Burnyeat J.:
The petitioner, Katrina Grimmova, applies pursuant to s.232(4) of the Income Tax Act and s.488.1 of the Criminal Code and the petitioners, Frederick Kranz, Katarina Kranz, Kranz Investments Ltd. and Yaletown Enterprises Ltd., apply pursuant to Rules 5(22) and 10 of the Supreme Court Rules for a determination of the question of whether certain documents sealed in the records of the court are subject to solicitor-client privilege so that the documents should be returned.
In the Information to Obtain Search Warrants, the banking records, financial documents, accounting records, documents pertaining to the purchase or sale of properties, rental records, documents pertaining to income tax, documents pertaining to the incorporation, shareholdings and minutes of meetings of certain companies all pertaining to the period January I, 1993 through December 31, 1995 were sought from the petitioners, Frederick Kranz, Katarina Kranz, Kranz Investments Ltd. and Yaletown Enterprises Ltd. and the banking records, accounting records, documents pertaining to income tax, and original documents containing specimen signatures of Katrina Grimmova as well as records, statements and documents pertaining to property at 524 Eastcot Road, West Vancouver for the period January 1, 1992 through December 31, 1994 were sought as against the petitioner Grimmova on the basis that those documents would afford evidence with respect to the commission of certain offences against the Income Tax Act, R.S.C., c.].
The alleged offences under the Income Tax Act were that Kranz Investments Ltd. and Frederick Kranz wilfully evaded or attempted to evade payment of taxes by under-stating the income of Kranz Investments Ltd., that Kranz Investments Ltd. and Frederick Kranz had made or participated in, assented to or acquiesced in the making of false or deceptive statements in the 1994, 1995 and 1996 income tax returns of Kranz Investments Ltd., that Yaletown Enterprises Ltd. and Katarina Kranz had wilfully evaded or attempted to evade payment of taxes imposed on Yaletown Enterprises Ltd. for the taxation years 1993 and 1994 and had unlawfully made or participated in, assented to or acquiesced in the making of false or deceptive statements in the 1993 and 1994 corporation income tax returns for Yaletown Enterprises Ltd., that Frederick Kranz had evaded payment of taxes imposed upon him personally in his income tax returns for 1993 through 1995 and had made or participated in, assented to or acquiesced in the making of false or deceptive statements in his income tax returns for 1993 through 1995 and that Frederick Kranz and Katarina Kranz had wilfully evaded or attempted to evade payment of taxes imposed upon Katarina Kranz for the taxation years 1993 through 1995, that Frederick Kranz and Katarina Kranz had unlawfully made, or participated in, assented to, or acquiesced in the making of false or deceptive statements in the 1993 through 1995 income tax returns of Katarina Kranz and that Katrina Grimmova conspired with Frederick Kranz and Katarina Kranz to enable Katarina Kranz to evade the payment of taxes in the 1994 taxation year and to commit an offence as described in paragraph 239(1 )(d) of the Income Tax Act.
Specifically, it was alleged that Frederick Kranz appropriated monies from Kranz Investments Ltd. in the amount of not less than $138,123 during the period January I, 1993 through December 31, 1995 by charging personal and non-business expenses to that company, that Katarina Kranz appropriated monies from Yaletown Enterprises Ltd. in the amount of not less than $111,910 during the period January 1, 1993 through December 31, 1995 by under-reporting the company’s rental income in 1993, by underpaying the company for renovations done on her personal residence and by under-reporting her income from the company in 1995, that Frederick Kranz under-stated his taxable income for the years 1993 through 1995 by failing to report the amount he appropriated from Kranz Investments Ltd., that Katarina Kranz under-stated her taxable income reported for the years 1993 through 1995 by failing to report the amount she appropriated from Yaletown Enterprises Ltd., that Frederick Kranz and Katarina Kranz understated the taxable income of Katarina Kranz reported for the 1994 taxation year when Katarina Kranz failed to report her income in the amount of $217,410 from the sale of property at 524 Eastcot Road, West Vancouver, that Frederick Kranz under-stated the revenues and over-stated the expenses of Kranz Investments Ltd. in an amount of not less than $138,123, that Frederick Kranz and Katarina Kranz under-stated the revenues and overstated the expenses of Yaletown Enterprises Ltd. in an amount of not less than $99,910 for the 1993 and 1994 taxation years and that Katrina Grim- mova conspired with Frederick Kranz and Katarina Kranz in the understatement of the 1994 taxable income of Katarina Kranz by claiming ownership of 524 Eastcot Road, West Vancouver, and entitlement to the principle residence exemption available to such an owner.
