http://decisions.fca-caf.gc.ca/fca-caf/decisions/en/item/142539/index.do
Canada (National Revenue) v. Lee (February 16, 2016 – 2016 FCA 53, Dawson (author), Near, Boivin JJ. A.).
Précis: The Federal Court denied CRA’s application for a compliance order under section 231.7 of the Income Tax Act ( the “ITA”) in respect of a requirement for information issued to Mr. Lee on the basis that it was overbroad and vague. The Federal Court of Appeal set aside the decision of the Federal Court and issued the compliance order sought by CRA. CRA was awarded costs both in the Federal Court of Appeal and the Federal Court.
Decision: The Federal Court denied CRA’s application for a compliance order pursuant to section 231.7 of the ITA:
[1] On June 1, 2012, the Canada Revenue Agency issued a Requirement for Information directed to the respondent. The Requirement was issued under subsection 231.2(1) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (Act). It required the respondent to provide a broad range of information and documents relating to the respondent’s financial and tax affairs. For example, the Requirement obliged the respondent to provide details of all common and preferred shares he owned, irrespective of whether the shares were registered in his name. While the respondent acknowledged receipt of the Requirement, he failed to comply with it. No information or documents were provided to the Canada Revenue Agency in response to the Requirement.
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[4] As we understand the reasons of the Federal Court, the Judge declined to grant the requested order because:
i) The Requirement was “overly expansive in breadth and in depth” (reasons, paragraph 6).
ii) The intended recipient of the Requirement was unclear; the Requirement failed to clearly identify the recipient “both in name and role” (reasons, paragraphs 3, 30, 39, 41 and 44).
iii) In the Judge’s view, “a requirement directed at a director or officer of the company that concerns business assets to be a requirement directed at the corporate entity itself” (reasons, paragraph 43).
The Federal Court of Appeal, in a decision delivered from the bench, disagreed:
[7] 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.
[8] 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 v. Canada (National Revenue), 2011 FC 224, 385 F.T.R. 103; aff’d 2011 FCA 306, 427 N.R. 354.
[9] In the present case, the Requirement was clearly and unequivocally directed to the respondent, he was required to provide the information or documents sought by the Canada Revenue Agency, he did not do so and he made no claim that the information or documents sought were protected from disclosure by solicitor-client privilege. The Federal Court ought to have issued the requested order. The cases of Canada (Minister of National Revenue) v. SML Operations (Canada) Ltd., 2003 FC 868, [2003] 4 C.T.C. 201 and Canada (Minister of National Revenue) v. Chamandy, 2014 FC 354, 452 F.T.R. 261 relied upon by the Federal Court were distinguishable on their facts.
As a result the Court issued the compliance order sought and awarded costs to CRA both in the Federal Court of Appeal and in the Federal Court.