Choptiany v. The King

Choptiany v. The King
Court (s) Database
Tax Court of Canada Judgments
Date
2022-10-05
Neutral citation
2022 TCC 112
File numbers
2013-1136(IT)G, 2013-4459(IT)G, 2014-4245(IT)G, 2016-1259(IT)G, 2016-2630(IT)G
Judges and Taxing Officers
Patrick J. Boyle
Subjects
Income Tax Act
Decision Content
Docket: 2013-1136(IT)G
BETWEEN:
THOR CHOPTIANY,
Appellant,
and
HIS MAJESTY THE KING,
Respondent;
Dockets: 2013-4459(IT)G
2016-1259(IT)G
AND BETWEEN:
SANDRA MCPHERSON,
Appellant,
and
HIS MAJESTY THE KING,
Respondent;
Dockets: 2014-4245(IT)G
2016-2630(IT)G
AND BETWEEN:
WAYNE RICHTER,
Appellant,
and
HIS MAJESTY THE KING,
Respondent.
Motion heard on March 29, 2022 at Toronto, Ontario and April 7, 2022, at Ottawa, Canada
Before: The Honourable Justice Patrick Boyle
Appearances:
Counsel for the Appellant:
Jeff Pniowsky
Matthew Dallo
Counsel for the Respondent:
Natasha W. Tso
Annette Evans
ORDER
UPON hearing the motion brought by the Appellants;
AND UPON hearing what was alleged by the parties;
The motion is allowed in accordance with the attached written reasons, and these appeals are allowed, with costs.
Signed at Montréal, Canada, this 5th day of October 2022.
“Patrick Boyle”
Boyle J.
Citation: 2022 TCC 112
Date: 20221005 Docket: 2013-1136(IT)G
BETWEEN:
THOR CHOPTIANY,
Appellant,
and
HIS MAJESTY THE KING,
Respondent;
Dockets: 2013-4459(IT)G
2016-1259(IT)G
AND BETWEEN:
SANDRA MCPHERSON,
Appellant,
and
HIS MAJESTY THE KING,
Respondent;
Dockets: 2014-4245(IT)G
2016-2630(IT)G
AND BETWEEN:
WAYNE RICHTER,
Appellant,
and
HIS MAJESTY THE KING,
Respondent.
REASONS FOR ORDER
Boyle J.
I. Precis
[1] The Appellants have brought a motion to have their appeals allowed as a result of the Respondent’s repeated failures to comply with
The rules of discovery, by failing to have a knowledgeable and informed official answer proper relevant questions, failing to produce relevant documents requested, and failing to correct or incomplete answers, and
Two orders of this Court specifically ordering the Respondent to do so.
This is the third motion dealing with essentially the same defaults and non‑compliance by the Respondent, there have been three examinations for discovery of the Respondent to date, and the Respondent remains in default. In these particular circumstances, for the reasons given below, I am allowing these five appeals as there is no less drastic remedy than allowing the appeals that can reasonably be expected to remedy the Respondent’s pattern of non-compliance with this Court’s rules and orders, and to provide procedural fairness to these Appellants and allow their appeals proceed to be decided on the merits. Accordingly these appeals are being allowed, even though these Appellants are contesting penalties assessed for having participated in tax schemes that resemble in many respects the de-taxation practices of sovereign citizens, though with less of the non-fiscal cultish aspects - schemes for which at least one promoter has been convicted and sentenced to a jail term. Such a result is the fault of the Respondent alone.
[2] These three Appellants have brought a motion to have their appeals allowed in full, with solicitor‑client costs. It is their position that this motion is the third or fourth time that they have had to return to court to have the Respondent produce information that should have properly been provided at the discovery stage, as this Court has already specifically ruled.
[3] This motion was filed on June 3, 2021, and the Appellants’ written submissions were filed June 30, 2021. The Appellants requested that their motion be heard by videoconference. Given that the relief requested would, if granted, finally dispose of these appeals, the Court recommended to the parties that it should be heard in person and they agreed. The hearing dates for this motion were set at a Case Management Conference in November 2021 convened for that purpose. The Respondent’s written submissions were filed March 15, 2022. The motion was argued in Toronto for the full day of March 29, 2022. It was continued virtually on April 7, 2022.
