Western Canada Business Litigation Blog

B.C. Supreme Court Rejects Auditor General’s Application for Access to Basi/Virk Accounts

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On January 29, 2013, Chief Justice Robert Bauman of the BC Supreme Court released his decision (2013 BCSC 98) rejecting an application by the BC Auditor General for sweeping access to information and documents relating to the provincial government’s payment of legal fees on behalf of Mr. Basi and Mr. Virk, two former government employees charged with criminal breach of trust for allegedly receiving bribes and other benefits in connection with the sale of BC Rail.

The lengthy saga that ultimately led to Mr. Virk and Mr. Basi pleading guilty to four charges of breach of trust in October 2010 is well known as the case, dubbed “Railgate” in the media, received considerable attention.  Following the guilty pleas, public scrutiny shifted to the fact that the two men had their legal fees incurred in defending the charge paid by the government to the tune of (reportedly) $6 Million.  The issue caught the attention of the Auditor General who launched an investigation.  Ostensibly, the investigation was into the government’s general program for indemnifying employees (known as Special Indemnities), but there is no doubt that it was triggered by the Basi/Virk case given that it represented the largest single payout ever under the indemnity program.

The government cooperated with the Auditor General and had provided him with considerable information and records in its possession.  In addition, the Auditor General had obtained access to further information through an earlier court application.  However, Messrs. Basi and Virk continued to resist production of certain records including the contents of defence counsel’s files and unredacted copies of the relevant invoices.  The argument advanced on behalf of Messrs. Basi and Virk was that the invoices and related documents would disclose information concerning legal advice and strategies and that the information was therefore protected by solicitor-client privilege.

For his part, the Auditor General argued that he was entitled to broad access to documents in order to conduct an audit or investigation pursuant to his governing statute, the Auditor General Act, S.B.C. 2003, c. 2.  In particular, section 16 of the Act provides that:

“Despite any other enactment, the Auditor General, in the conduct of the Auditor General’s duties, must be given access to records, information and any explanations required from a person or organization for the Auditor General to exercise the powers and perform the duties of auditor General.”

In his submission, the words used in section 16 must be given their ordinary meaning and be construed as extending to materials and information otherwise subject to solicitor-client privilege because such access is necessary in order for the Auditor General to properly perform his required function. 

In rejecting the Auditor General’s position, Chief Justice Bauman considered expert evidence as to what was necessary in order for the audit process to be valid and complete and whether access to otherwise privileged information was required to achieve that objective.  He accepted the opinion of the former Provincial Auditor of Saskatchewan that all auditors encounter some difficulty in accessing information of various types and that absolute assurance is not attainable.  Accordingly, the goal of the auditor is to reduce risk to the lowest level practicable.  In Chief Justice Bauman’s view, that was an important consideration particularly in light of the fact that the Auditor General did have access to extensive information voluntarily produced by the government.

The determinative factor however for Chief Justice Bauman, was the need to respect, and protect, solicitor-client privilege.  He noted recent Supreme Court of Canada authority where that Court again emphasized that solicitor-client privilege is fundamental to the proper functioning of our legal system and that it must be as close to absolute as possible.  Chief Justice Bauman recognized that solicitor-client privilege can be abrogated by the legislature where it uses clear and unambiguous language to do so, however in his view, section 16 of the Auditor General Act does not meet that test.  Absent language clearly directed at overriding privilege, the Chief Justice was not prepared to read or infer such an intent into the statute.

Recognizing that his decision might be viewed by some as inhibiting the Auditor General in his quest for transparency and accountability in government spending, the Chief Justice went to some length to explain why solicitor-client privilege must prevail.  He said:

“Solicitor-client privilege, as the case law repeatedly reminds us, is fundamental to the proper functioning of our legal system.  It is virtually an absolute privilege and must remain so.  Properly understood, the privilege does not act as a shield, obscuring from view matters that should be publically aired.

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Solicitor-client privilege is not a lawyer’s “trick” to avoid proper scrutiny of her client’s conduct of the steps taken on his or her behalf during the retainer, it is a critical civil right.  All citizens must be able to freely discuss their legal positions with their lawyers and to take frank advice thereon, secure in the knowledge that this relationship-that between solicitor and client-is as sacred as any secular business relationship can be.

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It would be wrong to conclude that the result in this case represents the triumph of secrecy over transparency and accountability.  It rather represents the reaffirmation of a principle which is a cornerstone value in our democracy and which has been so for hundreds of years.”

It is hard to improve on the Chief Justice’s eloquent defence of solicitor-client privilege other than to note that it is a right that belongs to the client, not the lawyer, and that it is intended to provide equal protection to individuals such as Messrs. Virk and Basi, who have pled guilty in a highly public and highly political case, as well as to innocent people who have been wrongly charged.

This decision does not bring an end to the Auditor General’s investigation and he is still expected to prepare a report based upon the information in his possession.  Regardless of what he finds, it is likely that the fall-out from Railgate will continue to be with us for a long time to come.