Robert G. Heath Et Al. v. Her Majesty the Queen, [1990] 2 CTC 28

Coultas, J.: —This is yet another in the long litany of cases in which a lawyer claims solicitor-client privilege in respect to documents pertaining to a client, which are about to be seized under the provisions of the Income Tax Act.

The petitioners Robert Heath and Robert Irving carry on business in partnership as barristers and solicitors in the City of Victoria in this province. The petitioner Kenneth Walton provides services as an independent contractor to the partners.

An agreed statement of facts was filed. The following extracts from it are relevant to the issues.

The law firm was retained by a company incorporated in this Province and by an officer and director of it, to act for the company upon the sale by it of real property. The firm provided legal advice to the company in respect of the sale and in connection with it, received and disbursed funds for the benefit of the client in accordance with the client's instructions.

The firm maintained trust account records in respect to the receipt and disbursement of funds as required by Part 8 of the Rules of the Law Society of British Columbia, and particularly those documents required by Rule 842 thereof.

The funds pertaining to the real estate transaction were received and disbursed through the trust ledger account required to be maintained pursuant to that rule.

The records and the trust ledger account were maintained by the Firm and not by any individual. Neither the records nor the account was the property of any individual in the firm, and funds could be deposited to the trust account by either partner, Mr. Walton, and any person employed by them, and cheques drawn on the trust account could be signed by any one of the partners, or Mr. Walton.

All entries made in the records maintained by the firm in connection with the sale were made by an employee of it, not by either partner nor Mr. Walton. Neither the records nor the ledger account was required for the business income of the Firm.

On or about May 15th, 1989, one T. Edwards, an officer employed by the Department of National Revenue, served a letter addressed to:

Heath Irving & Walton

Attn: R.G. Heath

requiring that the firm produce photocopies of the "Trust Ledgers" used for the named client company's sale of the real property. In addition the firm was required to produce:

Photocopies of the front and back of all cheques disbursed from your trust account relating to . . .

The cheques pertained to the specific sale of real property.

The letter was sent pursuant to para. 231.2(1)(b) of the Income Tax Act R.S.C. 1952, c. 148, as amended.

On June 12 Mr. Edwards attended on the firm and a claim of solicitor-client privilege on behalf of the named client was made, and the documents referred to in the May 15,1989 demand were sealed pursuant to section 232 of the Act, to await a hearing by this Court to determine if the client has a solicitor-client privilege in respect of them.

Counsel for the petitioners and the respondent agree that it is not necessary for me to look at the disputed documents. Mr. Pitfield, acting for the petitioner applicants and the Law Society of British Columbia, concedes that no legal advice is contained in any of the disputed documents.

Issues

The applicants submit that at common law the trust account records of a lawyer are, in the absence of fraud, privileged. They submit that the exception contained in paragraph 232(1)(e) of the Income Tax Act must be construed restrictively and, therefore, does not affect the privilege.

Paragraph 232(1)(e) reads:

(e) “Solicitor-client Privilege”

“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 him and his 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.

They submit that the words "accounting record of a lawyer" refer only to those records relevant to the determination of the income of a lawyer, and does not encompass trust accounting records maintained for the benefit of the client and pursuant to the rules of the Law Society.

They submit, further, that paragraph 232(1)(e) speaks of a "lawyer" singular, but the trust ledgers of their law firm are those of the firm, not an individual member of it and the “privilege” referred to in the section is that of solicitorclient, not law firm-client.

In support of both these submissions, they rely on the decision of the Honourable Judge Tyrwhitt-Drake in Cox, et al. v. A.-G. Canada, [1988] 2 C.T.C. 365; 88 D.T.C. 6494. I shall consider this case, subsequently.

On the other hand, the respondent submits that no privilege attaches to these documents at common law. Alternatively, if they are privileged, the privilege has been removed by the provisions of paragraph 232(1)(e) of the Act.

Does the exemption from privilege found in paragraph 232(1)(e) of the Act apply in the circumstances of this case? There are two cases directly on point. They cannot be reconciled.

