Citation: 2013TCC144
Date: 20130507
Docket: 2010-3940(IT)G
BETWEEN:
IMPERIAL TOBACCO CANADA LIMITED,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AMENDED REASONS FOR ORDER
D’Arcy J.
[1]
The Respondent has
brought a motion seeking:
(a)
An order, pursuant to
subsection 82(6) of the Tax Court of Canada Rules (General Procedure)
(the “Rules”), directing the Appellant to attend and be cross‑examined
on its affidavit of documents sworn on July 16, 2012 (the “Affidavit of
Documents”).
(b)
In the alternative, an order
pursuant to paragraph 88(a) of the Rules, directing the Appellant
to attend and be cross-examined on the Affidavit of Documents.
(c)
In the further
alternative, an order pursuant to paragraph 88(d) of the Rules,
directing the Appellant to produce true copies of all 42 documents listed in
Schedule B of the Affidavit of Documents for inspection by this Court to
determine the validity of the claims of privilege.
(d)
An order extending the
deadlines for completion of discovery examinations, undertakings, etc.
[2]
By an order dated
October 23, 2012, I granted the Respondent’s request for an extension of the
deadlines for the completion of the examinations for discovery and undertakings
and for reporting to the Court. The remaining issues in this motion relate to
the Appellant’s List of Documents provided under the Court’s full disclosure
rules.
[3]
More specifically, the
issues relate to the following:
·
what is referred to as metadata
in respect of documents included in Schedule A of the List of Documents,
·
the electronic documents
the Appellant describes in Schedule C as “[d]ocuments in electronic form that
have been deleted and have not been recovered or restored,” and
·
the documents listed in
Schedule B in respect of which the Appellant has claimed solicitor‑client
privilege.
Background
[4]
British American
Tobacco p.l.c. (“BAT”) is the parent company of a number of companies,
including the Appellant, British American Tobacco Australia Limited (“BATA”)
and BAT Italy Investments Ltd. (“BATI”). (The four companies will be collectively
referred to as the “Affiliated Companies”.) The Appellant acquired preferred
shares of BATA in 2001 for a subscription price of $483,910,000 and preferred
shares of BATI in 2003 for a subscription price of $879,535,000. The Minister
has disallowed approximately $600 million that the Appellant deducted in
respect of dividends received from BATA and BATI.
[5]
The issue in this
appeal is whether the provisions of paragraph 95(6)(b) of the Income
Tax Act (the “Act”) apply to the relevant transactions. This paragraph
provides, in part, as follows:
For the purposes of this subdivision (other than
section 90),
[. . .]
(b) where a person . . . acquires or disposes of
shares of the capital stock of a corporation . . ., either directly or
indirectly, and it can reasonably be considered that the principal purpose for
the acquisition or disposition is to permit a person to avoid, reduce or defer
the payment of tax or any other amount that would otherwise be payable under
this Act, that acquisition or disposition is deemed not to have taken place,
and where the shares . . . were unissued by the corporation . . . immediately
before the acquisition, those shares . . . are deemed not to have been issued.
[6]
This is not the first
motion brought by the Respondent. On March 19, 2012, the Respondent brought a
motion seeking:
(a)
an order striking out
the Notice of Appeal on the basis that it discloses no reasonable grounds for
appeal;
(b)
an order directing the
Appellant to file and serve a full disclosure list of documents as provided in
section 82 of the Rules;
(c)
an order directing the
Appellant to produce a knowledgeable current or former director of the
Appellant to be examined for discovery as provided in subsection 93(2) of the Rules;
and
(d)
an order compelling the
Appellant to answer certain discovery questions and follow-up questions and
produce certain documents.
[7]
On May 1, 2012, Justice
Webb issued an order dismissing the Respondent’s application to strike the
Notice of Appeal and deferred the Court’s decision with respect to the
unanswered questions and undisclosed documents. However, he ordered, pursuant
to section 82 of the Rules, each party to “file and serve on each other party
a list of all the documents that are or have been in that party’s possession,
control or power relevant to any matter in question between them in this
appeal.” This is generally referred to as full disclosure of documents.
[8]
Justice Webb also
ordered the Appellant to “choose one of the two remaining individuals who were
directors at the time that the preferred shares were acquired to be examined on
behalf of the Appellant.” The Appellant chose Mr. Luc Jobin.
[9]
The Appellant and the
Respondent each filed with the Court a List of Documents (Full Disclosure).
Schedule A to the Appellant’s List of Documents notes 249 documents in the
possession, control or power of the Appellant. Schedule B to the
Appellant’s List of Documents notes, pursuant to paragraph 82(2)(b)
of the Rules, 42 documents in respect of which the Appellant claims
solicitor-client privilege.
[10]
Schedule C to the
Appellant’s List of Documents refers to the following two sets of documents
that were formerly in the possession, control or power of the Appellant, but
are no longer in the Appellant’s possession, control or power:
1. Where applicable, originals of documents listed in
Schedules A and B that were sent or delivered by the Appellant to the person to
whom they were addressed.
2. Documents in electronic form that have been deleted and
have not been recovered or restored.
[11]
The Respondent subsequently
brought this motion.
[12]
At the commencement of
the hearing, I informed the parties that I would first hear argument with
respect to the cross-examination on the Appellant’s Affidavit of Documents and
would then decide if the Court required argument with respect to the
alternative relief sought by the Respondent, i.e., the production of the
documents listed in Schedule B for inspection by the Court to determine the
validity of the claims of solicitor-client privilege.
[13]
On October 10 and 12,
2012, I heard argument from the parties with respect to the cross-examination
issue. During his argument on October 10, 2012, counsel for the Appellant
informed the Court that the Appellant was “happy” to provide the Court with
copies of the documents listed in Schedule B for the Court’s inspection (the
“Book of Privileged Documents”).
[14]
Before accepting the
Book of Privileged Documents, I asked counsel for the Respondent what the
Respondent’s position was with respect to my receiving it. Counsel stated that
the Respondent did not object to my receiving the book. Counsel for the
Appellant then provided the Court with the Book of Privileged Documents.
[15]
On October 12, 2012,
after the parties had completed their argument on the cross-examination issue,
I informed them that I would reserve my decision on this issue until I heard
from them with respect to the solicitor-client privilege issue. I heard
argument from the parties on November 6, 2012 with respect to the issue of
whether the documents listed in Schedule B of the Appellant’s List of Documents
were, in fact, subject to solicitor-client privilege.
[16]
I will first deal with
the Respondent’s request to cross-examine on the Affidavit of Documents.
Cross-Examination on Affidavit of Documents
[17]
Counsel for the
Respondent stated that the Respondent would use the cross‑examination of
Mr. Edgard Goharghi, the employee of the Appellant who swore the Affidavit of Documents,
as follows:
a. With respect to Schedule A of the
Appellant’s List of Documents, the Respondent would use the cross-examination
to narrow down the number of documents for which metadata will be requested.
b. With respect to Schedule B of the
Appellant’s List of Documents, the Respondent would use the cross-examination
to elicit additional information that will help her determine whether the
Appellant has properly claimed privilege in respect of the documents. (The
Respondent argued that the description of the documents in the Appellant’s List
of Documents does not provide sufficient information to allow a determination
to be made that the Appellant has properly claimed privilege in respect of the
documents).
c. With respect to Schedule C of the
Appellant’s List of Documents, the Respondent would use the cross-examination
to determine if any relevant electronic documents have been omitted from the
Appellant’s List of Documents.
