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End of the Line: Federal Court of Appeal finds “End Product” of Legal Advice Not Subject to Privilege

In BMO Nesbitt Burns Inc. v Canada (National Revenue)[1], the Federal Court of Appeal (“FCA”) dismissed BMO Nesbitt Burns Inc.’s (“NBI”) appeal, finding that redacted pricing information contained in a spreadsheet was not subject to solicitor-client privilege. This decision is a reminder of the broad powers in the Income Tax Act (“Act”) to request documents and a caution when relying on solicitor-client privilege.

Key takeaways:

  • End of the Line: Output reflecting the operational implementation of legal advice (referred to as an “end product”) will only be protected by privilege if it communicates the legal advice given by counsel. Any internal “end products” communicating legal advice should be documented carefully to protect privilege.
  • Clear Identification: When demonstrating whether information is privileged, a party should (to the extent possible) clearly identify how the privileged material, if produced, would disclose the actual legal advice provided. Parties should avoid hiding behind the argument of privilege.
  • Taxpayers Cannot Run-out the Clock: Notices of reassessment do not preclude legitimate document requests from the Minister.


NBI is a full-service investment firm and indirect wholly owned subsidiary of the Bank of Montreal. As part of its 2016 audit of NBI, the CRA sought to verify whether NBI was in compliance with the Act regarding certain transactions. The CRA issued a Request for Information pursuant to section 231.7(1) of the Act, requesting various documents connected with the transactions. NBI claimed solicitor-client privilege on the spreadsheet, referred to as the Master Summary Pricing Model (“Model”), on the basis that the redacted portions of the Model reflect legal advice provided in two legal opinions in 2012 and 2013. The redacted portion, a column of the spreadsheet, was described as “a set of computations with some associated text” by the Federal Court.

At the Federal Court, Kane J.A. provided an overview of privilege as it pertains to the “continuum of communications” to which privilege applies.[2] In short, while privilege is given a broad scope, not all “end products” will fall on the continuum. An end product is not privileged “except to the extent that [it] communicates the very legal advice given by counsel”.[3] The test to determine the limit of the continuum is whether disclosure of a document would “undercut” the need for lawyers and their clients to “freely and candidly exchange information and advice so that clients can know their true rights and obligations and act upon them”.[4] In reviewing the Model and concomitant legal opinions, Justice Kane found that the Model “does not readily disclose or ‘translate’ the advice provided.”[5]

NBI bore the onus of establishing that the Model was protected by privilege. Justice Kane described the respondents’ evidence as “vague, but carefully worded, assertions” and ultimately insufficient to establish that the Model communicates legal advice. In particular, the Federal Court noted that the Model was amended to add the redacted column while communications with counsel were “underway” (i.e., NBI did not await the outcome of legal advice before amending the Model) and that, when asked to provide further details of the transactions and explain how the Model includes legal advice, responses instead focused on the impact of the disclosure of confidential information to potential business competitors.

Interestingly, NBI also argued that the Model constitutes tax accrual working papers (“TAWPs”), revealing uncertain tax positions or “soft spots”. In BP Canada Energy Company v Canada (National Revenue),[6] the FCA noted that, as an “unwritten rule”, the Minister of National Revenue (“Minister”) cannot routinely request TAWPs. Justice Kane rejected this argument and distinguished BP on the facts. Distinguished from BP, the Model was sought for a specific and identified purpose regarding certain transactions under audit which had not yet been addressed. Therefore, the order to produce the Model does not impose an obligation to self-audit.

Federal Court of Appeal Decision

On appeal, NBI argued that: (1) the Model is protected by solicitor-client privilege; and (2) an order pursuant to subsection 231.7(1) of the Act is inappropriate in the circumstances because such an order (i) must be tied to a tax audit and (ii) amounts to a requirement that NBI conduct a self-audit.

The FCA upheld the Federal Court’s decision. Locke J.A., writing for the FCA, found that it was open to the Federal Court to find NBI’s evidence insufficient. While NBI argued that it was wrongly put in the untenable position of revealing privileged information to establish sufficient evidence, the court was not convinced that NBI could have corrected this insufficiency even if it had referred to privileged information. Justice Locke wrote that this untenable position argument is an attempt “to hide behind the same vagueness about which the Federal Court expressed concern”[7].

NBI’s other arguments also failed. First, NBI argued that the 2016 audit ended with the Minister’s notice of reassessment, and therefore the Minister’s application should not have been granted. The FCA noted that the audit was ongoing when the Model was first requested, and, regardless, a notice of reassessment does not preclude an order pursuant to subsection 231.7(1) of the Act. To find otherwise would reward non-compliance with legitimate document requests. Finally, the FCA found no palpable and overriding error in the Federal Court’s rejection of the submission that ordering production of the Model amounts to a self-audit or reveals NBI’s “soft spots”.

[1] 2023 FCA 43.

[2]Canada (National Revenue) v. BMO Nesbitt Burns Inc., 2022 FC 157.

[3]Canada (Public Safety and Emergency Preparedness) v. Canada (Information Commissioner), 2013 FCA 104 (“Information Commissioner”) at para 31.

[4]Information Commissioner at para 28.

[5] Supra note 2 at para 115.

[6] 2017 FCA 61 (“BP”) at para 83.

[7] Supra note 1 at para 6.

tax Federal Court of Appeal Income Tax Act



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