Citation:
2016 TCC 85
Date: 20160412
Docket:
2013-1603(IT)G
BETWEEN:
CBS
CANADA HOLDINGS CO.,
Appellant,
and
HER
MAJESTY THE QUEEN,
Respondent.
REASONS
FOR ORDER
Lyons J.
[1]
The respondent brought this motion for an order
to strike out the affidavit of Deborah Toaze, the affiant (“Respondent’s
motion”). Ms. Toaze is a partner at the law firm of Blake, Cassels &
Graydon LLP (“Blakes”) representing CBS Canada Holdings Co., (“CBS”) in
its appeal. The affidavit and exhibits, (“Affidavit”) were filed in support of
the main CBS motion which requests that the appeal be
allowed in accordance with Minutes of Settlement (“CBS motion”).
[2]
The parties executed Minutes of Settlement (the
“Minutes”) pursuant to subsection 169(3) of the Income Tax Act (the “Act”).
The Court held the appeal in abeyance to enable the Minister of National
Revenue to implement the Minutes and issue notices of reassessment. Five weeks
later, the respondent informed CBS that the Minutes cannot be implemented
because there is a mistake of fact as to the availability to CBS, for the 2007
taxation years ended March 7, 2007 and December 31, 2007, respectively, under
appeal, of additional non‑capital loss carry-forwards from prior years in
the amount of $24,366,301 (the “non-capital losses”). The non-capital losses
are reflected in Schedule A attached to CBS’ initial written settlement offer
and the Minutes.[1]
[3]
The ground identified in the Respondent’s motion
to strike the Affidavit is that CBS failed to permit effective
cross-examination of its affiant, contrary to section 74 of the Tax Court of
Canada Rules (General Procedure) (the “Rules”), by invoking privilege
over information and exhibits in the Affidavit and by refusing to answer
relevant and proper questions. Alternatively, if I am not going to strike the
Affidavit as a whole, or portions, I should nonetheless give it no weight.
[4]
At the hearing, the respondent relied on two grounds.
First, CBS needlessly provided too much hearsay evidence in the Affidavit which
failed to meet the twin criterion of reliability and necessity thus making it
inherently unreliable when better evidence was available. Second, CBS
improperly put forward Ms. Toaze, a law partner of Blakes and CBS counsel, on a
controversial issue. Those grounds breached section 19 of the Rules. Selecting
her as the affiant, plus CBS’ and her actions of invoking privilege and refusing
to answer questions on various other bases, prevented meaningful cross-examination
on a controversial issue. If admitted, the Affidavit would cause extreme
prejudice to the respondent.
I. Background to the Respondent’s motion
[5]
The parties pled that a predecessor of CBS
deducted $25,751,078 in non‑capital losses from prior years in computing
its taxable income for the March 2007 taxation year. However, in the Reply,
the respondent denied that that predecessor had any non-capital losses to
deduct.[2]
Minutes of Settlement
[6]
On April 24, 2014, CBS’ counsel in the Notice of
Appeal, Edwin Kroft and Jeffrey Trossman, sent to respondent counsel, Elizabeth
Chasson, the initial settlement offer with Schedule A attached (“initial
settlement offer”).[3]
The initial settlement offer and Schedule A states:
5. …
2.8 Strictly for purposes of
the without prejudice settlement offer, the Minister and the Appellant agree
that the revised non-capital loss balances of the Appellant shall be applied,
pursuant to the provisions of the Act (including subparagraph 111(3)(b)(i)), in
accordance with Schedule A attached hereto.
…
[Schedule A]
Net Adjustments from Settlement
March 7, 2007 Taxation year:
Additional non-capital losses: (24,366,301.00)
Less denied capital losses: (1,540,380.00)
(22,825,921.00)
[7]
On May 21, 2014, respondent counsel acknowledged
the initial settlement offer and sought, amongst other things, information as
to the source and back-up for the non-capital losses because of the discrepancy
between the Canada Revenue Agency (“CRA”) records and Schedule A regarding the
quantum of such losses being available. The respondent was to provide a schedule
prepared by the CRA showing non-capital loss amounts available to CBS.[4]
[8]
On September 17, 2014, respondent counsel wrote
to CBS counsel that the CRA agreed with the non-capital losses in Schedule A.[5]
[9]
On December 19, 2014, CBS counsel sent to
respondent counsel revised draft minutes of settlement (the Minutes) to the
draft Minutes of Settlement CBS had previously sent on December 12, 2014.[6]
[10]
On January 7, 2015, respondent counsel executed
the Minutes and notified the Court that a settlement had been reached under
subsection 169(3) of the Act.[7]
The Court acknowledged that the appeal would be held in abeyance for 60 days.[8] The Minutes indicate:
8. …
2. The Minister of
National Revenue (the “Minister”) and the Appellant agree that the
revised non-capital loss balances of the Appellant shall be applied, pursuant
to the provisions of the Income Tax Act (Canada) (the “Act”)
(including subparagraph 111(3)(b)(i) of the Act), in accordance with Schedule A
attached hereto.
