Solicitor-Client Privilege

The Federal Court had granted a CRA application pursuant to s. 231.7 seeking an order requiring BMO Nesbit Burns (“NBI”) to provide an unredacted version of a spreadsheet in connection with CRA’s audit of suspected dividend rental arrangement transactions of NBI.

NBI in response to the initial request made pursuant to s. 231.1 had redacted a column in the spreadsheet on the basis that it reflected written legal advice it had received. In rejecting NBI’s claim of privilege, Kane J had stated that the spreadsheet was not more than the mere “operational outcome or end product of legal advice” and did not satisfy the requirement that it “communicate … the very legal advice given by counsel.” Locke JA found no reversible error in the findings below.

Regarding NBI’s submission (at para. 5) that “the Federal Court erred in putting it in an untenable position whereby it would have to reveal privileged information in order to adduce evidence of sufficient detail to convince the Federal Court that privileged information would be revealed,” Locke JA stated inter alia (at para. 6) that “NBI has … not convinced us that it could have corrected this insufficiency if it had referred to privileged information.”

The Minister brought an application pursuant to s. 231.7 seeking an order requiring the respondent (“BMONB”) to provide an unredacted version of a spreadsheet (the “MSPM”). The redacted column in the spreadsheet, which had been provided by BMONB pursuant to a request made by CRA in July 2019 in relation to its audit of suspected dividend rental arrangement transactions engaged in by BMONB in its 2016 taxation year, was claimed by BMONB to reflect legal advice in a small portion of legal written advice received by it in 2012 and 2013 from two law firms (McCarthy’s and Torys).

In rejecting BMONB’s claim of privilege, Kane J stated (at paras. 108 and 116):

As … found in Information Commissioner [2013 FCA 104], not all end products of legal advice fall on the continuum of solicitor-client communications; an end product is not privileged “except to the extent that [it] communicates the very legal advice given by counsel” (at para 31). …

The Court’s review of the legal opinions does not serve to establish that the MSPM falls on the continuum of solicitor-client communications. The Court remains of the view that BMONB has not established that the MSPM, which is a set of computations with some associated text, is other than the operational outcome or end product of legal advice, to some extent. BMONB has not established that the MSPM would disclose the legal advice provided.

The Minister sought an order pursuant to s. 231.7 requiring the respondent (“Atlas”) to provide a draft due diligence report (the “Report”) prepared by an accounting firm (“EYC”), that reviewed the tax attributes of a Canadian corporation (“LSI”) that subsequently was acquired by Atlas’s U.S. parent (“JMC”) and of a Canadian subsidiary (“LSC”) of LSI, as well as LSC’s material tax exposures resulting from its Canadian tax filings including risk of challenge by CRA. Shortly thereafter, JMC transferred a subsidiary of amalgamated LSI (“New LSI”) to Atlas. The overall due diligence process was led by JMC’s Executive Vice President and General Counsel (“McNamara”), and EYC was engaged by McNamara to conduct the Canadian tax diligence upon the recommendation of JMC’s Canadian legal counsel (“Stikeman”).

In finding that the Report was not protected by solicitor-client privilege, Southcott J stated (at paras 54-55):

… I find that its dominant purpose when commissioned and generated was to inform the decision whether to proceed with the transaction and at what price. As in L’Abbé [2011 ONSC 7575], this was a business purpose and, to the extent the Report or the information in it also informed the giving of legal advice by Stikeman, I find this to have been ancillary to the business decision.

These findings as to the principal or dominant purpose for the report are determinative of my conclusion that the Report is not subject to solicitor-client privilege.

He further found (also at para. 55) that the portion of the Report providing “an assessment of the probability that the filing positions leading to the tax exposures would be sustained if challenged by CRA, and an evaluation of whether appropriate reserves had been taken in respect of such exposures” were not “capable of being characterized as prepared for the purpose of obtaining legal advice on the structuring of the transaction.”

Prior to the acquisition of two companies from the appellants by a third party, tax counsel for the respondents (“Kirby”) was provided by tax counsel for Abacus (“Nitikman”) with a draft tax planning memo of Nitikman, which Kirby commented on, so that the memo as finalized reflected his input as well. CRA served a Requirement on the appellants to produce the memo pursuant to s. 231.2(1), which they refused to do, on the basis that the memo was subject to common-interest privilege and, thus, was protected by solicitor-client privilege.

In confirming the appellants’ position, Webb JA stated (at paras. 43-44):

[S]olicitor-client privilege is not waived when an opinion provided by a lawyer to one party is disclosed, on a confidential basis, to other parties with sufficient common interest in the same transactions. This principle applies whether the opinion is first disclosed to the client of the particular lawyer and then to the other parties or simultaneously to the client and the other parties. In each case, the solicitor-client privilege that applies to the communication by the lawyer to his or her client of a legal opinion is not waived when that opinion is disclosed, on a confidential basis, to other parties with sufficient common interest in the same transactions.

