Citation:2010TCC228
Date:20100427
Docket: 2006-3579(IT)G
BETWEEN:
HSBC BANK CANADA,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Motion heard on April 8, 2010, at Vancouver, British Columbia
By: The Honourable Justice Campbell J.
Miller
Appearances:
|
Counsel for the
Appellant:
|
Edwin
G. Kroft, Q.C.,
Deborah
Toaze and Michael Feder
|
|
Counsel for the
Respondent:
|
John
Shipley and Justine Malone
|
____________________________________________________________________
REASONS FOR ORDER
Miller J.
[1]
The Appellant brings a
motion pursuant to sections 92 and 110 of the Tax Court of Canada
(General Procedure) Rules (the "Rules") for an order directing
the Respondent to produce certain documents and directing Mr. Wou, a
representative of the Respondent, to re-attend examinations for discovery to
answer certain questions: fifty-three requests in all.
[2]
A brief background of
this lawsuit will be helpful in setting the stage for addressing the
Appellant’s requests.
[3]
During the relevant
years (1996 – 2000) the Appellant paid a guarantee fee to a parent corporation
residing in a foreign jurisdiction, to guarantee deposits, including deposits
required by statute to be guaranteed with Canadian Deposit Insurance
Corporation ("CDIC"). The Appellant deducted the guarantee fees as
business expenses. The Minister assessed the relevant taxation years, according
to the Reply "to give effect to a transfer pricing adjustment",
reducing considerably, but not eliminating, the amount of guarantee fees
claimed to be deductible by the Appellant in an aggregate amount of
approximately $90 million. The Respondent set forth in paragraph 63 of her
Reply the assumptions relied upon in determining the reassessment, including x)
which reads:
The amount paid as Guarantee Fees by the Appellant to HBAP and HHBV
in the taxation years under appeal is unreasonable and exceeds amounts which
would have been agreed to by parties dealing at arm’s length.
[4]
In paragraph 64 of the
Reply, the Respondent states additional facts in support of the reassessment:
64. The Deputy Attorney General states the
following additional facts in support of the reassessments under appeal:
a) as HBAP and HHBV were contractually bound
with the CDIC to guarantee all of the Appellant’s deposit liabilities in the
taxation years under appeal, a person dealing at arm’s length with HBAP and
HHBV would not have agreed, under similar circumstances, to pay any amount in
respect of the guarantee of its deposit liabilities;
b) the reasonable amount that would have been
paid between persons dealing at arm’s length in the circumstances is nil;
c) it was unreasonable for the Appellant in
the circumstances to pay or agree to pay any amount of guarantee fees;
d) the Guarantee Fees paid by the Appellant
in the taxation years under appeal were not incurred for the purpose of earning
income from its business;
e) in the alternative, a person dealing at
arm’s length with HBAP and HHBV would not have agreed, under similar
circumstances, to pay any amount in respect of the guarantee of its deposits
liabilities which were already covered by the CDIC deposit insurance;
f) the Guarantee Fees paid by the Appellant
in the taxation years under appeal in respect of the guarantee of its deposit
liabilities which were already covered by the CDIC deposit insurance were not
incurred for the purpose of earning income from its business;
g) the Appellant would have been fully
supported by HBAP and HHBV, even in the absence of the Deeds of Guarantee;
h) the guarantees provided by HBAP and HHBV
were of nil value to the Appellant;
[5]
The Respondent, in her
Reply, identifies three issues (apart from penalties):
65. The issues are:
a) whether the payment of any amount of
Guarantee Fees was made by the Appellant for the purpose of earning or
producing income from its business in the taxation years under appeal pursuant
to paragraph 18(1)(a) of the Act;
b) in the alternative, whether the payment of
the Guarantee Fees in relation to the portion of its deposit liabilities which
were already covered by the CDIC insurance was made for the purpose of earning
or producing income from its business pursuant to paragraph 18(1)(1) of the Act.
