Aug 2018 Charity & NFP Law Update
On June 15, 2018, the Federal Court released its decision in Canada (National Revenue) v Hydro-Québec, in which the court denied the Minister of National Revenue’s (“Minister”) request for authorization to receive customer information from Hydro-Québec, notwithstanding the fact that Hydro-Québec was prepared to surrender the information to the Minister. This information would have included the names, addresses, phone numbers and billing dates, among other things, of Hydro-Québec’s customers who were paying a business rate for services (“business customers”).
The Minister has a broad power to collect information or documents from any person for the purpose of administering and enforcing the ITA under subsection 231.2(1). However this power is subject to subsection 231.2(2) of the ITA, which requires the Minister to first obtain the authorization of a judge if the requested information or documents relate to “one or more unnamed persons.” Since the Minister wished to collect information relating to unnamed persons from Hydro-Québec, it brought an application to the court for authorization. The court denied the application on grounds that it did not meet the criteria required for judicial authorization to be granted under the ITA. The court also exercised its judicial discretion to deny the request due to the “practically unlimited scope of the request and a complete lack of consideration for the invasion of privacy.”
In its analysis, the court examined the statutory test by which a court may grant judicial authorization under subsection 231.2(3) of the ITA, which requires two conditions to be met: (1) that the person or group to whom the information relates is ascertainable, and (2) that the information is to verify that the person or group is complying with any duty or obligation under the ITA. The court rejected the Minister’s interpretation of the ITA provision on the basis that it was overly broad and would enable “an unlimited invasion of privacy.” Adopting a strict reading of the ITA test, the court found that “the information and documents that may be required are those that shed light on compliance with the Act of an ascertainable group within the meaning of the ITA”. The court held that the “mere identity of the business clients of a public utility does not meet that requirement.” Further, the court noted that in determining whether a group is ascertainable, the judge must ensure that “the requested documents be part of a tax audit conducted in good faith, with a genuine factual basis.”
The court therefore held that the Minister failed to sufficiently demonstrate either part of the test under subsection 231.2(3). Importantly, it unequivocally stated that, even if the conditions were met, it would have refused to grant judicial authorization because of the extent of the intrusion requested by the Minister. Emphasizing that the court retained discretion to grant authorization whether or not the conditions were met, it held that judicial intervention was required to prevent an “invasion of the privacy of many people”.
This case is particularly relevant to the rising concerns with privacy protection and gives some assurance to charities and not-for-profits that the government does not have limitless authority to collect the information of taxpayers. Rather, the court clearly affirms that the public significantly has the right to privacy from the state and in this case held it to be more important than the Minister’s request for information under the ITA. Charities and not-for-profits that receive requests from the CRA to collect information of unnamed persons may therefore be able to deny such requests, and should seek legal advice prior to divesting such information.