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Former Nortel CEO Frank Dunn leaves the Toronto court house Jan. 12, 2012. Mr. Dunn and other former Nortel executives are charged with fraud.Fernando Morales/The Globe and Mail

Notes taken by lawyers for former Nortel Networks Corp. executives Frank Dunn and Douglas Beatty will be important evidence at their criminal trial and do not meet the tests to be barred under "litigation privilege," the Crown said Wednesday.

Crown attorney Robert Hubbard told a Toronto court that the concept of litigation privilege was created to allow lawyers to commission work or prepare documents for use in lawsuits without having to worry the materials would be disclosed to the other side.

Notes taken by lawyers when Mr. Dunn and Mr. Beatty were questioned by Nortel investigators in 2004 don't fit the concept of litigation privilege because they were taken at meetings with "the other side" and contain nothing confidential related to litigation strategy, Mr. Hubbard said.

"What being sought to be protected is fundamentally inconsistent with the purpose of the [litigation privilege]rule," Mr. Hubbard said.

The trial of three former Nortel executives is hearing arguments this week about whether notes taken by lawyers for Mr. Dunn and Mr. Beatty in 2004 can be used by the Crown in their fraud trial.

Lawyers for the two men say the notes are covered by litigation privilege, which exempts documents from evidence if they are prepared by or for lawyers for use in legal cases. The Crown wants the notes admitted to provide evidence about what the two men said during internal interviews with company investigators.

Mr. Hubbard suggested the gist of Mr. Dunn's comments in his 2004 interview was that he was unaware of many of the accounting matters being revealed to him by investigators hired by Nortel's board.

"It's fundamentally different than what the defence is advancing at this trial," Mr. Hubbard said.

The defence has primarily argued at the fraud trial that the accused believed the accounting decisions at Nortel were appropriate at the time.

Four lawyers for Mr. Dunn and Mr. Beatty – including Bay Street veterans Thomas Heintzman and Jim Douglas – have been subpoenaed to testify at the trial about comments made by their clients in internal interviews in 2004.

Before they testify in detail about the interviews, however, Mr. Justice Frank Marrocco of the Ontario Superior Court has been asked to rule whether their notes from the meetings can be used as evidence at the trial.

Judge Marrocco said Wednesday he will not immediate rule on the issue, but will make a decision in future weeks before the lawyers are scheduled to return to the trial as witnesses.

Mark Sandler, a lawyer representing Mr. Dunn at the fraud trial, argued Wednesday the notes are subject to litigation privilege, because they were prepared by Mr. Dunn's lawyers in anticipation of future legal action.

"It's about as quintessential a litigation purpose as one could have," Mr. Sandler said.

Many litigation matters emerged after the May, 2004, interview, Mr. Sandler added, and they are ongoing today, so the privilege is still needed. Mr. Dunn is facing legal action by the Ontario Securities Commission and the U.S. Securities and Exchange Commission, and is also involved in lawsuits with Nortel, he said.

Mr. Sandler said most past cases where judges have granted exceptions to compel disclosure of documents involving litigation privilege were civil court matters involving lawsuits, and were not criminal court matters, where the quality of evidence must be even higher.

Abbey (Junior) Sirivar, one of Mr. Dunn's lawyers who took notes at the 2004 interview, testified Tuesday he was not confident the notes were a faithful recording of the meeting. Mr. Sirivar said he could not keep up with the rapid dialogue at the day-long meeting and eventually stopped trying to record all the questions and answers. He said he didn't see documents that were being presented to Mr. Dunn and was unfamiliar with accounting terminology used at the meeting.

Mr. Sandler said the notes may have been good enough for lawyers to use afterward to identify the key legal issues "at play" for Mr. Dunn at the time, but they would not meet the "forensic" standards of evidence at a criminal trial.

Mr. Dunn, Mr. Beatty and former Nortel controller Michael Gollogly are accused of fraudulently manipulating Nortel's accounting reserves in 2002 and 2003 to push the company to profitability and trigger bonuses for themselves.

The men have denied all the allegations.

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