[4] The substantive issues in these appeals all relate to the Appellants’ participation in Fiscal Arbitrators and/or the related DeMara Consulting tax schemes. These appeals are only disputing the imposition of the so‑called gross negligence penalties in subsection 163(2) of the Income Tax Act (the “Act”). The Court has been case managing the Fiscal Arbitrators and DeMara Consulting tax appeals for many years as a large group appeal and for the last number of years I have been Case Management Judge [1] . These three appeals were agreed by the parties to be lead appeals with respect to a larger number of Fiscal Arbitrators/DeMara appellants represented by the Appellants’ counsel and their firm. However, the outcome of this motion only affects the appeals of the three moving Appellants in their five specific appeals. More recently, and for unrelated reasons, a new Case Management Judge has been appointed to manage the remaining group of appeals pending before the Court, with the exception of this particular motion. It will be up to the other appellants, their counsel, Respondent’s counsel and the Case Management Judge (and/or a trial judge) to determine how, if at all, the decision in this motion affects the appeals of others in the group in abeyance pending the outcome of these appeals as they move forward.
II. Relevant Chronology of These Proceedings
[5] The notices of appeals and replies in these Appellants’ appeals were filed between 2012 and 2017.
[6] These appeals were set down for trial for five days starting March 25, 2019 (the “2019 Set Down Week”). An adjournment request was made by the Appellants on March 15, 2019, and granted to the Appellants on March 21, 2019 (the “First Adjournment”).
[7] These appeals were set back down again for the week of January 27, 2020 (the “2020 Set Down Week”).
[8] The Appellants brought a motion in October 2019 for further disclosure by the Respondent prior to the January 2020 trial. That motion was heard and decided by me in October 2019 in favour of the Appellants (the “October 2019 Motion”).
[9] In January 2020, prior to the opening of the scheduled January 27 hearing week, the Appellants brought a further motion asking to compel full compliance by the Respondent with my disclosure order in the October 2019 Motion (the “January 2020 Motion”). This motion was returnable on January 27, the day the weeklong trial was to begin. The trial judge wisely determined that the January 2020 motion should be heard and decided by me and not by her, as it only concerned an allegation by the Respondent that my order on the October 2019 motion was ambiguous (the “Second Adjournment”).
[10] The January 2020 motion was heard by me in November 2020. The January 2020 motion was decided by me in favour of the Appellants in November 2020. Further oral discovery of the Respondent’s CRA criminal investigator Mr. Matheson was ordered, which occurred in May 2021, but only following a March 2021 Case Management Conference.
[11] As noted above, this motion was filed by the Appellants in June 2021.
III. The First Adjournment
[12] The Appellants requested the first adjournment ten days before the appeals’ 2019 Set Down Week. Their principal grounds were:
That they had been advised by the Respondent the week before that its only witness was to be one of CRA’s lead criminal investigations officers, Mr. David Matheson, responsible for the DeMara Consulting investigation;
The Respondent’s nominee at the initial discovery was the CRA appeals officer responsible, Mr. Sean Irwin. Mr. Irwin was unaware of any criminal investigation and had not informed himself about Criminal Investigations’ involvement prior to being examined for discovery in January 2018 (the “First Discovery”);
Respondent’s counsel did not have the Criminal Investigations’ file from CRA at the time of the First Discovery;
The Respondent provided an additional 250 pages of documents relating to the criminal investigator’s planned testimony about the same time and these documents included references to the Appellants; and
The Appellants requested the adjournment to allow time to review the documents and to bring the needed motions, including one to produce a knowledgeable and informed deponent for further examination for discovery. I granted the adjournment request, recognizing typical attempts at trial by ambush, most notably by non‑compliance with the cardinal rule (Rule 95) of discovery, that the person a party chooses as their nominee to be discovered must be knowledgeable, and have made all reasonable inquiries regarding the matter in issue of all of that party’s officers, employees and agents, past or present. I required the parties to select a new set down week from those upcoming and available in Vancouver in the fall of 2019, and winter of 2020.
