Executive Summary: Key Legal and Evidentiary Issues

• Scope of article 221 C.p.c. and whether CSL may obtain ARQ’s internal interpretation request and related documents as part of pre-trial discovery.
• Extent of solicitor–client privilege (secret professionnel de l’avocat) over internal legal interpretation requests and supporting documents prepared within Revenu Québec.
• Effect of ARQ’s voluntary disclosure of the 9 July 2021 interpretation letter on implied waiver of privilege over the underlying 11 May 2021 request and associated internal communications.
• Application of the broad, liberal concept of “pertinence” in tax litigation, given the presumption of validity of tax assessments and CSL’s burden to “demolish” the factual assumptions.
• Relevance and accessibility of documents from a related company’s audit file when those facts were relied on by ARQ and referred to in CSL’s verification file.
• Need to balance the fundamental protection of professional secrecy with fairness and coherence in litigation, particularly where a party relies on privileged legal advice to justify its position.

Factual background

Groupe CSL inc. (CSL) is part of an international group operating a maritime freight transport business with a fleet of self-unloading vessels, bulk carriers and transhippers. It acts both as an operating company for its Canadian activities and as the parent of various foreign subsidiaries. Its Canadian head office is in Montréal, with additional establishments in Dartmouth (Nova Scotia), Stoney Creek (Ontario) and Winnipeg (Manitoba).
In 2018, the Agence du revenu du Québec (ARQ) launched a tax audit of CSL for the years 2015 to 2018, focusing on whether the salaries paid to its marine personnel (captains, sailors and chief engineers) were subject to Québec laws on source deductions and social contributions on the basis that the remuneration was paid from an establishment in Québec. The audit was mainly conducted by ARQ auditor Kathleen Turgeon, who exchanged with CSL’s tax director, Claudine Marineau, over a hundred times during the process.
Following an audit that lasted a little over three years, ARQ concluded that the salaries paid by CSL to its marine staff were in fact subject to various Québec payroll-related contributions and withholdings because, in ARQ’s view, they were paid from an establishment situated in Québec. ARQ issued four tax assessments dated 31 December 2021, totalling CAD 13,382,111.65 for the years in question. CSL challenged these assessments by way of an originating application before the Court of Québec. The core issue in the main proceedings is whether the salaries paid to CSL’s marine personnel are subject to certain Québec tax laws, depending on whether they are paid from a Québec establishment.

Procedural context and discovery dispute

During the court proceedings, out-of-court examinations were held on 6 July 2023. CSL’s counsel examined Ms. Turgeon and asked her to agree to several undertakings. Two of those undertakings became the focus of this interlocutory judgment.
First, CSL requested production of an internal interpretation request dated 11 May 2021 that the verification service had submitted within ARQ regarding salaries paid by CSL from an establishment in Québec (Undertaking no. 1). Second, CSL requested all documents, exchanges, memoranda, emails, letters and/or reports from any person involved in preparing the interpretation letter dated 9 July 2021 issued in response to the 11 May request (Undertaking no. 2).
ARQ objected to both undertakings on the basis that the requested documents were protected by solicitor–client privilege (secret professionnel) and by litigation privilege. At the hearing before the Court, ARQ did not pursue the litigation privilege argument but maintained that the documents were covered by professional secrecy and that questions relating to the interpretation letter fell outside the scope of article 221 of the Code of Civil Procedure (C.p.c.), which governs pre-trial examinations. ARQ also took the position that any waiver of privilege applied only to the 9 July 2021 interpretation letter itself, not to the prior request or the supporting internal material.

Legal framework on pre-trial examinations and relevance

The Court first considered the scope of article 221 C.p.c., which provides that an examination on discovery may address all facts pertinent to the dispute and the supporting evidence, and may have as its object the communication of documents. Case law interpreting article 221 and its predecessors emphasizes a broad and liberal understanding of “pertinence” aimed at transparency and extensive pre-trial disclosure, without allowing discovery to devolve into a “fishing expedition” for irrelevant or purely internal documents.
The Court underlined that, in tax matters, this broad interpretation of relevance is especially justified because, under section 1014 of the Québec Taxation Act (Loi sur les impôts), a tax assessment enjoys a presumption of validity. To succeed, the taxpayer must “demolish” the presumption by undermining the factual assumptions made by the tax authority. In practice, ARQ “claims” the taxes by issuing an assessment, and if the taxpayer refuses to pay, it must itself institute proceedings to contest the assessment. This procedural reality effectively places the taxpayer in the position of a defendant responding to ARQ’s recovery demand, and it supports a flexible and generous approach to the scope of questioning and document production on discovery.
Applying these principles, the Court found that both undertakings sought information in CSL’s tax file that had been used to establish the contested assessments, in particular the factual hypotheses adopted by ARQ. The documents were directly useful for CSL to prepare its evidence and attempt to rebut the presumption of validity. The Court therefore held that the undertakings fell within the ambit of article 221 C.p.c. and that ARQ’s objection on the ground of lack of relevance could not stand.

