The Federal Court decision in Canada (National Revenue) v Hydro-Québec (2018 FC 622) made a strong statement against an interpretation of the Canada Revenue Agency's (CRA's) powers that would allow almost unlimited invasions of taxpayer privacy. The decision considered the scope of the CRA's power to compel information about unnamed taxpayers from third parties under Section 231.2 of the Income Tax Act and the analogous Section 289 of the Excise Tax Act. In this context, the court held that it will strictly interpret the CRA's powers and exercise its discretion in appropriate cases in order to protect taxpayers from unjustified intrusions by the government and to prevent abusive fishing expeditions.


Under the Income Tax Act, the CRA has the power to compel information about a named taxpayer either from the taxpayer directly or from third parties. However, where it seeks to compel information about unidentified taxpayers from a third party, the CRA needs prior judicial authorisation. Under Section 231.2(3) of the act, the court can authorise the CRA's demand where the unnamed person or group is ascertainable and the purpose for collecting the information is to verify the taxpayer's compliance with tax obligations.


The CRA sought to obtain from Hydro-Québec a list of all of its business customers, including:

  • their names;
  • their addresses; and
  • certain other details.

Hydro-Québec was not opposed to providing the information, but the court found this to be irrelevant as it was the business customers, not Hydro-Québec, who were the targets of the CRA's inquiries, and these unnamed persons were not represented. Therefore, it fell to the court to consider their interests.


The court found that the CRA's request did not meet the requirements of Section 231.2 of the Income Tax Act because:

  • the business customers of Hydro-Québec do not constitute an ascertainable group; and
  • the information sought did not pertain to compliance with tax laws.

First, the group was not ascertainable because it was not identified by any characteristic relevant to tax compliance. The CRA failed to demonstrate that it was conducting a tax audit in good faith and with a genuine factual basis, as required by the case law. Instead, the CRA was in a preliminary stage of determining who should be audited.

Second, the information sought (ie, the names and contact information for accounts that Hydro-Québec classifies as 'business customers') was beyond the scope of Section 231.2. The information in itself had no connection to compliance with any tax laws.

Further, the court held that even if these requirements had been met, it would exercise its discretion to refuse the order sought by the CRA. The court reviewed the case law on Section 231.2(3), in which the courts have consistently expressed concerns about protecting against abusive state action that would violate taxpayers' right to be free from unreasonable search and seizure under Section 8 of the Canadian Charter of Rights and Freedoms. In this case, there would be a considerable invasion of privacy in light of:

  • the number of people indiscriminately targeted;
  • the fact that the information sought was in the form of an electronic database; and
  • the fact that there would be no restriction on the CRA's use of the information.

The court found this to be an appropriate case in which to exercise its discretion to refuse the authorisation sought by the CRA.


The case highlights the CRA's attempt to construe its powers in the broadest possible terms. The court held that the CRA's request was "a full-fledged fishing expedition" of "unprecedented magnitude" and "practically unlimited scope" with "a complete lack of consideration for the invasion of privacy and the consequences for all taxpayers involved in the request". Not only did the CRA interpret its own powers under Section 231.2(3) as practically limitless, but its interpretation of the court's discretion was so narrow as to render judicial involvement useless, making the protection of taxpayers "deceptive in practice".

The force with which the court rejected the self-serving interpretation advanced by the CRA should be encouraging for taxpayers. The case serves as an important reminder that, despite its considerable powers, the CRA cannot act outside the bounds of law and that it is the courts, and not the CRA, that interpret the law.

For further information please contact Jennifer Flood at Thorsteinssons LLP by telephone (+1 604 689 1261) or email ( The Thorsteinssons LLP website can be accessed at

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