ONTARIO SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 10-00145
DATE: 20120507

ONTARIO

SUPERIOR COURT OF JUSTICE

RULING RE LITIGATION PRIVILEGE

BETWEEN:

HER MAJESTY THE QUEEN – and – FRANK A. DUNN, DOUGLAS C. BEATTY AND MICHAEL J. GOLLOGLY Defendants

Robert W Hubbard, Amanda Rubaszek & David Friesen , for the Crown

Mark J. Sandler , for the Defendant, Frank A. Dunn
Gregory Lafontaine , for the Defendant, Douglas C. Beatty

HEARD: April 17 & 18, 2012

MARROCCO J. :

[ 1 ] The accused are being tried on charges of defrauding the public and defrauding Nortel Networks Corporation. The accused were formerly senior executives with Nortel Networks Corporation and its related entities. At the time of the transactions described by this indictment, Mr. Dunn was the Chief Executive Officer, Mr. Beatty was the Chief Financial Officer and Mr. Gollogly was the Controller.

The context of this application

[ 2 ] In October 2003, Nortel Networks Corporation announced that it was making a Restatement of its Consolidated Financial Statements. The Audit Committee of Nortel initiated a review of what led to the Restatement and retained Wilmer Cutler Pickering to conduct that review with the assistance of forensic accountants with the firm of Huron Consulting Services LLC.

[ 3 ] As part of its review, Wilmer Cutler Pickering undertook interviews with Mr. Dunn and Mr. Beatty.

[ 4 ] Mr. Dunn was interviewed on two occasions. The first interview occurred on February 19, 2004; Mr. Dunn was not represented by counsel at that interview. The second interview occurred on March 21, 2004. Mr. Dunn was represented by four lawyers at that interview: Canadian litigation lawyers, Thomas Heintzman and Abbey Sirivar from McCarthy Tétrault, and two United States lawyers, Larry Iason and Richard Albert, who were experienced in Securities Exchange Commission proceedings, among other things.

[ 5 ] Mr. Beatty was first interviewed on January 7 and 9, 2004; Mr. Beatty was not represented at that interview. Mr. Beatty was interviewed a second time on April 23, 2004. Mr. Beatty was represented by six lawyers at that interview: Mr. James Douglas, Ms. Karen Beitel and Ms. Wanique Pettigrew, litigation lawyers from the law firm of Borden Ladner Gervais, and John Siffert, Charlie Spada and Gabrielle Freedman, litigation lawyers from the New York law firm of Lankler Siffert and Wohl.

[ 6 ] Mr. Gollogly was interviewed on three occasions during this review; he was not represented by counsel during any of these interviews. He asserted no claim of litigation privilege on this application.

A claim of litigation privilege on behalf of Mr. Dunn

[ 7 ] At Mr. Dunn's second interview on Sunday, March 21, 2004, Abbey Sirivar, an associate in the litigation department at the law firm of McCarthy Tétrault, made handwritten notes of the interview. Mr. Sirivar made his notes because he was instructed to do so by Mr. Thomas Heintzman, who, at that time, was a senior litigation lawyer and partner at McCarthy Tétrault.

[ 8 ] Mr. Justice Nordheimer, of this Court, determined that Mr. Heintzman and Mr. Sirivar likely had relevant evidence for this trial and issued an order compelling them to appear as witnesses. His Honour’s order included a requirement that the lawyers bring all documents within their possession or control that might be relevant to issues in this trial. His Honour provided that Mr. Heintzman and Mr. Sirivar were not required to produce those documents until any claim of solicitor-client privilege was determined by this Court.

[ 9 ] No claim of solicitor-client privilege was asserted on this application. Counsel for Mr. Dunn on this application, Mr. Mark Sandler, asserted a claim of litigation privilege over a portion of the documents provided in response to the subpoena.

