Date: 19990108
Docket: 97-2864-IT-G
BETWEEN:
GENERAL MOTORS ACCEPTANCE CORPORATION
OF CANADA, LIMITED,
Applicant/Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for order
Bell, J.T.C.C.
[1] The Applicant made a motion seeking an Order pursuant to
subsection 93(3) or 93(4) of the Tax Court of Canada Rules
(General Procedure) ("Rules") directing the
Respondent to make Mr. Donald Frattaroli
("Frattaroli"), or in the alternative, Mr. Robert L.
Coker ("Coker") available to be examined on behalf of
the Respondent at an examination for discovery.
[2] Rule 93(3) and (4) read as follows:
(3) The Crown, when it is the party to be examined, shall
select a knowledgeable officer, servant or employee, nominated by
the Deputy Attorney General of Canada, to be examined on behalf
of that party, but if the examining party is not satisfied with
that person, the examining party may apply to the Court to name
some other person.
(4) Where an officer, director or employee of a corporation or
of the Crown has been examined, no other officer, director or
employee of the corporation or the Crown may be examined without
leave of the Court.
[3] Rule 93(2), which provides for the examination, reads as
follows:
(2) A party to be examined, other than an individual or the
Crown, shall select a knowledgeable officer, director, member or
employee, to be examined on behalf of that party, but if the
examining party is not satisfied with that person, the examining
party may apply to the Court to name some other person.
[4] The grounds for the motion stated in the Applicant's
Notice of Motion are:
(i) that there is a substantial issue between the parties as
to the basis of the reassessments in issue;
(ii) that Ms. Susan Miyazaki, the Respondent's nominee at
an examination for discovery held on September 18, and October 7,
8 and 9, 1998, was not properly informed with respect to the
basis of the reassessments in issue; and
(iii) that Messrs. Donald Frattaroli and Robert L. Coker
played a central role in the formulation of the basis for and the
issuance of the reassessments in issue.
[5] The transcript of the examination for discovery reveals
that the official, Susan Miyazaki ("Miyazaki"), a
chartered accountant, selected by the Respondent for examination,
consulted with nine officials of Revenue Canada,[1] including Robert L. Coker
("Coker") and Donald Frattaroli
("Frattaroli"), in preparation for the examination for
discovery.
[6] Counsel asked 1,588 questions during the four days of
examination. Approximately 159 questions resulted in
undertakings. In substance, there appear to be 92 undertakings, a
number of which are general or relate, for example, to procedural
matters. Of those undertakings, it appears that the answers to
five of the questions were within the particular knowledge of
Coker, the answers to ten were within the particular knowledge of
Frattaroli and the answers to nine were within knowledge of
either Frattaroli or Coker. These undertakings mostly related to
activities involving Coker or Frattaroli and/or the GAAR[2] Committee. Sixty-eight
undertakings related to review of documents, production of
documents, attempts to locate documents, certain policies and
procedures, the requirement to consult with named persons, the
membership of the GAAR Committee, et cetera. It appears that if
either Coker or Frattaroli were examined he would, in respect of
these matters need to expend the same effort as Miyazaki.
[7] Appellant's counsel referred to Miyazaki as being
"manifestly uninformed". He referred to certain
responses by way of explanation by the Respondent as being
"manifestly opaque". He referred to the Respondent as
being "manifestly unprepared for questions that they should
have been prepared for". He further says that anybody who
was "half prepared" would know that the Appellant would
be interested in whether certain assumptions were made.
[8] The Appellant states in the OUTLINE OF APPELLANT'S
ARGUMENT that the Deputy Attorney General:
takes the position that the amounts in issue are properly
included in the Appellant's income pursuant to, inter
alia, paragraphs 12(a)(c), 12(1)(x) and
subsection 56(2) of the Income Tax Act ... and he alleges
that the Minister made certain assumptions of fact that ground
the application of those provisions. Accordingly, it follows that
the Crown's nominee is properly discoverable on whether the
assumptions were in fact made and the particular facts and
circumstances that led to those assumptions.
[9] Counsel submitted that Miyazaki was not able to answer
questions relating to those assumptions. There are, however, a
number of responses which were accepted by Appellant's
counsel without counsel having pursued those responses with
queries which could have resulted in undertakings and may have
resulted in responses to its questions. There is no doubt that
answers by Respondent's counsel to certain questions were not
clear. However, the way of dealing with that is to persist in the
posing of questions which could result in undertakings and
responses. The failure to provide appropriate answers on those
undertakings would constitute support for an application of this
nature.
[10] Appellant's counsel also submitted that an
examination for discovery should not result in such a series of
undertakings that it is reduced to examination by interrogatory.
