2022 FC 236, 2022 FC 236

EDITOR’S NOTE: This document is subject to editorial revision before its reproduction in final form in the Federal Courts Reports . 2022 FC 236 T-252-19 The Minister of National Revenue ( Applicant ) v. Nader Ghermezian ( Respondent ) T-254-19 The Minister of National Revenue ( Applicant ) v. Marc Vaturi ( Respondent ) T-258-19 The Minister of National Revenue ( Applicant ) v. Gherfam Equities Inc ( Respondent ) T-259-19 The Minister of National Revenue ( Applicant ) v. Paul Ghermezian ( Respondent ) T-261-19 The Minister of National Revenue ( Applicant ) v.

Raphael Ghermezian ( Respondent ) T-262-19 The Minister of National Revenue ( Applicant ) v. Joshua Ghermezian ( Respondent ) Indexed as : Canada (National Revenue) v. Ghermezian Federal Court, Southcott J.—By videoconference, January 24-27; Ottawa, February 23, 2022.

Income Tax — Administration and Enforcement — Applications seeking compliance orders under Income Tax Act , s. 231.7 to compel respondents to provide documents and/or information previously sought by applicant under Act , ss. 231.1 , 231.2 — Respondents failed to provide all documentation, information — Argued requests purportedly issued under s. 231.1(1) sought information that Minister was authorized to compel only through requirement issued under s. 231.2(1) — Further a rgued, inter alia, that s. 231.1(1) not granting Minister power comparable to s. 231.2(1) , either to: (

a) compel provision of documents outside context of inspection; or (

b) compel provision of information other than information about location or provenance of documentation sought in context of inspection — R espondents’ position having two aspects — First, while an “authorized person” can rely upon s. 231.1(1) to enter business premises, inspect documents kept there, that

section providing no authority for authorized person to issue written demand compelling provision of such documents — Second, s. 231.1(1) relating only to pre-existing documentation, not authorizing issuance of written demand compelling recipient to answer questions or otherwise provide substantive information relevant to a taxpayer’s tax position — Respondents submitted that circumscribed power to demand documentation, information under s. 231.2(1), absence of similar guardrails

in s. 231.1(1), suggesting that s. 231.1(1) not intended to authorize issuance of demands in same manner as s. 231.2(1) — Whether respondents required to provide documents, information in response to request issued under s. 231.1 — S. 231.1(1) entitling authorized person to demand provision of documentation without physically attending at place or premises where documentation kept — Purpose of s. 231.1 is to facilitate Minister ’s unencumbered, immediate access to all of taxpayer’s books, records, information — Words “inspect, audit or examine…” in s. 231.1(1)(

a) are broad terms encompassing range of activities, which logically include requesting provision of documents — This consistent with statutory

interpretation analysis performed in Tellza Inc. v.

Canada (National Revenue) of comparable provision of Excise Tax Act ( ETA ), s. 288(1) — While Tellza involved application for judicial review under ETA , applicant in that case advanced a position essentially identical to that taken by respondents in present case — Within context, purpose of ETA , s. 288(1) indeed granting authorized person power to request or require taxpayer to provide information in any form — This i nspection power necessarily entailing power to request or require documents to be provided so that authorized person can conduct inspection, audit or examination effectively — No reason to depart from this analysis or to decline to apply it to provisions of Act at issue herein — Statutory

interpretation set out in Tellza reasonable, correct

interpretation of relevant provision — Conclusion in Tellza consistent with appellate authority identified by Minister — That said, s. 231.1 not authorizing issuance of demand compelling recipient to provide, through written answers to questions, substantive information relevant to taxpayer’s tax position — Words “inspect, audit or examine…” not encompassing demands for information that is not contained in a document — As explained in Canada (National Revenue) v. Cameco Corporation, obligation to assist in s. 231.1(1)(

d) is in aid of inspection, search, examination or review of records — Cameco not suggesting that s. 231.1 affording Minister access to undocumented information — Minister cannot compel oral answers to questions — N o point of principle identified here militating in favour of different result in context of demands to answer questions in writing rather than orally — S. 231.1(1)(

a) empowering Minister to compel provision of documented information, not undocumented information — Term “document” broader than term “record”, potentially encompasses records within meaning of s. 230 as well as other forms of documentation not falling within that meaning — Appropriate analysis not to identify “pith and substance” of a request, then consider whether it complies with s. 231.2 as a requirement — Rather, required analysis whether s. 231.1 providing authority for the request — Necessary herein to decide how conclusions on statutory

interpretation issue applied to individual items in requests and, as result, which items were valid because they represented demand for documentation, and which were not valid because they represented demand for undocumented information — Minister largely successful in resisting defence argument raised by respondents — Applications allowed. These were applications seeking compliance orders under

section 231.7 of the Income Tax Act to compel the respondents to provide documents and/or information previously sought by the applicant Minister under sections 231.1 and 231.2 of the Act . The nature of the documentation and/or information sought in each application pertained, inter alia , to a number of principally foreign corporations and to companies and other entities outside of Canada where the respondents were shareholders, officers, directors, trustees, or beneficiaries of a trust. The respondents failed to provide the requested documentation and information.

Sections 231.1 and 231.2 form part of the broad suite of powers that Parliament has conferred on the Minister to obtain information and/or documentation from taxpayers and third parties to verify self-assessments. The respondents submitted that the Minister conflated aspects of the authority provided by subsections 231.1(1) and 231.2(1) . They argued that many or all of the requests purportedly issued under

section 231.1(1) sought information and/or documentation that the Minister was authorized to compel only through a requirement issued under

section 231.2(1) . The respondents submitted that subsection 231.1(1) affords the Minister only an inspection power, i.e., authority to attend at the premises of a taxpayer or other person to inspect books and records or other documents. The respondents argued, inter alia , that subsection 231.1(1) does not grant the Minister power comparable to subsection 231.2(1) , either to: (

a) compel provision of documents outside the context of an inspection; or (

b) compel the provision of information other than information about the location or provenance of documentation sought in the context of an inspection. T here were two aspects to the respondents’ position. First, the respondents submitted that, while an “authorized person” can rely upon sub

section 231.1(1) to enter business premises and inspect documents that are kept there, that

section provides no authority for the authorized person to issue a written demand compelling the provision of such documents. Second, the respondents submitted that sub

section 231.1(1) relates only to pre-existing documentation and does not authorize issuance of a written demand compelling the recipient to answer questions or otherwise provide substantive (but previously undocumented) information relevant to a taxpayer’s tax position. They submitted that the express but somewhat circumscribed power to demand documentation and information under subsection 231.2(1), and the absence of similar guardrails in

section 231.1(1), suggest that subsection 231.1(1) is not intended to authorize the issuance of demands in the same manner as subsection 231.2(1). The main issue was whether the respondents were required to provide documents and/or information in response to a request issued under

section 231.1 of the Act . Held , the applications should be allowed. Regarding the first aspect of the respondents’ position, subsection 231.1(1) entitles an authorized person to demand provision of documentation without physically attending at a place or premises where the documentation is kept. In Canada (National Revenue) v. Cameco Corporation ( Cameco ), the Federal Court of Appeal stated that the purpose of

section 231.1 is to facilitate the Minister ’s unencumbered and immediate access to all books, records and information of the taxpayer. Cameco also recognizes that the legislative purpose, however important, cannot replace the language of the statute that Parliament has chosen. The words “inspect, audit or examine…” in paragraph 231.1(1)(

a) are broad terms encompassing a range of activities, which logically include requesting the provision of documents. This is consistent with the statutory

interpretation analysis performed in Tellza Inc. v. Canada (National Revenue) ( Tellza ). The Court in Tellza concluded that the inspection power afforded by the comparable provision of subsection 288(1) of the Excise Tax Act (ETA) necessarily entailed the power to request or require documents to be provided so that the authorized person can conduct an inspection, audit or examination effectively. Among the cases relied upon by both parties in support of their respective positions on the statutory

interpretation issue, Tellza most directly addresses this aspect of the issue. While Tellza involved an application for judicial review under the ETA, the applicant in that case advanced a position essentially identical to that taken by the respondents in this case. The Court found that on a plain reading of the applicable

definitions, within the context and purpose of the ETA, subsection 288(1) indeed grants an authorized person the power to request or require a taxpayer to provide information in any form. The inspection power necessarily entails the power to request or require documents to be provided so that the authorized person can conduct the inspection, audit or examination effectively. There was no reason to depart from this analysis or to decline to apply it to the provisions of the Act at issue in the case at hand. The statutory

interpretation set out in detail in Tellza was reasonable and is the correct

interpretation of the relevant provision. The conclusion in Tellza that the authorized person is not limited, in a modern, electronic era, to an inspection, audit or examination of the taxpayer’s documents and records at their premises, is consistent with appellate authority identified by the

