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Citation: 2003TCC258
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Date: 20030603
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Docket: 98-712(IT)G
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BETWEEN:
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GLAXO SMITHKLINE INC.,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR ORDER
Bowie J.
[1] This appeal under the Income
Tax Act (the Act) concerns the price at which the
Appellant (Glaxo) purchased the chemical compound ranitidine from
certain affiliated foreign companies (the affiliates), for import
into Canada, during its 1990, 1991, 1992 and 1993 taxation years.
The Appellant and those affiliates are all part of a large
multi-national group of companies (the Glaxo group) that
manufactures and distributes various pharmaceutical products
worldwide. The Appellant is the operating company in Canada, and
it manufactures, in Canada, a widely prescribed drug for the
treatment of ulcers. To do so, it purchases supplies of
ranitidine manufactured by the foreign affiliates, and sold to it
through a Swiss affiliate, for use at its Canadian manufacturing
facility. At issue is the reasonableness of the consideration
that was paid by the Appellant to the affiliates for ranitidine.
The Minister of National Revenue says that the consideration was
not reasonable in the circumstances, and has assessed
accordingly. It is from those assessments that these appeals are
brought. In addition to the Glaxo foreign affiliates, there are
other primary manufacturers of ranitidine in other countries, and
they supply it to generic manufacturers in Canada and elsewhere.
These Canadian generic manufacturers operate in competition with
the Appellant, selling finished product into the Canadian market.
The Appellant has pleaded that the appropriate method by which to
determine the transfer price for purposes of the Act is
the resale price method; the Respondent says it is the comparable
uncontrolled price (CUP) method, or alternatively, the cost-plus
method, that should be used. Each party has produced many
thousands of documents, and there have been weeks of examinations
for discovery. The trial will not take place before the end of
this year. All this is said simply to put in context the motion
that is now before me.
[2] The Respondent now moves for an
Order under subsection 231.6(8) of the Act. If granted,
the Order would have the effect of prohibiting the Appellant from
introducing at the trial any of a large body of documents, as
well as certain unspecified (and perhaps indefinable) oral
evidence. I was told on the hearing of the motion that there are
some two hundred documents that both parties agree would be
covered by the Order, and that there are perhaps as many as
40,000 additional documents that the Respondent submits would
also be covered by it. Neither party attempted either to specify
or to quantify the oral evidence that the Order would cover, nor
do I know of any practicable way in which that could be done.
[3] The audit of Glaxo which gave rise
to these reassessments began in 1993. One of the major issues
with which Mr. Tom Burkimsher, the Minister's auditor, was
concerned was the transfer price at which the Swiss affiliate
sold ranitidine to the Appellant. He proposed to test that price
by the CUP method. On October 14, 1994, he asked Mr. Ray Willis
of Glaxo to furnish him with certain information. His note of
that request reads:
1) Has Glaxo,
either here in Canada or elsewhere, ever performed any
comparative analyses of ranitidine to the ranitidine that is used
by the generic drug companies or any ranitidine available on the
open market?
2) If the
answer to 1) above is yes, please provide those analyses.
[4] There was a certain amount of
discussion back and forth between Mr. Burkimsher and Mr.
Willis over the next several months, but by March 1995, Mr.
Burkimsher had not received a response to this request. As the
1990 taxation year was going to be treaty-barred at the end of
June, Mr. Burkimsher served two requirements on Glaxo, one
under section 231.2 requiring the production of domestic based
documents and information, and the other under section 231.6
requiring the production of foreign-based documents and
information. It is only the latter that is relevant to the issue
before me on this motion.
[5] Before going further, I should set
out in full the text of section 231.6 of the Act.
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231.6(1) For the purposes of this section,
"foreign-based information or document" means any
information or document that is available or located
outside Canada and that may be relevant to the
administration or enforcement of this Act, including
the collection of any amount payable under this Act
by any person.
