Date: 20130416
Docket: A-297-12
Citation: 2013 FCA 102
CORAM: BLAIS
C.J.
PELLETIER
J.A.
TRUDEL J.A.
BETWEEN:
CLAUDE MERCURE
Appellant
and
Her Majesty the
Queen
Respondent
REASONS FOR JUDGMENT
PELLETIER J.A.
[1]
How must a trial
judge respond, in order to ensure the right to procedural fairness, when a taxpayer,
without understanding the implications, makes an admission that determines the
outcome of his appeal? This is the main issue in this appeal. The secondary
issue involves the right of the appellant, Mercure, to a rebate of the tax paid
pursuant to the construction of his new house.
[2]
Mercure and his
spouse decided to build themselves a new house. They were the contractors, i.e.,
they hired the usual subcontractors (plumbers, electricians, etc.) and
performed any work they could themselves.
[3]
Aware of the
possibility of a rebate on the Goods and Services Tax (GST) paid for construction
materials, Mercure contacted the Canada Revenue Agency (CRA) to find out how to
proceed and specifically inquired about the deadlines for filing his
application. Mercure testified that he had been told that the rebate had to be
claimed no later than two years [translation]
“from the date the house is suitable for habitation” (Appeal Book, p. 24). When
he asked what [translation] “suitable
for habitation” meant exactly, he was told the following:
[translation]
Think of yourself as a promoter building a house where the landscaping
isn’t done and stuff like that, and you walk into a house like that, like a model
house, and that gives you an idea of a house that is suitable for habitation.
Appeal Book, p. 24.
[4]
This explanation is
more or less caught by subsection 256(3) of the Excise Tax Act, R.S.C.
1985, c. E-5 (the Act), which reads as follows:
(3) A rebate
under this section in respect of a residential complex shall not be paid to an
individual unless the individual files an application for the rebate on or
before:
(a) the day (in this subsection referred to
as the “due date”) that is two years after the earliest of
(i) the day
that is two years after the day on which the complex is first occupied as
described in subparagraph (2)(d)(i),
(ii) the day
on which ownership is transferred as described in subparagraph (2)(d)(ii),
and
(iii) the day
on which construction or substantial renovation of the complex is substantially
completed; or
(b) any day after the due date that the
Minister may allow.
[5]
It is common ground that the applicable provision in this case is
subparagraph 256(3)(a)(iii). The issue arises from the fact that Mercure filed his claim
when he believed his house to be suitable for habitation, while the
test set out by the Act refers to construction or renovations that are
“substantially completed”.
[6]
Aware of the fact that the clock was ticking and that work on the house
had slowed down with the arrival of a second child, Mercure decided that his
house had become suitable for habitation in September 2007, upon the completion
of the construction and furnishing of his first child’s bedroom. He therefore
submitted his application for the rebate in July 2009, less than two years
after his house, on his own understanding, had become suitable for habitation.
His application was denied on the grounds that it was filed after the time
limit.
[7]
Mercure appealed from that decision to the Tax Court of Canada, 2012 TCC
148. In his reply to the notice of appeal, the Minister of Revenue, on behalf
of Her Majesty the Queen, set out his assumptions of fact:
[translation]
11. In denying the application for rebate, the
Minister based himself on the following conclusions and assumptions of fact:
. . .
(e) The appellant acknowledged that he
moved into the building in April 2006;
. . .
(i) The invoices submitted by the appellant were
checked during the verification carried out by the respondent;
(j) The respondent noted that the cost of the work
from the start of construction to December 31, 2006 amounted to $182,572.24;
(k) The respondent noted that the cost of the work in
2007, for the purchase of exterior stones, mouldings and ceramics, amounted to
$2,389.50;
(l) The respondent noted that the cost of the work in
2008, for the purchase of paint, sod and exterior membranes, amounted to
$2,463.20;
(m) The respondent noted that the cost of the work in
2009, for the purchase of paint and lighting fixtures, amounted to $191.60;
(n) Consequently, the work performed after 2006 was
minimal and the house was substantially completed in December 2006.
[8]
When Mercure appeared before the Tax Court of Canada, the judge asked
him whether he admitted or denied each of the Minister’s assumptions of fact, or
did not know. Mercure admitted all of the Minster’s assumptions of fact. After
Mercure had admitted the assumption appearing at paragraph 11(n), the judge asked:
HIS HONOUR: And the controversy: do you understand
what is primarily in dispute?
MR. MERCURE: Yes
Appeal Book, pp. 20-21
[9]
This question indicates that the judge immediately understood the
implications of this admission.
[10]
After this exchange, the judge explained to Mercure that he had the
“burden of proof”, i.e., that it was incumbent on him to show that his claims
were well founded. Mercure therefore testified and was cross-examined on the
facts that led him to believe that his house had not become suitable for
habitation until September 2009.
[11]
The Tax Court
of Canada judge rendered a written decision three months after the hearing. He
began by setting out the facts as they had been related by Mercure. He then
reproduced the portion of the transcript in which Mercure concedes the truth of
all the Minister’s assumptions of fact. The judge therefore decided the issue
as follows:
17. The appellant is someone who grasps matters
quickly and thoroughly. He is very organized and articulate. He was also very
well prepared. In the light of that, I cannot set aside his admissions, which
are very clear.
. . .
19. . . . In this case, the appellant
made an admission that left no room for ambiguity or interpretation. That
admission clearly pinpoints the date from which the time limit is calculated.
20. . . . The appellant himself
identified, through his admissions, the date from which the time limit was
calculated.
21. Consequently, the appeal must be denied since the
claim was filed after the expiry of the time limit specified by the Act.