Minister. As to the second aspect of the statutory

interpretation issue, the respondents were correct in their position that

section 231.1does not authorize issuance of a demand compelling the recipient to provide, through written answers to questions, substantiveinformation relevant to a taxpayer’s tax position. Notwithstanding that the words “inspect, audit or examine…” in paragraph 231.1(1)(a)are sufficiently broad that, in keeping with the statutory purpose, they encompass demands for the provision of documents, the words ofparagraph 231.1(1)(

a) are not capable of being interpreted to encompass demands for information that is not contained in a document.Cameco addressed whether the Minister can compel oral answers to questions posed by CRA auditors, as opposed to written answers asin the present case. As part of its textual analysis, Cameco also engages in analysis of paragraph 231.1(1)(

d) of the Act. Cameco explainsthat the obligation to assist in paragraph 231.1(1)(

d) is in aid of the inspection, search, examination or review of records. Cameco doesnot suggest that

section 231.1 affords the Minister access to undocumented information, as that

interpretation would be inconsistent withthe overall conclusion in Cameco that the Minister cannot compel oral answers to questions. In the present case, the Minister identifiedno point of principle that would militate in favour of a different result in the context of demands to answer questions in writing ratherthan orally. The distinction underlying the reasoning in Cameco is between documented and undocumented information. Paragraph231.1(1)(

a) empowers the Minister to compel provision of the former but not the latter. The term “document” is defined by

section 231to include money, security and a record. Therefore, “document” is a broader term than “record” and, at least potentially, encompassesrecords within the meaning of

section 230 as well as other forms of documentation that may not fall within that meaning. An authorizedperson seeking to compel the provision of documentation that does not qualify as “the books and records of the taxpayer”, and relying onthe potentially broader power to compel “any document of the taxpayer or of any other person that relates or may relate to theinformation that…should be in the books or records of the taxpayer” must also be seeking a document that relates or may relate to thisinformation, as it is clear from the language of paragraph 231.1(1)(

a) that it is a document that the person is empowered to inspect, auditor examine. The appropriate analysis is not to identify the “pith and substance” of a request and then potentially consider whether itcomplies with

section 231.2 as a requirement. Rather, the required analysis is to consider whether

section 231.1 provides the authorityfor the request. The parties herein met with divided success on the issue surrounding statutory

interpretation of the scope of subsection231.1(1). If certain demands included both valid and invalid items, the Court had discretion to order compliance with the valid portions,notwithstanding the invalidity of other portions. It was therefore necessary herein to decide how the conclusions on the statutoryinterpretation issue applied to individual items in the requests and, as a result, which items were valid because they represented a demandfor documentation and which were not valid because they represented a demand for undocumented information.

These conclusions were applied herein to the individual requests and requirements. The Minister was largely successful in resisting thedefence argument raised by the respondents in these applications. It was deemed appropriate and useful for the parties to provide furthersubmissions on the application of the outcome of the statutory

interpretation issue. The parties were afforded 60 days to complete thisprocess and either provide mutually agreed draft orders or advise the Court that agreement has not been achieved or has not beenachieved in relation to particular applications or individual demands or portions thereof. STATUTES AND REGULATIONS CITED Canadian Charter of Rights and Freedoms, being

Part I of the Constitution Act, 1982,

Schedule B, Canada Act 1982, 1982, c. 11 (U.K.)[R.S.C., 1985, Appendix II, No. 44], s. 8. Excise Tax Act, R.S.C., 1985, c. E-15, ss. 288(1), 335(1), 355(1). Federal Courts Act, R.S.C., 1985, c. F-7, s. 18.5. Federal Courts Rules, SOR/98-106, r. 81. Immigration and Refugee Protection Act, S.C. 2001, c. 27, s. 44. Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, ss. 94, 220(2.01), 230, 231, 231.1, 231.2, 231.6, 231.7, 237.1(1), 238(1), 244(5). TREATIES AND OTHER INSTRUMENTS CITED Convention Between Canada and the United States of America with Respect to Taxes on Income and on Capital, being

Schedule I of theCanada-United States Tax Convention Act, [1984] Can. T.S. No. 15, Art. XXVII. CASES CITED NOT FOLLOWED: Canada (National Revenue) v. Miller, 2021 FC 851, 2021 D.T.C. 5104; R. v. MacDonald, 2005 BCPC 398 , 2005 D.T.C. 5652. APPLIED: Tellza Inc. v. Canada (National Revenue), 2021 FC 853, [2022] 1 F.C.R. 75; Canada (National Revenue) v. Lee, 2016 FCA 53, 481 N.R.100, revg 2015 FC 634, 481 F.T.R. 71; Redeemer Foundation v. Canada (National Revenue), 2008 SCC 46, [2008] 2 S.C.R. 643, affg2006 FCA 325, [2007] 3 F.C.R. 40; Canada (National Revenue) v.

Cameco Corporation, 2019 FCA 67, [2020] 4 F.C.R. 254; Canada(Customs and Revenue Agency) v. Artistic Ideas Inc., 2005 FCA 68, [2005] 2 C.T.C. 25, [2006] 2 F.C.R. D-15. DISTINGUISHED: Canada (Board of Internal Economy) v. Canada (Attorney General), 2017 FCA 43, 412 D.L.R. (4th) 336. CONSIDERED: Canada (National Revenue) v. Derakhshani, 2009 FCA 190, 400 N.R. 311; Canada (National Revenue) v. Chamandy, 2014 FC 354, 452F.T.R. 261; Canada (Minister of National Revenue) v. SML Operations (Canada) Ltd., 2003 FC 868, [2003] 4 C.T.C. 201; Ghermezian

v. Canada (Attorney General), 2020 FC 1137, [2021] 1 F.C.R. D-12; Fabrikant v. Canada, 2017 FC 1115; Canada (Attorney General) v.Iris Technologies Inc., 2021 FCA 223, [2022] 4 C.T.C. 147; Twentieth Century Fox Home Entertainment Canada Limited v. Canada(Attorney General), 2012 FC 823, 414 F.T.R. 291, affd 2013 FCA 25; O’Grady v. Canada (Attorney General), 2016 FC 9, affd 2016FCA 221; Coldwater First Nation v. Canada (Attorney General), 2019 FCA 292; eBay Canada Ltd. v. Canada (National Revenue), 2008FCA 348, [2010] 1 F.C.R. 145; Canada (National Revenue) v.

Tellza Inc., 2021 CarswellNat 3964, (F.C.); Society ofComposers, Authors and Music Publishers of Canada v. Canadian Assn. of Internet Providers, 2004 SCC 45, [2004] 2 S.C.R. 427;Friedman v. Canada (National Revenue), 2021 FCA 101, affg 2019 FC 1583; Branigan v. Canada (Minister of Citizenship andImmigration), 2004 FC 245, 247 F.T.R. 305; Lim v. Canada (Citizenship and Immigration), 2019 FC 871; Canada (Minister of HumanResources Development) v. Wiemer (1998), 228 N.R. 341, [1998] F.C.J. No. 809 (QL) (C.A.); Boroumend v. The Queen, 2016 TCC 256;Luxury Home Landscape Construction Inc. v.

The Queen, 2021 TCC 4, 2021 D.T.C. 1008; R. v. Sedhu, 2015 BCCA 92 , 2015D.T.C. 5038; Canada (National Revenue) v. Hydro-Québec, 2018 FC 622, [2019] 4 C.T.C. 31, [2018] 4 F.C.R. D-11; Zeifmans LLP v.Canada (National Revenue), 2021 FC 363; Canada (National Revenue) v. Lin, 2019 FC 646; R. v. Hape, 2007 SCC 26, [2007] 2 S.C.R.292; Saipem Luxembourg S.A. v. Canada (Customs and Revenue Agency), 2005 FCA 218, 337 N.R. 213, [2006] 3 F.C.R. D-43; Canada(National Revenue) v. Kitsch, 2003 FCA 307, sub nom. Tower v. M.N.R., [2004] 1 F.C.R. 183; Nadler (Estate) v. Canada (AttorneyGeneral), 2005 FC 935, [2005] 4 C.T.C. 7.

