Docket: 2005-4290(IT)G
BETWEEN:
ARIZONA LEASING LTD.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AND BETWEEN:
Docket: 2005-4298(IT)G
DELTA PROPERTIES CORPORATION,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AND BETWEEN:
Docket: 2005-4299(IT)G
DIAMOND DEVELOPMENTS LTD.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AND BETWEEN:
Docket: 2005-4295(IT)G
WESTANA INVESTMENT GROUP #2 INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AND BETWEEN:
Docket: 2005-4294(IT)G
WESTANA INVESTMENT GROUP #3 INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AND BETWEEN:
Docket: 2005-4293(IT)G
WESTANA FINANCIAL CORPORATION,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AND BETWEEN:
Docket: 2005-4291(IT)G
CAMDEN
FINANCIAL CORPORATION,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AND BETWEEN:
Docket: 2005-4297(IT)G
724190 ALBERTA LTD.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Motion
heard on January 20, 2011 at Edmonton, Alberta
Before: The Honourable
Justice L.M. Little
Appearances:
|
Counsel for the Appellant:
|
Chad J. Brown
|
|
Counsel for the Respondent:
|
Carla Lamash
|
____________________________________________________________________
ORDER
Upon Motion by the Respondent for
an Order:
a) Pursuant to sections 95
and 110 of the Tax Court of Canada Rules (General Procedure), compelling
the Appellants’ officer to answer the requests posed during Examinations for
Discovery for which the officer:
i) undertook
to answer; and
ii) undertook,
under advisement, to answer;
but for which the officer subsequently
refused to answer, in whole or in part, specifically undertakings requests 4,
5, 6, 7, 21, 22, 23, 24, 25, 27, and 37 (as further set out in the attached
Schedule “A”);
b) Requiring the
Appellants’ officer to answer the questions asked of the Appellants’ nominee at
page 68, line 4 to page 70, line 11 of the transcript of his Examination for
Discovery;
c) Requiring the
court-ordered deadline for the completion of litigation steps, set out in the
order of the Tax Court dated August 13, 2010, to be amended;
d) Further, or in the
alternative, requiring the Appellants’ appeals be case-managed;
e) Requiring the
Appellants to pay the costs of this motion, in any event of the cause,
forthwith; and
f) Such further and other
relief as this Honourable Court may deem just.
And upon hearing submissions from
the parties;
IT IS ORDERED THAT:
1.
The Appellant companies
shall provide answers to undertakings 21, 22, 23, 24, 25 and 27 to the
Respondent on or before August 15, 2011.
2.
The Examinations for
Discovery shall be completed on or before September 30, 2011.
3.
The Appellant companies
shall pay costs to the Respondent in the amount of $1,000.00 on or before
August 15, 2011. The costs payable
by the Appellant companies are $1,000.00 in
total, not $1,000.00 paid by each Appellant company.
Signed at Vancouver, British Columbia, this 12th
day of July 2011.
“L.M. Little”
Citation: 2011 TCC 347
Date: July 12, 2011
Docket: 2005-4290(IT)G
BETWEEN:
ARIZONA
LEASING LTD.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AND BETWEEN:
Docket: 2005-4298(IT)G
DELTA PROPERTIES CORPORATION,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AND BETWEEN:
Docket: 2005-4299(IT)G
DIAMOND DEVELOPMENTS LTD.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AND BETWEEN:
Docket: 2005-4295(IT)G
WESTANA INVESTMENT GROUP #2 INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AND BETWEEN:
Docket: 2005-4294(IT)G
WESTANA INVESTMENT GROUP #3 INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AND BETWEEN:
Docket: 2005-4293(IT)G
WESTANA FINANCIAL CORPORATION,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AND BETWEEN:
Docket: 2005-4291(IT)G
CAMDEN
FINANCIAL CORPORATION,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AND BETWEEN:
Docket: 2005-4297(IT)G
724190 ALBERTA LTD.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Little J.
A. FACTS
[1]
The Appellant companies
were incorporated under the laws of the Province of Alberta.
[2]
Each of the Appellant
companies was in the business of owning and leasing assets.
[3]
Each of the Appellant
companies was reassessed (the “Reassessments”) by the Minister of National
Revenue (the “Minister”).
[4]
Each of the Appellant
companies filed Notices of Objection to the Reassessments and the Reassessments
were confirmed by the Minister.
[5]
Counsel for the
Respondent filed Notices of Motion with respect to each Appellant company in
which she sought an Order to compel each of the Appellant companies to answer
undertakings which were provided at the Examinations for Discovery.
