Piersanti v. The Queen, 2010 TCC 430

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2010 TCC 430

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Docket: 2008-2863(IT)G

BETWEEN:

TERRY PIERSANTI,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

____________________________________________________________________

Motions heard on June 17, 2010 at Toronto, Ontario

Before: The Honourable Justice Diane Campbell

Appearances:

Counsel for the Appellant:

V. Ross Morrison

R. Samantha Chapman

Counsel for the Respondent:

Laurent Bartleman

____________________________________________________________________

ORDER

Upon Motion by the Respondent seeking an Order for the following relief:

1. directing that within 30 days of the order issuing as a result of this motion the Appellant:

(i) complete the undertakings that she gave at her examination for discovery in response to questions 108, 289, 311, 324, 423 and 427;

(ii) answer questions 23, 26, 27, 53, 55, 384 to 386, 427, 606, 608, 645, 657, 659 and 662 that she took under advisement at her examination for discovery but failed to answer; and

(iii) answer questions 20, 32, 34, 55, 62, 90, 133, 145, 149, 152, 182, 189, 198, 242, 246, 248, 250, 304, 549, 553, 587, 588, 601, 672 to 676, 682 to 691 that she refused to answer at her examination for discovery;

2. costs on this motion payable forthwith in any event of cause; and

3. such further and other relief as this Court may deem just.

And upon motion by the Appellant seeking an Order for the following relief:

1. Directing that within 30 days of the order issuing as a result of this motion the representative of the Respondent, John DiRito:

(a) answer questions 230, 234, 236, 237, 241, 247, 253, 267, 270, 282, 303, 324, 328, 347, 348, 353, 354, 474, 498, 500, 506 and 541 that he took under advisement at his examination for discovery but failed to answer;

(b) answer questions 62, 70, 93, 95, 98, 121, 122, 126, 128, 132, 134, 152, 161, 162, 163, 176, 179, 184, 185, 188, 189, 193, 199, 200, 201, 209, 211, 212, 213, 214, 215, 221, 222, 226, 227, 229, 239, 246, 265, 277, 279, 293, 295, 296, 299, 302, 304, 308, 334, 337, 352, 375, 450, 451, 481, 591, 692, 818, 824, 931, 958, 976 and 979 that he refused to answer at his examination for discovery; and

2. Costs of this motion payable forthwith in any event of the cause; and

3. Such further and other relief as to this Honourable Court may seem just.

And upon hearing submissions of the parties;

IT IS ORDERED THAT:

With respect to the Respondent’s Motion:

1. The Appellant will answer the following questions and provide the requested documents and minute books:

Schedule “A”	1, 2, 3, 4, 5, 6, 7
Schedule “B”	1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20
Schedule “C”	1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33
Schedule “D”	Further questions that may arise from the responses contained in this schedule

The Appellant is therefore directed to respond to all of the questions in Schedules “A”, “B” and “C” attached to this Order.

With respect to the Appellant’s Motion:

2. The Respondent’s nominee will answer the following questions:

126, 128, 132, 162, 176, 185, 214, 222, 293, 304.

3. The Respondent’s nominee is also directed to answer those questions respecting the origin of the documents, subject to any claims of privilege that might arise, subject to any documents being publicly available or under the control of the Appellant: those questions include 62, 70, 93, 95, 98, 121, 193, 211, 221, 222, 229, 239, 246, 265, 277, 279, 299, 302, 308, 337, 375, 818, 824, 931 and 958.

Order of Lamarre J.

4. The timetable contained in the Order of Lamarre J., dated December 8, 2009, is amended to allow for the following:

With respect to the Respondent’s Motion:

(a) The Respondent shall provide the Appellant with any further questions arising out of the Appellant’s written responses of May 28, 2010 by September 20, 2010;

(b) The Appellant is directed to provide responses to the Respondent’s potential questions arising from the May 28, 2010 correspondence, together with responses to those questions/refusals which I have directed the Appellant to answer in my Reasons by October 4, 2010;

(d) The Appellant shall provide those responses to the Respondent by November 1, 2010.

