Slattery (Trustee of) v. Slattery

Slattery (Trustee of) v. Slattery
Collection
Supreme Court Judgments
Date
1993-09-30
Report
[1993] 3 SCR 430
Case number
22618
Judges
Lamer, Antonio; La Forest, Gérard V.; L'Heureux-Dubé, Claire; Sopinka, John; Gonthier, Charles Doherty; Cory, Peter deCarteret; McLachlin, Beverley; Iacobucci, Frank; Major, John C.
On appeal from
New Brunswick
Subjects
Taxation
Notes
SCC Case Information: 22618
Decision Content
Slattery (Trustee of) v. Slattery, [1993] 3 S.C.R. 430
Marguerite Slattery Appellant
v.
Doane Raymond Limited, Trustee of the Estate
of Raymond P. Slattery, a Bankrupt Respondent
Indexed as: Slattery (Trustee of) v. Slattery
File No.: 22618.
1993: March 29; 1993: September 30.
Present: Lamer C.J. and La Forest, L'Heureux‑Dubé, Sopinka, Gonthier, Cory, McLachlin, Iacobucci and Major JJ.
on appeal from the new brunswick court of appeal
Income tax ‑‑ Enforcement ‑‑ Confidentiality ‑‑ Evidence gained from Income Tax Act investigations protected unless required in proceedings relating to administration or enforcement of the Act ‑‑ Taxpayer petitioned into bankruptcy by Revenue Canada ‑‑ Trustee in bankruptcy seeking declaration that assets held by taxpayer's wife rightfully assets of bankrupt's estate ‑‑ Testimony of Revenue Canada officials from income tax investigation admitted into evidence ‑‑ Whether a civil action commenced by the trustee for a declaration that certain property belongs to the bankrupt's estate is a proceeding relating to the enforcement of the Income Tax Act ‑‑ Income Tax Act, S.C. 1970‑71‑72, c. 63, s. 241(1)(a), (b), (c), (2)(a), (b), (3), (4)(c).
A taxpayer unable to pay his taxes owing was petitioned into bankruptcy by Revenue Canada. The respondent trustee in bankruptcy commenced an action against the appellant (the bankrupt's wife) seeking a declaration that certain assets registered in her name were the property of the bankrupt's estate or were held in trust for that estate.
At trial, the trustee sought to introduce testimony from two Revenue Canada officials who had participated in the investigation into the bankrupt's affairs. Appellant argued that that testimony was barred because s. 241 of the Income Tax Act prohibits Revenue Canada officials from disclosing information obtained from a taxpayer for the purposes of that Act. The trial judge ruled that this testimony fell within the exception in s. 241(3) which provides that the prohibition does not apply in respect of proceedings relating to the administration or enforcement of the Act. Both officials testified, and the court granted the declaration in part. The New Brunswick Court of Appeal agreed with the trial judge's interpretation of s. 241 and dismissed the appeal. At issue here was whether a civil action commenced by the trustee for a declaration that certain property is property of the bankrupt's estate is a proceeding "relating to the . . . enforcement of" the Income Tax Act within the meaning of s. 241(3) of the Act.
Held (L'Heureux‑Dubé, Sopinka and McLachlin JJ. dissenting): The appeal should be dismissed.
Per Lamer C.J. and La Forest, Gonthier, Cory, Iacobucci and Major JJ.: Section 241 involves a balancing of competing interests: the privacy interest of the taxpayer with respect to his or her financial information, and the interest of the Minister in being allowed to disclose taxpayer information to the extent necessary for the effective administration and enforcement of the Income Tax Act and other federal statutes referred to in s. 241(4). Only in exceptional or prescribed situations does the privacy interest give way to the interest of the state. By instilling confidence in taxpayers that the personal information they disclose will not be communicated in other contexts, Parliament encourages voluntary disclosure of this information. Parliament, however, has also recognized that the possession of personal information is useless if it cannot be used to assist in tax collection, when required, including tax collection by way of judicial enforcement.
Section 241(3) contemplates not only administrative and enforcement proceedings brought under the Income Tax Act itself but also other proceedings. Both the text and the context of s. 241 buttress this conclusion. The connecting phrases used by Parliament in s. 241(3) ("in respect of" and "relating to") are of the widest possible scope and suggest that a wide rather than narrow view should be taken when considering whether a proposed disclosure is in respect of proceedings relating to the administration or enforcement of the Income Tax Act. This breadth of meaning is confirmed by the French version of the section.