The following two paragraphs really represent one
issue but it is a matter of a different provision of the Income Tax Act ("Act")
being in place in the different years, that requires the breaking down of this
issue into two segments which the Respondent has identified as subparagraphs c)
and d):
c) in the further alternative and in respect
of the Appellant’s August 31, 1996, October 31, 1996, October 31, 1997 and
April 30, 1998 taxation years, whether the payment of guarantee fees in excess
of $6,835494, $733,181, $23,572,390 and $8,112,862 respectively by the
Appellant to HBAP and HHBV would have been considered reasonable in the
circumstances, had the Appellant, HBAP and HHBV been dealing at arm’s length
within the meaning of subsection 69(2) of the Act;
d) in the further alternative and in respect
of the Appellant’s December 31, 1998, December 31, 1999, March 31, 2000 and
December 31, 2000 taxation years, whether the terms and conditions made or
imposed between the Appellant and HHBV differ from those that would have been made
between person dealing at arm’s length within the meaning of paragraph
247(2)(a) of the Act in a manner that these persons would have
established the amounts of the Guarantee Fees to be no greater than
$10,981,499, $13,580,813, $6,463,379 and $19,532,188 respectively; and
…
[6]
While the Appellant
appears to agree with the framing of the last issue, it framed the only other
issue (apart from penalties) as follows:
For all relevant taxation years, did the Appellant duly deduct the
appropriate amount of the HBAP Guarantee Fee and/or the HHBV Guarantee Fee in
computing its income in accordance with the provisions of Part I of the Act?
[7]
The Appellant described
the allegations in paragraph 64 of the Respondent’s Reply as representing a new
or fresh approach in the Appeal, upon which the Appellant is entitled to
examine to fully determine the case it has to meet. The answers given by Mr.
Wou on examination for discovery suggested to the Appellant that many Canada
Revenue Agency ("CRA") officials were involved in this file, and,
especially with respect to the fresh approach, Mr. Wou would not have been the
decision maker. The Appellant contends the Respondent cannot satisfy its
discovery obligations by producing only Mr. Wou’s audit file. The Respondent
has produced the audit file, which she clarified was more aptly described as
the audit file rather than simply Mr. Wou’s file.
[8]
With respect to
experts, the Appellant seeks draft reports of Dr. Duan, the expert engaged by
CRA at the time of the reassessment, along with documents reflecting CRA
comments on Dr. Duan’s report, all notes and minutes of meetings between CRA
and Dr. Duan and all contracts between CRA and Dr. Duan. The Respondent also
brought a motion to compel answers and filed, in support of her motion, two
affidavits of proposed experts, Mr. Kane and Mr. van Deventer. The Appellant
now seeks production of the findings, opinions and conclusions of these
proposed experts. I should note that the Appellant will be cross-examining
Mr. Kane and Mr. van Deventer on their affidavits.
[9]
The Respondent believes
some of the 53 requests have already been answered, some are patently
irrelevant, some constitute a fishing expedition, some concern the manner in
which facts are to be proven and those pertaining to Mr. Kane and
Mr. van Deventer are simply premature.
[10]
By letter dated April
1, 2010, counsel for the Respondent wrote to counsel for the Appellant as
follows:
We enclose copy of the appeal file as it relates to the examination
of the objections filed in respect of the assessments under appeal. We maintain
our position that the contents of the file are not relevant to the matters in
this appeal.
We have removed from the file documents which are protected by
litigation and/or solicitor-client privilege and the confidentiality provisions
of s.241 of the Income Tax Act. The file contains a few documents
obtained from the CDIC for which we will seek the CDIC’s position on their
disclosure to afford the CDIC an opportunity to object before they are provided
to the appellant.
[11]
Also, by e-mail dated
April 7, 2010, at 4:47 p.m., literally on the eve of the motion, counsel for
the Respondent informed the Appellant as follows:
We are writing to advise that the respondent has revised her
position in respect of question 54 in the hopes this position will serve the
interests of expediency of both parties. We will therefore undertake to make
our best efforts to provide the appellant copies of the files, if they exist
and can be obtained, of the persons named in question 54. If these
"files" have already been provided to the appellant under previous
undertakings, we will advise accordingly.
