2014 QCCA 552, 2014 QCCA 552

Unofficial English Translation Canada (Procureur général) c. Chambre des notaires du Québec 2014 QCCA 552 COURT OF APPEAL CANADA PROVINCE OF QUÉBEC MONTRÉAL REGISTRY No. 500-09-021073-101 (500-17-025479-059) DATE: March 21, 2014 CORAM: THE HONOURABLE MARIE-FRANCE BICH J.A. JACQUES A. LÉGER J.A. JACQUES R. FOURNIER J.A.

ATTORNEY GENERAL OF CANADA CANADA REVENUE AGENCY APPELLANTS – respondents CHAMBRE DES NOTAIRES DU QUÉBEC RESPONDENT – petitioner and BARREAU DU QUÉBEC RESPONDENT – intervener JUDGMENT [ 1 ] The appellants are appealing from a September 8, 2010 judgment of the Superior Court, District of Montréal (the Honourable Marc-André Blanchard), that allowed the action and intervention of the respondents, and concluded as follows: THEREFORE, THE COURT: [124] GRANTS the motion of the Chambre des notaires du Québec and the intervention of the Barreau du Québec; [125] DECLARES that, pursuant to

section 52 of the Charter, sections 231.2 and 231.7, as well as the fifth paragraph of section 232(1), of the Income Tax Act are unconstitutional and of no force or effect with respect to notaries and lawyers in the province of Québec, as concerns the documents and information protected by their professional secrecy; [126] DECLARES that the following documents are prima facie protected by the professional secrecy of legal advisers: • notarial acts, en minute or en brevet , unless they are published, in which case only the information published is not protected by professional secrecy; • the repertory of acts en minute and the index to the repertory; • unpublished acts under private signature, including contracts, agreements, by-laws and resolutions; • wills and codicils drawn up or held by notaries for their clients, including wills and codicils that have been revoked or replaced; • offers to purchase, respecting both securities and real estate transactions; • documents executed by notaries and certifying the identity, quality and capacity of a party to

an act; • powers of attorney and mandates; • correspondence and instructions sent to notaries for the purpose of preparing a contract, agreement, transaction or any other written document, as well as documents establishing by whom, when and how a client's instructions concerning a transaction were communicated to the notary; • marriage contracts and other union contracts or separation agreements;

• annexes provided for in

section 48 of the Notarial Act , R.S.Q., c. N-2; • patrimonial inventory, inventories of successions, declarations of heirs, trust agreements and all other documents of a confidential nature prepared by notaries or entrusted to them by their clients; • legal opinions prepared by notaries at the request of their clients or the parties to

an act; • motions and other proceedings prepared by notaries at the request of their clients that have not been filed in court or otherwise made public; • all trust accounting documents of notaries, in which sums of money, valuables and other property received by notaries are entered and recorded, including the cash book, the general ledger, official receipts, passbooks or statements of financial institutions or securities brokers, cheques (front and back) and other payment orders, and registers and other vouchers; • disbursement accounts or statements, and statements of amounts allocated or distributed (adjustment sheets) by notaries at the request of a party to

an act, including the date, the identity of the persons to whom the amounts were remitted, the method of payment and the receipt; • notaries' bills of account; • all drafts of the aforementioned documents; [127] DECLARES that these same documents are prima facie protected by the professional secrecy of legal advisers, regardless of the medium involved, including information technology media such as USB flash drives, removable hard drives, diskettes and CD-ROMs; [128] WITH COSTS. [ 2 ] For the reasons of Bich J.A., with which Léger and Fournier JJ.A. concur, THE COURT: [ 3 ] ALLOWS the appeal for the sole purpose of correcting paragraph 125 of the judgment in first instance and striking paragraphs 126 and 127 from the judgment, so that, henceforward, the conclusions of the judgment read as follows: [125] DECLARES that, pursuant to

section 52 of The Constitution Act, 1982 ,

section 231.2, subsection (1) , and

section 231.7 of the Income Tax Act , as well as the exception provided for in the definition of "solicitor-client privilege" (" privilège des communications entre client et avocat ") in subsection 232(1) of the same Act, are unconstitutional and of no force or effect, the whole with respect to notaries and lawyers in the province of Québec as concerns the documents and information protected by their professional secrecy, where the requirements to provide documents or information governed by these provisions are addressed to them; [126] WITH COSTS . [ 4 ] THE WHOLE , with costs against the appellants, as if the appeal were dismissed.

MARIE-FRANCE BICH J.A. JACQUES A. LÉGER J.A. JACQUES R. FOURNIER J.A. Mtre. Chantal Comtois Mtre. Marc Ribeiro DEPARTMENT OF JUSTICE OF CANADA JOYAL LeBLANC For the appellants Mtre. Raymond Doray Mtre. Loïc Berdnikoff LAVERY, DE BILLY For the respondent Chambre des notaires du Québec Mtre. Giuseppe Battista SHADLEY BATTISTA For the respondent Barreau du Québec

Dates of hearing: October 2 and 3, 2012 REASONS OF BICH J.A. [ 5 ] Can the professional secrecy of notaries and lawyers be a bar to the requirements to provide documents or information scheme provided for in

section 231.2, subsection (1), and

section 231.7 of the Income Tax Act [1] ( I.T.A.)? Do these legislative provisions and those ancillary to them sufficiently protect that professional secrecy, for the purposes of

section 8 of the Canadian Charter of Rights and Freedoms ? These are the delicate issues raised in this appeal. I. Context A. General picture [ 6 ] Given the trial judge's good

summary of the context of the case, I will rely on the following passages from his judgment: [TRANSLATION] [5] The factual backdrop is simple: Many notaries receive requirements to provide information or documents concerning their clients, from officers of the Agency acting under

section 231.2 I.T.A. [6] Below is the requirements mechanism set up by Parliament: • An officer of the Agency, for and on behalf of the Minister, may require any person to provide information or documents within a reasonable time. • Failure to do so may result in the laying of criminal charges in

summary proceedings, which, in the event of a conviction, will give rise to a fine of not less than $1000 and not more than $25 000, or to both the fine and imprisonment for a term not exceeding 12 months. • In addition, on

summary application to a judge, the Minister may, notwithstanding a guilty plea, obtain an order for any access, assistance, information or document sought by him or her. • The order may be made if the judge is satisfied that the right to do so exists under

section 231.2 I.T.A. and that, in particular, solicitor-client privilege, as defined in section 232(1) I.T.A., does not apply. • The judicial application must be made five clear days from the day of service on the person contemplated in the order. • The judge may impose conditions in the order. • Failure to comply with the order can give rise to a conviction for contempt of court, with the sanctions that entails. [7] In almost all of the requirements adduced in evidence, the officers informed the notaries of the possible criminal sanctions—a fine and imprisonment—if they did not comply with the requirement.

Some officers gave the notaries a reasonable time to respond; others gave them only a few days, which is clearly unreasonable. [8] Some notaries complied with the requirement after obtaining their client's authorization; others, after consulting the Chambre, cited the right to professional secrecy and refused to comply. [9] The Chambre believed it had negotiated a modus vivendi with the Agency regarding its dealings with notaries, but instituted its proceeding after realizing that requirements were being sent to its members again. [10] The Chambre requests that the Court: - DECLARE sections 231.2 and 231.7, as well as the fifth paragraph of section 232(1), of the Income Tax Act unconstitutional and of no force or effect with respect to Québec notaries and to documents and information protected by the professional secrecy of notaries and by their duty of discretion and loyalty; - DECLARE that the following documents are prima facie protected by the professional secrecy of legal advisers and that, consequently, requirements cannot be issued with respect to them: • notarial acts, en minute or en brevet , unless they are published, in which case only the information published is not protected by professional secrecy; • the repertory of acts en minute and the index to the repertory; • unpublished acts under private signature, including contracts, agreements, by-laws and resolutions;