With respect to the Appellant’s Motion:

(a) The Respondent shall provide responses in respect to the questions which I have directed the Respondent to answer by September 20, 2010;

(b) The Appellant shall forward to the Respondent any questions arising from the Respondent’s responses by October 4, 2010; and

5. All of the communications directed in paragraph 4 shall be made in writing.

6. Discoveries shall be completed within the established timetable. There shall be no further amendments to the dates set out in paragraph 4.

7. Costs are awarded to the Respondent, payable forthwith in any event of the cause.

Signed at Charlottetown, Prince Edward Island, this 20th day of August 2010.

“Diane Campbell”

Campbell J.

Citation: 2010 TCC 430

Date: August 20, 2010

Docket: 2008-2863(IT)G

BETWEEN:

TERRY PIERSANTI,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

REASONS FOR ORDER

Campbell J.

[1] The Appellant was reassessed in respect to the 1995, 1996 and 1997 taxation years and amounts were included in her income pursuant to subsection 6(1) of the Income Tax Act (the “Act”). The Minister of National Revenue (the “Minister”) alleges that the Appellant received benefits from a number of closely related corporations or trusts by way of cash advances paid directly to her or paid to cover third party expenses. The Appellant alleges that these cash advances were the result of repayments of loans that the Appellant had previously made to the corporations or trusts.

[2] By Order dated July 6, 2009, which was amended on July 13, 2009, Bowie J. set out a timetable for completion of exchange of lists of documents, examinations for discovery and satisfaction of any resulting undertakings. Pursuant to a Motion by the Appellant dated November 10, 2009, the timetable contained in that Order was amended by further Order of Lamarre J. dated December 8, 2009. According to this Order, the Appellant was to complete undertakings by December 31, 2009. The Order concluded by stating that: “There will be no further extensions granted in respect of the above‑mentioned schedule.”

[3] The Appellant failed to complete the undertakings given at the examination for discovery by December 31, 2009. Subsequently, on January 7, 2010, the Appellant provided a written response to the Respondent which addressed some of the Appellant’s undertakings. The Respondent’s nominee, John DiRito, was examined by the Appellant on January 26 and 27, 2010. By letter dated March 29, 2010, the Respondent provided a response to the undertakings given at this examination for discovery and to those questions taken under advisement. On May 28, 2010, the Appellant again provided further written responses which, according to the Respondent, did not fully address all of the Appellant’s undertakings.

[4] On June 8, 2010, the Respondent filed a Motion pursuant to section 110 of the Tax Court of Canada Rules (General Procedure) (the “Rules”) for the following:

1. directing that within 30 days of the order issuing as a result of this motion the Appellant:

(i) complete the undertakings that she gave at her examination for discovery in response to questions 108, 289, 311, 324, 423 and 427;

(ii) answer questions 23, 26, 27, 53, 55, 384 to 386, 427, 606, 608, 645, 657, 659 and 662 that she took under advisement at her examination for discovery but failed to answer; and

2. costs on this motion payable forthwith in any event of cause; and

3. such further and other relief as this Court may deem just.

[5] On June 11, 2010, the Appellant filed a Motion also pursuant to section 110 of the Rules for the following:

1. Directing that within 30 days of the order issuing as a result of this motion the representative of the Respondent, John DiRito:

2. Costs of this motion payable forthwith in any event of the cause; and

3. Such further and other relief as to this Honourable Court may seem just.

Both Motions were heard consecutively.

ANALYSIS

[6] There is considerable case law establishing the principles that govern whether questions will be permitted in an examination for discovery. Relevancy is the key and wide latitude is generally advocated. Questions will be relevant as long as they broadly relate to or affect the matters raised in the pleadings. Such a liberal approach supports the broad purpose of examinations for discovery, which is to enable all parties to be fully informed of the issues and the respective positions on those issues in order to know the case each has to meet so that the hearing process will advance efficiently. Courts generally refrain from interfering in this process except under circumstances where questions are clearly irrelevant or where conduct is abusive or meant to be a delaying tactic.

[7] The decision in Baxter v. The Queen, 2004 D.T.C. 3497, at paragraph 13, summarized the principles which emerge from the case law as follows:

[13] From these and other authorities referred to by counsel, I can summarize the principles that should be applied:

(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.