IV. The October 2019 Motion
[13] Following the granting of the First Adjournment, the Appellants brought the October 2019 Motion requesting an order granting leave to conduct further examination for discovery of the Respondent, and naming David Matheson, CRA’s lead criminal investigator as the representative to be examined.
[14] I granted the Appellants the relief requested at the hearing of the motion. The reasons included:
The Crown had failed at the first examination for discovery to provide a knowledgeable and informed representative as required—see Rules 93(3) and 95(2). There was no evidence that the appeals officer, Mr. Irwin, had made any efforts to inform himself as required. His selection effectively prevented the Appellants from getting Criminal Investigations’ reports and files or answers to questions about Criminal Investigations’ involvement with these Appellants;
The Crown had, as a result, also failed at the first examination to comply with Rule 95(1), as the answers given to proper and relevant questions were given by an uninformed deponent who said he was not aware of Investigations’ role and did not work in Investigations;
The Crown had failed to comply with its continuing obligation following the examinations for discovery to correct answers given to forthwith inform the Appellants that answers were incorrect or were no longer correct upon becoming aware of Investigations’ role and file information once Respondent’s counsel received the Criminal Investigations’ file following the first examination for discovery—see Rule 98. The answer given at the discovery that the Respondent was unaware of Investigations’ role was clearly incorrect to the knowledge of Respondent’s counsel at the latest, once counsel began considering the lead investigator as a witness, much less its only witness. It is the party’s awareness of the incorrect response, that is His Majesty the King’s not the deponent’s, that triggers Rule 98(1) and upon whom the Rule 98(1) obligations are clearly imposed. It is clearly not a defense to Rule 98(1) that the deponent’s answer was believed to be truthful when given;
The Crown did not disclose any of the Criminal Investigations file in its Rule 81 partial disclosure list of documents either when prepared or, as required by Rule 87, when the Crown became aware the initial list was incomplete. Rule 81 partial disclosure differs from Rule 82 full disclosure primarily in that full disclosure requires all documents relevant to any matter in question in the appeal, whereas Rule 81 partial disclosure only requires a party to identify documents that might be used in evidence to help that party who is preparing their list to establish the facts it pleaded or rebut the facts pleaded by the other party. In other words, Rule 81 partial disclosure only requires a party to list documents that might be helpful to it, and not those that might be helpful to the other party as required with full disclosure. When Crown counsel sent the documents to the Appellants shortly before the 2019 Set Down Week, they said these documents were being used by their only witness to prepare for his evidence at trial. It follows, without reading the documents, that when the list of documents was prepared these Investigations materials “might be used in evidence” to help the Crown meet its evidentiary burden. The French version of Rule 81 similarly uses the verb may or might, « pouvoir », so it is not limited to those the party has decided it intends to use—that documents might be used for this purpose is sufficient.
[15] The French version of Rule 81 differs from the English in that the phrase “might be used in evidence” in the French version is might be presented as evidence. I do not need to resolve this distinction. Even though the Crown decided to only use the Investigations material to refresh its witness’s memory before testifying, that does not change the fact that when the Crown prepared its list of documents these were materials that might be used by entering into evidence, if only to corroborate their witness’s testimony or if their witness needed to refresh their memory using their file when they were being questioned in chief or in cross‑examination.
[16] The Respondent is simply not correct that this interpretation of use has the effect of equating Rule 81 partial disclosure with Rule 82 full disclosure. Partial disclosure remains limited to documents that help the party and not documents that would hurt its case.
[17] Even if I was to assume that Respondent’s counsel was unaware of Criminal Investigations having had a role with Fiscal Arbitrators/DeMara participants such as the Appellants, which I cannot in these circumstances, Rule 87 required the Crown’s list of documents to be updated at the latest once they became aware of them and realized that the Investigations files of Fiscal Arbitrators/DeMara included documents involving these Appellants. One of these documents was said to be a criminal Information to Obtain a Search Warrant (“ITO”) that names one of these Appellants more than fifty times and appended their tax filings including information slips.
