Jeopardy To The Privilege Against Self-Incrimination In Cross-Border Proceedings

THE RISK

One of the little-known risks to officers and directors of public companies carrying on business in both Canada and the United States is the potential for the loss of the constitutionally-enshrined privilege against self-incrimination where these individuals face criminal or regulatory [Ontario Securities Commission ("OSC") or United States Securities and Exchange Commission ("SEC")] investigations or charges and civil litigation involving the same allegations of misconduct. Recent high-profile examples include proceedings involving Karlheinz Schreiber, the former officers and directors of Live Entertainment Corporation of Canada (Livent), the Hollinger-related corporations, and the B.C. reference into the constitutionality of the polygamy provisions of the Criminal Code.

Under the constitutions of Canada and the United States, an individual has the right not to be compelled to incriminate himself or herself; however, that privilege can be lost entirely where the individual is involved in legal proceedings that engage that right in both countries. This may occur for two reasons. Firstly, the same constitutional right is protected differently in the two countries, which raises the risk that evidence given in Ontario could be used against an individual in the United States. Secondly, courts have frequently determined that these circumstances do not actually engage a Canadian constitutional right for which an Ontario court can fashion a remedy. Citing principles of comity, Ontario courts have offered few solutions to ameliorate the risk of the loss of the privilege, opining that to do so would be to apply the Charter extra-territorially to make up for "perceived deficiencies" in the manner in which the privilege against self-incrimination is protected under U.S. law. Other courts have expressly taken comfort from concepts relating to the inherent power of the court to control its own processes, the implied undertaking rule, and protective orders. However, to date there has been little consideration of what happens to the person at risk if those measures fail.

THE CONSTITUTIONAL PROTECTION

The United States approach: the right to silence

The Fifth Amendment to the United States Constitution provides that, "a witness shall not be compelled...to be a witness against himself".1

The protection operates by allowing a witness to refuse to answer any question or give any evidence on the basis that the answer may tend to incriminate the witness; however, a court in a civil action or regulatory proceeding may draw an adverse inference against the witness for a failure to give evidence. A witness cannot pick and choose what evidence to give, as answering some questions may result in a waiver of the privilege.

The Canadian approach: testimony with use protection

The United States approach was the common law position in Canada until it was changed by the Canada Evidence Act2 and the Ontario Evidence Act.3 The protection against self-incrimination is now enshrined in sections 7 and 13 of the Canadian Charter of Rights and Freedoms.4

7. Everyone has the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice.

...

13. A witness who testifies in any proceedings has the right not to have any incriminating evidence so given used to incriminate that witness in any other proceedings, except in a prosecution for perjury or for the giving of contradictory evidence.

Under the Charter, the witness need not specifically claim the privilege, as was formerly required under the Canada Evidence Act and Ontario Evidence Act. Where the individual's evidence is compelled, that evidence cannot be used against him or her. The protection offered is both use immunity and derivative use immunity, which means that there is protection for the evidence itself as well as evidence that could not have been obtained or the significance of which could not have been appreciated but for the evidence given.5

The Canadian approach represents a balancing of the right of the state to compel evidence of a witness in its search for truth against the right of an accused to have the state prove its case against him or her without the use of the accused's own evidence. The Supreme Court of Canada has described this as a quid pro quo:

When a witness who gives evidence in a court proceeding is exposed to the risk of self-incrimination, the state offers protection against the subsequent use of that evidence against the witness in exchange for his full and frank testimony; if the testimony is not full and frank, the witness is subject to prosecution for perjury or for the related offence of giving contradictory testimony.6

The Canadian approach also differs from that in the United Kingdom, where the common law right remains unchanged. The manner in which the privilege against self-incrimination is protected in the U.K. was summarized by the Supreme Court of Canada in R. v. Noel, as follows:

In the United Kingdom, the state of the law that existed in Canada prior to 1893 is the current state of the law, subject to some modifications. A witness in the United Kingdom is afforded the full right of silence granted by virtue of the common law privilege against self-incrimination. The privilege is best summed up in a passage of Goddard L.J., in Blunt v. Park Lane Hotel, Ltd., [1942] 2 K.B. 253 (C.A.), at p. 257:

. . . the rule is that no one is bound to answer any question if the answer thereto would, in the opinion of the judge, have a tendency to expose the deponent to any criminal charge, penalty, or forfeiture which the judge regards as reasonably likely to be preferred or sued for.

