REASONS
FOR ORDER
Favreau J.
[1]
This is an application under subsection 116(2)
of Tax Court of Canada Rules (General Procedure) dated November 28, 2014
to compel the appellant to answer question number 32 served to the appellant in
the written examination for discovery. The relevant queries are as follows:
Question 32.
Having regard to the meetings and discussions referenced in the
document reproduced under tab 37 of the appellant's book of documents,
a)
when and where was each such discussion held?
b)
between whom was each discussion?
c)
who else, if anyone, was present for each
discussion? Please provide their full names and contact information.
d)
what was said?
[. . .]
g)
were any records created diarizing any part of
the discussion, and if so, please produce any and all copies of the same or
make your best efforts to obtain and produce the same, including making
requests of parties who might reasonably be expected to have copies of the same
(should your best efforts fail, please describe what efforts were taken)?
[2]
Counsel for the respondent served the appellant
with question 32 in the written examination because in an enclosure to a letter
dated April 15, 2004, the appellant provided the respondent with a copy of the Appellant’s Book of Documents reproducing
under Tab 37, a letter dated December 18, 2007 from Mr. Michael Stebila, C.A.
to Dr. Zbigniew Pona, then vice-president of Zeldap Corporation. The first
paragraph of the letter reads as follows:
This
letter is further to the meetings and discussions we have had regarding various
loans and investments made (sic) Zeldap Corporation (“Zeldap”)
during the years 2003 to 2006 and how these loans and investments are to be
reported in the Zeldap financial statements and corporation income tax returns
for these years.
[3]
In an enclosure to a letter dated September 29,
2014, the appellant provided responses to undertakings but refused to answer question
32 of written examination for discovery claiming solicitor-client privilege.
[4]
Counsel for the appellant opposed the motion brought
by the respondent and filed an affidavit of Dr. Zbigniew Pona, now president of
Zeldap Corporation, stating that:
(a)
he met with Michael Stebila, an accountant, under the direction of his
then lawyer, Scott Sullivan, in contemplation or anticipation of possible
litigation, and
(b)
every meeting took place in Mr. Sullivan’s office with
Mr. Sullivan being present at each meeting.
[5]
The appellant agreed with the facts as described
in paragraphs 1 to 6 of the Motion Record of the respondent which includes
the following facts described in subparagraphs (a) and (b) of paragraph 2 of
the affidavit of Sylvie Julian sworn on November 28, 2014:
(a)
the appellant has
appealed from reassessments dated March 29, 2011 and
(b)
the central issues
in the appeal are whether, from 2002 to 2006, the appellant’s ordinary business
included the lending of money and certain advances were made in the ordinary
course of lending money.
[6]
The respondent requested that the motion either
be heard by way of a telephone conference or be disposed of pursuant to section
69 of the Tax Court of Canada Rules (General Procedure) without
appearance by the parties. The appellant did not express any preference and
both parties made written representations.
[7]
In his written representations, the appellant
adopted the text used by Ducharme J. in Kennedy v. McKenzie, [2005] O.J.
No. 2060 to determine whether litigation privilege exists. In the Kennedy
decision, Ducharme J. held that the party asserting litigation privilege must
establish that the documents were created:
(a)
for the dominant purpose of existing,
contemplated or anticipated litigation; and
(b)
in answer to inquiries made by an agent for the
party’s solicitor; or
(c)
at the request or suggestion of the party’s
solicitor; or
(d)
for the purpose of being laid before counsel for
the purposes of obtaining his advice; or
(e)
to enable counsel to prosecute or defend an
action or prepare a brief.
(Emphasis added).
[8]
Ducharme J. also held that the onus of
establishing that the document is subject to litigation privilege rests on the
party asserting the privilege.
[9]
The appellant submitted that a prima facie
case has been made that the meetings took place for the dominant purpose of
contemplation or anticipation of litigation and that, at all material times,
the meetings with Mr. Stebila were under the direction of his lawyer, Mr.
Sullivan, only after seeking his legal advice and in compliance with that legal
advice.
[10]
Even if the meetings took place in Mr.
Sullivan’s office with Mr. Sullivan present at each meeting, no case has been
made that the dominant purpose of the meetings was in respect of an existing,
contemplated or anticipated litigation. No information has been given in this
respect. The December 18, 2007 letter from Michael Stebila to Dr. Pona referred
to a list of loans and investments made by the appellant and to the manner
these loans and investments are to be reported in the financial statements and
income tax returns of the corporation for the years 2003 to 2006. Most of the
meetings and discussions to which the letter refers to, seem to have taken
place in the year 2007, more than three years before those years were
reassessed. The appellant did not explain why a litigation was anticipated at
that time.
[11]
The fact that Mr. Sullivan was present at the
meetings between Mr. Stebila and Dr. Pona does not necessarily mean that the
dominant purpose of the meetings was in respect of an existing, contemplated or
anticipated litigation. A lawyer’s presence at a meeting is not indicative that
his legal advice was being sought. The appellant has not provided any
information concerning the nature of the legal advice sought from Mr. Sullivan.
[12]
In the circumstances, the appellant has not
established a prima facie case for litigation privilege to apply.
[13]
For the foregoing reasons, the respondent’s
application for an order from the Court directing the appellant to answer by
affidavit certain written examination for discovery questions by April 30, 2015
at the latest, is allowed without costs and the parties are directed to
communicate in writing with the Hearings Coordinator by May 30, 2015 at the
latest.
Signed at Montreal,
Canada, this 30th day of March 2015.
“Réal Favreau”
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