Section 231.2

An accounting firm (Zeifmans) had unsuccessfully argued in the Federal Court that the Minister should have sought prior judicial authorization under s. 231.2(3) of a requirement to provide information (RFI) issued in the course of a CRA audit of three related resident individuals (the “named persons”) who were Zeifmans clients. The RFI (which was issued after various attempts by CRA to obtain the information directly from the named persons and from the records of Canadian banks) set out a long and detailed list of required information and documents in relation to the named persons and all “entities owned, operated, controlled or otherwise connected to [such] individuals” (the “unnamed entities.”)

In confirming the decision below that no such prior judicial authorization was required, Stratas JA adverted to the decision in Toronto Dominion Bank (finding that a demand to the Bank to disclose the name, address and telephone number of an account holder to whose account a tax debtor had deposited a cheque was invalid as there was no prior judicial authorization under s. 231.2(2)) and stated (art para. 5):

Artistic Ideas, eBay and their progeny correctly interpret section 231.2. To the extent that Toronto Dominion Bank stands for something different from Artistic Ideas, eBay and their progeny, it should not be followed.

He also confirmed (at para. 7) the finding below that CRA had not targeted the unnamed entities for investigation (so as to require judicial authorization).

The respondent taxpayer alleged that s. 231.2 requirement letters issued to him were invalid because they were issued for the predominant purpose of furthering criminal investigations contrary to Jarvis. In finding that the taxpayer’s statement of claim should be struck, Woods JA applied the principle that even “if … a party is a stranger to a transaction, the transaction must still be described with sufficient detail that the other party can identify it” (para. 80) and noted, regarding the taxpayer’s allegation that the Audit Division shared information gathered from the requirement letters with criminal investigators, that the “pleading does not link the alleged sharing of information to any particular criminal investigation” (para. 83). Furthermore, although a general statement of the Minister suggested “that audits may precede criminal investigations … this is permitted in Jarvis” (para. 72).

However, the taxpayer was given leave to file an amended statement of claim on the condition that “the pleading identify with particularity the facts giving rise to the cause of action” (para. 96).

In the context of applications by the Minister for s. 231.7 compliance orders respecting CRA requests for various documents made pursuant to ss. 231.1(1) and 231.2(1), Southcott J rejected the submissions of the respondent taxpayers that applications should fail, because the Minister failed to adduce evidence that such requests or requirements had been approved by authorized persons, stating (at para. 124):

In the absence of any evidence or meaningful argument by the Respondents challenging the authority of those who issued the Requests or Requirements, the Minister benefits from the presumption of validity [as per, e.g., Branigan, 2004 FC 245)] … .

Southcott J found however that the somewhat detailed affidavit evidence of a CRA manager was sufficient to meet the burden on the Minister to establish service of the s. 231.2(1) requirements, even though the requirements of s. 244(5) had not been met.

Although Southcott J agreed (at para. 69) with the proposition that “when serving a Requirement, the Minister is to perform an assessment of the time required for compliance and provide the recipient with an objectively reasonable period to reply, based on the volume and details of the demand and circumstances then known to the Minister,” he found that the taxpayers had not adduced any evidence to meet their burden to show that the 30-day notice period given was unreasonable (para. 159).

After noting (at para. 176) the taxpayers’ submission “that the Minister cannot compel the production of foreign-based information or documents, within the meaning of s 231.6, other than through s 231.6,” Southcott J accepted (at para. 180) the position of the Minister “that the Requirements oblige the Respondents to provide the documents and information in their power, possession and control, if accessible from Canada [emphasis in original]”, and found that the taxpayers had not met their burden of establishing that the requested information was not accessible from Canada.

An accounting firm (Zeifmans) sought judicial review of a requirement to provide information (RFI) issued by the Minister pursuant to s. 231.2(1) in the course of a CRA audit of three related resident individuals (the “Named Persons”) who were Zeifmans clients. The RFI set out a long and detailed list of required information and documents in relation to the Named Persons and all “entities owned, operated, controlled or otherwise connected to [such] individuals” (the “Unnamed Persons.” The RFI was issued after numerous unsuccessful CRA efforts to obtain the information directly from the Named Persons and from the records of Canadian banks.

Zeifmans argued that judicial authorization should have been obtained pursuant to s. 231.2(2) given that the RFI also referred to the Unnamed Persons (these were unnamed persons because CRA knew “only that the Named Persons operate[d] through offshore entities and trusts,” without details” (para. 80).) In this regard, Walker J stated the principle (at para. 47):

If a Canadian taxpayer organizes their affairs through corporate or other entities, the CRA is entitled to obtain information related to those entities for the purpose of auditing and verifying the taxpayer’s compliance with the ITA. If the entities’ books and records are placed in the possession of third parties, the Minister is entitled to require the third party to provide the information requested if the unnamed persons are not subject to audit. The information is required to verify the compliance of the taxpayer being audited and no application for judicial authorization is required … .

