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Canadian Security Intelligence Service director Michel Coulombe waits to testify before the Senate national security and defence committee in Ottawa on Feb. 3, 2014.CHRIS WATTIE/Reuters

It's the kind of correspondence no self-respecting spymaster or security functionary would want to sign: "Dear Minister: our agents got called out for not telling the truth in court, and an important national-security power is now at risk as a result."

Yet this is the essence of memos that spy agency director Michel Coulombe and deputy minister Francois Guimont sent last December to Public Safety Minister Steven Blaney, after a judge's ruling ripped into Canada's two main intelligence agencies.

The Globe and Mail has obtained these (heavily redacted) memos under the Access to Information Act. At issue was a November ruling by Federal Court Justice Richard Mosley – a judge who had, five years earlier, presided over a surveillance union between the Canadian Security Intelligence Service and Communications Security Establishment Canada.

As Globe readers now know, Judge Mosley now rues aspects of his earlier decision. Last fall, he excoriated the agencies for not being forthcoming to his court, after he learned in a roundabout way that the CSIS-CSEC union he had blessed was actually a wider relationship, one involving U.S. and U.K. intelligence partners.

This ruling is now being appealed by the federal government. What's at stake is an arcane Canadian surveillance power known as a "DIFT" – we'll explain what it is in moment – which has apparently been used in dozens of terrorism cases, but the continued usage of which now appears to be in question.

Looking at the bigger picture, the stakes are decidedly high – everything from the nation's national security, to the rights and well-being of uncharged "targeted" Canadian terrorism suspects. While much is being kept murky, what's abundantly clear is that intelligence agencies risk a lot when they don't come clean to the courts.

Judge Mosley found that CSIS "has not met its duty of full and frank disclosure to the Court by not specifying that requests for DIFTS warrant powers are pursued in tandem with requests for foreign assistance," reads Mr. Guimont's Dec. 13 letter to the minister. He added that the ruling meant that the Canadian agencies can no longer legally "request foreign assistance to intercept the communications of Canadians abroad."

Mr. Coulombe, the career CSIS official recently appointed head of the agency, wrote the minister on Dec. 5 to say that the spy agency had been studying the ruling in order to come up with a "detailed evaluation on the repercussions for operations." (The findings have not been released.) He added that the DIFT power had been a "relatively new" intelligence tool for CSIS investigators, one put in place in 2009.

That year, CSIS and CSEC officials had appeared before Judge Mosley – in secret hearings – to argue they needed to be allowed to team up for more powers. Government lawyers told the court that Canadian intelligence had been losing track of dangerous "homegrown" terrorism suspects who had left Canada's borders for conflict zones.

Keeping tabs on such suspects is generally held to be a good idea – and, by Mr. Coulombe's own account before a Senate committee last month, there are 130 such Canadians out there in the wider world. Within CSIS, there is a perpetual fear that battle-hardened jihadist warriors could return from Syria, Somalia, Pakistan, or Yemen with fanatical ideas – or even take part in a globally significant terrorist attack, such as when two Canadians were part of an Algerian gas plant siege last year.

But while federal agents' pursuit of such suspects is not questioned, the methods of the pursuit have lately fallen under a cloud. Back in 2009, CSIS officials argued to Judge Mosley he needed to let them extend their domestic bugging warrants – by allowing the domestic intelligence officials at CSIS to enlist the more far reaching talents of CSEC, the nation's only true "foreign intelligence" service.

While CSEC is an electronic eavesdropping agency that is generally banned from spying on Canadians, it actually accomplishes much of its global bugging from within Canada's borders these days. One mysterious technique, never fully explained, is what's known as a "domestic interception of foreign telecommunications" – a DIFT.

Last year watchdog agencies in the federal government tipped Judge Mosley to the fact that the DIFT was not achieved by CSEC alone – but rather, by CSEC working in partnership with its "Five Eyes" allies in the United States, Britain, Australia and New Zealand. Ongoing leaks about the intense degree of partnership among these agencies has also clued the wider public into an important fact – in many ways, the Five Eyes can operate a lot more like one cohesive surveillance agency than five distinct ones.

When Judge Mosley realized that CSIS and CSEC officials had glossed over all this in their earlier testimony, he summoned them back to court last year and excoriated them in the ruling where he complained he had been misinformed and misled. His decision raises many intriguing questions that still hang – mostly, did it not occur to the CSIS and CSEC officials that their unarrested Canadian targets could be "detained or otherwise harmed" if they were red-flagged as terrorists abroad to Canada's more aggressive allies?

The matter is now heading to secret hearings at the Federal Court of Appeal. Nothing in the correspondence from Judge Mosley, Mr. Coulombe, Mr. Guimont speaks to what may have actually happened to the once-urgently pursued Canadian citizen terrorism suspects, whose communications were apparently tracked by Five Eyes agencies as they journeyed abroad.

Colin Freeze reports on national security from Toronto.