October 07, 2011

Crestbrook Forest Industries Limited (Plaintiff) v. Her Majesty the Queen (Defendant)

91 DTC 5521
Federal Court-Trial Division
September 16, 1991

(Court File No. T-2718-89).

Appeal procedure — Motion by corporate taxpayer for production of sensitive and confidential information obtained by Revenue Canada from other members of same industry for purposes of conducting survey — Confidentiality criteria to be applied in making Order for production — Income Tax Act, S.C. 1970-71-72, c. 63, s. 172.

Revenue Canada had commissioned TM Ltd. to produce a survey of pulp and newsprint pricing discounts and commissions in the Canadian pulp and newsprint industry (“the industry”). At Revenue Canada’s request, a large constituency of that industry had thereupon provided some very confidential and sensitive information on their individual pricing policies, but with assurances from Revenue Canada and TM Ltd. that such information would be protected by the strictest confidentiality. Revenue Canada later used the information contained in TM Ltd.’s published Report to reassess the corporate taxpayer (a member of the industry) for its 1984, 1985 and 1986 taxation years. Such reassessments were predicated on the allegations that the taxpayer’s discounts to its customers were in excess of reasonable pulp sales discounts in the industry and that such excess should be added back to the taxpayer’s income for those years. The taxpayer appealed to the Federal Court-Trial Division and, during the course of its appeal, the Crown refused to produce all of the supporting documents underlying TM LTd.’s Report on the ground that they contained third party information which had been obtained on condition of confidentiality. The taxpayer then applied to the Federal Court-Trial Division for an Order of production of the said documents. When agreement amongst the parties seemed possible, the taxpayer’s motion was withdrawn. When such agreement failed to materialize, the taxpayer brought a second motion for production.

Held: A carefully restricted Order for production should be made. The needs of the taxpayer in its attempts to prove its case had to be balanced with the needs of the intervenors (i.e., the other companies in the industry) to protect the confidentiality of the information which they had voluntarily submitted. Courts faced with this dilemma on previous occasions had simply adopted a policy of damage control. In the instant case, therefore, the best that could be done was to order disclosure, but subject to the strictest possible terms of confidentiality. Counsel for the intervenors had produced such an Order in draft form following an initial hearing of the taxpayer’s second motion and that draft should provide the basis for the final Order. It should be amended, however, to limit such disclosure to four people only (i.e., two counsel and two expert advisors, exclusive of any support staff).