Docket: 2012-2176(IT)G
BETWEEN:
DOMINION NICKEL INVESTMENTS LTD.,
appellant,
and
HER MAJESTY THE QUEEN,
respondent.
Motion heard on March 14, 2014 at Montreal, Quebec.
Before:
The Honourable Justice Gaston Jorré
Appearances:
|
Counsel for the appellant:
|
Wilfrid Lefebvre, Q.C.
Jonathan Lafrance
|
|
Counsel for the respondent:
|
Charles Camirand
|
Upon
motion made by the appellant for an order:
1.
ordering the respondent to disclose and provide
to the appellant an unredacted copy of all the documents mentioned in the
response to undertakings dated November 28, 2013, more specifically the
documents that relate to or are mentioned in undertakings 1 to 5;
2.
ordering the respondent to disclose and provide
to the appellant an unredacted copy of all the documents that relate to the two
assessments which are appealed, more specifically the documents contained in
the binders 10, 15, 16, 17, 21, 22, 23 and 25 of the Canada Revenue Agency
file;
For the reasons set out in the attached reasons for order, the
motion is allowed on terms and the Court orders as follows:
1.
With respect to (i) the documents in Exhibit R-2
containing redactions and (ii) the documents referred to in Exhibits H and I of
the affidavit of Evanthia Markou,
the respondent will provide unredacted copies of the documents subject to the
following exceptions:
(a)
Business numbers, social insurance numbers,
corporation numbers and the like will remain redacted, or in the case of the documents
referred to in Exhibits H and I of the affidavit of Ms. Markou, are to be redacted.
(b)
Dates of birth and marital status will remain
redacted, or in the case of the documents referred to in Exhibits H and I, are
to be redacted.
(c)
Documents covered by solicitor-client privilege
are not to be produced; this includes all of Exhibit E of the affidavit of Ms. Markou.
(d)
Accounts and bank records of law firms already
produced will keep their existing redactions. This includes redactions in
Exhibit G.
(e)
Accounts and bank records of law firms contained
in the documents referred to in Exhibits H and I are only to be produced if
they contain entries relevant to the appellant; any entries unrelated to the
appellant on such documents are to be redacted.
(f)
The respondent will not have to produce
unredacted copies of the Cortax printouts except as specifically set out in paragraph
2 below.
(g)
Duplicates of documents already provided need
not be produced.
2.
With respect to what was referred to as the
Cortax printouts which contain information coming from tax returns, the
respondent shall provide the following in respect of taxpayers specifically
named in the reply:
Unredacted copies of the Cortax printouts
will be provided except for the following:
(a)
Social insurance numbers, identification
numbers, dates of birth and marital status will remain redacted or, in the case
of the documents referred to in Exhibits H and I of the affidavit of Ms. Markou,
are to be redacted.
(b)
Dates of assessment and the like will remain
redacted or, in the case of the documents referred to in Exhibits H and I, are
to be redacted.
(c)
Anything relating to deductions or credits
relating to medical expenses, disability, children, education, spousal support,
moving expenses, farming and fishing income, employment insurance, pension
splitting, pensions, CPP/QPP, OAS, RRSPs and, more generally, deductions
unrelated to earning income shall remain redacted or, in the case of the
documents referred to in Exhibits H and I, are to be redacted.
(d)
Total, net and taxable income as well as amounts
assessed shall remain redacted or, in the case of the documents referred to in
Exhibits H and I, are to be redacted.
(e)
With respect to all of the items enumerated
above, not only the amounts shall remain redacted, but also the line of the
printout describing the item.
3.
The respondent shall pay the appellant’s costs.
Signed at Ottawa, Ontario, this 20th day of January 2015.
“Gaston Jorré”
Citation: 2015 TCC 14
Date: 20150120
Docket: 2012-2176(IT)G
BETWEEN:
DOMINION
NICKEL INVESTMENTS LTD.,
appellant,
and
HER
MAJESTY THE QUEEN,
respondent.
REASONS
FOR ORDER
Jorré J.
Introduction
[1]
The appellant has filed a motion to compel the
respondent to produce certain documents as well as unredacted copies of other
documents that have already been produced.
