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Accountant Privilege: Protecting Accountants' Work in Canadian Tax Matters
The British Columbia Supreme Court decision in Lewis v. WestJet Airlines Ltd. (2025 BCSC 1565) clarifies the circumstances under which accountants' work may be protected by legal privilege. Although the case did not involve tax matters, its principles are highly relevant for taxpayers and professionals navigating document requests or tax disputes in Canada.
Solicitor‑Client Privilege and Accountants
Solicitor-client privilege protects communications between a lawyer and their client, intended to seek or receive legal advice, and kept confidential. While third parties may sometimes be included, this only occurs when they act as an essential part of the lawyer-client relationship, such as an agent facilitating legal advice.
In Lewis, EY's investigative role did not satisfy this standard, so their work was not covered under solicitor-client privilege. Experienced Canadian tax lawyers emphasize that an accountant's routine or investigative tasks do not automatically attract privilege unless they are acting directly on behalf of legal counsel.
Litigation Privilege Offers Broader Protection
Litigation privilege shields materials created for the dominant purpose of ongoing or anticipated litigation. In Lewis, documents prepared by EY, including draft reports and invoices, were created under counsel's instructions for litigation purposes. The court recognized that even invoices commingled with non-privileged work could be protected if disclosure would reveal strategic litigation information.
Knowledgeable Canadian tax lawyers often recommend careful documentation of engagements and clear separation of privileged and non-privileged tasks to preserve litigation privilege.
Implications for Tax Matters
Canadian courts have repeatedly examined whether accountant-prepared documents are privileged in tax contexts. Decisions such as Coopers Park Real Estate Development Corporation v. The King confirm that solicitor-client privilege rarely applies to accountants unless their work is integral to the lawyer-client relationship. Litigation privilege, however, can protect accounting reports, notes, and supporting materials if their dominant purpose is legal preparation.
Seasoned Canadian tax lawyers recommend that memos or letters describing transactions, filings, or tax positions be drafted by counsel to maintain privilege.
Best Practices for Preserving Privilege
- Clearly document whether an accountant is retained for litigation purposes or acting as an agent for legal counsel.
- Route all instructions and engagement through the lawyer to maintain the privilege connection.
- Keep separate invoicing for privileged and non-privileged work.
- Ensure legal counsel drafts memos or recommendations supporting legal positions or tax filings.
Pro Tax Tips
- Early coordination between lawyers and accountants helps ensure communications remain privileged.
- Maintain detailed engagement letters and records outlining each professional's role and purpose.
- Use separate project codes or accounts for litigation-related or privileged tasks.
- Experienced Canadian tax lawyers advise that legal counsel, rather than accountants, draft documents summarizing steps for transactions or compliance matters to protect privilege.
FAQ
Can an accountant's routine work ever be privileged?
No, unless the accountant acts as an agent for legal counsel and the work is directly related to legal advice.
Are invoices always discoverable?
Invoices may be protected if they include privileged work or if disclosure would reveal strategic legal information.
Does litigation privilege expire after a case concludes?
Litigation privilege applies for the duration of litigation and may extend beyond, depending on the dominant purpose of the documents.
How can taxpayers protect accountant-prepared documents in tax disputes?
Coordination with legal counsel, detailed documentation, and separation of privileged and non-privileged tasks are critical. Knowledgeable Canadian tax lawyers can guide the proper structuring of engagements.
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.
