This is appeal involves investors in a software partnership loss scheme from the early 2000s. The appellants were investors, whose tax losses CRA denied. In General Procedure cases, the parties can “discover” one another in writing or orally (subject to restrictions for appeals where $50,000 or less of tax is at issue.)
The taxpayers couldn’t answer the government’s questions during discovery. They were investors; so they didn’t know much about how the software scheme was organized and run. So, the Government applied to the Court for permission to examine orally a representative of one of the corporations involved in orchestrating the scheme. The corporation, Advantex, was not an appellant. It resisted the Government’s request to have one of its officers examined.
For the motion, an officer of Advantex swore an affidavit, to explain why it shouldn’t have to answer questions: Its current officers weren’t the ones involved in the transactions. It had no way to contact the former officers. Its current officers had no time to search for documents. Chief Justice Rip believed none of these excuses.
Under rule 99 of the General Procedure rules, a judge of the Court may order an examination of a non-party where:
(a) the person seeking to examine the non-party can’t get the information from a party through discovery. Justice Rip noted that the Government had tried to get the information through discovery but the taxpayers didn’t know it themselves (they were mere investors) and they hadn’t been able to get it from Advantex. Also, Advantex had told the Government that it would not answer questions unless the Court ordered it to. So, this condition was satisfied. (Paras. 44-46.)
(b) it would be unfair to make the person go to the Court hearing without being able to examine the non-party. Justice Rip said it would be unfair–the information was “germane”. (Para. 47.)
and (c) the examination will not:
(i) unduly delay the commencement of the hearing of the proceeding,
(ii) entail unreasonable expense for other parties, or
(iii) result in unfairness to the person the moving party seeks to examine.
Satisfied that the conditions in subrule 99(2) were met, Chief Justice Rip ordered the examination.