[18] The First Discovery left at least two of these Appellants uncertain whether CRA Criminal Investigations’ involvement with Fiscal Arbitrators and DeMara involved them. Had the information and materials been corrected and provided earlier than shortly before the trial week, the Appellants would also have had the chance to ask further questions for discovery regarding the new information and material, including asking for a copy of the full Criminal Investigations file relating to these Appellants. The Crown’s disregard precluded this.
[19] It is very hard to believe that subparagraphs 1 to 4 above could have occurred without both CRA overall, and at the Appeals and Investigations divisions, and Respondent’s counsel, at some level within the group handling the Fiscal Arbitrators and DeMara group of appeals, having been aware, if only by wilful blindness. [2] At discovery, the Respondent disavowed knowledge of Investigations’ activities, but by trial time it hoped to make its case, a penalty case in which it has the onus, on the strength solely, of the lead investigator who had been obtaining, reviewing and/or authoring these very materials.
[20] The Appellants had a very good reason for raising the Crown’s unsatisfactory answers at the First Discovery a year later and shortly before the trial. They had only just been told by the Respondent’s counsel that one of the lead investigators was to be the sole witness and would be using the Investigations’ file materials to refresh his memory, when at discovery their answer was they were unaware of Investigations’ activities against these Appellants.
[21] Given these exceptional circumstances, at the conclusion of the hearing I ordered limited additional examination for discovery and production of documents, and that the investigator, Mr. Matheson, would be the person to be further examined. On the limited scope of this additional discovery my words were:
The scope is intentionally to be restricted narrowly to discovery on the role of Investigations and to documents relating to investigations of these three Appellants and that limitation applies to both the discovery questions and to documents, and in both cases, the rights extend to questions or further documents on relevant issues arising from the first.
So I am not intending to give the Appellants scope to be asking questions relating to Investigations’ investigation into [the promoters] or anybody else except to the extent of any other person’s investigation involves one of these three taxpayers, Richter, McPherson and Choptiany.
Any questions about my order?
[22] There were no questions by either party.
[23] Earlier in the hearing, I had described this as “additional discovery to be limited to the role of Investigations and its documents relating to investigations that… are limited only to the extent that they involve these three Appellants along with … relevant issues arising therefrom or from answers”, and “limiting it to investigations not of the three Appellants, but involving these three Appellants…”, and “can’t go asking anything about [the promoters] beyond aspects that involve one of these three Appellants…”, and I “don’t think it appropriate for Mr. Pniowsky… to have it wide open vis-a-vis [the promoters] and … that they should be limited to things in those investigations of others that involve their three taxpayer Appellants… that these three Appellants may not have been the subject of the investigation but they are involved in it in the investigator’s mind, notes or documents”. It should have been very clear to the parties that I was using the word “involving” in a broad manner comparable to the words “relating to”, “with reference to”, “in connection with”, “in relation to” and “in respect of” discussed in Nowegijick v. Canada, [1983] 1 SCR 29 and in Canada v. Basserman, (1994) 169 N.R. 109 (FCA).
[24] I have previously written “Let me be very clear. I begin from the premise that if CRA thought something involving the taxpayer in the taxation year under appeal was worth recording and decided that the obvious place to file it was in the taxpayer’s file for the very year under dispute, that document prima facie meets the relevance threshold applicable to pre-trial discoveries” see Concepts Plastics Ltd., 2009 TCC 79 at paragraph 5.
[25] Similarly, I begin from the premise that if CRA is investigating another person, entity or scheme that names an appellant, in anything other than a schedule of participants or investors or a similar manner, in respect of a matter that appellant taxpayer has appealed to this Court, that document prima facie meets the relevance threshold applicable to pre‑trial discoveries. That is not to say the Appellant can take the document on an unrestricted fishing expedition about the broader investigation. If the document is asked for in discovery, its existence or its production, that would prima facie be a proper question as would any other questions about the investigation’s involvement of or with the Appellant. [3]
[26] On October 17, 2019, two days after the hearing, the written Order was issued. It read:
1. The Appellants may conduct and complete further examination for discovery, answers, and follow up questions and answers, within 60 days of the date of the motion to the extent only of any involvement of any of the Appellants in the investigation, any documents relating to the investigation involving any of the Appellants, and any relevant issues arising therefrom.
[Emphasis added.]
