Date:
20130829
Docket:
A-515-12
Citation: 2013 FCA 197
CORAM: PELLETIER
J.A.
TRUDEL
J.A.
MAINVILLE
J.A.
BETWEEN:
DUNCAN
THOMPSON
Appellant
and
THE
MINISTER OF NATIONAL REVENUE
Respondent
REASONS
FOR JUDGMENT
TRUDEL J.A.
Introduction
[1]
This
appeal calls upon this Court to consider the solicitor-client privilege (or
privilege) asserted by a lawyer who is the subject of enforcement proceedings
pursuant to the Income
Tax Act,
R.S.C. 1985, c. 1 (5th Supp.) (the Act).
[2]
Mr.
Thompson (or the appellant) has raised the shield of solicitor-client privilege
to protect basic information regarding his accounts receivable, arguing that his
clients’ names and amounts owing are protected and out of the Minister of
National Revenue’s reach (Minister or respondent).
Background and
Context
[3]
More
specifically, this appeal is from an Order of the Federal Court (T-1180-12)
wherein Russell J. (the Judge) allowed the application of the Minister for a
compliance order under subsection 231.7(1) of the Act.
[4]
The
Judge found that the appellant did not comply with the Requirement for
Information (Requirement) provided to him by the respondent pursuant to
subsection 231.2(1) of the Act, which states:
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231.2 (1) Notwithstanding any other provision
of this Act, the Minister may, subject to subsection (2), for any purpose
related to the administration or enforcement of this Act (including the
collection of any amount payable under this Act by any person), of a
comprehensive tax information exchange agreement between Canada and another
country or jurisdiction that is in force and has effect or, for greater
certainty, of a tax treaty with another country, by notice served personally
or by registered or certified mail, require that any person provide, within
such reasonable time as stipulated in the notice,
(a) any
information or additional
information,
including a return of income or a supplementary return; or
(b) any
document.
|
231.2 (1) Malgré les autres
dispositions de la présente loi, le ministre peut, sous réserve du paragraphe
(2) et pour l’application ou l’exécution de la présente loi (y compris la
perception d’un montant payable par une personne en vertu de la présente
loi), d’un accord général d’échange de renseignements fiscaux entre le Canada
et un autre pays ou territoire qui est en vigueur et s’applique ou d’un
traité fiscal conclu avec un autre pays, par avis signifié à personne ou
envoyé par courrier recommandé ou certifié, exiger d’une personne, dans le
délai raisonnable que précise l’avis :
a) qu’elle fournisse
tout renseignement ou
tout renseignement supplémentaire, y compris une
déclaration de revenu ou une déclaration supplémentaire;
b) qu’elle produise
des documents.
|
[5]
As
a result, the Judge ordered that “the respondent shall comply with the
Requirement issued by the Minister and shall forthwith, and in any event not
later than 30 days after being served with this Order, provide the information
and documents [sought]” (Speaking Order, appeal book, volume 1, page 30 at
paragraph 1). Hence the within appeal by Mr. Thompson, which I propose to allow
in part, but for completely different reasons than those advanced by the
appellant.
[6]
Although
I generally agree with the legal statements made by the Judge in his Speaking
Order, I am of the view that the appellant’s objections called for an
intervention by the Federal Court to ensure that the question of privilege over
individual client names was addressed before the release of the clients’
accounts receivable information was ordered.
[7]
The
information and documents sought by the Canada Revenue Agency (CRA) consist of:
1. A completed statement
of your income and expenses, and assets and liabilities as of January 30, 2012 (form
enclosed). The income and expense, and asset and liability statement includes
any sole or joint income, expense, asset, or liability.
2. A current
accounts receivable listing as of January 30, 2012.
3. Copies of all
your bank statements, credit card statements, utility bill statements, gas and
electric bill statements, loans statements and mortgage statements for sole and
joint accounts for the period January 1, 2011 to December 31, 2011.
(affidavit of Maria Van Dyk, collection
officer with the Canada Revenue Agency, Exhibit A, Requirement date February 6,
2012, appeal book, volume 1, page 41).
[8]
Mr.
Thompson responded to the Requirement giving his explanation under six
headings: Income; Expenses (personal and business); Assets as of January 30,
2012; Liabilities (excluding Canada Revenue Agency); Accounts Receivable
Listing; and Statements (ibidem, Exhibit C, page 47).
