Introduction: The Canada Revenue Agency's Overzealous Use of Gross-Negligence Penalties
Gross-negligence penalties aim to punish taxpayers whose conduct "involves a high degree of negligence tantamount to intentional acting, an indifference as to whether the law is complied with or not": Venne v R., 84 DTC 6247. As such, the amount of the penalty can be steep—up to 50% of the income tax that was underreported as a result of gross negligence, or 25% of the GST/HST that was underreported as a result of gross negligence.
Yet the Canada Revenue Agency's tax auditors have historically applied gross-negligence penalties without sufficient evidence of gross negligence. Bowker v The Queen, 2021 TCC 14, serves as yet another example of this practice.
After analyzing the legislation and jurisprudence concerning gross-negligence penalties, this article examines the Tax Court's decision in Bowker. Finally, it concludes by offering expert Canadian tax guidance on disputing and avoiding gross-negligence penalties.
The Gross-Negligence Penalty: Subsection 163(2) of Canada's Income Tax Act & Section 285 of Canada's Excise Tax Act
Subsection 163(2) of Canada's Income Tax Act contains the provisions relating to gross-negligence penalties. These provisions allow the Canada Revenue Agency to levy the tax penalty upon any taxpayer "who, knowingly, or under circumstances amounting to gross negligence, has made or has participated in, assented to or acquiesced in the making of, a false statement or omission in [an income-tax] return [that was] filed."
Section 285 of Canada's Excise Tax Act contains analogous provisions regarding GST/HST returns, thereby allowing the CRA to impose gross-negligence penalties on a taxpayer who knowingly files incorrect GST/HST returns or who files incorrect GST/HST returns while exhibiting gross negligence.
The Amount of the Gross-Negligence Penalty
Gross-negligence penalties are designed to punish. Hence, if applied, gross-negligence penalties can result in an exorbitant tax bill. In the case of incorrect income-tax returns, the amount of the gross-negligence penalty equals 50% of the tax on the understated income (with a minimum penalty of $100). In the case of incorrect GST/HST returns, the amount of the gross-negligence penalty equals 25% of the understated net tax (with a minimum penalty of $250). For example, as a result of gross negligence, you filed an income-tax return that underreported your income, thereby allowing you to evade $500,000 in tax liability. The resulting gross-negligence penalty therefore equals $250,000 (i.e., 50% of the $500,000 in tax otherwise payable but for the underreported income). The Canada Revenue Agency will, of course, assess the tax and interest, too. So, you'll need to pay the $250,000 gross-negligence penalty in addition to both the $500,000 in income tax that you evaded and the interest accruing on the $750,000 in tax and penalty. (And this doesn't even account for any additional exposure to criminal tax liability for tax evasion.)
The Burden of Proof is on the CRA: Reversed Onus
Gross-negligence penalties serve as a disciplinary mechanism for taxpayers flaunting peculiar disregard for tax rules. Hence, Canada's tax legislation demands that the Canada Revenue Agency apply these penalties only in those clear cases warranting their use. So, while the taxpayer generally bears the initial burden of disproving the CRA's factual assumptions in a tax dispute, this burden is flipped when it comes to gross-negligence penalties. Subsection 163(3) of the Income Tax Act and subsection 285.1(16) of the Excise Tax Act each expressly say that the CRA bears the "burden of establishing the facts justifying the assessment of [a gross-negligence penalty]."
In principle, the Canada Revenue Agency must prove its case on a balance of probabilities. Yet the jurisprudence suggests that the CRA must in fact discharge a "heavy" burden to impose a gross-negligence penalty: Corriveau v. R,  2 CTC 2580. In Findlay v Canada,  3 CTC 152, for instance, the Federal Court of Appeal not only affirmed that the burden of proof lies with the CRA but also held that the CRA must bear this burden regardless of whether the taxpayer can provide a reasonable explanation for the false statement or omission appearing in the tax return. In other words, the Canada Revenue Agency always carries the onus of proving that a gross-negligence penalty is warranted even if the taxpayer is silent.
Moreover, any evidence raising doubt about the taxpayer's culpability militates against applying a gross-negligence penalty. In Fourney v The Queen, 2011 TCC 520, the Tax Court of Canada explained that the benefit of any doubt must go to the taxpayer:
Because [a gross-negligence penalty] is penal in nature, it calls for a higher degree of culpability and must be applied only where the evidence clearly justifies so doing. If the evidence creates any doubt that it should be applied in the circumstances of the appeal, then the only fair conclusion is that the taxpayer must receive the benefit of that doubt in those circumstances.
