CRA requirements for information – new developments

In the Summer 2010 Benchers’ Bulletin, we alerted lawyers to their professional obligations if they receive a request for information from the Canada Revenue Agency (CRA). New developments have arisen from a recent decision in the Quebec Superior Court.

In Chambre des Notaires du Quebec v. Canada (Procureur Général) [2010] CRL 136, the court declared that ss. 231.2 and 231.7 of the Income Tax Act (the sections that authorize the CRA to issue requirements for information, and to seek a compliance order if the documents are not produced pursuant to the requirement) were unconstitutional, insofar as they relate to demands made upon lawyers for information from client files. The Chambre des Notaires had argued that a process that allows the CRA to seize documents with no possibility of informing the affected client, and to require a lawyer to demonstrate that solicitor-client privilege applies before the documents can be afforded any protection, is unconstitutional. The court concluded that, in light of the Supreme Court’s decision in Lavallee, Rackel & Heintz v. Canada (Attorney General), a legislative regime that does not allow a client, who is the owner of the privilege, to know directly that the privilege was threatened and thus to ensure the protection of his or her rights, was not reasonable from a constitutional point of view. Sections 231.2 and 231.7 do not directly permit the client to know that privilege is threatened. Further, the court held that it was problematic that s. 231.7 required the application for a compliance order to be directed only to the person on whom the demand was made (the lawyer) and not the client as well.

The Law Society has written to the Department of Justice seeking confirmation that, in light of this case, CRA will cease issuing such demands on lawyers.

If you receive a demand or a notice of requirement to produce information pursuant to s. 231.2, or an application naming a lawyer as a party pursuant to an application for an order under s. 231.7 of the Act, contact Barbara Buchanan, Practice Advisor (604-697-5816) or Michael Lucas, Manager, Policy & Legal Services (604-443-5777).