She then rejected the argument, stating (at para. 64):

In the present case, the record establishes that the information requested in the RFI, including that related to the Unnamed Persons, is required in order to verify the compliance of the Named Persons with their obligations under the ITA. There is no evidence in the record that the Unnamed Persons are a current investigation target. I find that the possibility that one or more of the Unnamed Persons may be subject to audit in the future is not sufficient to require judicial authorization for the RFI and the Minister’s reliance on subsection 231.2(1) was justified.

In also rejecting an argument that the RFI had not been issued to a “person” as required by s. 231.2(1) because it was issued to a partnership (Zeifmans), she stated (at para. 72) that “the effect of subsection 244(20) is that the RFI was addressed to each partner for purposes of the ITA.”

The Minister issued requirements for information (“RFIs”) pursuant to s. 231.2(1) to four resident individuals and a corporation (“Gherfam”), and included information relating to various foreign entities.

Although the particular parties that the Minister was investigating had been identified, the RFIs themselves did not name those parties. In finding that this had not engaged a requirement to first seek judicial authorization under s. 231.2(3) before issuing the RFIs (i.e., that “unnamed persons” meant “unknown to the Minister” rather than “unnamed in the RFI” (para. 34), Southcott J stated (paras. 65, 74):

[Judicial] explanation describes ss 231.2 (2) and (3) as affording protections against abusive investigations to the unnamed persons, not to the party who is the recipient of the requirement … .

I also find particularly compelling the Respondent’s argument that the decision-maker could hardly have been expected to pursue an application under s 231.2(3), in an effort to satisfy the Court that the persons the Minister wished to investigate were ascertainable, when the identities of those persons were actually known to the Minister. … I find that it was reasonable for the decision-maker to have issued the RFIs without seeking judicial authorization in advance.

Southcott J also applied at various junctures the principle (para. 80) that “the unnamed persons provisions are not engaged where a requirement seeks information related to an unnamed person that is not the subject of the Minister’s investigation.”

Regarding the applicants’ submission that it was unreasonable for the Minister to issue the RFIs under s 231.2 rather than s 231.6, Southcott J stated (at para. 100) that the “Respondent has not convinced me that the statutory scheme of the ITA permits the Minister to require production of foreign-based information through s 231.2(1),” but went on to state (at paras. 106, 110):

It would be inconsistent with the rationale for the Minister’s powers under the ITA to require the Minister to accede to the taxpayer’s representations as to the location of material that is sought through such powers.

… [T]his is not to say that the Minister has recourse to both ss 231.2 and 231.6 for purposes of obtaining foreign-based information. Rather, it may turn out that some of the material sought is located within Canada and some of it is located outside Canada. The Canadian-based material would be engaged by the s 231.2 requirement and be subject to statutory consequences including the possibility of a compliance application under s 231.7. The foreign-based material would be engaged by the s 231.6 requirement, along with its statutory consequences including the s 231.6(8) prohibition against introducing in any subsequent civil proceeding any foreign-based material that was not produced in response to the requirement. In my view, the Applicants’ arguments do not demonstrate an inconsistency in the simultaneous use of both ss 231.2 and 231.6.

As to some of the RFIs seeking material dating back 21 years, he stated (at para. 141) that “there is no statutory time limit within which to make a request for information under … s 231.2(1).”

He further stated (at para. 152) that “the ITA does not require that the party from whom the information is sought be given any details as to the purpose of the requirement.”

However, one of the RFI’s stated:

4. Provide any additional information or explanations that are relevant in determining whether or not the rules of former section 94 of the Act (for taxation years before 2007) applies to the Royce and Regent Trusts in respect of the transaction described in the background of this query.

He stated (at para. 162):

[This] paragraph …does not give a description of the information required which is sufficient to enable the Applicant to prepare its response to that paragraph. I therefore find that the Gherfam RFI is unreasonable in this respect.

Accordingly, all the RIFs were found to be reasonable, except that the Gherfam RFI was quashed and returned to the decision-maker for re-determination.

The respondent (“Valero”) did not withhold under Reg. 105 on fees paid to non-resident carriers for international shipping services on the basis that such carriers’ income therefrom was exempt from Canadian tax (but without obtaining a CRA waiver and in reliance on an alleged CRA policy that no withholding was required in these circumstances). During an audit, Valero offered to make available all the requested international shipping information, provided CRA undertook not to assess any Reg. 105 withholding tax.

