Solicitor-Client Privilege and Requirements – Accounts of the Lawyer

MNR v Duncan Thomson, Leave to appeal to SCC granted March 13, 2014, Docket 35590

The SCC granted the application for leave to appeal but dismissed the application for leave to cross-appeal from the decision of the FCA, 2013 FCA 197. The summary provided by the SCC reads:

The respondent is a lawyer who is the subject of enforcement proceedings pursuant to the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.).  The Canada Revenue Agency (CRA) issued a Requirement seeking information and documents pertaining the respondent’s income and expenses, and assets and liabilities, including a current accounts receivable listing.  The respondent provided some, but not all, of the information set out in the Requirement.  The CRA subsequently found that he had provided no details regarding his accounts receivable other than a total balance owing.

The respondent challenged the Requirement, making solicitor-client privilege the focus of his objection. He sought a determination of whether s. 231.2(1) of the Income Tax Act can be interpreted, applied or enforced so as to require a lawyer who is the subject of enforcement proceedings by the CRA to divulge information about his clients, information which he argued is protected by solicitor-client privilege.  He also alleged that the Requirement was akin to an unreasonable search or seizure and thus was contrary to s. 8 of the Canadian Charter of Rights and Freedoms.

The FCA had concluded:

[68]                                As announced at the outset of these reasons, I propose to partially allow the appeal although, as did the Judge, I dismiss all of Mr. Thompson’s arguments.  In my respectful view, however, the Judge’s order was premature with respect to the accounts receivable listing. Once he had decided that Mr. Thompson’s position on that issue could not stand, the Judge had to take the appropriate steps to verify whether solicitor-client privilege protected any of Mr. Thompson’s clients individually. The appellant had built his case on an erroneous understanding of the law of solicitor-client privilege. As a result, he had made the blanket statement that clients’ names are always privileged. On a proper understanding of privilege and the construction of the statutory provisions and rules at play, it is possible that some of the appellant’s clients’ names are protected by solicitor-client privilege. If that is the case, these clients ought to have the opportunity to assert this privilege, and Mr. Thompson should be given the chance to lay the proper evidentiary foundation on their behalf.

[69]                                There is no specific obligation on a lawyer to advise a client when asserting a right on his or her behalf, when this right is in jeopardy. That being said, provincial law societies impose general obligations on lawyers, or make recommendations to lawyers, which suggest that the appellant should be asserting and pursuing the claims of solicitor-client privilege after having informed his clients and having obtained their instructions in this regard.

[70]                                With respect, I find that the Judge, as guardian of the law, should have fashioned a remedy addressing the critical issue of privilege before making his Order. The Act provides for the compliance order to be made by a Judge ensuring enough flexibility and discretion for him or her to remain the protector of the rights attached to solicitor-client privilege.

[71]                                As he did not fashion such a remedy, I propose to return the file to the Federal Court for a new hearing, on the question of the accounts receivable listing. Mr. Thompson may then have the opportunity to get his clients’ instructions and, on the basis of these reasons, may file new sworn affidavits explaining why individual clients’ names are privileged, if in fact this continues to be the case. I will not impose a time limit to do so and leave it up to the Federal Court to set the timelines for the parties to exchange further affidavits or materials. However, I should add that the clients on whose behalf the appellant is claiming privilege should produce their own affidavits explaining the history of their accounts. Copies of such affidavits should be served on the respondent, with clients’ names redacted.

[72]                                As for the rest of the missing information and documents, as listed in Ms. Maria Van Dyk’s affidavit (appeal book, volume 1, page 35 and ff.), the Judge’s Speaking Order stands. The missing information and documents shall be produced as ordered and in an unredacted version within thirty (30) days of the judgment to issue. For the sake of clarity, the relevant paragraphs of Ms. Van Dyk’s affidavit describing the missing information and documents are reproduced in an Annex to these reasons.

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