[8] In addition to the above mentioned principles, V.A. Miller J. in Kossow v. The Queen, 2008 D.T.C. 4408, at paragraph 60, states:

[60] A summary of the general principles from the case law is as follows:

1. The principles for relevancy were stated by Chief Justice Bowman…[referring to Baxter].

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 has 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. The Queen.

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 v. Canada.

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. The Queen.

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. the Queen.

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.

[9] The Respondent submitted four schedules which contained a breakdown of the actual questions at issue in the Respondent’s Motion. Those schedules consist of:

Schedule “A” - the Appellant’s unanswered undertakings;

Schedule “B” - the unanswered questions taken under advisement by the Appellant;

Schedule “C” – the Appellant’s refusals; and

Schedule “D” – the undertakings answered by the Appellant in the May 28, 2010 correspondence.

For ease of reference, I have attached these same schedules to my Reasons.

[10] In respect to the Appellant’s Motion, I have attached those questions which the Appellant alleges the Respondent refused to answer as Schedule “E” and those questions which the Respondent took under advisement but failed to answer as Schedule “F”. Since the Appellant’s Motion neglected to attach a complete list of the questions which the Appellant alleges the Respondent refused to answer, I have attached those questions/responses from the examination of John DiRito that were attached as Schedule “C” to the Respondent’s Written Representations filed on June 16, 2010.

[11] I have grouped the questions into twelve primary areas in respect to the Respondent’s Motion and three areas in respect to the Appellant’s Motion. I will discuss the various questions as they relate to these areas. I have dealt with the Respondent’s Motion by referring to the actual numerical numbers which were assigned to each question/response in the Schedules “A”, “B”, “C” and “D”. I addressed the Appellant’s Motion by referring to the actual question numbers as they appeared in the transcript evidence.

THE RESPONDENT’S MOTION

(A) Information Requested for the Period Prior to those Years Under Appeal

(i) Who were the officers/shareholders of the group of closely held companies including Gold Financial Corporation, Polar Property Management Inc., 789533 Ontario Ltd. and Yonge Davis Centre Inc. prior to 1995?; and

(ii) Information Requested respecting loans made to Gold Financial Trust prior to 1995;

Questions on Schedule “C”: 4, 5, 8, 9, 10, 12, 13, 14, 15, 17 and 18

[12] The Appellant submits that her responses should be limited to the years under appeal, 1995, 1996 and 1997. Because the Appellant has taken the position that the amounts in issue are repayments of loans made by her, the Respondent submits that the circumstances surrounding these loans as they relate to years prior to 1995 are relevant to the issues.

[13] In Waskowec v. The Queen, 94 D.T.C. 6149, the taxpayer was required to respond to discovery questions about the history of his business that related to years outside those under appeal where such questions might lead to the discovery of facts that could be relevant to the issues. According to the Respondent, the position, taken by the Appellant that these amounts were loans rather than income, means that the Respondent should be able to examine all of the years in which the loans were made. I agree with the Respondent’s submissions. Because of the nature of the issues and the Appellant’s position on those issues, it would be inappropriate to permit the Appellant to respond only to questions concerning the years under appeal. If the Appellant intends to rely on this position, the circumstances surrounding these loans and repayments become central to the issues and she cannot now take the position that they are irrelevant. It will take very little effort on the Appellant’s part to specify if and when she was an officer/director of one of these companies and to identify the events and particulars surrounding the loans. The Appellant will answer these questions.

(B) To provide information concerning amounts exchanged between the Appellant and Gold Financial Trust together with information on the source of the loans.

Questions on Schedule “A”: 2, 3, 4, 6 and 7

Questions on Schedule “B”: 7 and 8

[14] Because the position taken by the Appellant makes those amounts allegedly exchanged between the Appellant and Gold Financial Trust key to issues in the appeal, such questions meet the threshold test for relevancy. The Appellant is directed to answer these questions and she is reminded that providing imprecise responses such as, “They are in the general ledger” are unresponsive and will not be tolerated should these matters make a return visit to this Court.

(C)

(i) Who were the directors/officers/shareholders of Gold Financial Corporation?

