T-876-86
T-2270-86
Monica Lau (Plaintiff)
v.
The Queen in right of Canada, as represented by
the Minister of National Revenue (Defendant)
and
Monica Lau (Applicant)
v.
Public Service Staff Relations Board and Trea
sury Board (Respondents)
INDEXED AS: LAu V. M.N.R.
Trial Division, Reed J.—Ottawa, October 23 and
November 3, 1986.
Income tax — S. 241 proscribing disclosure of information
obtained by or on behalf of M.N.R. — Plaintiff dismissed
from employment as tax auditor with Department of National
Revenue — Dismissal based on own tax return information —
Whether use of information by M.N.R.'s officials contravening
s. 241 — National Revenue officials not entitled to access to
tax information for purposes of disciplining employees or
other personnel matters — Income Tax Act, S.C. /970-71-72,
c. 63, s. 241 (as am. by S.C. 1980-8/-82-83, c. 68, s. 117) —
Financial Administration Act, R.S.C. 1970, c. F-10, s. 7.
Public service — Labour relations — Grievance —
P.S.S.R.B. hearing — Motion to prohibit Board from receiving
in evidence tax returns of Department of National Revenue
employee dismissed for tax evasion — Whether giving of
information violating non-disclosure provisions of Income Tax
Act — Argued that plaintiff should be treated same as
employees of other departments — Defendant arguing Act, s.
241 allowing disclosure of information in connection with
administration of Act and employee discipline administration
— Personnel matters not "proceedings relating to the adminis
tration or enforcement" of Act — Reception of evidence not
necessarily excess of Board's jurisdiction — Income Tax Act,
S.C. 1970-71-72, c. 63, s. 241 (as am. by S.C. 1980-8/-82-83,
c. 68, s. 117).
Judicial review — Prerogative writs — Prohibition — To
prevent P.S.S.R.B. from receiving in evidence, at grievance
hearing, income tax returns of employee dismissed for tax
evasion — Writ of prohibition not available in circumstances
— Reception of evidence not necessarily constituting excess of
Board's jurisdiction.
Practice — Evidence — P.S.S.R.B. grievance hearing —
National Revenue employee dismissed on basis of information
in own income tax return — Convicted of tax evasion
Admissibility of income tax returns and related information
— Not violating Income Tax Act, s. 241 — Reception of
evidence by Board, if proferred, not necessarily excess of
jurisdiction — Income Tax Act, S.C. 1970-71-72, c. 63, s. 241
(as am. by S.C. 1980-81-82-83, c. 68, s. 117).
Practice — Pleadings — Motion to strike — Action for
declaration Department of National Revenue's officials not
entitled to disclose tax return information for use against own
employees — Arguments supporting motion substantive in
nature — Cannot be considered on motion to strike — Motion
dismissed — Federal Court Act, R.S.C. 1970 (2nd Supp.), c.
10, ss. 17(1), 18 — Canadian Charter of Rights and Freedoms,
being Part I of the Constitution Act, 1982, Schedule B,
Canada Act 1982, 1982, c. 11 (U.K.), s. 24(2).
The plaintiff was discharged from her employment as a tax
auditor with the Department of National Revenue. Her dis
charge was based on information she had provided to the
Department in her income tax returns. Prior to the hearing of
her grievance by the Public Service Staff Relations Board, she
raised a preliminary objection that the intended use by the
Department's officials of the information obtained would vio
late section 241 of the Income Tax Act. Section 241 prohibits
any official from disclosing information obtained by or on
behalf of the Minister of National Revenue except as author
ized by the section. The plaintiff filed a statement of claim
wherein she seeks, essentially, a declaration that since National
Revenue employees are forbidden to disclose tax return infor
mation with respect to employees of other departments, they
should not be entitled to do so with respect to their own
employees. The defendant's argument as to the merits is that
the disciplining of an employee falls within the exception
provided for in section 241, being part of the "administration of
the Act" and that therefore disclosure is authorized.
The defendant's motion is for an order striking out the
statement of claim on the grounds that it discloses no reason
able cause of action and that the Court is without jurisdiction.
