Citation: 2008TCC61
Date: 20080130
Docket: 2007-858(GST)G
BETWEEN:
INSURANCE CORPORATION OF BRITISH COLUMBIA,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER AND ORDER
Beaubier D.J.
[1] This motion by the
Respondent was heard at Vancouver, British Columbia on January 18, 2008. It is for an
order:
1. amending the Reply to
the Amended Notice of Appeal, under sections 4, 12 and 54 of the Tax Court
of Canada Rules (General Procedure) (the “Rules”) and subsection 298(6.1)
of the Excise Tax Act;
2. for discovery of the
Appellant respecting those amendments, under sections 4 and 95 of the Rules;
3. compelling responses to
certain questions asked of the Appellant at discovery, in accordance with
sections 4, 95, 110 and subsection 107(3) of the Rules;
4. for discovery on the
Appellant’s undertaking responses, in accordance with sections 4 and 95 of the
Rules;
5. for costs, in accordance
with section 110 and 147 of the Rules; and
6. for such further and
other relief as this Court deems just.
[2] Respecting items 3
and 4 of the motion, the examinee for discovery of the Appellant, Brian
Stonnell, (a) was not in the employ of the Appellant, Insurance Corporation
of British Columbia (“ICBC”), at the times material to this appeal and (b) did
not inform himself for the purposes of the discovery. ICBC is a well-known giant
provincial-owned vehicle insurance corporation in British Columbia with many employees and
senior officers. Many senior officers were directly involved in the subject
matter of this appeal. In these circumstances, using Mr. Stonnell as the
officer for this discovery is an interesting tactic.
[3] As stated in
paragraphs 7 to 14, inclusive, of the Affidavit of Ms. Perillié filed by the
Respondent, Mr. Stonnell was “unable” to answer questions about negotiations by
ICBC leading to, or part of, a Memorandum of Understanding (Exhibit “E”) signed
by ICBC and ICBC refused to search records respecting various matters
questioned. (Paragraphs 15 to 26, inclusive.) In argument, ICBC’s counsel
stated that these occurred because they all related to matters outside of the
scope of the pleadings and were not considered by the Respondent at the time of
reassessment.
[4] In essence, ICBC
signed a Memorandum of Understanding with British Columbia’s Ministry of Advanced
Education and a corporate body, “Tech BC”, which was going to create a new
university in British Columbia at Surrey, a suburb of Vancouver. ICBC was to build and lease the
facilities itself, or through its subsidiaries, to Tech BC at a development eventually called
Central City Development. Tech BC backed out. The subsidiaries were “IPL” and “Mall Co.”.
As the result of a “Settlement Agreement” dated July 16, 2002 signed by the province of British Columbia, Tech BC, ICBC, IPL and Mall
Co., (Exhibit K), Tech BC agreed to pay ICBC “Settlement Monies” ($41.1
million) for releasing Tech BC and the province of British Columbia from “all
liability for the losses, damages, costs and expenses suffered by the ICBC
Companies as a result of the cancellation of the participation of the Province
and of Tech BC in the Central City Development;” (Paragraph 4.2). In the
“Development Agreement” dated March 10, 2000 (Exhibit “H”) and signed by Surrey
City Centre Mall Ltd. (also described as ICBC Mall Co. - and herein as “Mall
Co.”), ICBC, Tech
BC and the province of British Columbia, Tech BC agreed to enter into a
lease with ICBC Mall Co. (Paragraph 3.1) for a term of 25 years (Paragraph
3.2). In the event of a dispute, there was an arbitration clause (Paragraph
5.3).
[5] Paragraph 2.21 of
the Amended Notice of Appeal states that Tech BC “agreed to pay the Settlement
Payment to ICBC or its nominee in exchange for ICBC, IPL and Mall Co. releasing
Tech BC and the Province from any liabilities under, inter alia, the
Development Agreement.” Paragraph 2.21 was admitted in the Reply. Assumption
7(t) of the Reply states that “on July 22, 2002 Tech BC paid the Appellant $41.1 million
(the Payment) for terminating Tech BC’s right to lease the buildings under the Development Agreement;”.
[6] The Respondent
levied GST on the $41.1 million on the basis that the payment was made
otherwise than as consideration for a supply (Excise Tax Act, R.S.C.
1985, c. E-13, ss. 182(1) and s. 133.).
[7] Particulars of the
reassessment are not in evidence. In the Court’s view, the pleadings are
sufficiently broad to require Mr. Stonnell or a knowledgeable nominee to
answer all of the queries put to Mr. Stonnell by Respondent’s counsel. The
ultimate relevancy of any such questions and answers is for the hearing judge
to determine, if that should be necessary. In fact, the nomination of Mr.
