Canada (National Revenue) v Clark, 2012 FC 950

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Asserting Solicitor-Cleint Privilege and Protecting Lawyer’s Duty of Confidentiality

Canada (National Revenue) v Clark, 2012 FC 950

The issue was whether some or all of the documents were subject to solicitor client privilege as contemplated by subsection 232(1), so as to exempt them from production.

The Court held that the lawyer (Respondent) had not satisfied the burden of establishing privilege, that the duty of confidentiality does not hinder the operation of a production order, and that the documents sought in this case were not “communications” but merely evidence of acts and transactions.


The MNR was asking for an order of compliance under section 231.7 of the ITA, so as to have three separate parties provide certain documents and information to the MNR. The Respondents acknowledge not having provided all of the information sought by the MNR.

IBI (one Respondent) facilitates investments between potential immigrants and businesses located in PEI pursuant to a provincial immigration program. 530 (numbered company respondent) was the sole shareholder of IBI, and Mr Clark was the sole director of both corporations. Mr. Clark is a lawyer whose sole practice is acting as in house counsel to both corporations.

The CRA began to audit the business and sought document production from all three parties pursuant to s 231.2. The documents sought were mainly banking and accounting information in relation to the immigration program.  Some documents were provided including a sealed packaged marked “privileged” that purportedly contains electronic accounting information.

The Respondent argued that documents may either contain information subject to client confidentiality or solicitor-client privilege, focusing on documents that contain party names, applicant names, and personal and confidential information and names of applicants.  Thus, the lawyer applicant was concerned not only with solicitor-client privilege, but also with the duty of confidentiality imposed by the code of professional conduct applicable to him.


Subsection 231.2(1) of the ITA gives the MNR the power to require any person to provide any requested information and documents, upon notice.  Tax payers and/or third parties may be served notices so long as “the Minister’s purpose is related to the administration and enforcement of the ITA”, or a Tax Information Exchange Agreement or a Tax Treaty with another country.

If a person fails to comply with the request, the MNR may force compliance via section 231.7.  Subsection 231.7(1) allows the minister to apply summarily for a court order requiring the person to provide the information or documents sought under subsection 231.2(1).

Before a compliance order may be issued, the judge must be satisfied that:

  • (a) the person was required under section 231.2 to provide the information or document, AND failed to do so; and
  • (b) “in the case of information or a document, the information or document is not protected from disclosure by solicitor-client privilege (within the meaning of subsection 232(1))”.

Subsection 232(1) defines Solicitor-client privilege as:

“solicitor-client privilege” means the right, if any, that a person has in a superior court in the province where the matter arises to refuse to disclose an oral or documentary communication on the ground that the communication is one passing between the person and the person’s lawyer in professional confidence, except that for the purposes of this section an accounting record of a lawyer, including any supporting voucher or cheque, shall be deemed not to be such a communication. [emphasis added]

Subsection 231.7(2) requires that the person be given at least 5 clear days of notice prior to an application being heard, and subsection 231.7(3) grants the hearing judge the discretion to impose such conditions on the order as the judge considers appropriate.

The Court recognized Parliaments intention to grant the MNR powerful tools while at the same time respecting solicitor-client privilege.  There is no presumption of privilege, the persuasive burden lying with the person claiming privilege to establish its existence (see B v Canada, [1995] 5 WWR 374 at para 33 (BCSC), 3 BCLR (3d) 363).  The conditions necessary for solicitor-client privilege to exists are set out in Canada (Minister of National Revenue – MNR) v Reddy, 2006 FC 277 at para 12, [2006] 3 CTC 17,[Reddy]:

  • (a) there must be an oral or written communication;
  • (b) the communication must be of a confidential character;
  • (c) the communication must be between a client and his agent and a legal advisor; and
  • (d) the communication must be directly related to the seeking, formulating, or giving of legal advice.

The Court noted some other points, including:


The respondent argued that Mr. Clark provided legal information and guidance to immigrant applicants, investee companies, and immigration consultants throughout the course of the application process through the government program.  The respondent acknowledged that accounting records of a lawyer are not subject to privilege, but argued on the basis of Organic Research Inc v MNR (1990), 111 AR 336 (QB), [1991] 1 CTC 417, that the documents sought are nonetheless subject to privilege due to being records of clients who are not themselves under investigation. The decision in Organic  only establishes that that a lawyer’s accounting records of clients are not “an accounting record of a lawyer” for the purposes of the statutory exception to solicitor-client privilege, and NOT that such records are subject to privilege.

The Court noted that the lawyers duty of confidentiality is a serious concern, but that this duty does not exempt a lawyer from the operation of a compliance order pursuant to section 231.7 (but will provide a complete answer to the Law Society).

The Court also noted that the claims of privilege were admittedly a remote possibility. Although Mr. Clark usually or often advised various persons involved in the investment program who were aware he was a lawyer, Mr. Clark also usually or often advised these same people that he was not their lawyer. The court was satisfied that none of those persons would have concluded that Mr Clark was their lawyer, and therefore any communications were not between a client and legal advisor.

The Court concluded that the burden of establishing privilege has not been satisfied, and that the documents sought by the minister are merely evidence of an act or transaction, not of a “communication” that attracts solicitor-client privilege.

– Sas Ansari, BSc BEd PC JD LLM PhD (exp) CPA In-Depth Tax 1, 2 &3

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