The Superior Plus Income Fund (the "Fund") effectively converted (in accordance with the distribution method contemplated under s. 107(3.1)) into a public corporation using an existing corporation (the taxpayer, a.k.a. "Old Ballard") with non-capital losses and other tax attributes as the new corporate vehicle - rather than using a new corporation. The transactions were designed to ensure that there was no acquisition of control of the taxpayer (which would have resulted in a streaming of its losses). In particular, although the unitholders of the fund became shareholders of the taxpayer, this was considered not to entail an acquisition of control of the taxpayer by a group of persons. Subsequent to the conversion, s. 256(7)(c.1) was introduced, which would have deemed there to be an acquisition of control of the taxpayer, if it had had retroactive effect (which it did not). The Minister disallowed the use of the tax attributes, on the basis that there in fact had been an acquisition of control of the taxpayer or, alternatively, under s. 245(2) (i.e., GAAR).
At the discovery stage, the taxpayer moved to compel the Minister to answer various questions, or to produce documents, or previously redacted portions of documents previously requested under the Access to Information Act, which CRA had resisted principally on the grounds of irrelevance. The questions included whether the Department of Finance considered making the 2010 SIFT amendments retroactive, why it had changed its explanatory notes to say that s. 256(7)(c.1) "clarified" rather than "extended" the change-of-control rules and whether the Attorney General agreed that initially the policy choice of the SIFT conversion rules was to allow the use of existing corporations. Requested documents included GAAR Committee minutes including comments of individual members (whereas CRA had provided only the final Recommendation of the Committee), and correspondence between CRA and Finance (resulting in the drafting of s. 256(7)(c.1))and between the GAAR Committee and Aggressive Tax Planning, with the questions seeking particulars on the questions posed above and policy considerations brought to bear on this file, and respecting what initially may have been diffidence on the part of Finance as to how to proceed, if at all.
Following the reasons in Birchcliff, Hogan J in the Tax Court granted the taxpayer's motion in the main (including all the above-mentioned questions and documents).
In the Court of Appeal, Noël CJ stated (at para. 8):
As was held…in Lehigh Cement Ltd. v. R., 2011 FCA 120… information pertaining to the policy of the Act, even where it is not taxpayer specific, can be relevant on discovery. …