In England, the privilege against self-incrimination is set out in a series of rules, including the rule that an accused cannot be compelled to testify at his or her own hearing, the voluntary confessions rule, and the prohibition on questioning suspects without providing a caution: see R. v. Hertfordshire County Council, ex parte Green Environmental Industries Ltd., [2000] 1 All E.R. 773 (H.L.), at pp. 777-78, per Lord Hoffmann. The other rule falling under this rubric is the one conferring a right of silence on any witness. As Lord Hoffmann observes in Hertfordshire County Council, at p. 778, these rules are "prophylactic rules designed to inhibit abuse of power by investigatory authorities and to preserve the fairness of the trial".

The absolute nature of these rules can best be understood as a response to the abusive practices of the prerogative courts of the sixteenth and seventeenth centuries, including the Star Chamber. Fearing such abuse, absolute prohibitions were set up by judges in the eighteenth and nineteenth centuries. These absolute prohibitions are the ones that survive in England to this day. As can be seen, the principle of self-incrimination is, at its core, a principle animated by trial fairness and the prevention of abuse. These principles are given greater emphasis under the common law rule than that of seeking out the truth.7

Also, in the U.K., unlike in Canada and the United States, the right against self-incrimination can be invoked by a corporation.8 The right also allows a person to refuse to produce documents that incriminate, and this has been codified in the Civil Evidence Act.9

The effect of the two approaches

The practical effect is that the constitutionally-protected privilege against self-incrimination can be eviscerated because of these two different approaches to the manner in which this right is protected. There is surprisingly little jurisprudence in Canada on this issue, particularly at the appellate level, and the jurisprudence to date provides little comfort to those facing this jeopardy.

Therefore, lawyers advising persons at risk cannot assure them that the privilege will be protected. There are all sorts of strategic and tactical issues that will have to be considered, perhaps in consultation with counsel in several jurisdictions. For example, an individual may choose to refuse to respond to civil litigation with the risk that judgment will be ordered against him or her, in order to preserve the privilege in respect of criminal or regulatory proceedings. However, a significant adverse judgment in civil litigation has the potential to bankrupt an individual, who may then lack the financial resources to defend criminal/regulatory proceedings.

HOW THE RISK ARISES: CASE STUDIES

The issue has so far arisen most frequently in Canadian courts in two scenarios. The first and less common scenario is where the person is a party to criminal or regulatory proceedings in Canada and civil litigation in the United States. The second is where the person is a party to criminal or regulatory proceedings in the United States and civil litigation in Canada. Each of these scenarios is considered below.

Scenario 1: criminal/regulatory proceedings in Canada and civil litigation in the United States

In King v Drabinsky10, the defendant accused persons, officers and directors of public corporation Livent, were facing criminal prosecution in both the United States and Canada in respect of the same allegations of wrongdoing. These allegations were that the defendants had made material misrepresentations in financial information filed with the SEC on behalf of Livent. They had chosen not to appear in the U.S. criminal proceedings. The Canadian criminal proceedings had not yet gone to trial. In addition, there was a class action commenced by shareholders of Livent in the United States.

In the U.S. class action, the defendants sought the protection of the U.S. Constitution's Fifth Amendment by refusing to answer questions at depositions taken, as a result of which the U.S. court granted judgment against them (without drawing an adverse inference). The U.S. class action plaintiffs then brought an action and motion in Ontario for an order enforcing the U.S...