The plaintiff's cross-motion is to amend her statement of claim
to add a paragraph thereto and for a writ of prohibition.
Held, the motion to strike and the motion for a writ of
prohibition should be dismissed. The motion to amend the
statement of claim should be allowed.
To support its motion to strike, the defendant advanced the
arguments that a declaratory action could not succeed: when it
serves no purpose (the evidence, even if obtained illegally,
would still be submitted to the Board); when academic or
hypothetical matters are involved; and when to allow it would
interfere with proceedings in a criminal court. It was further
argued that declaratory relief could not be granted with respect
to procedural matters and that courts will not interfere with
matters being dealt with by another court or tribunal and,
finally, that since the Federal Court of Appeal had jurisdiction
over the proceedings of the Board, it would be inappropriate for
the Trial Division to grant a declaration related to the
anticipated introduction of evidence before the Board by Na
tional Revenue officials. All those arguments were, however,
substantive in nature. They all relate to the merits of the claim
and could not properly be considered on a motion to strike. The
defendant's additional argument, that the operation of section
18 of the Federal Court Act precluded the granting of declara-
tory relief against the Crown, its servants or agents in other
circumstances, was also a substantive one. The motion to strike
was dismissed.
The defendant submitted that what was being asserted by the
proposed amendment to the statement of claim was a disguised
wrongful dismissal claim which the Court could not entertain.
The Court was not persuaded that this was so patently obvious
that the question should not be left for a trial judge to consider.
The motion to amend the statement of claim was therefore
allowed.
The motion for a writ of prohibition preventing the Board
from receiving the tax return information was dismissed. "Pro-
ceedings relating to the administration or enforcement of [the]
Act", which are excepted from the general rule against disclo
sure, do not encompass the disciplining of employees or other
personnel matters relating to National Revenue officials. The
latter, when operating as employer pursuant to their delegated
authority from Treasury Board, are not entitled to have access
to tax information for personnel purposes. Nevertheless, in the
present circumstances, a writ of prohibition cannot issue. The
case is not one where the reception of improper evidence would
necessarily constitute an excess of jurisdiction.
CASES JUDICIALLY CONSIDERED
REFERRED TO:
Bell Canada v. Attorney General of Canada, [1978] 2
F.C. 801 (T.D.); Bayer A.G. v. Commissioner of Patents
et al. (1984), 79 C.P.R. (2d) 166 (F.C.T.D.); The Royal
Bank of Scotland Ltd, v Citrusdal Investments Ltd,
[1971] 3 All ER 558 (Ch.D.); Chaffey v. Mount Cook
Air Services Ltd., [1969] N.Z.L.R. 25 (S.C.); Samuel
Varco v. The Queen et al. (1978), 87 D.L.R. (3d) 522
(F.C.T.D.); Terrasses Zarolega Inc. et al. v. Régie des
installations olympiques, [1981] 1 S.C.R. 94; 124 D.L.R.
(3d) 204; Hollinger Bus Lines Limited v. Ontario Labour
Relations Board, [1951] O.R. 562 (H.C.); Terrace View
Apartments Ltd. v. Attorney-General of Nova Scotia
(1978), 26 N.S.R. (2d) 490 (S.C.); Cassidy v. Stewart,
[ 1928] 3 D.L.R. 879 (Ont. S.C.); R. v. Wray, [1971]
S.C.R. 272; R. v. Collins (1983), 33 C.R. (3d) 130
(B.C.C.A.); Smith v. Attorney General of Ontario,
[1924] S.C.R. 331; Jamieson et al. v. Attorney General
of British Columbia, [1971] 5 W.W.R. 600 (B.C.S.C.);
Solosky v. R., [1978] 2 F.C. 632; 86 D.L.R. (3d) 316
(C.A.); Connaught Laboratories Ltd. v. The Queen, Fed
eral Court, Trial Division, T-2040-78, judgment dated
July 11, 1978, not reported; Operation Dismantle Inc. et
al. v. The Queen et al., [ 1985] 1 S.C.R. 441; Imperial
Tobacco Ltd. v. Attorney-General, [1981] A.C. 718
(H.L.); Affiliated Offices Ltd. et al. v. Bud Cullen et al.