231.6(2) Notwithstanding any other provision of
this Act, the Minister may, by notice served
personally or by registered or certified mail, require that
a person resident in Canada or a non-resident person
carrying on business in Canada provide any foreign-based
information or document.
231.6(3) The notice referred to in subsection (2)
shall set out
(a) a
reasonable period of time of not less than 90 days for the
production of the information or document;
(b) a
description of the information or document being sought;
and
(c) the
consequences under subsection (8) to the person of the
failure to provide the information or documents being
sought within the period of time set out in the notice.
231.6(4) The person on whom a notice of a
requirement is served under subsection (2) may, within 90
days after the service of the notice, apply to a judge for
a review of the requirement.
231.6(5) On hearing an application under
subsection (4) in respect of a requirement, a judge may
(a)
confirm the requirement;
(b)
vary the requirement as the judge considers appropriate in
the circumstances; or
(c) set
aside the requirement if the judge is satisfied that the
requirement is unreasonable.
231.6(6) For the purposes of paragraph
(5)(c), the requirement to provide the information
or document shall not be considered to be unreasonable
because the information or document is under the control of
or available to a non-resident person that is not
controlled by the person served with the notice of the
requirement under subsection (2) if that person is related
to the non-resident person.
231.6(7) The period of time between the day on
which an application for review of a requirement is made
pursuant to subsection (4) and the day on which the review
is decided shall not be counted in the computation of
(a) the
period of time set out in the notice of the requirement;
and
(b) the
period of time within which an assessment may be made
pursuant to subsection 152(4).
231.6(8) If a person fails to comply substantially
with a notice served under subsection (2) and if the notice
is not set aside by a judge pursuant to subsection (5), any
court having jurisdiction in a civil proceeding relating to
the administration or enforcement of this Act shall,
on motion of the Minister, prohibit the introduction by
that person of any foreign-based information or document
covered by that notice.
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231.6(1) Pour l'application du présent
article, un renseignement ou document étranger
s'entend d'un renseignement accessible, ou d'un
document situé, à l'étranger, qui
peut être pris en compte pour l'application ou
l'exécution de la présente loi, y compris
la perception d'un montant payable par une personne en
vertu de la présente loi.
231.6(2) Malgré les autres dispositions de
la présente loi, le ministre peut, par avis
signifié à personne ou envoyé par
courrier recommandé ou certifié, exiger
d'une personne résidant au Canada ou d'une
personne n'y résidant pas mais y exploitant une
entreprise de fournir des renseignements ou documents
étrangers.
231.6(3) L'avis doit:
a)
indiquer le délai raisonnable, d'au moins 90
jours, dans lequel les renseignements ou documents
étrangers doivent être fournis;
b)
décrire les renseignements ou documents
étrangers recherchés;
c)
préciser les conséquences prévues au
paragraphe (8) du défaut de fournir les
renseignements ou documents étrangers
recherchés dans le délai ci-dessus.
231.6(4) La personne à qui l'avis est
signifié ou envoyé peut, dans les 90 jours
suivant la date de signification ou d'envoi, contester,
par requête à un juge, la mise en demeure du
ministre.
231.6(5) À l'audition de la
requête, le juge peut:
a)
confirmer la mise en demeure;
b)
modifier la mise en demeure de la façon qu'il
estime indiquée dans les circonstances;
c)
déclarer sans effet la mise en demeure s'il est
convaincu que celle-ci est déraisonnable.
231.6(6) Pour l'application de
l'alinéa (5)c), le fait que des
renseignements ou documents étrangers soient
accessibles ou situés chez une personne
non-résidente qui n'est pas
contrôlée par la personne à qui
l'avis est signifié ou envoyé, ou soient
sous la garde de cette personne non-résidente, ne
rend pas déraisonnable la mise en demeure de fournir
ces renseignements ou documents, si ces deux personnes sont
liées.