CRA thereafter issued a requirement under s. 231.2(1) for such information, and Valero requested an order setting aside the requirement. In the alternative, Valero sought a declaration that CRA made representations to it or that it had legitimate expectations that no Reg. 105 withholding was required, or that there should be an exercise of the Minister’s discretion to reduce such withholding under s. 153(1). In finding that such requests could not succeed, Rivoalen JA stated (at paras. 35-37):

… If an order setting aside the requirement for information is granted, the Minister will be prevented from properly exercising her powers under the Act. …

The Minister has not yet assessed. Once she has received the complete information and documents, she may well find that Valero has no liability. In my view, Valero cannot stop the Minister from carrying out her statutory duty under the Act to assess income tax payable by way of an application for judicial review.

… [T]he doctrines of promissory estoppel and legitimate expectations cannot be utilized to prevent the Minister from obtaining the necessary documents she requires to properly administer the Act and fulfill her obligations. …

Furthermore, Valero’s alternative request was premature:

Once the Minister receives the documents, if she assesses Valero for not withholding tax, Valero may have recourse in accordance with administrative law principles. (para. 39)

In addition (para. 42):

[T]he Judge made no reviewable errors when she found that any review of the Minister’s discretion under subsection 153(1.1) of the Act was premature.

Grammond J had previously made an order pursuant to s. 231.2 that the taxpayer (“Béarence,” a land developer with numerous land sales and who had been undergoing a CRA audit) provide, within five days, an Excel file containing all the daily transactions for its 2012 to 2015 years and a report of transactions by each general ledger account for those years. In finding that Béarence could not now be found to be in contempt of court for not having provided these documents, Bell J accepted Béarence’s submission that CRA already had available to it all the information it needed to perform its audit and stated (at para. 18, TaxInterpretations translation):

[N]either the CRA nor this Court can impose the format in which this information must be provided to the CRA, as all the necessary information has already been provided.

The CRA special investigations division started an investigation of the taxpayer, issued s. 231.2 requirements to two banks, and used the resulting documents to prepare and issue net worth assessments for unreported business income of $5,855,773 for 2007 and $4,815,601 for 2008. Mr. Bauer amended his Notice of Appeal in the Tax Court stating that, since he was under investigation at the time that the requirements were issued, the information thereby obtained was inadmissible as his s. 8 Charter rights had been infringed.

In confirming that the Tax Court had correctly struck this amendment, Webb JA quoted (at para. 11) the Romanuk (2013 FCA 133) decision (including its quote of the statement in Jarvis that “although an investigation has been commenced, the audit powers may continue to be used, though the results of the audit cannot be used in pursuance of the investigation or prosecution" and then stated (at paras. 13-14, 17):

[E]ven though an investigation had commenced that could lead to charges being laid under section 239 of the ITA, this does not preclude the CRA from using requirements to obtain information or documents that could be used only in relation to the reassessments... .

While using requirements under section 231.2 of the ITA to obtain information or documents after an investigation has commenced may result in that information or those documents not being admissible in a proceeding related to the prosecution of offences under section 239 of the ITA, it does not preclude that information or documents from being admissible in a Tax Court of Canada proceeding where the issue is the validity of an assessment issued under the ITA. …

[T]he CRA’s power to issue requirements under section 231.2 of the ITA to obtain information or documents that will be used for the administrative purpose of reassessing a taxpayer is not suspended by the commencement of an investigation. Therefore, any information or documents obtained as a result of the issuance of the requirements in this case cannot be excluded, based on section 8 of the Charter, from the proceedings in the Tax Court of Canada related to the validity of the reassessments of Mr. Bauer’s tax liability for 2007 and 2008.

Notaries practising law in Quebec received requirements under s. 231.2 to provide documents or information relating to clients for tax collection or audit purposes. Wagner and Gason JJ found (at para. 87):

[T]he requirement scheme in the ITA infringes s. 8 of the Charter and must be declared to be unconstitutional insofar as it applies to notaries and lawyers in Quebec.

In support of this conclusion, they stated (at para. 44):

The defects in question are that the client is given no notice of the requirement, that an inappropriate burden is placed solely on the notary or lawyer concerned, that compelling disclosure of the information being sought is not absolutely necessary and that no measures have been taken to help mitigate the impairment of professional secrecy.