Section 222 clearly states that the Minister may resort generally to the courts to institute civil proceedings to collect taxes as debts in addition to the procedures specified in the Income Tax Act. In order to take full advantage of this power, the Minister must be able to disclose in court otherwise confidential information in order to prove the cause of action in debt. Absent the ability to disclose as required to prove a debt, s. 222 would be deprived of part of its meaning.
Glover v. Glover (No. 1) must be read to mean that the confidentiality provisions apply to any legal proceeding of a civil character which is not covered by the exception provided in s. 241(3). Sections 241(1) and (2) apply to civil proceedings not related to the administration or enforcement of the Income Tax Act. Glover does not inform the issue already set out: the essential question is whether or not the bankruptcy proceedings taken herein are related to the administration or enforcement of the Income Tax Act.
The proceedings taken here were related to the administration or enforcement of the Income Tax Act even though they were taken by the trustee in bankruptcy. A contrary interpretation is not supported by the wording of s. 241(3) and is somewhat inconsistent with the power given to creditors in s. 38(1) of the Bankruptcy Act. At the policy level, the Minister should not be inhibited from recourse to the bankruptcy process in light of the advantages and protection that this process can entail. If the Minister cannot disclose confidential information in bankruptcy to prove a claim asserted, the bankruptcy procedure will in many cases not be available for income tax enforcement.
The difference in nature between bankruptcy proceedings and proceedings under s. 160, where disclosure was admitted to be available by appellant, was not relevant. The important point was that disclosure made during bankruptcy proceedings was made in respect of proceedings relating to the administration or enforcement of the Act within the meaning of s. 241(3). The fact that the Minister chose to collect taxes by petitioning the taxpayer into bankruptcy did not disentitle Revenue Canada from disclosing the confidential information.
Arguments raising the possibility of difficult questions as to competence and compellability were not persuasive.
Per L'Heureux‑Dubé, Sopinka and McLachlin JJ. (dissenting): The s. 241(3) exemption applies only in the case of proceedings specifically provided for in the Income Tax Act. These proceedings are, for the most part, set out in Part XV of the Act which establishes "Administration and Enforcement" provisions. A trial to determine title between an individual and a trustee in bankruptcy is not a proceeding provided for in Part XV, or elsewhere in the Act. Accordingly, Revenue Canada officials should have been barred from disclosing information obtained in the course of their investigation of the bankrupt's affairs.
This Court gave the phrase "in respect of" a wide interpretation in the circumstances of the Indian Act as it related to taxation of personal property. The wide interpretation given the phrase in that context is not determinative of its application in s. 241(3) . The context of s. 241(3) , and jurisprudence of this Court treating the section, suggest that the phrase should be construed narrowly, not broadly.
The proceedings at issue on this appeal are not proceedings so connected to the administration of the Act that they fall within the contemplation of the exemption in s. 241(3). Part XV of the Act provides the Minister of Revenue with a system of debt collection proceedings that mirrors ordinary creditors' remedies. It does not, however, deal with bankruptcy, except to the extent of providing the Minister with the power to collect money owed to a secured creditor by a trustee in bankruptcy, notwithstanding the Bankruptcy Act. This legislative silence is significant. Bankruptcy is a particular process which has specific and salutary aims and which involves all of the creditors of a particular debtor. Concern for the confidentiality of information that is not public is very much at issue.
The proceeding at issue here is not an action under s. 222. The action is brought by a trustee in bankruptcy and not by the Crown as the section appears to contemplate. Under s. 69 of the Bankruptcy Act, all collection proceedings are stayed when the debtor is declared bankrupt. Until that point the Minister arguably may prove its debt by disclosure of information obtained for the purposes of the Act. But once a debtor is declared bankrupt, and a trustee in bankruptcy has been put in place to pursue the bankruptcy, the proceeding is no longer capable of being accurately characterized as a proceeding relating to the administration of the Act. The stay operates until the trustee in bankruptcy is discharged. The practical effect of the proceedings permitting the Minister to realize upon an outstanding debt does not operate to make the proceeding one relating to the administration of the Act.
Part XV of the Act makes no specific provision for disclosure in the context of bankruptcy. When the Minister has recourse to this procedure, its actions are governed by the Bankruptcy Act and no longer by the Income Tax Act. In so proceeding the Minister loses the capacity to deploy the special information gathering techniques, which accrue only by virtue of the Income Tax Act, either to its own advantage, or to those of its fellow creditors.