[6]
Counsel for the
Respondent said that there were also statements made by Counsel for the
Appellant companies at the Examinations for Discovery in which he undertook to
answer various questions but he later refused to answer the questions.
[7]
Counsel for the Respondent
also asked for costs in the Notice of Motion.
[8]
In support of the
Motion, Counsel for the Respondent noted that the main issue in the appeals is
the basis of the Capital Cost Allowance calculations claimed by the Appellant
companies. Counsel for the Respondent stated that she has not been able to
determine the position of the Appellant companies on this point.
[9]
Counsel for the
Respondent stated that, with respect to “refused undertakings”, they are listed
under Schedule “A” of her written brief.
[10]
Counsel for the
Respondent also noted that the “refused undertakings” under Schedule “B” of her
written brief are no longer in issue. She said that the Appellant companies
have agreed to satisfy these undertakings.
[11]
Counsel for the
Respondent stated that the only undertakings that, in her opinion, must be
answered are undertakings numbers 21 to 25 inclusive and undertaking number 27.
|
Undertaking #
|
Undertaking/Response
|
Transcript
|
|
21
|
Advise what facts are within each Appellants’ respective knowledge
that relate to or support the allegation in paragraph 27(c) of Westana’s
Notice of Appeal.
|
Pages 68-71
|
|
22
|
Advise which equipment the Appellants are referring to as
equipment that was not specified leasing property as referenced in 27(e) in
Notice of Appeal.
|
Pages 71-72
|
|
23
|
Referencing paragraph 12 of the Notice of Appeal, advise what
leases hold property that the Appellant maintains is exempt property; also
advise what property or what leases that the Appellant maintains constitute
specified leasing property.
|
Page 73
|
|
24
|
Advise for each lease in issue for the taxation years in issue
that the Appellant specify the type of property leased, the date of lease and
the length of lease, the aggregate fair market value of the lease property at
the time the lease was made, whether the respective appellant is claiming a
specified or exempt property, and what payments were made by the lessee in
the years in issue.
|
|
|
25
|
Advise with respect to each Appellant as to what CCA they are
claiming and how it is calculated.
|
Pages 74-75
|
|
27
|
Advise what is the fair market value of the property at the time
any of the Appellants maintain the conversion took place.
|
Pages 76-77
|
Respondent’s Position
[12]
Counsel for the
Respondent said that section 95 of the Tax Court of Canada Rules (General
Procedure) (the “Rules”) require that the Appellant companies’
officials answer to the best of their knowledge, information and belief any
proper question relevant to the matter in issue.
[13]
Counsel for the
Respondent said that, if the Appellant companies are found to have failed to
answer proper questions, section 110 of the Rules provides the remedy.
She stated that the Rule basically directs that the Appellant companies
answer the undertakings, re-attend at Examinations for Discovery, as well as
pay costs of the Motion.
[14]
Counsel for the
Respondent stated that the Appellant companies did not claim any capital cost
allowance in their tax returns and, therefore, they did not provide a Capital
Cost Allowance Schedule with the tax returns. However, Counsel for the
Respondent stated that the Appellant companies changed their position when they
filed Notices of Appeal and indicated that they wished to deduct capital cost
allowance.
[15]
Counsel for the
Respondent said:
In
essence all these undertakings are -- that the respondent has asked for are
simply an attempt to understand the facts and the position of the appellant as
to what CCA they're claiming and how they arrived at it or how they'll arrive
at that calculation.
(Transcript,
page 22, lines 19 to 24)
[16]
Counsel for the
Respondent said:
Now,
the appellant's response was the appellant refuses to answer the question on
the grounds that it requires the appellant to undertake a legal analysis and
such is a question of law. Well, the respondent's position -- this is based
directly on the respondent's pleadings. The case law clearly indicates that it
is proper for the appellant's officer -- or for the respondent to ask the
appellant's officer for the facts underlying the allegation in the appellant's
Notice of Appeal. That's referred to in the Kossow case, which is at Tab 6 of
the respondent's authorities, paragraphs 50 and paragraphs 60.
(Transcript,
page 25, line 18 to page 26, line 5)
[17]
At page 28 of the
transcript, Counsel for the Respondent said:
Also,
I note that at the HSBC decision, which is at Tab 5, and that's the decision of
Justice Campbell Miller, he also reiterates that point, again, makes a summary
of -- to say that asking a witness for the facts underlying allegation in their
pleadings is a proper question. Evidence is not, but asking for facts is.
