Tax Court

Quoted in the Law Times about Tax Court Discovery Procedures

Taking questions under advisement must stop

A Tax Court of Canada judge has issued a strong rejection of taking questions “under advisement” in examinations for discovery. In Burlington Resources Finance Co. v. the Queen, Justice Johanne D’Auray ordered the applicant to re-attend an examination for discovery to answer certain questions they had refused to answer or only provided part answers for.

BY Alex Robinson 21 Aug 2017

A Tax Court of Canada judge has issued a strong rejection of taking questions “under advisement” in examinations for discovery.

In Burlington Resources Finance Co. v. the Queen, Justice Johanne D’Auray ordered the applicant to re-attend an examination for discovery to answer certain questions they had refused to answer or only provided part answers for.

In the original examination, Burlington Resources Finance Co. took 1,700 questions under advisement — a common practice in Tax Court, which allows parties to delay answering a question when they are unsure if they want to formally refuse it.

There were 4,122 questions in total and Burlington Resources later refused to answer 1,200 of the questions it had taken under advisement.

In the decision, D’Auray rejected the practice, which lawyers say can be useful when used in moderation.

“In my view, the practice of using the quasi-objection ‘under advisement’ needs to stop,” she wrote in the decision.

Lawyers say that most practitioners will only take questions under advisement when they feel they need to, but they say the case is an illustration of what can happen when the tool is abused.

Leigh Taylor, a tax lawyer with Leigh Somerville Taylor PC in Toronto, says most practitioners will only use it when they want some genuine time to reflect on the answer.

“When it’s used judiciously, it’s appropriate. But in my experience, it’s typically only where you’re asking for a specific admission that hasn’t been considered before or when you’re asking for a position on law,” says Taylor, who was not involved in the case.

She says going forward practitioners may be more tepid about taking questions under advisement.

The underlying matter concerned an appeal by Burlington Resources Finance Co. in a transfer pricing case.

The federal government brought a motion asking for an order that Burlington Resources return to a discovery examination as there were disputed questions that were relevant to the matters at issue. Burlington opposed the motion, saying all proper questions had been fully answered.

The Crown claimed that refusing to answer questions on the basis they were being taken “under advisement” was a misuse of the examination for discovery process.

The government argued that by taking so many questions under advisement Burlington Resources was ignoring s. 107 of the court’s rules, which require parties to give reasons when they refuse to answer a question.

Taking these questions also deprived the Crown the opportunity to reformulate questions, they said.

D’Auray agreed.

She noted that, according to the rules, a nominee must either answer the question, refuse to do so and explain why or take “an undertaking” if they do not know the answer.

“The ‘under advisement’ quasi-objection is often a tactic used to gain time to reflect on which basis the question will be refused, without the party having to explain, at the time of discovery, why such question was refused,” D’Auray said.

“It deprives the party asking the question of the opportunity to rephrase the question. In my view, taking a question under advisement amounts to a ‘refusal.’”

Sunita Doobay, a tax lawyer with TaxChambers LLP who was not involved in the case, says the court’s rules need to be revised in order to deal with D’Auray’s concerns.

“Until the rules are revised, I believe there is little to refrain a practitioner from ‘buying time’ for his [or] her client to decide whether to answer the question posed to them at discovery for a matter that is being appealed before the Tax Court of Canada,” she says.

D’Auray also noted that there can be cost consequences when the tactic of taking questions under advisement without explanation “hinders the examination.”

Brandon Siegal, a tax lawyer and principal of Siegal Tax Law, says he still plans to use under advisements from time to time but with the understanding that government lawyers might push back by citing this decision.

“I certainly will use it a lot more sparingly because at the end of the day as the court has said, an under advisement is a refusal, and so you have to look at it as such. And you need to have the proper reasons for it,” says Siegal, who was not involved in the case.

The Federal Court banned taking questions under advisement in 2015, and the Tax Court could be very well be headed in that same direction, Taylor says.

“If this practice isn’t curtailed now through judicial commentary, it’s equally possible that the Tax Court will follow the Federal Court’s notice to the profession by saying no further questions taken under advisement,” she says.

The lawyers who represented the applicant in the proceedings declined to comment, as did the lawyers representing the federal government.

Presenting for the Advocate's Society

Brandon Siegal will be speaking on strategies for Tax Litigation: Rules, Motions and Oral Advocacy at The Advocates' Society Education Centre on December 1, 2015.

Tax Litigation: Rules, Motions and Oral Advocacy

This specialized program offers an exceptional opportunity for tax lawyers at all levels to convene and enhance their advocacy and litigation skills.