Section 29
Cases
International Hi-Tech Industries v. The Queen, 2014 TCC 198
Prior to its bankruptcy, the appellant granted a general security agreement ("GSA") to its holding body corporate and related companies as security of a $6 million advance. In the appellant's name, the receiver for the secured creditors appealed the Minister's denial of input tax credit claims of the appellant. The trustee in bankruptcy had already accepted the GSA as valid, waived redemption of the security and released the interests of the general creditors in the collateral (i.e., essentially all the appellant's assets, as the secured creditors' claim exceeded the value of the bankrupt estate), but had not specifically authorized the present proceedings.
The Minister applied to dismiss the claim on the basis of the lack of legal capacity of the receiver to bring the claim (i.e., that only the trustee could bring the claim).
Bocock J dismissed the Minister's application and found that the appeal could be brought by the appellant "by its Secured Creditors, Receivers in part and Lawful Attorneys [list secured creditors]." After finding that the deeming by ETA s. 266 of the receiver to be the appellant's agent meant that a receiver could object in respect of property seized by it, went on to indicate that the GSA, and the trustee's waiver, constituted an "assignment" of the appellant's interest in the ITCs, which empowered the Court under s. 29 of the Rules to make the creditors parties. He stated (at para. 22):
Legally, the secured creditors would be the parties exclusively entitled to the proceeds arising from any ITCs emanating from a successful appeal. ... Since entitlement to such proceeds subsists in the secured creditors through the GSA's valid assignment, section 29 [of the Rules] affords this Court the power to provide the procedural remedy to these validly, subsisting rights in the choses in action which comprise the alleged ITCs exclusively collectible from the Respondent through an appeal to this Court.
Section 53
Cases
AgraCity Ltd. v. The Queen, Docket: 2014-1537 (IT) G
In her Reply, the Minister alleged that a Barbados corporation ("NewAgco") which did not deal at arm's length with the taxpayer, took over a business of selling a product ("ClearOut") to Canadian farmers, and that NewAgco agreed to pay services fees to the taxpayer amounting to approximately $1 million for its 2007 and 2008 fiscal periods as contrasted to net profits of Barbados from sales of ClearOut for those years of $2.4 million and $3.6 million. C. Miller J found (at para. 16) that if he took the Minister's pleadings "that NewAgco had no role in selling ClearOut as true," there was "no basis upon which the Minister can successfully apply section 247(2)(a)." Accordingly, he struck the Minister's pleading, that the terms of the agreement between the taxpayer and NewAgco differed from arm's length terms. However, he did not strike pleading directed at ss. 247(2)(b) and (d) as they were broader provisions.
He noted (at para. 17) that, if supporting evidence emerged at trial, the Minister could advance ss. 247(2)(a) and (c) as alternative arguments.
Section 82
Subsection 82(2)
See Also
Canadian Imperial Bank of Commerce v. The Queen, 2015 TCC 280
Issues in the appeal of the taxpayer respecting whether it could deduct a payment of Cdn.$2.9 billion made to settle actions against it in connection with the Enron bankruptcy included whether the settlement amount should have been reimbursed to it by subsidiaries whose conduct may have been the primary basis for the actions. Before finding (at para. 22) that CIBC internal “investigations on various Enron-related actions by CIBC and related entities, including actions implicated in the litigation that led to CIBC deducting the Settlement Amounts, would be relevant to the Respondent’s arguments on which entity’s business incurred or should have incurred the Settlement Amounts,” so that the Minister was entitled to discovery, and after discussing authorities on the scope of discovery, Rossiter CJ stated (at para. 18):
The above principles governing discovery thus reveal the following salient points:
- Relevancy is extremely broad and should be liberally construed. The threshold for relevancy on discovery is very low but does not allow for a fishing expedition, abusive questions, delaying tactics or completely irrelevant questions;
- Everything is relevant that may directly or indirectly aid the party seeking the discovery to maintain its case or combat that of its adversary. If the questions are broadly related to the issues raised, they should be answered;
- Discovery is limited by the pleadings to some extent; and
- The examining party conducting the discovery is doing so for the purposes of: supporting his or her own case; obtaining admissions; attacking the opponent’s case; limiting the issues at trial; and revealing the case that he or she must meet at trial and the facts that the opponent relies upon.
