Citation:
2016 TCC 217
Date: 20160929
Docket: 2013-2939(IT)G
BETWEEN:
SUPERIOR
PLUS CORP.,
Appellant,
and
HER
MAJESTY THE QUEEN,
Respondent.
REASONS
FOR ORDER
Hogan J.
I. OVERVIEW
[1]
The Minister of National Revenue (the “Minister”) disallowed the use of certain tax
attributes by the Appellant on the basis that, among other reasons, the general
anti-avoidance rule (the “GAAR”) applied to
preclude their use. In so doing, the Minister alleged the existence of a
general policy in the Income Tax Act
(the “Act”) against the transfer of
losses between arm’s-length parties. The Appellant disputed whether the
Minister actually relied on the existence of such a policy in the assessment
and sought the production of certain documents and answers to certain questions
dealing with what was prepared in the context of the audit of the Appellant, or
considered by the Minister’s officials who were charged with that audit, or
consulted regarding the application of the GAAR. The Minister refused such
production on the basis that the individual views of the Minister’s officials
and the general mental process of the Minister in assessing were irrelevant.
[2]
I granted, in part, the Appellant’s motion on
the basis that, at the very least, the information sought could aid the
Appellant in establishing that the Minister had not relied solely on the
alleged policy or had not concluded that the impugned transactions clearly
frustrated this policy.
As individual Canada Revenue Agency (“CRA”) and
Department of Finance Canada (“Finance”) officials
whose views could have informed the Minister’s decision to invoke the GAAR could
be relevant to this determination, I ordered that such information be disclosed
in my Order dated 22 May 2015 (the “2015 Order”).
[3]
Following the dismissal of the appeal from the
2015 Order,
the Respondent, in mid-November, produced unredacted copies of the documents at
issue (the “Produced Documents”). On
10 December 2015, pursuant to the 2015 Order, the Respondent
provided answers to the questions whose refusal had been ruled improper. On
14 December 2015, counsel for the Appellant wrote to counsel for the
Respondent to express their view that the answers so provided were insufficient
and improper responses. By reply dated 17 December 2015, the
Respondent’s counsel affirmed that they were satisfied that the answers were
proper and suggested that the Appellant pose follow-up questions at the second
round of discovery.
[4]
The facts relevant to the imposition of the
distribution tax (the “SIFT tax”) on
specified investment flow-through trusts (“SIFTs”)
have been adequately summarized in the 2015 Reasons. They also contain an
explanation of the tax‑deferred conversion methods provided for by the July
2008 amendments to the Act (the exchange method and the distribution method),
and of the plan of arrangement between the Superior Plus Income Fund (the “Fund”) and Ballard Power Systems Inc. (“Old Ballard”).
[5]
In summary, the Minister reassessed the
Appellant on the basis that it was unable to use the favourable tax attributes
that had previously accrued to Old Ballard on the grounds that either:
(a) the
unit holders constituted a group of persons who acquired control of the
Appellant under the plan of arrangement, thereby triggering the application of
the so‑called streaming restrictions (the “Streaming Restrictions”)
under subsections 111(4), 111(5), 37(6.1) and 127(9.1) of the Act; or
(b) the GAAR
applied because the conversion was structured to circumvent the Streaming
Restrictions in an abusive manner.
[6]
The motion brought by the Appellant and the Respondent
before this Court in February 2015, which led to the 2015 Order, was
occasioned by questions arising out of the examination for discovery of the
Respondent’s nominee, Ms. Salimah Jina, in September 2014 (the “September Discovery”).
[7]
As noted above, I granted, in part, the
Appellant’s motion, ordering the Respondent to answer the large majority of
questions with respect to which the Appellant sought to compel answers. I also
ordered the production of most of the documents sought by the Appellant and the
reattendance of Ms. Jina to answer all proper follow-up questions. This
constituted, in part, the effect of the 2015 Order.
[8]
Following the dismissal of the appeal from the
2015 Order, the Respondent sought to comply with that Order. The Appellant
has brought the motion herein ostensibly because of the failure of the
Respondent to comply.
[9]
The Appellant examined Ms. Jina again in
December 2015 so as to put to her follow-up questions arising out of the
previously refused questions and the disclosed documents. At that examination
(the “December Discovery”), a number of
questions were taken under advisement and subsequently refused in a written
reply. The Appellant has therefore returned to this Court to compel proper
replies by Ms. Jina.
II. POSITIONS
OF THE PARTIES
[10]
In its motion, the Appellant initially sought a
continuation of the discovery of Ms. Jina on the basis that the discovery
had been adjourned to seek this Court’s directions on whether the Appellant
could probe the mental process of the Minister. The Appellant submitted that it
was entitled to continue its questioning so as to broach new lines of inquiry
in any further examination of Ms. Jina.
[11]
Following the oral hearing, the Appellant gave
notice that it was no longer seeking this relief.
[12]
As a result, the Appellant’s principal position
is that the questions that are currently the subject of dispute are all proper
follow-up questions arising out of the answers provided and documents produced
by the Crown pursuant to the 2015 Order.
[13]
In the alternative, the Appellant seeks leave
under subsection 93(1) of the Tax Court of Canada Rules (General
Procedure) (the “Rules”) to conduct a second
examination for discovery of Ms. Jina.
[14]
The Appellant also sought the production of the
documents described at paragraph 1 of its Notice of Motion. The Appellant
alleged that the Crown had repeatedly interpreted the 2015 Order in an overly
narrow manner so as to thwart the effective discovery of Ms. Jina, such
that only full production would move the discovery process along in an
effective manner. However, the Appellant has now informed the Court that it no
longer seeks this relief.
