Date: 19990921
Dockets: 97-3814-IT-G; 98-878-IT-G
BETWEEN:
INTERPROVINCIAL PIPE LINE (NW) LTD., IPL ENERGY INC.
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent,
Order and Reasons for Order
Beaubier, J.T.C.C.
[1] These matters came before this Court at 9:30 a.m. on September 13, 1999 on the Order of Bowie, T.C.J. signed on July 20, 1999, pursuant to motions dated June 21, 1999:
... that the Respondent may move before the Court for a review of the claims of privilege set forth by the Appellants in their affidavits of documents filed
and that the Appellants
... may move ... as to which the Appellants, assent on a claim of privilege.
The Notices of Appeal were begun in December, 1997 and April, 1998 and relate to assessments respecting alleged avoidance transactions within the meaning of subsection 245(3) of the Income Tax Act ("Act").
[2] At 9:30 a.m. on September 13, 1999, the Respondent withdrew its motions and the Appellants stated that they had conceded in the preceding two weeks that a few of the documents in dispute were not privileged. An order respecting the foregoing was filed on September 15, 1999. The matter of costs was reserved.
[3] The Appellants asked for solicitor and client costs of $155,558.19 for the proceedings it had to undertake as a result of the Respondent's motions respecting the documents over which they claimed privilege.
[4] These motions related to more than 1,000 documents and were proceeded with by the Respondent respecting all documents. They required the time of four of the Appellants' solicitors on an almost continuous basis. They related to a number of allegations by the Respondent which varied from time to time as did the bases alleged for them. There was an examination on an affidavit. A variety of allegations in law were made from time to time by Respondent's counsel on which briefs had to be prepared. An examination of these motions and the affidavits in support of them raises a question as to whether the Respondent's proceedings were reprehensible and vexatious since the number of documents was so great and the bases of the motions were neither fraud nor a criminal act by the Appellants. Neither was pleaded and there is no factual basis of either one, alleged or in evidence.
[5] From the material before the Court the only factual basis for all of this is two documents prepared by a consulting economist given by the Appellants to the Respondent and which merely contain a consultant's opinion. They are documents to which the Appellants have consented as stated in paragraph [2].
[6] In contrast to the documents which the Respondent required of the Appellants, the Respondent's affidavit of documents contains a description of documents in Schedule B that is not clear, explicit or detailed.
[7] The broad exercise that the Appellants were put through was a fishing expedition in the face of the authorities on solicitor client privilege that there is privilege to communications between solicitor and client unless the commission of a crime or fraud is in question. If such is in question, the law is that particulars of the alleged crime or fraud must be pleaded and proven.
[8] Appellants' counsel detailed what the Appellants went through to the Court. His statements were made as counsel and they were neither denied nor refuted. They are accepted as the proper undertakings of counsel in such circumstances. Similarly, his statements respecting the sum of $155,558.19 were not denied or refuted. From what both counsel stated to the Court, Respondent's counsel was in constant communication with Appellants counsel and was quite aware of the usage of solicitors time and the turmoil that these motions, various alleged bases (which changed from time to time and not all of which were followed through), and the number of documents involved were creating – all at great expense to the Appellants. These proceedings relate to various corporations or transactions in three national jurisdictions. The legalities were complicated and required legal advice at every step due to the jurisdictions and the complicated transactions.
[9] In the course of argument Counsel for the Respondent cited his authority for these motions to breach privilege on such a large scale. It is from an obiter opinion in the judgment of Osler J. in Re Church of Scientology and The Queen, 10 D.L.R. 4th, 711 at 714 which reads:
It is trite law that the advice of a solicitor may not be sought for an improper purpose, such as to assist in the commission of a crime or, in my view, a civil wrong upon a third party as, e.g., a tort or breach of contract, and such a purpose will defeat the privilege.
That interpretation has been renounced by higher authorities. Moreover, the definition of solicitor-client privilege in subsection 232(1) of the Income Tax Act has not changed the traditional concept of the breadth of privilege.
[10] The documents released from the claim of privilege by the Appellant consisted of two documents from a consulting economist and a second set of documents which the Appellants learned may have been given to a lawyer in his capacity as a director of one of the corporations involved in the transactions.
[11] The second set was only discovered by the Appellants to have been part of documents given to a director-lawyer of a corporation long after these motions and proceedings were under way. Thus, while the Respondent's counsel's basis of interpreting privilege was not well founded, the fact is that the motions resulted in the determination by the Appellants that certain of its documents were not privileged.
[12] For this reason, the determination of the award of costs respecting these motions is left to the trial judge to determine.
Signed at Toronto, Ontario this 20th day of September 1999.
"D.W. Beaubier"
J.T.C.C.