When Is Communication Between A Client's Accountant And Lawyer Privileged?

Communications between lawyers and their clients' accountants or other non-legal professionals are not in themselves privileged but can be where the communication is in "furtherance of a function essential to the solicitor-client relationship or the continuum of legal advice provided by the solicitor", the Saskatchewan Court of Appeal recently held in Redhead Equipment v Canada (Attorney General), 2016 SKCA 115 [Redhead].

Documents that are privileged do not have to be disclosed, for example, in a lawsuit or to tax authorities. Legal advice privilege, a type of privilege in which legal advice is sought from a lawyer, is the form of privilege most often relied on in transactional settings, and protects communications between a client and a lawyer. Often, however, accountants and other non-legal professionals are involved in such transactions. Are communications between these other professionals and a lawyer privileged? If "it depends", are there ways of strengthening the potential for such communications to be privileged? In Redhead, the Saskatchewan Court of Appeal had an opportunity to address these questions.

In Redhead, a group of companies (Redhead) effected a restructuring which involved Redhead seeking legal advice on tax-related matters. The Canada Revenue Agency (CRA) later requested that certain information and documents related to the restructuring be provided to it pursuant to the Income Tax Act. In response, Redhead applied for an order that the documents in question were privileged.

In considering the decision of a chambers judge, the Saskatchewan Court of Appeal reviewed relevant principles of law concerning legal advice or solicitor-client privilege (litigation privilege was not at issue, since litigation was not existing or contemplated at the time). The Court noted that the "nature or content of the communication must involve legal advice" and the "lawyer must be acting as a lawyer giving legal advice rather than in some other non-legal capacity". Accounting documents, or documents of a "factual nature" are not privileged. Likewise, documents that the lawyer possesses unrelated to the giving of legal advice are not privileged. However, to attract the privilege, it is not necessary for the communication to "specifically request or offer advice as long as it can be placed within the 'continuum' of communication in which the solicitor tenders advice."

In applying these principles to situations in which a third party, such as...