[18]
The Respondent is
relying on the following sections of the Rules:
82(1) The parties
may agree or, in the absence of agreement, either party may apply to the Court
for an order directing that each party shall file and serve on each other party
a list of all the documents that are or have been in that party's possession,
control or power relevant to any matter in question between or among them in
the appeal.
(2) Where a list of
documents is produced in compliance with this section, the list shall describe,
in separate schedules, all documents relevant to any matter in issue in the
appeal,
(a) that
are in the party's possession, control or power and that the party does not
object to producing,
(b) that
are or were in the party's possession, control or power and for which the party
claims privilege, and the grounds for the claim, and
(c) that
were formerly in the party's possession, control or power, but are no longer in
the party's possession, control or power, whether or not privilege is claimed
for them, together with a statement of when and how the party lost possession
or control of, or power over them and their present location.
(3) A list of
documents filed and served under this section shall be in Form 82(3).
(4) A list of
documents made in compliance with this section shall be verified by affidavit
(Form 82(4)A and 82(4)B),
[.
. .]
(b) if the
party is a corporation or any body or group of persons empowered by law to sue
or to be sued, either in its own name or in the name of any officer or other
person, by any member or officer of such corporation, body or group, and
(c)
if the party is the Crown . . . .
(5) The affidavit
shall contain a statement that the party has never had possession, control or
power of any document relevant to any matter in issue in the proceeding other
than those included in the list.
(6) The Court may
direct a party to attend and be cross-examined on an affidavit delivered under
this section.
[.
. .]
88. Where the Court
is satisfied by any evidence that a relevant document in a party's possession,
control or power may have been omitted from the party's affidavit of documents,
or that a claim of privilege may have been improperly made, the Court may,
(a) order
cross-examination on the affidavit of documents,
(b) order
service of a further and better affidavit of documents,
(c) order
the disclosure or production for inspection of the document or a part of the
document, if it is not privileged, and
(d) inspect
the document for the purpose of determining its relevance or the validity of a
claim of privilege.
[19]
I heard argument from
the parties with respect to the application of subsection 82(6) and section 88
of the Rules.
[20]
Counsel for the
Respondent began his argument by referring to paragraph 95(1)(c) of
the Rules, which provides that, during the examination for discovery of
a person, no question may be objected to on the basis that the question
constitutes cross-examination on the affidavit of documents of the party being
examined. He argued that under this provision he could cross-examine Mr. Luc
Jobin on the Appellant’s List of Documents during Mr. Jobin’s discovery.
Mr. Jobin is the former director of the Appellant who the Appellant has
chosen to be examined for discovery in satisfaction of Justice Webb’s Order of
March 19, 2012.
[21]
While counsel for the
Respondent believes he can cross-examine Mr. Jobin, he is concerned that Mr.
Jobin will not have personal knowledge of the Appellant’s List of Documents. I
have a much more significant concern.
[22]
Justice Webb’s order
states the following:
The Appellant shall choose one of the two remaining individuals who
were directors at the time that the preferred shares were acquired to be
examined on behalf of the Appellant. The examination of such person shall not
include any questions for which a satisfactory answer was provided by the
representative previously chosen by the Appellant during his discovery
examination or as a result of any follow-up questions that have been answered. The
examination of such person shall be limited to the line of inquiry that was
frustrated by the refusal of the representative of the Appellant to answer
questions related to what the board of directors considered in making the
decision to approve the acquisitions of the preferred shares that are in issue
in this appeal or to seek any further information from the former members of
the board of directors in relation to this.
[Emphasis added.]
[23]
It appears that counsel
for the Respondent is suggesting that the Respondent may ignore the portion of
this Court’s May 19, 2012 Order that restricts the examination of Mr. Jobin to
questions relating to what the board of directors considered in making the
decision to approve the acquisitions of the preferred shares that are in issue
in this appeal. I am extremely surprised by counsel’s submission. I do not
intend to entertain an argument that is based upon a party ignoring an order of
this Court.
[24]
With respect to the
relevant sections, counsel for the Respondent argued that there is no threshold
test in subsection 82(6). The subsection merely states that the Court may
direct a party to attend and be cross-examined on an Affidavit of Documents
delivered under section 82. Counsel argued that the subsection does not require
the examining party to justify the cross-examination or to identify objectives
that the examining party wishes to pursue. Counsel further argued that the only
reason leave is required under subsection 82(6) is that the cross-examination
is conducted at a time other than discovery.
[25]
Counsel for the
Respondent acknowledged that section 88 contains a threshold test and that,
once the test is satisfied, the Court may apply any of the four remedies set
out in section 88. One of the four remedies is cross-examination on the Affidavit
of Documents. He argued that the reason for the section 88 threshold test is
the inclusion in section 88 of the three remedies that are not available under
subsection 82(6).
[26]
Counsel for the
Respondent also argued that allowing cross-examination on the Affidavit of Documents
is the proper first step that the Court should take before considering the
other remedies under section 88. In support of her position, the Respondent
relies on the decisions of this Court in Heinig v. The Queen and 9005‑6342 Québec Inc. v. The Queen. I do not find either of these decisions particularly helpful. In his
decision in Heinig, Justice Webb decided that in the fact situation in
front of him the proper remedy under section 88 was cross‑examination on
the list of documents. However, he does not state, or even imply, that the
Court should use this remedy before it considers the other remedies available
under section 88.
[27]
My colleague Justice
Hogan’s decision in 9005‑6342 Québec Inc. simply does not address the issue of when leave
should be granted under subsection 82(6) or section 88 of the Rules,
other than to refer to Justice Webb’s decision in Heinig.
[28]
Counsel for the
Appellant argued that subsection 82(6) and section 88 must be read together. He
argued that subsection 82(6) takes away the automatic right to cross-examine on
an affidavit. It is the Appellant’s position that subsection 82(6) provides
that a party must obtain leave and section 88 particularizes what the party
must show in order to obtain leave. Counsel argued that there must be something
prima facie wrong with the List of Documents before the Court will grant
leave to cross-examine.
[29]
I agree, in part, with
counsel for the Appellant. Subsection 82(6) removes the automatic right to
cross-examine on an affidavit. In order to give it meaning there must be some
threshold before cross-examination is allowed.
[30]
Subsection 82(1) of the
Rules states that “. . . each party shall file and serve on each other
party a list of all the documents that are or have been in that party’s
possession, control or power relevant to any matter in question between or
among them in the appeal.” [Emphasis added.]
[31]
Justice Webb ordered
each party to provide such a List of Documents.