231.6(7) Le délai qui court entre le jour
où une requête est présentée
conformément au paragraphe (4) et le jour où
il est décidé de la requête ne compte
pas dans le calcul:
a)
du délai indiqué dans l'avis
correspondant à la mise en demeure qui a
donné lieu à la requête;
b)
du délai dans lequel une cotisation peut être
établie conformément au paragraphe
152(4).
231.6(8) Si une personne ne fournit pas la
totalité, ou presque, des renseignements ou
documents étrangers visés par la mise en
demeure signifiée conformément au paragraphe
(2) et si la mise en demeure n'est pas
déclarée sans effet par un juge en
application du paragraphe (5), tout tribunal saisi
d'une affaire civile portant sur l'application ou
l'exécution de la présente loi doit, sur
requête du ministre, refuser le dépôt en
preuve par cette personne de tout renseignement ou document
étranger visé par la mise en demeure.
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The precise wording of the requirement is also important. It
reads:
Hand Delivered
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Glaxo Canada Inc.
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7333 Mississauga Road North
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Mississauga, Ontario
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L5N 6L4
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Mississauga D.O.
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and
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P.O. Box 6000
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Michael McTeague
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77 City Centre Dr.
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Being an Officer of
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Mississauga, Ont.
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Glaxo Canada Inc.
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L5A 4E9
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March 16, 1995
Dear Mr. McTeague;
Pursuant to subsection 231.6(2) of the Income Tax Act,
you are required to provide the following foreign-based
information or documents by June 15, 1995:
i) All comparative and
other studies (for tax purposes or for any other purposes) on
ranitidine hydrochloride produced by Glaxochem (PTE) Ltd. in
Singapore, that your company or any of its affiliates or any
other party have undertaken, has in their possession or are aware
of in relation to ranitidine hydrochloride available from other
sources/suppliers. Identify any differences that were found and
state whether any of these differences have an impact on the
active ingredient's clinical effect. State the therapeutic
and clinical significance for each and every difference.
ii) Explanation of how the
differences identified in i) above relate to the pricing of
ranitidine hydrochloride. Provide any analysis done to quantify
the impact on the pricing of ranitidine hydrochloride for each
difference found in i) above.
iii) Any other
scientific/technical differences not cited in i) above that
impact on pricing and the basis for any difference.
iv) Complete, legible copies of all
data/reports/summaries and any other supporting documentation
generated as a result of i) or iii) above. If the documentation
incorporates camera ready type prints or photographs, duplicates
of the original photographs or prints should be provided rather
than photocopies.
To comply with this requirement, you should provide this
information and produce the documents hereby required to Ian
Thompson or Tom Burkimsher of the above District Office who will
attend at your office for that purpose.
Your attention is directed to subsection 231.6(8) of the
Income Tax Act which states that if a person fails to
comply substantially with a notice served under subsection
231.6(2) and if the notice is not set aside by a judge pursuant
to subsection 231.6(5), any court having jurisdiction in a civil
proceeding relating to the administration or enforcement of the
Income Tax Act shall, on motion of the Minister, prohibit
the introduction by that person of any foreign-based information
or document covered by that notice.
Yours truly,
"Barbara Hébert"
Director
Mississauga District Office
of the Department of National Revenue.
Date of Service: ____16.3.95____________
Received by: ______Illegible_________
Officer executing service: _"Tom
Burkimsher"
[6] The Appellant does not dispute
that the requirement under section 231.6 was properly served on
it, nor that it contained all that it was required by the section
to contain. Nor did it make an application to a judge under
subsection 231.6(4) to have the requirement either varied or
set aside, as it could have done. However, only one[1] document was produced
in response to it within the time fixed for compliance. From the
extensive affidavits and cross-examinations that were filed on
the hearing of the motion, it appears that the position taken by
the Appellant's parent company was that it was undesirable to
produce the documents covered by the requirement, for reasons
unrelated to the audit that was taking place. In addition, the
Appellant apparently misconstrued the scope of the requirement,
thinking that what was required by it did not go beyond the scope
of the informal request that had been made earlier by Mr.
