Part I: Case Facts and Legal Issues before the Federal Court
Our top Toronto Tax Lawyers have prepared this three part case comment. Part I will lay out the facts and issues, Part II will discuss the issue of procedural fairness, and Part III will discuss whether the decision of the Office of the Privacy Commissioner of Canada (the “OPC”) was reasonable.
Summary - Daley v. Canada (Attorney General)
In Daley v Canada (Attorney General) 2016 FC 1154 the Federal Court of Canada (the “Court”) found that the Office of the Privacy Commissioner of Canada beached the rules of natural justice and its duty of fairness towards Ms. Daley. The Court also found that the OPC erred in concluding that Ms. Daley was non-compliant with the Privacy Act.
Facts Daley v Canada (Attorney General)
Ms. Daley was retained by the Canada Revenue Agency (the “CRA”) to represent Mr. F. Mr. F is a CRA tax investigator that participated in the criminal tax prosecution of Mr. H for tax evasion. Before trial, Mr. H successfully challenged five search warrants issued against him. Mr. H then started civil proceedings against Mr. F and other crown witnesses.
Ms. Daley advised that Mr. O, a foreign witness, retain Ms. T to represent him against Mr. H. Mr. O did business with Mr. H and was interviewed by Mr. F during the tax evasion investigation. At Ms. T’s request, Ms. Daley provided her with a transcript of Mr. O’s interview with Mr. F.
Ms. Daley was later informed by a colleague at work that she was found to have breached the Privacy Act. Mr. H had complained about the disclosure of the transcript as it contained his personal information.
Ms. Daley wrote to the Office of the Privacy Commissioner of Canada stating that she was not aware of the complaint and that she had not been given a chance to respond to Mr. H’s allegations. Ms. Daley included arguments about how the information transmitted to Ms. T was public in nature and requested that the Office of the Privacy Commissioner of Canada reopen the investigation into the complaint. The Office of the Privacy Commissioner of Canada invited her to submit further information on the public nature of the information; however, the Office of the Privacy Commissioner of Canada stated there was insufficient grounds to reopen the investigation and that the matter was closed. Ms. Daley applied to the Court for judicial review of the decision of the Office of the Privacy Commissioner of Canada.
Ms. Daley raised three issues at Court:
- What is the applicable standard of review?
- Did the OPC breach the rules of natural justice and its duty of fairness toward Ms. Daley?
- Did the OPC err in concluding that Ms. Daley’s disclosure was unauthorized under the Privacy Act or the Income Tax Act (the “ITA”)?
This article will focus on the second and third issues and will not discuss the applicable standards of review, which were held to be correctness for the procedural fairness issue and reasonableness for the disclosure issue.
As you can see, Ms. Daley was blindsided by the Office of the Privacy Commissioner of Canada’s report. She was found to have breached the Privacy Act before she was even aware that her conduct was being investigated. Individuals that are affected by administrative decisions may be owed a duty of fairness. The CRA is an administrative body and our experienced Toronto Tax Lawyers can advise you if the Federal Court is the appropriate place to take your legal issue.
Part II: Procedural Fairness Issue
Procedural fairness complaints concern how the decision making body arrived at their decision while “substance” refers to what the decision actually was. To make a complaint you must be entitled to procedural fairness in the first place.
Judge made law is referred to as “common law” while legislation is referred to as “statute.” In Canada common law can be overwritten by statute unless the statute is declared unconstitutional by courts. Under Canadian common law the duty of (procedural) fairness applies to decisions of public authorities that affect an individual’s rights, privileges, or interests. The common law provides a presumption for procedural fairness.
To summarize, individuals affected by the decisions of public authorities are owed a duty of fairness unless statute explicitly gets rid of it. If the duty of fairness applies, the individual affected by the decision must be given notice and an opportunity to tell their side of the story.
The Breach in the Duty of Fairness
The Office of the Privacy Commissioner of Canada relied on case law in Ocean Port Hotel Ltd v British Columbia [2001 SCC 52] and argued that all principles of natural justice, including the duty of fairness, were ousted by statutory language in the Privacy Act. The Court examined the notice of intention to investigate provisions in the Privacy Act and came to the opposite conclusion. Section 31 of the Privacy Act states that “the head of the government institution concerned” must be notified of the intention to investigate the complaint and the substance of the complaint. Subsection 32(2) of the Privacy Act allows “the head of the government institution concerned” to respond to the complaint. The plain language of the statute states that certain persons must be notified and given the opportunity to make representations. The Court stated that the statute does not exempt the Office of the Privacy Commissioner of Canada from notifying or allowing third parties who may be affected by its decision to make representations.
This case is interesting as it adds a third party wrinkle to a Privacy Act complaint. The Court noted that while the results of the report were directed to the CRA, Ms. Daley’s conduct, namely her unauthorized disclosure, was the subject matter of the Office of the Privacy Commissioner of Canada’s report. Ms. Daley was a private sector lawyer retained by the CRA (the government institution) and was not an employee of that institution. Therefore her obligations towards the institution were different than that of an employee. She was retained to advise the CRA of their legal rights and obligations, and not vice versa. Lastly, the Court stated that violating the Privacy Act is of limited consequence for an institution, but has wide implications for a private sector lawyer.