The first in time is the decision of Mr. Justice Collier of the Federal Court sitting in the Trial Division, in Re Romeo's Place Victoria Ltd. v. The Queen, [1981] C.T.C. 380; 81 D.T.C. 5295; 128 D.L.R. (3d) 279.

At page 388 (D.L.R. 289) of the judgment, Judge Collier said:

This envelope contains copies of the solicitor's trust account records dealing with the applicants. There is also a copy of a trust account record dealing with a client having no connection with the taxpayers. The applicants claim privilege in respect of the entire contents of this envelope. They rely on Re Helman et al. and Minister of National Revenue, [1970] C.T.C. 586; 70 D.T.C. 6355.

A solicitor’s trust account record of a client’s transactions, is, in ordinary circumstances, fraud absent, privileged. It is not a record required, by the Income Tax Act, to be kept by lawyers.

Nevertheless, it is my view the particular trust account records in this case are excluded from the normal solicitor-client privilege: this by the specific exception in para. 232(1)(e) :

(e) . . . 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.

Trust account records are, undoubtedly, accounting records of a lawyer.

The Helman case, and its predecessor /n re Income Tax Act; In re a Solicitor [1963] C.T.C. 1, are, in my opinion, distinguishable.

The earlier case dealt with a routine investigation into the tax affairs of a lawyer. His trust account records were demanded. He refused. In order to determine the issue, a similar legal procedure to the one in this case was adopted. The claim of privilege was upheld. The Income Tax Act of that time did not have the exception clause in respect of solicitor-client privilege, which I have set out above.

The Helman case was factually similar to the earlier case. There was a routine check into the tax affairs of a firm of lawyers. A demand was made for the production of trust account records. The demand was refused. Once more, in order to decide the issue, a similar proceeding to the one before me, was launched. Once more, the claim of privilege was upheld. At the time of the He/man case, the present exception clause, in respect of solicitor-client privilege, had been inserted into the definition. Milvain, CJ upheld the claim for privilege on several grounds. He pointed out the initial investigation section of the statute (then subsection 126(1)) referred to entry into any premises where ”. . . any books or records are, or should be kept pursuant to this Act . . ."; that trust account records were not kept by reason of any direction in the Income Tax Act; that, in all the circumstances, the statutory provisions were not sufficient to do away with the solicitor-client privilege which arose in that case.

I note that the present version of subsection 126(1) (now subsection 231(1)) simply reads: where ”. . . any books or records are or should be kept . . .". the words "pursuant to this Act” have been removed.

I do not, in any way, question the correctness of the Helman decision and the earlier case. Those cases dealt with the investigation of a lawyer's affairs. The demand for trust records involved the disclosure of the confidential affairs and communications between solicitor and client. But the clients’ tax affairs were not under investigation.

That is not the situation here. The tax affairs of the clients, not their solicitor, are being investigated. The clients are, in reality, claiming the privilege. But the statute specifically provides the solicitor’s trust account records of those clients are not privileged. In that aspect, as distinguished from the Helman case, the legislators have, in my view, clearly done away with the normal solicitor-client privilege.

Judge Collier held that the privilege did not extend to the trust ledger records.

The second is the decision of Judge Tyrwhitt-Drake in Cox, et al. v. A.-G. Canada to which I have referred.

Judge Drake said of Judge Collier's decision in Re Romeo's Place Victoria Ltd. at page 367 (D.T.C. 6495-96):

Since I am unable to agree with the statement that "trust account records are, undoubtedly, accounting records of a lawyer" and its corollary "the statute specifically provides the solicitor’s trust account records of those clients are not privileged", I am faced with the disagreeable duty of saying so, and differing, with sincerely expressed respect, from the opinion of so learned and experienced a judge as Collier, J.

