Docket: 91-509(IT)G,
91-1816(IT)G
91-1946(IT)G, 2004-2787(IT)G
BETWEEN:
LINDA LECKIE MOREL,
GEOFFREY D. BELCHETZ,
ALLAN GARBER,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Motions
heard on August 18, 2008, at Toronto, Ontario
By: The Honourable
Justice E.A. Bowie
Appearances:
|
Counsel for the Appellants:
|
Howard
W. Winkler
|
|
Counsel for the Respondent:
|
John Shipley
|
____________________________________________________________________
ORDER
UPON motions by the respondent
for an Order pursuant to Rule 110 of the Tax Court of Canada Rules (General
Procedure), requiring the appellants to re‑attend the examination for
discovery no later than August 31, 2008, to answer proper questions on
discovery, comply with undertakings given and answer proper questions arising
from the answers to those undertakings, as set out in Schedule “A” to each
Notice of Motion herein; and for an Order for other relief;
AND UPON reading the
materials filed, and hearing counsel for the parties;
AND THE costs of the
motions heard on July 8, 2008 having been reserved to be dealt with following
the hearing of these motions;
IT IS ORDERED THAT:
1. The appellants shall each reattend at their own
expense to answer questions on examination for discovery in accordance with the
Reasons for Order delivered herewith, including follow-up questions;
2. If the appellants intend to
introduce a reconciliation of invoices for goods and services with the expenses
claimed on the financial statements of the partnerships at the trial they shall
produce a copy of it to the respondent at least 45 days before the commencement
of the trial; and
3. The appellants collectively
shall pay to the respondent the costs of the motions to strike out parts of the
Replies heard on July 8, 2008, which are fixed at $1,500 in total, and the
costs of the motions heard on August 18, 2008, which are fixed at $3,000 in
total, in any event of the cause. These costs are to be paid within 30 days of
the date of this order.
Signed at Ottawa, Canada, this 3rd day of September, 2008.
“E.A. Bowie”
Citation: 2008 TCC 491
Date: 20080903
Docket: 91-509(IT)G, 91-1816(IT)G
91-1946(IT)G, 2004-2787(IT)G
BETWEEN:
LINDA LECKIE MOREL,
GEOFFREY D. BELCHETZ,
ALLAN GARBER,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Bowie
J.
[1] The motion before
me in each of these four appeals arises out of the examinations for discovery
of the three appellants. The matters have a long and sorry history. Three of
the four appeals were begun in 1991. The events in issue date back a quarter
century. There have been numerous interlocutory motions, at least two of which
have been the subject of appeals. The pleadings have recently been amended.
Discovery of documents is ongoing, and oral discovery is not yet completed.
[2] Examinations for
discovery of the appellants were conducted in May and June 2004. Some questions
were not answered, and some undertakings were given. The Respondent has brought
these motions to obtain answers to certain questions, and to obtain more
complete answers to others. At one time there were objections by the appellants
based on relevance, but between the time the motions were filed in May and the
argument of them in August, the appellants have given answers to all the
unanswered questions.
[3] The issues now
remaining are whether the appellants have given adequate answers to the
following questions:
Mr. Belchetz: Q.
103
Q.
476
Ms. Leckie-Morel Q.
491
Mr. Garber: Q.
342
Q.
366
Q.
619
Q.
620
As to questions relating to the
Minister’s assumptions pleaded in the Replies to the Notices of Appeal, on
examination of Mr. Garber:
Qq. 15,
17, 18, 21, 22, 23
[4] As to that later
group, the parties agree that there are legitimate follow-up questions that the
respondent is entitled to ask and have answered. The real issue in dispute is whether
they should be asked and answered in writing, or if the appellants should be
required to re-attend to answer the follow-up questions. Briefly, the position
of the respondent’s counsel is that the appellants’ answers to date have been
neither timely nor complete, that in many instances the answers have only been
given since the original date fixed for these motions to be heard, which was July 8,
2008, and in many cases the answers were either not responsive, not complete, or
required follow-up questions to be asked.
