General Motors Acceptance Corp. Of Canada Ltd. v. R., [1999] 3 CTC 2056

Bell T.C.J.:

The Applicant (“Appellant”) made a motion seeking an order pursuant to sections 88 and 110 of the Tax Court of Canada Rules (General Procedure) (“Rules”) directing the Respondent’s nominee, Susan Miyazaki (“Miyazaki”) to attend a continuation of the examination for discovery and:

(a) produce unredacted [1] copies of all documents which the Respondent has refused to produce on the basis that they deal with confidential taxpayer information, and to answer any questions that may arise from such documents,

(b) answer question number 1158 respecting the basis on which the G AAR Committee arrived at its conclusion posed on examination of Susan Miyazaki to produce documents requested therein and answer any further questions that may arise which questions and productions the Respondent objected to on the basis of relevance, and

(c) produce documents listed in the Respondent’s response to questions 1476 and 1489 of that examination which documents the Respondent has refused to produce on the basis that they are subject to privilege.

Intervenors

This motion was scheduled to be heard on March 22, 1999 and was commenced on that date. It resumed on April 22, 1999 for the purpose of hearing submissions by intervenors. Those intervenors were Ford Credit Canada Limited (“Ford”), represented by Stephen Ruby (“Ruby”) and Chrysler Credit Canada Limited (“Chrysler”), represented by Melissa Fox- Revett (“Fox-Revett”).

General

Section numbers refer to the Rules unless otherwise stated.

Section 88 reads, in part, as follows:

Where the Court is satisfied by any evidence that a relevant document in a party’s possession, control or power may have been omitted from the party’s affidavit of documents, or that a claim of privilege may have been improperly made, the Court may,...

make certain orders. Therefore, the Court can make an Order only if a relevant document has been omitted or in respect of which an improper privilege claim has been made.

Respecting Motion (a)

At the commencement of the April 22 continuation of this motion, Appellant’s counsel, Al Meghji (“Meghji”) presented two documents to the Court. The first one was a memorandum from Mike Rose, Chief of Appeals, Toronto East TSO, Revenue Canada to Jim Nordin, HQ-Appeals. It stated that it attached the Appellant’s submissions and an agency agreement between General Motors of Canada Limited (“GM”) and the Appellant, dated July 7, 1988. Rose set forth that the Appellant believed the agreement to be legally effective with the result that there was no basis for assessing any of the rate support payments after the agreement date. The memo then says:

On a related matter, you already have a copy of a HQ-Rulings memo dated January 25, 1993 which opines that an agency agreement between Chrysler and Chrysler Credit is legally effective.

Meghji said that Head Office Appeals decided that the Appellant’s agreement was not effective, and in so doing, looked at the Chrysler material. He said the Appellant should be able to pursue that to determine how Revenue Canada came to its conclusion.

The second document is entitled “REVENUE REPORTING PRACTICES EMPLOYED IN RESPECT OF THE COST OF LOW-COST FINANCING PROGRAMS IN THE AUTOMOTIVE INDUSTRY”. It was prepared by Errol C. Anderson, Scarborough District Office. It consists of five pages. Page 3 contains redactions, page 4 is mostly redacted and there are redactions on page 5. Meghji suggested that it deals with the “question before the Court - how to tax the Appellant”. He stated that the auditor is common to all companies. He also said that the redactions on page 4 related to Ford and that Miyazaki, on cross-examination, confirmed that it was relied upon and looked at.

Meghji sought production of the second document without redaction and of the Chrysler agency agreement and the HQ-Rulings memo and any other documents referred to in the second document.

Section 82(1) of the Rules provides that each party shall file and serve on each other party:

… a list of all the documents ... relating to any matter in question between or among them in the appeal.

Section 82(2) states that where a list of documents is produced in compliance with that section, the list shall describe all documents relating to any matter in issue in the appeal in a party’s possession for which privilege is claimed and which were formerly in the party’s possession (but no longer are) whether or not privilege is claimed.

Section 82(4) provides that a list of documents shall be verified by affidavit. Schedule B, paragraph c) of the Respondent’s Affidavit of Documents referred only generally to documents obviously sought by the Appellant, as follows:

Statutory privilege:

Documents containing information subject to confidentiality under s. 241 of the Income Tax Act.