[9]
Following
a review of the appellant’s information, the CRA found that he had provided
sufficient information only with regard to his income and business expenses. The
CRA noted that no details were provided regarding his accounts receivable other
than a total balance owing.
[10]
Despite
his failure to follow through with the Requirement under most headings, Mr.
Thompson, both in this Court and below, has made solicitor-client privilege the
focus of his objection to the Requirement. Amongst other arguments, he has
raised section 8 of the Canadian Charter of Rights and Freedoms, Part 1
of the Constitution Act, 1982, being Schedule B to the Canada Act
1982 (U.K.), 1982, c. 11 (Charter) alleging that the Requirement is akin to
an unreasonable search or seizure. He has also filed a Notice of Constitutional
Question pursuant to section 57 of the Federal Courts Act, R.S.C. ,
1985, c. F-7:
Can Section 231.2(1) of the Income
Tax Act be interpreted, applied or enforced so as to require a Barrister
and Solicitor who, himself, is the subject of the proceedings or inquiry by the
Applicant (and not his clients), to divulge information about unnamed clients,
which information is protected by the principles of solicitor-client privilege,
found in the Legal Professions Act, R.S.A. 2000 c. L-8, the Rules of
the Law Society of Alberta and the Law Society of Alberta Code of
Conduct, and in the common law applicable to the Province of Alberta
thereby causing that Barrister and Solicitor to violate his Code of Conduct,
breach those Rules and contravene the Act, rendering him liable for serious
penal and civil consequences? (appeal book, volume 2, page 521).
Standard of Review
[11]
Even
before discussing the Judge’s Speaking Order and the parties’ position, it is
useful to state the applicable standard of review.
[12]
The
standard of correctness applies to questions of law, while the standard of
palpable and overriding error applies to questions of fact and mixed fact and
law: Canada (National Revenue) v. RBC Life Insurance Company,
2013 FCA 50 at paragraph 11. The interpretation of the Act and the legal
approach to solicitor-client privilege are questions of law. They attract no
deference. Most issues in this appeal are questions of law.
[13]
With
this said, I can immediately dispose of one of the ten grounds of appeal raised
by the appellant in his memorandum of fact and law at paragraph 66 and following
(ground of appeal E) :
The Learned Justice erred in law
by concluding under Section 231.7(1)(a) of the Income Tax Act
that the Appellant had failed to provide all the information and documents
sought by the Minister in the specific Requirement issued February 6, 2012, and
improperly allowed the Minister to amend, change, amplify or expand the
Requirement by ordering the Appellant to “provide additional information and
documents sought by the Minister as set forth in the Affidavit of Maria Van Dyk”
filed with this Application.
[14]
I
find that the Judge did not expand the Requirement. In his Speaking Order, the
Judge states:
My review of the evidence
suggests to me that the [appellant] has not fully complied with the Minister’s
request and I do not think his arguments that it is not clear what the Minister
wants, or that the Minister already has the information and documentation,
stand up to scrutiny or are supported by the evidence. (Judge’s Speaking Order,
appeal book, volume 1, page 21 at paragraph 2).
[15]
This
is a finding of fact. The appellant has not convinced me that the Judge
committed a reviewable error in concluding as he did.
[16]
Neither
did he convince me that it was not open to the Judge to order the appellant to
provide “additional information and documents … as set out in the affidavit of
Maria Van Dyk” where such information was not listed in the Requirement (ibidem,
page 29 at paragraph 2).
[17]
As
I read this affidavit, it appears to me that the Minister is simply seeking full
disclosure of the information and documents sought in the Requirement. The
“additional” information and documents are, in reality, the documents related
to the three categories of information and documents described in the
Requirement (see paragraph [7] of
these reasons), which the appellant has failed to provide in his response to
the Requirement.
[18]
The
failure of the appellant to make full disclosure as requested by the Minister
is what brought the parties to court. As soon as the Judge was satisfied under
subsection 231.7(1) that (a) Mr. Thompson was required under section 231.2 to
provide information or documents and did not do so; and (b) the information or
document was not protected from disclosure by solicitor-client privilege within
the meaning of subsection 232(1), he was entitled make the order that he did.
[19]
The
remaining nine grounds of appeal raised by the appellant all concern, in one
way or another, the question of solicitor-client privilege. For the sake of
convenience, I have regrouped them under the following three issues:
(1) Which party bore the
evidentiary burden to establish that the information at issue was subject to
privilege?
