Citation: 2010TCC462
Date: 20100908
Docket: 2006-3579(IT)G
BETWEEN:
HSBC BANK CANADA,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Miller J.
[1]
The Respondent seeks an
order:
i) directing the
Appellant, pursuant to section 110 of the Tax Court of Canada (General
Procedure) Rules (the "Rules"), to answer the questions
listed in Schedule "A" to the Respondent’s Notice of Motion, a total
of 48 Requests, and any proper questions arising from the answers given by the
Appellant;
ii) directing the
Appellant, pursuant to subsection 83(1) of the Rules to disclose all
relevant documents in the possession, control or power of its affiliated
corporations and to produce for inspection all such documents;
iii) directing the
Appellant pay all costs of this motion, apart from the incremental costs
arising from the personal attendance of the Respondent’s expert witnesses for
their cross-examination, forthwith and in any event of the cause. Further, the
Respondent, if successful, wants to receive the documents by October 11, 2010.
[2]
The Appellant
challenges all 48 Requests for a variety of reasons:
- already answered
- relevance,
including failure of Respondent to establish an appropriate factual paradigm
- fishing
expedition
- speculative
- improper
third party request
[3]
Before addressing these
areas of challenge and specifically the 48 Requests, I will reiterate
certain principles, applicable to this case, which I set out in dealing with
the Appellant’s request to compel: the principles applicable to this Motion
are:
a) relevancy
on discovery must be broadly and liberally construed and wide latitude should
be given;
b) a motion’s
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) a motion
judge’s 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 a witness or
delay the case should not be permitted;
e)
the threshold test for
relevancy on discovery is very low but it does not allow for a fishing
expedition;
f)
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;
g)
the Court should
preclude questions that are clearly abusive, clearly a delaying tactic or
clearly irrelevant.
[4]
The Parties agree that
two additional principles of discovery come into play on this motion:
a) it is
somewhat abusive of the discovery process for a party to require the other
party to expend great time and effort to obtain information within the examining
party’s "means of knowledge"; and
b) questions
which are too general need not be answered. "Discovery" should not
become the objective of the discovery process such that the goal is to uncover
as much as possible from the party being examined however marginally relevant.
[5]
There is no
disagreement with respect to these principles, but it is in the application of
the principles that the Parties diverge.
[6]
These principles have
been amply reviewed by myself and others and need no further discussion. I do
however wish to consider in more detail the question of the propriety of third
party requests in the context of Rule 83 and Rule 95 and also the
assertion by the Appellant that the Respondent has not established the
appropriate factual paradigm, which goes to the issue of the relevance of some
of the requests.
[7]
The Respondent asserts
that the Appellant should be ordered to provide information relating to the
Appellant’s affiliated companies (the "Parents"), relying for
authority on the cases of Her Majesty the Queen v. Crestbrook Forest
Industries Limited,
Monarch Marketing Systems Inc. v. Esselte Metro Ltd.
and Michelin North America (Canada) Inc. v. 9130-4550 Québec Inc..
[8]
I will consider these
cases in applying my discretion in the application of Rule 83 which
reads:
(1) The Court may direct a
party to disclose all relevant documents in the possession, control or power of
the party’s subsidiary or affiliated corporation or of a corporation controlled
directly or indirectly by the party and to produce for inspection all such
documents that are not privileged.
(2) The
direction under this section may be limited to such documents or classes of
documents, or to such of the matters in question as may be specified in it.
There is no question that Honkong and Shanghai Banking Corporation
Limited ("HBAP"), HSBC Holdings BV ("HHBV") and HSBC
Holdings PLC ("HGHQ") (collectively the "Parents") are
affiliated corporations of the Appellant.
[9]
The Federal Court of
Appeal stated the following in Crestbrook:
…
However, in Monarch Marketing Systems
Inc. v. Esselte Metro Ltd. (1983), 75 C.P.R. (2d) 130, Mahoney, J. (as he then was), in ordering a corporate
officer to answer questions in a patent action concerning matters in the
knowledge of foreign affiliated companies, referred to a most important
consideration which in my opinion must be taken into account in modern business
litigation. At page 133, he said:
Today's commercial reality, with
international corporations, large and small, doing business through affiliates
across much of the world and treating national boundaries as minor
inconveniences to be coped with by international organizations, dictates that
the corporate veil ought not be permitted to inhibit the administration of justice
in Canada. Examination for discovery is an
important tool in the administration of justice on its civil side. I have no
doubt that, under proper sanctions by the court, Canadian companies can readily
and economically obtain from their foreign affiliates answers to proper
questions on discovery. I am convinced that they should be required to try and
pay the consequences of their failure or their affiliates' recalcitrance.
International businesses ought not be permitted, either as an incident or
object of their organizational set-ups, to avoid full compliance with the law
of Canada in respect of the business they do
here.
In my view what Mahoney, J. said was
consistent with the philosophy underlying Rule 465 (and its successor, Rule
455). In the appropriate circumstances, this Court does have the power to
require the sort of answers sought by the Crown here, but the Court will only
do so in special situations, where it is shown as a prerequisite that it is in
the interests of the administration of justice to look behind the sanctity of
the corporate identity. To the extent, therefore, that the decision of the
Court in Indalex is in conflict with that in Monarch Marketing Systems v.
Esselte Metro, the latter should be taken as the correct statement of the law on
this issue.
This power, while for understandable
reasons used by the courts only sparingly, has been recognized for some time. …
[10]
In Michelin,
Justice Tremblay-Lamer stated:
…
21 I am aware that Crestbrook, supra,
stands for the proposition that ordering a party to answer questions for which
knowledge lies with third party affiliates is an exceptional power that must
only be used when the interest of justice so dictates. This is one such
situation.
22 I do not accept the plaintiff's argument
that the defendants ought to avail themselves of more appropriate procedural
channels to discover those known to possess the relevant information, for the
reasons addressed in Crestbrook, supra, and Eli Lilly, supra.
Having the plaintiff obtain information from related third party entities does
not circumvent the procedure for examining assignors and non-parties set out in
Rules 237 and 238. Rather, this offers a practical solution given the
commercial reality of international and affiliated corporations, and the challenges
faced by parties in seeking information in this context. Nor do I accept the
plaintiff's contention that the defendants want this information only to
support blunt allegations of design functionality. References to functionality
are apparent, among other ways, from the plaintiff's own promotional materials.
A clear foundation for functionality exists.
…
I could not agree more with Justice Tremblay-Lamer’s
attitude of seeking a practical approach to obtaining proper information.