This list is not “a list of all the documents” as required by section 82(1). Furthermore, the list does not “describe ... all documents relating to any matter in issue in the appeal ... for which the party claims privilege...” under section 82(2). Presumably,

(a) the two documents presented to the Court on April 22 would have been included in the documents described in paragraph c); and

(b) the other documents sought by the Appellant would be similarly included.

This matter not having been raised by the Appellant I will, for purposes of this part of the motion, assume that the requested documents were not omitted. Both intervenors relied upon the word “relevant” as it appears in section 88.

Ruby submitted that the document sought by the Appellant was not “relevant” within the context of the use of that word in section 88. He suggested that it was different from the wording in section 82 respecting Lists of Documents using the words “relating to any matter” and the same words used in section 95(1) of the Rules. He referred to Canada (Attorney General) v. Bassermann (1994), 114 D.L.R. (4th) 104 (Fed. C.A.). That simply suggests that the words “relating to” are as wide in scope as the words “in respect of” which are described in Nowegijick v. R. (1983), 83 D.T.C. 5041 (S.C.C.) as being words of the widest possible scope. He stated that the words “relating to a matter in question” as found in section 82 were held to be “not so broad as to dispense entirely with all requirement of relevance”. He referred to Owen Holdings Ltd. v. R.(1997), 97 D.T.C. 5401 (Fed. C.A.) in which Isaac, C.J., not in majority, said at 5405:

A semblance of relevancy exists only where the documents sought may lead the party seeking discovery to a train of enquiry which may directly or indirectly advance its case or damage that of its adversary.

Meghji, commenting on this case, quoted from Holmestead & Watson in Ontario Civil Procedure referred to in Isaac C.J.’s judgment, at page 5405:

While clearly irrelevant matters may not be inquired into, relevancy must be determined by the pleadings construed with fair latitude. The court should not be called upon to conduct a minute investigation as to the relevance of each question and whether questions are broadly related to the issues raised, they should be answered. The tendency is to broaden discovery and the right to interrogate is not confined to the facts directly in issue, but extends to any facts the existence or non-existence of which is relevant to the existence or non-existence of the facts directly in issue.

Ruby referred to Oro Del Norte S.A. v. R. (1990), 90 D.T.C. 6373 (Fed. T.D.) where it is stated at page 6375:

Counsel for the defendant concedes that the broad test of relevancy expounded by McEachern, C.J. in Boxer and Boxer Holdings Ltd. v. Reesor, et al and adopted by Urie, J. in Everest & Jennings Canadian Ltd. v. Invacare Corporation. [1984] 1 F.C. 856 (F.C.A.) applies.

It seems to me that the clear right of the plaintiffs to have access to documents which may fairly lead them to a train of enquiry which may directly or indirectly advance their case or damage the defendant’s case, particularly on the crucial question of one party’s version of the agreement being more probably correct than the other, entitles the plaintiff to succeed on some parts of this application.

He then quoted Jerome, J. in Oro as saying:

The Minister has an obligation to treat all similarly situated taxpayers in the same manner, but it does not follow that documents pertaining to a similarly situated taxpayer are relevant to any other taxpayer’s reassessment.

In response Meghji minimized the pertinence of Oro by quoting from the same case at the same page:

In any event, the affidavits filed by the defendant satisfy me that the documents in question were not relied upon by the defendant in formulating the assumptions of fact and reassessment in this case.

In his OUTLINE OF APPELLANT’S ARGUMENT (“OUTLINE”), Meghji said that:

Ms Miyazaki’s evidence clearly confirms that the materials in issue were relied upon in the course of reassessing.

Having regard to my reasons and conclusions the Respondent’s reliance upon the documents sought by the Appellant for purposes of assessing the Appellant has little, if any, foundation.

Ruby then referred to statements from the Federal Court of Appeal in Ford Motor Co. of Canada v. Minister of National Revenue, [1997] 3 C.T.C. 80 (Fed. C.A.) cited with approval in Owen Holdings (supra) at page 5407:

... we find that whatever the similarities or dissimilarities between Ford Canada and its importing competitors, the Minister’s treatment of other taxpayers cannot be determinative of the tax liability of Ford Canada.

