Date: 20090316
Docket: A-385-08
Citation: 2009 FCA 83
CORAM: LÉTOURNEAU
J.A.
NADON
J.A.
TRUDEL
J.A.
BETWEEN:
KATHRYN KOSSOW
Appellant
and
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
LÉTOURNEAU J.A.
Issues on appeal
[1]
This is an
appeal from an interlocutory decision of V. Miller T.C.C.J. (judge) rendered on
July 2008. The appellant takes issue with the judge’s ruling regarding her
motion to:
a) strike
some of the pleadings on the basis that they contain evidence, conclusions of
law or allegations of fact about third parties that the appellant does not
know;
b) shift to the Minister the onus of proof of
certain assumptions of fact made by him; and
c) direct
the respondent to answer a number of identified questions and undertakings and
the respondent’s nominee to re-attend at the respondent’s expenses for a
continuation of the discovery.
[2]
Before I proceed
to analyze the decision of the judge, I need to address two motions made to the
panel by the appellant at the hearing.
Motion to obtain leave to file new
evidence on appeal
[3]
Pursuant
to some discovery which occurred as a result of the judge’s interlocutory
order, the appellant filed a motion to be authorized to file new evidence on
appeal consisting of three affidavits with eight exhibits. The motion record
then contained 200 pages: see reasons for order of Evans J.A. issued on January
29, 2009, 2009 FCA 26.
[4]
Evans J.A.
dismissed the appellant’s motion but allowed her to renew it at the start of
the hearing of her appeal as he felt that the panel would be in a better
position to assess the relevancy of that evidence to the merit of the appeal.
[5]
The appellant
had ample time to file her motion between January 29, 2009 and March 11, 2009
which was the date fixed for the hearing of the appeal.
[6]
On March
5, 2009, on the Thursday afternoon, a mere six days before the hearing of the
appeal, the appellant filed her motion to obtain leave to introduce new
evidence on appeal.
[7]
However,
this time the motion consisted of no less than four volumes totalling 1189
pages. In great haste, the respondent prepared a motion record in response and
had it delivered by hand to the appellant and this Court on March 10, the eve
of the hearing.
[8]
The
appellant’s motion was presented at the beginning of the hearing of the appeal
scheduled for two hours on March 11. The panel accepted the respondent’s motion
record for filing.
[9]
We heard
the submissions of the parties and took the motion under advisement in order to
proceed to the hearing of the appeal.
[10]
The motion
in fact deals with new issues that were not raised before the Tax Court of
Canada. There is a motion pending in the Tax Court of Canada regarding the same
material filed before us. In addition, the motion before us deals with some
issues that have not been made the subject of the appeal. For example, the
notice of appeal seeks no relief against the judge’s refusal to direct the
respondent to file a further affidavit of documents pursuant to Rule 82 of the Tax
Court of Canada Rules (General Procedure). Any material in the appellant’s
motion record relating to this issue is irrelevant.
[11]
In any
event, the appellant has failed to convince us that the new material she wants
to file is necessary to dispose of the interlocutory appeal or would even be of
any assistance in determining the merit of this appeal.
[12]
For these
reasons, the motion will be dismissed with costs in the amount of $3,000
payable forthwith to the respondent. The costs are fixed at this amount because
of the late filing of voluminous material by the appellant which required
counsel for the respondent to incur additional costs to appraise themselves of
this material over the weekend and produce a timely response to the appellant’s
motion.
Motion to amend the notice of appeal
[13]
At the
close of her submissions on appeal, counsel for the appellant made an
unannounced motion to amend the notice of appeal so as to include therein as
relief an order from this Court directing the respondent to produce a new and
better list of documents pursuant to Rule 82 of the Tax Court of Canada
Rules (General Procedure).
[14]
The effect
of this late amendment was to add a new ground of appeal for which there are
neither a supporting motion record nor submissions in the appellant’s
memorandum of fact and law (paragraph 87 of the memorandum is a mere reference
to the motion to adduce new evidence which was dismissed).