Indeed, in Lust v the Queen, 2009 TCC 577, the Tax Court went so far as to say that the Canada Revenue Agency's onus is in fact "greater than on a balance of probabilities and closer to the criminal onus under the Criminal Code."
Put simply, the Canada Revenue Agency bears the burden of proving that gross-negligence penalties apply. But what exactly is it that the CRA must prove?
The Elements of the Gross-Negligence Penalty: A False Statement or Omission Made "Knowingly or under Circumstances Amounting to Gross Negligence"
To successfully apply a gross-negligence penalty, the CRA must meet two criteria:
- The Canada Revenue Agency must show that the taxpayer either made a false statement in a tax return or participated in, assented to, or acquiesced in the making of a false statement in a tax return.
- The Canada Revenue Agency must establish that the taxpayer either did so knowingly or did so under circumstances amounting to gross negligence. (The CRA need not prove both knowledge and gross negligence; it only needs to show that the taxpayer displayed one of these two attributes.)
The following sections discuss the false-statement requirement, the knowledge requirement, and the gross-negligence requirement in further detail.
The False-Statement Requirement
The false-statement requirement is relatively easy for the CRA to satisfy. The Canada Revenue Agency need only show that the tax return misrepresented a fact—e.g., purporting entitlement to a deduction that was in fact unavailable—or omitted something that should have been included—e.g., failing to report taxable income. That said, the false statement or omission must appear in a tax return that the taxpayer actually filed. Although failing to file tax returns might constitute tax evasion, it doesn't invoke a gross-negligence penalty because the legislation requires that the false statement or omission appear in a filed return (see: Lee v The Queen, 2010 TCC 400; Calandra v The Queen, 2011 TCC 7; Khan v The Queen, 2011 TCC 481). So, gross-negligence penalties don't apply if the taxpayer didn't file a return. Still, in cases where the taxpayer filed a return, the CRA can typically satisfy the false-statement requirement by demonstrating that a tax return purported something that was false. And this isn't a very high bar.
But the Canada Revenue Agency generally run into problems while attempting to prove that the taxpayer met the knowledge standard or the gross-negligence standard. Indeed, most of the jurisprudence concerning gross-negligence penalties centers on whether the taxpayer knew that the tax return contained a false statement or on whether the taxpayer exhibited gross negligence in filing a tax return containing a false statement.
The following two sections discuss the knowledge requirement and the gross-negligence requirement in turn.
The Knowledge Requirement
The Canada Revenue Agency can satisfy the knowledge requirement by proving that a taxpayer knowingly filed a tax return containing a false statement. The knowledge requirement imports a subjective test. That is, the inquiry is not whether the taxpayer ought to have known that a statement was false; it is whether the taxpayer subjectively knew about the false statement in the tax return: Fourney v The Queen, 2011 TCC 520, at paras 71-73, 78.
Wilful blindness entails knowledge. So, the CRA can satisfy the knowledge requirement by showing that the taxpayer wilfully turned a blind eye to false statements or omissions in the tax return. The Federal Court of Appeal has adopted the following definition: A "taxpayer is wilfully blind in circumstances where the taxpayer becomes aware of the need for inquiry but declines to make the inquiry because the taxpayer does not want to know, or studiously avoids, the truth. The concept is one of deliberate ignorance": Wynter v The Queen, 2017 FCA 195. In other words, wilful blindness basically covers those situations where you noticed something suspicious—i.e., something begging for further inquiry—yet opted to take the ignorance-is-bliss approach.
To establish wilful blindness, the CRA must prove the existence of suspicious circumstance indicating a need for the taxpayer to inquire about the tax return's accuracy. In Torres v The Queen, 2013 TCC 380, the Tax Court of Canada listed a number of red flags indicating that a taxpayer had exhibited wilful blindness by ignoring the suspicious behaviour of an accountant or other tax preparer:
- the magnitude of the advantage or omission;
- the blatantness of the false statement and how readily detectable it is;
- the lack of acknowledgment by the tax preparer who prepared the return in the return itself;
- unusual requests made by the tax preparer;
- the tax preparer being previously unknown to the taxpayer;
- incomprehensible explanations by the tax preparer; and
- whether others engaged the tax preparer or warned against doing so, or the taxpayer himself or herself expresses concern about telling others.
