Minister of National Revenue v. Lehigh Cement Ltd., 2011 FCA 120

• Judge: Evans, Dawson and Layden-Stevenson, JJ.A.
• Court: Federal Court of Appeal (Canada)
• Case Date: March 03, 2011
• Jurisdiction: Canada (Federal)
• Citations: 2011 FCA 120;(2011), 417 N.R. 342 (FCA)

MNR v. Lehigh Cement Ltd. (2011), 417 N.R. 342 (FCA)

MLB headnote and full text

Temp. Cite: [2011] N.R. TBEd. AP.025

Her Majesty the Queen (appellant) v. Lehigh Cement Limited (respondent)

(A-263-10; 2011 FCA 120)

Indexed As: Minister of National Revenue v. Lehigh Cement Ltd.

Federal Court of Appeal

Evans, Dawson and Layden-Stevenson, JJ.A.

March 31, 2011.

Summary:

Lehigh Cement Ltd. moved for an order requiring the Crown to answer a question objected to on discovery and to produce certain documents. The Tax Court of Canada, in a decision cited as 2010 TCC 366, ordered the Crown to: 1. Answer the following question: "If the shares of CBR Cement Corp. had been owned by the appellant [Lehigh] instead of a non-resident company related to the appellant, would the Crown have contested the arrangement"; and 2. Produce internal memoranda of the Canada Revenue Agency from 2000 to July 2007 that specifically related to the development of a general policy concerning s. 95(6)(b) of the Income Tax Act, not including documents relating to a particular taxpayer. The Crown appealed from the interlocutory order.

The Federal Court of Appeal dismissed the appeal.

Income Tax - Topic 7958

Returns, assessments, payment and appeals - Appeals to tax review board or Tax Court - Discovery and disclosure - Lehigh Cement Ltd. moved for an order requiring the Crown to answer a question objected to on discovery and to produce certain documents - The Tax Court of Canada ordered the Crown to answer the following question: "If the shares of CBR Cement Corp. had been owned by the appellant [Lehigh] instead of a non-resident company related to the appellant, would the Crown have contested the arrangement" - The Crown appealed - The Crown argued that the judge erred in ordering it to answer the question because: 1. The question was hypothetical; 2. The purpose of the question was to elicit from the Crown details pertaining to its legal argument; and 3. The question was a pure question of law - The Federal Court of Appeal dismissed the appeal - The court stated that "The judge ordered the question to be answered in order to help Lehigh know the case it has to meet. In the context of this proceeding the question is not a pure question of law, nor does it elicit details of the Crown's legal argument. Lehigh is entitled to know the basis of the reassessment and what led the CRA to conclude it had acquired its shares in CBR-LLC for the principal purpose of avoiding the payment of taxes that would otherwise have been payable. In the factual and procedural context before the Court, the Crown has not demonstrated that the judge erred in concluding that the disputed question should be answered" - See paragraphs 42 to 45.

Income Tax - Topic 7958

Returns, assessments, payment and appeals - Appeals to tax review board or Tax Court - Discovery and disclosure - Section 95(1) of the Tax Court of Canada Rules (General Procedure) stated that "A person examined for discovery shall answer, to the best of that person's knowledge, information and belief, any proper question relevant to any matter in issue in the proceeding ..." - Prior to its amendment in 2008, rule 95(1) required a person examined for discovery to answer any proper question "relating to" any matter in issue in the proceeding - A question was said to relate to any matter in issue if it was demonstrated that "the information in the document may advance his own case or damage his or her adversary's case" (see SmithKline Beecham Animal Health Inc. v. Minister of National Revenue (2002 FCA)) - The court in the SmithKline Beecham case characterized this test to be substantially the same as the train of inquiry test - The Crown submitted that it "is doubtful that the 'train of inquiry' test, in its present form, will survive the amendment" of rule 95(1) in 2008 - The Federal Court of Appeal stated that in its view the 2008 amendment to rule 95(1) did not have a material impact upon the permissible scope of oral discovery - The court stated, inter alia, that "the train of inquiry test has been found to be appropriate both under the pre-2008 Tax Court of Canada Rules (General Procedure) and the current Federal Courts Rules where the test is relevance" - See paragraphs 26 to 37.