[32]
It is my view that the
Court should considering granting leave to cross‑examine if it has any
concerns that the List of Documents does not satisfy the requirements of section
82 of the Rules. In particular, the Court should consider granting leave
if it has any concerns that the List of Documents does not list all relevant
documents that are in the relevant party’s possession, control or power.
[33]
However, the Court, at
the same time, must consider section 88 of the Rules. If the Court
concludes that the section 88 threshold test has been satisfied, then it should
consider all of the remedies in section 88 before issuing its order. I do not
accept that the Court should order cross-examination before considering the
other remedies available under section 88. If the Court believes that one of
the other remedies is more appropriate, then it should issue an order for such
remedy. As I will discuss shortly, while I believe there are deficiencies in
the Appellant’s List of Documents, it is my view that paragraph 88(b) of
the Rules provides the appropriate remedy, namely, the service of a
further and better Affidavit of Documents.
[34]
It is important for the
parties to recognize that my Order does not preclude the Respondent from
seeking cross-examination on the Amended Affidavit of Documents or from seeking
further discovery of the Appellant’s representative (i.e., the person whom the
Appellant previously put forward for discovery).
[35]
I will now consider the
specific issues raised by the Respondent.
Metadata
[36]
When referring to
metadata, the parties are referring to electronic data relating to specific
documents listed in Schedule A of the Appellant’s List of Documents. These
electronic data provide information with respect to a specific document, information
such as: the author or authors of the document, when the document was created,
and a history of changes to the document.
[37]
During the course of
argument, counsel for the Appellant informed the Court that, at the time the
parties prepared their respective Lists of Documents, they agreed to address
the metadata issue as follows:
-
Firstly, the parties
would prepare their Lists of Documents, listing the hard copies of the
documents.
-
Secondly, after these
lists were exchanged, counsel for the Respondent would identify the specific
documents in respect of which the Respondent requires metadata.
-
Finally, counsel for the
Appellant would then determine if the requested metadata existed in the
Appellant’s computer system.
[38]
The Respondent’s
counsel is concerned about what steps the Respondent may take if she does not
agree with the Appellant’s response to the request for metadata.
[39]
It is my view that the
metadata are information that should be listed in the List of Documents as a
document separate from the hard copy of the relevant document.
[40]
However, I also intend
to follow the agreement of counsel, since this is clearly intended to minimize
the costs of providing the information. Counsel for the Respondent will have 30
days from the date of this Order to identify the specific documents in respect
of which the Respondent requires metadata. The Appellant will have 120 days
from the date of this Order to amend its List of Documents to list the
requested metadata in either Schedule A or Schedule C of its List of Documents.
Deleted Documents
[41]
As I noted previously,
Schedule C of the Appellant’s List of Documents refers to the following:
“Documents in electronic form that have been deleted and have not been
recovered or restored.”
[42]
The Appellant does not
state that it cannot recover the documents; it merely states that they have not
been recovered.
[43]
Counsel for the
Respondent argued that he requires cross-examination in order to determine what
has been deleted and what steps the Appellant has taken to recover the deleted
documents.
[44]
Counsel for the
Appellant noted that, in other appeals, parties have agreed to use specific
search terms to search the database of a party to determine which deleted
documents may be recovered. Counsel stated that the parties have not discussed
this in the current appeal.
[45]
I believe that it is
time for such a discussion. The parties will have 30 days from the date of my Order
to agree on the specific search terms that the Appellant will use to search the
database. The Appellant will have 120 days from the date of this Order to amend
Schedule A of its List of Documents to include documents that it recovers using
the search terms.
Documents in Respect of Which the Appellant Has Claimed
Privilege
[46]
As I noted previously,
on October 10, 2012, the Appellant provided me with copies of the documents in
respect of which it was claiming privilege. The Court has read each of the
documents, heard arguments from the parties, and reached its decision with
respect to whether the Appellant has properly claimed privilege. As a result,
there is no need for an order under subsection 82(6) or paragraph 88(a)
of the Rules allowing cross-examination on Schedule B of the Appellant’s
List of Documents or an order under paragraph 88(d) of the Rules
directing the Appellant to produce the documents for inspection. The documents
have been produced by the Appellant.
Finding on Motion Seeking Cross-Examination
[47]
For the foregoing
reasons, the Respondent’s motion seeking an order pursuant to subsection 82(6)
or paragraph 88(a) of the Rules directing the Appellant to attend
and be cross-examined on its Affidavit of Documents is dismissed on the basis
that such an order is not required at this point in time. Rather, pursuant to
paragraph 88(b) of the Rules, the Appellant will be required to
serve a further and better Affidavit of Documents in accordance with my previous
comments relating to metadata and the deleted electronic documents and my
comments hereunder with respect to the documents in respect of which the
Appellant has claimed solicitor‑client privilege.
Solicitor-Client Privilege
[48]
Counsel for the
Respondent and the documents themselves raise a number of issues with respect
to whether the documents listed in Schedule B are subject to solicitor‑client
privilege. The specific issues are as follows:
· Whether certain internal communications
between employees of the Appellant were privileged.
· Whether privilege was waived when
privileged solicitor-client communications were shared by employees of BAT,
BATA and BATI or counsel for any of these companies.
· Whether privilege was waived (or existed)
when privileged solicitor‑client communications were sent to an
accounting firm.
· Whether there was an implied waiver by the
Appellant of solicitor‑client privilege with respect to legal advice
received from its counsel.
· Whether the communications between the
Appellant and its counsel constituted privileged legal advice or non-privileged
business advice.
Overview of the Law
[49]
Canadian courts have
strongly guarded solicitor-client privilege. As the Supreme Court of Canada
stated in Blank v. Canada (Minister of Justice), at paragraph 26:
. . . The
solicitor-client privilege has been firmly entrenched for centuries. It
recognizes that the justice system depends for its vitality on full, free and
frank communication between those who need legal advice and those who are best
able to provide it. Society has entrusted to lawyers the task of advancing
their clients’ cases with the skill and expertise available only to those who
are trained in the law. They alone can discharge these duties effectively, but
only if those who depend on them for counsel may consult with them in
confidence. The resulting confidential relationship between solicitor and
client is a necessary and essential condition of the effective administration
of justice.
[50]
Solicitor-client privilege is both
a rule of evidence and a substantive rule.
The criteria that must be satisfied before the privilege can be claimed were
summarized by Justice Dickson in Solosky v. The Queen as follows:
. .
. privilege can only be claimed document by document, with each document being
required to meet the criteria for the privilege - (i) a communication between
solicitor and client; (ii) which entails the seeking or giving of legal advice;
and (iii) which is intended to be confidential by the parties. To make the
decision as to whether the privilege attaches, the letters must be read by the
judge, which requires, at a minimum, that the documents be under the
jurisdiction of a court. . . .
[51]
Solicitor-client
privilege is permanent. It belongs to the client and only the client can waive
the privilege.
The client may either expressly waive the protection of the privilege or waiver
may be found by implication.
[52]
The Appellant elected
not to provide either affidavit evidence or viva voce evidence to
support its claim for privilege. The burden rests on the person claiming
solicitor-client privilege to show, on a balance of probabilities, that the
document in question is privileged.
