Canadian Lawyer

58 N o v e m b e r / D e c e m b e r 2 0 1 4 w w w . C A N A D I A N L a w y e r m a g . c o m by jiM MiddleMiSS BaCk pagE O P I N I O N Legal holy sacrament faces SCC scrutiny T he Supreme Court of Canada is hear- ing two cases touching on solicitor- client privilege in December, sug- gesting it has something important to say about the legal profession's holiest sacrament. The factums suggest a show- down over the extent to which solicitor-client privi- lege can be trumped by court orders or legislation. Like many cases before the Supreme Court, the facts are convoluted. Minister of National Revenue v. Duncan Thompson deals with lawyers' accounts receiv- ables under the Income Tax Act, which exempts lawyers "accounting records" from solicitor-client privilege. Duncan Thompson is an Alta.-based sole practitioner who owes taxes. His practice covers child-support litigation, estate planning, and criminal law. He claimed privilege over the names of his clients' accounts. The Federal Court disagreed, ordering him to disclose, but the Federal Court of Appeal varied the order, saying the Federal Court was obliged to address the solicitor- client privilege issue and Thompson's clients were entitled to weigh in on that argument. Thompson's counsel, McCarthy Tétrault LLP, argues solicitor-client privilege is a "fundamental civil and legal right" that should be "jealously guarded." If MNR knows who owes Thompson money, it can seek garnishing orders exposing his clients to MNR's withholding, seizure, and assess- ment powers. That has four "prejudicial consequences:" • Clients can't settle their accounts with Thompson, for a lesser amount; • The government could set off amounts payable to the client by the Crown, such as CPP or OAS benefits, or GST refunds — money Thompson could not garnish or seize as a creditor; • The Crown could seize and sell clients' assets; and, • It would trigger interest payments under the ITA. Counsel for the minister argues the integrity of Canada's tax collection regime is at stake and "if the respondent's position is accepted, then lawyers are placed in a different position vis a vis their tax liabilities than all other taxpayers. Only lawyers will be able to claim that crucial financial information [accounting records] are off limits to the Minister." The second case, Laiken v. Carey, examines how lawyers should handle client trust funds in the face of an unusual Mareva order. Peter Carey, an Ontario lawyer, was hired by Peter Sabourin to sue Judith Laiken over a deficit in her margin account. She counterclaimed alleging Sabourin defrauded her and obtained a Mareva order, which was unusual in that it didn't require Sabourin to disclose his assets. After the Mareva order was issued, Sabourin sent Carey a $500,000 cheque with no instructions. Carey could not reach Sabourin, so he deposited the cheque into his trust account. Sabourin later told Carey he wanted the money used to pay other creditors. Carey said the Mareva order prevented that and suggested using the funds to settle with Laiken. Sabourin told the other group of creditors that he had $500,000 in his lawyer's account, but couldn't pay because of the Mareva order. When Carey couldn't settle the case, he concluded that retain- ing the money would improperly shelter the funds from the Mareva order so he returned $440,000, applying the balance to future fees. Sabourin later went out of business and disappeared. Carey was found in contempt for returning the funds and appealed. Carey's lawyers, Torys LLP, argue "Carey was required to hold privileged the existence of the trust funds in his account, and to protect solicitor-client information." "Keeping the funds and maintaining privilege would shel- ter them from execution. The unusual terms of the Mareva Order issued in this case meant that there was no obligation on Sabourin to disclose the nature or location of his assets. When coupled with Law Society Bylaws requiring Carey to deposit Sabourin's funds in his trust account and his fundamental solic- itor-client privilege obligations, the result was that if the money remained in Carey's trust account, it would not be available for the execution that the Mareva Order was intended to enable." So the only option was to return it to Sabourin. Laiken's counsel, Brauti orning Zibarras LLP, argue "so- licitor-client privilege is not a defence to the breach of a Mareva injunction because the privilege is designed to further the admin- istration of justice, not frustrate it." ey maintain Carey had three duties: to the rule of law as an officer of the court; to comply with the Mareva order; and, to keep the existence of the funds in his trust account confiden- tial. "However, Carey could only satisfy the first two duties by keeping the funds in his trust account . . . e only option not available to him was the one that Carey chose." It will be interesting to see where the court draws the privilege line. ere are strong arguments on both sides. One thing about the cases is clear though — legal ethics professors at law schools have just been handed fresh ammunition for a challenging exam question, but only the top court has the correct answers. Jim Middlemiss is a principal at WebNewsManagement.com. You can follow him on Twitter @JimMiddlemiss. sArA tyson

• Cover