Our lawsuit claims that the legislation that enables the FATCA IGA “agreement” between Canada and United States violates Canada’s Charter of Rights and Constitution.
In this phase of the litigation, which little advances the lawsuit, the Canadian Government has asked, in a Motion, the Federal Court to compel the Plaintiffs to provide much additional private financial information. Our Vancouver litigators have had to spend time responding in a very lengthy document that such a request is unreasonable.
Personally, I am disappointed that our litigators have had to spend any time responding to the Government Motion.
Here is the “Overview” to the March 9, 2017 reply to the Government from Plaintiffs Ginny, Gwen, and Kazia:
“OVERVIEW [from pages 28 and 29 of Plaintiffs’ reply to Government Motion]:
1. More than two years after this constitutional and Charter challenge was initiated and its basis made clear to the defendant federal government ministries, the government is now asserting that it requires vast and invasive disclosure of private financial information concerning the Canadian citizen plaintiffs who have taken on the task and public responsibility of challenging highly problematic legislation on constitutional grounds.
2. The government’s motion is more than a mere fishing expedition. The effect of its application for such vast disclosure, if successful, could be to discourage Canadians from advancing precisely the sort of constitutional challenge being advanced in this proceeding.
The plaintiffs respectfully submit that the Court should not permit the government to require private citizens to comprehensively disclose years of private financial information as a precondition to challenging legislation on constitutional and Charter grounds.
This is especially so in the circumstances of the government’s present motion which, as set out below, completely fails to advance any reasonable theory as to how the documents it seeks are relevant to the plaintiffs’ challenge.
3. The government misleadingly glosses over the extremely remote nature of its theory as to the relevance of the disclosure it seeks. Put simply, the defendants [Mr. Justin Trudeau’s Attorney General and Minister of National Revenue] assert that, since Canadian financial institutions could be subjected to a 30% withholding tax on their operations in the United States if the impugned legislation is struck down as a result of the plaintiffs’ challenge, the plaintiffs must comprehensively disclose several years of their financial history on the tenuous and highly speculative theory that those financial institutions could pass on the costs of such a withholding tax to the plaintiffs in some unspecified and unquantified manner.
Among other things, this theory ignores the obvious fact that financial institutions – even when they face a new cost such as a foreign withholding tax – are obviously not automatically permitted to directly deduct amounts from their clients’ accounts in order to cover such costs.
4. As the government openly admits in, among other places, paragraph 16 of its Written Representations, its theory rests on the notion that debits in the plaintiffs’ bank accounts “may be increased” if the aforementioned withholding tax were imposed; while the plaintiffs’ financial holdings “could be devalued”. The who, what, where, and how of such speculative “increases” and “devaluations” are not explained. Suffice to say, these ideas require highly speculative and remote assumptions about how Canadian financial institutions and the U.S. government would react if the impugned legislation were struck down.
5. As for the government’s demand for particulars, the plaintiffs submit that this is simply a delay tactic as demonstrated by, among other things, the extreme lateness of the government’s motion. Not only is the government seeking particulars long after pleadings have closed (and indeed more than two years after receiving the plaintiffs’ original claim), but the particulars sought are, in substance and to the extent that have not already been provided by the plaintiffs, requests for evidence which the government will have the opportunity to request through discoveries.
It is trite that requests for particulars are an inappropriate means of seeking to obtain evidence from an opposing party. The pleadings are intended to illustrate the case to be met; not how it will be proven. In any event, it is extremely rare for particulars to be sought, let alone granted, where, as here, more than two years have passed since the relevant pleading was served and discoveries are contemplated to take place soon.
There are no exceptional circumstances that could justify the government’s delay.“
[The above is part of a 216 page document containing much legalese and private financial information of the Plaintiffs.]
@Bubblebustin. Yes, you do remember correctly. A Canadian judge ruled that a Canadian bank with US operations (TD) could not recover US tax levied against a US TD account from a Canadian citizen/resident’s Canadian TD accounts. The case and the judgement were reported here on IBS years ago but I’ll be damned if I can find it now.
As for the US threat of withholding 30% of any US source payments to the Canadian banks if the Canadian government loses the lawsuit and the IGA is struck down, the sums involved would be so vast that confiscating the entire net worth of all the plaintiffs wouldn’t even move the needle.
