Hugessen,
J.A.:—This
is
an
appeal
from
a
decision
of
the
Trial
Division
allowing
a
motion
by
the
respondents
under
Rule
419(1)(a)
and
striking
out
the
appellants'
statement
of
claim.
On
a
motion
such
as
this
one
the
facts
alleged
in
the
statement
of
claim
are
deemed
to
have
been
proven
and
the
Court
should
only
strike
out
the
claim
where
it
is
plain
and
obvious
and
beyond
doubt
that
the
action
must
fail.
In
the
present
case
the
statement
of
claim
asserts
that
prior
to
November
30,
1990
the
Minister
of
National
Revenue
received
from
the
U.S.
Secretary
of
the
Treasury
a
request
for
information
and
documents
concerning
the
plaintiff
company
and
that
subsequently,
on
March
4,
1991,
the
Minister
sent
to
the
individual
plaintiff
a
formal
requirement"
in
the
following
terms:
Mr.
Philip
Klein
administrator
of
Traitement
d'Aluminium
Montreal
Inc.
2
Place
André
Ouellet
|
Boisbriand,
Quebec
|
Peter
Chiarelli
|
|
]7E
4H4
|
Room
511
|
|
Tel:
283-1037
|
|
Gentlemen:
|
|
|
Requirement
for
Information
|
|
|
and
Production
of
documents
|
|
For
purposes
related
to
the
administration
or
enforcement
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the"Act"),
I
require
from
you
within
thirty
(30)
days
from
the
date
of
delivery
of
this
requirement,
information
and
production
of
documents
as
follows:
Pursuant
to
the
provisions
of
paragraphs
231.2(1)(a)
and
231.2(1)(b)
of
the
said
Act
a
statement
setting
out:
1.
Photocopies
of
all
bank
transactions
including
all
amounts
deposited
and
withdrawn,
and
original
source
documents
with
detailed
explanations
of
the
bank
transactions
pertaining
to
the
bank
accounts
at
the
Toronto
Dominion
Bank
A/C
#7301006
and
Banque
Nationale
de
Paris
A/C
#33976-501-85;
2.
Production
of
all
documents
including
deposit
slips,
checks,
accounts,
vouchers,
letters,
contracts,
invoices,
bank
drafts,
wire
transfers,
and
statements
that
are
known
to
be
or
to
have
been
related
to
the
business
transactions
of
Traitement
d
“Aluminium
Montreal
Inc.,
Carroll
Alloys
and
Metal
Inc.,
M
&
B
Trading
and
Congregation
Oir
Hachaim
set
out
in
the
statements
required
under
(1);
3.
The
relationship
which
exists
between
Traitement
d'Aluminium
Montreal
Inc.
and
Carroll
Alloys
and
Metal
Inc.,
Chicago,
Illinois
and
M
&
B
Trading,
New
York,
New
York
as
well
as
with
their
principal
shareholders
Nathan
and
Lea
Muller,
and
Chaim
Landau
respectively;
4.
The
reasons
in
regards
to
payments
from
Carroll
Alloys
and
Metals
Inc.
and
M
&
B
Trading
to
Traitement
d’Aluminium
Montreal
Inc.
(Montreal
Aluminium
Processing
Inc.);
5.
The
reasons
in
regards
to
payments
from
Traitement
d'Aluminium
Montreal
Inc.
to
Congregation
Oir
Hachaim.
The
above
is
requested
for
the
period
of
January
1,
1984
to
December
31,
1989.
To
comply
with
this
requirement
you
should
provide
the
information
and
produce
the
documents
hereby
to
an
officer
of
this
Department
who
will
attend
at
your
office.
Alternatively,
compliance
with
this
requirement
may
be
effected
by
mailing
the
information
and
documents
hereby
required,
by
registered
mail,
within
the
time
specified
in
the
first
paragraph
of
this
requirement.
Photostat
copies
of
the
documents
will
be
sufficient.
Your
attention
is
directed
to
section
238
of
the
Income
Tax
Act
for
default
in
complying
with
this
requirement.
