The Supreme Court of Canada recently granted leave to appeal in Minister of National Revenue v Duncan Thompson, 2013 FCA 197, which touches on the issue of whether a lawyer subject to enforcement proceedings can claim solicitor-client privilege over his accounts receivable.
Thompson was a lawyer, and the subject of enforcement proceedings pursuant to the Income Tax Act. The CRA issued a Requirement seeking information and documents pertaining Thompson's income and expenses, and assets and liabilities, including a current accounts receivable listing. Thompson provided some, but not all, of the information set out in the Requirement. In particular, he had provided no details regarding his accounts receivable other than a total balance owing.Thompson challenged the Requirement, in part, based on solicitor-client privilege, and sought a determination of whether s. 231.2(1) of the Income Tax Act can be interpreted, applied or enforced so as to require a lawyer who is the subject of enforcement proceedings by the CRA to divulge information about his clients, including their names and amounts owing, information that he claims is protected by solicitor-client privilege. Thompson also argued that the Requirement was akin to an unreasonable search or seizure and thus was contrary to s. 8 of the Charter.
The Federal Court ordered that Thompson must comply with the Requirement, and ordered that he provide unredacted financial records to the Minister. The Court of Appeal allowed Thompson's appeal, but only because the Federal Court did not review the accounts receivable listing to ensure solicitor-client privilege did not apply to protect each of Thompson's clients individually. The Court of Appeal upheld the Federal Court's order that Thompson produce unredacted versions of all other information and documents.
The Court of Appeal rejected Thompson's arguments with respect to solicitor-client privilege and s. 8 of the Charter. It found that solicitor-client privilege does not apply to a lawyer's accounting records and supporting documents because they do not constitute the provision of legal advice, and noted that if privilege were to apply, the CRA could never seek and obtain information from a lawyer about the revenue generate by his practice that would enable CRA to ensure compliance with the Income Tax Act.
With respect to s. 8 of the Charter, the Court rejected the assertion that a class privilege attaches to a lawyer's accounting records and client names, with the result that there was no interference with any rights in relation to privilege.
It is interesting that the Supreme Court has granted leave in this case, as there does not seem to be anything controversial about the decisions of either the Federal Court or the Court of Appeal. Perhaps the Supreme Court feels that some clarification on the law of solicitor-client privilege, and the process to be used to determine that privilege, especially in the context of demands for production from the CRA, is needed.