(1976), 76 DTC 6279 (F.C.T.D.); aff d on other grounds
in [1982] I S.C.R. 609 (sub nom. Fee et al. v. Bradshaw
et al.); Maritime Telegraph & Telephone Co. Ltd. v.
C.L.R.B., [1976] 2 F.C. 343 (T.D.); Bell v. Ontario
Human Rights Commission, [1971] S.C.R. 756; Marga-
ret, Duchess of Argyll (Feme Sole) v. Duke of Argyll,
[1965] 1 All E.R. 611 (Ch.D.); Attorney-General y
Jonathan Cape Ltd, [ 1975] 3 All ER 484 (Q.B.D.).
COUNSEL:
N. J. Schultz and Gerald R. Morin, Q.C. for
plaintiff.
L. P. Chambers, Q.C. and Jacqueline Morgan
for defendant.
SOLICITORS:
Soloway, Wright, Houston, Greenberg,
O'Grady, Morin, Ottawa, for plaintiff.
Deputy Attorney General of Canada for
defendant.
The following are the reasons for orders ren
dered in English by
REED J.: The defendant seeks to strike out the
plaintiff's statement of claim on the grounds: that
it discloses no cause of action; that this Court is
without jurisdiction. The plaintiff filed a cross-
motion to amend the statement of claim and add a
paragraph thereto as well as a motion seeking a
writ of prohibition.
The facts which gave rise to these proceedings
are not disputed. The plaintiff was discharged
from her employment as a tax auditor with the
Department of National Revenue on August 28,
1985. She was subsequently charged with tax eva
sion and pleaded guilty to that charge on Decem-
ber 3, 1985. Her discharge was based on informa
tion she had provided to the Department of
National Revenue in her income tax returns of
1981, 1982 and 1983. On August 29, 1985 after
receiving her letter of discharge, the plaintiff'filed
a letter of grievance. That grievance finally came
before the Public Service Staff Relations Board on
March 5, 1986. Prior to the hearing by the Board
and at the commencement of that hearing, the
plaintiff's representative raised a preliminary
objection. The objection was with respect to evi
dence it was anticipated the employer would
introduce: the plaintiff's income tax returns and
other information related thereto. It is argued that
the giving of such information by officials of the
Department of National Revenue would constitute
a violation of section 241 of the Income Tax
Act [S.C. 1970-71-72, c. 63 (as am. by S.C.
1980-81-82-83, c. 68, s. 117)]:
241. (1) Except as authorized by this section, no official or
authorized person shall
(a) knowingly communicate or knowingly allow to be com
municated to any person any information obtained by or on
behalf of the Minister for the purpose of this Act ... or
(b) knowingly allow any person to inspect or to have access
to any book, record, writing, return or other document
obtained by or on behalf of the Minister for the purposes of
this Act ...
(2) Notwithstanding any other Act or law, no official or
authorized person shall be required, in connection with any
legal proceedings,
(a) to give evidence relating to any information obtained by
or on behalf of the Minister for the purposes of this Act ...
or
(b) to produce any book, record, writing, return or other
document obtained by or on behalf of the Minister for the
purposes of this Act ....
(3) Subsections (1) and (2) do not apply in respect of
criminal proceedings, either by indictment or on summary
conviction, under an Act of the Parliament of Canada, or in
respect of proceedings relating to the administration or enforce
ment of this Act ....
I note that, while it is not at all clear from the
proceedings and other evidence on file, it has been
assumed by all parties, for the purposes of this
case, that the information in question was obtained
by the National Revenue officials from informa
tion supplied by the claimant as a taxpayer. It has
been assumed that the information was obtained
by the National Revenue officials in question as a
result of that Department's role in the administra
tion and enforcement of the Income Tax Act and
not as the result of some other role or from some
other source. The argument put by the plaintiff's
representative is simple: the plaintiff, as an
employee of the Department of National Revenue,
should be in no different position from the
employees of other government departments; offi
cials of National Revenue would not be able to
disclose tax return information with respect to the
employees of other departments; they should not
be entitled to do so with respect to employees of
their own Department. I quote from counsel's
written argument:
... Her Majesty's tax collectors cannot having obtained from
a person who also happens to be an employee information
wearing their tax collector hats take off those hats and,
putting on their employer hats, use that same information to
discipline that person as an employee.
