Backman v. R., [1996] 2 CTC 2611, 97 DTC 550

Bell J.T.C.C.: — The Applicant made a motion for an order under Rule 93(3) of the Tax Court of Canada Rules (General Procedure) for an order naming Mr. Glen Niemi (“Niemi”) as the Respondent’s nominee to be examined on behalf of the Respondent at an examination for discovery. Counsel for the Respondent, by letter dated October 10, 1995 advised counsel for the Applicant that Niemi had been selected as Respondent’s nominee for an examination for discovery to commence on November 30, 1995. On November 28, 1995 Respondent’s counsel, Ms. Goldstein (“Goldstein”), advised Applicant’s counsel, Mr. Meghji (“Meghji”), by telephone, that the examination for discovery was being cancelled because the Respondent was seeking to amend its Reply to the Notice of Appeal and was changing its nominee from Niemi to Mr. David Turner (“Turner”).

Rule 93(3) reads as follows,

The Crown, when it is the party to be examined, shall select a knowledgeable officer, servant or employee, nominated by the Deputy Attorney General of Canada, to be examined on behalf of that party, but if the examining party is not satisfied with that person, the examining party may apply to the Court to name some other person.

By letter dated November 29, 1995, Goldstein advised Meghji that,

We had originally intended to have the original auditor be the Respondent’s nominee. However, after reviewing the file, we realized that a significant amount of the work had been done by Head Office and we feel that a person from Head office (sic) will be better able to answer questions as to what the entire Department did, rather than the auditor, who is aware only of his role in the file. Accordingly, Dave Turner of Head Office Appeals will attend the Examination on behalf of the Respondent.

Meghji submitted that the Respondent could not refuse to produce Niemi “after he was properly selected and nominated”. He said that, as set out in Turner’s Affidavit made in support of the Respondent’s opposition to the motion, Niemi was an auditor employed with the Tax Avoidance Section of the relevant District Office of the Department of National Revenue. It also set out that Niemi had responsibility for collecting information pertaining to the audit, analysing the tax consequences arising from his audit and recommending to his section chief whether a reassessment should be made. It appears clear that reviews of Niemi’s work and recommendations led to the reassessment of the Applicant from which an appeal has been commenced. Meghji said in written argument that such affidavit

... confirms that the Deputy Attorney General’s nomination of Mr. Niemi was logical in that Mr. Niemi has first hand knowledge about the matters in issue.

He then stated that the rest of Turner’s Affidavit described “paper management and coordination” functions of the Department and submitted that the tasks carried out by Turner were modest and did not deal with the heart of the matter, namely, the basis of the assessments in issue. Meghji submitted that in those circumstances the Applicant was not satisfied with Martin as the Respondent’s nominee and applied under Rule 93(3) to have this Court name Niemi.

Goldstein relied upon the decision of the Federal Court of Appeal in Richter Gedeon Vegyészeti Gyar RT v. Merck & Co. (1995), 62 C.P.R. (3d) 137, 185 N.R. 88, in which that Court upheld the decision of the Trial Division Judge with respect to the designation of persons to be examined for discovery. The relevant rules of the Federal Court are Rules 456(3) and

(4) which read as follows,

(3) Where the Crown is to be examined for discovery, the Attorney General of Canada or the Deputy Attorney General of Canada shall select an informed officer, servant or employee to be examined on behalf of the Crown.

(4) The Court may, on the application of a party entitled to examine the person selected under paragraph (2) or (3) order that some other person be examined.

The Chief Justice, referring to the Motions Judge said,

He dismissed as premature the motion made pursuant to subrule 456(4) for an order that certain persons named by the Appellants be required to attend in Budapest to be examined for discovery on behalf of the respondent corporation. The Motions Judge pointed out, correctly in my respectful view, that by virtue of subrule 456(2) the right to designate the person or persons to be examined for discovery on behalf of the respondent corporation is given to the respondent in the first instance and not to the appellants or to the Court. Until the respondent’s designates had demonstrated during the examination for discovery that they were not informed persons within the meaning of subrule 456(2), the Appellants could not invoke to their benefit the provisions of subrule 456(4).

In response, Meghji said that Tax Court Rule 93 differed from Federal Court Rule 456, seeking to draw a distinction between “knowledgeable officer” and “informed officer”. I see no merit in that submission. I interpret the word “knowledgeable”, in the context of an examination for discovery, to mean that the party who has been selected has a duty to become informed. Meghji also submitted that the words “if the examining party is not satisfied with that person” do not appear in the Federal Court Rules implying that he was entitled to determine whether he was satisfied before commencing an examination. He further submitted that if he examined Turner and was not satisfied he could make an application under Rule 93(4) for examination of another person, suggesting that this was the reason for that Rule. It reads as follows,

(4) Where an officer, director or employee of a corporation or of the Crown has been examined, no other officer, director or employee of the corporation or the Crown may be examined without leave of the Court.

He appears to have advanced this argument in support of his earlier premise that Rule 93(3) permits him to make an application to the Court on the basis of dissatisfaction with a nominee before the commencement of an examination for discovery. I do not accept the Applicant’s submission. Obviously, Rule 93(4) is designed to limit the number of persons that may be examined. It does not really assist in the interpretation of Rule 93(3). That Rule refers to the “examining” party not being satisfied with the person selected for examination. The use of the word “examining” suggests that an examination for discovery must have commenced. The Respondent has the custom of setting forth in Replies to Notices of Appeal the facts and assumptions of fact on which an assessment is based. It follows that appellants’ counsel may wish to examine the Respondent’s officer in this regard. This fact alone, however, does not entitle an appellant to examine only the Departmental officer who conducted a pre- assessment audit. The Respondent must select a knowledgeable person to be examined. Upon failure so to do, which cannot be determined until an examination is conducted, it is appropriate for an appellant to seek relief under Rule 93(3). The reasoning of the Federal Court of Appeal is hard to resist. It is my view that the examination for discovery must be held or at least commenced and objectively found to be unsatisfactory before an application under Rule 93(3) can succeed. The logical basis for such dissatisfaction would be that the person being examined was not properly informed.

The motion is dismissed with costs to the Respondent.

Motion dismissed.