Milot Law v Sittler, 2025 ABCA 72
Reading time: 3 minutes (approx.)
By: Krista Nasartschuk
The Sittlers were clients of a Consulting company involved in a large-scale tax evasion scheme. Upon their discovery of the scheme they re-filed their taxes and were issued a gross negligence penalty by the Canada Revenue Agency (CRA).
To navigate the situation and their dealings with the CRA, the Sittlers retained Mr. Duane Milot of Milot Law Professional Corporation. The relationship was short-lived and ended with the Sittlers owing legal fees over $150,000. Following the dissolution of the solicitor-client relationship the Sittlers transferred significant assets to a trust called the Sittler Family Trust. Shortly thereafter they assigned themselves into bankruptcy.
Due to the legal fees owing to the firm, Milot Law became a creditor of the Sittlers under the Bankruptcy and Insolvency Act, RSC 1985, c B-3. As such, Mr. Milot was privy to the Sittlers’ bankruptcy Statement of Affairs and became aware that the Sittlers had not disclosed the totality of their assets to the bankruptcy trustee.
When correspondence to the Sittlers went unanswered, Mr. Milot consulted with the Law Society of Ontario regarding the predicament he found himself in. Following the guidance of the Law Society, Mr. Milot provided the bankruptcy trustee with information regarding the Sittlers undisclosed assets, though in a redacted format. The Sittlers subsequently brought an action seeking to have ‘privileged information’ excluded from the bankruptcy proceedings.
The chambers judge held that, in accordance with Section 158 of the Bankruptcy and Insolvency Act, Mr. Milot was obligated to disclose the information and had done so appropriately with the exception of a single email which had not been properly redacted.
The Sittlers appealed this decision. On appeal, Justices Kirker, Friesen and Shaner reviewed the general principles of solicitor-client privilege stating that:
“The party asserting solicitor-client privilege bears the onus of proving it. To prove the existence of solicitor-client privilege, the document in question must constitute:
- A communication between solicitor and client;
- which entails the seeking or giving of legal advice; and
- which is intended to be confidential by the parties.”
The Justices went on to state that while a bankrupt’s solicitor may be compelled to disclose information regarding their client, communications relating to legal advice remain protected. While the information provided to the bankruptcy trustee by Mr. Milot was not privileged it was deemed confidential and found to be obtained via the solicitor-client relationship. As such, it was barred from disclosure. However, the Justices noted that this situation was unique in that Mr. Milot was also a creditor to the Sittlers, stating:
“Mr. Milot did precisely as he should have done in the circumstances: he contacted his Law Society to seek advice about his professional conundrum. He was property informed that it would not be a breach of his fiduciary duty to his client for him to reveal limited confidential information to the trustee as it was only through the trustee that Milot Law could try to collect the legal fees owed.”
Based on the foregoing the court concluded that there was no error in the chambers judge’s decision and the decision was upheld.
