On June 3, 2016, the Supreme Court of Canada released two important decisions dealing with requests made by the Canada Revenue Agency (“CRA”) for information. The cases highlight the fact that when an individual or an organization receive such a request from CRA, they should consider whether any of the information requested is subject to solicitor–client privilege. If solicitor–client privilege applies, the information should not be produced.
The two decisions are:
1. Canada (Attorney General) v. Chambre des notaires du Québec, 2016 SCC 20; and
2. Canada (National Revenue) v. Thompson, 2016 SCC 21.
Although neither case involved a charity or not–for–profit, the cases are relevant as CRA can send those entities requests for information under the Income Tax Act (Canada) (the “Act”).
The central issue in both cases was whether the documents requested had to be disclosed to CRA because they were subject to solicitor–client privilege. When a document is subject to solicitor–client privilege, this means that it is a communication between a lawyer and his or her client. This gives the client the right to refuse to disclose the particular communication on the grounds that it is confidential. A lawyer cannot break solicitor–client privilege, only the client has that right. However, the Act states that solicitor–client privilege does not apply where the document sought by CRA is a lawyer’s accounting record, including any supporting voucher or cheque.
The first case came about because CRA had been issuing requests to notaries in Quebec asking for accounting documents and information about their clients. The Chambre des notaries du Québec brought a declaratory action to have the accounting record exception in the Act declared unconstitutional. The Barreau du Québec joined the proceedings for the purpose of ensuring that any declaration that was made by the court would apply equally to both notaries and lawyers.
In the proceedings, CRA maintained that the information it sought fell within the accounting records exception in the Act and contained information that was not privileged. The Chambre and Barreau maintained that the accounting records exception was unconstitutional and of no force or effect since a client’s right to solicitor–client privilege should prevail.
In the second case CRA requested various documents relating to the personal finances of Mr. Thompson (a lawyer) as well as his current accounts receivable listing. Mr. Thompson provided CRA with certain information but he claimed solicitor–client privilege over the details of his accounts receivables, as they included the names of his clients.
In both cases, the Supreme Court of Canada found that the accounting records exception relied on by CRA was unconstitutional. Accounting records of notaries and lawyers are presumed to include privileged information. If there is a dispute over whether a particular document should be disclosed, a court would first have to determine whether solicitor–client privilege actually applied to the document. This requires a court to review the document and consider a number of factors, including its contents and what it might reveal about the relationship and communications between a client and its legal advisor.
Receiving a request for information from CRA is a serious matter. For a charity, the potential consequence of not complying includes possible revocation of its charitable registration. A charity or a not–for–profit organization could also be subject to fines for failing to comply. If the request is addressed to a staff member of an organization, that staff member could be subject to fines and/or imprisonment if the request is ignored.
If your organization receives such a request from CRA, it is important to consider the nature of the information you are being requested to disclose and whether the documents are subject to solicitor–client privilege.
By: David W. Chodikoff and Sarah Fitzpatrick, Miller Thomson LLP
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