Judgment summary
This appeal concerned a requirement issued by the Canada Revenue Agency (CRA) under section 231.2(1) of the Income Tax Act (ITA) to Duncan Thompson, a lawyer, seeking documents about his personal finances and his accounts receivable listing, including client names. Thompson disclosed some material but claimed solicitor-client privilege over further details of his accounts receivable, such as client names (background section, before para 1).
The Minister applied to the Federal Court under section 231.7 ITA for a compliance order. Thompson resisted, arguing that section 232(1) ITA, which defines 'solicitor-client privilege' but excludes 'an accounting record of a lawyer' from that definition, could not be interpreted to strip privilege from a specific class of documents. He also raised a Charter section 8 argument, which was rejected below and was not before the Supreme Court (paras 10-15).
The Federal Court found that the definition in section 232(1) validly excludes accounting records from privilege and ordered Thompson to comply (para 12). The Federal Court of Appeal held that, in rare cases, records including client names may still be privileged, and sent the matter back to the Federal Court to determine whether this was so, while dismissing the Charter challenge (paras 13-14).
The Supreme Court held that the language, legislative history, and purpose of section 232(1) show a clear and unequivocal intention by Parliament to exclude a lawyer's accounting records from solicitor-client privilege for the purposes of the ITA (paras 26-34). However, in the companion case Canada (Attorney General) v. Chambre des notaires du Quebec, 2016 SCC 20, the Court held that this exception, and the ITA's requirement scheme as it applies to lawyers and notaries, are unconstitutional under section 8 of the Charter (paras 4, 35-36). As a result, the Minister's request to Thompson under that scheme was foreclosed, and it was unnecessary to send the matter back to the Federal Court (paras 38, 41).
The Court also noted that, even if the Federal Court of Appeal's approach had been appropriate, its order would have been insufficient to protect the rights of Thompson's clients, since solicitor-client privilege belongs to the client, not the lawyer, and clients must be given the opportunity to assert or waive it themselves (paras 39-40).
Background
Duncan Thompson is a lawyer practising in a small town in Alberta (para 5). The CRA took enforcement action against him under the ITA and sent him a requirement under section 231.2(1) seeking documents relating to his personal finances and his current accounts receivable listing (paras 5, 10).
Thompson provided some material but withheld further details of his accounts receivable, including client names, asserting solicitor-client privilege (para 10). The Minister applied to the Federal Court under section 231.7(1) ITA for an order compelling disclosure (para 11).
Thompson filed a notice of constitutional question in the Federal Court, arguing that section 231.2(1) could not be interpreted to require disclosure of privileged client information, and also argued that the CRA's requirement breached section 8 of the Charter (para 11).
Core dispute
The central issue before the Supreme Court was the proper statutory interpretation of the definition of 'solicitor-client privilege' in section 232(1) ITA, specifically whether Parliament intended, by excluding 'an accounting record of a lawyer' from that definition, to remove such records from the protection of solicitor-client privilege (paras 3, 15).
A secondary issue was whether the Federal Court of Appeal acted appropriately in sending Thompson's case back to the Federal Court to determine whether client names in his accounts receivable listing were in fact privileged (para 2, 14).
The Minister did not appeal on Charter grounds, and Thompson's constitutional argument was not before the Supreme Court as a ground of appeal, since his motion to state a constitutional question was dismissed; the constitutionality of the scheme was instead addressed in the companion appeal, Chambre des notaires (para 15).
Court findings
The Court held that solicitor-client privilege has evolved from an evidentiary rule to a principle of fundamental justice, and any intrusion on it is permitted only if absolutely necessary to achieve the ends of the enabling legislation (para 17-18). The Court rejected a fact/communication distinction for determining the scope of privilege, holding that, absent proof to the contrary, all information sought was prima facie privileged (paras 19-20).
Applying Canada (Privacy Commissioner) v. Blood Tribe Department of Health, 2008 SCC 44, the Court found that legislative language may only be found to abrogate solicitor-client privilege where it evinces a clear and unequivocal intent to do so (paras 22-25).
Unlike the provision considered in Blood Tribe, the Court found the definition in section 232(1) ITA to be unequivocal, given its express language, its legislative history (including the 1965 amendment responding to In re Income Tax Act, [1963] C.T.C. 1 (Brown)), and the purpose of the broader ITA scheme. Parliament's intent to exclude a lawyer's accounting records from the protection of the privilege 'could hardly be clearer' (paras 26-34).
However, the Court noted that Parliament's intent to define the privilege in a particular way, and its constitutional ability to do so, are not necessarily equivalent. Because the companion decision in Canada (Attorney General) v. Chambre des notaires du Quebec, 2016 SCC 20, found the purported exception in section 232(1), and the ITA's requirement scheme as it applies to lawyers and notaries, to be unconstitutional under section 8 of the Charter, the request made to Thompson under that scheme was foreclosed (paras 35-36, 38).
The Court also found that, while the Federal Court of Appeal acted appropriately in sending the matter back to the Federal Court, its order would have been insufficient to safeguard the rights of Thompson's clients, since solicitor-client privilege belongs to the client and can only be waived by the client, not the lawyer, who is not the client's alter ego (paras 39-40).
Outcome
The appeal was allowed solely to set aside the Federal Court of Appeal's disposition. The Minister's application for a compliance order against Thompson was dismissed, as the request made under the ITA's requirement scheme was foreclosed following the finding in Chambre des notaires that the scheme is unconstitutional as it applies to lawyers and notaries. It was therefore unnecessary to return the matter to the Federal Court. Thompson was awarded costs throughout (paras 41-42).
Major issues / areas of contention
- Whether section 232(1) of the Income Tax Act, by excluding 'an accounting record of a lawyer' from the definition of 'solicitor-client privilege', reflects a clear and unequivocal legislative intent to remove such records from the protection of the privilege
- Whether the Blood Tribe criteria for finding abrogation of solicitor-client privilege by statute were satisfied in respect of section 232(1) ITA
- Whether the Federal Court of Appeal was correct to send the matter back to the Federal Court to determine whether client names in Thompson's accounts receivable listing were privileged
- Whether Parliament's stated intent to define solicitor-client privilege in a particular way is constitutionally valid, given the parallel finding in Chambre des notaires that the exception and the ITA requirement scheme are unconstitutional under section 8 of the Charter
- Whether an order compelling disclosure adequately protects the rights of clients whose names or information may be privileged, given that the privilege belongs to the client rather than the lawyer