Documents, Discovery and Disclosure in a Tax Court Appeal in Canada

In a general procedure appeal at the Tax Court of Canada, both sides must share information before the hearing. This avoids surprises and narrows the real issues, so the hearing can focus on what the two sides actually disagree about.

Two main tools are the list of documents and the examination for discovery. Here is how they work in plain terms, how they connect to the rest of the appeal, and what you can do now to be ready.

This article covers Canadian federal tax law, which applies in every province.

Where discovery fits

A general procedure appeal is started by filing an originating document in the Registry. The Crown must file its reply within 60 days after service of the notice of appeal. Any answer to the reply is filed within thirty days after service of the reply.

The reply matters because it sets out, among other things, the facts admitted and denied and the issues to be decided. Allegations of fact in your notice of appeal that are not denied in the reply are deemed admitted.

Discovery comes after these pleadings. Each party then files and serves a list of documents within thirty days following the closing of the pleadings. The Court may extend or abridge any time in the Rules on just terms, but you should not plan on that. Treat the dates as firm.

The list of documents

The list identifies the documents each side has that relate to the case. A party may apply for an order requiring a full list of relevant documents.

In plain terms, this means you should not hold back records that bear on the issues in dispute. Building the list is easier if you start collecting early, well before the deadline.

• Gather returns, notices of assessment and correspondence with the CRA.
• Collect bank, business and accounting records tied to the disputed items.
• Keep originals safe and work from copies.
• Do not discard anything that could be relevant.

Examination for discovery

On an examination for discovery, the person examined must answer proper questions relevant to a matter in issue. If an earlier answer turns out to be wrong or incomplete, they must notify the other parties.

At the hearing, a party may read the adverse party's discovery evidence into its own case. That is why your answers matter well beyond the questioning itself. Answer carefully and truthfully, and prepare in advance.

An individual may appear in person or be represented by counsel in the general procedure. Whichever way you go, it helps to review your documents and the Crown's reply before you are questioned.

Privacy and confidentiality

A hearing may be held in camera on a party's application if the circumstances of the case justify it. A confidentiality order may be sought by motion under Rule 16.1 of the General Procedure Rules, and filers must redact SINs, business numbers and full birth dates.

Whether your own situation justifies a confidentiality request depends on the facts, so it is worth confirming with a lawyer.

Discovery, settlement and costs

What comes out in discovery often shapes whether a case settles. With the taxpayer's written consent, the Minister may at any time reassess to dispose of an appeal, which is the basis for settling a filed appeal.

Costs can also be affected. The Court can order either party to pay some of the other party's legal costs, and it considers factors including written settlement offers. A written offer of settlement can increase costs recovery to substantial indemnity costs (80% of solicitor-and-client costs) after the offer date if the judgment is as favourable. The offer must be served at least 30 days after pleadings close and at least 90 days before the hearing, and not withdrawn.

What to do next

• Calendar thirty days from the close of the pleadings for your list of documents.
• Sort your records by issue so the list is complete and organized.
• Prepare for questioning by reviewing the reply and the Crown's assumptions.
• Redact SINs, business numbers and full birth dates before filing.
• Talk to a tax lawyer about what counts as relevant and how to prepare.

Frequently asked questions