Canada (Attorney General) v. Chad

Canada (Attorney General) v. Chad
Court (s) Database
Federal Court Decisions
Date
2018-05-29
Neutral citation
2018 FC 556
File numbers
T-1052-17, T-1330-17, T-735-17, T-932-17
Decision Content
Date: 20180529
Dockets: T-735-17
T-1052-17
T-932-17
T-1330-17
Citation: 2018 FC 556
Ottawa, Ontario, May 29, 2018
PRESENT: The Honourable Mr. Justice S. Noël
BETWEEN:
THE ATTORNEY GENERAL OF CANADA
Applicant
and
S. ROBERT CHAD
Respondent
AMENDED JUDGMENT AND REASONS
I. OVERVIEW
[1] Section 37 of the Canada Evidence Act, RSC, 1985, c C-5 [CEA] is a statutory mechanism by which the Attorney General may claim public interest immunity, thereby withholding relevant evidence from a proceeding in order to protect a specified public interest. In the case before the Court, the Minister of National Revenue (“the Minister”) is claiming public interest immunity over redacted information found in the Certified Tribunal Record [CTR] filed in the (T-735-17 and T-1052-17) under Rule 318 of the Federal Courts Rules, SOR/98-106 [Rules]. To determine whether the redacted information found in the CTR should be disclosed or protected, the Court must balance the public interest in the disclosure of the information against the public interest advanced by the Attorney General.
II. FACTS AND PROCEDURAL HISTORY
A. The Applications for Judicial Review
[2] The Minister is currently auditing the Respondent, Robert S. Chad, in respect of his 2011, 2012 and 2013 personal income tax returns, as well as the income tax and GST/HST returns of certain related entities and entities that are linked through economic relationships with the Respondent under the Related Party Initiative Program [Program]. This Program aims to examine the tax compliance of high net worth taxpayers and their economic relationships.
[3] On May 4, 2017, the Respondent received two Requirement Letters, each dated April 20, 2017, issued by Parmpal Sandhu, Auditor at Canada Revenue Agency [CRA], requiring him to produce documents and information [Requirements] under sections 231.1 and 231.6 of the Income Tax Act, RSC, 1985, c 1 (5th Supp) [ITA].
[4] On May 18, 2017, the Respondent filed two notices of application for judicial review to set aside by writ of certiorari the decision of the Minister to issue the Requirements, alleging that they had been improperly issued, and were ultra vires, overly broad or non-compliant with the ITA.
B. The Disclosure Applications
[5] Pursuant to Rules 317 and 318 of the Rules, the Respondent requested all materials relied on in issuing the Requirements. The Minister provided a CTR with certain information redacted [the Redacted Information].
[6] The Attorney General then brought two applications under section 37 of the CEA for orders prohibiting the disclosure of the Redacted Information. The public interest grounds for the objections to disclosure of the Redacted Information were set out in the certificate of Sue Murray, Acting Director General of the International and Large Business Directorate of the International, Large Business and Investigations Branch of CRA [Certificate], pursuant to section 37(1) CEA.
[7] Early in the section 37 proceedings, the Respondent alleged that the Applicant’s approach to disclosure had created procedural unfairness. He therefore sought an order directing the Applicant to produce Ms. Murray for cross-examination, which he argued was necessary and productive to test the opinions and conclusions laid out in the Certificate. The Applicant opposed the cross-examination of Ms. Murray.
[8] On September 21, 2017, as case management judge, I ordered that files T-1330-17 and T-932-17 [the Section 37 Applications] be disposed of before any steps were in T-735-17 and T-1052-17 [the Judicial Review Applications]. I also ordered that the Respondent bring a motion in the Section 37 Applications for leave to cross-examine Ms. Murray on the Certificate.
[9] On December 6, 2017, I ordered that the Crown provide written submissions on the legal basis and proposed process it would rely on in the Section 37 Applications. I also invited counsel for the Respondent to provide submissions on this matter.
[10] On March 20, 2018, I issued reasons in Canada (Attorney General) v Chad, 2018 FC 319 [March Reasons], in which I set out, at paragraphs 11 and 12, the appropriate process under section 37 of the CEA for determining the validity of objections to disclosure of information. I will review these steps in the analysis below.