[11]
The Appellant argues
that there are no special circumstances here justifying these requests for
information from the Parents. With respect, I disagree.
[12]
The emphasis in
considering a request for information from the third party should be placed on
assessing the question – what is in the best interests of justice in the
context of an assessment by the Government of Canada in the circumstances of
any particular case? In considering the request before me, I need to bear in
mind that this is not just a transfer pricing case but there is also a paragraph
18(1)(a) of the Income Tax Act ("ITA") issue
whether the non-arm’s length guarantee fee was paid for the purpose of earning
income. From the perspective of both issues (payment for earning income and
application of transfer pricing provisions), the role of the Parent guarantor,
its economic position at the time, any existing guarantee or transfer pricing
policies, indeed most of the information sought is integral to afford the trial
judge a full understanding of the nature and substance of the guarantee
arrangement. This is not a matter of an uninvolved Parent. This is, I find,
a special situation of the Parent corporation intimately a part of the very
matter before the Court. The trial judge will want to know why the Appellant
paid what it did as well as what would be paid in an arm’s length situation. It
is in the best interests of the administration of justice that both the
Appellant and the Parents fully explain the circumstances surrounding the fee
and provide relevant documentation.
[13]
The Appellant raises
another factor, relying on a comment from Justice Hugessen in Eli Lilly v. Apotex Inc.,
cited in the Michelin case, that it is proper to require third party
information only where one may reasonably expect that it will be honoured
because of the relationship between the party and third party. The Appellant
contends it would not be reasonable to expect a request would be honoured by
the Parents with respect to highly sensitive information, such as the
requirements of financial regulatory regimes governing the Parents, nor to
documents that lack any connection with the Appellant (eg. other guarantees and
comfort letters). Bringing the Parents’ documents under the protection of the Confidentiality
Order issued in this case should address the Appellant’s first concern and
alleviate any similar concern of the Parents. With respect to the request for
documents to which the Appellant is not a party, I see the issue of reasonable
expectation less in terms of the lack of connection as I do in terms of whether
or not the document is indeed relevant. Given these views, I have no hesitation
in concluding that it is reasonable to expect the Parents to respond positively
to relevant inquiries. I see no impediment in exercising my discretion pursuant
to Rule 83 to order production of relevant documents. This conclusion addresses
all those challenges by the Appellant to the Requests based on documents not
being in the Appellant’s possession or control, where such documents may be in
the possession, control or power of the Parents.
[14]
In reaching this
conclusion, I recognize the parties disagree as to what is relevant. I will
comment on the question of relevancy as I go through the 48 Requests. My
intention is that my comments will help the parties determine relevance for
purposes of the Rule 83 production.
[15]
I want to also address
the Appellant’s views on establishing the appropriate factual paradigm before
ruling on relevancy. Getting to the heart of the Appellant’s concern is that information
with respect to non-arm’s length dealings is not relevant because the so-called
factual paradigm in a transfer pricing case should be limited, in this case, to
arm’s length guarantors and arm’s length borrowers. The Appellant goes so far
as to suggest I will have made an error in law if I permit the Respondent to
obtain and use information concerning non-arm’s length transactions when such
transactions do not involve the Appellant. While I appreciate that the transfer
pricing provisions do not call for comparison with other non-arm’s length
transactions, I can certainly see some relevance to how sister corporations
were treated in connection with determining the issue of whether the fee was
incurred for the purpose of earning income. Without having to determine the relevance
of circumstances surrounding the implicit support of the Parent in connection
with the transfer pricing, I find that such information is generally relevant
in determining the question of whether the fee was incurred for the purpose of
earning income.
[16]
Taking these
preliminary observations into account, I will now turn to each of the 48 Requests,
indicating the request itself and the Appellant’s grounds for challenge.
1. Request
Request that the Appellant obtain from its parent
company a copy of the transfer pricing policy prepared by HSBC Holdings PLC for
the relevant taxation years.
Challenge
-
the evidence does not
support a finding of relevance
-
the issue is not raised
in the pleadings
-
document not in the
possession, control or power of the Appellant.
[17]
In support of her
motion the Respondent provided affidavits of two financial experts. The
Appellant examined both the experts on their affidavits. The Appellant argues
that the Respondent’s experts, Dr. Kane and Dr. van Deventer,
were not able, upon such examination, to establish that such a request was
warranted. I find no need to consider the experts’ views on this point. A
transfer pricing policy prepared by HSBC Holding PLC is patently relevant in my
view. The fact that such a policy may pertain to other subsidiary companies
does not mean it was not applicable to the Appellant. While the policy itself
is not referenced in the pleadings, I simply do not follow the Appellant’s
argument that this is "information which was not raised in the pleadings".
This seems to suggest that parties must plead evidence. Not so.
[18]
In the case of Lloyd
M. Teelucksingh v. Her Majesty the Queen,
Justice Bowie set forth the principle that:
…
(i)
Examination for discovery is an examination as
to the information and belief of the other party as to facts that are relevant
to the matters in issue, as defined by the pleadings.
…
So, is the Appellant’s Parent’s policy on transfer
pricing relevant to a matter in issue, as defined by the pleadings? It seems
self-evident that transfer pricing is a matter in issue – how could such a
policy of one of the parties to the guarantee fee arrangement not be relevant
to this matter in issue?
[19]
Finally, the Appellant
raises the arguments, already addressed in the context of Rule 83, concerning
third party production. This document is captured by my section 83 ruling, but
this is one of the instances that should give guidance to the Appellant for the
Rule 83 production. I find this document specifically is relevant and
must be produced.
Requests 2, 3, 4, 5, 6 and
7
2. Request that the Appellant
ask the Parent company (HGHQ) to confirm that it provided guarantees and
letters of comfort to non-UK group members (in relation to R-4).
3. Request that the Appellant
ask the Parent company (HGHQ) whether it provided guarantees and letters of
comfort to non-UK group members to satisfy local banking regulatory
requirements (in relation to R-4).
4. Request that the Appellant
enquire of its Parent to confirm that the approach taken by the Parent was
accepted by Inland Revenue whereby letters of comfort, awareness and
responsibility should not attract a charge for the period 1997 through 2000 (in
relation to R-4).
5. Request that the Appellant
enquire of its Parent to confirm that the approach taken by the Parent was
accepted by Inland Revenue whereby there should be no charge in respect to
guarantees of a capital nature for the period 1997 to 2000 (in relation to R-4).
