Citation: 2010 TCC 463
Date: 20101012
Docket: 2008-1945(GST)G
BETWEEN:
9005-6342 QUÉBEC INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
AMENDED REASONS FOR ORDER
Hogan J.
[1]
The Appellant has filed
a motion for an order requiring the Respondent to disclose the following:
(a) all files of
audits conducted by Revenu Québec involving Construction Pro-Dal (9114-0566
Québec Inc.), Les Constructions Vimont Inc., Construction P. Bourget Inc. and
Construction Nikita (9125-9853 Québec Inc.) (the subcontractors);
(b) the last known
contact information for the subcontractors and their shareholders, directors
and employees, as well as the records of employment issued by the
subcontractors to their employees during the relevant period.
[2]
In its notice of motion
and in its submissions, the Appellant submits that the Respondent relies on, in
support of the assessments under appeal, the audit files of Revenu Québec
regarding the four subcontractors.
The Respondent confirmed in her oral submissions that the auditor who prepared the
Appellant’s audit report indicated that he drew on a colleague's audit of three
subcontractors.
[3]
The Respondent is
asking the Court to dismiss the motion. Although the Respondent has made such a
request, she mentioned on three occasions in her submissions that the Court
could order that the audit files on the subcontractors be submitted to the
Appellant and that the non-pertinent parts be stricken out.
Analysis
[4]
The following tables
contain the relevant provisions of the Excise Tax Act (ETA) in
English and in French as well as the sister provisions in the Income Tax Act
(ITA). I have included the provisions of both acts as, on the one hand, the
Appellant’s motion concerns the information gathered by the Respondent under
the two acts and, on the other, the provisions are all similar and case law
relevant to both provisions is available.
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Excise Tax Act
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Income Tax Act
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295(2) Provision
of information − Except as authorized under
this section, no official or other representative of a government entity
shall knowingly
(a) provide, or allow to be provided, to any
person any confidential information;
(b) allow any person to have access to any
confidential information; or
(c) use any confidential information other than
in the course of the administration or enforcement of this Part.
(3) Evidence relating to
confidential information
− Despite any other Act of Parliament or other law, no official or
other representative of a government entity shall be required, in connection
with any legal proceedings, to give or produce evidence relating to any
confidential information.
(4) Communications where
proceedings have been commenced − Subsections (2) and (3) do not apply in
respect of
(a) criminal proceedings, either by indictment or
on summary conviction, that have been commenced by the laying of an
information or the preferring of an indictment, under an Act of Parliament;
or
(b) any legal proceedings relating to the
administration or enforcement of this Act, the Canada Pension Plan,
the Employment Insurance Act, the Unemployment Insurance Act or
any other Act of Parliament or law of a province that provides for the
imposition of a tax or duty.
. . .
(5) Disclosure
of personal information − An official may
(a) provide such confidential information to any
person as may reasonably be regarded as necessary for the purpose of the
administration or enforcement of this Act, solely for that purpose;
(b) provide to a person confidential information
that can reasonably be regarded as necessary for the purposes of determining
any liability or obligation of the person or any refund, rebate or input tax
credit to which the person is or may become entitled under this Act;
. . .
295(1)
Definitions – In this section,
. . .
"confidential
information" means information of any kind
and in any form that relates to one or more persons and that is
(a) obtained by or on behalf of the Minister for
the purposes of this Part, or
(b) prepared from information referred to in
paragraph (a),
but does not include information
that does not directly or indirectly reveal the identity of the person to
whom it relates and, for the purposes of applying subsections (3), (6) and
(7) to a representative of a government entity who is not an official,
includes only the information described in paragraph (5)(j);
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241(1) Provision
of information − Except as authorized by
this section, no official or other representative of a government entity
shall
(a) knowingly provide, or knowingly allow to be
provided, to any person any taxpayer information;
(b) knowingly allow any person to have access to
any taxpayer information; or
(c) knowingly use any taxpayer information
otherwise than in the course of the administration or enforcement of this
Act, the Canada Pension Plan, the Unemployment Insurance Act or
the Employment Insurance Act or for the purpose for which it was
provided under this section.
(2) Evidence relating to
taxpayer information
− Notwithstanding any other Act of Parliament or other law, no
official or other representative of a government entity shall be required, in
connection with any legal proceedings, to give or produce evidence relating
to any taxpayer information.
(3) Communication where proceedings
have been commenced
-- Subsections (1) and (2) do not apply in respect of
(a) criminal proceedings, either by indictment or
on summary conviction, that have been commenced by the laying of an
information or the preferring of an indictment, under an Act of Parliament;
or
(b) any legal proceedings relating to the
administration or enforcement of this Act, the Canada Pension Plan,
the Unemployment Insurance Act or the Employment Insurance Act
or any other Act of Parliament or law of a province that provides for the
imposition or collection of a tax or duty.
. . .
