Tax Treaty Case: MIL (Investments) S.A. v. The Queen, 2006 TCC 208

By Robert Robillard - 28 January 2015

This blogpost originally appeared on

In MIL (Investments) S.A. v. The Queen, 2006 TCC 208 (CanLII):

“[1] This is a pre-trial motion in which the respondent seeks orders to compel answers to questions asked on discovery and to compel disclosure of a document that the appellant opposes on the ground of solicitor-client privilege.

[2] The appellant, a non-resident of Canada, has been assessed tax under the Income Tax Act in respect of a capital gain in the amount of $425,853,942 that was realized on the disposition of shares in the capital stock of Diamond Fields Resources Inc. The appellant claims exemption from tax under the provisions of the Canada-Luxembourg Income Tax Convention, 1989. The Minister has disallowed the exemption, relying in part on the general anti-avoidance rule.”

The respondent (the CRA) wishes to deepen its understanding of certain matters as it pertains to the taxpayer’s affairs to which the appellant “resists answering on grounds that they either have been fully answered or that they represent a new line of inquiry” (par. 5):

“[10]  The questions to which the respondent seeks answers relate to three lines of inquiry:

1. details of the work done by, and remuneration received by, two directors who work out of the appellant’s Luxembourg office;

2. details as to the use of the proceeds received on the disposition of the shares of Diamond Fields; and

3. details about a financial statement of a related company (Gondwana) that received a loan from the appellant.”

As for the matter at stake in this decision, the Court explains:

“[12] The principles to be applied in considering applications to the Court for further discoveries were recently discussed in Baxter v. The Queen, 2004 D.T.C. 3497 (T.C.C.). After reviewing a number of judicial decisions, Bowman C.J. concluded that a liberal approach should be taken and referred to the following passage from Montana Band v. R. (1999), 1999 CanLII 9366 (FC), [2000] 1 F.C. 267 (Fed. T.D.) at para. 10:

The general purpose of examination for discovery is to render the trial process fairer and more efficient by allowing each party to inform itself fully prior to trial of the precise nature of all other parties’ positions so as to define fully the issues between them. It is in the interest of justice that each party should be as well informed as possible about the positions of the other parties and should not be put at a disadvantage by being taken by surprise at trial. It is sound policy for the Court to adopt a liberal approach to the scope of questioning on discovery since any error on the side of allowing questions may always be corrected by the trial judge who retains the ultimate mastery over all matters relating to admissibility of evidence; on the other hand any error which unduly restricts the scope of discovery may lead to serious problems or even injustice at trial.”

After reviewing the specific facts of the case, the Court order was rendered as follow:


Upon motion by the respondent,

(a) it is ordered that the appellant present Edmond Van de Kelft, a director of the appellant, in Vancouver, British Columbia for the continuation of examination for discovery in relation to undertakings given at pages 46-47, 92, 118 and 124-126 of the transcript for the examination of Jean Raymond Boulle on November 18, 2005, and that the appellant answer related follow up questions; and

(b) the application for an order compelling the appellant to provide a copy of a planning memorandum is denied.

Costs of this motion shall be in the discretion of the trial judge.”

To see the full tax treaty case click here. Aussi disponible en français ici.

MIL (Investments) S.A. v. The Queen, 2006 TCC 208 (CanLII)

MIL (Investments) S.A. c. La Reine, 2006 CCI 208 (CanLII)

Robert Robillard, CPA, CGA, MBA, M.Sc. Econ.
Transfer Pricing Chief Economist, RBRT Inc.
514-742-8086; robert.robillard “at”

RBRT Inc. is all about transfer pricing. We specialize in transfer pricing, tax treaties and other international tax matters. Our services include transfer pricing documentation (transfer pricing policies and procedures, BEPS and C-doc), transfer pricing dispute resolution, tax treaty matters including double tax relief, tax treaty-based returns and waivers, advanced pricing agreement (APA), value chain management and TP planning, transfer pricing training. The information in this blog post is general information only. Data and information come from sources believed to be reliable but complete accuracy cannot be guaranteed. RBRT Inc. and the author are not responsible or liable for any error, omission or inaccuracy in such information. Readers should seek tax advice and tax counsel from RBRT Inc. as required.