CRA issued a Requirement under s. 231.2(1) requiring the taxpayer to provide a broad range of information and documents relating to his financial and tax affairs. Corporations owned by the taxpayer (but not specifically named in the requirement) had unremitted source deductions and GST. The taxpayer did not comply with the order, and the Minister applied to the Federal Court under s. 231.7, seeking an order compelling the taxpayer to comply. The Federal Court dismissed the application on the basis inter alia that the requirement was “overly expansive in breadth and in depth” (2015 FC 634, at para. 6) and noted (at para. 39) that it was unclear whether the taxpayer was “being asked to list his personal assets or to include documentation about corporate assets that he would only have access to in his capacity as a director or officer of the corporations.”

Before ordering the taxpayer to comply with the requirement, Dawson J.A. stated (at para. 5):

Section 231.2…confers broad and general powers on the Minister to require any person to produce any information or any document for any purpose related to the administration or enforcement of the Act.

Respecting the specific concerns of Mandamin J below, she stated (at paras. 7, 8):

“The fact the Requirement required disclosure of assets owned beneficially by the respondent neither made the Requirement overbroad nor ambiguous. Further, the scope or breadth of the Requirement is a matter for the Minister, so long as the information requested is required for any purpose related to the administration or enforcement of the Act.

Moreover, it is not improper for a requirement to issue that requires information to be provided about a third party. See, for example, Taxpro Professional Corporation., 2011 FC 224…aff’d 2011 FCA 306… .”

The taxpayer appealed a conviction under s. 238(1) for failing to comply in a timely manner with a demand under s. 231.2(1) to provide CRA with signed and completed returns. Melnick J. dismissed the taxpayer's argument that the s. 231.2(1) request was invalid in that there was not a "genuine and serious inquiry" into the taxpayer's tax liability. He stated (at paras. 21-22):

While a demand that an individual submit returns under section 231.2 may not be conclusive proof that there was a genuine and serious inquiry into a taxpayer's liability where there is evidence suggesting the contrary, it does amount to prima facie evidence of a genuine and serious inquiry and will satisfy the Crown's burden in situations where there is no evidence to the contrary.

In the present case, there was no evidence that the Minister was motivated by some ulterior purpose.

The taxpayer assisted its clients in acquiring minority shares in "Tech Wreck" corporations that had become insolvent, with a view to their accessing the substantial pool of losses from the old businesses. Mactavish J. granted the Minister's ex parte application to require the taxpayer to disclose its client list. The purpose of the requirement was demonstrably to verify an ascertainable group's compliance with the Act, given that the taxpayer would clearly know which of its clients participated in the scheme and given provisions of the Act which targeted loss trading. Mactavish J. noted that the Minister "no longer needs to show that the Requirement Order relates to a 'genuine and serious inquiry' into the tax liability of a specific person or persons,'" and that it was enough to show a good faith attempt to verify compliance (para. 50).

There was no merit to the taxpayer's submission that the Minister's application had failed to disclose that the information sought could have been obtained by mining its own databases or through the System for Electronic Document Analysis and Retrieval (SEDAR). Neither of these systems would enable the Minister to identify which loss companies were being used, and neither system would reveal the identities of the clients (because their ownership percentages were too low).

Before confirming the finding below that that the information sought of eBay in a s. 231.2 requirement was needed by the Minister to conduct a good faith audit of eBay “PowerSellers” resident in Canada to ensure that they were complying with their obligations under Canada’s tax laws, Evans JA held (at para. 63):

To oblige the Minister to prove that a genuine and serious inquiry was being conducted with respect to specific persons within the ascertained group of taxpayers would, in a case such as the present, rob subsections 231.2(2) and (3) of much of their efficacy.

The Respondent was unsuccessful in a submission that a notice given under s. 231.2(1) was not valid because the information requested related to a corporation that had been dissolved. Strayer D.J. noted (at para. 8) that "the information requested relates to the identification of assets which had belonged to a defunct company that owed unpaid taxes and might be revived in the future for purposes of collection".

Requirements issued to the taxpayer following the laying of charges against him in California in connection with various offences involving an illicit drug importation and distribution operation and the laundering of the proceeds were found to have been issued predominantly for the purpose of the conduct of an audit rather than the pursuit of a criminal investigation. No clear decision had been made to pursue a criminal investigation based on the evidence, and respecting the further question as to whether an adversarial relationship had developed within the meaning of the Jarvis case, the pre-audit inquiries were but a first step in determining whether the taxpayer was a non-filer for the taxation years in question, and the practice of the Special Enforcement Program Unit doing the investigation was to only conduct audits and not criminal investigations.