In In re Hansard Spruce Mills Ltd. (in Bankruptcy) (1954), 13 W.W.R. (N.S.) 285 Wilson, J., after discussing the matter of stare decisis and referring to the recently decided case of Bell v. Klein et al (1954), 12 W.W.R. (N.S.) 255 in the Court of Appeal, said (p. 286):

. . . I Will only go against a judgment of another judge of this Court if:

(a) subsequent decisions have affected the validity of the impugned judgment;

(b) it is demonstrated that some binding authority in case law or some relevant statute was not considered;

(c) the judgment was unconsidered, a nisi prius judgment given in circumstances familiar to all trial judges, where the exigencies of the trial require an immediate decision without opportunity to fully consult authority.

If none of these situations exist I think a trial judge should follow the decisions of his brother judges.

While we are not members of the same court, Collier, J. and I exercise co-ordinate jurisdiction in matters of the sort before me, so I consider the observations of Wilson, J. set out above to be applicable here.

I believe that item (c) of Wilson, J.'s criteria governs the situation in which I find myself. The finding of Collier, J. that a lawyer's trust account records are "records of a lawyer” within the meaning of paragraph 232(1)(e) of the Income Tax Act is a bald statement indeed. No authority is given for it: and there is nothing in his judgment to indicate that he heard argument on the point as I have done. I pause here to decry, in strong terms, the pestilential habit of the law reporters of this day which moves them to omit any note of the arguments addressed to the judge whose judgment they record. Such is, to my mind, a serious omission, particularly in such cases as this where I have had the benefit of extensive argument to the effect that I ought not to follow the baldly expressed opinion of Collier, J.

Had that learned judge had the benefit of the argument of Mr. Pitfield in the Romeo's case, I cannot see how he could have expressed the opinion he did without explaining the process at which he arrived at it. So I have to conclude that his opinion was "unconsidered, a nisi prius judgment given in circumstances .. . . where the exigencies of the trial require an immediate decision without opportunity to fully consult authority.”

Mr. Pitfield argued that while trust account records (which every lawyer is required to keep by the Law Society as well as by law, prudence and common sense) are indeed “accounting records of a lawyer", they are much more than that. I agree. They are in reality the acounting records of the lawyer's client. To say that such records are simply lawyers’ records without more, is analogous to saying that possessory and proprietary rights in the law of property are the same. A lawyer's trust accounts, like the accounts of any trustee, record the incomings and outgoings of his clients’ money: it is the client's account which he records.

To say that the record of a client's trust account is that of the lawyer who keeps it is to say, in the final analysis, that such records belong to the clerk who keeps the lawyer's books. The recording of someone else's transactions, whether by a trustee for his cestui que trust, a bookkeeper for his employer or a lawyer for his client is an act purely ministerial. The recorder has no interest, other than those of accuracy and confidentiality, in the content of such records. In my opinion Mr. Pitfield’s argument is unanswerable: a lawyer's record of his client's trust account is privileged, and only express legislation can take that privilege away.

The matter here is governed, there being no legal proceedings afoot, by the rule of the common law, a substantive rule rather than a rule of evidence, stated by Dickson, J. in Solosky v. The Queen, [1980] 1 S.C.R. 821; 105 D.L.R. (3d) 745 in this way at page 839 (D.L.R. 760):

One may depart from the current concept of privilege and approach the case on the broad basis that . . . the right to communicate in confidence with one's legal adviser is a fundamental civil and legal right, founded upon the unique relationship of solicitor and client . . .

This rule was stated with greater elaboration by Lamer J. in Descoteaux v. Mierzwinski and A.-G. Quebec, [1982] 1 S.C.R. 860; 141 D.L.R. (3d) 590. Lamer, J. referred to Solosky and went on to formulate a working rule thus:

1. The confidentiality of communications between solicitor and client may be raised in any circumstances where such communications are likely to be disclosed without the client’s consent.

2. Unless the law provides otherwise, when and to the extent that the legitimate exercise of a right would interfere with another person's right to have his communications with his lawyer kept confidential, the resulting conflict should be resolved in favour of protecting the confidentiality.

3. When the law gives someone the authority to do something which, in the circumstances of the case, might interfere with that confidentiality, the decision to do so and the choice of means of exercising that authority should be determined with a view to not interfering with it except to the extent absolutely necessary in order to achieve the ends sought by the enabling legislation.

