Two recent decisions by the Supreme Court of Canada1
considered demands for information made to lawyers and notaries
issued by the Canada Revenue Agency (CRA). Information that is
subject to "solicitor-client privilege" is excluded from
such demand. However, specifically excluded under the Income
Tax Act (Canada) (the Tax Act) from the scope of
solicitor-client privilege is an "accounting record of a
lawyer." The exclusion would thereby authorize the CRA
to demand accounting records of a lawyer.
These recent decisions confirmed that the Tax Act exclusion of
accounting records from the scope of information protected by
solicitor-client privilege is contrary to the unreasonable
search and seizure provisions of section 8 of the Charter and
consequently lawyers and notaries do not have to comply with such
requests from the CRA.
The demand for information in the Quebec case arose out of
requirements sent to notaries in Quebec for information or
documents relating to their clients, for tax collection or audit
purposes. The Supreme Court held that the requirement to provide
information scheme of the Tax Act constituted an unreasonable
search and seizure contrary to section 8 of the Charter
because it fails to ensure that the solicitor-client privilege
remains as close to absolute as possible, and is only interfered
with if absolutely necessary.
The Supreme Court found that the exception to solicitor-client
privilege in the Tax Act for accounting records contained several
defects, namely it failed to provide notice to taxpayers that their
information was at risk of being disclosed and with an opportunity
to object to such demand. Further, it placed the burden of
protecting the privilege solely on the notaries and lawyers (with
exposure to penalties for failure to comply). The Court held that
compelling disclosure of the information being sought was not
absolutely necessary and that no measures had been taken to help
mitigate the impairment of professional secrecy. The Supreme Court
concluded that solicitor-client privilege is a principle of
fundamental justice and an intrusion must only be permitted if
doing so is absolutely necessary to achieve the ends of the
In the Thompson case, the CRA sent a requirement to
provide information to a lawyer, requesting his accounts receivable
information, including the names of clients. Thompson refused the
requirement, claiming solicitor-client privilege. The Court
acknowledged that Parliament's intention to exclude "an
accounting record of a lawyer" from the scope of
solicitor-client privilege in s. 232(1) of the Tax Act is
clear and unequivocal. However, since the Court concluded in the
companion Quebec case that the accounting record exception was
unconstitutional, Thompson was not required to comply with the
requirement sent by the CRA.
The Court noted that it is possible that Parliament will amend
the Tax Act to remedy the constitutional defects of the requirement
scheme. Also, there are other situations in which courts could be
asked to determine whether certain information requested by the CRA
is covered by solicitor-client privilege and, if they find that the
privilege does not apply, to order that the information be
As a result, the Court commented on the appropriate steps
required to safe-guard a taxpayer's claim of privilege. The
Court affirmed that solicitor-client privilege can only be waived
by a client. It is the client and not the lawyer who must be given
an opportunity to assert the privilege, and a court must act to
facilitate the client's ability to do so. Also, the Court
stated that in order to properly afford clients the opportunity to
raise their right to solicitor-client privilege, they must be
notified when a court considers making any order requiring the
disclosure of what might be privileged information. They must also
be afforded the opportunity to decide whether they wish to contest
the disclosure of the information requested by the state, and if
they do wish to do so, they must be permitted to make submissions
in that regard on their own behalf.
The Court noted that should Parliament choose to modify the
existing Tax Act disclosure scheme in order to remedy its
constitutional defects, a court assessing a request for access to
presumptively privileged information will need to ensure that the
clients whose information is being sought can participate in the
process of asserting the protections that apply to them.
1 Canada (A.G.) v. Chambre des notaires du
Québec, 2016 SCC 20 and Canada (National Revenue) v.
Thompson, 2016 SCC 21
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