Date: 20020305
Docket: 2000-717-IT-G
BETWEEN:
GIBRALT CAPITAL CORPORATION,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
_____________________________________________
Counsel for the Appellant: Joel Nitikman
Counsel for the Respondent: Lynn Burch
________________________________________________
Reasonsfor
Order
(Delivered orally from the Bench at
Ottawa, Ontario, on August 28, 2001)
Mogan J.
[1]
This is a motion brought by the Appellant in connection with a
Request to Admit which was served on the Respondent pursuant to
Rule 130 of the Tax Court of Canada Rules (General
Procedure). The first relevant document is the Request to
Admit dated March 6, 2001 being a request by the Appellant that
the Respondent admit six different items of fact, and also a
Request to Admit the authenticity of certain documents.
[2]
Under Rule 131, the Respondent had 15 days to respond to the
Request to Admit. The second relevant document is the response to
the Request dated March 20, 14 days after the date of the
Request, and so within the 15-day limit. In that response which
would ordinarily speak for itself, the Respondent denies the
truth of certain facts in paragraphs 3, 4 and 6; admits the truth
of the statements of fact in paragraph 5; and then in the
critical area which is the subject of the dispute in this motion
today, the Respondent refused to admit the truth of facts in
paragraphs 1 and 2 for the following reason: that the information
concerning the Westward Inn prior to the purchase by the
Appellant is confidential information pursuant to section 241 of
the Income Tax Act. The Respondent then went on to accept
the authenticity of the two documents named in the Request to
Admit.
[3]
Therefore, the Respondent did in a timely manner (within the 15
days provided in Rule 131) respond to the various items in the
Request to Admit. On or about August 23, the Appellant brought
this motion. Specifically, the motion is for an order that
paragraphs 1 and 2 of the Request to Admit dated March 6, 2001
have been deemed to be admitted. Those are the first and second
items which the Respondent refused to admit and, in the case of
one item, on the ground that it was confidential information
under section 241 of the Income Tax Act.
[4]
The Appellant argues that the Respondent is not permitted to rely
on section 241 because the Courts have made it clear (most
recently in the decision of George William Harris v.
Minister of National Revenue, 2001 DTC 5322) that section 241
is not just to limit the disclosure of taxpayer information but,
where there is litigation in good faith between a citizen and the
Minister, to permit and perhaps require the Minister to disclose
taxpayer information that is relevant to such litigation and
necessary for the administration of justice. Those words are
mine, they are not necessarily the precise words which appear in
section 241. The Appellant says that section 241 has a broader
purpose in the administration of justice and, because the
Respondent may not rely on it, the facts in items 1 and 2 of the
Request to Admit should be deemed to be admitted.
[5]
The Respondent argues that, if there was an error in relying on
section 241, the remedy is not to deem items 1 and 2 to be
admitted but to award costs in accordance with paragraph
151(1)(e) of the General Procedure Rules. Counsel
for the Appellant relies on the decision of the British Columbia
Court of Appeal in Skillings v. Seasons Development
Corporation which held that when a Defendant refused to admit
facts for an improper reason, the facts should be deemed to be
admitted.
[6] I
do not see the Appellant's motion on the basis that I either
deny the motion and give the Appellant a remedy in costs when it
proves the facts at trial, or allow the motion and find that
items 1 and 2 in the Request to Admit are deemed to be admitted.
To me, there are a number of alternatives. I was surprised at the
delay between the response to the Request to Admit and the date
of the motion now before me. When I asked counsel for the
Appellant the reason for the delay, he stated that the parties
had been engaged for some considerable time negotiating the terms
of an agreement as to certain facts which is now signed and will
be presented at trial. He also stated, and I accept his
statement, that it was his failure to persuade the Respondent to
include items 1 and 2 from the Request to Admit in the Agreed
Statement of Facts that persuaded him to seek this remedy,
admittedly long after receiving the response to the Request to
Admit.
[7] I
am not inclined to grant this motion for the following reasons:
the second item in the Request to Admit, reads as follows:
Provincial had no reasonable expectation of profit from the
Westward Inn from the time Provincial acquired an interest in it
in 1981 to the time Provincial disposed of it to Shoctor in
1986.
In my view, whether Provincial "had a reasonable
expectation of profit" is a conclusion of law based on a
whole panorama of evidence. It may be acceptable to request the
other party to make that kind of admission but it is not
compellable. If the Respondent wanted to make that admission and
regard it as not relevant to the main issues in the case, there
is nothing wrong with asking the Respondent to do that but, in my
view, it is not a compellable fact which the Appellant can expect
the Respondent to admit. The Respondent's refusal to admit a
conclusion of law is well founded. I do not have any problem with
item 2.
[8]
Item 1 in the Request to Admit reads as follows:
For no year between 1981 and 1993 inclusive, did the Westward
Inn, taken as a separate business or property, actually earn a
net profit for either tax or accounting purposes after taking
into account interest, capital cost allowance and all other
amounts properly deductible.
I conclude that the Respondent erroneously relied on section
241 of the Income Tax Act when responding to item 1. But
the remedy is not to deem that item 1 be admitted. The remedy is
to pursue the matter in a more timely fashion. When the refusal
to admit item 1 was sent from the Respondent to the Appellant,
there was an opportunity for the Appellant to seek discovery of
the Respondent; to ask questions and compel answers. Perhaps, the
Respondent did not have to rely on section 241. If on examination
for discovery of the Respondent, the questions were put:
"What was the profit and loss situation of the Westward Inn
between 1981 and 1993? Can you produce financial statements to
show whether it made a profit or not? If so, did it deduct
interest on borrowed money?" the Revenue Department may have
had to admit that it could not find any records of the
corporation beyond a certain date. It may have been impossible
for the Respondent to respond to item 1.
[9]
In my view, the Respondent's reliance on section 241 was not
justifiable in terms of the law but, under Rule 131(3)(b),
when the Respondent refused to admit item 1 and set out the
reason for the refusal, the Respondent had done all that it was
required to do under Rules 130 and 131 if the Respondent
believed, in good faith, that its reliance on section 241 was
justifiable in law. If it was not justifiable in law, there were
avenues where that could have been pursued. I think an
examination for discovery of the Respondent and, a motion
following discovery requiring answers to specific questions would
have been the remedy.
[10] At this
point in the proceedings on the eve of trial, I will not grant
the motion deeming either item 1 or item 2 in the Request to
Admit to be admitted. On the matter of costs, I will leave it as
costs in the cause because how do I know how this precise item
might be dealt with at trial. I do not know what the parties
might do between now and trial or what the Appellant might do to
secure an admission or pursue this line of endeavour. Therefore,
I will not give costs in any event of the cause but I will grant
costs in the cause.
Signed at Ottawa, Canada, this 5th day of March, 2002.
"M.A. Mogan"
J.T.C.C.
COURT FILE
NO.:
2000-717(IT)G
STYLE OF
CAUSE:
Gibralt Capital Corporation and
Her Majesty the Queen
PLACE OF
HEARING:
Ottawa, Ontario
DATE OF
HEARING:
August 28, 2001
REASONS FOR ORDER
BY:
The Honourable Judge M.A. Mogan
DATE OF
ORDER:
August 29, 2001
APPEARANCES:
Counsel for the Appellant: Joel Nitikman
Counsel for the
Respondent:
Lynn Burch
COUNSEL OF RECORD:
For the
Appellant:
Name:
Joel Nitikman
Firm:
Fraser Milner Casgrain
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
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