A-1088-88
Her Majesty the Queen (Appellant) (Defendant)
v.
Diversified Holdings Ltd. (Respondent) (Plain-
tiff)
INDEXED AS: DIVERSIFIED HOLDINGS LTD. V. CANADA (C.A.)
Court of Appeal, Mahoney, Stone and Décary
JJ.A.—Vancouver, November 13; Calgary,
November 15, 1990.
Practice — Discovery — Production of documents — Reve
nue Canada seizing generator from building of which plaintiff
mortgagee — Flooding of building — Plaintiff alleging
wrongful seizure — Court ordering defendant to file list of
documents being docket notations made by collection officers
— Defendant arguing documents protected under Income Tax
Act, s. 241(1) — Plaintiff moving to compel production under
RR. 456, 457 — Trial Judge granting application — Appel
lant having to demonstrate documents confidential — Privi
lege in favour of taxpayer, not Revenue Canada — Appeal
dismissed.
Income tax — Practice — Revenue Canada causing sheriff's
officers to seize generator from building of which plaintiff
mortgagee — Building flooding — Plaintiff alleging wrongful
seizure — Plaintiff seeking production of collection officers'
docket notations — Defendant claiming documents privileged
under Income Tax Act, s. 241(1) — Whether documents
"obtained by or on behalf of the Minister for the purposes of
this Act" — Legislative intent to benefit taxpayer, not Revenue
Canada — S. 241 not enacted to assist Minister in defending
negligence claims — Order of Trial Judge compelling produc
tion affirmed.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Federal Court Rules, C.R.C., c. 663, RR. 448, 456, 457.
Income Tax Act, S.C. 1970-71-72, c. 63, ss. 223(2), 241
(as am. by S.C. 1980-81-82-83, c. 68, s. 117).
CASES JUDICIALLY CONSIDERED
DISTINGUISHED:
Glover v. Glover et al. (No. 1) (1980), 29 O.R. (2d) 392;
113 D.L.R. (3d) 161; 16 C.P.C. 77; [1980] CTC 531; 80
DTC 6262; 43 N.R. 273; 18 R.F.L. (2d) 116 (C.A.);
confd sub nom. Glover v. Minister of National Revenue,
[1981] 2 S.C.R. 561; (1981), 130 D.L.R. (3d) 383;
[1982] CTC 29; 82 DTC 6035; 43 N.R. 271; 25 R.F.L.
(2d) 335.
COUNSEL:
John E. D. Savage for appellant (defendant).
M. A. Clemens for respondent (plaintiff).
SOLICITORS:
Crease & Company, Victoria, for appellant
(defendant).
Campney & Murphy, Vancouver, for
respondent (plaintiff).
The following are the reasons for judgment
rendered in English by
DÉCARY J.A.: This is an appeal from an order
by Collier J. [[1989] 2 C.T.C. 10] by which he
allowed a motion by . the respondent/plaintiff to
compel the appellant/defendant to produce certain
documents, which she refused to disclose pursuant
to subsection 241(1) of the Income Tax Act [S.C.
1970-71-72, c. 63 (as am. by S.C. 1980-81-82-83,
c. 68, s. 117)] (the Act).'
' Subsections 241(1), (2) and (3) read as follows:
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, or
(b) knowingly allow any person to inspect or to have
access to any book, record, writing, return or other docu
ment 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.
(Continued on next page)
The facts, briefly stated, are as follows. The
respondent became the mortgagee of certain prop
erty in the Victoria, B.C. area. The mortgagor was
a company known as International Electronics
Corporation (IEC). Pursuant to a certificate
issued against IEC by Revenue Canada, the Vic-
toria Sheriffs Department entered the building
occupied by IEC and seized and removed various
items from the building pursuant to said certifi
cate. The respondent alleges that Revenue Canada
caused sheriffs officers to wrongfully seize and
remove some of the items, including fixtures, and
alleges also that extensive damage was done to the
building in the course of the seizure; the seizure of
a generator, it is said, resulted in flooding of the
building.
In a statement of claim filed against the appel
lant in the Trial Division of the Federal Court the
respondent claimed damages on the basis, inter
alia, that the sheriffs officers were acting "at the
direction of, and as agent of, Revenue Canada".
Pursuant to Rule 448 [Federal Court Rules,
C.R.C., c. 663] and to an order of Collier J., the
appellant filed a "Supplementary List of Docu
ments" which, however, she considered to be pro
tected under subsection 241(1) of the Act. The
documents in question are a number of docket
notations made by four collection investigation
officers of the Department of National Revenue.
As found by Collier J. [at page 11], who was
supplied with copies of the documents in issue, "It
is obvious a good deal of the materials in the
dockets have to do with Revenue Canada's claim
against IEC and the seizure by sheriffs on the
instructions of Revenue Canada."
