Ontario’s Superior Court of Justice has ruled against the Ontario Securities Commission, overturning an OSC decision regarding whether documents it obtained in the case of Philip Services Corp. should be considered privileged.

Philip appealed an OSC decision dated December 7, 2004, in which the commission found that Philip had waived privilege in the case of 10 documents by providing them to its auditor, Deloitte & Touche LLP, without cautioning Deloitte that they were privileged or requesting the maintenance of confidentiality.

The documents included: correspondence between Philip and its legal counsel on various issues including Philip’s legal disclosure obligations in the US or Ontario; handwritten notes of two audit committee meetings of Philip and a letter written by Philip’s Canadian counsel enclosing a memo.

The OSC ruled that all the documents that were the subject of the motion are no longer privileged and may be disclosed. But the court disagreed.

The court found that, “all of the disputed documents were prima facie privileged; that the provision of copies to Deloitte in its capacity as auditor did not waive the privilege for all purposes, but only to the extent necessary to enable Deloitte to carry out its audit functions; that delivery by Deloitte to [OSC] staff of those documents received from Philip was unauthorized and incapable of defeating the privilege; that [OSC] staff has not established any implied waiver by Philip…; and that, except for [certain notes], all the disputed documents remain privileged and may not be used or relied on by [OSC] staff as matters stand at this time.”

The court allowed the appeal, set aside the order of the commission and, ordered the OSC to decide the motion in accordance with its reasons.