(Transcript,
page 28, lines 16 to 22)
[18]
And at page 31 of the
transcript, Counsel for the Respondent said:
I
believe what the other -- I believe it's Justice Bowie in another one of our
authorities, in the Teelucksingh case, he also makes that point, and then also
in the Sandia case. You can ask for facts of an allegation because that's a factual
inquiry. And that is exactly how this undertaking request was worded. It was
asking for facts of a particular allegation in the appellant's Notice of
Appeal. Not evidence, just a breakdown of the facts.
(Transcript,
page 31, lines 11 to 20)
[19]
At page 34 of the
transcript, Counsel for the Respondent said:
Now,
again, the respondent's position is this requires a legal analysis. Well, it's
not -- it's basically a CCA claim. CCA claim is a fact. We need to know what --
it's a self-assessing system. We need to know what their CCA is.
(Transcript,
page 34, lines 11 to 15)
[20]
At page 47 of the
transcript, Counsel for the Respondent said:
Again,
my review was quite brief this morning too, but the appellant maintains that
Questions 21 to 24 that there's no fact-finding. These are all questions of
law. Well, no, the questions were specifically designed for facts, all of them
were designed to ascertain the facts regarding their position regarding CCA.
(Transcript,
page 47, lines 14 to 20)
[21]
At page 49 of the
transcript, Counsel for the Respondent said:
There's
also the – also maintain the position that the request that we be provided with
CCA calculation, the appellant's counsel has now maintained that these are
litigation privileged. The CCA calculation -- giving the Minister a calculation
of the CCA would be litigation privileged. Again, this wasn't maintained --
this is the first time we heard of this position. But, again, it's because --
my understanding is, and I'm sure you'll hear more from my friend on this, that
because the taxpayers never actually claimed CCA initially, but now want --
and, you know, after they were reassessed and now claiming CCA, and they're
saying, well, it's now part of the litigation process.
(Transcript,
page 49, lines 7 to 20)
[22]
At page 51 of the
transcript, Counsel for the Respondent said:
The
ancillary relief that we're seeking is, again, a request for an amendment, a court
order timeline. The appellants were to answer -- after several extensions they
were tasked to answer their undertakings by September 30th, and Examinations
for Discovery were to be completed by November 30th. However, in light of the
large number of undertakings that were refused, the respondent didn't proceed
on -- to examine on the answer to undertakings as we wanted to wait until this
motion and the disputed undertakings were dealt with.
Thus,
regardless of the outcome of whether these undertakings are provided all or
none or some, we still need an extension on the time to examine on the undertakings
that have been provided and the –
(Transcript,
page 51, line 11 to page 52, line 1)
Appellants’ Position
[23]
Counsel for the
Appellant said:
Sir,
if we take this application down to the basics, there's two questions that need
to be answered, and -- on the affirmative or in the negative. And those will
decide whether or not the question should be answered or not, and those
questions are twofold. One is is the respondent -- or, sorry, are the
appellants required to at this point in time synthesize and prepare and produce
a capital costs allowance schedule taking into account all the hundreds of
leases that you've heard about, applying the rules applicable to capital cost
allowance and the specified leasing property rules and prepare in the context of
Discovery a capital cost allowance calculation and provide it as a formal
admission in the context of Discovery to the respondent? My submission on
that, sir, would be no.
The
second question is -- and this is just sort of breaking out all the different
undertaking requests -- are the appellants required to provide opinion evidence
on the fair market value of each of these hundreds of leasing properties at the
date that they were disposed of to the various lessee? So each property was at
the end of the lease sold to the lessee for a dollar.
(Transcript,
page 56, line 9 to page 57, line 7)
[24]
At page 59 of the
transcript, Counsel for the Appellant said:
So
that's the primary argument. And even my friend in her own submissions said
that, to use her words, the economic reality that this was a financing
situation, to quote her. And she's right and that's why it was reported that
way.
The
alternative argument, sir, was capital cost allowance. The appellants say, if
you don't accept our primary argument, our alternative is that we want to claim
capital cost allowance on these properties if we are required to capitalize
them.
(Transcript,
page 59, lines 9 to 19)
[25]
Counsel for the
Respondent commented as follows:
… It's
an argument that is part of the pleadings, so, again, the CCA in our view is
the main issue because the income is not calculated correctly so it the is main
issue. We need to know the CCA.
In a
self-assessing system the taxpayer has to tell us what the CCA is and the basis
for that. Again, he has suggested that he'll -- we can show up at trial with
our CCA calculations, explain to the court how -- that's not how a trial works.
You can't just show up with the calculations and say, this is what we've done. You
have to provide the background and the evidence and the basis for that
calculation.