REFERRED TO: R. v. McKinlay Transport Ltd., (SCC), [1990] 1 S.C.R. 627, 68 D.L.R. (4th) 568; Capital Vision Inc. v. Canada(Minister of National Revenue), 2002 FCT 1317, [2003] 4 F.C. D-70; Redhead Equipment Ltd. v. Canada (Attorney General), 2016SKCA 115 , 402 D.L.R. (4th) 649; Canada (National Revenue) v. Atlas Tube Canada ULC, 2018 FC 1086, [2019] 4 C.T.C.123; Canada Trustco Mortgage Co. v. Canada, 2005 SCC 54, [2005] 2 S.C.R. 601; BP Canada Energy Company v. Canada (NationalRevenue), 2017 FCA 61, [2017] 4 F.C.R. 355; Canada (National Revenue) v. 2276230 Ontario Inc., 2021 FC 242; R. v. Tait, [1992]B.C.J.

No. 2693 (QL) (P.C.); Oroville Reman & Reload Inc. v. Canada, 2016 TCC 75, [2016] 5 C.T.C. 2118; Oceanspan Carriers Ltd. v.Canada, (FCA), [1987] 2 F.C. 171, [1987] F.C.J. No. 126 (QL) (C.A.); Holiday Luggage Mfg. Co. v. Canada, (FC), [1987] 2 F.C. 249, 86 D.T.C. 6601 (T.D.); Canada (National Revenue) v. Stanchfield, 2009 FC 99, 340 F.T.R. 150;Marino v. The Queen, 2020 TCC 50, 2020 D.T.C. 1039; Ludmer v. Canada, (FCA), [1995] 2 F.C. 3, 95 D.T.C. 5035(C.A.); Canadian Bank of Commerce v. Attorney General of Canada, (SCC), [1962] S.C.R. 729, 35 D.L.R. (2d) 49. APPLICATIONS seeking compliance orders under

section 231.7 of the Income Tax Act to compel the respondents to provide documentsand/or information previously sought by the applicant under sections 231.1 and 231.2 of the Act. Applications allowed. APPEARANCES Rita Araujo, Peter Swanstrom, Jesse Epp-Fransen and Allene Kilpatrick for applicant. Bobby J. Sood, Stephen S. Ruby, Michael H. Lubetsky and Sarah Cormack for respondents. SOLICITORS OF RECORD Deputy Attorney General of Canada for applicant. Davies Ward Phillips & Vineberg LLP, Toronto, for respondents. The following are the reasons for judgment and judgment rendered in English by Southcott J.: I.

Overview [1] This decision relates to six applications by the Minister of National Revenue (the Minister), seeking compliance orders undersection 231.7 of the Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1 (the Act). [2] The respondents are five individuals, all members of the Ghermezian extended family, and a related corporation, GherfamEquities Inc. (Gherfam). Nader Ghermezian (the respondent in Court file number T-252-19) and Raphael Ghermezian (the respondent inCourt file number T-261-19) are brothers.

Joshua Ghermezian (the respondent in Court file number T-262-19) is the son of RaphaelGhermezian, and Paul Ghermezian (the respondent in Court file number T-259-19) is the nephew of Nader Ghermezian and RaphaelGhermezian. Marc Vaturi (the respondent in Court file number T-254-19) is the son-in-law of Nader Ghermezian. [3] Each of the Minister’s applications seeks an order compelling the relevant respondent to provide documents and/or informationpreviously sought by the Minister under

section 231.1 and/or

section 231.2 of the Act. [4] These six applications were heard together, by videoconference employing the Zoom platform, on January 24 to 27, 2022. Asthey raise many common issues, these Reasons address all six applications. [5] As explained in greater detail in the Reasons below, these applications are granted, subject to the remaining steps I have outlinedfor applying my conclusions surrounding the respondents’ success in some of their defence arguments to the development of the form ofcompliance order in each application. II. Background [6] First, a few words about nomenclature. As set out in more detail later in these Reasons, most of these applications rely on both

section 231.1 and

section 231.2 of the Act . The issues in these applications include disputes between the parties on the scope of the powers granted to the Minister under

section 231.1 and

section 231.2 . For purposes of these Reasons, I will adopt the language employed by the Minister in her written submissions, referring to the invocation of

section 231.1 as a “Request” and the invocation of

section 231.2 as a “Requirement”. I note this is consistent with the language employed by Justice Fuhrer in Tellza Inc. v. Canada (National Revenue) , 2021 FC 853 , [2022] 1 F.C.R. 75 ( Tellza ), in relation to the comparable provisions of the Excise Tax Act , R.S.C., 1985, c. E-15 (ETA)). However, I emphasize these terms are adopted solely to enhance the readability of these Reasons and are not intended to be terms of art or to suggest that a Request issued under

section 231.1 gives rise to less compulsion than a Requirement issued under

section 231.2 . Similarly, without intending to ascribe any technical significance to it, I will employ the term “Demands” to encompass generically both Requests and Requirements. [ 7 ] The Minister commenced each of these six applications by a Notice of

Summary Application dated February 7, 2019. In each application, the Minister asserts that: she issued Requests and/or Requirements to the relevant respondent requiring the provision of documents and/or information related to the administration or enforcement of the Act ; the respondent has failed to provide all such documentation and/or information; and the respondent has not asserted any claim for solicitor-client-privilege in relation thereto. The Minister asserts that she has therefore met the statutory conditions for the Court to issue a compliance order under

section 231.7 of the Act , ordering the respondent to provide the outstanding documents and/or information. [ 8 ] In each application, the Minister has filed an Amended Notice of

Summary Application dated April 7, 2021 (Amended Notice), which specified the particular Demands, or portions thereof, that the Minister considered to be still outstanding.

In the course of the hearing, the Minister further clarified or refined her Demands in each application, in some cases further reducing the Demands or portions thereof for which she is seeking a compliance order. [ 9 ] In each application, the Minister relies upon an affidavit sworn in July 2019 by Andrew Bowe, who was, at the time, an International and Large Business Case Manager with the Canada Revenue Agency (CRA) and had conduct of the audit matters in relation to the respondents. In T-254-19 (with Mr. Vaturi as the respondent), Mr.

Bowe also affirmed a Supplementary Affidavit on April 7, 2021 (the Supplementary Affidavit). The respondents have cross-examined Mr. Bowe on his affidavits, and the relevant transcripts have been included in the record in each application. The respondents have not otherwise filed any evidence in these proceedings. [ 10 ] In opposing these applications, the respondents rely in part on arguments surrounding the admissibility of or, alternatively, the weight that should be afforded to Mr. Bowe’s evidence.

In the proceedings related to Nader Ghermezian, Raphael Ghermezian, and Marc Vaturi, the respondents had previously filed motions to strike Mr. Bowe’s affidavits and dismiss the applications. By Order dated December 15, 2021, Prothonotary Aalto adjourned these motions, concluding that the issues raised therein should be argued at the hearing of the applications. The parties presented their arguments on these issues at the commencement of the hearings on January 24, 2021.

This decision will address those arguments. [ 11 ] The respondents also raise a number of other issues in support of their position that the applications should be dismissed. Most of the issues are common to some or all of the applications, although there are also a small number of issues specific to individual applications. These Reasons will first address the common issues and identify any general conclusions that can be reached without individually canvassing each application, as well as apply those conclusions to the applications, to the extent it is possible to do so.

I will then turn to the individual applications, applying the general conclusions to each application where I have not done so already and addressing any additional issues specific to each application. III. Issues [ 12 ] The following issues, common to some or all of the applications, have been raised for the Court’s adjudication: A. Whether the affidavits of Andrew Bowe should be struck out or, in the alternative, afforded little weight; B. Whether the respondents were required to provide documents and/or information in response to a Request issued under

section 231.1 of the Act ; C. Whether the individuals who issued the Demands were authorized to do so; D. Whether the respondents were properly given notice of the Demands; E. Whether the Demands provided a reasonable time for compliance; F. Whether the Demands relate to one or more unnamed persons, requiring the Minister to seek prior judicial authorization under subsection 231.2(3) of the Act ; G. Whether the Demands raise ambiguity as to whether their recipient is the same as the respondent; H. Whether the Demands improperly sought the production of foreign-based information or documents within the meaning of

section 231.6 of the Act ; I. If the Court determines that any compliance orders should be issued, whether such orders should contain an exclusion for documents and information protected by solicitor-client privilege; J. If the Court concludes that a compliance order should not be issued in relation to a portion of a Demand, whether the Court has the authority to sever that portion and issue an order in relation to the remainder of the Demand; and K. Whether certain Requirements were ineffective because the respondents are not residents of Canada.

