Date: 20110609
Docket: A‑399‑10
Citation:
2011 FCA 196
CORAM: NOËL J.A.
PELLETIER J.A.
MAINVILLE J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
9005‑6342 QUÉBEC INC.
Respondent
REASONS FOR JUDGMENT
NOËL J.A.
[1]
This is an appeal of an interlocutory decision
by Justice Hogan of the Tax Court of Canada (TCC judge) ordering the Minister
of National Revenue (the Minister) to produce certain documents and information
before trial.
[2]
The background of this dispute is an appeal of
an assessment made by the Minister under the Excise Tax Act, R.S.C.
1985, c. E‑15 (ETA), disallowing certain input tax credits (ITCs)
claimed by 9005‑6342 Québec Inc. (hereafter Québec Inc.) for supplies of
property and services which it alleges having received from four
subcontractors. According to the Minister, no such property or services were
supplied, and the invoices issued by the subcontractors and filed by Québec
Inc. in support of the ITC claim were false.
[3]
In bringing its motion before the TCC, Québec
Inc. emphasized that it bears the burden of demonstrating that the assessment
is without merit. In its motion, Québec Inc. submits that it did indeed retain
the services of the four subcontractors in issue, that it intended to subpoena
the representatives and employees of these four subcontractors as witnesses in
order to establish this fact and that, despite having made reasonable
inquiries, it was unable to locate them. In his order, the TCC judge directed
the Minister to disclose the following documents and information:
(a) all files of audits conducted by Revenu Québec, as agent of the
[Crown], involving Construction Pro‑Dal (9114‑0566 Québec
Inc.), Les Constructions Vimont Inc., Construction P. Bourget Inc. and
Construction Nikita (9125‑9853 Québec Inc.);
(b) the last known contact information for the
aforementioned companies and their shareholders, directors and employees, as
well as the records of employment issued by the companies to their employees
during the relevant period.
[4]
The Crown does not object to disclosing the
audit reports concerning the four subcontractors. Only part (b) of the TCC
judge’s order is under appeal.
[5]
The only evidence filed in support of the motion
is the solemn affirmation of one of the lawyers of the firm representing Québec
Inc., who states having conducted searches on the Internet to try to track down
the subcontractors, to no avail. At the hearing of the motion, the Notice of
Appeal, the Minister’s reply and the list of documents were also adduced.
[6]
In this regard, it is useful to reproduce
paragraph 10 of the Notice of Appeal, in which Québec Inc. alleges that it
is
[translation]
. . . able to show that the services were supplied, identify
the persons who supplied the services for and on behalf of the
subcontractors and even, in some cases, adduce evidence of pay statements
and of the involvement of named individuals in the subcontracts.
[Emphasis added.]
[7]
The Crown asked that the motion be dismissed,
arguing primarily that the requested information contained confidential
information on third parties. The TCC judge found that the information
requested nonetheless could and had to be disclosed, given its relevance and
the fact that Québec Inc. could not otherwise have access to it.
[8]
In support of its appeal, the Crown submits that
the TCC judge usurped the Minister’s discretion under section 295 of the
ETA and exceeded his jurisdiction. Furthermore, the Crown submits that it is during
the examination for discovery stage under Rule 107 of the Tax Court of
Canada Rules (General Procedure) (S.O.R./90‑688a) that the issue
concerning the information requested should be addressed. Since that stage has
not taken place, Québec Inc.’s motion is premature and, as such, had to be
dismissed.
[9]
The Crown submits that, in any event, it was not
appropriate for the trial judge to make the order requested and that the judge
could not order the disclosure of the information in the absence of evidence
from an authorized representative of Québec Inc. stating the inquiries made by Québec
Inc. to find the directors, shareholders and employees of the four
subcontractors.
ANALYSIS AND
DECISION
[10]
In my humble opinion, the TCC judge made no
error in principle in ordering the disclosure of the information requested. Any
information of any kind, including information on third parties, may be disclosed
in an appeal before the TCC if that information is found to be relevant to the
dispute (see subsection 295(4) of the ETA).
[11]
The Crown acknowledges that the information
requested, if found to be relevant to the dispute, may be the subject of a
production order even if it contains third party information deemed
confidential. However, the Crown submits that the relevance of the information
requested can only be established on examination for discovery (Memorandum of
the Crown, paragraphs 18 to 21).
[12]
Although the issues in dispute often may be
clearly established at that stage in proceedings, it is not always the case. In
the case at bar, a plain reading of the proceedings shows that the
subcontractors and employees who allegedly supplied services on behalf of Québec
Inc. have information that is relevant to the dispute. It is clear that Québec
Inc. would normally have access to this information, but it states having been
unable to obtain it despite reasonable efforts.
[13]
To address the motion as it was drafted, it
follows that subject to Québec Inc.’s demonstrating that it tried to no avail
to obtain the information requested, it was open to the TCC judge to order that
the information be produced. However, in this last regard, the only evidence
before the TCC judge was the solemn affirmation of a lawyer of the firm representing
Québec Inc., who states having conducted searches on the Internet using various
search engines, to no avail. This attempt to find the subcontractors was allegedly
done during the day of April 7, 2010. On the basis of this evidence alone,
the TCC judge found as follows (Reasons, paragraph 47):
. . . Despite research that on its face seems
reasonable, [Québec Inc.] was unable to track down any of the subcontractors,
directors or employees. . . .
[14]
In my humble opinion, it was not open to the TCC
judge to make this finding in the absence of evidence from the principal
interested party (i.e., Québec Inc.) of the inquiries it made by means of a
representative who has personal knowledge or is well informed of those
inquiries and may be cross‑examined upon the inquiries and the results
obtained.
[15]
The directors of Québec Inc. have the best
knowledge of anyone of the four subcontractors they dealt with between
March 1, 2003 and February 28, 2006. Only they can state the nature
of Quebec Inc.’s association with these subcontractors. To go by the pleadings
entered in the record, the directors have known, since January 15, 2007, the
date on which the assessment was issued, of the Minister’s contention that no
work had been done by the subcontractors and that the invoices that Québec Inc.
had produced in support of its ITC claim were false. Therefore, since at least
2007, Québec inc’s directors have been aware that the information referred to
in their motion is essential to their case.
[16]
In the absence of any evidence from a director
of Québec Inc. or a well‑informed person, it was not open to the TCC
judge to find that Québec Inc. made reasonable efforts to obtain the
information in issue and was unable to obtain it.
[17]
For these reasons, I would allow the appeal with
costs and set aside the TCC judge’s decision with respect to part (b) of his
order, without prejudice to Québec Inc.’s right to file a new motion supported
by evidence showing the inquiries made and the results obtained.
“Marc Noël”
“I agree.
J.D. Denis Pelletier J.A.”
“I agree.
Robert
M. Mainville J.A.”
Certified true
translation
Sarah Burns
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