Professional secrecy and internal legal advice within Revenu Québec

The Court then turned to the core of ARQ’s objection: whether the documents covered by the undertakings were protected by solicitor–client privilege. Professional secrecy is recognized in the Québec Charter of human rights and freedoms as a fundamental right, protected in article 9, and reinforced by provisions in the Civil Code of Québec, the Professional Code and the Barreau Act. It has two dimensions: a duty of confidentiality owed by the professional to the client, and an immunity from compelled disclosure in judicial proceedings of confidential communications between lawyer and client.
The Supreme Court of Canada has described solicitor–client privilege as a fundamental component of the justice system, ensuring a relationship of trust and candid communication between lawyer and client. In complex or long-running mandates, once it is established that a lawyer has been retained to provide a range of services to a client, there is a rebuttable presumption that communications between them are confidential and privileged, unless the opposing party can show that specific information falls outside that protected sphere. This protection applies equally when the lawyer is a government or in-house lawyer and the client is a public body or agency such as Revenu Québec.
On the facts, the Court accepted that ARQ’s verification service acted as a client when it sought advice from the Direction de l’interprétation (DGL) and its legal counsel on how to interpret the tax legislation in CSL’s situation. An affidavit from Me Sonia Wagner, Director in ARQ’s tax legislation branch, explained that the DGL issues legal and tax interpretations at the request of operational units, and that these opinions are expressly marked as protected and for internal use only, unless a director of that branch authorizes disclosure. The Court found that the 11 May 2021 request for interpretation, the 9 July 2021 interpretation letter and the accompanying internal documents all formed part of a legal consultation between ARQ, as client, and its in-house lawyers, and that both sides treated the communication as confidential. In principle, they were therefore covered by solicitor–client privilege.

Implied waiver of privilege through disclosure of the interpretation letter

The decisive question became whether ARQ’s transmission of the 9 July 2021 interpretation letter to CSL amounted to a waiver of privilege extending beyond the letter itself. ARQ conceded that by voluntarily sending the interpretation letter to CSL on 26 July 2021, it had waived privilege in respect of that document. However, ARQ maintained that the underlying 11 May 2021 request and all internal communications and documents used to prepare the opinion remained privileged.
The Court recalled that waiver of privilege may be express or implied. Implied waiver can be inferred from conduct that is inconsistent with an intention to maintain confidentiality, particularly where a party relies on legal advice to support its position in litigation. Jurisprudence has held that reliance on part of a privileged communication or on the substance of a legal opinion can result in waiver for the whole of that communication, and fairness and coherence may require that related information also be disclosed to avoid a selective or misleading use of privilege.
In this case, although neither party had formally filed the interpretation letter as an exhibit, ARQ’s defence relies on the legal analysis it contains, which was obtained before issuing the contested assessments. Moreover, the interpretation letter itself explicitly states that it is issued “further to your interpretation request of 11 May” and identifies the subject matter of that request. Having voluntarily provided the opinion to CSL and referenced the underlying request in that document, ARQ could not plausibly maintain that the request itself remained wholly secret. The Court held that by disclosing the letter, ARQ had implicitly waived privilege over the 11 May 2021 request as well.
The same reasoning was applied to the internal documents and exchanges that fed into the preparation of the interpretation letter. The Court pointed to authority confirming that when a client waives privilege over a legal opinion or a report based on gathered information, the waiver extends to the factual information and supporting material that were used to produce that opinion or report, at least to the extent fairness requires that the court and the opposing party understand the full context. The Court rejected the idea that privilege could be dissected line by line or document by document within a single continuum of communication between client and lawyer, stressing that such an approach would undermine certainty and the coherent application of professional secrecy.

Related-company audit documents and the “secret de Polichinelle”

Some of the documents at issue related to the audit of another company affiliated with CSL. ARQ argued that because they were from a different taxpayer’s audit file, they should not be communicated to CSL. The Court disagreed. It noted that those documents were already referenced in a “communications and interventions log” documenting exchanges between the verifier and CSL’s representatives, which ARQ itself had put into evidence as part of CSL’s verification file. The content of the related file, including the parallels drawn by ARQ between the two companies’ situations, had thus effectively become a “secret de Polichinelle” and could no longer be treated as confidential vis-à-vis CSL.

Outcome and orders of the Court

Having concluded that the undertakings sought by CSL were relevant under article 221 C.p.c. and that, although the documents were originally protected by solicitor–client privilege, ARQ had impliedly waived that privilege by disclosing the 9 July 2021 interpretation letter and relying on the underlying advice, the Court rejected ARQ’s objections.
The Court ordered ARQ, within 30 days, to provide CSL under confidential cover with: (1) a copy of the internal interpretation request dated 11 May 2021 concerning salaries paid by CSL from an establishment in Québec; and (2) copies of all documents, exchanges, memoranda, emails, letters and/or reports emanating from any person involved in drafting the 9 July 2021 interpretation letter that had been filed under seal during the hearing on the objections. To preserve confidentiality toward third parties, the Court ordered CSL not to disclose these documents to anyone without the Court’s authorization and ordered that the previously filed documents remain under seal, accessible only to the parties absent further leave.
The Court also suspended the deadline for filing the inscription for trial and judgment until 29 May 2026 to allow the parties to agree on a modified case protocol reflecting the additional disclosure steps, and it remained seized solely to approve that protocol. On the question of costs, the Court stated that court costs were “to follow”, leaving the allocation of costs to be determined later, likely in the judgment on the merits of the tax appeal. As a result, in this interlocutory decision, Groupe CSL inc. is the successful party, but no specific monetary award, damages, or quantified costs have yet been granted or ordered in its favour, and the total amount, if any, cannot currently be determined.