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The risk of self-incrimination in cross-border disputes: Hollinger case study – Part I

2 minute read

The numerous proceedings involving the former officers and directors of the United States (U.S.) and Canadian Hollinger-related corporations offer a recent high-profile example of the risks to the privilege against self-incrimination arising from cross-border parallel proceedings. The defendants faced U.S. and Canadian civil litigation (including shareholder class actions), Ontario Securities Commission and Securities & Exchange Commission prosecutions, U.S. criminal proceedings, and Canada Revenue Agency and Internal Revenue Service investigations. The Hollinger corporations themselves were subject to bankruptcy proceedings in both the U.S. and Canada.

In Catalyst Fund General Partner I Inc. v. Hollinger Inc., [2005] O.J. No. 2191 (SCJ), aff'd [2005] O.J. No. 4666 (CA), certain officers and directors of Canadian corporation Hollinger Inc. faced proceedings by a shareholder under the oppression remedy provisions of the Canada Business Corporations Act (“CBCA”) at the same time as these other proceedings were also extant.

The applicant shareholder obtained an order removing these officers and directors and appointing an inspector to investigate certain payments made to them, which the applicant alleged were improper. The court-appointed inspector later sought to examine the former officers and directors under oath, as permitted under section 229 of the CBCA.

The defendants resisted the inspector's request for an examination on the ground that it would result in their inability to rely on the Fifth Amendment protection against self-incrimination in the U.S. criminal proceedings. They argued that any examination should at least be postponed until the inspector had exhausted other sources of information, in light of the real and likely risk that the transcript from an examination in Canada would find its way into the U.S. proceedings.

The Superior Court applied the analysis in Royal Trust Corporation v Fisherman and determined that it could impose effective safeguards to protect against self-incrimination concerns as part of its control process. In particular, the Court emphasized that an individual could apply for directions with respect to potentially incriminating questions before an answer was required, the inspector was not a compellable witness under the CBCA, the examination could take place in camera, and a protective order could be sought. The Court also pointed to unique aspects of an inspector's report, such as the privilege that is attached to material gathered by an inspector.

Ultimately, the inspector did not proceed with the examination and the safeguards relied on by the Court were never tested. However, questions remain about the effectiveness of such safeguards. For example, it is easy to imagine that Ontario evidence could make its way to the U.S., in violation of a protective order, and the witness who is affected may have little practical remedy.

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Lisa C. Munro, FCIArb, Q.Arb

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