It is our view that questions 7, 99, 59, 66, 92 and 40 are
duplicative of question 54 and will therefore take the position that they need
not be answered as we have agreed to answer question 54.
[12]
Both these gestures by
the Respondent are to be welcomed and, I would suggest, are made with a view to
the greater objectives of efficiency, effectiveness and expediency. The timing
however might have been better.
Law
[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 or 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.
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.
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.
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.
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.
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.
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.
[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.
[16]
So, there has been a
great deal written by myself, my colleagues and former colleagues on this
question of the scope of discovery. These comments are all helpful guides to
ensure some consistency on how litigation in this Court is to proceed. Yet it
is an art and not a science, and it would be counterproductive to dwell on each
and every principle as though applying a formula. Rather, it must always be
borne in mind what the Parties and the Court are trying to achieve with
examinations for discovery; that is, a level of disclosure so that each side
can proceed efficiently, effectively and expeditiously towards a fair hearing,
knowing exactly the case each has to meet. Presumably that is why there is an
attitude from the Courts of, as former Chief Justice Bowman put it, providing
wide latitude. It is therefore with some frustration that I am faced with a
motion referencing over 50 demands or questions. I would have thought the
guidelines and attitude of the Court would have limited the extent of these
motions. Counsel should be well aware that at one end of the spectrum fishing
expeditions are discouraged and at the other end of the spectrum very little
relevance need be shown to render a question answerable.
[17]
With that background
and brief review of the law, I will now address the questions and requests
indicating a reference to the undertaking number assigned in the transcript of
the examination of Mr. Wou or to the page number in his transcript.
1. (Page
182-183) Advise whether in allowing the deduction of a portion of the guarantee
fee from the Appellant’s income, CRA conceded that the guarantee fee was to
gain or produce income.
A review
of the transcript of the examinations satisfies me that this question has
already been answered.
2. (Page
353-354) Advise of the difference between paragraphs 64(b) and 64(c) of the
Amended Reply.
Subparagraphs
64(b) and 64(c) say what they say: no further answer is required.
3. (Page
612-613) Provide the analysis that Ron Simkover prepared in making his
recommendation about how to resolve the guarantee fee issue.
Given
that Mr. Simkover’s name is on the list of names in request (Undertaking) 54,
which I will get to, and which the Respondent has now acceded to, this request
is likely covered. The Appellant’s counsel, however, wanted me to give a
separate order for each request that may, in my view, be captured by request
54. I presume this goes to relevancy. Request 54 is a request for relevant
materials. The more specific request here for Mr. Simkover’s analysis does not
put the Respondent in the position of determining its relevance. I find it is
relevant so it does make sense that I address this point specifically.
I will do so though by ordering a response to request 54, and in that
order identifying specific requests such as this, that I find are relevant and
need to be provided by one or more of those people identified on the request 54
list. I see no need for an open-ended inquiry beyond this extensive list of
names.
4. (Undertaking
5) Provide details of Ron Simkover’s qualifications, both academic and
practical, to evaluate the sufficiency of Dr. Duan’s report.
Mr.
Simkover was CRA’s economist, who Mr. Wou relied upon in determining whether to
accept Dr. Duan’s expert report, the report on which the assessment was based.
Though, normally, I would not consider a CRA officer’s credentials to be of any
possible relevance, I am satisfied, given Mr. Wou’s explanation, that Mr.
Simkover’s qualifications are not patently irrelevant. The Respondent shall
provide the information requested.
5. (Undertaking
7) Advise of and provide all relevant communications between CRA and CDIC.
