Date:
20080512
Dockets: T-1075-07
T-1076-07
Citation: 2008 FC 594
Docket:
T-1075-07
[ENGLISH
TRANSLATION]
BETWEEN:
MINISTER OF NATIONAL
REVENUE
Applicant
and
NATIONAL BANK OF
CANADA
Respondent
and
LUC OUELLETTE
Intervener
Docket: T-1076-07
AND
BETWEEN:
MINISTER OF NATIONAL REVENUE
Applicant
and
CAISSE POPULAIRE DE THETFORD
MINES
Respondent
and
LUC OUELLETTE
Intervener
REASONS FOR ORDER
HARRINGTON
J.
[1]
Mr.
Luc Ouellette is a lawyer at a general partnership named Ouellette, Larouche,
Gagné, s.e.n.c., in Thetford Mines. The Canada Customs and Revenue Agency proceeded
with a random tax audit of this individual. The Agency states that the
selection of this individual for an audit was absolutely by a random choice and
that it had no preconceived ideas as to the validity of the income and expenses
claimed by him.
[2]
At
the beginning, Mr. Ouellette was cooperative with the audit process. He
provided the documents that the Agency was seeking. However, when he was asked
to provide the documents on which his tax transactions were based, deposit slips and cheques drawn from his
accounts, he balked. He was of the view that those documents would or could
reveal the names of a few clients and cases before him. For him, that
information had to be protected by solicitor-client privilege and he therefore
refused to disclose it.
[3]
In
reply, the Agency ordered the two financial institutions with whom Mr. Ouellette
does business, the National Bank of Canada and the Caisse Populaire de Thetford
Mines, to reply to a requirement to provide information and produce documents.
The Agency cited section 231.2(1)(a) and (b) of the Income
Tax Act:
|
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 … 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.
|
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 … 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.
|
[4]
In
reply, Mr. Ouellette referred the matter to the Syndic of the Barreau
du Québec
and consulted a solicitor who offered independent legal advice. In turn, the
Agency referred the matter to the Minister of Justice of Canada. An excerpt
from a letter written on behalf of the Agency to counsel for Mr. Ouellette
clearly indicates the Agency’s position:
[translation]
You must know that Mr. Luc Ouellette is
currently subject to a tax audit by the CRA. In that matter, like any Canadian
taxpayer, Mr. Ouellette has the obligation to keep books and records that
allow the Minister of National Revenue (“the Minister”) to establish his
income, expenses, and taxes payable. The Minister must also be able to consult
them during a tax audit and that is what Ms. Cantin of the CRA is
attempting to do in the file for your client
[5]
In
addition, the Agency claims that the affected documents do not receive the
protection afforded by solicitor-client privilege in light of the principle
stated in subsection 232(1) of the Act:
|
[…..]
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.
[Emphasis added.]
|
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.
[je
souligne.]
|
[6]
Whatever
the case may be, the Agency claims that even if those documents were protected
while in Mr. Ouellette’s hands, there is no privilege that extends to documents
once financial institutions are in possession of them.
[7]
The
issue was resolved in two steps. First, the National Bank and the Caisse Populaire
made copies of the documents in question and delivered them to the Court, and
they were sealed. The Court authorized Mr. Ouellette to intervene in the
cases in order to present his arguments for solicitor-client privilege and
against allowing the Agency to review that information.
[8]
Mr.
Ouellette also claims that the Agency has no need of those documents in particular
to complete a tax audit. The Minster submits that this claim exceeds the basis
on which Mr. Ouellette was authorized to intervene in the cases in this
matter. On that point, the auditors are entitled to consult the supporting
documents. It is not the role of the Court to dictate to the Agency how to
manage its affairs.
[9]
During
debates, it became clear that even though in letters addressed to the Minister
the financial institutions had described the contents of the sealed envelopes
in general terms, such as, for example, “deposit slips and drawn cheques”, Mr. Ouellette
never received copies of those letters or copies of documents filed with the
Court. When Mr. Ouellette took a look at said envelopes, he was of the
view that some of the documents could be submitted to the Agency. Nevertheless,
he maintained his objection to other documents. At that
stage of the matter, Mr. Ouellette conceded that he no longer objects to
the productions of the following documents:
a.
Documents provided by the National Bank of
Canada:
i.
Mr. Luc Ouellette’s credit file
ii.
Mr. Luc Ouellette’s financial profile
b.
Documents provided by the Caisse Populaire de
Thetford Mines
i.
Mr. Luc Ouellette’s credit file
ii.
The statements of all of Mr. Luc Ouellette’s
personal bank accounts
iii.
Mr. Luc Ouellette’s financial profile
[10]
The
Court preferred to hear the parties’ submissions at the hearing before opening
the sealed envelopes. After the hearing, I indeed opened the envelopes. Among
the documents, some of them do not identify the clients of Mr. Ouellette
when they were examined independently. However, when those documents are paired
with other information or documents, there may be a risk of such an
identification. By examining the drawn cheques, there may be the possibility of
figuring out the identity of clients. Some cheques do not in any way indicate
the reason for their existence, while others refer to a matter, possibly
identifying Mr. Ouellette’s cases or even his invoicing. A more detailed
description of the disputed documents is in Appendix 1 of these reasons.
MR. OUELLETTE’S
SUBMISSIONS
[11]
No
one can dispute Mr. Ouellette’s argument that communication
through solicitor-client privilege has a fundamental role in Canadian society. As
highlighted by Deschamps J. at paragraph 40 of Maranda v. Richer,
2003 SCC 67, [2003] 3 S.C.R. 193:
[…] The ultimate purpose of this
privilege is to enable every individual to exercise his or her rights in an
informed manner. The protection extends to advice given in both criminal and
civil cases, without distinction. The privilege performs the social function of
preserving the quality, freedom and confidentiality of information exchanged
between a client and his or her lawyer in the context of a legal consultation.
