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Citation: 2010 TCC 197
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Date: 20100414
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Docket: 2009-1011(IT)G
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BETWEEN:
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TERRY LONG,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR ORDER
Campbell J.
[1] The
Appellant, a self-represented litigant, brought this Motion to compel full
documentary disclosure pursuant to Rule 82(1) of the Tax Court of Canada
Rules (General Procedure) (the “Rules”).
Background
[2] In
2002, the Royal Canadian Mounted Police (“RCMP”) conducted an investigation of
the Appellant in respect to an illegal marijuana growing operation and
subsequently charged him. These charges were later stayed and the Appellant has
not been convicted of any offence in respect to the alleged operation.
[3] In
2003, the Canada Revenue Agency (“CRA”) contacted the Appellant and requested
information which the Appellant refused to provide.
[4] In
2004, an audit was commenced and on February 16, 2005, CRA advised the
Appellant that proposed assessments in respect to unreported business income
would be issued. Subsequently, in 2005, CRA issued a notice of proposed
assessment for the taxation years 1999 to 2003, which was later confirmed in
2008.
[5] During
this period, the Appellant made two separate Privacy Requests for information
and documentation under the Privacy Act (R.S., 1985, c. P-21), one to CRA and one to the RCMP. After a lengthy
period of time, particularly in the RCMP request, both Privacy Requests were
denied.
[6] On
December 23, 2005 the Appellant filed a Petition in the British Columbia
Supreme Court against Her Majesty the Queen, the Minister of National Revenue,
the CRA and the Minister of Finance respecting various Constitutional
challenges. In addition, the Appellant sought an order that he not be required
to provide any information to the Respondent in respect to any of the
assessments or objections on the basis that such information, if provided,
could be used against him in a criminal prosecution. At the hearing of this
Motion on January 5, 2009, the Appellant requested an adjournment which was
denied and the application was voluntarily abandoned by the Appellant.
[7] The
Appellant appealed the reassessment for amounts owing as unreported business
income by filing a Notice of Appeal on April 1, 2009. A Reply to the Notice of
Appeal was filed on June 19, 2009 with the Appellant delivering an Answer to
the Reply on July 17, 2009.
[8] On August
7, 2009, the Appellant requested the Respondent’s consent to the preparation of
a list of documents on the basis of full disclosure pursuant to Rule 82(1) of
the Rules. The Respondent did not consent but proposed a timetable for
the completion of steps in the appeal process beginning with an exchange of
partial lists of documents pursuant to Rule 81. On September 22, 2009,
the Appellant continued his request for full disclosure and rejected the
Respondent’s proposed timetable. The matter was set down for a status hearing
with permission given to the Appellant to bring the present Motion for full
disclosure at this time.
[9] The
Appellant’s Motion is brought at the close of the pleadings but before the
occurrence of any step in the appeal process, including production of lists of
documents and discoveries.
The Appellant’s Position:
[10] The
Appellant alleges that the audit process was actually a criminal investigation
and that information that he provides will be passed along to the RCMP in a
further or continued criminal prosecution. At paragraph 50 of his Affidavit
dated December 11, 2009 filed in support of the Motion, he states:
50. CRA is not asking me for
information in relation to employment for example, these officials are seeking
information in relation to income from an alleged illegal activity which to
date, the Crown has stayed charges for want of evidence to convict. To give
them any information by me could be an admission of participation in an illegal
activity and could and/or would be used against me in a criminal prosecution by
the RCMP pursuant to their Agreements to do so, and permit the Crown to
prosecute once again.
[11] The Appellant’s
position is that certain Canadian Charter of Rights and Freedoms (“Charter”)
rights have been engaged as a result of CRA’s investigative approach. He
therefore requires full disclosure from CRA and seeks unilateral disclosure,
claiming that he cannot reciprocate with full disclosure because any
information that he might share with the Minister is tantamount to
self-incrimination. This assertion is premised on the notion of preventive Charter
protections. With respect to timing, he has requested full disclosure at the
close of the pleadings so that he can determine with certainty the intentions
of CRA prior to further steps in the proceeding being taken and to determine if
he will be filing for Charter relief.
The Respondent’s Position:
[12] The Respondent
states that the Appellant has not provided sufficient reasons to grant an order
for full disclosure and that if such an order were granted it would put the
Respondent to considerable time and expense in assembling the documents in
order to comply.
[13] The Respondent’s
position is that the Appellant has several alternative remedies available to
him including:
(1) obtaining
documents and information through other avenues such as the Privacy Act
and the Access to Information Act;
(2) obtaining
documents and information through the exchange of partial lists of documents
and examinations for discovery and subsequent undertakings;
(3) the
Appellant can refuse to answer questions posed on examinations for discovery
which he believes to be self-incriminating; and
(4) the
Appellant may rely on the Minister’s implied undertaking not to use any of the
documents uncovered in discovery in a collateral action against him.
