Kossow v. The Queen

Kossow v. The Queen
Court (s) Database
Tax Court of Canada Judgments
Date
2008-07-18
Neutral citation
2008 TCC 422
File numbers
2005-1974(IT)G
Judges and Taxing Officers
Valerie A. Miller
Subjects
Income Tax Act
Decision Content
Docket: 2005-1974(IT)G
BETWEEN:
KATHRYN KOSSOW,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Before: The Honourable Justice Valerie Miller
Appearances:
Counsel for the Appellant:
A. Christina Tari
Counsel for the Respondent:
Arnold Bornstein
____________________________________________________________________
ORDER
1. The Respondent is to provide written answers to items 1, 2, 7, 32, 36, 37, 49, 102 and 103 by August 8, 2008.
2. The Respondent is to provide the documents to items 21 and 48 by August 8, 2008. Any questions arising from the additional documents are to be sent to the Respondent by August 15, 2008. They are to be answered by August 29, 2008.
3. The motion is otherwise dismissed.
4. The Respondent is awarded its costs payable forthwith.
Signed at Ottawa, Canada, this 18 day of July 2008.
“V. A. Miller”
V. A. Miller, J.
Citation: 2008TCC422
Date: July 18, 2008
Docket: 2005-1974(IT)G
BETWEEN:
KATHRYN KOSSOW,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
V.A. Miller, J.
[1] The Appellant has brought this motion for an Order as follows:
1. directing that the paragraphs and subparagraphs described in Schedule “A” be struck from the Reply;
2. alternatively, directing that the Respondent bear the burden of proof with respect to the allegations of fact pleaded as ministerial assumptions of fact in the paragraphs and subparagraphs described in Schedule “A”;
3. directing the Respondent to satisfy certain undertakings given at the examination for discovery of the Respondent’s nominee where the answers given were incomplete, non-responsive or otherwise ambiguous and to answer certain questions that the Respondent refused or failed to answer at this examination;
4. directing the Respondent to file a further affidavit of documents pursuant to Rule 82 containing all the documents in the Respondent’s possession that relate to the matters in issue, not only those documents which the Respondent considers “relevant” to the matters in issue;
5. directing the Respondent’s nominee to reattend at the Respondent’s own expense at a continuation of the examination for discovery to answer all proper questions that the Respondent previously refused or failed to answer, and to also answer any proper questions arising from those answers;
6. directing the Respondent to pay forthwith the costs of this motion, costs thrown away and the costs of the continuation of the examination for discovery.
[2] Schedule “A” referred to in the Appellant’s motion is attached to these Reasons. At the hearing of this motion the Appellant did not refer to Schedule “B” that was attached to her motion. Instead she provided a chart of the questions asked and refused in respect of which she wanted an Order compelling answers. That chart is attached to these Reasons.
[3] The appeal is for the Appellant’s 2000, 2001 and 2002 taxation years. By notices dated September 2, 2004 the Minister of National Revenue (“the Minister”) reassessed the Appellant for those years and disallowed 80% of the charitable tax credits she had claimed. The basis of the Minister’s reassessment was that there was no gift.
[4] On September 9, 2005 the Minister reassessed the Appellant for only the 2002 taxation year to disallow 100% of the claimed charitable tax credit. The 2000 and 2001 taxation years were statute barred.
[5] In reassessing the Appellant for the 2002 taxation year the Minister assumed that there was not a valid gift under section 118.1 of the Income Tax Act; that the loan the Appellant received was a sham; and that the general anti-avoidance rule (GAAR) applied. The Respondent pleaded sham and GAAR as alternative grounds for the 2000 and 2001 taxation years.
[6] For ease of reference I have divided these reasons into sections according to the relief sought in the Appellant’s motion.
Motion to Strike
[7] It is the Appellant’s position that the Ministerial assumptions in Schedule “A” are improper pleadings and should be struck as assumptions of fact. The Appellant has categorized the improper pleadings as those the Respondent has admitted are incorrect; evidence pleaded as assumptions of fact; allegations of fact about third parties which are solely within the Minister’s knowledge; allegations of fact about third parties and facts within the Minister’s knowledge which the Minister alleges the Appellant knew; and, conclusions of law.
[8] The grounds for this portion of the motion are:
1. The Reply contains 103 ministerial assumptions of fact, most of which relate to parties other than the Appellant, and most of which and whom the Appellant did not know.