Income Tax - Topic 7958

Returns, assessments, payment and appeals - Appeals to tax review board or Tax Court - Discovery and disclosure - Lehigh Cement Ltd. moved for an order requiring the Crown to answer a question objected to on discovery and to produce certain documents - The Tax Court of Canada ordered the Crown to produce internal memoranda of the Canada Revenue Agency from 2000 to July 2007 that specifically related to the development of a general policy concerning s. 95(6)(b) of the Income Tax Act, not including documents relating to a particular taxpayer - The Crown appealed - The Federal Court of Appeal dismissed the appeal - The Crown had disclosed the "Gulliver memorandum" to Lehigh - The inference could be drawn from the Gulliver memorandum and the subsequent reassessment of Lehigh on the basis of s. 95(6) that there might well be subsequent memoranda prepared within the CRA that considered whether s. 95(6) of the Act could be argued to be a general anti-avoidance provision - Such documents, if they existed, would be reasonably likely to either directly or indirectly advance Lehigh's case or damage the Crown's case - The judge did not err in ordering their production - The Crown's arguments that the opinions of CRA officials outside the context of a particular taxpayer were irrelevant and that official publications of the CRA were of limited relevance might be valid objections in another case - However, in this case, the Crown had already disclosed as relevant the Gulliver memorandum - For Lehigh to proceed expeditiously toward a fair hearing, knowing exactly the case it had to meet, it should receive any subsequent memoranda relating to the development of a general policy concerning s. 95(6)(b) of the Act - See paragraphs 22 to 41.

Practice - Topic 4252

Discovery - Examination - Range of - Questions related to or relevant and material to issues between the parties - [See first and second Income Tax - Topic 7958 ].

Cases Noticed:

HSBC Bank Canada v. Canada, 2010 TCC 228; 2010 DTC 1159, refd to. [para. 5].

Apotex Inc. v. Bristol-Myers Squibb Co. et al., [2007] N.R. Uned. 171; 162 A.C.W.S.(3d) 911; 2007 FCA 379, refd to. [para. 24].

Eurocopter v. Bell Helicopter Textron Canada Ltd. (2010), 407 N.R. 180; 2010 FCA 142, refd to. [para. 24].

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1; 2002 SCC 33, refd to. [para. 25].

SmithKline Beecham Animal Health Inc. v. Minister of National Revenue (2002), 291 N.R. 113; 2002 FCA 229, refd to. [para. 27].

Montana Indian Band v. Canada et al., [2000] 1 F.C. 267; 172 F.T.R. 46 (T.D.), refd to. [para. 30].

Bristol-Myers Squibb Co. et al. v. Canada (Attorney General) et al., [2005] 1 S.C.R. 533; 334 N.R. 55; 2005 SCC 26, refd to. [para. 31].

Owen Holdings Ltd. v. Minister of National Revenue (1997), 216 N.R. 381 (F.C.A.), refd to. [para. 32].

Eli Lilly Canada Inc. et al. v. Novopharm Ltd. (2008), 381 N.R. 93; 2008 FCA 287, refd to. [para. 34].

Merck & Co. et al. v. Apotex Inc. (2003), 312 N.R. 273; 2003 FCA 438, refd to. [para. 35].

Apotex Inc. et al. v. Wellcome Foundation Ltd., [2008] N.R. Uned. 37; 166 A.C.W.S.(3d) 850; 2008 FCA 131, refd to. [para. 35].

Baker v. Canada (Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817; 243 N.R. 22; 174 D.L.R.(4th) 193, refd to. [para. 49].

Statutes Noticed:

Tax Court of Canada Act Regulations (Can.), Tax Court of Canada Rules (General Procedure), SOR/90-688a, sect. 95(1) [para. 26].

Tax Court of Canada Rules (General Procedure) - see Tax Court of Canada Act Regulations (Can.).

Counsel:

Daniel Bourgeois and Geneviève Léveillée, for the appellant;

Warren J.A. Mitchell, Q.C., Mathew G. Williams and Natasha Reid, for the respondent.

Solicitors of Record:

Myles J. Kirvan, Deputy Attorney General of Canada, Ottawa, Ontario, for the appellant;

Thorsteinssons LLP, Tax Lawyers, Vancouver, B.C., for the respondent.

This appeal was heard on March 3, 2011, at Vancouver, British Columbia, before Evans, Dawson and Layden-Stevenson, JJ.A., of the Federal Court of Appeal. The following judgment of the Court of Appeal was delivered by Dawson, J.A., on March 31, 2011.