The implied undertaking does not preclude production of records provided to a regulator

The implied undertaking does not preclude production of records provided to a regulator by by Michael A. Marion and Daniel B.R. Johnson, Borden Ladner Gervais LLP, Canada December 14 2015

In a previous post…on The Resource, BLG commented on Imperial Oil v Jacques, in which the Supreme Court of Canada ordered the production of wiretap evidence gathered as part of a Competition Bureau investigation. Recently, inFloate v Gas Plus Inc, 2015 ABQB 545 (“Floate”)…the Alberta Court of Queen’s Bench ordered the production of documents provided to Alberta Environment and Sustainable Resource Development (“ESRD”) during a regulatory investigation in parallel litigation related to a release of hydrocarbons from a gas station. At issue in Floate was whether an implied undertaking applied to shield production of documents gathered during a regulatory investigation; the Court of Queen’s Bench ruled that it did not, and ordered production of the documents at issue.

In Floate, a hydrocarbon release occurred at a gas station in Calgary. Following the release, ESRD investigated and charged several entities, including Gas Plus Inc. (“Gas Plus”) and Handel Transport (Northern) Ltd. (“HTNL”) with regulatory offenses related to the release. Gas Plus and HTNL were convicted. The Plaintiffs in Floate sued Gas Plus, HTNL, and a number of other entities, including the Minister of Environment and Sustainable Resource Development and the Her Majesty the Queen, as represented by the Minister of Health and Alberta Health Services (“AHS”; collectively, the “Crown”), apparently prior to the conclusion of ESRD’s investigation.

During its investigation ESRD obtained certain records from Gas Plus and HTNL (and other entities), including through a search warrant executed at Gas Plus’s premises. ESRD also obtained other records from Gas Plus, HTNL, and other entities during other, non-enforcement related, activities. AHS also gathered relevant records in the ordinary course of conducting its own regulatory activities (again, non-enforcement related).

After being advised that Gas Plus took the position that records in ESRD’s possession should not be produced in the litigation because they were subject to an implied undertaking, ESRD brought an application to the Court of Queen’s bench for a determination that no implied undertaking applied. Although, at the time ESRD brought its application, AHS had already produced all the records in its possession which it deemed were not privileged, AHS brought a similar application to that brought by ESRD.

The Court of Queen’s Bench Decision
Ultimately, the Court ruled that no implied undertaking applied to records held by either AHS or ESRD. The respondents argued that the law implied an undertaking by AHS and ESRD that records gathered through an investigation would not be used for a collateral purpose, because they were compelled to disclose the records as part of ESRD’s investigation. Further, the respondents expressed concern about records gathered by ESRD after the civil suit began; the respondents argued that the implied undertaking would ensure a regulator could not gain an advantage in civil litigation by continuing to obtain documents under the guise of an investigation. ESRD argued that, since it was facing an allegation of negligent investigation, it had to be allowed to rely upon the records it had gathered during the investigation. AHS argued that the records in its possession were the property of the public and were not protected by the same privacy interests as would ordinarily be engaged in civil litigation. AHS and ESRD also argued that, even if an implied undertaking applied, it should be lifted.

After reviewing the general principles which establish both the obligation to search for and produce records and the implied undertaking, and cases considering the application of the implied undertaking, the Court found that the implied undertaking did not apply to the records gathered by AHS or ESRD. First, the Court noted that the regulatory process is governed by statute, not the Courts. Accordingly, although the Courts imply an undertaking not to use records produced in litigation for a collateral purpose to enhance the judicial process, the Court had no authority to imply such an undertaking to enhance the effectiveness of the regulatory process. The implied undertaking is given to the Court, and regulators owe no undertaking of confidentiality to the Court. In addition, nothing in either AHS or ESRD’s governing statutes protected records gathered from disclosure in civil litigation.

Second, the Court found that the burden of the implied undertaking proposed by the respondents outweighed any benefit to imposing it. Imposing the implied undertaking would dramatically increase the work of litigants other than the regulator in identifying records they wanted to be produced, and formulating arguments as to why the undertaking should be lifted.

The Court also found that implying the undertaking in these circumstances would reverse the presumption of discoverability and, by not imposing the implied undertaking, the Court would increase the prospects of a just decision on the merits.

Finally, the Court concluded that, even if an implied undertaking did apply, it should be lifted in this case. The information sought was highly relevant to the litigation and, without them, the Court’s ability to rule on the merits of the case would be significantly impaired.

As with the Jacques decision, the Alberta Court’s decision in Floate means that materials gathered by regulatory agencies during their investigations may be discoverable in civil actions. Where Jacques considered an order for third-party production and allowed that documents may not be producible where there is a specific prohibition on their disclosure, Floate appears to narrow the possible argument against the production of the fruits of regulator’s investigation. Even though the evidence gathered through an investigation is, in a sense, compelled disclosure Floate establishes that no implied undertaking applies to documents which are the subject of an investigation and which are compelled to be disclosed to the regulator. As such, those documents may be producible in subsequent civil litigation if they otherwise meet the requirement for disclosure and production.

Somewhat less controversially, Floate also demonstrates that records gathered by regulators during ordinary regulatory procedures are also not subject to any implied undertaking. While, in Floate, both AHS and ESRD were defendants (and thus under a primary obligation to produce relevant and material records under their control), the holding in Floate will also likely apply where an application for third-party production is brought against the regulator. This is particularly so given the Supreme Court of Canada’s ruling in Jacques…. [Emphasis added]

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