2. Throughout the examination of the Respondent’s nominee, Salvatore Tringali, he stated that these assumptions were based not on any particular document that would evidence the alleged fact, but on his interpretation of “all the documents”.
3. This response appears in the examination for discovery 238 times.
4. The pleadings listed in Schedule “A” contain evidence, conclusions of law and facts about which the Appellant had no knowledge and which do not benefit from the presumption of validity.
5. The Reply contains improper pleadings that may prejudice or delay the fair hearing of the appeal and are an abuse of process.
6. Sections 4, 49, 53, 70 and 126(b) and (e) of the Tax Court of Canada Rules (General Procedure) (the Rules).
[9] Section 53 of the Rules reads:
Striking out a Pleading or other Document
53. The Court may strike out or expunge all or part of a pleading or other document, with or without leave to amend, on the ground that the pleading or other document,
(a) may prejudice or delay the fair hearing of the action,
(b) is scandalous, frivolous or vexatious, or
(c) is an abuse of the process of the Court.
(a) Incorrect Pleadings
[10] At the hearing of the motion counsel for the Appellant sought to have paragraph 39(e) and the word “provincial” in paragraph 39 (yyyy) struck from the Reply. She stated that during the discovery of the Respondent’s nominee in April, 2008, she learned that the facts assumed in paragraph 39(e) of the Reply are incorrect. The error is that Penturn and Glatt were not equal shareholders of BFIL. Counsel’s argument with respect to paragraph 39(yyyy) is that provincial charitable tax credits are not at issue in this appeal and the word “provincial” should be struck.
[11] The Respondent’s counsel admitted that there was an error in paragraph 39(e). It was his position that the pleadings could be amended with leave from the Court. Alternatively, the paragraph could remain as it is. The Appellant has the admission that the paragraph is incorrect and it cannot be used at trial against the Appellant.
[12] With respect to the motion to strike paragraph 39(e), it is my opinion that the Appellant has made this motion within a reasonable time after she knew there was an error in that paragraph. However, I do agree with counsel for the Respondent that the Appellant has the admission of the inaccuracy in paragraph 39(e). The pleading cannot be used against the Appellant at the hearing of this appeal. I do not see the need at this point in time to grant further relief.
[13] I will address the Motion to Strike paragraph 39(yyyy) in my reasons below.
(b) Evidence, Conclusions of Law, Paragraph 39(yyyy) and Allegations about Third Parties
[14] The Appellant has asked that the paragraphs which contain evidence (paragraphs 34, 35, 39(y), 39(aaa) and 39(eee)) and conclusions of law (paragraphs 40, 41(a), 41(b), 41(c), 41(d), 41(e) and 41(f)) be struck from the Reply as they are improper pleadings.
[15] The Appellant has also moved to have the paragraphs which contain allegations of fact about third parties struck from the Reply or alternatively, she asked that they remain in the Reply as allegations that the Respondent must prove. In other words she has asked that the onus of proof for these allegations be shifted to the Respondent. The paragraphs in issue are: 10, 31, 33, 39(b), 39(c),39(d), 39(g), 39(h), 39(i), 39(j), 39(k), 39(l), 39(m), 39(n), 39(o), 39(p), 39(q), 39(r), 39(s), 39(t), 39(u), 39(v), 39(w), 39(x), 39(y), 39(z), 39(aa), 39(bb), 39(cc), 39(dd), 39(ee), 39(ff), 39(gg), 39(hh), 39(ii), 39(jj), 39(kk), 39(ll), 39(mm,) 39(nn), 39(oo), 39(pp), 39(qq), 39(rr), 39(ss), 39(tt), 39(uu), 39(vv), 39(ww), 39(xx), 39(yy), 39(fff), 39(ggg), 39(hhh), 39(jjj), 39(kkk), 39(lll), 39(mmm), 39(nnn), 39(ooo), 39(ppp), 39(qqq), 39(rrr), 39(sss), 39(ttt), 39(uuu), 39(vvv), 39(www), 39(xxx), 39(yyy), 39(zzz), 39(aaaa), 39(bbbb), 39(cccc), 39(dddd), 39(eeee), 39(ffff), 39(gggg), 39(hhhh), 39(iiii), 39(jjjj), 39(kkkk), 39(mmmm), 39(oooo), 39(pppp), 39(qqqq), 39(rrrr), 39(ssss), 39(tttt), 39(uuuu), 39(vvvv), 9, 39(f), 39(k), 39(jj), 39(zz), 39(jj), 39(zz), 39(aaa), 39(bbb), 39(eee), 39(ggg), 39(hhh), 39(nnnn), 39(yyyy), 40, 41(a), 41(a), 41(b), 41(c), 41(d), 41(e), 41(f).