[W]hen dealing with complex statutes such as the Income Tax Act, sharing of opinions may well lead to efficiencies in completing the transactions and the clients may well be better served as the application of the Income Tax Act will be of interest to all of the parties to the series of transactions. In my view, in the circumstances of this case, [the appellants] had sufficient common interest in the transactions to warrant a finding that, in Alberta or British Columbia, the … memo is protected from disclosure by solicitor-client privilege.

Prior to the acquisition of two companies from the respondents by an Abacus company, tax counsel for the respondents (“Kirby”) was provided by tax counsel for Abacus (“Nitikman”) with a draft tax planning memo of Nitikman, which Kirby commented on, so that the memo as finalized reflected his input as well (the “Abacus Memo”). There was no letter of intent, and the transactions instead were described in the Abacus Memo. CRA served a Requirement on the Respondents to produce the Abacus Memo pursuant to s. 231.2(1), which they refused to do, on the basis that the memo was subject to common-interest privilege (“CIP”) and, thus, was protected by solicitor-client privilege.

After finding (at para. 72) that “the Memo is legal advice provided by the lawyers to their clients in the strictest confidence and protected from disclosure under SCP subject to whether the privilege has been waived or is protected by CIP,” and before concluding (at para. 300) “that advisory CIP is not a legitimate or acceptable application of solicitor-client privilege,” Annis J went on to find that solicitor-client privilege had been waived through provision of the Abacus Memo to Kirby, stating (at para 289):

Litigation CIP is compatible with litigation privilege based on a shared adversarial purpose. …

Advisory CIP significantly expands the quantity of relevant evidence that is denied to the courts. …Furthermore, it provides an increased potential for abuse, while undermining the administration of justice by predominantly enabling transactions that anticipate creating litigation.

The claimed policy benefit of advisory CIP of enabling commercial transactions is entirely speculative, and more likely represents a cost to society by the fact that advisory CIP mostly enables transactions that anticipate litigation which undermine the administration of justice, or are otherwise of no, or harmful value to society.

Pitney Bowes is distinguishable as it was a matter involving joint client representation, not allied lawyer CIP.

In the course of an enforcement action against him, CRA sent the respondent (“Thompson”), a lawyer practicing in a small Alberta town, a requirement pursuant to s. 231.2(1) of the Act, requesting his current accounts receivable listing. He provided a general indication of the balance owing, but claimed that the provision by him of further details, such as the names of his clients, was precluded by solicitor‑client privilege. When the Minister applied to the Federal Court for a compliance order under s. 232.7, Thompson filed a notice of constitutional question, asking the Federal Court whether s. 231.2(1) could be interpreted to require a lawyer to divulge privileged information. He also claimed that the requirement constituted an unreasonable search or seizure contrary to s. 8 of the Charter.

The Minister appealed a decision of the Federal Court of Appeal to send the matter back to the Federal Court so that Thompson could be given the opportunity to assert the privilege on his clients’ behalf. The sole question before the Supreme Court was the proper interpretation of s. 232(1), and a motion of Thompson to state a constitutional question before that Court was dismissed.

Wagner and Gason JJ. stated (at paras 17, 19 & 20):

Solicitor-client privilege has evolved from being treated as a mere evidentiary rule to being considered a rule of substance and, now, a principle of fundamental justice…

…[F]acts connected with that relationship (such as the bills of account at issue in Maranda [2003 SCC 67, [2003] 3 S.C.R. 193 at paras. 33-34]) must be presumed to be privileged absent evidence to the contrary… .

…[W]e cannot conclude at the outset that Mr. Thompson’s communications with his clients are distinct from financial records that disclose various facts about their relationships in order to determine whether solicitor-client privilege covers those facts. Absent proof to the contrary, all of this information is prima facie privileged, and therefore confidential.

However, “once a court has determined that a document over which solicitor-client privilege is being asserted is an accounting record of a lawyer, s. 232(1) is clearly intended to bypass the traditional protection associated with solicitor-client privilege, which means that the document can then be seized and inspected by the Minister” (para. 27).

However, they concluded (at para. 41):

Because we conclude in Chambre des notaires that the ITA ’s requirement scheme is unconstitutional insofar as it applies to lawyers like Mr. Thompson, it is unnecessary to return the matter to the Federal Court.

The Minister’s demand was to be rejected.

Before so concluding, they stated (at paras. 39-40):

[S]olicitor-client privilege is a right that belongs to, and can only be waived by, a client of a legal professional… . In order to properly afford clients the opportunity to raise their right to solicitor-client privilege, they must… be afforded the opportunity to decide whether they wish to contest the disclosure of the information requested by the state, and if they do wish to do so, they must be permitted to make submissions in that regard on their own behalf.

