Citation: 2016 TCC 286
Date: 20161214
Docket: 2003-3382(GST)G
BETWEEN:
506913
N.B. LTD.,
Appellant,
and
HER
MAJESTY THE QUEEN,
Respondent,
and
Docket:
2003-3383(GST)G
BETWEEN:
CAMBRIDGE
LEASING LTD.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS
FOR ORDER
Boyle J.
[1]
The Appellants have brought a motion to turn a
number of the refusals by the Respondent at the further examination for
discovery in respect of the Respondent’s further amended replies.
[2]
These appeals were filed in 2003. They involve
GST/HST issues for periods in 1998 through 2000. Broadly speaking, the notices
of appeal describe the issues raised as relating to the application of the HST
to (i) the Appellants’ “export sales” of automobiles, and (ii) the Appellants’
sale of automobiles “to Indians on reserves”.
[3]
Amended notices of appeal and replies were filed
in 2010. In 2015, the Respondent was permitted by the Court to file further
amended replies. The Court also provided that the Appellants were granted leave
to conduct further discoveries “with respect to”
(per the Order) or “regarding” (per the Reasons)
the amendments in the Respondent’s further amended replies.
The Respondent’s Amendments
[4]
The Respondent’s further amended reply in the
Cambridge Leasing Ltd. (“Cambridge”) appeal added, among other things, the
following new paragraphs:
16. In determining
the Appellant’s net tax for the period under appeal the Minister relies on the
following additional facts:
a) The Appellant
was involved in a scheme to enable it to claim ITCs;
b) the
transactions referred to in subparagraph 13(d) above were not bona fide
business transactions;
c) the wholesale
dealer sales contracts used for the purchase and sale of motor vehicles were
prepared to facilitate the scheme;
d) the
information in the contracts did not represent genuine business transactions;
e) the invoices
were prepared to facilitate the scheme;
f) the
information in the invoices did not represent genuine business transactions;
g) the
information enabling the amount of the ITCs to be determined did not represent
genuine transactions; and
h) the
Appellant’s supporting documentation that purported to support the Appellant’s
entitlement to ITCs was for an amount no more than $436,281.15 as detailed in
the attached Schedule A forming part of this Further Amended Reply.
. . .
20. He further
submits that the Appellant was not entitled to ITCs as the information in the
Appellant’s supporting documentation in respect of claimed ITCs did not
represent genuine transactions.
21. The contracts
were contracts of accommodation, that is, contracts prepared to facilitate the
scheme and give an appearance that genuine transactions occurred.
22. The invoices
were prepared to facilitate the scheme and give an appearance that genuine
transactions occurred.
23. The information
contained in the contracts, invoices, and other supporting documentation did
not represent genuine transactions and was used in the scheme enabling the
Appellant to claim ITCs. The Appellant was therefore not entitled to ITCs
pursuant to subsections 169(1) and 169(4) of the Act and section 3 of
the Regulations.
[5]
The Respondent’s further amended reply in the
506913 N.B. Ltd. (“506913”) appeal included in paragraph 18 and paragraphs 28
through 31 virtually identical new paragraphs to these in Cambridge.
The Rules
[6]
Rule 107(3) of the Tax Court of Canada Rules
(General Procedure) provides as follows:
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107(3) A ruling
on the propriety of a question that is objected to and not answered may be
obtained on motion to the Court.
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107(3) La Cour
peut, à la suite d’une requête, décider du bien-fondé d’une question qui a
fait l’objet d’une objection et à laquelle il n’a pas été répondu.
|
[7]
Rule 95(1) sets out the scope of questioning
upon examination for discovery as follows:
|
95(1) A person examined for discovery
shall answer, to the best of that person’s knowledge, information and belief,
any proper question relevant to any matter in issue in the proceeding or to
any matter made discoverable by subsection (3) and no question may be
objected to on the ground that
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95(1) La personne interrogée au
préalable répond, soit au mieux de sa connaissance directe, soit des
renseignements qu’elle tient pour véridiques, aux questions pertinentes à une
question en litige ou aux questions qui peuvent, aux termes du paragraphe (3),
faire l’objet de l’interrogatoire préalable. Elle ne peut refuser de répondre
pour les motifs suivants :
|
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(a) the information sought
is evidence or hearsay,
|
a)
le renseignement demandé est un élément de preuve ou du ouï-dire;
|
|
(b) the question constitutes
cross-examination, unless the question is directed solely to the credibility
of the witness, or
|
b)
la question constitue un contre-interrogatoire, à moins qu’elle ne vise
uniquement la crédibilité du témoin;
|
|
(c) the question
constitutes cross-examination on the affidavit of documents of the party
being examined.
|
c)
la question constitue un contre-interrogatoire sur la déclaration sous
serment de documents déposée par la partie interrogée.