As a result of that Information, the documents which are in issue were seized on June 17, 1998 from the law firm of Gourlay, Spencer, Slade & Winch, from the residence of Frederick and Katarina Kranz and from the business premises of Kranz Investments Ltd. and Yaletown Enterprises Ltd.
In an affidavit sworn January 29, 1999, Janet Slade, Barrister and Solicitor, stated that the petitioner, Katrina Grimmova, retained her and her firm to provide legal advice, that she had communicated with Ms. Grimmova on a confidential basis in order to provide her with legal advice, that she had received instructions from Ms. Grimmova: “... to take instructions from and provide legal advice to the petitioner’s agent, Yaletown Enterprises Ltd., and its officers, employees and agents ... for the purposes of discharging a builder’s lien placed on the Petitioner’s property”, and that she had communicated with Yaletown Enterprises Ltd. “on a confidential basis in order to provide them with legal advice.”
Two affidavits were sworn by Frederick Kranz. In those affidavits he states that the firm of Russell & DuMoulin was retained by him in 1993 and acted as legal counsel for him as well as Kranz Investments Ltd. and Yaletown Enterprises Ltd., the firm of Clark Wilson was retained by him in 1993 and acted as legal counsel for him and the two companies through 1996, the firm of Thorsteinssons was retained by him in 1997 and has since acted as legal counsel for him, Katarina Kranz and the two companies in respect of certain income tax matters, David Okros was retained by him in 1993 and acted as legal counsel for him and the two companies and, that David Okros, representatives from Russell & DuMoulin, Clark Wilson and Thorsteinssons had confidential communications with him in his personal capacity and his capacity as an officer of the two companies for the purpose of seeking or obtaining legal advice and that Katarina Kranz has had confidential communications with representatives from Thorsteinssons for the purposes of seeking or obtaining legal advice.
Statutory Provisions
The provisions which are applicable to this matter are s.488.1 of the Criminal Code and s.232 of the Income Tax Act. Section 488.1 reads in part:
488.1(2) Where an officer acting under the authority of this or any other Act of
Parliament is about to examine, copy or seize a document in the possession of a lawyer who claims that a named client of his has a solicitorclient privilege in respect of that document, the officer shall, without examining or making copies of the document,
(a) seize the document and place it in a package and suitably seal and identify the package; and
(4) On an application under paragraph (3)(c), the judge
(a) may, if the judge considers it necessary to determine the question whether the document should be disclosed, inspect the document;
(d) shall determine the question summarily and,
(i) if the judge is of the opinion that the document should not be disclosed, ensure that it is repackaged and resealed and order the custodian to deliver the document to the lawyer who claimed the solicitor-client privilege or to the client, or
(ii) if the judge is of the opinion that the document should be disclosed, order the custodian to deliver the document to the officer who seized the document or some other person designated by the Attorney General, subject to such restrictions or conditions as the judge deems appropriate,
and shall, at the same time, deliver concise reasons for the determination in which the nature of the document is described without divulging the details thereof.
(10) An application under paragraph (3)(c) shall be heard in private. (11) This section does not apply in circumstances where a claim of solicitorclient privilege may be made under the Income Tax Act, R.S.C. 1985, c.27 (1st Supp.), s.71.
Section 232 of the Income Tax Act provides in part:
(1) “solicitor-client privilege” — “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.
(3) Where, pursuant to section 231.3, an officer is about to seize a document in the possession of a lawyer and the lawyer claims that a named client of the lawyer has a solicitor-client privilege in respect of that document, the officer shall, without inspecting, examining or making copies of the document,
(a) seize the document and place it, together with any other document in respect of which the lawyer at the same time makes the same claim on behalf of the same client, in a package and suitably seal and identify the package; and
(b) place the package in the custody of the sheriff of the district or county in which the seizure was made or, if the officer and the lawyer agree in writing on a person to act as custodian, in the custody of that person.