Notaries practising law in Quebec received requirements under s. 231.2 to provide documents or information relating to clients for tax collection or audit purposes. Wagner and Gason JJ found (at para. 94):

…[T]he exception for a lawyer’s accounting records set out in the definition of “solicitor‑client privilege” in s. 232(1) of the ITA is unconstitutional and invalid. The manner in which it limits the scope of professional secrecy is not absolutely necessary to achieve the purposes of the ITA, which means that the exception is contrary to s. 8 of the Charter.

In this regard, they noted (at para. 72) that “even where accounting information includes no description of work, it may in itself, if disclosed, reveal confidential and privileged information,” so that, for example, client names and even the amount of fees may be protected.

Fitzpatrick J. found that CRA had failed to establish neglect or carelessness in the filing position of the taxpayer ("Wesbild") given that such position had been carefully considered by its in-house tax lawyer – and, furthermore, he had consulted outside counsel (Robert Kopstein). Fitzpatrick J. found that it was unnecessary to put Kopstein’s opinion in evidence. He noted that Kopstein had refused to disclose the substance of his advice, and CRA had refused its proposal to have a Justice lawyer review his opinion and advise CRA that it met the due diligence defence. Fitzpatrick J. then stated (at paras. 174, 176-177):

I [disagree]… that Wesbild cannot exonerate itself by merely showing there is a potential legal argument that would support the filing position and that it must show what legal arguments were actually considered before the return was filed. …

The CRA invites the court to infer that there was no consideration of the legal issues by reason of the fact that Mr. Kopstein’s opinion was not put into evidence. …

…What that advice entailed is not before the Court. However, I was not referred to any authority… that, in considering this issue, Wesbild is compelled to waive its right to assert privilege … . To do so would render the protection afforded by such privilege to be illusory… .

The Crown sought to have tax memos provided to the taxpayer by its law firm (Macleod Dixon) produced, on the basis that the the taxpayer had produced on discovery a memo from Macleod Dixon that advised that the publicly traded debt of an income fund could be assumed by the corporation into which it effectively was converted under a "SIFT conversion" transaction without triggering its early redemption. The Crown argued that "Superior Plus waived the privilege on the opinion which supports its contention that the transactions in issue were not tax motivated while maintaining it on those pointing the other way" (para. 12). In finding that the production of the Macleod Dixon did not entail implied waiver of privilege for the tax memos, Noël CJ stated (at paras. 17, 19):

[U]ntil Superior Plus introduces the disclosed document in evidence, access to the other privileged opinions is neither "vital or necessary" to the Crown's ability to respond… .

[A]n implied waiver [is] not [to] be pronounced unless and until it becomes necessary to do so in order to prevent the unfairness and inconsistency which the doctrine of implied waiver is intended to guard against.

In the course of finding that some of the documents in issue were not protected by solicitor-client privilege, Mosley J stated (at paras. 24-5):

[I]t is clear that the Respondent shared some of the Retained Documents with accountants and commodity traders. There is nothing in the record before the Court to suggest that these individuals are anything other than third parties. Privilege does not attach to communications shared with such persons. …

A communication revealing the name of a law firm or lawyer – without anything else, such as actual legal advice – is not a confidential communication made for the purpose of receiving legal advice from a lawyer acting in a legal capacity. The name of a law firm, without more, is not protected by solicitor-client privilege. Nor is the revelation of shorthand tax language used by tax planning advisors.

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act required law firms to verify the identity and record the identity of clients for whom they acted as "financial intermediaries," collect and retain financial records when receiving or paying funds for purposes other than professional fees, disbursements, expenses or bail, and allowed the anti-money laundering a federal agency (FINTRAC) to make warrantless reviews of such records subject to the firm following a specified procedure for claiming solicitor-client privilege.

The Court largely confirmed the findings below that the provisions should be variously struck (in the case of the search and seizure provisions), or read down to exclude lawyers (for record keeping etc.). The impugned provisions breached the clients' rights against unreasonable search and seizure. The statutory accommodations for privilege in the Act were less robust than conventional solicitor-client privilege. For example, privilege could be lost if not asserted on a timely basis, which was found in Lavallee to be unacceptable. The Minister argued that Lavallee applied where law enforcement officials were seeking evidence of criminal wrongdoing, and not in connection with a regulatory compliance regime. The immediate problem with this position was that the Act was expressly aimed at finding criminal wrongdoing, and threatened imprisonment of lawyers for non-compliance.

Moreover, the bar in Lavallee against erosions of privilege was not confined to a criminal context. Cromwell J stated (at para. 38) "the reasonable expectation of privacy in relation to communications subject to solicitor-client privilege is invariably high, regardless of the context," and quoted with approval the statement of Arbour J in Lavalee that "all information protected by the solicitor-client privilege is out of reach for the state."