The
Respondent answered that any such communication would be in the audit file
already provided. But on March 30, 2010, the Respondent wrote to Appellant’s
counsel stating:
Subject to the right of CDIC to be heard, we are however prepared to
provide the appellant with a copy of the balance of documents, even though in
our judgment they are not relevant to the issues. We have been asked by the
CDIC to treat these documents as confidential. We will therefore seek the
CDIC’s position on the disclosure of the documents to afford the CDIC an opportunity
to object before they are provided to the appellant.
Given
the Confidentiality Order that CDIC has had input into, there is no impediment
to the Respondent now acceding to this request, as she has indicated she will.
6. (Undertaking 8) Provide all
information that CRA obtained from CDIC pursuant to the Requirement.
Given the Respondent’s letter of
March 30, 2010, referenced above, this request has been answered.
7.
(Undertaking 9) Provide
the contents of the appeals file in its entirety.
As mentioned, the Respondent provided the
appeals file by letter dated April 1, 2010. The Respondent has withheld parts
of the file, specifically those protected by section 241(1) of the Act.
Given the confidentiality order and the breadth of section 241(3) of the Act,
I conclude that no material is to be withheld from the appeals file on the
basis of the application of section 241(1) of the Act.
8.
(Undertaking 17 and 18)
Advise of and provide all information regarding guarantee fee comparables
accumulated in the course of the audit.
The Respondent, through Mr. Wou, contacted
the CRA’s current banking specialist, Mr. Bertolas, who advised he had no such
information, and if there was any it would be in the audit file.
Mr. Bertolas was not CRA’s banking specialist at the time. The Appellant
suggests that Mr. Mitchell and Mr. Thompson are more likely to have had such
information. Their names are on the undertaking 54 request, so I will
specifically include reference to guarantee comparables in my request 54 ruling.
9.
(Undertaking 19) Advise
of agreements between CRA and CDIC or OSFI concerning appropriate guarantee
fees to be charged by banks to their subsidiaries.
In reading the transcript referred to by
the Appellant on this point, I fail to see an undertaking. Indeed, it
appears Mr. Kroft was to get back to Mr. Shipley rather than vice versa. I
believe this is subsumed in any event in how I intend to frame the order on
request 54.
10.
(Undertaking 22)
Provide the names of any experts that the Respondent has retained.
This has already been answered by the
Respondent.
11.
(Undertaking 23)
Provide the findings, opinions and conclusions of any expert retained at any
time in relation to the deposit guarantee fee.
This one is a little tricky as it goes to
the interpretation of what I would describe as a difficult Rule – Rule
95(3). Rule 95(3) reads:
…
95(3) A party may on an examination for discovery obtain
disclosure of the findings, opinions and conclusions of an expert engaged by or
on behalf of the party being examined that relate to a matter in issue in the
proceeding including the expert’s name and address, but the party being
examined need not disclose the information or the name and address of the
expert where,
(a) the
findings, opinions and conclusions of the expert relating to any matter in
issue in the appeal were made or formed in preparation for contemplated or
pending litigation and for no other purpose, and
(b) the party being
examined undertakes not to call the expert as a witness at the hearing.
A little background is in order. The
Respondent filed a motion March 25, 2010, to compel answers from the
Appellant. That matter has been adjourned. In support of the Respondent’s
motion, the Respondent filed affidavits of Mr. Kane and Mr. van Deventer, whom,
it is clear, the Respondent has retained as experts. It is also clear from a
review of their affidavits they hold certain opinions, and they require certain
financial information from the Appellant to apply those opinions to the facts
of this matter to reach conclusions.
The Appellant argues it is unfair for the
Respondent to rely on these experts to get information from the Appellant while
refusing the Appellant any discovery of these experts’ work. However,
practically, the Appellant has been afforded the opportunity to cross-examine
these individuals on their affidavits. What possible better discovery could the
Appellant have?
The Appellant does go on to raise some case
law from Ontario that suggests "findings, opinions and conclusions"
are not limited to final reports, but would include a preliminary report and
data obtained by the expert; indeed, the test in Ontario appears to be -
"if the finding is expressed in a sufficiently coherent manner that it can
be used by counsel, then it is a "finding" that ought to be
disclosed. The same applies to "opinions" and
"conclusions".