[2]
One way of categorizing these documents is the
following:
(a)
documents that are partially redacted,
(b)
documents that are entirely redacted and
(c)
documents that have not been produced at all.
[3]
These documents can be broken down in other ways
as well.
[4]
At the hearing the appellant indicated that it
would not pursue certain aspects of its motion; among other things, it
indicated that it did not seek the documents where solicitor‑client
privilege was claimed and it did not seek to have the redactions of identifying
numbers, such as business numbers or social insurance numbers, removed. It also
does not seek to have removed the redactions from lawyers’ trust accounts.
[5]
For the reasons that follow, I agree almost
entirely with the result sought by the appellant and will issue an order
accordingly.
[6]
I should explain what I mean by an entirely
redacted document.
[7]
These documents usually have a cover page that
appears to be some form of control sheet; it has a number at the top and such
information as the case name, the case number and the box number. Occasionally,
there is a second page to the cover sheet. The control sheet appears to be
prepared sometime after the Canada Revenue Agency obtained the substantive
document and presumably is used to help manage all the documents. The control
sheet does not contain any substantive information.
[8]
For example, there may be a document which
consists of three pages. The first page is a control sheet and the next two
pages are, say, a letter. The letter is the substantial document and the entire
letter has been redacted. I refer to such a document as being entirely
redacted.
[9]
All the documents in issue that are in
categories (a) and (b) of paragraph 2 above were listed in the respondent’s
list of documents pursuant to rule 81 (partial disclosure) of the Tax Court
of Canada Rules (General Procedure).[3]
The documents which have not been produced, category (c) above, were not in the
list.
[10]
Under rule 81, a party must produce:
. . . a
list of the documents of which the party has knowledge at that time that might
be used in evidence,
(a) to
establish or to assist in establishing any allegation of fact in any pleading
filed by that party, or
(b) to
rebut or to assist in rebutting any allegation of fact in any pleading filed by
any other party.
[11]
Rule 81 is an important, and long-established,
feature of the procedure of this Court designed to try to reduce the cost of
litigation by eliminating the necessity of producing all relevant documents
automatically. Of course, a party may make application to obtain a full list
pursuant to rule 82.
[12]
Under rule 81 a party need only produce the
documents it may rely on. Given that, it is surprising that the list includes
documents that the respondent has entirely redacted.
General Nature of the Dispute
[13]
For the purposes of these reasons, I will very
briefly describe the nature of the dispute.
[14]
According to the appellant, it acquired and then
wound up another corporation. As a result, the appellant says that by the
operation of section 88 of the Income Tax Act, it became entitled to
claim a deduction in respect of a charitable donation of $65 million made
to the Banyan Tree Foundation by the corporation it acquired. The deduction was
claimed in its 2004 taxation year. The Minister of National Revenue
subsequently reassessed to disallow the claimed deduction.
[15]
Various issues arise, but what is important for
the purposes here is that the validity of the charitable donation is in
dispute.
[16]
A number of parties other than the appellant are
involved and many of those parties are located outside Canada.
Principles Applicable to the Motion
[17]
The resolution of evidentiary and procedural issues
that arise in the course of the trial process often involves the balancing of a
number of principles and considerations. That is the case here.
[18]
Here, one must take into account a variety of
factors including a party’s discovery rights, the scope of discovery, privacy
issues, particularly considering to the policy which is behind section 241 of
the Act, the implied undertaking, proportionality, the position a
motions judge is in as opposed to a trial judge and the “need to get on with it”.
In this case, it is also relevant that much of the information is in the hands
of parties other than the taxpayer and that some of those parties and some of
the relevant events take place outside the country.
[19]
Balancing these considerations and, indeed,
which considerations are relevant, is very much dependent on the specific facts
and circumstances of each case and, by its nature, is not a precise science.
[20]
There is an abundant amount of jurisprudence on
issues of discovery.[4]
[21]
Different considerations may come into play at
trial.
[22]
The scope of discovery is very wide. Some of the
key points applicable here regarding discovery are set out in the following
portions of HSBC Bank Canada v. The Queen:[5]
13 . . .