[15]
Finally, the Appellant seeks costs of its motion
awarded on a solicitor-client basis. It submits that an analysis of the factors
under subsection 147(3) of the Rules
leads to a conclusion that it is so entitled, even if the Crown has not engaged
in egregious or scandalous conduct.
[16]
The Respondent, in her oral and written
submissions, has opposed the motion on the basis that the disputed questions do
not logically and necessarily flow from the answers previously provided. By
this, the Respondent means that certain follow‑up questions could have been
or were in fact posed to Ms. Jina at the September Discovery. The
Respondent therefore submits that the questions at issue are not proper
follow-up questions, as they flow from information available to the Appellant
as of the September Discovery or were effectively abandoned by the Appellant
for strategic purposes in the proceedings leading to the 2015 Order.
[17]
The Respondent also submits that certain
questions posed and documents sought relate to internal communications of
Finance that are irrelevant and not considered as falling within the ambit of
the 2015 Order. I take it that the Respondent’s position is that these
questions embark on a new line of inquiry that seeks to go beyond the narrow
focus of the 2015 Order, and that this new line of questioning will lead
to the obtaining of irrelevant information having nothing to do with the
process of the Minister in assessing the Appellant.
[18]
The Respondent finally submits that certain of
the documents in question are protected as cabinet confidences, relying on the
decision of the Supreme Court of Canada in Babcock for relevant principles in
this regard.
III. ANALYSIS
A. Follow-Up Questions and General
Principles
[19]
Determining whether a certain question is proper
follow‑up is necessary if the principal examination for discovery of the
nominee is otherwise complete. This is because the examining party would
otherwise be free to pursue new lines of inquiry that have not been dealt with
in the previous examination. Where an examination has concluded, subject to
proper follow-up questions, the examining party is confined to posing proper
questions arising from the answers provided following the end of the
examination.
Absent leave being granted under subsection 93(1) of the Rules, the
examining party is no longer able to pursue a new line of inquiry unless it is
through a question arising out of information provided to fulfil an
undertaking, to correct or clarify a previous answer, to answer a question
taken under advisement or to answer a question to which an objection had been
made.
If the question whereby it is sought to open this new line of inquiry does not
arise out of the answer given, then the door to that line of inquiry is closed
to the examining party.
[20]
Even if a question arises from the answer given,
the Court must still determine that the question is proper in the circumstances
before it will compel the nominee to answer. Whether a question is proper is a
discretionary determination requiring that a given question be relevant and arise
out of the answer given.
Those however, are not the only considerations. As noted by the Federal Court
of Appeal, the “[t]ask of distinguishing proper
questions from improper ones requires consideration of the factual and
procedural context of the case, informed by an appreciation of the applicable
legal principles.”
[21]
A relevant consideration in this determination
is whether the question could have been posed in the earlier examination. However, the case law shows
that the fact that a question “could” have been
posed in the prior examination does not necessarily make it improper. This can be contrasted with
the contrary holding in Seabreeze Electric, where the disputed
follow-up questions arose out of undertakings given by a cooperative party and
could have been posed without any reliance on the answers to undertakings.
[22]
In this case, the Appellant was able to ask some
of its questions in the September Discovery but subsequently sought to pose those
questions, or substantially similar ones, in the December Discovery as proper
follow-up. I have highlighted examples in the context of Ontario civil
litigation where follow‑up questions that could have been posed at the
original examination were considered not to be “proper”.
There are cases going the other way where different circumstances led to a
different conclusion on whether a question was proper. In either instance, the
disputed questions arose logically out of the responses of the examined party
but could have been posed at the principal examination for discovery, without
having the nominee provide the answer subsequently.
[23]
Instances where the Court has found such
questions to still be proper and has compelled an answer include instances where
the representative of the taxpayer had provided contradictory and incomplete
information such that the Crown felt it necessary to demand a new nominee. In
such a case, Justice Woods determined that questions that could have been asked
at the examination of the first representative were still proper and allowed to
be posed to the new representative as follow-up questions given the procedural
context of the case, for which the examining party should not have been
faulted.
[24]
In Teranet Inc. v The Queen, Justice Miller refered to Blais
v Toronto Area Transit Operating Authority in which are outlined the
following principles that I find to be a useful guide as to the factors that I
should consider in exercising my discretion to compel or not compel the
Respondent to answer the Refused Questions.
•
As a general principle
a party giving undertakings or answering refusals may be required to reattend
to complete the discovery by giving the answers under oath and answering
appropriate follow up questions. A party being examined may not compel the
examining party to accept answers in writing simply by refusing to answer
questions or by giving undertakings.
•
On the other hand, the
court will not automatically make an order for follow up discovery if it serves
no useful purpose. Examples in which an order may not be appropriate would be
cases in which a full and complete written response has been given to a simple
question, in which the answer demonstrates that the question was not relevant
or in which the parties have agreed that written answers will suffice.
•
The court will
generally make such an order if it appears necessary in order to fulfill the
purposes of discovery. Examples of situations in which an order would be
appropriate are situations in which the answers appear cursory or incomplete,
where they give rise to apparently relevant follow up questions that have not
been asked, if newly produced documents require explanation, or the discovery
transcript supplemented by the answers will not be understandable or useable at
trial.
•
Even if answers do
appear to require follow up, the court has discretion to order answers in
writing or to decline to order further examination where it appears the cost or
the onerous nature of what is proposed outweighs the possible benefit or where
for any other reason it appears unjust to make such an order. Such discretion
should be exercised only if the interests of justice require it.
