Construction projects are often complex and involve many different parties and moving parts. This often necessitates a continued investigation of facts and assessment of legal rights and obligations to ensure that the owner or contractor properly understands its risks and options so that it can make informed decisions. The importance of doing so is heightened where disputes may be on the horizon in respect of common project issues such as change orders, delays, increases in cost, defects, force majeure and mechanical completion.
The purpose of this article is to outline the benefits of creating a structured format, or committee, within an organization to facilitate investigations during projects, and to provide guidelines for establishing such a committee. These committees can be instrumental in creating and maintaining legal privilege over sensitive documents and investigations.
One of the main benefits of creating such a committee is that it enhances the protection of legal privilege. While investigating project issues, a company may create documentation that may be missing context and be interpreted as adverse to its legal position, or that might otherwise contain sensitive information. Rather than avoid the creation of such documentation or avoid having the full and frank sharing of information, a committee can provide the mechanisms to create privilege and protect such information from disclosure.
A detailed review of privilege is outside the scope of this article. More generally, privilege is the legal right to refuse to disclose a document or communication. For the type of privilege that is the subject of this article, solicitor-client privilege and litigation privilege are the most applicable categories.
The types of documents that enjoy the protection of legal privilege are often misunderstood. In a claims committee context, the privilege is intended to protect records created to advance the purpose of the committee. Beyond the more obvious records (such as advice from legal counsel) such records can include:
Legal privilege generally does not protect pre-existing documents from disclosure that were created for a purpose that would not invite the protection of privilege.2 These can include typical project records (monthly reports, schedules, meeting minutes), or third-party reports obtained by business units outside the auspices of the committee or legal involvement. Courts tend to frown on attempts by parties to clothe records in privilege by simply sending them to their legal counsel after they have been created.3 Courts similarly discourage blanket claims of privilege over multiple categories of records.4 Where possible, it is better to have a defensible demarcation between documents over which privilege is claimed and not claimed to help satisfy the court that the privilege claims are reasoned and supported.
Related to this is the recognized principle that in-house legal counsel can have both a legal and business function,5 and that privilege may not apply when the latter function is exercised.6. It is important, therefore, to ensure that in-house legal counsel is exercising its legal function when acting on the committee or that external legal counsel has been retained.
If an actual dispute arises, and claims of privilege are challenged, courts or arbitrators will look to the contemporary evidence to determine the underlying purpose for which the impugned documents were created. Creating a claims or legal review committee in the manner suggested in Section 3 below can be instrumental in providing such evidence to maintain privilege. A committee also mitigates the risk of waiver of privilege—by having an established set of protocols around the creation, storage, and dissemination of records, there is less likelihood that privilege over a document will be waived through disclosure to a third party, for example.
In addition to increasing the protections of legal privilege, establishing a claims or legal review committee can have other benefits. For example, it can:
While there is no "one-size fits all" approach to establishing the committee, the following guidelines should be considered:
A "legal review" or "claims" committee provides a structured platform to efficiently assess legal positions and strategy as problems on the project arise while building a solid foundation for claiming privilege.
There can be complicating factors that require unique considerations. For example, owners and contractors will often engage in a "lessons learned" exercise after a project to improve their own performance on future projects raising questions of whether associated documents are protected by privilege.7 Another example is the disclosure of reports to regulators pursuant to applicable legislation and whether there has been waiver of privilege.8 For a review of this issue in particular please see this article on a recent decision from the Alberta Court of Appeal. These types of issues require careful consideration should an organization wish to claim and maintain privilege.
Should you have any questions in respect of the above or are interested in learning more about this area, please contact us.
1 General Accident Assurance Company v Chrusz, 1999 CanLII 7320 (ON CA).
2 CNOOC Petroleum North America ULC v ITP SA, 2024 ABCA 139; Canadian Natural Resources Limited v ShawCor Ltd, 2014 ABCA 289.
3 Attila Dogan Construction v. AMEC Americas Limited, 2011 ABQB 794.
4 Canadian Natural Resources Limited v ShawCor Ltd, 2014 ABCA 289; CNOOC Petroleum North America ULC v ITP SA, 2024 ABCA 139.
5 R v Shirose, [1999] 1 SCR 565.
6 Toronto-Dominion Bank v. Leigh Instruments Ltd, 1997 CanLII 12113 (ONSC).
7 Canadian Natural Resources Ltd v ShawCor Ltd. 2014 ABCA 289; and Attila Dogan Construction v AMEC Americas Limited, 2011 ABQB 794.
8 CNOOC Petroleum North America ULC v ITP SA, 2024 ABCA 139.