[14] In addition, the
Respondent alleges that the Appellant’s Motion is premature and most of the
materials requested in the Motion are not relevant to the assessment that is at
issue in this appeal.
Analysis:
[15] The Appellant is
requesting an order for full disclosure of documents under Rule 82(1) of the Rules
as opposed to the standard procedure in this Court of partial disclosure under
Rule 81. Although the partial disclosure of documents is standard practice in
this Court, it is the exception rather than the rule, as the majority of
Canadian courts require full disclosure of documents. For a party to be
successful in obtaining full disclosure under Rule 82(1), the Court must be
persuaded that there are reasonable grounds or basis for granting such an order
in that it will assist in the expeditious resolution of the issues surrounding
the assessment and assist directly or indirectly with advancing a party’s case
or damaging the opposing party’s case. Underlying all of this is the relevancy
of the requested documents to the issues outlined in the pleadings. An order
under Rule 82 must contain specifics in respect to a proposed list to be
produced. Whether a party requesting full disclosure requires all of the
documents sought is a question of relevancy to be determined by the Court on a
document by document basis. The threshold for such relevancy is generally established
to be of wide scope allowing any document “relating to” any matter in question
(SmithKline Beecham Animal Health Inc. v. The Queen,
2001 D.T.C. 192).
[16] The decision of
McNair J. in Ikea Ltd. v. Idea Design Ltd.,
[1987] 3 F.C. 317, at page 325, provides a comprehensive review
of the circumstances in which a court may order full disclosure. Although he
was dealing with the then Rule 448 of the Federal Court Rules, it is
similar to our present Rule 82.
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 of 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).
The leading case is Compagnie
Financiere du Pacifique v. Peruvian Guano Company (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.
[17] In addition to
relevancy, the court must give some consideration to whether some aspect of the
case mandates the increased expense and time required to assemble documents
pursuant to the full disclosure rule. This is particularly important when Charter
violations are alleged. The Appellant’s allegations of Charter
violations are central to his appeal. At paragraph 14 of the Appellant’s
affidavit affirmed December 11, 2009, the Appellant is demanding to know
whether information CRA is gathering will be used against him in subsequent
criminal proceedings. For this reason, the Appellant refuses to provide
information to CRA and this is the basis upon which he seeks some of the
documents from both the CRA and the RCMP.
[18] The Appellant is
essentially arguing for a one-way disclosure on the part of the Respondent as
occurs in criminal proceedings, where the Crown provides full disclosure and
the accused offers protected disclosure, as Charter rights against
self-discrimination are engaged (referred to as the “Stinchcombe
disclosure”).
[19] The Respondent
argues that a request for a one-sided disclosure is an improper purpose. At paragraph 23 of the Respondent’s
Written Submissions it states:
23. The Appellant’s motion
for full disclosure under Rule 82 of the General Procedure Rules is
brought for an improper purpose as it seeks to obtain a one‑sided
disclosure of the Respondent’s documents, in the absence of an intention on his
part to reciprocate in the full disclosure process established under
Rule 82.
[20] Taxpayers may be entitled, in certain circumstances, to
assert their Charter protections pre‑emptively, and to refuse to
provide disclosure upon threat of imminent violation relying upon section 7
rights against self-incrimination. The discovery process would then become, in
effect, comparable to a criminal appeal discovery process where an accused is
entitled to a “Stinchcombe disclosure” with the Crown providing full
disclosure and the taxpayer providing protected disclosure.
[21] I am therefore not prepared to go so far at this
particular stage as to accept the Respondent’s assertion that the Appellant’s
Motion for full disclosure is brought for an improper purpose.
[22] However, Mogan J. in Warawa v. The Queen, 2002
D.T.C. 1264, suggests that evidence that would be excluded in criminal
proceedings on the basis of Charter violations would not necessarily be
excluded in tax appeals. Bowman J. (as he was then) in O’Neill Motors
Limited v. The Queen, 96 D.T.C. 1486, stated at page 1496 that:
… In the exercise of the
discretion vested in the court under section 24 of the Charter one must be
vigilant in balancing, on the one hand, the rights of the subject that are
protected under the Charter, and on the other, the importance of maintaining
the integrity of the self-assessing system. …
[23] Although the high
standard of protection afforded to an accused in a criminal proceeding does not
necessarily follow in a regulatory context, there does not appear to be any
clear authority, in either the caselaw or the Rules, that unilateral
disclosure can never be granted in tax proceedings. I do not believe there is anything
that would prevent a Judge from using discretion from granting an order for
unilateral full disclosure. It would depend on the special circumstances of the case.
