Taxpayers who appeal to the Tax Court of Canada (“TCC”) under the General Procedure must submit to Examinations for Discovery (“Discovery”) and must answer “any proper question relevant to any matter in issue”: see Rule 95(1). That means virtually any question relevant to the appeal must be answered, aside from those subject to Solicitor-Client Privilege. This obligation continues even if the relevant business has been sold, the knowledgeable employees have left, or key documents are hard to find.
A common step in the Tax Court of Canada litigation process is the Examination for Discovery (“Discovery”). A Discovery is where each side (the taxpayer and the Canada Revenue Agency or “CRA”) will have the opportunity to examine witnesses from the other side, under oath. This is typically done with the assistance of a tax lawyer, and affords each side the opportunity to ask questions and request documents relevant to the issues in the tax appeal. The Witnesses are under oath and must answer questions truthfully, with the Discovery recorded, and transcripts produced after-ward.
The discovery process allows litigating parties to collect and consider all pertinent facts, to use those facts to assess the strengths and weaknesses of their case and to otherwise prepare for trial. A general exception to the requirement to disclose relevant documentation and information during the discovery process relates to documents or information that are “privileged”.
The recent decision of the Chief Justice of the Tax Court of Canada in CIBC v. The Queen (2015 TCC 280) is an excellent review of the strict rules surrounding privilege in this context, and a cautionary tale for litigants taking an overly obstructionist approach to the principles of full and proper disclosure.