(ii) Was the Appellant ever an officer/trustee of Pier Properties Inc.?; and

(iii) Was the Appellant ever a trustee of Piersanti Financial Trust?

Questions on Schedule “A”: 1 and 5

Questions on Schedule “B”: 1, 2, 3, 4, 5, 6

Questions on Schedule “C”: 2 and 3

[15] Some of these questions relate to the issue of ownership of Gold Financial Corporation and the assumption(s) contained in the Reply to the Notice of Appeal that state that corporate disbursements were made at the direction of the Appellant for her benefit or for the benefit of third parties. These questions, as well as the questions concerning Pier Properties Inc. and Piersanti Financial Trust, meet the threshold for relevancy. The Appellant is directed to answer these questions and to respond even if the line of inquiry may lead to questions concerning years prior to 1995.

(D) Information concerning disbursements made by Gold Financial Trust / Piersanti Financial Trust.

Questions on Schedule “B”: 9 and 10

[16] At paragraph 11 of the Notice of Appeal, the Appellant asserts that any disbursements made by corporations were reported and disclosed in the T3 tax returns. Consequently, the Respondent’s requests that the Appellant identify these reported amounts are relevant. The Appellant is directed to respond, as such details should be provided.

(E) Information concerning the education and extra-curricular activities of the Appellant’s children.

Questions on Schedule “B”: 11, 12 and 14

[17] The Appellant is directed to answer these questions. They are clearly relevant, particularly in light of the Respondent’s assumptions that disbursements were made to persons other than the Appellant and that the Appellant benefited from those disbursements. In addition, the Respondent’s assumptions also list those third parties.

(F) Corporate Information / Minute Books

Respondent’s requests for minute books/banking information and whether the Appellant had signing authority respecting Gold Financial Corporation, 789533 Ontario Ltd., Pier Properties Inc., Polar Property Management Inc. and Yonge David Centre Inc..

Questions on Schedule “B”: 15, 16, 17, 18, 19 and 20

Questions on Schedule “C”: 1, 6, 7, 11 and 16

[18] All of the requested information relates to corporations specifically referenced in the Notice of Appeal. The Respondent alleges that amounts were transferred under the direction of the Appellant for her benefit. The Respondent submits that the minute books would assist in ascertaining which individuals controlled these companies and, because the Appellant referred to minute books in her response to another question, she has put them in issue. In Smithkline Beecham Animal Health Inc. v. The Queen, 2001 D.T.C. 192, the Federal Court of Appeal confirmed that a “train of inquiry” test should be applied to documents and that documents will be relevant if they may reasonably lead to a train of inquiry that can advance the party’s case or damage that of its adversary. Since these questions satisfy the train of inquiry test and would be pertinent to the issue of the origin of the disbursements, the Appellant is directed to answer the questions and provide the requested documents and minute books.

(G) Was the Appellant ever a director/officer/shareholder of Duvernay Shopping Centres Inc.?

Question on Schedule “C”: 19

[19] The Respondent alleges that the disbursements were derived from “certain operations” that include commercial and rental activities (assumption 5(e) and (bbb) of the Reply). These activities are not specifically identified by the Respondent and there are no specific allegations connecting the Duvernay Shopping Centres to the corporate disbursements. The Appellant submits that this corporation is irrelevant to the appeal. While the Minister may not go on a so-called fishing expedition to determine facts that could have been discovered during the audit, I believe that the Respondent is entitled to pursue a line of questioning where there is a possibility that if the Appellant controlled Duvernay then some of the disbursements may be traceable to it. The Respondent is entitled to ascertain whether Duvernay is part of this group of closely connected companies even though it is not named in the Reply. As the Respondent suggests, this line of questioning is not in the nature of a fishing expedition because it opens a train of inquiry rather than asking questions in the hope that they may lead to a train of inquiry. Since this question meets the broad approach to relevancy and may be relevant in the context of the evidence as a whole, I direct the Appellant to respond to this question.

(H)

(i) Was the Appellant or her spouse a guarantor for the Greenbrook residence mortgage?; and

(ii) Information requested concerning the business activities of Gold Financial Corporation.