[24] If the Appellant were to be granted unilateral
disclosure, a judicial determination would be required of the existence of an
“imminent violation” of Charter protections. In Kligman v. M.N.R.
(C.A.), 2004 FCA 152, [2004] 4 F.C.R. 477, Létourneau J. of the Federal Court
of Appeal stated, at paragraph 3, that a preventive Charter right
should be exercisable in the face of imminent violation of a Charter
protection:
[3]
I do not accept the respondent's
contention that the appellants should comply with the requirements and, as it
was done in R. v. Jarvis, [2002] 3 S.C.R. 757, later oppose the
admissibility into evidence of the information thus provided. In Jarvis,
the documents had already been obtained and the only option left to the accused
in his criminal trial for tax evasion was to object to their admissibility. The
respondent's contention means that a taxpayer would be prohibited from
asserting preventively his Charter right to protection against unreasonable
searches and seizures and from impeding its imminent violation. He would only
be entitled to apply for a discretionary remedy under section 24 (2) of the
Charter. This would seriously undermine the beneficial and protective effect of
the Charter.
The fact of “imminent violation” was premised on the fact
that CRA had breached the taxpayer’s Charter protections in the
investigative process. However, no such determination has been made in the
present appeal. Without such a determination, the present appeal at this point
is essentially a tax appeal where Charter protections, preventive or
remedial, are not as yet presumed to apply. It must be remembered that the Charter
protections that are triggered in the criminal process are not presumed to
apply in the regulatory process.
[25] The Respondent argued that the Appellant
has alternate viable avenues to obtain the requested information and documents
or to deal with his other concerns and that these factors should be a
consideration in deciding if full disclosure under Rule 82 is appropriate. The
Appellant seeks unilateral disclosure in an effort to protect his right against
self-incrimination. However, the Appellant may have an opportunity to obtain
disclosure of some of the documents that he is requesting through an exchange
of a partial list of documents, examinations and undertakings. Also, as the
Respondent rightly pointed out, the Appellant may have a right to refuse to
answer questions posed to him on discovery if he believes the genesis of those
questions relate to a criminal investigation. In Svastal, the Appellants
were granted the right to object even though certain Constitutional issues
relating to the assessment had not been determined. In Bathurst Machine Shop Ltd. et al. v. The Queen, 2006 FCA 59, 2006 D.T.C. 6130, Evans
J. confirmed that this right to object was not absolute and had to be
determined on a balance of convenience test. As the various stages unfold in
this process, the Appellant in the present appeal may be able to exercise his
right to refuse to answer as an alternative to requesting full unilateral
disclosure.
[26] In The Queen v. Jurchison et al.,
2001 FCA 126, 2001 D.T.C. 5301, Sexton J. held that the right to
discovery applied to both parties and that the taxpayer, even in the face of
potential Charter breaches, would not be excluded from the discovery
process. In determining that the right to discovery should not be lightly
extinguished, Justice Sexton stated at paragraph 14:
[14] I turn now to the Crown's
appeal of the Order disallowing the examination for discovery of Mr. Jurchison.
The material in the record before us, including the judgments with respect to
the tax evasion charges, demonstrates the strong possibility that the judge in
the reassessment appeal may exclude at least some of the evidence collected by
Revenue Canada auditors and investigators. It
is impossible to know at this point exactly what that evidence might be. The
details of the evidence obtained in breach of the taxpayers' rights is not
before us, nor is the evidence which the Crown already had in its possession.
It may well be that certain questions on discovery could be seen to have a
genesis in the evidence taken in breach of the taxpayers' rights. However,
until such questions are asked no such determination can be made. The Crown has
the right to discovery and this right should not lightly be extinguished. In
my view, it is preferable to allow the discovery to proceed with the taxpayer
being given the right to object to any questions which are felt to have their
genesis in the impugned evidence. Then a Motions Judge will be in a better
position to assess the propriety of the question.
(Emphasis added)
[27] The Appellant is concerned that information
he provides will be used in criminal proceedings against him. The concept of implied
undertaking confirms that documents produced during the discovery process will
not be used by the CRA for collateral purposes. In Canada v. ICHI Canada
Ltd., [1992] 1 F.C. 571, at page 580, the Federal Court – Trial
Division described this concept as follows:
An order will therefore issue requiring the plaintiff to produce a representative
for discovery. The defendant will know from the text of these reasons that an
implied undertaking automatically arises so that information obtained on discovery
is to be used only for the purposes of the litigation for which it is obtained.