(5) An application under paragraph (4)(c) shall be heard in camera, and on the application
(a) the judge may, if the judge considers it necessary to determine the question, inspect the document and, if the judge does so, the judge shall ensure that it is repackaged and resealed; and
(b) the judge shall decide the matter summarily and,
(i) if the judge is of the opinion that the client has a solicitor-client privilege in respect of the document, shall order the release of the document to the lawyer, and
(ii) if the judge is of the opinion that the client does not have a solicitor-client privilege in respect of the document, shall order
(A) that the custodian deliver the document to the officer or some other person designated by the Deputy Minister of National Revenue, in the case of a document that was seized and placed in custody under subsection (3), or
(B) that the lawyer make the document available for inspection or examination by the officer or Other person designated by the Deputy Minister of National Revenue, in the case of a document that was retained under subsection (3.1),
and the judge shall, at the same time, deliver concise reasons in which the judge shall identify the document without divulging the details thereof.
Documents Seized from Gourlay, Spencer, Slade & Winch
The documents seized from this law firm are clearly documents contemplated by s.488.1 of the Criminal Code and s.232 of the Income Tax Act in that they are documents “in the possession of a lawyer and the lawyer claims that a named client of the lawyer has a solicitor-client privilege in respect of that document.” It is clear that the onus is on either the lawyer or the client to show that a solicitor-client relationship was in place so that solicitor-client privilege applies: R. v. Morra (1991), 68 C.C.C. (3d) 273 (Ont. Gen. Div.)); In the Matter of Application under s. 441.1(3)(c) of the Criminal Code of Canada, Re (February 21, 1990), Doc. Vancouver CC881107 (B.C. S.C.); Hilborn v. Canada (Attorney General) (May 18, 1990), Doc. Vancouver CC900160 (B.C. S.C.); R. v. Tysowski, [1997] 8 W.W.R. 493 (Man. Q.B.); and B. v. Canada, [1995] 5 W.W.R. 374 (B.C. S.C.).
In B. v. Canada, Thackray J. dealt with certain documents in the hands of a law firm and at the residence of one the firm’s solicitors. In his judgment, he refers to the Report of the Special Committee of the Canadian Bar Association - Ontario, Regarding Solicitor-Client Privilege (1985) and quotes the following passage:
... Cases suggest to the Committee that the limits of solicitor-client privilege may not be fully understood by all members of the legal profession. Some lawyers confuse the principle of confidentiality with the rule of privilege. The Committee feels that this misunderstanding accounts for most of the concern expressed by lawyers when cases involving solicitor-client privilege, such as Greymac are discussed.
The doctrine of solicitor-client privilege does not protect all communications between a solicitor and his client from disclosure. Certain communications between a solicitor and his client, while confidential, may be subject to compulsory disclosure under due process of law. Other communications are protected from disclosure by the rule of privilege provided, of course, that the communications themselves are not made in furtherance of a fraud or other crime.
It has been established for many years that in order for a privilege to exist, certain conditions must apply. The classic statement of those conditions is contained in 8 Wigmore, Evidence, Section 2285 (McNaughton rev. 1961) and may be summarized as follows:
1. the communications must originate in a confidence that they will not be disclosed;
2. this element of confidentiality must be essential to the full and satisfactory maintenance of the relation between the parties;
3. the relation must be one which in the opinion of the community ought to be sedulously fostered; and
4. the injury that would inure to the relation by the disclosing of the communications must be greater than the benefit thereby gained for the correct disposal of litigation (applied in Slavutych v. Baker et al (1975), 55 D.L.R. (3d) 224, 228-9, (S.C.C.)).
Because communications between a solicitor and his client fulfill these four conditions, the rule of privilege with respect to such communications has been established. The question then becomes to what extent does the privilege apply. As noted above, the privilege does not apply to every communication between a solicitor and his client but only to certain ones. In order for the privilege to apply, a further four conditions must be established. Those conditions may be put as follows:
1. there must be a communication, whether oral or written;
2. the communication must be of a confidential character;
3. the communication must be between a client (or his agent) and a legal advisor; and
4. the communication must be directly related to the seeking, formulating, or giving of legal advice.
