Coopers Park: Solicitor-Client Privilege Does Not Extend to Accountants
On September 20, 2024, the Tax Court of Canada (the “Court”) ordered Coopers Park Real Estate Development Corporation (the “Taxpayer”) to produce documents that the Taxpayer had previously claimed solicitor-client privilege over in its ongoing appeal.[1] The Taxpayer failed to provide adequate evidence to establish solicitor-client privilege should apply.[2]
This decision is a valuable reminder that privilege extends only to communications essential to the solicitor-client relationship, not to independent tax advice from accounting firms. Legal retainers should also provide for adequate and precise scope in respect of all professionals involved to help support privilege claims.
Background and Decision
The Taxpayer appealed the Minister’s application of the general anti-avoidance rule (the “GAAR”) to deny over $68 million in tax losses, expenditures, and credits claimed in its 2007 through 2009 tax years.[3] After discoveries, the Minister brought a motion to challenge privilege claims. The Court ordered the Taxpayer to produce certain documents that it previously claimed privilege over.
The privilege dispute emerged from an engagement letter between the “Concord Parties” (a group of affiliate entities that the Taxpayer subsequently became a part of), KPMG LLP, and two sets of counsel: Moskowitz & Meredith LLP (“Moskowitz Law”) and Farris Vaughan Wills & Murphy (“Farris Law”) (the “Engagement Letter”). The Court found that pursuant to the Engagement Letter:
- Moskowitz Law was to provide legal advice to the Concord Parties in relation to certain tax matters;
- KPMG LLP was to act as agent to Moskowitz Law on behalf of the Concord Parties and was to provide Moskowitz Law with factual and other information; and
- Farris Law (whose role is “less clear”, per the Court) would also act as agent for the Concord Parties to Moskowitz Law, while also providing some legal advice (of unclear scope) to the Concord Parties.
Solicitor-Client Privilege - Extension to Agents
The Court considered privilege asserted over a number of communications between the Concord Parties, KPMG LLP, and Farris Law. The Court found that the Concord Parties and Moskowitz Law had a solicitor-client relationship, that KPMG LLP was an agent for the Concord Parties vis a vis Moskowitz Law under the Engagement Letter, but that the scope of Farris Law’s engagement for legal services was unclear.[4] Most of the documents at issue were communications between KPMG LLP and Farris Law.
The Court found that communications between KPMG LLP and Farris Law were not privileged because the Engagement Letter did not identify KPMG LLP as an agent for the Concord Parties vis a vis Farris Law.[5] As such, these communications occurred outside the scope of the solicitor-client relationship established in the Engagement Letter. A similar conclusion was reached in instances where KPMG LLP provided independent legal advice.[6]
Evidentiary Burden of Solicitor-Client Privilege
The decision also lays out the evidentiary burden on a privilege claim. When asserting solicitor-client privilege, the party making the claim has the burden of proving with evidence that privilege applies. Where a party fails to lead evidence in support of a claim for privilege, the court must base their decision solely on the contents of the document in question. If on the face of the document no privilege appears to exist, the document is not privileged.[7]
The Taxpayer chose not to provide any affidavit evidence to support its assertions that solicitor-client privilege should apply to communications between itself, Farris Law, and KPMG LLP. The Taxpayer attempted to rely on a chart and letters between counsel (all created in the course of the litigation) to support the claim, but the Court held that these documents were insufficient.[8]
The Court assessed the Taxpayer’s privilege claim on the contents of the documents. Some documents lacked any indication at all of who the author and recipient were, while others showed no clear connection to legal advice. The Court denied privilege for these documents and stated that the Taxpayer’s failure to provide affidavit evidence was fatal to their claim.[9]
Key Takeaways
As evidenced in Coopers Park, taxpayers should be mindful of the following:
- Solicitor-client privilege does not extend to non-lawyers, such as accountants, and does not capture third parties who are not required for the purposes of the solicitor-client relationship.
- Retainer letters with law firms should be carefully drafted to ensure that anyone involved in tax planning is included within the scope of the solicitor-client relationship.
- In the event the CRA challenges a privilege claim, the taxpayer must affirmatively lead affidavit evidence or other sworn evidence to justify the privilege claim. Arguments and charts prepared by litigation counsel will not suffice.
[1]Coopers Park Real Estate Development Corporation v His Majesty the King, 2024 TCC 122 [Coopers Park].
[2]Coopers Park, at para 2.
[3]Coopers Park, at para 3.
[4]Coopers Park, at para 67-69.
[5]Coopers Park, at para 71-72.
[6]Coopers Park, at para 85.
[7]Coopers Park, at para 55 citing Imperial Tobacco Canada Limited v HMTQ, 2013 TCC 144, at para 52.
[8]Coopers Park, at paras 56-58.
[9]Coopers Park, at para 59.