Guy
Tremblay
[TRANSLATION]:—The
case
at
bar
was
heard
at
Montreal,
Quebec
on
June
8,
1977.
1.
Point
at
Issue
It
must
be
decided
whether
the
respondent
is
correct
in
including
in
the
appellant’s
income
for
the
1969
taxation
year
the
sum
of
$65,810.42,
or
half
the
undistributed
income
on
hand
of
Riverains
Transport
Inc
following
the
sale
by
the
appellant
of
his
shares
in
Riverains
Transport
Inc.
2.
Burden
of
Proof
The
appellant
has
the
burden
of
showing
that
the
respondent’s
assessment
is
unjustified.
This
burden
of
proof
derives,
not
from
one
particular
section
of
the
Income
Tax
Act
but
from
a
number
of
judicial
decisions,
including
the
judgment
delivered
by
the
Supreme
Court
of
Canada
in
R
W
S
Johnston
v
MNR,
[1948]
CTC
195;
3
DTC
1182.
3.
Facts
3.1
Until
July
1969,
the
appellant
owned
50%
of
the
shares
in
Riverains
Transport
Inc,
or
20
common
shares
issued.
Mr
Marcel
Guimond
owned
the
other
50%.
This
company,
which
owned
about
100
buses,
had
as
its
object
the
transportation
of
school
children.
3.2
Mr
Marcel
Guimond
had
the
position
of
president
of
the
company
and
managed
it.
The
appellant,
as
well
as
being
vice-president,
was
in
charge
of
maintenance
of
the
hundred
buses.
3.3
During
the
three
years
which
preceded
the
sale
of
the
appellant’s
shares,
evidence
was
presented
that
there
was
almost
constant
dis-
agreement
between
the
two
shareholders
in
the
company.
According
to
the
appellant,
one
of
the
causes
was
that
Mr
Guimond
took
decisions
alone,
without
his
consent.
3.4
Because
of
this
situation,
as
far
back
as
1967
the
appellant
requested
his
lawyer
for
a
legal
opinion.
It
appears
from
this
opinion,
which
is
six
pages
long,
dated
November
6,
1967,
and
filed
as
No
A-1,
that
the
appellant
wished
to
know
his
legal
position
in
relation
to
his
partner,
having
regard
to
the
law,
the
regulations
and
a
signed
agreement
between
the
two
parties.
Two
sentences
written
by
the
author
of
the
legal
opinion
speak
for
themselves
about
the
character
of
the
relations
between
the
appellant
and
Mr
Guimond:
However,
if
a
permanent
deadlock
develops,
one
solution
would
be
to
submit
an
application
for
the
liquidation
of
the
company.
This
is
obviously
an
extreme
solution,
but
one
which
is
available
in
circumstances
in
which
it
is
impossible
for
the
company
to
continue
to
act.
3.9
The
disagreement
became
more
and
more
bitter
until
finally
Mr
Marcel
Guimond
said
to
the
appellant:
“Buy
me
out
or
I'll
buy
you
out.’’
He
is
supposed
to
have
said
this
in
the
early
months
of
1969.
3.6
It
was
during
this
period,
according
to
the
witness
Geoffrey
Markus,
CA,
management
consultant
to
Mr
Guimond,
that
the
financial
institution
RoyNat
Ltd,
which
had
been
approached
about
refinancing
the
buses,
refused.
It
said
it
was
willing
to
agree
only
if
Mr
Guimond
bought
Mr
Champagne’s
shares.
3./
On
March
25,
1969,
following
a
series
of
interviews,
RoyNat
Ltd
made
an
offer
of
financing
(Exhibit
I-1)
to
Riverains
Transport
Inc.
This
letter
was
addressed
to
the
company
marked
“confidential”,
for
the
attention
of
Mr
Marcel
Guimond.
In
this
offer
of
financing
by
two
series
of
obligations,
A
and
B,
there
appear
the
following
conditions:
The
proceeds
of
these
obligations
will
be
used
to
implement
the
following
plan
.
.
.