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[8]
Upon a proper reading of both the English and
French versions of Rule 95(1), I believe the use of both the word “proper” and the word “relevant”
in the English version should not really be considered anything much more than
a drafting slip, compliments of the mythical Department of Legal Redundancies Department.
Rule 95(1) in French clearly only expresses a relevancy test by the use of the
concept of “pertinence”. Further, Rule 107(3) only calls upon the Court to decide the
“propriety” of refused questions and, in French, clearly deals with propriety (bien‑fondé) as a separate
concept to relevance (pertinence).
[9]
Specifically, for these reasons, I respectfully decline
to adopt paragraphs 53 through 58 in Stanfield v. The Queen, 2007 TCC
480, to the extent it views “proper” and “relevant” as separate requirements.
To paraphrase what was written by Associate Chief Justice Christie (as he then
was) of this Court in 569437 Ontario Inc. v. Canada, [1994] T.C.J.
No. 531 (QL), and quoted with emphasis by him in Shell Canada Ltd. v.
Canada, [1996] T.C.J. No. 1313 (QL):
. . . the standard for propriety of a question
. . . is whether the information solicited by a question may be
relevant to the matters which at the discovery stage are in issue on the basis
of pleadings filed by the parties.
Considerations to Turning Refusals
[10]
The scope of questioning on discovery has been
fully canvassed in this Court and in the Federal Court of Appeal. No less than
three accomplished jurists who went on to become Chief Justices of this Court
have addressed this in detail and consistently. In Baxter v. The Queen,
2004 TCC 636, Associate Chief Justice Bowman (as he then was) described the
scope of examinations for discovery in paragraphs 12 and 13. In Shell Canada,
above, Associate Chief Justice Christie describes the scope of examination for
discovery in paragraph 9. Most recently, Chief Justice Rossiter reviewed and
summarized discovery principles in Canadian Imperial Bank of Commerce v. The
Queen, 2015 TCC 280, in paragraphs 14 through 18, 270, 271, 362 and 363. In
Canada v. Lehigh Cement Limited, 2011 FCA 120, Justice Dawson, writing
for the Federal Court of Appeal, considered the scope of discovery in our Court
at paragraphs 24, 29, 30, 34, 37, 40 and 44.
[11]
These four cases, along with the cases referred
to therein, have established the following:
(a) The
general principles applicable to questions on discovery do not provide a magic
formula applicable to all situations.
(b) The
scope of questioning permitted on discovery is defined by the pleadings of the
parties. These pleadings set out the facts, issues and positions which are all
proper matters for discovery. A questioning party needs only be able to satisfy
the motions judge that the information sought may be relevant to such a matter,
construing the pleadings with fair latitude and in the factual and procedural
context of the particular case.
(c) The
threshold level of relevancy upon discovery is quite low and is not
likely difficult to meet in light of the goal of discovery — openness —
and its purpose of fairly, reasonably and expeditiously moving appeals forward
to a hearing.
(d) Relevancy
at this stage is extremely broad and must be generously, broadly and liberally
construed. Very wide latitude should be given to permit the fullest inquiry as
to all matters which can reasonably be considered to possibly affect the issues
between the parties. This has been described as a semblance of relevancy, which
I take to mean the question need only reasonably appear to possibly be
relevant.
(e) A
question is relevant if it may lead to a train of inquiry which may
directly or indirectly advance the party’s own case or damage that of the other
party.
(f) Only
questions concerning matters that are clearly or completely irrelevant should
be rejected at the discovery stage. Where there is doubt about the relevancy of
a question, the principal goal of openness favours requiring the question to be
answered.
(g) A
motions judge should permit questions that are broadly related to the
matters/issues in dispute. Touching the matters in question suffices.