Personally, I believe that 30% threat is totally hollow. Unilateral 30% withholding would violate both NAFTA and WTO rules and would spark a tit for tat trade war that would be a disaster for both counties. Its not going to happen. The US would, in effect, be saying that Canada has now suddenly become a tax haven and the entire world knows that is a ridiculous assertion. I hope the IGA is eventually struck down and if is, I predict that nothing will happen except perhaps the 2 countries might quickly negotiate a new “IGA lite” that both can live with just so some face can be saved. Or Congress might repeal FATCA in which case this whole situation from beginning to end has been a colossal waste of time and money.
The banks are not the defendants here, so why all this nonsense about a possible but more likely improbable 30% withholding? If the FATCA IGA is ruled against by the court (on constitutional grounds) then the banks could become the plaintiffs in an altogether different lawsuit against the Canadian government or better yet why not go after the source, the US government itself, IF it actually attempts to go ahead with what I believe to be an illegal economic sanction against a supposed-to-be ally? Ginny, Gwen and Kazia should not be involved in anyway with that. It’s not their doing; it’s not their problem. The banks didn’t battle FATCA as vigourously as they should have before it was implemented so it’s too darn bad if they have to do this later. It’s beyond ludicrous to think the banks could seek damages from our plaintiffs when it’s the US government that created the problem and the Canadian government that caved to the USA’s unreasonable demands without any consideration for the Canadian citizenry. Just my two cents … not sure if I’m making any sense though because this legal stuff is pretty daunting.
@EmBee. Yup, the US government managed to create a problem where previously there was none and then our Canadian government compounded it by playing chicken little and signing our charter rights away under that IGA. And now the Liberals are spending taxpayer money defending that bad decision. (Not to mention lying about it in order to get elected.)
A pox on all of them. With incompetence and stupidity like this its no wonder the general public has so little respect for politicians on either side of the border.
@ maz57
You put that into one very-good-plus-plus nutshell. Thanks!
@Ginny, I will say for the umptenth time you are indeed the proverbial perfect plaintiff for this litigation and if someone did not know better it would appear that you prepared your life for this ove4r four plus decades!
I would relish reading a deposition where you are asked about your alleged US Citizenship.
As this case goes on it allows time to focus on what is the core of the lawsuit and we are at the point of asking; Can the Government of Canada impose a foreign citizenship on a Citizen of Canada when that citizen never took any affirmative action to obtain or retain that foreign citizenship?
To be blunt, I believe that it is a Charter violation and a general human rights violation for the Government of Canada to call or classify you anything other than Canadian. You have done nothing since age 18 (21) to obtain and/or retain US Citizenship nor do you even hold yourself out to be a US Citizen.
I would love to see whoever is in charge of “Immigration Canada” named as a defendent in this case. Treating you differently for banking compared to other Canadians is bad enough but a defacto stripping of your Canadian Citizenship in favour of some foreign citizenship is abhorrent.
In order to treat you differently than your fellow Canadians you must be stripped of your Canadian Citizenship and it must be replaced with a foreign citizenship. IF this can be done for a FATCA IGA then there is no stopping it being used in other applications and that is what is dangerous.
Again I have fond thoughts of thinking of how such a deposition would go….
Oh and Joe Arvey………I may disagree with him on some things politically but my money has been well spent.
Ginny: Thank you for answering my question. I can see now that a criminal case and a Charter Challenge case would be treated differently with regard to delays. Thanks again, and, as always, thank you for *everything* you and Gwen and Kazia are doing on behalf of all of us.
@EmBee Agreed, the banks should consider suing the U.S. – if it ever got to witholdings – as the U.S. would be out to enforce a “treaty” that is arguably unconstitutional as the IGA was never submitted to the Senate for review and ratification.
The fact that the U.S. has not taken any steps toward reciprocity – such as requiring all U.S. banks to ferret through their account lists for Canadian persons — would indicate that it has been the U.S. who first broke the treaty, that has not yet been officially ratified as required by the U.S. Constitution. A standby backup that Canada may also use is that the agreement itself is against the Canadian public policy of Residence Based Taxation.
@ George
I am not seeing the core issue the way you are. Your view ( imposing foreign citizenship) might apply to the three plaintiffs and get us off the hook as well as Canadian born citizens who have an american parent or two but that is not what we are aiming at.
I want the CAN gov’t to show me how section 1 of the Charter justifies importing a foreign tax law on only certain Canadians thereby treating them differently and stripping them of their rights.
For someone shouting loud and clear all my life that I am a Canadian, do they now expect me to shout that I am only a second class Canadian?
