Citation: 2010TCC613
Date: 20101220
Docket: 2008-2315(IT)G
BETWEEN:
4145356 CANADA LIMITED,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Webb J.
[1]
At the conclusion of
the Appellant’s case, the Appellant sought to read into evidence, pursuant to subparagraph 100(1) of the Tax
Court of Canada Rules (General Procedure) (the “Rules”), excerpts from the examination for discovery of Simmin Hirji, the nominee
of the Respondent. The Respondent objected to the Appellant reading in several
portions of the excerpts.
[2]
Subparagraph 100(1) of
the Rules provides as follows:
100. (1) At the hearing, a party may read into
evidence as part of that party's own case, after that party has adduced all of
that party’s other evidence in chief, any part of the evidence given on the
examination for discovery of
(a) the adverse party,
or
(b) a person examined
for discovery on behalf of or in place of, or in addition to the adverse party,
unless the judge directs otherwise,
if the evidence is otherwise admissible, whether the
party or person has already given evidence or not.
It seems to me that the qualification “if the
evidence is otherwise admissible” is an important qualification to the
introduction of the discovery evidence.
[3]
Counsel for the
Appellant emphasized the decision of the Federal Court of Appeal in The
Queen v. Anchor Pointe Energy Ltd., 2007 FCA 188. In that decision
Justice Létourneau, writing on behalf of the Federal Court of Appeal, stated that:
29 Fairness requires that the facts pleaded as assumptions be
complete, precise, accurate and honestly and truthfully stated so that the
taxpayer knows exactly the case and the burden that he or she has to meet:
[4]
It is important to note
that it is the facts pleaded as assumptions that are to be
accurately stated. Counsel for the Appellant repeatedly referred to the right
of the Appellant to know the assumptions made by the Minister in assessing the
Appellant. In the written submissions, counsel for the Appellant stated that:
4. The Appellant says that the evidence and
documents are relevant because they shed light on the findings of fact
and assumptions made by the Minister of National Revenue in raising the
assessments in issue. The Appellant seeks to rely on the evidence in issue
(including the documents) to demonstrate, among other things that:
…
(b)
the fundamental premise
of the Crown's case - that the transaction is essentially a loan - was
considered and rejected during the avoidance audit based on the factual and
legal conclusions described in the documents;
(c)
The fundamental premise of Mr. John Steines'
expert report respecting the nature of the transaction ‑ a loan for U.S. tax purposes ‑ was rejected by
the CRA as being irrelevant to the issue of the Appellant’s entitlement of the
foreign tax credit.
(d)
The fundamental premise of Mr. John Small's
expert report – that the Appellant's entitlement to profit was 4.7% of the
consideration paid by the Appellant for the units of the partnership - was rejected
by the CRA after extensive analysis on the basis of factual and legal basis
described in the documents;
(e)
The Appellant's theory - that the Attorney
General's position in this litigation is an attempt to recharacterize the
transactions into a loan in the face of the CRA's finding that the legal form
and substance of the transactions was a purchase of partnership interest and
not a loan – is well founded; and
(f)
that the CRA's administrative policy is
consistent with allowing the foreign tax credit at issue because Crown Point
Investments LP is a partnership for Canadian tax purposes, and the Minister
refused to apply the policy, not because the policy is inapplicable to the
facts in this appeal, but because the Minister did not like the result.
(emphasis added)
[5]
The Appellant is
treating the findings of facts and the assumptions as two different items. There
are a number of questions of law in these paragraphs. It appears that it is the
Appellant’s position that the Appellant is entitled to introduce into evidence
questions and answers that relate to assumptions of law. However, questions of
domestic law are for argument, not testimony. The assumptions referred to in Anchor
Point Energy Ltd., supra, would not include assumptions of domestic
law. In another decision of the Federal Court of Appeal related to Anchor
Pointe Energy Ltd. (The Queen v. Anchor Pointe Energy Ltd., 2003
FCA 294), Justice Rothstein (as he then was) writing on behalf of the Federal
Court of Appeal stated that:
25 I agree that legal statements or conclusions have no place
in the recitation of the Minister's factual assumptions. The implication is
that the taxpayer has the onus of demolishing the legal statement or conclusion
and, of course, that is not correct. The legal test to be applied is not
subject to proof by the parties as if it was a fact. The parties are to make
their arguments as to the legal test, but it is the Court that has the ultimate
obligation of ruling on questions of law.