V. The Second Adjournment
[27] On January 20, 2020 the Appellants filed their Notice of Motion for the January 2020 Motion, and made it returnable on January 27, 2020, the opening trial day for the hearing set for their appeals.
[28] The Appellants grounded this motion in alleged non‑compliance by the Respondent with my Order in the October 2019 Motion: that the Respondent continued to refuse to produce the ordered disclosure and chose to read restrictive wording into my October 2019 Order that I did not say or write, and that the Respondent’s deponent Mr. Matheson was not prepared and informed and/or was unwilling to answer questions within the scope of that Order at the further oral discovery (the “Second Discovery”).
[29] The supporting Affidavit included as an exhibit a November 15, 2019 letter written by Respondent’s counsel which opens with the paragraph “We have now had an opportunity to review the entirety of the documents that we believe form part of Justice Boyle’s Order. The five binders of documents enclosed with this letter are limited to ‘documents relating to the investigation [of LaValley and Stancer] involving any of the Appellants…’.”
[30] The Second Discovery had taken place on December 10, 2019 and some of the Appellants’ questions to Mr. Matheson were not answered. After the filing of the January 2020 Motion, the Respondent sent answers to undertakings to the Appellants at 11:00 p.m. on the Wednesday before the start of their hearing on Monday, January 27, 2020.
[31] Appellants’ counsel notified the Court that Dr. Choptiany had made an assignment in bankruptcy and confirmed in writing on January 20, 2020 that the trustee had given instructions to proceed with the appeal.
[32] The relief the Appellants requested was that their appeals be allowed, with costs on a solicitor‑client basis.
[33] At the opening of the hearing on January 27, 2020, Justice Lyons declined to hear the motion as it was principally concerned with the interpretation of my order on the October 2019 Motion, and adjourned the hearing of the trial to allow me to hear and decide the January 2020 Motion. The Respondent argued strongly against the adjournment and strongly maintained this trial should proceed as discovery was properly conducted.
VI. The January 2020 Motion
[34] The January 2020 Motion asked that the appeals be allowed with costs. The grounds put forward by the Appellants were:
The Respondent’s written position that they believed my October 2019 Order was limited to investigations of the two named promoters, LaValley and Stancer, even though that is not what I wrote or said, thus precluding any disclosure or discovery of investigations of others that involved the Appellants, or investigations of the Appellants themselves;
The Respondent remained in breach of its obligation to provide a knowledgeable and informed nominee for examination (Rules 93(3) and 95(2)), to answer relevant questions (Rule 95(1)), and to correct the record upon learning of any incorrect or incomplete answer (Rule 87).
2. The Appellants were aware that there had been an actual investigation by CRA Criminal Investigations into Dr. Choptiany that was pursued to the point of witness interviews and later closed without further action, and these Investigations documents should have been disclosed and Mr. Matheson should have answered their questions as the investigation would meet the relevance at discovery threshold for their appeals of civil penalties, and they were already covered by my October 2019 Order. The Respondent’s written answer was that the investigation into Dr. Choptiany was not covered by the October 2019 Order because it was not a “full scale investigation” of him, even though his audit was carried out entirely by investigators in Investigations not Audit. The words full scale are not in my Order or used at the hearing nor were any words of similar import. The words full scale were not used in the questions asked of Mr. Matheson to which he responded that he was unaware of any investigations into any of the Appellants;
3. The Appellants were also aware that Mr. Richter was named more than sixty‑two times in the Investigations report of one of the two named promoters, including in the ITO, and this was also covered specifically in my October 2019 Order, yet the Appellants could not obtain answers about that investigation to their questions in search of exculpatory facts for the penalty assessments in dispute involving Mr. Richter;
4. The Respondent had not disclosed any additional documents to the Appellants following my October 2019 Order that contained any internal CRA Investigations notes, memos or emails relating to the Appellants;
5. The Respondent refused to provide any documents relating to the decision making, drafting and dissemination of the ITO involving Mr. Richter;
6. The Respondent refused to answer questions relating to Fiscal Arbitrators, counsel maintaining incorrectly that these appeals were DeMara lead cases—even though Dr. Choptiany’s appeal involves Fiscal Arbitrators and one of Ms. McPherson’s appeals only involves Fiscal Arbitrators;
7. The Respondent’s reading down of my October 2019 Order precluded Appellants’ counsel and the Appellant, McPherson herself, from finding out if CRA conducted a criminal investigation and witness interviews into her as well;
8. The Respondent’s answers to undertakings received two business days before the trial had been scheduled to start in January, 2020 were not sufficiently responsive;
9. The Respondent should not have read down my October 2019 Order by reading in the words “of LaValley and Stancer” or “full scale”, but should have brought any genuine concern about the scope of my Order back to me for clarification. The failure by the Respondent to seek such clarifications has been upheld by the Federal Court of Appeal in Canada v. Basserman, 114 DLR (4th) 104 as potentially fatal and warrants the appeals being allowed; and
[35] The Respondent filed written submissions in the January 2020 Motion. They did not provide any sound explanation for why they chose to read words into my October 2019 Order to address their past failings in discovery in these three appeals.
