Hamlyn T.C.J.:
This is a motion for:
• an Order requiring the Appellant to file and serve a further and better affidavit of documents which includes the documents which it permitted Revenue Canada auditors to inspect at the offices of Gowling, Strathy & Henderson on January 11, 1991;
° an Order requiring the Appellant to produce for copying by the Respondent the documents which it permitted Revenue Canada auditors to inspect at the offices of Gowling, Strathy & Henderson on January 11, 1991; and
e an Order requiring the Appellant to pay the costs of this motion.
The grounds for the motion are that the List of Documents served by the Appellant is not in compliance with the requirements of section 82 of the Tax Court of Canada Rules (General Procedure) (the “Rules”), in that it omits documents in the Appellant’s possession, control or power relating to matters in question in these appeals.
The amended list order of this Court, dated February 9, 1998, that is the subject document list, reads:
1. Each party shall file and serve on the other on or before February 2, 1998, a list of documents made in compliance with section 82 of the Rules.
One of the issues to be decided as defined in the Notice of Appeal is:
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(a) Was the Minister authorized under subsection 69(2) of the Income Tax Act to substitute a lower price in place of the amount in fact paid by the Appellant for SmithKline cimetidine during the relevant period on the basis that the amount in fact paid by the Appellant to the Affiliates was greater than the amount that would have been reasonable in the circumstances had they been dealing at arm’s length?
From the Reply to the Notice of Appeal, the following is pleaded:
21 In assessing the Appellant under Part I of the Income Tax Act, the Minister, in addition to the facts stated in paragraph 20 hereof, made, inter alia, the following assumptions of fact:
(a) the Appellant paid or agreed to pay U.S. $400.00 per kilogram to the Affiliates for cimetidine throughout the relevant period;
(b) cimetidine was available from arm’s length suppliers between 1981 and 1986 at prices of U.S. $50.00 to $250.00 per kilogram;
(f) The Appellant paid or agreed to pay amounts aggregating $66,982,990 in excess of the price that would have been reasonable in the circumstances if the Appellant and the Affiliates had been dealing at arm’s length during the relevant period.
From the March 10, 1998 affidavit of Timothy Ronald Truckle of the Large Business Audit Section of the Department of National Revenue in support of the motion:
10. I am informed by Wayne Voege of Revenue Canada, International Audit Directorate and do believe that on or about January 11, 1991, in the presence of counsel from Bennett Jones Verchere, Revenue Canada auditors Wayne Voege and Alf Aylward were permitted by the Appellant to inspect copies of documents at the offices of Gowling & Henderson in Ottawa. Attached to this affidavit and marked as Exhibit “6” are copies of notes made by Wayne Voege during the inspection of those documents, which included an agreement dated November 7, 1979 between Smith Kline Corporation and Smith Kline & French Laboratories Limited. I am informed by Mr. Voege and believe that he was not permitted to take copies of the documents, which are listed in the Respondent’s List of Documents in Schedule “C.” A copy of the Respondent’s List of Documents accompanies this affidavit as Exhibit "7."
Schedule C reads in part:
Documents that were formerly in the possession, control or power of the Respondent but are no longer in her possession, control or power:
1. Expert Affidavit of Thomas Dyson which the Appellant permitted Revenue Canada to inspect (but not to take a copy) on January 11, 1991 at the offices of Gowling, Strathy & Henderson at 160 Elgin Street, Ottawa.
This document is the remaining document product in issue on this motion. Of the balance of the documents (#2 to #8) sought to be produced, the Appellant no longer objects to their production.
Further, in the affidavit of Timothy Ronald Truckle:
11. My review of the Appellant’s four volume “Affidavit of Documents” discloses that the documents inspected by Revenue Canada with the Appellant’s consent on January 11, 1991 cannot be identified in the Appellant’s section 82 “Affidavit of Documents.”
12. Based upon my review of the Revenue Canada auditor’s notes attached to this affidavit as Exhibit “6”, I have no hesitation in concluding that the documents inspected by Revenue Canada with the Appellant’s consent on January 11, 1991 clearly relate to matters in issue in the present appeal.
And, from the affidavit of Denise Aubin, a para-legal officer with the Department of Justice, filed in support of the motion:
3. Attached hereto and listed as Exhibit “1” to my affidavit is a copy of the Appellant’s production number 17376 which is described in Volume 4 of the Appellant’s Affidavit of Documents as “Report: 1985 Forecast.”
