Short holding. A taxpayer who receives a lawful and specific CRA audit request can't avoid producing every record merely by saying the request is confusing or that some accounts may be inaccessible, without evidence explaining the problem. In Minister of National Revenue v. Fosty, 2026 FC 1276, the Federal Court ordered compliance because the statutory requirements were established and the taxpayer had produced none of the information sought. The order also required payment of $3,750 in costs.
John Aaron Fosty filed personal income tax returns for 2022 and 2023 with letters claiming that some earnings were private income taxable at zero. The CRA began an audit and sent a detailed request in December 2025 for financial records and completed personal expenditure worksheets. A second request followed in January 2026. The auditor made repeated attempts to communicate, supplied contact information and offered directions about obtaining help with the audit. A January letter from Fosty said books and records were enclosed, but the court found that no records actually accompanied it. By April, he told the auditor that he wouldn't comply unless he was paid for doing so. Nothing requested had been delivered when the matter reached court.
The Minister sought a compliance order under subsection 231.7(1) of the Income Tax Act. That provision requires the Court to be satisfied that the person was lawfully required to provide the documents or information, that they failed to comply and that the material isn't protected by solicitor client privilege. Justice Avvy Yao-Yao Go examined the actual request letters rather than assuming that an audit request must be enforceable because the CRA issued it. They identified recognizable categories of records, including banking, investments, property tax and insurance documents, together with the worksheets. The evidence supported each statutory element.
Fosty said the demands were unclear and that frozen accounts prevented access. The Court found no evidence that any account had been frozen and no explanation for why an account restriction, even if it existed, would prevent him from supplying other items such as tax returns or insurance policies. Nor had he shown that he tried to clarify the requests or submit what he could. He had access to the auditor's contact details throughout. The Court also noted the contradiction between claiming not to understand the audit and preparing a detailed document demanding further particulars as a condition of participation.
The procedural history affected the result and the costs. Attempts at serving the court papers required further steps, including a substituted service order. Fosty asked to postpone the October hearing shortly before it began, saying arrangements for assistance had fallen through. He provided no corroborating details, hadn't filed a responding record and had already had considerable time to prepare. The judge refused the adjournment. A document he tried to file at the hearing wasn't accepted because there was no proof it had been served on the Minister. His objections to process didn't displace the evidence of noncompliance.
The Court directed Fosty to deliver all requested information and documents and the completed expenditure worksheets within 30 days of the October 20, 2026 order. He was also ordered to pay $3,750 in costs within 60 days. In assessing costs, the judge considered the result, avoidable problems with service and the late adjournment request. Fosty's assertion that he couldn't afford costs wasn't supported by financial evidence. The judge expressly declined to decide whether he fitted a particular category of pseudolegal litigant because doing so wasn't necessary to resolve the application.
This case concerns an enforceable request for records during an audit, not the final calculation of tax or whether the taxpayer's zero tax position was correct. A business owner or individual faced with a request they genuinely can't meet should identify what is missing, explain why, preserve any privilege claim and supply accessible material rather than refusing everything. The statutory safeguard for solicitor client privilege wasn't lost in this case. The Court found there was simply no evidentiary basis to invoke it for the documents requested. Ignoring the request transformed an ordinary audit into litigation and a separate costs obligation.
The full 43 paragraph Federal Court reasons and signed operative order are available in a faithful free reproduction. Binder reviewed the complete reasons and the order.