1. . . .
(a) Relevancy on
discovery must be broadly and liberally construed and wide latitude should be
given;
. . .
(c) The motions judge
should not seek to impose his or her views of relevancy on the judge who hears
the case by excluding questions that he or she may consider irrelevant but
which, in the context of the evidence as a whole, the trial judge may consider
relevant;
. . .
2. The threshold test
for relevancy on discovery is very low but it does not allow for a “fishing
expedition”: Lubrizol Corp. v. Imperial Oil Ltd.
. . .
6. A party is entitled
to have full disclosure of all documents relied on by the Minister in making
his assessment: Amp of Canada Ltd. v. R.
. . .
14 . . .
1. The examining party
is entitled to “any information, and production of any documents, that may
fairly lead to a train of inquiry that may directly or indirectly advance his
case, or damage that of the opposing party”: Teelucksingh v. The Queen.
2. The court should
preclude only questions that are “(1) clearly abusive; (2) clearly a delaying
tactic; or (3) clearly irrelevant”: John Fluevog Boots & Shoes Ltd. v.
The Queen.
15 Finally in the
recent decision of 4145356 Canada Limited v. The Queen I concluded:
(a) Documents that lead
to an assessment are relevant;
(b) Documents in CRA
files on a taxpayer are prima facie relevant, and a request for those
documents is itself not a broad or vague request;
(c) Files reviewed by a
person to prepare for an examination for discovery are prima facie
relevant; and
(d) The
fact that a party has not agreed to full disclosure under section 82 of the
Rules does not prevent a request for documents that may seem like a one-way
full disclosure.
[Footnotes omitted.]
[23]
Some of the above points have to be read in
terms of documents rather than questions.
[24]
It is of course well accepted that relevancy
must be judged by reference to the pleadings.
[25]
It is very important to bear in mind that a
motions judge is in a very different position from the trial judge who hears
the entire case and is better placed to judge whether something is or is not
relevant.
[26]
In section 241 of the Act, Parliament has
clearly expressed a strong policy protecting privacy in income tax matters.
However, paragraph 241(3)(b) clearly allows for the production of
evidence in “any legal proceedings relating to the
administration or enforcement of” the Act.
[27]
Accordingly, while the privacy of tax
information is, of course, an important consideration, section 241 has no
direct application here.
[28]
The general rule is that, where a document is
relevant, it will have to be produced in its entirety. However, parts of it may
be redacted where the part is “clearly irrelevant”.[6]
[29]
Privacy considerations have been considered in
this Court in deciding whether parts of a document could be redacted. In Cameco
Corporation v. The Queen,[7]
the appeal related to transfer pricing of uranium and Chief Justice Rip, as he
then was, allowed the redaction of salary payments to individuals.
[30]
Similarly, in Heinig v. The Queen,[8]
Justice Webb, as he then was, held that it was appropriate to redact social
insurance numbers of third parties.
[31]
In both Cameco and Heinig, the redactions
are of information that is “clearly irrelevant”.
[32]
In considering privacy interests, it is
important to keep in mind that there is now a strong implied undertaking[9]
established in Canada that information obtained on discovery may only be used
for the purpose of the action in the course of which it was obtained. Except to
the extent that the information becomes public in the course of trial, the
undertaking survives after the end of the action.
[33]
This undertaking inherently limits the further
disclosure of the information and helps protect privacy interests of others.
[34]
It is useful to remember that, while the
existence of the implied undertaking is now clearly established in Canada, that was not always the case. It is in the period of roughly 1985 to 2000 that it
became firmly established.[10]
[35]
Prior to the implied undertaking becoming firmly
established, one had more reason to be concerned with confidentiality in the
course of the discovery process.
[36]
In an age where litigation can easily become
very costly, proportionality concerns are relevant. Dealing with redactions
from documents is time‑consuming for all concerned. As a result, partial
redactions ought not to be encouraged unless necessary.
