Canada: Privilege And Tax Law Advice: Who Gives The Advice Matters

Last Updated: March 14 2013
Article by Do-Ellen Hansen

Most Read Contributor in Canada, November 2017

"In this world nothing can be said to be certain, except death and taxes." (Benjamin Franklin, 1817). But if you get the right legal advice, you can at least be fairly certain that you're not paying more tax than you need to. And legal advice (or lawyer-client) privilege means you can be certain that the government won't be able to compel disclosure of the legal advice you received to do your tax planning. Right? Well, maybe.

Legal advice privilege has always been described as a right of the client. But the client's ability to claim that right depends on who gave the advice. So far, English and Canadian courts have upheld the traditional rule that, unless the advisor was a lawyer, privilege will not shield the legal advice from scrutiny by the taxing authorities. A January 2013 decision of the highest court in the United Kingdom (referred to as the Prudential case) reflects that the profession of the advisor matters at least as much as the nature of the advice. Given the rationale for legal advice privilege, there's a good argument that the advisor's profession should be irrelevant as long as legal advice is given in confidence by a qualified professional. But, until Canadian law changes, clients need to keep in mind that they will only be able to claim legal advice privilege if they involve a lawyer in obtaining the legal advice. Legal advice received directly from accountants is not privileged, no matter how expert in tax law the accountants may be.


Since the 16th century, the common law has upheld a person's right to receive legal advice in confidence, whether or not the advice is sought in contemplation of litigation. This right was recognized by the courts as promoting the administration of justice. It was explicitly not tied to any particular importance of the legal profession. In other words, it was the receiving of legal advice in confidence that gave rise to the privilege – not the profession of the advisor. This right has become known as legal advice privilege or solicitor-client privilege. The Supreme Court of Canada recognizes this privilege as a substantive constitutional right, deserving of the strongest protection. Unless the client waives it, the only two exceptions are public safety and "innocence at stake."

Originally, the focus of legal advice privilege was whether legal advice was sought and given in confidence: if it was, then it was privileged. Some judges have recognized that the focus on lawyers in the cases dealing with privilege flowed from the historical reality that, in the past, legal advice was generally available only from lawyers. Over time, however, the courts have modified their focus. Instead of focusing on whether the client received legal advice in a confidential, professional advisory context (sometimes known as the functional approach), the determinative issue has become whether it was a lawyer who gave the advice.


In a dispute with the taxing authorities, it is often to your advantage not to have to disclose the legal advice on which you relied in structuring your affairs. This is why legal advice privilege matters. As observed by one judge in the Prudential case:

Legal advice privilege is sometimes described as essential to the effective administration of justice, ... [T]he relevant public interest was in reality the rule of law, which depends upon the citizen being able without inhibition to find out what his legal position is. The complexity of the modern law and its progressive invasion of the interstices of daily life, have made this a public interest of greater importance than ever before. It is perhaps particularly significant in the area of tax law, where the citizen is brought up against the power of the state and the law is often technically complex.

Tax law is complicated, especially if your affairs are complex, or your business is multi-faceted, large or international. Creative, competent tax advice is essential. And these days it is often highly knowledgeable and skilled tax accountants who are the preferred tax advisors.


The Prudential group of companies implemented a tax avoidance scheme devised by their tax advisors, PricewaterhouseCoopers. As required by UK legislation, PwC disclosed the scheme to Her Majesty's Revenue and Customs. A tax inspector served notices on Prudential to obtain disclosure of documents. Prudential disclosed some, but asserted that legal advice privilege protected the rest. The inspector obtained a court order that Prudential disclose the rest. Prudential applied for judicial review of that order. Two levels of court held that the disputed documents would have been subject to privilege had the advice in them been provided by a lawyer, but that "no such privilege extended to advice, even if identical in nature, provided by a professional person who was not a qualified lawyer". [emphasis added]

On final appeal to the UK Supreme Court, five of the court's seven judges held that, while there were strong arguments in favour of extending legal advice privilege to advice given by non-lawyers, there was an equally strong case for confining the protection to advice by lawyers.To extend the privilege to non-lawyers would involve uncertainties and unknown consequences. What professions would qualify? What would be characterized as legal advice? The majority was concerned that saying privilege should be extended to advice from professionals "whose profession ordinarily includes the giving of legal advice" did not provide enough clarity with respect to professionals like municipal planners, engineers, surveyors, architects or actuaries, who often have considerable legal expertise, but do not always give legal advice, and who are governed by their own codes and disciplinary procedures.

Though the majority acknowledged there were powerful arguments in favour of extending legal advice privilege to non-lawyers qualified to give legal advice, they ruled that any radical change in the longstanding policy of confining privilege to advice given by lawyers was better left to the UK Parliament, especially in light of recent changes to the UK legal profession itself.

Two judges dissented. In their view, there was no principled basis to deny extension of legal advice privilege to non-lawyer professionals who gave legal advice. They emphasized that, properly understood, English common law has always taken the functional approach to privilege: its availability depends on the nature of the advice and the circumstances in which it is given, not the status of the adviser. The dissenting judges did not see this as an area of legal policy where the courts should defer to Parliament. They observed that common law courts are well equipped to develop the law of privilege on a case-by-case basis. This is what the common law courts have always done.

In summary, all seven judges in the Prudential case accepted that PwC had given confidential legal advice to the Prudential group. In spite of this, the majority of the court refused to recognize that legal advice privilege protected a client unless the advice was given by a lawyer – even where the client had received legal advice from the professionals best qualified to give it: tax accountants. The result is that, under UK law, a client can rely on legal advice privilege in respect of tax advice only if the advice was received from a lawyer.


In light of the fundamental rationale for legal advice privilege, it is logically inconsistent that the client's right to claim privilege should depend on the profession of the advisor, rather than on whether the advice is legal, and given in confidence, in a professional, as opposed to social, context. The majority in the Prudential case acknowledged this inconsistency.

The Canadian Federal Court of Appeal has taken the same position as the majority in the Prudential case.To date, the Supreme Court of Canada has not decided this issue.

The result of this kind of reasoning is that a client's right to obtain expert legal advice from a qualified professional – the fundamental right that legal advice privilege is supposed to protect – is constrained. To be protected the advice must be from a lawyer, even if another professional is more qualified to give it. Some argue this is an illogical and undesirable result. Some say it is anomalous that if a client communicates directly with an accountant, those communications will not be privileged, but if the client retains a lawyer, who in turn retains an accountant, then the same communications will be privileged.

Not all countries have accepted that only lawyers' tax law advice should be privileged. In the United States, Congress has amended the Internal Revenue Code to extend privilege to some communications with accountants who are 'federally authorized' tax practitioners. Given that example, and the strength of both the majority and dissenting reasons in the Prudential case, it will be interesting to see whether Canadian law extends legal advice privilege to confidential legal advice given by qualified non-lawyers. In the meantime, taxpayers should retain lawyers (who can then retain tax accountants) to provide confidential tax law advice that will be protected by legal advice privilege.

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions