Supreme Court of Canada
Canadian Bank of Commerce v. Attorney General
(Canada), [1962] S.C.R. 729
Date: 1962-06-25
The Canadian Bank
of Commerce (Plaintiff) Appellant;
and
The Attorney
General of Canada (Defendant) Respondent.
1962: May 17, 18; 1962: June 25.
Present: Kerwin C.J. and Taschereau, Locke,
Cartwright, Fauteux, Abbott, Martland, Judson and Ritchie JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR
ONTARIO.
Taxation—Requirement by Minister for
information and production of documents relating to accounts of bank’s
customer—Whether bank obliged to comply with requirement—Whether Minister’s
action subject to review—Income Tax Act, R.S.C. 1952, c. 148, s. 126(2).
The Assistant Deputy Minister of National
Revenue for Taxation, acting on behalf of the Minister, addressed a requirement
to the plaintiff bank under s. 126(2) of the Income Tax Act for
information and production of documents relating to the accounts of its
customer, the Union Bank of Switzerland. The plaintiff applied for a declaration that it was not under any
obligation to furnish the information or produce the documents called for by
the requirement and that it was not subject to the penalty provided for failure
to comply therewith. By agreement between the parties a special case was stated
for the opinion of the Court. It was agreed that the requirement did not relate
in any way to the administration or enforcement of the Act in respect to the
liability for tax of the plaintiff, and that the information to be furnished to
comply with the requirement would include a great deal of private information
in respect of the business and affairs of many corporations and individuals,
some resident and some not resident in Canada. It was admitted that the
Minister was acting in good faith, that the requirement related to a genuine
and serious inquiry into the tax liability of some specific person or persons
and that the Minister had reason to believe that such person or persons was or
were among those referred to in the special case. The trial judge gave judgment
against the plaintiff; this judgment was affirmed by the Court of Appeal, and
with leave obtained from that Court the plaintiff appealed to this Court.
Held: The
appeal should be dismissed.
Per Kerwin
C.J. and Taschereau, Abbott and Judson JJ.: The wording of subs. (2) of
s. 126 of the Income Tax Act was very broad and comprehensive since
the Minister “may, for any purpose related to the administration or enforcement
of this Act,” proceed in the manner indicated. So far as the Union Bank of Switzerland was concerned, if it carried on
business in Canada, it was
liable to tax under the Act and it was part of the administration or
enforcement of the Act to discover if the Union Bank was subject to taxation.
The wording of the subsection was in
such general terms that it could not be restricted to information as to the tax
liability of the plaintiff itself. The fact that the information sought would
disclose private transactions in which a number of persons were involved who
were not
[Page 730]
under investigation and might not be liable
to tax, did not affect the Minister’s power. Nor could the power be restricted
to an inquiry for definite and limited particular information.
Per Locke,
Cartwright, Fauteux, Martland and Ritchie JJ.: The purpose of the Minister’s
requirement was to obtain information relevant to the tax liability of some
specific person or persons whose liability to tax was under investigation; this
was a purpose related to the administration or enforcement of the Act.
On the question whether the test to be
applied in determining the validity of a requirement is subjective or
objective, here the condition was objective, and the question whether the
Minister was acting for the purpose specified in the Act was subject to review,
even though he might be acting in an administrative capacity. The question
involved an interpretation of the Act and its application to the circumstances
disclosed.
APPEAL from a judgment of the Court of Appeal
for Ontario, affirming a
judgment of Morand J. Appeal dismissed.
Hon. R.L. Kellock, Q.C., and J.B. Tinker,
for the plaintiff, appellant.
D. Guthrie, Q.C., and J.D. Lambert, for
the defendant, respondent.
The judgment of Kerwin C.J. and of Taschereau,
Abbott and Judson JJ. was delivered by
THE CHIEF JUSTICE:—By leave of the Court of
Appeal for Ontario the Canadian
Bank of Commerce appeals from a judgment of that Court1 affirming
the order of Morand J. That order answered the question asked in the special
case in the negative; directed that the appellant furnish the information and
produce the documents requested in a certain requirement of the Minister of
National Revenue, dated August 17, 1960; and directed that the time for
invoking the penalty for failure to comply with the requirement should commence
from the date of the order, May 1, 1961.
