Date: 20060302
Docket: T-273-06
Citation: 2006 FC 277
Vancouver, British Columbia, Thursday, the 2nd day of March, 2006
Present: THE HONOURABLE MR. JUSTICE SHORE
BETWEEN:
THE MINISTER OF NATIONAL REVENUE
Applicant
- and -
JYOTIKA REDDY
Respondent
REASONS FOR ORDER AND ORDER
OVERVIEW
Solicitor-client privilege attaches only to communications between a solicitor and a client and not to actions by the solicitor. For that reason, courts have consistently held that solicitor-client privilege does not apply to documents relating to monies flowing through a solicitor's accounts to or from a client or to documents relating to real estate transactions. In Ontario (Securities Commission) v. Greymac Credit Corp. (1983) 41 O.R. (2d) 328 (Ont. Div. Ct.) the Court stated:
Evidence as to whether a solicitor holds or has paid or received moneys on behalf of a client is evidence of an act or transaction, whereas the privilege applies only to communications. Oral evidence regarding such matters, and the solicitor's books of account and other records pertaining thereto (with advice and communications from the client relating to advice expunged) are not privileged, and the solicitor may be compelled to answer the questions and produce the material.
...
The fact that a client has paid to, received from, or left with his solicitor a sum of money involved in a transaction is not a matter to which the client himself could claim the privilege, because it is not a communication at all. It is an act.
Communications Not Actions
Stevens v. Canada (Privy Council) (1998) 161 D.L.R. (4th) 85 (F.C.A.)
B. v. Canada (1995) 3 B.C.L.R. (3d) (S.C.)
Real Estate Transactions
R. v. Tysowski (1997) 11 R.P.R. (3d) 165 (Man. Q.B.)
Eastwood & Company v. M.N.R. (1993) 94 D.T.C. 6411
BACKGROUND
[1] Betty Ann Tronchin ("Tronchin") is indebted to Her Majesty the Queen in right of Canada for unpaid income tax in the amount of $796,792.30 as at December 6, 2005. (Tab 2, Affidavit of A. Bocking, para. 4.)
[2] Land title documents indicate that on November 7, 2002, Tronchin transferred property described as PID 005-543-215, District Lot 7892, Lillooet District to Alan Gerald McColman (the "Real Estate Transaction") for consideration of $160,000.00 (the "Sale Proceeds"). (Tab 2, Affidavit of A. Bocking, para. 7, Exhibit "A".)
[3] The Canada Revenue Agency is only aware of one bank account held by Tronchin at the time of the Real Estate Transaction. There is no indication of a deposit of the Sale Proceeds into this bank account. (Tab 2, Affidavit of A. Bocking, para. 8.)
[4] In order to determine where the Sale Proceeds went, on April 14, 2005, the Applicant issued a letter by registered mail pursuant to subsection 231.2 of the Income Tax Act (the "Requirement for Information") to Jyotika Reddy, Barrister and Solicitor, the officer who certified the execution of the Form transfer document for the Real Estate Transaction. (Tab 2, Affidavit of A. Bocking para 9, Exhibit "B".)
[5] The Requirement for Information required Ms. Reddy to provide within 30 days:
A copy of the statement of dispersals in regards to the transfer of the property at 7338 Sheridan Lake Road West, Sheridan Lake, B.C., PID 005543215 Lillooet Land District. The property was previously owned by the above person and transferred to Mr. Alan McColman on November 7, 2002. Please provide a copy (front and back) of the dispersement (sic) cheque to Betty Ann Tronchin for the proceeds of the transfer. If the dispersement (sic) was not made by cheque or a draft please provide details of the financial institution where the funds were sent to (the "Information and Documents").
(Tab 2, Affidavit of A. Bocking, para.9, Exhibit "B".)
[6] On April 22, 2005, the Canada Customs and Revenue Agency received a letter from Mr. Kent Sanderson of the law firm Brawn Karras & Sanderson where Ms. Reddy was employed, acknowledging receipt of the Requirement for Information and advising that solicitor -client privilege was claimed and that the documents had been placed in a sealed envelope remaining in the firm's possession. (Tab 2, Affidavit of A. Bocking, para. 10, Exhibit "C".)
ISSUES
[7] Are the Information and Documents sought by the Minister under section 231.2 of the Income Tax Act protected from disclosure by solicitor-client privilege within the meaning of that term as defined in the common law or in subsection 232(1) of the Income Tax Act?