[11] I also concluded in my March Reasons that, in the context of the Section 37 Applications, cross-examination by the Respondent’s counsel of Ms. Murray would be a useless and wasteful exercise, and needlessly prolong the proceedings (see paragraphs 23 to 35 of my reasons).
[12] In my March Reasons, I also explained that, in order to adequately assert the scope of the privilege, a Certificate containing only generalized assertions of privilege would not be enough to discharge the Applicant’s burden. Thus, I ordered the Applicant to file any documents or affidavits that may be appropriate to adequately support the validity of the alleged privilege.
[13] I also concluded in my March Reasons that the “apparent case for disclosure” test had been met, considering that in an application for judicial review, fairness requires that the parties have access to a complete CTR containing the “relevant material” to the application (see Rule 317 of the Rules). I thereby requested that the Applicant submit to the Court, on a confidential basis, un-redacted copies of all documents relied on by the Minister in the CTR, so that the Court could determine (i) whether the disclosure of the Redacted Information would encroach upon a specified public interest, and then (ii) determine whether the public interest encroached upon was outweighed by the public interest in disclosure.
[14] On April 5, 2018, the Applicant filed the affidavit of Ms. Sandhu sworn that day, and provided a copy of the unredacted CTR under seal to the Court.
[15] On April 24, 2018, following a Case Management Conference held the previous day, I ordered that an ex parte hearing take place to deal with ex parte evidence and submissions as well as to question Ms. Sandhu on her affidavit sworn April 5, 2018.
[16] As I explained in my March Reasons, to ensure fairness and transparency, the Court should be attuned to the worries of the Respondent concerning the validity of the Certificate and the underlying role Ms. Murray played in the audit and redactions:
[30] (…) The presiding judge must adopt all reasonable measures to permit the Respondent to understand to the fullest extent possible the issues at play in the ex parte – in camera hearing, without going as far as disclosing the redacted information. The Court must be careful, minutious, vigilant and demanding in ex parte proceedings in order to ensure that the Applicant’s claim for privilege is fully tested. Considerations of fairness must radiate throughout every step of the section 37 proceedings.
[17] Furthermore, I offered the Respondent the opportunity to submit, confidentially, questions that he wished the Court to ask Ms. Sandhu during the ex parte hearing bearing in mind, however, that it is always up to the presiding judge’s discretion to determine what type of questions he or she will ask a witness during an ex parte hearing.
[18] And finally, to ensure fairness in the ex parte hearing, the parties were also given the opportunity to serve and file their respective written submissions on the merits of the Section 37 Applications; namely, whether the disclosure of the Redacted Information would encroach upon the specified public interest, and, if so, to the weighing of competing public interests required to determine whether to order disclosure.
[19] A three-hour ex parte in camera hearing was held on May 15, 2018, during which Ms. Sandhu answered questions regarding her April 5, 2018 affidavit. Of note, I asked most of the questions that were provided by the Respondent. As a result of the hearing, some Redacted Information in the CTR was made public. Moreover, also as a result of the hearing some un-redacted information was provided to the Respondent on a confidential basis due to privacy concerns, but will remain redacted in the public record.
[20] On May 23, 2018, a case management conference was held, where I explained to the Respondent in great detail, without divulging any potential privileged information, how the ex parte in camera hearing unfolded. I also reassured the Respondent that, considering this exceptional procedure, I took particular care to address his concerns when questioning Ms. Sandhu on every proposed redaction to the CTR in a frank and direct manner.
III. PUBLIC EVIDENCE PRESENTED TO THE COURT TO GROUND THE PRIVILEGE CLAIMED
A. The Certificate of Ms. Murray pursuant to section 37(1) of the Canada Evidence Act
[21] During this case management conference on May 23, 2018, Ms. Margaret McCabe, counsel for the Applicant, confirmed for the Court that she acted as a conduit between Ms. Murray, the author of the Certificate, and Ms. Sandhu. Ms. McCabe also explained that Ms. Murray had read all relevant documents and information before certifying, in her delegated authority, the objection to disclosure.
