Docket: 2009-411(IT)G
BETWEEN:
ALGOMA CENTRAL CORPORATION,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Motion heard on October 12, 2011 at Toronto, Ontario
By: The Honourable
Justice Judith Woods
Appearances:
|
Counsel for the Appellant:
|
David
Malach
|
|
Counsel for the Respondent:
|
Thang Trieu
|
____________________________________________________________________
ORDER
UPON motion
by the appellant for an order to compel
answers to questions asked on examinations for discovery, and for ancillary
relief;
THE MOTION is granted in part, and it is ordered that:
1.
the respondent shall provide to
the appellant any material relating to the valuation by Mr. Fournier that is
contained in specific files of the appellant that were kept by any of the
following individuals: Martine Bathurst, Don Beamish, Bob Boyer, Laurie
Davidson, Reinhard Hoffman, Arun Khanna, Yvon Lamontagne, Lise Malette, Gerard
Martineau, Tim Matthews, Richard St. Denis, and Karen Wiemer;
2.
the respondent shall
provide to the appellant the information relating to the contract with Mr.
Fournier that was provided to Paul Lynch and Fred O’Riordan;
3.
the respondent shall
provide to the appellant the material relied upon by Mr. Fournier in preparing
his valuation;
4.
the examinations for discovery, including undertakings,
shall be completed by February 17, 2012;
5.
the parties shall communicate with
the Hearings Coordinator, in writing, on or before March 30, 2012 to advise the
Court whether or not the case will settle, whether a settlement conference
would be beneficial or whether a hearing date should be set. In the latter
event, the parties shall file a joint application to fix a time and place for
the hearing in accordance with section 123 of the Tax Court of Canada Rules
(General Procedure) by said date; and
6.
each party shall bear their own
costs in respect of this motion.
Signed at Vancouver, British Columbia this 3rd
day of November 2011.
“J. M. Woods”
Citation: 2011 TCC 514
Date: 20111103
Docket: 2009-411(IT)G
BETWEEN:
ALGOMA CENTRAL CORPORATION,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Woods J.
[1]
The appellant, Algoma Central
Corporation (“Algoma”), brings a motion for an order to compel answers to
questions asked on examinations for discovery, and for ancillary relief.
[2]
By way of background, the appeal
concerns a sale of forested land by Algoma in 1997. A significant capital gain
was realized. The issue in the appeal is whether the appellant, in computing
the capital gain, properly determined the fair market value of the land on
December 31, 1971 (“V-Day”). The Minister valued the land on V-Day at
$11,295,802. Algoma valued it at $33,825.331.
[3]
This motion concerns questions on
discovery relating to a formal appraisal that was obtained by the Canada
Revenue Agency (CRA) from an outside valuator, Marco Fournier. The appraisal
was very expensive, but it was considered to be necessary because the CRA had
concerns with their prior valuations.
[4]
The questions at issue were raised
during an examination of the respondent’s representative on July 22, 2010. The
representative was Judy Dakers, the appeals officer who had reviewed Algoma’s
notice of objection.
[5]
On August 24, 2011, the respondent
provided written responses to many items that were outstanding from the
examination of Ms. Dakers.
[6]
In this motion, Algoma seeks
answers to four questions that the respondent has not answered, or has not
fully answered.
[7]
The general limits of examinations
for discovery were recently described by the Federal Court of Appeal in The
Queen v Lehigh Cement Ltd., 2011 FCA 120. Justice Dawson stated:
[34] The
jurisprudence establishes that a question is relevant when there is a
reasonable likelihood that it might elicit information which may directly or
indirectly enable the party seeking the answer to advance its case or to damage
the case of its adversary, or which fairly might lead to a train of inquiry
that may either advance the questioning party’s case or damage the case of its
adversary. Whether this test is met will depend on the allegations the
questioning party seeks to establish or refute. See Eurocopter at
paragraph 10, Eli Lilly Canada Inc. v. Novopharm Ltd., 2008 FCA 287, 381
N.R. 93 at paragraphs 61 to 64; Bristol-Myers Squibb Co. v. Apotex Inc.
at paragraphs 30 to 33.
[35] Where
relevance is established the Court retains discretion to disallow a question.
The exercise of this discretion requires a weighing of the potential value of
the answer against the risk that a party is abusing the discovery process. See Bristol-Myers
Squibb Co. v. Apotex Inc. at paragraph 34. The Court might disallow a
relevant question where responding to it would place undue hardship on the
answering party, where there are other means of obtaining the information
sought, or where “the question forms part of a ‘fishing expedition’ of vague
and far-reaching scope”: Merck & Co. v. Apotex Inc., 2003 FCA 438,
312 N.R. 273 at paragraph 10; Apotex Inc. v. Wellcome Foundation Ltd.,
2008 FCA 131, 166 A.C.W.S. (3d) 850 at paragraph 3.
[8]
The appellant seeks answers to
these four questions.
1.
Who else in the CRA, including
Deputy Ministers and Ministers, would have known that Mr. Fournier had
determined that the CRA figures for the valuation were closer to the reasonable
amount before the contract with Mr. Fournier was entered into?
2.
Provide the files of the
individuals at the CRA who the respondent had identified as being involved in
this matter, and the files of any anyone else involved, including all emails,
notes, memoranda, letters, voice-mail, etc., and similar documents in the CRA
files with respect to Mr. Fournier’s valuation.
3.