[15]
Counsel
for the respondent properly objected to this motion alleging surprise and
prejudice. For that reason and in view of the conclusion that this Court comes
to on the merit of the appeal, the motion will be dismissed.
The judge’s refusal to strike the
pleadings
[16]
The judge
concluded that the impugned pleadings were irregularities under Rule 7 of the Tax
Court of Canada Rules (General Procedure) which did not mandate that they
be declared a nullity.
[17]
Furthermore,
she found that the appellant pleaded over the reply and implicitly accepted the
irregularities. As a matter of fact, the appellant did not bring a motion to
strike until two and a half years after obtaining knowledge of these
irregularities. The appellant’s counsel required production of documents and
later made a demand for particulars in relation to the very subparagraphs of
the pleadings that she now seeks to strike out. She also conducted the
examination for discovery of the respondent’s nominee. She took fresh steps
which covered the irregularities.
[18]
I see no
error in the judge’s exercise of her discretion pursuant to Rule 8 of the Tax
Court of Canada Rules (General Procedure) to deny leave to attack the
pleadings in these circumstances.
The judge’s refusal to shift the burden
of proof on the assumptions of fact
[19]
The
appellant argued before the judge that the onus of proof with respect to the
allegations in many of the assumptions of fact made by the Minister should
shift to him because she alleges that she does not know or have control over
the third parties involved in the Minister’s assumptions about the existence of
a scheme. Alternatively, she contends that the assumptions are irrelevant and
should be stricken because they do not pertain to her. Another avenue would be
for us, she says, to order that these allegations be removed from the
assumptions of fact and be put as allegations in a different location in the
pleadings, the effect of which would be to place the onus of proof on the
Minister.
[20]
After
analyzing the submissions of the parties, the evidence before her and the case
law, the judge came to the conclusion that the trial judge would be in a much
better position to appreciate whether the burden of proof should be shifted to
the Minister in relation to some of the assumptions of fact.
[21]
At
paragraph 45 of her reasons from judgment, she quotes the following excerpt
from Bowman A.C.J.T.C.C. in Mungovan v. The Queen, 2001 TCC 568, at
paragraphs 10, 12 and 14:
[10] Assumptions are
not quite like pleadings in an ordinary lawsuit. They are more in the nature of
particulars of the facts on which the Minister acted in assessing. It is
essential that they be complete and truthful. The conventional wisdom is they
cast an onus upon an appellant and as Mr. Mungovan observes with some
considerable justification they may force him to endeavour to disprove facts
that are not within his knowledge. Superficially this may be true, but this is
a matter that can be explored on discovery. The trial judge is in a far
better position than a judge hearing a preliminary motion to consider what
effect should be given to these assumptions. The trial judge may consider them
irrelevant. He or she might also decide to cast upon the respondent the onus of
proving them. The rule in M.N.R. v. Pillsbury Holdings Ltd., 64 DTC
5184, is a rule of general application but it is not engraved in stone. …
…
[12] It is entirely
possible, as Mr. Mungovan points out, that some of the impugned assumptions are
irrelevant. This is a matter for the trial judge to determine after the
evidence has been presented. It is not a matter that can or should be
determined on a preliminary motion to strike. It may well be that the
paragraphs contain allegations that lie exclusively within the respondent's
knowledge. It is a matter for the trial judge to determine whether the onus
should be cast upon the respondent to establish them. …
…
[14] The trial judge
may well decide that the Crown has some onus that goes beyond the mere
recitation of a bald assumption. The weight to be put on these paragraphs is a
matter for the trial judge, as is the onus of proof. This is not, however, a
reason for striking the paragraphs before trial.