• wills and codicils drawn up or held by notaries for their clients, including wills and codicils that have been revoked or replaced; • offers to purchase, respecting both securities and real estate transactions; • documents executed by notaries and certifying the identity, quality and capacity of a party to

an act; • powers of attorney and mandates; • correspondence and instructions sent to notaries for the purpose of preparing a contract, agreement, transaction or any other written document, as well as documents establishing by whom, when and how a client's instructions concerning a transaction were communicated to the notary; • marriage contracts and other union contracts or separation agreements; • annexes provided for in

section 48 of the Notarial Act , R.S.Q., c. N-2; • patrimonial inventory, inventories of successions, declarations of heirs, trust agreements and all other documents of a confidential nature prepared by notaries or entrusted to them by their clients; • legal opinions prepared by notaries at the request of their clients or the parties to

an act; • motions and other proceedings prepared by notaries at the request of their clients that have not been filed in court or otherwise made public; • all trust accounting documents of notaries, in which funds, securities and other property received by them are entered and recorded, including official receipts, passbooks or statements of financial institutions or securities brokers, cheques (front and back) and other payment orders, and registers and other vouchers, in addition to the cash book and the general ledger; • disbursement accounts or statements, and statements of amounts allocated or distributed (adjustment sheets) by notaries at the request of a party to

an act, including the date, the identity of the persons to whom the amounts were remitted, the method of payment and the receipt; • notaries' bills of account; • all drafts of the aforementioned documents; - DECLARE that these same documents are prima facie protected by the professional secrecy of legal advisers, regardless of the medium involved, including information technology media such as USB flash drives, removable hard drives, diskettes and CD-ROMs; [All references omitted.] [ 7 ] It is worth adding here that the requirements to provide documents or information sent to the notaries under

section 231.2, subsection (1), I.T.A. (at least in the case of the requirements reproduced in the appeal record) often target a small number of specific documents—for example, a copy of the cheque or cheques showing that an amount regarding the sale of a particular immovable was paid to or by the taxpayer, the statement of disbursements respecting named transactions, the breakdown of amounts held in trust for a taxpayer further to, again, well-identified transactions, a copy of specified acts of sale or loan instruments, information on fees received further to certain acts or on the use of amounts in trust, a copy of acquittances, statements of adjustments, cheques or deposit slips, a copy of a will, and so forth.

However, representatives of the Canada Revenue Agency (and its predecessor, the Canada Customs and Revenue Agency) sometimes require more. [ 8 ] Thus, on February 5, 2003, the Canada Customs and Revenue Agency wrote notary Raymond Grenier a letter concerning specific acts of sale and hypothecary loans, in which it requested the following information: [TRANSLATION] Under the provisions of paragraph 231.2(1) (

a) of the said Act: • details of the transactions connected with the sale of the property located at [address], province of Québec; • details of the advances received and disbursements made relative to these two transactions; • details of the fees received for the two transactions. [2] [Emphasis added, address of the property deleted.] [ 9 ] In addition, below is an excerpt from the March 19, 2003 letter sent to notary Sylvie Fredette, requiring that she provide the following information and documents: [TRANSLATION] As part of an investigation to collect amounts owed by GMCA Inc., you are required, under paragraph 231.2(1) (

b) of the Income Tax Act , to provide the Canada Customs and Revenue Agency with: • details of all amounts received, from January 1, 2000 to this day, in cash or by commercial paper, cheque or bank draft, . . . on behalf of or for GMCA Inc., taking care to indicate the date, the person who remitted the amounts and the method of payment; provide a

copy of the method of payment or, in the event of a cash payment, a copy of the receipt and deposit slip, as applicable; • details of all amounts remitted or paid to GMCA Inc. in cash or by commercial paper, cheque, bank draft, . . ., from January 1, 2000 to this day, taking care to indicate the date, the person to whom the amounts were remitted and the method of payment; provide a copy of the method of payment, for example a front-back copy of all cheques you drew or issued to the order of GMCA Inc., or, in the event of a cash payment, a copy of the receipt; • details of all amounts remitted or paid to any third party, at GMCA Inc.'s request, from January 1, 2000 to this day, taking care to indicate the date, the person to whom the amounts were remitted and the method of payment; provide a copy of the method of payment or, in the event of a cash payment, a copy of the receipt; • details of all amounts held in the name of GMCA Inc., from January 1, 2000 to this day, and remitted or paid to any third party, taking care to indicate the date, the person to whom the amounts were remitted and the method of payment; provide a copy of the method of payment or, in the event of a cash payment, a copy of the receipt; no later than 28/03/03. [3] [ 10 ] Below is an excerpt from another letter, to notary Jean-Pierre Julien, dated February 5, 2003: [TRANSLATION] Details of the amounts having been held in trust on behalf of B. and P.

P. further to the transactions on lots 609, 610, 611, 612, 613, 614 and 94-2-1, cadastre of the parish of P., registration division of P., municipality of N. Details of the balance of all amounts held in trust for B. P., as well as the reasons for holding the amounts . Details of the balance of all amounts held in trust for P. P., as well as the reasons for holding the amounts . Details of all distributions relative to the transactions on the aforementioned lots. [4] [Emphasis added.

The names of the taxpayers and place references were shortened to their initials.] [ 11 ] The following is an excerpt from the requirement to provide documents or information, dated January 14, 2005, sent to notary Ernest Rashkovan: I- regarding the sale of an immovable property by D. L. N. to V. J. on September 15, 1999, filed under number 21,663 of your office record, and published at the Montreal Registry Office under the number 5122749.

a) copy of bill(

s) i.e. check(

s) or bank draft(

s) received by D. L. N. from V. J.; or,

b) copy of any document received to confirm that V. J. has paid 100 000.00$ to D. L. N.; II- regarding the assignment of hypothec by D. L. N. to Dow Dot Corporation Limited (DDC) on May 24, 2000, filed under the number 21,910 of your office record, and published at the Montreal Registry Office under the number 5173601:

a) copy of all documents consulted to certify the identity, quality, capacity and will of Dow Dot Corporation Limited, without limiting the generality of the foregoing:

i) Constitution and registration certificate of DDC with the Bahamas authorities; ii) rules, regulations and resolutions of DDC allowing Me Patrick James Blains to act on its behalf; iii) Constitution and registration certificates, rules, regulations and resolutions of Coubah Secretaries Limited (CS); iv) Rules, regulations and resolutions enabling DDC to acquire such rights;

v) How were the wills of DDC and CS communicated to you? By whom? When?

b) copy of bill(

s) i.e. check(

s) or bank draft(

s) totalizing 720 000.00$ received by D. L. N.;

c) copy of bill(

s) i.e. check(

s) or bank draft(

s) that you have made out to (or on behalf of) D. L. N.; III- regarding the assignment of hypothec by D. L. N. to Dow Dot Corporation Limited on May 24, 2000, filed under the number 21 911 of your office record, and published at the Montreal Registry Office under the number 5173602;

a) copy of all documents consulted to certify the identity, quality, capacity and will of DDC, without limiting the generality of the foregoing;

i) Constitution and registration certificate of DDC with the Bahamas authorities; ii) rules, regulations and resolutions of DDC allowing Me Patrick James Blaine to act on its behalf; iii) Constitution and registration certificates, rules, regulations and resolutions of Coubah Secretaries Limited (CS); iv) Rules, regulations and resolutions enabling DDC to acquire such rights;

v) How were the wills of DDC and CS communicated to you? By whom? When?

b) copy of bill(

s) i.e. check(

s) or bank draft(

s) totalizing 560 000.00$ received by D. L. N. from DDC;

c) copy of bill(

s) i.e. check(

s) or bank draft(

s) that you have made out to (or on behalf of) D. L. N. If you provide information (or produce a document in response), you are also required to indicate the name and the complete address of the person(

s) that gave you the information (or the document), the name and address of the corporation they represent, the date on which you have received the said information (or the said document), and the way you have obtained such information (or such document). [5] [The names of the taxpayers were shortened to their initials.] [ 12 ] It is also worth reproducing the requirement of April 12, 2005 sent to notary Daniel Vézina : [TRANSLATION] For the purposes of the administration or enforcement of the Income Tax Act and, in accordance with the provisions of paragraphs 231.1(1) (

a) and (

d) of the said Act, we ask that you kindly send us the following information, within thirty (30) days following the date of receipt of this requirement, respecting the aforementioned taxpayer: 1. a photocopy of the statement of adjustments for the sale of the immovable located at [No.] E. road, in D., and registered under number 32,869 of your minutes; 2. a front-back copy of the cheque or cheques issued to the seller; 3. a photocopy of all the documents you have in your possession respecting this client that could be deemed relevant .

