A Nova Scotia Securities Commission (NSSC) panel has found that expert evidence isn’t privileged, and ordered that respondents in an enforcement case to disclose the information an expert relied on in a producing a report used for their defence.

The NSSC handed down a decision Thursday ordering that respondents in a regulatory hearing, Allen Sheito and Gary Woods, produce copies of all materials used by their expert in preparing his May 24 report. In particular, it ordered that they disclose copies of all materials considered by their expert “which had an effect on, explains or contradicts his opinion”, including: his letter of engagement; any preliminary or draft reports; any relevant file materials; and, any correspondence relevant to the reports.

In January, the NSSC alleged that the pair engaged in improper trading designed to keep shares of a venture firm, Mountain Lakes Resources Inc., from falling, which contributed to a misleading appearance of trading activity in its shares. The allegations have not been proven.

The decision indicates that NSSC staff engaged an expert, Kim Stewart of Market Resolution Inc., to produce a report on the trading activity in question. And, the defence engaged Dean Holley with CMC Capital Market Consulting Corp., who produced a report analyzing the conclusions of the staff’s expert report.

NSSC staff sought more information about the basis of the defence report, and argued that litigation privilege should not apply to an expert report in a regulatory proceeding, as it does not in court cases. The defence contended that these principles should not apply to a regulatory hearing because the rules “place no obligation on respondents to disclose all relevant documents and only staff is obligated to make full disclosure”, and there’s no precedent for requiring that sort of disclosure.

But the panel sided with NSSC staff, finding that equal disclosure obligations apply to regulatory proceedings too. It found that once either side decides to call an expert to give evidence, “litigation privilege is waived in respect to a broad category of information which is relevant to the expert in drawing his conclusions and obligates disclosure of that information to allow the commission to evaluate the objectivity of the expert’s opinion.”

“We conclude that what must be disclosed is not solely that which is relevant to the statement of allegations but whether such material would be relevant in assessing the independence, objectivity and reliability, of the respondent’s expert,” it says.

The order notes that if there is any question about whether certain documents must be disclosed, they can be submitted to the commission for a ruling on whether it’s required or not.