Fink v. R. - FCA: Applicant entitled to ask questions about other remission order applicants in stock option plan

Fink v. R. - FCA:  Applicant entitled to ask questions about other remission order applicants in stock option plan

Canada (Attorney General) v. Fink (April 27, 2017 – 2017 FCA 87, Stratas, Near, De Montigny (author) JJ. A.).

Précis:  Mr. Fink applied for a remission order in connection with the taxation of stock option benefits.  He applied for judicial review of a decision of the Assistant Commissioner of the CRA refusing to recommend that the Governor in Council issue a remission order.  During the course of that application Mr. Fink’s counsel sought to cross-examine on affidavits filed on behalf of CRA.  The issue before the Court of Appeal was whether Mr. Fink’s counsel could put 5 questions related to remission applications filed by other taxpayers.  The Federal Court Judge directed CRA to answer the questions and CRA appealed to the Federal Court of Appeal.  On appeal the Federal Court of Appeal dismissed the appeal, with costs, holding that the questions were proper.

Decision:  The Court of Appeal did not accept CRA’s objections to answering the 5 disputed questions:

[7]               Despite the Attorney General’s able arguments to the contrary, I have not been convinced that the Judge made any reviewable errors. The power to compel answers or the production of documents is discretionary in nature. Such decisions are subject to the palpable and overriding standard of review, unless an extricable error of law is identified (Hospira Healthcare Institute of Rheumatology, 2016 FCA 215 at para. 79, [2016] F.C.J. No. 943). In the case at bar, the Judge identified the correct legal framework for a finding of relevance in the specific context of cross-examination of affidavits, and identified the proper governing authority, being the Federal Court’s decision of Merck Frosst (as affirmed by this Court). The CRA argues that the Judge failed to fully consider the question of formal and legal relevance, and applied an over-broad test for relevance. It becomes clear from its submissions, however, that it simply disagrees with how the criteria for a finding of relevance was applied to the set of facts before the Judge.

[8]               The CRA could have taken the position from the outset that the treatment of other taxpayers is never relevant to its discretionary remission determinations. In reviewing the affidavits tendered by the CRA, however, and especially Exhibit “A” of Mr. Trueman’s affidavit, it appears that the CRA did in fact consider the financial circumstances of other employees in making its determination regarding the respondent. While I accept that, generally speaking, the CRA’s treatment of other taxpayers is irrelevant when assessing whether to grant discretionary relief to a given individual, the Judge could reasonably infer in the particular circumstances of this case that the CRA’s decision not to recommend remission was premised, at least in part, on the respondent not being in similar circumstances as the SDL employees. Such being the case, the Judge’s finding that the disputed questions were formally and legally relevant and went to the very reasonableness of the CRA’s decision, was open to him.

[9]               The Attorney General submitted that the issue as to whether the financial circumstances of Mr. Fink are similar to those of the SDL employees “begins and ends in this case with whether the respondent participated in a stock purchase plan or not” (Appellant’s Memorandum at para. 52). On that reasoning, there would be no need to disclose the personal financial circumstances of those employees, since the similarity of Mr. Fink’s stock option plan with the SDL employees’ stock purchase plan could be assessed simply by comparing the two schemes. This restrictive interpretation may well be CRA’s position, but it did not bind the Judge. Indeed, it would appear from Mr. Trueman’s letter dated October 28, 2015, that other circumstances are taken into consideration to determine whether a taxpayer is in the same situation as SDL employees. After noting that the Minister of National Revenue had indicated that the same treatment would be provided to any taxpayer with the same circumstances than the SDL employees, Mr. Trueman stated:

An individual is considered to be in the same circumstances if he or she participated in a stock purchase plan offered by their employer and the purchase price of the shares was lower than the fair market value of the shares at the time the individual signed up for the stock purchase plan. In addition, an individual’s financial circumstances would also be taken into consideration as well as their overall participation in the stock purchase plan.

(emphasis in original)

[10]           Bearing in mind that it will be for the application judge to determine whether a stock purchase plan and a stock option plan amount to the “same circumstances”, and that Mrs. Laplante did swear that she “consulted the decisions taken in other taxpayers’ files” (Affidavit dated February 17, 2016 at para. 28) and “took a random sampling of information from a CRA file drawer containing the SDL former employee information” (Affidavit dated July 5, 2016 at para. 7), I am of the view that the Judge did not make a reviewable error in finding that the questions put to the affiants on cross-examination were legally relevant. The answers to those questions may clearly be of assistance to the respondent in trying to convince the application judge that he deserves to be treated the same way SDL employees have been treated in the past.

[11]           On the statutory interpretation question, the CRA urged a narrow reading of paragraph 241(3)(b) of the ITA and invited this Court to find that it has no application to the case at hand since remission orders, being an exercise of discretion under a separate piece of legislation (the FAA), lack the requisite nexus to the administration and enforcement of the ITA. Such a restrictive approach is not supported by the decision of the Supreme Court of Canada in Slattery (Trustee of) v. Slattery, [1993] 3 S.C.R. 430, 106 D.L.R. (4th) 212, upon which the Judge relied. This case stands for the proposition that a broad view must be adopted in determining whether a proposed disclosure is in respect of proceedings relating to the administration or enforcement of the ITA. As the outcome of a remission request ultimately affects an individual’s tax liability, it follows that such a proceeding is “connected” or “in relation to” the administration or enforcement of the ITA. Accordingly, the Judge made no reviewable error and correctly interpreted the above-mentioned provision of the ITA.

[12]           It goes without saying that any information disclosed is subject to the implied undertaking rule, which means that the information must be held in confidence by the parties within these proceedings.

As a consequence the appeal was dismissed with costs.