IV. Analysis A. General Principles Regarding Compliance Orders Under

section 231.7 [13] Before turning to the individual issues, it is useful to identify some general principles relevant to applications under

section 231.7of the Act, the text of which reads as follows: Compliance order 231.7

(1) On

summary application by the Minister, a judge may, notwithstanding subsection 238(2), order a person to provide anyaccess, assistance, information or document sought by the Minister under

section 231.1 or 231.2 if the judge is satisfied that (

a) the person was required under

section 231.1 or 231.2 to provide the access, assistance, information or document and did not do so;and (

b) in the case of information or a document, the information or document is not protected from disclosure by solicitor-client privilege(within the meaning of subsection 232(1)). Notice required

(2) An application under subsection (1) must not be heard before the end of five clear days from the day the notice of application isserved on the person against whom the order is sought. Judge may impose conditions

(3) A judge making an order under subsection (1) may impose any conditions in respect of the order that the judge considers appropriate. Contempt of court

(4) If a person fails or refuses to comply with an order, a judge may find the person in contempt of court and the person is subject to theprocesses and the punishments of the court to which the judge is appointed. Appeal

(5) An order by a judge under subsection (1) may be appealed to a court having appellate jurisdiction over decisions of the court towhich the judge is appointed. An appeal does not suspend the execution of the order unless it is so ordered by a judge of the court towhich the appeal is made. [14] As is evident from subsection 231.7(1), the Minister’s recourse to a compliance order is premised on the Minister previouslyhaving sought access, assistance, information or documentation under sections 231.1 or 231.2.

The text of those sections (which,together with other provisions considered in these Reasons, are set out in full in Appendix “A”), will be canvassed later in this decision.For present purposes, it is sufficient to identify that, in the context of Canada’s self-assessment system for the collection of income taxunder the Act, sections 231.1 and 231.2 form part of the broad suite of powers that Parliament has conferred on the Minister to obtaininformation and/or documentation from taxpayers and third parties to verify self-assessments (see R. v.

McKinlay Transport Ltd., (SCC), [1990] 1 S.C.R. 627, 68 D.L.R. (4th) 568 (McKinlay), at paragraph 18 (referencing subsection 231(3), which was thepredecessor to subsection 231.2(1)). [15] When a person who is subject to a demand under sections 231.1 or 231.2 does not comply with that demand,

section 231.7entitles the Minister to apply to the Federal Court for an order compelling compliance. Consistent with the language of subsection231.7(1), the Federal Court of Appeal explained in Canada (National Revenue) v. Lee, 2016 FCA 53, 481 N.R. 100 (Lee), at paragraph 6that the Court must be satisfied of three points before granting a compliance order:

i) The person against whom the order is sought was required under

section 231.1 or 231.2 of the Act to provide the access, assistance,information or documents sought by the Minister; ii) Although the person was required to provide the information or documents sought by the Minister, he or she did not do so; and, iii) The documents or information sought is not protected from disclosure by solicitor-client privilege as defined within the Act. [16] The respondents refer the Court to Canada (National Revenue) v.

Derakhshani, 2009 FCA 190, 400 N.R. 311 (Derakhshani), inwhich the Federal Court of Appeal rejected the Minister’s argument that, when presented with an application under subsection 231.2(3)of the Act, a judge has no discretion to reject the application if the conditions prescribed by that

section are met (at paragraphs 17–19).While that case involved an application under subsection 231.2(3) to authorize the Minister to serve a requirement related to an unnamedperson, I agree with the respondents’ submission that the Court’s analysis of whether it retains discretion even where the statutoryconditions are met usefully informs the

interpretation of

section 231.7 as well. Both sections require that the judge be satisfied that thestatutory conditions for the application are met and provide the judge granting an order the authority to impose any conditions the judgeconsiders appropriate. As these are the factors that the Court in Derakhshani took into account in identifying the existence of itsdiscretion, I agree that judicially exercised discretion exists under

section 231.7 as well. [17] Indeed, I do not understand the Minister to dispute this point in the case at hand. In support of her position on the “severance”issue (canvassed later in these Reasons), that the Court has the authority to issue an order in relation to a portion of a Demand orapplication, the Minister refers to the Court’s discretion to impose such conditions as it considers appropriate. [18] Because of the potentially serious consequences flowing from the failure to obey a compliance order, including fines and/orimprisonment, the jurisprudence explains that the Court should be satisfied that the statutory conditions of

section 231.7 have

been “clearly met” before exercising its discretion to grant an order (see Canada (National Revenue) v. Chamandy, 2014 FC 354, 452F.T.R. 261 (Chamandy), at paragraph 35; Canada (Minister of National Revenue) v. SML Operations (Canada) Ltd., 2003 FC 868,[2003] 4 C.T.C. 201 (SML Operations), at paragraph 15). [19] The respondents also rely on Derakhshani (at paragraphs 16–17) to support their position that the use of the phrase “if the judgeis satisfied” in

section 231.7 imposes on the Minister an onus to adduce and prove all the facts required to satisfy the conditions for theissuance of the compliance order. In my view, Derakhshani does not stand for this proposition. Paragraphs 16 and 17 rely on that phraseto conclude that the judge has discretion in an application under

section 231.7, but do not speak to which party bears the onus in such anapplication. [20] The respondents also rely on this Court’s decision in Ghermezian v. Canada (Attorney General), 2020 FC 1137, [2021] 1 F.C.R.D-12 (Ghermezian), at paragraphs 24–25, to support their position that the Minister bears the burden of proof. Again, that authority doesnot stand for the proposition that the respondents advance.

Ghermezian involved a number of applications for judicial review, brought bysome of the same parties who are respondents in the present applications, challenging a number of Requirements issued by the Ministerunder subsection 231.2(1) of the Act. Those applicants relied on Capital Vision Inc. v. Canada (Minister of National Revenue), 2002FCT 1317, [2003] 4 F.C. D-70 (Capital Vision) to support their position that the Minister bore the burden of proving her compliance withsubsection 231.2(1).

This Court rejected that contention, observing that Capital Vision held that the Minister must comply with the Actbut did not state a conclusion on the applicable burden of proof. [21] That said, I do not understand the Minister to dispute that, as the party seeking a compliance order under

section 231.7, she hasthe burden of satisfying the statutory conditions as set out in Lee, although she submits that whether the requested material is privilegedis relevant to the analysis only if a respondent actually asserts a claim of privilege (see Lee, at paragraph 9). I accept that the overall legalburden in the application resides with the Minister, and I concur that privilege factors into the analysis only if raised by a respondent,who then bears the burden on that issue (see Redhead Equipment Ltd. v.

Canada (Attorney General), 2016 SKCA 115 , 402D.L.R. (4th) 649, at paragraph 31; Canada (National Revenue) v. Atlas Tube Canada ULC, 2018 FC 1086, [2019] 4 C.T.C. 123 atparagraph 32). [22] However, the location of the burden becomes more nuanced in connection with particular defence arguments raised by therespondents in these applications. Which party bears the applicable burden is potentially relevant to several of the issues raised in therespondents’ arguments, including: (

a) authority to issue the Demands; (

b) proper notice of the Demands to the respondents; (

c) thereasonableness of the time given for compliance with the Demands; and (

d) whether the Demands improperly sought the production offoreign-based material. The respondents submit that the Minister bears the burden on all the issues. In contrast, the Minister urges theCourt to be guided by a general evidentiary principle that the party who alleges a proposition, and with whom the evidence is likely toreside, bears the applicable burden. Where necessary, I will return to the question of the burden of proof when considering the individualissues. B.

Whether the affidavits of Andrew Bowe should be struck out or, in the alternative, afforded little weight [23] The respondents in T-252-19 (Nader Ghermezian), T-254-19 (Marc Vaturi) and T-261-19 (Raphael Ghermezian) argue that theCourt should strike the affidavits of the Minister’s deponent, Andrew Bowe, in each of these applications. Relying on the fact that theMinister bears the overall legal burden in these applications, the respondents submit that, without these affidavits to support these threeapplications, the Court should dismiss these applications in full.