He further noted (at para. 55) that one of the objectionable features of the procedure for claiming privilege under the Act was that it had to be asserted on behalf of a named client (stating that "the name of the client may itself be (although is not always) subject to solicitor-client privilege") and further stated that "the same ... may be said about the obligation of the lawyer under s. 64(10) to provide the authorities with the latest known address for the client."

In determining whether communications involving the taxpayer's accountants ("MNP') and relating to a reorganization were subject to solicitor-client privilege on the basis that MNP were the taxpayer's agents, Allbright J stated (at para. 46):

[Q]uestions such as what was the role of the accountant and what is the focus of the advice being sought and given are appropriate. For example, if the accountant is acting as a "designer" of the document and the information contained in it, that would tend to negate the role of the accountant acting as "an agent" or a "conduit". Again, what is the nature of the advice being formulated? If at the heart of the document and its contents is found the overriding purpose of tax accounting advice, such would tend to negate the existence of solicitor-client privilege, as would disclosure to third parties.

In affirming the Minister's disallowance of the deduction by the taxpayers of legal fees, Sharlow JA noted (at para. 12) their argument that "they could not disclose more particulars of their legal expenses without waiving...privilege," and stated (at para. 13):

[N]either the Minister nor the Court is obliged to determine a factual dispute in the taxpayer's favour merely because the taxpayer asserts and refuses to waive a claim of solicitor and client privilege with respect to evidence that could resolve the dispute.

The Minister served a Requirement on the appellant, a lawyer, to disclose information including a detailed accounts receivable listing. The appellant argued that solicitor-client privilege protected that information, chiefly because it disclosed client names and other personal information. In affirming the trial judge's position that privilege did not apply, the Trudel JA noted that:

• privilege belongs to the client, and can only be asserted or waived by the client through his or her informed consent (para. 39);
• client names and addresses are not privileged per se - personally identifying information is only privileged if the client's identity constitutes the foundation of the retainer or the essence of the consultation (para. 41);
• the burden lies with the party claiming privilege (para. 49); and
• the Minister was not seeking the information contained in statements of account, which may be privileged (paras. 57-58).

Crampton CJ found that three documents prepared for the intervenor, an income fund, by its general counsel and secretary were subject to solicitor-client privilege, even though they were lean on legal content. He noted that "no one should be able to 'look into the mind' of the lawyer as he or she is preparing a case" (para. 23).

• One document was a letter to the trustees describing the structure, objectives and broad steps of the reorganization of the intervenor into an income fund. The document referred to counsel having been sought, and contained two statements of belief that appeared to convey a legal conclusion (para. 34).
• One document was clearly marked as being privileged and confidential, and purported to memorialize the lawyer's legal analysis. Although it was often difficult to tell whether statements were based on legal or accounting considerations, Crampton CJ stated that he would "err on the side of caution" (para. 35).
• The final document was a memo that contained no legal advice. However, the memo had been created with the lawyer "while working with him to analyze the legal tax implications of various steps in the reorganization." In other words, the document was prepared "for the purpose of providing ... legal advice" (para. 42).

The respondent, a solicitor,was the sole shareholder of two corporations, and asserted solicitor-client privilege over various corporate records, which were predominantly accounting records. Snider J. found that the respondent had not met the burden of showing that any of the records were confidential communications between a client and a legal advisor. Although the respondent was a solicitor, the documents in question did not appear to contain any form of legal advice. They were merely evidence of a transaction, not a "communication" that attracts solicitor-client privilege.

Groves J. found (at paras. 15-16) that solicitor-client privilege did not attach to the documents described below:

In terms of solicitor-client privilege, there is a large number of pieces of correspondence from the lawyers which are in the nature of reporting letters, often enclosing numerous documents, many of which are of a public record... .

In regards to these documents, I have concluded that it cannot be said that solicitor-client privilege attaches to them. There is no suggestion in any of the documents that the communication is designed to be of a confidential nature nor is there within any of the documents communication which seeks the formation of or giving of legal advice.

The taxpayer was unable to assert solicitor-client privilege in respect of documents that the applications judge had found to involve "financial matters without any indication or suggestion that legal advice is being sought or given." Noël J.A. stated that "to the extent that the appellants are of the view that there is a link between the legal advice given and the financial matters revealed by the documents, it was incumbent on them to point out what it was" (para. 6).

Campbell J. found that it was appropriate to extend solicitor-client privilege to documents prepared by the team responsible for the three defendant corporations' indirect acquisition of a copper-gold project in Chile. The team comprised seven financial advisors, a former senior employee of one of the defendants, and two tax advisors. Campbell J. stated (at para. 4):

The documents make clear the particular input of a relatively small number of non-lawyer individuals outside the companies, whose input was necessary and appropriate to the consideration, structuring, planning and implementation of very complex transactions in a very short timeframe.

