Ouellet v. The Queen, 94 DTC 1315, [1994] 1 CTC 2645 (TCC)

Lamarre, Proulx, J.T.C.C.:—At issue are two motions, one from the appellant, the other from the respondent, heard simultaneously. In his motion filed on October 28, 1993, the appellant asked that the respondent file a list as well as a complete copy of all the following documents in accordance with section 82 of the Tax Court of Canada Rules (General Procedure, SOR/92-41):

. . . directions, newsletters, opinions, agreements, decisions, letters or internal correspondence either issued by the respondent (Department of National Revenue, Treasury Board, Department of Justice or any other department which would be party to such an agreement) or in her possession, under her control or in her custody, pertaining to the deduction by federally or provincially appointed judges, having regard to the possibility for them of deducting an amount as a contribution to their registered retirement savings plans for 1989 and pertaining to the application of section 146, sections 5 and 5.1 of the Income Tax Act in respect of federal or provincial judges and their spouses for 1989 . . . .

[Translation.]

In support of his motion, the appellant recalled the facts of the main action. The appellant is a judge of the Court of Quebec. He paid a premium of $4,500 into a registered retirement savings plan of which his wife was the annuitant. In computing his income for 1989, he deducted the amount of $4,500 under subsection 146(5.1) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act"), and the Minister of National Revenue (the "Minister") disallowed that deduction on the ground that the appellant was subject to paragraph 146(5)(a) of the Act. On April 19, 1991, the Minister confirmed the said assessment for the following reason:

The consolidated fund of the Province of Quebec is an approved pension fund or plan designated at paragraph 146(5)(a) of the Act and you are therefore entitled to a deduction from your income for a registered retirement savings plan as provided at paragraph 146(5)(a).

[Translation.]

The reasons given by the appellant for obtaining full disclosure of the documents were that, on the one hand, our Court would have already issued an order for full disclosure on May 21, 1993 following a status hearing and, on the other hand, the tax treatment of judges appointed in other jurisdictions was an important point argued in the notice of appeal. Counsel for the appellant therefore contended that he was entitled to the documents described above since they were relevant to this argument raised in the main action.

This presumed order of full disclosure of documents which our Court allegedly issued arises from an order issued following a status hearing which ordered in particular:

It is ordered that each of the parties establish a list of documents (partial or full disclosure) in accordance with section 81 or 82 of the Tax Court of Canada Rules (General Procedure). This list shall be filed and served on the other party not later than June 30, 1993.

[Translation.]

As expressed at paragraph 11 of the motion, on July 2, 1993, a letter from counsel for the respondent, a copy of which was forwarded to the office of the registrar, was sent to the appellant indicating that the respondent objected to the production of the requested documents.

In support of his motion for production of a full list, counsel for the appellant referred to Everest & Jennings Canada Ltd. v. Invacare Corp., [1984] 1 F.C. 856, 79 C.P.R. (2d) 138 and argued that this Federal Court of Appeal judgment had established that the relevance of a document is a matter for the trial judge.

This was a case in which a part had filed part of a document and objected to production of the balance of the document, alleging that that balance was of no relevance. The Court was of the view that in filing the first part of the document, the party had in a way acknowledged its relevance and that it was now up to the trial judge to determine its relevance.

He also contended that the motion to strike was late and could not be granted since there was a joinder of issue in respect of paragraph 17 of the notice of appeal. He also referred to section 90 of the Rules which reads as follows:

The disclosure or production of a document for inspection shall not be taken as an admission of its relevance or admissibility.

The respondent's motion, for its part, seeks to strike out paragraph 17 of the notice of appeal which reads as follows:

17. Since the Judges Act (R.S.C. (1985) c. J-1) and the Courts of Justice Act (R.S.Q., c. T-16) respectively provide, according to the same basic principles, for the payment of annuities to judges appointed by the Government of Canada and to judges appointed by the Government of Quebec where they cease to perform their judicial duties, it would be discriminatory for the judges appointed by the Government of Quebec not to receive tax treatment equivalent to that of their colleagues appointed by the Government of Canada when they contribute to their RRSPs or to those of their spouses . . . .

[Translation.]

The argument raised by counsel for the respondent was that the tax treatment of other taxpayers is not a relevant factor in determining the validity of a taxpayer's contribution. This paragraph would therefore only have the effect of delaying the hearing of the instant appeal needlessly since this argument is necessarily bound to fail, particularly since the legislative texts are different.

Counsel for the respondent therefore did not deny that the documents requested were relevant to paragraph 17 of the notice of appeal, although he considered that, as worded, the burden appeared excessive, but he denied the relevance of paragraph 17 and requested that it be struck out, because if paragraph 17 were struck out, there would no longer be any obligation to produce the documents pertaining thereto.