In Ford (supra), the Court said at page 100:

The reasons which support this finding are amply expressed in the decision of the Associate Chief Justice on the interlocutory application in these proceedings:

The activities of other automotive manufactures and the defendant’s treatment of those manufacturers is of no relevance to the plaintiff’s actions. No matter how similar the activities of two businesses, if one company can frame its dispute in such a way as to make another company’s affairs relevant, the result would be chaos. In each individual case, the plaintiff must prove that it meets the requirements of the legislation. Here, if the plaintiff establishes that its manufacturing activities fall within the definition in s. 2(1 )(f), then it will be entitled to the consideration provided in s. 26.1 for “similar good”. That entitlement does not flow from the fact that other automotive manufacturers have received it but rather from the fact that the plaintiff meets the requirements in the legislation.

We are in complete agreement that, as a matter of principle, a taxpayer must prove that it meets the requirements of the legislation on its own terms.

Ruby then stated that cases in which the Court has permitted disclosure of third party taxpayer information were cases where the documents in issue contained financial information directly relevant to a taxpayer’s assessment by the Minister of National Revenue, such as transfer pricing information, and where the Minister clearly admitted having relied upon such financial information in forming his assumptions of fact in assessing the Appellant. [2] He stated that the information contained in the redacted paragraphs is not financial in nature and could not have been properly relied upon by the Minister in forming his assumptions of fact.

Fox-Revett referred to the Appellant’s quest for the agency agreement between Chrysler and Chrysler Credit and a memorandum respecting a departmental ruling. She echoed Ruby’s submissions and referred to Owen Holdings (supra) at page 5403:

Although obviously not synonyms, the words “relating” and “relevant” do not have entirely separate and distinct meanings. “Relating to” in Rule 82(1) necessarily imparts an element of relevance, otherwise the parties would have licence to enter into extensive and futile fishing expeditions that would achieve no productive goal but would waste judicial resources.... His assessment that those documents “which did not tend to establish legislative facts”, but rather set forth the opinions of writers, were so remotely related to the issues in controversy that they could not lead to a line of enquiry that could be of any use to the Appellant, appears to us to be perfectly sound.

Fox-Revett said that the rulings memo is an opinion of a writer and therefore “so remotely related”. She stated that the agency agreement is confidential and is a matter between Chrysler Canada and Chrysler Credit and has no relevance to whether GM and GMAC’s agreement is valid.

Appellant’s counsel, in his OUTLINE, stated that the third party taxpayer information “was material to the raising of the reassessments in issue and was relevant to determining the appropriate assessments against the Appellant, and as such, the disclosure of the material is permitted by subsection 241(4) of the Act”.

The general prohibition preventing Revenue Canada officials from providing taxpayer information to any person is found in subsection 241(1) of the Income Tax Act (“Act’) which reads:

(1) Provision of information — Except as authorized by this section, no official shall

(a) knowingly provide, or knowingly allow to be provided, to any person any taxpayer information;

(b) knowingly allow any person to have access to any taxpayer information; or

(c) knowingly use any taxpayer information otherwise than in the course of the administration or enforcement of this Act, the Canada Pension Plan, the Unemployment Insurance Act or the Employment Insurance Act or for the purpose for which it was provided under this section.

Exceptions are found in subsection 241(4) of the Act. Paragraph 241 (4)(b) reads:

(4) Where taxpayer information may be disclosed — An official may

(b) provide to any person taxpayer information that can reasonably be regarded as necessary for the purposes of determining any tax, interest, penalty or other amount that is or may become payable by the person, or any refund or tax credit to which the person is or may become entitled, under this Act or any other amount that is relevant for the purposes of that determination;

Appellant’s Counsel referred the Court to and relied upon the decision in Page v. R. (1995), [1996] 1 C.T.C. 2697 (T.C.C.). In that case, three of five directors of a company which failed to deduct or withhold and remit amounts to the Receiver General for Canada were assessed in respect of directors’ liability. The other two were not so assessed. This Court ordered that documents [3] to the extent that they related to the other two taxpayers, which may have contained inaccurate information and may have influenced the decision of Revenue Canada respecting the liability of directors, be produced. In that case the five directors were united in a common endeavour. It was the Court’s opinion that such documents were reasonably regarded as necessary for the purpose of determining any tax, interest or penalty payable under the Act.

