Apr 15, 2025
Introduction: Tax Litigation & Examination for Discovery
The Tax Court of Canada, established in 1983 under the Tax Court of Canada Act, serves as a federal court that adjudicates disputes arising from tax matters between individuals or companies and the Canada Revenue Agency. The court’s jurisdiction primarily encompasses appeals related to income tax, GST/HST, and employment insurance.
Canadian tax litigation involves numerous procedural rules governing almost every aspect of the lawsuit, including the examination-for-discovery process. In Whistler Blackcomb Holdings Inc v. The King, 2025 TCC 13, the Tax Court of Canada rendered a decision addressing a procedural matter concerning the examination-for-discovery phase of Canadian tax litigation.
The core of the decision revolved around the Canada Revenue Agency’s unsuccessful motion seeking to compel the corporate taxpayer to nominate a new representative for examination for discovery. The court’s ruling underscores the principle that, while a party’s nominee must be knowledgeable and make reasonable efforts to become informed, the examining party is not entitled to a “perfect” witness for the purpose of an examination for discovery. Moreover, before asking the court to appoint an alternative nominee, parties must first pursue the procedural remedies under the Tax Court of Canada Rules (General Procedure).
The Whistler decision illustrates one of the many procedural complications that may arise for Canadian taxpayers during tax litigation, and it underscores the importance of engaging a highly skilled Canadian tax litigation lawyer.
After discussing the examination-for-discovery process, this article analyzes the Tax Court of Canada’s decision in Whistler Blackcomb Holdings Inc v. The King, 2025 TCC 13. It then concludes by providing pro tax tips from our esteemed Canadian tax litigation lawyers on the implications of the Whistler decision and on securing effective representation during the tax litigation process.
What Is Examination for Discovery?
Examination for discovery is a pre-trial procedure in tax litigation (and civil litigation) where each party may subject the opposing party to questioning so that the parties may gather relevant facts and evidence before the actual trial takes place.
Typically, during the examination for discovery, the taxpayer’s Canadian tax litigation lawyer will question a CRA employee, such as a tax auditor, appeals officer, or tax collector, who the Canada Revenue Agency has nominated to give answers on behalf of the CRA, and the CRA’s Canadian tax litigation lawyer will question the taxpayer who initiated the tax appeal.
In the context of tax litigation before the Tax Court of Canada, the Tax Court of Canada Rules (General Procedure) govern the process for examination for discovery. Subsection 93(2) of the Rules specifically addresses the examination of a corporation. The provision demands that the corporation choose a knowledgeable current or former officer, director, member, or employee to answer questions on the corporation’s behalf. The rule also permits the examining party to ask the Tax Court to order an alternate nominee if the examining party “is not satisfied” with the initial nominee.
Whistler Blackcomb Holdings Inc v The King, 2025 TCC 13
The case of Whistler Blackcomb Holdings Inc v The King originated from a tax appeal by Whistler Blackcomb Holdings Inc. The taxpayer contested the Canada Revenue Agency’s denial of input tax credits (ITCs).
These input tax credits pertained to the GST/HST that the corporate taxpayer had paid on advisory service fees in connection with potential offers to purchase the corporation. The CRA denied the ITCs because, according to the CRA, the corporation didn’t obtain the advisory services for the purpose of making taxable supplies or for consumption, use, or supply in the course of commercial activities.
This underlying tax dispute led to litigation in the Tax Court of Canada, and during the pre-trial litigation stages, the Canada Revenue Agency disputed the nominee that the taxpayer had selected for the examination for discovery.
In particular, the CRA’s Canadian tax litigation lawyer at the Department of Justice expressed dissatisfaction with Ms. Toni Marie Mitchell, the individual selected by Whistler Blackcomb Holdings Inc. as its nominee for examination for discovery. Ms. Mitchell was allegedly unable to answer approximately twenty questions during her examination for discovery.
As a result, the CRA’s Canadian tax litigation lawyer filed a motion requesting the Tax Court to order the taxpayer to nominate a new individual. During the motion hearing, the Canada Revenue Agency argued that Ms. Mitchell lacked the requisite knowledge to adequately represent the corporation’s position during the examination for discovery.
The Tax Court of Canada ultimately dismissed the Canada Revenue Agency’s motion for a new nominee. In reaching this decision, the court drew upon the principles established in previous Tax Court cases, namely Imperial Tobacco Canada Limited v. The Queen, 2012 TCC 135, and Husky Energy Inc. v. The Queen, 2017-1252(IT)G (oral reasons delivered October 11, 2019).
In particular, the court distinguished Ms. Mitchell’s conduct from the conduct in Husky Energy, which involved the taxpayer’s overt attempt to impede the discovery process by deliberately limiting the disclosure of information. After reviewing the transcript of Ms. Mitchell’s testimony during the examination, the court concluded that Ms. Mitchell didn’t exhibit a similar pattern of obstruction.
The Tax Court reiterated several key principles governing the selection and adequacy of corporate nominees for examination for discovery. The court emphasized that, to succeed on a motion seeking a new nominee, the moving party must demonstrate two conditions:
- The initially selected nominee lacked personal knowledge of the relevant facts; and
- The nominee was unwilling to make inquiries of individuals within the organization who possessed such knowledge.
Furthermore, the court clarified that the mere fact that the nominee might not be the most knowledgeable person within the corporation, or even the best person to examine from the examining party’s perspective, does not constitute a valid basis for an application under subsection 93(2) of the Tax Court Rules.
