http://decisions.fca-caf.gc.ca/fca-caf/decisions/en/item/126320/index.do
Canada v. Superior Plus Corp. (November 3, 2015 – 2015 FCA 241, Noël CJ. (author), Scott, De Montigny JJ. A.).
Précis: This decision combines two appeals by the Crown from procedural decisions of the Tax Court blogged earlier on this site. The first decision dealt with the disclosure of background materials prepared by CRA during its GAAR audit of the taxpayer. The Tax Court ordered the production of the material and the Federal Court of Appeal affirmed that order. The second decision dealt with the Crown’s attempt to obtain privileged legal advice the taxpayer had received based on implied waiver of privilege. The implied waiver was alleged to arise out of the release by the taxpayer of another legal opinion from another law firm. The Tax Court declined to order production of the material in question and, again, the Federal Court of Appeal affirmed.
Both appeals were dismissed from the bench, with costs to the taxpayer in each appeal.
Decision: The Federal Court of Appeal gave a rather nuanced treatment to the production of the GAAR materials requested by the taxpayer:
[7] We are satisfied that no legal or factual error has been committed. Specifically, it has not been shown that the Tax Court judge inappropriately expanded the test for relevance at discovery. Rather, his decision to compel the production of the refused documents and answers to the refused questions is attributable to the fact that the General Anti-Avoidance Rule is invoked, in circumstances where a change in the Act’s underlying policy is in issue (Reasons at paras. 27 to 35).
[8] As was held by this Court in Lehigh Cement Ltd. v. R., 2011 FCA 120 [Lehigh] in like circumstances, information pertaining to the policy of the Act, even where it is not taxpayer specific, can be relevant on discovery. We accept that an important consideration in that case was that the Crown had itself established the relevance of the documents sought by disclosing an internal policy memorandum on the subject (Lehigh at para. 41). However, relevance in the present case is no less established by the Tax Court judge’s finding that the refused documents were either prepared in the context of the audit of Superior Plus or considered by officials who were involved in the audit (Reasons at para. 19). We can see no basis for distinguishing Lehigh. As always, the trial judge will be the ultimate arbiter of information garnered at the discovery stage.
[9] Nor can it be said that the disclosure of this information results in an unjustified intrusion into the CRA’s deliberative process, thereby jeopardizing public servants’ candour. While the Supreme Court did express similar concerns in John Doe v. Ontario (Finance), 2014 SCC 36 at paras. 43 to 46, they did so in addressing the purpose of access to information legislation. There is no useful analogy to be drawn between access to information and discovery. Reference is made to the decision of Rothstein J. in Canada Post Corp. v. Canada (Minister of Public Works), [1993] 3 F.C. 320 (Fed. T.D.) at paras. 58 to 61 (aff’d [1995] 2 F.C. 110 (Fed. A.D)) for a similar conclusion reached in a different context.
On the question of alleged waiver of privilege the Court was also quite careful to frame its decision narrowly:
[14] Superior Plus waived the solicitor-client privilege in answering an undertaking made during discovery (Answers to Undertakings, Appeal Book, Vol. 2, Tab 7, p. 413, U/A 64). Specifically, Superior Plus’ representative was asked by Crown Counsel to identify the document or documents on which Superior Plus relies to support its non-tax purpose plea (Answers to Undertakings, Appeal Book, Vol. 2, Tab 7, p. 420, U/A 93). By waiving the privilege and tendering the disclosed opinion, Superior Plus placed itself in a position to introduce this document in evidence at trial. That is the context in which the Crown is seeking immediate access to selected portions of the opinions with respect to which the privilege has not been waived.
[15] It can be seen that the alleged unfairness and inconsistency which the Crown alleges will only arise if Superior Plus follows through and introduces the disclosed opinion in evidence, in which case it will be up to the trial judge to determine whether the solicitor-client privilege has thereby been waived.
[16] There is no doubt that immediate access to the claimed opinions would allow the Crown to better prepare for trial. However, this is a problem that can easily be addressed by way of an adjournment and Superior Plus should not be exposed to the privilege being lifted in advance of causing the unfairness which the Crown alleges and which the doctrine of implied waiver is intended to address.
[17] Considering the matter from a different perspective, it can be seen that until Superior Plus introduces the disclosed document in evidence, access to the other privileged opinions is neither “vital or necessary” to the Crown’s ability to respond (Compare Procon Mining & Tunnelling Ltd. v. McNeil, 2009 BCCA 281 [Procon] at paras. 15 to 19).
[18] In Procon, the British Columbia Court of Appeal came to the conclusion that the legal advice sought did not have to be disclosed because it was not in any way relevant to the state of mind which had been plead by the plaintiff and which had allegedly given rise to an implied waiver (Procon at para. 17). That is the context in which the Court said: “[t]o establish waiver, the disclosure sought must be “vital” or necessary to the [requesting] party’s ability to answer an allegation.” (Procon at para. 19).
[19] To be clear, this test does not operate as a different and more demanding standard for determining whether a disclosure of privileged information has given rise to an implied waiver, but as a way of ensuring that an implied waiver not be pronounced unless and until it becomes necessary to do so in order to prevent the unfairness and inconsistency which the doctrine of implied waiver is intended to guard against.
[20] It follows that the Crown’s argument cannot succeed at the stage of the proceedings we are at and that the Tax Court judge’s decision refusing access to the privileged documents must accordingly stand.
As a result the Crown may have a second change to litigate the point if the document alleged to be the foundation for the waiver is introduced at trial by the taxpayer.
The appeal was dismissed from the bench, with costs to the taxpayer in each appeal.