Tax & Trade Blog
Protecting your Electronic Devices from Seizure
One of the emerging areas in criminal law in the 21st century are the rules that surround the search and seizure of electronic devices like computers, notebooks and smartphones – particularly where those devices contain information covered by Solicitor-Client Privilege.
When the CRA executes a Search Warrant in the tax consequence, and seizes electronic storage devices like a notebook or an iPhone, the party subject to the Warrant may still rely on a claim of Solicitor-Client Privilege. This results in a unique court process which deals with how to isolate privileged documents that are otherwise stored in the device alongside non-privileged ones.
A recent case before British Columbia Supreme Court dealt with this issue, and is a good read for persons finding themselves subject to such a seizure.
In Solicitor-Client Privilege of Things Seized (Re), 2019 BCSC 91, a CRA forensics team had seized electronic storage devices which the taxpayers (who were unnamed) claimed contained information that was subject to Solicitor-Client Privilege. The search of the devices was suspended pending the identification and isolation of Privileged materials—but the parties were unable to agree on the appropriate process to deal with the Privileged documents.
At the subsequent hearing in the BC provincial courts, the CRA argued that it would be sufficient for the CRA forensics team to resume their search of the electronic devices in an area physically separated from the CRA investigators who would only be given access to data that was not ‘quarantined’ by reason of Privilege. The taxpayer’s position was that this method would not protect Solicitor-Client Privilege and that the search could only resume in accordance with the procedure set out in Lavallee, Rackel & Heintz v Canada (Attorney Genera) (2002 SCC 61).
That process required the court to appoint an ‘independent referee’ to take possession of all seized materials who would then facilitate the identification of Privileged materials. Only when all Privileged materials were identified was the CRA able to obtain access to the remaining Non-Privileged documents. Here, the taxpayers pointed out that the CRA’s forensics unit would be searching the electronic devices rather than an independent forensics team.
In deciding the matter, the BC court found that appointing an independent referee to handle the allegedly privileged information was not required to protect Solicitor-Client Privilege, concluding that this particular safe-guard was “more appropriate” in circumstances where a law firm was the subject of the Search Warrants (seeking the client information in the hands of the law firm). Instead, the court found that taxpayer and CRA counsel were best suited to review a copy of the materials to identify which of them were privileged before the CRA continued its investigation.
To that end, the BC Court ordered that:
(1) Two perfect copies of the electronic devices should be made with a copy being provided to the court. The CRA should then delete any and all materials it had copied from the devices and swear and affidavit that this had been completed.
(2) The second copy was then to be provided to a court-appointed forensic computer technician. The taxpayers would then provide a list of privileged materials to the technician who would isolate the privileged documents.
(3) Only after the materials were isolated would the technician be permitted to provide their copy of the materials to the CRA’s forensics team.
By way of commentary, the takeaway here is that taxpayers have a right to assert Solicitor-Client Privilege over documents seized by the CRA and other provincial tax authorities, even if on electronic devices. Thereafter, taxpayers can expect an independent process to have the Privileged information isolated within electronic devices before the information is given to the CRA or provincial tax authority.
Taxpayers in the unenviable position of responding to a Search Warrant like this should immediately seek expert legal advice to defend their rights.
Need assistance in this area? If so, please click here.