Questions respecting the procedures and decision-making respecting booking the settlement amount (including choice of entity, but not peripheral bakground information) also were relevant (paras. 255-322).
In finding that the production of a mediation agreement with plaintiffs in a settled action, and other settlement-related documents such as those generatd in the mediation, was required, Rossiter CJ, after noting (at para. 132) that the Supreme Court had stated (2013 SCC 37, at para. 19) “that overruling settlement privilege requires a 'competing public interest' to outweigh the public interest in encouraging settlement,” he stated (at para. 158):
This case, however, involves two different subject matters. The Newby and MegaClaim Litigations were about CIBC’s liability relating to certain Enron transactions. The tax appeals, however, are about the deductibility of the Settlement Amounts that arose out of the litigation. There is no danger that disclosure from the first subject matter will prejudice CIBC in litigation surrounding that subject matter; that litigation is concluded. Many of the policy reasons for protecting settlement privilege thus fall away. …Communications and information from the first litigation are certainly relevant to resolving the tax litigation, since they will go to whether the Settlement Amounts are deductible… .
He stated (at para. 362):
This particular motion seems in large part to be the result of obstruction by CIBC...[which] I...do not believe...is the proper way to litigate, and there are certainly consequences to that strategy that the Court should and will consider.
See summary under s. 232 - solicitor-client privilege.
Section 84
Cases
Canadian Imperial Bank of Commerce v. The Queen, 2015 TCC 280
The taxpayer provided a list of 21,000 documents, prepared using metadata.
Some are only described as “Word document,” “Powerpoint presentation” and “electronic file”, with no indication of the author, recipient or date. There are also more than 5,422 documents in Schedule B that are described as attachments to emails but that lack any description of the subject matter or the date. (para. 226)
After adopting the statement in Canadian Natural Resources Ltd. v ShawCor Ltd., 2014 ABCA 289 that "'a party preparing an affidavit of records must, short of revealing information that is privileged, provide a sufficient description of each record for which privilege is claimed to assist other parties in assessing the validity of the claimed privilege,'" Rossiter CJ ordered (at para. 243):
that CIBC provide the author and/or sender, the recipient, the date of creation, subject line and describe the record in a way without revealing information that is privileged for all non-email documents listed in Schedule B.
See summaries under s. 232(1) – solicitor-client privilege and Tax Court Rule 82(2).
Subsection 86(1)
Cases
Canadian Imperial Bank of Commerce v. The Queen, 2015 TCC 280
On discovery of the taxpayer (“CIBC”) in its appeal respecting whether it could deduct a payment of Cdn.$2.9 billion made to settle actions against it in connection with the Enron bankruptcy, the Crown asked CIBC to approach its auditors (“EY”) to ask if they have any documents that matched defined search terms that CIBC used for documentary discovery, and to search for a multi-year period. Rossiter CJ stated (at para. 337):
I might have allowed these questions if they were narrower. But their broad terms lead me to conclude that CIBC is right in saying that a motion under s. 86 of the Rules should have been made, since that is the avenue for getting documents from a non-party, particularly on a request like this. Section 86 has its own test and rules that help limit over-discovery of non-parties... .
See summaries under s. 232(1) – solicitor-client privilege and Tax Court Rule 82(2).
Subsection 95(1)
Cases
Canadian Imperial Bank of Commerce v. The Queen, 2015 TCC 280
Issues in the appeal of the taxpayer respecting whether it could deduct a payment of Cdn.$2.9 billion made to settle actions against it in connection with the Enron bankruptcy included whether the settlement amount should have been reimbursed to it by subsidiaries, whose conduct may have been the primary basis for the actions, in accordance with the transfer pricing rules. The Crown asked questions about non-Enron litigation and settlements where a CIBC entity was sued along with an arm’s-length co‑defendant, on the basis that these might represent potential “internal comparables” for transfer pricing purposes. In finding that these questions were not to be answered on the grounds of irrelevancy, Rossiter CJ stated (at para. 251):
Even where there was litigation with an arm’s-length co-defendant, and even if that litigation involved some CIBC group members, the litigation could still be completely different so as to be utterly useless as a comparator.
See summaries under s. 232(1) – solicitor-client privilege and Tax Court Rule 82(2).