[22] Ms. Murray, Acting Director General of the International and Large Business Directorate of the International, Large Business and Investigations Branch of CRA in Ottawa, certified that the production of the Redacted Information, which included discussions and analyses between auditors and CRA specialists in the course of an ongoing audit, would be injurious to the public interest. Furthermore, she certified that the public interest in preventing disclosure at this stage outweighed any interest the Applicant might have in having access to the Redacted Information at this stage, given the purpose of the Requirements in the course of the audit.
[23] The public interest being claimed by the Minister is the proper administration and enforcement of the ITA, which includes:
- ensuring the timely and proper processingand completion of audits;
- seeking that the provision of assistance from specialists is carried out in a candid and open manner with freedom of discussion and analyses;
- ensuring that auditors can make strategic decisions and objectively consider whether taxpayers have been forthright or whether to seek further information;
- protecting internal tools and approaches as well as the technical advice of specialists during the development of the audit plan, assessment of risk, and identification of potential non-compliance by taxpayers;
- protecting the disclosure of technical advice and analysis that could prejudice ongoing audit operations and inhibit internal discussions having as their purpose the thorough examination and verification of the taxpayer’s compliance; and
- avoiding giving the opportunity to taxpayers to structure responses or provide documents to audit queries that could hide information or be misleading.
[24] Ms. Murray also explained that:
- taxpayers can obtain information with respect to the audit of returns upon the issuance of a reassessment; and
- some audit methods and techniques appearing in the CTR have no connection to the issue raised in the application.
B. The Accompanying public affidavit of Ms. Sandhu
[25] On May 15, 2018, Ms. Sandhu, case manager for the Related Party Initiative, International, Large Business and Investigations Branch of CRA in the Fraser Valley and Northern Tax Services Offices, attended the ex parte hearing for the purpose of questioning by the Court on her affidavit of April 5, 2018. The affidavit, the unredacted CTR and the subsequent ex parte in camera interrogation of Ms. Sandhu were able to fill in several evidentiary blanks left by Ms. Murray’s Certificate.
[26] Ms. Sandhu’s public affidavit outlines the following objections to disclosing the portions of the consultations and technical advice between technical specialists and auditors:
- the advice provided to auditors by technical specialists assists the auditors in focusing their requests for relevant information, in analyzing information provided by the taxpayer, and in determining the next steps in the audit;
- the ITA is complex, such that understanding and applying many of its provisions requires different levels of knowledge and specialization;
- disclosing internal technical consultations while the audit is ongoing will impact negatively on audits because CRA auditors will be reluctant to openly discuss issues in their files with technical advisors, which will result in auditors not having the requisite tools to correctly assess tax implications of certain tax structures;
- providing specific internal CRA discussions during the audit will ultimately remove control over the conduct of the audit from CRA and give it to the taxpayer;
- disclosing audit fact-specific information, such as the strengths and weaknesses of potential assessing positions, could cause taxpayers with off-shore entities or non-resident trusts to tailor or modify information provided to CRA in the event of an audit;
- disclosure would reveal internal discussions, thought processes, strengths and weaknesses about potential assessing positions in respect of the Respondent and selected entities, which could in turn provide them with a roadmap to structure their responses to CRA; and
- disclosing discussions concerning non-resident trusts and off-shore entities could impact CRA’s ability to obtain information known to the Respondent that is located outside of Canada.
IV. POINTS IN ISSUE
(1) Whether the disclosure of the Redacted Information would encroach upon a specified public interest;
(2) If so, whether the public interest encroached upon is outweighed by the public interest in disclosure; and
(3) If disclosure of the Redacted Information is ordered, what conditions if any should be imposed upon that disclosure.
V. SUBMISSIONS OF THE PARTIES
[27] As a preliminary note, the submissions of both the Applicant and the Respondent were filed at the Court at the same time. Therefore, the Court has taken into consideration the fact that the parties did not have the opportunity to respond to one another’s arguments on all points.
