Teskey J.T.C.C.: — The Appellant appeals from assessments of income tax for the years 1988, 1989 and 1991.
Issue
The sole issue before me is whether the Appellant in the years 1988 and 1989 is entitled to an overseas employment tax credit (O.E.T.C.).
The Appellant during 1988 and 1989 was an employee of Challenger Overseas (“C.O.”) a subsidiary of Challenger International Services (“C.I.S”) who was performing services for Bangladesh Oil, Gas and Mineral Corporation (“B.O.G.M.C.”). It is clear from the Income Tax Act (the “Act”) that if the work being performed by B.O.G.M.C. was a “prescribed international development program of the Government of Canada”, then, by virtue of the contract with B.O.G.M.C. and C.I.S., the Appellant could not qualify for an O.E.T.C. The question to be determined, therefore, is whether the work being performed by B.O.G.M.C. was such a prescribed international development assistant program.
To determine this question, I have to look at section 3400 of the Income Tax Regulations (“the Regulations”) which reads:
3400. For the purposes of paragraphs 122.3( l)(a) and 250(1 )(d) of the Act, each international development assistance program of the Canadian International Development Agency that is financed with funds (other than loan assistance funds) provided under External Affairs Vote 30a, Appropriation Act No. 3, 1977-78, or another vote providing for such financing, is hereby prescribed as an international development assistance program of the Government of Canada.
The Minister in making his assessment made the following assumptions:
(b) The Appellant received the subject income as an employee of C.O. and his duties involved the performance of services under a prescribed international development assistance program of the Government of Canada as that phrase is understood in the Income Tax Act, R.s.C. 1952, c. 148 as amended by S.C. 1970-71-72, c. 63, s. 1 and as subsequently amended (the “Act”).
(c) The subject funding of B.O.G.M.C. by CIDA was financed with funds (other than loan assistance funds) provided under External Affairs Vote 30(a), Appropriation Act No. 3, 1977-1978, or another vote providing for such financing.
The only evidence before me, other than these assumptions of fact, 1s the oral evidence of the Appellant and documents entered as exhibits.
In the two years in question the Appellant received T4 employment slips from C.O., both of which had typed thereon:
CIDA Funded Project Location Bangladesh
The Appellant produced the cover page and a signing page of what is purported to be a contract between B.O.G.M.C. and C.I.S. He also claimed that sometime during his employment with C.O. the project ran short of money and that B.O.G.M.C. received financing from the Canadian International Development Agency (“CIDA”).
I find as a fact that CIDA was involved in some financial way with B.O.G.M.C. and its contract with C.I.S., but there remains the question of whether this involvement constituted financing as contemplated by section 3400 of the Regulations.
The Appellant made an exhaustive search of the Appropriation Bills, being Statutes of Canada, in an attempt to find if the project his employer was working on was financed with funds as provided for under section 3400 of the Regulations.
He referred the Court to the Bills that provided money for the Government of Canada for the financial years ending March 31st, 1985, 1986, 1987, 1988 and 1989. A review of these many Bills in no way demonstrates that B.O.G.M.C. was financed with funds by CIDA as provided for under section 3400 of the Regulations.
Also before me is the CIDA estimates for 1988-89 which show grants and contributions of $1,988,200,000 for 1988-89 and for 1987-88 of $1,879,500,000 and the 1988-89 Estimates, Part II which contained the External Affairs Department budget. Neither document assists the Court whatsoever.
In this case the Court has before it an Appellant who does not believe that the project which his employer had contracted for was financed with funds from CIDA although he acknowledges that financial difficulties arose during the course of the contract and that funds were made available by Canada. Under the circumstances, he has conducted all reasonable searches to try to establish if his employer was financed with funds as provided for under section 3400 of the Regulations. This he could not do.
In regards to the T4s the Appellant received, he states they were issued in error and on the T4 received in 1989, he whited out the notation thereon which said: “CIDA Funded Project Location Bangladesh”.
ANALYSIS
In tax litigation, the Minister will normally plead certain assumptions of fact. It is settled law that these assumptions will cast the burden of proof with respect to those facts upon the taxpayer. If the taxpayer is unable to disprove those assumptions, the Court may rely on the assumptions of the
Minister to be fact.
The policy behind this was explained by Hugessen, J.A., in the case of Pollock v. R. (sub nom. Pollock v. Canada), [1994] 1 C.T.C. 3, 94 D.T.C. 6050 (F.C.A.), as follows at page 8 (D.T.C. 6053):
The special position of the assumptions made by the Minister in taxation litigation is another matter altogether. It is founded on the very nature of a self-reporting and self-assessing system in which the authorities are obliged to rely, as a rule, on the disclosures made to them by the taxpayer himself as to facts and matters which are peculiarly within his own knowledge.
The burden cast on the taxpayer by assumptions made in the pleadings is by no means an unfair one: the taxpayer, as plaintiff, is contesting an assessment made in relation to his own affairs, and he is the person in the best position to produce relevant evidence to show what the facts really were.
[Emphasis added.]
As stated above, at the time the Minister issued the assessments, he assumed the funding of the contract between B.O.G.M.C. and C.I.S. was financed with funds as provided for under section 3400 of the Regulations.
