Date: 20101101
Docket: A-1-10
Citation: 2010 FCA 290
CORAM: NOËL
J.A.
PELLETIER
J.A.
MAINVILLE
J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
GENERAL ELECTRIC CAPITAL
CANADA INC.
Respondent
REASONS FOR ORDER
NOËL J.A.
[1]
The Crown moves
pursuant to Rule 351 of the Federal Courts Rules, SOR/98-106, for leave
to file new evidence in the appeal, which is scheduled to be heard on November
16, 2010. Rule 351 provides that the Court may, in special circumstances, allow
evidence to be produced on a question of fact. General Electric Capital Canada
Inc. (the respondent) opposes the motion.
[2]
The motion is brought
in the context of the Crown’s appeal from the judgment of Hogan J. of the Tax
Court of Canada (the Tax Court Judge) (2009 TCC 563) allowing the appeal of the
respondent, a subsidiary of General Electric Capital Corporation (GECUS) from
the assessments made under Parts I and XIII of the Income Tax Act,
R.S.C. 1985, c.1 (5th Supp.).
[3]
New evidence may
exceptionally be presented on appeal if it can be shown that it could not have
been discovered before the end of the trial, and that it is otherwise credible
and practically conclusive of an issue on appeal: see Amchem Products Inc.
v. British Columbia (Worker’s Compensation Board), [1992] S.C.J. No. 110,
192 N.R. 390 at paragraph 6 (Amchem); and Franck Brunckhorst Co. v.
Gainers Inc. et al., [1993] F.C.J. No. 874 (C.A.) at paragraph 2.
[4]
The Crown seeks to
introduce eight documents on appeal:
-
GE Capital Finance
Limited Information Memoranda dated 4 March 1997 regarding an A$50,000,000
unguaranteed floating rate note issue due March 2000;
-
Standard & Poor’s
publication dated November 10, 1998, titled “S&P Rates GE Capital Finance
A$250mm MTN Program ‘A”;
-
Standard & Poor’s
publication dated January 12, 2001, title “GE Capital (Hong Kong) Ltd.”;
-
Standard & Poor’s
publication dated December 20, 2001, titled “GE Capital (HK) Ltd. HK$200 Mln
Note ‘A-‘ Rtg Withdrawn on Early Redemption”;
-
Standard & Poor’s
publication dated June 25, 2002, titled “GE Capital (Hong Kong) Ltd. A$50 Mil.
FRN Upgraded to ‘AAA’ from ‘A’”;
-
Standard & Poor’s
publication dated July 15, 2002, titled “GE Capital (Hong Kong) Ltd.”;
-
Standard & Poor’s
publication dated September 5, 2003, titled “GE Capital (Hong Kong) Ltd. ‘A/A’-
Ratings Withdrawn”; and
-
GE Capital Finance
Limited Offering Circular dated December 18, 1996, regarding a HK$200,000
subordinated floating rate notes du 2006.
[5]
The Crown asserts
that it only recently became aware of the new evidence as a result of an
information exchange made pursuant to the Canada-Australia Tax Treaty.
[6]
According to the
Crown, the new evidence is significant in three ways. Firstly, it demonstrates
that the testimony of Mr. Werner, who testified on behalf of the respondent,
was contradicted on a key point, that is, that the respondent was one of only
two GE financial companies (the other being GE Capital Australia) that issued
debt in its own name which was guaranteed by GECUS, the parent company. The new
evidence establishes that GE Capital (Hong Kong) Limited (GECHK) also issued
debt in its name.
[7]
Second, Mr. Werner’s
testimony, because it was not fully responsive to the questions asked,
prevented counsel for the Crown from pursuing evidence of potential comparable
transactions involving GECUS subsidiaries. According to the Crown, the new
evidence provides the Court with a tangible point of reference. Furthermore, it
demonstrates that the Tax Court Judge should, in evaluating the respondent’s
credit rating, have given greater weight to the fact that it is owned 100% by
GECUS as well as the implicit support of and its integration with triple “A”
GECUS. According to the Crown, the new evidence establishes that the
respondent’s credit rating is as high as GECHK’s, if not higher.
[8]
Third, the new
evidence establishes the unreliability of Mr. Chambers’ opinion as to how
Standard & Poor’s (S&P) would rate an unguaranteed debt issued by the
respondent as it was not based on factors which the actual S&P ratings from
GECHK took into account. Had the Tax Court Judge been aware of this evidence,
he would have been bound to dismiss Mr. Chambers’ opinion as unreliable.
DECISION
[9]
The respondent has
emphasized the fact that it would be entitled to adduce evidence of its own as
to the method used and the context in which the credit reports were compiled.
While the Crown asserts that the new evidence speaks for itself, it remains
that the respondent would be entitled to produce evidence in response for the
purposes which it asserts. This goes to the credibility of the new evidence and
tends to show that it is not of a conclusive character.
[10]
In my view, the Crown
has failed to show that the evidence sought to be adduced is practically conclusive
of the issue raised on appeal. It certainly is an element which the Tax Court
Judge would have had to address and weight in the context of the mass of
evidence which he was called upon to review. However, it has not been shown
that it would have altered the conclusion that he reached.
[11]
When the test for
introducing fresh evidence on appeal is not met, it remains open to an
appellate Court to allow new evidence if it is in the interest of Justice to do
so (Amchem, para. 6). In this respect, the Crown suggests that the
testimony of Mr. Werner was misleading, and that as a result it was prevented
from pursuing the line of questioning which would have led to the disclosure of
the existence of unguaranteed debt issues.
[12]
I have carefully
reviewed the relevant portions of his testimony and a fair reading falls short
of establishing that Mr. Werner’s testimony was misleading. His testimony was
that only the respondent and one other GE subsidiary issued guaranteed
debts on the capital market in their own name. This was responsive to the
question asked. If the Crown wanted information about unguaranteed debts, it
was incumbent upon it to ask the appropriate question.
[13]
I would dismiss the
motion with costs. I specifically decline making a special award.
“Marc
Noël”
“I
agree
J.D. Denis Pelletier J.A.”
“I
agree
Robert M.
Mainville J.A.”
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