—
refinancing
of
all-existing
liens;
—
purchase
of
preferred
shares
in
the
Cie
de
Gestion
Marcel
Guimond
Ltée
(to
be
incorporated);
this
company
must
use
the
proceeds
from
the
sale
of
these
preferred
shares
to
buy
50%
of
the
common
shares
in
Riverains
Transport
Inc.
These
shares
were
obviously
the
ones
held
by
the
appellant.
RoyNat
Ltd
allowed
until
March
31,
1969
for
the
offer
to
be
accepted.
3.8
The
appellant,
for
his
part,
does
not
recall
ever
hearing
about
this
document.
3.9
Minutes
of
directors’
and
shareholders’
meetings
dated
April
10,
1969
(photocopies
of
which
were
field
jointly
as
No
A-4,
with
five
other
sets
of
minutes)
show
that
the
offer
of
financing
made
on
March
25,
1969
was
accepted.
According
to
the
appellant,
he
only
signed
these
minutes
on
July
31,
1969.
3.10
After
discussions
with
his
lawyers
on
May
3,
1969,
the
appellant
made
Mr
Marcel
Guimond
an
offer
to
purchase
his
shares
(filed
as
No
A-2)
for
the
amount
of
$2,000.
Mr
Guimond
was
to
study
the
document
and
reply
before
noon
on
June
25,
1969.
3.11
On
June
16,
1969
the
appellant
and
his
lawyers
made
Mr
Guimond
another
offer
(Exhibit
A-3).
This
offer
is
exactly
like
that
of
May
3,
1969,
except
on
one
point.
The
first
offer
contained
the
following
clause
in
paragraph
5:
5.
This
offer
is
made
on
the
express
condition
that
upon
accepting
it
you
will
provide
me
with
a
copy
of
the
undertaking
of
RoyNat
Ltd
(hereinafter
called
“the
offer
of
financing’’),
to
you
or
to
a
company
to
be
incorporated
and
controlled
by
you
on
the
date
of
closure
(hereinafter
called
the
“Management
Company’’):
(a)
to
lend
either
to
you
or
to
the
Management
Company
the
sum
of
$125,000
to
enable
you
to
finance
payment
of
the
price;
(b)
to
make
possible
the
mortgage
provided
for
in
paragraph
9
below.
In
the
second
offer,
made
on
June
16,
1969,
paragraph
(a)
above
has
been
deleted,
and
the
closing
date
is
set
at
July
31,
1969.
Furthermore,
both
offers
contain
the
following
conditions
of
payment:
$10,000
upon
acceptance
of
the
offer,
$140,000
at
the
time
of
Sale
and
$50,000
in
five
annual
and
consecutive
payments,
at
an
interest
rate
of
9
/4%.
3.12
On
June
27,
1969
a
trust
deed
containing
about
75
pages,
filed
as:
Exhibit
I-3,
was
signed.
It
was
registered
on
July
2,
1969,
as
No
315,184.
The
title
of
the
deed
describes
its
nature:
“Trust
deed
of
a
pledge
and
security
mortgage
guaranteeing
first
mortgage
obligations
of
Riverains
Transport
Inc
in
favour
of
The
Canada
Trust
Company.”
This
trust
deed
bears
the
signature
of
Marcel
Guimond
and
Colette
Champagne
for
Riverains
Transport
Inc.
Placements
Guimond
Inc
also
acted
as
guarantor.
3.13
On
June
25,
Mr
Guimond
accepted
the
appellant’s
offer.
3.14
Mr
Guimond’s
testimony
confirms
the
appellant’s,
to
the
effect
that
the
latter
took
no
part
in
the
negotiations
between
RoyNat
Ltd
and
Riverains
Transport
Inc.
“I
was
the
one
who
was
buying
out
Champagne,
he
wasn’t
involved
in
it.’’
3.15
According
to
the
testimony
of
Mr
Michel
Gendron,
director
of
the
Montreal
branch
of
RoyNat
Ltd,
and
that
of
Mr
Geoffrey
Markuez,
CA,
Mr
Guimond’s
adviser,
the
appellant
was
not
involved
in
any
way
in
the
discussions
between
RoyNat
Ltd
and
Riverains
Transport
Inc,
even
though
the
purpose
of
these
discussions
was,
inter
alia,
to
refinance
the
buses
and
to
find
a
way
to
borrow
money
to
buy
the
appellant’s
shares.