4. Acts providing otherwise in situations under para. 2 and enabling legislation referred to in para. 3 must be interpreted restrictively.

Applying this formula to s. 232(1)(e) of the Income Tax Act, the phrase “accounting records of a lawyer" comes to mean, when interpreted restrictively, exactly what it says: the accounting records of a lawyer relating only to his own business.

I note that Mr. Pitfield, counsel for the applicant in Cox, et al., was also counsel for the applicant in the case of Re Romeo's Place.

The meaning to be given to the exception to privilege contained in the paragraph has been considered in a number of cases in this province and in Ontario. It is necessary to briefly consider those cases on this issue—does the exception apply only to accounting records of a lawyer relating to his own business, or to accounting records relating to his client's business?

In In re Income Tax Act and a Solicitor, [1963] C.T.C. 1; 62 D.T.C. 1331 (B.C.S.C.), Mr. Justice Sullivan considered paragraph 126A(1)(e) of the Income Tax Act. It read as follows:

(e) “Solicitor-Client Privilege”

“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 him and his lawyer in a professional capacity.

At that time there was no provision in the Act to exempt accounting records from the privilege. In the case a lawyer's personal income was being investigated. In holding that trust account records were privileged, Judge Sullivan acknowledged that the privilege could be narrowed by Parliament.

At page 5 (D.T.C. 1334) he said:

To hold otherwise would be tantamount to destruction of the solicitor-client privilege which the Act recognizes to exist in whittled-down form. If it were the intention of Parliament to make all records of a solicitor available to inspection by taxation people then it would be a simple matter to so provide by appropriate legislation.

Parliament acted. In 1965 subsection 126(A)(1) was amended to provide for the solicitor-client privilege provision now contained in 232(1)(e).

This amended definition was considered by Mr. Justice Milvain in Re Helman, referred to by Mr. Justice Collier. In He/man the Income Tax Department, investigating income tax matters of members of a practising firm of lawyers, demanded production of trust account ledgers, cancelled trust cheques, trust deposit books and trust bank statements. The law firm resisted production. Judge Milvain noted that the initial investigation section of the Act, then subsection 126(1), referred to entry into any premises where:

. . . any books or records are, or should be kept pursuant to this Act. . .

[Emphasis added.]

He found that the trust account records were not kept by reason of any direction in the Act. However, he suggested that if the Department had been investigating the tax situation of a client of the firm, the records might have been exempt from the privilege.

At page 596 (D.T.C. 6360; D.L.R. 763), he said:

I feel sure though, that if the Department were investigating the tax situation of a particular individual who happened to be a client of a firm of solicitors, that then, under the general laws relating to such matters, the information in the hands of the lawyer might become produceable in a Court, and perhaps even under the provisions of the Act. If I am right in this conclusion the matter would be entirely ended, because the Income Tax Department not seeking information with respect to a particular client, has no right to look into the trust records, which are not records kept pursuant to the Income Tax Act.

Subsequent to this decision, subsection 126(1) was amended to delete the words “pursuant to this Act".

In Re Evans (1968), 68 D.T.C. 5277; 70 D.L.R. (2d) 226 lawyers claimed privilege under the provisions of subsection 126A(1) of the Act in relation to correspondence between their client and themselves, and a statement of account for their services. Mr. Justice Dryer of this Court held that these documents were privileged. He said, at page 5278:

I hold to be privileged . . . Correspondence between Douglas [the law firm] and Mrs. Rorison, including a statement of account for solicitor’s services which I hold is a communication and is not an accounting record within the meaning of the 1965 amendment. To make such a document available to third persons might reveal the nature of instructions and advice given.

In Re Modern Film Distributors Ltd. et al., [1968] C.T.C. 549; 68 D.T.C. 5349, Mr. Justice Dryer decided that certain documents pertaining to client's affairs were exempt from privilege by virtue of paragraph 126A(1)(e) of the Act.