(4) Where
taxpayer information may be disclosed − An
official may
(a) provide to any person taxpayer information
that can reasonably be regarded as necessary for the purposes of the
administration or enforcement of this Act, the Canada Pension Plan,
the Unemployment Insurance Act or the Employment Insurance Act,
solely for that purpose;
(b) provide to any person taxpayer information
that can reasonably be regarded as necessary for the purposes of determining
any tax, interest, penalty or other amount that is or may become payable by
the person, or any refund or tax credit to which the person is or may become
entitled, under this Act or any other amount that is relevant for the
purposes of that determination;
. . .
241(10)
Definitions – In this section,
. . .
"taxpayer
information" means information of any kind
and in any form relating to one or more taxpayers that is
(a) obtained by or on behalf of the Minister for
the purposes of this Act, or
(b) prepared from information referred to in
paragraph (a),
but does not include information that does not directly or
indirectly reveal the identity of the taxpayer to whom it relates and, for
the purposes of applying subsections (2), (5) and (6) to a representative of
a government entity that is not an official, taxpayer information includes
only the information referred to in paragraph (4)(l);
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Loi sur la taxe d’accise
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Loi de l’impôt sur le revenu
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295(2) Communication de renseignements − Sauf autorisation prévue au présent article, il est
interdit à un fonctionnaire ou autre représentant d'une entité
gouvernementale :
a) de fournir sciemment à quiconque un
renseignement confidentiel ou d'en permettre sciemment la fourniture;
b) de permettre sciemment à quiconque
d'avoir accès à un renseignement confidentiel;
c) d'utiliser sciemment un
renseignement confidentiel en dehors du cadre de l'application ou de
l'exécution de la présente partie.
(3) Communication de renseignements dans le cadre d'une
procédure judiciaire − Malgré toute autre
loi fédérale et toute règle de droit, nul fonctionnaire ou autre représentant
d'une entité gouvernementale ne peut être requis, dans le cadre d'une
procédure judiciaire, de témoigner, ou de produire quoi que ce soit,
relativement à un renseignement confidentiel.
(4) Communication de
renseignements en cours de procédures − Les paragraphes (2) et (3)
ne s'appliquent :
a) ni aux poursuites criminelles, sur
déclaration de culpabilité par procédure sommaire ou sur acte d'accusation,
engagées par le dépôt d'une dénonciation ou d'un acte d'accusation, en vertu
d'une loi fédérale;
b) ni aux procédures judiciaires ayant
trait à l'application ou à l'exécution de la présente loi, du Régime de
pensions du Canada, de la Loi sur l'assurance-emploi, de la Loi
sur l'assurance-chômage ou de toute loi fédérale ou provinciale qui
prévoit l'imposition ou la perception d'un impôt, d'une taxe ou d'un droit.
. . .
(5) Divulgation d'un
renseignement confidentiel − Un fonctionnaire peut :
a) fournir à une personne un
renseignement confidentiel qu'il est raisonnable de considérer comme
nécessaire à l'application ou à l'exécution de la présente loi, mais
uniquement à cette fin;
b) fournir à une personne un renseignement
confidentiel qu'il est raisonnable de considérer comme nécessaire à la
détermination de tout montant dont la personne est redevable ou du
remboursement ou du crédit de taxe sur les intrants auquel elle a droit, ou
pourrait avoir droit, en vertu de la présente loi;
. . .
295(1) Définitions – Les définitions
qui suivent s’appliquent au présent article :
. . .
« renseignement confidentiel »
Renseignement de toute nature et sous toute forme concernant une
ou plusieurs personnes et qui, selon le cas :
a) est obtenu par le ministre ou en
son nom pour l'application de la présente partie;
b) est tiré d'un renseignement visé à
l'alinéa a).
N'est pas un renseignement confidentiel le renseignement qui ne
révèle pas, même indirectement, l'identité de la personne en cause. Par
ailleurs, pour l'application des paragraphes (3), (6) et (7) au représentant
d'une entité gouvernementale qui n'est pas un fonctionnaire, le terme ne vise
que les renseignements mentionnés à l'alinéa (5)j).
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241(1) Communication de renseignements − Sauf autorisation prévue au présent article, il est
interdit à un fonctionnaire ou autre représentant d'une entité
gouvernementale :
a) de fournir sciemment à quiconque un
renseignement confidentiel ou d'en permettre sciemment la prestation;
b) de permettre sciemment à quiconque
d'avoir accès à un renseignement confidentiel;
c) d'utiliser sciemment un
renseignement confidentiel en dehors du cadre de l'application ou de
l'exécution de la présente loi, du Régime de pensions du Canada, de la
Loi sur l'assurance-chômage ou de la Loi sur l'assurance-emploi,
ou à une autre fin que celle pour laquelle il a été fourni en application du
présent article.
(2) Communication de renseignements dans le cadre d'une
procédure judiciaire − Malgré toute autre
loi ou règle de droit, nul fonctionnaire ou autre représentant d'une entité
gouvernementale ne peut être requis, dans le cadre d'une procédure
judiciaire, de témoigner, ou de produire quoi que ce soit, relativement à un
renseignement confidentiel.
