Canada: Solicitor-Client Privilege and Tax Advice – Recent Cases

Last Updated: February 23 2005
Article by Salvatore Mirandola

Most Read Contributor in Canada, September 2016

This article originally appeared in the August 13th issue of The Lawyers Weekly.

Several recent Canadian cases have dealt with the issue of whether documents and other information and communications involving tax advisers are privileged. This article surveys some of these recent cases.

Belgravia Investments Limited

In Belgravia Investments Limited v. Her Majesty the Queen, the CRA sought a number of documents from various taxpayers who had invested or were otherwise involved in an alleged tax shelter. The taxpayers applied to the Federal Court of Canada for a determination of solicitor-client privilege in relation to a large number of disputed documents.

In the course of his analysis, Justice Heneghan summarized various principles relevant to the determination of solicitor-client privilege. For example:

  • There are two distinct branches of solicitor-client privilege: litigation privilege and legal advice privilege.
  • Solicitor-client privilege derives from a client's right of confidentiality in respect of communications made in the context of a solicitor-client relationship for the purpose of obtaining legal advice.
  • An accountant's communications are privileged only if they are made as a result of a request by the client's lawyer to be used in connection with litigation, or where the accountant acts as the client's representative in placing a factual situation or problem before a lawyer to obtain legal advice or assistance.


In The Minister of National Revenue v. Kitsch, the CRA sought information regarding the tax motivation behind a series of transactions that allowed the taxpayers in question to deduct certain interest amounts prior to their emigration from Canada.

The Federal Court of Appeal upheld the trial judge’s conclusion that there is no class accountant-client privilege in Canada on the basis that, unlike for the legal profession, there is apparently an insufficient link between the accounting profession and the public interest in the administration of justice:

Lawyers are legally and ethically required to uphold and protect the public interest in the administration of justice. In contrast, accountants are not so bound. Nor do they provide legal advice, as to do so would constitute a breach of provincial and territorial laws governing the legal professions.

As for so-called 'case-by-case' accountant-client privilege, none of the established criteria for determining case-by-case privilege (the Wigmore principles) were met.

Fraser Milner Casgrain and Pitney Bowes

Fraser Milner Casgrain LLP v. MNR and Pitney Bowes of Canada Ltd v. The Queen each deal with whether so-called 'common interest privilege' can exist in respect of tax advice provided to both or all opposing parties in commercial transactions. The CRA sought production of such advice on the basis that any solicitor-client privilege that may have existed had been waived. The applicants argued that the documents in question were protected from disclosure by common interest privilege.

Although common interest privilege has its origins as a branch of litigation privilege, in both cases the court found little point in confining common interest privilege to the litigation context. In Pitney Bowes, the court recognized that

In many commercial transactions…[t]he sharing of legal opinions will ensure that each party has an appreciation of the legal position of the others and negotiations can proceed in an informed and open way... Such circumstances…create a presumption that the privilege attaching to the solicitor-client communications remains intact notwithstanding that they have been disclosed to other parties.

Lavallee, Rackel & Heintz

In The Queen v Lavallee, Rackel & Heintz the Supreme Court of Canada held that section 488.1 of the Criminal Code ("Code") violates Canada's constitutional protections against unreasonable searches and seizures. Section 488.1 contains a procedure for claiming solicitor-client privilege when an officer acting under the Code or any other federal legislation, such as the Income Tax Act ("Tax Act"), attempts to obtain a document from a lawyer who claims that the document is privileged. Lavallee was a consolidation of three separate appeals, one involving an attempt by Revenue Canada (a CRA predecessor) to obtain documents relevant to an investigation of tax evasion. Section 232 of the Tax Act contains a largely parallel procedure for claiming solicitor-client privilege.

A majority of the court felt that section 488.1 of the Code was too strong an interference with the privacy interests that underlie the concept of solicitor-client privilege, which "must remain as close to absolute as possible if it is to retain relevance". The majority described several shortcomings with section 488.1 and struck it down because "the constitutional infirmity of the provision" could not be cured. The court invited Parliament to redraft the provision. In the meantime, the court set out a series of principles to govern law office searches.

It will be interesting to see how Parliament deals with the parallel provisions in the Tax Act. In any event, one is left with a reaffirmation that solicitor-client privilege is a fundamental feature of the Canadian legal system that ought to be protected by Canada's highest law. One might reasonably expect that Parliament will want to redraft section 232 of the Tax Act so that it will withstand constitutional scrutiny.


Solicitor-client privilege is alive and well in Canada, and will be vigorously protected in litigation and non-litigation tax contexts. The cases also demonstrate that privilege will not be extended to tax-related communications involving accountants, unless there is a sufficiently strong link to legal advice provided by a lawyer.

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.

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