I have not drawn any negative inferences from the Appellant’s decision not to
provide either affidavit or viva voce evidence. However, in situations
where the party claiming privilege does not produce such evidence, but provides
the Court with copies of the relevant documents for inspection, the Court must
make a decision based solely upon the documents. If, on the face of the
document, no privilege appears to exist, then the document is not privileged.
[53]
Schedule B lists
correspondence between various legal counsel and employees of the Appellant,
BAT and BATA. The actual correspondence discloses the following solicitor-client
relationships:
· Osler, Hoskin & Harcourt LLP (“Oslers”)
acted for the Appellant and BAT.
· Ogilvy Renault acted for the Appellant.
· Mallesons Stephen Jaques, an Australian law
firm, acted for the Appellant.
· Allen & Overy, a UK law firm, acted for
BAT with respect to BATI.
· Blake Dawson Waldron, an Australian law firm,
acted for BATA, BAT and the Appellant.
[54]
After
reading the Book of Privileged Documents, I have concluded that the following documents represent
privileged communication either between Oslers and their clients (the Appellant
and BAT) or between Ogilvy Renault and their client (the Appellant):
|
Document
Number
|
Document Description
|
Document Date
|
|
|
|
|
|
1
|
Memorandum from
Mario Tombari (Appellant) to Patrick Marley (Oslers)
|
April 5, 2001
|
|
7
|
Email from
Patrick Marley (Oslers) to Steve Dale (BAT), cc Firoz Ahmed (Oslers), Mario
Tombari (Appellant) and Mark Dunkley (BAT)
|
August 6, 2001
|
|
13
|
Email from Sunil
Panray (Appellant) to Firoz Ahmed (Oslers) cc Patrick Marley (Oslers) and
Mario Tombari (Appellant)
|
August 13, 2001
|
|
16
|
Email from
Patrick Marley (Oslers) to Steve Dale (BAT), cc Mario Tombari (Appellant),
Philip Andrew (BAT) and David Leach (BAT)
|
August 20, 2001
|
|
20
|
Email from
Patrick Marley (Oslers) to Steve Dale (BAT), Mark Dunkley (BAT), cc Mario
Tombari (Appellant)
|
August 30, 2001
|
|
21
|
Draft memorandum
from Patrick Marley and Firoz Ahmed (Oslers) to Steve Dale (BAT), Mario
Tombari (Appellant)
|
September 5,
2001
|
|
22
|
Draft memorandum
from Lyndon Barnes and Shelley Obal (Oslers) to Don McCarty and Sunil Panray
(Appellant)
|
September 5,
2001
|
|
29
|
Memorandum from
Patrick Marley and Firoz Ahmed (Oslers) to Steve Dale (BAT) and Mario Tombari
(Appellant)
|
November 8, 2001
|
|
36
|
Memorandum from
Renaud Coulombe and Robert Borduas (Ogilvy Renault) to Sunil Panray and
Pierre Leclerc (Appellant)
|
October 7, 2003
|
|
42
|
Memorandum from
Patrick Marley, Firoz Ahmed and Drew Morier (Oslers) to Mario Tombari
(Appellant)
|
December 11,
2003
|
Internal Communications Issue
[55]
One of the issues
raised by the Respondent, and by the documents themselves, is whether certain
internal communications between employees of the Appellant are privileged.
[56]
A communication between
employees of a company that disseminates or discusses confidential legal advice
provided by the company’s lawyer is privileged. As Justice Bowie stated in Global
Cash Access (Canada) Inc. v. The Queen in discussing legal advice provided
by the Department of Justice to the Canada Revenue Agency:
. . . The advice was
given to the Agency under the protective cloak of solicitor client privilege,
and it does not lose that protection when it is passed from one officer of the
Agency to another. If support for that proposition, other than common sense, is
required, it may be found in the judgment of Halvorson J. in International
Minerals & Chemical Corp. (Canada) v. Commonwealth Insurance Co.[
Footnote 1: [1990] S.J. 615; 89 Sask. R. 1 (Sask. Q.B.)]
[57]
However, an internal
communication that does not constitute the passing on of confidential legal
advice or directly involve the seeking of legal advice will not be privileged.
Further, such a document does not become privileged merely because a copy is
sent to a lawyer. However, if the lawyer marks the document or makes a note on
it, then it becomes a working paper of the lawyer and the marked copy is
privileged.
[58]
The following documents
are emails that simply forward legal advice provided to the Appellant by legal
counsel; the written advice was privileged when provided to the client (the
Appellant) and did not lose that privilege merely because it was forwarded by
one employee of the Appellant to another employee.
|
Document Number
|
Document Description
|
Document Date
|
|
|
|
|
|
6
|
Email from Mario
Tombari to Luc Jobin and Sunil Panray (all employees of the Appellant) that
forwards an email from Firoz Ahmed (Oslers) to the Appellant
|
August 1, 2001
|
|
23
|
Email from Harry
Steinbrenner to Sunil Panray, Caroline Ferland and Pierre Leclerc (all employees
of the Appellant) that forwards an email from Barbara Lynn Joss (Ogilvy
Renault)
|
September 6,
2001
|
|
24
|
Email from
Donald McCarty to Luc Jobin and Pierre Leclerc (all employees of the
Appellant) that forwards an email from Ben Luscombe (Mallesons Stephen
Jaques).
|
September 26,
2001
|
[59]
The following documents
are internal documents that, on their face, disclose no legal advice or passing
on of legal advice. These documents are not privileged and are to be
listed in Schedule A of the Appellant’s List of Documents:
1)
Document #2 in
Schedule B, dated April 5,
2001, which is identified in Schedule B as a memorandum from Mario Tombari
(Appellant) to Fergus Heaton and Steve Dale (BAT), with copies to Luc Jobin
(Appellant) and Patrick Marley (Oslers). The document consists of three pages.
Mr. Tombari states on the first page: “Please find herewith my
preliminary comments on . . . .” [Emphasis added]. Counsel for the Appellant
argued that the document represents the relaying by an employee of the
Appellant of legal advice obtained from Oslers. There is no evidence before me
to support such a conclusion. The document appears only to contain Mr. Tombari’s
view of the proposed transaction and to state potential issues that he has
identified. There is no mention in
the memorandum of legal advice obtained from the Appellant’s legal counsel.
The mere fact that a copy of the unmarked document is sent to Oslers is not
sufficient, in and of itself, for me to find that the document is connected
with the provision of legal advice. Counsel for the Appellant noted that Document
#2 is similar to Document #1 sent by Mr. Tombari to Oslers on April 5, 2001.
That is true; however, in Document #1 Mr. Tombari specifically requests Oslers’
comments. The Appellant did not present any evidence to the Court that Document
#1 was sent before Document #2 was sent, that Oslers provided advice in respect
of Document #1, or that such advice, if provided, was incorporated into
Document #2. I must make my decision on the basis of the evidence before me.