Question on Schedule “B”: 13

Question on Schedule “C”: 20

[20] The question respecting guarantors is the result of the issue raised in the Reply which suggested that the Appellant was the beneficial owner of the Greenbrook residence (paragraph 7 of the Reply). It may be directly related to the Respondent’s allegation that the resources of the group of related companies were used to pay the Appellant’s personal expenses. In respect to Question 20, Schedule “C”, the Respondent makes the assumption that Gold Financial Corporation did not carry on a business or conduct business activities (Assumption 5(f) of the Reply).

[21] I think both of these questions are relevant because they fall within the wide latitude afforded questions that “may” touch on the issues. They may touch on issues which the Judge hearing the appeals may consider relevant. The Appellant is directed to respond to these questions.

(I) Questions requesting confirmation of the amounts of the disbursements as listed in charts contained in the Reply.

Questions on Schedule “C”: 21 and 22

[22] The disbursement amounts are clearly relevant to the issues in this appeal and I believe the questions surrounding the issue of amounts should be answered. The Appellant’s records should support her agreement or disagreement with the amounts listed and if she disagrees with those amounts, she should be able to refer to the figures which her records do support. Therefore, the Appellant is required to respond to these questions and, in any event, it appeared that an undertaking to do so was provided at the response to Questions 602-603.

(J) Requests for credit card information.

Questions on Schedule “C”: 26, 27, 28, 29, 30, 31, 32 and 33

[23] These questions are clearly appropriate and meet the threshold for relevancy because they relate to the Respondent’s submissions that the corporate disbursements made to several credit cards were to pay the Appellant’s personal expenditures (assumption 5(cc), (dd) and (ee) of the Reply. The Appellant is directed to respond to these questions.

(K) Questions respecting an Agreed Statement of Facts together with the guilty plea in the criminal proceeding.

Questions in Schedule “C”: 23, 24 and 25

[24] These questions relate to the Appellant’s guilty plea respecting several charges laid under the Excise Tax Act and to an Agreed Statement of Facts submitted to the Superior Court in the criminal proceedings. The Appellant submits that these questions are irrelevant in this appeal. The Respondent suggests that they open a train of inquiry that may be relevant to the issue of intent and knowledge of the operations of these closely held companies in relation to the application of penalties. Although challenges to the admissibility of documents are best left for the Judge hearing this appeal, I do not believe that the Appellant will suffer any prejudice in responding to these questions.

(L) Partial Responses

Further questions that may arise from the responses contained in Schedule “D”

[25] The Respondent submits that the Appellant’s responses are vague and ambiguous because the Appellant did not clearly specify which of the Respondent’s questions her responses related to. In addition, the Appellant appeared to be providing partial responses to some of the questions. Therefore, the Respondent submits that some of the responses and/or questions may relate to some of those contained in Schedules “A”, “B” and “C”. The Appellant spent considerable time during the hearing of this Motion linking the answers to the appropriate questions. This “method” of responding is not only inappropriate but potentially misleading. Opposing counsel is entitled to have the Appellant’s responses documented in an orderly fashion that directly links the response to the question or questions. For the sake of efficiency and civility, I would strongly encourage Appellant’s counsel to respond appropriately and provide clarification to any further questions that the Respondent may have respecting the responses.

THE APPELLANT’S MOTION:

(A) “Source” Documents:

(i) Questions relating to the criminal investigation on Schedule “E”: 62, 70, 93, 95, 337 and 931; and

(ii) Questions relating to the source of the documents on Schedule “E”: 98, 121, 122, 152, 161, 179, 184, 193, 201, 209, 211, 221, 239, 246, 265, 277, 279, 299, 302, 308, 334, 352, 375, 818, 824 and 958.

[26] The Appellant posed several questions during discovery requesting information respecting the source of various documents, and asking how certain documents were obtained. The Appellant does not deny that one reason for this line of questioning was to confirm whether the documents being relied upon in the criminal investigation and the audit were properly obtained. As background, the Appellant pled guilty to 35 charges under the Excise Tax Act in respect to tax that was collected but not remitted by some of the closely held corporations. A number of the Respondent’s refusals relate to this criminal investigation.