If these four conditions are satisfied then the communications (and papers relating to it) are privileged.
It is these four conditions that can be misunderstood (or forgotten) by members of the legal profession. Some lawyers mistakenly believe that whatever they do, and whatever they are told, is privileged merely by the fact that they are lawyers. This is simply not the case. For example:
(a) the name of a client is not protected because it is not normally communicated in confidence and therefore has been held not to be privileged except in special circumstances;
(b) evidence as to what monies a solicitor holds, or 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;
(c) similarly, even where a document itself may be privileged, the facts contained in the document are not privileged because they are facts not communications and must, therefore, be revealed if properly compelled by law.
If the second set of four conditions noted above is kept in mind, the narrow scope of privilege is easier to understand. Further, decisions such as Greymac can be seen not as major encroachments on the rule of privilege but rather as the natural outcome of the proper application of these four conditions.
As noted at the outset, the confusion arises from a failure to distinguish between the rule of privilege and the principle of confidentiality. (at pp.379-380)
He also cites the following passage from Sopinka, Lederman and Bryant, The Law of Evidence in Canada, (Toronto: Butterworths 1992) at pp.626-27):
Although confidentiality is the cornerstone for the protection of communications within particular relationships, confidentiality alone is not sufficient to attract privilege. Confidentiality may well attract other legal and ethical rights and obligations but it does not have its foundation in the evidentiary doctrine of privilege.
Evidence law does not concern itself with the ethical requirement upon a professional such as a lawyer to hold in strict confidence all information acquired in the course of his or her professional relationship concerning the business and affairs of a client. The lawyer has a professional duty not to divulge such information without the client’s approval or unless required by law to do so. This ethical rule is wider than the evidentiary solicitor-client privilege and applies without regard to the nature of the source of the information or the fact that others may share the knowledge. Where there is a stronger public interest in disclosure, it will override the professional duties of confidence. (at pp.380-381)
Counsel for Ms. Grimmova agreed that a number of documents were not privileged and could be released. Accordingly, it is ordered that the following documents be released: 17, 18, 19, 20, 21, 22, 23, 26, 27, 30, 31, 32, 33, 34, 35, 37, 38, 42 (two documents), 43, 44, 45, 46, 49, 50, 51, 61, 62, 65, 67, 71, 72, 73, 80, 82, 83, 84, 85, 88, 89, 90, 91, 92, 94, 98, 99, 101, 102, 103, 104, 105, 107, 108, 109, 110, 111, 112, 113 and 119.
In accordance with the discussion set out in B. v. Canada, Supra, and the decisions noted below, the following documents are to be released:
(a) Documents relating the “accounting record of lawyer.”
Pursuant to s.232( 1 ) of the Income Tax Act and the decision of Romeo’s Place Victoria Ltd., Re (1981), 81 D.T.C. 5295 (Fed. T.D.); Heath v. Minister of National Revenue, [1990] 2 C.T.C. 28 (B.C. S.C.); and Organic Research Inc. v. Minister of National Revenue (1990), 90 D.T.C. 6261 (Alta. Q.B.). I am satisfied that a number of documents relating to the ac- counting records maintained by the subject law firm should be released. These documents relate to the monies received and disbursed, the disbursements incurred on behalf of the client and a trust reconciliation of funds received and disbursed. The documents to be released are numbers 13 and 16. An exception will be made regarding the top 6'/ inches of the third page of document 16. That portion of that page contains the internal computer records of the firm relating to services rendered. In accordance with the decisions set out below it is inappropriate for that part of that page to be released.
(b) Conveyancing documents.
The notes of the solicitor relating to a search and the vendor’s statement of adjustments are to be released: 117 and 118.
(c) Documents relating to the pay-out of sale proceeds.
In accordance with the decisions in Ontario (Securities Commission) v. Greymac Credit Corp. (1983), 41 O.R. (2d) 328 (Ont. Div. Ct.); Playfair Developments Ltd. v. Deputy Minister of National Revenue (1985), 85 D.T.C. 5155 (Ont. H.C.);
B. v. Canada, supra; and R. v. Joubert (1992), 7 B.C.A.C. 31 (B.C. C.A.), the following documents shall be released: 59, 60, 63, 64, 66, 68, 69, 70 and 100.