Neither of the parties has produced a list of documents to date.

In support of his motion to strike, counsel for the respondent referred in particular to the following judgments respecting the tax treatment of other taxpayers:

Livingston International Inc. v. Canada, [1992] 1 C.T.C. 217, 92 D.T.C. 6197 (F.C.A.);

Hutterian Brethren Church of Wilson v. The Queen, [1979] C.T.C. 1, 79 D.T.C. 5052

(F.C.T.D.);

West Hill Redevelopment Co. v. The Queen, [1987] 1 C.T.C. 310, 87 D.T.C. 5210

(F.C.T.D.);

Oro Del Norte, S.A. v. Canada, [1990] 2 C.T.C. 67, 90 D.T.C. 6373 (F.C.T.D.);

Ford Motor Co. of Canada Ltd. v. M.N.R., [1991] 3 F.C.D. 20 (T.D.);

Wenger's Ltd. v. M.N.R., [1992] 2 C.T.C. 2479, 92 D.T.C. 2133 (T.C.C., under appeal).

With respect to the argument that once there is a joinder of issue there can be no motion to strike, counsel for the respondent referred to the following judgments in order to show that lateness is a factor, but not a decisive factor:

Nabisco Brands Ltd. v. Procter & Gamble Co. (1985), 5 C.P.R. (3d) 417, 62 N.R. 364

(F.C.A.);

Montreuil v. The Queen, [1976] 1 F.C. 528 (T.D.);

Caterpillar Tractor Co. v. Babcock Allatt Ltd., [1983] 1 F.C. 487, 67 C.P.R. (2d) 135 (T.D.);

Canadian Olympic Association v. Olympic Life Publishing (1986), 1 F.T.R. 291, 8 C.P.R.

(3d) 405;

Ricafort v. Canada (1989), 24 F.T.R. 200.

Analysis

A distinction must first be drawn between the production of the list and the production of the documents. Sections 81 and 82 of the Rules concern the list. It is section 85 which provides for inspection of the documents.

A distinction must also be made between the effect of section 81 of the Rules and that of section 82 of the Rules. In the case of section 81, each party files a list of documents which it wishes to use to support its allegations of fact or to rebut the allegations of fact of the other party.

What is concerned in the case of section 82 are documents under the control or in the custody of a party concerning any matter in question between the parties. This list of documents need not be filed by law as that under section 81. The list filed under section 82 is filed by consent or failing that by order of the Court. That order must be specific.

Whereas, the order of May 21, 1993 of this Court was not a specific order for full disclosure. The very text of the order cited above is clear. What that order states is that the parties will have proceeded to the various necessary procedural stages before the date of the trial.

If a party believes it is helpful on a particular point to obtain a list under section 82 of the Rules, it must obtain it by consent or by order of the Court. I consider that it is such a request that is before me.

I refer to the judgment in Ikea Ltd. v. Idea Design Ltd., [1987] 3 F.C. 317, 16 C.P.R. (3d) 65 (F.C.T.D.), where McNair, J. reviewed the case law on the scope of section 448 of the Federal Court Rules, as it existed until 1990. It should be noted that this section was amended in 1990 and that full disclosure is now a matter of law. The scope of the former Rule 448 is similar to the present section 82 of the Rules of our Court. I cite McNair, J. at pages 325-27 (C.P.R. 71-73). The citation is long, but I am of the view that it contains an excellent analysis and that I could not better express the scope of the legislative provision for full disclosure of the list of documents, the elements of a document relating to any matter in question in an appeal and the distinction to be made between filing of the list and filing of the documents.

Scope of the Legislative Provision for Full Disclosure

It becomes necessary to look at the wording of Rule 448 to determine the scope of its application and intendment. Rule 448 reads as follows:

Rule 448(1) The Court may order any party to an action to make and file and serve on any other party a list of the documents that are or have been in his possession, custody or power relating to any matter in question in the cause or matter (Form 20), and may at the same time or subsequently order him to make and file an affidavit verifying such a list (Form 21) and to serve a copy thereof on the other party.

(2) An order under this Rule may be limited to such documents or classes of document, or to such of the matters in question in the cause or matter as may be specified in the order.

W.R. Jackett, former president of the Exchequer Court and chief justice of the Federal Court of Canada, wrote an excellent treatise on the practice under the new Federal Court Rules, entitled A Manual of Practice. In contrasting the old Exchequer Court Rules and the new Rules in respect of the discovery of documents, the learned author makes this statement at page 68 of the manual:

Under the new Rules the right to discovery of documents in the possession or control of the opponent that might conceivably be of help to the party demanding discovery has disappeared. Such right has disappeared even though it would obviously serve the ends of justice that there be discovery of such documents. The reason for thus curtailing the ambit of discovery as of right is the purely practical one that while, on the one hand, it is felt that there are relatively few cases where a party can be building his case on documents that he hopes to get from his opponent, on the other hand it is a very onerous, tedious and difficult task, involving considerable expense and delay, to prepare a list of documents that would, conceivably, be of aid to one’s opponent. This is particularly so when a party has widespread operations the details or which he prefers to keep from his opponent who is also his business competitor. On balance, it seems probable that the costs and delays of making such discovery outweigh, in most cases, the theoretical advantages obtained from it.