[25]
The Court therefore retains discretion under
section 110 of the Rules to determine whether to compel the party to
answer and to reattend for follow-up questions. In so doing, the Court may take
into account the above considerations with regard to whether the question
should have been posed at the original examination, whether the cost or the
onerous nature of answering the question outweighs the possible relevance of
the answer, or whether, for any other reason, it appears unjust or contrary to
the goals and purposes of the discovery process to compel an answer. As noted by the Supreme Court
of Canada in Hryniak,
“applying rules of court that involve discretion ‘includes . . . an
underlying principle of proportionality which means taking account of the
appropriateness of the procedure, its cost and impact on the litigation, and
its timeliness, given the nature and complexity of the litigation’”.
[26]
The Respondent has highlighted the decision of
Justice Potts of the Ontario Court (General Division) in Muslija in support of its contention
that the Appellant’s follow-up questions are improper because they could have
been asked at the September Discovery. I would note that the case before Justice
Potts involved a moving party who had unilaterally adjourned the examination
for discovery of the other party’s nominee to compel an answer to a disputed
question. That question was found to have been properly refused, but the moving
party later sought to continue the examination of the nominee. Justice Potts
concluded that the principal examination had finished and that there were no
grounds to grant leave for a second examination. That decision thus speaks to
identifying when the principal examination for discovery has concluded and when
leave may be granted under subsection 93(1) of the Rules for a second
examination for discovery. It does not support the Respondent’s contention that
any questions arising out of that which was provided to the Appellant pursuant
to the 2015 Order are categorically excluded from being proper follow-up simply
because they could have been asked at the September Discovery.
[27]
The principles arising out of Direct Source
Special Products Inc. v Sony Music Canada Inc. are similarly clear. In Direct
Source, the plaintiff unilaterally adjourned examination for discovery
under the Federal Courts Rules equivalent of section 108 of the
Rules after less than two hours of examination. The full day had been
peremptorily set for examination, and the prothonotary before whom the motion
was argued concluded that the defendants’ nominee had been cooperative with the
plaintiff’s counsel. He found that the examination for discovery had concluded
upon the adjournment of the examination. Justice Heneghan of the Federal Court
upheld the decision on the basis that it was not “clearly
wrong” insofar as it was a discretionary decision based upon a factual
finding by a case management prothonotary and therefore to be given significant
deference on appeal.
This decision however, as does Muslija, speaks to the question of
whether the Appellant may embark on new lines of inquiry in examining Ms. Jina,
not whether the refused questions before me now are proper follow-up.
[28]
Finally, I would note my general observations on
the procedural and factual circumstances giving rise to this motion, insofar as
to do so is proper for the exercise of my discretion under section 110 and
subsection 93(1) of the Rules and for my award of costs. I note that this
motion originated from the improper but good‑faith refusal to answer
certain questions at the September Discovery, based on a principled stance by
the Respondent that was unfortunately incorrect. These circumstances, while not
rising to the level of egregiousness seen in MIL, also, in my view,
distinguish this case from those in which an examining party seeks “to test a theory, possibly developed since the examination,
to which the answers may or may not have contributed”.
[29]
In my analysis of the parties’ representations
on the merits of the refused questions, I have been guided by the need to
balance the nature of the appeal, the potential relevance of the information
sought, the impact that full and responsive answers to the questions posed may
have on the length of the discovery process, the information obtained to date
by the Appellant in support of its position and a host of other similar
considerations that must be taken into account in the exercise of my discretion
to compel the Respondent to answer the questions.
[30]
The transactions at issue in this appeal were
fully disclosed in public documents, which were subject to a very high level of
disclosure under applicable securities law. The Appellant has also received a
vast number of documents from the Respondent. In this context, the parties
should to a large extent be able to agree on a large number of the material
facts. In my opinion, this should have facilitated the discovery process.
Unfortunately, it was all overshadowed by the inability of the parties to come
to an agreement on what is and is not potentially relevant in the history of
the audit and assessment process. As a result, the parties appear to have
adopted a more combative approach, which in my opinion will lead to more delays
and costs for both parties. The parties appear to be engaged, yet again, in a
full-fledged pugilistic encounter. The history of heated procedural skirmishes
in this matter appears to have prevented calmer discourse and useful
cooperation from gaining a toehold in the pre‑trial proceedings. As
motion judge, it is my duty to set this matter on a better course, having
regard to the fact that the information sought in this motion is, in my view,
of very limited importance. I trust that the parties will now turn their
attention to working on an agreed statement of facts.
[31]
The Appellant has raised a point that it views
as the distinguishing feature of this appeal – that an amendment to the Act
was made, supposedly using the transaction at issue in this appeal as a
template with a view to denying tax benefits arising on a prospective basis.
The Appellant says that broader leeway to explore the process involving the
enactment of that amendment is necessary in light of this exceptional
circumstance and the Minister’s invocation of the GAAR.
[32]
I disagree that this is so exceptional a
circumstance as to render Finance’s internal deliberations in enacting the
amendment relevant to whether the Minister assumed the existence of the policy
at issue or whether the policy actually does exist in the Act. It is
certainly not exceptional for Finance to react to information received from the
Minister on tax‑planning strategies encountered during audits. The
reasons why Finance decided to propose a prospective amendment for
Parliamentary consideration do not establish the Minister’s assumptions in
reassessing the Appellant under the GAAR. Any impact that the amendment has on
the inquiry in that regard will likely be determined by principles outlined in
case law.