[36] The evidence on this motion supported the Appellants’ version of the facts upon which they grounded their motion.
[37] However, I did not grant them the relief requested. I found that the Respondent’s position relying upon inserting words into my Order when CRA was informing itself of, and locating, the documents and knowledge required pursuant to the terms of my October 2019 Order was unreasonable and intentional, but I did not find them in contempt, or yet at the stage where the Appellants’ requested relief was appropriate. While the Respondent may plausibly have only neglectfully inserted these words restricting the scope of my order when they sent their November letter, I could not accept that could still have been the case on Monday January 27th when the Respondent strongly resisted an adjournment at a time when they had certainly reviewed the issues raised by the Appellants’ counsel. If I can’t accept that as of January 27th, it causes me to doubt whether it was the case in November when it occurred [4] . I instead ordered further oral discovery (the "Third Discovery") by a properly informed Mr. Matheson (or other person the parties might agree on), after disclosing all of the documents described in my October 2019 Order. I expressly left it open for the Appellants to return after that was complete with a motion to allow the appeals and for solicitor client or substantial indemnity costs throughout the proceeding if they believed the Respondent was not turning over documents they were ordered to or were not properly informed when answering relevant questions at the Third Discovery. I was only prepared to deal with costs on the January 2020 Motion before me and the related October 2019 Motion, to be payable forthwith by the Respondent.
[38] After I pronounced my decision at the end of the lengthy hearing, Respondent’s counsel asked if I would clarify specific questions about the scope of my decision and my October 2019 Order “just so we have no more missteps on behalf of the Respondent”. Respondent’s counsel was permitted to do so and both Respondent counsel had questions that I answered to their acknowledged satisfaction.
[39] No written order was issued as the parties asked for and were given ten days to try to agree on costs for this motion and on a draft order, failing which they were to provide me with the last draft orders they exchanged so I could focus my attention on the issues lacking agreement in preparing my Order, along with costs submissions for a fixed amount of costs.
[40] No draft order was received but the parties did proceed with scheduling the Third Discovery and providing further disclosure within the time frames set out in my decision at the hearing, although this was only accomplished with a further Case Management Conference.
[41] My decision that a third examination for discovery was required, following further disclosure of documents relating to investigations involving Fiscal Arbitrators or DeMara promoters, or of others, that involve any of the Appellants, or of the Appellants themselves, was based upon the following obvious breaches of my October 2019 Order:
The Respondent had inappropriately restricted the scope of CRA’s search for ordered documents by wrongly, unreasonably and intentionally inserting restrictive words in what they had CRA look for, that were attributed to me. This was not inattention or inadvertence; the Respondent’s use of the words “that believe from part of Justice Boyle’s Order” and inserting “[at LaValley and Stancer]” where they are quoting me make this clear. This had the effect of excluding from compliance with my Order any investigations of persons other than the two DeMara promoters, or of any of the Appellants themselves;
The Respondent wrongly, inappropriately and intentionally did not disclose an actual investigation by CRA Criminal Investigations into one of the Appellants, Dr. Choptiany, by choosing to interpret a reference to any investigation as a reference only to “full scale investigations”. It appears the Respondent’s explanation that it was not a full scale investigation was something it came up with after it decided not to disclose and Mr. Matheson answered that he was not aware of any investigation into any of the Appellants. There was no attempt to justify that by reference to anything I said at the October 2019 Motion, my decision at that hearing or my October 2019 Order. Nor was there any attempt by the Respondent to justify it by reference to how the question at the Second Discovery was phrased. I inferred from this and point 1 above, that there was some other reason motivating the Respondent’s failures to comply with my October 2019 Order that they did not wish to share with me;
The Respondent failed to disclose any further Investigations records involving Mr. Richter subsequent to my October 2019 Order that were specifically addressed at the October 2019 Motion;
The Respondent’s Mr. Matheson, who was the lead investigator in the DeMara files but not the Fiscal Arbitrator files, did not even inform himself for the Second Discovery whether any investigation was undertaken of any of these three Appellants themselves. When asked directly at the Second Discovery he simply said no;
The exchanges went as follows:
Q: Are you aware of any investigations in relation to any of the specific named Appellants in this case?
