Discovery of Documents in the Tax Court of Canada

Discovery: the process of requesting and receiving relevant documents from the other side is one of the most important stages of any litigation. When the other party is the Minister of National Revenue (the Minister) the discovery stage can seem like a David vs. Goliath type struggle.

Fortunately the Tax Court of Canada Rules (TCC) establishes a level playing field for all litigants in that forum.

As Bolduc v. The Queen exemplifies though, not all document requests can be permitted, and the Court frequently undertakes a “test of proportionality”  before any order is granted. In this case the Minister assessed a gross negligence penalty of $42,028.51 against the appellant. The appellant relied on section 82 of the Rules of the Tax Court, outlined in part below, to request significant documentation from the Minister.

Counsel for the appellant requested all documents used to obtain search warrants; all documents obtained as a result of them; the names of all CRA employees who had knowledge of the scheme and similar schemes the appellant participated in; all documents the CRA may have with respect to the scheme and similar schemes; and, the CRA files for all taxpayers who were assessed under the scheme and those similar to it. It was argued that the section 82 motion, if granted, would reduce the number of subpoenas that would have to be issued for the trial.

There are a number of requirements that a party must meet before a section 82 motion will be granted:   

1. The party requesting full disclosure of documents must show that they are relevant to the issues raised in the pleadings and that there are reasonable grounds for such an order;

2. In making its decision for full disclosure, the Court must be satisfied that full disclosure will secure the just, most expeditious, and least expensive determination of the proceeding (subsection 4(1) of the Rules);

3. In accordance with subsection 4(1) of the Rules, the Court should also consider whether the issues under appeal are such that the increased expense and time required to assemble the requested documents are warranted;

4. The objectives of efficiency, effectiveness, practicality and the ‘need to get on with the litigation’ also play a part in the Court’s decision for full disclosure;

5. Although the burden of discovery should remain proportionate to the issues, interest, and money at stake in an appeal, the Court must also question whether the requested documents are material with respect to the issue or whether they will add significant value to the Court’s appreciation of the evidence.

Unfortunately, the appellant lost this bid; the Honourable Justice V.A. Miller decided that the appellant had not demonstrated that the documents requested were relevant to the issue in his appeal, and even if they were, he felt that full disclosure in these circumstances would not secure the just, most expeditious and least expensive determination of the issue under appeal.

These issues should be kept in mind by taxpayers and their legal representatives who are making application for documentation under section 82 in the Tax Court of Canada.

Greer Jacks is updating jurisprudence in EverGreen Explanatory Notes, an online research library of assistance to tax and financial professionals in working with their clients.