[6]
The assumptions that
must be pleaded completely, precisely, accurately and honestly are the
assumptions of fact. It also seems to me that these assumptions
are the assumptions of fact that were made by the Minister is
assessing (or reassessing) the Appellant as the Appellant was assessed (or
reassessed). These are not assumptions of fact that would have been made if the
Appellant would have been assessed (or reassessed) under some other provision
of the Income Tax Act (“Act”) that may have been considered by
the Minister but not applied by the Minister in assessing (or reassessing) the
Appellant. The facts included in these assumptions of fact are the facts upon
which the Minister is basing the assessment (or reassessment). There are also
several references to the Respondent recharacterizing the transaction as a loan
but there is no reference in the Reply to the Respondent basing the
reassessment of the Appellant on a recharacterization of the transactions as a
loan for the purposes of the Act. In the Reply to the Amended Notice of
Appeal, in paragraph 9 it is stated in part that:
9. In determining the Appellant’s tax
liability for the 2001 taxation year, the Minister made the following
assumptions of fact:
…
ss) For U.S. tax purposes:
…
ii) the Cdn $400 million amount
paid by the Appellant to Altier for the LP Units was considered to be a loan to
Altier which was secured by the LP Units (“Repo Loan”)
[7]
This is clearly an
assumption made for U.S. Tax Purposes. In describing the Grounds Relied On in
the Reply to the Amended Notice of Appeal, it is stated that:
15. The Appellant did not pay U.S. federal income taxes during its 2003
taxation year and no such taxes were paid on its behalf. The Minister of
National Revenue properly disallowed the foreign tax credit claimed by the
Appellant, pursuant to subsection 126(2) of the Act.
16. Furthermore, Article XXIV of the Canada-United
States Income Tax Convention, 1980 does not require the foreign tax credit
claimed by the Appellant to be allowed as a deduction in computing tax payable
for the 2003 taxation year.
[8]
There is no indication
in the Grounds Relied On that the Minister was basing the reassessment on a
recharacterization of the transaction as a loan. As well, Mr. Bourgeois during
his opening submission at the hearing stated that:
…The Minister assessed on the basis that that was of the correct
view, that the appellant's entitlement to profits was 25 percent of the pre‑tax
profits of Crown Point LP. We've pled an alternative fact. We've stated that
that is not a proper interpretation of the partnership agreement because the
only way the Appellant can share in the profits of Crown Point LP is through
the distributions that are spelled out very clearly in the partnership
agreement that say regardless of how many profits, regardless of whether or not
the U.S. tax rate falls down to 10 percent, the only money that you can make,
the only return that you can make as a limited partner is 4.7303 percent of the
amount that you invested, which is $400 million. We're not re‑characterizing
the transaction as a loan. It is partnership agreement we're
interpreting.
(emphasis added)
[9]
Evidence and documents
that relate to a position that is not being taken in relation to the
reassessment of the Appellant are not admissible. As noted by Justice C.
J. Horkins of the Ontario Superior Court of Justice in Covriga v.
Covriga, [2009] O.J. No. 3359:
20 Pleadings
define the issues and serve as a framework for determining what evidence is relevant
at trial.
[10]
As well statements
related to positions or opinions in relation to matters of domestic law are not
admissible. In Eco-Zone Engineering
Ltd. v. Grand Falls - Windsor
(Town), 2000 NFCA 21 Justice Cameron,
writing on behalf of the Newfoundland Supreme Court - Court of Appeal stated
that:
15 What
the parties did not directly address before this Court, is the long accepted
view that courts do not accept opinion evidence on questions of domestic law
(as opposed to foreign law). This is part of the principle that courts do not
accept expert evidence on the ultimate issue which is for the court to decide,
which was referred to by the appellant. Though one could perhaps say that there
has been a relaxation of the rule regarding opinion on the ultimate issue,
there is little support for the admissibility of expert opinion regarding domestic
law. In R. v. Century 21 Ramos Realty Inc. and Ramos (1987), 32 C.C.C.
