1068754 Alberta Ltd., trustee of DGGMC Bitton Trust v. ARQ, 2018 QCCA 8 (Quebec Court of Appeal), aff'd 2019 SCC 37

The ARQ, which was auditing the appellant trust (“DGGMC”) based on a suspicion that the central management and control of DGGMC was in Quebec rather than Alberta, issued a requirement to a Calgary branch of the Banque Nationale du Canada (“BNC”) for various bank records respecting DGGMC under the Quebec equivalent of ITA s. 231.2(1). BNC, which carried on business in Quebec and had its head office there, provided the demanded documents, which were placed under seal when DGGMC sought to have the requirement nullified. DGGMC had argued unsuccessfully below that, as the ARQ only had the authority to impose tax within the province, it was exceeding its authority in sending a requirement outside the province.

After noting first that the required information was confidential, Hogue JCA found (at para. 34) and contrary to the finding below, that the requirement constituted a seizure. She then discussed s. 462 of the Bank Act, including s. 462(2), which provided:

Any notification sent to a bank with respect to a customer of the bank …constitutes notice to the bank and fixes the bank with knowledge of its contents only if sent to and received at the branch of the bank that is the branch of account of an account held in the name of that customer.

Before dismissing DGGMC’s appeal, she stated (at paras. 51-53, Tax Interpretations translation):

Here we are not concerned with … a seizure outside of Quebec which, it is true, could require the seizing party to approach an authority of the foreign State with a view to obtaining its collaboration in order to proceed. The ARQ wished to obtain particulars respecting banking transactions of a trust which it believes resides in Quebec. In order to do so it approached BNC, which carries on business in Quebec and has its head office there. However, it sent its requirement to the Calgary branch in order to comply with subsection 462(2). Compelling it, as would the appellant, to obtain the collaboration of the Albertan authority to “communicate” this demand would serve no useful purpose and, to the contrary, would encumber the process. The principle of comity between States does not require otherwise since no concrete act occurred on the Albertan territory, other than the simple communication of a requirement addressed to BNC.

The communication of the requirement to BNC through one of its branches situated outside Quebec is the sole external element that is present here. However, such communication is purely accessory and is insufficient to conclude that the ARQ exercised its powers of taxation or of audit outside of Quebec or exceeded its competence.

…The AARQ did not seek to “regulate persons, property, acts or legal facts which had no important and real link with Quebec.”

The ARQ, which was seeking to establish that the central management and control of an Alberta trust was in Quebec, issued a requirement to a Calgary branch of the Banque Nationale du Canada (“BNC”) for various bank records respecting the trust under the Quebec equivalent of ITA s. 231.2(1). The requirement was sent directly to the branch rather than to the BNC head office because this was required under s. 462(2) of the Bank Act. In finding that the ARQ had not exceeded its territorial competence in making this requirement, Hogue JCA stated:

Here we are not concerned with … a seizure outside of Quebec which, it is true, could require the seizing party to approach an authority of the foreign State with a view to obtaining its collaboration in order to proceed. …

The communication of the requirement to BNC through one of its branches situated outside Quebec is the sole external element that is present here. However, such communication is purely accessory and is insufficient to conclude that the ARQ exercised its powers of taxation or of audit outside of Quebec or exceeded its competence.