Solicitor-client privilege generally entitles clients to seek and obtain legal advice without fear that those communications will later be disclosed – a foundational doctrine in the Canadian legal system.
However, a recent case from the Ontario Court of Appeal (“ONCA”) shows that in some cases, privilege may be lost where a party relies on its understanding of its legal position in its court pleadings – even without expressly referring to the legal advice it has received.
Instead of filing a notice of objection, a taxpayer may enter into negotiations with the Canada Revenue Agency (CRA) with the purpose of resolving tax issues in dispute. When a settlement is reached, the CRA may request the taxpayer to sign a waiver, agreeing to the proposed changes to the assessment and confirming that the taxpayer will not appeal the assessment (made on the agreed terms) to the Tax Court of Canada (TCC). Such waiver of right is expressly provided for in sections 301(1.6) and 306.1(2) of the Excise Tax Act (ETA) and sections 165(1.2) and 169(2.2) of the Income Tax Act (ITA).
Like any contractual agreements, undue pressure, lack of proper legal advice, or unconscionable bargains may void a settlement agreement.The Federal Court of Appeal (FCA) recently confirmed in Taylor v. The Queen (2012 FCA 148) that a waiver of right to object or appeal an assessment signed by a taxpayer pursuant to a settlement is valid and binding on the taxpayer.