It falls then upon the Appellant to prove that B.O.G.M.C. was not so financed. While there is no question that the burden of proof is on the Appellant, there does remain a question as to the standard of proof required to satisfy that burden. In my opinion this case requires consideration of the knowledge of the parties and their comparable ability to garner the relevant evidence. I am not suggesting that the civil standard is not applicable, but as noted by Dickson, C.J.C R. v. Oakes, [1986] S.C.R. 103, 26 D.L.R. (4th) 200, 65 N.R. 87 at page 137 (D.L.R. 226, N.R. 127).:
Within the broad category of the civil standard, there exists different degrees of probability depending on the nature of the case [...]
The relevant principle to be applied can be found in the Supreme Court of Canada case of Snell v. Farrell 1990] 2 S.C.R. 311, 72 D.L.R. (4th) 289, 110 N.R. 200. While this case dealt with proof of causation in malpractice cases, I believe that the reasoning is equally applicable here. At page 328 (D.L.R. 300, N.R. 218), Sopinka J. wrote:
Furthermore, as I observed earlier, the allocation of the burden of proof is not immutable. Both the burden and the standard of proof are flexible concepts. In Blatch v. Archer (1774), 1 Cowp. 63, 98 E.R. 969, Lord Mansfield stated at page 970:
It is certainly a maxim that all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted.
In many malpractice cases, the facts lie particularly within the knowledge of the defendant. In these circumstances, very little affirmative evidence on the part of the plaintiff will justify the drawing of an inference of causation in the absence of evidence to the contrary. This has been expressed in terms of shifting the burden of proof. In Cummings v. City of Vancouver (1911), 1 W.W.R. 31 (B.C.C.A.), Irving J.A. stated at page 34:
Stephens [sic] in his Digest (Evidence Act, 1896) says: “In considering the amount of evidence necessary to shift the burden of proof, the Court has regard to the opportunities of knowledge with respect to the fact to be proved, which may be possessed by the parties respectively.”
Hollis v. Young (1909) 1 K.B., 629, illustrates the rule that very little affirmative evidence will be sufficient where the facts lie almost entirely within the knowledge of the other side.
In Dunlop Holdings Ltd.’s Application, [1979] R.P.C. 523 (C.A.), Buckley L.J. affirmed this principle in the following terms at page 544:
Where the relevant facts are peculiarly within the knowledge of one party, it is perhaps relevant to have in mind the rule as stated in Stephen’s Digest, which is cited at page 86 of Cross on Evidence [3rd ed.]:
“In considering the amount of evidence necessary to shift the burden of proof, the court has regard to the opportunities of knowledge with respect to the facts to be proved which may be possessed by the parties respectively.”
“This does not mean”, Sir Rupert continues, “that the peculiar means of knowledge of one of the parties relieves the other of the burden of adducing some evidence with regard to the facts in question, although very slight evidence will often suffice”.
[Emphasis added. I
See also Diamond v. British Columbia Thoroughbred Breeders’ Society (1965), 52 D.L.R. (2d) 146 (B.C.S.C.), at page 158; Pleet v. Canadian Northern Quebec R. Co. (1921), 64 D.L.R. 316 (Ont. S.C., App. Div.), at pages 319-20; and Guaranty Trust Co. of Canada v. Mall Medical Group, [1969] S.C.R. 541, at page 545.
The Minister of National Revenue, (the “Minister”) as an agent of the Crown and a member of Cabinet, has a vastly superior “opportunity of knowledge” than the Appellant in this matter. Further, the Minister has only to produce a copy of the vote providing the financing in question, while the Appellant is saddled with the more difficult task of proving the negative proposition that the vote did not exist. In such circumstances, it is extraordinary that the Minister would blithely assume that he can hide behind a burden of proof cast upon the taxpayer. Particularly, when the policy behind such a burden is that the taxpayer is presumed to have superior knowledge.
I fully endorse the statements of my brother Brulé J.T.C.C. when he wrote Karnin v. Minister of National Revenue [1993] 1 C.T.C. 2052, 93
D.T.C. 62 at page 2055 (D.T.C. 64):
The Minister does not have carte blanche in terms of setting out any assumption which suits his convenience. On being challenged by evidence in chief he must be expected to present something more concrete than a simple assumption.
I apply the reasoning in Farrell, and find that the Appellant requires “very little affirmative evidence” to satisfy the standard of proof. As I find the Appellant a credible witness, his oral testimony of his bona fide belief that his employer was not funded by CIDA, coupled with his best efforts to procure evidence that his employer was not so financed constitutes persuasive evidence and satisfies the required standard of proof. The Minister has not introduced any relevant evidence to rebut the oral testimony of the Appellant, and so, on the balance of probabilities, I find C.I.S. was not financed with funds as provided for under section 3400 of the Regulations in the years in question.
The appeals for 1988 and 1989 are allowed, with costs, and the assessments are referred back to the Minister for reconsideration and reassessment on the basis that the Appellant is entitled to an overseas employment tax credit in the years 1988 and 1989.
The Court has no jurisdiction to deal with the 1991 appeal as the Appellant is not objecting to his assessment of tax in that year and therefore that appeal is quashed without costs.
Appeals allowed.