2)
Document #3 in
Schedule B, dated April 5,
2001, which is identified in Schedule B as a memorandum from Mario Tombari
(Appellant) to Fergus Heaton and Steve Dale (BAT), with copies to Luc Jobin
(Appellant) and Patrick Marley (Oslers). This document is identical to Document
#2, except that it contains handwritten notes. It is not clear who made the
handwritten notes. My decision on Document #3 is the same as for Document #2:
there is no evidence before me that it is connected with the provision of legal
advice and it is not privileged.
3)
Document #5 in
Schedule B, dated July 26,
2001, which is identified in Schedule B as a memorandum from Mario Tombari
(Appellant) to Steve Dale (BAT), with copies to Luc Jobin and Sunil Panray
(Appellant) and Patrick Marley (Oslers). The document comprises two pages. It
is clear from the document that Mr. Tombari is providing answers to questions
asked by Mr. Dale in a July 25, 2001 email. There is no mention in the document
of legal advice obtained from the Appellant’s counsel. There is no evidence
before me to support a factual finding that the document represents the
relaying by Mr. Tombari of legal advice provided by Oslers.
4)
Document #26 in
Schedule B, dated
October 18, 2001, which is identified in Schedule B as a fax from Mario Tombari
(Appellant) to Steve Dale (BAT), with copies to Luc Jobin, Sunil Panray, Harry Steinbrenner
and Pierre Leclerc (Appellant) and Patrick Marley (Oslers). The document is a
two-page fax; the cover sheet discusses a recent CCRA release, and the actual
release is the second page of the fax. There is no mention in the document of
legal advice obtained from the Appellant’s counsel. There is no evidence before
me to support a factual finding that the document represents the relaying by
Mr. Tombari of legal advice provided by Oslers.
5)
Document #27 in
Schedule B, dated October
18, 2001, which is identified in Schedule B as a memorandum from Mario Tombari
(Appellant) to Richard Williams (BAT), with copies to seven employees of BAT,
four employees of the Appellant, and Patrick Marley (Oslers). The document
states that it provides the Appellant’s comments on BATA preferred shares.
There is no mention in the document of legal advice obtained from the
Appellant’s counsel. There is no evidence before me to support a factual
finding that the document represents the relaying by Mr. Tombari of legal
advice provided by Oslers.
6)
Document #34 in
Schedule B, dated August
27, 2003, which is identified in Schedule B as an email from Mario Tombari to
Sunil Panray. However, the email is actually from Fergus Heaton (BAT) to
Sunil Panray (Appellant), with copies to Justin Smith, Steve Burton and Neil
Wadey (BAT), Harry Steinbrenner and Mario Tombari (the Appellant) and Patrick
Marley (Oslers). The email provides Mr. Heaton’s comments on a withholding
tax issue. There is no mention in the document of legal advice obtained from
legal counsel. There is no evidence before me to support a factual finding that
the document represents the relaying by Mr. Heaton of legal advice
provided by Oslers or any other law firm.
7)
A portion of Document
#4 in Schedule B is not privileged. The document, dated July 24,
2001, is identified in Schedule B as a memorandum to file from Mario Tombari
(Appellant), with copies to Luc Jobin and Sunil Panray (Appellant) and Patrick
Marley (Oslers). The document is two pages long and appears to be answering
seven questions. However, it is not clear from the document who asked the
questions. The document is not addressed to anyone. The answers to the first
six questions appear to provide Mr. Tombari’s view on certain income tax
issues. There is no mention of legal advice obtained from the Appellant’s legal
counsel. The answer to the seventh question refers to the matter of whether Oslers
is able to provide a legal opinion. This is the only portion of the document
that relates to the provision of legal advice and will be redacted by the
Appellant. The remainder of the memorandum to file, which contains the answers
to the first six questions and the comments on page 2, is not privileged. The
redacted document is to be listed in Schedule A of the Appellant’s List of Documents.
Confidentiality Issue
[60]
Clearly,
confidentiality is one of the key requirements that must be satisfied before a
court will find that a communication enjoys solicitor-client privilege. As the
Ontario Court of Appeal noted in R. v. Dunbar,
at paragraph 53 QL:
An essential condition of the solicitor-client privilege is that the
communication in respect of which privilege is claimed has been made in
circumstances which indicate that it was made with the intention of
confidentiality. Generally, if the communication is intended to be revealed to
a third person, the element of confidentiality will be lacking. Similarly, in
most cases the presence of a third person when the communication was made
indicates that the communication was not intended to be confidential. But the
presence of a third person may not have that effect; for example, it will not
have that effect if it is reasonably necessary for the protection of the
client’s interest. See Wigmore on Evidence, (McNaughton Rev.), vol. a, pp. 599-603;
McCormick on Evidence, 2d ed., p. 187-89; Cross on Evidence, 5th ed. (1979), p.
289.
[61]
Schedule B to the
Affidavit of Documents discloses that the legal communications were revealed to
third parties.
Solicitor-Client Communications Disclosed to Employees
of Affiliated Companies
[62]
In the first instance, certain
communication between the Appellant and its counsel was disclosed to employees
of BAT and BATA. Similarly, certain legal communication between each of
BAT and BATA and their respective legal counsel was revealed to employees of the
Appellant. Such disclosure will negate the solicitor-client privilege unless
BAT and BATA had a common interest with the Appellant.
[63]
Solicitor-client
privilege may be maintained when one party to a commercial transaction provides
privileged documents to another party to the transaction. This may occur when
the party provides the documents to further the common interest of having the
transaction concluded and the parties do not intend to waive the privilege
attached to the documents.
This is known as common interest privilege.
[64]
The British Columbia
Supreme Court in Fraser Milner Casgrain LLP et al. v. M.N.R. explained
the reason for the common interest privilege as follows:
. .
. To my mind, the economic and social values inherent in fostering commercial
transactions merit the recognition of a privilege that is not waived when
documents prepared by professional advisers, for the purpose of giving legal
advice, are exchanged in the course of negotiations. Those engaged in
commercial transactions must be free to exchange privileged information without
fear of jeopardizing the confidence that is critical to obtaining legal advice.
[65]
The common interest
privilege may not apply if the parties are adverse in interest. This is not an
issue in the current appeal. The Appellant, BATA and BATI are all subsidiaries
of BAT. They were all working towards the same economic and commercial goals.
[66]
Each of the parties operated in a different
legal jurisdiction, as a result the parties required counsel with expertise in
Canadian, Australian and Italian law. It appears that in certain instances each
party retained its own legal counsel and, in others, two or more parties shared
legal counsel. Regardless of who retained which law firm, the legal advice
provided by the various law firms was shared among all of the parties to the
transaction and with the parent company, BAT. It is clear from reading the
documents in respect of which privilege is claimed that the legal advice
provided by all of the law firms was obtained by the parties to facilitate the completion of the transactions and was for the benefit of all
parties, including the parent company, BAT.
[67]
After reading all of the documents,
I have concluded that, to the extent that a party shared legal advice provided
to it by its legal counsel with one of the other parties to the transactions or
with the parent company, BAT, the party did not intend to waive privilege in
respect of the document. Further, the document was still privileged under the common interest privilege.