Demands made by the Minister on the taxpayer, (who had filed a proposal under the Bankruptcy and Insolvency Act), pursuant to s. 231.2(1) respecting properties in Florida were not contrary to s. 69.1(1) of the Bankruptcy and Insolvency Act, which stipulated that "on the filing of a proposal, no creditor ... shall commence or continue any action, execution or other proceedings, for the recovery of the claim provable in bankruptcy, until the trustee has been discharged or the insolvent person becomes bankrupt ...".

Requirements were issued in connection with a joint program with the RCMP to combat organized crime, and were quashed.

The appellant had arranged for the sale of artwork to individual Canadian taxpayers who donated the works to registered charities at a marked-up value. When the Minister issued a requirement to the appellant under s. 231.2(1), the appellant was entitled to redact the name of the third-party taxpayers (donors) given that the Minister was investigating compliance by the taxpayers with the Act. Counsel for the Minister unsuccessfully argued that "the restriction against obtaining information or documents relating to unnamed persons only applies where the third party itself is not under investigation".

A demand to the respondent bank to disclose the name, address and telephone number of an account holder to whose account a tax debtor had deposited a cheque was not valid as there was no judicial authorization pursuant to s. 231.2(2). Décary J.A. described the purposes of s. 231.2(2).

An investigation of the taxpayers conducted by Special Investigations was a criminal investigation as stated by one of the investigators. Accordingly, the requirement power in s. 231.2(1), which did not distinguish between physical and corporate taxpayers, could not be utilized. The Minister's requirements for production of documents were quashed.

An accounting firm was not permitted to refuse to answer the Minister's written questions in writing (thereby generating new documents). Given the contrast with s. 231.2(1)(b) which permitted the Minister to compel the production of documents and records, under s. 231.2(1)(a) the Minister had the right to ask questions to elicit knowledge or facts.

The trial judge had erred in finding that the accounting firm had the right to redact documents to expunge the names of clients of the accounting firm who were unrelated to the taxpayers being investigated by CCRA.

The applicants received letters entitled Requirement to Provide Information and Documents With Respect to Donations Made For Charitable Organizations

The record as a whole including testimony of CCRA investigators indicated that the predominant purpose of the investigation giving rise to the Requirements was prosecution of the applicants for tax evasion. The Requirements issued to the individual applicants were ordered to be quashed, whereas those issued to the corporate applicants were upheld given that the privacy interests of corporate entities are minimal as compared with those of individuals.

The taxpayer, which was involved in facilitating donations of artwork by third parties, blanked out the names of the third parties when information about the transactions was requested by the Minister ("CCRA"). When CCRA applied to the Court for a requirement to receive information about the unnamed persons, the applicants exercised their rights pursuant to s. 231.2(5) to seek judicial review of the requirements. CCRA then side-stepped this process by indicating it would not enforce the old requirements and instead applied for new requirements indicating that it was seeking the information about the third parties in connection only with its audit of the applicants.

Heneghan J. found (at p. 5065) that:

"The Minister, not the taxpayer, bears the burden of complying with section 231.2"

and (at p. 5066) that:

"The Minister here has failed to objectively establish that he had fairly stated his purpose in issuing the new requirements."

Accordingly, the new requirements were invalid for failure to comply with ss.231.2(2) and (3).

Upon receiving a request for information relating to the taxpayer including a list of shareholders and their percentage shareholdings, CCRA was required to obtain the information by the administrative measures available to it (rather than being only obligated to exchange information already gathered by it), with the result that a requirement for such information issued to the taxpayer pursuant to s. 231.2(1) was valid. In the absence of any evidence that information relating to the tax returns or liability of unidentified Canadian taxpayers was being requested, there was no requirement to comply with the procedure in s. 231.2(3).

Arguments that tax planning memoranda were irrelevant to the issue whether the transactions under investigation were avoidance transactions, were dismissed.

The Minister issued a requirement obligating the respondent to provide banking documents concerning a delinquent taxpayer as well as the banking documents of other related Credit Union account holders. Mandamin, J. found that the requirement was valid as these other unnamed account holders were not persons that were under investigation by the Minister.

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.

Zeifmans, 2021 FC 363, aff’d 2022 FCA 160 concerned the application of the Zeifmans accounting firm for judicial review of a CRA issuance of a requirement letter pursuant to s. 231.2(1) respecting three named individual clients of the firm and all “entities owned, operated, controlled or otherwise connected to [such] individuals” (the “Unnamed Persons.”) The submission of Zeifmans - that judicial authorization should have been obtained pursuant to s. 231.2(3) given that the requirement extended to the Unnamed Persons – was rejected essentially because there was “no evidence in the record that the Unnamed Persons [we]re a current investigation target.”

