Lawyers for Laurentian University and Ontario Auditor General Bonnie Lysyk faced off in court Dec. 6 regarding a dispute over whether LU is required to provide the auditor general’s office with privileged information.
Laurentian declared insolvency last winter, and is undergoing court-supervised restructuring under the Companies’ Creditors Arrangement Act (CCAA).
It is also undergoing a value-for-money audit by the auditor general’s office, but has refused to provide privileged (confidential) information to the audit team.
Due to this dispute, Lysyk has asked the courts for an interpretation of what is allowed for under the Auditor General Act.
The matter was heard Monday morning by Chief Justice Geoffrey Morawetz, the judge who has dealt with most matters related to Laurentian’s insolvency this year.
At issue in the case are a couple of sections of the Auditor General Act, most notably section 10, which deals with the “duty to furnish information” to the auditor general, and how that information must be treated.
In part, section 10 of the legislation says that “every ministry of the public service, every agency of the Crown, every Crown controlled corporation and every grant recipient shall give the Auditor General the information regarding its powers, duties, activities, organization, financial transactions and methods of business that the Auditor General believes to be necessary to perform his or her duties under this Act.”
It also says the auditor general “is entitled to have free access to all books, accounts, financial records, electronic data processing records, reports, files and all other papers, things or property” that the office “believes to be necessary to perform his or her duties under this Act.”
The legislation also says that “a disclosure to the Auditor General under subsection (1) or (2) does not constitute a waiver of solicitor-client privilege, litigation privilege or settlement privilege.”
Lawyers for the two parties also referred to another section of the Auditor General Act (part of section 27), which refers to what happens to privileged information when it is disclosed to the auditor general.
It says “a person required to preserve secrecy under subsection (1) shall not disclose any information or document disclosed to the Auditor General under section 10 that is subject to solicitor-client privilege, litigation privilege or settlement privilege unless the person has the consent of each holder of the privilege.”
Brian Gover, counsel for Laurentian University, said that Lysyk’s office contends that the legislation compels the university to provide her with everything including Gover’s own emails to LU about the very court application being dealt with Dec. 6.
But he said this is not what the legislation intended.
“She says that she needs this so she can use it to inform her audit,” he said. “She asserts that a failure by Laurentian’s directors, officers and employees to disclose privileged information is an obstruction of her audit.
“That is not what the legislature intended in Section 10. Section 10, properly interpreted, allows for, but does not require, the production of privileged information.”
Richard Dearden, counsel for the auditor general’s office, admitted that the legislation “could have been clearer” when it comes to whether audit subjects are required to provide privileged information.
But his submission is “that the information that was subject to solicitor-client privilege was going to be disclosed to the auditor general under section 10.”
He also said “section 10, read as a whole, in my submission, provides the auditor general right of access to grant recipients’ privileged information and documents.”
Gover, speaking for Laurentian University, also brought up some specific concerns about the idea of releasing privileged information to the auditor general.
He said the auditor general uses privileged information to inform her report, even if she does not disclose it directly.
“Having access to privileged information allows the Auditor General to reverse engineer or report to use the information obtained in the privileged documents to create a narrative that has the same effect as disclosing the information directly,” Gover said.
It just takes one mistake “for privileged information to be disclosed forever,” he said.
Laurentian’s lawyers are also making the argument that if section 10 of the Auditor General Act “did abrogate privilege as the auditor general contends, it would be unconstitutional.”
A factum filed by Laurentian on the subject said If section 10 abrogated privilege, it would be “in flagrant violation of the Charter of Rights.”
“The Auditor General’s interpretation of s. 10 would infringe two Charter rights, the right to be free from unreasonable search and seizure under s. 8, and the right not to be deprived of life, liberty and security of the person unless in accordance with the principles of fundamental justice, under s. 7.”
Auditor general lawyer Richard Dearden said Laurentian had not taken the proper steps to make what he argued is a charter challenge.
Later in the hearing, Laurentian’s lawyer, Brian Gover, said the university’s intent was not to make a charter challenge at this time.
“So I take it that for my purposes, it’s just interesting reading and colour,” Chief Justice Morawetz said.
Gover said if Morawetz does rule in favour of the auditor general’s office, “those aspects of our factum may be taken to foreshadow what may be then the next step in our litigation, and that would be a charter challenge.”
Morawetz said he would take the matter under reserve (meaning he will release his decision at a later date).
“I will deal with it as soon as possible,” he said, adding that his docket is quite busy.
Before the hearing wrapped up, lawyers for Laurentian University and the auditor general’s office met in a private breakout room to come to a consensual resolution regarding who will bear the costs of the court application.
Given the financial position Laurentian finds itself in, if Morawetz rules in favour of the auditor general’s office, they will not ask for Laurentian to pay the costs of the application.
However, if Morawetz rules in favour of Laurentian, the auditor general’s office will pay $25,000 in legal costs.