The dispute hinges upon the proper construction
of subs. (2) of s. 126 of the Income Tax Act, R.S.C. 1952, c. 148:
126. (2) The Minister may, for any purpose
related to the administration or enforcement of this Act, by registered letter
or by a demand served personally, require from any person
(a) any information or additional
information, including a return of income or a supplementary return, or
[Page 731]
(b) production, or production on
oath, of any books, letters, accounts, invoices, statements (financial or
otherwise) or other documents,
within such reasonable time as may be stipulated
therein.
The requirement reads as follows:
Special
Investigations Section,
J.M.
Fell
Department
of National Revenue
Canada
Taxation
Division
CONFIDENTIAL
REQUIREMENT
FOR INFORMATION AND PRODUCTION
OF DOCUMENTS
Ottawa, 17th August, 1960.
The General Manager,
The Canadian Bank of Commerce,
25 King Street West,
Toronto, Ontario.
Dear Sir,
The
Union Bank of Switzerland
1. For purposes related to the
administration or enforcement of the Income Tax Act, pursuant to the provisions
of Section 126(2) of the said Act, I require from you on or before 19th
September, 1960, information and production of documents as follows:
(a) A statement setting out all entries in
all accounts 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 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 including Casual, Manager’s, Sundry and
similar accounts for the period beginning 1st January 1955 and ending 31st
December 1959, both dates inclusive.
(b) A statement setting out particulars of
all transactions, including loans and discounts and collateral thereto, safety
deposit box rentals and security dealings with, for, or on behalf of the
persons named above or any of them, or any person or persons known to be or to
have been acting on behalf of those persons or any of them for the period
beginning 1st January 1955 and ending 31st December 1959, both dates inclusive.
(c) Production of 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, for the period beginning 1st
January 1955 and ending 31st December 1959, both dates inclusive.
[Page 732]
2. To comply with this requirement you
should forward the information and documents hereby required to the Deputy
Minister of National Revenue for Taxation, 444 Sussex
Drive, Ottawa, Ontario, by registered mail, within the time specified in paragraph 1.
Photostatic or certified copies of the documents will be sufficient.
3. If you so request in your acknowledgment
of this requirement, arrangements will be made for an officer of the Taxation
Division to attend at your office to receive the information and inspect the
documents required. Provision of the information and production of the
documents to that officer at the time of his attendance at your office will be
considered as compliance with this requirement if your acknowledgment is
received on or before 19th September 1960.
4. Your attention is directed to the
penalty provided in subsection 2 of section 131 of the Income Tax Act
for default in complying with this requirement.
Yours
truly,
“D.
Sheppard”
Assistant
Deputy Minister of
National
Revenue for Taxation
REGISTERED
Although there are various references in this
requirement to “the persons named above”, the Union Bank of Switzerland is the only party named, and it
is important to emphasize at the outset that from a consideration of the entire
document the Union Bank of Switzerland is under investigation. The requirement is signed by the Assistant
Deputy Minister of National Revenue for Taxation but it is admitted that under
the power conferred upon the Governor in Council by s. 117(1) (f) of the
Income Tax Act, R.S.C. 1952, c. 148:
117. (1) The Governor in Council may make
regulations
* * *
(f) authorizing a designated officer
or class of officers to exercise powers or perform duties of the Minister under
this Act.
the Assistant Deputy Minister of National
Revenue for Taxation was authorized by Reg. 900 to exercise all the powers and
perform all the duties of the Minister under the Act. It is convenient at this
point, because of an argument advanced on behalf of the appellant, to note that
under subs. (2) of the same regulation an official holding a position of
“Director-Taxation” in a District Office of the Taxation Division of the
Department of National Revenue may exercise the powers and perform the duties
of the Minister under subs. (2) of s. 126 of the Act.
[Page 733]
On September 15, 1960, the appellant issued a
writ of summons in the Supreme Court of Ontario claiming “a declaration that it
is not under any obligation to furnish the information or produce the documents
relating to the accounts of its customer, The Union Bank of Switzerland, called
for by the Requirement for Information and Production of Documents hereinafter
described, that the said Requirement is unauthorized and is of no force or
effect and that the Plaintiff is not subject to the penalty threatened therein
for failure to comply therewith”.