6. Request that the Appellant
enquire of its Parent to confirm that it has not been the practice to charge
for guarantees of depositors and legally binding undertakings of support which
contain explicit words of promise that the subsidiary will meet its obligations
for such guarantees as has always been perceived that there’s no real commercial
transfer of value as a result of guarantees being put in place (in relation to
R-4).
7. Confirm that the Parent
bank’s practice of having no intention to charge for such guarantees either
retrospectively or going forward was carried out for at least the period 1997
through 2000 (in relation to R-4).
Challenge
-
the information is not
relevant for purposes of subsections 69(2) and 247(2) because the transactions
are between non-arm’s length persons
-
the evidence does not
support a finding of relevance
-
the question is a pure
fishing expedition
-
the Appellant is not
required by the Rules to contact third parties for the information
-
the issue is not raised
in pleadings
[20]
Exhibit R-4 in these
proceedings is the HSBC "Transfer Pricing Review, updated January
2002". It claims "the guiding principle is that all cross-border
transactions are to comply with the arm’s length standard". The Respondent
contends, in light of this stated objective, that in assessing the
reasonableness of the guarantee fee and whether reasonable efforts were taken
to determine and use arm’s length prices, it is relevant not only to consider
the policies of the HSBC Group, but whether they were applied consistently
in practice and applied to the guarantee at issue. The Respondent argues that
is what Requests 2 to 7 relate to. The answer to these questions may suggest
either consistency or inconsistency. In the context of the transfer pricing
issue it is not as readily apparent, as the Respondent contends, that the
answers are relevant from a common sense appreciation of that issue. Yet the
answers may shed light on the level of implicit support from the Parent to its
subsidiaries, and consequently the determination of value of the fee to help
answer the question – what would a subsidiary bank with implicit support pay
for a third party guarantee? The answers to these Requests are not to
demonstrate any arm’s length comparison as such, but to help establish the
impact of this significant economic factor.
Requests 4 and 5, however, are unlike the others as they
go to the U.K. treatment of guarantee fees. This does not
pertain to the Canadian situation.
[21]
The answers may also be
relevant in addressing the paragraph 18(1)(a) of the ITA issue,
as they also go to the issue of whether there was any value at all. I find the
questions may be relevant. I do not see these questions as a fishing
expedition. The Appellant is required to make the inquiries, other than with
respect to Requests 4 and 5.
8. Request
Confirm whether the Parent bank took the
position within Inland Revenue that no charges should be made for such
guarantees and that some effort was made to resolve on the basis of 5 basis
points for obligations subject to guarantee for the relevant taxation years.
Challenge
-
the information is not
relevant for purposes of subsections 69(2) and 247(2) because the transactions
are between non-arm’s length persons
-
the question is a pure
fishing expedition
-
the Appellant is not
required by the Rules to contact third parties for the information
-
the issue is not raised
in pleadings
[22]
Although this Request
arises from Exhibit R-4, I see no relevance to any position the Parent took
with Inland Revenue. This is a Canadian issue, not a U.K. issue.
9.
Request
Provide the reason why the Parent treated the
non-Canadian groups and the Appellant differently.
10.
Request
If the difference in treatment relates to
the contents of the guarantees being provided or the substance of the
guarantees being provided by the Parent, have the parent produce copies of
those guarantees or letters of comfort.
Challenge
-
The information is not
relevant for purposes of the subsections 69(2) and 247(2) because the
transactions are between non-arm’s length persons
-
The question is a pure
fishing expedition
-
The Appellant is not required
by the Rules to contact third parties for the information
-
The issue is not raised
in pleadings
[23]
Request 9 also arises
from Exhibit R-4, specifically section 3.4.2.2, which describes the guarantee
at issue. The question seeks the reasoning behind what on its face appears to
be different treatment. This may be relevant, again not so much for purposes of
any comparison between different non-arm’s length arrangements, but to get an
understanding why the fee was incurred by the Appellant. Request 9 is answerable.
[24]
Request 10 however goes
solely to a comparison of the contents of the different non-arm’s length
guarantees and adds nothing to the transfer pricing issue, nor to the paragraph
18(1)(a) of the ITA issue. It is simply going too far afield.
11.
Request
Request to enquire of the Parent bank
(HHBV) whether it has copies of the board papers referred to in the May 6, 1999
GEM about the renegotiation of the guarantee arrangements.
Challenge
-
the Appellant is not
required to contact third parties for information
-
the document not in the
possession, control or power of the Appellant
[25]
As I have indicated at
the outset, it is appropriate and in the interests of justice to seek answers
from the Parents. The issue here is one of relevancy. The Appellant argues that
this only goes to a comparison of a non-arm’s length transaction and is
therefore irrelevant. I disagree. It may go to the very business essence of the
guarantee, assisting in understanding the commerciality and value of that
guarantee.
12.
Request
Request for copies of the monthly and
quarterly financial statements of the Parent companies (HBAP and HHBV) for the
taxation years under appeal.
Challenge
-
The Appellant provided,
to the Respondent, the financial statements of HBAP (1996) and HHBV (1997 to
2000), which it located in its records on November 30, 2009
-
the evidence does not
support a finding of relevance
-
the question is a pure
fishing expedition
-
documents not in the
possession, control or power of the Appellant
[26]
The Respondent relies
on the experts’ affidavits to argue that the reasonableness of the fees depends
on information about the financial viability of both the Appellant and the
entities providing the guarantee. Further, that the value will depend on the
creditworthiness and financial strength of both. The Appellant discounts the
experts’ evidence for the following reasons:
a)
the requests for
information on based on "wish lists";
b)
the requests for
information have been made without Dr. Kane or Dr. van Deventer knowing
what methodology might be used to value the guarantee fee;
c)
the sweeping requests
for information were made in an effort to support a precise or theoretically
perfect price for the guarantee once a methodology is chosen; and
d)
the requests for
information are based on a paradigm which cannot be correct because it assumes
that the Parents remain involved as the guarantors as well as shareholders.
[27]
Having read the experts’ discovery, I disagree with the Appellant that such Requests
represent wish lists. They represent reasonable efforts to determine a
reasonable fee. Further, until asked to provide a report, the very little
uncertainty as to methodology is inconsequential. Nor do I accept the
Appellant’s categorization that the experts are really seeking some
theoretically perfect price. This is more the Appellant’s take on the evidence
than any such specific testimony by the experts.
