Discovery Questions in Tax Court Appeals – Proper and Relevant?

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Discovery Questions in Tax Court Appeals – Proper and Relevant?

506913 N.B. Ltd. v The Queen, 2016 TCC 286

One of the issues was the application of Tax Court of Canada Rules (General Procedure), Rules 107(3) and 95(1).

Justice Boyle, after reviewing Rule 95(1) in both French and English, considered the use of the word “proper” and “relevant” to be no more than a drafting slip “compliments of the mythical Department of Legal Redundancies Department” as the French version only expresses a relevancy test (para 8).  Rule 107(3) imposes a “pertinence” test which is different than a “relevance” test (para 8).  As such, the TCC refused to follow the decision in Stanfield v. The Queen, 2007 TCC 480 (paras 53 – 58) in so far as “proper” and “relevant” were seen as separate requirements (para 9).   Rather, Justice Boyle quoted with approval 569437 Ontario Inc. v. Canada, [1994] T.C.J. No. 531 (QL), as quoted with emphasis in Shell Canada Ltd. v. Canada, [1996] T.C.J. No. 1313 (QL):

. . . the standard for propriety of a question . . . is whether the information solicited by a question may be relevant to the matters which at the discovery stage are in issue on the basis of pleadings filed by the parties.

Scope of Questioning on Discovery 

The Court referred to the decisions in Baxter v. The Queen, 2004 TCC 636 (paras 12-13), Shell Canada Ltd. v. Canada, [1996] T.C.J. No. 1313 (QL) (para 9),  Canadian Imperial Bank of Commerce v. The Queen, 2015 TCC 280 (paras 14-18, 270, 271, 362, and 363), and Canada v. Lehigh Cement Limited, 2011 FCA 120 (paras 24, 29, 30, 34, 37, 40, and 44), to summarize the law as follows (para 11):

(a)     The general principles applicable to questions on discovery do not provide a magic formula applicable to all situations.

(b)     The scope of questioning permitted on discovery is defined by the pleadings of the parties. These pleadings set out the facts, issues and positions which are all proper matters for discovery. A questioning party needs only be able to satisfy the motions judge that the information sought may be relevant to such a matter, construing the pleadings with fair latitude and in the factual and procedural context of the particular case.

(c)      The threshold level of relevancy upon discovery is quite low and is not likely difficult to meet in light of the goal of discovery — openness — and its purpose of fairly, reasonably and expeditiously moving appeals forward to a hearing.

(d)     Relevancy at this stage is extremely broad and must be generously, broadly and liberally construed. Very wide latitude should be given to permit the fullest inquiry as to all matters which can reasonably be considered to possibly affect the issues between the parties. This has been described as a semblance of relevancy, which I take to mean the question need only reasonably appear to possibly be relevant.

(e)      A question is relevant if it may lead to a train of inquiry which may directly or indirectly advance the party’s own case or damage that of the other party.

(f)      Only questions concerning matters that are clearly or completely irrelevant should be rejected at the discovery stage. Where there is doubt about the relevancy of a question, the principal goal of openness favours requiring the question to be answered.

(g)     A motions judge should permit questions that are broadly related to the matters/issues in dispute. Touching the matters in question suffices.

(h)     A motions judge should not fetter the discretion of the judge who will preside at trial and will be required and best able to decide relevancy as part of the admissibility of the evidence into the record in the context of the evidence as a whole. An inadvertent error by a motions judge determining relevancy at discovery may lead to serious problems or even injustice at trial. It is the trial judge’s determination that attains deference. Trial judges rightly give very little deference to a motions judge’s determination. Discovery and the admitting of evidence are distinctly different aspects of an appeal.

(i)      A motions judge should not second‑guess counsel conducting a discovery by minutely examining each question. A question can be relevant at the discovery stage even if, considered in isolation, it may seem irrelevant. The relevance of a question may be tied to other evidence not before the motions judge.

(j)      It is permitted to ask questions to ascertain the other party’s legal position.

(k)     It is not a valid objection that the examining party already knows the answer to the question. I do not read this as allowing counsel to repeat endlessly what is a substantively identical question at the same examination. That a question may be similar to one already asked does not make it substantively identical. Words and phrases may mean different things to different people. Different words and phrases have different meanings.

(l)      It is not a valid objection that the other party will no longer be relying upon a particular provision, position or characterization.

(m)    The Court will not automatically disallow a question as not relevant merely because it concerns matters outside the fiscal periods in issue in the appeal.

(n)     Motions judges should not permit questions that are patently irrelevant questions, abusive questions, questions designed to embarrass or harass the person or party, questions designed to delay the process, or questions forming part of fishing expeditions of vague and far-reaching scope.

(o)     A relevant question may be disallowed if answering it would constitute undue hardship on the other party.

(p)     The above summary is not exhaustive.


The Court concluded, in this case, that:

  • With respect to amended replies, the appellant is given full rights they would have had on initial examination for discovery (full and complete examination) with no limitation on the scope of discovery, as the respondent would not have sought leave to amend replies if the distinct and specific amendments were not necessary “as they were kind of, almost, mostly, pretty much already addressed in its existing replies” (paras 12-14);
  • Refusal to answer questions on the basis that “the questions were not related to the amendments” was considered to be “quite cheeky” and not proper (para 14);
  • It is proper to ask repetitive or overlapping questions where examination is resumed after a long adjournment, additional examination is permitted or ordered,  as basic introductory, contextualization, or refresher questions (para 17);
  • Where significant, substantive amendments are made, counsel if permitted to question as to the impact of the amendments through repetitive or overlapping questions, particularly where the overlap between new and old positions is set out in the pleadings (para 18);
  • Identical questions will have to be answered in relation to all new matters raised in amendments, including “how the new answers may differ from the prior answers in respect of the old matters previously pleaded and examined on” (para 19);
  • Asking questions as to the factual basis of legal conclusions is proper and relevant (para 29);


Sas Ansari, BSc BEd PC JD LLM PhD (exp) CPA In-Depth Tax 1, 2 &3

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