At page 552 (D.T.C. 5351), he said:

It is apparent that in this case the solicitors, on behalf of their clients, claimed privilege in respect of their entire files. I suggest that such a claim should only be made in respect of documents which may be covered by the privilege relating to solicitor-client communications, including that relating to the privacy of the solicitor's preparation. It should not be necessary for the Court to go through hundreds of documents in respect of which no claim of privilege could possibly succeed. Making such clearly unfounded claims of privilege can only reduce the time available for consideration of documents in respect of which a claim for privilege might succeed.

Decisions of Ontario courts were consistent with decisions in this province until the decision in Cox, et al.

In Mutual Life Assurance Company of Canada v. Deputy A.-G. Canada, [1984] C.T.C. 155; 84 D.T.C. 6177, Mr. Justice Southey considered the words “accounting record of a lawyer", found in the section. At issue was a statement of account sent to the client for services rendered, signed by a partner in the law firm, Lang, Michener. At pages 156-57 (D.T.C. 6178-179), Judge Southey said:

Were it not for the concluding exception in the definition, I would have no difficulty in deciding that a statement of account like document 24 is ordinarily a document to which the solicitor-client privilege attaches. In a recently decided case Re Ontario Securities Commission and Greymac Credit Corporation [1983] 41 O.R. (2d) 328, I had occasion to state the general scope of the solicitor-client privilege and used that adopted from Wigmore on Evidence by the Supreme Court of Canada in a recent case:

Where legal advice of any kind is sought from a professional legal advisor in his capacity as such the communications relating to that purpose made in confidence by the client are at his instance permanently protected from disclosure by himself or by the legal advisor except the protection be waived.

The privilege attaches not only to communciations made by the client but obviously to communications made by the solicitor to the client as well and generally speaking covers all communications relating to the obtaining of legal advice. That general rule in my view would cover a statement of account. The interesting question raised by Mr. Templeton on behalf of the Attorney General of Canada is whether a statement of account constitutes “an accounting record of a lawyer, including any supporting voucher or cheque".

In my view, this statement of account which was seized in the files of the client cannot be described as an accounting record of a lawyer (the lawyer in this case being Lang, Michener) nor is it a supporting voucher or cheque. This document could be regarded as a supporting cover for the accounting records of Mutual Life, but I do not think that documents sent out by the lawyers which would not ordinarily be returned to them can be regarded as part of the accounting records of the lawyer. Those records in my view, would ordinarily be the ledgers of the law firm and its other books of accounts together with the documents preserved in the files of the lawyer which support those entries.

In Re Playfair Developments Ltd., [1985] 1 C.T.C. 302; 85 D.T.C. 5155, Mr. Justice Galligan, considering the exemption provision of the section, at page 305 (D.T.C. 5157) said:

In this case the act of what is done with the client's funds is not privileged because of the provisions of paragraph 232(1)(e) of the Act. Thus the problem which arose in Greymac is not present in this case. The Deputy Minister has available all of the accounting information as to the transactions in the solicitor's accounts. The accounting records will show what money was received from the client and what was done with it. It seems to me that instructions given by solicitors to the accounting department which resulted in various financial activities that are recorded in the accounts do not fall within the meaning of “accounting record" or any "supporting voucher or cheque". Nor do I think that they form any part of the financial transactions themselves. It is my opinion therefore that all of those interoffice communications are privileged and I so rule.

I proceed now to consider the decision of Judge Tyrwhitt-Drake in the case of Cox, et al., supra.

Counsel for the respondent submits that the trial judge made five errors. I shall recite this submission and comment upon it.

(1) The learned trial judge erred in finding that the petitioner's trust account ledger was not "an accounting record of a lawyer" within the meaning of paragraph 232(1)(e), and therefore privileged.

I note that in Re Modem Film Distributors, supra, Judge Dryer found that a statement of receipts and disbursements and a ledger sheet of a firm of solicitors both pertaining to clients' affairs, constituted "an accounting record of a lawyer”.

