Docket: 2008-2315(IT)G
BETWEEN:
4145356 CANADA LIMITED,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Motion by the Respondent to introduce into
evidence a rebuttal report prepared by John P. Steines,
heard on October 29, 2010
and decision delivered orally from the
Bench on November 1, 2010
at Toronto, Ontario
Before: The Honourable
Justice Wyman W. Webb
Appearances:
|
Counsel for the Appellant:
|
Al
Meghji and
Martha MacDonald
|
|
Counsel for the Respondent:
|
Daniel Bourgeois and
Andrew Miller
|
____________________________________________________________________
ORDER
UPON hearing
from the parties on October 29, 2010;
AND UPON
rendering decision and reasons on November 1, 2010;
AND UPON
agreement reached by both parties following the decision;
IT IS
ORDERED THAT:
(a)
the principal report
and the rebuttal report prepared by John P. Steines shall be admitted into
evidence provided that he is available for cross‑examination when the
hearing resumes;
(b)
the report prepared by
H. David Rosenbloom shall be admitted into evidence as a rebuttal report to the
report of John P. Steines provided that he is available for cross-examination
when the Appellant opens its rebuttal case; and
(c)
the hearing is
adjourned.
Signed at Halifax, Nova Scotia, this 8th day of November,
2010.
“Wyman W. Webb”
Citation: 2010TCC565
Date: 20101108
Docket: 2008-2315(IT)G
BETWEEN:
4145356 CANADA LIMITED,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER AND DECISION RENDERED
ORALLY
Webb J.
[1]
On Monday morning
(November 1, 2010) I read the following in relation to an issue that had been
addressed by the parties on Friday, October 29, 2010.
(a)
At the commencement of
the Respondent’s case on Friday, the parties addressed an issue related to a
rebuttal report that had been prepared by John P. Steines, an expert
retained by the Respondent. This report was prepared in rebuttal of the report
prepared by H. David Rosenbloom, an expert retained by the Appellant. The
Respondent is seeking to introduce, at least in part, the rebuttal report of
John P. Steines even though H. David Rosenbloom was not called as a
witness by the Appellant.
(b)
Subsections 145(2) and
(3) of the Tax Court of Canada Rules (General Procedure) (the “Rules”)
provide as follows:
(2) Unless otherwise
directed by the Court, no evidence in chief of an expert witness shall be
received at the hearing in respect of an issue unless,
(a) the issue has been defined by the pleadings or by written
agreement of the parties stating the issues,
(b) a full statement of the proposed evidence in chief of the
witness has been set out in an affidavit, the original of which has been filed
and a copy of which has been served on all other parties, not less than thirty
days before the commencement of the hearing; and
(c) the witness is available at the hearing for
cross-examination.
(3) Unless otherwise directed by the Court, no
evidence of an expert witness shall be led in rebuttal of any evidence tendered
in writing under paragraph (2)(b) unless the rebuttal evidence has
been reduced to writing in accordance with this section and the original filed
and a copy served on all the other parties not less than fifteen days before
the commencement of the hearing.
(c)
In this case the Court
did otherwise direct that the expert reports and any rebuttals to the expert
reports were to be filed earlier than the deadlines as set out in these
subsections. By Order of Associate Chief Justice Rossiter dated May 14, 2010,
expert reports were to be filed by August 15, 2010 and any rebuttals to the
expert reports were to be filed by September 10, 2010. Counsel for the
Appellant stated that since the transactions involved were complex
transactions, the parties had jointly requested an extension of time within
which expert reports and rebuttal reports could be filed. This request was
granted by Justice Jorré by an Order dated September 29, 2010. The new
deadlines were August 31, 2010 for filing expert reports and September 24,
2010 for filing any rebuttals.
(d)
On August 31, 2010 the
Respondent filed a report prepared by John P. Steines and the
Appellant filed a report prepared by H. David Rosenbloom. On
September 24, 2010 the Respondent filed a report that had been prepared by John
P. Steines in rebuttal to the report prepared by H. David Rosenbloom. On
September 27, 2010 the parties jointly wrote to the Court to advise the Court
that the Appellant had not, as of that date, decided whether to call H. David
Rosenbloom as a witness and therefore requested that I not read either the
report that had been prepared by H. David Rosenbloom nor the rebuttal
report that had been prepared by John P. Steines.