(3) Communication de renseignements en cours de procédures − Les paragraphes (1) et (2) ne s'appliquent :
a) ni aux poursuites criminelles, sur
déclaration de culpabilité par procédure sommaire ou sur acte d'accusation,
engagées par le dépôt d'une dénonciation ou d'un acte d'accusation, en vertu
d'une loi fédérale;
b) ni aux procédures judiciaires ayant
trait à l'application ou à l'exécution de la présente loi, du Régime de
pensions du Canada, de la Loi sur l'assurance-chômage ou de la Loi
sur l'assurance-emploi ou de toute autre loi fédérale ou provinciale qui
prévoit l'imposition ou la perception d'un impôt, d'une taxe ou d'un droit.
. . .
(4) Divulgation d'un
renseignement confidentiel − Un fonctionnaire peut :
a) fournir à une personne un
renseignement confidentiel qu'il est raisonnable de considérer comme
nécessaire à l'application ou à l'exécution de la présente loi, du Régime
de pensions du Canada, de la Loi sur l'assurance-chômage ou de la Loi
sur l'assurance-emploi, mais uniquement à cette fin;
b) fournir à une personne un
renseignement confidentiel qu'il est raisonnable de considérer comme
nécessaire à la détermination de quelque impôt, intérêt, pénalité ou autre
montant payable par la personne, ou pouvant le devenir, ou de quelque crédit
d'impôt ou remboursement auquel elle a droit, ou pourrait avoir droit, en
vertu de la présente loi, ou de tout autre montant à prendre en compte dans
une telle détermination;
. . .
241(10) Définitions – Les définitions
qui suivent s’appliquent au présent article :
. . .
« renseignement confidentiel »
Renseignement de toute nature et sous toute forme concernant un ou
plusieurs contribuables et qui, selon le cas :
a) est obtenu par le ministre ou en
son nom pour l'application de la présente loi;
b) est tiré d'un renseignement visé à
l'alinéa a).
N'est pas un renseignement confidentiel le renseignement qui ne
révèle pas, même indirectement, l'identité du contribuable en cause. Par
ailleurs, pour l'application des paragraphes (2), (5) et (6) au représentant
d'une entité gouvernementale qui n'est pas un fonctionnaire, le terme ne vise
que les renseignements mentionnés à l'alinéa (4)l).
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[5]
The Privacy Act,
R.S.C. 1985, c. P‑21, provides as follows:
8(1)
Personal information under the control of a government institution shall not,
without the consent of the individual to whom it relates, be disclosed by the
institution except in accordance with this section.
Where personal information may be disclosed
(2) Subject to
any other Act of Parliament, personal information under the control of a
government institution may be disclosed
. . .
(c) for the purpose of complying with a subpoena or warrant issued or
order made by a court, person or body with jurisdiction to compel the
production of information or for the purpose of complying with rules of court
relating to the production of information;
(d) to the Attorney General of Canada for use in legal proceedings
involving the Crown in right of Canada or the Government of Canada;
[6]
In Scott Slipp
Nissan Ltd. v. Canada (Scott Slipp),
Phelan J. of the Federal Court also considered decisions pertaining to the
application and interpretation of section 241 of the ITA to rule on the
application and interpretation of section 295 of the ETA.
[7]
The Appellant in Scott
Slipp brought an application for judicial review before the Federal Court as
to its rights under section 295 of the ETA to the disclosure of a complete
audit file for an assessment. The Canada Revenue Agency (CRA) released a
redacted portion of the file but refused to release the balance of the file on
the basis that it contained third party information.
[8]
The judge confirmed
that the information requested was confidential information within the meaning
of section 295 of the ETA.
He quashed the decision of the CRA on the basis of paragraphs 295(5) and (6). He
did not address subsection 295(4), as “proceedings had yet to be commenced.”
The judge concluded that although there is no absolute duty on the Minister to disclose confidential
information within the
meaning of subsections 295(5) and (6), the Minister failed to properly exercise
the discretion to refuse to do so.
As the judge observed, “the Applicant is entitled to the disclosure of information
relevant to the assessment - information considered by CRA in making this
assessment.”
[9]
The judge stated that
“[t] he purpose
of the disclosure [of
the information requested] is to allow for the proper administration of the Act,
which includes the Notice of Objection process. . . . The disclosure is solely for that purpose. As such, it
falls squarely within paragraph 295(5)(a) of the Act.”
In his view, “[t]he
disclosure is also necessary for the determination of the liability or
obligation of the taxpayer, as contemplated by paragraph 295(5)(b). . . . The disclosure requested is
to permit the Applicant to better know and potentially reduce or eliminate his
alleged tax liability.” The judge also
stated, in reference to subsection 295(6) of the ETA, that the Minister can give to the
Applicant information relating to the Applicant, regardless of whether that information was provided
by the Applicant or by a third party.
[10]
The judge also noted
the following concerning the nature of the information requested by
distinguishing between information relating solely to a third party, that
relating to the taxpayer in the case, and that relating to both:
In exercising the discretion to
disclose confidential information, the Minister would have to have regard for
the nature of the information. There is a qualitative difference between
information held by CRA that relates solely to the tax affairs and business of
the third party and information supplied by the third party, especially
supplied under compulsion, that relates to the other taxpayer's (in this
instance, the Applicant's) tax affairs and business. Some information seems to
blur this difference, having a dual character in that it discloses information
about a third party and about the taxpayer/Applicant. A contract between the
third party and the Applicant, for example, discloses information about both.