Burkimsher.
positions of the parties
[7] The Respondent's position is
simple. The requirement is a valid one, it was neither varied nor
set aside under subsection 231.6(4), and it was not substantially
complied with before the time for doing so expired. There are
thousands of documents that the Respondent says should have been
produced; a printout of the list of them was filed at the hearing
of the motion and it is 8 centimetres thick. Even on the
Appellant's less inclusive reading of the requirement there are
hundreds of documents that were covered by it that were not
produced. The language of subsection 231.6(8) is mandatory, and I
therefore must make the Order that the Respondent seeks,
prohibiting the Appellant from introducing any foreign-based
information or document covered by the requirement at the trial.
Neither I nor the trial judge has any discretion in the matter
once it has been shown that there has not been substantial
compliance.
[8] The Appellant's submissions may be
examined under two broad heads. First, it says that section 231.6
is not capable of being construed and applied in such a way that
it would not deprive the Appellant of its right to a fair hearing
in accordance with the principles of fundamental justice. It is
therefore rendered inoperative by the provisions of paragraph
2(e) of the Canadian Bill of Rights.[2] Second, it argues in
the alternative that the broad language of the requirement must
be read in a restrictive way, in light of the context of the
total history of the dealings between Mr. Burkimsher and the
representatives of the Appellant with whom he dealt in the months
prior to the service of the requirement. Most of the affidavit
evidence, and the cross-examination on those affidavits,
was directed to showing that the Appellant's representatives had
been led to believe that what they were expected to produce in
response to the requirements was any existing comparative
analyses of the Glaxo group's ranitidine and that of other
manufacturers. Counsel also argued that the Respondent was, in
view of the history of those discussions, estopped from asserting
any broader scope to the requirement.
[9] I propose to deal first with the
scope of the requirement. I do not accept the Appellant's
proposition that the various discussions between representatives
of the two parties serve to narrow the scope of the written
requirement. The legislation has been carefully crafted to
provide that the requirement must be in writing, and that it must
set out in writing the subject matter that it covers. It makes
provisions for variation, but only by order of a judge.
Parliament has clearly recognized that the certainty of a written
instrument is necessary to define the scope of such a
far-reaching requirement for documents and information. In my
view, any variation of the terms of the requirement would also
have to be in writing, and would have to express unequivocally
the intention to vary the original document. There is nothing of
that sort in the material before me. For purposes of this motion,
I accept that a taxpayer served with a section 231.6 requirement
could resist an order under subsection (8) if it were shown that
a representative of the Minister had deliberately led the
taxpayer's representative to believe that compliance in whole
or in part would not be required of it, and the taxpayer, relying
on that representation, had then failed to comply. That is not
the situation revealed by the affidavits and the transcripts
filed, however. At most, the affidavits of Mr. Willis and Dr.
Winterborn and the cross-examination of Mr. Burkimsher
establish no more than an assumption on the part of
Mr. Willis that the language of the requirement did not go
beyond the informal request that Mr. Burkimsher had made in
October, 1994. Although the requirement is careless in its use of
language, particularly in the paragraph numbered (iii), it
is quite obvious that it is of greater scope than the October
1994 request. It is understandable that Mr. Willis might have had
difficulty understanding paragraph (iii). However, his proper
course would have been to seek written clarification from Mr.
Burkimsher and, if necessary, bring an application to vary the
requirement under subsection (4), with a view to having more
precise language substituted. Not having done that, the Appellant
must live with the reasonable meaning of paragraph (iii). It has
no licence simply to ignore it.
[10] I turn now to the scope of the
requirement. The information and documents required to be
produced are described in four separate paragraphs, and I shall
consider them separately. Before doing so, though, I would make
the observation that the drafting of the document leaves much to
be desired. Considering that the requirement was written by the
Minister, and that the consequences of non-compliance by the
taxpayer are far-reaching, it should be read contra
proferentem.
