Executive Summary: Key Legal and Evidentiary Issues

• Dispute centered on how the fair market value (juste valeur marchande – JVM) of real estate was determined under article 422 of the Taxation Act.

• Plaintiffs sought to include the value of unpaid work by the shareholder and his sons in the property valuation.

• The ARQ excluded this value based on internal guidance and a fiscal opinion.

• Plaintiffs challenged the refusal to disclose the fiscalist’s opinion and internal directives during pre-trial examinations.

• Court ruled that referring to the fiscal opinion in the audit report waived any privilege over it.

• Internal directives were deemed irrelevant to the legality of the tax assessment and protected from disclosure.

Facts and procedural background

The dispute involved two connected cases concerning tax assessments following real estate transactions between related parties. Gilles Bélanger, the sole shareholder of 9139-8354 Québec inc., transferred immovable properties to his sons. Revenu Québec issued tax assessments under article 422 of the Taxation Act, arguing that the sale price did not reflect the fair market value (JVM), as required in transactions involving non-arm’s-length parties.

Bélanger was personally assessed for the discrepancy between the sale price and the JVM, which was added to his income. The corporation, 9139-8354 Québec inc., was separately assessed for unpaid sales tax based on the same JVM valuation.

During pre-trial examinations, the plaintiffs sought access to two specific categories of evidence: (1) an internal opinion by a Revenu Québec fiscalist, which the audit report cited as a basis for rejecting the inclusion of unpaid construction work in the JVM; and (2) internal directives dealing with the treatment of unpaid work by shareholders or related persons in property valuations. The ARQ objected to both requests, invoking public interest privilege and arguing irrelevance.

Judicial findings on the objections

The court ruled in favor of the plaintiffs regarding the fiscal opinion. It found that Revenu Québec, by explicitly referring to the fiscalist’s input multiple times in the audit report, had waived any claim to privilege or confidentiality. The document became relevant and accessible, as it had influenced the ARQ’s position and was essential to test the credibility and basis of the assessment. The court rejected the defendant’s reliance on article 283 C.p.c. and article 69.9 of the Tax Administration Act, noting that no sworn declaration of public interest was filed and that the context fell within the statutory exceptions allowing disclosure in tax-related litigation.

In contrast, the court upheld the ARQ’s objection to disclosing internal directives. It emphasized that the legal validity of a tax assessment is based on proven facts and applicable law, not on internal administrative tools or guidelines. The court considered such documents irrelevant to the central question of whether the assessed JVM reflected the true value under the Taxation Act. Reference was made to earlier case law confirming that internal tools do not impact the legality of assessments.

Decision and outcome

The court granted partial relief to both parties. It ordered the ARQ to disclose the fiscalist’s opinion but denied the request to produce internal directives. Additionally, it extended the procedural deadline for filing for instruction and judgment to October 10, 2025. No costs were awarded given the split outcome.