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ADMINISTRATION AND ENFORCEMENT - Disclosure of information

Thursday, June 27, 2019 @ 1:59 PM  

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Appeal from a judgment of the Quebec Court of Appeal affirming a decision that dismissed a motion brought by DGGMC Bitton Trust’s sole trustee, the appellant, to quash a formal demand sent by the Agence du revenu du Québec (ARQ) for information and documents pursuant to s. 39 of the Quebec Tax Administration Act (TAA). Seeking to determine the residence of the Trust and whether it owed taxes in Quebec, the ARQ sent the Demand to a National Bank of Canada branch located in Calgary, Alberta, where the Trust maintained a bank account, in order to conform to the requirements of s. 462(2) of the Bank Act, which directed that demands for certain documents pertaining to bank customers be sent to the branch of account. National Bank furnished the requested documents, which included  bank records, credit card statements and statements respecting investments. The documents were put under seal after the appellant brought a motion requesting that the Demand be quashed. The appellant argued that the ARQ’s actions were extraterritorial and, accordingly, ultra vires. The Quebec Superior Court found that the Demand fell under s. 462(2) of the Bank Act, which did not treat the branch as a separate legal entity for the purposes of receipt of notifications. The Court of Appeal upheld this decision and concluded that the ARQ had properly sent the Demand pursuant to its taxation and auditing power under s. 92 of the Constitution Act, 1867. The issue in this appeal was whether the requirement under the Bank Act that demands for information and documents be sent to a branch of National Bank outside of Quebec meant that sending the Demand was beyond the authority of the ARQ.

HELD: Appeal dismissed. The appellant relied on the “Branch Entity Rule”, which, in its opinion, deemed the bank branch an entity distinct from the bank itself for the purposes of seizures. Section 462(1) of the Bank Act, which the appellant argued applied in this case, set out an exhaustive list of documents that were to be served at a specific branch in order to bind property. While the Demand could compel information about the Trust’s property, the obligation did not seek to encumber the property itself.  The requested banking records and information were the property of National Bank and not the Trust. Given that the Demand pertained to a customer of National Bank, and having found that s. 462(1) did not apply, the Court agreed with the ARQ that the method of communicating the Demand was prescribed by s. 462(2) of the Bank Act. The use of the word “notification” in s. 462(2) contemplated not only documents that served a notification function, but also documents that could impose positive obligations on a bank, such as the ARQ’s Demand in this instance. The effect of s. 462(2) was to require that a document be sent to the branch of account. Doing so fixed the bank with notice of the Demand. The bank, as a corporation, was a single entity, and the Branch Entity Rule did not operate in the present circumstances. The appellant also argued that the ARQ did not have the authority to send the Demand to the Calgary Branch, even if the Branch Entity Rule did not apply. The fact that the exercise of the ARQ’s power had some impact outside Quebec did not ipso facto render such action impermissible or extraterritorial. Given that National Bank operated in Quebec, both the consequences of a failure to comply and the potential enforcement of the Demand could be effected in Quebec. The destination of the Demand did not change the party to whom the Demand was made, nor the party against whom any enforcement action would be brought. By sending the Demand to another province, the ARQ was not attempting to exercise its taxation or enforcement powers outside Quebec. The Bank Act did not limit the authority of the ARQ under the TAA to issue a formal demand pursuant to s. 39.

1068754 Alberta Ltd. v. Québec (Agence du revenu), [2019] S.C.J. No. 37, Supreme Court of Canada, Wagner C.J. and Abella, Moldaver, Karakatsanis, Gascon, Côté, Brown, Rowe and Martin JJ., June 27, 2019. Digest No. TLD-June242019015-SCC