3. The Minister
shall reassess the Appellant’s taxation years ending March 7, 2007 and December
31, 2007 (the “2007 Years”) and:
(a)
Allow the Appellant’s
deduction, in computing taxable income for the March 7, 2007 taxation year, of
non-capital losses arising in prior taxation years equal to $24,366,301;
Mistake
[11]
Respondent counsel attempted to contact Mr.
Kroft on February 16, 2015. Ms. Toaze returned the call on behalf of Mr. Kroft.
Respondent counsel informed Ms. Toaze that the CRA is having difficulty
implementing the Minutes because of questions relating to Schedule A. Ms. Toaze
relayed that information to Mr. Kroft. On February 19, 2015, Mr. Kroft set out
CBS’ position in a letter to respondent counsel.[9]
The next day, she notified him that contrary to the CRA’s prior understanding,
the CRA recently discovered that there are no non-capital losses available for
carry-forward to the taxation years under appeal and asked CBS to provide
information to substantiate those.[10]
[12]
On March 10, 2015, respondent counsel informed
the Court that the CRA had informed her that there is a mistake of fact in the
Minutes.[11]
Case management
[13]
On March 10, 2015, CBS counsel requested case
management from the Court and advised it would be filing the CBS motion.[12] On June 26, 2015, an Order
was issued pursuant to a case management conference call directing that the
parties complete certain steps (“Motion Order”) before the hearing of the CBS
motion scheduled for December 3, 2015.
CBS motion
[14]
The CBS motion and Affidavit in support were
filed on June 30, 2015.
Cross-examination
[15]
The affiant was cross-examined on the Affidavit
on October 7, 2015.
Respondent’s motion
[16]
The Respondent’s motion was filed on November
9, 2015.
[17]
Prior to filing the Respondent’s motion, the
respondent had served on CBS a Request to Admit the fact that “As of April 23,
2014, the appellant did not have a balance of $24,366,301 in non-capital losses
realized in the taxation years prior to 2007.” Before the expiry of the
deadline for the Request to Admit, CBS made an urgent request to the Court for
a case management conference call, which the respondent opposed, and four days
later, CBS brought an interim motion for an order requesting that no steps be
taken by either party in the appeal other than those in the Motion Order until
the CBS motion is heard.[13]
[18]
On August 13, 2015, the case management judge
granted the request and issued an abeyance order (“Abeyance Order”) which
ordered, amongst other things, that CBS’ response to the Request to Admit and
interim motion shall be held in abeyance. Also, the Motion Order shall remain
in effect and be strictly adhered to by the parties.
II. Principles to strike an affidavit
[19]
Trudel J.A. articulated the principles to strike
an affidavit in Canada (Attorney General) v Quadrini, 2010 FCA 47,
[2010] FCJ No. 194 (QL) [Quadrini]. At paragraph 18, he states:
18. […] As a
general rule, the affidavit must contain relevant information which would be of
assistance to the Court in determining the application. As stated by our Court
in Dwyvenbode v. Canada (Attorney General), 2009 FCA 120, the purpose of
an affidavit is to adduce facts relevant to the dispute without gloss or
explanation. The Court may strike affidavits, or portions of them, where
they are abusive or clearly irrelevant, where they contain opinion, argument or
legal conclusions, or where the Court is convinced that admissibility would be
better resolved at an early stage so as to allow the hearing to proceed in a
timely and orderly fashion […].
[Emphasis Added]
[20]
In Mayne Pharma (Canada) Inc. v Aventis
Pharma Inc., 2005 FCA 50, [2005] FCJ No. 215 (QL),
the Federal Court of Appeal notes that motions to strike affidavits should be
exceptional, especially where the question is one of relevancy, and prejudice
must be demonstrated. With respect to motions to strike based on hearsay, the
Court, in quoting from Canadian Tire Corp. v P.S. Partsource Inc., 2001
FCA 8, 267 NR 135 (FCA) [Canadian Tire Corp.], outlines that:
18. … In the case of motions to strike based on hearsay, the motion
should only be brought where the hearsay goes to a controversial issue, where
the hearsay can be clearly shown and where prejudice by leaving the matter for
disposition at trial can be demonstrated.
III. CBS’ position
[21]
In opposing the Respondent’s motion, CBS’ main
argument is that there is no dispute about the authenticity of the Affidavit
exhibits nor that those were filed, served, sent and received and the
respondent informed the Court of the settlement reached on January 7, 2015. Therefore,
the exhibits are routine documents containing uncontroversial documentary facts
for the purposes of the CBS motion. The sole function of the Affidavit is to
append exhibits, as in any routine motion. It was not proffered for the truth
of its contents. Given that, no prejudice would result to the respondent if the
Affidavit was admitted, but serious prejudice would result to CBS if it was struck,
as critical documents would be excluded.