Counsel for the defendant's argument with
respect to the merits is twofold: (1) section 241
expressly allows officials of National Revenue to
disclose information "in the course of [their]
duties in connection with the administration or
enforcement" of the Income Tax Act (subsection
241(4)); and the disciplining of an employee is
part of the administration of the Act; (2) even if
the disclosing of such information to the Public
Service Staff Relations Board in this case could be
an offence under section 241 of the Act, it is the
criminal sanctions thereunder which should be left
to operate and it would be premature for this
Court to make any anticipatory type declaration.
I should note that it is not the merits or demerits
of the discharge that is being attacked in these
proceedings. It is the use which has been made and
which it is apprehended will be made of the plain
tiffs tax returns and related information that is in
issue. If the information being presented to the
Board came from public documents filed in rela
tion to the tax evasion charges, there would be no
dispute (except perhaps before the Board with
respect to relevancy) as to the appropriateness of
their disclosure. The issue is thus a very narrow
one relating to the actions of National Revenue
employees.
The plaintiff's statement of claim seeks a decla
ration. The declaration sought is variously framed
as: that information obtained under the Income
Tax Act may not be communicated except as
authorized by section 241; that section 241 prohib-
its the defendant's communication of information
obtained under the Act in the course of his duties
to supervise and control employees; the defen
dant's intended use of the information obtained
from the plaintiff's income tax returns would con
stitute an offence. While these may not be felici-
tously framed and the last, at least, seems to be a
kind of declaration the Court would not give, the
thrust is, as noted above, to elicit from the Court a
declaration that Revenue Canada, as employer, is
in the same position as any other government
departments with respect to the use of tax return
information concerning its employees.
Damages are also claimed in the statement of
claim, and the amendment the plaintiff seeks to
add would set out as the underpinning for that
claim an allegation that the defendant (its servants
or agents) acted in wilful disregard of its duty not
to disclose information contained in the plaintiff's
tax returns and in wilful disregard to the damage
caused thereby.
On reviewing the defendant's arguments with
respect to their motion to have the plaintiff's state
ment of claim struck out, I find it quite remark
able that they have chosen to proceed in this
fashion. The arguments being made are properly
ones that should be brought in the hearing of the
claim itself, not by way of a summary proceeding
on a motion to strike.
The defendant argues that the statement of
claim discloses no reasonable cause of action
because:
(1) Declaratory actions are not rendered with
respect to procedural matters and the courts will
not interfere by way of declaration with matters
being dealt with by another court or tribunal—in
support are cited: Bell Canada v. Attorney General
of Canada, [1978] 2 F.C. 801 (T.D.), at pages
805-806; Bayer A.G. v. Commissioner of Patents
et al. (1984), 79 C.P.R. (2d) 166 (F.C.T.D.), at
page 168; The Royal Bank of Scotland Ltd, v
Citrusdal Investments Ltd, [1971] 3 All ER 558
(Ch.D.); Chaffey v. Mount Cook Air Services
Ltd., [1969] N.Z.L.R. 25 (S.C.); Samuel Varco v.
The Queen et al. (1978), 87 D.L.R. (3d) 522
(F.C.T.D.); Terrasses Zarolega Inc. et al. v. Régie
des installations olympiques, [1981] 1 S.C.R. 94,
at pages 102-105; 124 D.L.R. (3d) 204, at pages
210-212; Hollinger Bus Lines Limited v. Ontario
Labour Relations Board, [1951] O.R. 562 (H.C.),
at pages 570-571; Terrace View Apartments Ltd.
v. Attorney-General of Nova Scotia (1978), 26
N.S.R. (2d) 490 (S.C.), at pages 507-508.