A: No.
Q: Did you make inquiries with respect to whether there would be – were there investigations involving the specific Appellants in this case?
A: Did I make specific inquiries with respect to whether there were investigations carried out?
Q: Yes.
A: No.
…
Q: There was a criminal investigation regarding Fiscal Arbitrators as well, correct?
A: I don’t know.
…
Q: It is my understanding that there were active investigations involving one or more of the named Appellants in this discovery.
A: Oh.
Q: And you are not aware of that?
A: No.
Q: So there’s no point in me asking anymore questions about that?
A: Yeah. I have no knowledge.
The Respondent did not disclose its Investigations records into Dr. Choptiany as ordered, even when asked again by the Appellants. There is no doubt that CRA Criminal Investigations conducted an investigation into Dr. Choptiany;
Mr. Matheson’s answer to an uncertain question that CRA had a policy of focusing the investigations on promoters, was evasive and non‑responsive to the issue of whether these three Appellants were investigated. Instead, it suggested the negative response, but documents before the Court show that there was clearly an investigation into Dr. Choptiany by CRA Criminal Investigations, and a preliminary investigation into Ms. McPherson;
The Respondent clarified one of Mr. Matheson’s answers to state that the investigation of Dr. Choptiany did not extend to investigative interviews. That is completely untrue from even a cursory review of Criminal Investigations’ notes of their investigation of him. The Respondent has never corrected that;
At the Second Discovery Mr. Matheson said he did not know that there was a criminal investigation regarding Fiscal Arbitrators. This was a clear acknowledgement that he was thoroughly unprepared, uncooperative, or untruthful. The Respondent wrongly maintained that my October 2019 Order only covered investigations of DeMara related investigations and not Fiscal Arbitrators related investigations. Given that, of these three Appellants, one (Richter) is appealing in respect of DeMara, one (Choptiany) is appealing in respect of Fiscal Arbitrators, and one (McPherson) is appealing in respect of both tax schemes, this unsupportable position precluded proper disclosure and discovery in accordance with my October 2019 Order for these Appellants. It is worth noting that Appellants’ counsel explained this to Respondent’s counsel very clearly. Respondent’s counsel’s response was to maintain the refusal. Combined with Mr. Matheson’s professed ignorance, this precluded proper questioning at the Second Discovery;
The Respondent was wrong to delay its release of those Fiscal Arbitrators documents it did release days before the second Set Down Week due to Dr. Choptiany’s bankruptcy until his trustee confirmed it would be proceeding. Ms. McPherson was one of the Appellants and her appeal relates to her participation in Fiscal Arbitrators. This appears to have been a deliberate step in the Respondent’s litigation strategy and it used the bankruptcy as a pretense to not comply with its clear obligations. This appears to have left Ms. McPherson still not knowing if she was the subject of an investigation, which would be relevant to her appeal at the discovery stage. The bankruptcy of one Appellant and bankruptcy legislation did not have the effect of changing my October 2019 Order. Had the Respondent had bona fide concerns with the impact, if any, it had on the Court Order, they should have contacted me – see Basserman above. The Respondent has contacted the Court for case management issues on the larger group of Fiscal Arbitrators (including DeMara) appeals countless times;
Respondent’s counsel maintained at the hearing in 2020 that they believed these three cases (and presumably the other cases in abeyance for which these were lead cases) only involved DeMara. Not only is it clear from the pleadings that this is not the case, at the First Discovery of Mr. Irwin, the examination included this exchange at the opening:
Q: And you’re aware of underlying project that generated these files, correct?