The Minister was not permitted to disclose confidential information in the case at bar even though a superior court judge is a person, as provided in s. 241(4)(c), "legally entitled" to the information. A party should not be able to avail itself of the s. 241(4)(c) exemption if it cannot bring the proceeding within the terms of s. 241(3).
Cases Cited
By Iacobucci J.
Considered: Glover v. Minister of National Revenue, [1981] 2 S.C.R. 561, aff'g (1980), 29 O.R. (2d) 392; referred to: Canadian Pacific Tobacco Co. v. Stapleton (1952), 86 C.L.R. 1; Nowegijick v. The Queen, [1983] 1 S.C.R. 29; Diversified Holdings Ltd. v. Canada, [1991] 1 F.C. 595.
By McLachlin J. (dissenting)
Nowegijick v. The Queen, [1983] 1 S.C.R. 29; R. v. McKinlay Transport Ltd., [1990] 1 S.C.R. 627; Glover v. Minister of National Revenue, [1981] 2 S.C.R. 561, aff'g (1980), 29 O.R. (2d) 392.
Statutes and Regulations Cited
Bankruptcy Act, R.S.C., 1985, c. B‑3, ss. 16(3) , (4) , 17(1) , 19(1) , (2) , 38(1) , 69(1) , 136 , 163 to 167 .
Income Tax Act, R.S.C. 1952, c. 148, s. 133.
Income Tax Act, S.C. 1948, c. 52, s. 121.
Income Tax Act, S.C. 1966‑67, c. 47, s. 17.
Income Tax Act, S.C. 1966‑67, c. 91, s. 22.
Income Tax Act, S.C. 1970‑71‑72, c. 63, ss. 160(1)(a) [rep. & sub. S.C. 1980‑81‑82‑83, c. 140, s. 107], (e) [rep. & sub. idem], 222, 223(3), (5) [rep. & sub. S.C. 1988, c. 55, s. 168], 224(1), 224(1.2) [ad. S.C. 1987, c. 46, s. 66], 224.1 [rep. & sub. S.C. 1980‑81‑82‑83, c. 48, s. 104], 225(1), 238, 239, 241(1)(a), (b) [am. S.C. 1987, c. 46, s. 68(1)], (c) [ad. idem], (2)(a), (b), (3) [rep. & sub. ibid., s. 68(2)], (4)(c) [am. S.C. 1978‑79, c. 5, s. 9].
Income War Tax Act, R.S.C. 1927, c. 97, s. 81(1), (2).
Income War Tax Act, 1917, S.C. 1917, c. 28, s. 11.
Indian Act, R.S.C. 1970, c. I‑6, s. 87.
Authors Cited
Bohémier, Albert. Faillite et Insolvabilité, t. 1. Montréal: Thémis, 1992.
Brown, D. Scott. "Bankruptcy and Income Tax: A Revenue Canada Perspective" in 1990 Conference Report: Report of Proceedings of the Forty‑Second Tax Conference. Canadian Tax Foundation, 1991.
Chabot, Marc. Faillite et Insolvabilité. Sillery, Québec: Presses de l'Université du Québec, 1987.
Dictionnaire de la langue française. Paris: Larousse, 1989, "traits".
Harris, Edwin C. Canadian Income Taxation, 4th ed. Toronto: Butterworths, 1986.
Houlden, L. W. Bankruptcy and Insolvency Law of Canada, 3rd ed. By L. W. Houlden and C. H. Morawetz. Toronto: Carswell, 1993 (loose‑leaf).
Le Robert Méthodique. Paris: Le Robert, 1988, "avoir trait à".
The Pocket Oxford Dictionary, 7th ed. Edited by R. E. Allen. Oxford: Clarendon Press, 1984, "relation".
Toope, Stephen J., and Alison L. Young. "The Confidentiality of Tax Returns Under Canadian Law" (1982), 27 McGill L.J. 479.
APPEAL from a judgment of the New Brunswick Court of Appeal (1991), 120 N.B.R. (2d) 4, 84 D.L.R. (4th) 360, 7 C.B.R. (3d) 157, dismissing an appeal from a judgment of Jones J. Appeal dismissed, L'Heureux‑Dubé, Sopinka and McLachlin JJ. dissenting.
B. A. Crane, Q.C., and Randall J. Hofley, for the appellant.
John R. Power, Q.C., and Michael Donovan, for the respondent.
