Tax Court of Canada, Tax Court of Canada Rules, Tax Practice

Pleadings, Document Production, and Redactions

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Pleadings, Document Production, and Redactions

Dominion Nickel Investments Ltd v The Queen, 2015 TCC 14

In the court of a tax appeal, the MNR produced documents that were either entirely or partially redacted.  The Appellant brought a motion asking for unredacted copies of the documents.

The Court agreed almost entirely with the Appellants position and ordered the production of unredacted copies.

ANALYSIS

The disclosure documents at issue were listed by the MNR in its list of documents pursuant to Rule 81 of the Tax Court of Canada Rules (General Procedure), which requires the production of documents that, to the party’s knowledge, might be used as evidence to establish a fact  or rebut an allegation of fact (or assist with the foregoing). This rule is meant to speed up appeals and reduce costs by requiring automatic production, leaving it to the party to apply for a full list of documented pursuant to Rule 82.

Relevant considerations when dealing with redacted documents may include (relevance of considerations will depend on the case):

  • the party’s discovery rights;
  • the scope of discovery;
  • privacy issues, in light of the policy behind ITA s 241;
  • the implied undertaking rule;
  • whether the documents sought are in the hands of third parties, and whether the parties are inside or outside of Canada;
  • proportionality; and
  • the position of the motions judge as compared to the trial judge, with the motions judge supporting the “need to get on with it” (para 18).

The court referred to the jurisprudence on the issue of discovery: Kossow v. The Queen, 2008 TCC 422; HSBC Bank Canada v. The Queen, 2010 TCC 228; John Fluevog Boots & Shoes Ltd. v. The Queen, 2009 TCC 345; Sputek v. The Queen, 2010 TCC 540.

The scope of discovery is very wide, and some key points were set out in HSBC Bank Canada v. The Queen, 2010 TCC 228:

  • relevance is widely construed on discovery so as not to limit the trial judge’s view of relevance on the evidence as a whole;
  • the threshold for relevance is very low but does not allow for a fishing expedition: Lubrizol Corp v Imperial Oil Ltd, 1998 CanLII 8906 (FC)
  • full disclosure of the document required on by the MNR in making of an assessment must be made: Amp of Canada Ltd v R
  • the party is entitled to “any information, and production of any documents, that may fairly lead to a train of inquiry that may directly or indirectly advance his case, or damage that of the opposing party”: Teelucksingh v. The Queen, 2010 TCC 94;
  • the court should preclude only questions that are “(1) clearly abusive; (2) clearly a delaying tactic; or (3) clearly irrelevant”: John Fluevog Boots & Shoes Ltd. v. The Queen, 2009 TCC 345; 
  • Documents that lead to an assessment are relevant: 4145356 Canada Limited v. The Queen, 2009 TCC 480;
  • Documents in CRA files on a taxpayer are prima facie relevant, and a request for them is not in itself broad or vague: 4145356 Canada Limited v. The Queen, 2009 TCC 480;
  • the files reviewed by a person in preparing for an examination for discovery are prima facie relevant: 4145356 Canada Limited v. The Queen, 2009 TCC 480;
  • The fact that a party has not agreed to full disclosure under Rule 82 does not prevent a request for documents that may appear like a one-way full disclosure: 4145356 Canada Limited v. The Queen, 2009 TCC 480.

What is relevant is to be determined in light of the pleadings – the issues of the case.  So long as a document may lead to “a train of inquiry that may directly or indirectly advance his case” the document are prima facie relevant: 4145356 Canada Limited, 2009 TCC 480.  The question for the motions judge is not whether the documents seem useful, but only if they are “clearly irrelevant” (para 50).

Although ITA s 241 protects privacy in tax matters, paragraph 241(3)(b)  allows for production of evidence in “any legal proceedings related to the administration and enforcement of the Act”.

Next, the court dealt with redactions of documents.  The starting point is that all relevant documents must be produced in full.  However, redactions may be made where the portion is “clearly irrelevant” (O.I. Group of Companies v. Canada (Minister of National Revenue), 2006 FCA 234) including irrelevant information raising privacy concerns (Cameco Corporation v The Queen, 2014 TCC 45; Heining v The Queen, 2009 TCC 47).

Privacy concerns must be considered in light of the strong implied undertaking rule – that discovery materials are only to be used for purposes of the action in the course in which they are obtained Goodman v. Rossi, [1994] O.J. No. 2778 (QL); Lac d’Amiante du Québec Ltée v. 2858-0702 Québec Inc. [2001] 2 S.C.R. 743.  Unless the information becomes public in the course of the trial, the implied undertaking rule survives the action.

Where the some of the information is in the hands of third parties that are outside of Canada, production favours the taxpayer so that s/he has access to all fo the MNR’s knowledge and documentation relevant to the case.

– Sas Ansari, JD LLM PhD (exp)

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