[5] Mr. Winkler’s
position is that the appellants have, at this stage, given all the information
that they have, and that they should not be required to attend personally to be
asked questions which, in his submission, could only give rise to additional
undertakings. Mr. Shipley argues that the history of the discoveries to date
makes it likely that to proceed with written questions and answers would simply
lead to more inadequate answers.
[6] There is also an
issue as to whether the respondent is entitled to further examine the appellants
for discovery as a result of my Order of July 28, 2008 permitting amendments to
the Notices of Appeal. Mr. Shipley argues that the question whether the appellants
borrowed cash to pay for their partnership shares, or simply signed notes for
the purchase price, is fundamental to the issue of whether the promoters
defrauded the investors, as the Replies allege, and therefore, to the extent
that the Appellants have changed their positions by these amendments, they
should be required to submit to further discovery.
[7] I shall deal first
with the questions that the respondent says have not been adequately answered.
Mr. Belchetz
Question 103 concerns the services
provided for the professional fees referred to in paragraph 16 of the Notice of
Appeal. Mr. Belchetz was not properly prepared to answer the question when he
was examined in June 2004. The response given pursuant to an undertaking was
vague. The Respondent is entitled to ask follow‑up questions on this
issue, and, specifically, is entitled to know the advice that the appellant
received.
Question 476 asks for a copy of a
reconciliation of the invoices for goods and services and the expenses claimed
on the financial statements of the partnerships. It is not clear that any such document
has been completed by the appellants. If any such reconciliation is to be used
at trial the Respondent is entitled to see it beforehand. Otherwise, it is not
a proper subject for discovery. If the Appellants are going to introduce any
such reconciliation at trial, they are to give notice of that, and provide a
copy of the reconciliation to the Respondent 45 days prior to the commencement
of the trial.
Dr. Leckie-Morel
[8] Question 491
asks for the appellants’ position as to the facts stated in four paragraphs of
the Reasons given by Justice Chapnick when sentencing the promoters of the
partnerships following conviction. The question, put as it was, is simply an
invitation to make admissions which the respondent would use at trial, but to
make them in the context of another proceeding and the culpability of another
individual. I do not consider this to be an appropriate question when put as it
was and the appellants are not bound to answer it. Having once put the question
in that way, it is not now open to the respondent to pursue it piecemeal.
Mr. Garber
Question 342 required the appellant
to make certain inquiries of the Toronto‑Dominion Bank. Those inquiries
apparently were made. The respondent is entitled to know if there has been a
response to the inquiry and if so to be informed of it.
Question 366 is a question as to the
financial capacity of O.C.G.C. to fund the purchase by investors of their
partnership units. It is now pleaded by both parties that the units were not
paid for with the proceeds of loans from O.C.G.C., but by promissory notes. The
financial capacity of O.C.G.C. to fulfill its obligations in respect of
partnership business is a separate issue and is addressed elsewhere in the
respondent’s Replies. There is no need for further pursuit of a more detailed
answer to this question.
[9] Questions 619
and 620: These questions and the answers to them must be read together. These
relate to the financing of the appellants’ partnership units. By the time this
motion was heard on August 18, three answers additional to the original answers
had been delivered, the last of them less than a week before the hearing and
more than a month after the date originally fixed for the motion to be heard.
The question is now answered adequately.
questions relating to the
Minister’s assumptions:
[10] It is not
seriously disputed that the respondent is entitled to follow-up questions in
relation to questions 15, 17, 18, 21, 22, and 23. The real issue is whether the
appellants should be required to attend personally to answer those follow-up
questions, or if they should be asked and answered in writing.
further
discovery in relation to the amendments to the pleadings
[11] Mr. Shipley asks
for additional discovery of the appellants as a result of the amendments to the
Notices of Appeal for which I gave leave on July 28, 2008. Those amendments are
minor in nature, and do not add any significant factual issues to the appeals.