His decision was partly based on his acceptance of the reasoning in para. 64 of Camp Development. However, he also stated (at para. 19):

I do not accept that there is to be expected a "deal team" extension of solicitor/client privilege in every complex commercial transaction where there is not a specific protocol that has been executed. In each instance the context, the parties and the framework for the establishment and maintenance of privilege must be established to the satisfaction of the Court. In this case from the review of documents, it does.

Voith J. found that privilege attached to communications between the defendant's lawyers and an acquisition consultant ("Mr. Pavlakovic"), who sought advice from the defendant's lawyer on the defendant's behalf. The plaintiff was seeking additional compensation in respect of an expropriation of land.

Voith J. distinguished the facts from Chrusz, where the third party involved was found to have merely collected information to assist the client in apprising counsel of the facts. He stated (at paras. 63-64):

Instead, this is a case where Mr. Hanman [the defendant's general counsel] and Mr. Pavlakovic worked hand-in-hand, within their respective areas of expertise, on an ongoing basis to advance the interests of the Authority. They simply did so under an economic model that caused the Authority to outsource part of the project to Mr. Pavlakovic. All of their activity was undertaken with the knowledge of and at the instance of the Authority. ...

The nature of the interrelationship and of the dealings between the Authority, Mr. Pavlakovic and Mr. Hanman are a practical reality in major commercial projects where teams of individuals with focused expertise are assembled. All functions are not performed under a single roof, and the solicitor, though retained by a single client, may be required to give advice to different members of the team who work for the client.

The plaintiff sought damages against two former employees, for alleged breaches of the plaintiff's code of business conduct and ethics, and for gross negligence in approving certain mortgages. The plaintiff had arrived at these allegations through an investigation carried out by a certified fraud examiner ("Filliter"), and employed a consulting firm to oversee the employee terminations ("Hewitt Associates"). The plaintiff claimed privilege in respect of the communications between these parties.

Boyd J. agreed that solicitor-client privilege applied. She stated (at para. 18):

Adopting the functional analysis set out in General Accident Assurance Co., the court must determine whether the third party communications are in furtherance of a function which is essential to the existence or operation of a relationship between the solicitor and the client. In my view, in this case, Filliter was not simply gathering and passing information to Smith [the plaintiff's general counsel]. Rather he was empowered by both the client (Gowlings who retained him) and by the Bank, which worked with him, to perform a function which was integral to the solicitor-client functioning.

Communication with Hewitt Associates also gave rise to privilege. Because it "intimately involved in the potential termination, Smith's legal advice was provided to Hewitt Associates" (para. 19). Therefore, the communication was "essential to the existence of the solicitor-client relationship" between the plaintiff and its lawyers (para. 19).

Solicitor-client privilege did not attach to a Statement of Adjustments provided in a real estate purchase transaction.

The Minister issued a demand under s. 231.2 to the respondent requiring the provision of a statement of dispersements in regards to a real estate sale transaction and a copy of the cheque for the proceeds. In finding that this information was not protected by solicitor-client privilege, Shaw J. stated (at p. 6180) that the documents were "evidence of an 'act or transactions', not of a 'communication' that attracts solicitor-client privilege ...".

The files of the appellant, an actuary engaged to provide valuations to lawyers acting for employers who are considering setting up health and welfare trusts, including its reports, notes, drafts and communications with the lawyers, did not fall within the class of solicitor-client privilege simply because the lawyers used the actuary's views to provide legal advice to their clients.

However, Gauthier J. went on to note (at p. 6102) that "the names and coordinates of a client would be protected by solicitor-client privilege if, on the particular circumstances of the case, disclosing them would reveal the topic and substance of the legal advice sought" and that here, given that CCRA already had a copy of one of the legal opinions that had been given, "an assiduous and intelligent investigator at CCRA [would] be able to determine the nature of the legal advice given to each of these employers", the names of the employers in this case were protected by a solicitor-client privilege. Although such names have been passed on by the lawyers to the actuary, this disclosure was not intended to waive their clients' privilege.

CCRA was audited the respondents' accounting records in connection with its review of an alleged scheme involving the extraction of funds from RRSPs without payment of income tax, and served a requirement under s. 231.2(1) requiring the respondents trust account records pertaining to transfers from nine trust companies. In finding the privilege did not attach to these records, Mosley J. affirmed the proposition "that solicitor-client privilege does not extend to records of financial transactions directed through solicitor's trust accounts as such records are evidence of an act or transaction rather than communications" (p. 5705).

There was no privilege protecting communications of tax advice between an accounting firm and its clients given that none of the four Wigmore principles (which had been adopted in R. v. Gruenke [1991] 3 S.C.R. 263) had been satisfied.