[27] The Appellant relied on the decision in O’Neill Motors Ltd. v. The Queen, 98 D.T.C. 6424, to support the position that a reassessment that is based upon documents that were improperly obtained during such an investigation may be vacated.

[28] The Respondent’s refusal to answer these questions at the discovery was based on the position that the origin or source of these documents would be irrelevant. The Respondent argued that the decision in Norwood v. The Queen, 2001 D.T.C. 5111, provides a better indication of how to treat this type of situation when there is an allegation of improper conduct, where documents, relied upon by the Minister in an audit, have not been procured under valid requirements. As I understood the Appellant’s submissions, there is concern respecting the source of documents because of a possible breach under the Charter of Rights and Freedoms (the “Charter”), particularly section 8 of the Charter. The Respondent submits that the Appellant failed to specify why such questions were posed to the Respondent’s nominee at the discoveries other than to state that they were relevant and went to admissibility of documents. The Respondent has now agreed to produce the requirements used in the audit in light of the Appellant’s stated concerns. The Respondent advised that it was his understanding that all of these documents have already been produced during the criminal trial. It is apparent that if the Appellant had been more cooperative and provided his reasons for the questions at the discovery, they might have been answered prior to this Motion.

[29] The major concern I have is that the Appellant has not raised this as an issue in the Notice of Appeal. In Aventis Pharma Inc. v. The Queen, 2007 D.T.C. 1585, at paragraph 42, the Court confirmed that questions aimed at pursuing facts to support other issues not raised in the pleadings will not be permitted. Relevancy must be connected to the issues raised in the pleadings in order to prevent the parties from engaging in a fishing expedition.

[30] Although it is not clear that this line of questioning has satisfied the test for relevancy, as the pleadings are silent on this issue, in light of the Respondent’s concession to produce the requirements used in the audit, I see no particular harm in having the Respondent’s nominee answer those questions respecting the origin of the documents, subject to any claims of privilege that might arise, as they relate to the Appellant’s concerns over a Norwood situation. However, some of the questions in this group are clearly irrelevant on their face as they are self-evident. Questions 122, 152 and 161 deal with publicly available corporate profile reports relating to corporations over which the Appellant had control. Questions concerning the source of the returns are irrelevant as the T1 returns are the Appellant’s own documents. The authenticity of these documents was never raised in the pleadings. Again, it is totally irrelevant which individual at the Canada Revenue Agency (“CRA”) may have been responsible for printing various documentation (Questions 179, 184, 201 and 209). Questions 334 and 352 relate to authenticity of documents and are best left to the discretion of the Judge hearing the appeals. The response to Question 481 is within the knowledge of the Appellant not the Respondent. Some of these questions also reference public documents such as Land Registry documentation and others reference documents produced by the Appellant or a corporation controlled by the Appellant and need not be answered. I see no possible Norwood issues arising here on those points.

(B) Questions Concerning the Relevancy of the Respondent’s Documents / Litigation Strategy:

Questions by the Appellant throughout the examination for discovery relating to the reasons why documents were being produced or relied on.

Questions on Schedule “E”: 126, 128, 132, 134, 162, 163, 176, 185, 188, 189, 199, 200, 212, 213, 214, 215, 222, 226, 227, 229, 293, 295, 296 and 304.

[31] The Appellant’s questioning of the Respondent’s nominee often related to the integrity of the documents, their relevance and whether they were properly obtained. For the most part, the Respondent’s refusal was based on the premise that the questions related to litigation strategy. Many of the examples offered by the Appellant also related to those questions respecting the source of the documents.

[32] In Loewen et al v. The Queen, 2006 D.T.C. 3543, at paragraph 7, the Court confirmed that a party is entitled to ask, “Why is this document on your list and what does it have to do with this case?” At paragraph 8 of that decision, the Court explained:

[8] … A party is entitled to know why a document is being produced. One must bear in mind that section 81 of the Tax Court of Canada Rules (General Procedure), in contrast with section 82, is rather unique in that it requires only that the party produce a list of documents that it is intended will be used in evidence. If the answers given were acceptable it would mean that a litigant could swamp the other side by producing cartons of documents and leave it to the other side to go through them in an attempt to anticipate what use, if any, will be made of them. I think a litigant is entitled to know why the other party thinks a document is relevant. It is insufficient to say, in effect, that a document is being put in the list of documents on the off chance that it may be useful to rebut some unspecified point that the other side may wish to make.

