Supreme Court


Taxation

Income tax
Clients must be notified when court considering order requiring disclosure

Canada Revenue Agency sent requirement pursuant to s. 231.2(1) of Income Tax Act (Can.) to taxpayer lawyer, requesting documents regarding income and expenses. Taxpayer claimed that details such as clients’ names in accounts receivable listing were protected by solicitor-client privilege. Federal Court granted Minister of National Revenue’s application for compliance order. Federal Court of Appeal allowed taxpayer’s appeal in part, dismissed taxpayer’s arguments based on s. 8 of Canadian Charter of Rights and Freedoms and sent matter back to Federal Court. Minister appealed. Appeal allowed. Federal Court of Appeal’s order was set aside and Minister’s application for compliance order was dismissed, given holding in companion case that accounting records exception in s. 232(1) of Act was constitutionally invalid. Definition of “solicitor-client privilege” in s. 232(1) of Act was clearly intended to permit Minister to have access to lawyers’ accounting records even if they contained otherwise privileged information. While taxpayer’s challenge was based on argument that definition of “solicitor-client privilege” in s. 232(1) of Act did not satisfy jurisprudential criteria, in companion case, s. 232(1) of Act was found to be constitutionally invalid. In companion case, Act’s requirement scheme as it applied to lawyers and notaries unjustifiably infringed s. 8 of Charter, which meant that request made to taxpayer under scheme was now foreclosed. To properly safeguard clients’ right to solicitor-client privilege, clients must be notified when court considered making order requiring disclosure of possibly privileged information, and be given opportunity to contest disclosure of information.

Minister of National Revenue v. Thompson (Jun. 3, 2016, S.C.C., McLachlin C.J.C., Abella J., Rothstein J., Cromwell J., Karakatsanis J., Wagner J., and Gascon J., 35590) Decision at 230 A.C.W.S. (3d) 736 was reversed. 265 A.C.W.S. (3d) 1083.

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