Two legal opinions of a U.K. firm, that were prepared for three of the parties involved in some sale-lease-leaseback transactions, were expected to be distributed among other parties to the transactions so that there would be a common understanding of certain legal aspects of the transactions for the collective benefit of the parties. In these circumstances, such distribution of the opinions did not result in a loss of the privilege.

Privilege was not lost when legal opinions of Fraser Milner and documentation prepared by an accounting firm in order to assist Fraser Milner in providing legal advice were provided to the other parties to a commercial transaction, given that Fraser Milner was instructed to communicate these documents in order to facilitate the completion of the transactions in which both parties had a common interest. Lowry J. stated (at p. 5049) that:

"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."

In finding that experts' opinions obtained by the college's lawyer were not covered by legal advice privilege, the Court noted that the experts were retained to help the lawyer interpret and assess whether the evidence supported an allegation that a certain doctor had hypnotized his patient. The Court stated:

"While the experts' opinions were relevant, and even essential, to the legal problem confronting the College, the experts never stood in the place of the College for the purpose of obtaining legal advice. Their services were incidental to the seeking and obtaining of legal advice."

Some of the documents reviewed were found not to be privileged based on an assessment that the documents were business advice or mere statements of fact. Heneghan J. also stated (at p. 7141) that "if there is doubt on whether the disclosure of documents by the lawyers to the accountants was for the purpose of rendering or facilitating the provision of legal advice, the benefit of the doubt should enure to the benefit of acknowledging and maintaining the privilege ... ."

General discussion of the privilege before finding that specific documents were privileged.

After accepting authorities that statements of account received from a lawyer containing descriptions of services rendered are related to the giving or obtaining of legal advice, and that the amount of legal fees paid is also privileged, Macaulay J. found that statements of account or drafts each of which contain some description of services provided were privileged, including the amounts billed; and that what he described as "another category of documents which contains entries as to legal services" were to be redacted before release to the Revenue Canada investigators, including the removal of any amounts for legal fees and disbursements.

A claims adjuster originally had been retained directly by the client, an insurance company, and some time after the appointment of this expert, the insurance company retained a lawyer and directed the claims adjuster to report to the lawyer. The Court found that as the claims adjuster did not have the authority to seek legal advice or to give instructions on legal matters on behalf of the insurance company, his authority did not reach inside this client-solicitor relationship. Instead, his function was to educate the lawyer as to the circumstances surrounding a fire so that the client (the insurance company) could receive the benefit of better informed advice from its lawyer. The claims adjuster's correspondence and communications with the lawyer were not privileged.

Doherty J.A. stated (at p. 26):

"I think that the applicability of client-solicitor privilege to third party communications in circumstances where the third party cannot be described as a channel of communication between the solicitor and client should depend 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. ... If a client authorizes a third party to direct a solicitor to act on behalf of the client, or if the client authorizes the third party to seek legal advice from the solicitor on behalf of the client, the third party is performing a function which is central to the client-solicitor relationship."

On the basis that a group of companies shared a law firm for tax advice purposes and so had a common interest in privilege claims raised by one company within the group, McMahon J. found that a claim for privilege could not be defeated on the basis that the claim for privilege was being raised by the wrong company.

This summary is based on case description in "A Privilege Primer," article by Paul M. Perell, Judge, Superior Court of Justice, May 2006.

The defendant contested a motion to enforce a settlement by alleging that her lawyer did not have the authority to settle on her behalf. By this denial of his authority, she had, by implication, waived the privilege that otherwise would have attached to her communications with him.

This summary is based on case description in "A Privilege Primer," article by Paul M. Perell, Judge, Superior Court of Justice, May 2006.

The plaintiff sued her insurer for disability benefits. The issue arose as to whether she had improvidently settled the personal injury claim to which the defendant insurer was subrogated. The Court found that the lawyer-and-client communications about the settlement were legitimately put into issue with the consequence of a waiver of the privilege by implication.

Various working papers prepared by a trustee in bankruptcy were not subject to solicitor-client privilege because the dominant purpose for their preparation was not their submission to legal advisors.

The TD Bank sued a corporation for negligent misrepresentation with respect to a comfort letter received in connection with a $40.5 million loan to the corporation's subsidiary. Reliance and the Bank's state of mind being important ingredients of its misrepresentation claim, the presence or absence of legal advice about comfort letters was relevant and, therefore, the Court concluded that the Bank had waived any privilege it had with respect to documents about comfort letters prepared or collected by the Bank's law department.

The Court quoted (at p. 590) McLachlin J. (as she then was) in S & K Processors Ltd. v. Campbell Avenue Herring Producers Ltd. (1983), 35 C.P.C. 146 (S.C.) in saying that "waiver of privilege as to part of a communication, will be held to be waiver as to the entire communication". Respecting the Court's determination that the state of mind of the plaintiff had been put in issue by the allegations that it had relied on comfort letters produced by the defendants, the Court stated (at p. 589):

The plaintiff, they assert, has pleaded reliance on the conduct of the defendants, when they knew, or ought reasonably to have known, through the advice of their legal department, that comfort letters were not binding. The consequence, they assert, is that the plaintiff has waived by implication any solicitor-client privilege it may have held over the legal advice or knowledge which gave rise to that state of mind. I agree with those submissions.