[Emphasis added]
[22]
In a
subsequent case bearing much similarity with the appellant’s case, Gould v. The
Queen, 2005 TCC 556, at paragraphs 21 and 22, Chief Justice Bowman wrote:
[21] With respect, I
am unable to ascribe to either the Status-One decision or the case which it
followed, The Queen v. Global Communications Limited, 97 DTC 5194, the effect
contended for by counsel for the appellant. A central component in the
assessment which disallowed the charitable donations is the existence of a
“scheme” in which it is alleged that the appellant participated and which
enabled the participants to obtain what the Crown sees as artificial or
inflated charitable tax credits. It of necessity involved third parties and if
the existence of a scheme is essential to the Crown’s case it should be able to
plead and prove all of the components of the scheme. To say, as the appellant
does, that Global and Status-One preclude any reference to third party
transactions unless the appellant knows of or is privy to those transactions
goes too far. If the existence of a scheme is germane to the disallowance it
cannot be ignored whether or not the Minister assumed that the appellant knew
about or was a party to the third party transactions that, according to the
Reply, were an integral part of the scheme. If any of the facts assumed are
truly within only the Crown’s knowledge the Crown probably has the onus of
proving them although this is ultimately for the trial judge to decide.
[22] I might observe that the complaint that
is usually made is that the Crown has not pleaded all of the material
assumptions or has not pleaded assumptions that assist the appellant. Here the
reverse is true. The appellant is complaining that too many assumptions are
pleaded. It would seem to me that if an assessment is based on assumptions that
are irrelevant, contradictory or illogical, as the appellant alleges, this
could arguably form a cogent basis for attacking the assessment. If those
assumptions are removed from the Reply the appellant has deprived himself of
one of the weapons in his arsenal. Why he would wish to do so escapes me. There
is a danger that one can, in getting too engrossed in technical minutiae, lose
sight of the substantial tactical advantage of forcing the Crown to live with
its own pleadings. There is much to be said for the venerable rule about not
educating your opponent.
[Emphasis added]
See also Stanfield v. The Queen, 2007 TCC 480.
[23]
Having the
benefit of all the evidence, the trial judge will be able to appreciate the
fairness of the assumptions and provide the necessary relief should it turn out
that they work unfairly to the detriment of the appellant: see Canada v. Anchor Pointe Energy Ltd., 2007 FCA 188, at paragraph
36; Transocean Offshore Ltd. v. Canada, 2005 FCA 104, at paragraph 35. I
agree with the judge that it is premature to shift the onus of proof.
The
judge’s refusal to direct the respondent to answer a number of identified
questions and undertakings and the respondent’s nominee to re-attend at the
respondent’s expense for a continuation of the discovery
[24]
Before
proceeding to a review of the questions submitted for discovery, the judge laid
down the legal principles that should govern this review, supported by the
applicable legislation and jurisprudence. I see no error in her approach. It is
not the role of this Court to second guess her appreciation of the relevancy of
the questions, the appropriateness of allowing follow-up questions and the
adequacy of the answers given unless there has been a misuse of her discretion
or an error in principle on her part: Beloit Canada Ltd. v. Valmet Oy
(1992), 45 C.P.R. (3d) 116 (F.C.A.).
[25]
As for the
appellant’s request that the discovery process continue, the judge noted that
there had been extensive discovery. “At some point in time”, she writes at
paragraph 66 of her reasons for judgment, “discoveries must end so that the
parties can get ready for the trial in this matter. That time has arrived”. In
the exercise of her discretion, she was entitled to put an end to the discovery
process: see Canada v. Aventis Pharma Inc., 2008 FCA 316.
Conclusion
[26]
For these
reasons, I would dismiss the appeal with costs. The motion to amend the notice
of appeal will be dismissed. The motion to obtain leave to file new evidence on
appeal will be dismissed with costs fixed at $3,000 payable forthwith to the
respondent.
“Gilles
Létourneau”
“I
agree
M.
Nadon J.A.”
“I
agree
Johanne
Trudel J.A.”
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