(2) Did the Court err in
finding that the information requested by the respondent – information relating
to the appellant’s business accounts receivable, including the names and
amounts owed by the appellant’s client – consists of accounting records and is
not subject to solicitor-client privilege?
(3) Did the Court err in
finding that the decision does not infringe any privacy rights under section 8
of the Charter?
[20]
I
will return to these issues after reviewing the relevant portion of the
Speaking Order under appeal, the general scope of the solicitor-client
privilege and subsection 232(1) of the Act, which states:
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“solicitor-client
privilege” means the right, if any, that a person has in a
superior court in the province where the matter arises to refuse to disclose
an oral or documentary communication on the ground that the communication is
one passing between the person and the person’s lawyer in professional
confidence, except that for the purposes of this section an accounting record
of a lawyer, including any supporting voucher or cheque, shall be deemed not
to be such a communication.
|
«
privilège des communications entre client et avocat » Droit
qu’une personne peut posséder, devant une cour supérieure de la province où
la question a pris naissance, de refuser de divulguer une communication orale
ou documentaire pour le motif que celle-ci est une communication entre elle
et son avocat en confidence professionnelle sauf que, pour l’application du
présent article, un relevé comptable d’un avocat, y compris toute pièces
justificative out tout chèque, ne peut être considéré comme une communication
de cette nature.
|
[21]
Finally,
I shall dispose of the constitutional question.
The Judge’s Speaking
Order
[22]
The
Judge expressed his conclusion in these words:
… I have considerable sympathy
for the situation [Mr. Thompson] now finds himself in whereby his clients could
face garnishee proceedings if their names are disclosed, which might come as a
surprise to them and will certainly not assist the [appellant] who practices
law in a small town … [H]owever I do not think the law supports [his] position.
The information and documents that the Minister is seeking are simply financial
records of the [appellant] and, in my view, are not privileged… (ibidem,
appeal book, volume 1, pages 21-22 at paragraphs 3 and 4).
[23]
Referring
to Lavallee, Rackel & Heintz v. Canada (Attorney General); White,
Ottenheimer & Baker v. Canada (Attorney General); R. v. Fink, 2002 SCC
61, [2002] 3 S.C.R. 209 [Lavallee], the Judge noted that
clients’ names are not always privileged. He found, as a matter of fact, that
Mr. Thompson had provided no evidence to show that any particular client name
should be protected and that Mr. Thompson had failed to establish that the
financial records sought by the Minister constituted or contained information
or documents properly protected by solicitor-client privilege.
[24]
The
Judge also considered the appellant’s argument on section 8 of the Charter and
dismissed it. Noting that Mr. Thompson conceded that section 8 protects against
unjustified state intrusions on a person’s reasonable expectation of privacy, the
Judge observed that taxpayers have a very low expectation of privacy in their
business records relevant to the determination of their tax liability, and that
an expectation of privacy should not be confused with a duty of
confidentiality.
[25]
Furthermore,
the Judge pointed out that duties of confidentiality pursuant to the
regulatory directives of bodies such as the Law Society of Alberta cannot be
relied on to invalidate a provision of the Act: Canadian Western Bank v.
Alberta, 2007 SCC 22, [2007] 2 S.C.R. 3; Law Society of British Columbia
v. Mangat, 2001 SCC 67, [2001] 3 S.C.R. 113. In any case, the Law Society
of Alberta’s Code of Conduct contains an explicit exception to the duty
of confidentiality where “required by law or a court to do so”: Rule 2.03(1)(b)
Confidential Information (Judge’s Speaking Order, appeal book, volume 1, page
27 at paragraph 22).
[26]
Finally,
relying on R. v. McKinlay Transport Ltd., [1990] 1 S.C.R. 627, the Judge
stated that subsection 231.2(1) of the Act provides the least intrusive means
to effectively monitor compliance with the Act. For the aforementioned reasons,
and in light of the circumstances, the Judge concluded that both the provision
of the Act and the Requirement met the requirements of section 8 of the Charter
(ibidem at paragraphs 25-28).
The Position of
the Parties
[27]
Mr.
Thompson’s position is straightforward. He asserts that the names, addresses,
phone numbers of clients and the amount that they owe their lawyers for legal
services rendered are always privileged. They cannot form part of a lawyer’s
accounting records within the meaning of subsection 232(1) of the Act.
[28]
Bills
or statements of accounts are at the very core of the relationship between
solicitors and clients. They are privileged. The Minister would be interfering
in that unique relationship if she was allowed to enforce her Requirement. Amongst
other consequences, the appellant would no longer be in a position to diminish
the amount owed by a given client or write it off completely after service of
garnishment proceedings by the Minister to this client.