In this subsequent proceeding, an application of the Minister for a compliance order pursuant to s. 231.7 was dismissed. Of crucial significance was the finding of Pallota J that Unnamed Persons were (and had been at the time of issuing the Requirement) an investigation target, i.e., the lead auditor had effectively admitted in cross examination in these proceedings that the requirement had been issued as part of the CRA audits of all the companies in the group.

In relation to five requirements for information (“RFIs”) issued pursuant to s. 231.2(1) to four resident individuals and a corporation, Southcott J found:

• Although the RFIs themselves did not name all the particular parties that the Minister was investigating, this was acceptable since the requirement to first seek judicial authorization under s. 231.2(3) before issuing the RFIs to “unnamed persons” meant only that such persons were “unknown to the Minister” rather than being “unnamed in the RFI” (paras. 34).
• Furthermore, “the unnamed persons provisions are not engaged where a requirement seeks information related to an unnamed person that is not the subject of the Minister’s investigation” (para. 80).

Roofmart appealed the Federal Court’s granting of an application under s. ITA 231.2(3) and ETA s. 289(3) for Roofmart to disclose various particulars for all of its customers who in the past 4 ½ years had made purchases of construction materials from Roofmart exceeding specified thresholds. One of the grounds of appeal was that the application is ultra vires because it was not brought by the Minister, as required by s. 231.2(3), and instead had been brought by a specific CRA official to whom no delegaton under s. 220(2.01) had occurred.

In rejecting this submission, Rennie JA stated (at paras. 31, 32):

The notice of application was brought by the Minister of National Revenue, and not by Mr. Blackmore. … The notice of application is signed by counsel for the Attorney General, who is referred to in the notice of application as “counsel for the applicant”, with the applicant clearly stated as being the Minister. ...

Roofmart’s argument confounds the authority to bring the application, which rests with the Minister or their delegate, with the role of the person who swore the affidavit filed in support of the Minister’s application. … The fact that Mr. Blackmore’s affidavit is proffered in support of the Minister’s application does not change the fact that it is the Minister, not the affiant, who made the application for authorization

In also rejecting Roofmart’s argument “that there was no evidence before the Court that the Minister’s counsel had the Minister’s authority or instructions to bring the application” (para. 33), he stated (at para. 34):

Once retained, counsel have all the authority—apparent, ostensible and implied—to take all necessary steps and actions in litigation on behalf of their client … .

Pursuant to ITA s. 231.2(3) and ETA s. 289(3), the Minister sought the following information about residential and commercial construction contractors having an account with the Respondent (“Roofmart”) and for whom the total annualized purchases were $20,000 or greater for the 4 ½ year period covered (and “Unnamed Persons Requirement”):

(a) Identifying information (e.g., name, address, phone number and contact person);

(b) The business number, if known;

(c) The Customers’ itemized transaction details including invoice date, invoice number, total sales amount, method of payment, and address of delivery, and

(d) All bank account information for the Customers (including transit, institution, and account numbers) from credit applications and/or otherwise maintained by Roofmart in its records.

In rejecting Roofmart’s submissions that authorization of the Unnamed Persons Requirement should not be granted, Campbell J stated (at para.11) that the unnamed persons were an ascertainable group as “the total annual purchase requirement set out in the Unnamed Persons Requirement is sufficient to establish the target group of residential and commercial contractors among Roofmart’s customers,” and (at para. 13) that the Unnamed Persons Requirement had been established to had been “made to verify compliance by the person or persons in the group with any duty or obligation under the ITA and ETA” e.g., verifying that the unnamed persons had filed all of their required income tax returns and calculated and remitted GST/HST.

The Minister sought judicial authorization under ITA s. 231.2(3) and ETA s.289(3) for making a demand of Hydro-Quebec to furnish listed particulars (e.g., invoicing address, address of electricity use, late payment identification and telephone number) for all its commercial customers who were charged the regular electricity rate (as contrasted with very large industrial users with different rates). This information was requested in electronic form so that it could be compared with the information that CRA had in its own files. Hydro-Quebec was quite willing to provide the information, but Roy J considered that this was irrelevant to whether he should grant the authorization.

In finding that s. 231.2(3)(a) was not satisfied, he stated (at paras. 78, 98, TaxInterpretations translation):

Where the group is generic without a link to the ITA, and where one can require information without a link to the ITA (as in the case of the commercial customers of a public utility), there is no limitation on a fishing expedition … The invasion of the private life, the right to not be importuned by the state … is not restricted. …

The plaintiff has indiscriminately created a group which has no actual factual foundation respecting the administration or enforcement of the ITA for that group. The Minister does not see why all the customers of Hydro-Quebec could not constitute an ascertainable group; it would be the same for all the residents of Quebec.

