Docket UT94102
Order UT97-1
IN THE MATTER of an appeal by Northern Telecom Limited against a Decision of the Provincial Tax Commissioner dated May 2, 1994.
BEFORE THE COMMISSION
on Tuesday, the 9th day of December, 1997.
Ginger Breedon, Vice-Chair
Deborah MacLellan, Commissioner
Elizabeth MacDonald, Commissioner
Order
Contents
Appearances & Witnesses
Reasons for Order
1. Introduction
2. Discussion & Findings
2.1 Tour of Island Tel Facilities
2.2 Disclosure of Information
2.3 Component Costs
3. Disposition
Order
Appearances & Witnesses
1. For Northern Telecom Limited
Counsel:
Ronald J. Keefe
2. For the Provincial Tax Commissioner
Counsel:
Roger B. Langille, Q.C.
Mary Hennessey, Chief Tax Auditor
3. For the Island Regulatory and Appeals Commission
Counsel:
Thomas A. Matheson
Staff:
Donald G. Sutherland
Director, Technical Services
Heather R. Walker
Recording Secretary
Reasons for Order
1. Introduction
On December 5, 1997, the Commission heard argument from counsel for Northern Telecom Limited (the "Appellant") and Counsel for the Provincial Tax Commissioner (the "Respondent") on the following preliminary issues in this case:
1. whether there will be an inspection tour of the Island Tel premises;
2. whether there will be an ordered disclosure of certain information; and
3. whether there will be an adjournment, if necessary, to allow the Provincial Tax Commissioner to introduce evidence on the issue of component costs.
2. Discussion & Findings
2.1 Tour of Island Tel Facilities
The Appellant has requested that the panel members hearing this case tour the facilities of the Island Telephone Company Limited ("Island Tel") to view the equipment at issue in this appeal. The Appellant notes that, while a videotape of an earlier tour is available to the Commission, two of the three panel members who participated in the original videotaped tour are no longer with the Commission. The Appellant believes that the tour would give the current panel members first-hand knowledge of the facilities and a better understanding of the matters before the Commission in this appeal.
The Respondent opposes the request. It submits, among other things, that the existing videotape was taken much closer to the original tax assessment date and is therefore more pertinent to the case. It argues, as well, that a new tour may result in new evidence and the possibility of further delays in the hearing.
The Commission notes that a videotape of the original tour of the facilities has been reviewed by the Commission and the Commission is satisfied that there is no need, at this time, for a further tour. If, during the course of the hearing, it is considered necessary or advisable to view the site, the Commission may order a further site inspection. Accordingly, the Commission finds that:
1. An inspection tour of the facilities of Island Tel is not, at this time, deemed necessary.
2.2 Disclosure of Information
The Appellant seeks full access to the Respondent's audit file. With the exception of third-party information, audit time sheets or recordings and audit procedures, the Respondent is prepared to allow access to the file.
The Commission is generally of the view that it is desirable to have full and complete disclosure of all material that has gone into the preparation of the audit and assessment. In our view, access to information is a fundamental necessity if an Appellant is to know the case it has to meet and the basis upon which the Respondent determined the tax assessment. It is not, in our view, nearly enough to suggest that certain information in the file is not relevant.
The Commission recognizes, however, that certain information in a vendor or audit file may, if disclosed, compromise either general audit procedures or the right of a third party to confidentiality. The release of audit procedures would, in our view, possibly compromise the Respondent's audit process. Moreover, in the case of third-party information, the Commission views such information as confidential unless the third party consents to its release.
On the question of audit time sheets or recordings, the Commission sees no purpose in their release. Finally, correspondence to or from legal counsel relating to case preparation should not, in our view, be disclosed. As a result, the Commission finds that:
2. With the exception of audit time sheets, audit procedures, third-party information and material to or from legal counsel relating to case preparation, full and complete disclosure of the Appellant's vendor file shall be made to the Appellant, including such photocopies of the disclosed material or information in the vendor file as the Appellant may request; and
3. With the consent of third parties, information from such third parties shall be disclosed to the Appellant.
The Appellant also seeks the filing of the terms of reference for the Respondent's witness, Mr. Forest. The Respondent has indicated an unwillingness to file such terms as there may be confidential "solicitor-client" material in the terms.
The Commission notes that it has been a frequent practice in proceedings before the Commission to require the filing of terms of reference for a witness. We see no reason why such terms can not be provided here. We will, however, allow the deletion or blanking of any material in such terms that might be viewed as solicitor-client privileged. Accordingly:
4. The Respondent shall provide the Appellant with the terms of reference for the engagement of Mr. Forest but may delete or blank out material that may be viewed as solicitor-client privileged. Should any difficulty arise in relation to material to be deleted or blanked out, the matter may be referred to the Commission for further disposition.
At the hearing on December 5, 1997, Counsel for the Respondent requested that, should he be ordered to produce the terms of reference for Mr. Forest, the Appellant should be required to produce terms of reference for its expert witnesses as well. Counsel for the Appellant opposes the Respondent's request on the grounds that any additional requests for information were required to be made by November 19, 1997 in accordance with earlier directions of the Commission. While the Commission would normally require the filing of such terms, it is clear that the Respondent's request has been made well beyond the established time limits. As a result:
5. The Respondent's request for the filings of the terms of reference for the Appellant's witnesses is denied.
The Respondent also requests that the Appellant be ordered to file a planning guide and a book published by the Appellant relating to the equipment at issue in this appeal. The Appellant has indicated that the request was also made after the November 19, 1997 filing deadline and the material is not readily available. The Appellant has also pointed out that the Respondent's witness has referred to these documents and must, therefore, have the material in his possession. The Respondent agreed that this is so but that the witness only has one copy of each document and that more copies should be made available for the hearing.