[29]
As
a result, the appellant argues that the Judge took an incorrect and restrictive
approach to the meaning of solicitor-client privilege and failed to give full
effect to the common law principles of solicitor-client privilege set out in Canada
(Privacy Commissioner) v. Blood Tribe Department of Health, 2008 SCC 44,
[2008] 2 S.C.R. 574.
[30]
Furthermore,
the appellant argues that the Judge erred in applying the definition of
“solicitor-client privilege” found at subsection 232(1) of the Act, reproduced
above at paragraph [20], to
the facts of this case. In his view, this definition applies only to matters
arising under section 232 of the Act (entitled solicitor-client privilege) and
not to a consideration of whether a compliance order should issue under section
231.7 of the Act.
[31]
In
any event, the appellant also states that the Judge erroneously prioritized the
Act over the Legal Profession Act, R.S.A. 2000 c. L-8, the Rules and the
Code of Conduct of the Law Society of Alberta, which he submits take
precedence over the Act as matters of property and civil rights in the
province.
[32]
Finally,
as mentioned above, the appellant invokes section 8 of the Charter. Relying
upon the case of Baron v. Canada, [1993] 1 S.C.R. 416, a case in which
the Supreme Court of Canada found section 231.3 of the Act of no force and
effect and in violation of section 8, the appellant opines that the same
reasoning applies to subsection 231.2(1) of the Act. He submits that sections
231 through 232 of the Act interfere with the administration of justice in a
manner comparable with subsection 231(3). He states:
… the Minister’s attempted
interference with the clients’ guaranteed right and freedom regarding
“solicitor-client privilege” can not [sic] be “demonstrably justified in
a free and democratic society” as is required by Section 1 of the [Charter] and
as provided in Section 8 thereof (appellant’s memorandum of fact and law, page
26, Ground of Appeal “J”).
[33]
The
respondent fully supports the Order of the Federal Court. She asserts that the
Judge made no reviewable error, whether in law or in fact.
Solicitor-Client
Privilege
[34]
Solicitor-client
privilege is one of the most revered doctrines under the common law, described
by the Supreme Court of Canada as “one of the most ancient and powerful
privileges known to our jurisprudence”. It is generally seen as a “fundamental
and substantive rule of law”: R. v. National Post, 2010 SCC 16, [2010] 1
S.C.R. 477 at paragraph 39, quoting R. v. McClure, 2001 SCC 14,
[2001] 1 S.C.R. 445 [McClure] discussed by Professor Adam
Dodek in “Solicitor-Client Privilege in Canada, Challenges for the 21st
Century” (Discussion Paper for the Canadian Bar Association, February 2011).
[35]
In
McClure at paragraph 35, Major J. wrote:
… solicitor-client privilege must
be as close to absolute as possible to ensure public confidence and retain
relevance. As such, it will only yield in certain clearly defined
circumstances, and does not involve a balancing of interests on a case-by-case
basis.
[36]
Court
reiterated this position in Lavallee, adding:
Accordingly, this Court is
compelled in my view to adopt stringent norms to ensure its protection (at
paragraph 36).
[37]
More
recently, the Supreme Court stated as follows in R. v. Cunningham, 2010
SCC 10, [2010] 1 S.C.R. 331 at paragraph 26, [Cunningham]:
It need hardly be said that
solicitor-client privilege is a fundamental tenet of our legal system. The
solicitor-client relationship is integral to the administration of justice;
privilege encourages the free and full disclosure by the client required to
ensure effective legal representation.
[38]
While
the Supreme Court of Canada has adopted a firm stance on the importance of
privilege, it has also consistently recognized that the claim of privilege is
not absolute. As stated above, solicitor-client privilege will yield in clearly
defined circumstances. Of relevance to the within appeal are the following
limitations to the protection against disclosure afforded by privilege.
[39]
Firstly,
the privilege belongs to the client, not the lawyer: Smith v. Jones,
[1999] 1 S.C.R. 455 at paragraph 46. It can only be asserted or waived by the
client or through his or her informed consent (Lavallee at
paragraph 39). It “serves to both protect the essential interests of clients
and ensure the smooth operation of Canada’s legal system…”: Foster Wheeler
Power Co. v. Société intermunicipale de gestion et d’élimination des déchets
(SIGED) inc.,
2004 SCC 18, [2004] 1 S.C.R. 456 at paragraph 34 [Foster Wheeler]
[Emphasis added.]
