ADCS-ADSC LITIGATION UPDATES: Key Actions, Milestones and Timeline Estimates

SUMMARY OF ADCS LITIGATION:

We have established a non-profit corporation, registered with Corporations Canada, with the objective of ending the harm caused by United States laws, and Canada’s compliance with the foreign laws, to people living outside the U.S.

Our corporation, the Alliance for the Defence of Canadian Sovereignty (see ADCS website), is at present focused on an ongoing lawsuit opposing the Government of Canada’s legislation that enables the U.S. FATCA (Foreign Account Tax Compliance Act) law. The Canadian legislation mandates that Canada must hunt down and turn over, to the U.S. Internal Revenue Service (by way of Canada Revenue), Canadians the United States deems on its own to be “U.S. persons”. ADCS claims that the Canadian legislation violates Canada’s Constitution (sovereignty) and Charter of Rights and Freedoms. Our attorney is Joseph Arvay and his team in Vancouver Canada.

The four Directors of ADCS are: Stephen Kish (Chair, Toronto Canada), John Richardson (Co-Chair, Legal Counsel, Toronto), Patricia Moon (Secretary-Treasurer, Toronto) and Carol Tapanila (Calgary, Canada). Three Directors have renounced U.S. citizenship and one remains a citizen of both the United States and Canada.

ADCS-ADSC CANADIAN FATCA IGA LAWSUIT:

2018 to 2019

Our Charter-Constitutional trial took place on January 28 to February 1 in Canada’s Federal Court in Vancouver. We lost the decision and are now considering next steps.

Key submissions can be found on our ADCS website and on this ADCS blog.

Here below is a “brief” sketch of key events in the ADCS FATCA IGA lawsuit against the Government of Canada:

The litigation process evolved into something much more complicated than any of us had expected — two (not one) trials — which might not be easily appreciated:

— On April 21, 2014 our Alliance for the Defence of Canadian Sovereignty (ADCS-ADCS; “ADCS”) is legally incorporated in Canada under the Canada Not-for Profit Corporations Act.

— Schedule 1 of our Articles of Incorporation provides “The Purpose of the Corporation”:

“The overall PURPOSE of the Corporation is to defend Canadian sovereignty and protect all persons in Canada from the attempts of other countries to impose their “extra-territorial legislation” on Canada. This includes, but is not limited to, defending Canadian sovereignty against the governments of foreign countries and from the Canadian government.

An immediate SPECIFIC AIM is to oppose the threat posed by the extraterritorial US law “FATCA” (Foreign Account Tax Compliance Act) – enacted by the United States (U.S.) Congress and embraced by the Government of Canada – through fighting by fundraising, funding, mounting a legal challenge, and by other related approaches. The immediate focus is to oppose attempts by the Government of Canada to change Canada’s laws that would:

1. Discriminate against persons in Canada of U.S. origin; and

2. Impose compliance with U.S. laws, enacted for the purpose of controlling the behaviour of Canadian financial institutions and their account holders in Canada….

— August 11, 2014: On behalf of two Plaintiffs (Gwen and Ginny) and ADCS (the client), our Vancouver legal team (Joe Arvay) files a lawsuit in Canada’s Federal Court.

Plaintiffs Claim (in the October 12, 2014 amended Claims) in part, that the FATCA IGA legislation violates the privacy and discrimination sections of Canada’s Charter of Rights and Freedoms (the “Charter”), the principle that Canada will not forfeit its sovereignty to a foreign state, and the Canada-United States Tax Convention Act, 1984.

— We wanted a “full” trial on all of the Claims with the hope that a win would prevent the automatic turnover, from Canada to U.S. IRS, of banking information from a group of Canadian citizens deemed, by the U.S./financial institution, to be “U.S. persons”.

— So what happened?

Canada responds that it would need to examine up to 100,000 potentially relevant documents as part of discovery — this would likely mean a decision on the very “complicated” full trial well past the time in September 2015 that banking information would begin to be turned over to the IRS.

But we did not want the FATCA turnover to begin. Should we nevertheless proceed with the full trial? What to do?

— Mr. Arvay recommended, and we agreed, to move forward on a revised strategy, to split up the trial into an immediate, and simpler, “Tax Treaty” component, for which a decision might, with some luck, be reached by September 2015 (the turnover month), and argue, if necessary, the much more complicated Charter component (which had no/little chance of moving quickly) in a separate trial at a later date.

— August 4-5, 2015: a summary trial is held in Federal Court, Justice Martineau presiding, dealing only with the “Tax Treaty” component.

