Gaudreau v. The King, 2023 CCI 115

The taxpayer was assessed under s. 84(2) regarding his sale of his interest in an insurance company (RBP) that was structured as a hybrid sale transaction. The taxpayer took the position that he was not required to produce on discovery a six-page memo that had been prepared by the accounting firm for the purchaser and which had been shared with him (as vendor) and his advisors, on the grounds that it contained nothing but a description of transactions of which the Minister was already aware and matters of “subjective opinion” and that it contained no mention of or discussion of s. 84(2). In finding that the memo should be produced, St-Hillaire J noted the absence of accountant-client privilege, and stated (at paras. 61-62, TaxInterpretations translation):

[T[he Memorandum is relevant to the issues in this case. … [A] document is relevant to the issues in dispute when it contains information that may, directly or indirectly, enable the party requesting disclosure either to plead its own case or to prejudice that of its adversary, or to initiate an investigation. The … Memorandum, deals in large part with the transactions at issue; it followed the agreement concerning the sale of RBP, which contained a clause on [minimization of] taxation and … the parties followed what was provided for in the Memorandum. It is also worth recalling the jurisprudential principles according to which the preferred approach to the interpretation of subsection 84(2) involves an examination of the circumstances surrounding the transactions in question.

The taxpayer was assessed under s. 84(2) regarding his sale of his interest in an insurance company (RBP) that was structured as a hybrid sale transaction. The taxpayer took the position that he was not required to produce on discovery a six-page memo that had been prepared by the accounting firm for the purchaser and which had been shared with him (as vendor) and his advisors, on the grounds that it contained nothing but a description of transactions of which the Minister was already aware and matters of “subjective opinion” and that it contained no mention of or discussion of s. 84(2). Before finding that the memo was potentially relevant and should be produced, St-Hillaire J noted that there was no accountant-client privilege, stating (at para. 59, TaxInterpretations translation):

According to the appellant, if such advice were to be systematically disclosed, the quality of communication between accountants and their clients, and compliance with the Act would be reduced … . The courts have confirmed that there is no accountant-client privilege regarding tax advice given by a professional accountant (see for example Tower v MNR, 2003 FCA 307). …I note that the appellant did not make any submissions regarding privilege based on the circumstances of each case in respect of which the Supreme Court of Canada has held that the principles enunciated by Professor Wigmore provide the general framework for analysis for determining whether or not a communication is privileged (see Tower, supra at paras. 39 et seq.). In these circumstances, I cannot conclude that the Memorandum communication is privileged on the basis of case-by-case privilege, and as there is no accountant-client, this is not a ground for refusing disclosure even if, in certain cases, the disclosure of tax advice could according to the appellant, discourage accountants from providing advice to their clients.