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CCCA_V2No3_Privilege-FIN.qxd:CCCA_V1No1_DriversSeat-FIN.qxd 9/18/08 5:02 PM Page 18 Cover “ If you put ‘P&C’ on a docu- ment and then send it to the entire firm of five or six thousand people across the country, it’s unlikely that it will be accorded solicitor-client privilege. Make sure that [those individuals] have a need to know the information based on making a manage- ment decision, and that they are actually looking to you to provide them legal advice on that management decision. ” Peter Sahagian Partner and General Counsel KPMG, Toronto Certainly, the European Union thinks so. In September 2007, “I always tell the CLO or legal officer that they must ensure — in the case of Akzo Noble Chemicals Ltd., the European Court and now the Québec bar makes it a requirement —that they of First Instance held that communications with in-house coun- must have a direct line to the chairman of the board,” Langlois sel were outside the scope of solicitor-client privilege, based on says. “Because the ultimate body to whom everybody reports in the conclusion that in-house counsel do not offer independent the organization is the board.” legal advice because they are employees of the corporation. Again, however, a recent decision may complicate that report- To maintain privilege, it would seem, a European corporation ing line. In Delaware, widely seen as a business-friendly state and must involve outside counsel. And Canadian corporate counsel home to the headquarters of many Fortune 500 companies, the must now be aware that their communications with foreign Court of Chancery recently held in Ryan v. Gifford that a corpo- counterparts are not necessarily privileged. ration waived privilege when a special committee of its board While lawyers in private practice can face similar ethical dilem- reported its findings to the full board, which included directors mas — clients have been known to ask a lawyer to do something who were named as defendants in pending action. he or she cannot do — the difference, points out Langlois, is that “To my mind, that’s a very, very unfortunate decision,” says Peter the law firm lawyer is one step removed from his or her client. Sahagian, a partner and general counsel at KPMG. “The board has He has advised in-house counsel to refuse appointments where the ultimate fiduciary responsibility and stewardship role to make they are called upon to report to the company’s chief financial sure the company is being governed properly. To say that its very officer, “because the CFO is the most sensitive position in the subcommittee can’t report to it the result of an investigation con- company. So to me, it’s important that the chief legal officer be at ducted by an external law firm, retained by the company itself, least on the same level as the CFO,” with a reporting line to the seems a very difficult and unfortunate decision. To my mind, a sub- MARK STEGAL CEO and, ideally, the chairman of the board. committee of the board showing a report to the full board is not 18 CCCA Canadian Corporate Counsel Association FALL 2008