Death knell for resisting RFIs?

  • March 14, 2022
  • Rob Kreklewetz & Stuart Clark

Zeifmans LLP v. Canada (National Revenue) (2021 FC 363) (“Zeifmans”) and Tellza Inc. v. Canada (National Revenue) (2021 FC 853) (“Tellza Inc.”) show the grim odds for those resisting CRA attempts to gain access to information held by their clients.

Subsection 289(1) of the ETA (and subsection 231.2(1) of the ITA) provide the Minister with broad powers to compel the production of information and documents from any person “for any purpose related to the administration or enforcement” of any person’s tax obligations. This broad power is theoretically limited by subsections 289(2) and (3) of the ETA (and subsections 231.2(2) and (3) of the ITA), which require the Minister to obtain judicial authorization if the information or documents requested relate to third-party “Unnamed Persons.” Authorization is granted only if that person or group is “ascertainable” and the request for information (RFI) is made to “verify [their] compliance.”

The classic RFI example in the Unnamed Persons context is the situation described in Roofmart (2020 FCA 85), where the CRA sought to obtain a huge amount of customer information from which they planned to detect potential non-compliance by other taxpayers. Commentators at the time speculated that Roofmart marked the end of effective opposition to the CRA’s use of RFI’s for unnamed person information because of the strict wording and interpretation of subsections 289(3) of the ETA and 231.2(3) of the ITA. Provided that the person or group was ascertainable and the RFI was made to verify compliance, the judicial authorization appeared to follow as a matter of course.

Since Roofmart, parties subject to audits and RFIs have been forced to try residual and, unfortunately, unsuccessful strategies for curtailing the CRA’s reach.

In Zeifmans, the appellant sought judicial review of an RFI on the ground that it dealt with Unnamed Persons without judicial authorization. The CRA had commenced an audit of clients of the appellant accounting firm and served an RFI requesting certain information and documents related to those clients as well as “any one or more individuals that the request applies to” (these were the “Unnamed Persons,” according to the firm). Interestingly, the Court found that the firm had not established that the CRA was “engaged in an investigation of the Unnamed Persons’ compliance with the ITA.” To the court, the possibility that the CRA could audit one or more of the Unnamed Persons in the future using the information it obtained did not make the RFI improper.

In Tellza Inc., the appellant corporation advanced the argument that the CRA could not use its general audit powers under ETA section 288 to request the production of all of Tellza’s electronic accounting data. It argued that the CRA was instead required to issue an RFI under subsection 289(1), because only the RFI power could require them to produce that information. The court found that although the general audit powers under section 288 were somewhat limited in terms of what questions the CRA could compel a person to answer, they could still be used to access all of Tellza’s records and no RFI was required.

By way of commentary, it appears that a combination of the CRA’s general audit powers and its RFI powers has demolished whatever procedural guardrails were intended by ETA subsection 289(2) and ITA subsection 231.2(2). In a world where the CRA can easily obtain information on Unnamed Persons in the course of an audit (Tellza Inc.) or ancillary to an RFI of a named person for later use (Zeifmans), one begins to wonder why a requirement for judicial authorization even exist? Which then causes one to wonder whether the Courts have been a bit overzealous in advancing the CRA’s interests in this area?

Even where the judicial authorization requirement is engaged, Roofmart also seems to demonstrate that this hurdle may be extremely low, if not entirety existent. This then creates an awkward situation for large corporate taxpayers who may—despite the dire odds created by the case law—still want to resist CRA demands for information or documentation because of the reputational risk involved in releasing it, and the harm to potential clients, customers, and suppliers.


Rob Kreklewetz is a partner at Millar Kreklewetz LLP and past chair of the CBA Commodity Tax, Customs, and Trade Section. Stuart Clark is an associate at the firm.