632738 Alberta – Tax Court of Canada confirms the refusal of a company to not disclose its reasons for engaging in transactions on grounds of privilege

The taxpayer was assessed under s. 103(1). The individual wholly-owning it refused to answer questions posed on his examination for discovery, that were aimed at eliciting the reason for which various transactions were engaged in by the taxpayer and other group companies, on the grounds that he and the taxpayer did not have any information pertaining to those questions that could be provided without disclosing information that was protected by solicitor-client privilege.

Sommerfeldt J found, in the context of a Crown motion brought for an order for the individual to answer the questions, that the taxpayer had not impliedly waived solicitor-client privilege by disputing the s. 103(1) assessment (which put in issue its principal reason for the transactions) given that in its pleadings and on discovery it had not relied on legal advice as part of its position. He then stated:

Although I will not issue an order that would require the Appellant, in response to any of the Disputed Questions, to disclose information that is subject to solicitor-client privilege, I will note that … unless the Appellant furnishes the information in writing to the Respondent no later than ten days after this Appeal is set down for trial, the Appellant will require leave of the trial judge [under Rule 96(1)], in order to introduce that information at trial.

I suspect that the Appellant is of the view that it can make its case without introducing the privileged information at trial.

It is quite unclear how the trial judge could impose the suggested potential Rule 96(1) “penalty,” for not disclosing its reasons on discovery, if at trial the taxpayer simply advances its reasons for the transactions without referring to any related legal advice.

Neal Armstrong. Summaries of 632738 Alberta Ltd. v. The King, 2023 TCC 117 under General Concepts – Solicitor-client privilege, Purpose/intention.