Executive Summary: Key Legal and Evidentiary Issues

• The appeal concerns the tax characterization of a "signing bonus" paid to NHL player John Tavares by the Toronto Maple Leafs under Article XVI(4) of the Canada-United States Convention with Respect to Taxes on Income and on Capital.

• Respondent (the Crown) sought leave under section 99 of the Tax Court of Canada Rules (General Procedure) to examine a third-party representative from Maple Leaf Sports & Entertainment Partnership Ltd. (MLSE).

• Rule 99 is an extraordinary remedy requiring strict compliance with subsection 99(2), including proof that the moving party was unable to obtain the information from persons already examined and from the non-party sought to be examined.

• The Court found the Respondent failed to adequately pursue relevant lines of questioning during Mr. Tavares' examination for discovery or in follow-up questions.

• No direct request for information was ever made by the Respondent to MLSE; contact was attempted only indirectly through the Appellant's counsel.

• Merely anticipating an inability to obtain information from a non-party does not satisfy the threshold under paragraph 99(2)(a).

Background of the tax dispute

John Tavares, a well-known NHL hockey player, is appealing the reassessment of his 2018 taxation year. The central issue in the underlying appeal is the characterization of a "signing bonus" that formed part of his contract with the Toronto Maple Leafs. Specifically, the dispute turns on whether the signing bonus was paid "as an inducement to sign an agreement relating to the performance of the services of an athlete" within the meaning of Article XVI(4) of the Canada-United States Convention with Respect to Taxes on Income and on Capital. The Appellant's Notice of Appeal pleads that the Toronto Maple Leafs designed their offer to include a signing bonus to entice Tavares, that MLSE considered the signing bonus to be one of the key factors in getting Tavares to agree to play for the Toronto Maple Leafs, and that signing the long-term contract with the star player benefited MLSE and the Toronto Maple Leafs with positive publicity.

The Respondent's motion to examine a third party

During the litigation, the Respondent — His Majesty the King, represented by the Deputy Attorney General of Canada — brought a motion under section 99 of the Tax Court of Canada Rules (General Procedure) seeking leave to examine for discovery a knowledgeable representative from MLSE. The Respondent argued that MLSE possessed information about its intentions and motivations in negotiating and entering into the contract with Mr. Tavares, particularly in respect of the signing bonus, and that this was central to determining whether the amount at issue constitutes an "inducement." Mr. Tavares opposed the motion. The motion proceeded by way of written submissions under subsection 69(1) of the Rules. MLSE was served the Respondent's motion record pursuant to subsection 67(1) of the Rules but did not make any submissions.

Legal framework for third-party examinations under Rule 99

Justice Edward (Ted) Cook explained that Rule 99 provides an extraordinary remedy that ought to be applied sparingly and only where there is demonstrably strict compliance with subsection (2) of the Rule, as stated by Bowie J. in Teelucksingh v The Queen, 2007 TCC 125. Before granting leave, the Court must be satisfied of several conditions under subsection 99(2). The Court focused its analysis on paragraph 99(2)(a), which requires that the moving party has been unable to obtain the information sought from both the person it was entitled to examine for discovery (Mr. Tavares) and the person sought to be examined (a knowledgeable representative from MLSE). Citing Barker v The Queen, 2012 TCC 64, the Court confirmed that the "or" in the paragraph is to be read conjunctively, meaning both conditions must be met.

Failure to exhaust discovery of Mr. Tavares

The Court found that the Respondent had not been unable to obtain the information from Mr. Tavares but rather did not seek the information from him during examination for discovery or in follow-up questions. The Respondent examined Mr. Tavares on November 4, 2024. Undertakings were given and Mr. Tavares provided answers; follow-up questions were served and answered. When paragraphs 24 and 30 of the Notice of Appeal were put to Mr. Tavares, his counsel answered that Mr. Tavares would rely on documents already produced (or that would be produced as an undertaking) and viva voce testimony by an individual from the Toronto Maple Leafs or MLSE. No further questions were asked about either paragraph. The Respondent did not ask Mr. Tavares any questions about paragraph 31 of the Notice of Appeal at examination for discovery. Justice Cook noted that the Respondent could have asked how MLSE designed its offer, why MLSE thought its offer would entice Mr. Tavares, and what factors were considered by MLSE. Additionally, Mr. Tavares gave and fulfilled undertakings requiring him to obtain information from MLSE on other matters — such as escrow, duty days, and T4A-NR — yet was not asked to obtain any information from MLSE regarding its use of the signing bonus to induce him to sign the contract. Citing Labow v The Queen, 2008 TCC 511, the Court held that the Respondent's lack of information about MLSE's intentions and motivations was a result of the decision to not further pursue that line of questioning in discovery rather than an inability to obtain it from Mr. Tavares.

Failure to directly contact MLSE

On the second condition, the Court found that the Respondent did not contact MLSE directly to request the information sought. In July 2025, Respondent's counsel raised the possibility of seeking leave to discover a representative of MLSE. Mr. Tavares' counsel suggested the Respondent's interest might be satisfied informally (e.g., by way of a meeting or a written list of questions) and offered to reach out to MLSE to help facilitate an informal meeting. In October 2025, Mr. Tavares' counsel advised that he had reached out to MLSE but had not heard back. The Respondent only reached out indirectly through Mr. Tavares' counsel and made no direct request to MLSE or attempt to use written questions. The Respondent relied on Sim v The King, 2025 TCC 22, in which the Court recognized that, although inquiries could have been made directly through counsel, it was not prepared to question the professional judgment of the respondent in choosing not to do so. Justice Cook distinguished Sim, noting that in that case there were undertakings to make inquiries of Mr. Sim regarding certain issues, those inquiries were made, and the responses were generally that Mr. Sim did not have the requested information — whereas Mr. Tavares was not asked to make any inquiries of MLSE relating to the subject matter of the proposed third-party examination. The Court further held, citing McBane Estate v The Queen, 2005 TCC 264, that it is not sufficient to anticipate not being able to obtain the information from the person sought to be examined.

Ruling and outcome

Justice Cook dismissed the Respondent's motion because the conditions in paragraph 99(2)(a) had not been met. As that conclusion was sufficient basis for dismissing the motion, no comment was made on whether the other mandatory conditions in subsections 99(1) and (2) had been met. The Appellant, John Tavares, was awarded costs for this motion in any event of the cause. No exact monetary amount for the costs award was specified in the decision.