Canada (National Revenue) v. KPMG LLP - FCt: Court refuses to set aside an ex parte requirement Order

Canada (National Revenue) v. KPMG LLP - FCt:  Court refuses to set aside an ex parte requirement Order

Canada (National Revenue) v. KPMG LLP (November 29, 2016 – 2016 FC 1322, Crampton C.J.).

Précis:   In 2013 Justice Nöel granted an ex parte application ordering KPMG LLP to produce documentation about certain unnamed persons involved in a tax structure known as the Offshore Company Structure [the “Unnamed Persons Requirement”].  KPMG LLP moved in 2016 before Chief Justice Crampton to cancel or quash that order on the basis of the confidentiality requirement contained in Rule 208 of the Chartered Professional Accountants of Ontario’s Code of Professional Conduct [the “Code”] as well as the fact that the provision of the Income Tax Act in question, subsection 231.2(3),was amended effective June 26, 2013, to eliminate the Court’s ability to issue orders under that provision on an ex-parte basis.  Chief Justice Crampton denied the application holding that the amendment of subsection 231.2(3) did not undermine the logic on which the original order was based.  Accordingly the application was dismissed with costs.

Decision:   This application seemed somewhat of a reach.  In 2013 Justice Nöel issued the Unnamed Persons Requirement to KPMG LLP on an ex parte basis.  Later that year the provision in question was amended to remove the ex parte option.  KPMG LLP moved to have the order cancelled or quashed.  Chief Justice Crampton was not persuaded by their arguments:

[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. The mere fact that Rule 208, and similar rules in other provinces, exist would not ordinarily provide a sufficient basis to warrant the exercise of the Court’s discretion to cancel or set aside an order validly issued pursuant to s. 231.2(3). There is nothing in the particular facts of this case that would warrant the exercise of such discretion. Indeed, cancelling or varying Justice Noël’s Order based on KMPG’s concerns regarding confidentiality would appear to be inconsistent with Parliament’s intent in enacting s. 231.2 (R. v. McKinlay Transport Ltd., [1990] 1 SCR 627, at paras 36-38; MNR v Sand Exploration Ltd, [1995] FCJ No 780 (QL), at paras 17-18 (TD).  

[10]           As KPMG has advised its unnamed clients, and as recognized by the Minister, any claim of solicitor-client privilege that they may wish to make can be raised at the time of KPMG’s compliance with the Unnamed Person’s Requirement.

[11]           The fact that s. 231.2(3) has been amended to remove the Minister’s ability to seek the information described therein on ex-parte basis does not change the foregoing analysis.

Accordingly the application was dismissed with costs.