IV. Analysis
[22]
I agree that the respondent did not dispute that
the Affidavit exhibits were filed, served, sent and received and other than
Schedule A, I also agree that authenticity was not challenged. These exhibits comprise
mostly correspondence, commencing with the initial settlement offer on April
24, 2014 and up to and including correspondence sent on March 10, 2015,
exchanged between the parties’ counsel or sent by the respondent to the Court. I
disagree, however, with CBS’ position that the exhibits contain uncontroversial
documentary facts and that the sole function of the Affidavit is to merely
append exhibits similar to any routine motion.
[23]
At the hearing, the respondent conceded that the
majority of the facts in the Affidavit and exhibits are uncontested except for the
pivotal issue. That issue, which CBS is aware of, relates to the accuracy,
truth and origin of the non‑capital losses in Schedule A (“controversial
issue”), attached to the initial settlement offer and the Minutes.
[24]
I find that this is the controversial issue in
this and the CBS motion in which CBS will contend a settlement was reached and the
respondent will contend that there was a mistake of fact relating to the
non-capital losses in Schedule A. The amounts of non-capital losses shown in
Schedule A are incorporated into the initial settlement offer, the Minutes,
plus referenced in other exhibits. It was the primary focus of the
cross-examination. The controversial issue is supported by the exhibits showing
the communications and correspondence between the parties’ counsel and
correspondence to the Court in February and March 2015, referred to in
paragraphs 29 through to 32 of the Affidavit.
[25]
As to the contents and the function of the
Affidavit, paragraphs 11, 12, 13, 15 and 29 do not append any exhibits; thus, the
sole function was not to merely append exhibits that were filed, served, sent
and received. Nor does the Affidavit indicate that function. The affiant’s statements
show that she had some involvement in the file. When Mr. Kroft was absent on
one occasion, she contacted respondent counsel on his behalf and proceeded to
obtain some information and subsequently relayed that to him. In other
instances, the affiant received information from Mr. Kroft and recorded and
reiterated that in the Affidavit. This goes beyond merely appending exhibits. I
do not accept CBS’ contention that the purpose of the statements in the
Affidavit was merely to prove the statements were made, as opposed to the truth
of its contents. Therefore, we do not get to hearsay.
[26]
In paragraph 1 of the Affidavit, Ms. Toaze
deposes that “I have personal knowledge of the matters to which I hereinafter
depose, except where stated on information and belief and, where so stated, I
believe to be true.” Affirming the Affidavit on personal knowledge, goes beyond
merely appending exhibits. Personal knowledge means that an affiant has
first-hand knowledge of the facts and cannot recount out-of-court statements by
others.
[27]
The Respondent’s motion is predicated on
sections 19, 72 and 74 of the Rules relating to affidavits and
principles to strike an affidavit based on hearsay.[14]
[28]
Section 19 reflects the general rule against
hearsay that an affidavit is confined to relevant facts, without gloss or
explanation, within the personal knowledge of the deponent. However, section 19
does not displace the traditional exceptions, the principled approach nor
specific exceptions within the Rules to the hearsay rule. Subsection
19(2) states:
19(2) An affidavit shall be confined to a statement of facts within
the personal knowledge of the deponent or to other evidence that the deponent
could give if testifying as a witness in Court, except where the rules provides
otherwise.
Hearsay
[29]
Section 72 permits an affidavit that contains
hearsay statements based on information and belief. In 506913 N.B. Ltd. v
Canada, 2012 TCC 210, [2012] TCJ No. 144 (QL) [506913 N.B. Ltd.],
the Court notes that section 72 is an exception to the general rule in subsection
19(2) of the Rules. Whilst permissible, evidence will only be admissible
if the hearsay is reliable and necessary. Section 72 states:
Contents of
Affidavit
72. An affidavit for use on a motion may contain statements of the
deponent’s information and belief, if the source of the information and the
fact of the belief are specified in the affidavit.
[30]
This is consistent with the principled approach,
under which hearsay statements remain presumptively inadmissible but may be admissible
where the twin criterion of reliability and necessity are sufficiently
demonstrated as set out in R v Khelawon, 2006 SCC 57, [2006] 2 S.C.R. 787, otherwise
the general exclusionary rule prevails.
[31]
The respondent submits that neither reliability
nor necessity exists to justify the admissibility of the hearsay in the
Affidavit as it relates to the controversial issue (Schedule A and anything
emanating from it).
[32]
The admissibility inquiry into threshold
reliability is focussed on whether there is sufficient indicia of reliability
of the hearsay statement so that the trier of fact has a satisfactory basis to
evaluate the truth and accuracy of the statement or its trustworthiness to make
use of the evidence. Evidence in an affidavit must be capable of being tested
for its reliability during cross-examination.