[11]
The Supreme Court had an
opportunity to rule on the scope of section 241 of the ITA in Slattery (Trustee
of) v. Slattery.
Although that case pertains to the application of section 241 of the ITA in a
bankruptcy case, the Court’s comments on the purpose of section 241 may guide
the Court as to the application of sections 241 of the ITA and 295 of the ETA in
tax disputes. Iacobucci J., writing
for the majority of the Court,
stated as follows:
. . . [S]ection 241 involves a balancing of
competing interests: the privacy interest of the taxpayer with respect to
his or her financial information, and the interest of the Minister in being
allowed to disclose taxpayer information to the extent necessary for the
effective administration and enforcement of the Income Tax Act and other
federal statutes referred to in s. 241(4).
Section 241 reflects the importance of
ensuring respect for a taxpayer's privacy interests, particularly as that
interest relates to a taxpayer's finances. Therefore, access to financial
and related information about taxpayers is to be taken seriously, and such
information can only be disclosed in prescribed situations. Only in those
exceptional situations does the privacy interest give way to the interest of
the state.
As alluded to already, Parliament recognized
that to maintain the confidentiality of income tax returns and other obtained
information is to encourage the voluntary tax reporting upon which our tax
system is based. Taxpayers are responsible for reporting their incomes
and expenses and for calculating the tax owed to Revenue Canada. By
instilling confidence in taxpayers that the personal information they disclose
will not be communicated in other contexts, Parliament encourages voluntary
disclosure of this information. The opposite is also true: if
taxpayers lack this confidence, they may be reluctant to disclose voluntarily
all of the required information (Edwin C. Harris, Canadian Income Taxation
(4th ed. 1986), at pp. 26-27).
Parliament has also recognized, however, that
if personal information obtained cannot be used to assist in tax collection
when required, including tax collection by way of judicial enforcement, the
possession of such information will be useless. Disclosure of information
obtained through tax returns or collected in the course of tax investigations
may be necessary during litigation in order to ensure that all relevant
information is before the court, and thereby to assist in the correct
disposition of litigation. But this necessity is sanctioned by Parliament
in a very limited number of situations. Disclosure is authorized in
criminal proceedings and other proceedings as set out in s. 241(3).
Certain other situations are specified in s. 241(4), which have been
described by the Ontario Court of Appeal as being "largely of an
administrative nature" (Glover v. Glover (No. 1), supra,
at p. 397).
[12]
In Huron Steel
Fabricators (London) Ltd. v. Canada
(Huron Steel), Heald J. of the Federal Court was called to examine
the Minister's refusal to disclose to the applicants other taxpayers' income
tax returns, returns which the Minister relied on in assessing the applicants.
According to the Minister, the applicants and other taxpayers' entered into
fraudulent agreements which minimized the applicants’ tax burden. The applicants
requested access to such documents in order to prepare their appeals. The Minister
denied access by invoking section 41 (now repealed) of the Federal Courts
Act (FCA). The section provided as follows:
41(1) Subject to the provisions of any other
Act and to subsection (2), when a Minister of the Crown certifies to any
court by affidavit that a document belongs to a class or contains information
which on grounds of a public interest specified in the affidavit should be
withheld from production and discovery, the court may examine the document and
order its production and discovery to the parties, subject to such restrictions
or conditions as it deems appropriate, if it concludes in the circumstances of
the case that the public interest in the proper administration of justice
outweighs in importance the public interest specified in the affidavit.
[13]
The Court based its
decision on the interpretation of that section. As for section 241 of the ITA, the
judge stated that “[s]ection 241 has no application
to the situation here because subsection (3) thereof exempts the provisions of
subsections (1) and (2) from income tax proceedings such as this. Subsections
(1) and (2) are the provisions dealing with confidentiality.” Therefore, according
to the judge, it was clear that the applicants were entitled to the information
under subsection 241(3) of the ITA.
[14]
The Minister justified
his refusal to disclose the income tax returns on the ground of the public
interest. The judge did not accept that argument. According to him, “in the present case, the public interest in the proper
administration of justice far outweighs in importance any public interest that
might be protected by upholding the claim for privilege for the whole class.”
[15]
Finally, Heald J. ordered
that the income tax returns be disclosed to the applicants, noting that:
In income tax appeals, the onus is on the
taxpayer to demolish the Minister's assessments. In order to do this, he must
demolish the assumptions of fact upon which the Minister's assessments are
based. And yet, in this case, the Minister refuses to produce documents upon
which some of his assumptions are admittedly based.
[16]
The Federal Court of Appeal
(FCA) dismissed the Minister’s appeal in Huron Steel. Thurlow J.A. did
not accept the argument that the public interest justified the Minister’s refusal
to disclose the documents.
[17]
In Bassermann v.
