Digests

Belgravia Investments Ltd. v. Canada

T-167-00

2002 FCT 649, Heneghan J.

7/6/02

33 pp.

Application for determination of solicitor-client privilege in relation to certain documents requested by CCRA during audit under Income Tax Act, ss. 231.2(1)(a), (b)--Audit regarding applicants' corporate tax shelter transactions (transactions)-- Applicants (Investors Group) some but not all of corporations (WNCLP) Investors participating in formation of limited partnership (WNCLP) participating in joint venture to manufacture newsprint--Successive corporations (first RES, then Chilcotin) acting as WNCLP investors' agent in relation to joint venture project--Agency function including retainer of professional advisers--RES retaining law firm (MT) to act as legal counsel relative to transactions--RES retaining accountants (SC) as agent for applicant investors for purpose of providing MT advice and information regarding business and tax aspects of transactions--Accounting firm (LC) retained by corporate members of WNCLP Investors and Investors Group to communicate information on behalf of corporate members to MT to assist lawyers in providing legal advice to WNCLP Investors or Investors Group--Accounting firm (CJ) also providing accounting services and advice to corporate member (CQI) of WNCLP Investors--CQI not member of Investors Group and not participating in audited transactions--CQI also retaining CJ to communicate CQI information to MT to allow law firm to provide legal advice to WNCLP Investors regarding transactions--CCRA sending requirement letters requiring each member to provide certain documents to CCRA-- Applicants delivering all documents regarding transactions to counsel at MT, instructing him to claim solicitor-client privilege respecting documents-- Applicants instructing agent Chilcotin to respond to requirement letters, excluding claimed privilege documents-- Agent Chilcotin claiming privilege for Investors Group only--Parties agreeing certain documents privileged after previous Federal Court order--Disputed documents classified in three categories: (1) documents arising from business of agents RES and Chilcotin; (2) documents related to MT; (3) documents relating to SC-- Applicants claiming privilege over disputed documents on basis of confidential communications through representatives of client for purpose of obtaining legal advice: Susan Hosiery Ltd. v. Minister of National Revenue, [1969] 2 Ex. C.R. 27-- Applicants arguing principle in Susan Hosiery, supra, not confined to circumstances where representative acting as "mere conduit" for information passing between solicitor and client but also including representatives' professional skills in providing information and advice to be used by counsel in rendering legal advice: Long Tractor Inc. v. Canada (Deputy Attorney General), [1998] 3 C.T.C. 1 (Sask. Q.B.), at pp. 10-12--Applicants arguing where information given by lawyer to representative of client, such as accountant, for purpose of rendering legal advice to client, information properly subject of solicitor-client privilege--Applicants contending privilege therefore applies to disputed documents from LC and CJ accounting firms, documents provided by MT to SC, RES or Chilcotin in connection with provision of legal advice to WNCLP Investors or Investors Group-- Applicants further arguing disclosure of privileged communications to representatives and agents not waiver of privilege over content or subject-matter: Alcan-Colony Contracting Ltd. et al. v. Minister of National Revenue (Re) (1971), 18 D.L.R. (3d) 32 (Ont. H.C.), at pp. 34-35-- Applicants arguing communica-tions between client and representative of client, such as accountant, relating directly to legal advice being sought from or received by client's lawyer also basis of solicitor-client privilege--Applicants contending privilege therefore applies to all disputed documents exchanged between SC, RES, and Chilcotin and WNCLP Investors and Investors Group relating to legal advice being sought from, or received by MT-- Applicants further arguing communications between representative of client and client's lawyer for purpose of enabling lawyer to render legal advice to client privileged--Applicants contending privilege therefore applies to all disputed documents exchanged between MT and SC, RES or Chilcotin for purposes of requesting or providing information or advice concerning business- and taxation-related aspects of transactions, to enable MT to provide legal advice --Applicants also contending: (1) communications among firm members at MT privileged; (2) disclosure of such privileged MT internal communications to representatives or agents of WNCLP Investors or Investors Group not constituting waiver; (3) work product of MT privileged, including handwritten notes of MT lawyers on disputed documents; (4) documents or copies obtained by or forwarded to lawyer other than MT for purpose of assisting lawyer in rendering legal advice also privileged; and (5) where inadvertent production of privileged document, no waiver of privilege: Royal Bank v. Lee (1992), 9 C.P.C. (3d) 199 (Alta. C.A.)