(signature)
Réjean
Doré
Director—Taxation
Montreal
District
Office
Department
of
National
Revenue,
Taxation
(Appeal
Case,
pages
4-5)
The
statement
of
claim
then
goes
on
to
assert,
inter
alia,
the
following
facts
which
are
to
be
taken
as
proved:
The
requirement
was
motivated
by
the
aforesaid
United
States
request
and
was
designed
to
obtain
for
the
United
States
Secretary
of
Treasury
or
his
representatives
the
information
and
documents
requested
by
them.
(Appeal
Case,
page
5)
The
information
and
documents
required
by
the
requirement
was
information
sought
for
use
in
connection
with
a
United
States
Grand
Jury
investigation
into
alleged
violations
of
United
States
laws
other
than
tax
laws
as
well
as
alleged
violations
of
United
States
tax
laws
and
such
information,
not
only
does
not
fall
within
paragraph
1
of
Article
XXVII
but,
is
not
information
obtainable
compulsorily
under
the
laws,
or
in
the
normal
course
of
the
administration,
of
the
United
States
and
the
requirement
thereof
is
at
variance
with
the
laws
and
administrative
practice
of
the
United
States.
(Appeal
Case,
page
7)
The
prayer
for
relief
seeks
a
declaration
that
the
requirement
is
of
no
force
or
effect.
The
burden
of
the
plaintiffs’
case
in
law
is
an
argument
based
on
the
scope
of
the
Canada-United
States
Tax
Convention,
1984,
and
the
effect
of
the
implementing
statute
being
the
Canada-United
States
Tax
Convention
Act.
Article
27
of
the
Convention
reads
as
follows:
Article
XXVII
Exchange
of
Information
1.
The
competent
authorities
of
the
Contracting
States
shall
exchange
such
information
as
is
necessary
for
carrying
out
the
provisions
of
this
convention
or
of
the
domestic
laws
of
the
contracting
states
concerning
taxes
covered
by
the
convention
insofar
as
the
taxation
thereunder
is
not
contrary
to
the
convention.
The
exchange
of
information
is
not
restricted
by
Article
I
(Personal
Scope).
Any
information
received
by
a
contracting
state
shall
be
treated
as
secret
in
the
same
manner
as
information
obtained
under
the
taxation
laws
of
that
state
and
shall
be
disclosed
only
to
persons
or
authorities
(including
courts
and
administrative
bodies)
involved
in
the
assessment
or
collection
of,
the
administration
and
enforcement
in
respect
of,
or
the
determination
of
appeals
in
relation
to,
the
taxes
covered
by
the
convention.
Such
persons
or
authorities
shall
use
the
information
only
for
such
purposes.
They
may
disclose
the
information
in
public
court
proceedings
or
in
judicial
decisions.
2.
If
information
is
requested
by
a
contracting
state
in
accordance
with
this
article,
the
other
contracting
state
shall
endeavor
to
obtain
the
information
to
which
the
request
relates
in
the
same
way
as
if
its
own
taxation
was
involved
notwithstanding
the
fact
that
the
other
state
does
not,
at
that
time,
need
such
information.
If
specifically
requested
by
the
competent
authority
of
a
contracting
state,
the
competent
authority
of
the
other
contracting
state
shall
endeavor
to
provide
information
under
this
Article
in
the
form
requested,
such
as
depositions
of
witnesses
and
copies
of
unedited
original
documents
(including
books,
papers,
statements,
records,
accounts
or
writings),
to
the
same
extent
such
depositions
and
documents
can
be
obtained
under
the
laws
and
administrative
practices
of
that
other
state
with
respect
to
its
own
taxes.
3.
In
no
case
shall
the
provisions
of
paragraphs
1
and
2
be
construed
so
as
to
impose
on
a
contracting
state
the
obligation:
(a)
To
carry
out
administrative
measures
at
variance
with
the
laws
and
administrative
practice
of
that
or
of
the
other
contracting
state;
(b)
To
supply
information
which
is
not
obtainable
under
the
laws
or
in
the
normal
course
of
the
administration
of
that
or
of
the
other
contracting
state;
or
(c)
To
supply
information
which
would
disclose
any
trade,
business,
industrial,
commercial
or
professional
secret
or
trade
process,
or
information
the
disclosure
of
which
would
be
contrary
to
public
policy
(ordre
public).
4.