In connection with other applications, the respondents submit that Mr.Bowe’s evidence should be afforded little or no weight. [24] The respondents’ principal arguments in support of these positions fall broadly into two categories. First, they submit that Mr.Bowe’s affidavits are outdated, incomplete and unreliable. Second, they submit that Mr. Bowe’s affidavits offend the hearsay rule byproviding evidence as to facts that are outside his personal knowledge. However, particular issues are also raised with respect to Mr.Bowe’s Supplementary Affidavit in T-254-19.

I will begin my analysis with the Supplementary Affidavit.

(1) Supplementary Affidavit in T-254-19 (MNR v. Marc Vaturi) [25] The Supplementary Affidavit is a relatively brief document, affirmed on April 7, 2021, which appears intended to update theevidence provided by Mr. Bowe in his original affidavit in T-254-19, sworn on July 27, 2019. Mr. Bowe states that, subsequent toservice of the July 27, 2019 affidavit, CRA received information and documentation from Mr. Vaturi and/or his representatives.

Mr.Bowe then proceeds to identify, through attached exhibits, the information and documentation received and the items from the relevantDemands that CRA considered to be outstanding. [26] The respondent’s counsel refers to what he characterizes as two “bombshells” revealed through cross-examination of Mr. Bowe,conducted on November 17 and 18, 2021. First, in relation to a Demand identified as A-MV-0128, the respondent notes Mr. Bowe’sevidence that, to the date of the Supplementary Affidavit, Mr.

Vaturi had not provided the outstanding information and/ordocumentation identified in follow-up correspondence sent by CRA on March 10, 2020. In the course of cross-examination, respondent’scounsel pointed out that Mr. Vaturi had, in fact, provided a response exceeding 150 pages on November 4, 2020. [27] The November 4, 2020, response was addressed to Mr. Bowe and copied to the Minister’s counsel. When presented with thisresponse on the first day of his cross-examination, Mr. Bowe stated he did not recall seeing it and explained that he was transitioning outof his role at the relevant time.

The Minister’s counsel subsequently investigated this issue and confirmed, on the second day of cross-examination, that Mr. Vaturi’s submission had been received but was misfiled and therefore missed in the preparation of Mr. Bowe’sSupplementary Affidavit. Both Mr. Bowe and the Minister’s counsel confirmed that they were not able to state whether there was stillinformation or documentation outstanding in relation to A-MV-0128. The Minister subsequently withdrew her request for a complianceorder with respect to this Demand. [28] The respondent submits that these events demonstrate that Mr.

Bowe affirmed the Supplementary Affidavit, attesting to factsessential to the Minister’s application, without knowing, or even making any effort to confirm, whether they were true. Relying onCanada (Board of Internal Economy) v. Canada (Attorney General), 2017 FCA 43, 412 D.L.R. (4th) 336 (Board of Internal Economy),

at paragraph 30 , the respondent submits that the affidavit should be struck, because it is “…so clearly out of bounds … that it ought to be stopped in its tracks.” [ 29 ] I find little merit to the respondent’s position that the affidavit should be struck. The evidence suggests that Mr. Bowe was unaware of the November 4, 2020, submission due to an administrative error. However, even if I were to ascribe to Mr. Bowe a higher level of culpability in connection with this error, I would find no basis to strike the Supplementary Affidavit as inadmissible.

Certainly, this error could cast doubt on the reliability of his evidence and, if there was a dispute as to whether Mr. Vaturi had submitted a particular document to CRA, I might therefore afford more weight to evidence adduced by the respondent to establish the submission. However, there is no dispute of that sort raised in this application.

Following her investigations, the Minister ’s counsel confirmed that the November 4, 2020, submission had been overlooked, and the Minister subsequently withdrew her request for a compliance order in connection with the relevant Demand. [ 30 ] I agree with the Minister ’s submission that Board of Internal Economy is distinguishable, as the affidavit that was struck in that case was found inadmissible because it amounted to a legal opinion on Canadian law. [ 31 ] The second issue that the respondent raises in connection with the Supplementary Affidavit surrounds Mr.

Bowe’s explanation during his cross-examination that, notwithstanding that the affidavit was affirmed in April 2021, it was prepared in June 2020, before he transitioned out of his role in November 2020. Because Mr. Bowe no longer had current personal knowledge of CRA’s audit of Mr. Vaturi when he affirmed the Supplementary Affidavit, the respondent again argues that it should be struck. [ 32 ] In response to this argument, the Minister explains that she was required to present a motion seeking an order allowing the filing of the Supplementary Affidavit.

The Court issued the resulting Order on March 30, 2021, granting the motion and permitting the filing of the affidavit. It was then filed in largely the same form as presented in the motion and authorized by the Order—which included an appendix setting out the form of the Supplementary Affidavit—notwithstanding that several months had passed. The respondent takes issue with this explanation, noting that the introductory paragraphs of the affidavit were updated to explain the change in Mr.

Bowe’s role. [ 33 ] Again, I find little merit to the respondent’s argument that the Supplementary Affidavit is inadmissible and should be struck. I accept that the affidavit is misleading, as it amounts to testimony by Mr. Bowe that, other than as identified in the updates set out in the affidavit, the information and documentation sought in the Demands issued to Mr. Vaturi was still outstanding as of April 2021. It appears to have been Mr. Bowe’s intention that his testimony to that effect apply as of June 2020 when the affidavit was prepared, but the affidavit does not read that way.

If, in his cross-examination of Mr. Bowe, the respondent’s counsel had not identified this irregularity, the Court could have been misled in relying on the Supplementary Affidavit. The benefit of his identification of this error obviously accrues to the respondent and, to the extent there was a dispute between the parties on whether Mr. Vaturi had submitted additional documentation between June 2020 and April 2021, the Supplementary Affidavit would not assist the Minister . However, there was no contention that Mr.

Vaturi made additional submissions during this period and, in any event, these circumstances do not raise a basis for the Court to find the Supplementary Affidavit inadmissible.

(2) Staleness of Affidavits [ 34 ] Turning to the respondents’ principal inadmissibility arguments, related to the main affidavits sworn by Mr. Bowe in each of T- 252-19, T-254-19 and T-261-19, they submit first that these affidavits are out of date and should be struck as inadmissible due to their staleness. As canvassed by the respondents’ counsel in cross-examination, it is clear that (other than the Supplementary Affidavit in T- 254-19) Mr. Bowe did not prepare additional affidavits to update his evidence after the original affidavits were sworn on July 27, 2019.

Noting that noncompliance with the Minister ’s Demands is one of the statutory conditions for issuance of compliance order under subsection 237.1(1) , the respondents submit that Mr. Bowe’s affidavits should be struck because they are stale. They rely on Fabrikant v. Canada , 2017 FC 1115 ( Fabrikant ), in support of their argument. [ 35 ] Fabrikant involved an appeal of a prothonotary’s decision, which had refused to waive the Court’s filing fee for a self- represented vexatious litigant wishing to file an application for judicial review.

The prothonotary dismissed the motion for waiver of the fee on the grounds that the applicant’s evidence of impecuniosity was prima facie deficient, being based on an affidavit nearly one year old.

Justice Harrington upheld the prothonotary’s decision on several grounds, including that a motion should be accompanied by a current affidavit and that the prothonotary was entitled to reject the applicant’s affidavit as stale-dated (at paragraphs 23–24). [ 36 ] I agree with the Minister ’s response that Fabrikant does not express a general principle that the passage of time alone stale-dates affidavits, requiring them to be struck.

Indeed, it is not clear from Fabrikant that either the prothonotary or Justice Harrington considered the affidavit to be inadmissible, as opposed to concluding that, because it was outdated, the evidence simply did not support the relief requested. [ 37 ] In the case at hand, the fact that Mr. Bowe did not file updated evidence does not make his original evidence inadmissible. Rather, the Court must consider whether Mr. Bowe’s evidence, including the date as of which it speaks, supports issuance of the requested compliance orders.

In that respect, it is clear from the records before the Court, including the Amended Notices, that circumstances have evolved since Mr. Bowe swore his affidavits on July 27, 2019. The respondents argue that it is improper for the Minister to simply amend her Notices of

Summary Application, so as to reduce the scope of the Demands to take into account additional documentation or information that has been received, without filing updated evidence reflecting the receipt of that material. [ 38 ] I find nothing problematic in the Minister ’s approach. Particularly with the significant scope of the Demands at issue in the present applications, and the length of time that has passed in bringing these applications to a hearing, it is perhaps not surprising that the Minister has received additional material in response to certain Demands.