[16] The Appellant relied on the decision of Justice Bowie in Zelinski v. The Queen1 where he explained the purpose of pleadings:
[4] The purpose of pleadings is to define the issues in dispute between the parties for the purposes of production, discovery and trial. What is required of a party pleading is to set forth a concise statement of the material facts upon which she relies. Material facts are those facts which, if established at the trial, will tend to show that the party pleading is entitled to the relief sought. Amendments to pleadings should generally be permitted, so long as that can be done without causing prejudice to the opposing party that cannot be compensated by an award of costs or other terms, as the purpose of the Rules is to ensure, so far as possible, a fair trial of the real issues in dispute between the parties.
[5] The applicable principle is stated in Holmsted and Watson:
This is the rule of pleading: all of the other pleading rules are essentially corollaries or qualifications to this basic rule that the pleader must state the material facts relied upon for his or her claim or defence. The rule involves four separate elements: (1) every pleading must state facts, not mere conclusions of law; (2) it must state material facts and not include facts which are immaterial; (3) it must state facts and not the evidence by which they are to be proved; (4) it must state facts concisely in a summary form.
[17] Counsel for the Appellant stated that pleading evidence masqueraded as a fact and pleading conclusions of law or mixed fact and law without first pleading the facts to support the conclusions are improper pleadings and they should be struck from the Reply.
[18] It was the Respondent’s position that Rules 7 and 8 applied to the paragraphs that the Appellant sought to have struck. Counsel for the Respondent stated that if these paragraphs contained improper pleadings, then that was an irregularity as it is defined in Rule 7. He further argued that the present motion was not brought within a reasonable time after the Appellant ought to have known of the irregularity and that the Appellant has taken several other steps in the proceeding.
[19] Rules 7 and 8 read:
7 A failure to comply with these rules is an irregularity and does not render a proceeding or a step, document or direction in a proceeding a nullity, and the Court,
(a) may grant all necessary amendments or other relief, on such terms as are just, to secure the just determination of the real matters in dispute, or
(b) only where and as necessary in the interests of justice, may set aside the proceeding or a step, document or direction in the proceeding in whole or in part.
8 A motion to attack a proceeding or a step, document or direction in a proceeding for irregularity shall not be made,
(a) after the expiry of a reasonable time after the moving party knows or ought reasonably to have known of the irregularity, or
(b) if the moving party has taken any further step in the proceeding after obtaining knowledge of the irregularity,
except with leave of the Court.
[20] It is my opinion that pleading evidence and conclusions of law are irregularities within Rules 7 and 8 and that Rule 8 does apply to a motion brought pursuant to Rule 53. 2
[21] Rule 8(b) is known as the “fresh step” rule. The purpose of this rule was stated by Justice O’Keefe of the Federal Court in Vogo Inc. v. Acme Window Hardware Ltd.3 in these words:
The purpose of the "fresh step" rule is to prevent a party from acting inconsistently with its prior conduct in the proceeding. By pleading in response to a statement of claim, for instance, a defendant may extinguish their right to complain of fatal deficiencies in the allegations made against them. The fresh step rule aims to prevent prejudice to a party who has governed themselves according to the procedural steps taken by the opposing side, where it would be unfair to permit a reversal in approach.
[22] Associate Chief Justice Bowman, as he then was, explained the fresh step rule as follows:
The "fresh step" rule is one that has been part of the rules of practice and procedure in Canada and the United Kingdom for many years. There is a great deal of jurisprudence on what constitutes a fresh step but the rule is based on the view that if a party pleads over to a pleading this implies a waiver of an irregularity that might otherwise have been attacked.4
[23] The chronology of events with respect to the pleadings in this appeal is:
a) The Notice of Appeal was filed on June 14, 2005;
b) The Reply was filed on August 19, 2005.
c) An Amended Notice of Appeal was filed on December 8, 2005;
d) A Reply to the Amended Notice of Appeal was filed on January 16, 2006;
e) An Amended Reply to the Amended Notice of Appeal was filed on August 18, 2006. The Appellant consented to it being filed and served.
f) A Further Amended Reply to the Amended Notice of Appeal was filed on February 16, 2007 and the Appellant consented to its filing and serving.