[28]
Finally, the Appellant
argues the experts are proceeding on an incorrect paradigm – one where the
Parents continue to provide the guarantee and remain as shareholders of the
Appellant. The Appellant suggests the appropriate paradigm is a borrower with
the profile of the Appellant who transacts with an arm’s length person
guarantor. The borrower is a wholly owned subsidiary of a non-resident with the
profile of the Parent. The Appellant suggests this paradigm takes account only
of the explicit guarantee and does not provide for any element of implicit
support of the Parent for the Appellant. I fail to see support for this
proposition of the Appellant. If the Appellant’s paradigm has a borrower with a
profile of the Appellant and a parent with a profile of the Parents in this
case, then those profiles must address the financial strengths of each of them.
And, consequently, there may be a question of implicit support of a
hypothetical parent for a hypothetical subsidiary. The role of implicit support
may well be an issue at trial (this may depend to some extent on the outcome of
the General Electric Capital Canada Inc. v. Her Majesty the Queen Appeal)
but to rule it out as irrelevant at the stage of discovery is, I find, not
appropriate.
[29]
I want to be clear that
I find this is relevant, and therefore producible in any event pursuant to Rule
83(1).
13.
Request
Request of the Parent banks whether they
conducted risk assessments of the Appellant during the relevant taxation years.
Challenge
-
the evidence does not
support a finding of relevance
-
the Appellant is not
required by the Rules to contact third parties for the information
[30]
This is relevant in
determining the commerciality of the guarantee and is answerable.
14.
Request
Make enquiries of the Parent companies and
advise what expenses were incurred by these Parents in monitoring the
activities of the Appellant and which of these expenses were directly the result
of the contractual obligation to the CDIC and guarantee of the Appellant’s
deposits.
31.
Request
Provide a complete record of the expenses
that the Parents incurred in monitoring and controlling the Appellant during
the years under appeal. Provide an explanation of which of the expenses were
specifically occasioned by the guarantee in issue in this appeal. Provide a
detail of the entity bearing the cost of these expenses.
Challenge
-
the evidence does not
support a finding relevance
-
the question a pure
fishing expedition
-
the Appellant is not
required by the Rules to contact third parties for the information
-
documents not in the
possession, control or power of the Appellant
[31]
The Respondent relies
on Dr. Kane’s affidavit in ascertaining the relevance is apparent, as Dr. Kane
states that Parents incur expenses in monitoring and controlling their
subsidiaries, and that specific expenses relating to the guarantee would affect
the fair market value of the guarantee. The Appellant argues that even those
specific expenses are of no relevance to an arm’s length guarantor. I disagree:
such costs could well be a factor in the arm’s length guarantor’s determination
of an appropriate fee. They certainly could be evidence of implicit support.
15.
Request
Request for the funds transfer pricing
policy for the years under appeal of the parent bank.
33. Request
Provide copies of internal policy documents
or policies and procedures of the Appellant and the parents in respect of
"funds transfer pricing" for the years under appeal.
Challenge
-
the information is not
relevant for purposes subsections 69(2) and 247(2) because the transactions are
between non-arm’s length persons and within departments of a financial
institution
-
the evidence does not
support a finding of relevance
-
the question is a pure
fishing expedition
-
document not in the
possession, control or power of the Appellant
[32]
The Appellant argues
this is irrelevant in a transfer pricing context as it relates only to
non-arm’s length transactions. Yet, it is also the policy that would apply to
the Appellants and would therefore provide some insight into implicit financial
support. Given the low threshold for relevancy at the discovery stage, and
given I have not been convinced of a clear irrelevancy, I find the requests are
answerable.
16.
Request
Determine whether it was the position of
the Appellant that HBAP would not have provided the guarantee absent the
explicit agreement that was entered into.
17.
Request
Determine whether it was the position of
the Appellant that HHBV and HSBC Holdings would not have provided the guarantee
absent the explicit agreement that was entered into.
Challenge
-
the question is a pure
fishing expedition
-
the Appellant is not
required by the Rules to contact third parties
-
the question calls for
speculation and an opinion
[33]
As I have indicated,
the question of implicit support at this stage of the litigation cannot be
ruled irrelevant. The Respondent argues basically that as implicit support is
relevant, these questions are proper. I note that it was in paragraph 64 of the
Respondent’s Reply where she raises additional facts in support of the
assessment that one finds the statement: "The Appellant would have been
fully supported by HBAP and HHBV even in the absence of the Deed of
Guarantee." The Appellant argues that as a new argument from the
Respondent, the Respondent should not be allowed to shift the burden to the
Appellant by having the Court order it to answer "what if" questions.
The Appellant maintains hypothetical questions calling for speculation and an
expression of an opinion are not proper. I agree. It is for the trial
judge to determine this key fact, based on a review of all of the evidence
presented as to what occurred those many years ago. It does not follow that
just because the question of implicit support may be relevant, the Appellant
should be required to speculate regarding the ultimate issue pertaining to
implicit support. This is unfair and improper. The facts relating to the
respective financial strengths of parent and subsidiary, their respective
policies and all other surrounding circumstances leading to the explicit
guarantee will have to be assessed and weighed. An officer of the Appellant, 14
and 23 years after the fact hypothesizing to what might have been without a
guarantee is simply not appropriate.
18.
Request
Request for the sourcing of the information
set out in A-1 Tab 102 for each taxation year under appeal.
19.
Request
Provide the identity of the depositors (in
the context of a question relating to how many of the 18$ billion deposits in
1996 were sourced from other banks and other entities within the Appellant’s
corporation group).
20.
Request
Provide the source of the attrition
assumptions set out at Exhibit A-1, Tab 102 for the period 1997-200 and the
identity of the depositors.
Challenge
-
question answered
[34]
The Exhibit referred to
in this group of questions is the Appellant’s own analysis of the benefit of
the guarantee. With respect to Request 18, the Appellant indicated in its
November 30, 2009 correspondence to the Respondent that it was able to provide
the answer. I am unclear, however, whether it has yet done so. Given the
Confidentiality Order in this case, confidentiality should not be an issue. The
Appellant should proceed to answer as it has indicated it will.
[35]
With respect to Request
19, the Appellant advised the Respondent it searched its records but was unable
to find the information. I accept this response, and so too should the
Respondent.
[36]
With respect to Request
20, the attrition rate used by the Appellant is significant in impacting the
benefit. The Appellant does not appear to have addressed this. It is relevant
and should be answered.
21.
Request
Request for the financial information
provided to the CDIC in 1999‑2000 for the purpose of establishing the Appellant’s
rating category.
