I actually have been reading up on the case law there, and I have to say that I'm a little less concerned than the Federation of Law Societies—I hope they don't take away my certificate to practise law.
The Supreme Court jurisprudence on this actually does suggest that at the first level hearing, it does have to be done in camera, which means with the public not there and with the other side not there. That is because this privilege is viewed as such an absolute, or near absolute, privilege.
On further reflection, I think that proposed subsection 18.1(7), which you're referring to, would present problems if it didn't have the phrase “unless the judge orders otherwise”. I think that gives the judge enough leeway to follow the Supreme Court's instructions, which are that closed hearings without the applicant being present are sometimes necessary in order to preserve the privilege.
Once the person's identity is out, the person's identity is—