Responding to requests for information from Canada Revenue Agency

A recent decision of the Federal Court of Canada addresses the process for dealing with a requirement to provide information issued by the Canada Revenue Agency.

In MNR v. Cornfield, 2007 FC 436, the court considered an application by the Canada Revenue Agency (CRA) for a compliance order requiring a BC lawyer to produce certain client accounting documents that the CRA had sought from the lawyer pursuant to a requirement for information issued under s. 289(1) of the Excise Tax Act.

The lawyer was unable to contact his client and, therefore, could not obtain instructions about whether the client wished to claim privilege. As a result, he determined he was bound by his professional obligations, as set out in Chapter 5, Ruling 14 of the Professional Conduct Handbook, which require him to claim privilege in the absence of instructions to the contrary.

The Law Society appeared as an intervener in the application for the compliance order to raise issues relating to privilege and notice.

The judge ruled that accounting records are not protected by solicitor-client privilege and, consequently, that the obligations imposed by the Professional Conduct Handbook did not apply, as there was nothing for the client to waive.

The decision acknowledged that only the client, and not the lawyer, has the right to determine whether to claim privilege, but said that where the law is clear that the information is not privileged, “such a right simply does not arise.”

The ruling also rejected the Law Society’s contention that Federal Court rule 303(1) required the CRA to name a lawyer’s client as a respondent when it applies for a compliance order, as the client is a person directly affected by the order and may wish to argue that the documents sought are privileged. The judge held that rule 303 does not apply because the procedure for compliance orders is set out in the Excise Tax Act and only requires notice to the party from whom the information is sought.

filesThe Law Society is concerned that the decision does not adequately protect solicitor-client privilege and has filed an appeal.

While the appeal is pending, the Law Society recommends that lawyers faced with a demand to produce documents under s. 289(1) of the Excise Tax Act (or s. 231.2 of the Income Tax Act) consider Chapter 5, Ruling 14 of the Professional Conduct Handbook before responding to the CRA.

The privilege, if any, attaching to the documents sought is that of the client and not the lawyer and the Law Society, therefore, recommends that lawyers obtain the instructions of the client (or former client).

The Law Society strongly encourages lawyers to advise their clients to obtain independent legal advice as to whether the documents sought by the CRA are, or may be, privileged.

It may also be prudent for the lawyer to obtain independent advice on this point as the CRA request for information may place the lawyer in a conflict of interest with the client.

After obtaining advice, the following options exist:

  1. If the lawyer determines the documents are, or may be, privileged, then the lawyer must assert a claim of privilege unless he or she receives instructions from the client to waive privilege. If the client cannot be found, the lawyer will have to claim privilege over the documents.
  2. If the client does not wish to assert a claim of privilege, then the documents may be produced to the CRA.
  3. If the lawyer is unable to obtain instructions from the client, and if the lawyer has determined that the documents are not privileged, then, following the Cornfield decision, it appears the documents must be given to the CRA. The Law Society is, however, concerned that this result means the client may never be aware of the demand for production of documents over which the client may wish to consider making, and arguing, a claim of privilege. If, for example, the lawyer erred in his or her determination, privilege would be lost without the client ever having had an opportunity to argue the issue.
  4. If the lawyer considers that the documents are of the same nature as those at issue in Cornfield, but the client nevertheless instructs the lawyer to claim privilege, the lawyer should contact the Law Society for guidance.

Lawyers with questions about their professional obligations relating to a requirement to provide information should contact Michael Lucas, Staff Lawyer, Policy and Legal Services, or Kensi Gounden, Manager, Standards and Professional Development, at the Law Society’s office.



Chapter 5, Rule 14 of the Professional Conduct Handbook states:

Disclosure required by law

14. A lawyer who is required, under the Criminal Code, the Income Tax Act or any other federal or provincial legislation, to produce or surrender a document or provide information which is or may be privileged shall, unless the client waives the privilege, claim a solicitor-client privilege in respect of the document.