[Justice Rennie of the Appeal Court (see below) later describes this trial as dealing “…exclusively with the allegation that the [FATCA IGA] disclosure was contrary to the Canada – United States Tax Convention Act 1984 (S.C. 1984, c. 20), [and] the Canada-US Tax Treaty and Income Tax Act (R.S.C. 1985, c. 1 (5th Supp.))…” and that “Charter challenges to the propose action were, on consent, not addressed and await trial.”]

— September 16, 2015: Justice Martineau rules against us, but notes that the Charter claims were not dealt with in the “Tax Treaty” trial.

— We still wanted to prevent, in the remaining two weeks, the September 30 FATCA turnover — and Mr. Arvay then proceeded with one final last-ditch attempt: A request to the Federal Court of Appeal to issue a “stay” (“interlocutory injunction”).

— September 30, 2015: Justice Rennie of the Appeal Court makes a ruling on the injunction, the morning before the turnover:

Justice Rennie describes our application in part:

“The appellants move on an urgent basis for an interlocutory injunction, effectively staying the disclosure of their financial information by the Canada Revenue Agency (CRA) to the Internal Revenue Service (IRS) under the authority of this legislation. The Minister has made clear that she intends to disclosure this information at the close of business today, hours from now.”

“By way of background, and at the highest level of generality, the legislation mandates the disclosure of information about “U.S. persons” held by Canadian banks to the CRA, and provides for the CRA to automatically disclose that information to the IRS on an annual basis. The IRS may or may not use that information to pursue enforcement actions against US persons resident in Canada”

“The Minister concedes the existence of a continuing live controversy.”

Justice Rennie describes our Plaintiffs:

“The appellants are “U.S. persons” by virtue of birth, but have spent their working lives in Canada and are Canadian citizens. They do not hold US passports. They claim to be “accidental Americans”, US citizens only by reason of birth. Their information would be disclosed under the regime, which could lead to the IRS enforcement action. The judgement below is candid that the application of the law could cause the appellants serious difficulties.”

Justice Rennie rules that Plaintiffs do have a “credible case to make an appeal” but that the “criteria of irreparable harm” to the Plaintiffs has not been met — and Canada’s FATCA IGA begins … with info on about 155,000 accounts turned over….now apparently up to 600,000/year.

— November 6, 2015: We disagree (and still do) with Justice Martineau’s arguments in his decision, but feel that it would be best to delay any appeal until it can be heard with the expected appeal of the separate Charter trial decision. Federal Court of Appeal (Madame Justice Dawson) agrees and gives us the OK to “park” this “Tax Treaty” appeal, where it now sits.

— January 28 – February 1 2019: After many delays, our Charter trial takes place in Federal Court, and we now await the verdict from Justice Mactavish.

— July 22 2019: Justice Mactavish rules against Plaintiffs and says that we have only limited expectation of privacy.

— July 22 – September 30 2019: Plaintiffs and ADCS are considering next steps and will advise supporters..

Thank you all for your kind support that makes this marathon lawsuit possible.

FINANCIAL STATEMENTS:

ADCS-ADSC Financial Statements for Fiscal Year Ending April 30, 2018 ,

ADCS-ADSC Financial Statements for Fiscal Year Ending April 30,2017

2017.04.07
ADCS-ADSC Auditor Report for YE April 30, 2016

2016.01.14:

ADCS-ADSC Auditor Report for YE April 30, 2015

OTHER DATES AND EVENTS:

 
2016.03.08
$594,970 has been donated to pay for the legal costs of our ADCS lawsuit in Federal Court. We now have raised the money needed to take the Constitutional-Charter trial to the Federal Court of Canada, which will take place some time in 2017.

2015.11.30
Mr. Arvay receives a reply from Crown counsels to his November 9 letter: The counsels advise that they have received no new instructions from the Attorney General and Minister of National Revenue defendants, meaning that Government will continue to defend the lawsuit. Crown counsels also undertake to provide by week end the documents that we need for the Charter Trial.

Many of us had some hope that the new Liberal Government might behave differently from the previous Conservative Government and decide to protect the rights of Canadians and the sovereignty of our country — and we are all disappointed in the response to Mr. Arvay’s letter. We now have no choice but to move to Charter trial.

2015.11.09
Canada now has a new Liberal Government and we have two new defendants who we are suing (new Attorney General, new Minister of National Revenue). Our Litigator Joe Arvay sent today a letter to the Justice lawyers representing the new defendants and asked that the lawyers pass on the letter to the defendants.