On March 15, 1961, the solicitors for the
parties agreed upon a special case for the opinion of the Court which is set
out in extenso in the reasons for judgment in the Court of Appeal. It is
sufficient to state that it is thereby agreed that the appellant is a large
bank of Canada and a taxpayer under the Income Tax Act of Canada; the
requirement does not relate in any way to the administration or enforcement of
the Act as respects the liability for tax of the appellant; the Union Bank of
Switzerland is one of the major banks in Switzerland and is a customer of the
plaintiff; the requirement was duly received by the appellant which had failed
to comply in whole or in part with it. The special case also shows that the
appellant has numerous branches throughout Canada, twelve in the West Indies, five branches or agencies in the United
States and two branches in London, England, and that it would require a great amount of clerical work
to comply with the requirement. Paragraph 11 referred to particularly by
counsel for the appellant reads as follows:
11. The information to be gathered together
and produced to comply with the said Requirement includes a great deal of
private information in respect of the business and affairs of the Union Bank of
Switzerland and of many other corporations and individuals, some resident in
Canada and some not resident in Canada.
Before Morand J. it was admitted that the
Minister was acting in good faith and that the requirement relates to a genuine
and serious inquiry into the tax liability of some specific person or persons;
that the Minister had good reason to believe that such person or persons is or
are among those referred to in the special case. The Minister refused to state
who the person or persons was or were or to designate the person or persons in
any way, shape or form.
[Page 734]
At the hearing before the Court of Appeal
counsel for the bank submitted that certain inferences of fact should be drawn
from the special case as follows:
(a) The Minister is proceeding in good
faith in the sense that he honestly believes he is proceeding in accordance
with his powers.
(b) The said Requirement relates to a
genuine and serious inquiry into the tax liability of some specific person or
persons.
(c) The Minister has reason to believe that
such person or persons under investigation are among those referred to in the
Special Case.
(d) Neither the Union Bank of Switzerland nor many of the persons
referred to in the Special Case, para. 11 are among the person or persons under
investigation.
Counsel for the Attorney-General agreed as to
(a), (b) and (c) but not as to (d). I, therefore, proceed upon the basis that
the first three are in the same position as if they were included in the
special case.
The argument of counsel for both parties covered
a wide field and submitted propositions with which it is unnecessary to deal
because, as has already been pointed out, by the very terms of the requirement
the Union Bank of Switzerland
is under investigation. The wording of subs. (2) of s. 126 of the Income
Tax Act is very broad and comprehensive since the Minister “may, for any
purpose related to the administration or enforcement of this Act,” proceed in
the manner indicated. Section 2 of the Act enacts:
2. (1) An income tax shall be paid as
hereinafter required upon the taxable income for each taxation year of every
person resident in Canada at
any time in the year.
(2) Where a person who is not taxable under
subsection (1) for a taxation year
(a) was employed in Canada at any time in the year, or
(b) carried on business in Canada at any time in the year,
an income tax shall be paid as hereinafter
required upon his taxable income earned in Canada for the year determined in accordance with Division D.
(3) The taxable income of a taxpayer for a
taxation year is his income for the year minus the deductions permitted by
Division C.
Therefore, so far as the Union Bank of Switzerland is concerned, if it carried on
business in Canada, it is liable
to tax and it is part of the administration or enforcement of the Act to
discover if the Union Bank was subject to taxation.
The wording of s. 126(2) is in such general
terms that it cannot be restricted, as counsel for the appellant argued, to
information as to the tax liability of the appellant itself. He also contended
that the words in subs. (2) of s. 126
[Page 735]
“including a return of income or a
supplementary return” indicated that the
requirement could only be directed to the question of liability to taxation of
the appellant. The words italicized do not restrict the generality of the
opening words in subs. (2). Although para. 11 of the special case shows that
the information to be gathered together and produced to comply with the
requirement includes a great deal of private information in respect of the
business and affairs of the Union Bank of Switzerland and of many other
corporations and individuals, some resident in Canada and some not resident in
Canada, I agree with Chief Justice Porter that the fact that the information
sought will disclose private transactions in which a number of persons were
involved who are not under investigation and may not be liable to tax, does not
affect the power. As the Chief Justice points out, much of the information
obtained will turn out to be irrelevant. Neither of these probabilities take
the case out of a purpose related to the administration or enforcement of the
Act.