[24] Paragraph 39(yyyy), the paragraphs that contain allegations about third parties and the paragraphs that the Appellant has asked to be struck because they contain evidence, have been in the Respondent’s pleadings since August 19, 2005 and those that contain conclusions of law have been in the Respondent’s pleadings since January 16, 2006. The Appellant did not make this motion to strike the pleadings until June 6, 2008.
[25] Counsel for the Appellant stated that the Appellant objected to the Respondent’s pleadings as early as 2006. She referred to the decision of Chief Justice Bowman in Kossow v. The Queen5.
[26] The Appellant did file a Notice of Motion dated February 17, 2006. I have reviewed the Motion and Chief Justice Bowman’s Order and Reasons for the Order. None of these documents support counsel’s assertion that the Appellant objected to the Respondent’s pleadings at an earlier date. The Motion on February 17, 2006 was for a “determination, before hearing, of a question of law, or a question of mixed law and fact raised by a pleading”. The question as stated by Chief Justice Bowman and his reasons for dismissing the Motion were as follows:
[12] The only thing I have to decide is whether the first ground of assessing (no gift/material benefit) constitutes a separate and discrete question that can be answered ahead of the trial.
[13] I do not think the first basis of assessment should be severed from the rest of the case and dealt with separately. I say this for several reasons.
(a) Whether the making of the donation entailed a corresponding benefit to the appellant involves a substantial factual issue that can best be dealt with by the trial judge in the context of the overall hearing.
(b) It is inappropriate for me, as a motions judge, to set the matter down for determination before one judge and have that judge's determination tie the hands of the judge who hears the other issues (sham and GAAR). The factual and legal issues in the first question are inextricably bound up with those in the second and third bases. One judge should be free to deal with all issues at one sitting.
(c) A decision on the question that the appellant wants to have heard as a preliminary matter under Rule 58 will not be determinative of the entire case. The other two grounds will require adjudication. Therefore, there will be no appreciable shortening of the trial.
(d) The first ground (no gift/material benefit) is something up on which both parties should hold discoveries. To try to determine the question in the abstract without a factual underpinning is in my view premature.
[14] A number of authorities were cited by both counsel. Some preceded the amendment to Rule 58. To some extent the court's discretion must in part be based on convenience, efficiency and fairness. The court has as much of an interest as the parties in having cases dealt with expeditiously. I do not, however, think that splitting the case into separate adjudications achieves that result.
[27] The Appellant filed an Amended Notice of Appeal after she was made aware of the pleadings in paragraphs 34, 35, and the subparagraphs of 39 that she now wishes to strike. She did not complain of the pleadings at that time or at anytime until the present motion. The Appellant pleaded over the Reply and in my opinion this implied that she accepted the irregularities and the pleadings in these paragraphs.6
[28] The conclusions of law that the Appellant seeks to strike from the Respondent’s pleadings speak to the reassessment of the 2002 taxation year made on September 9, 2005.
[29] The Appellant has taken several fresh steps since she knew or ought to have known of the irregularities and the pleadings that she now seeks to strike. The Appellant’s counsel conducted the examination for discovery of the Respondent’s nominee, Salvatore Tringali, on January 17, 18, 19, 22 and 23, 2007. Subsequent to this, on February 13, 2007, Appellant’s counsel sent a list of 10 questions to the Respondent. These questions related to all the assumptions in the Respondent’s pleadings including those that the Appellant now seeks to strike out. The Respondent answered these questions by letters dated April 20, April 30, May 1, and June 8, 2007. The Appellant was not satisfied with the responses to questions 3, 4, 5, 6 and 10 and she filed a Notice of Motion dated October 11, 2007 pursuant to section 4 of the Rules to compel the Respondent to provide detailed, complete and responsive answers, in writing, to these questions. Justice Campbell Miller heard the motion on November 20, 2007. His Order was as follows:
1. The Appellant’s motion with respect to compelling the Respondent to provide detailed, complete and responsible answers is dismissed;
2. The Appellant’s motion with respect to full disclosure is allowed, and the Respondent is to make full disclosure pursuant to Rule 82 by January 31, 2008, but such disclosure does not apply to documents relating specifically to donor taxpayers other than the Appellant, nor to Canada Revenue Agency generated documents other than already disclosed pursuant to Rule 81;
3. The Appellant is to make full disclosure pursuant to Rule 82 by December 14, 2007;
4. Further examinations for discovery, if required as a result of full disclosure, are to be completed within six weeks of receipt by the Appellant of the Respondent’s full production, on the understanding that the Appellant will require no more than five further days of discovery; if the Appellant requires more than five days, she is required to obtain a Court Order to that effect;
5. The Respondent’s motion is allowed and the Appellant will attend on examination for discovery on November 28, 2007; if a second day is necessary, the Appellant will attend on a day prior to December 31, 2007 and to be determined by the parties;
6. The hearing of this appeal is scheduled to commence on Monday, June 16, 2008, at 9:30 a.m., for two (2) consecutive weeks, at the Tax Court of Canada, Federal Judicial Centre, 180 Queen Street West, 6th floor, Toronto, Ontario.