(2) Declarations will not be granted when they
serve no purpose and in this case, even if the
evidence was illegally obtained by offices of Reve
nue Canada, that would not prevent it being sub
mitted to the Board—in support are cited: Ter-
rasses Zarolega Inc. et al. v. Régie des
installations olympiques, supra, at pages 106-107
S.C.R.; 213 D.L.R.; Cassidy v. Stewart,* [1928] 3
D.L.R. 879 (Ont. S.C.), at page 883; R. v. Wray,
[1971] S.C.R. 272, at page 287; Canadian Charter
of Rights and Freedoms [being Part I of the
Constitution Act, 1982, Schedule B, Canada Act
1982, 1982, c. 11 (U.K.)] subsection 24(2); R. v.
Collins (1983), 33 C.R. (3d) 130 (B.C.C.A.), at
pages 142, 149-150.
(3) Declarations are not granted with respect to
academic or hypothetical matters—in support are
cited: Smith v. Attorney General of Ontario,
[1924] S.C.R. 331; Jamieson et al. v. Attorney
General of British Columbia, [1971] 5 W.W.R.
600 (B.C.S.C.), at pages 606 and 608; Solosky v.
R., [1978] 2 F.C. 632, at pages 633-634; 86
D.L.R. (3d) 316 (C.A.), at page 318; Connaught
Laboratories Ltd. v. The Queen, Federal Court,
Trial Division, T-2040-78, dated July 11, 1978,
unreported, at page 13; Operation Dismantle Inc.
et al. v. The Queen et al., [1985] 1 S.C.R. 441, at
page 447.
(4) Declarations will not be granted when they
interfere with the procedure in the criminal
courts—in support are cited: Imperial Tobacco
* Editor's Note: The name "Stewart" is spelled "Stuart" on
the first page of the case.
Ltd. v. Attorney-General, [1981] A.C. 718 (H.L.),
at pages 742, 746, 752; Affiliated Offices Ltd. et
al. v. Bud Cullen et al. (1976), 76 DTC 6279
(F.C.T.D.) (aff d on other grounds in [1982] 1
S.C.R. 609 [sub nom. Fee et al. v. Bradshaw et
al.]).
(5) A declaration should not be granted because
the Federal Court of Appeal has jurisdiction over
the proceedings of the Board and, therefore, it is
not appropriate to grant a declaration relating to
the apprehended behaviour of the officers of Na
tional Revenue before that Board.
All of these arguments are substantive argu
ments as to whether or not a declaration should, in
fact, issue. They are arguments that relate to the
merits of the claim and whether and in what
circumstances a court's discretion to grant a decla
ration will be exercised. They are not arguments
properly brought on a motion to strike.
The defendant's arguments with respect to lack
of jurisdiction are of a similar substantive nature.
It is argued that since section 18 gives the Federal
Court jurisdiction to grant declarations with
respect to federal boards, commissions and tri
bunals, Parliament intended to exclude from sub
section 17(1) jurisdiction to grant declaratory
relief against the Crown, its servants or agents, in
other circumstances (an argument that seems
spurious at best). It is argued that this Court is
without jurisdiction because declarations are only
granted with respect to a plaintiff's legal rights
and a defendant's legal obligations. It is argued
that declarations are not granted to restate the law
or to answer hypothetical or premature questions.
Clearly, these are arguments that relate to the
merits of the claim, not jurisdiction. The defen
dant's motion to strike will, therefore, be dismissed
with costs.
With respect to the plaintiff's motion to amend
her statement of claim, I have not been persuaded
that there is any good reason why it should not be
allowed. It may be, as counsel for the defendant
argues, that what is thereby being asserted is a
disguised wrongful dismissal claim, which it is not
within this Court's jurisdiction to entertain. But I
am not persuaded that this is so patently obvious
that the question should not be left for a trial
judge to consider. It is conceivable that the dismis
sal could be justified but the disclosure of the tax
returns still be a wilful or negligent act causing
damages (though damages might be difficult to
prove). In any event, in my view, it is more appro
priate to decide this issue after hearing the evi
dence. No prejudice will be visited on the
defendant by allowing the amendment to the state
ment of claim, at this stage of the proceedings. It
will better enable all the issues in the case to be
decided.
That leaves for consideration the plaintiff's
application for a writ of prohibition to prevent the
Board receiving the tax information.
