MNR v. KPMG: Professional Duty Overruled
In Canada (National Revenue) v. KPMG LLP (2016 FC 1322),
KPMG sought unsuccessfully to quash an order to disclose confidential
information relating to its unnamed clients on the basis of CPA
Ontario's Code of Professional Conduct ("the code").
Subsection 231.2(3) provides that a judge of the FC may, on application
by the minister, authorize the minister to impose on a third party a
requirement to provide documents or information relating to unnamed
persons if the person or group of persons is ascertainable and the
requirement is made to verify the person or group's compliance with any
duty or obligation under the Act. The authorization is also subject to
any conditions that the judge considers appropriate.
KPMG submitted that the requirement to disclose confidential information
should be quashed because rule 208 of the code (and similar provisions
in other provinces) provides that "[a] member or firm shall not disclose
any confidential information concerning the affairs of any client."
KPMG also noted that the commentary to the code states that "ultimately,
it is for the court to determine 'whether the confidentiality of the
information should be maintained.' " In the circumstances, the court was
not persuaded that this was an appropriate case to grant relief.
In Greater Montréal Real Estate Board (2007 FCA 346), the court held that there is no prerequisite to a judicial authorization of a "genuine and serious inquiry." In KPMG,
the judge specifically stated that "the language of s. 231.2(3) of the
Act is clear and overrides the general confidentiality rule imposed by
Rule 208 of the Code." In other words, a confidentiality clause in the
profession's code of ethics is not enough to warrant the exercise of the
court's discretion to set aside an order granted under subsection
Although this case involved the accounting profession, the decision can
also affect communications with other professions that have a
confidentiality clause in their codes of conduct, such as chartered
business valuators and chartered financial analysts. It even affects
confidential but non-privileged communications with lawyers. Therefore,
when a court order authorizes the minister to obtain third-party
information, these professions will also have to comply with the demand,
unless it is possible to find something in the particular facts of the
case that warrants an exception.
This may not be the end of the story. The judgment notes that some KPMG
clients may want to make a claim of solicitor-client privilege at the
time of KPMG's compliance with the order. That claim could even block
the release of a client's name (Welton Parent, 2006 FC 67; Thompson, 2016 SCC 21).
For information on practical steps that accountants can take to use
solicitor-client privilege to protect client information, see Brian R.
Carr, "Solicitor-Client Privilege," in the Canadian Tax Foundation's
2010 Conference Report, 7:1-36.
Henry Shew and Jody Wong
Cadesky Tax, Toronto