A-274-84
The Queen (Appellant)
v.
The Capitol Life Insurance Company (Respon-
dent)
INDEXED AS: CAPITOL LIFE INSURANCE CO. v. R. (F.C.A.)
Court of Appeal, Urie, Mahoney and Stone JJ.—
Ottawa, February 25, 26, 27, 28 and March 7,
1986.
Practice — Evidence — Hearsay — Appeal from Trial
Division decision respondent not carrying on business in
Canada — Trial Judge excluding evidence obtained from
affiliated company and put to designated officer during
examination for discovery, answers to fulfil respondent's
undertakings given at discovery, and officer's answers concern
ing affiliated company's practices — Error in law, but no
prejudice to appellant — In absence of objection at examina
tion for discovery of corporate officer, information obtained
from affiliated corporation presumed within knowledge of
corporate party and not hearsay — Fiction that corporate veil
inhibiting flow of information between affiliated companies.
Practice — Evidence — Expert evidence as to foreign law —
No error in accepting evidence of Colorado attorney as to
Colorado law — Westgate v. Harris, [1929j 4 D.L.R. 643
(Ont. C.A.) explained — Witness' conclusions supported by
letter of opinion stating facts and assumptions upon which
conclusions based, appending Colorado statute and citing
numerous decisions of United States courts — Weight to be
given expert evidence matter for trier of fact — No error in
findings of fact based on evidence — Federal Court Rules,
C.R.C., c. 663, R. 482.
Income tax — Non-residents — Appeal from Trial Division
decision respondent not carrying on business in Canada and
not taxable — Respondent licensed in Canada, but not opening
offices, appointing sales agents or soliciting business in
Canada — Trial Judge not erring in findings of fact or in
applying law thereto — Appeal dismissed — Income Tax Act,
S.C. 1970-71-72, c. 63 — The Canada-United States of
America Tax Convention Act, 1943, S.C. 1943-44, c. 21 —
Foreign Insurance Companies Act, R.S.C. 1970, c. 1-16.
CASES JUDICIALLY CONSIDERED
DISTINGUISHED:
Westgate v. Harris, [1929] 4 D.L.R. 643 (Ont. C.A.).
REFERRED TO:
Monarch Marking Systems, Inc. v. Esselte Meto Ltd.,
[1984] 1 F.C. 641 (T.D.).
COUNSEL:
L. P. Chambers, Q.C. and Robert W. McMe-
chan for appellant.
Guy Du Pont for respondent.
SOLICITORS:
Deputy Attorney General of Canada for
appellant.
Verchère, Noël & Eddy, Montreal, for
respondent.
The following are the reasons for judgment
rendered in English by
MAHONEY J.: This is an appeal from a decision
of the Trial Division, (1984), 84 DTC 6087, which
found that the respondent, a non-resident of
Canada, had not carried on business in Canada in
1976 and that, therefore, it was not taxable under
the Income Tax Act [S.C. 1970-71-72, c. 63]. In
view of that finding, the learned Trial Judge did
not have to consider whether the respondent's 1976
commercial profits were exempt from tax by virtue
of The Canada-United States of America Tax
Convention Act, 1943, S.C. 1943-44, c. 21. The
further question of the allocation of those commer
cial profits between Canada and the United States
was not put in issue.
The respondent was, in 1976, an insurance com
pany, incorporated in Colorado, licensed in
Canada under the Foreign Insurance Companies
Act, R.S.C. 1970, c. I-16, and licensed in all
provinces except Newfoundland and Prince
Edward Island. Although licensed, it made a con
scious, documented decision not to open offices,
appoint sales agents or otherwise solicit business in
Canada. It was among the 600-odd companies
subsidiary of Gulf & Western Industries Inc. Six
of those subsidiaries, including Associates Accept
ance Company Limited, hereinafter "Associates",
were Canadian companies. The respondent had
issued five group contracts of insurance under
which Canadian residents were insured prior to the
end of 1976. Three of these were characterized by
the Trial Judge as "life and health employer-
employee policies" issued to affiliated companies
insuring their employees and those of their subsidi
aries. The circumstances of these three policies
were not specifically raised by the appellant in
support of this appeal and they will not be specifi
cally referred to again. The other two policies were
creditor's group policies issued to Associates.