The judgment of Lamer C.J. and La Forest, Gonthier, Cory and Major JJ. was delivered by
Iacobucci J. -- This appeal concerns the interpretation to be given to s. 241(3) of the Income Tax Act, S.C. 1970-71-72, c. 63 (the Income Tax Act), which permits in certain circumstances the disclosure of otherwise confidential information obtained from a taxpayer by officials of the Department of National Revenue. More specifically, the appeal concerns an action by a trustee in bankruptcy under the Bankruptcy Act, R.S.C., 1985, c. B-3 , for a declaration that certain property is the property of a taxpayer bankrupt's estate. The issue is whether such an action is a proceeding "relating to the administration or enforcement of" the Income Tax Act.
I.Facts
Raymond Slattery, who is not a party to this action, fell into arrears in paying income tax, resulting in a lengthy investigation by Revenue Canada. Unable to collect the taxes owing, Revenue Canada petitioned Slattery into bankruptcy. The respondent, Doane Raymond Limited (the Trustee), was appointed as trustee in bankruptcy of the Raymond Slattery estate. In the bankruptcy, Revenue Canada proved a claim of just over $1 million and other creditors proved claims of over $3 million; however, since Revenue Canada is the only preferred creditor, it appears that the assets of the estate will not be sufficient to satisfy the claims of any other creditors.
The trustee commenced an action against the appellant, Marguerite Slattery, who is the wife of the bankrupt Slattery. The action sought a declaration that certain assets registered in Marguerite Slattery's name were, in fact, the property of the bankrupt's estate or were held in trust for that estate.
At trial, the trustee sought to introduce testimony from two Revenue Canada officials who had participated in the investigation into Raymond Slattery's affairs. Counsel for Marguerite Slattery objected on the ground that such testimony was barred by s. 241 of the Income Tax Act, which prohibits Revenue Canada officials from disclosing information which has been obtained from a taxpayer for the purposes of the Income Tax Act. The trial judge ruled that the testimony was not barred by s. 241 because it fell within the exception contained in s. 241(3), which exception provides that the prohibition does not apply "in respect of proceedings relating to the administration or enforcement of" the Income Tax Act. Both officials testified, and the New Brunswick Court of Queen's Bench granted the declaration sought in part.
Marguerite Slattery appealed. She argued that the trial judge had erred in permitting the Revenue Canada officials to testify. The New Brunswick Court of Appeal agreed with the trial judge's interpretation of s. 241 of the Income Tax Act, and dismissed the appeal.
II.Relevant Statutory Provisions
Income Tax Act, S.C. 1970-71-72, c. 63, s. 241:
241. (1) Except as authorized by this section, no official or authorized person shall
(a) knowingly communicate or knowingly allow to be communicated to any person any information obtained by or on behalf of the Minister for the purposes of this Act or the Petroleum and Gas Revenue Tax Act ,
(b) knowingly allow any person to inspect or to have access to any book, record, writing, return or other document obtained by or on behalf of the Minister for the purposes of this Act or the Petroleum and Gas Revenue Tax Act , or
(c) knowingly use, other than in the course of his duties in connection with the administration or enforcement of this Act or the Petroleum and Gas Revenue Tax Act , any information obtained by or on behalf of the Minister for the purposes of this Act or the Petroleum and Gas Revenue Tax Act .
(2) Notwithstanding any other Act or law, no official or authorized person shall be required, in connection with any legal proceedings,
(a) to give evidence relating to any information obtained by or on behalf of the Minister for the purposes of this Act or the Petroleum and Gas Revenue Tax Act , or
(b) to produce any book, record, writing, return or other document obtained by or on behalf of the Minister for the purposes of this Act or the Petroleum and Gas Revenue Tax Act .
(3) Subsections (1) and (2) do not apply in respect of criminal proceedings, either by indictment or on summary conviction, that have been commenced by the laying of an information, under an Act of the Parliament of Canada, or in respect of proceedings relating to the administration or enforcement of this Act or the Petroleum and Gas Revenue Tax Act .
(4) An official or authorized person may ...
(c) communicate or allow to be communicated information obtained under this Act or the Petroleum and Gas Revenue Tax Act , or allow inspection of or access to any book, record, writing, return or other document obtained by or on behalf of the Minister for the purposes of this Act or the Petroleum and Gas Revenue Tax Act , to or by any person otherwise legally entitled thereto.
III.Judgments Below
1.New Brunswick Court of Queen's Bench (Jones J.)
