The Supreme Court of Canada has been unequivocal in its affirmation of the importance of the protection of solicitor-client privilege. For example, in R. v. McClure, 2001 SCC 14 the Court held (at para.35) that the privilege “must be as close to absolute as possible” and in R. v. Cunningham, 2010 SCC 10, the Court recognized (at para.26) that the “solicitor-client relationship is integral to the administration of justice.” In the recent decision of Thompson v. the Minister of National Revenue, 2013 FCA 197, the court considered the application of these principles within the context of a lawyer who was the subject of a compliance order, pursuant to s.231.7(1) for failing to comply with a s.231.2(1) Requirement. (both Income Tax Act provisions)

In Thompson, CRA sought the production of information and documents including a statement of income, expenses, assets and liabilities and, a listing of accounts receivable. The Appellant, a practicing lawyer, took the position that the names of clients and the amounts owed by the clients were protected by solicitor-client privilege and therefore not compellable.

In issuing the compliance order the Federal Court judge held that the information sought by CRA was not privileged. The appeal court agreed noting that “solicitor-client privilege applies only to a communication between a lawyer and client, which is of a confidential character, and which is directly related to the seeking, formulating or giving of legal advice.” Further, the appeal court found that the name of a client will only be protected by solicitor-client privilege in limited circumstances.

On the basis of the applicable principles including those from McClure and Cunningham, the appeal court concluded: “I fail to see how [solicitor-client privilege] applies to accounting records and supporting vouchers and cheques, which constitute, as a general rule, evidence of an act or transaction rather than a privileged communication.” This conclusion was, however qualified to the extent that “if for some unusual circumstances a lawyer’s accounting records contain privileged communications, these communications would remain subject to judicial scrutiny under the Act since legislative language governing the production of documents must be read so that it does not include communications subject to solicitor-client privilege.”

In the result, the appeal court rejected the appellant’s arguments but allowed the appeal on the limited issue that, the judge’s Order, which compelled the production of the accounts receivable was “premature” as the judge was required “to take the appropriate steps to verify whether solicitor-client privilege protected any of Mr. Thompson’s clients individually.” Further: “…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.”

This case illustrates the importance and complexity of issues surrounding the protection of solicitor-client privilege and several practice issues may be drawn from the case. First, while professional ethics require a lawyer to protect the privilege that belongs to his or her client, the proper exercise of this obligation rests upon a full understanding of what is, and what is not protected by solicitor-client privilege.

Secondly, the court in Thompson observed that while the appellant, who claimed “shield of privilege” also bore the “evidentiary burden to establish the claim on a balance of probabilities”, the appellant in the case presented no evidence to support the claim. “Had Mr. Thompson raised solicitor-client privilege until he had further opportunity to consult with his clients and assess their rights, and then provided specifics in his affidavit explaining why some of the names might attract privilege, he would have been in a better position to persuade the Judge that his position might be justified.” In other words, the mere utterance of the phrase “solicitor-client privilege” is not a sufficient basis upon which to raise the shield of privilege.

Finally, as guardian of the law, a judge who is considering a claim of solicitor-client privilege must take steps to ensure that those communications which are protected by the privilege are protected. A poorly framed application does not relieve the judge of this critical responsibility.