The danger is that CRA can use end products to reverse engineer legal advice
A recent Federal Court of Appeal decision has done little to assuage the uncertainty as to whether and when legal advice “end product” is subject to solicitor-client privilege.
In BMO Nesbitt Burns Inc. v. Canada (National Revenue), a unanimous panel upheld Federal Court Justice Catherine Kane’s decision denying privilege to an unredacted spreadsheet, known as the Master Summary Pricing Model. NBI had resisted the Canada Revenue Agency’s request for the document claiming the computations in the spreadsheet flowed from legal advice that would be revealed if the entire document were disclosed.
“Because the decision is a little vague, it makes it difficult to determine where the court drew the line between documents that implement legal advice, which may not be privileged, or those which disclose legal advice, which are privileged,” said Scott Bower, the Calgary-based co-head of Bennett Jones LLP’s research and opinions practice. “But it’s a good warning to us all that when a client is implementing legal advice, the end product – if not privileged – can be used to reverse engineer that advice.”
The case turned on the lower court’s determination that BMO’s “vague but carefully worded assertions” did not establish that the Model communicated legal advice.
“Moreover, we do not accept the NBI’s concern (that) the need to expose privileged information to fully respond to the Minister’s application was insurmountable,” the FCA stated. “NBI attempts before this Court to hide behind the same vagueness about which the Federal Court expressed concern.”
The upshot was that NBI had not met its burden of demonstrating that the unredacted spreadsheet would reveal the privileged legal advice.
According to Bower, however, that was not necessarily the case.
“Here, NBI was calculating amounts it had taken as reserves and apparently based those amounts on legal opinions, creating a tough situation where the lawyer’s assessment of probabilities is built into the calculations. It’s quite possible, then, that CRA could have reverse-engineered the legal opinions. So is the spreadsheet implementing the advice, or disclosing it, or both?”
Bower adds that the court’s criticism of NBI’s vagueness was not necessarily justified.
“The dilemma in claiming privilege is that you often have to give up some of it in order to succeed on the claim, so it’s difficult to draw the line on how much information to give out.”
Bower posits the case of a criminal proceeding in which the accused pleads to charges after discussing with their lawyer.
“The plea pretty well tells us what the legal advice was, but that doesn’t make the plea itself privileged. So, it’s always difficult to describe where the line is.”
Yet Justice Kane’s reasons provide a helpful overview of the law of privilege as it relates to the “continuum of communications” to which privilege applies.
Kane stated that privilege did indeed have a broad scope, but it did not necessarily cover all “end products” of legal advice. These were not protected “except to the extent that (they) communicated the very legal advice given by counsel.”
The test for determining the parameters of the protection was whether disclosure of an end product would “undercut” the ability of clients and lawyers to “freely and candidly exchange information and advice” in a way that allowed clients to know and act on their rights and obligations. The onus of demonstrating that this test had been satisfied lay with the party claiming privilege.