Exhibit 1, Report: 1985 Forecast, reads in part:
• In recent years the transfer price has come under significant pressure.
¢ need to import precursor into Argentina
• Columbia setting maximum price of $95 for kilo for importation
• Dyson report in Canada
The Parties Position
The Appellant resists the motion on the grounds that the Expert Affidavit of Thomas B. Dyson (the “Dyson Report”) does not relate to the matter in issue. That report was produced for constitutional litigation including the appeal, the tax assessment was not related to the constitutional issue, and that, the parties are not the same. From the motion transcript (at pages 46 to 48):
[T]hat the financial information and the information of Smith Kline & French Canada at the time, which is what the Dyson affidavit is based on, is relevant and it has been provided to Revenue Canada in its full disclosure under Section 82.
But the actual report of the affidavit itself is not relevant to this appeal. ... The Dyson report was prepared in the context of the constitutional litigation between similar but not identical parties. The constitutional litigation was the sole purpose for that report, and it’s not relevant to the action concerning the tax audit or the litigation arising from the audit, and I would like to refer to the case of Smith Kline & French Laboratories Limited against the Attorney General of Canada, a decision of Mr. Justice MacKay, the Federal Court Trial Division in 1989.
[A]t the conclusion of the constitutional litigation, the Attorney General applied for access to the sealed documents, of which the Dyson affidavit is one, for permission for officers from Revenue Canada to inspect the documents and photocopy them for the purposes of the income tax audit relating to transfer pricing of cimetidine.
Mr. Justice MacKay, at page 5210, refers to the confidentiality orders and states in the highlighted portion that there is no reason — or "... there is no reason on the record in relation to the orders of the Trial Division of the Court of Appeal” — as — we’re talking about the reasons for the confidentiality order — “and those orders provide in each case a complete ban on access, except for purposes of the proceedings then underway, unless the Court should order otherwise.”
And on page 5213 ...
The reason for varying the order should be truly compelling, especially where the purpose for access is unrelated in any way and is in that sense collateral or ulterior to the action in which the documents are filed and sealed.
And ... my submission that the income tax audit and the litigation arising from that audit are and continue to be unrelated in any way to the actual purpose for the production of the Dyson affidavit. And it’s for those reasons that we should not be ordered to produce document number 1.
The Respondent argues the evidence on the motion is uncontroverted that the Dyson Report is part of the documents inspected by Revenue Canada auditors with the Appellant’s consent, which clearly relates to matters in issue and are subject to Rule 82.
From the motion transcript, the Respondent’s response to the Appellant’s argument is as follows (at pages 49 to 52):
[T]he material which represents Revenue Canada’s notes of the inspection of the Dyson report in January 1991, when it was doing its audit, the uncontradicted statement of Mr. Truckle in his affidavit in Paragraph 12, that he has no hesitation in concluding that the documents inspected by Revenue clearly relate to matters in issue...
And ... the appellant’s document ... which is attached to the Aubin affidavit, which sets out that Smith Kline’s review of the Dyson report in connection with pressure on its transfer price discloses that this report prepared by the Canadian government showed third party prices for the years 1981 to 1985 ranging from $288 down to $69 a kilo....
[W]hat‘s in issue ... by reference to the pleadings. What price did Revenue Canada properly assess cimetidine at being transferred into Canada during the years 1981 to 1986....
My learned friend goes on to say that the Dyson report didn’t involve the same parties exactly....
[T]he test is not whether or not the very same parties are present in both pieces of litigation. The test is whether the information in the documents is relevant to issues in the appeal....
The matter before Mr. Justice MacKay was completely different than the matter before Your Honour. In the MacKay decision, the question was that he had to consider, were there compelling circumstances which would cause the Court to change its own order.
[W]e’re not trying to vary the Federal Court Trial Division’s order ... We’re simply saying that there are documents related to other matters in the tax appeal which are or have been in the possession, control, or power of the appellant which it’s obliged to list.
Jurisprudence
Regarding relevancy of documents, from Owen Holdings Ltd. v. R., [1997] 3 C.T.C. 351 (Fed. C.A.), at page 361:
[R]elevancy exists where the document sought may lead the party seeking discovery to a train of inquiry which may directly or indirectly advance its case or damage that of its adversary.