7. A case management teleconference will be held on Wednesday, January 16, 2008, at 1:00 p.m.
8. Costs of these motions will be in the cause.
[30] The Appellant did have five additional days in April, 2008 to discover the Respondent’s nominee.
[31] The Appellant has not met either provision in Rule 8.7 The motion to strike was not brought within a reasonable time after she knew or ought to have known of the irregularities and the pleadings as a whole and she has taken several fresh steps after obtaining knowledge of the irregularities and the pleadings as a whole.
[32] The Appellant’s motion to strike is dismissed.
(c) Onus of Proof
[33] The Reply is 37 pages in length plus a schedule titled Ideas Leveraged Donation Scheme. There are 138 pleaded assumptions and many of these assumptions refer to the Scheme, the parties involved in the Scheme and their dealings with each other.
[34] The Appellant acknowledged that it is trite law that in tax litigation matters the onus is on the taxpayer to demolish the assumptions of fact made by the Minister.8 In her memorandum she stated that the rule respecting ministerial assumptions is “a matter of policy in light of the common-sense proposition that the material facts underlying an assessment are peculiarly within the knowledge of the taxpayer and not the Minister”. She argued that the rule ought not and does not extend to facts assumed by the Minister that an Appellant could not reasonably or practically be expected to either prove or disprove.9
[35] It is the Appellant’s position that the decision in Johnson10 was not intended to cover the present situation where the majority of the assumptions relate to third parties, their dealings with each other and a Scheme.
[36] The Appellant relied on this court’s decision in Redash Trading Inc. v. Canada11 to assert that facts which are peculiarly within the knowledge of the Minister do not carry a presumption of correctness that the taxpayer has to disprove. Further, she argued, the Federal Court of Appeal’s decision in Transocean Offshore Ltd. v. Canada12 has recognized that fairness requires that no onus be cast on a taxpayer respecting facts solely within the Minister’s knowledge.
[37] In conclusion the Appellant relied on Chief Justice Bowman’s decision in Gould v. Canada13 where he stated that the Minister likely bears the onus of proof regarding these allegations about third parties and their dealings.
[38] The appeal in Gould is similar to the present appeal and the Minister’s pleadings are almost identical to his pleadings in the present appeal. In that appeal, Chief Justice Bowman refused to strike portions of the Reply including those paragraphs that dealt with third parties. His reasoning was as follows:
21 With respect, I am unable to ascribe to either the Status-One decision or the case which it followed, The Queen v. Global Communications Limited, 97 DTC 5194, the effect contended for by counsel for the appellant. A central component in the assessment which disallowed the charitable donations is the existence of a “scheme” in which it is alleged that the appellant participated and which enabled the participants to obtain what the Crown sees as artificial or inflated charitable tax credits. It of necessity involved third parties and if the existence of a scheme is essential to the Crown’s case it should be able to plead and prove all of the components of the scheme. To say, as the appellant does, that Global and Status-One preclude any reference to third party transactions unless the appellant knows of or is privy to those transactions goes too far. If the existence of a scheme is germane to the disallowance it cannot be ignored whether or not the Minister assumed that the appellant knew about or was a party to the third party transactions that, according to the Reply, were an integral part of the scheme. If any of the facts assumed are truly within only the Crown’s knowledge the Crown probably has the onus of proving them although this is ultimately for the trial judge to decide.