[68]
Specifically, I have
concluded that the following documents represent privileged communications
between legal counsel and their client where the communication was made in the
course of either the client seeking legal advice or the legal counsel providing
legal advice, and the privilege was not lost or waived when the communication
was shared by employees of the Affiliated Companies:
|
Document Number
|
Document Description
|
Document Date
|
|
8
|
Three emails:
email from Mario Tombari to Luc Jobin and Sunil Panray (all employees of the
Appellant) forwarding email from Steve Dale (BAT) to Patrick Marley (Oslers)
which contains and discusses legal advice provided by Blake Dawson Waldron in
an attached email that was sent to several employees of BAT and BATA.
|
August 6 and 8,
2001
|
|
14
|
Two emails:
email from Mario Tombari to Luc Jobin and Sunil Panray (all employees of the
Appellant) forwarding email from Steven Dale (BAT) to Patrick Marley (Oslers)
in which legal advice is discussed; second email is sent as cc to one
employee of Appellant and two employees of BAT
|
August 15 and 16,
2001
|
|
15
|
Five emails:
email from Mario Tombari to Luc Jobin and Sunil Panray (all employees of the
Appellant) forwarding four emails between Steven Dale (BAT) and Patrick
Marley (Oslers); the four emails all discuss legal advice and are sent as cc
to several employees of the Appellant and BAT
|
August 15-17,
2001
|
|
17
|
Five emails:
email from Sunil Panray to Luc Jobin and Harry Steinbrenner, cc Christine
Benoit and Mario Tombari (all employees of the Appellant) forwarding email
from Philip Andrew (BAT) to Mr. Panray which discusses and contains various
emails between Patrick Marley (Oslers) and several employees of BAT and the
Appellant; all the emails either relate to advice provided by Oslers or
request additional legal advice from Oslers
|
August 17-20,
2001
|
|
19
|
Two emails: first
email from Steve Dale (BAT) to Patrick Marley (Oslers), cc to Mario Tombari
(Appellant), in which Mr. Dale requests Oslers to provide legal advice with
respect to the second email
|
August 24 and 29,
2001
|
|
25
|
Email from
Philip Andrew to various employees of the Appellant which forwards an email
containing legal advice provided by Blake Dawson Waldron to BAT
|
October 12, 2001
|
|
28
|
Three emails:
email from Sunil Panray (Appellant) to Richard Williams (BAT), cc to two
employees of the Appellant; Mr. Panray’s email replies to a previous
email of Mr. Williams that forwarded legal advice provided to BAT by Blake
Dawson Waldron
|
October 26, 2001
|
|
30
|
Three emails: first
email from Sunil Panray to Luc Jobin and Harry Steinbrenner (all employees of
the Appellant) forwarding email from Fergus Heaton (BAT) to Mr Panray and a
number of employees of BAT and the Appellant that discusses legal advice
contained in an attached email from Patrick Marley (Oslers)
|
August 12, 2003
|
|
31
|
Two emails: mail
from Fergus Heaton (BAT) to Sunil Panray and a number of employees of BAT and
the Appellant that discusses legal advice contained in an attached email from
Patrick Marley (Oslers)
|
August 12, 2003
|
|
32
|
Four emails:
First email from Sunil Panray to Luc Jobin (both employees of the Appellant)
forwarding an email from Mr. Panray to Fergus Heaton (BAT), which replies to
Mr. Heaton’s email noted in the description for Tab 30
|
August 12 and 13,
2003
|
|
33
|
Two emails:
email from Mario Tombari to Harry Steinbrenner and Sunil Panray (all employees
of the Appellant) forwarding email from Patrick Marley (Oslers) to Fergus
Heaton (BAT) and Mr. Tombari that contains legal advice
|
August 22 and 30,
2003
|
|
35
|
Six emails:
email from Mario Tombari to Sunil Panray (both employees of the Appellant),
cc to various employees of BAT and the Appellant, which discusses various
issues raised in the five attached emails, the earliest being an email from
Patrick Marley (Oslers) to Fergus Heaton (BAT), cc to Mr. Tombari; all
the emails either relate to advice provided by Oslers or request additional
legal advice from Oslers
|
August 6-27,
2003
|
|
37
|
Three emails: first
email is from Mario Tombari to Luc Jobin and Sunil Panray (all employees of
the Appellant) forwarding email from Fergus Heaton (BAT) to Mr. Tombari and
various employees of BAT which discusses and contains an email from Allen
& Overy to various BAT employees that contains legal advice
|
September 3, 8
and October 9, 2003
|
|
38
|
Three emails: first
email from Mario Tombari to Luc Jobin, Pierre Leclerc and Sunil Panray (all
employees of the Appellant) forwarding an email from Mr. Tombari to Blake
Dawson Waldron, cc to two employees of BAT, which replies to an email from
Blake Dawson Waldron to Mr. Tombari and an employee of BAT that contains
legal advice
|
December 9, 2003
|
|
39
|
Two emails: first
email from Mario Tombari to Luc Jobin, Pierre Leclerc and Sunil Panray (all
employees of the Appellant) forwarding an email from Blake Dawson Waldron to
Mr. Tombari and various employees of BAT that contains legal advice.
|
December 9, 2003
|
|
40
|
Two emails: first
email from Mario Tombari to Luc Jobin, Pierre Leclerc and Sunil Panray (all
employees of the Appellant) forwarding email from Blake Dawson Waldron to Mr. Tombari
and various employees of BAT that contains legal advice
|
December 9, 2003
|
|
41
|
Four emails: first
email from Mario Tombari to Luc Jobin and Sunil Panray (all employees of the
Appellant) forwarding email from Mr. Tombari to two employees of BAT in
reply to an email from an employee of BAT, which contains an email from Blake
Dawson Waldron to an employee of BAT; all the emails either relate to legal
advice provided by Blake Dawson Waldron or request additional legal advice
from Blake Dawson Waldron
|
December 5 and
9, 2003
|
Solicitor-Client Privileged Documents Disclosed
to an Accountant
[69]
The second instance
where a party revealed legal communications to a third party occurred when the
Appellant, its counsel, BAT and BATA disclosed legal communications to an
Australian accounting firm, PriceWaterhouseCoopers, (“PWC Australia”). PWC
Australia appears to have been retained by BATA.
[70]
The Courts have not
extended privilege to accountants. However, an exception to the rule that
solicitor-client privilege is lost when a communication between a solicitor and
his/her client is disclosed to a third party, such as an accountant, exists for
certain communications.
