

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