This does not, of course, restrict the use of any information which
subsequently is made part of the public record. Nor does it affect the use of
information which while obtained on discovery may also have been obtained from
some other source. An implied undertaking cannot operate to pull under its
umbrella documents and information obtained from sources outside the discovery
process merely because they were also obtained on discovery. In addition, the
implied undertaking does not prevent a party from applying, in the context of
collateral litigation, for release from the implied undertaking, so that
information obtained on discovery might be used in that litigation. This, however,
is a matter to be determined in the context of that proceeding and not in this
proceeding.
[28] The rule of implied undertaking is not an
absolute protection or guarantee that the information will never be used
against the Appellant. However, it may be a realistic alternative to full
disclosure.
[29] The Appellant’s Motion for full disclosure
attempts to obtain access to various documents that will support his concerns
respecting communication between the CRA and the RCMP in connection with
alleged RCMP investigations. The Respondent has suggested that the Appellant
can reapply through third-party sources such as the Privacy Act and Access
to Information Act to obtain this information. The Respondent relies on Mintzer
v. The Queen, 2008 TCC 72, 2008 D.T.C. 2613, to support its argument
that full disclosure should be denied where the information may be available
through third-party sources. However, the present case is distinguishable from Mintzer
because the Appellant has already made requests to these agencies which have
been denied, unlike the Appellant in Mintzer, where that taxpayer did
obtain information through these sources. The Appellant outlined the lengthy
procedure he has been involved with in an attempt to obtain additional
information and I think it may be entirely unreasonable to expect him to
reapply when it apparently took several years to obtain the denial. In the
circumstances, this is not a compelling alternative to full disclosure at this
stage of the proceedings.
[30] The most compelling argument against full
disclosure at this time is the timing of the Motion. The Appellant brought this
Motion at the close of the pleadings but prior to the commencement of any other
steps in the litigation process. Although there is no limitation on the timing
of a Rule 82 application, one of the considerations to be taken into
account is the stage of the proceedings, particularly when none of the
preliminary steps have been initiated. In fact, some of the very documents
which the Appellant requests under Rule 82 may be produced under the production
of a partial list of documents pursuant to Rule 81.
[31] The timing of this Motion is premature in
my view. Exchange of partial lists of documents under Rule 81 has not yet
occurred and, consequently, it is too early to ascertain whether the
Respondent’s partial disclosure is deficient in any way based on the
Appellant’s arguments. If the Appellant is dissatisfied with the production of
documents under Rule 81 or with the production of documents through undertakings
given during examinations for discovery, he may pursue full disclosure at this
point. He may also refuse to answer questions posed to him at the examinations
for discovery if he feels they might incriminate him. In this event, it is open
to the Respondent to bring an application requesting responses by the
Appellant. The Appellant may also rely to some degree upon well established
legal principles of implied undertaking that none of the information that he
discloses in this process would be used in a collateral proceeding. As the
steps in the proceeding unfold, there will be more context within which the
Court, in a possible subsequent motion, can decide specifics pleaded. At this
point, if I allowed the Appellant’s Motion, I would be allowing full disclosure
in a vacuum. The Appellant’s list of requested documents is lengthy and
extensive and includes documents that are in the possession of third parties
such as the RCMP. Although the threshold for relevancy under Rule 82 is low,
care must be taken to ensure that the Appellant is not permitted to engage in a
fishing expedition. Although it is not necessary for me to determine the
relevancy of the requested documents or this Court’s authority to compel
third-party evidence at this point, it would appear that certain items such as
CRA notes and records and the T-134’s, being referrals of audit files to
Special Investigations, would be the proper material for a full disclosure
claim, if not made available during any of the subsequent litigation steps.
However items, such as the Appellant’s request for documents relating to the
allocation of income tax, may be too remotely connected to the issues and facts
within the appeal to meet the test for relevancy.
[32] For these reasons, the
Appellant’s Motion is premature and must be dismissed. Although the Respondent
requested costs in any event of the cause, I believe it is best to leave the
issue of costs to the trial Judge.
[33] The parties shall
complete the following timetable of dates for the remaining litigation steps:
1. The parties are directed
to prepare a list of documents (Partial Disclosure) pursuant to section 81 of
the Tax Court of Canada Rules (General Procedure) and to serve the list
on the opposing party by April 23, 2010. Proof of service shall be filed
with the Court within five (5) days after service.
2. The
examinations for discovery shall be completed by July 16, 2010.
3. Undertakings
given at the examination for discovery shall be satisfied by September 16,
2010.
4. The
parties shall communicate with the Hearings Coordinator in writing on or before
October 22, 2010 to advise the Court whether the case will settle, whether a
Settlement Conference would be beneficial or whether a hearing date should be
set. In the latter event, the parties shall file a joint application to fix a
time and place for the hearing in accordance with section 123 of the Tax
Court of Canada Rules (General Procedure) by said date.
Signed at Vancouver,
British Columbia, this 14th day of April 2010.
Campbell J.
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