Notwithstanding
the
provisions
of
Article
II
(Taxes
Covered),
for
the
purposes
of
this
article
the
convention
shall
apply:
(a)
In
the
case
of
Canada,
to
all
taxes
imposed
by
the
Government
of
Canada
on
estates
and
gifts
and
under
the
Income
Tax
Act;
and
(b)
In
the
case
of
the
United
States,
to
all
taxes
imposed
under
the
Internal
Revenue
Code.
Section
3
of
the
Act
provides:
3.
(1)
The
convention
is
approved
and
declared
to
have
the
force
of
law
in
Canada
during
such
period
as,
by
its
terms,
the
convention
is
in
force.
(2)
In
the
event
of
any
inconsistency
between
the
provisions
of
this
Act,
or
the
convention,
and
the
provisions
of
any
other
law,
the
provisions
of
this
Act
and
the
convention
prevail
to
the
extent
of
the
inconsistency.
(3)
The
Minister
of
National
Revenue
may
make
such
regulations
as
are
necessary
for
the
purpose
of
carrying
out
the
convention
or
for
giving
effect
to
any
of
the
provisions
thereof.
The
learned
motions
judge
in
allowing
the
defendants’
motion
and
striking
out
the
plaintiffs’
statement
of
claim
was
of
the
view
that
the
effect
of
the
Act
and
the
convention
was
to
empower
the
Minister,
at
the
request
of
the
United
States
taxing
authorities,
and
in
the
absence
of
any
direct
Canadian
tax
interest
to
use
his
power
to
require
information
under
the
terms
of
subsection
231.2(1)
of
the
Income
Tax
Act:
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,
by
notice
served
personally
or
by
registered
or
certified
mail,
require
that
any
person
provide,
within
such
reasonable
time
as
is
stipulated
in
the
notice,
(a)
any
information
or
additional
information,
including
a
return
of
income
or
a
supplementary
return;
or
(b)
any
document.
I
do
not
consider
it
necessary
or,
since
the
case
is
still
in
its
very
early
stages,
desirable
that
I
should
comment
on
the
motions
judge’s
view
of
the
law.
On
the
appeal
before
us
the
appellants
raised
a
point
which
was
not
dealt
with
by
the
motions
udge
and
may,
in
fact,
not
even
have
been
argued
before
him.
It
flows
from
the
allegations
of
fact
in
the
statement
of
claim,
however,
and
is
clearly
available
to
appellants.
In
my
view,
it
raises
a
question
which
is
at
least
fairly
arguable
and
on
which
it
is
not
plain
and
obvious
that
the
action
will
fail.
It
will
be
recalled
that
the
requirement
purports
to
be
made
pursuant
to
the
provisions
of
subsection
231.2(1).
It
will
also
be
recalled
that
the
statement
of
claim
alleges
that
the
requirement
was
"motivated"
by
the
American
request
for
information
and
that
the
information
and
documents
were
"sought
for
use
in
connection
with
a
United
States
Grand
Jury
investigation.”
The
opening
words
of
the
requirement,
however,
state
clearly
that
it
is
"For
purposes
related
to
the
administration
or
enforcement
of
the
Income
Tax
Act.
.
.
.".
On
the
argument
of
the
appeal,
counsel
for
the
respondents
conceded,
for
present
purposes
at
least,
that
those
words
were
incorrect.
Arguably,
they
are
misleading.
It
is
settled
law
that
the
test
as
to
whether
or
not
the
Minister,
when
he
exercises
his
powers
under
subsection
231.2(1),
is
acting
for
a
purpose
specified
in
the
Act
is
an
objective
one.
In
my
view,
it
is
arguable
that
the
recipient
of
a
requirement
is
entitled
to
a
fair
notice
as
to
the
purpose
for
which
the
Minister
purports
to
exercise
his
powers
under
subsection
231.2(1).
Accordingly,
it
is
my
opinion
that
a
claim
that
a
false
or
misleading
statement
of
purpose
invalidates
a
requirement
is
not
one
that
it
is
obvious
and
beyond
doubt
will
fail.
I
would
allow
the
appeal,
I
would
set
aside
the
decision
of
the
motions
judge
and
would
dismiss
the
defendants'
motion
to
strike
with
costs
here
and
below.
Appeal
allowed.
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