(3d) 353 (Ont. C.A.) the principal of a real estate company was charged with
income tax evasion as a result of appropriation of property belonging to the
company. The taxation year in which the appropriation took place was an issue
at trial and the Crown called an employee of Revenue Canada to give expert
evidence as to when the accused had appropriated the property. The Ontario
Court of Appeal held such evidence to have been inadmissible as the judge was
to determine what constitutes an appropriation (a question of law) and if and
when an appropriation took place. The expert evidence was therefore
inadmissible. In Doncaster et al. v. Smith (1985), 65 B.C.L.R. 173
(B.C.S.C.) at pp. 180-181, Southin J. suggested another approach should be
taken:
Strictly speaking, expert evidence of the domestic law of this country is
not admissible. The classic rule is that evidence may be adduced of foreign law
which is considered a fact but not of domestic law. However, as the Income Tax
Act of Canada is so complicated that the Honourable John Crosbie, now Attorney
General for Canada, once commented, "even a witch doctor can't read
it", perhaps the courts should relax the rule and permit expert evidence
on the Act and its effect. Without taking it upon myself to relax the rule, I
adopt the statement as setting out the relevant considerations and the effect
of an amalgamation [of companies].
The British
Columbia Court of Appeal reversed the decision of the trial judge but without
comment on the question of expert evidence on domestic law. (See (1987), 40
D.L.R. (4th) 746.)
16 I see
no basis upon which to announce the death of the rule against the admissibility
of expert evidence as to domestic law. The opinions of the expert as to whether
the GST was an excise tax or a sales tax should not have been admitted.
[11]
Since individuals who
have been qualified as experts are not permitted to provide opinions to the
Court on matters of domestic law, any person who has not been qualified as an
expert will likewise not be permitted to testify with respect to their opinion
on matters of domestic law. This is also confirmed by Master Funduk of the Alberta Court of Queen's Bench in First Edmonton Place Ltd. v. Qualico Developments Ltd., 97 A.R. 91:
Reimer's
"evidence" in paragraph 3, that the Plaintiff is "obliged"
to draw on the letter of credit, is a legal opinion thinly disguished as
evidence. That "evidence" is not admissible. On a question of law a witness
cannot give opinion evidence about what the law is, except in the case of an
expert witness testifying as to what some foreign law is.
The general
admonition in Alberta Human Rights Commission v. Alberta Blue Cross
Plan, (1983) 6 W.W.R. 758 (Alta. C.A.), p. 760, must be kept in mind:
The respondent's response to justify the dismissal is contained
in an affidavit taken by one of its officers in which he alleges that the
complainant was dismissed "because of her record of attendance and
problems over the six months previous". We might add, as an aside, that
mixed with a lengthy recital of facts the affidavit contains a good deal of
argument and opinion including the conclusion that the demand for documents was
"entirely unreasonable" and "completely unreasonable". We
would suggest to the deponent and to counsel that affidavits ought to be
confined to evidence. Any conclusion based on the evidence is the function of
the court.
Opinion
evidence is admissible if it is by an expert witness and goes to an issue of
fact. Argument is solely a function of counsel. Law and any conclusions based
on evidence is solely a function of the Court.
[12]
Therefore any
expressions of any opinions of domestic law will not be admissible. This would
include any expressions of any opinion with respect to whether any particular
provision of the Act will apply.
[13]
It should also be noted
that the issue of whether any particular question or matter is relevant is not
the same for discovery examinations as it is at a hearing. Then Associate Chief
Justice Christie in 569437 Ontario Inc. v. The Queen, [1994] 2
C.T.C. 2399, 94 D.T.C. 1922 stated as follows:
9 I adopt these two propositions in the reasons for
judgment delivered by Chilcott J., in Algoma Central Railway v. Herb
Fraser and Associates Ltd. et al. (1988), 36 C.P.C. (2d) 8, 66 O.R. (2d)
330 (Div. Ct.). He was sitting as a member of the Divisional Court of the
Supreme Court of Ontario on an appeal from an order of Montgomery J. First,
there is a broader standard of relevance regarding questions asked at the
discovery stage of proceedings than at trial. Second, questions asked on
examination for discovery may be proper bearing in mind that issues of
admissibility and weight to be assigned to evidence at trial are for the trial
judge to determine.
