Date: 20010319
Docket: A-828-00
Neutral citation: 2001 FCA 74
CORAM: RICHARD C.J
BETWEEN:
HER MAJESTY THE QUEEN and
THE MINISTER OF NATIONAL REVENUE
Appellants,
- and -
GEORGE WILLIAM HARRIS,
on his own behalf, and on behalf of a class of Plaintiffs
comprised of all individuals and others required to file returns
pursuant to section 150 of the Income Tax Act, 1985 c. 1 (5th Supp.)
as amended, excepting those filers as described in paragraph 2 of this Claim,
Respondent
Heard at Ottawa, Ontario, March 8, 2001
JUDGMENT delivered at Ottawa, Ontario, March 19, 2001
REASONS FOR JUDGMENT BY: SHARLOW J.A.
CONCURRED IN BY: RICHARD C.J.
STRAYER J.A.
Date: 20000319
Docket: A-828-00
Neutral citation: 2001 FCA 74
CORAM: RICHARD C.J
STRAYER J.A.
SHARLOW J.A.
BETWEEN:
HER MAJESTY THE QUEEN and
THE MINISTER OF NATIONAL REVENUE
Appellants,
- and -
GEORGE WILLIAM HARRIS,
on his own behalf, and on behalf of a class of Plaintiffs
comprised of all individuals and others required to file returns
pursuant to section 150 of the Income Tax Act, 1985 c. 1 (5th Supp.)
as amended, excepting those filers as described in paragraph 2 of this Claim,
Respondent.
REASONS FOR JUDGMENT
SHARLOW J.A.
The Crown is appealing the order of a Case Management Judge that requires it to make limited disclosure of the identity of a taxpayer who obtained a certain advance income tax ruling in 1991.
The question arises in the context of an action commenced by the respondent George William Harris in 1996. Mr. Harris seeks a number of declarations based on allegations that the ruling is incorrect in law and that the Minister, in giving the ruling, bestowed an undue preference and special benefit on the taxpayer who received it. The statement of claim also alleges "a reasonable apprehension of bad faith administration and an ulterior motive on the part of the Crown in the circumstances of this case".
The Crown argues in its defence that the 1991 ruling is correct in law and that there was nothing improper or unlawful about the issuance of the ruling.
There is no allegation of wrongdoing on the part of the taxpayer.
The affidavit of documents filed on behalf of the Crown lists a number of documents in Schedule "2" as documents for which privilege was claimed on the basis of section 241 of the Income Tax Act, R.S.C. 1985, C. 1 (5th supp), and section 37 of the Canada Evidence Act, R.S.C. 1985, c. C-5.
The Crown sought directions from the Case Management Judge under Rule 54 as to the validity of its claims of privilege with respect to these documents.
The Case Management Judge directed that the Crown's privilege claims could not stand and ordered the disclosure of the documents listed in Schedule "2" of its affidavit of documents, including any information that would disclose the identity of the taxpayer, subject to editing to remove irrelevant details. However, she directed that the disclosure be limited under Rules 151 and 152 to taxpayer's counsel and any other lawyers working on the case.
The Crown appeals these directions.
At the hearing of the appeal, counsel for the Crown conceded its obligation to disclose the documents in Schedule "2" of its affidavit of document. However, the Crown maintains that the documents should first be edited so that they do not reveal the identity of the taxpayer. The Crown's proposal is to edit the documents by blanking out names and other information that could lead a knowledgeable reader to discern the identity of the taxpayer, and replacing the blanked out words with generic descriptions that will be explicit enough to permit counsel for Mr. Harris to conduct a meaningful examination for discovery.
It is not clear whether the documents as so edited are intended to continue to be treated as confidential under Rule 151 and Rule 152. This is a matter to be determined by the case management judge who made the original order.
As a result of this concession on the part of the Crown, this appeal now relates only to the question of the disclosure of the identity of the taxpayer.
Counsel for the Crown also indicated at the hearing of this appeal that the taxpayer involved had consented, under subsection 241(5) of the Income Tax Act, to the disclosure of the documents in unedited form to the Case Management Judge or the Trial Judge. That consent is intended to permit a review of the editing process to ensure that it is done appropriately, and to facilitate the Crown's application under section 37 of the Canada Evidence Act.
The issues to be addressed may be summarized as follows:
1. Was the Case Management Judge correct in concluding that the action of Mr. Harris is a legal proceeding within the scope of paragraph 241(3)(b) of the Income Tax Act, so that subsections 241(1) and (2) do not preclude the Minister from disclosing the identity of the taxpayer?