Please contact me if you would like more information in this regard. [6] [Emphasis added; place references shortened.] [ 13 ] The requirement of November 18, 2008 sent to notary Angelo Pinchiaroli is not without interest: [TRANSLATION] For the purposes of the administration of the Income Tax Act (s. 231.1), please make available to us for consultation and copies, where necessary, the information required in the Act respecting the following taxpayers: Mr. M. (M.) S. Ms. R. M. G. [address] 1. Concerning the properties held by Mr. S. and Ms.

G., obtain the following documents: (handwritten entry: January 1, 2003 to December 31, 2007 [7] ) a. Copy of the statements of adjustments for the acquisition and sale of the properties. b. Copy of the statements of account for your trust account for the above transactions. c. Copy of the disbursements (supporting documents) made to purchase and dispose of the said properties. d. Copy of the provenances of the funds (supporting documents) used to purchase the said property. 2.

All other information in your possession concerning the transactions in which the aforementioned taxpayers were reportedly involved . [8] [Emphasis added; the taxpayers' names were shortened to their initials.] [ 14 ] Lastly, the following excerpt from the letter of October 28, 2008 sent to the notarial firm Gariépy et associés, to the attention of Mtre. Denis Gariépy and Mtre. Stéphane Denis Lacombe, should be mentioned: [TRANSLATION] The information sought in the requirement to provide information concerns J. P. M., born on [date]; T. L., born on [date]; A.

M., born on [date]; LES PLACEMENTS J P M T H 1 Inc., LES PLACEMENTS L G J P M 1 Inc. and 9022-5566 QUÉBEC INC. Under paragraphs 231.2(1) (

a) and (

b) of the Income Tax Act , and for the purposes of the administration or enforcement of that Act, you are required to immediately provide the following information to Lise Gagné, a collector with the Canada Revenue Agency (CRA): - a copy of all documents, including those that are part of the said sale of immovables and a business but are not recorded in the act of sale signed before Mtre. Stéphane Denis Lacombe on August 7, 1995, minute number 301, published at the registry office of the Richelieu registration division under number 253 460;

- a copy of all documents, including those that are part of the said sale of a business but are not recorded in the act of sale signed before Mtre. Stéphane Denis Lacombe on August 7, 1995, under number 302 of his minutes; - a copy of all documents, including those that are not recorded in the act constituting the immovable hypothec and that are part of the said act signed before Mtre. Stéphane Denis Lacombe on August 8, 1995, kept under number 303 of his minutes; [9] [ 15 ] Of course, for a complete picture, the reasons underpinning the requirements to provide documents or information scheme must be examined.

These reasons are clearly explained in the appellants' factum: [TRANSLATION] 10. Income tax collection is one of the government's principal sources of revenue. It is the engine of the state. The Canadian tax system is based on the principles of self-reporting and self-assessment. Every taxpayer is required to file an annual tax return and personally estimate the amount of income tax payable under the I.T.A. To that end, the taxpayer must also keep books of account and registers. Compliance with these two obligations under that public policy statute is essential to the system's success. 11.

Some taxpayers may want to take advantage of this system based on honesty and integrity, by not reporting all of their income and not paying their income tax. That is why the Minister has broad audit and examination powers, including, in particular, the power to demand, by means of a "requirement", that documents or information be filed. A requirement may be sent to any person, including a third party, in order to obtain any information or documents respecting a taxpayer, for any purpose related to the administration or enforcement of the I.T.A. Subsection 231.2(1) I.T.A. stipulates the following: . . . 12.

The Minister may therefore request information and documents, regardless of whether they are private or confidential, or whether the documents must be kept by the taxpayer under the I.T.A. Information thus gathered must be kept confidential by the Minister, in accordance with the parameters of

section 241 I.T.A., thereby safeguarding the taxpayer's privacy. 13. This tool essential to the Minister is frequently used in tax audits to obtain information on earned income or respecting collection files, in order to locate assets of taxpayers who refuse and/or neglect to pay their income tax. The information sought is sometimes in the hands of a notary or lawyer. The following illustrates why it is useful to be able to resort to requirements to provide documents or information. 14. A taxpayer who has a debt owing to the Minister is not cooperating in paying his income tax.

The Agency discovers that the taxpayer has disposed of an immovable, his only known asset. On seeing in the index of immovables that the sale generated a profit, the Agency wants to know what became of the amount, in order to try to collect it. The seller (tax debtor) refuses or neglects to provide the information. The Agency uses a requirement to provide documents or information in order to obtain, from the buyer, proof of the payment made during the transaction. It obtains a copy of a cheque made payable to the officiating notary.

To continue following the trail of the funds, the Agency sends the notary a requirement to provide a copy of the cheque or cheques issued to the seller (tax debtor). This will enable it to find out, from the back of the cheque, in which bank account the money was deposited and complete its collection efforts. 15. If that information cannot be obtained from the notary, the money trail may be cut off, thus jeopardizing the chance of collecting the money. Indeed, the seller (tax debtor) may have deposited the cheque in an account unknown to the Agency.

He may also have instructed the notary to issue the cheque in the name of a third party. 16. Time is obviously a key factor in collection matters. The faster the Agency learns what happened to the proceeds of the sale, the better chance it has of collecting the money before it disappears. 17. Hence, a multitude of situations—with respect to both audits and collection—force the Minister to require that third parties provide information which he or she is entitled to obtain.

The recipient of such a requirement must provide the documents or information requested, unless they are protected by solicitor-client privilege, as defined in subsection 232(1) I.T.A. [All references omitted.] [ 16 ] Finally, for a better idea of the content and tone of requirements, it is helpful to reproduce here, in full, two sample requirements from the appeal record. Here is the first one: [TRANSLATION] MTRE.

France germain, notaRy Your file/Votre référence 6455, Jean-Talon est, bureau 404 Montréal (Saint-Léonard) , Québec Our file/Notre référence H1S 3E8 Sylvie Houle Revenue Collections Division Phone: (514) 956-6636 Fax: (514) 956-7035

December 21, 2004 Dear Mtre. Germain: For the purposes of the administration and enforcement of the Income Tax Act , and in accordance with the provisions of subsection 231.2(1) of the said Act, you are hereby required to provide the following no later than: January 7, 2005. Subject: 6014968 CANADA INC. 11375, Saint-Vital, Montréal, Québec H1H 4T9. - A copy of the cheque for $25 000 in trust, issued to the company 6014968 Canada Inc. on May 4, 2004 by Mtre. Germain, notary.

If, by January 7, 2005, you have not complied with this requirement to provide documents or information, you will be liable to prosecution without further notice. Under subsection 238(1) of the said Act, every person who has failed to provide the required documents as and when reasonably required by the notice is guilty of an offence and is liable on

summary conviction to a fine of not less than $1000 and not more than $25 000, or both a fine and imprisonment for a term not exeeding 12 months. In addition to the criminal sanctions stemming from subsection 238(2) should you fail to respond to this requirement, application for an order for specific performance may be made to the Court, under

section 231.7 of the Income Tax Act , in the event of non-compliance. Failure to act on such an order could lead to a charge of contempt of court. You must provide the required information to the Laval Tax Services Office, at 3400, avenue Jean-Béraud, Laval, Québec H7T 2Z2, to the attention of Sylvie Houle, field investigation officer. Sincerely, (

s) Lyette Dextradeur Lyette Dextradeur Manager Revenue Collections Division [10] [ 17 ] Below is the other requirement (as far as can be seen from the record, it is a second requirement, sent further to the notary's refusal, on the ground of professional secrecy, to remit the documents requested [11] ): [TRANSLATION] December 4, 2003 MTRE. RAYMOND grenier, NOTARY C/O grenier gagnon, notaires 625, boul. rené-lévesque ouest bureau 1410 montréal qc h3b 1r2 Dear Mtre. Grenier: CONTACT: FRANÇOIS BACAVE Subject: Requirement to provide information Date: December 4, 2003 Name: 172302 CANADA INC. In accordance with

section 231.2 of the Income Tax Act , and for the purposes relative to the administration and enforcement of the Act, you must, within 30 days of the above-mentioned date, provide us with the following information and/or documents: Copies of the statements of adjustments and front-back copies of the cheques concerned respecting the following transactions (1579 to 1585 St-Denis), under the numbers of your minutes indicated below: 4048

7106 7596 You must certify that, to the best of your knowledge, the above-mentioned information is true, accurate and complete in every respect, and send it to the address indicated on the first page of this letter, within 30 days of the date hereof. If you do not comply with this requirement by the prescribed time limit, you may be subject to legal action without further notice.