The respondent then moved under Rules 456
and 457 for an order compelling the appellant to
produce those documents listed as privileged docu
ments. That application was resisted by the appel
lant on the grounds that these documents were
records, writings, or other documents "obtained by
(Continued from previous page)
(3) Subsections (1) and (2) do not apply in respect of
criminal proceedings, either by indictment or on summary
conviction, 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.
or on behalf of the Minister for the purposes of
this Act", within the meaning of subsection 241(1)
and that they were not, therefore, subject to disclo
sure to others, including the respondent.
Collier J. granted the application, basically, for
the following reasons [at page 12]:
In this present litigation, the plaintiff is not seeking to get
confidential information and material gathered by the Minister
in the course of general income tax information, procedures,
investigations and matters of that kind. The documents, for
which the so-called privilege is claimed, relate to the actions
taken by and on behalf of Revenue Canada which give rise to
the present litigation against, for practical purposes, Revenue
Canada itself.
These dockets were not, and are not, as I see it, "given to the
Minister for the purposes of the Income Tax Act". They came
into existence as a result of collection proceedings started
against I.E.C. (the mortgagor) which allegedly caused the
damage asserted by the plaintiff mortgagee. In that sense, there
is no breach of confidentiality, or of the statute.
In order to succeed, the appellant had to demon
strate that the documents in question were of a
confidential nature within the meaning of subsec
tion 241(1), i.e. that they were: i) "obtained by or
on behalf of the Minister", ii) "for the purposes of
[the Income Tax Act]".
Section 241 cannot be interpreted in a vacuum.
The legislative intent, admittedly, is the protection
of the confidentiality of information given to the
Minister for the purposes of the Income Tax Act.
The privilege is not established in favour of Reve
nue Canada but in favour of those, particularly the
taxpayer, who give information to the Minister on
the understanding that such information will
remain confidential.
The most usual and natural meaning of the
word "obtained" and of its French equivalent
"obtenu", whether read in the context of "any
information" as in paragraph 241(1)(a) or in the
context of "other document" as in paragraph
241(1) (b), is that of information or document not
in the possession of the person seeking either and
being "given" to that person. In my view, in order
to be "obtained" within the meaning of subsection
241(1), a document must be either a document in
the possession of someone else than the Minister or
his officers, or a document prepared by the Minis
ter or his officers but on the basis of information
given to them that has remained confidential. For
example, internal self-generated documents, as
they were described by the appellant, could well be
subject to the statutory prohibition against disclo
sure if they are based on information given to the
authors of the documents under the Income Tax
Act and not released to the public through court
proceedings.
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.
Furthermore, the documents only relate, to use the
words of Collier J. [at page 12 C.T.C.], "to the
actions taken by and on behalf of Revenue Canada
which give rise to the present litigation against, for
practical purposes, Revenue Canada itself".
Section 241 was not enacted for the purpose of
helping the Minister out of a negligence claim that
has been brought against him. Should there be
anything remaining confidential in the documents
in question, the taxpayer himself or any concerned
person could object to their production. In the
present case, not only was there no prejudice to the
taxpayer or anyone other than the Minister
alleged, but Collier J., who examined the docu
ments, found as a fact that there was "no breach
of confidentiality". This is not a ruling with which
I would, even if I could, interfere.
In the Glover case 2 the information sought to be
disclosed in a custody case was the address of a
taxpayer who had abducted his two children and
whose whereabouts were unknown. That informa
tion was most certainly an information obtained by
the Minister for the purposes of the Income Tax
Act and there would have been an obvious preju
dice, however unsympathetic, to the taxpayer had
2 Glover v. Glover et al. (No. 1) (1980), 29 O.R. (2d) 392
(C.A.); confirmed by Glover v. Minister of National Revenue,
[1981] 2 S.C.R. 561.
the information been disclosed. The Glover case is,
therefore, of no help to the appellant.
In view of the conclusion I have reached that the
documents in question were not "obtained by or on
behalf of the Minister", I need not decide whether
they were obtained "for the purposes of the
[Income Tax Act]". Suffice it to say that the
appellant, in order to qualify under subsection
241(1), must contend that the documents were
indeed obtained for the purposes of the Act, and
yet, in order to avoid the exception of disclosure
established under subsection 241(3) the appellant
must submit, as she did before us, that the pro
ceedings in question were collection proceedings
that were independent from and not related to the
administration and enforcement of the Act. The
appellant would, therefore, need to demonstrate
that documents obtained with respect to the collec
tion proceedings were obtained "for the purposes
of [the] Act" but that the collection proceedings
themselves were not "relating to the administra
tion or enforcement of this Act". In view of the
very wide words used in subsection 241(3), it is far
from being evident that the appellant can have it
both ways.
I would dismiss the appeal with costs.
MAHONEY J.A.: I agree.
STONE J.A.: I agree.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.