Stonnell and his answers and the reasons for them amount to stonewalling by the
Appellant.
[8] As a result, it is
ordered that the nominee of ICBC shall properly and without restriction inform
himself thoroughly and (a) re-attend at ICBC’s expense and answer the questions
and produce the document or documents; (b) answer questions and produce
documents arising therefrom; and (c) forthwith, pay the costs of the motion,
the costs thrown away and (on the basis that it is now a second examination for
discovery and production of documents) the costs of the examination now ordered
and of production of any document or documents.
[9] Respecting items 1
and 2 of the motion, Appellant’s counsel objected, on the basis that these
matters would have been discovered on an audit which the Appellant did not do
in this case and that the amendments are irrelevant. Therefore, the amendments
should not be allowed.
[10] Exhibit QQ to the
Affidavit of Agnès Perillié dated December 20, 2007 contains the Respondent’s
proposed Amended Reply. The proposed amendments are in paragraphs 9, 10, 11,
12, 13 and 19. They read:
9. The
directors and officers of Mall Co. were also the directors and officers of IPL.
10. The directors
and officers of Mall Co. and IPL were also the directors and officers of the
Appellant.
11. Mall Co.
funded its design, development and construction of the Project by way of
advances from, and amounts owed to, IPL.
12. IPL funded its
advances to Mall Co. by way of advances from, and amounts owed to, the
Appellant.
13. Once Tech BC made the Payment:
a) the
Appellant reduced the amount that IPL owed it by $41.1 million;
b) IPL
reduced the amount that Mall Co. owed it, and the amount that it owed the
Appellant, by $41.1 million;
c) Mall
Co. reduced the amount that it owed IPL by $41.1 million; and
d) Mall Co.
received the Payment as revenue
…
19. Alternatively,
under the Development Agreement Mall Co. provided Tech BC with the right to a
lease and therefore agreed to the making of a taxable supply. Tech BC paid the
Payment to Mall Co. within the meaning of subsection 182(1) of the Act, as Mall
Co. indirectly or constructively received it. That Payment was made as a
consequence of the termination the Development Agreement respecting that
supply, and not as consideration for that supply. As a result, subsection
182(1) of the Act deems Tech BC to have paid GST respecting the Payment and the Appellant
must remit that GST under subsections 225(1) and 228(2) of the Act.
[11] Appellant’s counsel
also argued that the amendments should not be allowed because the Appellant’s
GST return in question was filed on August 2, 2002 and it is now past the time
limit in which to assess. But the assessment of ICBC is timely and the proposed
amendments do not constitute a new assessment or an amendment of the existing
assessment. Rather, they merely describe a form of intertwining of parties to
various documents in evidence.
[12] It is noted that the
amendments are not to the assumptions. Thus, it is the duty of the Respondent
to prove them.
[13] In Walsh v. The
Queen, 2007 DTC 5441 (F.C.A.), at paragraph 18, the Federal Court of Appeal
set out the conditions which apply to the Respondent’s motion under subsection
152(9) of the Income Tax Act. They are:
1) the Minister cannot include
transactions which did not form the basis of the taxpayer’s assessment;
That is not the case
here; see the Reply to the Amended Notice of Appeal.
2) the right of the Minister to
present an alternative argument in support of an assessment is subject to
paragraphs 152(9)(a) and (b) which speak to the prejudice to the
taxpayer;
The proposed amendments
would not (a) require relevant evidence that the taxpayer is no longer able to
adduce without the leave of the court, and (b) it is not necessary for the
court to order that such evidence may be adduced.
and 3) the Minister cannot use section
152(9) to reassess outside the time limitations in subsection 152(4) of the
Act, ...
Nor would this be the
case, since there is no proposed amendment to change the assessment or
introduce any facts or allegations that are not already contained in the Reply
to the Amended Notice of Appeal.
[14] In law the question
of permitting these amendments and examinations for discovery on them is
whether it is just (it is); whether it would unduly delay the hearing (since
the appeal is only at the discovery stage, it would not); and whether the
particulars pleaded are remote or forlorn to the cause of action (they are
not).
[15] For these reasons,
it is ordered that:
1. The Respondent shall serve
and file an Amended Reply to the Amended Notice of Appeal within 14 days of the
date of this Order.
2. The Appellant shall have
30 days after the date of filing the said Amended Reply in which to file an
Answer thereto.
3. Counsel of the Respondent
shall conduct discovery of a knowledgeable nominee of the Appellant respecting
those amendments within 75 days after the date of filing the Amended Reply.
4. Costs respecting this
order are in the cause.
Signed at Saskatoon,
Saskatchewan, this 30th day of
January 2008.
“D.W. Beaubier”
Beaubier D.J.
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