ANALYSIS
[8] Subsection 231.7(1) of the Income Tax Act provides, in part, that on summary application by the Minister, a judge of this Court may order a person to provide any documents sought by the Minister under section 231.2 if the judge is satisfied that:
(a) the person was required under section 231.2 to provide the documents and did not do so; and
(b) the documents are not protected from disclosure by solicitor-client privilege (within the meaning of subsection 232(1)).
[9] In this case, it is clear that the Respondent was required under section 231.2 of the Income Tax Act to provide the Minister with certain information and documents and that she not do so.
[10] Accordingly, the issue in this application is whether the Information and Documents sought by the Minister are protected from disclosure by solicitor-client privilege.
Solicitor-Client Privilege
[11] The Information and Documents sought by the Minister may be confidential records of the Respondent, but it is submitted that they are not privileged either at common law or under subsection 232(1), which provides that, for specified purposes of the Income Tax Act:
"solicitor-client privilege" means the right, if any, that a person has in a superior court in the province where the matter arises to refuse to disclose an oral or documentary communication on the ground that the communication is one passing between the person and the person's lawyer in professional confidence, except for the purposes of this section an accounting record of a lawyer, including any supporting voucher or cheque, shall be deemed not to be such a communication. (emphasis added)
(Income Tax Act, subsection 232(1).)
The common law definition of solicitor-client privilege
[12] There is a distinction between a lawyer's duty of confidentiality and solicitor-client privilege. Communications may be confidential without being protected by solicitor-client privilege. In order for solicitor-client privilege to apply, four conditions must be established:
(a) there must be a communication, whether oral or written;
(b) the communication must be of a confidential character;
(c) the communication must be between a client or his agent and a legal advisor; and
(d) the communication must be directly related to the seeking, formulating or giving of legal advice.
(B. v. Canada (1995) 3 B.C.L.R. (3d) 363 (S.C.).)
[13] The Supreme Court of Canada recently reiterated these general principles of solicitor-client privilege in the case of Pritchard v. Ontario (Human Rights Commission), at para. 15, where the court said:
Dickson J. outlined the required criteria to establish solicitor-client privilege in Solosky v. The Queen, [1980] 1 S.C.R. 821, at p. 837, as "(i) a communication between solicitor and client; (ii) which entails the seeking or giving of legal advice; and (iii) which is intended to be confidential by the parties". Though at one time restricted to communications exchanged in the course of litigation, the privilege has been extended to cover any consultation [page 817] for legal advice, whether litigious or not: see Solosky, at p. 834.
(Pritchard v. Ontario (Human Rights Commission), [2004] 1 S.C.R. 809.)
[14] Solicitor-client privilege attaches only to communications between a solicitor and a client and not to actions by the solicitor. For that reason, courts have consistently held that solicitor-client privilege does not apply to documents relating to monies flowing through a solicitor's accounts to or from a client or to documents relating to real estate transactions. In Ontario (Securities Commission) v. Greymac Credit Corp. (1983) 41 O.R. (2d) 328 (Ont. Div. Ct.) the Court stated:
Evidence as to whether a solicitor holds or has paid or received moneys on behalf of a client is evidence of an act or transaction, whereas the privilege applies only to communications. Oral evidence regarding such matters, and the solicitor's books of account and other records pertaining thereto (with advice and communications from the client relating to advice expunged) are not privileged, and the solicitor may be compelled to answer the questions and produce the material.
...
The fact that a client has paid to, received from, or left with his solicitor a sum of money involved in a transaction is not a matter to which the client himself could claim the privilege, because it is not a communication at all. It is an act.
Communications Not Actions
Stevens v. Canada (Privy Council) (1998) 161 D.L.R. (4th) 85 (F.C.A.)
B. v. Canada, supra
Real Estate Transactions
R. v. Tysowski (1997) 11 R.P.R. (3d) 165 (Man. Q.B.)
Eastwood & Company v. M.N.R. (1993) 94 D.T.C. 6411
[15] The distinction has not been removed by the Supreme Court of Canada decisions in Lavallee, Rackel & Heintz v. Canada (2002) 216 D.L.R. (4th) 257 and Maranda v. Richer (2003) 232 D.L.R. (4th) 14. In a case that followed those decisions, the Ontario Superior Court of Justice held that transactions in a solicitor's trust account "relate to questions of objective fact, independent of communications between the solicitor and client¼" and therefore do not attract solicitor-client privilege. (R. v. Serfaty, [2004] O.J. No. 1952, at para. 47-54.)