Policy GR-67-205 applied to loans made by
Associates which were not secured by real estate
mortgages. The borrower had the option of cover
age by this policy to a limit of $20,000 in case of
death and $250 per month while disabled by sick
ness or injury from earning income. All benefits
were payable to Associates on account of the loan.
The cost of the insurance was recovered from the
borrower by a separate charge identified in the
loan application. Policy GA-67-269 applied to real
estate secured loans. The limits were the same.
The coverage was not optional nor the charge
separate and identifiable. No doubt, in the end, the
borrower, not Associates, paid.
Aside from the basic proposition that the
learned Trial Judge erred in his findings of fact, to
which I shall return, two errors of law are asserted.
Firstly, the learned Trial Judge is said to have
erred in excluding certain evidence which the
appellant sought to introduce. Secondly, he is said
to have erred in receiving and relying on certain
opinion evidence as to the law of Colorado.
The evidence said to have been wrongly exclud
ed was all relevant to the appellant's contention
that Associates was the respondent's agent in the
sale of insurance to its borrowers. The first catego
ry, Exhibits D-218 to D-223 inclusive, was copies
of "loan sets", the documents used by Associates'
lending officers in dealing with loan applications.
They had been obtained from Associates by Reve-
nue Canada personnel in 1979 and had been put to
the officer designated by the respondent during the
course of his examination for discovery. The
second category of evidence excluded was answers
provided to fulfil undertakings given on behalf of
the respondent during the examination for discov
ery. Again, the information for these answers was
obtained from Associates, not the respondent and
it related to the loan sets. The third category of
evidence excluded was the officer's answers to
questions as to Associates' practices in dealing
with the charges to borrowers for insurance cover
age and payment of premiums to the respondent.
The examination for discovery had proceeded on
the usual basis that the officer produced would
obtain information as might be requested and that
his answers would be binding on the respondent.
The evidence was excluded by the learned Trial
Judge on the basis that it was hearsay in so far as
the respondent and the officer were concerned
although no objection had been taken to providing
it during the discovery. The learned Trial Judge
did offer the appellant the opportunity to call a
witness from Associates who might have testified
first-hand as to its documents and practices, but
that offer was declined.
In my respectful opinion, the learned Trial
Judge erred in excluding the evidence in the cir
cumstances. A party examining a corporate officer
on discovery is entitled, at least in the absence of
objection taken at the time, to proceed to trial on
the basis that relevant information obtained from
an affiliated corporation is within the knowledge
of the corporate party and will not be objected to
or rejected as hearsay at trial. To maintain the
fiction of an impenetrable corporate veil inhibiting
the flow of authentic information between affiliat
ed companies would be to ignore commercial real
ity, c.f. Monarch Marking Systems, Inc. v. Esselte
Meto Ltd., [1984] 1 F.C. 641 (T.D.).
That said, the error does not, in my opinion,
provide a ground for reversing the judgment
below. The documents and answers excluded were
all before this Court on appeal. Exhibit D-238,
which was admitted, is a loan set for use in Nova
Scotia. Exhibit D-238 appears to contain all of the
information contained in Exhibits D-218 to D-223
upon which appellant's counsel said he wished to
rely. Nothing in the answers excluded proves, or
adds significantly to the evidence that was admit
ted tending to prove, that Associates was acting on
behalf of the respondent, as opposed to acting on
its own behalf, in dealing with the borrowers or the
charges to the borrowers for coverage. The appel
lant was not, in my view, prejudiced by the exclu
sion of the evidence. The result would not have
been otherwise.
The other error in law alleged is that expert
evidence as to the law of Colorado was admitted.