[71]
The Exchequer Court in Susan
Hosiery Limited v. M.N.R. summarized the principles that apply with respect
to disclosure to accountants as follows:
Applying these principles, as I understand them, to materials
prepared by accountants, in a general way, it seems to me
(a) that no communication, statement or other material made or
prepared by an accountant as such for a business man falls within the privilege
unless it was prepared by the accountant as a result of a request by the
business man's lawyer to be used in connection with litigation, existing or
apprehended; and
(b) that, where an accountant is used as a representative, or
one of a group of representatives, for the purpose of placing a factual
situation or a problem before a lawyer to obtain legal advice or legal
assistance, the fact that he is an accountant, or that he uses his knowledge
and skill as an accountant in carrying out such task, does not make the
communications that he makes, or participates in making, as such a
representative, any the less communications from the principal, who is the
client, to the lawyer; and similarly, communications received by such a
representative from a lawyer whose advice has been so sought are none the less
communications from the lawyer to the client.
[72]
Counsel for the
Appellant argued that the solicitor-client privilege extended to communications
with PWC Australia on the basis that PWC Australia’s input was necessary to the
provision of legal advice by counsel. She noted that PWC Australia’s relationship
was with BATA rather than with BATA’s counsel.
[73]
Justice Doherty
(dissenting in part) noted in General Accident Assurance Company v. Chrusz that
the applicability of solicitor‑client privilege to third-party
communications depends on the true nature of the function that the third party
was retained to perform for the client.
. .
. If the third party’s retainer extends to a function which is essential to the
existence or operation of the client-solicitor relationship, then the privilege
should cover any communications which are in furtherance of that function and which
meet the criteria for client-solicitor privilege.
[74]
The Appellant relied on
the decision of the Ontario High Court of Justice in The Mutual Life
Assurance Company of Canada v. The Deputy Attorney General of Canada. That
was a case in which the Ontario High Court was called upon to deal with a
letter from the law firm Lang Michener to an employee of its client, Mutual
Life. Attached to the letter was a memorandum described as the professional
communication of Lang Michener and a firm of chartered accountants. In finding
that the memorandum was privileged, the Court noted that Lang Michener “by
sending the memorandum with the covering letter have accepted responsibility
for the very considerable amount of legal advice contained in it.” The
Court found that Lang Michener was responsible for the entire document.
[75]
That is not the fact
situation in front of me here.
[76]
The Appellant chose not
to provide the Court with any affidavit or other evidence to explain the
relationship between PWC Australia and BATA or between PWC Australia and any of
the Affiliated Companies. What counsel for the Appellant did provide me with
was a confidential aid to argument that contained excerpts from a number of the
documents in respect of which the Appellant is claiming privilege.
[77]
These excerpts, in my
view, do not establish that PWC Australia’s role, whatever it was, extended to
any function which could be said to be integral to the solicitor-client
relationship.
[78]
None of the documents
describe in any way the relationship between PWC Australia and BATA; they do
not refer to PWC Australia (except for two short references that I will discuss
shortly), and they do not describe any accounting information that could only
be provided by PWC Australia. In fact, a number of the documents I was referred
to show that the Affiliated Companies had employees who were very knowledgeable
with respect to accounting matters. For example, counsel for the Appellant took
me to the document attached at Tab 19, which appears to have been prepared by
employees of the Affiliated Companies. It contains a very detailed analysis of
accounting issues.
[79]
Counsel, through the
aid to argument, took me to two documents that mention PWC Australia. The first
is an email exchange between Oslers, the Appellant and BAT. (It is attached at
Tab 12). The author of one of the emails is an employee of BAT. The email was
sent to Oslers and copies went to employees of the Appellant, BAT, BATA and PWC
Australia. At one point in the email, the author is requesting comments from
two individuals with respect to his comments relating to an income tax/legal
issue. The two individuals are only identified by their first names, however,
considering the recipients of the emails, it appears that one of the
individuals is an employee of BAT and the other an employee of PWC Australia.
Even if I accept that one of the two individuals was with PWC, this comment
only evidences the fact that BATA obtained some tax advice from PWC Australia.
[80]
Similarly, the second
reference to PWC Australia also involves income tax advice. Counsel for the
Appellant took me to a document at Tab 19 that contains legal advice provided
by Blake Dawson Waldron to BATA. It contains a one-line reference to tax advice
provided by PWC Australia.
[81]
The little evidence
provided by the Appellant with respect to the role of PWC Australia does not
establish, in my view, that PWC’s role extended to any function which could be
said to be integral to the solicitor-client relationship. It is clear from the
documents that the Appellant and its Affiliated Companies are large, well-staffed
and sophisticated. There is no reference in any of the documents to PWC
Australia, its relationship with BATA, the reason for its involvement in the
matter or why its involvement was required in order to provide legal advice.
[82]
On the basis of the
evidence before me, I have concluded that the disclosure of documents to PWC
Australia constituted disclosure to a third party. Further, it is clear from
the documents that the clients (BATA and BAT) were aware of the disclosure, and
such disclosure was not inadvertent. As a result, the following emails (and any
emails attached to them) are not privileged:
1)
Document #9 in
Schedule B – The second
email dated August 8, 2001, which is from Steve Dale of BAT to Patrick Marley
of Oslers and was also sent to Mario Tombari of the Appellant, several
employees of BAT, two lawyers at Blake Dawson Waldron and a Michael Frazer at
the accounting firm PWC Australia, is not privileged. The first email
merely forwards the second email.
2)
Document #10 in
Schedule B – The second
email dated August 8, 2001, which is from Mark Dunkley of BAT to Patrick Marley
of Oslers and was also sent to Mario Tombari of the Appellant, a number of
employees of BAT, two lawyers at Blake Dawson Waldron and Michael Frazer and
Neil Wilson at the accounting firm PWC Australia, is not privileged. The
first email merely forwards the second email.
3)
A portion of
Document #11 in Schedule B -
The second email dated August 8, 2001, which is from Steven Dale of BAT to Patrick
Marley of Oslers with copies to employees of BAT and the Appellant, relates to
legal advice provided by Oslers and was not disclosed to a third party. It
is privileged. However, the third email dated August 8, 2001 (and the email
attached to it) is not privileged. The third email was sent by Patrick Marley of Oslers to Steve Dale of BAT and
was also sent to Mario Tombari and Sunil Panray of the Appellant, a number of
employees of BAT, two lawyers at Blake Dawson Waldron and Michael Frazer at
the accounting firm PWC Australia.
4)
Document #12 in
Schedule B - The second
email dated August 13, 2001, which is from Steve Dale of BAT to Patrick Marley
of Oslers and was also sent to Mario Tombari and Sunil Panray of the Appellant,
two employees of BAT, one employee of BATA and Michael Frazer and Neil Wilson at
the accounting firm PWC Australia, is not privileged. The first email
merely forwards the second email.
5)
A portion of
Document #18 in Schedule B –
The second email which is dated August 29, 2001, is from Steve Dale of BAT to
Mark Dunkley of BAT, with copies to Patrick Marley of Oslers and Mario Tombari
of the Appellant. It relates to legal advice provided by Oslers and was not
sent to a third party. It is privileged. However, the third email,
which is dated August 8, 2001 (and the email attached to it) is not privileged.
The third email (which is also part of Document #11) was sent by Patrick Marley
of Oslers to Steve Dale of BAT and was also sent to Mario Tombari and Sunil Panray
of the Appellant, a number of employees of BAT, two lawyers at Blake Dawson
Waldron and Michael Frazer at the accounting firm PWC Australia.