[16] This has been confirmed recently in Minister of National Revenue v. Bindal, a case which dealt with privilege in the context of section 231.7 of the Income Tax Act. At pp.6-7, the Court stated:
Contrary to the respondents' submission, in my view Greymac remains good law notwithstanding Lavallee and Maranda. In Maranda, Justice LeBel, for the majority (Justice Deschamps concurring in the result) held that the substantive rule of privilege cannot rely on the distinction between facts and communication and thus, in that case, defence counsel's fee records were protected. However, he expressly noted, at paragraph 30, that not everything that happens in the solicitor-client relationship falls within the scope of privilege "as has been held in cases where it was found that counsel was not acting in that capacity but simply as a conduit for transfers of funds citing Greymac as authority.
(Minister of National Revenue v. Bindal, 2005 FC 1538.)
[17] On the principles stated above, the Courts have recently affirmed that in the context of a real estate transaction, cheques from a solicitors' account and a statement of adjustments are not subject to solicitor-client privilege. (In the Matter of the Legal Profession Act and Martin K. Wirick, 2005 BCSC 1821; The Minister of National Revenue v. Vlug, 2006 FC 82.)
[18] In summary, the Information and Documents are not subject to solicitor-client privilege whether under subsection 232(1) of the Income Tax Act, or at common law. The Information and Documents are evidence of an "act or transaction", not of a "communication" that attracts solicitor-client privilege, and fall within a class of documents that have not been held to be subject to solicitor-client privilege; nothing in the recent jurisprudence has changed this state of affairs.
ORDER
UPON the application of the Minister of National Revenue (the "Minister") on Monday, February 27, 2006, at the Courthouse located at 701 West Georgia Street, Vancouver, British Columbia;
AND UPON the Court reviewing the materials filed by the Minister and hearing the submissions of counsel for the Minister and counsel for the Respondent;
AND UPON the Court reviewing the information and documents at issue in this proceeding;
AND UPON THE COURT BEING SATISFIED THAT:
1) By notice dated April 14, 2005, the Minister required the Respondent to provide the following information and documents to the Minister under section 231.2 of the Income Tax Act:
A copy of the statement of dispersals in regards to the transfer of the property at 7338 Sheridan Lake Road West, Sheridan Lake, B.C., PID: 005543215 Lillooet Land District. The property was previously owned by the above person [Betty Ann Tronchin] and transferred to Mr. Alan McColman on November 7, 2002.
Please provide a copy (front and back) of the disbursement cheque to Betty Ann Tronchin for the proceeds of the transfer. If the disbursement was not made by cheque or a draft please provide details of the financial institution where the funds were sent to.
(the "Information and Documents")
2) All reasonable steps have been taken by counsel to bring this application to the attention of Betty Ann Tronchin, as per the affidavits submitted to the court on February 27, 2006, by both counsel without their having determined at the time whether or not it was necessary to notify Betty Ann Tronchin, and;
3) the Information and Documents are not protected from disclosure by solicitor-client privilege.
THIS COURT ORDERS THAT:
1. Pursuant to section 231.7 of the Income Tax Act, the Respondent, or the law firm of Brawn Karras & Sanderson, thus, is to comply with the notice issued by the Minister on April 14, 2005, and forthwith, and, in any event not later than 30 days after being served with this Order, provide the Information and Documents to a Canada Revenue Agency officer acting under the authority conferred by the Income Tax Act or other person designated by the Commissioner of Revenue.
2. There be no award as to costs.
(Sgd.) "Michel Shore"
Judge
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-273-06
STYLE OF CAUSE: THE MINISTER OF NATIONAL REVENUE
- and -
JYOTIKA REDDY
PLACE OF HEARING: Vancouver, BC
DATE OF HEARING: February 27, 2006
REASONS FOR ORDER AND ORDER: SHORE J.
DATED: March 2, 2006
APPEARANCES:
Ms. Neva Beckie FOR APPLICANT
Mr. Kent Sanderson FOR RESPONDENT
SOLICITORS OF RECORD:
John H. Sims, Q.C. FOR APPLICANT
Deputy Attorney General of Canada
Vancouver, BC
Brawn Karras & Sanderson FOR RESPONDENT
Vancouver, BC