[11] The first paragraph refers initially to
comparative and other studies of ranitidine produced by the Glaxo
affiliate in relation to ranitidine available from other sources;
it then requires that "differences" be identified, and
it requires specific information about those differences. It is
impossible to give any meaning to the word "other" as
it appears in the first sentence, as all the first part of the
sentence is qualified by the words "in relation to
ranitidine hydrochloride available from other
sources/suppliers" at the end of that sentence. This and the
reference in the following sentences to "differences",
lead me to conclude that paragraph (i) should not be read as
requiring any studies other than studies that compare Glaxo
ranitidine to ranitidine from other sources, and the particulars
described of any differences that those studies have
identified.
[12] The second paragraph is limited in its
effect by the references in it to "the differences
identified in (i)". It, too, is limited to explanations
relating to the differences between Glaxo ranitidine and
ranitidine from other sources, as identified in the comparative
studies referred to in paragraph (i).
[13] Paragraph (iii) refers to "Any
other scientific/technical differences not cited in (i) above
that impact on pricing and the basis for any difference".
When read in context, this can only mean documents that provide
evidence of, or other knowledge of, scientific differences or
technical differences between Glaxo ranitidine and other
ranitidine that were known to Glaxo or its affiliates, other than
the comparative studies covered by (i), together with any
knowledge as to how those differences affect the relative prices
of Glaxo ranitidine and other ranitidine. I do not think that
(iii) can be construed as taking in all those documents that, if
read together, would tend to show that there are scientific or
technical differences between Glaxo ranitidine and ranitidine
from other sources. If that were intended then it should have
been expressed more precisely, perhaps by specifying all those
documents that contain information as to scientific or technical
properties of Glaxo ranitidine, and the same in relation to
ranitidine from other sources. It may be that the language
actually used adds little or nothing to that specified in
paragraph (i) insofar as documents are concerned. However, it
might cover knowledge in the possession of one or more employees
of Glaxo affiliates. I am not prepared to read it as covering all
those documents that, if read together, would reveal
"differences ... that impact on pricing". As
I have said, ambiguities in the requirement are to be
interpreted restrictively.
[14] Paragraph (iv) contains no additional
substantive requirement.
[15] The parties recognized during the
hearing of the motion that it would not be possible for me to
determine as to each of the disputed documents, of which there
are thousands, whether it falls within the scope of the
requirement. I have examined the descriptions of the documents
that appear in the exhibits to the affidavits filed. With few
exceptions, they do not give sufficient information for me to be
able to say whether they are covered by the requirement. It will
be up to the Appellant in light of these Reasons, and subject of
course to any variation on appeal, to determine what documents it
proposes to adduce in evidence, and it will be up to the
Respondent to identify which of those she says come within the
ambit of the requirement and so cannot be introduced by the
Appellant at trial. Only then can there be an adjudication as to
those that are in dispute.
[16] I turn now to the Appellant's
argument invoking paragraph 2(e) of the Canadian Bill
of Rights which reads:
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2. Every
law of Canada shall, unless it is expressly declared by an
Act of the Parliament of Canada that it shall
operate notwithstanding the Canadian Bill of Rights,
be so construed and applied as not to abrogate, abridge or
infringe or to authorize the abrogation, abridgment or
infringement of any of the rights or freedoms herein
recognized and declared, and in particular, no law of
Canada shall be construed or applied so as to
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2. Toute
loi du Canada, à moins qu'une loi du Parlement
du Canada ne déclare expressément qu'elle
s'appliquera nonobstant la Déclaration
canadienne des droits, doit s'interpréter et
s'appliquer de manière à ne pas
supprimer, restreindre ou enfreindre l'un quelconque
des droits ou des libertés reconnus et
déclarés aux présences, ni à en
autoriser la suppression, la diminution ou la
transgression, et en particulier, nulle loi du Canada ne
doit s'interpréter ni s'appliquer comme
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(e)
deprive a person of the right to a fair hearing in
accordance with the principles of fundamental justice for
the determination of his rights and obligations.