[40]
Secondly,
solicitor-client privilege applies only to a communication between a lawyer and
client, which is of a confidential character, and which is directly related to
the seeking, formulating or giving of legal advice. Put differently, privilege
will not attach to communications in which legal advice is neither sought nor
offered or where the communication is not intended to be confidential. The
purpose of privilege is to ensure that clients will not fear that information
given in confidence to their lawyers may later be disclosed and used against
them: Canada (Combines Investigation Act) (Re), [1975] F.C. 184,
55 D.L.R. (3d) 713 at paragraph 12 approved and adopted in Solosky v. The
Queen [1980] 1 S.C.R. 821, page 834).
[41]
Thirdly,
courts have determined that solicitor-client privilege protects client names,
but only in certain circumstances. In R. v. Budd, 2002, [2002] O.T.C. 893, the
Ontario Superior Court canvassed Canadian case law and authorities on the
question of privilege over client names, and concluded that privilege protects
client names where the identity of the client “constitutes the foundation of
the retainer” or “the essence of the consultation” (at paragraphs 14-15). The
Court determined that the general rule is that client names are not per se
privileged in Canadian law.
[42]
In
the same year that Budd was decided, the Supreme Court concluded to the
same effect in Lavallee. It stated: “The name of the client may very
well be protected by solicitor-client privilege, although this is not always
the case”: See also Thorson v. John Jones (1973), 38 D.L.R. (3d) 312
(B.C.S.C.) and R. D. Manes and M. P. Silver, Solicitor-Client Privilege in
Canadian Law (Markham, Ont: Butterworths, 1993) at page 141, quoted in Lavallee.
[43]
Lastly,
privilege is distinct from, and narrower than, the duty of confidentiality. The appellant relies on
the duty of confidentiality he owes his clients pursuant to the Law Society of
Alberta’s Rules and its Code of Conduct. However, courts and law
societies recognize the distinction between the duty of confidentiality and
solicitor-client privilege. The Law Society of Alberta’s Code of Conduct includes
this commentary under Rule 2.03 concerning confidentiality:
This rule must be distinguished
from the evidentiary rule of lawyer and client privilege, which is also a
constitutionally protected right, concerning oral or documentary communications
passing between the client and the lawyer. The ethical rule is wider and applies
without regard to the nature or source of the information or the fact that
others may share the knowledge.
[44]
The
Supreme Court has similarly distinguished between the two concepts. In Cunningham, the Court stated that its reasons,
which “address the application, or non-application, of solicitor-client
privilege” should not be taken as affecting “counsel’s ethical duty of confidentiality” (at paragraph
31). Similarly, in Foster Wheeler, the Court distinguished
between “the scope of the lawyer’s obligation of confidentiality”
(i.e., the duty of confidentiality) on the one hand, and “the
application of the immunity from disclosure designed to protect that confidentiality” (i.e., solicitor- client privilege) on
the other (at paragraph 29).
Subsection
232(1) of the Act
[45]
As
mentioned above, subsection 232(1) defines solicitor-client privilege for the
purposes of the Act. For ease of reference, I reproduce it again:
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“solicitor-client
privilege” means the right, if any, that a person has in a
superior court in the province where the matter arises to refuse to disclose
an oral or documentary communication on the ground that the communication is
one passing between the person and the person’s lawyer in professional
confidence, except that for the purposes of this section an accounting record
of a lawyer, including any supporting voucher or cheque, shall be deemed not
to be such a communication.
|
«
privilège des communications entre client et avocat » Droit
qu’une personne peut posséder, devant une cour supérieure de la province où
la question a pris naissance, de refuser de divulguer une communication orale
ou documentaire pour le motif que celle-ci est une communication entre elle
et son avocat en confidence professionnelle sauf que, pour l’application du
présent article, un relevé comptable d’un avocat, y compris toute pièces
justificative out tout chèque, ne peut être considéré comme une communication
de cette nature.
|
[46]
This
definition is in line with the teachings of the Supreme Court of Canada on the
law of solicitor-client privilege. It protects from disclosure those communications
passing between solicitor and client in professional confidence, i.e.