[33]
Respondent counsel argues that the Affidavit
hearsay evidence is inherently unreliable because she did not have a full
opportunity to test the truth and accuracy, on cross-examination, as to the controversial
issue. Further, it was unnecessary to have Ms. Toaze as the affiant when better
evidence was available from CBS personnel, who would have had first-hand
knowledge of the facts alleged in the Affidavit relating to its non‑capital
losses in Schedule A and could not assert privilege, as did Ms. Toaze. Specifically,
several times during cross‑examination, the affiant was asked if she had
knowledge of the existence, truth, accuracy and source of the non-capital
losses in Schedule A but repeatedly refused and/or objected on various bases to
answer the questions relating to the information in the Affidavit and the
exhibits. No explanation was provided as to why CBS was not available. Rather,
CBS put forward Ms. Toaze, as the affiant on the controversial issue, who is a
law partner at Blakes and CBS counsel. This served to preclude cross-examination
of CBS personnel.
[34]
The respondent referred to the decision in Belchetz
v Canada, 98 DTC 1230, involving section 72 of the Rules noting that
hearsay is merely permissive. Hamlyn J. indicated that the Court is entitled to
the person who has personal knowledge and knows the facts, when that person is
available, instead of hearsay sworn by someone who knows nothing of the facts.[15]
[35]
Evidence in an affidavit must be capable of
being tested for accuracy to evaluate the hearsay, subject of course to any
proper objections, to demonstrate reliability. Paragraph 9 of the Affidavit
states “The Appellant’s Settlement Offer included a schedule of non-capital
losses entitled “Schedule A”.” The applicant is CBS. Unlike other paragraphs
that the affiant affirmed to in the Affidavit, paragraph 9 makes no reference
to the source of Schedule A, nor if the affiant has personal knowledge or if
she is affirming on information and belief as it relates to Schedule A and
merely refers to inclusion in the initial settlement offer making this
ambiguous.
[36]
When the respondent sought to ascertain the
source of Schedule A during cross-examination, the response, without any other
elucidation was “That would be confidential information.” I agree with the
respondent that this is inadequate. CBS cannot take advantage of such ambiguity
of its own making. On its face, I find that Schedule A is hearsay and was not
offered merely to show it was appended to the initial settlement offer and the
Minutes but is attempting to rely on it to demonstrate the existence of the
non-capital losses. Even if paragraph 9 was an attempt to establish that
Schedule A was merely appended to the initial settlement offer and other
documents, as opposed to proving the truth of the statements, it would still be
hearsay given the paucity of information surrounding the controversial
document. All of which impeded the respondent’s ability to test the accuracy of
the information contained in the Affidavit and in issue in the motion. I will
address this more fully later in these reasons under the heading “cross-examination”.
This rendered the information, in my view, sufficiently unreliable. As an
aside, given the finding that it is hearsay, the failure to identify the source
of the information is contrary to section 72 of the Rules.
[37]
In Canadian Tire Corp., the Court struck
portions of an affidavit where it would not have been possible for the opposing
party to cross-examine effectively in respect of hearsay statements from
unidentified sources.
[38]
In Clive Tregaskiss Investment Inc. v Canada,
2003 TCC 398, [2003] TCJ No. 339 (QL) [Tregaskiss], Bowie J. considered
an affidavit in the context of section 72 of the Rules. He found that
the affidavit filed by an associate in the firm of counsel for the party on
whose behalf it was filed was given no weight by the Court, not only for that
reason, but because it failed to provide specifics of the source of
information.
[39]
The necessity to have Ms. Toaze, as affiant, on
a controversial issue is not readily apparent when CBS personnel would have
been available.
Affidavit
sworn by and as CBS counsel on the controversial issue
[40]
According to the respondent, the affiant
improperly affirmed, as CBS counsel, the Affidavit involving the controversial
issue. The respondent is unsure of Ms. Toaze’s precise role because she claimed
privilege over the issue of whether she was counsel for CBS.
[41]
During cross-examination, Ms. Toaze confirmed
that Blakes is counsel for CBS and Mr. Kroft and Mr.Trossman are identified as
counsel on the Notice of Appeal. When asked by respondent counsel if she was also
CBS counsel, the following exchanges took place:
65. Q. If you go
to the Notice of Appeal, you will see it’s Tab A to your affidavit and,
specifically, to page 31. It’s noted that Mr. Kroft and Mr. Trossman are
counsel for the Appellant?
A. Yes
66. Q. You are
not?
A. That’s
correct.
…
68. Q. Are you
also counsel for the Appellant, CBS?
A. My name is not
listed.
69. Q. Are you
counsel?
MR. KROFT: She
just indicated, Counsel, previously she was not.
THE WITNESS: My
name is not listed.
MR. KROFT: You
asked her that.
MS. GOLDSTEIN:
No. I asked her if she is counsel. I did not ask her if her name was listed.
MR. KROFT: I
think you asked her previously, but carry on.