It has been clear from the get go that the Canadian government entered into the IGA solely to protect the banks and not its own citizens. And there was a perfectly simple reasonable way to do that which either they failed to see or chose not to and which I do not believe can be justified under any policy sec.1 argument, especially as that policy includes a potentially huge transfer of assets from the Canadian economy to a foreign bully country.
@Maz57
I wonder if this court precedent is useful to the ADCS lawsuit. Stephen?
@Ginny
“It has been clear from the get go that the Canadian government entered into the IGA solely to protect the banks and not its own citizens.” Not only that, now the government seeks to weaponize the banks against you!
EmBee & JC: When this is all over and FATCA is dead and gone I would just LOVE to see financial institutions the world over sue the US government for the colossal amount of money they have all wasted to comply with it. We will all deserve a good gloat on that happy day! I’m looking forward to it!
‘I am not seeing the core issue the way you are. Your view ( imposing foreign citizenship) might apply to the three plaintiffs and get us off the hook as well as Canadian born citizens who have an american parent or two but that is not what we are aiming at.’
I think it would apply to all Canadian citizens and, although it’s not the core issue, it looks like a very powerful additional issue. How can the Canadian government impose a foreign citizenship on a Canadian citizen, regardless of what reason the foreign government might have for doing so?
@MuzzledNoMore. The “FFI” are complying with local law. The issue of compliance costs – and lawsuit to recover – would need to be taken up by the “foreign” governments. The case would be on expenditure of compliance based on expectations of reciprocal data. With FATCA stricken then there could never be reciprocal data provided. The IGA have a copout clause (pointed out by Allison Christians) that the data need not be provided if it would violate public policy. This is what the U.S. might say (that is what the Canadian Government could have and can say about their public policy of residence based taxation). Then it gets back to the rotten IGA agreement requiring Canada to provide data first and not on a simultaneous basis, to eliminate the possibility that the U.S. might never provide reciprocal data.
@Canadian Ginny One option the Canadian Government could have taken was to be very public about the requirements of FATCA. The “agreement” could have been called out as a rotten one, and the mafia style economy bankruptcy blackmail threat could have been very public. I would have expected more more from the Canadian Government along these lines as so many in Canada may be considered U.S. persons. This remains an option for the Canadian Government.
The Canadian federal government is defending the automatic turnover of personal and financial information to a foreign government, yet an expert in the US says that the IRS is not capable of keeping that Canadian (or any other) information secure and private:
ex.
“..1-5 INTRODUCTION § 1.01
The problem is that government has a little or no ability to establish, operate, and maintain the technology necessary to make FATCA work. Complicating the matter is that government cannot provide any reliable assurance that the private financial information obtained or millions of U.S. and non-U.S. persona and institutions can be in any meaningful sense be considered secure….”..
“.. FATCA is dependent on the IRS to maintain the security of the financial information submitted, which at present does not appear reliably secure….”…….
1-29 INTRODUCTION § 1.04[1]
“..However, there is no assurance that the IRS is fully secure nor is there any indication that the IRS would take financial responsibility should disclosure of private financial information cause financial losses or other damages…”
1-67 INTRODUCTION § 1.11[2]
Ҥ 1.19 FATCA AND CRS COMPLIANCE 1-110
“……….requires that, among other matters, Compliance Officers will be personally liable. Government appears to have sovereign immunity. Considering that there is no governmental FATCA computer system that is reliably certified cyber secure, there is the potential for loss of private financial information by persons inside or outside of the financial institution or in government. It is reasonable to expect that breaches of cyber security will bring litigation against the offending financial concerns that could include class action, derivative lawsuits, and even other regulatory enforcement actions where officers and directors may have personal civil and potentially criminal liability exposures. Special FATCA insurance programs are being created but the cost of FATCA liability insurance in problematical as there is no historical date as to the frequency and severity of risks……”
Ҥ 1.07 FATCA AND CRS COMPLIANCE 1-52
“……….A 2014 GAO Report entitled “IRS Need To Address Control Weaknesses That Place Financial and Taxpayer Data At Risk” should be a red flag to taxpayers and financial institutions subject to FATCA. There are an extensive number of GAO reports highlighting significant risks. The GAO determined that weaknesses remain that could affect the confidentiality, integrity, and availability of financial and sensitive taxpayer data. During fiscal year 2013, IRS management devoted attention and resources to addressing information security controls, and resolved a number of the information security control deficiencies that were previously reported by GAO. However, significant risks remained. Specifically, the agency had not always (1) installed appropriate patches on all databases and servers to protect against known vulnerabilities, (2) sufficiently monitored database and mainframe controls, or (3) appropriately restricted access to its mainframe environment. In addition, IRS had allowed individuals to make changes to mainframe data processing without requiring them to follow established change control procedures to ensure changes were authorized, and did not configure all applications to use strong encryption for authentication, increasing the potential for unauthorized access.”…”……..
