Date: 19990921
Dockets: 97-3814-IT-G; 98-878-IT-G
BETWEEN:
INTERPROVINCIAL PIPE LINE (NW) LTD., IPL ENERGY INC.
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent,
Order and Reasons for Order
Beaubier, J.T.C.C.
[1] These matters came before this Court at 9:30 a.m. on
September 13, 1999 on the Order of Bowie, T.C.J. signed on July
20, 1999, pursuant to motions dated June 21, 1999:
... that the Respondent may move before the Court for a
review of the claims of privilege set forth by the Appellants in
their affidavits of documents filed
and that the Appellants
... may move ... as to which the Appellants, assent
on a claim of privilege.
The Notices of Appeal were begun in December, 1997 and April,
1998 and relate to assessments respecting alleged avoidance
transactions within the meaning of subsection 245(3) of the
Income Tax Act ("Act").
[2] At 9:30 a.m. on September 13, 1999, the Respondent
withdrew its motions and the Appellants stated that they had
conceded in the preceding two weeks that a few of the documents
in dispute were not privileged. An order respecting the foregoing
was filed on September 15, 1999. The matter of costs was
reserved.
[3] The Appellants asked for solicitor and client costs of
$155,558.19 for the proceedings it had to undertake as a result
of the Respondent's motions respecting the documents over
which they claimed privilege.
[4] These motions related to more than 1,000 documents and
were proceeded with by the Respondent respecting all documents.
They required the time of four of the Appellants' solicitors
on an almost continuous basis. They related to a number of
allegations by the Respondent which varied from time to time as
did the bases alleged for them. There was an examination on an
affidavit. A variety of allegations in law were made from time to
time by Respondent's counsel on which briefs had to be
prepared. An examination of these motions and the affidavits in
support of them raises a question as to whether the
Respondent's proceedings were reprehensible and vexatious
since the number of documents was so great and the bases of the
motions were neither fraud nor a criminal act by the Appellants.
Neither was pleaded and there is no factual basis of either one,
alleged or in evidence.
[5] From the material before the Court the only factual basis
for all of this is two documents prepared by a consulting
economist given by the Appellants to the Respondent and which
merely contain a consultant's opinion. They are documents to
which the Appellants have consented as stated in paragraph
[2].
[6] In contrast to the documents which the Respondent required
of the Appellants, the Respondent's affidavit of documents
contains a description of documents in Schedule B that is not
clear, explicit or detailed.
[7] The broad exercise that the Appellants were put through
was a fishing expedition in the face of the authorities on
solicitor client privilege that there is privilege to
communications between solicitor and client unless the commission
of a crime or fraud is in question. If such is in question, the
law is that particulars of the alleged crime or fraud must be
pleaded and proven.
[8] Appellants' counsel detailed what the Appellants went
through to the Court. His statements were made as counsel and
they were neither denied nor refuted. They are accepted as the
proper undertakings of counsel in such circumstances. Similarly,
his statements respecting the sum of $155,558.19 were not denied
or refuted. From what both counsel stated to the Court,
Respondent's counsel was in constant communication with
Appellants counsel and was quite aware of the usage of solicitors
time and the turmoil that these motions, various alleged bases
(which changed from time to time and not all of which were
followed through), and the number of documents involved were
creating – all at great expense to the Appellants. These
proceedings relate to various corporations or transactions in
three national jurisdictions. The legalities were complicated and
required legal advice at every step due to the jurisdictions and
the complicated transactions.
[9] In the course of argument Counsel for the Respondent cited
his authority for these motions to breach privilege on such a
large scale. It is from an obiter opinion in the judgment
of Osler J. in Re Church of Scientology and The Queen, 10
D.L.R. 4th, 711 at 714 which reads:
It is trite law that the advice of a solicitor may not be
sought for an improper purpose, such as to assist in the
commission of a crime or, in my view, a civil wrong upon a third
party as, e.g., a tort or breach of contract, and such a
purpose will defeat the privilege.
That interpretation has been renounced by higher authorities.
Moreover, the definition of solicitor-client privilege in
subsection 232(1) of the Income Tax Act has not changed
the traditional concept of the breadth of privilege.
[10] The documents released from the claim of privilege by the
Appellant consisted of two documents from a consulting economist
and a second set of documents which the Appellants learned may
have been given to a lawyer in his capacity as a director of one
of the corporations involved in the transactions.
[11] The second set was only discovered by the Appellants to
have been part of documents given to a director-lawyer of a
corporation long after these motions and proceedings were under
way. Thus, while the Respondent's counsel's basis of
interpreting privilege was not well founded, the fact is that the
motions resulted in the determination by the Appellants that
certain of its documents were not privileged.
[12] For this reason, the determination of the award of costs
respecting these motions is left to the trial judge to
determine.
Signed at Toronto, Ontario this 20th day of September
1999.
"D.W. Beaubier"
J.T.C.C.
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