Tax Court of Canada Authorizes Commission Evidence to be Taken in the U.S. on an Art Valuation Case: Sackman v. The Queen

On October 21, 2011, the Tax Court of Canada (Justice Valerie Miller) released her decision on a motion brought by the Crown for commission evidence to be taken in California from an art dealer (see our earlier post). The Court held that the art dealer’s testimony is material to the appeal, which deals with the valuation of artwork in the context of a charitable donation program, and ordered that a Commission and a Letter of Request be issued to allow the examination of Mr. Sloan in California under section 112 of the Tax Court of Canada Rules (General Procedure).

The Court took into account the following factors in exercising its discretion to make the order:

(a) the convenience of the person whom the party seeks to examine,

(b) the possibility that the person will be unavailable to testify at the hearing by reason of death, infirmity or sickness,

(c) the possibility that the person will be beyond the jurisdiction of the Court at the time of the hearing,

(d) the expense of bringing the person to the hearing,

(e) whether the witness ought to give evidence in person at the hearing, and

(f) any other relevant consideration.

The Court was satisfied that the Crown had fulfilled the traditional tests for commission evidence, namely:

1. the application is made bona fide;

2. the issue is one which the court ought to try;

3. the witnesses to be examined can give evidence material to the issue;

4. there is some good reason why he or she cannot be examined here.

The only real issue was materiality of the dealer’s evidence.  The Crown submitted that its:

. . . theory of the case is that there was no identifiable market for the prints before Coleman, Silver and Artistic [the promoters] created a market through the donation program. Mr. Sloan is able to give evidence concerning the origins of the donation program and the absence of any discernible market for the artwork before it was packaged as part of the Artistic program. His testimony is also necessary to authenticate documents necessary to challenge the appellant’s anticipated expert evidence.

The Court also noted that the Crown is entitled “to put its best foot forward in this litigation” and should be allowed to obtain the evidence necessary to accomplish that objective.

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