[37]
I think it is also important to bear in mind
that much of the knowledge of what is at stake in this appeal is in the hands
of third parties and some of those parties are offshore. While that does not
change the appellant’s general onus, it also militates in favour of the
appellant having access to all of the Minister’s knowledge and documentation
relevant to the case.
Analysis
[38]
Having reviewed these principles, let us now
turn to their application. The disputed items are referred to in Exhibits A to
K of the affidavit of Evanthia Markou. In most of these exhibits, there is a
list of the documents in question and in the left-hand column these documents
are numbered from one to the end of that particular list.[11]
[39]
Apart from the claim for solicitor‑client
privilege on certain documents which is not disputed, the essence of the
respondent’s position appears to be based on the view that what is redacted and
what has not been produced is irrelevant and, in addition, should not be
disclosed in order to protect privacy.
[40]
I would also note that although at the hearing
the respondent was not suggesting that section 241 had any application, as
such, it is clear that, when one reads the examination for discovery of
Ms. Markou, she, in consultation with her team leader, redacted material
out of concern for section 241.[12]
[41]
At the hearing, Ms. Markou explained that there
were two reasons why the information about other taxpayers was mixed in with
information relevant to the appellant’s transaction.
[42]
First, the respondent was looking into a number
of transactions involving different taxpayers, but where the same persons were
involved in arranging those transactions. As a result, requests for information
were often made to individuals or to organizations in a single request dealing
with a number of transactions.
[43]
As a result, there are documents dealing with
transactions relating to different persons.
[44]
Secondly, because examinations relating to
different taxpayers in different transactions were being worked on at the same
time, there were in the same project binders documents relating to different
individuals.
[45]
I will begin with the application of the
principles to the redacted documents which are contained in the disk which was
entered as Exhibit R-2. This corresponds to the contents of the lists in Exhibits
A to G of the affidavit of Ms. Markou.
[46]
I first note that there are two reasons which
suggest that the documents in Exhibit R-2 are, prima facie, relevant to
the appeal. First, they were produced in the respondent’s list of documents
under rule 81. The fact that they were produced in that list suggests that at
some point the respondent thought that they were relevant to the appeal.
[47]
Secondly, most documents, including the ones
which are entirely redacted, have a cover sheet which has on it as a case name “Dominion Nickel Investments Ltd.”. Again this suggests
that at some point these documents were thought relevant to this matter or, at
least, they involved inquiries which were thought to be potentially relevant to
this matter.
[48]
Given that “documents that
lead to an assessment are relevant” and given that a party is entitled
to documents that may lead to “a train of inquiry that
may directly or indirectly advance his case”,[13] I am satisfied that
the appellant is entitled to examine the documents and consider what was being
sought.
[49]
Accordingly, all these documents are, prima
facie, relevant and the appropriate test is whether there are things which
are “clearly irrelevant” which should be redacted.
[50]
When looking at these documents, and not having
the kind of knowledge of the facts and issues that come from being the trial
judge, while I see many redactions containing information that does not strike
me as likely to be useful, I am unable to determine that they are “clearly
irrelevant”, subject to certain exceptions.
[51]
Accordingly, with respect to the documents in Exhibit
R-2, I will order the respondent to provide unredacted copies subject to the
following exceptions:
(a)
Business numbers, social insurance numbers,
corporation numbers and the like will remain redacted.
(b)
Dates of birth and marital status will remain
redacted.
(c)
Documents covered by solicitor-client privilege
will not be produced, e.g. Exhibit E of the affidavit of Ms. Markou.
(d)
Exhibit G contains documents from two law firms.
There is correspondence as well as bank statements, some of which are clearly
labelled as trust accounts. The existing redactions are to remain.
(e)
Existing redactions of the Cortax printouts will
remain except as set out in paragraph 52 below.
[52]
With respect to what was referred to as the Cortax
printouts[14]
which contain information coming from tax returns, the respondent shall provide
the following in respect of taxpayers specifically named in the reply:
Unredacted copies
of the Cortax printouts will be provided except for the following:
(a)
Social insurance numbers, identification
numbers, dates of birth and marital status will remain redacted.
(b)
Dates of assessment and the like will remain
redacted.
