Attorney General of Canada and Canada Revenue Agency v. Chambres des notaires du Québec and Barreau du Québec

Canada

03.06.2016

Direct Taxation

Notaries and lawyers exempt from disclosure scheme in Canadian tax law

Canada’s Supreme Court held unconstitutional tax provisions relating to request for information by the Revenue Agency in the assessment of tax payable by notaries for downplaying lawyer-client privilege.

Notaries practicing law in Québec had received a request for information for tax collection and audit, which raised concerns about their clients’ right to professional secrecy. Under such ‘requirement scheme’ the Revenue Agency can compel disclosure of professional documents and accounting records to ascertain tax liability.

Since legal communication between a lawyer and their client is protected from disclosure, the Income Tax Act, in its definition for ‘solicitor-client privilege’ reduced protections typically available with such professional communication. It stated: “an accounting record of a lawyer, including any supporting voucher or cheque, shall be deemed not to be such [oral or documentary communication passing between person and person’s lawyer] a communication”. The Supreme Court raised two questions: whether government action was contrary to Section 8 of the Canadian Charter of Rights, which protects against unreasonable searches and seizures, and; whether the government’s action intruded upon an individual’s reasonable expectation of privacy and was such intrusion unreasonable. It noted that the Act pursued the objective of collection of taxes, with there being a direct connection between the collection of taxes and the scheme to require submission of additional documents in the conduct of tax assessment. But, the definition ‘solicitor-client privilege’ in the Act impaired the right to professional secrecy.

The ‘requirement scheme’ as per the Income Tax Act was found in conflict with protections in the Charter, so far as they applied to notaries and lawyers in Québec. As such, the scheme would have to be “read down” to exclude persons engaged in the legal profession, and claiming protection for work done thereunder. The definition of solicitor-client privilege in the Act was also found unconstitutional for the manner in which it limited the scope of professional secrecy.

Tags : search and seizure legal advice privileged information canada

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