I note that Mr. Justice Southey in Re Mutual Life Assurance Company of Canada v. Deputy A.-G. Canada, supra, found at page 157 (D.T.C. 6179) that "accounting records of a lawyer” would: ”. . . ordinarily be the ledgers of the law firm and its other books of accounts together with the documents preserved in the files of the lawyer which support those entries.”

I note that in Playfair Developments Ltd., supra, Mr. Justice Galligan found that accounting information concerning a transaction in the solicitor’s accounts which would show what money was received from the client and what was done with it, were "accounting records of a lawyer”.

Thus, it is clear that Mr. Justice Collier's finding in Re Romeo's Place, that trust account records were “accounting records of a lawyer", was consistent with the decisions in these three cases, and was not just a “leap of faith”, as it were.

The decision in Re Modern Film Distributors was handed down some thirteen years before Judge Collier’s decision. It is not referred to by Judge Tyrwhitt-Drake.

Section 232 of the Act does not define "accounting records of a lawyer”. However, Part 8 of the Law Society Rules is concerned with accounting.

The heading of that section is "Accounting".

Section 800, under Part 8 defines "trust funds" to include: “I i (A) . . . funds from a client for services to be performed or for disbursements to be made on behalf of the client. . ."

Part 8, section I is headed “Books and Accounts Required to be Maintained", and under it, as a heading to Rule 842, are the words, "Types of Trust Books and Accounts Required to be Maintained”

Included in their number are "a trust cash book” and "a trust ledger"—it is the excerpt from this ledger, together with the cheques disbursed from the trust account pertaining to the sale of real property, that the Department has demanded by letter of May 15, 1989.

A law firm's trust ledgers are considered by the Law Society to be part of a lawyer's accounting records.

(2) The learned trial judge erred in finding that the expression "accounting records of a lawyer" in paragraph 232(1)(e) means the accounting record of a lawyer, relating to his own business.

This finding of Judge Tyrwhitt-Drake stands alone. No court in Canada either prior or subsequent to it, has so found.

In my view, no issue of privilege would arise if the exception in the section referred to a lawyer's accounting records, only as they relate to his own business.

It should not be forgotten that the application under subsection 232(4) of the Act to decide whether a document is privileged, is made by the client or the lawyer on behalf of the client.

With great respect, I cannot agree with the trial judge's finding that the exception applies only to the accounting records of a lawyer "relating to his own business”.

(3) The learned trial judge erred in holding that the trust account records are, “in reality, the accounting records of the lawyer's client".

With respect, again I have difficulty accepting that accounting records maintained by lawyers to comply with the requirements of the Law Society respecting moneys received and disbursed by them on behalf of the client, become the property of the client. If that were so, lawyers might well refuse to produce such records to the Law Society auditors. Counsel for the respondent submits that a bank's record of a client's deposits and withdrawals in the client's account do not become the property of the client; nor do hospital records of a patient's treatment, become the property of the patient. The analogy is apt.

(4) The learned trial judge erred in holding that the exception in paragraph 232(1)(e) applies only to the accounting records of a single lawyer and not a firm or partnership of lawyers.

I find that the accounting records are jointly and severally the records of each individual lawyer and the firm. Each member of the firm had access to, possession and control of the accounting records. Each member of the firm must say to the Law Society and to Revenue Canada that the trust account and trust ledger form part of his accounting records.

Sections 3, 12 and subsection 33(2) of the Interpretation Act, R.S.C. 1985, c. 1-21, bear on this issue:

3. (1) Every provision of this Act applies, unless a contrary intention appears, to every enactment, whether enacted before or after the commencement of this Act.

(2) The provisions of this Act apply to the interpretation of this Act.

(3) Nothing in this Act excludes the application to an enactment of a rule of construction applicable to that enactment and not inconsistent with this Act.

12. Every enactment is deemed remedial, and shall be given such fair, large and liberal construction and interpretation as best ensures the attainment of its objects.

*****

33 (2) Words in the singular include the plural, and words in the plural include the singular.