(Transcript,
page 73, line 24 to page 74, line 12)
Conclusion
[26]
In HSBC Bank Canada v The Queen, 2010 D.T.C. 1159, Justice Campbell Miller reviewed
the scope of examinations for discovery. Justice Campbell Miller said:
[13] Both parties provided useful summaries of how this Court has
in the past addressed the question of the scope of examinations for discovery.
Justice Valerie Miller recently summarized some of the principles in the case
of Kossow v. R.
1. The principles for relevancy were stated by
Chief Justice Bowman and are reproduced at paragraph 50:
a) Relevancy on discovery must be broadly and
liberally construed and wide latitude should be given;
b) A motions judge should not second guess the discretion
of counsel by examining minutely each question of asking counsel for the party
being examined to justify each question or explain its relevancy;
c) The motions judge should not seek to impose his or
her views of relevancy on the judge who hears the case by excluding questions
that he or she may consider irrelevant but which, in the context of the
evidence as a whole, the trial judge may consider relevant;
d) Patently irrelevant or abusive questions or
questions designed to embarrass or harass the witness or delay the case should
not be permitted.
2. The threshold test for relevancy on discovery is
very low but it does not allow for a “fishing expedition”: Lubrizol Corp
v. Imperial Oil Ltd.
3. It is proper to ask for the facts underlying an
allegation as that is limited to fact-gathering. However, it is not proper to
ask a witness the evidence that he had to support an allegation: Sandia
Mountain Holdings Inc. v. The Queen [2005 DTC 206]
4. It is not proper to ask a question which would
require counsel to segregate documents and then identify those documents which
relate to a particular issue. Such a question seeks the work product of
counsel: SmithKline Beecham Animal Health Inc. v. R. [2001 DTC
192]
5. A party is not entitled to an expression of the
opinion of counsel for the opposing party regarding the use to be made of
documents: SmithKline Beecham Animal Health Inc. v. The Queen
[2001 DTC 192]
6. A party is entitled to have full disclosure of
all documents relied on by the Minister in making his assessment: Amp of
Canada Ltd., v. R. [87 DTC 5157]
7. Informant privilege prevents the disclosure of
information which might identify an informer who has assisted in the
enforcement of the law by furnishing assessing information on a confidential
basis. The rule applies to civil proceedings as well as criminal proceedings: Webster
v. R. [2003 DTC 211]
8. Under the Rules a party is not required to
provide to the opposing party a list of witnesses. As a result a party is not
required to provide a summary of the evidence of its witnesses or possible
witnesses: Loewen v. R. [2006 DTC 3543]
9. It is proper to ask questions to ascertain the
opposing party’s legal position: Six Nations of the Grand River Band v.
Canada.
10. It is not proper to ask questions that go to the
mental process of the Minister or his officials in raising the assessments: Webster
v. The Queen [2003 DTC 211]
[14] The following additional principles can be gleaned from some
other recent Tax Court of Canada case authority:
1. The examining party is entitled to “any
information, and production of any documents, that may fairly lead to a train
of inquiry that may directly or indirectly advance his case, or damage that of
the opposing party”: Teelucksingh v. The Queen
2.
The court should preclude only questions that
are “(1) clearly abusive; (2) clearly a delaying tactic; or (3) clearly
irrelevant”: John Fluevog Boots & Shoes Ltd. v. The Queen
[15] Finally in the recent decision of 4145356 Canada
Limited v. The Queen I concluded:
(a) Documents that lead to an assessment are
relevant;
(b) Documents in CRA files on a taxpayer are prima
facie relevant, and a request for those documents is itself not a broad or
vague request;
(c) Files reviewed by a person to prepare for an
examination for discovery are prima facie relevant; and
(d) The fact that a party has not agreed to full
disclosure under section 82 of the Rules does not prevent a request for
documents that may seem like a one-way full disclosure.
[27]
I agree with the
comments made by Justice Campbell Miller.
[28]
I have considered the
points made by Counsel for the Respondent and the points made by Counsel for
the Appellant companies and I have concluded that the questions contained in
the undertakings in issue are proper questions relevant to the matters in issue.
In my opinion, the Appellant companies should be compelled to provide answers
to undertakings 21 to 25 and undertaking 27 on or before August 15, 2011.
[29]
The Examinations for
Discovery are to be completed on or before September 30, 2011.
[30]
I also order that the
Appellant companies pay costs to the Respondent in the amount of $1,000.00 on
or before August 15, 2011. The costs payable by the Appellant companies are
$1,000.00 in total, not $1,000.00 paid by each Appellant company.
Signed at Vancouver, British
Columbia, this 12th day of July
2011.
“L.M. Little”
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