22.
Request
Request for the quarterly and monthly
financial information that would have been provided to OSFI during the period
of 1996 to 2000.
Challenge
-
the information is not
relevant for purposes of subsections 69(2) and 247(2) because the financial
information is not available to arm’s length persons for any purpose including
the determination of an arm’s length guarantee fee
-
the evidence does not
support a finding of relevance
-
the question is a pure
fishing expedition
-
the Respondent asked
the Appellant to produce the monthly and/or quarterly filings that would have
been given to OSFI during the period 1996 to 2000. As a courtesy to the
Respondent, the Appellant provided financial statements, posted to the OSFI website,
in the binder accompanying the Appellant’s 2010 undertaking response.
[37]
The real concern here
for the Appellant is the relevance of information that would not be available
to a third party guarantor, as that is what is being requested. Clearly, any information
provided by the Appellant to CDIC or OSFI that is in the public domain is not
at issue. Why does the Respondent make these requests? Because, as she points
out, "the issue in the appeal deals with the reasonableness of the price
paid for a guarantee against the probability of its default. The analysis under
sections 69 and 247 will require an examination, among other factors, of the
financial strength, credit risk, leverage, risk exposures and default
probabilities of the Appellant and its Parent corporations". The
Respondent gets this language from Dr. van Deventer. The Respondent also refers
to Dr. Kane’s affidavit where he states:
"Documents and information provided by the Appellant in
fulfilling its obligations to the CDIC would be highly relevant to the
assessing the value received, if any, from the explicit guarantee in this
case.".
[38]
The experts must bear
in mind that the sections 69 and 247 analysis is a comparative one. It is one
thing to suggest this information is helpful in assessing the value of the fee,
but it is quite different to rely on it to determine what a third party would
do without that information. The transfer pricing issue is not one of the value
of the fee, but the reasonableness of the fee compared to an arm’s length fee.
The arm’s length fee cannot be determined on the basis of information that an
arm’s length party would not have. This does raise the intriguing question of
whether the third party is deemed to have knowledge that the parent would have
had notwithstanding in the real world it could not get that knowledge. My view
is that one has to take the real world approach.
[39]
However, the value of
the fee to the Appellant would be influenced by this internal confidential
information. Is "value" to the Appellant relevant? Yes, but not with
respect to the transfer pricing issue, only with respect to the issue of
whether or not the fee was paid to earn income. The Respondent should be
careful in the use of experts’ testimony.
[40]
Turning to the question
of confidentiality, I do not understand the Appellant’s argument that
legislation prohibits disclosure when the Confidentiality Order in this
matter specifically defines confidential information as including information
which is to be kept confidential pursuant to the CDIC Act and OSFI Act.
Confidentiality is no bar to these Requests and they are to be answered, though
not, as indicated, for the purposes of the transfer pricing issue.
23.
Request
Request for copies of the financial
information provided to the Parent bank on monthly or quarterly basis.
Challenge
-
the Respondent asked
for copies of the financial statements provided to the Parent bank on a monthly
or quarterly basis. The Respondent did not ask for "financial
information".
[41]
I agree the Request is
for financial statements not financial information. The Appellant has indicated
it found some of these records, but has not been specific as to whether it
searched for the balance. If it did, so advise the Respondent.
24.
Request
Request for the production of documents
that relate to the operating plan for the taxation years under appeal and the
reporting of the financial results against that operating plan.
25.
Request
Determine whether the Parent bank would
intervene to ensure that the operation plan was either met or, in the event it
was not met, take steps to ensure that in the future it would be met.
Challenge
-
the question is a pure
fishing expedition. The specific nature of the documents requested is not
specified. The question is so vague and the ambit of the request is so broad as
to make the request incomprehensible. Note: the Appellant, however, provided
the Respondent with the quarterly financial reporting to the Appellant’s board
of directors which compared the financial results against operating plan.
-
The Appellant is not
required by the Rules to contact third parties
[42]
The Appellant maintains
these questions are too vague, yet in his discovery, Mr. McIsaac indicated that the Board did
receive financial statements that show the performance of the bank against the
operating plan on a quarterly basis: the Appellant advises these have been
provided. Mr. McIsaac also stated that the Board would receive updates in terms
of credit issues and credit quality. These documents are producible if Mr.
McIsaac is able to locate them.
[43]
With respect to Request
25, while this does relate to the support provided by the Parent and may be
relevant as it pertains to the years in issue, in reviewing Mr. McIsaac’s
discovery, I am of the view he was unable to answer the question beyond a general
observation that it would be part of the normal course of operating a business.
This is not something that I require Mr. McIsaac to pursue further from the
Parent, as whether or not the Parent intervened is information available to the
Appellant and not exclusive to the Parent. The Appellant’s representative
simply could not identify any specific interventions.
26.
Request
Provide all balance sheets and income
statements for the years under appeal for both the Appellant and the Parents
offering the guarantee.
Challenge
-
question answered in
respect to the Appellant
-
question answered based
on information of Parents located by Appellant
-
the evidence does not
support a finding of relevance
-
the question is a pure
fishing expedition
-
documents not in
possession, control or power of the Appellant
[44]
The Respondent is
looking for the Parents’ balance sheet and income statements as the Appellant’s
statements have been provided. Some limited information of the Parents was also
provided. The financial statements are producible pursuant to Rule 83(1)
as I find they are relevant to a paragraph 18(1)(a) of the ITA inquiry.
If the Appellant is unable to obtain any further financial statements beyond
what it has already produced, it should briefly indicate to the Respondent why.
27.
Request
Provide a record of all internal and
external inspections, examinations, valuations and risk assessments of the Appellant
and the Parents for the years under appeal.
Challenge
Question answered with respect
to:
-
letters and public reports
issued DBRS, S&P and Moody’s to the Appellant
-
the information is not
relevant for purposes ss. 69(2) and 247(2) because it relates, in part, to
non-arm’s length transactions.
-
the evidence does not
support a finding of relevance
-
the question is a pure
fishing expedition.
-
risk assessments of
rating agencies are within the Respondent’s means of knowledge
-
documents not in
possession, control or power of the Appellant
-
the Appellant, however,
provide the information which it located regarding published credit rating
agency materials.