The primary role of the nominee is to represent the corporate entity involved in the litigation. When a nominee’s knowledge is found to be lacking on certain points, the appropriate recourse for the examining party is to seek an undertaking from the nominee to obtain the necessary information or documentation.
The court also noted that the inability of a nominee to locate specific documents doesn’t automatically entitle the examining party to select a second nominee who the examining party believes possesses greater personal knowledge of the relevant facts.
The court also drew attention to the conduct of the CRA’s Canadian tax litigation lawyer during Ms. Mitchell’s examination. The transcript of the examination revealed that the CRA’s lawyer concluded the questioning without adjourning the session or requesting that Ms. Mitchell take steps to become better informed about the matters where she lacked knowledge.
The court pointed out that subsection 95(2) of the Tax Court of Canada Rules (General Procedure) typically requires such an adjournment to allow the nominee to gather the necessary information. This procedural oversight on the part of the Canada Revenue Agency’s lawyer contributed to the court’s decision to dismiss the CRA’s motion.
Pro Tax Tips: No Entitlement to a “Perfect” Witness & The Need for Effective Representation by an Expert Canadian Tax-Litigation Lawyer
The Tax Court’s decision in Whistler Blackcomb Holdings Inc. carries several important implications for tax litigation in Canada. A key takeaway is that, during tax litigation, neither party has a right to demand a “perfect” nominee for examination for discovery.
While nominees are expected to make reasonable efforts to inform themselves about the relevant facts and must not intentionally frustrate the discovery process, the onus also lies on the examining party to effectively use the procedural tools available under the Tax Court of Canada Rules (General Procedure).
This includes (amongst other tools) seeking undertakings from the opposing party and even adjourning the examination so that the other party’s nominee may become better informed. A court will generally only permit the examination of an additional nominee in circumstances where the initial nominee fails to take reasonable steps to acquire the necessary knowledge or attempts to obstruct the discovery process.
The Tax Court of Canada’s decision in Whistler Blackcomb Holdings Inc v The King, 2025 TCC 13, reinforces the established principles governing the examination-for-discovery process, specifically, those concerning the selection and adequacy of corporate nominees.
The court’s dismissal of the Canada Revenue Agency’s motion underscores that, while nominees must be knowledgeable and willing to become informed, the examining party does not have a right to a “perfect” witness and must invoke the procedural mechanisms available under the Tax Court of Canada Rules (General Procedure) before seeking an order for another representative. This decision should remind Canadian taxpayers of the importance of understanding and adhering to the specific procedural rules and judicial precedents that govern tax litigation in Canada.
Canadian tax litigation involves numerous procedural rules governing almost every aspect of the lawsuit, including specific deadlines, acceptable evidence, settlement negotiations, and the contents of pleadings. What’s more, the substantive tax issues are often themselves very complicated, involving intricate, sometimes convoluted tax legislation.
As a result, Canadian taxpayers who represent themselves will typically be at a heavy disadvantage against the Canada Revenue Agency’s Canadian tax litigation lawyers at the Department of Justice.
Instead of taking your chances on your own, consult one of our expert Canadian tax litigation lawyers who can simplify the tax litigation process, review your evidence, prepare you for depositions, devise a litigation strategy for your case, and represent you before the Tax Court of Canada during the hearing or settle your appeal before the hearing by negotiating a settlement with the Canadian tax litigation lawyer representing the Canada Revenue Agency.
FREQUENTLY ASKED QUESTIONS
What is an examination for discovery?
Examination for discovery is a pre-trial procedure in tax litigation where each party may subject the opposing party to questioning so that the parties may gather relevant facts and evidence before the actual trial takes place.
Typically, during the examination for discovery, the taxpayer’s Canadian tax litigation lawyer will question a CRA employee, such as a tax auditor, appeals officer, or tax collector, who the Canada Revenue Agency has nominated to give answers on behalf of the CRA, and the CRA’s Canadian tax litigation lawyer will question the taxpayer who initiated the tax appeal.
I recently received a notice of reassessment, and I want to dispute this tax reassessment in the Tax Court of Canada. Why should I hire a Canadian tax litigation lawyer? Isn’t tax litigation something that I can handle myself?
Canadian tax litigation involves numerous procedural rules governing almost every aspect of the lawsuit, including specific deadlines, acceptable evidence, settlement negotiations, and the contents of pleadings.
What’s more, the substantive tax issues are often themselves very complicated, involving intricate, sometimes convoluted tax legislation. As a result, Canadian taxpayers who represent themselves will typically be at a heavy disadvantage against the Canada Revenue Agency’s Canadian tax litigation lawyers at the Department of Justice.
Instead of taking your chances on your own, consult one of our expert Canadian tax litigation lawyers who can simplify the tax litigation process, review your evidence, prepare you for depositions, devise a litigation strategy for your case, and represent you before the Tax Court of Canada during the hearing or settle your appeal before the hearing by negotiating a settlement with the Canadian tax litigation lawyer representing the Canada Revenue Agency.
DISCLAIMER: This article just provides broad information. It is only up to date as of the posting date. It has not been updated and may be out of date. It does not give legal advice and should not be relied on. Every tax scenario is unique to its circumstances and will differ from the instances described in the article. If you have specific legal questions, you should seek the advice of a Canadian tax lawyer.
