A new budget bill that would modify the Income Tax Act has lawyers warning that the legislation, if passed, would violate the Canadian Charter of Rights and Freedoms and break lawyer-client privilege by requiring lawyers to identify clients to the Canada Revenue Agency (CRA).
“This disclosure would violate the client’s reasonable expectation of confidentiality in connection with their dealings with lawyers,” the letter said.
“The lawyer’s obligation to file a return may conflict with the duty of confidentiality owed to the client, as well as make it difficult to give unbiased advice on the scope of the client’s privilege,” added the CBA, a national association of over 37,000 lawyers, Quebec notaries, law students, and law professors.
In addition to lawyer-client privilege and conflict-of-interest concerns, the association said the proposed reporting requirements for client-specific trust accounts would impose costly and unreasonable burdens on lawyers.
It gave an example involving real estate lawyers that it said would be especially problematic.
‘Serious Concerns’
A charter statement provided by Justice Canada for Bill C-32 says the requirement to provide information about trusts potentially relates to section 8 of the charter, and that the justice minister has reviewed the relevant provisions and “has not identified any potential effects that could constitute an unreasonable interference with privacy as protected by section 8 of the Charter.”The Federation of Law Societies of Canada (FLSC), the national association of the 14 law societies at the provincial and territorial level, stated , however, that “the trust reporting provisions of Bill C-32 that target trust accounts of legal professionals are unconstitutional and would violate Section 8 of the Charter.”
It also states that the minister’s conclusion is contrary to a 2016 Supreme Court decision that said the protection afforded to lawyer-client privilege “in the context of a s. 8 analysis is invariably high” regardless of whether the seizure of information occurred in a criminal or an administrative context.
The CBA said it had “serious concerns” about how Bill C-32 would amend the Income Tax Act and that it did not believe the amendments would “withstand constitutional scrutiny.”
Bill Amendment Recommendation
“Solicitor-client privilege is a quasi-constitutional right that has been repeatedly affirmed by the Supreme Court of Canada as fundamental to the rule of law, access to justice and the proper administration of justice,” wrote the CBA.“Protecting full and frank communication between lawyers and their clients promotes the public interest in the observance of law, and respect for the administration of justice.”
The FLSC asked to appear before the Senate national finance committee to “address the serious problems with the trust reporting requirements under Bill C-32.”
Meanwhile, the CBA asked to appear before the House finance committee to discuss the issues it raised and its recommendation to amend subsection 150(1.2)(c) of the bill to specifically exempt trust accounts maintained by lawyers and notaries, which would include trust accounts maintained for clients.
The ruling determined that lawyers’ billings were shielded from auditors.
“Professional secrecy is a principle of fundamental justice,” wrote the court. “Professional secrecy must thus remain as close to absolute as possible and the courts must adopt stringent standards to protect it.”