Analysis
[39] The initial onus of disproving the Minister’s assumptions is on the Appellant.14 As stated by Justice L'Heureux-Dubé:
92 It is trite law that in taxation the standard of proof is the civil balance of probabilities: Dobieco Ltd. v. Minister of National Revenue, [1966] S.C.R. 95 (S.C.C.), and that within balance of probabilities, there can be varying degrees of proof required in order to discharge the onus, depending on the subject matter: Continental Insurance Co. v. Dalton Cartage Ltd., [1982] 1 S.C.R. 164 (S.C.C.); Pallan v. Minister of National Revenue (1989), 90 D.T.C. 1102 (T.C.C.) at p. 1106. The Minister, in making assessments, proceeds on assumptions (Bayridge Estates Ltd. v. Minister of National Revenue (1959), 59 D.T.C. 1098 (Can. Ex. Ct.), at p. 1101) and the initial onus is on the taxpayer to "demolish" the Minister's assumptions in the assessment (Johnston v. Minister of National Revenue, [1948] S.C.R. 486 (S.C.C.); Kennedy v. Minister of National Revenue (1973), 73 D.T.C. 5359 (Fed. C.A.), at p. 5361). The initial burden is only to "demolish" the exact assumptions made by the Minister but no more:First Fund Genesis Corp. v. R. (1990), 90 D.T.C. 6337 (Fed. T.D.), at p. 6340.
[40] It is premature for the Appellant to ask that the onus of proof for the allegations of fact with respect to third parties be shifted to the Respondent. This is a decision that should ultimately be made at the hearing by the trial judge.15
[41] In Tolley v. The Queen16,Justice Bell, as he then was, succinctly explained his decision in Redash, to the effect that the onus of proof will be addressed at trial once the Appellant has initially demolished the assumptions of the Respondent:
86. In Redash Trading Incorporated (supra) I discussed at length the effect of no evidence being adduced by the Respondent in a situation where the onus had clearly shifted to the Respondent. I refer to that entire discussion and conclusion on this matter. Specifically, I set out here statements from Hickman Motors Ltd. v. Canada, [1997] 2 S.C.R. 336 where the Supreme Court of Canada stated:
As I have noted, the appellant adduced clear, uncontradicted evidence, while the respondent did not adduce any evidence whatsoever. In my view, the law on that point is well settled, and the respondent failed to discharge the burden of proof ...
The law is settled that unchallenged and uncontradicted evidence "demolishes" the Minister's assumptions: ... As stated above, all of the Appellant's evidence in the case at bar remained unchallenged and uncontradicted ...
Where the Minister's assumptions have been "demolished" by the appellant, the onus ... shifts to the Minister to rebut the prima facie case made out by the appellant and to prove the assumptions.
and
Where the burden has shifted to the Minister, and the Minister adduces no evidence whatsoever, the taxpayer is entitled to succeed.
The Respondent has simply not responded to the shifted onus in this case.
[42] Counsel for the Appellant stated that the Appellant testified at the examination for discovery that she did not know the third parties referred to in the Minister’s pleadings. Counsel specifically referred to excerpts of the discovery examination of Kathryn Kossow which were contained in the affidavit of Michelle Julfs, an employee of Richler & Tari. The Respondent objected to this use of the discovery transcript.
[43] The use of discovery evidence at the hearing of a motion is contained in Rule 75:
75. On the hearing of a motion an examination for discovery in the proceeding may be used in evidence and section 100 applies with necessary modifications.
100(1). At the hearing, a party may read into evidence as part of that party’s own case, after that party has adduced all of that party’s other evidence in chief, any part of the evidence given on the examination for discovery of
(a) the adverse party, or
(b) a person examined for discovery on behalf of or in place of, or in addition to the adverse party, unless the judge directs otherwise,
if the evidence is otherwise admissible, whether the party or person has already given evidence or not.
(1.1) The judge may, on request, allow the part of evidence referred to in subsection (1) to be read into evidence at a time other than that specified in that subsection.
(2) Subject to the provisions of the Canada Evidence Act, the evidence given on an examination for discovery may be used for the purpose of impeaching the testimony of the deponent as a witness in the same manner as any previous inconsistent statement by that witness.
(3) Where only part of the evidence given on an examination for discovery is read into or used in evidence, at the request of an adverse party the judge may direct the introduction of any other part of the evidence that qualifies or explains the part first introduced.
