Date: 20080709
Docket: T-673-08
Citation: 2008 FC 853
Ottawa, Ontario, July 9,
2008
PRESENT: The Honourable Mr. Justice Mandamin
BETWEEN:
THE
MINISTER OF NATIONAL REVENUE
Applicant
and
ADVANTAGE
CREDIT UNION
Respondent
REASONS FOR ORDER AND ORDER
[1] The Minister
of National Revenue (the “Minister”) issued a Requirement For Information (the
“Requirement”) obligating Advantage Credit Union to provide banking documents
concerning a delinquent taxpayer, Marcel Simonot, as well as the banking
documents of other related Credit Union account holders. Following strong objections
by Mr. Simonot, the Credit Union refused to comply with the Requirement. The
Minister now applies for a compliance order compelling observance of the Requirement.
Issue
[2] Is the Minister
entitled to issue a Requirement that will require the Credit Union to disclose
information concerning unnamed persons without first obtaining judicial
authorization?
[3] I have
decided that the compliance order should issue. My reasons follow.
Background
[4] The Minister is
pursuing collection of unpaid taxes from Mr. Simonot whose outstanding tax
indebtedness is over $1.3 million.
[5] The related
parties named in the Requirement are Albertine Simont, MAS Consulting Inc., Big
Al Investments Ltd. and Bodmin Farms. They all have accounts or other business
dealings with the Credit Union. Albertine Simonot is the spouse of Mr.
Simonot. MAS Consulting Inc. is now named Marcel Simonot Consulting Inc. and Marcel
Simonot is listed as sole director in the Saskatchewan corporate
registry. Albertine Simonot is listed as sole director and shareholder of Big
Al Investments Ltd. in the Registry. The registered office addresses of the
two corporations are the same as Mr. Simonot’s law office. Finally, Bodmin
Farms held an account with the Credit Union and that the account name is also
in the name of Albertine Simonot.
[6] The Minister
served the Requirement on the Credit Union on March 29, 2007, then known as
Northgate Credit Union. The Requirement, issued pursuant to s. 231.1(a) and
(b) of the Income Tax Act, R.S.C. 1985 (5th Supp.), c.1, as
amended (the “Act”), required the Credit Union to provide information
and documents in respect of Marcel Simonot, Albertine Simont, MAS Consulting
Inc., Big Al Investments Ltd. and Bodmin Farms as follows:
(a)
A
statement setting out all entries in all accounts at your branch, that are
known to be or to have been operated or controlled by, for, or on behalf of the
persons named above or any of them and all joint accounts in the names of any
of those persons and another or others and all entries that are known to be or
to have been related to the affairs of those persons or any of them, in all
other accounts at your branch including casual, manager’s sundry and similar
accounts.
(b)
A
statement setting out particulars of all transactions, including loans and
discounts and collateral thereto, safety deposit box rentals, safekeeping and
security dealings at your branch with, to, for or on behalf of the persons
named above or any of them either alone or with another or others, or any
person or persons known to be or to have been acting on behalf of those persons
or any of them; and
(c)
All
documents, including authorizations, powers of attorney, mail and telegraphic
transfers, accounts, vouchers, letters, contracts, letters of credit and
statements that are known to be or to have been related to the entries or
transactions set out in the statements required under (a) and (b) above.
[7] The Credit
Union responded on May 17, 2007 advising that Mr. Simonot had objected to the
Requirement and it invited the Minister to seek judicial authorization for the information
sought. The basis for the Credit Union’s refusal was that the disclosure of
the information sought would also reveal information about unnamed persons. An
exchange of correspondence followed between the Credit Union and the Minister. Ultimately,
the Credit Union declined to comply with the Requirement.
[8] Lastly, the
Minister provided, by way of affidavit evidence, that:
33.
The
Minister issued the Requirement for purposes related to the administration and
enforcement of the Income Tax Act, in particular the collection of
amounts payable under the Income Tax Act by Marcel Simonot.
34.
The
Applicant requires the information to determine whether Marcel Simonot made a
transfer or transfers to any or all of Albertine Simonot, MAS Consulting Inc.,
Big Al Investments Ltd. and Bodin Farms that may be the subject of collection
action. Collection action may include assessments against any or all of
Albertine Simonot, MAS Consulting Inc. (now known as Marcel Simonot Consulting
Inc.), Big Al Investments Ltd., or Bodmin Farms pursuant to section 160 of the Income
Tax Act.
35.
The
Requirement was not made to verify compliance by any unnamed person with any
duty or obligation under the Income Tax Act. The information and
documents sought in the Requirement are not required to verify compliance by
any unnamed person with any duty or obligation under the Income Tax Act.
Is
the Minister entitled to issue a Requirement that requires the Credit Union to disclose information concerning
unnamed persons without first obtaining judicial authorization?
