The Queen v. Indalex, 84 DTC 6492, [1984] CTC 373 (FCA)

Heald, J:—This is an appeal from portions of an order made by the Trial Division on an interlocutory motion. The order under appeal provided, inter alia'.

(1) that the appellant’s motion to dismiss the respondent’s action be dismissed;

(2) that the appellant’s motion for discovery of Victor Johnson be dismissed;

and

(3) that Walter Edwin Stracey be required to reattend for further examination for discovery on behalf of the respondent to answer further questions on the matters specified in the order.

The appeal to this Court was restricted to item 2, supra, and to the request for a declaration that, for the purposes of any further examination for discovery, loans made by Pillar International Services Limited to Rallip Canada Limited, whether subsequent to the years under appeal or not, are relevant to the issues in this action.

Issue A — The compellability of Victor Johnson to be examined for discovery either as an officer of the respondent or in his personal capacity.

The appellant submits that because Victor Johnson is a “‘main resource person” for the respondent in this litigation, he has a continuing and sufficient connection with the respondent to be an “officer” of the respondent for the purposes of Rule 465(1 )(b). This Rule reads as follows:

465. (1) For the purposes of this Rule, a party may be examined for discovery, as hereinafter in this Rule provided,

(b) if the party is a corporation or any body or group of persons empowered by law to sue or to be sued, either in its own name or in the name of any officer or other person, by questioning any member or officer of such corporation, body or group,

The taxation years in issue in this action are 1971 to 1974 inclusive. Similar issues arise in respect of the taxation years 1975 and 1976.

The record establishes that the appellant has already had substantial discovery of Walter E Stracey, the chairman and chief executive officer of Indal Limited, the respondent’s parent company. This discovery has extended over 13 days resulting in 1,495 pages of transcript. As noted supra, the order of the Trial Division requires him to reattend for further discovery in respect of certain specified matters. In the discovery thus far, approximately 250 undertakings were given by counsel for the respondent in response to questions asked by counsel for the appellant. Since the appellant proceeded with the discovery of Mr Stracey at some length, it seems to me that this examination should proceed to its conclusion, the appellant having accepted him, at the outset, as a proper person to be examined on behalf of the corporation. The respondent has a right to have the proper kind of person examined since that person speaks for this corporate respondent and the answers of that person bind the respondent.* [1] It may be that in the event the continued examination of Mr Stracey is unsatisfactory from the appellant’s point of view that she may wish to consider an application under Rule 465(19) for an order of the Court to examine Mr Johnson. That Rule reads as follows:

465. . ..

(19) The Court may, for special reason in an exceptional case, in its discretion, order a further examination for discovery after a party or assignor has been examined for discovery under this Rule.

However, on this record I am not persuaded that “special reasons” and “an exceptional case” have been shown entitling the Court to order that additional examination at this juncture. It would only be after the appellant has completed the Stracey examination that any possible basis for an application under Rule 465(19) could arise. As I perceive this record, most of the refusals to answer by Mr Stracey on the advice of his counsel are based more on counsel’s views on lack of relevance and improper extensions of the duty to inform on an examination for discovery rather than on the inability of Mr Stracey to answer the questions. This is clearly a case where the examination in progress should be proceeded with to its conclusion.

In the event an application is made under Rule 465(19) for a second discovery, that is the occasion when the Court would be required to determine the validity of the respondent’s submission to us that Mr Johnson was neither a member or officer of the respondent at the relevant times, within the meaning of Rule 465(l)(b) and, assuming a decision that he was not such a member or officer, the answer to the further question as to whether or not Rule 465(19) confers upon the Court the power to order discovery of someone other than an officer or member of a corporation. As stated supra, it is my view that these issues need not be decided on this appeal since the present application under Rule 465(19) for a second discovery is premature because it was launched prior to the completion of the original discovery under Rule 465(I)(b). Accordingly, I conclude that the learned Motions Judge did not err in refusing discovery of Victor Johnson.

Issue B — The request for a declaration that certain loans made by Pillar International Limited to Rallip Canada Limited are relevant to the issues in this action.

The learned Motions Judge held that these loans were entirely irrelevant to the issues in this action. On the record, I am unable to say that in so concluding he proceeded on an erroneous principle or on some misapprehension of the facts. It may subsequently transpire that relevance can be established but at this stage of the proceedings, I am not persuaded that the Motions Judge erred in his view of the matter.

For these reasons I would dismiss the appeal with costs.