The Commission is reluctant to require one party to file material that is relied upon and apparently already available to the other. The Respondent may wish to produce such material at the hearing if it is relevant to his case. Therefore:
6. The Respondent's request for the provision of two original copies of the "Feature Planning Guide: 32 - July 1991" and the publication "DMS-100 Family System Description - July 1988" is denied.
The Respondent requests that the Appellant be ordered to produce all notes and correspondence relating to communications between Glen Pye, Fred Weatherby and Gerald McCarthy in the period between January 1, 1991 and January 7, 1994. While the Commission is not, at this stage, making any decision on the ultimate admissibility of such material, we note that there is reference in the current case file to such notes and correspondence. In the interests of having the case file as complete as possible, the Commission will require the filing of the requested information. As a result:
7. The Appellant shall produce all notes and correspondence between Glen Pye, Fred Weatherby and Gerald McCarthy in the period between January 1, 1991 and January 7, 1994.
The Respondent also requests that the Appellant produce documents indicating the basis upon which the Appellant unbundles and separates TPP equipment to determine whether revenue tax will be charged to its customer or paid by Northern Telecom as the consumer. The Appellant takes the position that it is not compelled to provide documentation after the assessment to "shore up" the audit.
As with the issue of communications between Messrs. Pye, Weatherby and McCarthy, there is reference in the case file to the unbundling and separation of TPP equipment. In order to have the case file as complete as possible, we will also require the filing of this information. Therefore:
8. The Appellant shall produce documents indicating the basis upon which Northern Telecom unbundles and separates TPP equipment to determine whether revenue tax will be charged to its customer, Island Tel, or paid by Northern Telecom as the consumer.
2.3 Component Costs
The Respondent requests that, in the event the Commission determines that the equipment at issue in this case is incorporated into a structure, it be allowed to present further evidence on the issue of the method by which the Appellant calculates certain of its hardware costs and the related determination of tax owing in respect of consumption by Northern Telecom. The Appellant takes the position that the Respondent, by its request, is extending the audit period beyond four years and that such an extension is beyond the jurisdiction of the Commission.
The Commission is of the opinion that it is unnecessary at this time to make a determination on this issue. Should the need arise, a finding will be made in due course. Accordingly:
9. The Commission defers decision on whether it will be necessary to later hear evidence of the method by which the Appellant calculates certain of its hardware costs.
3. Disposition
An Order incorporating the above findings will be issued.
Order
WHEREAS
a hearing to consider preliminary issues in this proceeding was conducted in Charlottetown on December 5, 1997;NOW THEREFORE, for the reasons given in the annexed Reasons for Order;
IT IS ORDERED THAT
1. An inspection tour of the facilities of Island Tel is not, at this time, deemed necessary;DATED at Charlottetown, Prince Edward Island, this 9th day of December, 1997.2. With the exception of audit time sheets, audit procedures, third-party information and material to or from legal counsel relating to case preparation, full and complete disclosure of the Appellant's vendor file shall be made to the Appellant, including such photocopies of the disclosed material or information in the vendor file as the Appellant may request;
3. With the consent of third parties, information from such third parties shall be disclosed to the Appellant;
4. The Respondent shall provide the Appellant with the terms of reference for the engagement of Mr. Forest but may delete or blank out material that may be viewed as solicitor-client priviliged. Should any difficulty arise in relation to material to be deleted or blanked out, the matter may be referred to the Commission for further disposition;
5. The Respondent's request for the filings of the terms of reference for the Appellant's witnesses is denied;
6. The Respondent's request for the provision of two original copies of the "Feature Planning Guide: 32 - July 1991" and the publication "DMS-100 Family System Description - July 1988" is denied;
7. The Appellant shall produce all notes and correspondence between Glen Pye, Fred Weatherby and Gerald McCarthy in the period between January 1, 1991 and January 7, 1994;
8. The Appellant shall produce documents indicating the basis upon which Northern Telecom unbundles and separates TPP equipment to determine whether revenue tax will be charged to its customer, Island Tel, or paid by Northern Telecom as the consumer; and
9. The Commission defers decision on whether it will be necessary to later hear evidence of the method by which the Appellant calculates certain of its hardware costs.
BY THE COMMISSION:
Ginger Breedon, Vice-ChairDeborah MacLellan, Commissioner
Elizabeth MacDonald, Commissioner
NOTICE
Section 12 of the Island Regulatory and Appeals Commission Act reads as follows:
Parties to this proceeding seeking a review of the Commission's decision or order in this matter may do so by filing with the Commission, at the earliest date, a written Request for Review, which clearly states the reasons for the review and the nature of the relief sought.
Sections 13.(1) and 13(2) of the Act provide as follows:
(2) The appeal shall be made by filing a notice of appeal in the Supreme Court within twenty days after the decision or order appealed from and the Civil Procedure Rules respecting appeals apply with the necessary changes.