2. Was the Case Management Judge correct in concluding that section 37 of the Evidence Act does not apply?
3. Was the Case Management Judge correct to order disclosure of the taxpayer's identity?
Section 241 of the Income Tax Act
Section 241 of the Income Tax Act provides as follows:
| 241(1) Except as authorized by this section, no official shall |
241(1) Sauf autorisation prévue au présent article, il est interdit à un fonctionnaire: |
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| (a) knowingly provide, or knowingly allow to be provided, to any person any taxpayer information; |
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| a) de fournir sciemment à quiconque un renseignement confidentiel ou d'en permettre ciemmen la prestation;(b) knowingly allow any person to have access to any taxpayer information; or |
b) de permettre sciemment à quiconque d'avoir accès à un renseignement confidentiel; |
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| (c) knowingly use any taxpayer information otherwise than in the course of the administration or enforcement of this Act, the Canada Pension Plan, the Unemployment Insurance Act or the Employment Insurance Act or for the purpose for which it was provided under this section. |
c) d'utiliser sciemment un renseignement confidentiel en dehors du cadre de l'application ou de l'exécution de la présente loi, du Régime de pensions du Canada, de la Loi sur l'assurance - chômage ou de la Loi sur l'assurance - emploi, ou à une autre fin que celle pour laquelle il a été fourni en application du présent article. |
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| (2) Notwithstanding any other Act of Parliament or other law, no official shall be required, in connection with any legal proceedings, to give or produce evidence relating to any taxpayer information. |
(2) Malgré toute autre loi ou règle de droit, nul fonctionnaire ne peut être requis, dans le cadre d'une procédure judiciaire, de témoigner, ou de produire quoi que ce soit, relativement à un renseignement confidentiel. |
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| (3) Subsections 241(1) and 241(2) do not apply in respect of |
(3) Les paragraphes (1) et (2) ne s'appliquent: |
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| (a) criminal proceedings, either by indictment or on summary conviction, that have been commenced by the laying of an information or the preferring of an indictment, under an Act of Parliament; or |
a) ni aux poursuites criminelles, sur déclaration de culpabilité par procédure sommaire ou sur acte d'accusation, engagées par le dépôt d'une dénonciation ou d'un acte d'accusation, en vertu d'une loi fédérale; |
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| (b) any legal proceedings relating to the administration or enforcement of this Act, the Canada Pension Plan, the Unemployment Insurance Act or the Employment Insurance Act or any other Act of Parliament or law of a province that provides for the imposition or collection of a tax or duty. |
b) ni aux procédures judiciaires ayant trait à l'application ou à l'exécution de la présente loi, du Régime de pensions du Canada, de la Loi sur l'assurance-chômage ou de la Loi sur l'assurance-emploi ou de toute autre loi fédérale ou provinciale qui prévoit l'imposition ou la perception d'un impôt, d'une taxe ou d'un droit. |
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The identity of the taxpayer that obtained the 1991 ruling is clearly "taxpayer information" within the meaning of section 241 of the Income Tax Act. The question is whether the action commenced by Mr. Harris is a legal proceeding "relating to the administration or enforcement" of the Income Tax Act.
As explained above, the subject matter of the action is an advance income tax ruling. The Minister issued that ruling as part of the administration of the Income Tax Act. Mr. Harris commenced this proceeding to establish that the issuance of that ruling was not a proper administrative act. In that sense this proceeding "relates to" the administration of the Income Tax Act. Therefore, the words of paragraph 241(3)(b) are broad enough to cover this proceeding.
However, counsel for the Crown argues for a narrower interpretation of paragraph 241(3)(b). He argues that because the Minister is the only person who is authorized to administer and enforce the Income Tax Act, only a legal proceeding undertaken by or on behalf of the Minister for the purpose of the administration or enforcement of the Income Tax Act can be within the scope of paragraph 241(3)(b). The Minister is arguing, in essence, that a legal proceeding that seeks to uncover improper administration of the Income Tax Act cannot be said to be related to its administration. This argument seems to me illogical and I am unable to accept it.
I conclude that this proceeding is within the scope of paragraph 241(3)(b) of the Income Tax Act. It follows that the Case Management Judge was correct in determining that subsections 241(1) and (2) of the Income Tax Act do not preclude the Minister from disclosing the identity of the taxpayer.