The judgment of the New Brunswick Court of Queen's Bench consists of an oral ruling during the trial on the admissibility of testimony from the Revenue Canada officials. Jones J. held that the proceedings in the case at bar fell within the exception in s. 241(3) of the Income Tax Act. In interpreting the phrase "in respect of proceedings relating to the... enforcement of this Act", the trial judge commented upon two possible approaches, namely, the one set out in Glover v. Minister of National Revenue, [1981] 2 S.C.R. 561, in which the exception in s. 241(3) was held not to apply in any legal proceedings of a civil character, and a second approach taken in Canadian Pacific Tobacco Co. v. Stapleton (1952), 86 C.L.R. 1 (Aust. H.C.), which was more supportive of the trustee's position.
The trial judge held that "relating to" in s. 241(3) has a broad meaning. He suggested that, although s. 241(3) does not apply to civil proceedings unrelated to the Income Tax Act, some civil proceedings nonetheless fall within the exemption. He concluded that the action by the Trustee was of this latter kind, stating:
Now I know there can be civil legal proceedings strictly under the Income Tax Act, nevertheless, it is my finding that on the interpretation that I make of the words "relating to the enforcement of the Act" that -- and bearing in mind the circumstances in this case, the fact that it is -- this is a civil action by trustee in bankruptcy, major -- while the primary creditor is Revenue Canada, and the purpose for which -- came out in evidence before me yesterday morning, this action is pursued, I would find that it comes within the meaning of s. 241.3 and I would, therefore allow the plaintiff to continue with questions along that -- along the line which he was pursuing, or at least I would say that Sections 241.1 and 241.2 would not apply in this proceeding.
Accordingly, the trial judge permitted the Revenue Canada officials to testify.
2.New Brunswick Court of Appeal (1991), 120 N.B.R. (2d) 4 (Hoyt, Ayles and Ryan JJ.A.)
The reasons of the court were delivered by Hoyt J.A. (as he then was). During a brief review of the facts, Hoyt J.A. noted the importance of the testimony given by the Revenue Canada officials to the decision reached by the trial judge. He also noted that the purpose of the trustee's action was to ensure that the assets of the estate were collected, so that the bankrupt's creditors, including Revenue Canada, could be paid. In determining whether such proceedings were "proceedings relating to the administration or enforcement of this Act", Hoyt J.A. held at pp. 11-12:
A taxpayer who, like Mr. Slattery, circumvents tax collection procedures found in the Act is not thereby immune from other proceedings that the Minister may take to collect unpaid taxes and thus enforce the Act. Although Mr. Slattery is not a defendant in this proceeding, the trial judge has found, correctly in my view, that this situation arose because Mr. Slattery attempted to avoid paying outstanding taxes owed to Revenue Canada by implicating Mrs. Slattery with, it must be noted, her acquiescence.
Hoyt J.A. held at p. 12 that to "accept the appellant's submission could prevent the Minister from enforcing the Income Tax Act in proceedings other than those brought specifically under that Act". He distinguished Glover, supra, by stating that the present action could not be characterized as a non-Income Tax Act legal proceeding. Although this proceeding was not instituted under the Income Tax Act, he found it to be related to the enforcement of that Act.
As a result, the Court of Appeal held that the Revenue Canada officials had properly been permitted to testify and the appeal was dismissed.
IV.Issue
The question raised by this appeal is whether a civil action commenced by the trustee for a declaration that certain property is property of the bankrupt's estate is a proceeding "relating to the ... enforcement of" the Income Tax Act within the meaning of s. 241(3) of that Act. If it is, the prohibitions contained in s. 241 of the Income Tax Act against Revenue Canada officials' communicating or giving evidence of information obtained from the taxpayer do not apply. The respondent trustee in its factum also argues that the disclosure could be permitted by the exception contained in s. 241(4)(c), by suggesting that a bankruptcy judge is a "person otherwise legally entitled" to such information. As a result of my conclusion, I need not discuss this argument further.
An analysis of the history of s. 241, its underlying purposes and policy, its text and context, applicable judicial authority, and the nature of the proceedings involved herein, leads me to conclude that the courts below were correct in their holdings and that this appeal should be dismissed.
V.Analysis
1. History of s. 241
At the outset, it is worth noting that the taxation of income in Canada has been and is based on a self assessment and self reporting system. Confidentiality of taxpayer information has been an important part of our income tax collection system.