Counsel for the defendant argues that the dis
closure of information by National Revenue
offices falls within the exemption set out in subsec
tion 241(3) because the disciplining of Revenue
Canada employees is part of the "administration
of the Income Tax Act". I am not persuaded that
that is a valid argument.
In my view "proceedings relating to the
administration or enforcement" of the Income Tax
Act referred to in subsection 241(3) do not encom
pass the disciplining of employees or other person
nel matters relating to National Revenue officials,
any more than the administration of the Aeronau
tics Act [R.S.C. 1970, c. A-3] encompasses per
sonnel matters relating to officials of the Depart
ment of Transport. As counsel for the plaintiff
points out, Treasury Board is the branch of gov
ernment which has responsibility as employer with
respect to government employees. Some of Trea
sury Board's authority may be delegated to deputy
heads of departments pursuant to section 7 of the
Financial Administration Act, R.S.C. 1970, c.
F-10 but that does not subtract from Treasury
Board's primary responsibility in this area. Coun
sel argues that Treasury Board itself has no right
of access to the information in question, nor do its
delegates in other departments. Equally then, it is
argued that when National Revenue officials are
operating as employer pursuant to their delegated
authority from Treasury Board, they are not en
titled to have access to the tax information for
such personnel purposes. I agree with that
contention.
Nevertheless, I cannot find that a writ of prohi
bition properly lies against the Board in this case.
Counsel for the plaintiff argues that if the Board
accept the evidence, it would be exceeding its
jurisdiction and, therefore, prohibition lies to pre
vent that occurring. He argues that in the analo
gous cases of solicitor-client privilege and Crown
privilege, a writ of prohibition will lie. He notes
that counsel for the defendant in his memorandum
of law respecting the motion to strike (page 27,
paragraph 48) admitted that a writ of prohibition
was a possibility.
Mr. Justice Addy's comments in Bell Canada v.
Attorney General of Canada, [1978] 2 F.C. 801
make it clear that in some cases the reception of
improper evidence may constitute an excess of
jurisdiction and in such cases, prohibition will lie.
Also, if the challenge to jurisdiction were on a
clearly fundamental ground such as lack of consti
tutional competence as in Maritime Telegraph &
Telephone Co. Ltd. v. C.L.R.B., [1976] 2 F.C. 343
(T.D.), or a clear lack of statutory jurisdiction as
in Bell v. Ontario Human Rights Commission,
[1971] S.C.R. 756, prohibition would lie. But in
this case, I cannot say that the reception of the
evidence, if it is proferred, by the Board would
necessarily constitute an excess of jurisdiction. I
have not been referred to any jurisprudence which
requires, for example, the Board to monitor and
refuse on its own motion evidence such as that in
issue in this case. Certainly, if the evidence were
proferred with the consent of the parties, there
would be no excess of jurisdiction. Consent of the
parties in the case of a lack of constitutional or
statutory jurisdiction does not cure the defect.
The plaintiff's concern is not so much with the
anticipated conduct of the Board as it is with the
anticipated conduct of officials of National Reve
nue. Counsel for the plaintiff recognizes this to be
the case. He originally framed the action as one
seeking declaratory relief: a declaration relating to
the anticipated conduct of the National Revenue
employees. he candidly stated that the claim for a
writ of prohibition against the Board was brought
for tactical reasons "to ensure that no part of this
case falls between the cracks". I think counsel's
original conception of the appropriate remedy was
correct. As he points out, there are a number of
cases in which an injunction has issued to prevent
the disclosure of privileged information by private
individuals: Margaret, Duchess of Argyll (Feme
Sole) v. Duke of Argyll, [1965] 1 All E.R. 611
(Ch.D.); Attorney-General y Jonathan Cape Ltd,
[1975] 3 All ER 484 (Q.B.D.). An injunction does
not in most instances lie against the Crown. There
fore, as counsel concluded an action for declarato-
ry relief is the appropriate one to bring.
The motion to strike will be dismissed. The
motion to amend the statement of claim will be
allowed. The motion for a writ of prohibition to
prevent the Board using any income tax evidence,
should it be proferred, will be dismissed.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.