Section 238 of the said Act states that a person who refuses to comply with this requirement is guilty of an offence and may be fined an amount of at least $1000 and no more than $25 000, or fined and handed a term of imprisonment of no more than 12 months. In addition to the criminal sanctions stemming from subsection 238(2) should you fail to respond to this requirement, application for an order for specific performance may be made to the Court, under

section 231.7 of the Income Tax Act , in the event of non-compliance. Failure to act on such an order could lead to a charge of contempt of court. Sincerely, (

s) Sylvain Bayeur Sylvain Bayeur Manager Revenue Collection Montréal Tax Services Office [12] [ 18 ] Not all requirements to provide documents or information include the explicit threat of criminal prosecution under

section 238 I.T.A., although they frequently do (as is the case with most of the ones reproduced in the appeal record). The appellants explained that signees of such letters often use stock formulations without giving thought to whether they are sending a given letter to a notary, a taxpayer or another person. That explanation is surprising, given that, under the very provisions of the Act, notaries and lawyers enjoy a special privilege that the tax authorities cannot simply shrug off and that can necessitate a different approach.

At any rate, whether or not the threat is included in the letter received changes little: Like anyone else, a notary who does not comply with a demand he or she receives under

section 231.2, subsection (1), I.T.A. is in fact liable to such prosecution, which could result in a fine or imprisonment. (The appellants affirmed that, in practice,

section 238 I.T.A. would not be used with respect to notaries or lawyers.) [ 19 ] As for the rest, the record shows that most of the notaries who received such requirements verified the situation with their professional order and then followed the order's recommendation, asserting professional secrecy and refusing to provide the required documents or information without client consent. The Agency's attorneys sometimes reacted to the refusals by sending letters explaining their point of view, which was based essentially on the exception respecting solicitor-client privilege in

section 232, subsection (1), I.T.A. Below, for example, is an excerpt from such a letter, dated March 21, 2003 and sent to notary Sylvie Fredette: [TRANSLATION] . . . On reading section 232(1) I.T.A., it seems that the information requested in the requirements sent to you is directly contemplated by the exception provided for therein. In Ministère du revenu national v.

M e Pierre Audet, notaire , T-560-02 [reference omitted], the Federal Court of Canada was asked to decide whether the exception provided for in the definition of "solicitor-client privilege" in subsection 232(1) I.T.A. applied to the documents requested by the Minister [reference omitted] in his requirement to provide information.

The Honourable Blanchard J. found as follows: [TRANSLATION] Being satisfied that the documents in the respondent's possession that were requested by the Canada Customs and Revenue Agency and that are covered by this motion, namely, lists of financial transactions (statements of adjustments) and front-back copies of cheques issued and received in the respondent's trust account, are directly contemplated by the exception in subsection 232(1) I.T.A. (Emphasis added.) Consequently, the Court ordered Mtre.

Pierre Audet, notary, to respond to the requirement to provide information that had been sent to him under subsection 231.2(1) I.T.A. At this point, you should have no difficulty concluding that the exception in section 232(1) (

e) I.T.A. clearly applies to the information requested in the requirements to provide information, with the result that you cannot win . . . . In the present case, the information requested in our client's requirements is directly contemplated by the exception in subsection 232(1) I.T.A. Consequently, you cannot assert that privilege with respect to the requirement to provide information.

In the event that you do not comply with the provisions of the Act because you consider yourself still bound by professional secrecy, we will obviously have no other choice but to institute the necessary proceedings before the Federal Court of Canada so that it can rule on the merits of your refusal. Were the Court to decide that your refusal was unjustified, because of the legislative provisions and the jurisprudence, we would have no other alternative but to ask the Court to order you to pay the costs incurred to institute these proceedings .

If you wish to discuss this letter, your client waives professional secrecy in the interim or you wish to provide the information and/or documents specified in the requirements, kindly contact the undersigned immediately.

If the undersigned does not hear from you within ten (10) days of this letter, we will understand that you maintain your position, and act accordingly. [13] [ 20 ] There is also the October 21, 2008 letter sent by the Department of Justice to notary Joanne Jacob: [TRANSLATION] On August 7, 2008, the Canada Revenue Agency sent you a requirement to provide information (see copy attached), in which it requested that you provide it with a copy of the statements of adjustments and of the payment or payments made to the sellers respecting the transaction (see copy attached).

On September 16, 2008, you replied by letter, saying that, in your opinion, the documents requested were covered by professional secrecy and that, consequently, you could not send a copy of the documents without client consent. I submit to you that the documents requested are not covered by professional secrecy and that, as a result, you can rightfully send us a copy of them. In support of my contentions, I would like to cite a number of judgments rendered in recent years in the other provinces [reference omitted] on the issue of professional secrecy as it pertains to requirements sent to lawyers.

To date, the case law is unanimous: No judgment has recognized that solicitor-client privilege exists—apart from the privilege defined in the Income Tax Act— with respect to the type of information concerned. Accordingly, we ask that you provide us with a copy of the documents within ten days of receipt of this letter. If you do not provide us with the documents within that time, the Canada Revenue Agency will be obliged to contact your bank to obtain the necessary information. Your trust account information contained in their registers would therefore be accessible.

PLEASE ACT ACCORDINGLY. [14] [ 21 ] Proceedings were indeed instituted under

section 231.7 I.T.A. (the appeal record contains a few examples), some of which were discontinued and others, suspended pending the outcome of the appeal. * * [ 22 ] Perceiving a systemic and systematic infringement of professional secrecy, the Chambre des notaires brought an action under

article 453 of the Code of Civil Procedure seeking to have the provisions at issue declared to be unconstitutional on the ground of infringement of the Canadian Charter of Rights and Freedoms , and, accordingly, of no force or effect. The Barreau du Québec became a party to the action, as an intervener, giving its full backing to the Chambre des notaires and stating the same arguments in regard to lawyers. [ 23 ] A similar proceeding was instituted concomitantly, against the Attorney General of Québec and the Deputy Minister of Revenue of Québec, for similar reasons.

The outcome of that proceeding was a transaction reproduced as an appendix to the factum of the Chambre des notaires du Québec . [15] B. Legislative framework [ 24 ] The relevant legislative provisions, according to the version in force at the time of the judgment in first instance, [16] are as follows: [17] 231.2

(1) Notwithstanding any other provision of this Act, the Minister may, subject to subsection (2), for any purpose related to the administration or enforcement of this Act (including the collection of any amount payable under this Act by any person), of a comprehensive tax information exchange agreement between Canada and another country or jurisdiction that is in force and has effect or, for greater certainty, of a tax treaty with another country, by notice served personally or by registered or certified mail, require that any person provide, within such reasonable time as 231.2

(1) Malgré les autres dispositions de la présente loi, le ministre peut, sous réserve du paragraphe (2) et pour l'application ou l'exécution de la présente loi (y compris la perception d'un montant payable par une personne en vertu de la présente loi), d'un accord général d'échange de renseignements fiscaux entre le Canada et un autre pays ou territoire qui est en vigueur et s'applique ou d'un traité fiscal conclu avec un autre pays, par avis signifié à personne ou envoyé par courrier recommandé ou certifié, exiger d'une personne, dans le délai raisonnable que précise l'avis :

stipulated in the notice, (

a) any information or additional information, including a return of income or a supplementary return; or (

b) any document.

(2) The Minister shall not impose on any person (in this

section referred to as a “third party”) a requirement under subsection 231.2(1) to provide information or any document relating to one or more unnamed persons unless the Minister first obtains the authorization of a judge under subsection 231.2(3)).

