Privilege: A Primer. Cathie Brayley Partner, Tax [email protected]

Transcription

1 Privilege: A Primer Cathie Brayley Partner, Tax [email protected]

2 Agenda Context Overview of the Basics Case Studies Strategies to Preserve Privilege 2

3 Context Tax Audit Broad legislative options Production of financial records of taxpayer Requirement Compliance order CRA s position Tax Court of Canada generally supportive 3

4 Context Exclusion (para 231.7(1)(b)) documents that are subject to solicitor client privilege ss. 232(1) 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 that for the purpose of this section, an accounting record of a lawyer, including any supporting voucher or cheque, shall be deemed not to be such a communication. 4

5 Context Disclosure requested by CRA where privilege claimed Title of Document Date of the Document or other Communication Name and Title of the Author Name(s) of persons to whom the document is addressed and the person who have been carbon copied Whether copies have been provided to anyone else Type of document Whether there are any attachments and the particulars of the document, as detailed above 5

6 Context CRA Policy (2010) [i]f a document or other communication has been so widely distributed that it is no longer confidential, privilege will be lost. Documents that have been disclosed to someone other than the lawyer and client are not privileged, even if they have been provided to the lawyer for the purposes of obtaining legal advice. 6

7 Privilege The Basics Solicitor-client privilege Communication between solicitor and person Entails the giving of legal advice Intends to be confidential Solosky v Queen [1980] 1 S.C.R. 821 British Columbia (Securities Commission) v C.W.M BCCA 244 7

8 Litigation privilege Ends on termination of the litigation Privilege vs Confidentiality Client s right Privilege The Basics Descoteaux v. Mierzwinski, [1982] 1 S.C.R. 860 Waiver Intentional > Express intention not to waive privilege > Provision to external auditors implies intention not to waive Not inadvertent 8

9 Privilege The Basics Susan Hosiery Ltd. v. MNR [1969] 2 Ex. C.R. 27 (Can Ex.Ct) Company s auditor in communication with lawyer as representative of company Court: Communications between a client s accountant and lawyer are privileged where the accountant was hired for the purpose of placing a factual situation or problem before a lawyer in the context of providing legal advice 9

10 Privilege The Basics Susan Hosiery Ltd. President Jackett confirmed law: All communication, verbal or written of a confidential character, between a client and a legal advisor directly related to the seeking, formulating or giving of legal advice or legal assistance (including the legal advisor s working papers directly related thereto) are privileged All papers and materials created or obtained for the lawyer s brief for litigation whether existing or contemplated are privileged 10

11 Privilege The Basics MNR v Welton Parent Inc., 2006 DTC 6093 (FCTD) Audit of employers who made contributions to offshore health and welfare trusts Lawyers to employers engaged Welton Parent to prepare a valuation Expectation that information provided to Welton Parent would be privileged and would be kept in strictest confidence and disclosed to no one 11

12 Privilege The Basics MNR v Welton Parent Inc. Welton Parent never communicated with anyone other than lawyers Issue: are names of employers subject to privilege? Concern sought legal advice from lawyers but also nature and substance of legal advice given with respect to plan 12

13 Privilege The Basics Lawyers testified: MNR v Welton Parent Inc. names of employers given for limited purpose to establish and/or implement the plan No authority from clients to waive privilege beyond limited purpose No authority from them or on behalf of clients to give authority to Welton Parent Court concluded that names subject to privilege 13

14 Privilege The Basics MIL (Investments) SA v. Queen, 2006 D.T.C (TCC) Non-resident corporation based in Luxembourg Assessed $425,853,942 from disposition of shares of capital stock Taxpayer voluntarily provided information regarding validity of trust 14

15 Privilege The Basics MIL (Investments) SA v. Queen Discovery refused to answer questions regarding corporate directors in Luxembourg, details of use of proceeds from disposition of shares Motion for order compelling answers of questions and disclosure of planning memo Court: Disclosure of planning memo properly withheld on basis that solicitor client privilege had not been waived 15

16 Privilege The Basics Martin Visser v. MNR, 89 DTC 5172 (SC PEI, TD) Seized documents from Visser s solicitor Search warrant Visser made voluntary disclosure concerning income earned in Trinidad Solicitor prepared voluntary disclosure Waiver of privilege by virtue of voluntary disclosure 16

17 Privilege The Basics Imperial Tobacco Canada Ltd. v. Queen, 2013 DTC 1103 (TCC) Internal communication between employees Discuss or disseminate confidential legal advice provided by counsel Internal communication that does not constitute passing on or confidential legal advice not privileged even if copy is sent to lawyer > Situation where employee identified issues in transaction but Court noted no reference to legal advice If lawyer marks document or makes note, then part of working paper of lawyer and marked paper is privileged 17

18 Privilege The Basics Imperial Tobacco Canada Ltd. v. Queen Was privilege waived when solicitor-client communications shared by employees of company, its affiliates or counsel? Affiliates need to confirm common interest here parent and subsidiaries working towards same economic and commercial goals Extend to sharing with counsel 18

