Canada (National Revenue) v Revcon Oilfield Constructors Incorporated, a judgment of the Federal Court
released on April 23, 2015, discusses solicitor-client privilege during tax planning. The decision is the
result of a summary application made by Canada Revenue Agency (“CRA”) through the Minister of
National Revenue, after Revcon Oilfield Constructors Incorporated (“Revcon”) failed to produce material
to the CRA in connection with a reorganization that it undertook in 2011. CRA requested the material pursuant to section 231.7 of the Income Tax Act (ITA), though Revcon asserted solicitor-client privilege
over the material and refused to provide it.
The ITA, at s. 231.7, defines “solicitor-client privilege” as “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 purposes of this section an accounting record of a lawyer,
including any supporting voucher or cheque, shall be deemed not to be such a communication.”
The materials in dispute fell into four categories:
- Items that would identify Law Firm X, an undisclosed law firm which was retained by the
Respondent’s counsel for the purposes of the restructuring transactions being audited [the Law
Firm X claim]. - Items which include “shorthand tax law language used by Law Firm X that describes the
Transactions in a manner that could potentially be prejudicial to the Respondent’s interests” [the
Nomenclature claim]. - Items which include Law Firm X’s opinion respecting the transactions or the work product of Law
Firm X’s legal retainer [the Structuring claim]. - Items which were communications for the purpose of obtaining legal advice or assistance [the
Legal Advice claim].
The Court rejected the Law Firm X claim and the Nomenclature claim. The judge concluded, in line with
well-established principles of solicitor-client privilege, that only documents containing legal advice were
privileged. Charities and not-for-profits should be reminded that although CRA cannot view documents
subject to legal privilege, legal privilege can be waived if the charity or not-for-profit is not careful when
sharing communications, such as sharing legal opinions with third-parties. If an auditor requests a
document that a charity or not-for-profit suspects is privileged, the organisation should place the document
in a sealed package and retain the package until a judge provides an order about its status.