(h) A
motions judge should not fetter the discretion of the judge who will preside at
trial and will be required and best able to decide relevancy as part of the
admissibility of the evidence into the record in the context of the evidence as
a whole. An inadvertent error by a motions judge determining relevancy at
discovery may lead to serious problems or even injustice at trial. It is the
trial judge’s determination that attains deference. Trial judges rightly give
very little deference to a motions judge’s determination. Discovery and the
admitting of evidence are distinctly different aspects of an appeal.
(i) A
motions judge should not second‑guess counsel conducting a discovery by
minutely examining each question. A question can be relevant at the discovery
stage even if, considered in isolation, it may seem irrelevant. The relevance
of a question may be tied to other evidence not before the motions judge.
(j) It
is permitted to ask questions to ascertain the other party’s legal position.
(k) It
is not a valid objection that the examining party already knows the answer to
the question. I do not read this as allowing counsel to repeat endlessly what
is a substantively identical question at the same examination. That a question
may be similar to one already asked does not make it substantively identical.
Words and phrases may mean different things to different people. Different
words and phrases have different meanings.
(l) It
is not a valid objection that the other party will no longer be relying upon a
particular provision, position or characterization.
(m) The
Court will not automatically disallow a question as not relevant merely because
it concerns matters outside the fiscal periods in issue in the appeal.
(n) Motions
judges should not permit questions that are patently irrelevant questions,
abusive questions, questions designed to embarrass or harass the person or
party, questions designed to delay the process, or questions forming part of
fishing expeditions of vague and far-reaching scope.
(o) A
relevant question may be disallowed if answering it would constitute undue
hardship on the other party.
(p) The
above summary is not exhaustive.
Analysis and Conclusions
[12]
With respect to matters (whether issues, facts,
evidence, law, arguments, theories or positions, etc.) that were first
introduced by the Respondent in its further amended replies, it is clear and
obvious that the Appellants were not able to question the Respondent about them
at the initial examination for discovery completed before the Respondent
produced the further amended replies. This Court gave to the Appellants their
full rights to discover the Respondent with respect to each, any and all such
matters. With respect to each, any and all such matters, the Appellants are
entitled to conduct as full and complete an examination for discovery as they
would have been at the initial discovery, had these matters already been set
out in the Respondent’s pleadings.
[13]
In this case, it is clear from the 2015 order of
this Court that there is no limitation imposed on the scope of discovery with
respect to such new matters reflecting either (i) that there had already been
an examination for discovery, (ii) that any of these newly raised matters were
similar to or related to other matters already pleaded by the Respondent, or (iii)
otherwise. I see no reason whatsoever to impose any such limitation or
restriction on the scope of questioning on court‑ordered further
discovery at this stage on a motion.
[14]
I can only conclude that the Respondent would
not have sought leave of this Court to file its further amended replies if the
Respondent believed that the requested distinct and specific amendments were
not necessary as they were kind of, almost, mostly, pretty much already
addressed in its existing replies. In that light, I find that the Respondent
requiring this entire motion be brought to be quite cheeky. The principal
reason given for refusing to answer questions at the discovery was that the
questions were not related to the amendments.
[15]
In deciding this motion, I will therefore simply
be determining whether or not each of the questions that the Respondent refused
to answer was relevant, as that term is applied at the discovery stage and
described above, to any of the newly raised matters in the further amended
replies.
[16]
I will also be considering the other reasons put
forward by the Respondent on this motion for refusing to answer particular
questions.
Repetitive or Overlapping Questions
[17]
Where an examination is resumed after a lengthy
adjournment, or where further additional examination is permitted or ordered, a
reasonable degree of what may appear to be repetitive or overlapping questions
will be allowed with respect to questions of a basic introductory or refresher
nature. This allows counsel to situate the person being discovered and to
contextualize forthcoming questions.
[18]
When significant and substantive amendments to
the discovered party’s pleadings have been made, as in this case, counsel will
be allowed to ask questions concerning the impact those amendments might have
on the overall position of the discovered party. This is particularly so where,
as here, there is overlap between the new and old positions set out in the
pleadings.
[19]
Otherwise, identical questions will have to be
answered with respect to all new matters raised in the amended pleadings,
including how the new answer may differ from the prior answer in respect of old
matters previously pleaded and examined on.
[20]
None of the questions refused on the basis of
having been answered in a previous examination appear to clearly go beyond this
scope, nor do they appear to be so extensive as to be abusive, and for those
reasons each of them must be answered.