Subsections (1) and (3) of s. 126 provide:
126. (1) Any person thereunto authorized by
the Minister for any purpose related to the administration or enforcement of
this Act may, at all reasonable times, enter into any premises or place where
any business is carried on or any property is kept or anything is done in
connection with any business or any books or records are, or should be, kept
pursuant to this Act, and
(a) audit or examine the books and
records and any account, voucher, letter, telegram or other document which
relates or may relate to the information that is or should be in the books or
records or the amount of tax payable under this Act,
(b) examine property described by an
inventory or any property, process or matter an examination of which may, in
his opinion, assist him in determining the accuracy of an inventory or in
ascertaining the information that is or should be in the books or records or
the amount of any tax payable under this Act,
(c) require the owner or manager of
the property or business and any other person on the premises or place to give
him all reasonable assistance with his audit or examination and to answer all
proper questions relating to the audit or examination either orally or, if he
so requires, in writing, on oath or by statutory declaration and, for that
purpose, require the owner or manager to attend at the premises or place with
him, and
(d) if, during the course of an
audit or examination, it appears to him that there has been a violation of this
Act or a regulation, seize and take away any of the records, books, accounts,
vouchers, letters, telegrams and other documents and retain them until they are
produced in any court proceedings.
* *
*
[Page 736]
(3) The Minister may, for any purpose
related to the administration or enforcement of this Act, with the approval of
a judge of the Exchequer Court of Canada or of a superior or county court,
which approval the judge is hereby empowered to give upon ex parte application,
authorize in writing any officer of the Department of National Revenue,
together with such members of the Royal Canadian Mounted Police or other peace
officers as he calls on to assist him and such other persons as may be named
therein, to enter and search, if necessary by force, any building, receptacle
or place for documents, books, records, papers or things which may afford
evidence as to the violation of any provision of this Act or a regulation and
to seize and take away any such documents, books, records, papers or things and
retain them until they are produced in any court proceedings.
Certainly, those powers are stringent as well as
the powers contained in s. 126A dealing with a solicitor-client privilege and
the powers of a judge of a Superior Court or of the Exchequer Court of Canada
but it is unnecessary to determine their exact limits.
The power conferred upon the Minister or Assistant
Deputy Minister of National Revenue for Taxation cannot be restricted to an
inquiry for definite and limited particular information; and the mere fact that
by subs. (2) of Reg. 900 an official holding the position of “Director‑Taxation”
in a District Office of the Taxation Division of the Department of National
Revenue might exercise the powers and perform the duties of the Minister under
subs. (2) of s. 126 does not derogate from the wide powers conferred by this
last-mentioned subsection. The cases cited by counsel for the appellant are
quite distinguishable and I find it unnecessary to go over them in detail.
The final argument was that the Assistant Deputy
Minister of National Revenue for Taxation is not authorized to act on his
opinion, belief or decision, but must in fact have a purpose related to the
administration or enforcement of the Act. I have already expressed the opinion,
that, in view of the contents of the special case and the admissions of
counsel, the Assistant Deputy Minister was in fact acting for a purpose related
to the administration or enforcement of the Act. The decision of the Judicial
Committee in Nakkuda Ali v. Jayaratne,
relied upon by counsel for the appellant, is not applicable. In that case power
to cancel a licence was conferred upon the Controller of Textiles where he “has
reasonable cause to believe that any dealer is unfit to
[Page 737]
be allowed to continue as a dealer”. The
decision was that the requirement of the regulation there in question that the
Controller must have reasonable grounds of belief was insufficient to oblige
him to act judicially and that there was nothing else in the context or
conditions of his jurisdiction which suggested that he must regulate his action
by analogy to judicial rules. It was held that the respondent was not amenable
to a mandate in the nature of certiorari in respect of his action under
the regulation. Much that followed that holding was obiter and has since
given rise to considerable discussion as to its validity.
The appeal is dismissed, but counsel for the
respondent suggested that a new time should be fixed for invoking the penalty
for failure to comply with the requirement, which was dated August 17, 1960, and required the information and
production of documents on or before September 19, 1960. The trial judge
directed that the time for invoking the penalty should commence from the date
of his order, May 1, 1961.