[28] The Applicant argues that the public interest in disclosing the Redacted Information is outweighed by the immediate and unnecessary harm to Canada’s ability to administer and enforce the ITA, and specifically to conduct functional audits of taxpayers.
[29] On the other hand, the Respondent argues that the public interest being advanced by the Applicant relates to the carrying out of routine government responsibilities, some of which are publicly disclosed. Furthermore, he argues that the Applicant has not submitted sufficient evidence to the Court to establish the encroachment upon the privilege, and thus that the Court need not proceed to the balancing exercise.
A. Is the Applicant asserting a class privilege?
[30] According to the Respondent, the Applicant is claiming that communications between CRA auditors and technical specialists are immune from disclosure. The Respondent highlights that Ms. Sandhu asserts that, notwithstanding differences “from audit to audit”, the disclosure of communications between CRA auditors and specialists “will cause taxpayers” to structure the information they provide to CRA when audited. The crux of the Respondent’s argument is that the Applicant, in relying on these statements, is asking this Court to find that a privilege exists to protect communications that occur within that relationship, regardless of the nature of the specific communications. In her submissions, the Applicant does not explicitly try to establish a class privilege.
B. Does the disclosure of the Redacted Information encroach upon a specified public interest?
[31] The Applicant chose to concentrate her submissions on the weighing of competing interests by starting her analysis at the last stage of the section 37 exercise (i.e., determining whether the public interest claimed is outweighed by the public interest in disclosure). By diving directly into the balancing exercise, the Applicant implicitly submits that there is an encroachment on the public interest if the redacted information is disclosed to the public. This was confirmed during the ex parte in camera hearing.
[32] The Respondent argues that the Applicant has not provided any evidence of a specific deleterious effect or that the Redacted Information would somehow compromise or risk the “integrity” or “proper process” of audits, affect the general administration or enforcement of the ITA, or lead to significant changes in CRA’s broader organizational context. The Respondent also submits that the specific concerns of the Applicant are premised on outlandish assumptions that he would use the Redacted Information to commit an offence under the ITA. Thus, he argues that the Applicant is relying on overly-general assertions of privilege, which are considered to be insufficient to ground a proper privilege.
C. Is the public interest encroached upon outweighed by the public interest in disclosure?
[33] It is the Respondent’s position that there is insufficient evidence before the Court to proceed to the second step of the analysis. Thus, he spent a considerable amount of his pleadings on the encroachment analysis rather than arguing on the proper weighing of conflicting interests.
[34] According to the Applicant, the following factors should be considered in the balancing exercise:
the subject-matter of the litigation;
the probative value of the evidence in the particular case and how necessary it will be for a proper determination of the issues;
the effect of non-disclosure on the public perception of the administration of justice;
whether the claim or defence involves an allegation of government wrongdoing;
the level of government from which the information emanated; and/or
the sensitivity of the contents of the information (including the extent to which there has been prior publication of the information).
(Bryant, Evidence in Canada at para 15.44)
[35] According to the Respondent, the proper approach is to follow Wang v Canada (Public Safety and Emergency Preparedness), 2016 FC 493 [Wang], in which Justice Mactavish listed the following factors to be considered in the balancing exercise:
1. the nature of the public interest sought to be protected by confidentiality;
2. whether the evidence in question will probably establish a fact crucial to the defence;
3. the seriousness of the charge or issues involved;
4. the admissibility of the documentation and the usefulness of it;
5. whether the applicants have established that there are no other reasonable ways of obtaining the information; and
6. whether the disclosures sought amount to general discovery or a fishing expedition.