The OUTLINE set forth that Miyazaki confirmed that the Toronto East Tax Services Office was responsible for auditing the other credit arms of Canadian automobile manufacturers, such as Ford and Chrysler. These corporations are separate, apart and distinct from the Appellant. The law is clear that a taxpayer cannot succeed with a submission that the Minister has treated another taxpayer differently from it. [4] In Hokhold v. R. (1993), 93 D.T.C. 5339 (Fed. T.D.), the Federal Court, Trial Division, stated at page 5344:

While it is understandable that the plaintiff considers it unfair that Revenue Canada appears to have treated taxpayers in similar circumstances differently, that cannot be the basis for the plaintiff’s appeal.

The Federal Court of Appeal, in Hawkes v. R. (1996), 97 D.T.C. 5060 (Fed. C.A.) at page 5062, said:

Thus the fact that the Minister has assessed one return of a taxpayer in a different way from another return, or has assessed two taxpayers involved in similar activities differently, is not proof that any particular assessment is incorrect. That is a matter for determination on appeal.

The information respecting Chrysler Credit is not relevant to this appeal. The agency agreement between Chrysler Canada and Chrysler Credit was determined by Revenue Canada to be valid. The validity of the agency agreement between GM and the Appellant will be decided by the Court [5] after weighing all evidence and assessing all submissions. It is the Appellant’s task to present relevant facts and legal propositions in its attempt to establish the validity of its agreement. The Ford, Chrysler and General Motors companies are not and have not been in business together. They are competitors.

The Appellant has been assessed. The Appellant has the onus of dealing with that assessment. The documents sought by it are not relevant in the determination of its appeal. Furthermore, the information with respect thereto cannot within the meaning of paragraph 241(4)(b) of the Act reasonably be regarded as necessary for the purposes of determining any tax, interest, penalty or other amount that is or may become payable by the Appellant.

The Appellant cannot succeed on this part of its motion.

Respecting Motion (b)

These documents appear to have been omitted from the Respondent’s Affidavit of Documents and, accordingly, under section 88 of the Rules this Court has authority to deal with the Appellant’s request.

Appellant’s counsel stated that with respect to the GAAR materials that were refused on the basis of relevance, it is the Appellant’s position that the responses to the questions and the materials may assist the Appellant to advance its case or to damage the Respondent’s case and as such the threshold of relevance for discovery purposes had been met.

Section 245 of the Act, which includes a general anti-avoidance provision, is commonly referred to as GAAR. It is common ground that a reference was made to the GAAR committee respecting direction as to whether section 245 of the Act would be used as a basis for assessing the Appellant. As such reference did not result in the application of the GAAR provisions, the report of the GAAR committee and materials examined by it in order to come to its conclusion are not relevant to the conduct of this case. The Appellant cannot succeed on this portion of the motion.

Respecting Motion (c)

Appellant’s counsel states that the Respondent has refused to produce 49 documents held in the Head Office Appeals’ file on the basis of privilege. [6] His written submission states that the remaining 49 documents relate to Head Office Appeals’ consideration and development of the basis relied upon in support of the assumptions alleged in the Respondent’s Reply. The Respondent claimed solicitor-client privilege, litigation privilege and settlement privilege in respect of those documents. He says further in the OUTLINE:

It is submitted that the Crown’s assertion of privilege leaves the Appellant in an untenable position. The Crown is alleging as a fact, that Head Office Appeals made the assumptions enumerated in the Reply on the basis of analysis contained in the 49 documents. The only way for the taxpayer to challenge the veracity of that allegation is to have access to the very material in the Head Office files — which material was described by the Crown as, “documents related to Head Office’s consideration of the issues in dispute.” The Crown has denied the Appellant access to that material by asserting a privilege. How then, is a taxpayer to challenge the allegation that the assumption was made?

Counsel for the Appellant, after suggesting that the allegation that assumptions were made by Head Office Appeals “may not be true”, presented a chart describing four assumptions from the Reply to the Notice of Appeal indicating that three branches of Revenue Canada reached contrary conclusions. They were Tax Avoidance Section, Toronto, Appeals Section, Toronto and the GAAR Committee. He then stated that the Respondent’s position was that Head Office Appeals analyses formed the foundation for the reassessments and asserted that the material that would confirm or refute this position is protected from production as being privileged. The fact is, however, that such assumptions have been set forth in the Reply and have validity unless successfully assailed.