[33]
The Appellant highlights the fact that the
documents disclosed to date show that there was an ongoing debate among senior
CRA officials as to whether or not the GAAR could be invoked to deny the tax
benefit received by the Appellant. I surmise that the Appellant wishes to
advance this as evidence to show that the policy underlying the provisions that
the Minister is purported to have assumed were abused was not sufficiently
clear to warrant the GAAR assessment. This is why Finance sought to amend the
Act, partly on the basis of representations from the Minister. The
determination of policy is however a question of statutory interpretation for
the trial judge, who will have to put the legislative amendment in its proper context, having regard to principles outlined in the case law
and the submissions of the Respondent at trial on the existence of the policy.
It is, at best, unclear to me how much more the Appellant can hope to find in
the files of Finance that would help it refute the anticipated case to be made
by the Respondent on this point.
[34]
As discussed more fully in my treatment of
individual questions, I am however of the view that the Appellant’s submissions
conflate the Minister’s awareness of Finance’s deliberations in deciding how to
deal with the issue raised by the Appellant’s conversion and the actual
deliberations undertaken by Finance. It seems to me that the internal
communications or deliberations in the halls of Finance to which the Minister
was not privy could not be relevant to the Minister’s mental process in
auditing and assessing the taxpayer. Nor could they be relevant to ascertaining
Parliamentary intent for the purposes of the GAAR analysis at trial.
[35]
Since I have concluded that the Respondent does
not need to answer the questions that are irrelevant, they could not form the
basis for a successful application under subsection 93(1) of the Rules for
leave to conduct a second examination. Insofar as the Appellant might seek to
examine Ms. Jina a second time on questions that I have determined to be
irrelevant and improper follow-up questions, leave to do so is refused. The
only questions that the Respondent must answer are those outlined in this
Order.
[36]
The transactions at issue in this appeal, while
difficult for a lay person to assess, are not that complex in the eyes of this
Court. The principles that the Court must apply in determining the validity of
a GAAR assessment have become well established in the seminal decisions of the
higher courts. In my opinion, this appeal appears more than ripe for hearing.
In this context, it is hard for me to imagine how the Appellant’s case will be
prejudiced if the Respondent is not compelled to answer the questions that I
have identified as having been properly refused or properly answered. In my
opinion, the foregoing also justifies my decision to not allow further follow‑up
questions arising from the answers given pursuant to this Order to be asked without
leave of the Court.
[37]
I now turn to examining the disputed questions
in light of the 2015 Order and in the context of the September Discovery.
B. QUESTIONS RELATING TO THE
ADAMS-ERNEWEIN E-MAIL CHAIN
[38]
The Appellant asked Ms. Jina to confirm
whether a chain of e-mails, reproduced at Tab 1 of Tab 2.P. of the
Motion Record and presented to Ms. Jina at the December Discovery,
represents the entire chain of e-mails between Mr. Wayne Adams and
Mr. Brian Ernewein, or whether there are further communications
between Mr. Adams and Mr. Ernewein with respect to the subject matter
of these e-mails.
Ms. Jina was also asked to find out if a record exists of the discussions
that occurred between Finance and the CRA Income Tax Rulings Directorate (“Rulings”) with respect to the subject matter in
question.
[39]
The Appellant also asked Ms. Jina to
inquire of Mr. Ernewein regarding what documents or correspondence he may
have with respect to the e-mail chain.
In addition, the Appellant has asked Ms. Jina to ask Mr. Adams why he
identified certain other individuals (Mr. Marc Vanasse,
Mr. Mark Symes and Mr. Yves Moreno) as contacts with
respect to the subject matter of these e‑mails. The Appellant then asked
Ms. Jina to produce any documents at Rulings dealing with such subject
matter
and to follow up with Mr. Vanasse, Mr. Symes, Mr. Moreno and
Mr. David Palamar to determine whether they are aware of any
documents dealing with the subject matter discussed in the e-mails.
[40]
These questions arise out of, and are logically
connected to, the production of the e‑mail dated December 18, 2008 from
Mr. Adams to Mr. Ernewein, as redacted by the 2015 Order. They are
relevant insofar as they go to the same issue as Document 4 did, that being the
facts and circumstances surrounding the pleading of the policy. In the e-mail,
Mr. Adams cites the (at the time proposed) conversion of the Fund into
what is now the Appellant, using an existing corporation, as an example of the
loss-shifting transactions involving income funds that were causing the erosion
of “billions of dollars” from the tax base.
[41]
The Respondent had submitted that a redacted
copy of the e-mail in question had been obtained by the Appellant under the Access
to Information Act
(referred to in these reasons as an “AIA document”)
and that the portions that were unredacted on that copy gave sufficient
information to allow the Appellant to pose these questions at the September
Discovery. The Respondent notes that the Appellant did in fact pose questions
to Ms. Jina at the September Discovery that are similar to those now in
dispute, but that the Appellant did not move with regard to those questions
when bringing its original motion. It is the Respondent’s view that the
Appellant should suffer the consequences of its strategic narrowing of the issues
and should not be permitted to revive under the guise of follow-up questions
previously refused.
[42]
The Appellant submits that the proper prism
through which to view the context of these questions is that the produced
e-mail is essentially a different document from the AIA document because of the
relevant redactions that were made in the latter document. While I agree in
principle that redactions in a document can effectively make it a different
document insofar as the information it conveys is restricted or altered, the
differences between the now produced e-mail and the AIA document version would
only be relevant if a party could not have been reasonably expected to ask the
questions at issue when confronted with the AIA document version. As noted by
the Respondent, the Appellant had asked questions at the September Discovery
that were broadly similar to those upon which it now seeks to move. In my view,
this strongly suggests that these questions do not necessarily arise out of
Document 4.