(Wang at para 37 citing Khan v Canada (Minister of Citizenship and Immigration), [1996] 2 FC 316 at para 25)
[36] The Applicant argues that the following points weigh in favour of upholding the objection to disclosure:
- the subject matter of the litigation concerns administrative law principles requiring deference to the decision of the Minister;
- the Redacted Information is not necessary for the determination of the Minister’s compliance with the ITA, and relevancy of the redacted consultations between CRA experts and auditors is marginal at best, and is only peripheral to the issue of the reasonableness of the Requirements;
- the effect of non-disclosure does not undermine the public perception of the administration of justice, since taxpayers will be able to feel confident that all taxpayers share equally in the obligations imposed by the ITA;
- the effect of non-disclosure does not undermine the public perception of the administration of justice because the Respondent is not facing criminal charges, nor is he involved in an immigration proceeding in which liberty and security interests are engaged;
- there are no allegations that there was any intentional conduct by the auditor to cause harm to the Respondent, nor is there any evidence to support allegations of wrongdoing by CRA in the course of the audit;
- the fact that the Requirements are part of an ongoing, not final audit process weighs in favour of upholding the objection to disclosure; and
- disclosing the Redacted Information while the audit is ongoing would permit the Respondent and other taxpayers in similar circumstances to effectively control the course of an audit by structuring their answers, thereby negatively impacting on the administration and enforcement of the ITA.
[37] The Respondent argues that the following application of the above-cited Wang factors to the within case strongly favours disclosure:
- section 37 of the CEA offers less public interest protection than sections 38 and 39 of the CEA. The specified public interest does not engage issues of national policy, or involve a risk of harm to the public. Thus, the timely and proper completion of taxpayer audits would fall at the lowest end of the spectrum of activities demanding secrecy;
- the protection of the proper functioning of government is an inadequate justification for government secrecy;
- the underlying Judicial Review Applications engage serious issues from the Respondent’s perspective, such as criminal sanctions including imprisonment;
- the Redacted Information appears to arise from internal discussions regarding how the auditors were approaching the Respondent’s audit, and could be highly relevant to the core issues in the Judicial Review Applications, such as the procedural and substantive issues that led to the issuance of the Requirements, and whether their issuance were reasonable;
- given the improper assumptions of potential impropriety found in Ms. Sandhu’s affidavit, the Respondent has a reasonable basis on which to inquire whether the issuance of the Requirements was even-handed; and
- the documents that the Respondent wishes to be disclosed are a defined set and are few in number, thus there can be no suggestion of a fishing expedition.
VI. Analysis
[38] Public interest immunity or privilege is a duty that is held by the Crown in order to protect information in the public interest (Bryant, Lederman and Fuerst, The Law of Evidence in Canada, 3rd Ed (LexisNexis Canada Inc, 2009) at paras 15.2 and 15.3). Section 37 of the CEA provides a statutory mechanism by which the Attorney General may claim public interest immunity to withhold relevant evidence from a proceeding in order to protect a specified public interest.
[39] In my March Reasons, I determined the appropriate process under section 37 of the CEA for determining the validity of objections to disclosure of information:
[11] The section 37 objection at issue arises in the factual and statutory context of a judicial review application challenging a request for information issued by the Minister to the Respondent, in the course of an ongoing audit of the Respondent under the ITA, for the purposes of that audit. Furthermore, the Court must be cognizant of the statutory context related to the ITA. The Canadian tax system is based on self-reporting, thus in order to perform her statutory duty, the Minister has been given broad powers to inspect and audit information and documents of taxpayers under audit, and to examine any matter relating to the taxpayer to ensure taxpayers pay the correct amount of tax; this is in the public interest (see eBay Canada Ltd v MNR, 2008 FCA 141 at para 39; AGT Ltd v Canada (AG), [1996] 3 PC 505 (TD) at para 54). That said, the Court must be alert to fairness considerations in judicial review applications, to ensure that the tribunal record contains all possible elements not covered by the privilege that were in front of the decision-maker when the decision under review was taken.
[12] The Court has determined that, in the present proceedings, the following procedure should be followed:
1. The Court must determine whether the Crown has
established the specified public interest as claimed;
2. If that determination cannot be made based on the
certificate alone, further submissions, such as a secret
affidavit and un-redacted documents, must be filed in
support of the privilege claimed, which will be dealt
with in an ex parte manner;
3. The Court must determine whether the Respondent has
established an “apparent case” for disclosure of the
redacted information (Khan v R, [1996] 2 FC 316 at
paras 24-25);
4. Once an apparent case for disclosure has been
established, the Court must consider reviewing the
redacted information (Khan v R, [1996] 2 FC 316 at
para 25);
5. If the Court finds that the disclosure of the redacted
information would encroach on the specified public
interest, it must conduct a balancing of interests. The
interests to be balanced are the public interest in
disclosure and the specified public interest advanced by
the Applicant. The Court may review the original form
of the redacted information at this stage (Wang v
Canada (Public Safety and Emergency Preparedness),
2016 FC 493 at paras 36- 37); and
6. Determine whether the redacted information should be
disclosed.