THE WITNESS:
Counsel for the Appellant are Edwin G. Kroft, Q.C., and Jeffrey Trossman.
BY MS. GOLDSTEIN:
70. Q. So you are
not counsel for the Appellant?
A. I’m not listed
here as counsel for the Appellant.
71. Q. I think we
can all see that you are not listed there. I’m asking you: Are you counsel for
the Appellant?
A. I’m not sure –
I don’t understand the question because counsel for the Appellant is listed on
the Notice of Appeal.
72. Q. Are you
retained in any capacity as a counsel for the Appellant?
MR. KROFT: Well,
Counsel, that’s an improper question.
MS. GOLDSTEIN:
Why?
REF-2 MR. KROFT: Because you are asking about whom the Appellant
retained. Our firm was retained, and the counsel are stipulated there, so I’m
objecting to the question because the witness has already answered the question
as well.[16]
[42]
In my view, the responses from the affiant
amount to obfuscation to straightforward questions that warrant straightforward
responses as to the nature of her involvement. In other instances of the read-ins
presented, the affiant responded to questions put to her by invoking privilege,
raising confidentiality and indicating that the document speaks for itself. From
her responses, it appears how Ms. Toaze perceived her role as counsel.
[43]
In paragraph 1 of the Affidavit, Ms. Toaze
deposes that “I am a partner at the law firm of Blake, Cassels & Graydon
LLP. I work with Edwin G. Kroft Q.C. (“Mr. Kroft”), counsel for the Appellant.”
In paragraph 29 of the Affidavit, the affiant states that on one occasion she contacted respondent counsel on Mr. Kroft’s behalf. Based on the
foregoing, I infer that Ms. Toaze was CBS counsel.
[44]
The Law Society of Upper Canada’s Rules of Professional Conduct, as noted
by the respondent, indicates that lawyers who appear as advocate shall not
submit their own affidavits before a tribunal unless permitted by law, the
rules of court or if the matter is purely formal or uncontroverted.[17]
[45]
The jurisprudence has established that if there
are uncontroversial documents of minimal importance and the motion is routine
or straightforward, the Court has the discretion to accept a lawyer’s
affidavit.
[46]
In Pluri Vox Media Corp. v The Queen,
2012 FCA 18, 2012 DTC 5039 [Pluri Vox], the Court exercised its
discretion and accepted a lawyer’s affidavit because of the non‑controversial
nature of the exhibits. The Court commented that if the affiant had a law partner,
associate lawyer, student-at-law or legal assistant, it would have been
preferable to have the three documents exhibited by one of those persons.[18] This reflects the standard
practice in routine motions where matters are uncontroverted.
[47]
However, Stratas J. cautioned that unacceptable
conflicts can arise when a lawyer appears on a motion as a witness on
controversial matters of fact and as an advocate. He states:
7. …
- … when the
lawyer enters the fray by testifying on factual matters, the lawyer runs the
risk of his or her testimony being disbelieved, with the effect of undercutting
the lawyer’s believability and trustworthiness as an advocate for the client’s
cause. Further, the lawyer seems less of an officer of the court and more as a
partisan with a stake in the outcome of the case. Finally, the lawyer may be in
conflict or may appear to be in conflict by trying to defend his or her own
credibility as a witness, rather than single-mindedly advancing the client’s
cause. Further, a lawyer has certain obligations of fairness and responsibility
as an advocate (see, e.g., Rule 4.01 of the Law Society’s Rules of
Professional Conduct). Many of these have the potential to be broken if the
lawyer becomes a participant in the fray.
8. When the Court interprets and applies Rule 82, concerns such as
these should be front of mind. The more that these concerns are present, the
more the Court should exercise its discretion against allowing a lawyer’s
affidavit. The Court should also consider whether the evidence can be supplied
by a person other than the lawyer.
[48]
I find that Schedule A and the documents relating
thereto are controversial, of critical importance, and therefore, this is not a
routine motion. As envisaged in Pluri Vox, dangers arise when
counsel enters the fray in circumstances where there is a controversial issue
and regard should be had as to whether evidence could be supplied by a person
other than counsel. I infer that CBS personnel could have supplied it.
[49]
I conclude that the twin criterion was not
satisfied in that the hearsay evidence including and relating to Schedule A,
was not sufficiently reliable to provide a satisfactory basis for me to
evaluate the truth and accuracy or its trustworthiness. It does not pass the
threshold reliability test to be admissible nor could it be said to be
necessary.
Cross-examination
[50]
An adverse party may cross-examine a deponent
who has sworn an affidavit for a motion as contemplated in section 74 of the Rules
as follows:
Evidence by
Cross-Examination on Affidavit
74. A deponent whose affidavit has been filed may be cross-examined
on it by a party who is adverse in interest on the motion, and the evidence
adduced may be used at the hearing of the motion.
