[1] The applicant, David M. Sherman, is a tax consultant and author. He seeks disclosure of certain statistical information from the Canada Revenue Agency (CRA) regarding collection assistance under paragraph 1 of Article XXVII relating to Article XXVI A of the Protocol amending the Convention Between Canada and the United States of America (the U.S.) with respect to Taxes on Income and on Capital (the Convention). The purpose of Article XXVI A is to enable Canada and the United States Internal Revenue Service (IRS) to lend assistance to each other in the collection of taxes. The Convention and the amending Protocol were implemented respectively by the Canada-United States Tax Convention Act, 1984, S.C. 1984, c. 20 and the Act to Amend the Canada-United States Tax Convention Act, 1984, S.C. 1995, c. 34.
FACTS
[2] Mr. Sherman initially requested disclosure from Revenue Canada (now CRA) on February 19, 1999. He asked for the following information:
With respect to Article XXIV A of the Canada-United States Tax Convention, which permits Revenue Canada to seek collection assistance from the U.S. Internal Revenue Services (IRS), and permits the IRS to seek collection assistance from Revenue Canada:
1. Since this provision came into force in 1995, how may requests have been made by Revenue Canada to the IRS? How many requests have been made by the IRS to Revenue Canada?
2. What were the total dollars involved in collection assistance requested by Revenue Canada of the IRS? By the IRS of Revenue Canada?
3. What percentage of the requests have been accepted for action by the IRS? By Revenue Canada?
4. What percentage of the requests acted on have resulted in successful action by the IRS? By Revenue Canada?
5. What percentage of the dollars requested have been collected by the IRS and remitted to Revenue Canada? Collected by Revenue Canada and remitted to the IRS?
6. Can I get breakdowns of each of the above numbers by year (1995, 1996, 1997, 1998)?
[3] Revenue Canada's ministerial delegate, the Director of the Access to Information and Privacy Division, refused the request on May 10, 1999 on the basis that the requested information came within the exemptions provided in paragraphs 13(1)(a), 16(1)(b) and 16(1)(c) of the Access to Information Act, R.S.C., 1985, c. A-1 (the Act). Mr. Sherman complained to the Information Commissioner, but his complaint was dismissed. In relation to paragraph 13(1)(a) of the Act, the Commissioner determined:
Following my personal review of the record withheld, it is my opinion that the information exempted under this paragraph was obtained in confidence from the government of a foreign state. There is no evidence that the withheld information is in the public domain and there is no consent for disclosure.
[4] Regarding paragraphs 16(1)(b) and 16(1)(c), the Commissioner found:
I am satisfied that disclosure of the information exempted could reasonably be expected to be injurious to the enforcement of a law in Canada. Moreover, I am satisfied that the discretion contained in the provision has been properly exercised. Thus, in my opinion, paragraph 16(1)c) was properly applied. As paragraph 16(1)(b) was applied concurrently, it is not necessary for me to comment on the application of this exemption.
[5] Mr. Sherman applied for judicial review of the Minister's decision. On May 22, 2002, the Federal Court Trial Division, as it was then constituted, dismissed the application on the basis that the requested information was exempt under paragraph 13(1)(a) of the Act. Having so determined, the applications judge did not find it necessary to consider the Minister's position with respect to paragraphs 16(1)(b) and 16(1)(c).
[6] Mr. Sherman appealed the decision of the Trial Division. The Federal Court of Appeal allowed the appeal and concluded that the exemption under paragraph 13(1)(a) of the Act, for the most part, could not be justified as a matter of law. The Court of Appeal found that an exemption exists only with respect to information received by Canada from the U.S. No exemption exists with respect to all information exchanged unless that information also contains information received from the U.S. that would be revealed by the disclosure of the Canadian information. Statistics, generated by the Minister, from information received from the U.S. are not covered by the exemption unless their disclosure would reveal the contents of the confidential information itself.
[7] The conclusions in relation to each of Mr. Sherman's requests were summarized in schematic form at paragraph 40 of Sherman v. Canada (Minister of National Revenue), [2003] 4 F.C. 865 (C.A.) (Sherman). However, due to a misunderstanding, the Court of Appeal did not have before it the information for which the exemptions were claimed. Consequently, the Court of Appeal was not able to determine whether the nature of the information was such that it could be readily extracted from the information that was protected from disclosure. Nor could the Court of Appeal determine, notwithstanding any disclosure that might be permitted under paragraph 13(1)(a), whether the information is nonetheless subject to exemption from disclosure under paragraphs 16(1)(b) and 16(1)(c) of the Act.