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e)
privant une personne du droit à une audience
impartiale de sa cause, selon les principes de justice
fondamentale, pour la définition de ses droits et
obligations;
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[17] The Appellant asserts that subsection
231.6(8) intrudes upon the right of an Appellant in this Court to
a fair hearing in accordance with the principles of fundamental
justice, in that an Order made under that subsection deprives it
of the right to adduce relevant evidence that would otherwise be
admissible, while leaving it open to the Respondent to adduce
that same evidence, or any part of it. Indeed, the Respondent is
left free to adduce part of the evidence covered by the Order
selectively, relying on that which is helpful to her case and
omitting relevant evidence that qualifies or contradicts the part
that she has chosen to introduce. For example, if the documents
that were the subject of an Order included two opinions of a
scientist as to the quality of the product in issue, the second
of which contradicted or qualified the first on the basis of an
error in the original opinion, the Respondent could rely at trial
on the first opinion and it would not be open to the Appellant to
put the second opinion before the Court. This, it is argued,
would deprive the Appellant of a fair hearing in accordance with
the principles of fundamental justice. Counsel for the Appellant
also posited situations in which the taxpayer might find itself
subject to an Order under subsection (8) without having had the
opportunity to comply with the requirement that had been served
on it. For example, the officer of the taxpayer who was served
might, it was suggested, put the document in his briefcase and
then board an airplane that crashed before reaching its
destination. In such a case the time for compliance could run out
before any other representative of the taxpayer knew of the
existence of the requirement. Similarly, I suppose, a taxpayer
that had done all that was necessary to comply with a requirement
might be frustrated in its efforts to do so by the loss of the
documents in transit on the eve of the last day for
compliance.
[18] Counsel for the Respondent took the
position that subsection (4) is sufficient to ensure that a
taxpayer's right to a fair hearing will not be infringed. If a
requirement is too onerous in its terms, then it can be modified
by a judge upon application by the taxpayer. She accepted,
however, as she had to do, that once the 90-day period referred
to in subsection (4) has expired, there is no discretion in
either the judge before whom a motion under subsection (8) is
brought or the trial judge to relieve the taxpayer of the effects
of its non-compliance, no matter what the surrounding
circumstances might prove to be. On the plain words of the
Act, the judge hearing an application for an Order under
subsection (8) can only decide whether there has been substantial
compliance; if there has not, then the judge must make the Order
sought, no matter what circumstances may have given rise to the
failure to comply. Once the Order has been made, the trial
judge's hands are tied; she has no power to permit the Appellant
to adduce any evidence that is covered by the Order under any
circumstances.
[19] From the foregoing, it is apparent that
section 231.6 may, in some circumstances, give rise to an
infringement of a taxpayer's right to a fair hearing in
accordance with the principles of fundamental justice to
determine the incidence of taxation upon it. That does not end
the inquiry, however. At the hearing of the motion, counsel for
both parties made submissions as to whether, applying a test
analogous to section 1 of the Canadian Charter of Rights and
Freedoms, it could be said that the impact of section 231.6
on the right to a fair hearing was justifiable in a free and
democratic society.[3] Before considering that aspect of the case, however, I
intend to deal with the matter of appropriate remedies to be
applied in cases involving infringement of the Bill of
Rights.
[20] In MacBain v. Lederman,[4] the Federal Court of
Appeal accepted the Appellant's submission that the provisions of
the Canadian Human Rights Act[5]governing a hearing by the Human
Rights Tribunal had the effect of infringing his right under
paragraph 2(e) of the Bill of Rights. In considering the
remedy to be applied, Heald J.A. reviewed the cases in which the
Supreme Court had applied the Bill of Rights in the
context of legislation that it had found to be defective, and
concluded that the remedies that may be applied where a statutory
provision offends against the Bill of Rights must be
limited to that which is required in order to remedy a breach
arising out of the specific facts of the case before the Court.