He complained about the inability to answer questions relating to
the sections referred to above which were discussed in a meeting,
a Revenue Canada hand written memorandum in respect of which is
entitled GMAC-TAX AVOIDANCE 1989 & 1990. This handwritten
memorandum is described at the end as having been "prepared
from Notes and Memory". It is clearly about whether section
245(GAAR) should be applied. Although references to the sections
in question were discussed in that memo, section 245 was not in
fact used as a basis for the reassessment. It is not reasonable
to expect, that GAAR not having been applied, Miyazaki would have
devoted much, if any, time to informing herself as to what
occurred at that meeting.
[11] Appellant's counsel, in quoting from Newbigging v.
Loewen Group Inc., 30 C.P.C. (3d) at 355 and 356, read as
follows:
The plaintiff was entitled to expect that PW, as designated
proper officer on agreement of the parties, would be adequately
informed with respect to the basic and critical issues in the
litigation. The obligation to inform oneself prior to examination
for discovery arose with the appointment as a proper officer, not
upon the posing of a question. PW had an obligation to consult
with RL before his examination for discovery began. He did not do
so. ...
Undertakings were usually limited to facts and issues arising
in an unexpected fashion. Examination for discovery could not be
converted into interrogatories by ignoring the obligation of a
proper officer to inform himself on a basic and critical issue
and consigning that issue, for all practical purposes in its
entirety to be dealt with by way of undertakings. An examining
party could not be forced to accept the "undertaking"
approach in an area critical to the action by the simple
expedient of a proper officer failing to inform himself despite
ample opportunity to do so. The plaintiff did not receive the
discovery to which it was entitled. The plaintiff was entitled to
the appointment of an officer who was able to answer the
questions at a resumed examination for discovery.
[12] I do not find that Miyazaki failed to inform herself for
the examination for discovery in this very complex matter. The
evidence indicates that she took pains so to do, having consulted
with eight separate Revenue Canada officials for the sole purpose
of preparing for the examination.
[13] In this regard, in Rogers v. Bank of Montreal et
al, [1986] 1 B.C.L.R. (2d) 132 (B.C.S.C.), McDonald, J.
stated at 135:
... the examination for discovery of Mr. Scalf is not yet
complete. There is a difference of judicial opinion as to whether
or not that is a condition precedent to the granting of leave to
examine a second representative of a party.
An overview of the reported decisions leads me to the
conclusion that the outcome depends to a substantial degree
upon:
(a) the circumstances of the particular case;
(b) the responsiveness of the witness under examination and
the degree to which he has taken pains to inform himself;
(c) the nature and materiality of the particular evidence
sought to be canvassed with the second representative; and
(d) what appears to be the most practical, convenient and
expeditious alternative.
To some degree, the matter is discretionary.
[14] The transcript of the examination for discovery reveals
situations such as the answer by Respondent's counsel when
she said:
... I would agree that the provisions they relied upon at the
audit stage were section 9 and 12(1)(x).
[15] There was no pursuit by Appellant's counsel to
determine what was meant by the term "audit" stage and
whether it was in fact the reassessment stage. Such pursuit may
have resulted in an undertaking which would have produced a
different and enlightening response.
[16] Appellant's counsel also referred to the decision of
this Court in Backman v. Her Majesty the Queen, dated
September 3, 1996. In this case, the Appellant made an
application to this Court in advance of the examination for
discovery, for the examination of an officer other than that
nominated by the Crown. This Court refused that application.
After the examination for discovery was completed, Appellant
brought another motion for a substitution of the officer for
purposes of examination and this motion was granted by this
Court. In his reasons for the Order, Beaubier, J. said:
Because there was an earlier motion before the Court in which
the Appellant expressed fears that the very thing that happened
in the examination for discovery would occur, this motion is
fully justified. Moreover, Mr. Turner went into the examination
for discovery unprepared, or ignorant. In either case, he and
Respondent's counsel had every reason to have him fully
prepared. They should have been fully prepared and they
weren't.
The examination for discovery was a waste of time. ...
[17] I do not find that to be the situation in this case. The
circumstances in that case are markedly different. Miyazaki took
steps to inform herself by consultation with other officers of
Revenue Canada including those that the Applicant now seeks to
examine. Her lack of information respecting the GAAR Committee
memorandum, in light of section 245 of the Act not having
been applied, should not be interpreted as meaning that she was
uninformed. Coker and Frattaroli, the Revenue officers whom the
Appellant seeks to examine, were and apparently still are,
available to furnish Miyazaki with responses to questions in
respect of which undertakings were made. They would similarly be
available to inform Miyazaki with respect to undertakings which
were not made because questions which could have produced the
information sought by the Appellant were not asked.
[18] The Respondent's obligation was to produce a
"knowledgeable officer" and it is my conclusion that it
did so. It is not surprising, in such a complex case, that
questions were posed which required a number of undertakings.
[19] The motion is dismissed with costs to the Respondent.
Signed at Ottawa, Canada this 8th day of January,
1999.
J.T.C.C.
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