While discovery as of right has been thus limited in scope, any party may apply for an order for the old style discovery by his opponent of the documents that are or have been in his possession, custody or power relating to any matter in question in the cause or matter (Rule 448). Such an application will only be granted where the applicant can convince the Court that there is something in the circumstances of the particular case calling for this more expensive type of discovery and, if granted, it may be granted on a restricted basis (Rule 448(2)). There is an automatic right of inspection and to make copies of any documents discovered pursuant to such an order (Rule 453).

Elements of a Document Relating to any Matter in Question in an Appeal

The leading case is Compagnie Financière du Pacifique v. Peruvian Guano Co. (1882), 11 Q.B.D. 55 (C.A.), where Brett, L.J., stated the principle applicable to the interpretation of the words of the rule ‘’a document relating to any matter in question in the action”, at page 63 as follows:

It seems to me that every document relates to the matters in question in the action, which not only would be evidence upon any issue, but also which, it is reasonable to suppose, contains information which may—not which must—either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary. I have put in the words “either directly or indirectly”, because, as it seems to me, a document can properly be said to contain information which may enable the party requiring the affidavit either to advance his own Case or to damage the case of his adversary, if it is a document which may fairly lead him to a train of inquiry, which may have either of these two consequences . . . .

This general principle has been consistently followed and applied by the courts over the years, and has been extended to the area of the production of documents.

In Boxer v. Reesor (1983), 43 B.C.L.R. 352, 35 C.P.C. 68 (S.C.), McEachern, C.J., stated the following test of relevancy for the production of documents (at page 359 (C.P.C. 76)):

It seems to me that the clear right of the plaintiffs to have access to documents which may fairly lead them to a train of inquiry which may directly or indirectly advance their case or damage the defendants' case particularly on the crucial question of one party's version of the agreement being more probably correct than the other, entitles the plaintiffs to succeed on some parts of this application. Other parts seem to me, with respect, to be asking for too much.

In Everest & Jennings Canadian Ltd. v. Invacare Corp., [1984] 1 F.C. 856, 79 C.P.R. (2d) 138, the Federal Court of Appeal upheld an appeal from an order refusing to require the respondent to produce the balance of a file from which an exhibit had been produced on the examination for discovery of its officer on the ground of its irrelevancy. The Court held that the production of the exhibit was an acknowledgment of the relevancy of the file itself.

In reaching this result, Mr. Justice Urie, delivering judgment for the Court, expressly adopted the test of McEachern, C.J., as the correct test of relevancy for purposes of discovery.

The question of the precise extent of the right to discovery of documents that may enable a party to advance his own case or damage the case of his adversary must be decided by reference to the description of the nature of the documents sought to be discovered and their relevance to the matters in issue, based upon a reasonable interpretation of the pleadings: Compagnie Financière du Pacifique v. Peruvian Guano Co., supra; Boxer v. Reesor, supra; R. v. Special Risks Holdings Inc., [1983] 2 F.C. 743, [1983] C.T.C. 36, 83 D.T.C. 5046 (C.A.); and Koninklijke Nederlandsche Stoombootmaatschap- pij N.V. (Royal Netherlands Steamship Co.) v. The Queen, [1967] 2 Ex. C.R. 22.

Production of a List

Incidentally, it should be noted that in R. v. Special Risks, supra, Mr. Justice Heald pointed out that any reference to the production of documents under Rule 448 was clearly inaccurate because the Rule speaks only of an order compelling the filing and serving of a list of documents.

It is therefore in order to counter the principles pertaining to the production of the list of documents, that is to say that a party may request that the opposite party produce the list of documents which may help the party plead his case, that the respondent filed her motion to strike out paragraph 17 of the notice of appeal. Counsel for the respondent therefore argued that the said paragraph 17, with its reference to the discriminatory treatment of judges appointed by Quebec, was of no relevance in the instant appeal.

He cited Mr. Justice Jérôme, Associate Chief Justice of the Federal Court, in Oro Del Norte, supra, at page 70 (D.T.C. 6375):

I fail to see how documents pertaining to the activities of other mining companies, whether similar to the plaintiffs or not, can in any way “lead the plaintiffs to a train of inquiry which may directly or indirectly advance their case or damage the defendant's case. . . ." The Minister has an obligation to treat all similarly situated taxpayers in the same manner, but it does not follow that documents pertaining to a similarly situated taxpayer are relevant to any other taxpayer's reassessment.