19 Privilege The Basics Imperial Tobacco Canada Ltd. v. Queen Was privilege waived when documents sent to accounting firm? Australian firm (PwC) engaged by one of parties > Copied on s Considered nature of function that third party retained to perform essential to existence or operation of client-solicitor relationship if so, solicitor client privilege No privilege here function not integral to solicitorclient relationship Concluded aware of disclosure, not inadvertent 19

20 Privilege The Basics Imperial Tobacco Canada Ltd. v. Queen Was communication between taxpayer and counsel privileged legal advice or non-privileged business advice? Only privileged if provided to lawyer in context of practice of law 20

21 Privilege The Basics Imperial Tobacco Canada Ltd. v. Queen Also: Metadata information as to author, when created and history of changes > Crown 120 days to identify documents for which metadata required Electronic documents that have been deleted and not recovered or restored > Further discussion on terms to search data base 21

22 Privilege The Basics M.N.R. v Thornton, 2013 D.T.C (FC) Audit of income fund reorganization Requirement to auditor advising documents to be produced CRA applied for compliance order Bell Secretary and general counsel of Fund Administrator but not at time Accountant but never acted for fund as accountant > Fund had own CFO 22

23 Privilege The Basics M.N.R. v Thornton Structure and objectives of reorganization, belief as to legal issues Description of transaction steps and tax consequences evidence that B never acted as accountant Undated memo, administrator asserted privilege, disclosure inadvertent 23

24 Marking of documents M.N.R. v Thornton Privileged and Confidential The writer has been retained by Counsel to act on its behalf for the purposes of supporting legal advice in this matter. Prepared under expectation of Solicitor-Client Privilege 24

25 Unintentional waiver M.N.R. v Thornton Documents inadvertently disclosed to auditor in circumstances where administrator swiftly asserted privilege on discovering disclosure 25

26 THOMPSON v MNR, 2013 D.T.C (FCA) CRA sought compliance order for documents relating to lawyer s income and expense Lawyer asserted privilege over AR listings -- client s names and amounts owing FC allowed application for compliance order FCA judge should have addressed issue of privilege before making order SCC heard December 4,

27 Case Studies Case Study #1 Communication between lawyer and client - initial - even if not retained 27

28 Case Studies Case Study #2 Communication by employees with VP Legal/General Counsel - Legal - Non-legal/Executive Functions Crown Zellerbach Canada Ltd. V. Canada (Deputy AG), [1982] CTC 118 (BCSC) 28

29 Case Studies Case Study #3 Communication by and with director of corporate taxpayer who is counsel at law firm 29

30 Case Studies Case Study #4 Information shared among employees of companies in group provided to lawyer Case Study #5 Lawyer s /documents shared among employees of the taxpayer. 30

31 Case Studies Case Study #6 Lawyer s /documents shared with employees of affiliated companies. Case Study #7 Lawyer s /opinion/documents shared with foreign counsel. 31

32 Case Studies Case Study #8 Legal bills provide details of services rendered, issues considered and conclusions reached. Case Study #9 Accountant s bills provide details of services rendered, issues considered and conclusions reached. 32

33 Case Studies Case Study #10 Drafts of lawyer s documents marked up by General Counsel Employees of Taxpayer Accountants 33

34 Case Studies Case Study #11 Drafts of accountant s documents marked up by General Counsel Employees of Taxpayer Lawyer 34

35 Case Studies Copies of any advice or opinions received from outside parties concerning this reorganization Case Study #12 Opinions Prepared by accounting firm, addressed to law firm Provided to external auditor for purposes of preparing audited financials Drafts Memoranda to lawyer prepared by accountant; lawyer s letter suggesting changes 35

36 Case Studies Case Study #13 s To CC BCC Forwarded Re: Line Reply all??? 36

37 Strategies to Preserve Privilege At outset -- is privilege an issue? The team Working group list protocol Role of third parties (accountants, experts) Document Common Interest Privilege 37

38 Strategies to Preserve Privilege Educating the team: Privilege Waiver Action if unintentional waiver 38

39 Strategies to Preserve Privilege Creation of documents - consider details requested by CRA where privilege claimed Title of Document > Legal Advice > Subject to Solicitor and Client Privilege Date of the Document or other Communication Name and Title of the Author Name(s) of persons to whom the document is addressed and the person who have been carbon copied Type of document 39

40 Strategies to Preserve Privilege Marking of documents Privileged and Confidential Warning about disclosure Requirement of consent to disclose Communications Re-line of Phone and memo to file 40

41 Strategies to Preserve Privilege Files Segregate Documents that are privileged > Electronic > Hard Copy > Drafts of memoranda, agreements, planning documents Tax planning memoranda in separate file marked privileged 41

42 Strategies to Preserve Privilege Document retention policy Is there one? > Electronic > Hard Copy Is it adhered to? 42

43 Strategies to Preserve Privilege Third parties retained by lawyer Intention Documentation Course of conduct 43

44 Strategies to Preserve Privilege Legal invoices Accounting record of a lawyer Descriptions: balance need to account for time vs. roadmap 44

45 Strategies to Preserve Privilege Possible Format For services rendered with sufficient detail to support treatment of the expense Description attached to document marked privileged Warning not to include cover letter with accounting records Richard A. Kanan Corporation v. R D.T.C (TCC) 45

46 Strategies to Preserve Privilege Document Record Book Include opinion? Include reporting letter? 46

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