It enables all individuals to participate in society with the benefit of the
information and advice needed in order to exercise their rights. It is closely
associated with access to justice. Accordingly, regardless of the historical
origin of the privilege, contemporary imperatives dictate that the same generous
approach be taken which led to the recognition of this privilege as a principle
of fundamental justice.
[12]
Mr. Ouellette
cited case law, establishing that a client’s expectation of confidentiality is
determined according to the very nature of the consultation with a solicitor
and not only according to the contents (Thorson v. Jones, [1973] B.C.J.
No. 489, 38 D.L.R. (3d) 312), and even if the warrant is well-known, the
invoicing may be protected (Maranda, above).
[13]
Although
the concept of solicitor-client privilege developed from the law of evidence in
common law, Mr. Ouellette claims that the definition found in the Income Tax
Act itself incorporates provincial law, and more specifically in this case,
Quebec law. In Quebec, article 9 of the Charter of Human Rights and
Freedoms specifies that:
Every person has a
right to non-disclosure of confidential information.
Disclosure of confidential information.
No person bound to professional secrecy
by law and no priest or other minister of religion may, even in judicial
proceedings, disclose confidential information revealed to him by reason of his
position or profession, unless he is authorized to do so by the person who
confided such information to him or by an express provision of law.
Duties of the tribunal
The tribunal must, exofficio, ensure
that professional secrecy is respected.
I must highlight that this article
is compatible with the concept put forward by Mr. Ouellette, but the
article does not allow us to stray from the connotation that is well developed
and recognized across the country. Undergoing a tax audit by the Agency is
without a doubt an unpleasant experience, but such audits are necessary.
ANALYSIS
[14]
Although
I can understand the position of Mr. Ouellette, and that possibly a certain
portion of the information may be confidential, that information is not
protected by solicitor-client privilege.
[15]
As
affirmed in R. v. McKinlay Transport Ltd., [1990] 1 S.C.R. 627, [1990] S.C.J.
no. 25, everyone has the right to be secure against unreasonable search or
seizure as guaranteed by section 8 of the Canadian Charter of Rights
and Freedoms. In those reasons, Wilson J. states that the Act is based
on the principle of self-reporting and self-assessment. To ensure compliance
with the Act, the Minister of National Revenue must be given broad powers to
audit taxpayers’ returns and inspect all relevant records whether or not he has
reasonable grounds for believing that a particular taxpayer has breached the
Act. The integrity of the tax system can be maintained only by a system of
random monitoring. Another important decision on which Mr. Ouellette
relied, like Maranda, above, is Lavallee Rackel & Heintz v.
Canada (Attorney General), 2002 SCC 61,
[2002] 3 S.C.R. 209, but both of those are cited out of context. Those cases
involve criminal investigations of solicitors’ clients and searches of law
offices were authorized by search warrants. In this case, it is Mr. Ouellette
himself who is subject to a random tax audit. Whether there are circumstances
according to which the identity of a client or the information linked to the
invoicing of legal services may be protected by solicitor-client privilege,
there is nothing in the record before the Court affirming such a claim.
[16]
Among
the decisions that are recognized in this filed, we find Ontario (Securities
Commission) v. Greymac Credit Corp., 41 O.R. (2d) 328,
[1983] O.J. No. 2986. This Court recently had the opportunity to examine Greymac,
although in a context in which the Agency was asking a lawyer to provide his
client’s tax information (Canada (Minister of National Revenue – MNR) v.
Singh Lyn Ragonetti Bindal LLP, 2005 FC 1538, [2005] F.C.J. no. 1907 and Canada
(Minister of National Revenue – MNR) v. Reddy, 2006 FC 277, [2006] F.C.J.
no. 348).
[17]
As
noted by Shore J. in Reddy, above, at paragraph 14:
Solicitor-client
privilege attaches only to communications between a solicitor and a client and
not to actions by the solicitor. For that reason, courts have consistently held
that solicitor-client privilege does not apply to documents relating to monies
flowing through a solicitor’s accounts to or from a client or to documents
relating to real estate transactions. In Ontario (Securities Commission) v. Greymac Credit Corp.
(1983) 41 O.R. (2d) 328 (Ont. Div. Ct.), the Court stated:
Evidence as to
whether a solicitor holds or has paid or received moneys on behalf of a client
is evidence of an act or transaction, whereas the privilege applies only to
communications. Oral evidence regarding such matters, and the solicitor’s books
of account and other records pertaining thereto (with advice and communications
from the client relating to advice expunged) are not privileged, and the
solicitor may be compelled to answer the questions and produce the material.
[18]
Mr.
Ouellette’s argument only deals with general platitudes. He did not provide the
Court with any specific considerations that would allow for the drawn cheques
or other documents in this case to be protected by solicitor-client privilege.
In addition, I am of the view that in any case, such a privilege, even if
applicable to the documents in question, was lost when the information was
disclosed to a third party, in this case, to the National Bank or the Caisse Populaire.
That concept was selected by the Quebec Court of Appeal in Chevrier et al.
v. Guimond et al., (1984) R.D.J. no. 240 (JE 84-188).
[19]
For
those reasons, the Minister’s applications will be allowed and Mr. Ouellette’s
interventions will be dismissed with costs (a fee based on Tariff B, item 6)
against him.
Ottawa, Ontario
May 5, 2008
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