(3.1) A party who seeks to read into evidence under subsection (1) or who requests the judge to direct the introduction of evidence under subsection (3) may, with leave of the judge, instead of reading into evidence, file with the Court a photocopy or other copy of the relevant extracts from the transcripts of the examination for discovery, and when the copy is filed such extracts shall form part of the record.
(4) A party who reads into evidence as part of that party’s own case evidence given on an examination for discovery of an adverse party, or a person examined for discovery on behalf of or in place of or in addition to an adverse party, may rebut that evidence by introducing any other admissible evidence.
(5) The evidence given on the examination for discovery of a party under disability may be read into or used in evidence at the hearing only with leave of the judge.
(6) Where a person examined for discovery,
(a) has died,
(b) is unable to testify because of infirmity or illness,
(c) for any other sufficient reason cannot be compelled to attend at the hearing, or
(d) refuses to take an oath or make an affirmation or to answer any proper question,
any party may, with leave of the judge, read into evidence all or part of the evidence given on the examination for discovery as the evidence of the person examined, to the extent that it would be admissible if the person were testifying in Court.
(7) In deciding whether to grant leave under subsection (6), the judge shall consider,
(a) the extent to which the person was cross-examined on the examination for discovery,
(b) the importance of the evidence in the proceeding,
(c) the general principle that evidence should be presented orally in Court, and
(d) any other relevant factor.
(8) Where an appeal has been discontinued or dismissed and another appeal involving the same subject matter is subsequently brought between the same parties or their representatives or successors in interest, the evidence given on an examination for discovery taken in the former appeal may be read into or used in evidence at the hearing of the subsequent appeal as if it had been taken in the subsequent appeal.
[44] Neither Rule 75 nor Rule 100 allows a party to read its discovery examination into evidence at the hearing of a motion and have that testimony accepted. The Appellant was not cross-examined for credibility at the examination for discovery17. The Appellant could not be cross-examined on the affidavit filed with this motion as it was not her affidavit18. The discovery transcript cannot be used at this motion by the Appellant to establish that she had no knowledge of the third parties referred to in the Minister’s pleadings.
[45] The decision of whether the onus of proof should be shifted to the Minister for certain of the assumptions of fact is a decision that should be made by the trial judge. The following portions from Mungovan v. The Queen19 are relevant to this motion:
[10] Assumptions are not quite like pleadings in an ordinary lawsuit. They are more in the nature of particulars of the facts on which the Minister acted in assessing. It is essential that they be complete and truthful. The conventional wisdom is they cast an onus upon an appellant and as Mr. Mungovan observes with some considerable justification they may force him to endeavour to disprove facts that are not within his knowledge. Superficially this may be true, but this is a matter that can be explored on discovery. The trial judge is in a far better position than a judge hearing a preliminary motion to consider what effect should be given to these assumptions. The trial judge may consider them irrelevant. He or she might also decide to cast upon the respondent the onus of proving them. The rule in M.N.R. v. Pillsbury Holdings Ltd., 64 DTC 5184, is a rule of general application but it is not engraved in stone.
[12] It is entirely possible, as Mr. Mungovan points out, that some of the impugned assumptions are irrelevant. This is a matter for the trial judge to determine after the evidence has been presented. It is not a matter that can or should be determined on a preliminary motion to strike. It may well be that the paragraphs contain allegations that lie exclusively within the respondent's knowledge. It is a matter for the trial judge to determine whether the onus should be cast upon the respondent to establish them.
[14] The trial judge may well decide that the Crown has some onus that goes beyond the mere recitation of a bald assumption. The weight to be put on these paragraphs is a matter for the trial judge, as is the onus of proof. This is not, however, a reason for striking the paragraphs before trial.
For these reasons, the motion to shift the onus of proof to the Minister is dismissed.
2. Refusal Motion
[46] This portion of the Appellant’s motion is for an order that the Respondent provide answers to certain undertakings and questions refused to be answered at the examination for discovery of the Respondent’s nominee. The grounds relied on by the Appellant are as follows:
1. An examination for discovery is intended to render the trial process more fair and efficient by allowing each party to fully inform itself of the precise nature of the opposing party’s position and evidence.
2. The scope of questioning on discovery ought to be liberal; any error which unduly restricts the scope of discovery may lead to serious prejudice to the examining party.
3. The Respondent’s answers to undertakings include failures to answer, incomplete, non-responsive and otherwise ambiguous answers and improper refusals.