A: Yes.
Q: And they’re, I’ll call them project files, but I think you know what I’m talking about. We’re talking about those who participated in the project, the Fiscal Arbitrators we’ll call it tax filing method, and the DeMara tax filing method?
A: Yes. Those are the two projects that are at issue. [5]
The Respondent’s answers to undertakings were not sufficiently responsive;
The Respondent’s refusal to undertake, when asked of Mr. Matheson at the Second Discovery, to provide CRA documents in which there is a deliberation, discussion or decision whether or not to criminally investigate the participants in the DeMara or Fiscal Arbitrators projects was wrong. It was clear in context that Appellants’ counsel was limiting his request to documents that named any of these three Appellants. Respondent’s counsel’s answer was “I am not going to give you an undertaking… with respect to any participants”. Other answers by Respondent’s counsel to similar requests were non‑responsive;
The Respondent was wrong to provide just the excerpt from the first page of Investigations’ investigation referral or lead, claiming it was provided as a courtesy, i.e. claiming it was outside the scope of my October 2019 Order. Respondent counsel’s argument that, when they wrote that it was provided as a courtesy, they did not mean it was not required by my Order was given very short shrift; and
These appeals had not yet been set down for hearing again following the Second Adjournment and there was no evident prejudice to the Appellants that could not be compensated with costs if further disclosure and discovery was again ordered on the same terms, though now fully thrashed out, as my October 2019 Order.
[42] During the November 2020 hearing in which this January 2020 Motion was decided, the following aspects of what was addressed should be noted.
[43] I described the Respondent’s insertion of square‑bracketed words when quoting my Order as clearly suggestive that I had earlier referred to these named persons in my statement but in the quoted portion used a pronoun like them, him, her or it. That the Respondent prefaced the quote by saying they believed that is what I said does not change that.
[44] I variously described this as “outrageously misleading and inappropriate”, “this might be contemptuous”, “that’s not fair”, “playing advocate with what should just be a clarification, not an arguable position”, “I don’t believe it is reasonable/arguable”, “deeply, deeply disturbed”, “highly inappropriate” and “I don’t think you were reasonably mistaken”.
[45] Respondent’s counsel acknowledged at that hearing that inserting words into mine “has caused some confusion”. They said that they were mistaken in the way they interpreted my order.
[46] I said “I don’t believe these taxpayers got the discovery and disclosure that I ordered. It was frustrated on November 15”.
[47] I said of the failure of Mr. Matheson to inform himself whether there were investigations into these three Appellants that “this might be contemptuous”, that it was “shocking”, that I could not believe he was not directed by Justice to make those inquiries as part of his preparation, that it appears to taint his whole discovery and how can any of his answers be considered satisfactory, and that these appeals are now wholly jeopardised by how the Respondent chose to interpret my Order.
[48] I said that the combined effect of restricting my disclosure Order and Mr. Matheson not informing himself properly, whether there were even investigations into the Appellants themselves ,was that the additional discovery and disclosure opportunity I granted in my October 2019 Order had been frustrated, and that “this is seriously poor behaviour”.
[49] With respect to costs, I made it clear that I thought it might be best to wait and see how well the Respondent complied with my decision in the January 2020 Motion before I was asked to fix costs if the parties could not agree on an amount. I referred the Respondent to what I said in paragraph 20 of the Jolly Farmer costs decision. I referred to my published practice being to award enhanced costs if asked and appropriate as a percentage of reasonable actual costs. I told the parties that the Respondent’s unreasonable and unacceptable behaviour did not yet rise to the threshold level for solicitor‑client costs, but that there was an accumulating aspect which is why I would leave costs until after the next round if one was needed.
[50] In outlining my decision at the end of the hearing, I said “the officer to be put forward is either to a named officer we agree on today, or I fix today, and to be fully informed with respect to