Date: 20010523
Docket: A-685-99
Neutral Citation: 2001 FCA 167
CORAM: STRAYER J.A.
ISAAC J.A.
EVANS J.A.
BETWEEN:
ROSELAND FARMS LTD.,
(Plaintiff), Appellant
and
HER MAJESTY THE QUEEN
(Defendant), Respondent
Heard at Winnipeg, Manitoba, May 23, 2001
JUDGMENT delivered from the Bench at Winnipeg, Manitoba, May 23, 2001
REASONS FOR JUDGMENT BY: STRAYER J.A.
Date: 20010523
Docket: A-685-99
Neutral Citation: 2001 FCA 167
CORAM: STRAYER J.A.
ISAAC J.A.
EVANS J.A.
BETWEEN:
ROSELAND FARMS LTD.,
(Plaintiff), Appellant
and
HER MAJESTY THE QUEEN
(Defendant), Respondent
REASONS FOR JUDGMENT
(Delivered from the Bench at Winnipeg,
Manitoba on May 23, 2001)
STRAYER J.A.
[1] This is an appeal from Sharlow J. of the Trial Division from a judgment in an appeal to that court from the Tax Court of Canada by way of trial de novo. The sole issue for our determination is whether the learned trial judge erred in dismissing the taxpayer's appeal with respect to the Minister's reassessment of the net profit from the sale of farm land as income and not as capital gain.
[2] The appellant corporation was incorporated in Manitoba in 1976 to hold the land. Its two shareholders were Italian nationals who at all relevant times were resident in Italy. The land was bought, and the company was incorporated, through a Manitoba law firm, three of whose members became the only directors of the company. The land was bought in 1976 and 1977 and resold in 1980 for a gain of $420,630. In the meantime it was farmed under the supervision of the directors.
[3] The taxpayer corporation reported the amount of $420,630 as a capital gain in respect of 1980. The Minister reassessed it as income. In his statement of defence in the Trial Division the Minister stated the assumptions of fact upon which the reassessment was based. These included the assumption that one of the motivating factors in the purchase of the land by the plaintiff corporation was the possibility of reselling it at a profit.
[4] At trial the only witness for the taxpayer was Mr. MacKay, one of the lawyer-directors of the company. He testified as to his knowledge and understanding, or as to the inferences he had drawn, concerning reasons for the purchase and sale of the property. Sharlow J. concluded that this evidence was not sufficient to rebut the Minister's assumptions on which the reassessment was based. She therefore dismissed this part of the appeal.
[5] We are all of the view that the appeal before us must be dismissed. The trial judge accurately stated the law as pronounced by the Supreme Court of Canada in [1998] S.C.R. 486">Johnston v. Canada [1998] S.C.R. 486, and followed by this Court ever since (See e.g. Pollock v. The Queen (1993) 94 D.T.C. 6050 at 6053; see also Hickman Motors Ltd. v. Canada [1997] 2 S.C.R. 336 at 378-79) that once the Minister states the assumptions on which a reassessment is based, the onus is on the taxpayer to disprove those assumptions. It was thus a question of fact for the trial judge to determine whether the assumptions here were rebutted, and we can find no error, palpable or otherwise, in the conclusions she reached on the evidence. It was essentially a matter of weighing such evidence as was produced and, although she found Mr. MacKay's evidence to be "honest and frank", she concluded that he was not in a position to know all of the intentions of the shareholders of the company when they caused the company to purchase this land. In particular, she noted that he was not the main point of contact between the firm and the shareholders and that he had only met the shareholders once or twice. He could only communicate with them through an interpreter. In our view, the trial judge was entitled in these circumstances to require more direct evidence as to the intentions of the two shareholders when they bought the land through the corporation, and the conclusion was open to her that such intentions had not been proven, by the evidence presented, to be other than as assumed by the Minister.
[6] We would also note the appellant's argument that the shift of the burden of proof to the taxpayer to disprove the Minister's assumptions can be prevented through an examination for discovery of the Minister's representatives if that examination reveals the assumptions not to be based on any reasonable grounds. We neither believe that this was the effect of the examination for discovery in this case, nor do we accept this argument. The Minister's assumptions are made because it is the taxpayer who best knows his own affairs. It is the logic of the [1998] S.C.R. 486">Johnston case and these which follow it that, once an assumption is stated, it is for the taxpayer to prove it wrong through his superior access to information about his personal affairs. The examination for discovery of the Minister's representative may help define and narrow the issues for trial, but it cannot be viewed as a preliminary challenge to the reasonableness of the Minister's assumptions which, if successful, will preclude the burden from shifting to the taxpayer.
[7] The appeal will therefore be dismissed with costs.
"B.L. Strayer"
J.A.
FEDERAL COURT OF CANADA
APPEAL DIVISION
NAMES OF SOLICITORS AND SOLICITORS ON THE RECORD
Appeal from an order of the Trial Division dated October 4, 1999, Trial Division
Docket T-452-86.
DOCKET: A-685-99
STYLE OF CAUSE: Roseland Farms Ltd. v. Her Majesty the Queen
PLACE OF HEARING: Winnipeg, Manitoba
DATE OF HEARING: May 23, 2001
REASONS FOR JUDGMENT OF
THE HONOURABLE MR. JUSTICE STRAYER
DATED MAY 23, 2001
APPEARANCES:
Mr. Sidney Green, Q.C. for the (Plaintiff), Appellant
Mr. Gerald Chartier for the (Defendant), Respondent
Department of Justice
301 - 310 Broadway
Winnipeg, MB R3C 0S6
SOLICITORS OF RECORD:
Mr. Sidney Green, Q.C. for the (Plaintiff), Appellant
700 - 444 St. Mary Avenue
Winnipeg, MB R3C 3T1
Morris Rosenberg
Deputy Attorney General of Canada for the (Defendant), Respondent
Email this Content