4. The Appellant was denied a full and fair examination for discovery of the Respondent.
5. Rules 93, 95, 107, 108, and 110 of the General Procedure Rules.
Appellant’s Position
[47] The Appellant provided written points of argument in support of her motion. The salient points are:
1. The Federal Court of Appeal in Basserman v. Canada (1994), 114 D.L.R. (4th) 104 (FCA) has recognized the distinction between documents which are relevant to matters in issue and documents which relate to any matter in question. The latter entails the widest possible scope:
It is not necessary that they be relevant to any issue to be resolved in the litigation, only that they relate to a matter in question. The appellant's submissions to us as to their potential relevance are simply not to the point at this stage.
2. While the words “relating to” necessarily impart an element of relevance, relevance in discovery is a low threshold, unlike relevance at trial.
Owen Holdings Ltd. v. Canada, 97 D.T.C. 5401 (FCA)
3. Relevance on discovery is to be liberally construed and a motions judge ought not to second guess the discretion of counsel by minutely examining each question or requiring a party to explain the relevance, unless the question is patently irrelevant or abusive.
Baxter v. Canada, 2004 D.T.C. 3497 (TCC)
4. Questions clarifying the party’s legal position are proper as are questions about the facts which underlie a particular allegation in a pleading.
Sandia Mountain Holdings Inc. v. Canada, 2005 D.T.C. 206 (TCC)
Respondent’s Position
[48] In the Appellant’s motion under Schedule “B” (which is attached to these reasons) the refusals are listed in two categories: “non-responsive, incomplete, vague and ambiguous answers” and “improper refusals”. In his opening statement counsel for the Respondent stated that it was not until the hearing of this motion that he knew the exact grounds for the Appellant’s motion with respect to the improper refusals. He was not aware that the Appellant was challenging his claim to litigation privilege, solicitor client privilege, taxpayer confidentiality and informant privilege. He stated that if he had known of this particular complaint, he would have submitted sealed evidence for my review.
[49] The Respondent categorized the questions that are in issue as:
(a) questions the Respondent has already answered;
(b) questions concerning litigation privilege;
(i) questions on how the Respondent’s list of documents was prepared;
(ii) questions on whether the Respondent should be obliged to allocate documents to a particular assumption;
(iii) questions concerning the facts that the Respondent relies on in support of a particular assumption;
(iv) questions on the source or author of documents that were acquired after litigation began;
(c) questions of law;
(d) questions concerning the Canada Revenue Agency.
[50] He relied on the decision in Baxter v. Canada20 where Chief Justice Bowman summarized the principles concerning relevancy of questions in an examination for discovery as:
(a) Relevancy on discovery must be broadly and liberally construed and wide latitude should be given;
(b) A motions judge should not second guess the discretion of counsel by examining minutely each question or asking counsel for the party being examined to justify each question or explain its relevancy;
(c) The motions judge should not seek to impose his or her views of relevancy on the judge who hears the case by excluding questions that he or she may consider irrelevant but which, in the context of the evidence as a whole, the trial judge may consider relevant;
(d) Patently irrelevant or abusive questions or questions designed to embarrass or harass the witness or delay the case should not be permitted.
[51] Respondent’s counsel cited the decision in Blank v. Canada (Minister of Justice)21 for the definition of litigation privilege. The relevant passages are below.
27 Litigation privilege, on the other hand, is not directed at, still less, restricted to, communications between solicitor and client. It contemplates, as well, communications between a solicitor and third parties or, in the case of an unrepresented litigant, between the litigant and third parties. Its object is to ensure the efficacy of the adversarial process and not to promote the solicitor-client relationship. And to achieve this purpose, parties to litigation, represented or not, must be left to prepare their contending positions in private, without adversarial interference and without fear of premature disclosure.
32 Unlike the solicitor-client privilege, the litigation privilege arises and operates even in the absence of a solicitor-client relationship, and it applies indiscriminately to all litigants, whether or not they are represented by counsel: see Alberta (Treasury Branches) v. Ghermezian (1999), 242 A.R. 326, 1999 ABQB 407. A self-represented litigant is no less in need of, and therefore entitled to, a “zone” or “chamber” of privacy. Another important distinction leads to the same conclusion. Confidentiality, the sine qua non of the solicitor-client privilege, is not an essential component of the litigation privilege. In preparing for trial, lawyers as a matte