[40] These reasons will address steps five and six of the above-mentioned steps, in order to (i) determine whether the disclosure of the Redacted Information would encroach upon a specified public interest, and, if so, (ii) determine whether the public interest encroached upon is outweighed by the public interest in disclosure, and, if the disclosure of the Redacted Information is ordered, (iii) determine what conditions should be imposed upon the disclosure, if any.
[41] First, I shall quickly address the question of class privilege, which was brought forward by the Respondent but not argued by the Applicant. Two principal categories of privileges have developed in the common law. First, there are case-by-case content-based privileges, which require for policy reasons the exclusion of otherwise relevant evidence after a contextual weighing exercise. Second, there are class privileges that are absolute, in the sense that the information they protect is prima facie inadmissible. Such privileges cover types of communications or relationships, such as solicitor-client privilege or informer privilege (R v Basi, 2009 SCC 52 at paras 22 - 37; R v McClure, 2001 SCC 14 at paras 26-30; R v Gruenke, [1991] 3 SCR 263 at 289-291).
[42] The Respondent argues the Applicant is essentially claiming a class over communications that occur between CRA auditors and technical specialists, regardless of the nature of the specific communications. I do not think that the Applicant is trying to establish such a class privilege.
[43] Ms. Sandhu in her affidavit is not claiming that every conversation between CRA auditors and specialist is to be automatically protected based solely on the relationship between auditors and specialists. Rather, she is claiming that the specific content of the Redacted Information in this case could lead to the Respondent and similar taxpayers to advantageously structure their responses. Thus, as Ms. Sandhu is not claiming that every single conversation is privileged based on a certain class, the content of the specific conversations are to be assessed on a case-by-case basis based on their injury to public interest.
[44] Even if the Applicant was claiming such a privilege, I do not think, subject to a more fulsome record, that there is a basis to find that all communications between CRA auditors and specialists must be treated as an absolute or class privilege. A clear line of jurisprudence has demonstrated that it is “practically impossible” to recognize a new class privilege in situations much more perilous to the public interest than the one before us (Canada (Citizenship and Immigration) v Harkat, 2014 SCC 37 at para 87; R v National Post, 2010 SCC 16 at para 42). Furthermore, the procedure to follow to establish section 37 public interest immunity requires the weighing of competing interests in a case-by-case contextual manner. The procedure and outcome of such an exercise must always be considered in the context of the litigation at hand.
[45] Thus, having dealt with the question of class privilege, let us now address the essential components of a section 37 application so that the Judicial Review Applications can eventually come to fruition.
A. Would the disclosure of the Redacted Information encroach upon a specified public interest?
[46] In assessing whether the Redacted Information encroaches on a public interest, the Court may not rely upon “generalized assertions of possible disadvantage”; instead, the onus is on the Applicant to demonstrate that the disclosure of the documents at issue “would have a concrete deleterious effect” on the public interest (Wang at para 35).
[47] The Respondent argues that the Court can end its analysis at this stage and order disclosure since the Applicant has, by not demonstrating the specific deleterious effect the disclosure would have on the “integrity” of audits and on the general administration of the ITA, not demonstrated how the public interest is being encroached upon. Moreover, the Respondent argues that the Applicant has not shown how the disclosure would lead to any significant changes in CRA’s broader organizational context.