Canada,
the Respondent taxpayer, a lawyer, appealed from a notice of reassessment that
demanded the payment of “Unemployment Insurance
premiums, penalties and interest in respect of the employment of persons
engaged by him from time to time through a secretarial service.” In his appeal
to the Tax Court of Canada (TCC), the taxpayer applied
for discovery. Couture C.J. of the TCC made an order
. . . which allowed him to examine an officer
of the Department of National Revenue under oath and also required that the
officer, on behalf of the Minister,
make discovery
on oath of all books, accounts, invoices, contracts, letters, statements,
records, returns, bills, vouchers, and copies of the same, in the
Respondent's possession or under its control relating
to the matter within the scope of this proceeding. [Emphasis added.]
[18]
After the order, the taxpayer
demanded production of the personal income tax
returns of five of the individuals supplied by the secretarial service.
Three of them did not consent to the Minister producing
their returns and the Minister therefore refused to
produce them. The taxpayer therefore moved
that the appeal be allowed by reason of the Minster’s failure to comply with
the Order. The TCC granted the motion and the Minister applied to the
FCA to set aside that decision.
[19]
The FCA dismissed the
Minister’s application. Mahoney J.A., who wrote the decision of the FCA, noted
the following with respect to the application of section 241 of the ITA:
Since the Order was made, substantial
amendments to section 241 of the Income Tax Act have come into force.
They would not have prevented what has happened here. The prohibition of
subsection (2) against disclosure of an income tax return "in connection
with any legal proceeding" is subject to the exception of paragraph (3)(b)
as to proceedings relating to the administration or enforcement of, among
others, the Unemployment Insurance Act. By subsection (6), notice to
"interested parties" is required only if a party to the proceeding
chooses to appeal the order to disclose. The Order made here can still be made
without a taxpayer knowing that his or her return is required to be disclosed
in its entirety to a business connection.
[20]
The judge also noted
that the Minister did not appeal from the Order of the TCC. In his view,
[p]ublic policy arguments we heard from the
Applicant might have been very persuasive in obtaining a different order but,
as with the relevance arguments, they are not pertinent at this stage. They
provide no excuse for failure or refusal to obey the Order and no basis for a
finding of error by the learned Tax Court judge.
[21]
The words of the judge
confirm that the Court can dismiss a motion seeking information disclosure in
accordance with sections 241(3) of the ITA and 295(4) of the ETA
for reasons of public policy and relevance.
[22]
The Appellant in General
Motors Acceptance Corp. of Canada v. Canada (General
Motors) brought a motion seeking an order pursuant to sections 88 and 110 of
the Rules requiring the Respondent to disclose to it documents which, in its
view, were used to assess it.
The documents sought were as follows: an agreement between among the Appellant’s
competitors, a departmental memorandum respecting the validity of the agreement,
a document entitled “Revenue Reporting Practices Employed in Respect of the
Cost of Low-cost Financing Programs in the Automotive Industry,” and all other documents
mentioned in the latter.
[23]
Bell J. denied the
order on the ground that “the Respondent's reliance
upon the documents sought by the Appellant for purposes of assessing the
Appellant has little, if any, foundation” and that the documents
sought by it were not relevant in the determination
of its appeal Furthermore, according
to the judge, “the information with respect thereto
cannot within the meaning of paragraph 241(4)(b) of the Act reasonably
be regarded as necessary for the purposes of determining any tax, interest,
penalty or other amount that is or may become payable by the Appellant.”
[24]
Bell J. also an opportunity
to consider Page v. The Queen,
in which the disclosure of documents involving third parties who were not parties
in the case was sought. He summarized the substance of the decision as
follows:
In that case, three of five directors of a
company which failed to deduct or withhold and remit amounts to the Receiver
General for Canada were assessed in respect of directors' liability. The other
two were not so assessed. This Court ordered that documents [not including income tax returns] to the extent that
they related to the other two taxpayers, which may have contained inaccurate
information and may have influenced the decision of Revenue Canada respecting
the liability of directors, be produced. In that case the five directors
were united in a common endeavour. It was the Court's opinion that such
documents were reasonably regarded as necessary for the purpose of determining
any tax, interest or penalty payable under the Act.
[Emphasis added.]
[25]
In
Heinig v. Canada,
Webb J. of the TCC dealt with an application by the Appellant for an order
requiring the Minister to produce a certain number of documents. In dispute was
the amount of certain payments that one Heather Mailow had made to the
Appellant. The Respondent provided the documents sought, but had redacted the
income of Ms. Mailow and her social insurance number as well as the social
insurance number of other individuals. The Appellant was seeking the redacted
information. The Appellant was also seeking a number of other documents the
Respondent refused to provide her with under the pretext that they were
confidential.
[26]
Webb J. noted that “[s]ection 241 of the ITA and
section 295 of the ETA provide restrictions on the
release of taxpayer information. Each statute contains an exception in respect
of any legal proceedings related to the administration or enforcement of that
particular Act.”
