March.24.2015

Privilege over Adjusters’ Files: Raj v Khosravi, 2015 BCCA 49

Once an action commences, an adjuster’s file materials can be of significant forensic value to plaintiffs’ counsel. Unless the adjuster has been instructed by counsel, there is a risk that the adjuster’s file materials may not be properly guarded against production. Subject to litigation privilege, the purpose of which is to afford parties a “‘zone of privacy’ in relation to pending or apprehended litigation”(1) , the file is relevant and therefore producible in the course of litigation. While it is easy to see how reports commissioned shortly before or after the commencement of an action would be protected by this type of privilege, the concept is trickier when applied to materials in an adjuster’s file that may have been collected or commissioned months or even years prior to the action. However, in the recent case of Raj v Khosravi,(2) the BC Court of Appeal confirmed that litigation privilege can attach to a document at any stage along the investigation-litigation spectrum so long as the “dominant purpose” for the document’s existence is in aid of or for the conduct of litigation.

Raj was a case arising from a low-impact motor-vehicle accident. The plaintiff was injured when the defendant’s vehicle collided with his vehicle. ICBC admitted liability on behalf of the defendant. The plaintiff met with an ICBC adjuster to advance his personal injury claim. Based on his observations of the plaintiff and his evaluation of the conflicting statements provided by the plaintiff, the adjuster did not believe that the plaintiff’s injuries were as severe as the latter alleged them to be or that they had rendered him incapable of working. Shortly following this initial interview, the adjuster retained a private investigator to conduct surveillance on the plaintiff and to prepare a report (the “Report”). Although coverage was initially confirmed for the plaintiff’s anticipated claims, ICBC later denied it on the basis that the plaintiff had not been honest in his statements to ICBC with respect to the alleged nature and extent of his injuries.(3)

Once litigation commenced, the plaintiff demanded a copy of the Report. ICBC refused to disclose it, claiming that it was subject to litigation privilege. The plaintiff brought an application in chambers to compel the production of the Report. The master found that based on the adjuster’s evidence, which she accepted, that litigation was in reasonable prospect when the Report was commissioned and that the Report’s dominant purpose was for use in the anticipated litigation.

On appeal, the chambers judge held that the master was “clearly wrong” in her findings that litigation was “in reasonable prospect” at the time the Report was commissioned. On his view of the evidence, namely the adjuster’s affidavit, the chambers judge found that there was an absence of evidence to support the adjuster’s belief that litigation was likely to arise. The judge essentially concluded that the adjuster was still in the “information gathering process” and all he had at that point, were suspicions. He allowed the appeal and ordered the defendant to produce the Report.(4)

One of the issues on appeal before the Court of Appeal was whether the chambers judge had correctly applied the test for proving the claim of litigation privilege. The Court confirmed that the two-part test in Hamalainen (Committee of) v Sippola,(5) as cited by both the master and the chambers judge, applied. The party claiming the privilege has the burden of proving that:

  1. litigation was in reasonable prospect at the time it was produced; and
  2.  that litigation was the dominant purpose in the document’s collection or commission.

With regard to the first part of the test, the Court reiterated that the inquiry is based on an objective test of reasonableness. In other words, while certainty that litigation may follow is not required, the party claiming the privilege must establish “something more than mere speculation” that a claim may arise.(6) Citing Mr. Justice Joyce in Sauvé v ICBC ,(7) the Court stated that the essential question was whether “a reasonable person being aware of the circumstances could conclude that the claim will not likely be resolved without litigation”.(8) The threshold for whether litigation is “in reasonable prospect” is a low one to meet.

The challenge is often with the second aspect of the test because the claiming party must prove that the dominant purpose for the document’s existence was to obtain legal advice or to conduct or aid in the conduct of litigation. It is not enough for the document to be of some purpose in advancing the anticipated litigation. Where a document has been collected or created for dual or multiple purposes, unless litigation is the whole or main purpose for the document’s existence, that document should be disclosed.(9)

In the Court’s view, the chambers judge had erred in characterizing that the initial meeting was part of the “information gathering process”. This characterization led him to foreclose a finding that litigation was “in reasonable prospect” at the time the Report was commissioned.(10) The Court held that it was open to the master to conclude, based on her findings of fact, that litigation was in “reasonable prospect” and that the Report had been commissioned for no other purpose but to defend the plaintiff’s anticipated tort claim. The master’s order was accordingly restored.

In summary, so long as there is a reasonable or rational evidentiary basis to show that a party would have more than mere suspicions about the prospect of litigation arising, a finding that litigation was in “reasonable prospect” can occur any point along the continuum between the information gathering stages and the litigation stage. As the Court in Raj made clear, the mere categorization of a document as being one collected or commissioned in the “adjusting stage”, “information-gathering stage” or “litigation stage” is not sufficient for the purposes of determining whether litigation privilege attaches to a document. It is critical that adjusters and insurers undertaking investigation on a file be mindful of the test for privilege and where appropriate, engage counsel at an early juncture to ensure that privilege is properly maintained.

(1)  Blank v Canada (Minister of Justice), 2006 SCC 39 at para 39
(2)  2015 BCCA 49 [Raj]
(3)  Ibid at para 2
(4)  Ibid at para 4
(5)  (1991), 62 BCLR (2d) 254 (CA)
(6)  Raj, supra at para 10
(7)  2010 BCSC 763
(8)  Raj, supra at para 11
(9)  Ibid at para 16
(10) Ibid at para 50

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Mary H. Nguyen