[8] In addition to its conclusions regarding paragraph 13(1)(a), the Court of Appeal noted a number of factors of import. I refer to the following:
- the burden of proof required to establish an exemption from disclosure rests on the party resisting disclosure;
- the entitlement to an exemption must be established on a balance of probabilities;
- the opinion of the Information Commissioner is a factor to consider when determining whether the information should be disclosed;
- the purpose of the Act is to provide a broad right of access to information in records under the control of a government institution;
- all exemptions must be limited and specific and in the case of ambiguity, the interpretation that least infringes on the public's right to access must be chosen;
- the standard of review for errors of law is correctness while findings of fact cannot be overturned unless they result from palpable and overriding error. Mixed findings of fact and law are governed by a criterion of reasonableness, but where a legal issue is extricable from the mixed question, the determination of the legal issue is reviewable on a standard of correctness;
- Mr. Sherman is not seeking the denied information for personal gain. As a researcher and author, he is interested in assessing the actual as well as the cost efficiency of the tax collection assistance system;
- Mr. Sherman is also interested in determining, from the Canadian perspective, the extent to which the Minister is performing his public duty to enforce the taxation laws to the benefit of Canadian taxpayers;
- Mr. Sherman is not seeking personal information relating to taxpayers which is and should remain confidential. Rather, he wants statistical information regarding the system jointly put in place by the American and Canadian governments;
- Mr. Sherman's request raises issues of public interest as regards the interpretation of paragraph 1 of Article XXVII of the Convention and the extent to which certain exemption provisions of the Act apply, in the context of that Convention, to material generated and derived by the Minister from confidential information obtained from the United States;
- Mr. Sherman's question number 6 requests the yearly breakdown of the statistics covering the subject-matter of his five previous questions. No breakdown by year exists.
ISSUE
[9] Is the information, having now been examined by this court, subject to any exemptions from disclosure?
THE RELEVANT STATUTORY PROVISIONS
[10] The extent of the paragraph 13(1)(a) exemption has been determined by the Federal Court of Appeal. It is primarily paragraphs 16(1)(b) and 16(1)(c) that are at issue in this application. All of the noted paragraphs are included here for ease of reference.
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Access to Information Act,
R.S.C. 1985, c. A-1
13. (1) Subject to subsection (2), the head of a government institution shall refuse to disclose any record requested under this Act that contains information that was obtained in confidence from
(a) the government of a foreign state or an institution thereof;
[...]
16. (1) The head of a government institution may refuse to disclose any record requested under this Act that contains
[...]
(b) information relating to investigative techniques or plans for specific lawful investigations;
(c) information the disclosure of which could reasonably be expected to be injurious to the enforcement of any law of Canada or a province or the conduct of lawful investigations, including, without restricting the generality of the foregoing, any such information(i) relating to the existence or nature of a particular investigation,
(ii) that would reveal the identity of a confidential source of information, or
(iii) that was obtained or prepared in the course of an investigation;
[...]
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Loi sur l'accès à l'information,
L.R.C. 1985, ch. A-1
13. (1) Sous réserve du paragraphe (2), le responsable d'une institution fédérale est tenu de refuser la communication de documents contenant des renseignements obtenus à titre confidentiel_:
a) des gouvernements des États étrangers ou de leurs organismes;
[...]
16. (1) Le responsable d'une institution fédérale peut refuser la communication de documents_:
[...]
b) contenant des renseignements relatifs à des techniques d'enquêtes ou à des projets d'enquêtes licites déterminées;
c) contenant des renseignements dont la divulgation risquerait vraisemblablement de nuire aux activités destinées à faire respecter les lois fédérales ou provinciales ou au déroulement d'enquêtes licites, notamment_:
(i) des renseignements relatifs à l'existence ou à la nature d'une enquête déterminée,
(ii) des renseignements qui permettraient de remonter à une source de renseignements confidentielle,
(iii) des renseignements obtenus ou préparés au cours d'une enquête;
[...]
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PARAGRAPH 13(1)(a)
[11] Counsel agree that my task in relation to paragraph 13(1)(a) arises only if I determine that the exemptions under paragraphs 16(1)(b) and 16(1)(c) do not apply. If that is the case, I must, according to the criteria set out by the Federal Court of Appeal, determine what information is exempt and what information is not exempt.
PARAGRAPH 16(1)(b)
[12] Mr. Sherman submits that this paragraph does not apply because he does not seek information of the type referred to in the provision. He claims that the word "investigation" should be interpreted in light of the Income Tax Act, the Excise Tax Act and relevant jurisprudence. Collection action under these statutes is not connected to investigative techniques or to future investigations. Alternatively, he argues that a collection action does not entail investigative techniques and even if it did, he seeks only statistics regarding the result, not information about the techniques.