3.16
According
to
Mr
Geoffrey
Markuez,
CA,
since
he
and
Mr
Guimond
were
not
experienced
in
this
kind
of
business,
RoyNat
advised
them
to
consult
a
law
firm
which
was
familiar
with
this
type
of
financing
and
would
provide
a
formula
which
would
be
acceptable
to
RoyNat.
Incidentally,
this
law
firm
was
the
same
one
which
had
given
the
appellant
a
legal
opinion
on
November
6,
1967.
3.17
For
the
purpose
of
financing
the
purchase
of
shares,
a
company
entitled
“Placements
Guimond
Inc’’
was
formed.
However,
RoyNat
Ltd
did
not
wish
to
lend
to
this
company,
according
to
Mr
Markuez.
It
would
only
lend
to
Riverains
Transport
Inc.
It
was
then
decided
that
Riverains
Transport
Inc
would
use
part
of
the
borrowed
money
to
buy
$140,000
worth
of
shares
in
Placements
Guimond
Inc,
and
the
latter
company
would
buy
the
appellant’s
shares.
This
condition
appears
on
the
Offer
of
RoyNat
Ltd
dated
March
25,
1969,
cited
above.
3.18
In
order
to
complete
the
transactions
legally,
a
series
of
meetings
of
the
provisional
directors,
shareholders
and
permanent
directors
of
Placements
Guimond
Inc
took
place
on
June
27,
1969.
The
minutes
of
these
meetings
were
filed
jointly
as
No
1-17.
The
permanent
directors
of
this
company
also
held
two
meetings
on
August
1,
1969;
the
minutes
of
these
meetings
were
filed
as
Nos
I-6
and
I-7.
3.19
The
directors
and
shareholders
of
Riverains
Transport
Inc
held
meetings
on
August
1,
with
a
view
to
completing
the
transactions.
The
minutes
of
these
meetings
were
filed
jointly
as
No
A-4,
along
with
the
minutes
of
April
10,
1969.
3.20
According
to
his
testimony,
the
appellant
met
with
the
representatives
of
RoyNat
Ltd,
Mr
Guimond’s
lawyers
and
his
own
lawyers
on
July
31,
1969.
It
is
only
then
that
he
is
supposed
to
have
become
personally
acquainted
with
the
agreements
concerning
the
transactions.
3.21
However,
evidence
was
given
that
his
lawyers
were
aware
of
the
various
agreements
and
transactions
between
Riverains
Transport
Inc,
RoyNat
Ltd
and
Placements
Guimond
Inc.
3.22
It
was
proved
that
the
appellant
received
the
sum
of
$10,000
at
the
time
of
acceptance.
It
was
also
proved
that
the
money
borrowed
by
Riverains
Transport
Inc
was
used
to
refinance
all
existing
mortgages
and
liens,
and
that
on
August
1,
1969
400
non-voting
preferred
shares
in
Placements
Guimond
Inc
were
purchased
for
$140,000
by
Riverains
Transport
Inc.
3.23
Furthermore,
on
the
same
day,
August
1,
1969,
Placements
Guimond
Inc
purchased
all
the
shares
which
the
appellant
held
in
Riverains
Transport
Inc
for
$140,000
with
the
cheque
received
from
Riverains
Transport
Inc
after
it
had
been
endorsed
(Exhibit
I-13).
3.24
Mr
Clement
Lussier,
CA,
the
appellant’s
accountant
since
1974,
who
had
been
commissioned,
inter
alia,
to
verify
the
notice
of
assessment
and
to
establish
the
value
of
the
shares
sold,
demonstrated
to
the
Board
that
the
shares
sold
had
an
approximate
value
of
$187,000.
This
figure
was
not
challenged
by
the
respondent.
3.25
On
May
23,
1974,
the
respondent
issued
a
reassessment
which
included
in
the
appellant’s
income
the
sum
of
$72,382.51,
or
half
the
undistributed
income
on
hand
(UIOH)
of
Riverains
Transport
Inc,
basing
this
on
section
138A
of
the
old
Act.
