— SEPTEMBER 30 MORNING BUT NO DECISION YET FROM COURT ON OUR REQUEST FOR A STAY.
— Remember, win or lose the stay, we move on to the Constitutional-Charter trial.
Here is a link to part of our request for a stay and here is part of Government response.
— I also enclose below a September 28 response of the Arvay team to some key points raised by Government.
— Starting first with part of our request for a stay in the turnover:
Appropriateness of Injunctive Relief
58. The Appellants acknowledge that the three part test In RJR-MacDonald Inc. v. Canada (A.C), [1994] 1 S.C.R. 311 applies to this application.
59. With respect to whether the Appellants have raised a “serious question” on the appeal, that branch of the test will be satisfied if on a limited review of the issues the Court concludes that the Appellants -14- “may” have a meritorious appeal: Coca-Cola Ltd v. Pardhan,
(1999),85 C.P.R. (3d) 501 (F.C.A.).
60. In this case, that threshold is easily satisfied. For example, in his reasons for judgment, Martineau J.:
a. entirely fails to address the meaning and import to be accorded the Technical Interpretation, which unambiguously states that Article XXVII prohibits bulk exchange of financial institution
account information;
b. engages in an unduly formalistic and narrow construction of Article XXVIA;
c. entirely fails to address the Article XXV admission which unanswerably shows that the Impugned Provisions violate the Canada-US Tax Treaty; and
d. reaches the conclusion that for the purposes of Canadian law, the Intergovernmental Agreement is a treaty or listed agreement for the purposes of s. 241 (4) of the ITA when that was not pled by the Respondents, where the Intergovernmental Agreement explicitly purports to be subordinate to the Canada-US Tax Treaty, and where the Appellants sought to tender evidence showing that from the point of view of the other party to the agreement it certainly is not a treaty.
61. With respect to whether the Appellants would suffer irreparable harm, there is a real risk that the appeal would be rendered moot insofar as the existing Account information of U.S. Persons is concerned if an injunction were not granted.
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62. Under Article 4 of the Intergovernmental Agreement, Canada is required to begin providing the Accountholder Information to the United States by September 30,2015.
63. Canada previously advised that it intended to begin disclosing the Accountholder Information to the United States on September 23, 2015. On September 18, 2015 the Appellants informed the
Respondents of their intent to seek a stay and requested the Respondents’ confirmation that any exchange of information pursuant to the Impugned Provisions would be delayed as a result of it. On September 22,2015, the Respondents informed the Appellants that no information would be exchanged until September 29,2015.
64. Once Canada has disclosed the Accountholder Information, the information will be irretrievable. The impact on the individuals whose Accountholder Information is disclosed will be permanent and irremediable.
65. This is particularly so given that this first disclosure will identify the Appellants and others in their position to the IRS as US Persons where previously the IRS would not have had that information.
66. Thus, once the information is disclosed, the primary purpose of the appeal for such persons and for such information, to prevent such disclosure, will have been rendered moot.
67. With respect to the balance of convenience, the Appellants acknowledge that there is a strong presumption in favour of legislation enacted by Parliament being in the public interest, which presumption is rebuttable if it can be shown that injunctive relief would serve a public interest greater than that served by maintaining the challenged legislation in immediate force: Allard v. Canada, 2014 FC 280.
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68. Further, it should be noted that the present motion does not seek a complete suspension of the IGA, but rather only an exemption in respect of a subclass of persons to whom it applies and then only insofar as it seeks to enjoin the disclosure of Accountholder Information and not the collection. Courts have drawn a distinction between injunctions which seek to suspend legislation, and those which seek exemptions from the application of legislation. Those seeking only exemptions are subjected to a less stringent test:Manitoba (Attorney General) v. Metropolitan Stores (MTS) Ltd.,
[1987] 1 S.C.R. 110.
69 . Moreover, in the present case, there are, on their face, competing public interests embodied in section 241 of the ITA, the Tax Treaty Act, and the Impugned Provisions.
70. Privacy over taxpayer information has been recognized by this Court and the Supreme Court of Canada as an important public interest under s. 241 of the ITA because it is a key tool to promote compliance in self-assessment tax systems: Slattery (Trustee oj) v. Slattery, [1993] 3 S.C.R. 430; Gernhart v. Canada, [2000] 2 F.C.R. 292 (F.C.A.).
71. ‘The Technical Interpretation evinces that pnvacy of taxpayer financial account information specifically is a public interest that animates the Canada-US Tax Treaty and, accordingly, therefore the Tax Treaty Act.
72. There can be no doubt that unless an injunction is granted to prevent imminent disclosure under the Intergovernmental Agreement, the public interest in privacy of taxpayer information will have been compromised. The question as to whether such compromise is lawful is the very question under appeal. In that sense, the status quo very much favours the granting of an injunction.
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73. Furthermore, there is reason to believe that the specific public interest the Impugned Provisions purport to advance, enhanced taxpayer compliance, will not actually be achieved. Indeed, Martineau J.
explicitly recognized in paragraph 76 of his Reasons that in many quarters, the regime the FATCA regime is regarded as ineffective, as well as costly and unjust. The record before him amply supports the conclusion that such may well be the case.
74. It is to be recalled that both the Tax Treaty Act and the Impugned Provisions contain paramountcy clauses. If in fact the provisions of the two pieces of legislation cannot be reconciled in the manner that either the Appellants or Respondents advocate, and if the paramountcy clause in the Tax Treaty Act were to be found primary over the paramountcy clause in the Impugned Provisions, then failure to issue an injunction will have resulted in the will of Parliament to protect the public interest in privacy over taxpayer confidentiality as expressed in s.241 of the ITA, the Tax Treaty Act having been subverted.
75. On the other hand, if an injunction is granted, there will only be a delay while the appeal proceeds, and the Appellants submit that in that case the appeal should be expedited to minimize the delay. Further, it is apparent from the Notice that the IRS is aware that a number of jurisdictions may not be ready to exchange information by the original deadlines pursuant to their IGAs, and is for that reason treating 2014 and 2015 as “transition years” and granting certain countries extensions for the exchange of information. It is submitted that common sense would prevail, and the United States would refrain from taking any steps while its ally and treaty partner adheres to the rule of law.
—- Part of the Government’s response to our request for a stay:
OVERVIEW
1. The Appellants seek an injunction against the Crown in a non-constitutional case. This is something this Court has no jurisdiction to grant.