[12]
It is clear
that the admission to which the judge is referring in his reasons is that
relating to paragraph 11(n), according to which [translation] “the house was
substantially completed in December 2006”.
[13]
Mercure appealed
from the decision, challenging the approach taken by the Tax Court of Canada
judge. He alleges that the judge, who did not make him aware of the effect of
his admission of paragraph 11(n), denied him his right to procedural
fairness. He also alleges that everything that happened after that point
demonstrated that he had never accepted that the end of December 2006 was the
relevant date for calculating the time limit for filing his claim. He concludes
with the argument that, because the judge failed to draw his attention to the
effect of the admission of paragraph 11(n), the judge should have decided the issue
on the basis of his testimony and should not have given his admission the effect
that he gave it.
[14]
On the
merits, Mercure continues to argue that the date from which the time limit for
filing his claim should have been calculated was late September 2007. He relies
on photos of the interior of the house, taken after December 2006, showing
the extent to which the work remained incomplete.
[15]
Although
these are not his words, the impression created by Mercure’s submissions is
that he felt he had been set up by the Tax Court of Canada judge. He was led to
making an admission whose implications he did not understand, without being
given an opportunity to withdraw it or to explain what he meant. He argues
rather compellingly that he was deprived of his right to procedural fairness.
[16]
As this Court
wrote at paragraph 23 of Wagg v. Canada, 2003 FCA 303, [2004] F.C.R. 206:
Litigants represent themselves for a variety of reasons. If they
come to realize before the commencement of trial that they have underestimated
the complexity of the task before them, it is in their interest and the Court’s
to allow them to obtain representation. But once a trial is underway, I do not
think it unfair to hold appellants to their choice to represent themselves, and
to be guided by their own judgment.
[17]
In this case, Mercure should
have looked at section 256 of the Act, which governs his claim. Had he done so,
he would have seen and read the statement, “at the time the construction or
substantial renovation thereof is substantially completed” and would have been
in a position to understand the significance of the judge’s question as to
whether paragraph 11(n) of the reply
to the notice of appeal was true or false. The fact that Mercure prepared his
case on the basis of the phrase [translation]
“suitable for habitation” is understandable, but this explanation does not
relieve Mercure of his duty, as a self-represented litigant before the Court,
to familiarize himself with the law whose application he is challenging.
[18]
However, Mercure is rightly critical of everything
that followed his unfortunate admission. The Tax Court of Canada judge seems to
have been, or should have been, aware of the fact that this admission
eliminated any hope that the appeal would succeed. Therefore, why allow Mercure
to make a case whose purpose was to undermine or circumvent his own admission?
To the extent that the law of Quebec applied, according to section 40 of
the Canada Evidence Act, R.S.C. c. C-5, it was not open to Mercure to
contradict his own admission. Such is the effect of article 2852 of the Civil
Code of Quebec. In La preuve civile, 4th ed., Cowansville, Éditions Yvon Blais, 2008, Jean-Claude Royer summarizes the doctrine and
case law on this issue as follows:
[translation]
895 – Inadmissibility of contrary evidence – A judicial admission
that has not been revoked constitutes full and exclusive evidence. The author
of the admission may not give contrary evidence. It would be inconceivable to
authorize a litigant to prove the opposite of what he has admitted before the
court. Moreover, a judicial admission may only be revoked if it has been made
through an error of fact.
[19]
It was open to the Tax Court of Canada judge to
ask Mercure whether he admitted or denied the Minister’s assumptions of fact or
did not know. However, when Mercure admitted that the construction of his house
had been substantially completed in December 2006, the judge had a duty to
explain to him that he could not adduce evidence that contradicted his own
admission. The judge also had a duty to inform him that his appeal would have
to be dismissed on the strength of that admission.
[20]
Such an explanation would have enabled Mercure
to respond and to make submissions about the scope and substance of his
admission, which would have led to either the revocation of the admission and
the continuation of the trial or a pronouncement of the judgment dismissing the
appeal. In either case, Mercure would have had an opportunity to be heard on
these points. By proceeding as he did, the Tax Court of Canada judge deprived
Mercure of his right to be heard on the issue that became, without Mercure’s
knowledge, the determinative issue of his appeal, and the judge therefore
denied him his right to procedural fairness.
[21]
It remains to be decided to what remedy
Mercure is entitled. As a general rule, in the case of a breach of procedural
fairness, the court does not consider whether the breach had an effect on the
outcome of the dispute. The mere fact that a breach of procedural fairness
occurred is enough to warrant a new trial. This general rule has only one
exception, which is the case in which the question before the court has an
inevitable answer: see Mobil Oil Canada Ltd. v. Canada-Newfoundland
Offshore Petroleum Board, [1994] 1 S.C.R. 202 at
paras. 50-54.
[22]
It appears that we are
faced with such a question. Even if Mercure’s admission regarding paragraph 11(n)
were to be set aside, the fact remains that the expenses incurred by the end of
December 2006 amounted to $182,572.24. The total expenses incurred by the
end of 2009 amounted to $187,616.54, which means that 97.3% of the total expenses
connected with the construction of the house were incurred by
December 2006. While Mercure did store a certain amount of supplies in his
garage, as he argued before this Court, the high percentage of the expenses incurred
by the end of 2006 leaves no room for doubt that the construction of the house
was substantially completed in December 2006. The photographs of the state
of the interior of the house and various times after December 2006 filed
into evidence by Mercure are not determinative, because the Act requires only
that the construction be substantially completed, not fully completed.
[23]
For these reasons, I would
dismiss this appeal, but without costs.
“J.D. Denis Pelletier”
“I concur.
Pierre Blais C.J.”
“I concur.
Johanne
Trudel, J.A.”
Certified true translation
François Brunet, Revisor
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