communications that involve seeking and providing legal advice. I fail to see
how it applies to accounting records and supporting vouchers and cheques, which
constitute, as a general rule, evidence of an act or transaction rather than a
privileged communication: See also Canada (Minister of National Revenue –
M.N.R.) v. Jakabfy, 2013 FC 706 at paragraph 11 [Jakabfy]; Canada
(Minister of National Revenue – M.N.R.) v. Singh Lyn Ragonetti Bindal LLP,
2005 FC 1538 at paragraph 18; Canada (Minister of
National Revenue – M.N.R.) v. Reddy, 2006
FC 277; Canada (Minister of National Revenue – M.N.R.) v. Cornfield,
2007 FC 436; Canada (Minister of National Revenue – M.N.R.) v. Currie,
2008 FC 237. Of course, if for some unusual circumstances a lawyer’s accounting
records contain privileged communications, these communications would remain
subject to judicial scrutiny under the Act since legislative language governing
the production of documents must be read so that it does not include
communications subject to solicitor-client privilege: Canada (Privacy
Commissioner) v. Blood Tribe Department of Health, above at paragraph 11.
[47]
I
also fail to understand the appellant’s argument as to the non-applicability of
the definition of solicitor-client privilege found in the Act to his case. The
Minister has instituted her proceedings under subsection 231.7(1) because the appellant
had failed to comply with a Requirement served pursuant to subsection 231.2(1)
of the Act. Paragraph 231.7(1)(b) refers specifically to that definition
when stating the Judge’s task when presented with a summary application for a
compliance order.
[48]
I
now turn to the three specific issues identified earlier at paragraph [19] of
these reasons.
The Burden of
Proof
[49]
Mr.
Thompson raised the shield of solicitor-client privilege. It is the party
asserting privilege that bears the evidentiary burden to establish the claim on
a balance of probabilities.
[50]
Mr.
Thompson did not. To the contrary, the Judge found that “on the record before
[him], there is nothing to suggest that any client’s name requires the
protection of privilege” (Judge’s Speaking Order, appeal book, volume 1, page
22 at paragraph 5). This factual finding is fully supported by the evidence,
especially Mr. Thompson’s affidavit, which contains only generalities about his
legal practice (appellant’s affidavit, appeal book, volume 2, page 335 and ff.).
[51]
One
of the difficulties with the appellant’s position that names of clients are
always privileged is that it runs contrary to the foundation of the taxation
system in Canada, which is a self-assessing and self-reporting system. On his
theory, the CRA could never seek and obtain information from a solicitor or
barrister about the revenue generated by his practice or otherwise that would
enable the CRA to ensure compliance or determine non-compliance by a lawyer.
Indeed, the appellant goes as far as arguing that privilege covers the
financial institutions who hold registered mortgages on his own personal
interests because he provides legal services to these financial institutions
where he also has bank accounts.
[52]
In
my view, the appellant could not succeed on his argument by simply raising the
shield of privilege on behalf of his clients whose names the Minister was
seeking and by hiding behind it. The appellant is a taxpayer whose compliance
with the Act the Minister is fully entitled to verify. Had Mr. Thompson raised
solicitor-client privilege until he had further opportunity to consult with his
clients and assess their rights, and then provided specifics in his affidavit
explaining why some of the names might attract privilege, he would have been in
a better position to persuade the Judge that his position might be justified.
[53]
It
is also noteworthy that the Court observed that there was no indication, on
record, that the appellant had even informed his clients that he was asserting
privilege on their behalf. Rather, it appears that he is attempting to protect
his clients from knowledge of the whole matter. Once again, the Judge found
that the appellant “has provided no evidence to show that any particular client
name should be protected in this case” (Judge’s Speaking Order, appeal book,
volume 1, page 25 at paragraph 14). I have not been persuaded that the Judge
committed reviewable errors when he made these findings.
The Information
Requested is not Subject to Solicitor-Client Privilege
[54]
Interestingly,
case law provides a very recent example of a barrister and solicitor whose clients
were facing a compliance order under section 231.7 of the Act. In Jakabfy,
Mr. Jakabfy was found to have acted appropriately in his dealings with his
former clients (the Lavallees) and with the Minister. Upon receipt of the
Requirement addressed to him, seeking information as to how Mr. Lavallee had
distributed the proceeds from the sale of a property, Mr. Jakabfy wrote to his
clients and sought their specific instructions. He then, by sworn affidavit,
informed the CRA of his clients’ refusal to disclose the relevant information. In
the end, the Federal Court Judge ordered Mr. Jakabfy to provide the information
in the form of, inter alia, trust account ledger, cheque journal,
statement of adjustments or disbursements, copies of invoices or receipts for
payments. All these documents were found not to be privileged.