[14]
Also, as noted by
Justice Quinn in 1224948 Ontario Ltd. v. 448332 Ontario Ltd.,
[1998] O.J. No. 4544, 28 C.P.C. (4th) 57:
8 As
for the second ruling, it can be resolved by reference to the wording of the
rule itself: (Emphasis added [by Justice Quinn])
31.11(1) At the trial of an action, a party may read into
evidence as part of the party's own case against an adverse party any part of
the evidence given on the examination for discovery of,
(a)
the adverse party; or
(b)
a person examined for discovery on behalf or in place of, or in addition
to the adverse party, unless the trial judge orders otherwise,
if the evidence is otherwise admissible,
whether the party or person has already given evidence or not.
When the
transcript and the two affidavits were made exhibits on the discovery of Mr.
Ferri in this action, they became, in the words of rule 31.11(1),
"evidence given on the examination for discovery of" the first
mortgagee. As such, they are properly the subject of read-ins under that rule
provided, however, that they are "otherwise admissible" pursuant to
the rules of evidence governing trials (it being trite law that what is
admissible on discovery is not necessarily admissible at trial).
(additional emphasis
added as designated by the portion that is in bold and italics)
[15]
Included after the
excerpts from the transcripts that were submitted by counsel for the Appellant are
several documents. Counsel for the Respondent during argument confirmed the
authenticity of the documents. The position of the Appellant was that since the
documents had been produced at the examination for discovery that such
documents were therefore admissible at the hearing. I do not read the decisions referred to by counsel for the Appellant
in support of the Appellant’s argument as standing for the proposition that
basic rules of evidence and admissibility should be dispensed with simply
because a document was produced at a discovery examination. As noted by Justice
Quinn in 1224948 Ontario Ltd. v. 448332 Ontario Ltd., supra, the
documents introduced at the discovery (the transcript and the two affidavits in
that case) would be “properly the subject of read-ins under that rule provided,
however, that they are ‘otherwise admissible’ pursuant to the rules of evidence
governing trials”. Therefore the documents must be admissible documents pursuant
to the rules of evidence governing trials in order to be introduced as
documents at the hearing.
[16]
The first excerpt to
which the Respondent objected is located after Tab 18 in the binder submitted
by the Appellant. The questions and answers in this excerpt relate to a prior opinion
that had been expressed by someone with the Canada Revenue Agency (the “CRA”)
with respect to whether the Appellant should be entitled to claim the foreign
tax credit that is in issue in this appeal. This opinion would clearly be an
expression of an opinion on matters of domestic law and not admissible. The
document included after Tab 18 is the request for an opinion. It appears from
the questions that were asked that the purpose for introducing the document
would be to have admitted into evidence the views expressed by the CRA auditor
(who wrote the request for an opinion) on whether the Appellant should be
entitled to the foreign tax credit. These views would be an expression of the
opinion of the CRA auditor on matters of domestic law and therefore are not
admissible. Therefore neither the excerpt nor the document located after Tab 18
is admissible.
[17]
The excerpts after Tab
19 also relate to expressions of the opinions of various individuals with
respect to whether the Appellant is entitled to claim the foreign tax credit
that is in dispute in this appeal. These would also be expressions of opinions
of domestic law and not admissible. The document which is included after Tab 19
(which is the expression of the opinion rendered by the Income Tax Rulings
Directorate (International and Trusts Division) (“Rulings”)) is also an
expression of the opinion of Rulings on the domestic legal question of whether
the Appellant is entitled to claim the foreign tax credit that is in issue and
is not admissible.
[18]
There were also
excerpts related to certain legal advice that the CRA was seeking in relation
to the transactions. This would also relate to opinions of domestic law and
would not be admissible. As a result the excerpt and the documents located
after Tab 19 are not admissible.
[19]
The questions and
answers after Tab 21 relate to the question of whether the matter had been
referred to the GAAR committee. Since the general anti-avoidance rule (“GAAR”),
in section 245 of the Act, has not been applied by the Respondent, these
questions and answers are not relevant to the actual reassessment that is in
issue in this appeal.
[20]
There is no reference
in the pleadings to the CRA applying GAAR. Whether the CRA considered applying
GAAR or considered applying any other section of the Act that is not
referred to in the pleadings is not relevant. Why any other section of the Act
was not applied would presumably also require someone to express a legal
opinion, which would not be admissible. What is relevant are the facts as
assumed by the Respondent in reassessing the Appellant as the Appellant was
reassessed, not any facts that might relate to another section under which the
Appellant might have been (but was not) reassessed. The questions and answers
related to whether the CRA considered applying GAAR are not admissible.