[48] I cannot agree with the Respondent that the Applicant has not met her burden. The Applicant has sufficiently demonstrated that the disclosure of the information would have a “concrete deleterious effect” on the public interest. The record before the Court demonstrates that there is a public interest in the proper administration and enforcement of the ITA, which includes ensuring the timely and proper processing and completion of audits of taxpayers. Audits require ensuring that the seeking and provision of guidance from specialists is carried out in a candid and open manner with freedom of discussion and analyses between CRA specialists and auditors. In an ongoing audit, disclosing consultations with internal technical specialists, where, among other things, the strengths and weaknesses of possible assessing positions are analyzed, could cause the Respondent or similar taxpayers to tailor or modify information provided to CRA. In my opinion, this would be injurious to the proper administration of the ITA and the proper processing and completion of audits of taxpayers.
[49] The Respondent also submits that the specific concerns of the Applicant are premised on overly-general and outlandish assumptions that he would use the Redacted Information to commit an offence under the ITA. I agree with the Applicant that it is well recognized that, while taxpayers can arrange their affairs to minimize their tax burden, some taxpayers use elaborate plans and complex transactions to minimize or avoid tax liability (Shell Canada Ltd v Canada, [1999] 3 SCR 622 at paras 44 and 48; Faraggi v R, 2008 FCA 398 at paras 56 and 57, leave to appeal to SCC refused).
[50] Moreover, Parliament clearly provided the Minister with the authority to request information from a taxpayer for the purposes of an ongoing audit, thereby recognizing the reality that:
Nonetheless, it would be naive to think that no one attempts to take advantage of the self-reporting system in order to avoid paying his or her full share of the tax burden by violating the rules set forth in the Act. Because of this reality Parliament enacted several provisions, among them s. 231(3), giving the Minister of National Revenue power to investigate and audit taxpayers.
(R v McKinlay Transport Ltd, [1990] 1 SCR 627 at para 18)
[51] Moreover, the fact that these claims would lead to significant changes in a broader organizational context of the CRA is irrelevant to whether or not there is encroachment on the public interest in the present audit. The administration of the ITA is based on good faith between the taxpayer and CRA. The record in this case demonstrates that, among other things, revealing CRA’s internal technical discussions, as well as strategic discussion on the strengths and weaknesses of possible assessing positions, could possibly endanger the successful and timely audit of the Respondent’s file. The fact that the Respondent’s audit alone could be affected, without considering the potential effect to the broader organizational structure of CRA, does not render the assertion of privilege overly generalized or non-deleterious. It is my opinion that the enforcement of the ITA in the Respondent’s case alone is enough to satisfy the Court of an encroachment on the public interest claimed without even considering its broader impact on CRA.
B. Is the public interest encroached upon outweighed by the public interest in disclosure?
[52] I thought it relevant to start with the Supreme Court of Canada’s comments in Carey v Ontario, [1986] 2 SCR 637 [Carey]:
It is obviously necessary for the proper administration of justice that litigants have access to all evidence that may be of assistance to the fair disposition of the issues arising in litigation. It is equally clear, however, that certain information regarding governmental activities should not be disclosed in the public interest.
(at para 38)
[53] Although related to common law cabinet privilege, these comments are also pertinent to understanding the competing public interests to be weighed in this case: the public interest in disclosure with the public interest encroached upon by the potential disclosure.
[54] As mentioned above, the parties have presented two different lists of factors, which I do not think are mutually exclusive or irreconcilable. I have therefore combined the factors into the following list of considerations to assist in the Court’s balancing exercise:
the subject-matter of the litigation / the seriousness of the charge or issues involved;
the probative value of the evidence in the particular case and hownecessary it will be for a proper determination of the issues / whether the evidence in question will probably establish a fact crucial to the defence;
the nature of the public interest sought to be protected by confidentiality;
the effect of non-disclosure on the public perception of the administrationof justice;
whether the claim or defence involves an allegation of government wrongdoing;
the level of government from which the information emanated;
the sensitivity of the contents of the information (including whetherthe extent to which there has been prior publication of the information);
whether there are no other reasonable ways of obtaining the information; and/or
whether the disclosures sought amount to general discovery or a fishing expedition.
(1) What is the subject-matter of the litigation / the seriousness of the charge or issues involved?