[45]
The Respondent relies
on the experts’ affidavits in seeking this financial information (including the
information sought in Requests, 28, 30, 32 and 35). It is interesting to note
that different opinions were sought from the two experts. Dr. Kane’s affidavit
states he has been retained to provide an expert opinion as to the fair market
value of the guarantee, while Dr. van Deventer states he has been retained to
provide an opinion "on the explicit guarantee fees, if any, that in the
circumstances would have been reasonable for the Appellant to pay its Parent
corporation in the years 1996 to 2000, had they be dealing at arm’s
length".
[46]
In their affidavits Dr.
Kane specifically addressed the items leading to Requests 27 and 30 and Dr. van
Deventer addressed the items leading to Requests 28, 32 and 35.
[47]
With respect to Request
27 arising from Dr. Kane’s identification of factors that will assist in
determining value of the guarantee, I agree that this information pertaining to
the Appellant is relevant. The Appellant has provided some external
information, presumably all that it has been able to locate. No further demand
is required.
[48]
With respect to
internal reports, I do find this request broadly framed. My reading of Dr. Kane’s
need for information in this regard is that this is a matter of risk
assessment. It is inappropriate to seek every inspection or examination of
whatever nature of the Parent. Risk assessment reports alone are sufficient. Such
risk assessments are necessary in getting a fuller picture of the Appellant’s
financial strength and consequently both the need for and value of the
guarantee. If there are any such internal risk assessment reports, they should
be produced.
[49]
With respect to the
Parents, I reiterate that the Request, as framed, is too far reaching to the
point of being a fishing expedition. While there is merit in understanding the
financial strength of the guarantor as well as the borrower, I question
whether the inquiry need be as extensive at the Parents level. Again,
I limit this Request. If the Parents possess any public (external) reports
relating to them, similar to the DBRS, S&P or Moody’s reports provided with
regards to the Appellant, then these should be provided under the Rule
83 production.
[50]
With respect to internal
reports of the Parent, as the Request is framed it could extend to all such
internal reports of all its subsidiaries. I question how much information is
indeed required from the Parent to determine if the Parent is good for the guarantee,
as surely that is the penultimate inquiry. Does the expert require every
internal report of every subsidiary? No. This should be limited to specific
risk assessment reports prepared by or for the Parents, assessing their risk or
the Appellant’s risk.
Foreseeing some possible disagreement between the
Parties as to what is a risk assessment report, I would urge the Parties to be
reasonable: the report need not be titled "Risk Assessment" provided
it does address the creditworthiness of the entity assessed.
28.
Request
Provide copies of the principles,
guidelines and procedures of the Appellant and the Parents in respect of risk
assessment and management for the years under appeal.
Challenge
-
the information is not
relevant to a determination under ss. 69(2) and 247(2) because it relates
to non-arm’s length transactions
-
the evidence does not
support a finding of relevance
-
the question is a pure
fishing expedition
-
documents not in
possession, control or power of the Appellant
[51]
The Appellant objects to
the release of the Parents’ information on the basis this is seeking
comparative information of other non-arm’s length entities, which is irrelevant
for the transfer pricing analysis. Clearly, the Request comes from Dr. van
Deventer’s affidavit in which it is evident he is engaged for the purposes of a
third party comparison. Yet principles, guidelines and procedures would be
applicable to the Appellant as well as others. It is not solely for purposes of
non‑arm’s length comparison. Such information is relevant and producible.
[52]
I find the information
requested from the Appellant itself is also relevant as it goes to value, as
well as assisting and setting the basis on which a third party guarantor might
evaluate the borrower’s financial strength. Dr. van Deventer explains he needs
this information as it is important to determine the market’s perception of
implicit support from the Parent to Appellant. Risk management and assessment
by the Parent is relevant to that determination.
29.
Request
Provide a list of all publicly traded
securities the Appellant and the Parents had outstanding in the years under
appeal and records of the daily bid-asked prices and closing and open prices
for these same securities.
Challenge
Question answered with respect to the Appellant
-
the evidence does not
support a finding a relevance
-
the question is a pure
fishing expedition in relation to the Parents
-
the information is
within the Respondent’s means of knowledge
-
documents not in
possession, control or power of the Appellant
[53]
The Respondent argues
that "the list of publicly traded securities of the Appellant and its
Parents and their prices will provide information on the financial market
participants’ view of the creditworthiness of these entities and will allow for
a more accurate determination of the reasonable or arm’s length price of the
guarantee". This information, I am presuming, would have been readily
available in the years at issue, unlike some of the other information
requested. The Appellant argues that it has answered this inquiry vis-à-vis the
Appellant’s publicly held shares by providing details of those shares as well
as advising the Respondent it was unable, after searching its records, to
locate daily bid-asked prices or the closing and opening prices. I consider
that a full answer with respect to the Appellant.
[54]
With respect to the
request of the Parents, the Appellant suggests the Respondent can seek that
information through various services such as Bloombergs or Reuters. If the
Parents have already accumulated this information, and consequently could save considerable
time and expense of the Respondent in seeking it out from a third party, that
information should be provided by the Appellant. If not, after an appropriate
search of the Parents’ records, the Appellant is not required to contact third
parties such as Bloombergs to put together such information. The Respondent
will have to do so.
30.
Request
Provide any and all information available
for credit default swaps written on or contemplated by the Appellant and the Parents
for the years under appeal
Challenge
Questions answered with respect to the
Appellant.
-
the evidence does not
support a finding of relevance
-
the information is
within the Respondent’s means of knowledge
-
documents in
possession, control or power of the Appellant
[55]
This question arises
from Dr. Kane’s affidavit. I am satisfied from a review of Mr. McIsaac’s
transcript and subsequent correspondence between the parties that the Request
has been answered with respect to the Appellant. I see nothing in the
undertaking that requires a similar search in this situation where the Parent
is the reference entity.
32.
Request
Provide monthly, quarterly and semi-annual
disclosure of how much of the liabilities of the Appellant were supplied by
entities within the HSBC group of companies in the years under appeal.
Provide monthly, quarterly or semi-annual
disclosure of how much of the assets of the Appellant are represented by
extensions of credit to other entities within the HSBC group of companies.
Challenge
Question answered
[56]
This information is, I
find, relevant, and if it is not available from the Appellant, inquiries should
be made of the Parent for such information. This type of information is
producible pursuant to the Rule 83 Order.
34. Request
Provide copies of documents for the years
under appeal regarding the guarantees by the Parents of other affiliates or
subsidiaries within the HSBC group of companies.