[51]
Cross‑examination is intended to enable
the evaluation of evidence and reveal whether the information is reliable or
not. Counsel cross‑examining has a right to put questions covering all
matters relevant to the determination of the issue. The Affidavit was filed in
support of the CBS motion and utilized in the respondent’s motion. CBS says the
CBS motion was brought to allow the appeal in accordance with the settlement
reached in the Minutes which includes the non‑capital losses derived from
Schedule A and the Minutes attach Schedule A. The respondent claims that
there was a mistake of fact in the Minutes as to the accuracy of the
non-capital losses in Schedule A and challenges CBS’ entitlement to those.
[52]
The respondent submits that the selection by CBS
of Ms. Toaze, as an affiant, and its conduct were designed to thwart proper
cross-examination so as to deny the respondent the opportunity to properly and
fairly cross-examine CBS on the controversial issue it knew to be contentious. Ms.
Toaze and CBS invoked privilege and refused to answer nearly every question
asked during cross-examination on all underlying facts in the information in
the Affidavit and exhibits so that the truth and accuracy of certain facts did
not emerge relating to the non-capital losses in Schedule A and its source. CBS
personnel could have provided first-hand knowledge without claiming privilege.
[53]
In reply, CBS contends that all relevant and
proper questions were answered and viewed many questions as improper or abusive.
For example, the respondent had asked questions as to work-product privilege of
Blakes.[19]
It provided Appendix A to illustrate those points.[20] References to the page
numbers of the transcript and a precis as to what transpired from CBS’
perspective was provided to me for my review.
[54]
The respondent challenges CBS’s suggestion that
CBS or the affiant had answered the questions and refutes the characterization as
to what transpired in Appendix A. In her view, a mere assertion of privilege or
confidentiality or other claim such as “It’s privileged, and therefore I can’t
tell you” is insufficient and non‑responsive. The respondent presented the
following exchanges from the cross-examination to demonstrate the point:
…
4. Q. And that
subpoena requested that you bring all relevant documents?
A. Yes.
5. Q. What
documents have you brought?
A. I have brought
the motion record, which are the relevant documents.
6. Q. And how did
you determine that that was the only relevant document?
A. Those are the
documents that are cited in the affidavit and they are the relevant documents.
7. Q. Did you
make any inquiries as to whether or not there were other relevant documents?
A. I made – any
other documents would be privileged. I made no inquiries with respect to
privileged documents.
8. Q. Did you
make any other inquiries as to whether or not there were relevant documents?
REF-1 MR. KROFT:
I think it’s a circular question, Counsel. I’m objecting to the question. It’s
impoper. It’s not ---
MS. GOLDSTEIN:
Why is it ---
MR. KROFT: It’s
improper, Counsel, because the witness gave you an answer.
She said that
those are the documents she believed were relevant.
MS. GOLDSTEIN: I
asked if she made any inquiries as to whether or not there were other relevant
documents.
MR. KROFT: And I
believe she answered the question.
MS. GOLDSTEIN: I
don’t believe she answered that question.[21]
…
114. Q. Just
to clarify, we understand that you previously said, “I have not spoken with the
client representative with respect to the affidavit.” Is that accurate?
A. I believe that
I said that, and I also said that, quite frankly, to the extent that there are
or are not conversations, that’s confidential.
115. Q. When you
said it, was it accurate?
A. Yes.
116 Q. So I take
it that you have not spoken the – have you spoken to the person or persons
responsible for maintaining the tax records at the Appellant in conjunction
with this affidavit or the cross examination?
Any conversations
that I would have had, if I had any – and I’m not saying that I have had any –
would be confidential.[22]
…
120. Q. According
to your affidavit, Schedule A, at page 56, was attached to the Blakes letter of
April 24, 2014, which is at pages 50 to 55. Correct?
A. That is
correct.
121. Q. Who
prepared Schedule A?
A. That would be
confidential information.
122. Q. Why is it
confidential?
MR. KROFT: Well, I’m going to object to the question, Counsel, for
the same reasons that I will keep indicating. Blakes is counsel to the
Appellant. How that letter was prepared is something that’s the subject of
litigation privilege, and I’m instructing -- well, I’m not instructing anybody
to do anything. I’m just objecting to the question.[23]
[55]
Without delving into the formulation and
propriety of each of the questions and responses in Appendix A, which is not
the subject matter of this motion, suffice to say and in the context of this
motion, some objections were well founded, others are arguable. My general
impression from reviewing the questions set out in the Appendix, the answers in
the transcript and the exchanges referred to by the respondent at the hearing
is that the responses to the questions tended to be lacking. The response to
question 121 is illustrative of that. Even the response to follow‑up
question 122 is off target. The response, as framed, relates to Blakes’ letter
as litigation privilege – which it is – but the specific question put to the
affiant related to Schedule A, not the letter. Admittedly, Schedule A is
attached to that letter, and other exhibits, and is the focus of paragraph 9 of
the Affidavit. I agree with the respondent that the response to question 121 is
insufficient. Other responses were convoluted.