Jérôme, A.C.J. expressed the same opinion in Ford Motor Co., supra, a judgment dated May 8, 1991, reported in digest form in the Canada Federal Court Reports, 1991, vol. 3, at page D-20. Following is part of that digest:

Questions asked by appellant on discovery regarding inconsistent application of legislation by Minister—Issue of inconsistent application not raised in pleadings—No facts pleaded on which allegation could be founded—Activities of other automobile manufacturers and their treatment by Minister not relevant—To allow one company to make another's affairs relevant would be chaos—plaintiff must prove in its individual case it meets legislation . . . .

It is true that the presumed discriminatory treatment of a taxpayer is not a factor to consider in an appeal concerning an assessment.

Only the legislative text is important and I wish to refer on this subject to the comments of Pratte, J. of the Federal Court of Appeal in Cohen v. The Queen, [1980] C.T.C. 318, 80 D.T.C. 6250 at page 319 (D.T.C. 6251):

Counsel argued that the Minister could not repudiate that understanding, particularly after the expiry of the time within which the appellant might have appealed the 1961 to 1964 assessments.

In my view, the trial judge correctly dismissed that argument. ”. . . the Minister has a statutory duty to assess the amount of tax payable on the facts as he finds them in accordance with the law as he understands it. It follows that he cannot assess for some amount designed to implement a compromise settlement. . . ." The agreement whereby the Minister would agree to assess income tax otherwise than in accordance with the law would, in my view, be an illegal agreement. Therefore, even if the record supported the appellant's contention that the Minister agreed to treat the profit here in question as a capital gain, that agreement would not bind the Minister and would not prevent him from assessing the tax payable by the appellant in accordance with the requirements of the statute.

However, to the extent that what the appellant requested was not so much to know the tax treatment of other judges in Canada as to know whether, in respect of paragraph 146(5)(a) of the Act, there are administrative interpretations for federally-appointed judges or for those appointed by other provinces, I must take into consideration on this point the judgment of the Supreme Court of Canada in Harel v. D./M.R. (Quebec), [1978] 1 S.C.R. 851, [1977] C.T.C. 441, 77 D.T.C. 5438, and I cite at page 859 (C.T.C. 448, D.T.C. 5442):

Once again, I am not saying that the administrative interpretation could contradict a clear legislative text; but in a situation such as I have just outlined, this interpretation has real weight, and, in case of doubt about the meaning of the legislation, becomes an important factor.

Counsel for the respondent also argued that the legislative texts were different and that the interpretation given in regard to one could not be used in regard to the other. He obligingly reproduced in his list of authorities the Courts of Justice Act (Quebec), R.S.Q. c. T-16 and the Judges Act (Canada), R.S.C. 1985, c. J-1 and drew the Court's attention to the relevant provisions of those Acts.

The second paragraph of Article 238 of the Courts of Justice Act reads as follows:

For the application of the Income Tax Act (chapter 1-3), the contributions made under the first paragraph are deemed to be made under a registered retirement plan.

[Translation.]

Subsection 50(3) of the Judges Act reads as follows:

(3) For the purposes of the Income Tax Act, the amounts contributed by a judge pursuant to subsection (1) or (2) shall be deemed to be contributed to or under a registered pension fund or plan.

To all appearances, I do not find the texts of these provisions so different that I must grant the respondent's motion to strike. I must leave the analysis to the trial judge.

In conclusion, I do not see why, if there are administrative interpretations concerning contributions to a pension plan and to a registered retirement savings plan which have been sent or made available to judges in a general manner, a list of those administrative interpretations should not be produced for the purposes of this appeal. Those interpretations may in my view be in the nature of the information bulletins issued by the Office of the Commissioner for Federal Judicial Affairs on April 2, 1987 and March 2, 1988 and of an enclosed letter from the Assistant Deputy Minister for Legislative and Intergovernmental Affairs Branch of the Department of National Revenue dated March 17, 1987.

In respect of the motion for filing of the full list, the Court, relying on the principles in Harel, supra, therefore orders that the list of administrative interpretations for federally and provincially appointed judges pertaining to the aforementioned subject be filed.

In paragraph 17 of the notice of appeal, the appellant also invokes the possible discriminatory treatment of provincially appointed judges. This allegation of discriminatory treatment, which must not be confused with an allegation of discriminatory legislation, as was seen at the outset, has no legal effect on the validity of an assessment.

Thus, as regards the motion to strike out paragraph 17 of the notice of appeal, it is granted only in order to strike out this reference to discriminatory treatment.

Appellant’s and Crown's motions allowed in part.