(3) On ex parte application by the Minister, a judge may, subject to such conditions as the judge considers appropriate, authorize the Minister to impose on a third party a requirement under subsection 231.2(1) relating to an unnamed person or more than one unnamed person (in this

section referred to as the “group”) where the judge is satisfied by information on oath that (

a) the person or group is ascertainable; and (

b) the requirement is made to verify compliance by the person or persons in the group with any duty or obligation under this Act. (

c) and (d) [Repealed, 1996, c. 21, s. 58(1) ]

(4) Where an authorization is granted under subsection 231.2(3), it shall be served together with the notice referred to in subsection 231.2(1).

(5) Where an authorization is granted under subsection 231.2(3), a third party on whom a notice is served under subsection 231.2(1) may, within 15 days after the service of the notice, apply to the judge who granted the authorization or, where the judge is unable to act, to another judge of the same court for a review of the authorization.

(6) On hearing an application under subsection 231.2(5), a judge may cancel the authorization previously granted if the judge is not then satisfied that the conditions in paragraphs 231.2(3) (

a) and 231.2(3) (

b) have been met and the judge may confirm or vary the authorization if the judge is satisfied that those conditions have been met .

a) qu'elle fournisse tout ren- seignement ou tout renseignement supplémentaire, y compris une déclaration de revenu ou une déclaration supplémentaire;

b) qu'elle produise des docu-ments.

(2) Le ministre ne peut exiger de quiconque – appelé « tiers » au présent

article – la fourniture de renseignements ou production de documents prévue au paragraphe (1) concernant une ou plusieurs per-sonnes non désignées nommément, sans y être au préalable autorisé par un juge en vertu du paragraphe (3).

(3) Sur requête ex parte du ministre, un juge peut, aux conditions qu'il estime indiquées, autoriser le ministre à exiger d'un tiers la fourniture de renseignements ou production de documents prévue au paragraphe (1) concernant une per-sonne non désignée nommément ou plus d'une personne non désignée nommément – appelée « groupe » au présent

article –, s'il est convaincu, sur dénonciation sous serment, de ce qui suit :

a) cette personne ou ce groupe est identifiable;

b) la fourniture ou la production est exigée pour vérifier si cette personne ou les personnes de ce groupe ont respecté quelque devoir ou obligation prévu par la présente loi;

c) et d) [Abrogés, 1996, ch. 21, art. 58(1) ]

(4) L'autorisation accordée en vertu du paragraphe (3) doit être jointe à l'avis visé au paragraphe (1).

(5) Le tiers à qui un avis est signifié ou envoyé conformément au paragraphe (1) peut, dans les 15 jours suivant la date de signification ou d'envoi, demander au juge qui a accordé l'autorisation prévue au paragraphe (3) ou, en cas d'incapacité de ce juge, à un autre juge du même tribunal de réviser l'autorisation.

(6) À l'audition de la requête prévue au paragraphe (5), le juge peut annuler l'autorisation accordée antérieurement s'il n'est pas convaincu de l'existence des con-ditions prévues aux alinéas

(3) a) et b) . Il peut la confirmer ou la modifier s'il est convaincu de leur existence .

231.7

(1) On

summary application by the Minister, a judge may, notwithstanding subsection 238(2), order a person to provide any access, assistance, information or document sought by the Minister under

section 231.1 or 231.2 if the judge is satisfied that (

a) the person was required under

section 231.1 or 231.2 to provide the access, assistance, information or document and did not do so; and (

b) in the case of information or a document, the information or document is not protected from disclosure by solicitor-client privilege (within the meaning of subsection 232(1)).

(2) An application under subsection (1) must not be heard before the end of five clear days from the day the notice of application is served on the person against whom the order is sought.

(3) A judge making an order under subsection (1) may impose any conditions in respect of the order that the judge considers appropriate.

(4) If a person fails or refuses to comply with an order, a judge may find the person in contempt of court and the person is subject to the processes and the punishments of the court to which the judge is appointed.

(5) An order by a judge under subsection (1) may be appealed to a court having appellate jurisdiction over decisions of the court to which the judge is appointed. An appeal does not suspend the execution of the order unless it is so ordered by a judge of the court to which the appeal is made. 231.7

(1) Sur demande

sommaire du ministre, un juge peut, malgré le paragraphe 238(2), ordonner à une personne de fournir l'accès, l'aide, les renseignements ou les documents que le ministre cherche à obtenir en vertu des articles 231.1 ou 231.2 s'il est convaincu de ce qui suit :

a) la personne n'a pas fourni l'accès, l'aide, les renseignements ou les documents bien qu'elle en soit tenue par les articles 231.1 ou 231.2;

b) s'agissant de renseignements ou de documents, le privilège des communications entre client et avocat, au sens du paragraphe 232(1), ne peut être invoqué à leur égard.

(2) La demande n'est entendue qu'une fois écoulés cinq jours francs après signification d'un avis de la demande à la personne à l'égard de laquelle l'ordonnance est demandée.

(3) Le juge peut imposer, à l'égard de l'ordonnance, les conditions qu'il estime indiquées.

(4) Quiconque refuse ou fait défaut de se conformer à une ordonnance peut être reconnu coupable d'outrage au tribunal; il est alors sujet aux procédures et sanctions du tribunal l'ayant ainsi reconnu coupable.

(5) L'ordonnance visée au para- graphe (1) est susceptible d'appel devant le tribunal ayant compétence pour entendre les appels des décisions du tribunal ayant rendu l'ordonnance. Toutefois, l'appel n'a pas pour effet de suspendre l'exécution de l'ordonnance, sauf ordonnance contraire d'un juge du tribunal saisi de l'appel.

(1) In this section, . . . "lawyer" means, in the province of Quebec, an advocate or notary and, in any other province, a barrister or solicitor; . . . "solicitor-client privilege" means the right, if any, that a person has in a superior court in the province where the matter arises to refuse to disclose an oral or documentary communication on the ground that the communication is one passing between the person and the person’s lawyer in professional confidence, except that for the purposes of this

section an accounting record of a lawyer, including any supporting voucher or cheque, shall be deemed not to be such a communication .

(2) Where a lawyer is prosecuted for failure to comply with a requirement under

section 231.2 with respect to information or a document, the lawyer shall be acquitted if the lawyer establishes to the satisfaction of the court (

a) that the lawyer, on reasonable grounds, believed that a client of the lawyer had a solicitor-client privilege in respect of the information or document; and (

b) that the lawyer communicated to the Minister, or some person duly authorized to act for the Minister, the lawyer’s refusal to comply with the requirement together with a claim that a named client of the lawyer had a solicitor-client privilege in respect of the information or document. . . . 232

(1) Les définitions qui suivent s'appliquent au présent article. « avocat » Dans la province de Québec, un avocat ou notaire et, dans toute autre province, un barrister ou un solicitor . . . . « privilège des communications entre client et avocat »

Droit qu'une personne peut posséder, devant une cour supérieure de la province où la question a pris naissance, de refuser de divulguer une communication orale ou documentaire pour le motif que celle-ci est une communication entre elle et son avocat en confidence professionnelle sauf que, pour l'application du présent article, un relevé comptable d'un avocat, y compris toute pièce justificative ou tout chèque, ne peut être considéré comme une communication de cette nature.

(2) L'avocat poursuivi pour n'avoir pas obtempéré à une exigence de fourniture d'un renseignement ou de production d'un document prévue par l'article 231.2 doit être acquitté s'il démontre, à la satisfaction du tribunal, ce qui suit :

a) pour des motifs raisonnables, il croyait qu'un de ses clients bénéficiait du privilège des communications entre client et avocat en ce qui concerne le renseignement ou le document;

b) il a indiqué au ministre ou à une personne régulièrement autorisée à agir pour celui-ci son refus d'obtempérer à cette exigence et a invoqué devant l'un ou l'autre le privilège des communications entre client et avocat dont bénéficiait un de ses clients nommément désigné en ce qui concerne le renseignement ou le document. . . .

(1) Every person who has failed to file or make a return as and when required by or under this Act or a regulation or who has failed to comply with subsection 116(3), 127(3.1) or 127(3.2), 147.1(7) or 153(1), any of sections 230 to 232 or a regulation made under subsection 147.1(18) or with an order made under subsection 238(2) is guilty of an offence and, in addition to any penalty otherwise provided, is liable on

summary conviction to (

a) a fine of not less than $1,000 and not more than $25,000; or (

b) both the fine described in paragraph 238(1)(

a) and imprisonment for a term not exceeding 12 months.

