Federal Court of Appeal upholds disclosure of eBay PowerSeller records to CRA

In September of last year, I blogged about a decision of the Federal Court of Canada that ordered eBay to hand over to the Canada Revenue Agency information about Canadian "power sellers". (See: Canadian Privacy Law Blog: Federal court orders disclosure of eBay PowerSeller records to Canada Revenue Agency.)

That decision was appealed to the Federal Court of Appeal, which upheld the decision on November 7, 2008:

eBay Canada Ltd. v. Canada (National Revenue), 2008 FCA 348 (CanLII)

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[46] In order to induce compliance with a requirement, subsection 231.6(8) provides that a judge may prohibit a person who has failed to comply substantially with the requirement from relying on foreign-based information covered by it in a civil proceeding relating to the enforcement or administration of the Act.

[47] The scheme of section 231.6 suggests that Parliament was concerned that it could be unduly onerous for a person to be required to produce material located outside Canada and in the possession of another person, and that the section may operate in an unduly extraterritorial manner. While these concerns may be taken into account on a review by a judge for unreasonableness, they are largely irrelevant to the information (bulky as it may be) that is the subject of the requirement in the present case.

[48] This is because, with the click of a mouse, the appellants make the information appear on the screens on their desks in Toronto and Vancouver, or anywhere else in Canada. It is as easily accessible as documents in their filing cabinets in their Canadian offices. Hence, it makes no sense in my view to insist that information stored on servers outside Canada is as a matter of law located outside Canada for the purpose of section 231.6 because it has not been downloaded. Who, after all, goes to the site of servers in order to read the information stored on them?

[49] Nor is the extraterritorial application of the Act a significant issue on the present facts. For example, the agreements with eBay Canada expressly provide that they may disclose confidential “eBay System Information” (which the appellants say includes information about PowerSellers) which “is required to be disclosed by order of any court”: Appeal Book, vol. II, pp. 295-96. Nor does the requirement oblige a person outside Canada to do anything.

[50] Counsel concedes that the information identifying PowerSellers registered as having an address in Canada would be located in Canada if the appellants had downloaded it to their computers. In my view, it is formalistic in the extreme for the appellants to say that, until this simple operation is performed, the information which they lawfully retrieve in Canada from the servers, and read on their computer screens in Canada, is not located in Canada.

[51] I would only add that, although Justice Hughes does not frame his reasons by reference to the statutory definition of “foreign-based information” in subsection 231.6(1), he clearly meant that the information in question could be “located” at places other than the site of the servers where it is stored. For example, he stated 2007 FC 930 (CanLII), (2007 FC 930 at para. 23) that information stored electronically outside Canada “cannot truly be said to ‘reside’ only in one place”, and (supra at para. 25) the information required by the Minister “is not foreign but within Canada” for present purposes.

[52] Having concluded that information in electronic form stored on servers outside Canada is in law capable of being located in Canada for the purpose of section 231.6, I now consider whether Justice Hughes’s application of the law to the particular facts of this case was vitiated by palpable and overriding error. In my view, it was not. In finding that the information in question was located in Canada within the meaning of section 231.6, Justice Hughes properly took into consideration the fact that eBay US and eBay International had granted the appellants access to information about Canadian PowerSellers for the purpose of their business, and that they indeed used it for this purpose. The facts support the following conclusion by Justice Hughes (supra at para. 25):

For perhaps corporate efficiency the information is stored elsewhere, but its purpose is in respect of Canadian business. The information is not foreign but within Canada for the purposes of section 231.2 of the Income Tax Act.

[53] Since the facts of this case do not engage section 231.6, it is not necessary to consider whether the presence of that section in the statutory scheme reduces the Minister’s powers under section 231.2 when the requirement relates to “foreign-based information”.

See also: Michael Geist - Federal Court of Appeal Upholds Ebay Power Seller Decision, EXCESS COPYRIGHT: eBay "PowerSeller" data is "both here and there".