The Appellant does acknowledge that there
is some authority (Hosh (Litigation guardian of) v. Black
suggesting counsel’s decision whether to undertake not to call an expert as a
witness may be deferred for a short time following discovery.
The Respondent looks at this issue more in
terms of timing. At what point must a party disclose experts’ findings,
conclusions and opinions? The Respondent’s view is that while examinations are
still ongoing, and before the expert has reached any findings with respect to
the case at hand, it is premature to have to make a Rule 95(3) election,
whether or not to call the expert, and consequently premature to be obliged to
disclose "findings, opinions and conclusions", if any. I agree
with the Respondent.
The Respondent must provide more than just
an expert’s final report: that is absolutely clear. But, to insist that from
the moment a party retains an expert to consider a matter, the party is obliged
to immediately disclose the expert’s name and his or her expert opinions makes
more of Rule 95(3) than is reasonable. A party retains an expert for the
very reason that the expert holds opinions. But it is not until the expert has
an opportunity to make findings in the matter at issue, and then apply his
opinion to those findings to be able to reach conclusions that Rule
95(3) should rear its head. I am not suggesting the conclusion must be final:
the law does not support such a position. Preliminary and informal findings and
conclusions are discoverable. My point is there must be findings, opinions and
conclusions in the context of the particular litigation. The expert will bring
opinions to the table but in a vacuum; without findings and ultimately conclusions
on the matter at issue, it is premature to insist on disclosure. Given the
stage of examinations for discovery in this matter, combined with my preceding
views of the approach to take to Rule 95(3), I conclude that disclosure
at this point is premature.
Having reached that conclusion, I am not
prepared to order the Respondent to answer Undertaking 23 as it pertains to Mr.
Kane and Mr. van Deventer. Frankly, this is somewhat academic as the Appellant
has an opportunity to cross-examine them in any event as the Respondent chose
to disclose their involvement by providing the Affidavits in support of her
motion.
With respect to Dr. Duan, the Respondent
has answered that all findings and conclusions of Dr. Duan are contained in the
audit file. The Appellant argues that because others at CRA, and not just
Mr Wou, communicated with Dr. Duan, there may be preliminary or informal
findings and conclusions in others’ files. I agree. The Respondent should seek
from those CRA officials, who the Respondent knows communicated with Dr. Duan
with respect to the valuation of the guarantee fee, any of Dr. Duan’s findings,
opinions and conclusions provided to such officials.
12.
(Undertaking 27) Advise
of Dr. Duan’s engagements with the federal government prior to this engagement
by CRA.
I see no relevance to Dr. Duan’s former
engagements, if any, with CRA to matters at issue in this appeal.
13.
(Undertaking 35) Advise
whether Dr. Duan received any assistance from CRA officials, whether during or
after the audit. (My reading is that this request really goes to assistance
after the audit.)
I am confused by this request. The
Appellant seeks advice whether Dr. Duan received any assistance from CRA
officials after the audit; in effect, after his report. Assistance with respect
to what? Information regarding communications between Dr. Duan and CRA
officials will be picked up by request 54 and I see no need to make any further
order regarding this request.
14.
(Undertaking 39)
Provide Exhibit "C" (summarizing fees collected to foreign subsidiaries)
as referred to in the January 19, 1995 memo from Doug Mitchell to Ron Simkover.
The Respondent suggests this has already
been answered. The Exhibit "C" referred to was attached to a
memo from Mr. Mitchell to Mr. Simkover, and, in that memo, it was specifically
stated that this exhibit should not be attached to any particular file. Given
that, the order with respect to request 54 may not be sufficient, so I am
prepared to order a response on this matter. If Exhibit "C" cannot be
located, the Respondent shall indicate what steps were taken to search for Mr.
Simkover’s and Mr. Mitchell’s papers.
15.
