Muszka v. The Queen, 94 DTC 6076, [1994] 1 CTC 365 (FCA)

Mahoney, J.A.:—This application for judicial review and a parallel one by the applicant's wife, file A-984-92, are concerned with appeals against their 1986 and 1987 income tax assessments dealt with together by the Tax Court of Canada under its informal procedures as they elected under section 18 of the Tax Court of Canada Act, S.C. 1988, c. 51, section 5. The procedure, as it is relevant to this application, is defined by subsection 18.15(4).

Notwithstanding the provisions of the Act out of which an appeal arises, the Court, in hearing an appeal referred to in section 18, is not bound by any legal or technical rules of evidence in conducting a hearing for the purposes of that Act, and all appeals referred to in section 18 shall be dealt with by the Court as informally and expeditiously as the circumstances and considerations of fairness permit.

The applicant applied to amend his application record by adding the transcript of the Tax Court hearing and the affidavit of George Valenti, an accountant, who had been his counsel at the hearing and had been refused the opportunity to testify. The affidavit is directed to two discrete subjects. Paragraphs 1 to 4 deal with the refusal to hear his evidence and the balance outlines the evidence he would have given had he been permitted. The application to add the transcript and paragraphs 1 to 4 was allowed when the matter came before the Court on December 13 and the matter was then adjourned until this morning to permit the respondent's counsel to consider her position. Having had that opportunity, she now consents to the judgment we propose. We feel, nevertheless, that it would be useful to indicate the grounds upon which that consent is, in our view, entirely justified. It will not be necessary to refer to the affidavit.

At the outset of the hearing, when Valenti sought to outline the applicant's case, the following exchange occurred (transcript, page 2, I. 2-16):

MR. VALENTI: Your honour, I am appearing here today as an agent and also as a friend who has intimate knowledge of the assessments and their business affairs over the years. In fact, I was involved many years ago—I was an accountant and I was involved to some extent with the preparation of the year-end financial statements for those two years, 1986 and 1987, with Price Waterhouse. There are several issues here that I would like to bring out. In the 1986 taxation year there was a meeting—

HIS HONOUR: Well, no, you mustn't get into testifying as to facts. You are here as agent or counsel for these people.

The hearing proceeded directly to receive the evidence of the applicant and his wife. It appeared during examination, cross-examination and reexamination that neither had much understanding of the financial statements. Valenti's efforts to lead them were forestalled by the judge. When their testimony was concluded the following transpired (transcript, page 80, I. 1 to page 81, I. 19):

HIS HONOUR: I take it, Mr. Valenti, you have no other witnesses to call?

MR. VALENTI: No, I don't. Can I call myself as a witness?

HIS HONOUR: Why would you call yourself as a witness? You're going to have an opportunity to argue from the facts that have been adduced here today.

MR. VALENTI: Will it have the same force as being a witness?

HIS HONOUR: Normally, a person doesn't come in and act as both counsel and a witness.

MR. VALENTI: I realize that. This is an unusual situation.

HIS HONOUR: What is unusual about it?

MR. VALENTI: The reason that I would like to give some evidence is because they perhaps don’t understand financial statements. They perhaps didn't state their case too clearly about what changes they had made to the company after their attention was drawn to the inadequacies of the records and books that were kept.

HIS HONOUR: What do you say about it?

MR. FORER: I would object to an agent being called as a witness when he's carried the case throughout. It’s certainly prejudicial to the Minister to have to now, while we sat here and found there were failings in their case from direct testimony, to be able to stand up and clarify anything that they have personal knowledge of, and 1 have yet to hear whether he has any personal knowledge of it as well.

HIS HONOUR: I am not going to allow you to testify.

Finally, as he was about to present his argument, Valenti was instructed (transcript, page 117, I. 16-21):

HIS HONOUR: We are coming to argument now. You lead [sic] and argue from the facts that have been placed before me here this morning. Don’t inject your personal knowledge of the case. Don't act as a witness, in other words. Act as an advocate arguing from a set of facts.

The initial instruction that the facts had to be established by evidence under oath is unexceptionable. So is the final instruction that argument ought to be based on the facts so proved. However, barring Valenti, as counsel, from making an opening statement was by no means right and the refusal to let him testify was clearly wrong.

The credibility of every witness is in issue. That a member of the bar acting as counsel in a proceeding be not allowed to testify is a requirement of the due administration of justice. Such counsel is an officer of the Court whose credibility is accepted without qualification. That credibility must not be put in issue by counsel giving evidence. For an officer of the Court, the functions of counsel and witness in the same cause are simply incompatible and not to be tolerated. Lay counsel, when required or permitted to be heard as in the subject Tax Court proceeding, is not an officer of the Court.

The objection of the respondent's counsel, assuming it to have been a factor in the ruling, was based on pure speculation. The prejudice, if any, which might have resulted from Valenti’s testimony was something to be dealt with once it had been heard, not by refusing to hear it.

We are all of the opinion that the exclusion of Valenti’s evidence denied the applicant the opportunity fully to present his case, that there were no circumstances peculiar to this proceeding that justified that denial and that the approach taken throughout by the learned Tax Court judge was contrary to the direction for the conduct of informal hearings Parliament has given that Court by subsection 18.15(4) of its constituting Act. The appeal was not, in our view, conducted in accordance with the dictates of natural justice nor of the Act. The decisions of the Tax Court of Canada rendered July 8, 1992, under its files 92-599 and 92-600 will be set aside and both appeals remitted for a new hearing by a different judge.

Application allowed.