[9] The relevant
provisions of the Act are:
|
231.2 (1) Notwithstanding any other provision
of this Act, the Minister may, subject to subsection (2), for any purpose
related to the administration or enforcement of this Act (including the
collection of any amount payable under this Act by any person), of a
comprehensive tax information exchange agreement between Canada and another
country or jurisdiction that is in force and has effect or, for greater
certainty, of a tax treaty with another country, by notice served personally
or by registered or certified mail, require that any person provide, within
such reasonable time as stipulated in the notice,
(a) any
information or additional information, including a return of income or a
supplementary return; or
(b) any
document.
Unnamed persons
(2) The Minister shall not impose
on any person (in this section referred to as a “third party”) a
requirement under subsection 231.2(1) to provide information or any
document relating to one or more unnamed persons unless the Minister first
obtains the authorization of a judge under subsection 231.2(3).
Judicial authorization
(3) On ex parte
application by the Minister, a judge may, subject to such conditions as the
judge considers appropriate, authorize the Minister to impose on a third
party a requirement under subsection 231.2(1) relating to an unnamed person
or more than one unnamed person (in this section referred to as the “group”)
where the judge is satisfied by information on oath that
(a) the
person or group is ascertainable; and
(b) the
requirement is made to verify compliance by the person or persons in the
group with any duty or obligation under this Act.
(c) and
(d) [Repealed, 1996, c. 21, s. 58(1)]
|
231.2 (1)
Malgré les autres dispositions de la présente loi, le ministre peut, sous
réserve du paragraphe (2) et pour l’application ou l’exécution de la présente
loi (y compris la perception d’un montant payable par une personne en vertu
de la présente loi), d’un accord général d’échange de renseignements fiscaux
entre le Canada et un autre pays ou territoire qui est en vigueur et
s’applique ou d’un traité fiscal conclu avec un autre pays, par avis signifié
à personne ou envoyé par courrier recommandé ou certifié, exiger d’une
personne, dans le délai raisonnable que précise l’avis :
a)
qu’elle fournisse tout renseignement ou tout renseignement supplémentaire, y
compris une déclaration de revenu ou une déclaration supplémentaire;
b)
qu’elle produise des documents.
Personnes non désignées nommément
(2) Le ministre ne peut exiger de
quiconque — appelé « tiers » au présent article — la fourniture de
renseignements ou production de documents prévue au paragraphe (1) concernant
une ou plusieurs personnes non désignées nommément, sans y être au préalable
autorisé par un juge en vertu du paragraphe (3).
Autorisation judiciaire
(3) Sur requête ex parte du
ministre, un juge peut, aux conditions qu’il estime indiquées, autoriser le
ministre à exiger d’un tiers la fourniture de renseignements ou production de
documents prévue au paragraphe (1) concernant une personne non désignée
nommément ou plus d’une personne non désignée nommément — appelée « groupe »
au présent article —, s’il est convaincu, sur dénonciation sous serment, de
ce qui suit :
a)
cette personne ou ce groupe est identifiable;
b) la
fourniture ou la production est exigée pour vérifier si cette personne ou les
personnes de ce groupe ont respecté quelque devoir ou obligation prévu par la
présente loi;
c) et d)
[Abrogés, 1996, ch. 21, art. 58(1)]
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[10]
This
issue turns on the interpretation of s. 231.2(2) of the Act. The Credit
Union argues that the Minister must seek a judicial order before it can impose
a Requirement that will release information on individuals who are unnamed in
the Requirment. The Credit Union relies on the
Federal Court of Appeal decision in Canada (Minister of National Revenue) v.
Toronto Dominion Bank, 2004 FCA 359 (“Toronto Dominion”).
[11]
The
Credit Union agrees that section 231.2(1) of the Act empowers the
Minister to issue a Requirement to provide documents or information for any
purpose related to the administration or enforcement of the Act. However,
the Credit Union argues that s. 231.2(2) constrains the Minister from imposing
on a third party, in this case the Credit Union, an obligation to provide information or documentation relating
to one or more unnamed persons without the prior authorization of a judge.
[12]
The
necessity to seek judicial authorization to obtain information from a third
party concerning unnamed persons was considered by the Federal Court of Appeal in
Toronto Dominion, above. In that case, the Minister served a Requirement To Provide Information on
the Toronto Dominion Bank requesting information with respect to a specific
account into which it had reason to believe the named tax debtor had deposited
a large cheque. The account belonged to an unnamed party. The Federal Court of
Appeal decided the bank was justified in not providing the information. Justice
Décary described the purpose of section 231.2(2) as protecting the third party holding
the information, in that case the Toronto Dominion Bank, as well as the unnamed
party not under investigation, in that case the holder of the account in which
the cheque was deposited. Justice Décary stated at paragraph 7:
… The purpose of subsection 231.2(2) is
to protect both the third party with the information and the person concerned.