(e)
Since the principal
report of John P. Steines addresses issues of the tax laws of the United
States, it seems reasonable to conclude that the report of H. David Rosenbloom
and the rebuttal report of John P. Steines also deal with the tax laws of the United States. Questions related to foreign law are questions of
fact. Justice
Rothstein in Backman v. The Queen, (1999), 178 D.L.R. (4th) 126,
[1999] F.C.J. No. 1327 (Fed. C.A.), stated as follows:
38 Where foreign law is relevant to a case, it is a question of fact
which must be specifically pleaded and proved to the satisfaction of the Court.
(f)
The Appellant did not
call H. David Rosenbloom as a witness during the hearing and the Respondent
still wants to introduce the rebuttal report prepared by John P. Steines. Since
I have not read the report prepared by H. David Rosenbloom nor the rebuttal
to this report prepared by John P. Steines I am unable to comment on
the opinions expressed in either one of these reports. However, it is clear
that the Respondent believes that the rebuttal report of John P. Steines
contains opinions that are relevant. It also appears that there are opinions
expressed in John P. Steines’ rebuttal report that address questions that had
not been considered when John P. Steines was asked to prepare his
principal report.
(g)
It seems to me that a
report filed under subsection 145(3) of the Rules is to be restricted to
a rebuttal of the evidence of an expert that is contained in a report referred
to in subsection 145 (2) of the Rules. Subsection 145(3) of the Rules
specifically states that:
no evidence of an expert witness shall be led in rebuttal of any
evidence tendered in writing under paragraph (2)(b) unless the
rebuttal evidence has been reduced to writing…[and filed and served by
September 24, 2010 in this case]
(h)
Therefore it seems to
me that it is not appropriate to introduce in a rebuttal report new expert
evidence that does not simply rebut the evidence of another expert. The
opposing party (the Appellant in this case) is not provided an opportunity to
file a further report in rebuttal of any new opinions expressed in the rebuttal
report.
(i)
Counsel for the
Respondent had stated that the Respondent was now prejudiced because the
Appellant did not call H. David Rosenbloom as a witness during the hearing. I
do not agree. Each party has the right to choose whether to call or not to call
any particular person as a witness and has the right to not call an expert
witness even though a report of such expert was duly filed prior to the
commencement of the hearing. Each party has a responsibility to ensure that it
will be able to tender the relevant evidence that it wants to introduce at the
hearing. In this case, once the Respondent had realized that there were
additional opinions that it should have sought from John P. Steines and which
ought have been included in his principal report, the Respondent should have
brought a motion to amend the principal report, which would also have meant
that the deadlines for filing the experts’ reports and the rebuttal reports
should also have been amended.
(j)
Paragraph 145(2)(b) of
the Rules provides that “no
evidence in chief of an expert witness shall be received at the hearing in
respect of an issue unless”… “a full statement of the proposed evidence
in chief of the witness has been set out in an affidavit” that, in this case,
was to have been filed by August 31, 2010. It is clear that some of the evidence in chief of
John P. Steines that the Respondent is proposing to introduce was not
set out in the report that was attached to the affidavit that was filed by
August 31, 2010. Therefore the Respondent is not in compliance with the Order
of this Court that set the deadlines for filing the expert reports.
(k)
It is the position of
the Appellant that the rebuttal report of John P. Steines should be
excluded from evidence because the Respondent is not in compliance with the
Court order. It seems to me, however that this is not the only remedy for this
breach of the Court order. I accept that the failure to include the additional
opinions that were sought of John P. Steines was not deliberate but was simply
as a result of counsel for the Respondent not becoming aware of these issues
until after the report of John P. Steines had been filed on August 31, 2010.
(l)
As noted by counsel for
the Appellant the transactions in this case are complex. The transactions
involve a limited partnership that was formed under the laws of Delaware and to which Delaware law will apply. The limited partnership conducted its business in the United States and therefore there are foreign law issues that arise
(which as noted above are questions of fact). The amount of the foreign tax
credit in issue is significant (approximately $3.2 million) and the
determination of this issue may affect subsequent years. Although there was no
indication whether the Appellant had been reassessed for any other years, the
year under appeal (2003) is the first year that the Appellant became involved
in these transactions and since its involvement continued after this year, it
seems more likely than not that it continued to claim a foreign tax credit.
