This is the fifth post in my series dealing with suggestions for the corporate secretary when drafting board minutes. In this post, I discuss suggestions for drafting to protect privilege and confidentiality. To access my first post containing an overview of all of the suggestions, click Writing Board Minutes for Peace of Mind. For my posts dealing with the first three issues in detail, click The “Front Page of the Newspaper” Test, Keep the Purposes Front and Centre and Draft to Minimize Unnecessary Production.
Drafting to Assist the Litigator
Even though the corporate secretary should presume that minutes of board meetings may be produced in litigation, the corporate secretary can take steps to assist the company’s litigator in defending against production on the basis of privilege or confidentiality. The argument for protection against disclosure will be more persuasive if the minutes appear on their face to be privileged or confidential, since a judge may inspect the minutes before making a ruling.
Therefore, the most important of step is to ensure that the minutes contain the elements that satisfy the legal test for privilege or confidentiality. To do that, the corporate secretary should be familiar with and watchful for three types of privilege when preparing board minutes: (a) solicitor-client privilege; (b) litigation privilege; and (c) common law privilege.
Solicitor-client privilege applies to confidential communications between a lawyer and his or her client for the purpose of seeking lawful legal advice.
When external counsel attend a board meeting it is usually obvious that the advice given by external counsel is subject to solicitor-client privilege. However, the role of in-house corporate counsel at board meetings presents complications. It may not be obvious whether corporate counsel is providing legal advice or business advice, particularly if in-house counsel attends regularly in more than one capacity. For example, corporate counsel may report on an environmental compliance issue. It may not be obvious whether in-house counsel gave the report as part of legal advice or as the compliance officer of the corporation.
To enhance the likelihood that solicitor-client privilege will be recognized and maintained, consideration should be given to identifying in the minutes that the board “received confidential legal advice” from the lawyer (whether external counsel or in-house corporate counsel).
Another complication may arise because other persons are in attendance when the advice is being given, such as financial advisors or other invited guests. It has been said that confidentiality is the sine qua non of solicitor-client privilege. With some exceptions (discussed below), the attendance of third parties may destroy a claim that the advice given was confidential.
If there are observers or other participants at the board meeting, those persons should be requested to absent themselves for the portion of the meeting dealing with the legal advice. The board minutes should reflect that those persons were not in attendance during that portion of the meeting.
From time to time, the presence of observers or participants, such as financial advisors, may be necessary because they are part of the “team” dealing with the issue on which legal advice is being given. Courts in Ontario, at least, accept that privilege may not be lost in these circumstances. It is prudent to get legal advice to see if the criteria for protecting privilege will be met. As a general rule, if privilege is available, the board minutes should reflect the role of those third parties and why the board requested that those persons remain in attendance during the receipt and discussion of legal advice.
Another important type of privilege is litigation privilege. Litigation privilege is a zone of privacy in which a litigant may prepare its case “without adversarial interference and without premature disclosure.” Every litigant (whether represented by a lawyer or not) is entitled to litigation privilege. Unlike solicitor-client privilege, litigation privilege covers non-confidential communications with third parties and documents of a non-communicative nature (such as draft argument and research). Litigation privilege will only attach to those documents and communications whose dominant purpose is to respond to actual or apprehended litigation.
The applicability of litigation privilege is usually clear once litigation has been commenced. However, in the run-up to litigation, it is prudent to note that the board was considering an isuse that was apprehended to be litigious. Be aware, however, that once litigation is contemplated, there are document preservation responsibilities for the corporation.
If litigation privilege is available, the minutes should reflect that the dominant purpose of the agenda item is to receive a confidential report from management regarding potential or actual litigation and for the directors to discuss and to prepare for or to respond to the litigation. If third parties are present, the purpose of their attendance should be noted. For example, financial or other advisers may be present to assist the directors with evaluating or preparing a response to the real or apprehended litigation.
Common Law Privilege
Common law privilege is a residual category of privilege from disclosure. It is available on a case-by-case basis after the court considers the following criteria:
(a) The communications originate in a confidence that they will not be disclosed.
(b) This confidence is essential to the full and satisfactory maintenance of the relationship between the parties.
(c) The relationship is one, which in the opinion of the community, ought to be sedulously fostered.
(d) The injury to the relationship by the disclosure of the communications is greater than the benefit gained in the litigation process.
Common law privilege may be available when the board is conducting an investigation, such as, for example, in response to a whistle-blower complaint.
The court exercises significant discretion when deciding whether common law privilege is available. Legal advice should be sought when dealing with matters such as an internal investigation arising out of a whistle-blower complaint or other matters that might attract common law privilege so that the corporate secretary has guidance on how to manage these types of activities.
The guidelines with respect to confidentiality and third-party participation discussed above in connection with solicitor-client and litigation privilege apply equally to common law privilege. In addition, it would be prudent for the minutes to reflect the board’s consideration of the importance of confidentiality to the matter being addressed and the board’s concerns with respect to any breach of confidentiality. For example, if a third-party investigator is reporting to the board on an investigation, the board should consider (and the minutes should reflect) the importance of confidentiality to the integrity of the investigation and the harm that could occur to the organization and the investigation if confidentiality is not maintained, such as, for example, employees may be less willing to speak with the investigator about the potential misconduct of a colleague or supervisor if confidentiality is not assured.
Confidentiality or Sealing Orders
Another litigation issue that corporate secretaries should consider is the potential availability of a confidentiality order or a sealing order in the event that the minutes are required to be produced. In general, a confidentiality order restricts the persons with whom documents and information are to be shared and applies only to the parties and any specific third parties who are involved in the litigation process (such as experts). A confidentiality order will often contain a protocol requiring a standard form confidentiality agreement, restricting onward sharing of information, and requiring the destruction of the information when it is no longer necessary to be kept by the third party. A sealing order prevents records in the court file from becoming public. In Ontario, subsection 137(2) of the Courts of Justice Act provides the authority for a sealing order. Subsection 137(2) provides that the court “may order that any document filed in a civil proceeding before it be treated as confidential, sealed and not form part of the public record.” The trend has been for courts to restrict the availability of these orders, given the importance of the openness of judicial proceedings.
However, in many business-to-business contracts, organizations will require confidentiality agreements as an essential term of the relationship. These terms are so frequently required that they have become part of the boilerplate of most commercial agreements. At any given time, an organization may have in its possession, power and control, significant amounts of information received from contracting parties to whom the organization owes duties of confidence. Conversely, the organization may have placed significant confidential information into the hands of third parties who are restricted from using that confidential information for non-approved purposes so long as the information is not in the public domain. If the information is disclosed during discovery, it will be at risk of public disclosure in a court proceeding.
The Supreme Court of Canada has suggested that this type of obligation is one that might qualify as an “important commercial interest” worthy of protection by court order. Again, this is an area in which the corporate secretary should get legal advice in advance of the board meeting.
As a general rule, board minutes should expressly identify that matters presented to the board or discussed by the directors are subject to third-party confidentiality obligations. If the matters being discussed are not subject to third-party confidentiality obligations but are of significant commercial interest, reference to the fact that what is discussed is material non-public information or a trade secret or a potential patent issue should be recorded in the minutes. If observers or participants are present, they should be reminded of their confidentiality obligations and this reminder should be recorded in the minutes.