In Hill v Church of Scientology [ 2 SCR 1130] the Supreme Court of Canada held that, to lawyers, reputation is extremely important. Violating the Privacy Act would negatively affect Ms. Daley’s professional reputation. In fact, Mr H was using the Office of the Privacy Commissioner of Canada findings to start a letter-writing campaign to smear Ms. Daley’s reputation. The Court relied on Hill to determine that Ms. Daley had a direct and significant interest in protecting her professional reputation. The Court found that she should have been notified and given a chance to respond. Ms. Daley was owed a duty of fairness by the OPC.
The Office of the Privacy Commissioner of Canada’s concerns about the procedural difficulties of recognizing a general duty of fairness to third parties was dismissed. The Court stated that the particular facts of this case did not give rise to a general duty that would apply to all third parties.
Ms. Daley had a right to notice and a hearing before a decision was handed down by the Office of the Privacy Commissioner of Canada. The administrative process leading up to the decision was incorrect in law. Part III of this article will address the decision made by the Office of the Privacy Commissioner of Canada. As you will see, the Court also found issues with the decision and it was declared to be unreasonable. Contacting our top Toronto Tax Lawyers to determine if you can apply for judicial review of a CRA decision may be the solution to your tax issue. Please continue to Part III of this case comment to read about why the Office of the Privacy Commissioner of Canada’s decision was unreasonable and the remedy that was provided to Ms. Daley.
Part III: Unauthorized Disclosure Issue and Case Comment Conclusion
The Court found that the disclosure was not unauthorized and determined that the OPC had assumed authority which was statutorily entrusted to another decision-maker (The Minister of Revenue or CRA) through an Act of Parliament (the Income Tax Act). They were unreasonable in assuming this authority and incorrectly interpreted paragraph 241(3)(b) of the Income Tax Act. Paragraph 241(3)(b) lays out when the CRA can disclose taxpayer information. Unless authorized by a provision in section 241 of the Income Tax Act, the CRA must keep taxpayer information private.
The Federal Court of Canada in Privacy Act (Can.) (Re) ( 3 FCR 82) determined that paragraph 8(2)(b) of the Privacy Act enables Parliament to confer wide discretion about the disclosure of information their departments have collected to a Minister. The Court concluded that, at minimum, the OPC must take into account the CRA’s interpretation of paragraph 241(3)(b) and related jurisprudence in its analysis. The Office of the Privacy Commissioner of Canada failed to do so and used a narrow interpretation approach as opposed to the CRA’s stance that it should be interpreted broadly.
In Slattery (Trustee of) v Slattery ( 3 SCR 430) the Supreme Court of Canada stated that the language in paragraph 241(3)(b) was broad. Broad language indicates that a wide view should be used when considering if a disclosure was made in respect of proceedings relating to the administration of the Income Tax Act. Confidentiality does not apply if a disclosure is made in respect of proceedings relating to the administration or enforcement of the Income Tax Act.
The Court stated that the Office of the Privacy Commissioner of Canada characterized the proceedings between Mr. H and Mr. O as “damages arising out of business dealings.” This characterization led to the conclusion that the disclosure of the transcript was made for proceedings not relating to the enforcement of Income Tax Act. The Court found that this characterization of the facts was misleading.
In 2002, CRA interviewed Mr. O as part of an investigation and the information he provided formed the basis of the charges against Mr. H. In January of 2003, Mr. H sued Mr. O and Minutes of Settlement were produced. The Minutes of Settlement contradicted the information provided in the interview. In May of 2003, Mr. O gave a further interview to CRA. In this interview Mr. O confirmed his prior testimony (contrary to the Minutes of Settlement). The interview in May 2003 produced the transcript that Ms. Daley disclosed to Ms. T. A slew of litigation followed as Mr. H re-launched civil proceedings commenced in 2003 after successfully challenging the criminal proceedings on Charter grounds.
The Court found that if the CRA had not investigated Mr. H, Mr H would never have sued Mr. O. The Court determined that the causal connection between the CRA’s initial investigation and Mr. H’s subsequent civil proceedings was enough to meet the broad connection criteria in paragraph 241(3)(b) of the Income Tax Act.
Judicial Review of the Office of the Privacy Commissioner of Canada’s decision was granted. The Court concluded that a duty of fairness was owed to Ms. Daley. The Court also concluded that the Office of the Privacy Commissioner of Canada misstated the facts of the case by ignoring the context surrounding why proceedings against Mr. O were brought. The Office of the Privacy Commissioner of Canada’s report of findings was quashed and sent back to the Office of the Privacy Commissioner of Canada for redetermination. Judicial overview of administrative decisions also applies to other government institutions such as the Canada Revenue Agency. For some taxation issues, the Tax Court of Canada may not be the appropriate venue to challenge the decision. Our expert Toronto Tax lawyers can assess your tax issues and represent you at the appropriate court to provide you with the tax help you require.