Wednesday, 28 March 2012

Solicitor-Client Privilege: Lawyers' Fees and Disbursements

Judging by the cases coming out of BC courts over the last two weeks, privilege must be as hot of a topic as judicial independence.  Last week, I reported on a decision dealing with settlement privilege and, on Monday, a decision addressing litigation privilege.  Keeping the trend going, the BCSC and BCCA, respectively, have just released decisions dealing with two specific aspects of solicitor-client privilege:
(i)  School District No. 49 (Central Coast) v. British Columbia (Information and Privacy Commissioner), 2012 BCSC 427 – dealing with privilege attaching to information about lawyers’ fees and disbursements and strengthening, if not making irrebuttable, the presumption that these records are privileged and not producible; and 

(ii)  Donell v. GJB Enterprises Inc., 2012 BCCA 135dealing with privilege attaching to lawyers’ trust account ledgers and holding that although such records are not presumed to be privileged, they are not automatically producible and the court must still consider whether they arise out of the solicitor-client relationship and, if so, whether, by their production, "there is a reasonable possibility that an assiduous inquirer could deduce, infer or otherwise acquire communications that are protected by solicitor-client privilege".

This and the following post will summarize both decisions.

Information About Lawyers' Fees

In School District No. 49, the court considered an application for judicial review from a decision of the Information and Privacy Commissioner (the “Commissioner”) ordering the Petitioner (the “Board”) to release certain records regarding legal fees in response to a request made under the Freedom of Information and Protection of Privacy Act by an individual involved in ongoing legal proceedings against the Board.  Specifically, the Commissioner ordered that the Board could not withhold the following records on the basis that they were covered by solicitor-client privilege:
  1. a “computer printout labeled “G/L Account summary” which shows budget numbers and a lump sum of expenditures of an account described as “OPER-BUS ADMIN-LEG—NON”, because the Board “did not provide any evidence regarding what the numbers in this printout represent or their connection to any information that might be privileged” and therefore did not provide a “factual foundation to allow for a determination that presumption of privilege attaches to the documents in issue”; and
  2. the total value of payments on a per-law firm basis, because it could “be released without revealing or allowing anyone to deduce any communications protected by the privilege” and it was only a “fanciful or theoretical possibility” that this might affect privileged information.
Generally, the court agreed that the Commissioner applied the following correct test, based on Maranda v. Richer, 2003 SCC 67, for determining whether the information sought was privileged:
... there is a rebuttable presumption that privilege does apply to information about lawyer’s fees and disbursements ... [which] will be rebutted “if there is no reasonable possibility that disclosure of the amount of the fees paid will directly or indirectly reveal any communication protected by the privilege.” ... the following questions will be of assistance in this regard:
(1) Is there any reasonable possibility that disclosure of the amount of the fees paid will directly or indirectly reveal any communication protected by the privilege?

(2) Could an assiduous inquirer, aware of background information, use the information requested to deduce or otherwise acquire privileged communications?
However, the court quashed the Commissioner’s decision ordering the release of the information, finding that he erred in deciding that the information was not privileged. First, with respect to the ledger, the court held that the Commissioner should have presumed that the information was privileged because it was “responsive to the request for information pertaining to legal fees or disbursements, expenditures relating to litigation or grievances, or a ‘litigation fund’.”  Starting with the presumption of privilege, the Commissioner should have applied the above test to determine whether the presumption was rebutted. 

Second, and arguably more important for civil practice, the court found that information about the aggregate amount of legal fees, even without any particulars of what exactly the fees were spent on, was privileged because, adopting the comments of Holmes J. in a pre-Maranda decision in Municipal Insurance Assn. of B.C. v. B.C. (Information and Privacy Commissioner) (1996), 143 D.L.R. (4th) 134 (S.C.):
Knowledgeable counsel, given the information as to his opponent's legal costs, could reach some reasonably educated conclusions as to detail of the retainer, questions or matters of instruction to counsel, or the strategies being employed or contemplated.  
Perhaps tacitly acknowledging that this conclusion does sound a little bit fantastic, the court also cited Justice Holmes’s examples of information that “could reasonably be discerned from the fact of the total of interim fees to date in a lawsuit”:
  • the state of a party’s preparation for trial;
  • whether the expense of expert opinion evidence had been incurred;
  • whether the amount of the fees indicated only minimal expenditure, thus showing an expectation of compromise or capitulation;
  • where co-defendants are involved whether it appears one might be relying upon the other to carry the defence burden;
  • whether trial preparation was done with or without substantial time involvement and assistance of senior counsel;
  • whether legal accounts were being paid on an interim basis and whether payments were relatively current;
  • what future costs to the party in the action might reasonably be predicted prior to conclusion by trial.
Thus, the court held that:
  1. “the name of the law firm and the total amount of fees paid – could enable an assiduous inquirer, aware of background information, to deduce or otherwise acquire privileged information”; and
  2. although it was “less apparent” that the general ledger “would risk revealing privileged information”, “it may nonetheless allow for the deduction of privileged information” because an “assiduous inquirer” could determine what other litigation the Board was involved in and from that infer how much was spent on this particular action.
At first glance, for all practical purposes, this decision appears to make the presumption of privilege with respect to lawyers’ accounts irrebuttable.  After all, it is difficult to envision a situation where the amount of legal fees, whether incurred in a lawsuit or charged by a solicitor, will not, at least arguably, provide some fodder for “an assiduous inquirer” to draw one of the conclusions listed in Municipal Insurance. The question, however, is the likelihood that such a conclusion will be accurate.

In Maranda, the SCC explained that presumption of privilege for lawyers' fee accounts is rebuttable by demonstrating that there is no “reasonable possibility” that privileged information may be disclosed.   On the other side of the same coin, the BCCA in Legal Services Society v. B.C. (Information and Privacy Commissioner), 2003 BCCA 278, which was also relied on by the court in this case, explained that “a merely fanciful or theoretical possibility” of disclosure of privileged information will not be sufficient to maintain privilege.  Thus, both courts confirmed that it must not only be possible but also plausible (reasonable possibility) that privileged information may be ascertained from the disclosure of information about fees and disbursements.
Although Holmes J. in Municipal Insurance described the list of examples as "reasonable possibilities", it appears inconsistent with Maranda and Legal Services Society that all of these examples, or even any one of them, would be a reasonable possibility in every case.  For example, "the state of a party’s preparation for trial" would clearly not be a reasonable possibility where no trial is contemplated or after trial had completed.  Accordingly, it appears that the way to reconcile this decision and Municipal Insurance with Maranda and Legal Services Society is not by asking whether fee information generally can result in an assiduous inquirer obtaining privileged information, but whether this is a “reasonable possibility” in the case before the court based on the particular records sought (which would be examined by the court in camera).