(d) Statements of account.
Document number 15 contains an extensive description of services rendered and, accordingly, in accordance with the decisions reached in Mutual Life Assurance Co. of Canada v. Canada (Deputy Attorney General) (1984), 84 D.T.C. 6177 (Ont. H.C.); Southern Railway of British Columbia v. Deputy Minister of National Revenue (1990), 91 D.T.C. 5081 (B.C. S.C.); Legal Services Society (British Columbia) v. British Columbia (Information & Privacy Commissioner) (1996), 140 D.L.R. (4th) 372 (B.C. S.C. [In Chambers]); and Taves v. Canada, [1995] 2 C.T.C. 347 (B.C. S.C.). The document numbered 15 is privileged. At the same time, the top 6V2 inches of the third page of document 17 is also privileged.
(e) General conveyancing documents.
In Eastwood & Co. v. Minister of National Revenue (1993), 94 D.T.C. 6411 (B.C. S.C.), Hall J. concluded:
It appears to me that the majority of the documents herein are what I might call simple conveyancing type documents and statements of account relating thereto and I cannot see that any of these document partake of anything but factual conveyancing matters that ought not to attract solicitor and client privilege. Concerning these documents, it does not seem to me that any elements of advice were given or sought by the client. These documents are more in the nature of simple reports by a conveyancing agent relating to certain noted conveyancing matters. (at p. 6412)
An even broader view of these documents was taken by Oliphant A.C.J.Q.B. in À. v. Tysowski, supra:
Although it must be conceded that advice is given by the solicitors to their respective clients by way of reporting letters on the closings of the transactions involved in the various files, the advice really is a factual report as to what has transpired in the various transactions and not legal advice in the strict sense of the word. I hold that advice given by way of reporting on the closing of a real estate transaction is not subject to a solicitorclient privilege. (at p.499)
Accordingly, the following documents are not subject to solicitor-client privilege: 14, 24, 25, 28, 29, 36, 39, 40, 41, 47, 48, 52, 53, 54, 55, 56, 57, 58, 74, 75, 77, 78, 79, 81, 86, 87, 95, 96, 97, 106 and 116.
(f) Instructions regarding the sale.
There were no written instructions received. Rather, a telephone conversation on April 15, 1994 set into motion the subject law firm acting on the conveyance. In the circumstances, the following documents are privileged: 114 and 115.
Documents Seized from Frederick Kranz, Katarina Kranz, Kranz Investments Ltd. and Yaletown Enterprises Ltd.
While none of the documents seized were documents which were in the possession of the various solicitors who have acted in the past for these parties so that the provisions of s.488.1 of the Criminal Code and s.232 of the Income Tax Act would then apply, the documents nevertheless are subject to the scrutiny of the court in determining whether they are subject to solicitor-client privilege. Solicitor-client privilege is a privilege belonging to the client and the court is in a position to make a declaration on the basis of the common law dealing with what documents and communications are subject to solicitor-client privilege.
Much of what was seized relates to documents which are outside of the time period specified under the search warrant or which do not fall within the materials sought to be produced by the search warrant. While there are some decisions of Canadian courts which would suggest that it is not for the court to determine whether documents are relevant or not, I am satisfied that the question of relevancy must be considered in deciding whether the documents should be produced pursuant to the search warrants served. While it may be that some documents would not be subject to solicitorclient privilege if they were the subject matter of a different search warrant, the right to privacy as is available to all citizens requires the court to determine the question of relevancy when search warrants such as these cast such a wide net. I rely on the following decisions in arriving at that conclusion:
(a) Romeo's Place Victoria Ltd., Re., 81 D.T.C. 5295 (F.C.T.D.) where Collier J. concluded:
Where solicitor-client privilege is claimed, the court must decide whether that privilege exists. But the question of that privilege must, in my opinion, be decided in respect of documents or records relevant to the affording of evidence as to the violation of any provision of the Income Tax Act. If the documents or records have no reasonable relevance as possible evidence in respect of a violation of the Act or a regulation, then, as I see it, the court need not, and should not, decide whether there is solicitor-client privilege. The scheme of sections 231 and 232 indicates to me the legislators intended the court must determine, on a generous and reasonable basis, the relevance of the records to the investigation. If on inspection by the judge, they are absolutely irrelevant to any present or potential violation of the Income Tax Act, then they should be returned to the taxpayer without examination by any departmental officials. (at p. 5298)
(b) Organic Research Inc. v. Minister of National Revenue (Alta. Q.B.) (November 1990) Egbert J. cited with approval Romeo's Place Victoria Ltd., Re., supra, as well as Kelly Douglas & Co. v. The Queen, [1981] C.T.C. 457 (B.C. S.C.):
l am in agreement that documents must fall within the temporal scope of the warrant to be legally seized. This is preliminary to a section 232 application.” (at p.420).