They add an allegation, in the passive voice, as to “substantial start-up
costs”, and they clarify that the appellants gave promissory notes to acquire
their partnership units. These are not new matters. The respondent had already
addressed the subject of financing the operations of the partnerships in the
Replies to the Notices of Appeal, and had specifically alleged that the
partnership units were acquired not for cash but for promissory notes. These
matters have therefore been relevant from the time that pleadings were closed,
and the respondent has no doubt already explored them fully on discovery. I
will not order additional discovery on that issue as a result of the amendments.
written
questions and answers or personal reattendance
[12] The appellants
will be required to attend personally to answer the questions that remain to be
answered. It is evident from the material before me that the use of written
questions and answers is unlikely to bring the discovery process in this case
to a timely end. Whether deliberately or not, many of the answers provided in
writing to date have been either unresponsive or only partly responsive. Since
these motions were filed, the appellants have furnished answers to many of the
questions to which the motion sought to compel answers. If there is another
round of written questions and answers, I would expect it to lead to
considerable delay, and quite possibly to yet more motions. The appellants
surely must know by now what the follow-up questions are going to be. With four
lawyers working on the case, they should be able to anticipate the questions
that will be asked and ensure that the three appellants are properly prepared
to answer them. Of course, nothing prevents counsel for the respondent from
directing the minds of counsel for the appellants to specific items in advance
of the continuation of the examinations.
costs
of the motions
[13] My Order of July
28 reserved the question of costs of the motions heard that day to be dealt
with following the hearing of these motions.
[14] I was not
convinced that the appellants’ motions to amend the Notices of Appeal were
either necessary or particularly useful. Nor was I convinced that the
respondent’s opposition to those motions was necessary or useful. The
respondent’s counsel took the position that the appellants were withdrawing an
admission, and so needed to meet the evidentiary burden for doing so. But the
amendment had the result of making the appellants’ position as to the payment
for the partnership units coincide with that of the respondent. I presume that
both sides were trying to gain some small tactical advantage. I do not believe
that either of them succeeded in that. In my view they should each bear their
own costs of those motions.
[15] The other motions
heard in July were to strike out five paragraphs of each Reply, and a reference
therein to “reasonable expectation of profit”. The pleadings in the four
appeals are, for practical purposes, identical. The respondent consented to the
striking out of paragraphs 19 and 30 of the Garber Reply, and the analogous
paragraphs in the other three appeals. In the result, only those paragraphs
were struck out. The respondent, having been successful, should have her costs
of the motions. That motions occupied about half a day. I fix the costs at
$1,500 in total for the four motions.
[16] Turning to the
August motions, Mr. Winkler argues that it was not necessary that the motions
be heard as the appellants had, by the time the motions were heard on August
18, given answers to the questions to which they were directed. He did agree
that there are follow-up questions that the appellants should answer, but takes
the position that this has never been in issue and did not justify the motions
proceeding to a hearing. I do not intend to detail each answer that the
appellants supplied between May 30 when these motions were filed, and August 18
when they were heard. Questions 619 and 620 on the examination of Mr. Garber
are illustrative. Undertakings were given, to which unresponsive answers were
given in March 2007. Further answers were provided on April 25, 2008, and
July 7, 2008. Only on August 13, 2008, five days before the motions were heard
and more than a month after the originally scheduled hearing date, was a
responsive answer provided. In the meantime, these motions had been adjourned
from the July hearing date, scheduled in advance for all of these motions to be
heard, due to a conflicting commitment made by counsel for the appellants. It
was necessary for the respondent to bring the motions, and it was necessary
that they proceed to a hearing. The appellants have had some limited success on
these motions, but that is largely attributable to answers given after the
motions were filed. The respondent is entitled to costs of the motions, which I
fix at $3,000.
[17] This is an
appropriate case in which to apply the practice that has prevailed in Ontario since
the decision in Axton v. Kent,
and has since been codified there,
which is that costs of a contested interlocutory motion are made payable
forthwith, in any event of the cause, unless the court is satisfied that a
different order would be more just in the particular case. I agree with the Divisional Court
that this is a salutary practice. It is likely to discourage interlocutory
motions that are not absolutely necessary, and thereby promote the timely and
economical disposition of cases. I see nothing in the present case that would
make a different order more just. The costs therefore will be payable within 30
days of the date of this order.
Signed at Ottawa, Canada, this 3rd
day of September, 2008.
“E.A. Bowie “
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