The third party naturally wants to be sure, before it gives information to the
Minister (which moreover here is confidential under paragraph 244(d) of the Bank
Act) that it has a legal duty to do so. The person concerned is entitled
to have his or her privacy respected to the extent provided by law. It is
specifically to achieve this twofold objective that Parliament has limited the
Minister’s power and required him to obtain prior judicial authorization, once
the conditions mentioned in paragraphs 231.2(3)(a) and (b) are met.
[13]
The
Credit Union states it is governed by legislation, section 33 of the Credit
Union Act, 1998, S.S. 1998, c. C-45.2, that protects the confidential information of
customers from disclosure except as permitted by the Credit Union Act,
any other applicable law or court order, or by customer authorization. The Credit
Union argues that the Federal Court of Appeal’s reasoning in Toronto
Dominion applies in this situation.
[14]
The
Minister contends that the Requirement is valid since the unnamed persons are
not themselves the subject of an investigation. The Minister relies on the
more recent Federal Court of Appeal decision in Canada (Customs and Revenue
Agency) v. Artistic Ideas Inc., 2005 FCA 68 (“Artistic Ideas”).
[15]
In
Artistic Ideas, above, the Federal Court of Appeal again considered s.
231.2(2) of the Act. In this case an art dealer, Artistic Ideas,
arranged for sale of art to individuals who donated the art to registered charities.
Artistic Ideas in this case was the third party and its tax liability was being
investigated. The Minister in Artistic Ideas, above, also wanted to
reassess the donors. The donors received
tax deduction receipts from the charities based on the appraised value of the
art. The appraised values exceeded the amount paid by the donors and the tax
deduction provided the donors with net financial benefits. The Minister required
Artistic Ideas to provide the names of both the donors and the
charities. Artistic Ideas refused and the matter proceeded to court. Writing
for the Federal Court of Appeal, Justice Rothstein (now of the Supreme Court)
took a different approach than in Toronto Dominion, above. In holding
that the names of the charities must be revealed but not the names of the
donors, Rothstein J.A. stated:
11. However, where unnamed persons are
not themselves under investigation, subsections 231.2(2) and (3) do not apply.
Presumably, in such cases the names of unnamed persons are necessary solely for
the Minister’s investigation of the third party. In such cases a third party
served with a requirement to provide information and documents under subsection
231.2(1) must provide all the relevant information and documents including the
names of unnamed persons. That is because subsection 231.2(2) only pertains to
those unnamed persons in respect of whom the Minister may obtain an
authorization of a judge under subsection 231.2(3).
[16]
These
two Federal Court of Appeal cases were recently considered by Deputy Judge Strayer
in Canada (National
Revenue) v. Morton, 2007 FC 503. He found Artistic Ideas,
above, decided after Toronto Dominion, above, to more clearly indicate
the intention of s. 231.2(2). He noted that Artistic Ideas, above, was
quite clear in distinguishing between the charities that were not under
investigation and the donors who were under investigation and therefore not
required to be identified.
[17]
I
agree with Deputy Justice Strayer. Section 231.2(2) clearly relates “one or
more unnamed persons” to the authorization required in subsection 231.2(3).
Those “one or more unnamed persons” in subsection 231.2(2) are individuals in
subsection 231.2(3) for whom “the requirement is made to verify compliance by
the person or persons in the group with any duty or obligation under this Act.”
I conclude that the interpretation of s. 231.2(2) given by the Federal Court of
Appeal in Artistic Ideas, above, governs this matter.
[18]
The
Minister has led evidence that the Requirement, and the information and documents
sought, were not made to verify compliance by any unnamed person with any duty
or obligation under the Act. As such, I find that s. 232.2(2) of the Act
is not applicable and the Requirement in question is valid. Accordingly, I
will grant the compliance order.
[19]
The
Credit Union sought the guidance of the court in this matter. It acknowledged
that should the Requirement be valid, a compliance order should issue against
it. The Minister acknowledges that the Credit Union was in a difficult
position given the objections of Mr. Simonot. In this regard, the Minister seeks
a lesser amount of costs which I consider to be appropriate in these
circumstances.
ORDER
THIS COURT ORDERS AND
ADJUDGES that:
1.
The
Respondent shall comply with the Requirement for Information issued pursuant to
subsection 231.2(1) of the Income Tax Act by the Minister of National
Revenue to the Respondent on March 29, 2007 within thirty (30) days after being
served with this Order;
2.
Compliance
shall be effected by providing the documents and information to Jim Wytosky, an
officer with Canada Revenue Agency;
3.
The
Minister is authorized to effect service of this Order on the Respondent by
personal service under Rule 128 of the Federal Courts Rules; and
4.
Costs
are awarded to the Minister in the amount of $250.00.
“Leonard
S. Mandamin”
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