(c)
It is quite clear that the following are clearly
irrelevant: anything relating to deductions or credits relating to medical
expenses, disability, children, education, spousal support, moving expenses,
farming and fishing income, employment insurance, pension splitting, pensions,
CPP/QPP, OAS, RRSPs and, more generally, deductions unrelated to earning
income. All such items will remain redacted.
(d)
With respect to all of the above, not only the
amounts shall remain redacted, but also the line of the printout describing the
item.
(e)
Total, net and taxable income as well as amounts
assessed shall remain redacted.[15]
[53]
The respondent was very concerned with the possible
use of documents in issue at trial, but that is a different issue which I will
come back to.
[54]
Exhibit F is a list of documents which were
previously released but which the respondent says should be redacted in part.
Even if I had a motion before me from the respondent seeking this, the
appellant has already received these documents and, absent any extraordinary
circumstances,[16]
there is no reason to issue any order in respect of these, especially given the
implied undertaking.
[55]
I will now turn to the remaining documents.
[56]
The respondent does not seek production of what
is listed in Exhibits J and K of the affidavit of Ms. Markou and,
accordingly, nothing additional need be produced in respect of those binders.
[57]
What is left are the documents referred to in
Exhibits H and I of the affidavit of Ms. Markou.
[58]
These documents in the boxes in question were,
in general, not produced although there is apparently some duplication with
what has been produced.
[59]
The respondent did not provide me with the
documents from those boxes; while I may actual have some in the form of
duplicates, I do not know which ones are duplicated in what is covered by
Exhibits H and I.
[60]
As a result I am unable to examine these
documents myself. All I have are the indexes provided in Exhibits H and I.
[61]
What I do know is that Ms. Markou worked on this
file and two other files involving the same persons arranging different
transactions. Others in her group worked on a number of files as did her
supervisor. As already stated, information in documents often covered more than
one transaction and some materials covering different transactions were stored
in the same boxes.
[62]
I also know that when Ms. Markou was working on
the redactions with her supervisor, section 241 was very much on their mind.
That section is an extremely important one for the Agency and for Canadians but
is not a relevant test for production in these circumstances.
[63]
In addition, shortly before the hearing the respondent
provided the appellant with revised copies of many documents previously
produced where the redactions were reduced.
[64]
Given these particular circumstances and considering
the previously cited passage of Teelucksingh, I am satisfied that it is
likely that many documents referred to in Exhibits H and I were considered as
part of the audit of the appellant and accordingly are, prima facie,
relevant.
[65]
Given that I cannot examine the documents, I am
not in a position to conclude that all, or part of any of, these documents are
clearly irrelevant.
[66]
Accordingly, the documents referred to in
Exhibits H and I should be provided subject to substantially the same exceptions
as in the case of the documents in Exhibit R-2; the details will be set out in
the order. In addition, duplicates of documents already provided need not be
produced.
Arrangements for Trial
[67]
A large part of the respondent’s concern
appeared to be not only protecting the privacy of third parties now, but also
at trial.
[68]
As for the immediate issue, as already indicated
the implied undertaking will protect third parties since any discovery
information can only be used by the appellant for the purpose of this
litigation. That prevents wider diffusion of the information and, except for
what becomes public at trial, the undertaking survives the completion of the
litigation and can only be lifted by an order of this Court.
[69]
As for the concerns with respect to disclosure
at trial, I would point out the following. First, the appellant may well not
use much of the material disclosed so that any privacy concerns are narrowed.
[70]
Secondly, with respect to what is used, there is
nothing to prevent the parties from negotiating an arrangement whereby they
will exchange all the documents they propose to use at trial a reasonable time
in advance and propose to the Court in advance of trial an arrangement for
managing this issue such as to prevent public disclosure of documents where
privacy issues arise,
until the Court has decided if the document or a portion thereof should be kept
private.
If they cannot reach an agreement on such arrangements, either party may apply
to the Court for directions.
Conclusion
[71]
For these reasons, the motion is allowed and the
respondent will produce additional documents as set out above.
Signed at Ottawa, Ontario, this 20th day of January 2015.
“Gaston Jorré”
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