The expert witness, a Colorado attorney, was
accepted as an expert as to Colorado law without
objection. The statement of his evidence in chief,
duly filed and served pursuant to Rule 482 [Fed-
eral Court Rules, C.R.C., c. 663], stated the
following conclusions:
(a) A Colorado court, presented with this case, would apply
Colorado substantive law in addressing the legal issues raised
in this case;
(b) An Indiana court, presented with this case, would apply
Colorado substantive law in addressing the legal issues raised
in this case;
(c) Under Colorado law, Associates Acceptance Company
Limited ("Associates") was the "insured" party under Group
Policy No. 67-205 (including all addendums and amend
ments) and under Group Policy No. 67-269 (including all
addendums and amendments) issued by The Capitol Life
Insurance Company ("Capitol") to Associates;
(d) Under Colorado law, the borrowers of Associates had no
rights or claims against Capitol arising out of or under these
Group Policies; and
(e) Under Colorado law, no agency relationship existed
between Capital and Associates with respect to these Group
Policies or in connection with any transactions relating to
these Policies.
A letter of opinion, stating the facts and assump
tions upon which the conclusions were based,
appending the Colorado statute and citing numer-
ous decisions of United States courts was exhibited
to the statement.
I would say, immediately and parenthetically,
that the attorney was not qualified as an expert as
to Indiana law and was not qualified to express the
opinion in paragraph (b). Nothing turns on that.
The learned Trial Judge did not rely on the
opinion expressed in paragraph (a) in concluding
that the applicable law was the law of Colorado.
That conclusion was based on his consideration of
the law of Canada and the facts he found on the
evidence. See page 6096 and following of the
report previously cited. He relied on paragraph (a)
only for the conclusion that a Colorado court,
hearing the case, would apply the substantive law
of Colorado.
The appellant's argument, then, is principally
directed to the conclusions expressed in para
graphs (c), (d) and (e). As I understand that
argument, because the courts of Colorado had not
decided the precise questions upon which the wit
ness expressed his opinion, his conclusions were
not evidence as to the fact of what was the law of
Colorado but merely his opinion as to what it
would be if the Colorado courts were to decide
them.
The appellant relies on a decision of the Ontario
Court of Appeal, Westgate v. Harris, [1929] 4
D.L.R. 643, per Hodgins J.A., at page 647:
I think that evidence of the kind I have quoted is wanting in
legal precision and lacks any reference to authority on the
question at issue, and that the opinion expressed is quite beside
the mark, being based not on Canadian law but on that of the
United States, and attempts to usurp the function of the trial
Judge. The "opinion" of a lawyer alone does not prove the
law—he must be in a position to testify that such is in fact the
law. [My emphasis.]
The appellant completely ignores the significance
of the word "alone" in the last sentence. As is
plain from what precedes the last sentence and the
recitation of the evidence in issue, which I have not
found it necessary to set out, the witness in that
case, in the course of oral examination, expressed a
conclusion without reasons or authorities support
ing it. In context, the court has said no more than
what is trite law: the weight to be given expert
evidence is a matter for the trier of fact and an
expert's conclusion which is not appropriately
explained and supported may properly be given no
weight at all. A lawyer's bare opinion, without
supporting and explanatory references to legisla
tion and decisions, is no more likely to prove
foreign law to the satisfaction of the court than,
for example, the bare opinion of a land appraiser,
without reference to comparable properties and
transactions, will satisfy it as to the value of a
parcel of land.
It is unfortunate that, taken out of its factual
context, the last sentence has drawn Wigmore's
pejorative attention, vid. Wigmore on Evidence, 7
Wigmore, Evidence § 1953, footnote 1. It would,
indeed, be astonishing if foreign law could not be
established as a matter of fact by the opinion of a
qualified lawyer. Westgate v. Harris is not author
ity for that proposition. The learned Trial Judge
did not err in accepting the expert evidence as to
the law of Colorado.
The appellant's attack on the judgment of the
learned Trial Judge consisted of a selective review
of the evidence with a view to persuading us that
he had erred in his material findings of fact. The
respondent, in kind, sought to demonstrate that the
evidence did support the findings. It is true that
there is no evident issue of credibility here and
that we are probably in as good a position as the
Trial Judge to make the necessary findings of fact.
An appellate court is not, however, even in that
circumstance, entitled to substitute its views for
those of the Trial Judge simply because it would
have concluded differently; the appellate court
must conclude that he was wrong.
I am not persuaded that the learned Trial Judge
erred in his findings of fact based on the evidence
nor that he overlooked any evidence material to his
decision. In my opinion, he correctly applied the
law to the facts.
I would dismiss this appeal with costs.
URIE J.: I agree.
STONE J.: I agree.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.