Regarding access to documents in a non-related, non-identical proceeding, in AGT Ltd. v. Canada (Attorney General), [1997] 2 C.T.C. 275 (Fed. C.A.), at page 284:
The fact that the documents in issue were prepared for another forum, namely providing the CRTC with information required under a rate setting process, does not prevent the Minister from having access to them since they are relevant to the potential tax liability of the taxpayer.
Regarding confidentiality orders in relation to documents made in other Courts on consent. From Ed Miller Sales & Rentals Ltd. v. Caterpillar Tractor Co. (1988), 90 A.R. 323 (Alta. C.A.), the Alberta Court of Appeal has concluded, at page 330, Laycraft, C.J.A. said:
I am unable to agree that a party can prevent production of a relevant document, otherwise subject to production, in a Canadian court by its own action (or inaction) in another jurisdiction.
From Promex Group Inc. v. R. (April 1, 1998), Doc. 95-1950(IT)G (T.C.C.), Judge Bowman of this Court has said at paragraph [55]:
I find it somewhat absurd that a party to a proceeding in the Tax Court of Canada can refuse to produce relevant documents because it has, as a result of its own motion and on consent in another court, caused those documents to be covered by a confidentiality order — particularly long after the action in which the order was made has been dismissed.
Conclusion
In relation to document production and in respect of the matter in question, the scope is broad, the relevancy threshold is low.
The documents in question - from a reading of the pleadings and the evidence filed on the motion - and the Federal Court of Canada decisions containing references to the documents sought to be produced relate to the matter in issue in this appeal. The parties to the prior litigation being different from the present litigation and the self-imposed confidentiality order as well as the findings of the orders of the Federal Court of Canada in relation to the document in question does not prevent the Minister of National Revenue having access to these since they relate to the potential tax liability as pleaded in this proceeding.
Decision
There will be an Order requiring the Appellant to file and serve a further and better affidavit of documents, which includes the document which it permitted Revenue Canada auditors to inspect at the offices of Gowling, Strathy & Henderson on January 11, 1991.
There will be an Order requiring the Appellant to produce the documents which it permitted Revenue Canada auditors to inspect at the offices of Gowling, Strathy & Henderson on January 11, 1991, for copying by the Respondent.
Costs
The ultimate reason for a costs award is the transparency of the relevancy issue in view of the jurisprudence and the threshold test of relevancy at the stage of document production.
The relevance of the Dyson report to the issues under appeal becomes clear from both a reading of the Reasons for Judgment of Justice Strayer of the Federal Court Trial Division in Smith, Kline & French Laboratories Ltd. (supra), and from the affidavit of Mr. Truckle. In the case of Smith, Kline & French Laboratories Ltd.(supra) it is clear that Justice Strayer regarded the Dyson report as having significant value in the determination of the costs, profits, and most importantly the differentiation between competing prices for cimetidine. From the affidavit of Mr. Truckle comes the evidence of the notes made by Wayne Voege as to the table of contents of the Dyson report. Such descriptions in the table of contents as “comparison of actual cost to open market price of raw cimetidine” or “open market cost or raw cimetidine” were recorded by Mr. Voege during his inspection of documents at the offices of Gowling, Strathy & Henderson in Ottawa.
From the Appellant’s statement as to the issues in this appeal included ‘whether the amount paid by the Appellant to the Affiliates was reasonable in the circumstances had they been dealing at arm’s length’, is clear to me that the Dyson report has real relevance in the determination of what price was, or would have been, reasonable in arm’s length circumstances.
The jurisprudence for section 82 of the Rules is clear that the test for relevance has a low threshold as to what documents are required to be listed. On the basis of the evidence before me it is obvious that the Dyson report was, and is, relevant to the issues under appeal. The Appellant should have at the very least listed the document in compliance with section 82 of the Rules. Had the Appellant an issue with its production, it should have listed it under paragraph 82(2)(b), and claimed privilege against its production.
Lastly, the Appellant’s plea that this motion should have been brought under section 83 of the Rules is not supported by the evidence on this motion.
Costs of this motion are to be awarded to the Respondent on a party and party basis to be taxed at the conclusion of the trial process.
Motion granted.
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