3.26
At
the
beginning
of
the
hearing
before
the
Board,
it
was
agreed
between
the
parties
that
the
undistributed
income
on
hand
of
Riverains
Transport
Inc
was
$131,620.84,
and
therefore
the
respondent
only
included
in
the
appellant’s
income
the
sum
of
$65,810.42,
or
half
the
UIOH.
3.27
On
August
14,
1974
the
appellant
filed
an
objection
to
the
notice
of
reassessment
with
the
respondent.
On
June
19,
1975
the
respondent
notified
the
appellant
that
he
was
maintaining
the
reassessment
issued
on
May
23,
1974.
3.28
On
September
12,
1975
the
appeal
against
the
respondent’s
decision
was
submitted
to
the
Tax
Review
Board.
4.
Act
The
sections
on
which
the
respondent
bases
his
assessment
are
subsections
138A(1),
(3),
paragraph
38(1
)(a),
subsection
8(3),
subsection
81(1)
and
paragraph
139(1
)(a)
of
the
old
Act:
138A.
(1)
Where
a
taxpayer
has
received
an
amount
in
a
taxation
year,
(a)
as
consideration
for
the
sale
or
other
disposition
of
any
shares
of
a
corporation
or
of
any
interest
in
such
shares,
(b)
in
consequence
of
a
corporation
having
(i)
redeemed
or
acquired
any
of
its
shares
or
reduced
its
capital
stock,
or
(ii)
converted
any
of
its
shares
into
shares
of
another
class
or
into
an
obligation
of
the
corporation,
or
(c)
otherwise,
as
a
payment
that
would,
but
for
this
section,
be
exempt
income,
which
amount
was
received
by
the
taxpayer
as
part
of
a
transaction
effected
or
to
be
effected
after
June
13,
1963
or
as
part
of
a
series
of
transactions
each
of
which
was
or
is
to
be
effected
after
that
day,
one
of
the
purposes
of
which,
in
the
opinion
of
the
Minister,
was
or
is
to
effect
a
substantial
reduction
of,
or
disappearance
of,
the
assets
of
a
corporation.^
such
a
manner
that
the
whole
or
any
part
of
any
tax
that
might
otherwise
have
been
or
become
payable
under
this
Act
in
consequence
of
any
distribution
of
income
of
a
corporation
has
been
or
will
be
avoided,
the
amount
so
received
by
the
taxpayer
or
such
part
thereof
as
may
be
specified
by
the
Minister
shall,
if
the
Minister
so
directs,
(d)
be
included
in
computing
the
income
of
the
taxpayer
for
that
taxation
year,
and
(e)
in
the
case
of
a
taxpayer
who
is
an
individual,
he
deemed
to
have
been
received
by
him
as
a
dividend
described
in
paragraph
(a)
of
subsection
(1)
of
section
38.
(3)
On
an
appeal
from
an
assessment
made
pursuant
to
a
direction
under
this
section,
the
Tax
Appeal
Board
or
the
Exchequer
Court
may
(a)
confirm
the
direction;
(b)
vacate
the
direction
if
(i)
in
the
case
of
a
direction
under
subsection
(1),
it
determines
that
none
of
the
purposes
of
the
transaction
or
series
of
transactions
referred
to
in
subsection
(1)
was
or
is
to
effect
a
substantial
reduction
of,
or
disappearance
of,
the
assets
of
a
corporation
in
such
a
manner
that
the
whole
or
any
part
of
any
tax
that
might
otherwise
have
been
or
become
payable
under
this
Act
in
consequence
of
any
distribution
of
income
of
a
corporation
has
been
or
will
be
avoided;
or.
(ii)
in
the
case
of
a
direction
under
subsection
(2),
it
determines
that
none
of
the
main
reasons
for
the
separate
existence
of
the
two
or
more
corporations
is
to
reduce
the
amount
of
tax
that
would
otherwise
be
payable
under
this
Act;
or
(c)
vary
the
direction
and
refer
the
matter
back
to
the
Minister
for
reassessment.
38.