(Emphasis added)

[33] At paragraphs 9 and 10 of the Loewen case, the following was stated concerning litigation privilege:

[9] … (i) … I am not prepared to extend the concept of “litigation privilege” or “work produce of counsel” to the point of allowing a party to refuse to disclose documents or information in its possession that are relevant to the litigation.

[10] The leading case on litigation privilege is General Accident Assurance Co. v. Chrusz, 45 O.R. (3d) 321 (Ontario Court of Appeal). I do not propose to examine in detail the concept of litigation privilege. It is a far more restricted principle than the appellant suggests. The modern view of discovery is in favour of full disclosure and it is this principle which I think should be applied in this court. We have long since moved away from the “trial by ambush” that prevailed in the old Tax Review Board or the Tax Appeal Board. …

The Court then quoted a summary respecting this principle contained in Sopinka, Lederman & Bryant, The Law of Evidence in Canada, Second Edition, Supplement.

[34] In Shannon v. The Queen, 2009 D.T.C. 1149, the Court held that a party may request which specific documents the opposing party will be relying upon where the documents are listed as a bundle.

[35] Generally, the Appellant may not ask such questions as, “How are you intending to use these documents?” but instead may ask the Respondent’s nominee, for example, to explain specifically how a document was used to allegedly support a particular third party disbursement.

[36] Questions 126 and 128 relate to the Appellant’s own tax return for 1997, one of the taxation years under appeal. Questions 126 and 128 should be answered.

[37] Question 132 relates to the corporation profile reports and should be answered. It appears that Question 162 also relates to the reports and seems to be a re-statement of Question 132, so it can be answered. I believe that a general question, such as Question 134, relating to how the documents are relevant is distinct from why the documents are being produced and is an improper question.

[38] Question 163 need not be answered. Questions 176 and 185 will be answered. If Question 185 is answered, I see no reason why the Respondent should further spell out for the Appellant how the document will assist or rebut an allegation of fact in the Notice of Appeal. Questions 188 and 189 need not be answered.

[39] Questions 199, 212 and 213 are improper and need not be answered. They improperly ask the Respondent’s nominee how the document establishes or rebuts a non-specific allegation.

[40] Questions 200, 226 and 227 need not be answered.

[41] Questions 214, 293 and 304 will be answered.

[42] Question 215 draws a conclusion and then asks the witness to agree. It is improper and need not be answered.

[43] Question 222 will be answered but no response is required for Question 229.

[44] Question 295 is an improper question for the same reason that questions 199, 212 and 213 are.

[45] Question 296 is an improper question as it is irrelevant why the Respondent is not relying on certain documentation.

[46] The Appellant seeks responses to a number of other questions that the Respondent refused to answer on the ground that they were irrelevant and appeared to be delay tactics employed by the Appellant.

[47] These questions related to:

1. the delay that occurred confirming the Assessment after the Notice of Objection was filed;

2. whether the Appellant, Terry Piersanti, was or was not a director of any of the group of closely held corporations; and

3. whether the Respondent’s nominee should identify certain statements such as bank statements and credit card statements.

[48] In the decision in Baxter, the Court confirmed that questions that are designed to delay should not be permitted. Whether there was a delay or not after the Assessment (Questions 450 and 451) is irrelevant. Requesting the Respondent to confirm or deny that the Appellant was an officer/director of any of this group of corporations (Question 481) is inappropriate. Question 591 is an inappropriate request. Asking the Respondent to identify bank and credit card statements (Question 692) is a waste of time which I consider to be a delay tactic. The working papers have been provided to the Appellant and it would also seem to be a delaying tactic if the Appellant were permitted to pursue a line of questioning where she attempted to pinpoint the source of each entry by referencing the working paper entry to these bank statements. This would be a tedious waste of time.

[49] In his written representations, the Respondent submits that Questions 976 and 979 should have been answered and that responses to those questions have now been provided.