[43]
This, however, does not end the matter. The
Respondent has demonstrated in her replies to other questions posed at the
December Discovery that she is able to contact the persons needed for the
purpose of providing an answer.
The Respondent, apart from making clear in oral submissions her view that this
matter is ready for trial, has provided no other reason why all of these
requests should be refused. There is no suggestion that they are irrelevant, or
onerous, or constitute a fishing expedition
or are otherwise at variance with the principles I have enunciated above.
Having reviewed the e-mail chain, I would view the subject matter of the e-mail
chain as being characterized by the following taken from Mr. Adams’ e-mail
of December 18, 2008: “[the notification of
Finance of the] revenue loss resulting from the use of unaffiliated
corporations having deductible tax accounts to continue the activities of
income trusts”. I am of the view that information relating to the views
of CRA officials on that subject is relevant to the Minister’s pleading of the
alleged policy.
[44]
In the circumstances of this case, I am inclined
to order answers to Requests 107, 108, 110, 111, and 112.
[45]
In contrast, the Respondent has objected to
Requests 113, 114 and 115 on the additional basis that these requests are
overbroad insofar as they seek both relevant and irrelevant information. I
believe that these concerns do not arise on my view of the subject matter of
the e-mail chain. Furthermore, I do not view the Appellant as being precluded
from asking for responsive documents because it sought and then abandoned its
quest for unredacted relevant documents earlier in this appeal. As these
requests may be relevant to the case that the Appellant is attempting to make
before the trial judge and are otherwise proper, the Respondent should answer
these questions.
C. ROLES OF THE PARTIES TO THE
CHAIN OF E-MAILS OF 5 MARCH 2010
[46]
This category follows up on the production of
Document 20, referred to as such in the 2015 Reasons, which was an e‑mail
from Mr. Ted Cook, a former official at Finance, to Mr. Gérard
Lalonde, one of his Finance colleagues, that is dated March 5, 2010 and which
forwarded an attached chain of e‑mails in which CRA officials were discussing
“Trust Conversions” and which had been provided
to Mr. Cook by Mr. Symes of the CRA. While the Appellant had an AIA
document version of this prior to the 2015 Order, the portion containing the
discussion between the CRA officials had been redacted.
[47]
The Appellant asked Ms. Jina to find out
what the involvement of each participant in the e-mail chain (Mr. Palamar,
Mr. Vanasse, Mr. Moreno, Mr. Prud’homme and Mr. Bisson) was
in the subject matter discussed in that chain.
[48]
It seems clear that the follow-up question arises
from the production of the unredacted document. While the subject line of the
e-mail chain between the CRA officials was not redacted, the content of the
discussion was unavailable to the Appellant at the time of the September
Discovery. The Appellant would have therefore been unaware of the exact content
of the e-mail chain beyond knowing that it could contain representations
communicated by the Minister to Finance relating to the introduction of
paragraph 256(7)(c.1) of the Act. In this situation, I view this
to be a proper set of follow-up questions regardless of whether the Appellant
could or could not have posed these questions in the September Discovery.
D. DISCUSSIONS WITH MR. PALAMAR
[49]
The Appellant asked Ms. Jina to inquire of Mr. Palamar
regarding what records he or Rulings may have about discussions with Finance on
the amendment of paragraph 256(7)(c) of the Act, to produce such
records or to advise of the circumstances under which such records were
destroyed or deleted, as applicable.
[50]
The Appellant submits that these questions are
also proper follow-up to the disclosure of the unredacted e-mail chain of 5
March 2010. I agree and am of the view that these questions should be answered
for reasons substantially similar to those involving the roles of the various
CRA officials involved in the e-mail chain. As noted above, I do not view the
Appellant as being precluded from asking for responsive documents because it
sought unredacted relevant documents earlier in this appeal.
[51]
I would note that the Respondent in her
submissions has raised the potential for documents responsive to this series of
questions to be properly subject to cabinet confidence. My decision cannot be
viewed as dispositive of that issue, as no certificate to that effect has been
presented under section 39 of the Canada Evidence Act. I expect that a timeframe
acceptable to both parties for the review of responsive documents and answers
will be determined following the issuance of these reasons, so as to provide
appropriate time for such certificates to be issued as needed.
E. DISCUSSIONS WITH MR. COOK
[52]
In a similar vein, the Appellant asked Ms. Jina
to inquire of Mr. Cook whether he has documents respecting his discussions
with Rulings, including Mr. Palamar, on the amendment of paragraph 256(7)(c)
generally and Mr. Palamar’s comments in particular. Ms. Jina was also asked
to find out what documents exist within Rulings in respect of the point made by
Mr. Symes to Mr. Cook regarding how the amendments were an incomplete
response to the SIFT loss trading problem,
and to find out as well whether any such documents were destroyed and, if so,
how.
These questions, it is submitted, are proper follow-up to the disclosure of the
unredacted e-mail chain of March 5, 2010, as are the inquiries made
with respect to Mr. Palamar.
[53]
I agree with the Appellant that these are proper
follow-up questions, and would answer similarly to how I answered with respect
to Requests 122-124. While these questions do involve making inquiries of a
former Finance official, they are relatively closely tailored to catch documents
relating to his conversations with Rulings on a particular topic. To the extent
that Request 125 deals with correspondence between Rulings and Mr. Cook or
documents summarizing such conversations, it is proper. The Respondent has
furthermore made no submissions claiming that a disproportionate burden is placed
on her in having to contact Mr. Cook to make these inquiries. As a result,
these requests are proper. As mentioned above, this ruling is in no way
dispositive of the issue of cabinet confidence, should it be properly invoked.