“…1-53 INTRODUCTION § 1.08
An underlying reason for these weaknesses is that IRS has not effectively implemented portions of its information security program…..”……..
Lexisnexis® Guide to FATCA Compliance: Chapter 1
LexisNexis® Guide to FATCA Compliance (4th ed., 2016)
Texas A&M University School of Law Legal Studies Research Paper No. 16-17
120 Pages Posted: 9 Mar 2016 Last revised: 2 Sep 2016
William Byrnes
Texas A&M University School of Law
Robert J. Munro
Texas A&M University (TAMU), School of Law, Students
Date Written: 2016
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2742383
JC: Of course, you’re right. Local law is what is truly at issue and governments around the world should all be sued, not just the US. It remains that everybody has wasted their money and their time over all of this while at the same time there is such dire need for the basic necessities of life in so many places. I can’t help but think what all these billions of dollars could have accomplished. The waste is criminal and it has been forced upon everyone from the top down. Governments … all of them …. and their thoughtless, kow-towing law-making machinery are entirely to blame. Unfortunately, the money is gone. Lawsuits of the type I’m talking about will only waste more. It would just be selfishly satisfying for the culprits to be hauled up on the carpet and made to answer for what they’ve done.
badger – there’s a 5th edition of that paper – published last week – https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2926119
I haven’t compared the two versions, so I’m not sure what has changed.
Thanks Karen, I missed that revision. The whole thing is well worth reading.
And thank you very much for the great work over athttp://fixthetaxtreaty.org/ . Much of it is very similar to the issues raised here. Your work is very valuable locally but also has significance for those in Canada and elsewhere. The more we can raise these issues globally, the more we can show how the US is acting like a blood sucking parasite, intent on extraterritorially leeching away the local post-tax legal savings of ordinary people outside its borders, all around the world, solely on the basis of parentage, birthplace, etc. with NO economic connection to the US – and extorting our own local governments to assist – doing so at the point of the FATCAsanction gun, and afraid of losing trade, and other favour.
Ex. http://fixthetaxtreaty.org/2017/02/24/foi-take-2/ this has much in common with the issues being fought here re constitutional and Charter rights, right to privacy, search and seizure, etc. Interesting to compare what our respective Privacy Commissioners in Canada and Australia have been saying and doing – or not doing.
On March 10 the Defendants (Mr. Justin Trudeau’s Attorney General and Minister of National Revenue) in our FATCA IGA lawsuit confirmed to the Court that they would be replying to Plaintiffs’ arguments that the Government request for additional financial information from Plaintiffs is unreasonable:
The gov’t request for financial info is a stalling tactic. It is irrelevant to the case, but they (using our tax dollars) will throw everything they can into the mix to delay things. They will continue to do so until some judge compels them to do otherwise. They have an endless source of funds (us), and their hope is the plaintiff will run out of funds to fight them. The so-called Justice Minister could instruct them to stop the delaying tactics, but that will never happen. Just another Liberal lie, along with 10 bn deficits.
Canada’s Voluntary Disclosure Program becomes more American in tone:
“The alleged purpose of the changes is to give the appearance of fairness to all taxpayers. However, one wonders whether these recommendations will discourage non-compliant taxpayers from becoming compliant; they may decide to take their chances rather than risk the antagonistic process.”
This from the Revenue Minister who implied that someone who is against FATCA might be in favour of tax evasion.
http://www.mondaq.com/article.asp?articleid=576262&email_access=on&chk=1526458&q=950196
@bubblebustin, the Feds had David Rosenbloom and D. Scott Michel of Caplin Drysdale and other US tax professionals up here getting US tax lawyer advice re ‘voluntary’ disclosure programs, etc. back in 2011 and 2013;
https://openparliament.ca/search/?q=rosenbloom%20Person%3A%20%22H.%20David%20Rosenbloom%22
https://openparliament.ca/search/?q=scott%20AND%20michel%20Person%3A%20%22Scott%20D.%20Michel%22
I’m curious about something that appears in the Federal Court of Canada recorded entry for the litigation on Feb 21, 2017. There it says:
Result: This Court Orders that the first six digits of the Plaintiffs’ Canadian social insurance numbers and American social security numbers shall be redacted in materials filed or to be filed with the Court,
This is confusing to me because the statement of claims states that none of the three plaintiffs have American social security numbers.