Assuming that the rebuttal report does contain relevant opinions that relate to
the issue that I am to decide and which has been defined by the pleadings, then
it seems to me that such opinions should be admitted into evidence provided
that the Appellant is provided an opportunity to respond to such report and is
not unduly prejudiced. It is important to ensure that there is compliance with
the principles of procedural fairness.
(m)
Because the opinions of
John P. Steines that the Respondent wants to introduce were expressed in a
rebuttal report to which the Appellant did not have any right to file a further
rebuttal report, the Appellant would be prejudiced if the hearing were to
continue now and the rebuttal report were to be admitted into evidence.
(n)
However, it does not
seem to me that there would be any prejudice to the Appellant, that could not
be remedied by costs, in adjourning the matter and allowing the Appellant an
opportunity to have a rebuttal report prepared and filed by an expert of its
choosing. While in some instances there might be a concern about the affect
that a delay would have on a witness’ recollection of events that happened
several years ago, there is no such concern in this case as the witness for the
Appellant who was called to testify about the actual events that did occur, has
already testified.
[2]
After reading the above
I indicated that:
(a)
As a result:
(i)
the hearing is
adjourned;
(ii)
when the hearing
resumes the Appellant shall be allowed to reopen its case. There is no
prejudice to the Respondent in allowing the Appellant to reopen its case as the
Respondent has not yet called any witnesses.
(iii)
The Respondent shall,
on or before [a date to be determined], file and serve a revised report of John
P. Steines that includes all of the matters on which John P. Steines will be
providing evidence in chief;
(iv)
The Appellant shall
have until [a date to be determined] to file and serve a rebuttal report to the
report of John P. Steines;
(v)
The hearing shall
resume on [a date to be determined]; and
(vi)
The Respondent shall
pay costs, in any event of the cause, to the Appellant, in an amount to be
determined as provided herein. The issue of costs was not addressed by either
party. The Appellant and the Respondent shall have the opportunity to try to
reach an agreement on the amount of costs that will be paid by the Respondent
to the Appellant. If they are unable to agree, then either party may request
that this be determined at a hearing which could be held at the conclusion of
the argument when this hearing resumes or at some other time.
[3]
A discussion then
ensued with respect to the dates that were to be determined for the Respondent
to file a consolidated report of its expert and for the filing of a rebuttal
report by the Appellant. The dates that were agreed upon were November 15,
2010 for a consolidated report of John P. Steines and December 31, 2010
for the deadline for the Appellant to file and serve a rebuttal report. When
the discussion turned to setting a date for the resumption of the hearing,
counsel for the Appellant asked for a short break.
[4]
Following the break
counsel for the Appellant stated that counsel for both parties had reached an
agreement that:
(a)
both reports of John P.
Steines would be admitted into evidence without any changes;
(b)
the Appellant was
waiving its right to reopen its case and waiving its right to obtain another
report as a rebuttal report to the report of John P. Steines;
(c)
the report of H. David
Rosenbloom would be admitted into evidence as a rebuttal report to the report
of John P. Steines and the Appellant would call H. David Rosenbloom as part of
the Appellant’s rebuttal case;
(d)
the hearing would not
be adjourned until after John Small testified for the Respondent (which
testimony was heard on November 1, 2010); and
(e)
following the testimony
of John Small the hearing would be adjourned.
[5]
As a result of the
agreement of the parties following my decision and since John Small has now
testified:
(a)
the principal report
and the rebuttal report prepared by John P. Steines shall be admitted into
evidence provided that he is available for cross‑examination when the
hearing resumes;
(b)
the report prepared by
H. David Rosenbloom shall be admitted into evidence as a rebuttal report to the
report of John P. Steines provided that he is available for cross-examination
when the Appellant opens its rebuttal case; and
(c)
the hearing is
adjourned.
Signed at Halifax, Nova Scotia, this 8th day of November, 2010.
“Wyman W. Webb”
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