The Overlap of Criminal and Civil Proceedings Has a New Frontier
It is increasingly common for counsel to find themselves dealing with a civil action in which one party may be facing criminal or regulatory sanctions arising from the same events underlying the civil action. For example, a defendant may be charged in criminal or regulatory proceedings for insider trading or tipping and may also be defending a civil action for, among other things, breach of fiduciary duty. Similarly, a company may commence a civil action against a former employee to recover stolen funds while that individual faces criminal fraud charges. These issues may also arise in personal injury, antitrust and environmental litigation. The Supreme Court of Canada's recent decision in R v Nedelcu raises some complex and difficult issues for counsel on the use of civil evidence in subsequent criminal proceedings.
Marius Nedelcu was involved in a motorcycle collision. His passenger, a co-worker, was seriously injured. Nedelcu was charged criminally with dangerous driving and impaired driving. The passenger sued Nedelcu in a related civil proceeding. At Nedelcu's examination for discovery in the civil matter, he testified under oath that he had no memory of the accident or anything that happened that day either before or after the accident. At the criminal trial, Nedelcu dramatically changed his testimony and claimed to have “a recollection of 90, 95 percent”. He proceeded to give a detailed account of the events leading up to and during the collision. The trial judge granted leave to the Crown to cross-examine Nedelcu using the transcript of his civil discovery evidence to test his credibility. On account of his prior statements, Nedulcu's testimony at the criminal trial was found to be unreliable. The trial judge found that the Crown had met its burden and Nedelcu was convicted. The Court of Appeal allowed Nedelcu's appeal and ordered a new trial. In a 6-3 decision, the Supreme Court allowed the Crown's appeal and restored the conviction.
The Court's Analysis
The Canadian Charter of Rights and Freedoms protects witnesses against self-incrimination. Section 13 of the Charter states: “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.” The Supreme Court has described this protection as a quid pro quo: a witness is compelled to give evidence, even if that evidence may incriminate him or her, on the condition that the evidence will not be used to establish his or her guilt. Of critical importance for U.S. counsel to recognize on their clients' behalf is that this bargain is different from that in the United States, where witnesses may rely on the Fifth Amendment to the U.S. Bill of Rights and refuse to testify.
Section 13 of the Charter supplements the protections afforded by the Canada Evidence Act, the various provincial evidence acts and the deemed undertaking rule. The deemed undertaking rule precludes the usage of evidence obtained on discovery for any purposes other than those of the proceeding in which the evidence was obtained. However, the deemed undertaking rule does not apply to evidence that has been filed or referenced during a hearing. By contrast, section 13 protects the accused from any compelled evidence, regardless of whether it was filed or given in open court.
While the court in Nedelcu agreed that civil discovery evidence is compelled (even though the defendant voluntarily defends the action and may not be subject to a subpoena or summons), the court was divided on whether its prior decision in R v Henry prohibited use of all prior compelled evidence at the subsequent criminal proceeding, or only incriminating evidence. In Henry, the court unanimously held that the Crown is prohibited from using a witness' prior compelled evidence against him or her in another proceeding. The accused was re-tried for murder, and told a different story than he had at the earlier trial. That evidence could not be used against him.
The majority of the court, relying on the narrow wording of section 13 of the Charter, found that only incriminating evidence is prohibited from being used to prove guilt (i.e., evidence to prove or assist in proving one or more of the essential elements of the offence). Using non-incriminating evidence for impeachment purposes does not engage section 13 because the rejection of an accused's testimony does not create dispositive evidence for the Crown. Since the prior evidence is not incriminating evidence (i.e., there was no quid), there cannot be a Charter violation. As such, Nedelcu's discovery evidence was not protected and the Crown's use of it was permissible (i.e., there can be no quo).
The dissenting judges would have prohibited the use of any evidence, including “innocent statements” that impeach the credibility of the witness. Their opinion was based on the general notion that even innocent statements that expose inconsistencies in the testimony of an accused will aid the Crown's case and, consequently, may help prove guilt.
Recent Consideration by the Court of Appeal for Ontario
The Court of Appeal for Ontario has already had an opportunity to consider the use-immunity principles and the Supreme Court's decision in Nedelcu in the context of compelled international testimony. In Treat America Limited v Leonidas, the plaintiffs in a U.S. class action sought to examine Robert Leonidas, the former President and Chief Executive Officer of Nestlé Canada Inc., to obtain information relevant to the American proceeding. Mr. Leonidas is also a target of an ongoing criminal investigation being conducted in Canada by the Commissioner of Competition in relation to alleged price-fixing in the confectionary industry. In order to obtain his evidence, a representative of the U.S. class action plaintiffs sought an order of the Ontario courts to compel Mr. Leonidas' testimony. The Ontario Superior Court gave effect to the Letter of Request for International Judicial Assistance issued by the United States District Court subject to two conditions that were designed to protect the use of Mr. Leonidas' testimony: (i) the court accepted an undertaking from the Commissioner's counsel to provide notice if the Commissioner sought access to transcript or if any party sought to make the evidence public prior to trial; and (ii) the court required that the U.S. court allow for notice to be given if a party sought to amend the protective orders already in place in the U.S. proceedings.
On appeal, one of the issues considered was whether the enforcement of the Letter of Request would violate Mr. Leonidas' Charter rights. The Court of Appeal briefly mentioned the Nedelcu decision and reiterated the principle that section 13 use-immunity protection is limited to previously compelled, incriminating evidence. The Court of Appeal was also asked to consider whether Mr. Leonidas' compelled testimony in the U.S. could affect his right not to have to disclose his position to the investigating authority on the basis that if the Commissioner could access the transcript, there would be a strategic advantage. However, given that the Commissioner agreed not to seek access to compelled testimony before charges are laid for investigative purposes, the court did not decide this issue. As a result, the Court of Appeal affirmed the lower court order compelling Mr. Leonidas to testify in the U.S. proceeding subject to three additional restrictions.
The Practical Consequences
Although Nedelcu arose in the criminal context, the practical impact may be broader than the court anticipated in terms of how it can affect the conduct of civil proceedings. In particular, when civil matters are proceeding in tandem with criminal or regulatory proceedings, there is the clear need for coordination and consultation between the defendant's criminal and civil counsel. For example, criminal counsel may seek to observe civil discoveries to assist civil counsel in dealing with potentially incriminating evidence from the client.
Courts have generally resisted allowing the timing of civil actions to be impeded by related criminal proceedings. As such, counsel may attempt to have the criminal proceeding resolved prior to discovery in the civil proceeding. There may be a need for judicial reconsideration of the principle that the potential disclosure through the civil proceedings of the nature of the accused's defence or of self-incriminating evidence will not necessarily satisfy the extraordinary-or-exceptional-circumstances test for obtaining a stay of the civil proceeding (Nash v Ontario). How far civil counsel can properly go in attempting to affect strategically the timing of civil proceedings or the answering of questions on discovery directly relevant to the criminal proceedings remains to be determined.
Counsel could attempt to seek an order that the discovery evidence be protected by a sealing order (usually discovery evidence is not filed until trial but opposing counsel may do so if the discovery evidence is relevant to an interlocutory motion). It may be difficult to obtain such an order given sealing orders usually require the moving party to prove both necessity and proportionality, and the court usually sets a high bar for impeding public access to court proceedings.
Nedelcu gives rise to a whole host of new issues. Renewed vigilance by counsel to protect a client's interests and avoid both unfairness and unanticipated consequences is needed. The well known caution “what you say in Canada (voluntary or compelled) can and will be used against you in a court of law” all of a sudden has new meaning in as yet unchartered territory of a new frontier.