@Dash
I don’t know the answer to this but tend to think as you do; that they do not have social security numbers. Perhaps the judge just issued a general statement to try and address the issue of protecting their identities. ???????
Hopefully SK or Ginny will wade in with the right answer…….or……GwEvil???/
BTW, I am pretty sure who is one of the key players in convincing the Liberals and Justin Trudeau to go along with FATCA. This lady. She should been enemy number one in Canada.
Dr. Huguette Labelle
https://en.wikipedia.org/wiki/Huguette_Labelle
Second I have been a little disappointed there have not been more attacks from the tax justice folks towards our legal team, our plantiffs, and ADCS much in some way more tax justice types went after another prominent lawyer Marie Henein for representing accused sex assault perpretrator Jian Ghoumeshi. Interestingly Henein’s husband works for a big time white shoe law firm that refused ADCS as a client to avoid offending the tax justice crowd.
https://en.wikipedia.org/wiki/Marie_Henein
http://www.feministcurrent.com/2016/04/04/marie-henein-not-a-feminist-not-a-surprise/
“In 2008, Henein ensured hockey coach, David Frost, was acquitted of sexual exploitation charges. In order to win her case, Henein attacked the credibility of the victim, who had been 16 at the time of the alleged assault, based on “minor inconsistencies in the various statements she gave police.” She went on to suggest that “she was in cahoots with another young woman to bring down Mr. Frost,” who was 29 at the time of the alleged assaults. Similarly, Henein picked on inconsistencies (which do not disprove violence) in the testimonies of Ghomeshi’s victims, and framed communications between Lucy DeCoutere and another complainant as a plot to enact revenge on her client.”
Second I have been a little disappointed there have not been more attacks from the tax justice folks towards our legal team, our plantiffs, and ADCS much in some way more tax justice types went after another prominent lawyer Marie Henein for representing accused sex assault perpretrator Jian Ghoumeshi.
+++++++++
@Tim
This will no doubt mark one other time when I should have listened to my gut and offered no response to a comment. And continued on my much needed hiatus from Brock. ( Or as my father used to say: this is a golden opportunity to keep your mouth shut.)
However, I am really trying to not misinterpret what the above words mean.
1) did you mean surprised rather than disappointed? Did you wish the three of us received more harassment from the justice department than to date? I expect you will have your wish if that is the case when our Discoveries take place as I predict they will be less than unfriendly.
2) there is little comparison between a civil and a criminal case. There are albeit some that call Gwen, Kazia and I and others tax cheats, implying criminality but all know this is a civil constitutional case.
3) Marie Henein is a very capable experienced dedicated criminal lawyer who is charged with doing the best representation for her client as any other lawyer is. Either a jury or a judge decides whether she has succeeded in that job. You may not like her use of her skills but she has them honed, and she doesn’t need me to defend them. The onus is always on the Crown and sometimes, as in the Ghoumeshi case, they must deal with the unfortunate circumstances of witnesses who take it upon themselves to collaborate before trial. Little blows a case wider open than that.
4) Lastly tax lawyers did not go after Ms. Henein; it was a criminal matter so if that happened, it could have been Crowns.
5) Her spouse turned us down as did similar large Bay Street firms. While we had to wrap our minds around that, we were fortunate that choosing Joe Arvay as our lawyer granted us the benefit of the experienced tax lawyers in his firm.
The above are my opinions and some facts. Lawyers are familiar with being publicly criticised, especially criminal defence lawyers. When I was practicing family law, I had my fair share of it depending on who I represented. Ms. H and I lost no sleep.
And it is possible I did not understand what you were implying above. Perhaps I am over protective of the other two plaintiffs as they face their first Discoveries. I try to assure Gwen and Kazia that they will be fine in Examinations, because I know they will be. As they are intelligent women, they also recognize it can be harrowing, so how are your comments to be taken as helpful? Knowing that the plaintiffs will not be testifying in open court due to the nature of a summary trial, we know the heat will be turned up very high under us in Discoveries. Our answers could then be incorporated into further documents filed after by the Defendants so as to draw attention to them for interpretation and use by the hearing Justice. Furthermore, we have received sufficient approbation from tax experts who have publicly tried to shame us for, if we succeed, in ‘bringing the Canadian banking system down’. Which as we know, it utter nonsense. We know why we are doing this and for whom. The rest doesn’t matter.