This isn't an exhaustive list, and a court is free to consider other relevant circumstances when determining whether a taxpayer exhibited wilful blindness.
The Gross-Negligence Requirement
The gross-negligence requirement is distinct from the knowledge requirement. While the legal standards of knowledge and of its sister concept, wilful blindness, both import a subjective test, the gross-negligence standard imports an objective test: "Gross negligence is distinct from wilful blindness. It arises where the taxpayer's conduct is found to fall markedly below what would be expected of a reasonable taxpayer. Simply put, if the wilfully blind taxpayer knew better, the grossly negligent taxpayer ought to have known better. [...] While subjective considerations may play a role in either analysis, gross negligence is determined with reference to an objective test." Wynter v The Queen, 2017 FCA 195.
The CRA need not prove both knowledge and gross negligence; the CRA only needs to show that the taxpayer possessed one of these two attributes. So, even if the Canada Revenue Agency cannot establish that the taxpayer knew about the false statement, the gross-negligence penalty may still apply if the taxpayer exhibited gross negligence when making or acquiescing to the false statement appearing in a tax return. And because gross negligence doesn't require actual knowledge and permits the court to ask whether a taxpayer ought to have known better, it's easier for the CRA to prove gross negligence than it is to prove knowledge.
That said, gross negligence isn't merely the failure to act as a reasonable person would. Such conduct implies negligence, but not gross negligence. Gross negligence requires far more egregious behaviour. Carelessness doesn't cut it. Instead, the Canada Revenue Agency "must prove a high degree of negligence, one that is tantamount to intentional acting or an indifference as to whether the law is complied with or not. A taxpayer may avoid these penalty provisions where he or she has relied on the erroneous advice of a tax advisor and has not knowingly failed to report income or a capital gain": Zsoldos v. Canada (Attorney General), 2004 FCA 338, at para 21.
Hence, courts have denied the CRA's attempts to levy gross-negligence penalties in the following circumstances:
- the taxpayer sought professional-accounting assistance to complete tax returns: Hine v R, 2012 TCC 295.
- the taxpayer made numerous errors on tax returns, indicating a lack of skill in accounting and tax matters: Fourney v the Queen, 2011 TCC 520.
- the taxpayer disclosed all amounts at issue on his or her tax return: Crown Cork & Seal Canada Inc v The Queen,  2 CTC 465.
- the taxpayer found it difficult to operate accounting software: Fourney v the Queen, supra.
So, even though gross negligence elicits an objective standard, courts trounce the Canada Revenue Agency when its tax auditors apply gross-negligence penalties in cases involving ordinary negligence because "these penalties are meant to capture serious conduct": Wynter v The Queen, 2017 FCA 195, at para 21 (quoting the Supreme Court of Canada's decision in Guindon v. Canada, 2015 SCC 41, at para 61).
Fooled by DaMara Consulting Inc.'s "The Remedy" – A Tax Scheme Influenced by the Tax-Protestor Movement: Bowker v The Queen, 2021 TCC 14
In 2010, Mrs. Bowker, a 67-year-old assistant pastor, was a few years shy of retirement. Her husband played the piano professionally. Neither one had any specific education or training in tax or accounting matters.
Mrs. Bowker's husband had been doing the couple's income-tax returns for several years prior. When her husband prepared her return, Mrs. Bowker would review it and approve it for filing.
But, in 2011, Mrs. Bowker's husband decided to use the services of a tax accountant to prepare the couple's income-tax returns for the 2010 taxation year. The tax accountant prepared and filed the couple's returns without issue, and the Canada Revenue Agency assessed Mrs. Bowker's 2010 income-tax return as filed.
The problems started a few months later, however.
In June 2011, Mrs. Broker's husband learned about the services of DeMara Consulting Inc. Intrigued, Mr. Bowker participated in a few conference calls, during which a DeMara representative pitched the services that DeMara offered. Mr. Bowker then conveyed the message to his wife. As Mrs. Bowker understood it, DeMara's services consisted of reviewing a person's income-tax return and determining person was entitled to additional expenses that could lead to a tax refund. Mrs. Bowker's husband also told her that one of DeMara's principals, Ms. Stancer, possessed specialized knowledge and expertise in Canadian taxation because she had worked for the Canada Revenue Agency.
