Citation: 2005TCC264
Date: 20050413
Docket: 2003-815(IT)G
BETWEEN:
THE ESTATE OF THE LATE PATRICK MCBANE BY ITS EXECUTRIX
AND LEGAL REPRESENTATIVE MARY ANN MCBANE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Paris, J.
[1] The Respondent has applied under Rule 99 of the Tax
Court of Canada Rules (General Procedure) for leave to examine for discovery a
non-party, Michele Potts, in this appeal. The Respondent is also seeking an
extension of time to complete examinations for discovery pursuant to Rule 12.
[2] The grounds for
the Motion are:
1. The Crown has been unable to
examine a knowledgeable nominee on behalf of the Appellant;
2. It would be unfair to require
the Crown to proceed to hearing without having the opportunity of examining
Michele Potts;
3. The examination will not
unduly delay the commencement of the hearing of the proceeding, entail
unreasonable expense for other parties or result in unfairness to Michele
Potts; and
4. The Appellant consents to this
motion.
[3] The Appellant
does not oppose the application, but made submissions relating to the payment
of Ms. Potts to attend the examination for discovery, if ordered to do so.
[4] The Respondent
filed two affidavits in support of the motion as it relates to Rule 99, one
from Nancy Turner and one from Wendy Burnham, both of the Tax Law Services
Section, Department of Justice, in Ottawa. The affidavits indicate that:
·
Counsel for the Appellant advised
counsel for the Respondent that he intended to produce Mrs. Mary Ann McBane as
the Appellant’s nominee for the examination for discovery but that Mrs. McBane
was not particularly knowledgeable and had no personal direct knowledge of the
matters in issue.
·
Counsel for the Appellant
suggested that the Respondent bring an application under Rule 99 of the Tax
Court of Canada Rules (General Procedure) to discover Michele Potts, who
was admittedly more knowledgeable about the matters in issue than Mrs. McBane.
·
Ms. Potts advised counsel for
the Respondent that she was the only person who has knowledge of the
transactions in issue in this appeal. Although Ms. Potts agreed to attend a
meeting with the Respondent’s counsel, she failed to keep the appointment.
·
Counsel for the Appellant
indicated that he would not oppose such an application, but would seek to have
the Court order the Respondent to pay Ms. Potts some compensation for her
efforts.
[5] Rule 99 reads:
(1) The Court
may grant leave, on such terms respecting costs and other matters as are just,
to examine for discovery any person who there is reason to believe has
information relevant to a material issue in the appeal, other than an expert
engaged by or on behalf of a party in preparation for contemplated or pending
litigation.
(2) Leave
under subsection (1) shall not be granted unless the Court is satisfied that,
(a) the
moving party has been unable to obtain the information from other persons whom
the moving party is entitled to examine for discovery, or from the person
sought to be examined,
(b) it
would be unfair to require the moving party to proceed to hearing without the
opportunity of examining the person, and
(c) the
examination will not,
(i) unduly delay the commencement
of the hearing of the proceeding,
(ii) entail unreasonable expense
for the other parties, or
(iii) result in unfairness to the
person the moving party seeks to examine.
[6] I am satisfied
that the Respondent has shown that Ms. Potts has information relevant to a
material issue in the appeal. As already indicated, Ms. Potts advised counsel
for the Respondent that she was the only person who has knowledge of the
transactions in issue in this appeal.
[7] I am not
satisfied that the conditions in subsection (2) of Rule 99 have been met.
[8] With respect to
paragraph 2(a) of Rule 99, I note that the Respondent has not attempted
to obtain the information in issue from Mrs. McBane, whom the Respondent is
entitled to examine for discovery. The most that can be said is that the
Respondent anticipates not being able to obtain the information if a discovery
of Mrs. McBane were held.
[9] Similarly, it
has not been shown that the Respondent has made any significant effort to
obtain the information in question from Ms. Potts, and therefore it cannot be
said that the Respondent has been unable to obtain the information from her.