(Undertaking 40) Advise
if the information that Doug Mitchell communicated to Ron Simkover after his
review and examination of permanent files in the North York district office are related to Schedule II banks.
The Respondent states that she cannot
locate these people. It is not enough to be unable to contact these gentlemen –
what happened to their records? Presumably they did not take records with them.
The Respondent must answer the request or assure the Appellant steps have been
taken to search for Mr. Simkover’s and Mr. Mitchell’s papers.
16.
(Undertaking 49)
Provide particulars for the basis of the allegation that the fees paid by the
Appellant were exorbitant.
The Respondent responded, "fees were
exorbitant because they far exceeded a reasonable amount, if any or an amount,
if any, which would have been agreed to between persons dealing at arm’s
length".
This is one of those fine line questions
between seeking evidence and questions aimed at getting the witness to divulge
relevant facts in connection with an allegation. I find this more the latter
than the former. To respond that something is exorbitant because it is not
reasonable is hardly responsive. The Appellant is entitled to a more detailed
response setting out the facts the Respondent has relied upon in making the
"exorbitant" allegation.
17.
(Undertaking 51) Advise
why the fees were exorbitant by reference to paragraphs 63(v), (x) and (y) of
the Amended Reply.
See my answer to the preceding question.
18.
(Undertaking 52)
Provide the information and documents relied on in support of the assumptions
in paragraph 63 of the Amended Reply.
This should be covered by the Respondent’s
response to request 54.
19.
(Undertaking 53)
Provide the information and documents relied on in support of paragraph 64 of
the Amended Reply.
The statement of facts in paragraph 64 of
the Respondent’s Amended Reply indicate the Respondent is travelling down a
different track from that arising as a result of assumptions in paragraph 63 of
the Reply. It is appropriate for the Appellant to seek facts underlying those
allegations.
20.
(Undertaking 54)
Provide all relevant written and electronic communications (including e-mails,
memos, draft memos, letters, draft letters, working papers, notes to file,
drafts of notes to file, reports and draft reports) of CRA officials who
participated in the reassessment.
The parties go on to list approximately 44
names, whom I will specifically mention in my order.
As indicated, the list of individuals named
is extensive. Also, the Respondent has agreed to this request, but given some
specific areas I want to raise arising from other requests, I will draft
my order to answer this request accordingly.
21.
(Undertaking 57)
Provide CRA’s audit files and correspondence files with respect to the audit of
the guarantee fee for the Relevant Taxation Years.
The request for the audit file has been
answered; any other correspondence outside the audit file should be covered by
the order I intend to give regarding request 54.
22.
(Undertaking 59)
Provide the files found in CRA headquarters in Ottawa
that pertain to the matters in issue in this Appeal, including files created
during the audit of the guarantee fee for the relevant Taxation Years and
during the appeals process.
This I find is covered by the order with
respect to request 54.
23.
(Undertaking 60)
Provide Mr. Wou’s complete working paper file pertaining to the audit of the
guarantee fee for the Relevant Taxation Years, including any documents relating
to the audit of the guarantee fee for years prior to the Relevant Taxation
Years.
I am satisfied this matter has been dealt
with.
24.
(Undertaking 61)
Provide Mr. Wou’s referral to CRA headquarters’ chief economist along with all
information and documents forwarded to the chief economist in conjunction with
the referral and any written response received by Mr. Wou or any other person
to the referral.
Any written response by "any other
person" is covered by the order with respect to request 54.
25.
(Undertaking 63)
Provide all notes, files, e-mail, memoranda, position papers, working papers
and other correspondence of Doug Mitchell and other CRA banking specialists,
dealing with the guarantee fee or matters related to the termination of the
guarantee fee.
This, I find, is covered by the order with
respect to request 54. Any broadening of that order beyond the names already
identified as having in some way touched on the matter is casting the net too
broadly.
26.
(Undertaking 64)
Provide all written and electronic notes (including summaries and minutes) of
meetings in which the guarantee fee was discussed in respect of the Relevant
Taxation Years.