[56]
CBS referred to Cameco
Corp. v Canada, 2010 TCC 636, 2011 DTC 1050 [Cameco] principally
because the ground for the motion and arguments made were similar to the
present case.[24]
I agree, however, Cameco does not assist CBS because no ruling was made
on the motion to strike the affidavit in Cameco. Rather, the decision
was based on the defects on the face of the pleadings,
such that the affidavit was not critical to the findings. Further, Ms. Toaze
had a more enhanced role than that of the associate in Cameco. As pointed out by the respondent at the hearing, the associate did
not inquire beyond what she had been told by other associates was needed, which
implied that the affidavit was submitted for the truth of what the associate
told her as to the particulars needed. The respondent had suggested in those
circumstances, one of the other associates would have been more knowledgeable
and preferable.
[57]
CBS asserts that there was an overtone that the
affiant was obliged to go behind the documents to investigate the accuracy and
amount of the losses, even though the Rules do not impose any such
obligations on an affiant as to the statements made in the documents appended
to the exhibits and viewed several questions as examination for discovery type
questions and objected to those.
[58]
CBS correctly points out that the scope of
cross-examination on an affidavit in support of a motion is narrower than an
examination for discovery and there are other differences between
cross-examination and examination for discovery. It referred to the decision in
Merck Frosst Canada Inc v Canada (Minister of
Health), 1998 CanLII 7729 (FC), aff’d 1999 CanLII
8930 (FCA) [Merck], which highlighted the following differences: in
cross-examination, the affiant is examined as a witness, not a party; the
answers given constitute evidence, not admissions; the affiant cannot be
required to inform himself or herself; the affiant can be required to produce
only documents within his or her custody or control; and the rules of relevance
are more limited. I note that the cross-examination conducted in Merck
was in the context of a judicial review application.
[59]
In Ontario v Rothmans Inc., 2011 ONSC
2504, 5 CPC (7th) 112 (Ont Sup Ct),[25]
Perell J. prepared a compilation of eleven principles summarized from existing
jurisprudence. Below principle 6 notes that the scope of the cross‑examination
can vary based on the nature of the application and there is some authority,
according to principles 10 and 11, that expands beyond the principle in Merck,
as follows:
…
5. If a
matter is raised in, or put in issue by the deponent in his or her affidavit,
the opposite party is entitled to cross-examine on the matter even if it is
irrelevant and immaterial to the motion before the court: …
6. The proper
scope of the cross-examination of a deponent for an application or motion will
vary depending upon the nature of the application or motion: …
…
10. The
deponent for an application or motion may be asked relevant questions that
involve an undertaking to obtain information, and the court will compel the
question to be answered if the information is readily available or it is not
unduly onerous to obtain the information: …
11. The deponent for a motion or application who deposes on
information and belief may be compelled to inform himself or herself about the
matters deposed: …
That said, it is
recognized that principles 10 and 11 are exceptions to the general rule.
[60]
In Ottawa Athletic Club Inc. (cob Ottawa
Athletic Club) v Athletic Club Group Inc., 2014 FC 672, 2014 CarswellNat
2636, the Court acknowledges that the scope of cross-examination has long been
contentious and various answers have been provided by the courts over time. The
Court notes, however, that the consensus is that an affiant who swears to
certain matters, should not be protected from fair cross-examination on the
information in the affidavit and collateral questions which arise from his or
her answers.
[61]
Schedule A is contained in the Affidavit thrice (attached
to documents). The Affidavit exhibits are replete with references to Schedule A
or the exhibits utilize the non-capital losses derived from Schedule A. For
example, page 3 of the initial settlement offer, paragraphs 2 and 3 of the
Minutes, Schedule B and including but not limited to Exhibits “D”, “E”, “F”, “G”,
“I” and “K”. Schedule A is clearly a crucial document.
[62]
The respondent asked the following questions and
received the following responses concerning Schedule A:
d)
125.
Q. What information was used to prepare Schedule A?
Mr. Kroft: Counsel, I’m going to object to this question. This isn’t
an examination. It’s improper. This isn’t an -
e)
127. Q. Do you have any knowledge as to how the alleged
– the noncapital losses that are alleged to have arisen and are set out in
Schedule A, how did they arise?
Mr. Kroft: Well, Counsel, I’m going to object to these
questions on a number of grounds concisely. First of all, they are not really
relevant to the subject matter and relief sought in this motion. The motion is
about whether or not a settlement agreement is –
…
i)
[sic]
Line 11: Ms. GOLDSTEIN: So you are refusing to allow the witness to
answer the following question: Did the Appellant, through its counsel, in
Exhibit C, represent to the Minister of National Revenue that it had available
noncapital losses equal to $24,314,000 sorry, I have the wrong one here
$24,366,301?