Legislated confidentiality of information obtained from taxpayers has moved through two distinct stages in Canada. The first stage began with s. 11 of the Income War Tax Act, 1917, S.C. 1917, c. 28. That section was a simple prohibition against disclosure by a person employed in the service of the Crown to a person, not legally entitled thereto, of any information obtained under the Act. Section 11 read as follows:
11. No person employed in the service of His Majesty shall communicate or allow to be communicated to any person not legally entitled thereto, any information obtained under the provisions of this Act, or allow such person to inspect or have access to any written statement furnished under the provisions of this Act. Any person violating any of the provisions of this section shall be liable on summary conviction to a penalty not exceeding two hundred dollars.
Section 11 was re-enacted as s. 81 of the 1927 Income War Tax Act, R.S.C. 1927, c. 97, with the only modification being that the section was divided into two subsections, with the penalty portion becoming s. 81(2). In 1948, s. 81 became s. 121 of The Income Tax Act, slight changes in wording took place, and the subsections reverted to a consolidated form once more (S.C. 1948, c. 52). In 1952, the last change of the first stage occurred, and s. 121 became s. 133 in the Income Tax Act, R.S.C. 1952, c. 148. Viewed as a whole, this stage of legislative history is distinguishable because the extent of confidentiality protection afforded to taxpayers by the plain language of the statute had two features. First, the prohibition against disclosure was directed only at persons in the service of the Crown. Second, the success of that prohibition depended almost entirely upon the meaning ascribed to the statutory phrase "a person, not legally entitled thereto", which phrase offered the only exception to the otherwise blanket statutory prohibition.
The second legislative stage began in 1966 when the confidentiality section was entirely modified by two amendments (S.C. 1966-67, c. 47, s. 17, and S.C. 1966-67, c. 91, s. 22). These amendments extended the general rule of non-disclosure to everyone, and at the same time spelled out specific exceptions for prescribed situations. (See Stephen J. Toope and Alison L. Young, "The Confidentiality of Tax Returns Under Canadian Law" (1982), 27 McGill L.J. 479.) The following is a succint summary of the 1966 amendments at p. 489:
The general effect of these provisions is to make the section easier to apply. There is now a general prohibition against release of tax information to anyone. The subsections which follow the general prohibition set up exceptions to the rule, and the circumstances in which ministerial discretion may operate seem to be clear. The organization of the section is, in this respect, more amenable to application by common law courts as it resembles a set of rules rather than an abstract principle.
As will be noted again below, the 1966 amendments were described by the Ontario Court of Appeal as "a comprehensive code designed to protect the confidentiality of all information given to the Minister for the purposes of the Income Tax Act" -- Glover v. Glover (No. 1) (1980), 29 O.R. (2d) 392, at p. 396. The amendments were initially embodied in s. 133, but in 1970, s. 133 became s. 241 of the Income Tax Act, as it remains today. Since then, the section has been only slightly modified.
2. Purposes and Policy Underlying s. 241
In my view, s. 241 involves a balancing of competing interests: the privacy interest of the taxpayer with respect to his or her financial information, and the interest of the Minister in being allowed to disclose taxpayer information to the extent necessary for the effective administration and enforcement of the Income Tax Act and other federal statutes referred to in s. 241(4).
Section 241 reflects the importance of ensuring respect for a taxpayer's privacy interests, particularly as that interest relates to a taxpayer's finances. Therefore, access to financial and related information about taxpayers is to be taken seriously, and such information can only be disclosed in prescribed situations. Only in those exceptional situations does the privacy interest give way to the interest of the state.
As alluded to already, Parliament recognized that to maintain the confidentiality of income tax returns and other obtained information is to encourage the voluntary tax reporting upon which our tax system is based. Taxpayers are responsible for reporting their incomes and expenses and for calculating the tax owed to Revenue Canada. By instilling confidence in taxpayers that the personal information they disclose will not be communicated in other contexts, Parliament encourages voluntary disclosure of this information. The opposite is also true: if taxpayers lack this confidence, they may be reluctant to disclose voluntarily all of the required information (Edwin C. Harris, Canadian Income Taxation (4th ed. 1986), at pp. 26-27).
Parliament has also recognized, however, that if personal information obtained cannot be used to assist in tax collection when required, including tax collection by way of judicial enforcement, the possession of such information will be useless. Disclosure of information obtained through tax returns or collected in the course of tax investigations may be necessary during litigation in order to ensure that all relevant information is before the court, and thereby to assist in the correct disposition of litigation. But this necessity is sanctioned by Parliament in a very limited number of situations. Disclosure is authorized in criminal proceedings and other proceedings as set out in s. 241(3). Certain other situations are specified in s. 241(4), which have been described by the Ontario Court of Appeal as being "largely of an administrative nature" (Glover v. Glover (No. 1), supra, at p. 397).