In his book Drafting and Interpreting Legislation (Carswell, 1988), the learned author Mr. Louis-Philippe Pigeon, at pages 15-17, wrote of the importance of the third rule of statutory interpretation, (at page 15), "the law speaks in the singular” and the ”. . . singular number extends to more than one person or thing". At page 16, he wrote that "this rule is absolutely constant”.

In Laurentian Pilotage Authority v. Shell Canada Ltd., [1978] 1 F.C. 119; 18 N.R. 439, Mr. Justice Pratte of the Federal Court of Appeal referred to subsection 26(7), now subsection 33(2) of the Interpretation Act in interpreting the word “pilot” and said “One must therefore avoid attaching too much importance to the use of singular in the tariff”.

Subsection 33(2) was applied in the case of The Credit Protectors (Alberta) Limited v. M.N.R., [1947] Ex. C.R. 44, to interpret shareholders to mean "shareholder" in paragraph 7(a) of the Excess Profits Tax Act.

In The Queen v. Healy, [1979] 1 F.C. 81; [1978] C.T.C. 355; 78 D.T.C. 6239; rev'd. [1979] 2 F.C. 49; [1979] C.T.C. 44; 79 D.T.C. 5060, Mr. Justice Thurlow applied subsections 3(1) and 26(7) and 33(2) of the Interpretation Act to find "Municipality" and "Establishment" in subsection 8(4) of the Income Tax Act included the plural: and see Morin v. Morin, [1979] 2 S.C.R. 205.

I find that the clear legislative objective of paragraph 232(1)(e) of the Income Tax Act is to exempt accounting records of lawyers either practising alone or in association with others from solicitor-client privilege.

(5) The learned trial judge erred in deciding that paragraph 232(1)(e) should be interpreted restrictively.

At page 368 (D.T.C. 6496) he wrote:

Mr. Pitfield made a further submission of a rather technical nature, but when one looks at the statute with a restrictive eye—and indeed, apart from the rule enunciated in Descoteaux, all taxing statutes are required to be interpreted strictly —it has merit.

This statement of the law conflicts with two judgments of the Supreme Court of Canada, decided prior to Cox, et al.

In Stubart Investments Ltd. v. The Queen, [1984] 1 S.C.R. 536; [1984] C.T.C. 294; 84 D.T.C. 6305, Mr. Justice Estey considering the "strict construction" rule as it applied to taxing statutes, said, at page 316 (D.T.C. 6323; S.C.R. 578).

Professor Willis, in his article, supra, accurately forecast the demise of the strict interpretation rule for the construction of taxing statutes. Gradually, the role of the tax statute in the community changed, as we have seen, and the application of strict construction to it receded. Courts today apply to this statute the plain meaning rule, but in a substantive sense so that if a taxpayer is within the spirit of the charge, he may be held liable. See Whiteman and Wheatcroft, supra, at p. 7.

While not directing his observations exclusively to taxing statutes, the learned author of Construction of Statutes, 2nd ed., (1983), at 87, E A Dreidger, put the modern rule succinctly:

Today there is only one principle or approach, namely, the words of an act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.

In The Queen v. Golden, [1986] 1 S.C.R. 209; [1986] C.T.C. 274; 86 D.T.C. 6138, the principle in Stubart was reaffirmed.

In the decision in Golden, at page 277 (D.T.C. 6140; S.C.R. 214 and 215), Mr. Justice Estey said:

In Stubart Investments Ltd. v. The Queen, [1984] 1 S.C.R. 536, at 573-79; [1984] C.T.C. 294 at 313-17, the Court recognized that in the construction of taxation statutes the law is not confined to a literal and virtually meaningless interpretation of the Act where the words will support on a broader construction a conclusion which is workable and in harmony with the evident purposes of the Act in question. Strict construction in the historic sense no longer finds a place in the canons of interpretation applicable to taxation statutes in an era such as the present, where taxation serves many purposes in addition to the old and traditional object of raising the cost of government from a somewhat unenthusiastic public.

These two judgments were handed down subsequent to the decision of the Court in Descoteaux et al v. Mierzwinski, [1982] 1 S.C.R. 860; 141 D.L.R. (3d) 590 (S.C.C.).