Mr. Arvay first reminds the defendants of the many pre-election comments made by Liberal Party MPs, including the new Prime Minister himself (Mr. Justin Trudeau) emphasizing that the FATCA IGA enabling legislation passed by the previous Conservative Government is insufficient to protect Canadians.

He then asks whether the defendants now wish to alter course regarding the defence of the lawsuit (e.g., move to repeal/amend legislation) and asks for the documents we need from the Crown lawyers in order to move on the Charter trial.

2015.11.06
Federal Court of Appeal gives OK for Plaintiffs to “park” Summary Trial appeal:
Following the negative decision of Justice Martineau in the Summary Trial, Plaintiffs Ginny and Gwen instructed the Arvay team to appeal the ruling. Consistent with Federal Court Rules, the Federal Court of Appeal was asked to permit the appeal to be heard together with all other (expected) appeals arising out of the Constitutional-Charter trial. The Crown attorneys did not object to this request and on November 6, 2015 Madam Justice Dawson of the Federal Court of Appeal granted permission to “park” (hold in abeyance) the summary trial appeal until all Charter trial appeals are heard.

This ruling is important because it preserves our right to appeal on arguments that might ultimately prove to be successful, and, by arguing all appeals in one hearing, will also reduce legal costs for all parties.

2015.09.30
Justice Rennie of the Federal Court of Appeal denies our request for a “stay” (injunction) to prevent the September 30 handover of bank account information to the U,S. IRS. Consequently, private information on 155,000 accounts is turned over to the IRS.

2015.09.16
Justice Martineau rules against Plaintiffs’ claims argued in August 4-5 Summary Trial. However, he notes that the Charter of Rights and Freedoms and Constitutional claims filed in August 2014 were separate and not dealt with in the summary trial.  Isaac Brock Society thread on Justice Martineau’s decision.

2015.08.17
Supporters raise a total of $500,000 for Canadian FATCA IGA lawsuit.

2015.08.10
Justice Martineau rules against our preliminary motions and the preliminary motion of the Government. See link.

2015.08.04 to .05
SUMMARY TRIAL HELD IN VANCOUVER FEDERAL COURT. Justice Martineau will try to reach decision by September 13.  Isaac Brock Society thread – Reports on Summary Trial.

2015.07.20
Plaintiffs provide Motion Record response to Government motion to strike portions of our expert witness testimony.

2015.07.13
Government provides Motion Record in response to our arguments for the Summary Trial. See Volume one and Volume 2.

2015.08.04-05
Federal Court of Canada did not grant us a date (that we requested) in June/July but has directed that our summary trial will be heard at a special sitting at the Federal Court, 701 West Georgia Street, Vancouver, British Columbia, commencing on Tuesday, August 4, 2015 at 9:30 a.m. for a maximum duration of two days.

GINNY AND GWEN’S MOTION RECORD FOR AUGUST 4-5 SUMMARY TRIAL IS NOW POSTED ON OUR ADCS WEBSITE. SEE VOLUME 1, VOLUME 2, VOLUME 3, VOLUME 4. and the Memorandum of Fact and Law.

In the first Government response to our Summary Trial filings (Volume 1 and Volume 2), Government states, as expected, that part of our expert witness testimony should be disallowed. Mr. Arvay disagrees. The Court has agreed to our request that this issue will be debated at the Summary Trial.

We argue that the FATCA IGA enabling legislation is contrary to sections of the Income Tax Act and the Canada-US Tax Treaty.

IN OTHER WORDS, THIS FIRST SUMMARY TRIAL DID NOT DEAL WITH ANY CHARTER-CONSTITUTIONAL ISSUES, WHICH WERE ARGUED SEPARATELY IN OUR MUCH LATER JANUARY 2019 TRIAL IN FEDERAL COURT (SEE ABOVE).

A full trial with Charter arguments could not happen until some uncertain time next year. The option of a summary trial was selected as our “best bet” from a number of options which offered the opportunity to provide some interim relief that could prevent bank information from being turned over to the IRS before September 30, 2015.

We made the decision to pursue a summary trial approach (in addition to preparing for the full trial with Charter arguments) that at least offered the potential of interim relief (stop the bank records from being turned over before September 30) rather than to not pursue this approach. Had we not taken this summary trial approach (which may or may not be successful), our inaction in waiting for a Charter trial some time in 2016 would have ensured absolutely that the bank records of innocent Canadians would have been turned over to the IRS by September 30, 2015. We hope that our supporters appreciate our position (see also below).

We have received these statements from Government Counsel:

“1) Canada confirms that it is not required to exchange information pursuant to the Intergovernmental Agreement until September 30, 2015.