[27]
The judge observed that,
in Huron Steel, “[t]he Federal Court of Appeal
. . . confirmed
that the tax returns of a third party that had been relied upon by the Minister
in assessing the taxpayer in that case were to be disclosed to the taxpayer.”
He also cited the words of Associate Chief Justice
Jerome (as he then was) of the Federal Court Trial Division in Oro Del Norte, S.A. v. The Queen, who dealt with a request for the production of documents
and information in relation to third parties. According
to Jerome J.:
A taxpayer must
therefore be permitted access to all documents which are relevant to or relied
upon by the Minister of National Revenue in reassessing a return. Counsel for the defendant concedes that the broad test of relevancy
expounded by McEachern, C.J. in Boxer and Boxer Holdings
Ltd. v. Reesor et al. (1983), 43 B.C.L.R. 352,
35 C.P.C. 68, and
adopted by Urie, J. in Everest & Jennings Canadian Ltd.
v. Invacare Corporation, [1984] F.C.J. No. 67,
[1984] 1 F.C. 856
(F.C.A.) applies:
It seems to me that the clear
right of the plaintiffs to have access to documents which may fairly lead them
to a train of inquiry which may directly or indirectly advance their case or
damage the defendant's case particularly on the crucial question of one party's
version of the agreement being more probably correct than the other, entitles
the plaintiffs to succeed on some parts of this application.
In order to
determine whether the plaintiff has satisfied this relevancy test regard must
be had to the essence of its appeal from the defendant's reassessment of the
income tax return.
(emphasis added)
[28]
Webb J. refused to
order that the redacted information be provided to the Appellant as the social
insurance numbers of Heather Mailow and other individuals were not relevant in relation to the determination of the
amounts that Heather Mailow paid to the Appellant. He expressed the view that to have a right
“to all documents does not necessarily mean that an
entire document should be disclosed to an appellant if only part of that
document is relevant to the appeal and another part contains confidential third
party information that is not relevant to the appeal.” In his opinion,
. . . it would not be appropriate for the entire
document to be disclosed if these parts could be severed. Only the relevant
part will be required to be disclosed if the relevant part can be severed from
the irrelevant part without rendering the relevant part incomprehensible.
If the irrelevant part that contains confidential third party information
cannot be severed from the relevant part without rendering the relevant part
incomprehensible, then the entire document would have to be disclosed.
[Emphasis added.]
[29]
The judge stated that
the income of Heather Mailow was relevant to determine whether the Appellant had
received payments from that person and that the income should not have
therefore been redacted in the documents provided by the Respondent. The judge noted
that the Respondent had obscured the income of Heather Mailow in one of the documents
sought, but not in the other. He therefore found that it was not necessary to order
that the Respondent provide the first document that was not redacted, as the
Appellant had been informed of the income of Heather Mailow in the other.
[30]
The Respondent did not
provide the judge with the documents that, according to her, were confidential.
Webb J. was unable to determine their nature and grant, if necessary, a
disclosure order.
The judge ordered cross-examination on the affidavit
of documents, noting that the Appellant would be entitled to make a
motion to the Court after such cross-examination
if in her opinion the Respondent still had documents containing relevant information.
[31]
In April, Campbell J.
Miller J. discussed the scope of examination for discovery in HSBC Bank
Canada v. The Queen.
Although in that case the application of section 241 of the ITA or section
295 of the ETA was not in issue, it is nonetheless interesting as the Court
discussed the criterion of relevance in the case of a request for disclosure of
documents. The Appellant in that case brought a motion under sections 92 and
110 of the Rules asking that the Minister answer 53 disclosure requests.
[32]
The judge derived from
the case law a list of principles governing the determination of information
that must be revealed at an examination for discovery. He then stated that,
while the principles drawn from the case law were useful, they could not be applied
in a formulaic fashion. In his view:
Rather, it must
always be borne in mind what the Parties and the Court are trying to achieve
with examinations for discovery; that is, a level of disclosure so that each
side can proceed efficiently, effectively and expeditiously towards a fair
hearing, knowing exactly the case each has to meet. Presumably that is why
there is an attitude from the Courts of, as former Chief Justice Bowman put it,
providing wide latitude. . . . Counsel should be well aware
that at one end of the spectrum fishing expeditions are discouraged and at the
other end of the spectrum very little relevance need be shown to render a
question answerable.
[33]
Campbell J. Miller J.
noted the principles that defnie the scope of discovery:
[13] . . . Justice Valerie Miller
recently summarized some of the principles in the case of Kossow
v. R:
1. The principles for relevancy were
stated by Chief Justice Bowman and are reproduced at paragraph 50:
(a) Relevancy on discovery must be broadly and
liberally construed and wide latitude should be given;
(b) A motions judge should not second guess the
discretion of counsel by examining minutely each question or asking counsel for
the party being examined to justify each question or explain its relevancy;
(c) The motions judge should not seek to impose
his or her views of relevancy on the judge who hears the case by excluding
questions that he or she may consider irrelevant but which, in the context of
the evidence as a whole, the trial judge may consider relevant;
(d) Patently irrelevant or abusive questions or
questions designed to embarrass or harass the witness or delay the case should
not be permitted.