Implied Waiver
[83]
The Respondent has also
raised the issue of implied waiver of solicitor-client privilege by the
Appellant. Counsel for the Respondent summarized the Respondent’s position as
follows: “since the Appellant has denied that tax avoidance was its principal
purpose for its investments, fairness requires that the appellant not be
allowed to protect documents that may show otherwise. When a party places its
state of mind in issue and has received legal advice to help form that state of
mind, privilege will be deemed to be waived with respect to such legal advice.”
[84]
I do not agree with the
Respondent’s arguments on this issue.
[85]
The state of mind
waiver relates to the situation where a party relies, as part of a claim or
defence, on legal advice it has received, where the claim or defence is based,
at least in part, on its state of mind. The state of mind waiver arises by
implication.
[86]
The concept of implied waiver was
explained by McLachlin J. (as she then was) in S. & K. Processors Ltd.
v. Campbell Ave. Herring Producers Ltd.,
as follows:
Waiver
of privilege is ordinarily established where it is shown that the possessor of
the privilege: (1) knows of the existence of the privilege; and (2) voluntarily
evinces an intention to waive that privilege. However, waiver may also occur in
the absence of an intention to waive, where fairness and consistency so
require. Thus waiver of privilege as to part of a communication will be held to
be waiver as to the entire communication. Similarly, where a litigant relies on
legal advice as an element of his claim or defence, the
privilege which would otherwise attach to that advice is lost . . . .
. .
.
. . . As pointed out in Wigmore on
Evidence, McNaughton revision (1961), vol. 8, pp. 635-36, relied on by Meredith
J. in Rogers v. Hunter, supra,
double elements are predicated in every waiver — implied intention and the
element of fairness and consistency. In the cases where fairness has been held
to require implied waiver, there is always some manifestation of a voluntary
intention to waive the privilege at least to a limited extent. The law then
says that in fairness and consistency it must be entirely waived. . . .
[87]
In the current appeal,
the Appellant has not put its state of mind at issue. If the Appellant’s state
of mind has been put at issue, the Respondent, not the Appellant, did it.
[88]
By relying on paragraph
95(6)(b) of the Act, the Respondent has raised the issue of the
Appellant’s purpose when completing the relevant transactions. For example, at
paragraph 6.44 of the Reply, the Respondent states that when determining the
Appellant’s tax liability for the 2002-2005 taxation years, the Minister made
the following assumption of fact: “it can reasonably be considered that the
principal purpose for the acquisition of the BATII Preferred Shares by ITCAN
was to avoid, reduce, or defer the payment of tax otherwise payable by ITCAN
[the Appellant]”.
[89]
The Appellant has taken
the position that paragraph 95(6)(b) of the Act does not apply to
the transactions. However, its pleadings do not contain any reference to legal
advice that it previously obtained.
[90]
In fact, in its first motion, the
Respondent sought to have the Appellant’s entire Notice of Appeal struck on the
basis that the Appellant did not state therein its purpose in acquiring certain
preferred shares. It is difficult for me to understand how the Respondent could
argue, in the first instance, that the Appellant has not pleaded any intention
and now argue that the Appellant has put its state of mind at issue.
[91]
Regardless, a taxpayer does not
put its state of mind at issue merely because it opposes an assessment that is
based on a section of the Act that contains an intention or purpose
test. It is simply not fair or reasonable to place a taxpayer in a position
where it either accepts an assessment or waives privilege.
[92]
Further, a state-of-mind implied
waiver requires more than the fact that an
appellant’s
purpose for entering into certain transactions is at issue in an appeal. The
implied waiver requires the appellant to take the positive step of relying, in
its pleadings or during trial, on legal advice it has previously obtained from
its counsel.
The Appellant has taken no such step in the current appeal.
[93]
Counsel for the Respondent also
argued that the Court, when determining whether privilege should be deemed to
be waived, must balance the interest of full disclosure for the purposes of a
fair trial against the preservation of solicitor-client privilege. I do not
agree.
[94]
The Courts have noted that the
privilege must be as close to absolute as possible to ensure public confidence
and retain relevance.
As the Supreme Court of Canada noted in Goodis v. Ontario (Ministry of Correctional Services) the question of disclosure of solicitor-client
privileged communications does not involve a balancing of interests on a
case-by-case basis.
[95]
If privilege has been established
and has not, either expressly or by implication, been waived by the client,
then the courts will not interfere with the confidentiality of the
communications unless absolutely necessary. “Absolute necessity is as
restrictive a test as may be formulated short of an absolute prohibition in
every case. . ..”
[96]
The issue of whether the Appellant
has waived solicitor-client privilege does not involve the balancing of one
interest against another. The question that must be answered is whether, as a
question of fact, the Appellant implicitly waived the solicitor-client
privilege. There is no evidence before me to support a finding that the
Appellant waived the privilege.
Legal Advice vs. Business Advice
[97]
The Respondent questions whether
the advice provided by legal counsel to one or more of the Affiliated Companies
was legal advice or advice on purely business matters.
[98]
A communication between a lawyer and his or her client
will only be privileged if such communication is provided by the lawyer in the
course of his or her practice of law. Privilege does not attach to advice
provided by a lawyer on purely business matters.
[99]
This issue does not arise in the
current appeal. All of the documents that I have found to be privileged relate
to legal advice provided by legal counsel in the course of their practice of
law.
Conclusion
[100]
For the foregoing reasons:
a)
The Respondent’s application for
an order from the Court directing the Appellant to attend and be cross-examined
on its Affidavit of Documents is dismissed.
c)
Pursuant to paragraph 88(b)
of the Rules:
a.
Counsel for the Respondent shall
provide the Appellant, within 30 days of the date of my Order, with a list of
the specific documents listed in Schedule A of the Appellant’s List of Documents
in respect of which the Respondent requires metadata. The Appellant shall,
within 120 days of the date of my Order, amend its List of Documents to list
the required metadata in either Schedule A or Schedule C of its List of Documents.
b.
The parties shall, within 30 days
of the date of my Order, agree on the specific search terms that the Appellant
will use to search its database in respect of the documents described in
Schedule C of its List of Documents as “[d]ocuments in electronic form that
have been deleted and have not been recovered or restored.” The Appellant shall,
within 120 days of the date of my Order, amend Schedule A of its List of Documents
to include documents that it has recovered using the search terms.
c.
The Appellant shall, within 120
days of the date of my Order, amend Schedule A of its List of Documents to
include the documents in respect of which it has incorrectly claimed privilege,
being documents 2, 3, 4 (as redacted in accordance with the Reasons for Order),
5, 9, 10, 12, 26, 27, and 34. It shall also include in Schedule A the emails
contained in documents 11 and 18 that are not privileged.
[101]
In light of the mixed result,
there will be no order with respect to costs.
These Amended Reasons for Order are issued
in substitution of the Reasons for Order dated April 15, 2013.
Signed at Ottawa, Canada, this 6th day
of May 2013.
“S. D’Arcy”
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