F. OTHER REQUESTS RELATING TO
RULINGS’ CONCERN REGARDING THE AMENDMENT PF PARAGRAPH 256(7)(c)
[54]
The Appellant asked Ms. Jina to inquire of
Mr. Palamar, Mr. Vanasse, Mr. Moreno, Mr. Prud’homme, Mr. Bisson,
and Mr. Symes whether the e‑mail chain of 5 March 2010 as
already produced is the entire chain of e‑mails dealing with Rulings’
concerns that the amendment was an incomplete response by Finance, and to produce all e‑mails
and correspondence dealing with the communication with Finance about paragraph
256(7)(c) not being a complete response to the SIFT loss trading
problem.
Ms. Jina was also asked to inquire of Rulings regarding documents in their
possession dealing with paragraph 256(7)(c) being an incomplete response
to the SIFT loss trading problems and to produce the said documents.
[55]
In addition, the Appellant has asked
Ms. Jina to inquire of Mr. Lalonde, Mr. Wach, and Mr. Isabella
what documents they may have respecting Rulings’ view that the amendment was an
incomplete response to the SIFT loss trading problem.
[56]
For reasons similar to those provided above, I
find that most of these questions are proper follow-up questions and should be
answered. With respect to Request 131, however, I have trouble understanding
how that request, concerning the documents relating to Rulings’ alleged view on
paragraph 256(7)(c.1) that Finance officials had in their possession is
proper. It would produce information that is either in the hands of the
Minister already (and thus discoverable on that basis) or irrelevant as being
information to which the Minister was not privy. While I admit the possibility
that documents to which the Minister was privy but of which no record exists in
the Minister’s files could exist, Request 131 casts too wide a net over
irrelevant and duplicative information in order to gain such potentially
relevant information. It makes broad reference to documents “respecting Rulings’ view”, which I find casts too wide
a net. I view it to be improper.
G. REQUESTS ARISING OUT OF THE 28
NOVEMBER 2011 E‑MAIL
[57]
This question follows up on the production of
Document 21, referred to as such in the 2015 Reasons. That document consisted
of internal Finance correspondence between Mr. Shawn Porter and
Ms. Annemarie Humenuk, one of his Finance colleagues, that is dated
December 21, 2011 and which forwarded an attached chain of e‑mails
involving Ms. Humenuk and other Finance officials who were drafting
submissions to the GAAR committee on the GAAR’s application “relating to loss trading in the context of SIFT conversions”.
While the Appellant had the AIA document version prior to the 2015 Order, a
significant amount of the chain, including the majority of the draft
submissions had been redacted.
[58]
The Appellant noted a statement in those draft
submissions to the effect that legislation is only announced with retroactive
effect in clearly defined and exceptional circumstances. The Appellant asked Ms. Jina
if she knew whether Finance had a document detailing these circumstances and asked her to produce this
document.
In case of a refusal to do so, the Appellant asked Ms. Jina to inquire of
Ms. Humenuk what she meant in that e-mail, why she stated that such
circumstances did not exist in the circumstances leading to this appeal,
whether there is a record of Finance’s consideration of this issue (following
the GAAR Committee’s request), whether such a record may be provided to the
Appellant and, if it no longer exists, when it was destroyed and under what
circumstances.
[59]
The Respondent has refused to make inquiries with
a view to obtaining internal Finance documents not disclosed to the CRA, doing
so on the basis that such inquiries would be for irrelevant material and that, therefore,
these are not proper follow-up questions.
[60]
I am inclined to agree. As noted by the
Respondent, it is not by reference to the confidential musings of individual Finance
officials that the Respondent will try to establish the alleged policy upon
which the GAAR assessment depends. Such materials will also not help the
Appellant in seeking to disprove the existence of such a policy. In short, they
will not be relevant to the inquiry undertaken by the eventual trial judge in
this matter.
[61]
Internal Finance documents that go neither to
informing the search for Parliamentary intent in the purposive analysis of the
GAAR nor to establishing the Minister’s state of mind in applying the GAAR are
not relevant to the matter at issue. These requests were properly refused.
H. EDITS BY MS. ROACH
[62]
In the same e-mail chain as that referenced in
the previous category, Ms. Davine Roach makes reference to edits made
by her to the draft submissions to the GAAR committee. This is contained in her
e-mail to Ms. Humenuk dated December 6, 2011. The Appellant
asked Ms. Jina to obtain a copy of a document outlining these changes. The Crown has refused this
request, stating that the request would concern an internal Finance
communication, as the particulars of Ms. Roach’s edits were not shared
with the CRA. The Appellant highlights its view that a blanket refusal to
disclose internal Finance communications goes against the spirit of the 2015
Order.
[63]
For the same reasons as those stated above, I do
not see how these changes would have a semblance of relevance to the inquiry
mandated by this appeal. The request was properly refused.
I. GAAR COMMITTEE DOCUMENTS
[64]
The Appellant has asked Ms. Jina to inquire
of Finance what documents exist regarding the GAAR Committee’s inquiry, to
produce such documents or to indicate if responsive documents have been
destroyed (as well as when they were destroyed and the circumstances under
which they were destroyed).