[13] The respondent Minister, in accordance with the jurisprudence, maintains that determining whether the information is exempt involves a two-step process. First, the Minister must decide whether the information comes within the exemption in question. This initial determination must be reviewed on a standard of correctness. If the information comes within the exemption, the second step involves the Minister's discretionary determination as to whether the information should be disclosed. Here, the Minister maintains that the information relates to investigative techniques used in the enforcement of the Income Tax Act in terms of requesting collection assistance from the U.S. The word "investigative" should not be restricted to the manner in which it is used in the Income Tax Act or the Excise Tax Act. The investigative technique exemption, argues the respondent, is intended to apply to investigations carried out under many Acts of Parliament. The Minister exercised his discretion in an appropriate manner.
[14] In my view, the respondent devoted unnecessary time to oral argument on the issue of the exercise of discretion. Mr. Sherman did not, at any time, take issue with the manner in which the discretion was exercised. The discretion is relevant only if the threshold is met - the information in question must fall within the exemption. In the case of paragraph 16(1)(b), it must relate to investigative techniques or plans for specific lawful investigations. Insofar as the word "investigation" is concerned, in my opinion, the word should be read in its ordinary and grammatical sense. In Re. First Investors Corp., [1988] 4 W.W.R. 22 (Alta Q.B.), Berger J., as he then was, stated at paragraph 45:
"Investigation" has been defined as: "the action of investigating; the making of a search or inquiry; systematic examination, careful or minute search" (Oxford English Dictionary). A search or inquiry must be made with some object in mind. A systematic inquiry requires a guiding paradigm [...]
[15] There is nothing in the information before me, confidential or otherwise, that provides so much as an inkling as to investigative techniques of specific lawful investigations. Thus, the threshold that gives rise to the exercise of discretion has not been met. Moreover, it cannot be said that collection actions are investigative in nature. The Convention provides for an arrangement for the collection of money from those not within the jurisdiction. While there may be some investigation related to the whereabouts of the persons involved, Mr. Sherman does not seek, nor does the information in question provide, disclosure of such information. The statistics sought by Mr. Sherman are those that provide no more and no less than the results of the collection actions. That information cannot be said to be investigatory in any sense.
PARAGRAPH 16(1) (c)
[16] Mr. Sherman reiterates his position that collection action is not an investigation and submits that disclosure of the extent to which the collection assistance provision is used will not be injurious to the enforcement of a law in Canada. He emphasizes that it is for the Minister to demonstrate injury. Whether use of the collection assistance provision is minimal or extensive, it does no harm to enforcement. Conversely, he argues, refusal to disclose can harm the enforcement of the law. Pointing to the sub-paragraphs of paragraph 16(1)(c), he maintains that the paragraph is intended to relate to individual investigations rather than statistics. Relying on Rubin v. Canada (Minister of Transport), [1998] 2 F.C. 430 (C.A.), he submits that the chilling effect on future investigations is not a valid reason to refuse disclosure.
[17] The respondent argues that the disclosure of this information could reasonably be expected to injure the enforcement of the Income Tax Act. Who other than the Director is competent to make such a determination, asks the respondent. Counsel urges me not to interfere when the Director, better-positioned than I, has determined that there are reasonable grounds upon which to refuse the information.
[18] The respondent concedes that to come within the exemption, the injury must be specific and known and that a chilling effect on future investigations is not sufficient reason to withhold information. However, in this situation, it is not future investigations, but future enforcement that will be harmed as contemplated in paragraph 16(1)(c). The enforcement of the Convention and the Income Tax Act would be impaired, according to the respondent, and the harm is specific and known - the decreased willingness of the U.S. to cooperate in collection matters. Again, it is urged that the person who deals with the IRS is the best person to determine what damage may occur.
[19] I digress momentarily to note that, in the written submissions, the respondent also argues that the information may reasonably be expected to be injurious to the conduct of international affairs and that the head of the institution therefore has discretion to refuse to disclose under subsection 15(1). That position was not pursued at the hearing.
[20] It seems to me that the respondent, on the one hand, characterizes the information as investigative and, on the other hand, argues that it is not. The Minister cannot have it both ways. I have determined that the collection actions are not investigative. What remains is to determine whether the disclosure of the information could reasonably be expected to be injurious to the enforcement of any law in Canada. It is useful, in approaching this issue, to review the basic principles underlying access to information in the possession of the government.
