http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/66934/index.do
Fio Corporation v. The Queen[1] (February 20, 2014) is a potentially ground-breaking decision of the Tax Court. The appellant had appealed reassessments of its 2007 and 2008 taxation years to the Tax Court. It provided discovery documents to the Crown. The Crown then used that documentation to issue further reassessments of its 2007 and 2008 taxation years as well as a reassessment of its 2009 taxation year.
The Tax Court issued an order as follows:
a) a) The Court orders the Respondent not to use any documents obtained by the Respondent in the course of the discovery relating to the Appellant’s appeal instituted on April 12, 2012 in any other proceeding before this Court or any other court. The Court’s order does not apply to any documents that the Canada Revenue Agency obtained prior to the date the Appellant instituted its appeal.
b) b) Costs are awarded to the Appellant in the amount of $25,000.
c) c) The Respondent shall have 30 days to file an application with the Court for leave to use the relevant documents in another proceeding.
In essence the Crown asserted that it was not bound by the implied undertaking rule. The Tax Court rejected that argument out of hand. While the Tax Court declined to hold CRA in contempt it decided to award substantial costs to sanction CRA’s conduct:
[79] During counsel for the Respondent’s argument, I was left with the impression that the Respondent considered the Minister to have the same authority as the Court to determine the use of documents provided in the course of discovery. This is simply not correct. All parties who appear before the Court, including the Minister, are subject to the authority of the Court.
[80] In light of the Respondent’s conduct, I have decided to award the Appellant costs of $25,000.
Comment: This decision raises some very serious questions about the use of discovery documentation by the Crown, the role of contempt sanctions, the use of costs sanctions and even the power of the Tax Court to vacate assessments that are not actually before the court (in this decision the Tax Court held it had the power to do so but declined to exercise that power).
[1] 2014 TCC 58.