[ 10 ] Specifically, counsel for Mr. Dunn asserted a claim of litigation privilege over the handwritten notes made by Mr. Sirivar at the March 21, 2004 interview. The notes were in a sealed envelope and marked as Exhibit “A” on this application. Counsel for Mr. Dunn also produced and made a claim of litigation privilege over a typed version of Mr. Sirivar's notes that had been prepared by secretarial staff at McCarthy Tétrault. The typed notes were also in a sealed envelope and marked as Exhibit “C” on this application. Counsel for Mr. Dunn produced a second typed version of Mr. Sirivar's notes. This version was created because Mr. Sirivar sent his notes to Mr. Iason and Mr. Albert and they returned Mr. Sirivar's notes with their amendments and additions. Litigation privilege is claimed with respect to this document as well. This version of Mr. Sirivar's notes was produced in a sealed envelope and marked as Exhibit “D” on this application.

[ 11 ] Mr. Heintzman did not recall taking any notes himself. A search was done at McCarthy Tétrault and no notes by Mr. Heintzman were located.

A claim of litigation privilege on behalf of Mr. Beatty

[ 12 ] Mr. Justice Nordheimer also determined that Mr. James Douglas, Ms. Karen Beitel and Ms. Wanique Pettigrew likely had relevant evidence for this trial and issued an order compelling them to appear as witnesses. His Honour required Mr. Beatty's lawyers to bring all documents within their possession or control that might be relevant to issues in this trial. Mr. Douglas made no notes; Ms. Pettigrew did make notes: however, she is no longer in Canada. Her notes were produced in response to the order of Justice Nordheimer and a claim of litigation privilege was made with respect to them. A compilation of notes produced by one of Mr. Beatty's American lawyers, who was present at April 23, 2004 interview, and provided to Mr. Beatty's counsel in Canada was also produced.

[ 13 ] Mr. Lafontaine, on behalf of Mr. Beatty, made a claim of litigation privilege with respect to this bundle of notes. These documents were tabbed, bound and marked as Exhibit “J”.

[ 14 ] The evidence established that the March 21, 2004 and April 23, 2004 interviews were not transcribed. The representatives of Nortel's Audit Committee who conducted these interviews took notes, but have declined to produce them despite the fact that Nortel Networks Corporation waived privilege.

[ 15 ] Justice Nordheimer made a ruling excluding the evidence of the American lawyers who attended the interviews with Mr. Dunn and Mr. Beatty. Although Justice Nordheimer did not have jurisdiction to make this order, His Honour ruled on this matter because the Crown and defence asked him to and agreed to be bound by His Honour’s ruling.

The mechanics of the litigation privilege claim evidence at trial

[ 16 ] The Crown called Mr. Heintzman, Mr. Sirivar and Ms. Beitel as witnesses. As indicated, Mr. Douglas had no notes; Ms. Pettigrew had left the jurisdiction and her evidence was, in counsels' view, not required.

[ 17 ] The Crown called each of the three lawyers. Shortly after the direct examination of each lawyer began, counsel made a claim of litigation privilege. At this point, counsel for the Crown halted its direct examination and counsel for Mr. Dunn and Mr. Beatty assumed the burden of proving, on a balance of probabilities, the factual prerequisites for the litigation privilege claim. Practically, counsel for Mr. Dunn and Mr. Beatty assumed the direct examination of Mr. Heintzman, Mr. Sirivar and Ms. Beitel. Counsel for the Crown cross-examined each of the witnesses concerning the claim of litigation privilege. After the litigation privilege claim is resolved, each of the witnesses will return to the stand and the Crown will continue its direct examination.

[ 18 ] It is common ground that all of the notes contain some, but not all, of the questions and answers that occurred at the interview. The notes do not contain an expression of the thoughts or strategies of counsel.

[ 19 ] I accept the evidence of all three lawyers who testified. Their evidence was consistent within itself and their responses to the interviews of their clients were logical and understandable.

The pre-conditions for litigation privilege

[ 20 ] In Kennedy v. McKenzie , [2005] O.J. No 2060 (S.C.) , Mr. Justice T. Ducharme set out the test for litigation privilege at para. 20 of his judgment. His Honour held that a party asserting the privilege must establish that the documents were created:

• for the dominant purpose of existing, contemplated or anticipated litigation; and

• in answer to inquiries made by an agent for the party's solicitor; or

• at the request or suggestion of the party's solicitor; or

• for the purpose of giving them to counsel in order to obtain advice; or

• to enable counsel to prosecute or defend an action or prepare a brief.

(Decision continues exactly as in source…)

MARROCCO J.

Released: 20120507