The applicant provided privileged legal advice to its auditors to assist them in the conduct of their statutorily-required audit. Because the applicant's waiver of solicitor-client privilege was for this limited purpose only, the privilege was not removed for other purposes, including for purposes of tax investigations.

Solicitor-client privilege also attached to advice provided by the Toronto office of the auditors to their Edmonton office which, in turn, was used by outside counsel in the course of preparation of legal advice to the applicant, given that there was no evidence that the applicant was aware of these exchanges and given that the Toronto office had no authority to waive privilege on behalf of the applicant.

Documents in the nature of simple reports by a conveyance agent relating to certain noted conveyancing matters were not privileged.

In finding that a legal memoranda received by a tax accountant at a firm of public accountants ("Peats") that otherwise would have been protected by solicitor-client privilege because they were communicated to her as agent for the client in the obtaining of legal advice by the client, did not cease to be privileged because she provided them for review by the audit team, Haley J. stated (p. 6409)

"On the evidence, I accept the position that Peats had no power or right to waive the legal privilege in the five documents. I am also satisfied that when Shelley Levine gave the documents to the audit team or placed them in the audit file, she did so without regard to the client's privilege and without knowledge of it. It was inadvertent in that sense.

Haley J. indicated that if the audit team had received the memoranda following a request to the client for such disclosure, the privilege would have been lost.

In finding that a corporate minute book maintained in a law office was not subject to solicitor-client privilege, Platana J. stated (p. 6354)

"To be privileged, documents therefore must relate to matters in which a solicitor's professional advice is sought in his capacity as solicitor, and not merely documents required to be kept by law in the solicitor's possession in his/her capacity as a repository or holder of the documents. The mere keeping of such records cannot be considered part of a solicitor's work.

An environmental audit report on an Arizona property that was prepared in order to enable a solicitor to give a legal opinion to his clients regarding the acquisition of interests in a U.S. partnership, and an appraisal report on the Arizona property that was provided to the solicitor for the same purpose, were not privileged. However, financial statements prepared for the purposes of allowing the solicitor to give a legal opinion to his clients were privileged. Teitelbaum J. stated (p. 6524)

"Documents, not accounting documents, prepared by third parties, for and on behalf of a solicitor would be subject to the privilege only if the documents were prepared for the purpose of litigation or in contemplation of litigation ... Accounting documents would be subject to solicitor-client privilege if the accountant is used as a representative of a client to obtain legal advice.

With respect to the preparation of a list of the documents for purposes of determining whether they were privileged, the appellant had no general right to require that the name of the sender of the document, and its date, be excluded.

Egbert J. note (p. 424) that "communications are not acts and the privilege does not extend to positive acts that result from solicitor-client communications and instructions".

Privilege was granted with respect to documents which arose from the interaction of accountants and lawyers with the former acting as agents in the course of obtaining legal advice from the client.

Non-privilege documents with lawyers' notes on them were privileged except for those which were capable of redaction.

Documents which related to an alleged scheme involving the sale of land at a substantial undervalue by a corporation to another corporation in which its president had a beneficial interest, or which were exchanged in the course of furthering that scheme, were divested of solicitor/client privilege by reason of their relevance to the alleged fraud. Most documents which lost their privilege on this basis related to the closing of the transaction of purchase and sale. Documents which emerged once the Department's challenge was disclosed and which were created or exchanged for the purpose of advising the clients as to their rights, obligations, liabilities and defences, did not lose their privilege. In finding that a statement of account was privileged, Henry J. stated (p. 5594) that "if one looks at the document as a form of report to the client of what the solicitor has done, which it is, it becomes self-evident that it must be a privileged communication".

Communications between lawyers and accountants were privileged on the basis that the accountants were acting as representatives of the client for whose benefit the legal advice was being provided. In addition, lawyers' bills containing a description of the services rendered were protected.

Arkell J. quoted with approval the statement in In re Modern Film Distributors Ltd. that

"'If the client's files contain copies of documentary activities performed by the solicitor, they will not be subject to the privilege.'"

The president of a company, whose shareholders were non-resident individuals, was not entitled to claim solicitor-client privilege in respect of his knowledge of transactions that he had entered into on behalf of the corporation, notwithstanding that he also was the company's solicitor. "To be privileged, 'the communication must be made in order to elicit professional advice from the laywer based on his expertise in the law'" (p. 6515).

Reed J. indicated that even if she accepted the submission of counsel that the law of Quebec provided for an accountant-client privilege in the context of litigation, such a privilege was not available with respect to federal income tax litigation. Unlike solicitor-client privilege, any accountant-client privilege "is not founded upon a need to ensure an effective system of the administration of justice.