Counsel then submitted that the Department of Justice became “so intimately involved in the audit and appeals process that they were in fact carrying out the assessing function and, as such, the communications between the Department of Justice and the Department of Revenue Canada in this case are not privileged”. I do not accept this position. It would be astonishing to conclude that a client and solicitor could not have free and full exchange respecting a given subject. Solicitor-client privilege has long been recognized as a fundamental principle of law. Lord Cotton in Southwark Water Co. v. Quick (1878), 3 Q.B.D. 315 (Eng. C.A.) at pages 321-322 said:

... for the purpose of having the litigation conducted properly, the law has said that communications between the client and the solicitor shall be privileged, and that no one shall be entitled to call for the production of a document which has been submitted to the solicitor for the purpose of obtaining his advice, or for the purpose of enabling him to institute or to defend proceedings. There must be the freest possible communication between solicitor and client.

Furthermore, Kellough, J.A. set out the criteria that must be met in order to claim document privilege. In Blackstone v. Mutual Life Insurance Co. of New York, [1944] O.R. 328 (Ont. C.A.). He said at page 337:

In order that these documents be privileged from production, two conditions must co-exist: the documents must be (1) made in answer to inquiries made by a party as the agent for or at the request or suggestion of his solicitor, or without any such request but for the purpose of being laid before a solicitor or counsel for the purpose of obtaining his advice or of enabling him to prosecute or defend an action or prepare a brief; and (2) for the purposes of litigation existing, or in contemplation, or anticipated.

Appellant’s counsel then submitted that if a solicitor-client privilege did exist it has been waived

... because the legal advice that would otherwise be protected has been put into issue or because of the application of the principal of fairness.

He referred to authorities to support the proposition that implied waiver of privilege arises where a party directly raises in a pleading or in evidence the legal advice received by that party. Such submission cannot succeed in this case. The assumptions are all clearly stated and are not expressed to be founded upon legal opinion.

Appellant’s counsel then submitted that a party will be found to have waived its privilege over “communications or documentations” in the interest of “fairness”. He ties this to his prior submission that a party will have impliedly waived privilege where it relies upon privileged communications to ground its claim. He referred to the statement of McLachlin, J. in S. & K. Processors Ltd. v. Campbell Avenue Herring Producers Ltd., [1983] 4 W.W.R. 762 (B.C. S.C.) at 765-766, namely:

In the cases where fairness has been held to require implied waiver, there is always some manifestation of a voluntary intention to waive the privilege at least to a limited extent. The law then says that in fairness and consistency, it must be entirely waived.

At page 764-765 the learned justice said:

Waiver of privilege is ordinarily established where it is shown that the possessor of the privilege (1) knows of the existence of privilege, and (2) voluntarily evinces an intention to waive that privilege. However, waiver may also occur in the absence of an intention to waive, where fairness and consistency so require. Thus waiver of privilege as to part of a communication, will be held to waiver as to the entire communication. Similarly, where a litigant relies on legal advice as an element of his claim or defence, the privilege which would otherwise attach to that advice is lost: Hunter v. Rogers, [1982] 2 W.W.R. 189.

I have perceived no intention to waive privilege and have not been persuaded that privilege has been waived as to part of a communication.

Appellant’s counsel then submitted that the Respondent must satisfy the Court that each document over which it has claimed litigation privilege was prepared for the “dominant purpose” of litigation [7] He said also that from ... the little information that has been provided by the Respondent with respect to the documentation over which it has claimed litigation privilege, it is apparent that the “dominant purpose” of the documentation has been for the carrying out of Head Office’s analysis.

Potential litigation respecting income tax assessments is always present because every assessment is subject to litigation procedures contained in the very statute that authorizes assessments.

Counsel’s very brief submission with respect to settlement privilege raises nothing not previously presented.

This portion of the Applicant’s motion also fails.

Accordingly, the Applicant’s motion is dismissed with costs to the Respondent.

Motion dismissed.