Citation: 2010TCC171
Date: 20100324
Docket: 2008-3859(IT)G
BETWEEN:
RAYMOND WONG,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2008-3883(IT)G
BETWEEN:
BOB DING BOR MA,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2008-3885(IT)G
BETWEEN:
395047 B.C. Ltd.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
V.A. Miller, J.
[1]
The Appellants have
made an application pursuant to paragraph 58(1)(a) of the Tax Court
Rules (General Procedure) for the determination of questions of law. This
is the first step in that two step process.
[2]
The issues raised in
the Notices of Motion are: (1) whether the questions can appropriately be
decided under Rule 58; (2) whether the Information from the BC Court
which set out the charges against the Appellants, the transcript of the
testimony of Raymond Wong given in the proceeding in the BC Court, and the
Reasons for Judgment of the BC Court, constitute evidence within the meaning of
Rule 58(2); and, (3) whether the Appellants can adduce affidavit
evidence at the second step of the hearing of this motion.
[3]
The relevant portions
of Rule 58 read:
58
(1) A party may
apply to the Court,
a) for the determination, before hearing, of a question of
law, a question of fact or a question of mixed law and fact raised by a
pleading in a proceeding where the determination of the question may dispose of
all or part of the proceeding, substantially shorten the hearing or result in a
substantial saving of costs, or
(b) to strike out a pleading
because it discloses no reasonable grounds for appeal or for opposing the
appeal,
and the Court may grant judgment
accordingly.
(2) No evidence is
admissible on an application,
(a) under paragraph (1)(a),
except with leave of the Court or (on consent of the parties, or
(b) under paragraph (1)(b).
[4]
The questions posed by
the Appellants are:
a)
Whether issue estoppel
applies to prevent the Appellants from being put to the proof of facts and issues
related to the accurate reporting of the income of 395047 B.C. Ltd. (the
“Corporation”) for the 1997, 1998, 1999 and 2000 taxation years, (the “Years in
Issue”) such facts and issues having been already determined in a related
proceeding in the B.C. Provincial Court (the “BC Court”); and,
b)
Whether putting the
Appellants to the proof of facts and issues related to the accurate reporting
of the income of the Corporation for the Years in Issue, where such facts and
issues have already been determined in a related proceeding in the BC Court,
would amount to an abuse of process.
[5]
The Appellants have
relied on the following statements in bringing this motion:
a)
The Respondent
concluded that the Appellants earned amounts of unreported income in the Years
in Issue from the operation of a Boston Pizza restaurant in Cranbrook, British Columbia.
b)
The Respondent
reassessed the Appellants for the unreported income that was purported to have
been earned by the Corporation in the Years in Issue.
c)
The determination of the
accurate amount of income earned by the Corporation in the Years in Issue is
the central issue underlying the Appellants’ appeals of the reassessments
before this court.
d)
The determination of
the accurate amount of income earned by the Corporation in the Years in Issue
was also a central issue in the related criminal proceedings in the BC Court,
whereupon the Appellants were acquitted of charges of income tax evasion,
filing false income tax returns and GST evasion.
e)
In the course of
acquitting the Appellants of the above noted charges the BC Court determined
that the Crown had failed to prove that the Corporation had misstated its
revenues in filing its income tax and GST returns for the Years in Issue.
[6]
In the Notice of
Motion, the Appellants stated that, in support of the application, they also
intended to rely on:
a) Various paragraphs in the Notice
of Appeal and the Reply to Notice of Appeal;
b) The Information, Reasons for
Judgment of the BC Court, the transcripts attached to the affidavit of Robert
Sawers; and,
c) The facts deposed to in the
affidavit of Robert Sawers.
[7]
Robert Sawers was
counsel for Bob Ding Bor Ma at the criminal prosecution in the BC Court. His
affidavit, which was filed with the Notice of Motion, contained the Information
and the Reasons for Judgment of the BC Court. It did not contain the transcript
of those proceedings. At the hearing before me, counsel for the Appellants
withdrew the request to use a portion of the transcript from the criminal
prosecution.