Challenge
-
the information is not
relevant for the purposes of ss. 69(2) and 247(2) because the transactions are
between non-arm’s length persons
-
the evidence does not
support a finding of relevance
-
the question is a pure
fishing expedition
-
the issue is not raised
in the pleadings
-
documents not in
possession, control or power of the Appellant
[57]
I do not agree with the
Respondent that all copies of other non-arm’s length guarantees go to the value
of the guarantee in issue, nor that the trial judge will want to know how the
transfer pricing policy was applied to other related entities. The trier of
fact may want to know the extent of the Parents’ guarantees of affiliated
corporations as that certainly goes to the question of creditworthiness and
financial strength. The Request, as framed, smacks more of a fishing expedition
and need not be answered, neither do such documents need to be produced
pursuant to any subsection 83(1) order.
35. Request
Provide internal data from the Parents and
the Appellant that lists the dates, amounts, yield to maturity at issue, and
matched maturity spread over relevant government funding costs for all debt
issues by entities with the HSBC group of companies of 1 year or more in
maturity and with an initial principal amount of $50 million or more during the
years under appeal.
Challenge
Question answered with respect to the
Appellant
-
the evidence does not
support a finding of relevance
-
the question is a pure
fishing expedition
-
documents not in the
possession, control or power of the Appellant
[58]
This Request arises
from Dr. van Deventer’s affidavit. The Appellant claims the undertaking has
been answered vis-à-vis the Appellant. It has looked and been unable to locate
such information. I see no need to demand further explanation of the steps
taken.
[59]
With respect to the
same information from the Parents, it is not irrelevant in assessing the
financial strength or creditworthiness of the Parent, which is important for
establishing the value of the guarantee, as well as determining the implicit
support of the Parent. My concern about this last issue, however, is whether
any third party guarantor could access such information in assessing the
strength of implicit support. This is more a concern for the trial judge in
attempting to accurately evaluate a comparative third party guarantee. For
purposes of discovery, however, I find the information sought meets the low
threshold for relevance, certainly as it pertains to determining the value of
the guarantee.
36. Request
Provide copies of any internal documents of
the Parents and the Appellant that discuss the rating or credit quality of the Appellant
during the years under appeal.
Challenge
-
the evidence does not
support a finding of relevance
-
the question is a pure
fishing expedition
-
issue was not raised in
the pleadings
-
documents not in the
possession, control or power of the Appellant
[60]
The Appellant is
concerned with the breadth of the inquiry as it, according to the Appellant, is
a "hunt for any tidbit of information which it (Respondent) might be able
to make use of when affiants focus on the methods which they might use in
considering the guarantee fee". Frankly, I do not fully appreciate what
the Appellant is getting at. The credit rating of the Appellant is something
the Appellant itself raises in its appeal indicating the guarantee increased the
Appellant’s rating. Any documents from the Appellant or Parents that discuss
the Appellant’s credit rating are relevant in assessing the worth of the
guarantees to the Appellant, and the importance the Parents placed on the
ratings in providing and maintaining such guarantee. I do not see this as a
fishing expedition.
[61]
With respect to the
Parents, their request should be covered by the subsection 83(1)
production ruling.
[62]
I have not been made
aware of how many employees the Parents have or had at the time, or how many of
those employees had any involvement in the issuance and maintenance of the
guarantees, but impliedly from the Appellant’s submissions, this Request could
prove monumental. As guidance to the Parties, I suggest that a reasonable
search by the Appellant could be limited to materials on the subject arising at
board meetings as well as materials in the files of those employees or officers
of the Parent who were involved on a hands-on basis with the guarantees and
their ongoing scrutiny; in effect, files specifically related to the
guarantees.
37. Request
Provide copies of internal or external documents
of the Appellant or the Parents which relate to a valuation of the guarantee
fee in issue from the perspective of the Parents.
If no such documents exist, explain whether
it is the Appellant’s position that the guarantee in issue had no value to the
Parents in the years under appeal and why.
Challenge
-
the question is a pure
fishing expedition
-
the question calls for
speculation and an opinion
-
documents not in
possession, control or power of the Appellant
[63]
The Respondent argues
that the value to the Parents of the guarantee goes to both the implicit
support and price of the guarantee. The Appellant argues that the value to the
Parents does not impact on prospective third party guarantors in the
comparative paradigm, as Parents would obviously not be the guarantors. Yet, the
financial marketplace, according to the Respondent, recognizes implicit support
from Parents and would seek out this information if asked to provide a
guarantee. The dilemma here is that what is being sought from the Parents
(internal documents regarding the value of the explicit guarantee) is
information that would not exist if a third party guarantor was in play. It is
something of a dog chasing its tail.
[64]
With respect to the
need of the information as it might shed light on the price paid by the
Appellant, this goes to the issue of whether the Appellant paid a fee for the
purpose of earning producing income. This is not a question to be assessed from
the guarantors’ perspective. It is the value seen through the eyes of the
Appellant that is critical. This Request need not be answered.
38. Request
Questions relating to the $200 million
payment the Parent bank received for contracting with the CDIC to fulfill
certain obligations.
Challenge
Questions answered but otherwise
not raised in the pleadings
[65]
Only questions 86 and
396 remain. The Appellant’s objection to those questions is that the matter is
not relevant and not raised in the pleadings. The Appellant claims, it is not
relevant because:
i) "the $200
million payment was made by CDIC to HBAP in 1986 and has nothing to do with the
calculation of the guarantee fee during the 1996 to 2000 taxation years;
ii) the $200 million
payment was made as part of the acquisition by the Appellant of the Bank of
British Columbia in 1986;
iii) the reasons for
$200 million payment are set out in the agreement between CDIC and HBAP dated
November 26, 1986; and
iv) the Respondent’s
affiants stated, during cross‑examination, that they did not request any
information related to the $200 million payment."
[66]
I disagree with the
Appellant on both the issue of relevance and pleadings and find that questions
regarding the $200 million payment would be proper, though I share the
Appellant’s concern that a blanket approval is sought without any full
appreciation of the nature of the questions. The Respondent replies that
naturally the questions would be in accordance with proper principles of examination.
[67]
I agree that the
Respondent need not be forced to rely upon answers given to the Appellant by a
representative of CDIC, and is entitled to the Appellant’s view. I see no
need to review the transcript of the Appellant’s discovery of the CDIC representative.
[68]
With that brief
background, I would allow the Respondent to ask questions on this topic, but
see no need for extensive inquiry given the nature of the documents involved
and the examination of the CDIC representative. If Mr. McIsaac was not
reattending for other questions, I would suggest written questions would be
more appropriate.