[65]
The Respondent is of the view that Finance
documents prepared internally, even if prepared to develop Finance submissions
to the GAAR Committee, are irrelevant. I am inclined to agree. We are not
dealing with the representations of the Finance representative on the GAAR
Committee to CRA colleagues or with communications otherwise involving the
parties who came to the conclusion that the GAAR should be applied to the
Appellant. This inquiry would produce documents that would be neither relevant for
the purpose of rebuttal with regard to whether the Minister actually assumed
the supposed policy nor relevant to the assessment of Parliamentary intent to
be undertaken by the trial judge. These questions were properly refused.
J. MS. HUMENUK’S E‑MAIL
DATED 7 DECEMBER 2011
[66]
The Appellant drew Ms. Jina’s attention to
a portion of an e‑mail, contained in the Document 21 chain of e-mails, in
which Ms. Humenuk stated that, after having reviewed certain files, she
concluded that the proposed paragraph 256(7)(c.1) was not intended to
preclude the application of the GAAR to transactions arising before 5 March
2010, and in which she made reference as well to a discussion she had had with
two other individuals. The Appellant then asked Ms. Jina to find out to
what files Ms. Humenuk referred and to produce them, and to find out what the
discussion was and produce it.
[67]
The Respondent maintains that this request is
improper for the same reasons as those provided for having objected to the
other requests for internal Finance communications. For reasons substantially
similar to those resolving those objections, these requests for information are
improper.
K. INTERNAL FINANCE DOCUMENT
[68]
The Appellant asked Ms. Jina about the
internal Finance document whose subject is “GAAR
Committee Referral (November 1, 2011, as a follow up to
April 19, 2011 meeting)”. Specifically, she was asked:
a.
Who its author is;
b.
When it was created;
c.
The purpose for which it was created;
d.
In which file it was found (and what other
documents are in that file);
e.
With whom it was shared;
f.
Who the “members”
described as being “concerned” are;
g.
What information the author had when he or she
wrote Item 5 of this document;
h.
What persons expressed the concerns
characterized as the “CRA’s concern” in Item 5
of this document, and what division they are from;
i.
With regard to a statement in Item 5 that seems
pessimistic as to the successful application of the GAAR in this case, to
provide:
i.
Particulars of the basis for this statement,
ii.
The source of this statement,
iii.
What was relied on in making this statement, and
iv.
What informed this statement, etc.
j.
With regard to a statement in the document in
question that “[w]e do not propose to oppose the CRA”
in its position against invoking the GAAR, who precisely within the CRA is
being referred to.
[69]
The Respondent has refused those questions and
requests on the basis that questions on the applicability of paragraph 256(7)(c)
are irrelevant since that paragraph was not applied. She also submits that it
is “obvious” that the paragraph in question “only applies to corporations”. The Crown has stated a
caveat to its answers about the document: it will not make further inquiries
for internal Finance communications if those documents did not arise in the
context of the audit of the Appellant or were not considered by officials
engaged in the audit. The Respondent has stated that Ms. Humenuk is probably
the author of the document in question. The Respondent has also noted that the
document “would have been prepared about a week before
the GAAR committee meeting, possibly in late October 2011. [Ms. Humenuk]
cannot recall who it was shared with, but it would have been officials in the
Tax Policy Branch at . . . Finance.” The Respondent
states that the document was never shared with the CRA. With respect to the “some members” who were noted to have concerns in the
document, the Respondent affirms after further inquiries, that it was actually
one member, Mr. Dan Rivet. The Crown further asserts that it has produced all
of Finance’s correspondence addressed to the GAAR Committee.
[70]
To the extent that the dispute between the
parties deals with a disagreement over whether the Respondent has provided
sufficient information to respond to the Appellant’s questions about this
document, I am of the view that the Respondent has answered. Furthermore, the
requests for other documents in the same file as this one would be for internal
Finance documents that are not relevant to the appeal.
L. ATPD’S
POSITION AT THE GAAR COMMITTEE MEETING
[71]
Ms. Jina was asked whether the Respondent
agrees with the Appellant that a particular chain of e-mails, found in Document
22 of the documents produced following the 2015 Order, confirms that at
the GAAR Committee meeting the Aggressive Tax Planning Division (ATPD) was of
the view that the GAAR should not be invoked in the matter under appeal.
[72]
The Respondent states that she is not in
agreement, as the e-mail chain is dated before the GAAR Committee meeting. The
Appellant seeks to compel an answer on the basis that the response is
incomplete, as the e-mails clearly reference the upcoming GAAR Committee
meeting and the ATPD’s position thereat.
[73]
The Appellant is of the view that the
Respondent’s reply is overly technical. It seems to me, however, that the
Respondent’s reply has responded fully to the question posed regarding the
Respondent’s position.
M. FINANCE’S
POSITION ON THE RETROACTIVITY OF THE AMENDMENT
[74]
The Appellant asked Ms. Jina whether the
Respondent has knowledge of whether Finance considered making a retroactive
amendment, and if the Respondent has no such knowledge, to make inquiries to
determine the answer, and to inquire of Finance whether it considered such a
step.
[75]
The Respondent refuses the question on the basis
that this is not proper follow-up and that the question could have been asked
at the September Discovery. In the alternative, the Respondent submits that
internal Finance communications or analyses neither arising in the context of
the audit nor considered by officials involved in the audit are not relevant.
Moreover, any fully responsive answer would require information most likely
subject to Cabinet confidence.
[76]
While the Appellant draws parallels between
these questions and the questions put to Ms. Jina at the September
Discovery, it is clear that they have a broader ambit. Question 4 dealt within
the 2015 Order read as follows: “With regard to when
the Department of Finance introduced the 2010 amendment, do you have any facts,
information or knowledge as to whether the Department of Finance considered
making that amendment retroactive?” This question would deal with the CRA’s
knowledge of Finance’s deliberations with respect to making the amendment
retroactive.