[8]
I have decided, in the
exercise of my discretion, that a Rule 58 motion is not appropriate in the
circumstances of these appeals. My reasons are as follows.
[9]
It is not obvious that
the issues which were before the BC Court are the same as those which are
before this court. The income tax issues in the criminal proceeding was whether
the Applicants unlawfully made, participated in, assented to or acquiesced in
the making of false or deceptive revenue statements in the 1997, 1998, 1999 and
2000 income tax returns for the Corporation so that the Appellants wilfully
evaded or attempted to evade tax in the amount of $51,000. In the BC Court it
was the Crown’s position that the unreported income totalled $390,705 for the
Years in Issue.
[10]
The issues before this
court as raised by the pleadings are:
Notice of Appeal
a)
Whether this Court
should apply the principles of issue estoppel to prevent the Respondent from
re-trying the facts and issues already determined by the BC Court;
b)
Whether, in the
alternative, it would amount to an abuse of this Court process for the
Respondent to require this Court to reconsider the facts and issues already
determined by the BC Court;
c)
In the event the merits
of the appeal are to heard by this Court, whether the Appellants failed to
report amounts of income in any of the Years in Issue; and,
d)
In the event the merits
of the appeal are to be heard by this Court, whether the Minister erred in
assessing penalties pursuant to subsection 163(2) of the Income Tax Act (the
“Act”).
Reply to Notice of Appeal
a)
Whether the Corporate
Appellant failed to report income in the amounts of $57,641, $155,666, $119,790
and $123,988 in the 1997, 1998, 1999, and 2000 taxation years respectively. The
Minister of National Revenue (the “Minister”) has assumed that the Corporation failed
to report income in the amount of $457,085 in the Years in Issue;
b)
Whether the individual
Appellants failed to report income in the amounts of $24,614, $55,436, $63,475,
$66,529, and $32,118 in the 1997, 1998, 1999, and 2000 taxation years
respectively;
c)
Whether the Minister
properly assessed gross negligence penalties with respect to the Appellants’
unreported income in 1997, 1998, 1999 and 2000 taxation years; and
d)
Whether issue estoppel
prevents the Minister from reassessing the Appellants for the Years in Issue
and from assessing gross negligence penalties.
[11]
I am not satisfied that
there are no material facts in dispute between the parties. As an example, it
is the Appellants’ position that the accurate amount of income earned by them
in the Years in Issue has been finally determined in the BC Court. The Reasons
for Judgment from the criminal prosecution do not support this assertion. I
note from those Reasons for Judgment that the Crown did not lead evidence on
the amount of tax it alleged was evaded and Carlgren J., who presided at the
hearing, found that the amount of tax evaded and the amount of income
underreported were mere surplusages to the charges laid. He stated:
I will convict if I’m satisfied of all essential ingredients of each
count, without regard for whether the Crown has proven the specific amounts
alleged in counts 17 and 22.[1]
[12]
The focus of the BC
Court with respect to the charges was whether the Corporation misstated
revenues, and if it did, whether there was intent to evade taxes.
[13]
At the criminal
prosecution, there were records which the Crown was not permitted to introduce.
Based on the evidence before him, Carlgren J. found that he was not satisfied
beyond a reasonable doubt that the revenue amounts alleged by the Crown were any
more reasonable than those submitted by the Appellants.
[14]
At the hearing of these
appeals, the Tax Court Judge will be in the best position to determine the
admissibility of the evidence and the relevant weight to be assigned to that
evidence. The issues under appeal will be decided on a balance of
probabilities, a completely different standard than was used by the BC Court.
[15]
The BC case is not
conclusive of the issues that will be before the Tax Court.
[16]
For these reasons the
application is dismissed with costs to the Respondent.
Signed at Ottawa, Canada, this 24th day of March 2010.
“V.A. Miller”
Email this Content