Section 37 of the Evidence Act
Section 37 of the Evidence Act permits the Crown to resist disclosure of information in a legal proceeding on the basis of a judicial determination that there is a specified public interest that outweighs the public interest in the disclosure of the information. Subsections 37(1) and (2) read as follows:
| 37(1) A minister of the Crown in right of Canada or other person interested may object to the disclosure of information before a court, person or body with jurisdiction to compel the production of information by certifying orally or in writing to the court, person or body that the information should not be disclosed on the grounds of a specified public interest. |
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| 37 (1) Un ministre fédéral ou toute autre personne intéressée peut s'opposer à la divulgation de renseignements devant un tribunal, un organisme ou une ersonne ayant le pouvoir de contraindre à la production de renseignements, en attestant verbalement ou par écrit devant eux que ces renseignements ne devraient pas être divulgués pour des raisons d'intérêt public déterminées.(2) Subject to sections 38 and 39, where an objection to the disclosure of information is made under subsection (1) before a superior court, that court may examine or hear the information and order its disclosure, subject to such restrictions or conditions as it deems appropriate, if it concludes that, in the circumstances of the case, the public interest in disclosure outweighs in importance the specified public interest. |
(2) Sous réserve des articles 38 et 39, dans les cas où l'opposition visée au paragraphe (1) est portée devant une cour supérieure, celle-ci peut prendre connaissance des renseignements et ordonner leur divulgation, sous réserve des restrictions ou conditions qu'elle estime indiquées, si elle conclut qu'en l'espèce, les raisons d'intérét public qui justifient la divulgation l'emportent sur les raisons d'intérêt public invoquées lors de l'attestation. |
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In this case the Crown invoked subsection 37(1) of the Evidence Act on the basis of the certificate of the current Director General of the Income Tax Rulings Directorate in the Policy and Legislation Branch of the Canada Customs and Revenue Agency, the entity that is now responsible for income tax administration. That certificate describes the harm that the Director General believes would result from disclosure of the documents referred to in Schedule "2" of the Crown's affidavit of documents. The certificate does not specifically address the question of whether there is a specified public interest in preventing the disclosure of the identity of taxpayer, which is the only information the Crown still seeks to protect.
It appears that the Case Management Judge did not embark on the enquiry mandated by subsection 37(2) of the Evidence Act. Rather, she seems to have considered section 37 to be inoperative because of her conclusion that disclosure was not precluded by subsections 241(1) or (2) of the Income Tax Act. She said, at paragraph 38 of the reasons:
The exception provided in section 241(3)(b) [of the Income Tax Act], to the general bar against disclosure of taxpayer information, overrides the public interest immunity which is claimed here. In my opinion, the public interest lies in determining whether the Minister discharged his statutory duty in applying the [Income Tax] Act.
In this case, the disclosure of the information sought by Mr. Harris is required by the Federal Court Rules, 1998, subject only to any applicable claim of privilege. In my view, the Crown must be permitted to assert a claim of public interest immunity with respect to taxpayer information independently of its nondisclosure obligations in section 241 of the Income Tax Act.
I conclude that the Case Management Judge erred in relying on section 241 of the Income Tax Act as a basis for determining the scope of the public interest immunity claim made by the Crown in this case. She ought to have considered specifically whether the public interest in disclosure outweighed the specified public interest asserted by the Crown in the certificate. Having failed to do so, she was in no position to conclude that the documents were not protected from disclosure on the basis of public interest immunity.
The appropriate remedy is to refer the Crown's section 37 application back to the Case Management Judge for reconsideration. In light of the Crown's concessions as described above, the claim of privilege must now be considered to relate only to the taxpayer's identity. It may be appropriate for the Crown to submit a new certificate, and it should be at liberty to do so.
Order for disclosure of taxpayer identity
It cannot be determined from the pleadings whether the identity of the taxpayer who obtained the 1991 ruling is relevant to any of the allegations in the statement of claim. Nor does the record disclose any evidence on that point. The absence of such evidence may be explained by the unusual procedure followed in this case. It appears that the directions sought by the Crown preceded the commencement of examinations for discovery, so there are no unanswered questions that could give rise to a motion under Rule 242. Nor has Mr. Harris moved for disclosure under Rule 229.
The result in any event is that the Case Management Judge had before her no evidence from which it could be determined whether the identity of the taxpayer is relevant to the allegations in the statement of claim. In the absence of such evidence, the Case Management Judge erred in ordering the disclosure of the identity of the taxpayer.
Conclusion
On the basis of the foregoing reasons, I would allow this appeal in part.
The direction for disclosure of the taxpayer's identity should be vacated, without prejudice to the right of Mr. Harris to make an application for disclosure under Rule 229 or 242 as appropriate.
The direction that the documents are not immune from disclosure under section 37 of the Canada Evidence Act should be vacated and the Crown's section 37 application should be referred back to the Case Management Judge for a redetermination that is independent of section 241 of the Income Tax Act. Given the Crown's new position on the disclosure of edited documents, the Crown should be entitled to present a new certificate dealing with the issue of the disclosure of the taxpayer's identity.
Karen R. Sharlow
J.A.
"I agree
J. Richard C.J."
"I agree
B.L. Strayer J.A."