2. The threshold
test for relevancy on discovery is very low but it does not allow for a
"fishing expedition": Lubrizol Corp. v.
Imperial Oil Ltd.
3. It is proper to
ask for the facts underlying an allegation as that is limited to
fact-gathering. However, it is not proper to ask a witness the evidence that he
had to support an allegation: Sandia Mountain
Holdings Inc. v. The Queen.
4. It is not proper
to ask a question which would require counsel to segregate documents and then
identify those documents which relate to a particular issue. Such a question
seeks the work product of counsel: SmithKline Beecham
Animal Health Inc. v. R.
5. A party is not
entitled to an expression of the opinion of counsel for the opposing party
regarding the use to be made of documents: SmithKline
Beecham Animal Health Inc. v. The Queen.
6. A party is
entitled to have full disclosure of all documents relied on by the Minister in
making his assessment: Amp of Canada Ltd., v. R.
7. Informant
privilege prevents the disclosure of information which might identify an
informer who has assisted in the enforcement of the law by furnishing assessing
information on a confidential basis. The rule applies to civil proceedings as
well as criminal proceedings: Webster v. R.
8. Under the Rules a party is not required to provide to the opposing
party a list of witnesses. As a result a party is not required to provide a
summary of the evidence of its witnesses or possible witnesses: Loewen v. R.
9. It is proper to
ask questions to ascertain the opposing party's legal position: Six Nations of the Grand River Band v. Canada.
10. It is not proper
to ask questions that go to the mental process of the Minister or his officials
in raising the assessments: Webster v. The Queen.
[14] The following additional
principles can be gleaned from some other recent Tax Court of Canada case
authority:
1. The examining party is entitled to
"any information, and production of any documents, that may fairly lead to
a train of inquiry that may directly or indirectly advance his case, or damage
that of the opposing party": Teelucksingh v. The
Queen.
2. The court should preclude only
questions that are "(1) clearly abusive; (2) clearly a delaying tactic; or
(3) clearly irrelevant": John Fluevog Boots
& Shoes Ltd. v. The Queen.
[15] Finally in the recent decision
of 4145356 Canada Limited v. The Queen I concluded:
(a) Documents that lead to an assessment are
relevant;
(b) Documents in CRA files on a taxpayer
are prima facie relevant, and a request for those documents is itself
not a broad or vague request;
(c) Files reviewed by a person to prepare for an examination for discovery are
prima facie relevant; and
(d) The fact that a party has not agreed
to full disclosure under section 82 of the Rules does not prevent a request for
documents that may seem like a one-way full disclosure.
[34]
The Respondent provided
me with a copy of Her Majesty The Queen v. Charles Commanda (Commanda)
of the Quebec Court of Appeal. Commanda pertained to a motion for the disclosure
of documents in the penal and not fiscal context. The accused in the case
sought from the Attorney General the disclosure of evidence, notably “evidence tending to confirm or disprove the status of each
of the [defendants] as Aboriginal” and “to
confirm or disprove [their] Aboriginal right.” According to
the Attorney General, the evidence the defendants were seeking to obtain fell “outside the scope of the obligation to disclose.”
[35]
The Court of Appeal ruled
that the Attorney General was not required to disclose the evidence sought. According
to the Court, “[t]he Crown, however, is not obliged
to respond to requests for information that are speculative, fanciful,
disruptive, unmeritorious, obstructive, and time-consuming (R. v. Chaplin, supra at para.
32).”
The Court also stated as follows:
The Crown's obligation to disclose is limited
to documents in its possession in the context of the criminal prosecution it
has undertaken. By its very nature and purpose, the information the defendants
request is not part of the Crown's case. At least, not yet. It is external to
the elements of the offences with which the defendants are charged. It consists
essentially of information and reports that may be (or probably are) available
to the government but that, at the present stage of the proceedings, the Crown
has not needed to identify or assess for the purposes of the trial. Therefore,
in my view, the request goes beyond the obligation to disclose.
[36]
According to the case
law pertaining to subsections 295(4) and (5), the taxpayer must have access to documents
and information the Minister relies on to make an assessment or which are
relevant to the assessment. The case law has accepted that the following information
involving a third party must be disclosed to the taxpayer contesting an
assessment, insofar as the information has been taken into account by the CRA
or could have influenced the CRA in making an assessment:
(a)
income tax returns (Huron
Steel; Bassermann v. Canada);
(b)
the amount of a third
party's income (Heinig v. Canada);
(c)
information exchanged between
the Minister and the directors of a company who were not the subject of an
assessment involving other directors of the same company, written records of other communications between the Minister
and his directors, as well as related memoranda (Page v. The Queen).
[37]
The case law shows that
Courts will not order the disclosure of information concerning third parties
when the Minister had virtually no reason to use the information to make an
assessment. In Budget Propane Corp. v. Canada, it was the personal
and corporate income tax returns of an intervenor; in General Motors, it
was an agreement between the applicant’s competitors, a related departmental memorandum
and reviews by the Agency; in Heinig v. Canada, it was the social
insurance numbers of third parties.