The Appellant has been provided with the
audit file, appeals file and now is getting an order with respect to request 54
with a view to picking up any information from a large number of CRA officials.
This request need not be specifically ordered, though I am prepared to add to
the request 54 order reference to "notes of meetings".
27.
(Undertaking 66)
Provide all written and electronic working papers, correspondence, notes,
e-mails, analyses, research and meeting minutes of the members of the transfer
pricing review committee as these materials relate to the consideration of the
guarantee fee and the imposition of transfer pricing penalties.
I believe the names of members of the
transfer pricing review committee are on the request 54 list of names, and this
request is therefore covered.
28.
(Undertaking 67)
Provide all information regarding guarantees provided by Canadian banks to
their foreign subsidiaries that was reviewed by Mr. Wou in the course of the
audit.
The Respondent objects to this request
citing the confidentiality provisions of section 241(1) of the Act.
Given the exception provided in section 241(3) of the Act and the
existence of a Confidentiality Order, this objection has been met, and this
request is to be answered.
29.
(Undertaking 68)
Provide any information or documents which Ron Simkover obtained from
third parties regarding guarantee fee comparables.
See my answer to question 15 of my list.
30.
(Undertaking 69)
Provide any information or documents which Robert Thompson obtained from
third parties regarding guarantee fee comparables.
As Mr. Thompson is still employed at CRA this
request should be answered.
31.
(Undertaking 70)
Provide all summaries of the audit history of the guarantee fee.
This, I find, is covered by the order with
respect to request 54.
32.
(Undertaking 71)
Provide all communications relating to CRA’s decision to issue the proposal
letter in June 2001 and its decision to use as a basis for the proposed
reassessment a guarantee fee of 8.33 basis points.
Similar to my answer to question 26
(Undertaking 64) this will form part of my request 54 order by specifying therein
"communications relating to CRA’s decision to issue the proposal letter in
June 2001 and its decision to use as a basis for the proposed reassessment a
guarantee fee of 8.33 basis points".
33.
(Undertaking 72)
Provide all notes, including minutes and draft minutes, of the December 13,
1999 meeting between representatives of CRA and CDIC.
Given the Respondent’s comments in its
March 30, 2010 correspondence and the breadth of the request 54 order, and the
Confidentiality Order now in place, no separate order is necessary with respect
to this request.
34.
(Undertaking 73)
Provide the differential premium binder that CRA obtained from CDIC as a result
of the December 13, 1999 meeting.
Given the Confidentiality Order now in
place this request should be answered.
35.
(Undertaking 75)
Provide all notes, including minutes and draft minutes, relating to the July
21, 2003 meeting between representatives of CRA and the Appellant.
This should be specifically mentioned in
the request 54 order.
36.
(Undertaking 82) Advise
whether Ron Simkover contacted OSFI for information regarding the matters in
issue in this Appeal.
See my answer with respect to question 15
of my list.
37.
(Undertaking 83)
Provide all correspondence, and records and notes of communications, between
Ron Simkover and OSFI.
See my answer with respect to question 15
of my list.
38.
(Undertaking 91)
Provide all contracts, including engagement letters, between CRA and Dr. Duan
with respect to the valuation of the guarantee fee.
This request is to be limited to those CRA
officials in addition to Mr. Wou who the Respondent knows communicated
with Dr. Duan with respect to the guarantee fee, as this type of material in
connection with an expert is relevant, as it goes to establish the parameters
within which the expert was retained.
39.
(Undertaking 92)
Provide all relevant correspondence, including e‑mails, amongst officials
at CRA headquarters in Ottawa who dealt with the assessment,
reassessment or appeals of the guarantee fee issue.
This, I find, is covered by the order with
respect to request 54.
40.
(Undertaking 93)
Provide the letter sent by Tom Markota or Robert Thompson to the Appellant
regarding advance pricing agreements in respect of the 1994 to 1995 period.