In accordance with the decisions cited above and in accordance with my ruling on the question of relevancy, the documents presently sealed will be dealt with as follows:
(a) Documents 1 through 56.
These documents relate to various correspondence relating to an action commenced by Kranz v. Nelson (City) (April 12, 1995), Doc. Vancouver C922371 (B.C. S.C.). Some of the documents are protected by solicitor-client privilege. Some of the documents relate to periods of time prior to the first date specified in the Search Warrant. None of the documents are relevant to the Search Warrants. Accordingly, documents 1 through 56 will not be produced.
(b) Documents 60 through 74.
These documents relate to advice given to Mr. and Mrs. Kranz, Kranz Investments Ltd. and Yaletown Enterprises Ltd. by their present solicitors Thorsteinssons, regarding the matters which are the subject matters of the Search Warrants as well as accounts rendered relating to the same and/or work product relating to the advice given. Accordingly, documents 63 through 74 are privileged and are not to be produced.
(c) Documents 76 through 151.
These documents relate to an unrelated litigation matter where Boiler Inspection & Insurance Company of Canada was the defendant. Virtually all of the documents relate to accounts for services rendered. The remainder of the documents are irrelevant or are privileged. Accordingly, none of the documents 76 through 151 are to be produced.
(d) Documents 152 through 297.
These documents relate to action C9422189 (Vancouver Registry) where Frederick Kranz and Kranz Investments Ltd. are the plaintiffs and the Corporation of the City of Nelson and Trainor Mechanical Contractors Ltd. are the defendants, Action C922371 (Vancouver Registry) where Frederick Kranz is the plaintiff and the Corporation of the City of Nelson and A.D. Schneider are the defendants, and a proposed claim by the Owners Strata Plan VR29 against Mr. Kranz. A considerable number of the documents relate to accounts rendered. The major of the documents relate to settlement of the question of the balance due and owing to the Strata Corporation of Strata Plan VR29. On the basis of irrelevancy, on the basis that some of the documents represent accounts rendered and on the basis that privilege attaches to the work product and the advice given as set out in the documents, these documents will be not produced.
(e) Documents 298 through 324.
These documents relate to the Supreme Court of British Columbia Action No. C922371 (Vancouver Registry) where Frederick Kranz was the plaintiff and the Corporation of the City of Nelson and A.D. Schneider were the defendants. There are some statements of account and some documents which were filed in Action C922371. On the basis of relevancy, these documents are not to be produced.
(f) Documents 325 through 418.
These documents relate to the Supreme Court of British Columbia Kranz v. Boiler Inspection & Insurance Co. of Canada (April 3, 1995), Doc. Vancouver C892202 (B.C. S.C.) where Frederick Kranz and Kranz Investments Ltd. were the plaintiffs and The Boiler Inspection and Insurance Company of Canada was the defendant. Based on relevancy, accounts rendered relating to the matters, opinion letters provided relating to the trial and on the basis of privilege, these documents shall not be produced.
(g) Documents 419 through 580.
These documents relate to the Supreme Court of British Columbia Action No. C922371 (Vancouver Registry) where Frederick Kranz was the plaintiff and the Corporation of the City of Nelson and A.D. Schneider were the defendants. Documents 419 through 449, 452 through 470, 528 through 530 are accounts rendered relating to this and other actions and are privileged. The following documents relate to instructions given or discussions regarding instructions between the client and counsel and are not to be released: 450 and 451. The remainder of the documents are not relevant to these proceedings or relate to instructions received and matters of confidentiality as between solicitor and client. Accordingly, none of the documents 419 through 580 are to be produced.
Order accordingly.