In such circumstances, it is appropriate for the Minister to reduce the scope of the applications. If, for that reason or others, the Minister decides to abandon certain Demands or portions thereof, I see no basis for a strict requirement to file updated evidence explaining the reason for the reduction in scope. [ 39 ] Of course, depending on the particular issues and supporting evidentiary basis raised by a respondent to a compliance application, the Minister may be unable to succeed without updated evidence. For instance, if the respondent had adduced evidence that

particular responses had been provided subsequent to the filing of the compliance application, the Minister may be unable to resist that assertion without additional updated evidence of her own. However, I do not understand any of the respondents’ arguments in these applications to be of that nature. As will be canvassed later in these Reasons, Mr. Vaturi argues in T-254-19 that he has fully complied with some of the outstanding Demands. However, the Court’s analysis of that argument involves consideration of the details of the relevant Demands and of the material Mr. Vaturi provided in response.

That argument does not engage a dispute as to whether certain submissions were actually made or received after the Minister filed her application and therefore will not turn on the absence of updated affidavit evidence. [ 40 ] In each of the six applications before the Court, Mr. Bowe provided evidence as of July 26, 2019, as to the then outstanding Demands, and swore that the respondent had not provided the information and documents responsive to those Demands. As will be explained immediately below in my analysis of the respondents’ arguments surrounding hearsay in Mr.

Bowe’s affidavits, any conflict in the evidence including meaningful challenge of Mr. Bowe’s testimony would require the Court to consider the weight to be afforded to Mr. Bowe’s evidence. However, with the exception of the November 2020 submission identified earlier in these Reasons, the respondents have not adduced evidence, through cross-examination of Mr. Bowe or otherwise, that they have provided responses to the Demands and portions thereof that the Minister is presently pursuing that have not been taken into account.

The November 2020 submission identified through cross-examination was addressed through the Minister ’s subsequent withdrawal of the relevant Demand. [ 41 ] As previously noted, noncompliance with the Minister ’s Demands is one of the statutory conditions for issuance of compliance order under subsection 237.1(1) , and the Minister bears the onus of proof on this condition. However, in the absence of any conflicting evidence, I consider Mr. Bowe’s evidence sufficient to meet this onus, notwithstanding that it has not been updated.

(3) Hearsay [ 42 ] The respondents’ second argument in relation to Mr. Bowe’s original affidavits challenges their admissibility, or alternatively their weight, based on hearsay contained therein. [ 43 ] The first paragraph of each of these affidavits is materially identical, reading as follows: I am an International and Large Business Case Manager with the Canada Revenue Agency (“CRA”), in the Edmonton Tax Services Office. In the normal course of my duties I have conduct of audit matters in respect of the Respondent.

I have reviewed the files and have personal knowledge of the matters hereinafter deposed to, save and except that which is stated to be based on information and belief, and where so stated, I verily believe it to be true. [ 44 ] In his cross-examination in each of T-252-19, T-254-19 and T-261-19, Mr. Bowe admitted that a large number of paragraphs in his affidavit contained facts that were not based on his personal knowledge. The respondents also submit, correctly in my view, that in most cases the affidavits do not state that these paragraphs are based on information and belief.

In his cross-examination in T-252-19 (Nader Ghermezian), Mr. Bowe confirmed that, in some cases, his affidavit fails to identify which facts are based on information and belief. [ 45 ] The respondents therefore argue that the affidavits should be struck as inadmissible, on the basis that they offend rule 81 of the Federal Courts Rules , SOR/98-106 , and, more generally, include substantial amounts of inadmissible hearsay. Rule 81 provides as follows: Content of affidavits 81

(1) Affidavits shall be confined to facts within the deponent’s personal knowledge except on motions, other than motions for

summary judgment or

summary trial, in which statements as to the deponent’s belief, with the grounds for it, may be included. Affidavits on belief

(2) Where an affidavit is made on belief, an adverse inference may be drawn from the failure of a party to provide evidence of persons having personal knowledge of material facts. [ 46 ] In support of the inadmissibility of hearsay evidence, the respondents rely on the following explanation in the recent decision by the Federal Court of Appeal in Canada (Attorney General) v. Iris Technologies Inc. , 2021 FCA 223 , [2022] 4 C.T.C. 147 ( Iris Technologies ), at paragraph 32 : The rules of evidence, both substantive and procedural, matter.

They matter because they are the foundation of the truth-seeking role of the courts. They are also the foundation of fairness in the adjudicative process. They are not to be overlooked, and there are consequences if they are. Here, the affidavit was wafer thin. It did not comply with the Ares v. Venner exception to the hearsay rule, it did not measure up to the statutory exception specifically designed to facilitate the introduction of documents in the possession of the CRA and no notice was given under the Canada Evidence Act of an intention to rely on business records.

Quite apart from the question of the admissibility of evidence in any individual case, courts have an over-arching concern to ensure that proceedings unfold in accordance with established laws of evidence and procedure. This is the foundation of fairness. This factor militates against admission of the affidavit. [ 47 ] In Iris Technologies , the Federal Court of Appeal ultimately held that the affidavit at issue was admissible under the common law exception to the hearsay rule based on reliability and necessity (at paragraph 33).

In the case at hand, the Minister does not rely on that particular exception but rather upon what it refers to as the corporate exception to the hearsay rule. The Minister refers the Court to Twentieth Century Fox Home Entertainment Canada Limited v. Canada (Attorney General) , 2012 FC 823 , 414 F.T.R. 291 ( Twentieth Century Fox ), which considered the admissibility of an affidavit of a CRA official, filed in response to a judicial review of a decision under the ETA .

Justice Phelan accepted into evidence the hearsay components of the affidavit, holding that the official’s evidence was in the nature of “corporate” evidence, in that he acted in a supervisory capacity, was responsible for his subordinates, and was therefore in a position to know if the facts in his affidavit were true (at paragraphs 23 and 26). Twentieth Century Fox was affirmed on appeal ( 2013

FCA 25 ), although without any commentary on this particular issue. [ 48 ] Subsequently, in O’Grady v. Canada (Attorney General) , 2016 FC 9 ( O’Grady ), Justice LeBlanc followed the approach of Twentieth Century Fox to the admissibility of hearsay evidence, concluding that the affiant in O’Grady , a Director General with Statistics Canada, was, based on her sphere of responsibility, in a position to know that the facts sworn in her affidavit were true (at paragraph 19).

For similar reasons, Justice LeBlanc also concluded that the affiant was in a position to swear the affidavit without providing evidence of the persons having personal knowledge of the material facts (at paragraph 20). The Court declined to draw an adverse inference under Rule 81(2) and concluded that whether the respondent had provided the best evidence went to the weight to be accorded to the affidavit by the judge on the hearing of the application (at paragraph 22). [ 49 ] On appeal, in O’Grady v.

Canada (Attorney General) , 2016 FCA 221 , the Federal Court of Appeal again relied on Twentieth Century Fox and found no error in Justice LeBlanc’s decision that the affidavit evidence was admissible, because the affiant, by virtue of her responsibilities in the Government of Canada, was in a position to depose to the matters in question without necessarily having personal knowledge (at paragraph 10). [ 50 ] In support of her reliance on this jurisprudence, the Minister refers to Mr. Bowe’s affidavit and cross-examination evidence.

In each of his affidavits, he swore that he was employed as an International and Large Business Case Manager with CRA. In his cross- examination in T-252-19 (Nader Ghermezian), he explained that this role involved the duties of a team leader in CRA’s Audit and Compliance Programs Branch. In his cross-examination in T-261-19 (Raphael Ghermezian), in the context of questioning about the mailing by a student employee of a particular Requirement, Mr.

Bowe described himself as the supervisor of the employee, as the individual with the conduct of the audit, and as therefore possessing knowledge of what happened within the audit file. In T-254-19 (Marc Vaturi), when questioned about Requirement A-NG-0127, addressed to Mr. Vaturi on June 27, 2018, under the signature of an individual named John Harasymchuk, Mr.

Bowe referred to the Requirement being issued on his recommendation as the case manager with responsibility for the audit. [ 51 ] In my view, this evidence is sufficient to support the Minister ’s reliance on the above jurisprudence for the admissibility of Mr. Bowe’s affidavits under the corporate exception. [ 52 ] In arriving at this conclusion, I have considered the respondents’ submission that this case law supports only the ability of a manager to testify about tasks performed by subordinates. I disagree that the principle is as limited as the respondents suggest. I note that, in Coldwater First Nation v.