[77]
The Appellant’s questions here, in contrast, ask
Ms. Jina to make inquiries of Finance to find out whether it did in fact
consider such retroactivity. She is called upon to answer for both the CRA and
for the Department of Finance, and to examine internal Finance documents in
making such a determination.
[78]
This would of course stray beyond the ambit of calling
into question whether the Minister truly believed in the existence of the
purported policy, as it is not limited to communications made to the CRA by
Finance. It goes to determining the Department of Finance’s internal
deliberations on retroactivity and whether Finance believed such a policy underpins
the Act.
[79]
The problem presented is that, as the Respondent
notes, the views of Finance on the matter are irrelevant to determining whether
such a policy actually does exist. The existence of the alleged policy is a
question of law, with the Respondent having the onus to clearly identify the
policy underlying the relevant legislation that is said to be frustrated. It is with reference to
legislative intent, not the intent of an individual official of Finance, that
the GAAR analysis is made. Whether individual Finance officials believe such a
policy to exist has no bearing on the object, spirit or purpose of the relevant
provisions enacted by Parliament.
[80]
As a result, I am unconvinced that these
questions, to the extent that they are not confined to the knowledge of the
CRA, are properly tailored. They seek irrelevant information and are overly
broad, in contrast to Question 4 in the 2015 Order.
N. USE
OF THE WORD “CLARIFY” IN THE TECHNICAL NOTES
[81]
The Appellant asked Ms. Jina to inquire of
Finance why it chose to change the word “extend”
in the technical notes accompanying the enactment of paragraph 256(7)(c.1)
to “clarify”.
The Appellant then followed up by asking Ms. Jina to inquire of persons
previously mentioned, at Finance and the CRA, whether the reason behind the
change of terminology was a conversation between Finance and the CRA that
highlighted the possibility that a trial judge might not accept the Crown’s
argument on the GAAR.
[82]
Later on in the December Discovery, the
Appellant asked Ms. Jina to inquire as to the role of the Finance members
of the GAAR Committee, and as to Mr. Wach’s role in this matter. It also asked her to inquire
of Mr. Wach on whether he has any facts, information or knowledge regarding
why the language of the technical notes was changed, or whether he was
otherwise involved in the change.
[83]
Requests 197, 198 and 211 through 213 all seek
information arising out of internal Finance communications and deliberations.
Request 198 has been answered to the extent that it relates to information
within the knowledge of the CRA. Any further answer would provide irrelevant
information, and so the question was properly refused.
[84]
Requests 208 and 210 are, however, in the
Appellant’s submissions proper follow-up and should be answered. Request 208
arises out of the replies made to questions posed and taken under advisement
during the September Discovery. Those questions dealt with whether certain Finance
officials were standing members of the GAAR committee or whether they were specially
invited for the March 6, 2012 meeting. In the responses to
undertakings, the Respondent informed the Appellant that those Finance
officials were not standing members, and that the Director of the Tax
Legislation Division at Finance would select who from Finance would attend GAAR
Committee meetings. From those answers, it would seem that Mr. Lalonde,
the Director of the Tax Legislation Division, would have been provided with the
agenda of any GAAR Committee meeting and associated materials so that he might
select officials from Finance to attend the meeting.
[85]
Request 208 is not a proper follow-up question
to the answers to the undertakings given by Ms. Jina. As emphasized by the
Appellant itself, the central dispute in the prior motion to compel was over
whether the Appellant had the right to probe the Minister’s mental process.
While I have allowed other questions in this motion because answers to them
would similarly have been refused by the Respondent given her position in the
prior motion to compel, I do not see how inquiring about the role of Finance
officials at the GAAR Committee logically follows from the questions that were
the subject of the 2015 Order. Such inquiry does not arise logically out of
questions answered or documents produced as a result of the 2015 Order. The presence
of Finance officials at the GAAR Committee was known to the Appellant as of the
September Discovery. The request was therefore properly refused as not being a
follow-up question.
[86]
I can conclude that Request 210 is however
proper follow-up in these circumstances. While the involvement of Mr. Wach
in the e-mail chain at Document 20 of the documents disclosed by the 2015
Order is apparent, how important that e-mail chain might be to the Appellant’s
case was not easily discernable to the Appellant because of the substantial
redactions made to the AIA document copy. While the Appellant could have made
Request 210 at the September Discovery, the disclosure of the contents of
the e-mail chain could also have changed the extent to which the Appellant was
interested in the response. Indeed, the Appellant was not shy about asking
questions of Ms. Jina in the September Discovery. The fact that it now
seeks to pose this question, which arises logically out of the properly
disclosed Document 20, implies that it is the previously redacted contents
of the e-mail chain that have opened the Appellant’s counsel’s eyes to the
relevance of this question to the case the Appellant seeks to put before the
trial judge. The request should therefore be answered.
IV.
COSTS
[87]
While both parties have sought their costs in
this motion, the mixed success of each party and my previous observations on
the procedural and factual context giving rise to this motion have allowed me
to conclude that each party should bear its own costs.
[88]
As a result, the motion to compel is allowed
with respect to the improperly refused questions, which are Requests 107, 108,
110, 111, 112, 113, 114, 115, 117, 122, 123, 124, 125, 126, 127, 128, 129, 130
and 210.
Signed at Ottawa, Canada, this 29th day of
September 2016.
“Robert J. Hogan”
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