SCC Upholds Solicitor-Client Privilege

In Chambre des notaires (2016 SCC 20) and Thompson (2016 SCC 21), released on the same day, the SCC affirmed the importance of solicitor-client privilege as it applies to CRA written requests (“requirements”) to provide client information and a lawyer’s accounting records: both requirements were found to be unconstitutional. As a result, any lawyer who receives a CRA letter requesting such information should inform affected clients of the letter and their rights under this doctrine.

Chambre des notaires concerned Quebec notaries who received requirements in the course of an audit, asking for specific data about their clients that could be used for tax collection or audit purposes. The SCC, emphasizing the quasi-constitutional status of solicitor-client privilege, found that the Act’s requirement scheme contained a number of defects, including the provision that the CRA was not obliged to inform the clients of the letters sent to their lawyers. Thus, the requirements scheme violated section 8 of the Charter as an unreasonable intrusion on an individual’s reasonable expectation of privacy, and could not be saved by the minimal-impairment-of-rights exception in section 1. The SCC made a similar finding about the Act’s exclusion of protection for a lawyer’s accounting records in its definition of solicitor-client privilege, noting that the term “accounting record of a lawyer” is not defined by the Act. These records may reveal privileged names, descriptions of the engagement between the lawyer and the client, and aspects of litigation strategy.

The companion case, Thompson, involved a lawyer who received a requirement from the CRA for his accounting records, including receivables, for the purposes of collecting on the lawyer’s personal taxes owing. The SCC stated that having a court determine whether solicitor-client privilege attached to certain documents was insufficient to safeguard clients’ rights. In other words, because a lawyer is not the client’s alter ego (roughly, a second self), the client should be notified when a court considers making an order to require disclosure. The client should be given an opportunity to assert privilege over the information being demanded by the CRA and should be allowed to make submissions on its own behalf.

In obiter, the SCC opined in Chambre des notaires that the defects of the requirement scheme could “easily be mitigated” to respect solicitor-client privilege; it referred to a settlement agreement reached between the Quebec attorney general and the Chambre regarding similar requirement provisions found in the Quebec Tax Administration Act. The settlement provided, among other things, that before issuing a formal demand to a notary or lawyer, Revenu Québec had to attempt to obtain the requested documents from the public record, the taxpayer, other parties to the document, financial institutions, and the accountant who prepared the document. Even if the lawyer had sole possession of the document, Revenu Québec had to first request permission from the taxpayer before sending a formal demand. In turn, the formal demand had to specify the type of information requested and a rationale explaining why solicitor-client privilege did not apply. It remains to be seen whether the CRA will adopt a similar policy.

Sze Yee Ling and Nathan Wright
JGW Business and Tax Law LLP, Toronto

Canadian Tax Focus
Volume 6, Number 3, August 2016
©2016, Canadian Tax Foundation