(2) Where a person has been convicted by a court of an offence under subsection 238(1) for a failure to comply with a provision of this Act or a regulation, the court may make such order as it deems proper in order to enforce compliance with the provision.

(3) Where a person has been convicted under this

section of failing to comply with a provision of this Act or a regulation, the person is not liable to pay a penalty imposed under

section 162 or 227 for the same failure unless the person was assessed for that penalty or that penalty was demanded from the person before the information or complaint giving rise to the conviction was laid or made. 238

(1) La personne qui ne produit ou ne présente pas ou ne remplit pas une déclaration de la manière et dans le délai prévus à la présente loi ou à son règlement ou qui contrevient au paragraphe 116(3), 127(3.1) ou (3.2), 147.1(7) ou 153(1) ou à l'un des articles 230 à 232 ou à une disposition réglementaire prise en vertu du paragraphe 147.1(18) ou encore qui contrevient à une ordonnance rendue en application du paragraphe (2) commet une infraction et encourt, sur déclaration de culpabilité par procédure

sommaire et outre toute pénalité prévue par ailleurs :

a) soit une amende de 1 000 $ à 25 000 $;

b) soit une telle amende et un emprisonnement maximal de 12 mois.

(2) Le tribunal qui déclare une personne coupable d'une infraction prévue au paragraphe (1) peut rendre toute ordonnance qu'il estime indiquée pour qu'il soit remédié au défaut visé par l'infraction.

(3) La personne déclarée coupable, par application du présent article, d'avoir contrevenu à une disposition de la présente loi ou de son règlement n'est passible d'une pénalité prévue à l'article 162 ou 227 pour la même contravention que si une cotisation pour cette pénalité a été établie à son égard ou que si le paiement en a été exigé d'elle avant que la dénonciation ou la plainte qui a donné lieu à la déclaration de culpabilité ait été déposée ou faite. [ 25 ] The Minister referred to in these legislative provisions is the Minister of National Revenue (s. 248, subs. (1), I.T.A.), the Canada Revenue Agency (formerly the Canada Customs and Revenue Agency) being responsible for "supporting [the Minister in] the administration and enforcement of the program legislation". [18] C.

Judgment in first instance [ 26 ] On September 8, 2010, the trial judge allowed the motion of the Chambre des notaires and the intervention of the Barreau du Québec.

Further to a review of the rules governing professional secrecy and the decisions of the Supreme Court of Canada on the subject, he made the following findings: [TRANSLATION] [80] From all of this, the Court finds as follows regarding professional secrecy: • There is no reason, a priori , to draw a distinction between the law in criminal matters and civil matters. • There is no justification for the distinction between "fact" and "communication". • As soon as a legitimate professional relationship is established between a legal professional and a client, all actions, documents and information are prima facie covered by professional secrecy. • It is up to the person who challenges the existence of either immunity from disclosure or the obligation of confidentiality to demonstrate why it does not exist. • The exceptions overriding it must be extremely rare and used only as a last resort. • The legislative mechanisms in place must ensure that its existence is scrupulously preserved so as to avoid improvident disclosures. • All enactments likely to infringe it must be narrowly interpreted and cannot allow the production of documents protected by it.

[ 27 ] Moving on to an examination of

section 231.2, subsection (1), and

section 231.7 I.T.A., he first recognized that, in accordance with R. v. McKinlay Transport Ltd. , [19] the measures stipulated in the former

section constituted a seizure and were therefore subject to the requirements in

section 8 of the Canadian Charter of Rights and Freedoms . [20] While recognizing that the privacy expectations of citizens, as taxpayers, are lower than in other contexts (such as in criminal matters), and while conceding that the tax authorities have broad investigative powers in this area, the trial judge nevertheless felt that these considerations did not represent or justify a weakening of the professional secrecy of notaries or lawyers.

Such secrecy can still be fully and legitimately set up against the tax authorities' requirements to provide documents or information, and cannot be overridden by the tax authorities. [ 28 ] On the basis of Lavallee, Rackel & Heintz v. Canada (Attorney General); White, Ottenheimer & Baker v. Canada (Attorney General); R. v. Fin k , [21] the judge felt that the provisions of the Income Tax Act intended to recognize and safeguard professional secrecy were insufficient and, consequently, contrary to

section 8 of the Canadian Charter . He wrote: [TRANSLATION] [86] What needs to be ascertained is whether the class privilege flowing from the right to professional secrecy is contextually more important than the search for the truth. The fundamental importance of the right to professional secrecy is the cornerstone not only of our legal system, but, more broadly, of our justice system as well.

To paraphrase Lavallee , the point is to ascertain whether Parliament has taken all required steps to ensure the right is preserved as much as possible. [87] While it is true that the Supreme Court taught that a more flexible approach must guide the Court in its assessment in the regulatory or administrative context, it nevertheless reiterated that infringement of professional secrecy must be absolutely necessary and minimal.

In fact, it would not be going out too far on a limb to say that its attitude on the subject is becoming increasingly scrupulous. [88] There is no denying that a requirement to provide documents intrudes less on one's privacy than a search does, because, among other things, government officers do not have direct access to the information or documents merely because of the requirement.

However, the potential threat to impairment of the right to professional secrecy in this context should not be downplayed. [89] In light of Lavallee , the procedure introduced by Parliament, combined with the effects of sections 231.2 and 231.7 I.T.A., does not enable the client, holder of the right to professional secrecy, to be aware that his or her right is threatened, and, consequently, to ensure it is protected. [90] Under

section 231.7(2) I.T.A., the Minister's application to the judge must be addressed only to the person contemplated in the order—the notary, in this case—not to the client as well. That, according to the teachings of the Supreme Court, is the first flaw of the legislative mechanism. [91] In addition, the five-day time limit for obtaining the order seems too short. Therein lies the second flaw of the system. Third, the law does not impose the condition that the judge be satisfied that there is no other reasonable alternative before the professional is approached.

That is another failing. [92] Since the Court is compelled to adopt stringent norms to ensure the protection of professional secrecy and, therefore, to label as unreasonable within the meaning of

section 8 of the Charter any legislative provision that infringes it more than is absolutely necessary, the Court must make that assessment in the present case. [93] Like section 488(1)8 of the Criminal Code ,

section 231.7(2) I.T.A. does not guarantee holders of professional secrecy a reasonable opportunity to ensure that privileged information remains so.

According to the Supreme Court, that failing is fatal, for the state has a duty to ensure sufficient protection of the rights of the holders of professional secrecy. [94] On the basis of the very wording of some requirements for information and documents sent to the notaries, the only logical conclusion is that notaries are in an untenable position: Either they decide to reply to the requirement, thereby, at the very least, contravening their ethical duty, or they refuse to reply, in keeping with their obligations to their client, laying themselves open to criminal prosecution. [95] It is therefore not a minimal impairment that is involved.

All of this amounts to an unreasonable search and seizure contrary to

section 8 of the Charter . The Agency and the AGC did not attempt to save the violation under

section 1 of the Charter. As with Lavallee , the Court in fact does not see how it could be done. [96] So, it flows from the preceding that the Court, in relying on the teachings of the Supreme Court, cannot validate the constitutionality of these legislative provisions. Consequently, a declaration of unconstitutionality and of no force or effect will be made pursuant to

section 52 of the Charter . [All references omitted.] [ 29 ] Lastly, the judge found that the exception provided for in the fifth paragraph of subsection 232(1) I.T.A. could not be set up against Québec notaries and lawyers. That provision, which equates Québec notaries with lawyers, [22] excludes "an accounting record of a lawyer, including any supporting voucher or cheque" (" relevé comptable d'un avocat, y compris toute pièce justificative ou tout chèque ") from the scope of professional secrecy.