[55] Firstly, it is important to mention that audits and criminal investigations are two completely different legal mechanisms. The success of the self-reporting tax system depends on the honesty and integrity of taxpayers, and their collaboration with CRA. Audit powers granted to CRA by the ITA provide for penalties where tax returns are inaccurate. If a taxpayer wishes to challenge an audit request, it can be done by judicial review to the Federal Court, as in the case at bar. An audit is not a criminal process but an administrative one. On the other hand, CRA has at its disposal investigative functions, which are completely distinct from its audit functions. The purpose of these investigative functions is to investigate cases of importance to CRA, which might divulge schemes of suspected tax evasion of a criminal nature, which are criminal offences. When exercising its investigative functions, CRA and the taxpayer are in an “adversarial relationship”, bringing into play constitutional protections (Stanfield v Minister of National Revenue, 2005 FC 1010 at paras 35 and 36).
[56] The case at bar is one of administrative, not criminal, law. Although the Respondent asserts rightly that there is a potential for incarceration should he choose not to provide the information sought in the Requirements, I agree with the Applicant that any such penalty could only be imposed by this Court after a successful compliance order application brought by the Minister under the ITA.
[57] As the Applicant has helpfully indicated, decision-makers exercise powers given to them by laws; the Minister is required to assess taxpayers’ income tax returns and determine whether taxpayers’ self-assessments are accurate (ITA at sections 220(1), 220(2) and 220(2.01); Canada Revenue Agency Act, SC 1999, c 17 at sections 5 and 6). In order to properly administer and enforce the ITA, the Minister may request selected documents or information from taxpayers in the course of an ongoing audit (ITA at section 231.1). Thus, the exercise of broad discretionary statutory powers, such as the power to inspect, audit, and examine the information and documents of taxpayers, is in the public interest because it safeguards the integrity of the tax system by ensuring that taxpayers pay the correct amount of tax (eBay Canada Ltd et al v the Minister of National Revenue, 2008 FCA 141 at para 39; AGT Ltd v Canada (Attorney General), [1996] 3 FC 505 at para 54, aff’d [1997] 2 FC 878 (CA), leave to appeal to SCC ref’d [1997] 3 SCCA No 314).
[58] The Applicant submits that the subject matter of the litigation weighs in favour of upholding the objection to disclosure because the litigation concerns administrative law principles requiring the Court to respect the discretion of the Minister to issue requirement letters.
[59] Therefore, whichever way we may envisage this factor, the audit under the ITA is an administrative procedure. The issues at play in the litigation, although of importance to the Respondent, are not such that they would balance in favour of the disclosure of the confidential information.
(2) What is the probative value of the evidence in the particular case and how necessary would it be for a proper determination of the issues?
[60] As mentioned in my March Reasons, Rules 317 and 318 of the Rules demonstrate that an applicant in a judicial review application can request that an administrative decision-maker certify that all relevant material relating to the administrative decision be disclosed. In the specific context of judicial review applications, it is vital and necessary for an applicant to receive the full disclosure of the certified tribunal record to prepare his or her application.
Federal Courts Rules, SOR/98-106
Règles des Cours fédérales, DORS/98-106
Material in the Possession of a Tribunal
Obtention de documents en la possession d’un office fédéral
Material from tribunal
Matériel en la possession de l’office fédéral
317(1) A party may request material relevant to an application that is in the possession of a tribunal whose order is the subject of the application and not in the possession of the party by serving on the tribunal and filing a written request, identifying the material requested.
317(1) Toute partie peut demander la transmission des documents ou des éléments matériels pertinents quant à la demande, qu’elle n’a pas mais qui sont en la possession de l’office fédéral dont l’ordonnance fait l’objet de la demande, en signifiant à l’office une requête à cet effet puis en la déposant. La requête précise les documents ou les éléments matériels demandés.
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Material to be transmitted
Documents à transmettre
318(1) Within 20 days after service of a request under rule 317, the tribunal shall transmit
318(1) Dans les 20 jours suivant la signification de la demande de transmission visée à la règle 317, l’office fédéral transmet:
(a) a certified copy of the requested material to the Registry and to the party making the request; or
a) au greffe et à la partie qui en a fait la demande une copie certifiée conforme des documents en cause
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