Mrs. Bowker and her husband eventually visited DeMara's office. They did so to evaluate whether DeMara's business appeared legitimate. From what Mrs. Bowker could see, DeMara maintained a professional office. While there, Mrs. Bowker and her husband ultimately decided to use DeMara's services, and Mrs. Bowker received a membership kit containing documents that Mrs. Bowker was required to sign if she wanted to use DeMara's services. The membership kit included, among other documents, the CRA form for requesting a business number (i.e., Form RC1, "Request for a Business Number and Certain Program Accounts").
Unbeknownst to Mrs. Bowker, she was one of over 200 individuals that had been duped by DeMara Consulting Inc.'s tax scam. The two individuals behind DeMara Consulting Inc., Donna Marie Stancer and Deanna Lynn LaValley, defrauded 224 clients under the pretense of a legitimate tax loophole that they marketed as "The Remedy."
But "The Remedy" was neither a loophole nor legitimate. It was blatant, unsophisticated tax fraud. The tax scam called for filing amended income-tax returns that attempted to generate bogus tax refunds by claiming fraudulent expenses. Stancer and LaValley obtained a business number under a client's name, regardless of whether the client operated a business. Stancer and LaValley would then tally all the client's personal expenses and debts—including mortgage payments, the mortgage principal, payments and amounts owing on personal lines of credit, grocery and household bills, car bills, insurance and repair bills, amounts owing to the Canada Revenue Agency, and utility bills. The tax scammers then prepared T5 slips showing the sum of their client's personal debt and expenses as interest that the client had paid during the year. The tax scammers also prepared T5008 slips showing the same amount as capital losses that their client had incurred from disposing of investments during the year. The tax scammers then filed amended income-tax returns for their clients. The amended income-tax returns claimed the fraudulent interest payments as business expenses, and they claimed capital losses for the amounts reported on the fraudulent T5008 slips. By claiming these fraudulent expenses on their clients' amended income-tax returns, the tax scammers attempted to reduce each client's taxable income to zero, thereby claiming refunds for taxes already paid.
This sort of tax scam is often used by proponents of the tax-protestor movement—or "de-taxers," as they're often called. Tax protestors characteristically employ a number of pseudo-legal arguments purporting to render them immune from paying income tax. To be clear, the tax-protestor arguments have no basis in actual law, and the Canada Revenue Agency's Canadian tax litigation lawyers don't shy away from criminally prosecuting tax protestors for tax evasion. Indeed, this was the ultimate fate of the two individuals behind DeMara Consulting. Donna Marie Stancer and Deanna Lynn LaValley were found guilty of tax evasion in 2015.
But DeMara's tax scam had not yet become public when Mrs. Bowker and her husband retained DeMara's services. On March 26, 2012, DeMara filed an amended 2010 income-tax return on Mrs. Bowker's behalf. While Mrs. Bowker's income remained the same as originally reported, the amended income-tax return fraudulently claimed over $660,000 in business losses and over $330,000 in capital losses. Mrs. Bowker's amended tax return also requested loss carrybacks of over $30,000 for each year of the previous three tax years. (The loss carrybacks stemmed from the fraudulent losses that the amended return claimed for Mrs. Bowker's 2010 taxation year.)
DeMara didn't notify Mrs. Bowker before filing the amended 2010 income-tax return. As a result, Mrs. Bowker hadn't reviewed a copy of the amended tax return that DeMara filed on her behalf. Moreover, Mrs. Bowker hadn't seen any of the CRA letters that she received after DeMara filed her amended 2010 tax return. DeMara asked her husband to forward all CRA correspondence directly to DeMara.
Eventually, the Canada Revenue Agency's Criminal Investigations Division executed a search warrant at DeMara's office and laid criminal charges against Donna Marie Stancer and Deanna Lynn LaValley for initiating the tax scam.
Around this time, the CRA also reassessed Mrs. Bowker's 2010 taxation year and disallowed the business losses, capital losses, and carry-back losses claimed on Mrs. Bowker's amended 2010 tax return. In addition, the Canada Revenue Agency imposed a gross-negligence penalty of over $130,000 on Mrs. Bowker.