In Descoteaux, Mr. Justice Lamer gave judgment for the Court. He formulated a substantive rule at page 605 D.L.R. with respect to the right to confidentiality. It is this:

1. The confidentiality of communications between solicitor and client may be raised in any circumstances where such communications are likely to be disclosed without the client’s consent.

2. Unless the law provides otherwise, when and to the extent that the legitimate exercise of a right would interfere with another person's right to have his communications with his lawyer kept confidential, the resulting conflict should be resolved in favour of protecting the confidentiality.

3. When the law gives someone the authority to do something which, in the circumstances of the case, might interfere with that confidentiality, the decision to do so and the choice of means of exercising that authority should be determined with a view to not interfering with it except to the extent absolutely necessary in order to achieve the ends sought by the enabling legislation.

4. Acts providing otherwise in situations under para. 2 and enabling legislation referred to in para. 3 must be interpreted restrictively.

In Descoteaux, the Court was concerned with solicitor-client privilege raised as the result of a search warrant issued pursuant to the Criminal Code. In his judgment, Lamer, J. twice referred to the safeguards contained in section 232 of the Income Tax Act.

At page 602 he said:

It is again owing to the importance of this right [solicitor-client privilege] that certain statutes contain special provisions applicable in situations where, were it not for those special provisions, there would be undue interference with the right to confidentiality. An example of such concern for that right can be found in the safeguards set out in s. 232 of the income Tax Act 1970-71-72 (CAN.), c. 63.

At page 617, Mr. Justice Lamer remarked that when a Justice of the Peace was deciding whether to issue a warrant to search a lawyer's office, he could "take guidance from the provisions of the Income Tax Act, s. 232, adapting them to fit the particular case, of course".

I agree with the submission of counsel for the respondent that these remarks in Descoteaux suggest a recognition by the Court that section 232 represents Parliament's attempt to balance the right of solicitior-client privilege with the need of the Department to obtain documentary information in connection with the administration and enforcement of the Act.

The Issue of Stare Decisis

In Cox, et al., the trial judge applied in In re Hansard Spruce Mills Ltd., supra, for declining to follow Judge Collier in Re Romeo's Place Victoria Ltd.. In Re Hansard, Mr. Justice Wilson (as he then was) spoke of the circumstances that would prevent him following a fellow judge's decision. The only one that is relevant to this case is "B" which reads:

B It is demonstrated that some binding authority in case law or some relevant

statute was not considered;

Counsel agree that the two decisions of Mr. Justice Dryer, in Re Evans, supra, and Re Modern Film Distributors Ltd., supra, were not put before Judge Tyrwhitt-Drake. I am satisfied that if they had been, he might well have decided differently.

Counsel cannot agree that the sections of the Interpretation Act to which I have referred, were put before him. In any event, he does not refer to them.

I do not know if the decisions of the Supreme Court of Canada in Stubart and Golden were put before him, and it is immaterial. He did not consider them in his reasons, and his finding that all taxation statutes must be "interpreted strictly" cannot be reconciled with the statements of the Court in those two cases.

For these reasons, I conclude that I am not bound by Judge Tyrwhitt-Drake's decision, and with respect, I decline to follow it. Counsel agree that it was not possible to appeal his decision; just as it is not possible to appeal this one.

I find that by enacting paragraph 232(1)(e), Parliament has sought to balance the competing interests of solicitor-client privilege with the public interest in the administration and enforcement of the Act.

Conclusion

I find that the trust ledger entries and cheques sought by letter of May 15, 1989 of the Director-Taxation, Revenue Canada, directed to the firm are excluded from privilege by virtue of paragraph 232(1)(e) of the Income Tax Act.

Therefore, it is not necessary to consider the issue of common law privilege, in these circumstances.

I order that the documents sought by Revenue Canada be delivered to Mr. T.E. Edwards, forthwith.

I am indebted to counsel for their able and helpful submissions.

Judgment accordingly.