During the course of the proceedings there was of course no attempt to proceed
by the respondent. It would appear to be reasonable to fix August 1, 1962, as
the date for compliance.
No order as to costs was made by Morand J., or
by the Court of Appeal. The appellant might well have been satisfied that it
had done all that it should in appealing to the Court of Appeal, but it applied
for and obtained leave from that Court to appeal to this Court. The appellant
must pay the costs of this appeal.
The judgment of Locke, Cartwright, Fauteux,
Martland and Ritchie JJ. was delivered by
CARTWRIGHT J.:—The course of the proceedings in
the Courts below and the relevant portions of the record are set out in the
reasons of the Chief Justice.
I agree that the appeal fails.
I do not find it necessary to deal with all the
arguments which were addressed to us as I have reached the conclusion that on
the facts set out in the stated case read with the admissions of counsel as to
the inferences which should be drawn therefrom it has been shewn that in
addressing the requirement to the appellant the Minister was acting for
purposes related to the administration or enforcement of the Income Tax Act.
[Page 738]
I do not base my judgment on the view that it
has been established that the liability to tax of the Union Bank of Switzerland
is under investigation, a view which I understood counsel for the respondent to
reject; on the record it appears to me that the liability of that bank may or
may not be under investigation.
Paragraphs 2 and 11 of the stated case are as
follows:
2. The Requirement mentioned in the Writ of
Summons herein does not relate in any way to the administration or enforcement
of the Income Tax Act as respects the liability for tax of the plaintiff
itself.
* *
*
11. The information to be gathered together
and produced to comply with the said Requirement includes a great deal of private
information in respect of the business and affairs of the Union Bank of
Switzerland and of many other corporations and individuals, some resident in
Canada and some not resident in Canada.
Inferences (b) and (c) which
counsel agreed should be drawn are as follows:
(b) The said Requirement relates to
a genuine and serious inquiry into the tax liability of some specific person or
persons.
(c) The Minister has reason to
believe that such person or persons under investigation are among those
referred to in the Special Case.
When these are read together it appears to be
common ground, (i) that the requirement addressed to the appellant relates to a
genuine and serious inquiry into the tax liability of some specific person or
persons, (ii) that the Minister has reason to believe that such person or
persons are among those referred to in the special case, (iii) that the persons
referred to in the special case are those mentioned in paragraph 11, “the Union
Bank of Switzerland and many other corporations and individuals some resident
in Canada and some not resident in Canada” and (iv) that the answer to the
requirement will provide a great deal of private information in respect of the
business and affairs of the persons referred to in item (iii) and therefore in
respect of the business and affairs of the person or persons into whose
liability to tax inquiry is being made.
I agree with the Chief Justice and with Porter
C.J.O. that the circumstance that the answer to the requirement will disclose
private transactions involving a number of persons who are not under
investigation and may not be liable to tax does not invalidate the requirement.
[Page 739]
The purpose of the requirement, then, is to
obtain information relevant to the tax liability of some specific person or
persons whose liability to tax is under investigation; this is a purpose
related to the administration or enforcement of the Act. As I have reached the
conclusion that the existence of this purpose is established by the material in
the record, I do not find it necessary to examine the arguments addressed to us
on the question of the incidence of the burden of proof.
On the question, fully argued before us, whether
the test to be applied in determining the validity of a requirement is
subjective or objective, I agree with and desire to adopt the following passage
in the reasons of Porter C.J.O.
In the present case the condition is
objective, and the question whether he (i.e. the Minister) is acting for the
purpose specified in the Act is subject to review, even though he may be acting
in an administrative capacity. This question involves an interpretation of the
Act and its application to the circumstances disclosed. However, once it is
established as in this case that the Minister is acting for the purposes
specified in the Act, his acts within this scope are administrative and not
judicial, and as such are not subject to review.
For these reasons I would dispose of the appeal
as proposed by the Chief Justice.
Appeal dismissed.
Solicitors for the plaintiff, appellant:
Blake, Cassels & Graydon, Toronto.
Solicitors for the defendant, respondent:
Cassels, Brock & Kelley, Toronto.