Canada (Attorney General) , 2019 FCA 292 ( Coldwater First Nation ) , the Federal Court of Appeal explained that evidence is admissible from departmental supervisors or similar individuals about the activities of their department, the conduct of their employees, and events taking place in relation to the department, where their knowledge is sufficiently direct and personal, without having to be directly involved in the conduct, activities, and events (at paragraph 42). [ 53 ] Coldwater First Nation also explains that there is no general “department head” exception to hearsay that would permit a departmental supervisor to introduce particular statements made by departmental personnel for the truth of their contents (at paragraph 42).

In that context, I note the respondents’ submission that this principle does not permit Mr. Bowe to provide testimony about the various dealings of members of the Ghermezian family. However, I find compelling the Minister ’s submission that, in large measure, Mr. Bowe’s affidavits serve to set out his understanding of facts that provide relevant contextual background to the issuance of the Demands.

As the Minister is in some respects a stranger to these facts, which are known principally to the respondents themselves, CRA’s understanding of such facts may be of limited significance to the outcome of these applications. [ 54 ] Of course, some of the facts set out in Mr. Bowe’s affidavits could be determinative of particular issues in these applications. For instance, as will be canvassed later in these Reasons, the respondents dispute whether the Demands were properly served upon them. Mr. Bowe’s evidence explaining how CRA sent the Demands to the respondents will be significant to the outcome of this issue.

However, his evidence on this issue falls well within the principle that a manager can testify to tasks performed by employees. [ 55 ] Mr. Bowe’s evidence as to particular relationships among members of the Ghermezian family or entities in which they are interested, or their respective business dealings, does not necessarily have the same significance. As the Minister submits, this evidence may provide context that assists the Court in understanding the background to the audits underlying the Demands and in understanding the Demands themselves.

However, if the understanding of certain background facts set out in Mr. Bowe’s affidavit were incorrect, this would not necessarily invalidate the Demand or a related application for a compliance order. Indeed, Demands represent a means of obtaining information or documentation from the respondents, who are the best source of material that would enable CRA to either verify or change its understanding. [ 56 ] The respondents’ arguments in support of their efforts to strike Mr.

Bowe’s affidavit challenge a large number of paragraphs, without identifying particular uses by the Minister of the evidence in those paragraphs that would offend the distinction identified in Coldwater First Nation . In the absence of such submissions, I find no basis to conclude that the affidavits, or particular portions thereof, are inadmissible as adduced for a hearsay purpose outside the scope of the jurisprudence upon which the Minister relies. Of course, the absence of direct and personal knowledge on the part of Mr.

Bowe could affect the weight to be afforded to his evidence, particularly in the context of any compelling conflicting evidence or meaningful challenge to his testimony in cross-examination. However, any such determinations as to weight should be made, in relation to particular components of Mr. Bowe’s evidence upon which the Minister relies, in analyzing the individual issues in the applications. C. Whether the respondents were required to provide documents and/or information in response to a Request issued under

section 231.1 of the Act [ 57 ] One of the principal issues raised by the respondents, which relates to most of the applications, involves the proper statutory

interpretation of subsection 231.1(1) of the Act and the particular authority it affords to the Minister in her efforts to obtain information and documentation from the respondents. As will be explained in more detail below, the respondents submit that the Minister has conflated aspects of the authority provided by subsections 231.1(1) and 231.2(1) . The respondents argue that many or all of the Requests purportedly issued under subsection 231.1(1) sought information and/or documentation that the Minister was authorized to compel only

through a Requirement issued under subsection 231.2(1) . The Requests do not comply with certain technical requirements of subsection 231.2(1) , and the Minister does not seek to rely upon subsection 231.2(1) in support of those Requests. Therefore, the respondents argue that the Requests are invalid and cannot support the issuance of a compliance order under

section 231.7 . [ 58 ] As a starting point, the respondents again emphasize the Minister ’s burden to satisfy the statutory conditions under

section 231.7, one of which is that the person against whom a compliance order is sought was required under either

section 231.1 or 231.2 to provide the access, assistance, information or documents sought by the Minister . The respondents submit that, if a Request falls outside the authority provided by

section 231.1 , then the recipient was not required to comply, the statutory condition is not met, and a compliance order cannot be issued in relation to that Request. I find no basis to disagree with this aspect of the respondents’ argument. [ 59 ] I therefore turn to the particular bases on which the respondents argue that Requests are not authorized by subsection 231.1(1). Later in these Reasons, I will address other arguments surrounding limitations on the Minister ’s authority to issue Requirements under subsection 231.2(1) related to unnamed persons and foreign-based information.

However, for purposes of the present issue, the respondents accept that, through a Requirement properly issued and served under subsection 231.2(1) , the Minister is authorized, for any purpose related to the administration or enforcement of the Act , to require any person to provide any information or document.

In contrast, the respondents submit that subsection 231.1(1) affords the Minister only an inspection power, i.e., authority (again, for any purpose related to the administration or enforcement of the Act ) to attend at the premises of a taxpayer or other person to inspect books and records or other documents. The respondents argue that subsection 231.1(1) does not grant the Minister power comparable to subsection 231.2(1), either to: (

a) compel provision of documents outside the context of an inspection; or (

b) compel the provision of information other than information about the location or provenance of documentation sought in the context of an inspection. [ 60 ] As suggested by this explanation of the respondents’ argument, there are two aspects to their position, both of which they say are offended by the Requests. First, the respondents submit that, while an “authorized person” (the meaning of which will be canvassed later in these Reasons) can rely upon subsection 231.1(1) to enter business premises and inspect documents that are kept there, that

section provides no authority for the authorized person to issue a written demand compelling the provision of such documents. Second, the respondents submit that subsection 231.1(1) relates only to pre-existing documentation and does not authorize issuance of a written demand compelling the recipient to answer questions or otherwise provide substantive (but previously undocumented) information relevant to a taxpayer’s tax position.

The Minister disputes both aspects of the respondents’ position, arguing that there is overlap in the powers afforded by sections 231.1 and 231.2 and that the Requests were all validly issued under subsection 231.1(1). In particular, the Minister relies on paragraph 231.1(1)(

a) as authority for the Requests. [ 61 ] While there is some overlap in the parties’ arguments in relation to these two aspects of this issue, and I am conscious that the legislation must be interpreted holistically, in my view the required analysis can be most easily explained by addressing these aspects individually. I will first consider the question whether paragraph 231.1(1)(

a) authorizes the compulsion of documentation through a written request, outside the context of a physical attendance at premises where an inspection is being conducted.

(1) Compulsion of Documents [ 62 ] As this issue is one of statutory

interpretation, the outcome must be governed by the modern approach to statutory

interpretation, which requires that the words of the statute be read in their entire context and in their grammatical and ordinary sense, harmoniously with the scheme of the statute, the object of the statute, and the intention of Parliament. This approach involves a textual, contextual and purposive analysis to find a meaning that is harmonious with the statute as a whole (see Canada Trustco Mortgage Co. v.

Canada , 2005 SCC 54 , [2005] 2 S.C.R. 601, at paragraphs 10–11 ). [ 63 ] Starting with the text of the statutory provision at issue, described as the point of departure for any interpretive exercise (see eBay Canada Ltd. v. Canada (National Revenue) , 2008 FCA 348 , [2010] 1 F.C.R. 145 ( eBay ), at paragraph 32 ),

section 231.1(1) reads as follows: Inspections 231.1

(1) An authorized person may, at all reasonable times, for any purpose related to the administration or enforcement of this Act , (

a) inspect, audit or examine the books and records of a taxpayer and any document of the taxpayer or of any other person that relates or may relate to the information that is or should be in the books or records of the taxpayer or to any amount payable by the taxpayer under this Act , and (

b) examine property in an inventory of a taxpayer and any property or process of, or matter relating to, the taxpayer or any other person, an examination of which may assist the authorized person in determining the accuracy of the inventory of the taxpayer or in ascertaining the information that is or should be in the books or records of the taxpayer or any amount payable by the taxpayer under this Act , and for those purposes the authorized person may (

c) subject to subsection 231.1(2), enter into any premises or place where any business is carried on, any property is kept, anything is done in connection with any business or any books or records are or should be kept, and (

d) require the owner or manager of the property or business and any other person on the premises or place to give the authorized person all reasonable assistance and to answer all proper questions relating to the administration or enforcement of this Act and, for that purpose, require the owner or manager to attend at the premises or place with the authorized person. [ 64 ] Focusing on this language, the respondents emphasize that

section 231.1(1)(a), upon which the Minister relies, empowers an authorized person to “inspect, audit or examine…” certain books, records and other documents. The mid-amble in

section 231.1(1) then states that “…for those purposes…”, meaning the purposes set out in the preceding paragraphs including the right to inspect, audit or examine, the authorized person is given additional powers under paragraphs 231.1(1)(

c) and (d). Paragraph 231.1(1)(

c) entitles the authorized person to enter certain premises or places where business is carried on or where property, books or records are kept. Paragraph

231.1(1)(

d) requires the owner or manager of the property or business and any other persons at the premises or place to give theauthorized person assistance and answer questions. For that purpose, paragraph 231.1(1)(

d) also requires that the owner or managerattend at the premises or place with the authorized person. [65] Against that backdrop, the respondents emphasize that the only obligation expressly imposed by the language of subsection231.1(1) is found in paragraph 231.1(1)(d), where the use of the word “require” mandates the provision of assistance, answering ofquestions, and attendance at the premises or place with the authorized person.

