In a recent decision of the Federal Court of Appeal (FCA),
Canada (National Revenue) v. RBC Life Insurance Company,
2013 FCA 50, the FCA confirmed that government
officials must be fully transparent with the court when they apply
for ex parte for production orders, including with regard
to the extent of inconvenience and cost associated with compliance
with that order.
The Minister of National Revenue applied ex parte for
authorizations under section 231.2 of the Income Tax Act
to obtain, among other things, "all information and documents
relating to RBC Life Insurance Company's '10-8' plan
holders" for a specified period. The respondents applied for
review of those authorizations, including seeking production of
relevant documents related to the Minister's application, which
the Minister twice refused to disclose claiming that the
information was either privileged or irrelevant.
Upon review and consideration of the additional disclosure, the
Federal Court concluded that the Minister had failed to disclose
material facts to the authorizing judges to allow them to properly
exercise their discretion in respect of the authorizations.
Principally, the Minister did not disclose that the Canada Revenue
Agency's GAAR Committee had determined that the 10-8 plans
likely complied with the letter, if not the spirit, of the
Income Tax Act. The FCA affirmed the Federal Court's
IMPLICATIONS FOR COMPETITION ACT PRODUCTION ORDERS
The RBC Life decision has direct implications on the
application of section 11 of the Competition Act,
which, like the provision in issue in RBC Life, allows the
Commissioner of Competition to obtain production orders, on an
ex parte basis, where the Commissioner has commenced an
inquiry and establishes that the respondent has, or is likely to
have, information relevant to that inquiry. The decision confirms
the significant burden on the Commissioner to fully disclose all
material facts in his application and failure to do so could expose
the Commissioner to further disclosure obligations under the Federal Courts Rules.
Government officials, including the Commissioner, who seek
ex parte production orders are to be held to a "high
standard of good faith" to make "full disclosure" to
"fully justify" an ex parte order. Indeed, the
FCA's decision repeated many of the same conclusions of the
Federal Court in Canada (Commissioner of Competition) v. Labatt
Brewing Co. et al., 2008 FC 59 (which was cited by the Federal
Court in RBC Life), noting that a judge hearing or
reviewing the ex parte application is "at the
mercy" of the party seeking ex parte relief. The
requirement to provide full disclosure allows the judge, acting as
an independent and impartial arbiter, to ensure that the
respondent's constitutional right to be free from unreasonable
searches and seizures is protected.
Both the FCA decision in RBC Life and the Federal Court
decision in Labatt acknowledged that the judge hearing an
ex parte application has the residual discretion to deny
that application even when the party seeking the order can satisfy
the statutory criteria. For the court to be able to control its own
processes and to guard against abuses, it must be fully informed of
all relevant circumstances surrounding the request.
When seeking a section 11 production order, the Commissioner
must provide the court with information relevant to the exercise of
the court's residual discretion. The FCA's decision in
RBC Life supplemented the kinds of information that could
be relevant for this exercise, including information previously
provided to the Commissioner, the extent of inconvenience and cost
on the respondent as a result of the order, any additional
motivations or purposes behind the application, and any facts or
determinations regarding whether the conduct being investigated
complies with the Competition Act.
As the Commissioner recently announced his intention to use
section 11 orders in relation to inquiries of non-merger matters,
the RBC Life decision will serve as legal guidance when
these orders are sought on an ex parte basis.
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