SCC Rules that Quebec Tax Officials Could Demand Information from an Alberta Bank Branch for Audit of a Trust
The Supreme Court of Canada recently issued a decision concerning the authority of the Agence du revenu du Québec (“ARQ”) under Quebec’s Tax Administration Act (“TAA”), as it interacts with the requirements of a federal statute, the Bank Act, against the backdrop of principles that limit the authority of provincial government agencies to act extraterritorially.
In 2003, the DGGMC Bitton Trust (the “Trust”) was settled under the laws of the Province of Alberta. The Trust maintained a bank account at the Calgary Branch of National Bank.
The ARQ initiated an audit of the Trust while auditing a related corporate group. The purpose of the audit was to determine the residence of the Trust for the purposes of taxation; the ARQ was seeking to ascertain the residence of the Trust and determine if the Trust owed taxes in Quebec. In January 2014, the ARQ sent a formal demand (the “Demand”) for information or documents relating to the Trust to National Bank at its Calgary Branch pursuant to s. 39 of TAA. The ARQ requested the following information or documents:
- The bank records (including returned cheques, deposit books, debit memo, credit memo, etc.) of all accounts held by the Trust.
- The lines of credit and credit card statements (including returned cheques, deposit books, debit memo, credit memo, etc.) held by the Trust.
- All statements respecting investments of any type held by the Trust.
- Documents related to the opening of accounts (including bank accounts, lines of credit, credit cards and investment).
Consistent with s. 61 of the TAA, the Demand outlined the consequences of a failure to comply:
“If you fail to comply with this formal demand within 30 days of it being delivered by certified or register[ed] mail or served by bailiff, you will be liable under penal proceedings to a fine of $800 to $10,000, to which may be added a term of imprisonment of no more than six months, as provided under section 61 of the Tax Administration Act.”
National Bank did not contest the Demand and furnished the requested documents, which were then put under seal. The sole trustee of the Trust, 1068754 Alberta Ltd. (“Alberta Ltd.”), objected to the Demand as beyond the ARQ’s authority. The ARQ took the position that it sent the Demand to the Calgary Branch in order to conform to the requirements of s. 462(2) of the Bank Act, which directs that certain documents pertaining to customers be sent to the branch of account.
The parties agreed that, in the absence of the Bank Act, there was no question that the ARQ would have authority pursuant to s. 39 of the TAA to issue a formal demand to National Bank (in Quebec) for information and documents pertaining to one of its customers, given that National Bank operates in Quebec.
However, Alberta Inc. argued that the ARQ could not legally send a formal demand, which was a coercive document, outside of Quebec’s territory. In Alberta Ltd.’s submission, the Demand was extraterritorial, and therefore ultra vires.
The question on appeal was whether the requirement under the Bank Act that such a demand be sent to a branch of National Bank outside of Quebec meant that sending the Demand was beyond the authority of the ARQ.
The Quebec Court of Appeal had affirmed the ARQ’s authority under s. 39 of the TAA to send the Demand to the Calgary Branch.
Supreme Court of Canada Decision
The Supreme Court of Canada agreed with the lower court decisions and dismissed the appeal, stating:
“I would dismiss the appeal. The ARQ was required by s. 462(2) of the Bank Act to send the Demand to the Calgary Branch. Complying with this requirement of the Bank Act did not render the ARQ’s actions extraterritorial and, accordingly, they were not ultra vires. Subsection 462(2) prescribes a mode of communication with banks. It does not change the party with respect to whom authority is exercised — here, National Bank — nor does it alter the nature of the communication. Thus, s. 462(2) of the Bank Act does not change what is fundamental, that National Bank is the party to whom the ARQ issued the Demand, and that National Bank is within the ARQ’s territorial jurisdiction. Thus, I agree with the Quebec Court of Appeal that the Demand was validly issued to National Bank.”
As a result, the ARQ has the right to obtain the information requested in the Demand.
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