2) Canada confirms that it has not yet exchanged information with respect to Reportable Accounts pursuant to the Intergovernmental Agreement. The provision of information with another tax administration is normally a confidential matter; however, Canada is prepared to confirm this point at this time.

3) A date for the exchange of information pursuant to the Intergovernmental Agreement has not been set. Again, while the provision of information with another tax information is a confidential matter, we are prepared to indicate that it will not occur before September 15, 2015. In addition, the CRA will only exchange such information through the existing provisions and safeguards of the Canada-US Convention.”

We confirm that the Arvay team will strongly make the case to Federal Court that the Court decision on the August 4 summary trial should be made prior to September 15. We cannot predict the outcome of the summary trial or whether any decision would be successfully appealed or negated in part or whole by legislation. However, we do feel that ultimately we will be moving to a full trial, and appeals, with Charter arguments, and need to prepare for this.

2015.05.01
Our supporters raise another $100,000 — making a total of $400,000 provided in legal fees to the Arvay team.

2015.04.16
Today the attorneys on both sides attended the first case management conference in which the Court (an arbitrator) imposed rules to deal with the Government of Canada-caused delay (review of 100,000 plus documents). I cannot disclose all information from that meeting or specifics of our strategy but can confirm again first that the litigation will be split up into two parts: an early summary trial which does not require any review of documents, and a separate later trial on the remaining constitutional (Charter) issues.

[Ginny, our plaintiff - retired attorney, explains the difference between a "summary trial" vs. the "full trial": "The main difference between a summary trial and a regular trial in Canadian Federal Court is that Summary Trials are more expeditious and generally faster to schedule to argue and to be heard ( i.e. shorter). In most cases it is conducted [only and unlike a regular trial] by means of affidavits and oral legal arguments. However, a judge can also order examinations for discovery and call for viva voce evidence, particularly of expert witnesses if s/he feels expert evidence greatly conflicts. There are also the usual bars to be met: a triable issue etc.” Here is a link here and here that she suggests but the articles are full of legalese. This is a “fast track” way of getting to trial sooner and for us, using the arguments that do not depend on review of the 100,000 plus documents that is holding up the full trial.]

While no date for the first summary trial was set at the case management conference it appears likely (but not definite) that a 2 day hearing will be set either late June or early July 2015 (but see above). The court also directed the federal government to provide us with their list of documents by mid-September. Depending on the outcome of the summary trial an actual trial on the remaining constitutional issues may or may not be necessary (there are many possible variations in this scenario) but if necessary our counsel will be trying to secure a date for the remaining trial in the Spring of 2016. We will release the application for the first trial when it is filed.

2015.03.13
Because Government of Canada will be reviewing over 100,000 “potentially relevant” documents in order to produce an affidavit of documents (see 2015.02.10) there will be a “departure from the timelines set out in the rules”. Consequently, the Federal Court has ordered that a case management judge (as an “umpire”) be brought into the process to keep the proceedings moving efficiently and fairly. This is not unexpected and can be considered to be a positive, but “minor” development. The Arvay team continues work on preparing a new application (see 2015.02.14) that does not depend on the affidavit of documents.

2015.02.14
In response to Government delay (see 2015.02.10) we have instructed Mr. Arvay to begin a legal proceeding (a summary trial) in Federal Court to prevent the Government from disclosing the banking information that it will be collecting from the banks to the U.S. government. Mr. Arvay’s position is that if this application (summary trial see above) is successful that it will be a better outcome than seeking an injunction since an injunction will only be effective until trial. It is possible that there may be an extra cost resulting from this application. See POST from our legal counsel John Richardson.

2015.02.10
Today we received correspondence from Government indicating that it will need “likely” sometime in “summer” to process “over 100,000” documents” possibly relevant to our lawsuit and which would be turned over to us. We interpret a “summer” delay to be a delay that more likely means sometime in fall 2015. The Court will grant Government what the Court considers to be a reasonable time to review the documents. The Government now confirms in this correspondence that it aims to introduce a significant delay in the litigation.

2015.01.24
“Small pockets” donors raise $300,000 to date with the monies forwarded to the Arvay legal team — an amazing achievement.

2014.11.10
See Government response to Claims.

2014.08.11
Constitutional Litigator Joseph Arvay, acting on behalf of Plaintiffs Ginny Hillis and Gwen Deegan, and the Alliance for the Defence of Canadian Sovereignty, files lawsuit in Canadian Federal Court opposing the legislation enabling the FATCA IGA. See Claims (amended 2014.10.07).

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