In his view, the provision's general definition of "solicitor-client privilege" (" privilège des communications entre client et avocat ") is such that, in the case of Québec, the privilege refers directly to the professional secrecy protected by

section 9 of the Charter of human rights and freedoms [23] and to all components of Québec law in that regard. Moreover, the exception stipulated by Parliament with respect to accounting records of notaries and lawyers (including supporting vouchers or cheques) is unreasonable, in that it was not shown to be absolutely necessary: [TRANSLATION] [107] On the basis of the principles set forth earlier, from Descôteaux , Pritchard and Blood Tribe , for example, the Court concludes

that an explicit legislative provision is required to limit the right protected under

section 9 of the Québec Charter , and that it must be interpreted narrowly. [108] As affirmed by the Supreme Court and required by the Québec Charter , the Court must actively ensure the protection of professional secrecy by labeling as unreasonable any legislative provision that infringes it more than is absolutely necessary. [109] To repeat, since, on the basis of Descôteaux , Lavallee , Maranda , Foster Wheeler and Cunningham , the Court concludes that no distinction should be made between civil law and criminal law as regards professional secrecy, that there should no longer be a dichotomy between "fact" and "communication" and that all acts, documents and information are prima facie covered by professional secrecy, it follows that the exception in section 232(1), fifth paragraph, I.T.A.—"for the purposes of this

section an accounting record of a lawyer, including any supporting voucher or cheque, shall be deemed not to be such a communication"—must be considered constitutionally of no force or effect. [110]

Section 9 of the Québec Charter is simply an additional element satisfying the Court that the above legislative provision is exorbitant. [All references omitted.] [ 30 ] The judge also made the following remarks: [112] In this regard, by contending the application of Blood Tribe , the Chambre argued that only a court of record is empowered to examine a document for the purpose of ruling on a contested claim of privilege, since the officers using the requirements procedure do not have the independence required to do so. [113] The Court readily agrees.

In the opinion of the Court, it is not up to notaries or government officers to ultimately decide what is covered by professional secrecy, as that is the role of a superior court. However, it is not a problem in the present case.

This is because, once a requirement to provide information or documents has been sent and the notary has informed the Agency of his or her refusal to claim professional secrecy, or in the absence of a response from the notary, the law already provides that a court will rule on the legitimacy of such a claim. [114] It will be noted that the requirements sent to the notaries do not state that the legal authorization mechanism will be set in motion should they fail to comply; rather, the requirements indicate that criminal proceedings will be undertaken under

section 238 I.T.A. [115] In fact, because the Court finds that the documents contemplated in the application of the Chambre are prima facie covered by professional secrecy, it follows that all requirements sent to notaries become, de facto , useless.

Consequently, the officers of the Agency should apply directly to a superior court judge if they wish to obtain such information. [116] Again, as taught in Foster Wheeler , since, prima facie , all communications between clients and notaries must be considered confidential, it is up to the Agency to show to a superior court judge, further to the application of a legislative mechanism in keeping with clients’ constitutional rights, that what it seeks is subject neither to the obligation of confidentiality nor to immunity from disclosure. [117] When the state is confronted with the right to the professional secrecy of legal advisers, it must follow the teachings in Lavallee .

It is worth recalling that, with respect to searches, there is prior judicial authorization by a legal authority, namely, a justice of the peace, the documents seized from a legal adviser are sealed and judicial adjudication follows. Parliament should therefore consider an analagous procedure for the purposes of the I.T.A. [118] In that respect, the fears of the Agency and the AGC that the offices of lawyers and notaries will become tax havens seem exaggerated. First, certain documents remain available to third parties.

Second, to the extent that illegal acts are committed, it is up to them to show that the exception recognized in Solosky and McClure as to the lawfulness of the acts must be recognized. [All references omitted.] [ 31 ] Consequently, he declared that, "pursuant to

section 52 of the Charter , [24] sections 231.2 and 231.7, as well as the fifth paragraph of section 232(1) of the Income Tax Act are unconstitutional and of no force or effect with respect to notaries and lawyers in the province of Québec, as concerns the documents and information protected by their professional secrecy". [25] He also chose to declare that all the documents listed in paragraph 126 of the conclusions are prima facie protected by the professional secrecy of legal advisers, regardless of the medium involved, "including information technology media such as USB flash drives, removable hard drives, diskettes and CD-ROMs", [26] although he questioned the need to do so.

D. Appeal [ 32 ] The appellants are appealing from that judgment. Essentially (and I am giving a very brief

summary of their arguments here), they contended that the legislative provisions contested by the Chambre des notaires and the Barreau du Québec respect professional secrecy and introduce guidelines that adequately protect it and conform fully to

section 8 of the Canadian Charter , especially when one factors in—as one must—the duty of transparency, honesty and disclosure borne by taxpayers, who cannot refuse to reveal their actual tax situation to the tax authorities in an administrative investigation, without violating public order. In this regard, taxpayers have little expectation, even next to none, that their privacy will be respected.

In such circumstances, the protection of professional secrecy need not comply with the rules that, for example, govern searches or seizures in criminal matters, where other principles (such as protection against self-incrimination) are in play, principles that do not apply to parties that are under administrative investigation, as is the case here. As dramatically stated by the appellants: The offices of notaries and lawyers must not become tax havens where information that ill-intentioned taxpayers unduly seek to hide from the tax authorities would be lost forever.

In their opinion, the provisions at issue preserve [TRANSLATION] "a fair balance between protecting the privilege, and the public interest in enforcing the I.T.A." [27] II. Analysis

A. Preliminary remarks [ 33 ] First, subsections 232(3) to (14) I.T.A. are not under discussion, since the parties recognize these provisions to be invalid and of no force, on the basis of Lavallee, Rackel & Heintz v. Canada (Attorney General) , in which the same finding was made with respect to similar provisions in

section 488.1 of the Criminal Code . [28] [ 34 ] Nor is the "crime exception", which the appellants did not invoke, at issue, any more so than the question of someone's innocence or the danger to public safety. [29] [ 35 ] Second, the case remains circumscribed by the nature of the proceedings instituted (article 453 of the Code of Civil Procedure ), the facts alleged in the motion to institute proceedings and what the evidence led at trial reveals.

Of course, it is not a matter here (I will have an opportunity to come back to this, see infra , paragraphs 87 et seq. ) of ruling on each of the special cases in the appeal record and deciding whether the documents or information requested in the Minister's letters are protected by professional secrecy. Rather, it is a matter of answering, on the basis of the factual background disclosed by the evidence, the question as to whether the requirements scheme established by

section 231.2, subsection (1), I.T.A. and, to the extent that they are tied to that particular subsection, by

section 231.7 and

section 232, subsection (1), I.T.A., complies with

section 8 of the Canadian Charter when the Minister contacts a taxpayer's notary or lawyer to obtain documents or information pertaining to the taxpayer. [ 36 ] The case does not concern the other situations in which requirements for documents or information are sent, in particular when a notary or lawyer is the very taxpayer who is the object of the requirement. [30] It does not concern the situation in which a requirement is addressed to a professional other than a notary or lawyer (the secrecy of these other professionals does not enjoy the same constitutional protection). Nor does it concern requirements sent under the other subsections of

section 231.2 I.T.A. (although it may be assumed that some of the remarks made here apply to the scheme provided for in those subsections, the administration of which is, however, the responsibility of judges: see, in particular, subsections (2) and (3) of

section 231.2 [31] ). [ 37 ] Lastly, here are a few propositions that, in this context, are not contested by the parties and on which there is consensus. [ 38 ] Since the Supreme Court judgment in R. v. McKinlay Transport Ltd. , [32] it has been understood—the appellants in fact acknowledged this—that the requirement to provide documents or information governed by

section 231.2, subsection (1), I.T.A. (formerly

section 231, subsection (3)) is a seizure within the meaning of

section 8 of the Canadian Charter , which reads as follows: 8. Everyone has the right to be secure against unreasonable search or seizure. 8. Chacun a droit à la protection contre les fouilles, les perquisitions ou les saisies abusives. [ 39 ] In another vein, there is no doubt that Canadian taxpayers have an obligation to conduct themselves honestly and openly with the tax authorities, which means that they must disclose the information needed by the authorities in question to rule on their situation with full knowledge of the facts. Hence, taxpayers are required to cooperate with the tax authorities.

The following remarks by Wilson J., in McKinlay Transport , supra , are in fact just as true today as they were in 1990: A chief source of revenue for the federal government is the collection of income tax. The legislative scheme which has been put in place to regulate the collection of tax is the Income Tax Act . The Act requires taxpayers to file annual returns and estimate their tax payable as a result of calculations made in these returns.