3. The Text and Context of s. 241(3)
As already noted, s. 241(3) provides, inter alia, that the confidentiality provisions in s. 241(1) and (2) do not apply "in respect of proceedings relating to the administration or enforcement of" the Income Tax Act. The appellant argues that the only proceedings covered by this exception are those which are expressly provided for in Part XV of the Act, entitled "Administration and Enforcement". The appellant's argument would require the words in s. 241(3) to be read as meaning that the confidentiality provisions do not apply "in respect of proceedings taken pursuant to the administration or enforcement provisions" of the Income Tax Act. Neither the text nor context of s. 241 supports this argument.
The connecting phrases used by Parliament in s. 241(3) are very broad. The confidentiality provisions are stated not to apply in respect of proceedings relating to the administration or enforcement of the Income Tax Act.
The phrase "in respect of" was considered by this Court in Nowegijick v. The Queen, [1983] 1 S.C.R. 29, at p. 39:
The words "in respect of" are, in my opinion, words of the widest possible scope. They import such meanings as "in relation to", "with reference to" or "in connection with". The phrase "in respect of" is probably the widest of any expression intended to convey some connection between two related subject matters. [Emphasis added.]
In my view, these comments are equally applicable to the phrase "relating to". The Pocket Oxford Dictionary (1984) defines the word "relation" as follows:
... what one person or thing has to do with another, way in which one stands or is related to another, kind of connection or correspondence or contrast or feeling that prevails between persons or things;...
So, both the connecting phrases of s. 241(3) suggest that a wide rather than narrow view should be taken when considering whether a proposed disclosure is in respect of proceedings relating to the administration or enforcement of the Income Tax Act.
This breadth of meaning is confirmed when one examines the French version of the section. The French version of s. 241(3) reads as follows:
241. ...
(3) Les paragraphes (1) et (2) ne s'appliquent ni aux poursuites au criminel, sur acte d'accusation ou sur déclaration sommaire de culpabilité, engagées par le dépot d'une dénonciation, en vertu d'une loi fédérale, ni aux poursuites ayant trait à l'application ou à l'exécution de la présente loi... [Emphasis added.]
The phrase "ayant trait à" is defined in the Larousse dictionary Dictionnaire de la langue française (1989) as: "Avoir trait à : avoir un rapport avec". The dictionary Le Robert Méthodique (1988) defines the phrase as: "Avoir trait à: Se rapporter à... V. Rapport". And the same dictionary defines the word "rapport" as meaning "Lien, relation". Consequently, the French version of s. 241(3) is as broad as the English version.
The next question to ask considers what type of administration or enforcement proceedings are contemplated by s. 241(3): only proceedings brought under the Income Tax Act itself, or both such proceedings and others? To answer this question, one must look first to the wording of s. 241(3). That provision contains no language which confines the concept of proceedings relating to administration or enforcement to the boundaries of the Income Tax Act. This conclusion is buttressed when one considers the context of s. 241.
Section 241 is found in Part XV of the Income Tax Act, which deals with administration and enforcement as previously noted. It is obvious, but the fact must nonetheless be highlighted, that the collection of money owing to Revenue Canada is an important part of the Act's enforcement. This proposition is confirmed by s. 222 of the Act which reads as follow:
222. All taxes, interest, penalties, costs and other amounts payable under this Act are debts due to Her Majesty and recoverable as such in the Federal Court of Canada or any other court of competent jurisdiction or in any other manner provided by this Act. [Emphasis added.]
Section 222 is a clear statement that, in addition to the procedures specified in the Income Tax Act, the Minister may resort generally to the courts to institute civil proceedings to collect taxes as debts. But, in order to take full advantage of this power, the Minister must be able to disclose in court otherwise confidential information in order to prove the cause of action in debt. It must therefore be possible to disclose such information to establish the amount owed and to prove related matters. Absent the ability to disclose as required to prove a debt, s. 222 would be deprived of part of its meaning. The absurdity of such a result strongly suggests that the collection proceedings specified in s. 222 are proceedings "relating to the... enforcement" of the Income Tax Act within the meaning of s. 241(3).