In finding that s. 231.2(3)(b) also was not satisfied, he stated (at para. 79):

The particulars of the commercial customers of Hydro-Quebec are, at best, upstream from information for the audit of their compliance with the ITA.

In further rejecting the Minister’s submission that once the conditions in s. 231.2(3)) were satisfied, the Court was required to issue an authorization, he indicated that even if the conditions were satisfied, he nonetheless had the discretion to refuse authorization, which he would do given the scope of the requested information, stating (at para. 96):

[I]t is for the avoidance of such an invasion that judicial authorization is required in the case of unnamed persons. A certain form of fishing expedition is permitted, but judicial authorization, with its inherent discretion, is there to limit and temper it. To me this seems essential where a fishing expedition is of unparalleled amplitude and the requested information is remote from an audit of compliance with the Act. In creating the power under subsection 231.1(3), Parliament sought at the same time for the judiciary to prevent abusive seizures.

Gascon J granted an authorization of the Minister to issue a requirement (the “Unnamed Persons Requirement”) on Paypal Canada to disclose the names and specified identifying particulars (e.g., addresses and telephone numbers) corporations and individuals holding a business account with PayPal that had used PayPal's online payment platform in the course of their commercial activities during the period covering the calendar years 2014 to the date of service, and to provide the total number of credit transactions (payments received) and debit transactions (payments sent) for each of the relevant years and the total value of such transactions (payments received) for each of the relevant years.

Before granting the application, Gascon J indicated that:

• "the expectation of privacy with respect to business records such as those targeted by the Unnamed Persons Requirement is very low"
• "PayPal has not filed any evidence to support a claim that the Unnamed Persons Requirement is overbroad or reaches a disproportionate number of persons or transactions"
• "the information sought in the Unnamed Persons Requirement is required in the context of verification activities undertaken in good faith by the Minister to combat the underground economy … to determine whether the Unnamed Persons have filed their required tax returns"

Rona Inc. appealed an order made by Martineau J of the Federal Court to authorize the Minister to serve Rona with a requirement letter (RL) with respect to its business clients pursuant to s. 231.2(3) to the Act and s. 289 of the ETA. Specifically, Rona submitted that the judge erred in allowing the RL to be served on the basis that CRA officials obtained a copy of a form used to open commercial credit on the pretext that they were building contractors, and subsequently used that form in the preparation of the RL

Boivin JA stated that the judge had concluded that the form was blank and generally available to the public, the taxpayer was not being audited, and there was no risk that the administration of justice would be brought into disrepute if the RL were served. (para 5)

After noting that Jodoin, 2017 SCC 26, p. 52 indicated "that when an appellate court is faced with the exercise of a judge's discretion, it must'"show great deference...'," Boivin J A dismissed the appeal, concluding (at para 8):

In this case, the appellant did not satisfy us that the judge erred in the exercise of his discretion.

KPMG LLP sought to quash an order of Noël J - that authorized the Minister to impose on KMPG a requirement pursuant to s. 231.2(3) to disclose confidential information relating to certain of its unnamed clients relating to their participation in a tax structure known as the Offshore Company Structure – on the grounds that Rule 208 of the Ontario Code of Professional Conduct for CPAs (and similar rules in other provinces) provided that “a member or firm shall not disclose any confidential information concerning the affairs of any client [or] former client… .”

After noting (at para 7) that there was a listed exception from this rule where “such information is required to be disclosed by order of lawful authority,” and before dismissing the motion, Crampton CJ stated (at para 9):

In my view, the language of s. 231.2(3) of the Act is clear and overrides the general confidentiality rule imposed by Rule 208 of the Code. … [C]ancelling or varying Justice Noël’s Order … would appear to be inconsistent with Parliament’s intent in enacting s. 231.2 (R. v. McKinlay Transport Ltd., [1990] 1 S.C.R. 627, at paras 36-38; MNR v Sand Exploration Ltd, [1995] FCJ No 780 (QL), at paras 17-18 (TD).

This was a companion decision to RBC Life Insurance.

The Minister had obtained authorizations from the Federal Court under s. 231.2(3) to require the taxpayer to produce information relating to the employees of its corporate customers who had participated in a promotional cruise organized by the taxpayer.

