Canada (Canada Revenue) v. Hydro-Québec, 2023 FCA 171

In Hydro-Québec (2018 FC 622) the Federal Court declined to authorize pursuant to s. 231.2(3) a requirement delivered to Hydro-Québec by CRA in 2017 to furnish listed particulars for all its commercial customers who were charged the regular electricity rate, on the grounds inter alia that they did not constitute an “ascertainable group” and that the request also did not satisfy the s. 231.2(3)(b) requirement that it be “made to verify compliance.” In 2019, CRA provided an essentially identical requirement to Hydro-Québec although, unlike the 2017 requirement, it was supported by evidence. The Minister’s motion for authorization of the 2019 requirement pursuant to s. 231.2(3) was dismissed at 2021 FC 1438 because the matter was res judicata.

In reversing this decision, and remitting the matter to the Federal Court for a determination as to whether the s. 231.2(3) authorization should be granted, Goyette JA noted that s. 231.2(3) conferred a discretion on the Federal Court, which “indicates that this is not the usual situation of a judge applying the Act in light of the facts before the court” (para. 15, TaxInterpretations translation). Furthermore, in proper fulfilment of its audit obligations, one could envisage situations in which CRA could make a subsequent demand for information that was very similar to a previous one in order to respond appropriately to new information learned during the audit (para. 18).

She provided further reasons in support of allowing the appeal, as well as commenting on the nature of the Federal Court’s discretion under s. 231.2(3), but her colleagues (Boivin and LeBlanc JJA) indicated that they did not endorse these reasons and comments.

Hydro-Québec (2018 FC 622) found that an s. 231.2 requirement for information concerning a large grouping of Hydro-Québec customers should not be authorized pursuant to s. 231.2(3) on the grounds inter alia that they did not constitute an “ascertainable group.” In 2019, CRA provided an essentially identical requirement to Hydro-Québec, and the Minister’s motion for authorization of this requirement pursuant to s. 231.2(3) was dismissed at 2021 FC 1438 because the matter was res judicata.

In reversing this decision, and remitting the matter to the Federal Court for a determination as to whether the s. 231.2(3) authorization should be granted, Goyette JA noted that s. 231.2(3) conferred a discretion on the Federal Court, which “indicates that this is not the usual situation of a judge applying the Act in light of the facts before the court” (para. 15, TaxInterpretations translation). Furthermore, one could envisage situations in which CRA in proper fulfilment of its audit obligations could make a subsequent demand for information that was very similar to a previous one in order to respond appropriately to new information learned during the audit (para. 18).

She provided further reasons in support of allowing the appeal, but her colleagues (Boivin and LeBlanc JJA) indicated that they did not endorse those reasons.