[38]
The case law does not address
the fact that subsections 295(4) of the ETA and 241(3) of the ITA, contrary to
subsections 295(5) of the ETA and 241(4) of the ITA, do not specify that the
information that may be provided must be relevant to case. I am of the view,
however, that the information being sought must be relevant, since relevance is
an essential criterion for examination of discovery. In Bassermann, the Court
of Appeal also noted that relevance and public policy are elements that may be
taken into account in an application for a disclosure order.
[39]
On the basis of my review
of the above-mentioned case law, I conclude that although the Appellant has the
right to have access to the files of audits conducted by the CRA, the
Respondent or the Deputy Minister of Revenu Québec, in the case of the Deputy
Minister of Revenu Québec, the Appellant only has a right of access to the information
related to the excise tax audit report subject to Part IX of the ETA.
[40]
As stated by Associate Chief Justice Jerome of the Federal Court in
Oro Del Norte, S.A. v. The Queen, supra: “A taxpayer must therefore be permitted access to all documents which are
relevant to or relied upon by the Minister of National Revenue in reassessing a
return.” In the Reply to the Notice of Appeal, the Respondent alleges that
the subcontractors at issue did not have [Translation] “the staff or the equipment to provide the contracted services they
undertook [according to the Appellant] to provide for the Appellant.” It is reasonable
at this stage, to conclude that, prima facie, the audit reports regarding
the taxpayers may contain relevant information, such as income declared by the
companies, number of employees, etc., that may be useful to either party’s case.
[41]
In this case, the
Respondent confirmed that the auditor who drafted the Appellant’s audit report
drew on a colleague’s audit of the three subcontractors. It appears to me that
such confirmation is sufficient to warrant the conclusion that the Appellant should
have access to the reports, as the information they contain is relevant to the
assessment. Under the principles set out by Campbell J. Miller J., in HSBC
Bank Canada v. The Queen, supra, the notion of relevance must be
interpreted broadly.
[42]
This leads us to the
second issue, that is, whether the Court should order that the Respondent
provide the last known contact information for the subcontractors, their
shareholders, directors and employees, as well as the records of employment issued
by the subcontractors to their employees over the course of the relevant period.
[43]
To my knowledge, there
is no decision relating to a taxpayer’s request to have access to the contact
information of third parties as well as their records of employment. That
information, if in the Minister’s possession, is confidential in accordance
with subsection 295(1) of the ETA. In my opinion, the Court can order that the
information be disclosed under subsections 295(4) and 295(5), if relevant to
the case.
[44]
According to the
Appellant, the information is relevant as it will enable it to refute the
Respondent’s conclusion, in the Reply to the Notice of Appeal, according to
which the subcontractors did not have [Translation] “the staff or the equipment to provide
the contracted services they undertook to provide for the Appellant.”
[45]
The Respondent accuses the
Appellant of engaging in a fishing expedition and of using the Respondent as an
information officer.
The Respondent advanced the public policy argument that it should not be
permitted to make orders that systematically compel the CRA to provide
information of that nature without any specifications or information the CRA
does not have on hand. According to the Respondent, such an order would go
against the examination for discovery rule, according to which a witness cannot
create a document.
The Respondent also argues that the Appellant’s motion is premature, as she has
yet to question the auditor.
[46]
The Appellant should, according
to the Respondent, know the contact information of its subcontractors under subsections
169(4) of the ETA and should make its own inquiries with the subcontractors to
find the information sought.
Also, according to the Respondent, the records of employment of the employees’
subcontractors are not relevant as they do not prove that the employees performed
worked under subcontracts for the Appellant.
[47]
I understand the arguments
put forward by counsel for the Respondent, as I have just summarized them. Nevertheless,
from my reading of the judgments of the Court and of the Federal Court of Appeal
in Amiante Spec Inc. v. Canada
, I am of the view that that case stands for the proposition that all elements
necessary for the deductibility
of inputs for each
subcontractor must be proven by the Appellant. The Appellant could subpoena its
subcontractors’ representatives to establish that evidence and confirm that the
services were actually performed so as to avoid an unfavourable inference, as
was the case in Amiante Spec. Despite research that on its face seems
reasonable, the Appellant was unable to track down any of the subcontractors, directors
or employees. Consequently, I don't think that it would be too great a burden in
this case to ask the Respondent and the CRA to provide, insofar as they are
available, the records of employment of the subcontractors’ employees for the
relevant period, on the sole basis of the subcontractors’ income tax returns for
the period in issue or for the two previous years, if they were filed with the CRA.
For these reasons, the Respondent must produce the last known contact
information for Construction Pro‑Dal (9114‑0566 Québec Inc.), Les
Constructions Vimont Inc., Construction P. Bourget Inc. and Construction Nikita
(9125‑9853 Québec Inc.), and their shareholders, directors and
employees, as well as the records of employment issued by the companies to their
employees during the relevant period.
Signed at Ottawa, Canada, this 12th day of October
2010.
“Robert J. Hogan”
Translation certified true
on this 22nd
day of December 2010.
François Brunet, Revisor
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