Abuse
[21]
The Respondent’s statement that the alleged
repetitive nature of certain questions constituted abuse was not developed or
made out in the facts or reasons put forward by the Respondent in its motion
materials before me. Abuse is a serious matter. If a party claims abuse, that
party should take that allegation seriously since it expects this Court to take
it seriously.
Relevance
[22]
Each of the questions refused on the basis of
irrelevance satisfies me that it is relevant to, and relates to or is with
respect to, the amendments made by the Respondent in its further amended
replies. No questions should have been refused on the basis that they were not
related to, or in respect of, those amendments. The questions should have been
answered or, in appropriate circumstances, undertakings to answer given.
[23]
Asking if the Respondent’s position is that the
alleged scheme in which the Appellants were engaged began prior to the taxation
periods in issue in these appeals in which the Appellants conducted similar
activities is relevant. What could be more basic than asking what a pleaded
scheme was comprised of and when it began?
Documents not on List of Documents
[24]
Each of the questions refused on this ground
appears to be in respect of a particular document of an Appellant that was
taken on audit or later seized, or an affidavit of the Respondent with respect
to such documents prepared for and used in a criminal proceeding against a
third party in respect of specific transactions very much in issue in these
appeals. These documents had not been returned or provided to the Appellants by
the Respondent until shortly before the additional discovery and were not
available to the Appellants at the earlier discoveries. Since the further
discovery, the Appellants have revised their lists of documents.
[25]
If a question is based upon or concerns a
document that has a semblance of relevance, that question should be answered,
or the appropriate undertaking made. If this is extensive, and appears
to be an ambush, any refusal should be accompanied by an undertaking to
reconvene to answer questions on such documents following an adjournment to
permit their review. This is even more clear where the documents were prepared
by, or obtained by, the party being discovered.
Criminal Prosecutions of
Third Parties
[26]
The Respondent maintains that questions relating
to third party criminal proceedings are, for that reason, not relevant. It
appears that the third parties were prosecuted in respect of some transactions
that the Respondent’s pleadings claim to be ineffective misleading schemes and
that the Appellants’ documents were made available by the Canada Revenue Agency
to the prosecution. That is sufficient to satisfy the relevance threshold at
discovery. These questions must be answered.
Questions of Law
[27]
Certain questions were refused on the basis that
they were legal questions or were legal in nature. This was not developed
further by the Respondent in its written submissions.
[28]
Question 855 would be asking for a conclusion of
law if it simply asked if title passed to the cars. However, the question is
prefaced with language that focusses on the question of why the Respondent
thinks this was a scheme of other than genuine business transactions. That contextualization
qualifies the question and makes it relevant to the new issue raised by the
Respondent about schemes, mala fides and non-genuine information and transactions.
Whether or not the fact that title did or did not pass was or was not a
consideration of the Respondent is an appropriate question.
[29]
Asking what facts were considered in arriving at
a legal conclusion pleaded by the questioned party is entirely appropriate.
Asking which part of a provision pleaded by the questioned party was relied on
is not asking for a conclusion of law, nor is asking the basis on which the
requirement of a provision of the Excise Tax Act pleaded by the party
questioned was satisfied.
[30]
None of the questions refused because they were
legal questions or legal in nature seek a legal opinion nor seek a legal
conclusion and, for that reason, each of these must be answered.
Disposition
[31]
All the refused questions are to be answered.
[32]
The Respondent’s designate is to reattend examination
for discovery at its expense to respond to the refused questions within
60 days and to respond promptly to any further questions arising from the
answers to the refused questions.
[33]
The Appellants are entitled to their costs of
preparing for and attending to the further discovery on a substantial indemnity
basis.
If the parties cannot agree on the amount, they may each file submissions not
exceeding six pages in length within 30 days.
[34]
These are appeals that, in Dickensian language,
drag their weary length before the Court. There have been several case
management and motions judges involved in the more than thirteen years these
appeals have been before this Court. A previous case management judge ordered
that no further motions or other proceedings could be brought before the Court
in these appeals prior to the hearing of the appeals. The Respondent’s motions
to amend its replies were brought just before the deadline imposed on further
motions. These appeals can be expected to proceed promptly to a hearing — and
it would be best if the parties make that happen themselves.
[35]
The Appellants are entitled to one set of costs
on this motion.
Signed at Ottawa, Canada, this 14th day of December
2016.
“Patrick Boyle”
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