(1)
An
individual
who
was
resident
in
Canada
at
any
time
in
a
taxation
year
may
deduct
from
the
tax
otherwise
payable
under
this
part
for
a
taxation
year
20%
of
the
amount
by
which
(a)
the
aggregate
of
all
dividends
received
by
him
in
the
year
from
taxable
corporations
in
respect
of
shares
of
the
capital
stock
of
the
corporations
from
which
they
were
received
and
of
all
dividends
that
he
is,
by
subsection
(3)
of
section
8
and
section
81,
deemed
to
have
received
from
such
corporation
in
the
year,
to
the
extent
that
the
dividends
so
received
or
so
deemed
to
have
been
received,:as
the
case
may
be,
were
included
in
computing
his
income
for
the
year,
8.
(3)
An
annual
or
other
periodic
amount
paid
by
a
corporation
to
a
taxpayer
in
respect
of
an
income
bond
or
income
debenture:
shall
be
deemed
to
have
been
received
by
the
taxpayer
as
a
dividend
unless
the
corporation
is
entitled
to
deduct
the
amount
so
paid
in
computing
its
income.
81.
(1)
Where
funds
or
property
of
a
corporation
have,
at
a
time
when
the
corporation
had
undistributed
income
on
hand,
been
distributed
or
otherwise
appropriated
in
any
manner
whatsoever
to
or
for
the
benefit
of
one
or
more
of
its
shareholders
on
the
winding-up,
discontinuance
or
reorganization
of
its
business,
a
dividend
shall
be
deemed
to
have
been
received
at
that
time
by
each
shareholder
equal
to
the
lesser
of
(a)
the
amount
or
value
of
the
funds
or
property
so
distributed
or
appropriated
to
him,
or
(b)
his
portion
of
the
undistributed
income
then
on
hand.
139.
(1)
In
this
Act,
(a)
“amount”
means
money,
rights
or
things
expressed
in
terms
of
the
amount
of
money
or
the
value
in
terms
of
money
of
the
right
or
thing;
5.
Precedents
Only
one
judgment
has
been
delivered
concerning
an
assessment
based
on
subsection
138A(1)
of
the
old
Act
or
subsection
247(1)
of
the
new
Act.
This
was
the
case
of
Giguère
et
al
v
MNR,
[1972]
CTC
2466;
72
DTC
1392.
6.
The
problem
of
the
direction
6.1
Subsection
138A(3)
cited
above
makes
it
quite
clear
that
this
Board
is
hearing
an
appeal
“from
an
assessment
made
pursuant
to
a
direction
under
this
section’’.
No
evidence
was
presented
to
the
Board
that
such
a
direction
existed.
What
is
the
nature
of
this
direction?
By
whom
should
it
be
issued?
Can
it
be
merely
verbal
or
must
it
be
written?
Must
this
direction
be
proved?
If
so,
who
has
the
burden
of
proof,
the
appellant
or
the
respondent?
Can
subsection
9(2)
of
the
Tax
Review
Board
Act,
dealing
with
the
administration
of
evidence,
be
applied
to
such
a
case?
6.2
Under
the
old
and
the
new
Acts,
not
all
assessments
must
be
issued
under
a
direction.
For
ordinary
assessments,
subsection
46(1)
of
the
old
Act
and
subsection
152(1)
of
the
new
Act
simply
say
this:
The
Minister
shall,
with
all
due
despatch,
examine
each
return
of
income
and
assess
the
tax
for
the
taxation
year
and
the
interest
and
penalties,
if
any,
payable.
In
point
of
fact,
only
in
parts
dealing
with
“tax
evasion”
does
one
find
these
assessments
established
according
to
a
direction,
that
is,
in
Part
VI
of
the
old
Act
and
Part
XVI
of
the
new
Act.
Subsections
246(5)
and
247(3)
of
the
new
Act,
like
subsections
138(5)
and
138A(3)
of
the
old
Act,
give
to
the
appropriate
tribunals
the
power
of
confirming,
vacating
or
varying
the
direction.
Can
this
direction
be
verbal?
The
Board
strongly
doubts
this.
How
could
the
Board
confirm,
vacate
or
vary
a
direction
if
it
does
not
know
the
exact
terms?
Is
not
the
best
evidence
written
evidence?
In
the
Board’s
opinion,
subsections
138(1)
of
the
old
Act
and
246(1)
of
the
new
Act
may
provide
the
answer
to
these
questions:
138.
