Thompson v. R. – FCA: Identities of Lawyer’s Clients Not Necessarily Privileged

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Thompson v. Canada (Minister of National Revenue)
[1] (August 29, 2013) is a decision of the Federal Court of Appeal dealing primarily with issues of solicitor-client privilege.  The case arose is the somewhat unusual context of a CRA collection action against a lawyer:


[1]                                    This appeal calls upon this Court to consider the solicitor-client privilege (or privilege) asserted by a lawyer who is the subject of enforcement proceedings pursuant to the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (the Act).

[2]                                    Mr. Thompson (or the appellant) has raised the shield of solicitor-client privilege to protect basic information regarding his accounts receivable, arguing that his clients’ names and amounts owing are protected and out of the Minister of National Revenue’s reach (Minister or respondent).

Background and Context

[3]                                    More specifically, this appeal is from an Order of the Federal Court (T-1180-12) wherein Russell J. (the Judge) allowed the application of the Minister for a compliance order under subsection 231.7(1) of the Act.

[4]                                    The Judge found that the appellant did not comply with the Requirement for Information (Requirement) provided to him by the respondent pursuant to subsection 231.2(1) of the Act, which states:

231.2 (1) Notwithstanding any other provision of this Act, the Minister may, subject to subsection (2), for any purpose related to the administration or enforcement of this Act (including the collection of any amount payable under this Act by any person), of a comprehensive tax information exchange agreement between Canada and another country or jurisdiction that is in force and has effect or, for greater certainty, of a tax treaty with another country, by notice served personally or by registered or certified mail, require that any person provide, within such reasonable time as stipulated in the notice,

(a) any information or additional information, including a return of income or a supplementary return; or

(b) any document.

[5]                                    As a result, the Judge ordered that “the respondent shall comply with the Requirement issued by the Minister and shall forthwith, and in any event not later than 30 days after being served with this Order, provide the information and documents [sought]” (Speaking Order, appeal book, volume 1, page 30 at paragraph 1). Hence the within appeal by Mr. Thompson, which I propose to allow in part, but for completely different reasons than those advanced by the appellant.

[French version of statute omitted]

The appellant raised ten grounds of appeal.  The first ground, that the application judge expanded the terms of the Minister’s requirement, was dismissed summarily.  The remaining nine grounds were grouped by the Court of Appeal into three:[2]

(1)   Which party bore the evidentiary burden to establish that the information at issue was subject to privilege?

(2)   Did the Court err in finding that the information requested by the respondent – information relating to the appellant’s business accounts receivable, including the names and amounts owed by the appellant’s client – consists of accounting records and is not subject to solicitor-client privilege?

(3)   Did the Court err in finding that the decision does not infringe any privacy rights under section 8 of the Charter?

As to burden of proof, the court found:

[49]                                Mr. Thompson raised the shield of solicitor-client privilege. It is the party asserting privilege that bears the evidentiary burden to establish the claim on a balance of probabilities.

[50]                                Mr. Thompson did not. To the contrary, the Judge found that “on the record before [him], there is nothing to suggest that any client’s name requires the protection of privilege” (Judge’s Speaking Order, appeal book, volume 1, page 22 at paragraph 5). This factual finding is fully supported by the evidence, especially Mr. Thompson’s affidavit, which contains only generalities about his legal practice (appellant’s affidavit, appeal book, volume 2, page 335 and ff.).

As to whether the application judge erred in holding that the information sought was not subject to solicitor-client privilege, the court found:

[57]                                Statements of account are not the same as a lawyer’s accounting records. The latter consist essentially of statements of fact such as the name of the client, the amount billed for the professional services, the payments received and the amounts still owed. Statements of account, by contrast, may reveal a history of the file. They may contain information including the nature of the consultation, a summary of communications between solicitor and client, and so on, which may be covered by solicitor-client privilege.

[58]                                In this case, the Minister is not seeking the information contained in statements of account. She seeks purely factual information consisting of the names of the clients and the amounts of money owed by these clients individually.

[59]                                At the hearing of this appeal, Mr. Thompson admitted that he could institute legal proceedings to recover his fees from an uncooperative client. In light of the public nature of court proceedings, he would be obliged to reveal an uncooperative client’s identity and amounts owing in order to recover these fees. On that answer alone, it is difficult to accept his position that this information is subject to solicitor-client privilege. I note that the Law Society of Alberta’s Code of Conduct provides for circumstances where this type of information may be disclosed. Rule 2.03(5) states:

2.03(5) A lawyer may disclose confidential information in order to establish or collect the lawyer’s fees, but must not disclose more information than is required.

[60]                                Consistent with this example, what Mr. Thompson is asked to provide is no more than the information he would need to include in a Statement of Claim to disclose a cause of action.