MR KROFT: No Counsel. I’m advising you that the question was
improper because the witness already answered that question of ours at least
once, which was she said the document spoke for itself. In other words, the
document says what it says. You keep wanting to put words into the witness’s
mouth and ask her to affirm something other than what she has said.
…
132. Q. Is the document [Schedule A] a representation? True?
The document speaks for itself.
133. Q. That’s not what I asked. I asked you: It is true? Is it
accurate?
MR KROFT: What is accurate, Counsel?
THE WITNESS: What is accurate?
MR. KROFT: I’m sorry. That question is of such a general nature it’s
an improper one. It’s vague. It doesn’t ask the witness to answer anything.
BY MS. GOLDSTEIN:
134. Q. Specifically the representation on page 52, 3.9(a) that the
Appellant has a noncapital loss equal to $24,366,301?
A. I think that is out of context because you would need to read
paragraph 2.8, which says:
“Strictly for purposes of the without prejudice settlement offer,
the Minister and the Appellant agree that the revised noncapital loss balances
of the Appellant shall be applied pursuant to the provisions of the Act
(including subparagraph 111(3)(b)(i)) in accordance with Schedule A attached
hereto.”
135. Q. I would like a yes or a no answer to the following question:
Does the Appellant have $24,366,301 in noncapital losses available for
carry-forward from the March 7, 2007 reassessment?
A. The settlement offer speaks for itself.
136. Q. That’s not my question. Are you refusing to answer my
question?
A. I do not have a yes or a no answer. It is simply the document
speaks for itself.
137. Q. Why don’t you have a yes or a no answer?
A. The document speaks for itself.
MR. KROFT: Are you asking her if she knows that?
MS. GOLDSTEIN: I’m asking her if it’s true or not. She has attached
to her affidavit a document, and I’m entitled to ask: Do you know if the
representations in that document are true or not?
MR. KROFT: No, Counsel.
I’m sorry. I beg to differ with you. It’s an improper question. It’s not an
examination for discovery with respect to the contents of this document.[26]
[63]
Given the scope of an affidavit is determined by
the issues raised by the motion (settlement or mistake of fact) and the
cross-examiner has the right to put questions covering all matters relevant to
the determination of issues in the motion, in my opinion, the respondent’s
questions properly focused on Schedule A. Schedule A materially affects the
evidentiary burden and must be capable of being tested in cross-examination,
fairly and properly, to enable the Court to evaluate the evidence as to its
accuracy to ultimately determine the issue. This was not done. I infer and find
that the selection by CBS of Ms. Toaze and her conduct impeded full
cross-examination to test the accuracy of the evidence on the controversial
issue it knew to be contentious, when CBS could have provided first-hand
knowledge thus making the hearsay in the Affidavit unreliable.
Prejudice
[64]
The Court should not strike an affidavit on a
motion to strike unless the applicant can show prejudice. Respondent counsel argues
if the Affidavit is allowed to stand, there is extreme prejudice to the
respondent because she has not been permitted to test, through
cross-examination, certain items in the Affidavit.
[65]
According to CBS, nothing in the Affidavit is
offensive that would prejudice the respondent if the Affidavit is admitted as
evidence because it merely reiterates statements about the correspondence sent
by the parties and/or to the parties or correspondence to/from the Court about
documents sent. I agree with the respondent that because of the limitations in
the ability to test the Affidavit, that demonstrates prejudice to the
respondent. CBS argues that serious prejudice would result to CBS. Striking the
Affidavit would amount to the dismissal of the CBS motion without it being
heard on the merits as it would exclude from evidence documents that are
authentic, that were either filed, served, sent and received and not
controversial.
[66]
CBS referred to 506913 N.B. Ltd. to
illustrate the Quadrini principle where the Court found that failing to
specify the source of information or fact of belief go to the weight to be
ascribed at the main motion.[27]
Conversely, in Tregaskiss, the Court gave no weight to the hearsay
evidence.[28]
[67]
Applying the principles on a motion to strike
based on hearsay and based on the foregoing reasons, I conclude that the
Affidavit containing hearsay, sworn by the affiant as CBS counsel on a
controversial issue, failed to meet the twin criterion of reliability and
necessity to assist me in evaluating the evidence for the CBS motion. In
exercising my discretion against allowing the Affidavit, as noted by the
Federal Court of Appeal in Pluri Vox, the Court should consider if evidence
could have been supplied by a person other than counsel. CBS personnel could
have done so. The respondent’s motion is granted.
[68]
The respondent asks that the Affidavit, in whole
or part, be struck. Alternatively, that the Affidavit be admitted but no weight
be ascribed. Given the breadth of the impact of Schedule A on the Affidavit and
the exhibits, severability is difficult. As such, the Affidavit is struck.
[69]
I am granting leave to CBS to file an affidavit
in support of the CBS motion.
[70]
Costs will be awarded to the respondent in this
motion, in any event of the cause.
Signed at Toronto,
Ontario, this 12th day of April 2016.
“K. Lyons”
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