[55]
In
Mr. Thompson’s case, the Minister seeks similar documents, more particularly a
“current accounts receivable listing”. In his memorandum of fact and law, the
appellant argues that names of clients are as privileged as statements of
account. He asserts that, contrary to what the Judge found, client names do not
form part of an accounting record of a lawyer (at paragraphs 35-37). I disagree
with the appellant.
[56]
Section
230 of the Act generally defines the terms "Records and Books of
Account". They are documents containing "such information as will
enable the taxes payable under this Act or the taxes or other amounts that
should have been deducted, withheld or collected to be determined". The
particular situation of lawyers is addressed in subsection 230(2.1) in these
terms:
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(2.1) For greater
certainty, the records and books of account required by subsection 230(1) to
be kept by a person carrying on business as a lawyer (within the meaning
assigned by subsection 232(1)) whether by means of a partnership or
otherwise, include all accounting records of the lawyer, including supporting
vouchers and cheques.
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(2.1) Il est entendu que les registres et les
livres de comptes qui doivent, en vertu du paragraphe (1), être tenus
par une personne exploitant une entreprise consistant dans l’exercice de la
profession d’avocat (au sens du paragraphe 232(1)) en société de personnes ou
autrement comprennent tous les registres comptables de l’avocat, y compris
les pièces justificatives et les chèques.
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[57]
Statements of
account are not the same as a lawyer’s accounting records. The latter consist
essentially of statements of fact such as the name of the client, the amount
billed for the professional services, the payments received and the amounts
still owed. Statements of account, by contrast, may reveal a history of the
file. They may contain information including the nature of the consultation, a
summary of communications between solicitor and client, and so on, which may be
covered by solicitor-client privilege.
[58]
In
this case, the Minister is not seeking the information contained in statements
of account. She seeks purely factual information consisting of the names of the
clients and the amounts of money owed by these clients individually.
[59]
At
the hearing of this appeal, Mr. Thompson admitted that he could institute legal
proceedings to recover his fees from an uncooperative client. In light of the
public nature of court proceedings, he would be obliged to reveal an
uncooperative client’s identity and amounts owing in order to recover these
fees. On that answer alone, it is difficult to accept his position that this
information is subject to solicitor-client privilege. I note that the Law
Society of Alberta’s Code of Conduct provides for circumstances where this
type of information may be disclosed. Rule 2.03(5) states:
2.03(5) A lawyer may disclose confidential
information in order to establish or collect the lawyer’s fees, but must not
disclose more information than is required.
[60]
Consistent
with this example, what Mr. Thompson is asked to provide is no more than the
information he would need to include in a Statement of Claim to disclose a
cause of action.
[61]
In
light of the foregoing, I conclude that the Judge did not err in finding that
the information requested in the Requirement was not subject to
solicitor-client privilege.
Privacy Rights
not Infringed under Section 8 of the Charter
[62]
The
appellant asserts that the Minister’s attempted interference with clients’
guaranteed rights in relation to solicitor-client privilege violates section 8
and is not saved by section 1 of the Charter. As the appellant has failed to
establish that the Court erred in finding that a class privilege does not
attach to the accounting records and client names requested by the Minister,
there is no interference with any rights in relation to privilege, and this
argument cannot succeed.
[63]
The
appellant also refers to the case of Baron v. Canada, [1993] 1 S.C.R.
416 in which the Supreme Court of Canada struck down section 231.3 of the Act,
because the provision interfered with judicial discretion as to whether or not
a search warrant should be issued to enter, search any building, receptacle or
place and seize any document or thing that may afford evidence as to the
commission of an offence under this Act. However, in the circumstances at bar,
the appellant points to no evidence that the Court’s decision-making ability is
fettered by the wording of the provisions at issue.
[64]
Further,
the appellant’s analogy with the physical seizure of documents in the course of
executing a warrant does not apply on the facts. There is no entry of tax
officials onto the appellant’s premises. The Requirement consists solely of a
demand for production of documents. Finally, I note a recent decision from the
Superior Court of Quebec wherein a Judge of that Court declared
unconstitutional and inoperable sections 231.2, 231.7 and subsection 232(1)(5)
of the Act as far as Quebec lawyers and notaries were concerned: Chambre des
notaires du Québec c. Canada (Procureur general), 2010 J.Q. no. 8868;
[2010] QCCS 4215.