Appellant’s Motion Request that Questions Taken Under Advisement by the Respondent be Answered (paragraph 1(a) of the Motion)

[50] I have attached the Appellant’s questions taken under advisement and the Respondent’s responses in Schedule “F”. After reviewing the responses, I am satisfied that the Respondent has fully answered those questions.

Appellant’s Motion Request that Respondent Complete Undertakings (paragraph 1(c) of the Motion)

[51] The Appellant’s Motion requests an Order of this Court compelling the Respondent to “complete the undertakings that he gave at his examination for discovery”. However, in the Appellant’s written submissions, it states that the Respondent has answered “most but not all” of the undertakings. Although I have not reproduced the chart of the questions and of the responses which the Respondent provided the Court and which was the same chart provided to the Appellant on March 29, 2010, after reviewing the Respondent’s responses, I am satisfied that the Respondent provided complete responses and answered all of its undertakings.

[52] Finally, the Appellant takes issue with the method used by the Respondent in providing its responses in discovery. The Respondent provided some of its undertakings by referring the Appellant to specific indexed documents filed on a CD. The Appellant noted that the indices are composed of many pages of documents. The Appellant argued that this method was generally unorganized and that the indices were not numbered sequentially.

[53] In Kossow, the Court confirmed that it is not proper to ask a question which would require counsel to segregate documents relating to a particular issue, as that seeks work product. Although Ms. Mboutsiadis, the Respondent counsel who conducted the examination for discovery, could have put a little more effort into organizing these responses more efficiently, the responses are sufficiently organized that I would only suggest and encourage present counsel, Mr. Bartleman, to use his best efforts to provide clarification if needed.

CONCLUSION

[54] Although the Appellant is clearly in default of the Order of this Court dated December 8, 2009, it would unfairly prejudice the Respondent if I deprived the Respondent of the Appellant’s responses. I am therefore amending the Order to allow for the following:

1. The Respondent shall provide the Appellant with any further questions arising out of the Appellant’s written responses of May 28, 2010 by September 20, 2010;

2. The Appellant is directed to provide responses to the Respondent’s potential questions arising from the May 28, 2010 correspondence, together with responses to those questions/refusals which I have directed the Appellant to answer in my Reasons by October 4, 2010;

3. Questions arising out of the Appellant’s responses are to be provided to the Appellant by October 18, 2010; and

4. The Appellant shall provide those responses to the Respondent by November 1, 2010.

[55] In respect to the Appellant’s Motion:

1. The Respondent shall provide responses in respect to the questions which I have directed the Respondent to answer by September 20, 2010;

2. The Appellant shall forward to the Respondent any questions arising from the Respondent’s responses by October 4, 2010; and

3. The Respondent shall answer those questions by October 18, 2010.

[56] All of the communications which I have directed both counsel to provide in the preceding paragraphs shall be made in writing.

[57] The Respondent submitted that this would be an appropriate case for elevated costs, payable forthwith and in any event of the cause. Although the Appellant has achieved some minor success in this Motion, there was a failure to comply with the December 8, 2009 Order of Lamarre J. for which the Appellant offered only a feeble excuse as to why no attempt was made to amend the Order. In addition, the Appellant, for the most part, has improperly refused to answer proper questions and to delay the discoveries by providing vague and imprecise responses. Although I am not awarding elevated costs, let this be fair warning to the Appellant’s counsel that unless he complies with the timelines I have established, he may well be faced with not only elevated costs but greatly elevated costs in the next round. Costs in this Motion are awarded to the Respondent, payable forthwith in any event of the cause.

[58] It is apparent that the discoveries were conducted in a heated, adversarial manner. While some of this may reflect counsel’s style, where conduct becomes overly aggressive, the proceedings will be unnecessarily hampered and the focus will shift from the purpose for which discoveries are held to the seemingly personal triumphs afforded counsel within the adversarial process.

[59] Counsel shall comply with the respective timetables contained in my Reasons. Discoveries are to end within the timetables I have established and there shall be no further amendments to the dates I have set. It is time that the parties move the appeals along in a cooperative fashion and cease all further procedural manoeuvring.

Signed at Charlottetown, Prince Edward Island, this 20th day of August 2010.

“Diane Campbell”

Campbell J.