39. Request
Provide the financial analysis performed to
determine the benefits which the Appellant believed it was obtaining as a
result of having the guarantee in the period subsequent to the relevant
taxation years.
Challenge
-
the question is a pure
fishing expedition
-
the issue is not raised
in the pleadings
[69]
The Respondent’s view
is that it is relevant what benefits the Appellant saw in the guarantee. I
agree. However, the analysis sought was conducted a couple of years after the
years under appeal, with respect to benefits received at that time. The
Respondent claims that does not make the information irrelevant, but that it
may require some adjustments. The Appellant argues this information has no
relevance to the value of the guarantee in the relevant year. The benefit the
Appellant saw in the guarantee is to be limited to the benefit at the relevant
time. I find that a subsequent analysis about a subsequent time period is
not relevant to that inquiry and could possible create confusion and murkiness
in considering the real issue. This need not be answered.
40. Request
Ask Mr. Bakos if Mr. Atkinson is
still with GHQ.
Challenge
Question answered
[70]
The Appellant asked Mr.
Bakos, who answered that he did not know. The Respondent viewed this as a
simple question that, with minimal inquiry, Mr. Bakos could have found out.
Frankly, this is a silly little debate and, I have, regrettably, the somewhat
non-judicial irritating sense that each word I write in connection with it, is
one word too many, one second too long. Perhaps this is normal thrust and parry
in tax litigation with a considerable amount at stake, but should reason and
practicality simply take flight and mutual stubbornness insidiously take over?
Surely not. Even outside the examination process could Respondent’s counsel not
just ask the Appellant’s counsel to find out if an individual is still with an
organization related to the Appellant? This is all the more baffling to me as
at page 361 of the transcript of Mr. McIsaac, Mr. Kroft stated: "Mr.
Atkinson, I believe the witness has indicated on a number of occasions, is not
with the bank, namely the Parent, any longer". Enough said!
41. Request
Refusal to answer questions relating to Appellant’s
premium category, filings or insured deposits with the CDIC.
Challenge
-
the information is not
relevant for purposes of subsections 69(2) and 247(2) because the information
is not available to arm’s length persons for any purpose including the
determination of an arm’s length guarantee fee
-
the question is a pure
fishing expedition
[71]
The Appellant objects
as this information would not be available to an arm’s length guarantor, and
therefore has no bearing on a comparative fee charged by such guarantor in what
the Appellant refers to as the "real world". Yes, but it is relevant
to what the Parent guarantors charged and what the Appellant paid for the
explicit guarantee and that is necessary information to evaluate the value, if
any, to be accorded to the guarantee, and consequently to determine whether the
Appellant paid the fee for purposes of earning or producing income. This is not
a fishing expedition. Finally, such information should be protected by the Confidentiality Order
already in place in this matter.
42. Request
Refusal to make enquiries of
former employees.
Challenge
Questions answered.
-
the issue is not raised
in the pleadings
[72]
Some of these questions
have been answered though it appears a request for the final version of the
draft HKBC guarantee remains to be provided. I cannot find any specific
reference in argument to this question however. In any event, if it has not
been provided, it should be.
[73]
The Respondent had
mistakenly identified question 807, rather than 805 of the transcript, which
asked Mr. McIsaac to inquire of Mr. Atkinson why the Parent was glad CDIC
insisted on a guarantee. If the Appellant is able to track down Mr. Atkinson,
this is relevant information to be answered by a former (?) employee.
43. Request
Redaction of letters provided in
response to undertaking number 60.
[74]
As the Appellant is not
opposed to an order in this regard, the Court does so order production in
unredacted form.
44. Request
Request for information on surveys of any
kind conducted by the Appellant to determine the effect of the removal of the
guarantee on its client base in 2005. The request also relates to surveys
conducted by the Appellant with its clients to determine whether any of them
had left as a result of the removal of the guarantee.
Challenge
-
the question is a pure
fishing expedition
-
the issue is not raised
in the pleadings
[75]
This need not be
answered given my reasoning as set out in connection with Request 39.
45. Request
Request that the Appellant enquire of Mr.
Bond or through materials available within the HSBC group of companies what his
source of information was that the guarantee was never intended to grow from
CAD 1.7 billion to CAD 1 billion (Exhibit A1, tab 206, (ii)).
Challenge
-
the question is a pure
fishing expedition
-
the appellant is not
required by the Rules to contact third parties
[76]
The Appellant argues
that the Respondent is fishing for any information to assist its case regarding
the deposit liabilities of the Appellant. I disagree. This information could
have direct bearing on the price determined for the guarantee and is to be
answered.
46. Request
Determine whether the Appellant has any
information that Mr. Dalton’s assertion that the statement "the
deposit guarantee is clearly indicated as the quid quo pro for the $200
million injection by the CDIC" is not factually accurate, and, if so, what
is that information Parent banks received for contracting with the CDIC to
fulfill certain obligations.
Challenge
Question was answered
[77]
The Appellant responded
that the CDIC agreed to pay $200 million pursuant to the agreement between CDIC
and HBAP and that agreement speaks for itself. That response does not answer
the question, which goes to some possible motivation behind the guarantee. This
is to be answered.
47. Request
Request for information about its interest
rate swaps and credit derivatives spreads for the years under appeal.
Challenge
Acknowledged to have been answered.
48. Request
Provide the Respondent with the amount of
deposits placed by HSBC group of companies during the relevant taxation years
reflected on a quarterly and monthly basis.
Challenge
Question answered
[78]
This Request is really
a demand that the Appellant not only search its records but ask its Parents to
do likewise. If the Parents have documents setting out such information, I find
it is relevant and should be produced pursuant to subsection 83(1) order.
[79]
In summary, I order
that pursuant to Rule 83(1), the Appellant provide all relevant
documents of the Parents, subject however to the confidentiality provisions set
out in the Confidentiality Order of April 27, 2010 by October 22, 2010. I encourage
the parties to take note of what I have indicated as relevant or not relevant
with respect to the Requests generally, in taking a reasonable approach to this
production. For example, documents are to pertain to the years in question, and
to the explicit guarantees of the Appellant, not with respect to other
affiliates’ guarantees.
[80]
With respect to the
orders concerning each of the 48 Requests, these shall be contained in the
order itself.
[81]
Costs to the Respondent
in any event of the cause, except for incremental costs arising from the
personal attendance of the expert witnesses for their cross‑examination.
Signed at Ottawa, Canada, this 8th day of September 2010.
"Campbell J. Miller"
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