Granted, the letter pre-dates the taxation
years in question, but it goes to the CRA’s knowledge of the Appellants
approach on this issue, and could have some bearing on the Appellant’s future
conduct. All to say, I can see some possible relevance. The request should
be answered.
41.
(Undertaking 98)
Provide the referral issued to Ron Simkover in respect of the audit of the 1994
and 1995 taxation years and any advice provided by Rom Simkover in respect of
that referral.
Again, I can see some possible relevance,
certainly in connection with the penalty issue: this request should be
answered.
42.
(Undertaking
99) Provide communications from Doug Mitchell to Wayne Wou, Ron Simkover,
Robert Thompson, Phil Fortier, Mark Turnbull, Slav Kanjer or Tom Markota
regarding guarantee fee comparables.
This, I find, is covered
by the order with respect to request 54.
43.
(Undertaking
100) Provide all correspondence between CRA and the Inland Revenue of the United Kingdom regarding the guarantee
fee.
The Respondent has
indicated it will respond.
44.
(Undertaking
101) Provide all correspondence between CRA and treaty partners regarding
guarantee fee comparables.
The Respondent has
indicated it will respond.
45.
(Undertaking
105) Provide all relevant communications, including e‑mails and notes of
telephone conversations, between Mr. Wou and CRA officials at CRA headquarters
in Ottawa.
This, I find, is covered
by the order with respect to request 54.
46.
(Undertaking
108) Advise of and provide all notes, minutes or summaries of CRA’s meeting
with Dr. Duan on April 26 and 27, 1999.
This specific request is
to be added to the wording of the request 54 order, limited to the persons
named.
47.
(Undertaking
109) Advise whether Ron Simkover prepared any documents in which he recommended
how to resolve the guarantee fee issue (as Paul Wong suggested he had).
See my answer with
respect to question 15 of my list. This is the same undertaking identified at
item 3.
48.
(Undertaking
110) Provide the binder of information that Mr. Wou sent to Ron Simkover on or
about June 26, 2000 for delivery to Dr. Duan, as well as any other
packages sent to Dr. Duan.
If there were any other
packages sent to Dr. Duan, in connection with his expert opinion in this
matter, they should be provided.
49.
(Undertaking
112) Provide any notes, minutes, memos, e-mails or other correspondence relating
to the May 26, 2000 meeting with Doug Mitchell, and provide any materials
distributed at the meeting which relate to the matters at issue in this Appeal.
The Respondent’s answer
is only partially responsive, and as there is no further objection from the
Respondent other than "no notes were taken", the Respondent must
respond to the balance of this question.
50.
(Undertaking
114) Provide any correspondence between Bruno Westerlund and Larry Dankoff
in response to the request for information regarding guarantee fee payments by
Schedule B banks to foreign parents contained in Bruno Westerlund’s June 2,
1989 memo.
The Appellant suggests
the guarantee fee comparables are inherently relevant to issues in this appeal.
But there is a limit. This is a question asked by one CRA officer to another in
1989 with respect to 1986 and 1987 fees. The years in question start in 1998.
This does not go to the issue of penalties but simply the question of
comparable guarantee fees, and I conclude that 11 or 12 year old information
arising from this memo is too dated to be relevant.
51.
(Undertaking
116) Provide a resume for Govindaray Nayak which includes his academic
qualification and work experience.
Same answer as I gave to
item 4 in Mr. Simkover’s qualifications, albeit with some reservation.
52.
(Undertaking
117) Provide all draft reports prepared by Dr. Duan for CRA.
I am satisfied this has
been answered as of March 12, 2010.
53.
(Undertaking
118) Provide all comments by CRA personnel on all draft reports prepared by Dr.
Duan.
This is to be limited to
those people identified in request 54, and therefore added to the wording of
the order I intend to give with respect to request 54.
[18]
Costs
of this motion to the Appellant in any event of the cause.
Signed at Ottawa, Canada, this 27th
day of April 2010.
"Campbell J. Miller"
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