[21]
There are however, a
number of questions and answers that relate to questions of foreign law. In
this case the foreign law is that of the United States. Questions related to foreign law are questions of
fact. Justice
Rothstein in Backman v. The Queen, 178 D.L.R. (4th) 126, [1999]
F.C.J. No. 1327 (Fed. C.A.), stated as follows:
38 Where foreign law is relevant to a case, it is a question of fact
which must be specifically pleaded and proved to the satisfaction of the Court.
[22]
Therefore the questions
and answers related to the foreign law as assumed by the Respondent are
questions and answers related to the facts as assumed by the Minister (which
appear in subparagraphs 9(tt) and (uu) of the Reply to the Amended Notice of
Appeal) and therefore are admissible. Questions 336 and 337 and the related
answers on pages 103 and 104 of the transcript; questions 344 and 347 and the
related answers on page 107 of the transcript and the questions and answers on
pages 108 to 110 of the transcript are admitted into evidence. Questions 345
and 346 quote from an expression of an opinion with respect to whether the
Appellant could rely on Interpretation Bulletin IT-270R3, which is a question
of domestic law and therefore are not admissible.
[23]
Since the relevant part
from the documents that are included after Tab 21 was read into the discovery
transcript there is no necessity to introduce that part of the document. Since
the remaining parts of the document from which the paragraph was read contain
legal arguments and submissions in relation to a presentation that was being
made to the GAAR Committee (including a recitation of the facts as assumed for
that presentation), the document after Tab 21 identified as A7 at the discovery
examination is not admissible. The facts that were assumed by the Minister in
making the reassessment that is under appeal are relevant. The facts as assumed
by the Minister in contemplating whether another provision of the Act
will apply are not relevant because that other provision was not applied in
reassessing the Appellant.
[24]
The other documents
after Tab 21 are also related to the submission that was being made to the GAAR
Committee and therefore are not admissible.
[25]
As a result the only
part of the excerpt and the documents located after Tab 21 that are
admitted into evidence are the questions 336 and 337 (and the related answers)
on pages 103 and 104 of the transcript, questions 344 and 347 (and the related
answers) on page 107 of the transcript and the questions and answers on pages
108 to 110 of the transcript.
[26]
The only question that
Simmin Hirji answered in the excerpt included after Tab 22 was whether she
could “read French”. The documents included after Tab 22 include
expressions of opinions on domestic law. Neither the excerpt nor the documents
included after Tab 22 are admissible.
[27]
The questions and
answers and the documents included after Tab 23 relate to the submissions being
made by the CRA to the GAAR Committee. Since the Appellant was not reassessed
based on the application of GAAR, what assumptions of fact were made in these
submissions is not relevant. What is relevant are the assumptions of fact that
were made by the Respondent is reassessing the Appellant as it was reassessed,
not as it might otherwise have been (but was not) reassessed. There are also
expressions of opinion of domestic law that are not admissible in any event.
[28]
Counsel for the
Appellant cited an example of the “facts” that the Appellant wanted to have
submitted through the e-mails included after Tab 23:
I take Your Honour to tab 23. There's a document included at tab 23,
an email exchange. If we go to the second page of that email exchange ‑
it's a long exchange ‑ but if we start near the top of the second page
there's a question that says:
Are you saying
that you will avoid the appearance of taxing Royal Bank on pre‑tax
profits but denying a foreign tax credit because you will only include the net
amount in income?
And the answer
is:
InvestCo's share
of USLP's tax profits for Canadian tax purposes…
must be the pre‑tax
amount. What do we do with the U.S. tax paid at the partnership level that InvestCo can not claim as a
foreign tax credit but does not receive? Rick believes there is a lot of case
law that supports the non‑deductibility of these amounts for tax
purposes. I could double check that. If that verifies we will have to
consider it as a non‑deductible disbursement for InvestCo, since the
Canadian taxpayer was not liable to pay tax in the U.S. but agreed to share in paying the taxes of his fellow partners.
The next
response comes, it says:
I suppose you
can wrap all that in your presentation. If you intend to tax this notional
gross amount I will be interested in seeing what you call the foreign tax that
you are not allowing as a foreign tax credit. Will you be suggesting that it
is some sort of benefit the Royal Bank has conferred on a third party?
