BC court orders KPMG partner examined under oath despite confidentiality
Because the director and the developer were not at arm’s length, the transfer carried potential income tax consequences, since the advance might be treated as deemed income. To manage that exposure, the director retained KPMG, and one of the firm’s partners designed what the court described as a complicated tax transaction.
The judge was careful to note there was no suggestion the partner acted improperly or unlawfully, and made no findings against him.
At issue was the developer’s request to examine the partner under oath before trial. KPMG, acting for itself and the partner, joined the defendants in opposing the application. They argued the accountant had not refused to cooperate, since he was willing to answer written questions, so a court order was premature.
The court saw it differently. The partner’s willingness, it found, was conditional on not breaching his obligations under the CPABC Code of Professional Conduct, which restricts disclosure of confidential client information without consent or a court order. In practice, that meant the defendants controlled what he could say. The judge described the defendants’ assurance as “at best highly equivocal and at worst, illusory,” and treated their position as a refusal under the rules governing pre-trial examination of witnesses.
The court also rejected written questions as a substitute for oral examination, finding that approach unworkable given the technical nature of the transaction and the follow-up questions it would inevitably prompt.
