Date: 20060126
Docket: T-2238-05
Citation: 2006 FC 86
BETWEEN:
THE MINISTER OF NATIONAL REVENUE
Applicant
and
GARY VLUG
Respondent
BACKGROUND
[1] The Minister has made an application under subsection 289.1(1) of the Excise Tax Act (AETA@) for an order compelling Gary Vlug, a lawyer, to provide (a) a copy of the Statement of Adjustments between a purchaser and Vlug=s client Afghan Enterprises Inc. (AAfghan@) related to the sale of a store, and, (b) a copy of the front and back of any and all cheques relating to that store sale transaction.
[2] The Respondent Vlug acted for Afghan in this particular transaction. There is a suggestion that he no longer has a solicitor-client relationship but his obligation to protect his former client=s privilege remains. He has taken no position in this matter other than to advise the Court and the Applicant that there may be an issue of solicitor-client privilege, that he has no instructions from Afghan, and that he awaits the Court=s order.
[3] The Applicant takes the position that it has served Afghan at its last known addresses although there is no acknowledgement of service from the company. The Applicant also takes the position that, having served Vlug, he has an obligation to the Applicant to notify the company. It also takes the position that the type of documents required to be produced are not covered by solicitor-client privilege.
[4] The Law Society of British Columbia sought and obtained leave to intervene to assist the Court, for which the Court is grateful. The Law Society did so because Vlug was in a difficult position, caught between his own interests as a respondent and those of his client. The Law Society=s interest, in particular, was to alert the Court to the need to determine if the client had received sufficient notification from the Minister, and to alert the Court to the existence of litigation in the Cour supérieure du Québec challenging the validity of a similar provision in the Income Tax Act.
[5] The Court granted the Law Society full intervention status as if it was a party, given the limitations under which Vlug suffered.
[6] At the conclusion of the hearing, Vlug was ordered to deliver up to the Court copies of the requested documents in a sealed envelope. I have now examined those documents.
ANALYSIS
[7] As to the first issue of proper notification of Afghan, the company was served with the Minster=s Application Record by courier delivered to the corporate principal=s last known address on file with the Customs and Revenue Agency (ACRA@). The company was also served with the same documents by courier to two addresses registered at the BC Corporate and Personal Property Registries as the corporate offices of Afghan.
[8] I am satisfied that this is sufficient service under the circumstances and is acceptable substituted service for purposes of Rule 130.
[9] As to the Minister=s contention that Vlug had an obligation owed to the Minister to notify the company, I reject that proposition. Vlug has his first and primary obligation to his client and cannot owe any such duty to a party adverse in interest to his client. The Minister=s argument would erode the nature of the solicitor-client relationship. Any legitimate limitation on this aspect of the solicitor-client relationship is covered by ETA subsection 293(15) under which the solicitor is merely required to advise the Minister of the client=s last known address. (I have assumed, without deciding, that this subsection is valid).
[10] The documents at issue are not covered by a litigation privilege. Therefore they must be considered under the principles of the solicitor-client relationship. Two quotes from the Report of the Special Committee of the Canadian Bar Association B Ontario, (1985), referred to in R v. B (1995) B.C.J. No. 41 (S.C.) are germane:
B AIn order for the privilege to apply, a further four conditions must be established. These conditions may be put as follows:
...
4. the communication must be directly related to the seeking, formulating as giving of legal advice.@
B A... evidence as to what monies a solicitor holds, has received, or has paid on behalf of a client is not privileged because the handling of a client=s funds is considered to be an act, not a communication.@
[11] I have also examined the documents in question. The Statement of Adjustment is a communication not only between the solicitor and the client but also to the other party and its solicitor. As such, and without some other evidence, it cannot be considered as a privileged communication. Likewise, the cheques issued are principally an act, not a communication. Again without some other evidence, to the extent that a cheque is a communication to the bank to pay some other person, it does not have the character of a privileged communication. None of the documents are a communication related to obtaining legal advice.
[12] Lastly, the Court appreciates the Law Society bringing to its attention the existence of the Quebec litigation brought by La chambre des notaires du Québec and the stay of a section 231.2 Income Tax Act proceeding (similar to ETA section 289.1 proceedings) issued by Federal Court Prothonotary Morneau.
[13] With the greatest respect, I am not prepared to issue such a stay on the basis of some pending litigation in another superior court. I would need more evidence and a proper motion before contemplating such action.
[14] Therefore the Applicant=s motion will be granted without costs.
(Sgd.) AMichael L. Phelan@
Judge
FEDERAL COURT
NAME OF COUNSEL AND SOLICITORS OF RECORD
STYLE OF CAUSE: Minister of National Revenue v. Gary Vlug
PLACE OF HEARING: Vancouver, B.C.
DATE OF HEARING: January 23, 2006
APPEARANCES:
| Mr. Jason Levine
|
FOR THE APPLICANT(S) |
| Mr. Gary Vlug
|
FOR THE RESPONDENT(S) |
| Mr. Richard C.C. Peck, Q.C.
|
FOR THE INTERVENOR |
| John H. Sims, Q.C. Deputy Attorney General of Canada Department of Justice Vancouver Regional Office |
FOR THE APPLICANT(S) |
| Vancouver, B.C.
|
FOR THE RESPONDENT(S) |
| Peck and Company Vancouver, B.C.
|
FOR THE INTERVENOR |