[21] Subsection 2(1) of the Act contains its purpose, which is to provide the public with a right of access to information in records under the control of the government. Exceptions to that right of access should be limited and specific: Canada Packers Inc. v. Canada (Minister of Agriculture), [1989] 1 F.C. 47 (C.A.); Dagg v. Canada (Minister of Finance), [1997] 2 S.C.R. 403; Sherman, supra. Public access ought not be frustrated by the courts except in the clearest of circumstances. It is a heavy burden of persuasion that rests upon the party resisting disclosure: Maislin Industries Limited v. Minister for Industry, Trade and Commerce, [1984] 1 F.C. 939 (T.D.); Rubin v. Canada (Mortgage and Housing Corp.), [1989] 1 F.C. 265 (C.A.). The entitlement to an exemption must be established on a balance of probabilities: Sherman, supra.
[22] The standard is probability, not possibility or speculation. There must exist, in the evidence, an explanation establishing that the injury to the enforcement of the law is reasonably probable. Here, the evidence - both confidential and otherwise - that attempts to establish that harm to U.S. relations will result from disclosure, and consequently the enforcement of Canadian laws will suffer, is equivocal at best. It falls far short of meeting the threshold on the basis that the alleged injury is reasonably probable. Moreover, it is Canadian data, not U.S. data, that would be released. Hence, the generalized statements of the ministerial delegate cannot be sustained in view of the Federal Court of Appeal's determinations. Sherman, supra, limits the requested information that can be released to material based on Canadian information or U.S. statistics that do not reveal the content of confidential information.
[23] I am unable to conclude, on the evidence, that it can reasonably be expected that the revelation of this information will harm Canada-U.S. relations such that the U.S. will refuse to engage in further collection actions.
[24] The Information Commissioner did not address the exemption under subsection 15(1) of the Act and as noted earlier, the 15(1) argument was not advanced at the hearing. However, since the evidence does not disclose harm to Canada-U.S. relations under paragraph 16(1)(c), it would not be more likely to do so under subsection 15(1).
[25] Mr. Sherman's application for judicial review will be allowed and an order will so provide. The respondent identified the information that is exempt from disclosure in accordance with the determinations in Sherman, supra. I identified an additional piece of information that is exempt because its disclosure would permit Mr. Sherman, by performing a simple calculation, to obtain disclosure of information that the Court of Appeal has determined is exempt. Except for the information identified by the respondent and the noted additional information that I identified, the information will be disclosed. Counsel agreed that I should produce, concurrent with my order, a redacted version of the information. The redacted information will be provided in a sealed envelope.
[26] The sealed envelope containing the redacted information as well as the affidavit and documents, contained in the respondent's record and filed on a confidential basis, will remain in the Registry office under seal pending the expiration of the appeal period, or if an appeal is taken, until the respondent has had the opportunity to apply to the Federal Court of Appeal for these documents to remain sealed. Unless the Federal Court of Appeal orders that the redacted information remain sealed, it will be released to Mr. Sherman.
[27] Mr. Sherman is entitled to costs that I fix in the all-inclusive amount of $1500, including GST and disbursements, to be paid by the respondent to the applicant.
Judge
Ottawa, Ontario
October 14, 2004
Date:20041014
Docket: T-612-00
Ottawa, Ontario, this 14th day of October 2004.
Present: THE HONOURABLE MADAM JUSTICE LAYDEN-STEVENSON
BETWEEN:
DAVID M. SHERMAN,
Applicant,
- and -
THE MINISTER OF NATIONAL REVENUE,
Respondent.
ORDER
The application for judicial review is allowed. The sealed envelope containing the redacted information as well as the affidavit and documents, contained in the respondent's record and filed on a confidential basis, will remain in the Registry office under seal pending the expiration of the appeal period, or if an appeal is taken, until the respondent has had the opportunity to apply to the Federal Court of Appeal for these documents to remain sealed. Unless the Federal Court of Appeal orders that the redacted information remain sealed, it will be released to the applicant.
The applicant is entitled to costs in the all-inclusive amount of $1500, including GST and disbursements, to be paid by the respondent to the applicant.
________________________________
Judge
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-612-00
STYLE OF CAUSE: DAVID M. SHERMAN v. THE MINISTER OF NATIONAL REVENUE
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: September 20, 2004
REASONS FOR ORDER : LAYDEN-STEVENSON J.
DATED: October 14, 2004
APPEARANCES:
David Sherman ON HIS OWN BEHALF
David W. Chodikoff FOR RESPONDENT
SOLICITORS OF RECORD:
MORRIS A. ROSENBERG FOR RESPONDENT
DEPUTY ATTORNEY GENERAL OF CANADA
Toronto, Ontario
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