(1)
Where
the
Treasury
Board
has
decided
that
one
of
the
main
purposes
for
a
transaction
or
transactions
effected
before
or
after
the
coming
into
force
of
this
Act
was
improper
avoidance
or
reduction
of
taxes
that
might
otherwise
have
become
payable
under
this
Act,
the
Income
War
Tax
Act,
or
The
Excess
Profits
Tax
Act,
1940,
the
Treasury
Board
may
give
such
directions
as
it
considers
appropriate
to
counteract
the
avoidance
or
reduction.
The
Board
concludes
from
this
that
under
these
sections
the
direction
must
be
written
document
issued
by
the
Treasury
Board:
This.
conclusion
is
reinforced
by
the
explicit
use
of
the
word
“direction”
in
subsections
138(5)
and
246(5),
in
the
same
context
as
subsection
138A(3)
cited
above
and
this
is
the
very
word
used
in
subsection
138(1).
Subsection
138A(3),
which
gives
the
Board
its
mandate
in
the
case
at
bar,
also
used
the
word
“direction”,
six
times
in
all.
Subparagraph
138A(3)(b)(i)
refers
to
the
“direction
under
subsection
(1)”,
the
subsection
which
is
the
basis
of
the
reassessment
which
is
the
subject
of
this
dispute,
as
appears
from
form
T7WC
appended
to
the
notice
of
reassessment
and
the
Minister’s
notification,
as
well
as
the
respondent’s
reply
to
the
notice
of
appeal.
Subsection
138A(1),
cited
above
in
full
by
the
Board,
does
not
however
use
the
word
“direction”;
instead,
it
uses
the
phrases
“in
the
opinion
of
the
Minister”
and
“amount
.
.
.
as
may
be
specified
by
the
Minister
.
.
.
if
the
Minister
so
directs”.
These
expressions
used
in
the
body
of
a
section
do
not
show
clearly,
in
themselves,
that
the
opinion
or
direction
must
necessarily
be
written.
However,
when
another
subsection
such
as
subsection
138A(3)
refers
to
this
‘‘opinion’’
not
only
as
a
“direction”
which
is
used
to
make
an
assessment
(“assessment
made
pursuant
to
a
direction”),
but
also
as
a
“direction”
on
which
the
courts
must
rule
in
order
to
confirm,
vacate
or
vary
it,
one
can
hardly
conclude
that
the
direction
was
not
written.
Moreover,
it
is
a
recognized
principle
that
to
interpret
words
or
expressions
in
a
section
of
an
Act,
it
is
usual
to
have
recourse
to
similar
sections
in
the
same
Act
where
the
same
words
are
used.
Subsection
138(5),
which
obviously
refers
to
the
Treasury
Board
direction
in
subsection
138(1),
makes
it
abundantly
plain
that
this
is
a
written
document.
Therefore
the
same
meaning
should
be
given
to
the
word
“direction”
used
in
subsection
138A(3).
Another
argument
in
favour
of
this
thesis
of
a
written
document
is
that
Part
VI
of
the
old
Act,
dealing
with
tax
evasion,
provides
for
drastic
measures
to
check
tax
evasion,
and
gives
very
broad
discretionary
powers
which
really
represent
exceptional
procedures.
Since
they
have
the
effect
of
further
restricting
taxpayers’
freedoms,
these
procedures
must
be
clearly
established
and
verifiable
by
the
administrative
courts,
to
ensure
that
the
taxpayer
is
not
subject
to
arbitrary
decisions
of
the
revenue
authorities.
The
Board
is
therefore
of
the
opinion
that
the
direction
mentioned
in
subsection
138A(3)
must
be
a
written
document.
6.3
Must
this
direction
be
proved?
How
can
the
Board
confirm,
vacate
or
vary
such
a
direction
if
it
is
not
acquainted
with
it?
We
cannot
become
acquainted
with
it
unless
it
has
been
entered
in
evidence.
Furthermore,
in
the
case
cited
above
in
paragraph
5,
Giguere
et
al
v
MNR,
the
direction
was
cited
at
length,
which
implies
that
it
was
proved.