The affidavit evidence shows only that Ms. Potts agreed to attend a meeting
with the Respondent’s counsel, but failed to keep the appointment. There is no
indication whether Ms. Potts was contacted again by the Respondent’s counsel either
to determine why she did not come to the meeting, or to arrange another
opportunity to question her about the transactions in issue.
[10] In my view the
evidence does not show that there has been either an actual or constructive
refusal by Mrs. McBane or Ms. Potts to provide the information that the
Respondent is seeking. It is not sufficient that a party anticipates being
unable to obtain the information. In Reichmann v. Vered, the Ontario Court
of Appeal set aside an order for the examination for discovery of a non-party
given by a Motions Judge under Rule 31.10(2) of the Ontario Rules of Civil
Procedure (which is identical in all material respects to Rule 99 of the Tax
Court Rules (General Procedure)) on the basis that the order was premature.
The motions judge had found that the moving party would have been unable to
obtain the information from the other parties and that refusal of the order
would unnecessarily delay and thus increase the cost of the proceedings. In
setting aside the order, the Court of Appeal said:
There may come
a time in this litigation when an order to examine a representative of Coopers
& Lybrand is appropriate, but at this stage such an order is premature. We
observe that Chilcott J. did not find that the responding parties had been unable
to obtain the information but only that they will be unable to obtain it, a
finding that emphasizes the prematurity of the order. Whatever practical
benefit there may be to the order of Chilcott J. must give way to the
requirements of r. 31.10(2). Coopers & Lybrand is not a party and an
order for discovery of a non-party is an exceptional order which should not be
made unless the criteria in r. 31.10(2) have been satisfied. ...
[11] In Famous
Player Development Corp. v. Central Corp.,
another case involving Rule 31.10(2), the Ontario Court (General Division)
set aside an order of a master permitting the discovery of a non-party, where
the master had interpreted the phrase “unable to obtain” as meaning “unable to
obtain cheaply and without delay where the costs and delay that would otherwise
ensue are large and obvious.”
[12] In allowing the
appeal from the master’s decision, the Court said:
In so saying
the master was applying a different test instead of the test in rule 31.10(2)(a)
and in so doing he was clearly wrong. The test is inability to obtain the
information. While there may be a level of difficulty, delay and/or expense
that could, even in the absence of refusals by the defendant to undertake to
answer follow-up questions, reasonably be characterized as amounting to an
inability to obtain the information, the facts here fall far short of that....
[13] In the case at
bar, I think it is fair to say that the Respondent’s counsel, with the
encouragement of the Appellant’s counsel, brought this motion in the belief
that a discovery of Ms. Potts rather than Mrs. McBane would expedite matters
and result in cost savings to both parties. Such
considerations may be taken into account in deciding whether to exercise the Court’s
discretion under subsection (1) of Rule 99 once the moving party meets the
onus on it under subsection (2).
[14] As indicated by
the Ontario Court of Appeal, above, an order to examine a non-party is an
exceptional order and should only be made where compliance with all of the
conditions in Rule 99 has been shown. In this case, the Respondent has not
shown that it has been unable to obtain the information it requires either from
Mrs. McBane or Ms. Potts, and therefore has not met the onus under
paragraph (2)(a) of the Rule. Since the conditions in subsection (2) of
Rule 99 are conjunctive, it is not necessary for me to make any findings with
respect to the conditions set out in paragraphs 2(b) and (c) of
that Rule.
[15] The application
under Rule 99 is therefore dismissed. The application to extend the time for
completing the examination for discoveries is allowed under Rule 12(1). The
parties will have until June 30, 2005 to complete the examinations for
discovery, until August 31, 2005 to complete any undertakings and are requested
to contact the Court by September 30, 2005 to set a hearing date.
Signed at Ottawa, Canada, this 13th
day of April 2005.
"B. Paris"
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