Photocopies of relevant trust ledgers and cancelled trust account cheques relating to a sale by one of the clients of a law firm, were accounting records of a lawyer, and therefore were not privileged. Coultas J. disagreed with the finding of the trial judge that the exception applies only to the accounting records of a lawyer relating to his own business, and also disagreed with the trial judge's finding that the exception applies only to the accounting records of a single lawyer and not of firm or partnership of lawyers.

A prima facie case, based on reasonable inferences from documentary evidence, as to fraud, which fell short of proof beyond a reasonable doubt was sufficient to vitiate a claim for privilege.

A voluntary disclosure by the taxpayer constituted a waiver of privilege with respect to his communications with his solicitor.

Privileged documents included communications with respect to legal advice between employees of the American subsidiary of the taxpayer, and in-house lawyers of the taxpayer, communications by such lawyers with respect to legal problems in jurisdictions outside Ontario, and working papers found in those lawyers' files, including copies of non-privileged documents with lawyers' notes on them.

Trust account records of a law partnership were privileged because they were records of the client rather than of the solicitor, and because the records of a partnership of lawyers are not those of "a" lawyer. "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.

Since the Deputy Minister already had available all the accounting information as to transactions in the solicitors' accounts, instructions given by solicitors to their firm's accounting department which resulted in the various financial activities which were recorded in the firm's accounts were not "accounting records" and were privileged. Similarly, letters covering the transmission of cheques from client to solicitor were privileged, as was the solicitors' reconciliation of their disposition of certain funds in the trust account.

A note made by a solicitor of information received by him was part of his work product, and privileged.

The privilege respecting a letter containing legal advice was not lost when it was sent to a European financial adviser of the clients in addition to being sent to the clients.

Documents containing information necessary to the preparation of closing documents were privileged.

The primary purpose of an audit report was to enable the Minister to determine whether to reassess tax on the taxpayer's income rather than to assist counsel in the event of litigation, and it accordingly was not privileged.

A statement of account sent by a lawyer to his client is not "an accounting record of a lawyer".

A memorandum that advised as to the impact of income tax laws that was prepared jointly by an accounting firm and a law firm was protected by solicitor-client privilege since the law firm had accepted responsibility for this advice. Also protected was a legal memorandum which originally had been prepared by a law firm for a third party, but which later was sent to in-house counsel of the taxpayer (probably without the knowledge of the preparing law firm) for his comments.

"There is no distinction, for the purpose of a claim to legal professional privilege, between lawyers in private practice and salaried legal advisors such as ", in this case, a lawyer who was vice-president, secretary and general counsel of the petitioner.

As to the privilege accorded to communications made for the purpose of pending or contemplated litigation between the taxpayer and Revenue Canada "it [is] clear that litigation may be definitely in prospect prior to any formal legal step such as a reassessment being taken". In this case, the date at which litigation was taken to be in contemplation, was the date of a memorandum showing that active consideration was being given to the income tax implications of the inter-company dealings which later became the subject of a Revenue Canada field audit.

A prima facie case of fraud by the applicant was made out where the evidence established inter alia that a company owned by the applicant, which had filed a "nil" return stating that it had been inactive, had had extensive activity in its bank account. The applicant's claim to privilege thus could not be sustained.

Trust account records are accounting records of a lawyer, and thus are excluded by S.232(1)(e) from the privilege where it is the client, not the lawyer, whose affairs are being investigated by the Department.

Although copies of non-privileged documents generally are themselves not privileged, where disclosure of a collection of copies might afford a clue to the views of the solicitors as to their client's case, such collection is privileged.

In order for the privilege to be displaced on the ground of fraud, some definite charge or allegation of fraud must be made.

Lacourciere, J.A. stated "that the loss of privilege attendant upon the involuntary, in the sense of inadvertent, disclosure of a document, which would allow proof in court of the original document or secondary evidence of its contents, does not apply to the involuntary disclosure of a document pursuant to a court order [under s. 232]."

A report prepared by a Special Investigations officer was intended, in part, to assist Justice lawyers in prosecuting the appellant, and therefore was privileged.

After recognizing that, in practice, smaller corporations do engage accountants to act for them in such matters, President Jackett concluded that Mr. Pall, the taxpayer's auditor, was acting as representative of the taxpayer for the purpose of obtaining legal advice from the taxpayer's lawyer when he communicated with the lawyer. Thus, these communications were privileged.

President Jackett stated:

"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 ... Where an accountant is used as a representative ... or 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 ... does not make the communications that he makes ... 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 nonetheless communications from the lawyer to the client."

Privilege was lost with respect to documents which came into the hands of the Minister's representative by the voluntary act of the taxpayer's solicitor.