There is no express obligation imposed upon a taxpayer orany other person to provide documents pursuant to a written demand in the nature of the Requests. [66] The respondents also note the reference, in the introductory language of subsection 231.1(1), to the powers of that

section beingexercisable “at all reasonable times”, which they submit is consistent with an inspection power but not a power to issue a writtendemand. [67] Turning to context, the respondents’ argument compares subsection 231.1(1) to subsection 231.2(1), which reads as follows: Requirement to provide documents or information 231.2

(1) Notwithstanding any other provision of this Act, the Minister may, subject to subsection (2), for any purpose related to theadministration or enforcement of this Act (including the collection of any amount payable under this Act by any person), of a listedinternational agreement or, for greater certainty, of a tax treaty with another country, by notice served personally or by registered orcertified mail, require that any person provide, within such reasonable time as is stipulated in the notice, (

a) any information or additional information, including a return of income or a supplementary return; or (

b) any document. [68] Subsection 231.2(1) expressly empowers the Minister, for purposes including those related to the administration or enforcementof the Act, to require any person to provide any information or any document. Unlike subsection 231.1(1), this language expresslyimposes such an obligation upon the recipient of a Requirement under subsection 231.2(1).

The respondents submit this comparisonsuggests that, where Parliament intends to require a person to provide a document, it does so expressly and not by implication. [69] The respondents also observe that the Minister’s power in subsection 231.2(1) is subject to a number of express limitations. Aswill be canvassed in more detail in relation to other issues later in these Reasons, these limitations on the Minister’s power include that it:(

a) may be exercised only by the Minister (or a delegate duly authorized under subsection 220(2.01)); (

b) cannot be exercised in relationto unnamed persons without prior judicial authorization; and (

c) may be exercised only through a notice which specifies a reasonabletime for compliance. The respondents refer to these limitations as “guardrails” intended to protect taxpayers and other recipients ofrequirements issued under subsection 231.2(1).

They submit that the express but somewhat circumscribed power to demanddocumentation and information under subsection 231.2(1), and the absence of similar guardrails in subsection 231.1(1), suggest thatsubsection 231.1(1) is not intended to authorize the issuance of demands in the same manner as subsection 231.2(1). [70] I note the Minister’s reliance on Redeemer Foundation v. Canada (National Revenue), 2008 SCC 46, [2008] 2 S.C.R. 643(Redeemer), in which the majority of the Supreme Court of Canada rejected a somewhat similar argument. There, the Court found thatthe limitation in

section 231.2, preventing the Minister from obtaining information about unnamed persons without judicialauthorization, did not prohibit the Minister from seeking the same information under

section 231.1 (at paragraphs 14–15). Nevertheless,in my view, there is logic to the respondents’ submissions based on the text and context of the statutory provisions in issue and, in theabsence of a purposive analysis, I might be persuaded by the respondents’ arguments. [71] However, as emphasized by the Minister, eBay explains the importance of statutory

interpretation examining the purpose of theprovision in question and the statute as a whole so that, whenever possible, the text of the statute is interpreted in a manner whichfurthers that purpose (at paragraph 32). In Canada (National Revenue) v. Cameco Corporation, 2019 FCA 67, [2020] 4 F.C.R. 254(Cameco), one of the leading authorities on the

interpretation of

section 231.1, the Federal Court of Appeal states that the purpose ofsection 231.1 is to facilitate the Minister’s unencumbered and immediate access to all books, records and information of the taxpayer (atparagraph 27). More broadly, eBay explains that the Minister’s broad powers in supervising the regulatory scheme of the Act are afunction of Canada’s self-reporting tax system (at paragraph 34): … The Supreme Court of Canada has provided additional guidance which is relevant to the

interpretation of the Act’s enforcementpowers. Thus, in R. v. McKinlay Transport Ltd., (SCC), [1990] 1 S.C.R. 627, a case involving a challenge under section8 of the Canadian Charter of Rights and Freedoms to the Minister’s power to require the production of documents, Justice Wilson noted(at 648) that the major drawback of a self-reporting tax system such as ours is that some taxpayers will attempt to evade tax, by failing toreport income, for example.

Accordingly, she said: [T]he Minister of National Revenue must be given broad powers in supervising this regulatory scheme to audit taxpayers’ returns andinspect all books and records which may be relevant to the preparation of these returns.

The Minister must be capable of exercising thesepowers whether or not he has reasonable grounds for believing that a particular taxpayer has breached the Act. … A spot check or asystem of random monitoring may be the only way in which the integrity of the tax system can be maintained. [72] Cameco also recognizes that the legislative purpose, however important, cannot replace the language of the statute thatParliament has chosen (at paragraph 27). However, the Minister argues that the words “inspect, audit or examine…” in paragraph231.1(1)(

a) are broad terms encompassing a range of activities, which logically include requesting the provision of documents. Thissubmission is consistent with the statutory

interpretation analysis performed in Tellza, in relation to the comparable provision of the ETA(subsection 288(1)), which took into account not only the context and purpose of the ETA as part of Canada’s self-reporting and self-assessing taxation regime, but also the plain, grammatical, dictionary meaning of “inspect, audit, or examine” (at paragraph 13). TheCourt concluded that the inspection power afforded by this provision necessarily entailed the power to request or require documents to beprovided so that the authorized person can conduct an inspection, audit or examination effectively (at paragraph 18).

[73] Indeed, among the jurisprudence relied upon by both parties in support of their respective positions on the statutory

interpretationissue, Justice Fuhrer’s recent decision in Tellza is the authority which most directly addresses this aspect of the issue. While Tellzainvolved an application for judicial review under the ETA, challenging a written request to obtain electronic accounting data, rather thana compliance application under the Act, it is apparent from the decision that the applicant in that case advanced a position essentiallyidentical to that taken by the respondents in the case at hand.

Given the significance of this particular authority for the issue now beforethe Court, it is worthwhile to reproduce a substantial portion of Justice Fuhrer’s description of the applicant’s position and her reasonsfor rejecting it (at paragraphs 11–18): Contrary to Tellza’s position that the October 4, 2019 letter was a “requirement” and not a “request” and hence, should have issued underthe ETA s 289(1), instead of the ETA s 288(1), I am not persuaded that it was unreasonable for the CRA to issue the letter under the latterprovision instead. The parties do not disagree that the statutory

interpretation of a provision must be consistent with the text, context and purpose of theprovision: Vavilov, above at paras 117-120; see also Rizzo & Rizzo Shoes Ltd (Re), (SCC), [1998] 1 SCR 27 at para 21.The role of the reviewing court, however, on a reasonableness review involving statutory

interpretation is not to “undertake a de novoanalysis of the question or ‘ask itself what the correct decision would have been’”: Vavilov, above at para 116, citing Law Society of NewBrunswick v Ryan, 2003 SCC 20 at para 50. Taking into account the context and purpose of the ETA, as a self-reporting and self-assessing taxation regime, as well as the plain,grammatical, dictionary meaning of “inspect, audit, or examine”, in my view the CRA’s decision to rely on subsection 288(1) as thebasis for issuing the October 4, 2019 letter was justified.

I add that Tellza did not adduce any evidence contradicting that the letter wasissued by an “authorized person,” as contemplated in the relevant provision. Subsection 288(1) essentially permits the authorized person to “inspect, audit or examine the documents, property or processes” ofpersons with record keeping and reporting obligations under the ETA, including in connection with any claimed rebate or refund such asinput tax credits or ITCs. Further, subsection 288(1) and the remainder of

section 288 deal with the conditions under which theauthorized person

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