In Imperial Tobacco Canada Limited v. The Queen, 2013 TCC 135, the Tax Court of Canada (TCC) usefully examined various elements of solicitor-client privilege and common interest privilege when it ordered the disclosure of certain documents. The judgment arose following an interim motion brought by the Crown seeking disclosure of certain internal communications relating to a cross-border investment involving the Canadian, Australian, and Italian subsidiaries of a UK parent company. The Crown was partly successful. The following useful principles emerge from the judgment, and should be kept in mind by anyone involved in significant corporate transactions. Where reasonable and appropriate, these principles should be expressly referred to on the face of the applicable communication and document.

  • Canadian courts have strongly guarded solicitor-client privilege, as being essential for the effective administration of justice (paragraph 49).
  • Communications between employees of a company that disseminate or discuss confidential legal advice are privileged (paragraph 56). However, other employee-to-employee communications that do not meet this test, and are not otherwise in furtherance of seeking additional legal advice, are not privileged (paragraph 57).
  • Privilege is not waived when otherwise privileged documents are disclosed to affiliated companies within a corporate group, provided such disclosure is made in furtherance of their common interest in either concluding a transaction (paragraph 63) or working towards the same economic or commercial goals (paragraph 65).
  • Canadian courts have generally not extended privilege to accountants (paragraph 70). However, privilege should cover communications to or from an accounting firm if that firm’s involvement in a transaction extends to a function that is integral to the solicitor-client relationship (paragraphs 73 and 77). In this respect, a court will examine evidence of the relationship between the client, the law firm and the accounting firm.
  • Privilege attaching to a document is not deemed to be waived simply because the client has opposed a tax assessment based on a statutory provision that contains an intention or purpose test (paragraph 91). In this particular case the provision in issue was s. 95(6). Waiver can only arise in such a case if the client takes a positive step of actually relying – in its pleadings or at trial – on the legal advice previously obtained (paragraph 92).
  • In the absence of any other evidence, a court will examine the face of documents for evidence of the foregoing (paragraph 52).