This legislative interpretation accords with the necessary balancing of privacy and state interests which takes place in s. 241. Confidentiality of tax information is necessary in order to promote the privacy interests of taxpayers and the success of voluntary tax reporting. But the success of the voluntary tax reporting system will be of no import if Revenue Canada cannot effectively collect taxes owed by taxpayers. In order to collect taxes owed, Revenue Canada should be able to resort to various procedures and proceedings to pursue the amounts owed and in doing so should also be able to disclose in court the information necessary to prove a cause of action in debt. As Décary J.A. said in Diversified Holdings Ltd v. Canada, [1991] 1 F.C. 595 (C.A.), at p. 599:
In the instant case, the documents are part of a process, the collection proceedings, which is in itself in the public domain and which involves by its very nature the publication of information that would otherwise have remained confidential. One cannot seize a property pursuant to a certificate which has the force and effect of a judgment (see subsection 223(2) of the Act) without revealing to some extent information given to the Minister.
4. Judicial Interpretation of s. 241
I do not find it necessary to discuss all the cases which were decided under s. 241's predecessor sections or which deal with actions related to those predecessor sections. However, both the appellant and respondent cited, in support of their respective positions, the decision of the Ontario Court of Appeal in Glover v. Glover (No. 1), supra, which was affirmed by this Court in a short judgment (Glover v. Minister of National Revenue, supra). Accordingly, some comment on this case is required.
In Glover, a trial judge ordered Revenue Canada to disclose the address of a taxpayer who had abducted his children in violation of a court order which granted custody to the children's mother. The question was whether the judge who ordered disclosure of the information was a person "legally entitled thereto". That phrase had been carried over from s. 241's predecessor provision and was restated in s. 241(4)(c) as an enumerated exception. The Ontario Court of Appeal set aside the trial judge's order, holding that the judge did not come within the s. 241(4)(c) exception.
In the course of his reasons, MacKinnon A.C.J.O. on behalf of a unanimous court made some general comments on the interpretation of s. 241. He stated at p. 396 that "[s]ection 241, in my view, is a comprehensive code designed to protect the confidentiality of all information given to the Minister for the purposes of the Income Tax Act". In his opinion, at p. 397, s. 241(3) was:
... a clear statement of parliamentary policy that no information obtained for the purpose of the Act shall be communicated and no official or authorized person shall be required to give evidence relating to such information in any non-Income Tax Act civil legal proceedings.
The mother appealed the decision of the Ontario Court of Appeal to this Court, which dismissed the appeal with brief reasons in which Laskin C.J. said at p. 562:
Sympathetic though one is inclined to be to the appellant's plight, the statutory provisions above-mentioned for non-disclosure, in connection with any legal proceedings of a civil character, do not give any power to a court to qualify them, nor do the exceptions set out in s. 241(4)(c) assist the appellant.
I agree with the respondent that, in Glover, the proceedings in question had no connection whatsoever with the administration or enforcement of the Income Tax Act. As a result, this Court's decision must be read to mean that the confidentiality provisions apply to any legal proceeding of a civil character which is not covered by the exception provided in s. 241(3). In other words, ss. 241(1) and (2) apply to civil proceedings which are not related to the administration or enforcement of the Income Tax Act. In my view, Glover does not inform the issue already set out: the essential question is whether or not the bankruptcy proceedings taken herein are related to the administration or enforcement of the Income Tax Act. As I will now discuss, I think they are.
V. Are the Present Proceedings Covered by s. 241(3)?
In determining whether the present bankruptcy proceedings are covered by the exception in s. 241(3) of the Income Tax Act, I think it worthwhile to note briefly some of the features of the bankruptcy process.
It has been stated that among the purposes of the Bankruptcy Act are a desire to permit an effective and fair distribution of the assets of a bankrupt person, and a desire to protect creditors of insolvent persons. See Houlden and Morawetz, Bankruptcy and Insolvency Law of Canada (3rd ed. 1993), at pp. 1-3, 1-4; see also Marc Chabot, Faillite et Insolvabilité (1987), at p. 8. Indeed, it has been asserted that not only are the interests of debtors and creditors protected under the Bankruptcy Act, but so is the public interest. See Professor Albert Bohémier, Faillite et Insolvabilité, vol. 1, (1992), at pp. 48-56. Thus, there are many who would advocate resort to bankruptcy proceedings as an effective and fair means of debt collection. I need not join the debate as to whether or to what extent these assertions are true. I will simply note that the bankruptcy process is aimed at the proper protection of debtor, creditor and public interests.
In the case on appeal, the Minister of National Revenue petitioned Raymond Slattery into bankruptcy. Mr. Slattery filed a statement of affairs stating that he had virtually no assets. The trustee then commenced the present action in the Court of Queen's Bench of New Brunswick seeking a declaration that certa