Who was the highest person in the
CRA who knew about the contract with Mr. Fournier and what information was
provided to that person?
4.
Provide all of the materials Mr.
Fournier relied upon in preparing his valuation.
[9]
The respondent objects to these
questions on several grounds. With respect to the first three questions, the
respondent submits that enough information concerning this line of inquiry has
already been provided, that the questions are too broad and that they amount to
a fishing expedition.
[10]
The respondent also submits that
the questions are improper because they are intended to attack the credibility
of a CRA official. Counsel relies on Lucenti v Progressive Casualty
Insurance Co. of Canada, [2000] OJ No 1777 (OSCJ).
[11]
As for the fourth question, the
respondent objects on the ground that there was no formal refusal. It appears
from the transcript that both counsel simply forgot that the question was
outstanding. The respondent states that it does not have to answer the question
in these circumstances, and relies on Merchant Law Group v The Queen,
2008 TCC 49, [2008] GSTC 20, para. 17.
[12]
I will consider the first three
questions together. The fourth question will be discussed separately because
the objection is quite different.
[13]
Part of the respondent’s objection
to the first three questions is based on lack of relevance. Pursuant to the
test of relevance as described in Lehigh, I agree with Algoma that the
first three questions are relevant.
[14]
In general terms, Algoma wishes to
probe whether the value of the land as determined by Mr. Fournier was
influenced by the CRA. Algoma’s theory, as I understand it, is that since the CRA
was incurring significant expense, approximately $400,000, the CRA may have
expected a certain result from Mr. Fournier. The material before me indicates
that this theory is not purely fanciful (Affidavit of Marni Pernica, Tab 10). The
line of inquiry is therefore relevant for purposes of the discovery process.
[15]
The respondent submits that the
questions are also improper because they challenge the credibility of CRA
officials. It is submitted that the respondent already provided information to
Algoma which shows that Mr. Fournier was not influenced to give a particular
result.
[16]
I do not agree with this
submission. Algoma is entitled to further probe whether there might have been
influence. The questioning on this line of inquiry has not been excessive.
[17]
The judicial decision relied on by
the respondent in support, Lucenti, does not support the objection. In Lucenti,
questions were considered to be improper if they are a collateral attack and only
relevant to credibility. In this case, the questions are not collateral. They
go to a matter of substance in this appeal, whether Mr. Fournier’s opinion is
biased or not. It is not simply a matter of credibility.
[18]
It remains to be considered
whether the Court should step in to disallow the questions on the ground that
they are a fishing expedition (Lehigh, para. 35).
[19]
It is appropriate to cut back the
inquiry somewhat on this basis, in my view.
[20]
The first question, for instance,
is too far-reaching. It is not a request for documents but for knowledge, and
encompasses a very large group of persons. It appears that over 30 individuals have
had some involvement with this file. The request is too broad.
[21]
The third question goes to the
same line of inquiry but the scope is more limited. There are two parts to the
question. Although objecting on the grounds of relevance, the respondent
answered the first part of the question and provided the names of two high
level officials who may have knowledge of the Fournier contract. The respondent
should also answer the second part of the question. It should disclose what
information was provided to the high level officials about the Fournier
contract.
[22]
As for the second question, it
requests the files of anyone involved with Mr. Fournier’s valuation. The
inquiry is very broad, considering that over 30 individuals have already been
identified as having had some involvement. It is reasonable, though, that there
should be disclosure concerning the files of individuals who likely had significant
involvement. Information was previously provided to Algoma through an access to
information request but this information was not responsive enough because it did
not identify the source from which the documents came.
[23]
At the hearing, I asked each of
the parties for their position on a middle ground so that this request could be
limited. The respondent took the position that it had already provided
sufficient information; it was not willing to provide a possible middle ground.
Counsel for Algoma did provide a more limited list of names.
[24]
It is unfortunate that the
material from the access to information request did not identify its source.
Some further inquiry is reasonable, and I will accept the appellant’s middle
ground with a few modifications. The respondent shall provide material which
relates to the Fournier valuation from the files of the appellant that were
kept by the following individuals: Martine Bathurst, Don Beamish, Bob Boyer,
Laurie Davidson, Reinhard Hoffman, Arun Khanna, Yvon Lamontagne, Lise Malette,
Gerard Martineau, Tim Matthews, Richard St. Denis, and Karen Wiemer.
[25]
As for the fourth question, the
respondent objects to this question because there was not a formal refusal at
the discovery. This is not a satisfactory basis to object in the circumstances
of this case.
[26]
The information that is sought is
materials relied upon by Mr. Fournier in preparing the valuation. This
information may be important for Algoma in order to know the case that it has
to meet. It is not sufficient for the respondent to object on such a
technicality. It appears that this question was simply overlooked by both
counsel. Accordingly, if Algoma had sought to reopen the examination to ask
this question again, I would allow it. The respondent will be required to
answer this question.
[27]
The respondent relies on Merchant
Law Group, an oral decision of ACJ Rossiter which disallowed two questions
for this reason. I do not think that a hard and fast rule should apply in these
circumstances. A decision should be made on a case by case basis taking into
account fairness for both parties.
[28]
The appellant also asked for an
extension of the pre-trial steps. This will be provided for in the formal
order.
[29]
As for costs, as success was
mixed, each party shall bear their own costs of this motion.
Signed at Vancouver, British
Columbia
this 3rd day of November 2011.
“J. M. Woods”
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