And the answer
that comes back is:
That can be
included in my presentation. The foreign tax credit will be called a foreign
tax. There is no other name for it. I will present it by way of an example as
a partnership of two U.S.
partners and one Canadian partner whether where the Canadian partner is exempt
from tax in the U.S. but agrees
to use a share of his pre‑tax distribution to pay for a share of his
partner's tax. The Canadian partner agrees to do that because that is the
condition under which he is allowed to be a partner and the partnership deal is
still lucrative for him, at least that is what he believed on the assumption
that the foreign tax credit will be granted.
[29]
The first part relates
to the amount that would be included in the income of the Appellant. The amount
that should be included in the income of the Appellant for the purposes of the Act
is a question of domestic law. The opinions of the authors of the e-mail on
this question of domestic law are not admissible. The references to the
“non-deductibility” of the amounts paid as foreign taxes (although it is not
entirely clear) presumably relate to the question of whether the Appellant can
deduct these amounts in computing its income for the purposes of the Act.
The references to the case law would presumably be to Canadian tax law cases.
This is also a question of domestic law and not admissible. The part related to
the presentation is with respect to the presentation to be made to the GAAR
Committee and is not admissible.
[30]
Therefore the questions
and answers and the documents located after Tab 23 are not admissible.
[31]
The exchange of
questions and answers included after Tab 24 is a four page exchange between
counsel for the Appellant and counsel for Respondent. The only answers provided
by Simmin Hirji were that she saw two parts of the e-mails to which she was
referred – one was a part that had been blacked out as solicitor client
privilege was claimed and the other was a statement that had been made by a
person in one of the e-mails. It is not at all clear why these questions and
answers should be admissible. The e-mails that are attached include expressions
of opinions on domestic law (and whether the Appellant should be entitled to
claim the foreign tax credit if GAAR is not applied). These expressions of opinions
on domestic law are not admissible. Therefore the questions and answers and the
documents located after Tab 24 are not admissible.
[32]
The excerpt included
after Tab 25 consists entirely of an exchange between counsel for the Appellant
and counsel for the Respondent. Exchanges between counsel are not evidence.
Simmin Hirji, the person who was being examined at discovery, did not answer
any questions in this excerpt. Subsection 100(1) of the Rules provides,
in part, that:
100. (1)
At the hearing, a party may read into evidence as part of that party's own
case, after that party has adduced all of that party’s other evidence in chief,
any part of the evidence given on the examination for discovery…
(emphasis
added)
[33]
A party may only read
into evidence “any part of the evidence given on the examination
for discovery”. Only evidence may be read in at the hearing. In Black’s Law
Dictionary, Ninth Edition, “evidence” is defined as:
Something (including testimony, documents and tangible objects) that
tends to prove or disprove the existence of an alleged fact.
[34]
In a dissenting
judgment in R. v. Schwartz, [1988] 2 S.C.R.
443, then Chief Justice Dickson stated certain general principles. There
is no indication that the majority of the Justices of the Supreme Court of
Canada disagreed with the general principles as expressed by then Chief Justice
Dickson. In his judgment, then Chief Justice Dickson stated that:
59 One of
the hallmarks of the common law of evidence is that it relies on witnesses as
the means by which evidence is produced in court. As a general rule, nothing
can be admitted as evidence before the court unless it is vouched for viva voce
by a witness. Even real evidence, which exists independently of any statement
by any witness, cannot be considered by the court unless a witness identifies
it and establishes its connection to the events under consideration. Unlike
other legal systems, the common law does not usually provide for
self-authenticating documentary evidence.
60 Parliament
has provided several statutory exceptions to the hearsay rule for documents,
but it less frequently makes exception to the requirement that a witness vouch
for a document. For example, the Canada Evidence Act provides for the admission
of financial and business records as evidence of the statements they contain,
but it is still necessary for a witness to explain to the court how the records
were made before the court can conclude that the documents can be admitted
under the statutory provisions (see ss. 29(2) and 30(6)). Those explanations
can be made by the witness by affidavit, but it is still necessary to have a
witness….
[35]
There is no evidence
given in this excerpt. There are no answers provided by the witness. The only
persons who make any statements in this portion are the lawyers. No part of
this excerpt is admissible.
[36]
The e-mails that are
attached are related to the policy of the CRA. In Silicon Graphics Limited v.