The Dispute Reaches the Tax Court of Canada: Bowker v The Queen, 2021 TCC 14
Mrs. Bowker's experienced Canadian tax litigator objected to the gross-negligence penalties, and the dispute ultimately ended up before the Tax Court of Canada.
Arguing before the Tax Court of Canada, the Canada Revenue Agency insisted that Mrs. Bowker's conduct warranted application of a gross-negligence penalty under subsection 163(2) of the Income Tax Act. The Canada Revenue Agency alleged that Mrs. Bowker made a false statement by signing the RC1 form requesting a business number for a business that didn't exist. The CRA also asserted that Mrs. Bowker participated in making the false statements appearing in her amended 2010 income-tax return because these false statements depended on her signing the form requesting a business number. The CRA then argued that, if Mrs. Bowker read the business-number-request form before signing it, then she knowingly made these false statements, and, if Mrs. Bowker didn't read the form before signing it, she was grossly negligent. Moreover, the CRA purported that, if Mrs. Bowker didn't know that she was requesting a business number for the purpose of fraudulently generating tax refunds, she was wilfully blind.
Mrs. Bowker's Canadian tax-litigation lawyer argued that the Canada Revenue Agency failed to meet the burden of proving the facts that would justify imposing gross-negligence penalties. Although Mrs. Bowker's amended 2010 income-tax return contained false statements, Mrs. Bowker didn't make these false statements because she didn't authorize DeMara to file her tax return. Mrs. Bowker also didn't participate, assent to, or acquiesce in making the false statements because she didn't know that the return was filed, and she didn't provide any information that assisted DeMara in making the false statements. Finally, even if the Tax Court finds that Mrs. Bowker participated, assented to, or acquiesced in making false statements, Mrs. Bowker didn't knowingly make a false statement, nor did she do so under circumstances amounting to gross negligence.
The Tax Court of Canada held in favour of Mrs. Bowker and vacated the gross-negligence penalties.
The court agreed with the Canada Revenue Agency and found that, by signing the RC1 form requesting a business number for a business that didn't exist, Mrs. Bowker did indeed participate in making the false statements appearing in her amended 2010 income-tax return.
Yet the court rejected the CRA's contention that Mrs. Bowker did so knowingly. Mrs. Bowker wasn't wilfully blind because the Canada Revenue Agency failed to prove the existence of suspicious circumstance indicating a need for Mrs. Bowker to inquire about the accuracy of her tax return. While DeMara's amended tax return resulted in a significant advantage for Mrs. Bowker, Mrs. Bowker testified that neither her own husband nor DeMara had ever told her that the amended return would result in a refund. The court also found Mrs. Bowker to be a credible witness yet credulous taxpayer. As a result, she wasn't alerted by DeMara's request that she sign a business-number-request form. Mrs. Bowker testified that she thought that the form was "part of DeMara's process," and, by signing the form, she was "cooperating with the process." The court also noted a number of other facts underlying its finding that Mrs. Bowker wasn't wilfully blind. For instance, Mrs. Bowker didn't have any specific income-tax or accounting knowledge, and she relied on her husband to prepare her tax returns throughout the course of her working career. Mrs. Bowker had complete confidence in her husband's ability to handle her tax affairs, even if it meant that he would seek outside assistance to complete her income-tax returns. DeMara's offices looked like any other professional tax preparer's office. Given these findings, the court concluded that Mrs. Bowker didn't knowingly participate in making the false statements appearing in her amended 2010 income-tax return.
Nor did Mrs. Bowker do so under circumstances amounting to gross negligence. While the court agreed that Mrs. Bowker had been negligent, the court didn't find any evidence of gross negligence:
Mrs. Bowker was negligent. She should have asked Mr. Bowker questions about why she was signing a form requesting a business number, a confidentiality agreement and a Serenity Bound Society membership form. She also should have asked Mr. Bowker about the status of the work being done by DeMara. That being said, at all material times, she was following the recommendations of Mr. Bowker, someone in whom she had complete trust. Before 2010, Mr. Bowker had always been in charge of preparing Mrs. Bowker's tax returns. There is no evidence that Mrs. Bowker had any tax-related issues prior to 2010 using the "services" of Mr. Bowker. Therefore, there is no reason why a reasonable and responsible taxpayer in a similar position to Mrs. Bowker would not have had complete confidence in Mr. Bowker's "services" as well. After all, he was a trusted family member. Furthermore, Mrs. Bowker did not have any information prior to the filing of her Amended Income Tax Return that could have led her to believe that DeMara was not a legitimate tax preparer or that it would file an Amended Income Tax Return on her behalf that contained false statements [para 58].