[65]
I
am unmoved by this decision. Firstly, a Quebec Superior Court decision is not
binding on this Court. That decision is under appeal and no decision on the
appeal has been rendered to date (appeal filed on October 7, 2010,
500-09-021073-101). Secondly, the facts of that case are distinguishable as
they involve information requirements issued by the CRA to a number of Quebec notaries in order to obtain information and documents concerning their clients. The Quebec Charter of Human Rights and Freedoms, R.S.Q. c. C-12 and Quebec’s Code of
Ethics of Notaries, R.R.Q., c. N-3, r. 2 and Code of Ethics of
Advocates, R.R.Q., c. B-1, r. 3 are also relied upon. They are not
applicable to the appellant.
[66]
As
a result, I conclude that the appellant points to no palpable error in the Judge’s
reasons on the Charter questions that would justify our intervention.
The Notice of Constitutional
Question
[67]
The
need for a
notice of constitutional question is linked to the remedy sought by a party: Canada (Minister of Canadian Heritage) v. Mikisew Cree First Nation, 2004 FCA
66, [2004] 3 F.C.R. 436. Section 57 of the Federal Courts Act
states that the constitutional validity, applicability, or operability of an
Act of Parliament shall not be judged unless notice has been served. Neither in
his Notice of Appeal nor in the Order Sought section of his memorandum of fact
and law does the appellant seek a finding that the provisions of the Act under
which the Minister acted in this case are invalid, inapplicable or inoperable
as required by section 57. As a result, it is not necessary to address the
question raised in the notice of constitutional question.
Conclusion
[68]
As
announced at the outset of these reasons, I propose to partially allow the
appeal although, as did the Judge, I dismiss all of Mr. Thompson’s arguments. In
my respectful view, however, the Judge’s order was premature with respect to
the accounts receivable listing. Once he had decided that Mr. Thompson’s
position on that issue could not stand, the Judge had to take the appropriate
steps to verify whether solicitor-client privilege protected any of Mr. Thompson’s
clients individually. The appellant had built his case on an erroneous
understanding of the law of solicitor-client privilege. As a result, he had
made the blanket statement that clients’ names are always privileged. On a
proper understanding of privilege and the construction of the statutory
provisions and rules at play, it is possible that some of the appellant’s
clients’ names are protected by solicitor-client privilege. If that is the
case, these clients ought to have the opportunity to assert this privilege, and
Mr. Thompson should be given the chance to lay the proper evidentiary
foundation on their behalf.
[69]
There
is no specific obligation on a lawyer to advise a client when asserting a right
on his or her behalf, when this right is in jeopardy. That being said,
provincial law societies impose general obligations on lawyers, or make
recommendations to lawyers, which suggest that the appellant should be
asserting and pursuing the claims of solicitor-client privilege after having
informed his clients and having obtained their instructions in this regard.
[70]
With
respect, I find that the Judge, as guardian of the law, should have fashioned a
remedy addressing the critical issue of privilege before making his Order. The
Act provides for the compliance order to be made by a Judge ensuring enough
flexibility and discretion for him or her to remain the protector of the rights
attached to solicitor-client privilege.
[71]
As
he did not fashion such a remedy, I propose to return the file to the Federal
Court for a new hearing, on the question of the accounts receivable listing. Mr.
Thompson may then have the opportunity to get his clients’ instructions and, on
the basis of these reasons, may file new sworn affidavits explaining why individual
clients’ names are privileged, if in fact this continues to be the case. I will
not impose a time limit to do so and leave it up to the Federal Court to set
the timelines for the parties to exchange further affidavits or materials.
However, I should add that the clients on whose behalf the appellant is
claiming privilege should produce their own affidavits explaining the history
of their accounts. Copies of such affidavits should be served on the
respondent, with clients’ names redacted.
[72]
As
for the rest of the missing information and documents, as listed in Ms. Maria
Van Dyk’s affidavit (appeal book, volume 1, page 35 and ff.), the Judge’s
Speaking Order stands. The missing information and documents shall be produced
as ordered and in an unredacted version within thirty (30) days of the judgment
to issue. For the sake of clarity, the relevant paragraphs of Ms. Van Dyk’s
affidavit describing the missing information and documents are reproduced in an
Annex to these reasons.
Costs
[73]
Considering
the result of this appeal, I would order that each party bear its own costs.
"Johanne
Trudel"
“I
agree
J.D. Denis Pelletier J.A.”
“I
agree
Robert M. Mainville J.A.”
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