[61]                                In light of the foregoing, I conclude that the Judge did not err in finding that the information requested in the Requirement was not subject to solicitor-client privilege.

On the alleged infringement of privacy rights, the court concluded:

[62]                                The appellant asserts that the Minister’s attempted interference with clients’ guaranteed rights in relation to solicitor-client privilege violates section 8 and is not saved by section 1 of the Charter. As the appellant has failed to establish that the Court erred in finding that a class privilege does not attach to the accounting records and client names requested by the Minister, there is no interference with any rights in relation to privilege, and this argument cannot succeed.

[63]                                The appellant also refers to the case of Baron v. Canada, [1993] 1 S.C.R. 416 in which the Supreme Court of Canada struck down section 231.3 of the Act, because the provision interfered with judicial discretion as to whether or not a search warrant should be issued to enter, search any building, receptacle or place and seize any document or thing that may afford evidence as to the commission of an offence under this Act. However, in the circumstances at bar, the appellant points to no evidence that the Court’s decision-making ability is fettered by the wording of the provisions at issue.

[64]                                Further, the appellant’s analogy with the physical seizure of documents in the course of executing a warrant does not apply on the facts. There is no entry of tax officials onto the appellant’s premises. The Requirement consists solely of a demand for production of documents. Finally, I note a recent decision from the Superior Court of Quebec wherein a Judge of that Court declared unconstitutional and inoperable sections 231.2, 231.7 and subsection 232(1)(5) of the Act as far as Quebec lawyers and notaries were concerned: Chambre des notaires du Québec c. Canada (Procureur general), 2010 J.Q. no. 8868; [2010] QCCS 4215.

[65]                                I am unmoved by this decision. Firstly, a Quebec Superior Court decision is not binding on this Court. That decision is under appeal and no decision on the appeal has been rendered to date (appeal filed on October 7, 2010, 500-09-021073-101). Secondly, the facts of that case are distinguishable as they involve information requirements issued by the CRA to a number of Quebec notaries in order to obtain information and documents concerning their clients. The Quebec Charter of Human Rights and Freedoms, R.S.Q. c. C-12 and Quebec’s Code of Ethics of Notaries, R.R.Q., c. N-3, r. 2  and Code of Ethics of Advocates, R.R.Q., c. B-1, r. 3 are also relied upon. They are not applicable to the appellant.

[66]                                As a result, I conclude that the appellant points to no palpable error in the Judge’s reasons on the Charter questions that would justify our intervention.

The Court of Appeal did, however, allow the appeal because it found that the application judge had not properly dealt with the possibility of clients wishing to assert solicitor-client privilege over the information in question:

[69]                                There is no specific obligation on a lawyer to advise a client when asserting a right on his or her behalf, when this right is in jeopardy. That being said, provincial law societies impose general obligations on lawyers, or make recommendations to lawyers, which suggest that the appellant should be asserting and pursuing the claims of solicitor-client privilege after having informed his clients and having obtained their instructions in this regard.

[70]                                With respect, I find that the Judge, as guardian of the law, should have fashioned a remedy addressing the critical issue of privilege before making his Order. The Act provides for the compliance order to be made by a Judge ensuring enough flexibility and discretion for him or her to remain the protector of the rights attached to solicitor-client privilege.

[71]                                As he did not fashion such a remedy, I propose to return the file to the Federal Court for a new hearing, on the question of the accounts receivable listing. Mr. Thompson may then have the opportunity to get his clients’ instructions and, on the basis of these reasons, may file new sworn affidavits explaining why individual clients’ names are privileged, if in fact this continues to be the case. I will not impose a time limit to do so and leave it up to the Federal Court to set the timelines for the parties to exchange further affidavits or materials. However, I should add that the clients on whose behalf the appellant is claiming privilege should produce their own affidavits explaining the history of their accounts. Copies of such affidavits should be served on the respondent, with clients’ names redacted.

The Court of Appeal’s finding that the identity of clients was not necessarily privileged information is not new:

[42]                                In the same year that Budd was decided, the Supreme Court concluded to the same effect in Lavallee. It stated: “The name of the client may very well be protected by solicitor-client privilege, although this is not always the case”  …

[Emphasis added]

What appears to be new however is the court placing an onus on applications judges to fashion a remedy to protect the rights of clients in this context.  It will be interesting to see what sort of remedy ultimately emerges, i.e., how the procedure will be structured, who will have standing, whether information will be sealed, etc.  Moreover,  it will be important to see what sort of evidentiary basis must be established to successfully assert privilege over the identity of a client.  For example one would tend to think that a run of the mill residential real estate closing would not involve privilege issues concerning the identity of clients.  On the other hand, if the property were being held on a secret trust for a client privilege might well be successfully asserted.  Time will tell how this area of the law evolves.

[1] 2013 FCA 197.

[2] Para. 19.