The court therefore concluded that the Canada Revenue Agency "did not rightfully impose on Mrs. Bowker a gross-negligence penalty of $139,032." As a result, the Tax Court of Canada allowed Mrs. Bowker's appeal and vacated the gross-negligence penalties that the CRA had imposed as a result of her amended 2010 income-tax return.
Expert Canadian Tax Lawyer Tax Guidance – Disputing & Avoiding Gross-Negligence Penalties
Bowker illustrates that the Canada Revenue Agency often applies gross-negligence penalties without sufficient evidence. If a Canada Revenue Agency tax auditor has reassessed you for gross-negligence penalties, you may dispute the tax auditor's decision to apply the gross-negligence penalty by filing a notice of objection. A notice of objection triggers the CRA's administrative dispute-resolution process, and the Canada Revenue Agency's Appeals Division will assign an appeals officer to review the merits of your objection. If the CRA's appeals officers renders an unfavourable decision, you may continue the dispute by filing a notice of appeal to the Tax Court of Canada. (In the alternative, you may effectively bypass the CRA's Appeals Division and appeal directly to Tax Court if the Appeals Division hasn't rendered a decision within 90 days from the date that you filed your objection.)
That said, you have only a limited amount of time to object to an assessment or reassessment for gross-negligence penalties. Generally, you must object within 90 days from the date on the assessment or reassessment, and you must appeal to the Tax Court of Canada within 90 days from the date of a notice of confirmation from the CRA's Appeals Division. You may, however, qualify for a deadline extension, given that you apply for the extension within one year and 90 days from the date on the assessment or confirmation. If you fail to object within these statutory deadlines, you'll remain liable for the gross-negligence penalty—even if the Canada Revenue Agency failed to discharge the burden of proving that the gross-negligence penalty was warranted.
So, if you have been assessed for gross-negligence penalties under subsection 163(2) of Canada's Income Tax Act or under section 285 of Canada's Excise Tax Act, speak with one of our experienced Canadian tax lawyers today. We thoroughly understand this area of law, and we can ensure that you deliver a forceful, thorough, and cogent objection to the Canada Revenue Agency or appeal to the Tax Court of Canada.
If you filed Canadian tax returns that omitted or underreported your taxable income, you risk facing not only civil monetary penalties, such as gross-negligence penalties, but also criminal liability for tax evasion. Still, you may qualify for relief under the Canada Revenue Agency's Voluntary Disclosures Program (VDP), also known as tax amnesty. If your VDP application qualifies, the CRA will renounce criminal prosecution and waive gross-negligence penalties (and may reduce interest). A voluntary-disclosure application is time-sensitive, however. The CRA's Voluntary Disclosures Program will reject an application—and thus deny any relief—unless your application is "voluntary." This essentially means that the Voluntary Disclosures Program must receive your voluntary-disclosure or tax-amnesty application before the CRA contacts you about the non-compliance that you seek to disclose. Our experienced Canadian tax lawyers have assisted numerous Canadian taxpayers with unreported income and with incorrectly claimed expenses, tax deductions, and input tax credits. We can carefully plan and promptly prepare your voluntary-disclosure application. A properly prepared disclosure application not only increases the odds that the CRA's Voluntary Disclosures Program will grant tax amnesty but also lays the groundwork for a judicial-review application to the Federal Court should the Canada Revenue Agency unfairly deny your voluntary-disclosure application.
To determine whether you qualify for the Voluntary Disclosures Program, schedule a confidential and privileged consultation with one of our expert Canadian tax lawyers. The Canada Revenue Agency cannot compel the production of information protected by solicitor-client privilege. Hence, solicitor-client privilege prevents the CRA from learning about the legal advice that you received from your top Canadian tax lawyer. Your communications with an accountant, however, remain unprotected. So, if you seek Canadian tax advice but want to keep that information away from the CRA, you should first approach our Canadian tax lawyers. If you require an accountant, we can retain the accountant on your behalf and extend solicitor-client privilege.