--Respondent submitting distinction between legal and business advice: in absence of existing or contemplated litigation, solicitor-client privilege only applying to communications concerning legal advice: Susan Hosiery, supra, p. 5281--Respondent contending MT and accountants merely acting as conduit for relay of business information about transactions--Respondent arguing waiver of privilege on two bases: (1) relative to existence of tax shelter investments, applicants denying transactions tax shelter investments in statutory declaration in response to requirement letters, denial akin to making statement of fact in pleadings: Potash Corp. of Saskatchewan Mining Ltd. v. Saskatchewan Government Insurance (1990), 83 Sask. R. 19 (Q.B.) and denial putting entire communication in issue and constituting waiver; (2) where documents made available to third parties, privilege waived as consequence of communication--Issues: (1) general principles governing solicitor-client privilege where non-legal advisors involved; (2) implied waiver of solicitor-client privilege due to statutory declaration; (3) waiver by production to third parties; (4) effect of inadvertent production on privilege; (5) which remaining challenged documents subject to solicitor-client privilege--Solicitor- client privilege defined in Act, s. 232(1)--General principles: two distinct branches of solicitor-client privilege: litigation privilege and legal advice privilege--Litigation privilege protecting all communications between solicitor, client and third parties but requiring actual or contemplated litigation--Legal advice privilege protecting all communica-tions between solicitor, client and third parties directly relating to seeking, formulating or giving legal advice--Hallmark of solicitor-client privilege confidentiality: Descôteaux et al. v. Mierzwinski, [1982] 1 S.C.R. 860--Statements of accountants not privileged unless prepared at request of lawyer for actual or anticipated litigation: Susan Hosiery, supra, at p. 5283--Facts contained in otherwise privileged documents, if otherwise discoverable, not protected by privilege--No automatic privilege attaching to documents not otherwise privileged simply because coming into hands of party's lawyer: General Accident Assurance Co. v. Chrusz (1998), 37 O.R. (3d) 790 (Gen. Div.), at p. 796--Party asserting privilege carrying evidentiary burden--Party asserting privilege must do more than baldly assert privilege: lawyer must adduce viva voce or affidavit evidence showing solicitor-client relationship; communications between lawyer and client; communications entailing seeking or giving of legal advice; and advice intended to be confidential: R. v. Morra (1991), 68 C.C.C. (3d) 273 (Ont. Gen. Div.), at p. 276--Communica-tions, statements or other materials prepared by third parties for and on behalf of solicitor subject to privilege only where documents prepared in contemplation of litigation: Long Tractor Inc., supra--Accounting documents subject to privilege if accountant used as representative of client to obtain legal advice: Gregory v. Canada (Minister of National Revenue) (1992), 92 DTC 6518 (F.C.T.D.)--Where communication made to agent, such as accountant who must consider it and provide individual opinion no privilege attaching--Where document created by lawyer consulted by client's own lawyer in relation to client's business, documents privileged: Klassen-Bronze Ltd. et al. (Re) (1970), 70 DTC 6361 (Ont. S.C.)--Implied waiver/s tatutory declaration: mere reference in statutory declaration to absence of tax-shelter representations not putting tax shelters in issue--Statutory declaration not pleading in usual sense--No implied waiver arising from statutory declaration of lack of representations concerning tax shelters--Lead MT lawyer appearing at application hearing to give viva voce evidence regarding disputed documents and privilege-- Evidence: comments of counsel not constituting evidence on application: Federal Court Rules, 1998, rr. 301(b), 306, 308--Issue of privilege determined on basis of affidavits, related cross-examinations and actual disputed documents--If doubt whether disclosure of documents by lawyers to accountants for purpose of rendering or facilitating legal advice, benefit of doubt inuring to acknowledging and maintaining privilege: Smith v. Jones, [1999] 1 S.C.R. 455--Applicants listing bases of privilege as: (1) communications from client's agent to lawyer; (2) communications from lawyer to client or client's agent; (3) communications between client's agent and client; (4) Use of client's agent to enable lawyer to render legal advice; (5) communications among MT lawyers; (6) work product of MT lawyers; (7) documents obtained by or forwarded to MT; (8) joint work product of lawyer and client's accountant; (9) privileged notes of lawyer from non-privileged meeting or telephone call; 10. notes of accountants from meetings with lawyers--Certain documents found to be privileged on various bases outlined above--Certain documents found not privileged as business advice or mere statements of fact--Documents prepared by accountants for applicants providing information about proposed investment and setting out terms of transactions not implying receipt of legal advice or products of legal advice and not privileged--Documents merely for purpose of conveying information--Nothing in affidavit evidence, including cross-examinations, establishing evidentiary basis for assertion of solicitor-client privilege-- Retainer of lawyers for purpose of legal advice not casting solicitor-client privilege over documents created and distributed by RES, Chilcotin and SC to applicants for business or accounting purposes or merely for relaying proposed terms of transactions--Privileged documents exempt from disclosure pursuant to Act, s. 232(5)(b)(i)-- Non-privileged documents to remain under seal and in possession of custodian until expiry of appeal period, excepting documents applicants offered to produce during hearing--Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, ss. 231.2(1)(a),(b), 232(1),(5)(b)(i).