The Bill of Rights confers no broad powers on the Court to
fashion remedies, including declarations of invalidity of
legislation, of the kind that are found in the Charter; in
effect, courts are authorized under the Bill of Rights to
do no more than find a breach of its protections in the
circumstances of the case before them and then "... remedy
the constitutional shortcomings of the statute in the
circumstances of this case".[6] The emphasis is that of Heald J.A. From this I
conclude that I have no mandate to find that section 231.6 may
some day, in the hypothetical situations that were addressed in
argument, offend paragraph 2(e), and on that basis find
that it is inoperative. The Appellant in the present case had 90
days in which it could have applied under subsection (4) to have
the Requirement modified, or even vacated. I did not
understand Mtre. Barsalou to assert that anything occurring up to
this point has infringed on the Appellant's paragraph 2(e)
rights. His concern is that I, on this motion, and the trial
judge at a later date, have no discretionary power to prevent an
injustice that may arise at trial.
[21] Mtre. Barsalou accepted during his
argument the need for a provision such as section 231.6 to
prevent abuse in the context of transfer pricing disputes. It is
obvious, I think, that without it there would be good reason to
fear that the Minister's assessors would not have access to all
the documents and information that they need in order to arrive
at appropriate assessments in such cases. The potential to secure
huge economic advantage for a multinational group of companies by
moving profit away from high tax countries to low tax or no tax
countries needs no explanation. Nor does the temptation to keep
records and other evidence that would be unhelpful to the
taxpayer in countries where the taxing authorities cannot reach
them, while producing to the assessor conducting an audit only
those that are helpful to the taxpayer. The real issue that must
be decided is whether the absence of any discretion on the part
of either the judge hearing a motion under subsection (8) or the
trial judge can be sustained. In my view it cannot, for the
reason to which I have alluded above. If I were to make the Order
sought in the absolute terms that subsection (8) contemplates,
then the trial judge would be powerless to prevent an abuse of
the kind I have described, giving rise to the potential for an
unfair hearing. The Respondent put evidence before me in the form
of an affidavit of Mr. Ernewein to establish the need to have a
provision such as section 231.6 in the Act. However, there
is no evidence to suggest that the section could not properly
fulfil its purpose if it left a residual discretion with the
trial judge to admit evidence that would otherwise be excluded,
where it can be shown that the evidence is required in order to
prevent injustice. Nor did counsel make any such submission in
argument. I understood her position to be simply that, in the
view of Parliament, no such discretion is required. That is a
view with which I respectfully must disagree. I conclude that the
section as it stands may prove in any case to be unnecessarily
obtrusive, in that it may be impossible in certain circumstances
for the trial judge to prevent injustice.
[22] What, then, is the appropriate remedy
to apply on the facts of this specific case? The United States
Congress has enacted similar legislation.[7] It provides for a general prohibition
on the introduction of foreign-based documents covered by a
formal document request, but subject to a general exception if
the taxpayer can show reasonable cause for the failure to produce
the required documents. In the present case, however, there is no
issue of reasonable cause. The Appellant made virtually no
attempt to comply with the requirement, for its own reasons, or
those of its parent. There is no need for a reasonable cause
exception in the present case. All that is required is that the
trial judge have the power to permit the Appellant to proffer
evidence in rebuttal that would otherwise be excluded by section
231.6, if that is necessary to prevent injustice. The Order will
therefore provide that the Appellant is prohibited from
introducing in this proceeding, at the trial or otherwise, any
foreign-based information or document covered by the notice
delivered to it pursuant to section 231.6 of the Act on
March 16, 1995, otherwise than as rebuttal evidence, or in
cross-examination, and only with leave of the trial judge. Costs
of the motion will be in the cause.
Signed at Ottawa, Canada, this 3rd day of June, 2003.
J.T.C.C.
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