Moreover, the Act requires various third parties such as employers, corporations and banks to file information on wages, dividends, interest payments and the like: see s. 221(1)(

d) and

Part II of the Income Tax Regulations , C.R.C. 1978, c. 945. In essence, the system is a self-reporting and self-assessing one which depends upon the honesty and integrity of the taxpayers for its success: see Search and Seizure Under the Income Tax Act (1985), a study paper prepared for the Law Reform Commission of Canada by Neil Brooks and Judy Fudge. Nonetheless, it would be naive to think that no one attempts to take advantage of the self-reporting system in order to avoid paying his or her full share of the tax burden by violating the rules set forth in the Act.

Because of this reality Parliament enacted several provisions, among them s. 231(3), giving the Minister of National Revenue power to investigate and audit taxpayers . . . . . . . At the beginning of my analysis I noted that the Income Tax Act was based on the principle of self-reporting and self-assessment. The Act could have provided that each taxpayer submit all his or her records to the Minister and his officials so that they might make the calculations necessary for determining each person's taxable income.

The legislation does not so provide, no doubt because it would be extremely expensive and cumbersome to operate such a system. However, a self-reporting system has its drawbacks. Chief among these is that it depends for its success upon the taxpayers' honesty and integrity in preparing their returns. While most taxpayers undoubtedly respect and comply with the system, the facts of life are that certain persons will attempt to take advantage of the system and avoid their full tax liability .

Accordingly, the Minister of National Revenue must be given broad powers in supervising this regulatory scheme to audit taxpayers' returns and inspect all records which may be relevant to the preparation of these returns. The Minister must be capable of exercising these powers whether or not he has reasonable grounds for believing that a particular taxpayer has breached the Act. Often it will be impossible to determine from the face of the return whether any impropriety has occurred in its preparation.

A spot check or a system of random monitoring may be the only way in which the integrity of the tax system can be maintained. If this is the case, and I believe that it is, then it is evident that the Hunter criteria are ill-suited to determine whether a seizure under s. 231(3) of the Income Tax Act is reasonable. The regulatory nature of the legislation and the scheme enacted require otherwise.

The need for random monitoring is incompatible with the requirement in Hunter that the person seeking authorization for a search or seizure have reasonable and probable grounds, established under oath, to believe that an offence has been committed. If this Hunter criterion is inapplicable, then so too must the remaining Hunter criteria since they all depend for their vitality upon the need to establish reasonable and probable grounds.

For example, there is no need for an impartial arbiter capable of acting judicially since his central role under Hunter is to ensure that the person seeking the authorization has reasonable and probable grounds to believe that a particular offence has been committed, that there are reasonable and probable grounds to believe that the authorization will turn up something relating to that particular offence, and that

the authorization only goes so far as to allow the seizure of documents relevant to that particular offence. This is not to say that any and all forms of search and seizure under the Income Tax Act are valid. The state interest in monitoringcompliance with the legislation must be weighed against an individual's privacy interest. The greater the intrusion into the privacyinterests of an individual, the more likely it will be that safeguards akin to those in Hunter will be required.

Thus, when the tax officialsseek entry onto the private property of an individual to conduct a search or seizure, the intrusion is much greater than a mere demand forproduction of documents. The reason for this is that, while a taxpayer may have little expectation of privacy in relation to his businessrecords relevant to the determination of his tax liability, he has a significant privacy interest in the inviolability of his home. In my opinion, s. 231(3) provides the least intrusive means by which effective monitoring of compliance with the Income Tax Act can beeffected.

It involves no invasion of a taxpayer's home or business premises. It simply calls for the production of records which may berelevant to the filing of an income tax return. A taxpayer's privacy interest with regard to these documents vis-à-vis the Minister isrelatively low. The Minister has no way of knowing whether certain records are relevant until he has had an opportunity to examinethem.

At the same time, the taxpayer's privacy interest is protected as much as possible since s. 241 of the Act protects the taxpayer fromdisclosure of his records or the information contained therein to other persons or agencies.[33] [40] Indubitably, taxpayers to whom a requirement to provide documents or information is sent under what is now

section 231.1,subsection (1), I.T.A. can hardly argue an expectation of privacy in refusing to comply with the requirement: On the contrary, they must,in theory, comply with the requirement. If they do not, they expose themselves not only to the remedy provided for in

section 237.1, butalso to criminal prosecution under

section 238 I.T.A. The same is true of third parties to whom the Minister may decide to turn to obtaininformation (including documents) pertaining to a taxpayer. Third parties must, in theory, comply with such a requirement. [41] However, this raises the question of whether there is an exception to these principles, where the information sought by theMinister is in the hands of a taxpayer's notary or lawyer and therefore possibly subject to the professional secrecy of legal advisers. Whenthe third party to whom the Minister decides to turn under

section 231.2, subsection (1), I.T.A. is a notary or lawyer, can the Minister,by means of a requirement, demand that the notary or lawyer hand over information or documents relative to the affairs of the taxpayerwho is their client? If the Minister does so, can the notary or lawyer assert professional secrecy, by which he or she is in fact bound, andrefuse to comply with the requirement? [42] First, it should be emphasized that Parliament recognizes the problem. On reading

section 231.7 and

section 232, subsections(1) and (2), I.T.A., it is clear that

(1) Parliament accepts the existence of legal advisers' professional secrecy, or, more precisely, of"solicitor-client privilege" (the term "solicitor" includes "notary", with respect to Québec, as previously indicated), and that (2) theprivilege (barring exception, which I will come back to later) can be set up against requirements to provide documents or information. [43] Indeed, a notary or lawyer who asserts the privilege in question in support of his or her refusal to respond to such a requirementcan avoid the order sought against him or her under

section 231.7, paragraph 1(a), I.T.A. In addition, where a notary or lawyer is chargedunder

section 238 I.T.A., he or she must be acquitted, in accordance with

section 232, subsection (2), I.T.A., if he or she, "on reasonablegrounds, believed that a client of the lawyer had a solicitor-client privilege in respect of the information or document" ("pour des motifsraisonnables, il croyait qu’un de ses clients bénéficiait du privilège des communications entre client et avocat en ce qui concerne lerenseignement ou le document"), and if, having notified the Minister of his or her refusal, he or she expressly claimed the privilege.Furthermore, the information or documents demanded in a requirement will not be remitted to the Minister otherwise than as providedfor in

section 231.7 and

section 238, subsection (2), I.T.A. [44] In short, Parliament implemented a process clearly intended to ensure a measure of protection for the professional secrecy oflegal advisers. However, is this legislative mechanism sufficient with respect to the Canadian Charter, or does it violate

section 8 thereof?That is the crux of the case opposing the parties. [45] To decide the case, I will address the following points successively: - Professional secrecy as a principle of fundamental justice. - The scope of the professional secrecy recognized by

section 232, subsection (1), I.T.A. - The protection of professional secrecy relative to

section 8 of the Canadian Charter, and the compliance or non-compliance of therequirements scheme with that provision. B. Professional secrecy, a principle of fundamental justice [46] The protection of legal advisers' (lawyers' or notaries') professional secrecy has gradually evolved—throughout Canada, and inboth civil law and common law—from a simple rule of evidence to a substantive rule of law held as indispensable to the functioning ofthe Canadian legal system (not just the justice system, it will be noted). The trend has strengthened since Descôteaux v.

Mierzwinski,[34]with the result that it is now possible to speak of a principle of fundamenal justice, intended to ensure a free and open relationshipbetween a client and his or her legal adviser, as well as the "free flow of legal advice",[35] in all fields of law.[36] [47] In Blank v. Canada (Minister of Justice),[37] Fish J. said, with respect to professional secrecy (solicitor-client privilege), that ithad to be distinguished from "litigation privilege", and summarized as follows the evolution and the state of the law in the matter: 24 Thus, the Court explained in Descôteaux v.

Mierzwinski, (SCC), [1982] 1 S.C.R. 860, and has since thenreiterated, that the solicitor-client privilege has over the years evolved from a rule of evidence to a rule of substantive law. And the Courthas consistently emphasized the breadt

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