The trial judge's decision to grant the taxpayer's application under s. 231.2(6) and cancel the authorization was based on similar reasoning as in RBC, and was therefore upheld. Stratas J.A. noted two additional observations worth making. He stated (at para. 6):

Key to the Federal Court's decision was the failure of the Minister to disclose in the ex parte application that there was an alternative source by which the information it desired could be obtained. As the Federal Court noted in its reasons, this Court has held that the existence of an alternative source is a material fact that should be disclosed in the ex parte application and "[a] judge must not be left in the dark on such an important point": M.N.R. v. Derakhshani, 2009 FCA 190 at paragraph 29.

Regarding the Minister's submission that the authorization should nevertheless be upheld because of the interest of verifying compliance with the Act, Stratas J.A. stated (at para. 7):

Considering the relevance of the non-disclosure to the court's discretion to issue the authorization, the reasons behind the disclosure requirement, the extent of the culpability associated with the non-disclosure, and the importance and significance of the matters not disclosed, the Federal Court exercised its discretion to cancel the authorization. The Minister has not persuaded me that there is any error in principle or palpable and overriding error vitiating the Federal Court's exercise of discretion.

The Court made an order setting aside an order of the Federal Court, which had set aside an earlier order made ex parte under s. 232.2(3) authorizing the Minister to impose a requirement on the Greater Montreal Real Estate Board (a non-profit organization) to provide information and documents relating to its members, who were 8,500 real estate agents and brokers in Quebec.

The order related to an identifiable group (the real estate agents and brokers living or carrying on business in the area served by a particular office of CRA), and the applications judge was satisfied that the information was required for a tax audit conducted in good faith. There was no requirement that each and every member of the group be the subject of a "genuine and serious" inquiry.

S.231.2 permitted an order that would require a Canadian resident to provide information (i.e., the particulars of Canadian "PowerSellers") to which it had access in Canada and which in fact it accessed as part of its business conducted in Canada but which was stored on data facilities owned by a parent corporation in the United States.

A charity auditor had acted improperly when he handed over a list of donors, who had contributed comic books to the appellant, to the tax avoidance section. On his ex parte application to subsequently obtain the list of the donors pursuant to an s. 231.2 application, the Minister failed to disclose that the CRA tax avoidance section was already using the list obtained during the charity audit. In these circumstances, the appropriate remedy was to penalize the CRA by way of costs on a solicitor-client basis and to insist that the CRA reassess taxpayers on the basis of the list that was ordered to be produced by the Court rather than on the basis of the list previously provided.

Before finding that the Minister had properly obtained an authorization pursuant to s. 231.2(3) requiring the respondents to provide a list of all persons who had been sold interests in certain seismic data, Rothstein J. rejected a submission that the names of the investors would be more readily available through an audit of the respondents and stated (at p. 5364):

"I agree with counsel for the Minister that for the Minister to obtain the names of unnamed investors by way of an audit of the vendors would be to do indirectly what the Minister is not allowed to do directly. To obtain the names of unnamed persons from third parties, the Minister must seek a Court order."

The taxpayers offered "10-8" insurance plans to their customers, which generated exempt income and deductible interest. Under a 10-8 plan, the customer borrows money at 10% tax-deductible interest, and uses the borrowed amount to obtain an investment vehicle that returns 8% tax-exempt interest. After the Minister obtained authorizations from the Federal Court under s. 231.2(3) requiring the taxpayers to disclose customer lists, the taxpayers successfully applied under s. 231.2(6) to have those prior authorizations cancelled. The Minister had withheld significant information on the original application, including that CRA was deliberately engaging in an "audit blitz" so as to have a chilling effect on the 10-8 plans, notwithstanding that they were acknowledged to technically work.

The Court affirmed the cancellation of the authorizations. In response to a submission that a judge reviewing such authorization under s. 231.2(6) may only consider specifically whether the conditions in s. 231.2(3)(a) and (b) are satisfied, Stratas J.A. stated that the existence of judicial discretion is essential to the constitutional validity of an authorization in the first place under s. 231.2(3) (para. 23), that the "review under subsection 231.2(6) must include a discretionary element and is not limited to verifying that the two statutory preconditions are met" (para. 27), and that the alternative would render the Court "powerless" to address an abuse of process (para. 28): such as the withholding of relevant information - for example "the Minister could misinform the judge about the inconvenience and cost to persons who will be subject to the authorization" (para. 30); or even "bald lies" (para. 29).

Since Canada (Human Rights Commission) v. Canadian Liberty Net, [1998] 1 S.C.R. 626 at paras. 35-38, the Federal Courts have had "plenary powers" analogous to the inherent powers of a provincial superior court (para. 35), which include the power to address abuse of process.