The Queen, 2002 FCA 260, 2002 D.T.C. 7112, [2002] 3 C.T.C. 527,
Justice Sexton, writing on behalf of the Federal Court of Appeal stated that:
52 Of course, statements by Revenue Canada officials are not declarative of the law. However, in the recent
case of Canadian Occidental U.S. Petroleum Corp. v. R., 2001 D.T.C. 295
(T.C.C. [General Procedure]), Bowman A.C.J. noted that while the administrative
position of Revenue Canada is not declarative of the law, it is nonetheless of
assistance in circumstances where the Minister seeks to reassess the taxpayer
in a manner inconsistent with its own administrative position. Associate Chief
Justice Bowman wrote at 299:
The Court is not bound by departmental practice although it is not
uncommon to look at it if it can be of any assistance in resolving a doubt: Nowegijick
v. The Queen et al., 83 D.T.C. 5041 at 5044. I might add as a corollary to
this that departmental practice may be of assistance in resolving a doubt in
favour of a taxpayer. There can be no justification for using it as a means of
resolving a doubt in favour of the very department that formulated the
practice.
[37]
In this case the
administrative policy that is referred to in the e-mails that are included
after Tab 25 is the policy contained in Interpretation Bulletin IT-270R3. The
parties had previously brought motions in relation to questions that were not
answered during discovery examinations. As part of his decision on these
motions, Justice Campbell Miller stated that:
4. Question 235 - Will the Respondent urge the Court not to follow
the Minister's administrative practice as described in IT-270R3 because it is
wrong in law?
31 The Respondent claims this goes beyond seeking their legal
position and is looking for an opinion on the state of the law. I agree. The
Appellant appears to be engaging in tactics best left for argument at trial.
The Appellant referred me to a number of decisions (notably Silicon Graphics
Ltd. v. R.* and Canadian Occidental U.S. Petroleum Corp. v. R.*)
commenting on the use of IT Bulletins. These comments were raised in the
context of legal argument. If Mr. Meghji believes the Respondent has acted
inconsistently with an Interpretation Bulletin, the trial judge may certainly
take that into consideration. Discovery is not the place to obtain the
Government's opinion on its IT Bulletin. It is what it is. The Respondent's legal
position is not to be crafted by the Appellant seeking opinions on IT
Bulletins.
(* denotes a
footnote reference that was in the original text but which has not been
included.)
[38]
The e-mails in question
do not address the question raised and dealt with in the motions brought before
Justice Campbell Miller. The e-mails simply state the rationale for the
position taken in the Interpretation Bulletin. There is no suggestion that the
Respondent would be arguing that its position as stated in the Interpretation
Bulletin should not be followed. In any event that would be a matter for
argument not testimony.
[39]
The e-mails consist of
an inquiry about documents with respect to the foreign tax credit generator and
a response that refers to Interpretation Bulletin IT-270R3 and a statement of
the rationale. It is not clear why an inquiry about documents is relevant in
relation to the issues raised in this Appeal. With respect to the response, whether
the rationale is correct is a question of law. As a result these documents are
not admissible.
[40]
The excerpt after Tab
26 includes questions and answers related to what the Appellant did in filing
its tax returns and questions related to the amounts paid by the limited
partnership to the government of the United States and are
admissible. The e-mails that are also after Tab 26 include speculations on
questions of domestic law - whether a taxpayer in certain situations should be
entitled to claim a foreign tax credit. Expressions of opinions on matters of
domestic law are not admissible. Therefore the e-mails are not admissible.
[41]
As a result, none of
the documents included with the excerpts from the examination for discovery of Simmin Hirji, the nominee of the
Respondent, are admissible and the following portions of the excerpts from her examination for discovery are not admissible into evidence:
(a)
the excerpt located
after Tab 18;
(b)
the excerpt located
after Tab 19;
(c)
the excerpt located
after Tab 21, except that questions 336 and 337 and the related answers on
pages 103 and 104 of the transcript; questions 344 and 347 and the related
answers on page 107 of the transcript; and the questions and answers on pages
108 to 110 of the transcript are admitted into evidence;
(d)
the excerpt located
after Tab 22;
(e)
the excerpt located
after Tab 23;
(f)
the excerpt located
after Tab 24; and
(g)
the excerpt located
after Tab 25.
Signed at Halifax, Nova Scotia, this 20th day of December, 2010.
“Wyman W. Webb”
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