" There are potentially serious consequences that can flow from the failure to obey a compliance order, including fines and/or imprisonment. In light of this, the Court indicated in SML Operations that it would not exercise its discretion to order the production of the documents sought by the Minister unless it was satisfied that the statutory conditions of section 231.7 of the ITA had been “clearly met”: at para. 15.
" After reviewing the conflicting evidence as to the true identity of the addressee, the Court concluded in SML Operations that “[i]n light of the uncertainty as to whether the requirement was addressed to the respondent [corporation] or to [the individual] in his personal capacity, I am not satisfied that the first condition [that the person against whom the order is sought “was required under section 231.1 or 231.2 to provide the access, assistance, information or document” sought by the Minister] has been met”: at para. 19. The same may be said here."
The decision raises other issues but doesn't answer them:
(1) CRA said its demand was under ITA s. 231.1, which is the rule that allows auditors to go to a business place and ask questions of people running it. But ITA s. 231.2 is the rule that allows demands for information and documents relating to the enforcement of the ITA. Does s. 231.1 allow the CRA to ask for the kinds of documents CRA sought -- e.g., about other parties -- which aren't normally the kind one must keep at one's office as "books and records"?
(2) Suppose CRA had sent the demand to Mr. Chamandy. Was he obliged to comply? He was a director. But the records weren't his. This is a technical distinction that might not matter. The Court's ruling just seems to leave open to the CRA the prospect of re-sending the demand to Mr. Chamandy as director, such that if he failed to comply, CRA could enforce the demand through the Court.
Going to Court is extremely expensive today. The kind of technical decision in this case fails to resolve the real issues between taxpayer and collector; so it risks dragging out the dispute rather than shortening it, adding wasted cost rather than reducing it. And what guidance do we get for future cases?
The Court did comment helpfully, though, on solicitor-client privilege:
 Given the above finding, it has not been necessary to address the parties’ submissions with respect to the issue of solicitor/client privilege. I do not wish to conclude, however, without expressing my dismay over the fact that the November 29, 2012 demand letter expressly sought the disclosure of advice provided by lawyers with respect to a number of issues. As counsel for the Minister quite properly conceded at the hearing, this information was clearly protected by solicitor/client privilege. As a consequence, production of the information should never have been sought.
See Canada (National Revenue) v. Chamandy, (2014 FC Mactavish)