In
many
other
cases
involving
Part
VI
of
the
Act,
the
Board
noted
the
citation
or
reference
to
the
direction.
In
several
cases
there
is
no
mention
of
it,
but
this
does
not
mean
that
it
was
not
proved.
6.4
Who
has
to
prove
the
direction?
In
R
W
S
Johnston
v
MNR,
cited
in
paragraph
2
of
this
judgment,
it
was
held
that
the
appellant
had
the
burden
of
proof.
However,
the
assessment
involved
there
was
an
ordinary
assessment
or
reassessment
in
the
sense
of
section
46
of
the
old
Act
and
section
152
of
the
new
Act.
It
was
not
a
special
assessment
made
in
compliance
with
a
direction
issued
by
the
Minister
or
the
Treasury
Board.
The
Board
considers
that
in
the
latter
cases
the
direction
preceded
the
assessment.
The
assessment
can
be
presumed
to
be
correct
in
fact
and
in
law,
but
only
after
the
direction
has
been
proved.
Can
the
appellant
be
required
to
prove
the
direction?
That
is
not
the
Board’s
opinion.
One
of
the
factors
which
has
led
the
courts
to
consider
that
ordinary
assessments
are
correct
and
valid,
and
to
compel
the
taxpayer
to
prove
their
falsity
if
he
can,
is
that
in
theory
the
taxpayer
is
the
person
who
is
most
familiar
with
his
own
affairs,
and
in
the
best
position
to
explain,
demonstrate
the
facts,
produce
the
appropriate
documents,
and
in
fact
establish
the
truth.
In
a
situation
where
the
direction
issued
by
the
Minister
must
be
proved,
who
is
better
able
to
produce
it
than
the
respondent?
Therefore
the
respondent
must
prove
the
direction.
6.5
In
the
case
at
bar,
the
respondent
has
not
proved
the
direction.
Can
the
Board
use
the
powers
described
in
subsection
9(2)
of
the
Tax
Review
Board
Act?
Notwithstanding
the
provisions
of
the
Act
under
which
an
appeal
is
made,
the
Board
is
not
bound
by
any
legal
or
technical
rules
of
evidence
in
conducting
a
hearing
for
the
purposes
of
that
Act,
and
all
appeals
shall
be
dealt
with
by
the
Board
as
informally
and
expeditiously
as
the
circumstances
and
considerations
of
fairness
will
permit.
The
Board
strongly
doubts
that
it
may
use
these
powers
to
presume
that
the
direction
has
been
proved.
The
problem
remains
unsolved.
How
can
the
Board
confirm,
vacate
or
vary
the
direction
if
it
does
not
have
a
copy
of
it
to
hand?
If
there
is
no
evidence
of
the
direction,
the
Board
must
presume
that
it
does
not
exist.
Moreover,
it
is
quite
possible
that
no
direction
was
in
fact
issued.
6.6
What
is
the
legal
consequence
of
the
fact
that
the
direction
does
not
exist?
Does
the
assessment
become
void?—or
must
the
burden
of
proof
for
the
assessment
issued
be
borne
by
the
respondent?
At
first
glance,
the
problem
does
not
seem
to
have
an
easy
solution.
However,
the
Board
thinks
that
in
order
to
solve
it,
one
must
consider
the
role
of
this
direction
in
its
context.
As
was
emphasized
above,
the
direction
issued
by
the
Minister
is
used
only
in
the
chapter
dealing
with
tax
evasion.
It
is
a
special
procedure.
The
legislator
wished
to
grant
discretionary
powers
of
an
exceptional
nature
to
the
Minister
of
National
Revenue,
powers
which
hold
the
taxpayer
in
a
vise-like
grip
from
which
he
will
have
trouble
escaping.
This
special
procedure
in
taxation
must
be
handled
at
least
in
the
Same
way
as
the
courts
handle
exceptional
procedures,
such
as
seizures
before
judgment.
Because
of
the
very
fact
that
these
procedures
are
exceptional
in
common
law,
the
person
who
uses
them
must
comply
strictly
with
all
the
conditions
governing
their
use.
The
Board
concludes
from
this
that
the
Minister’s
direction
is
an
essential
condition
for
the
assessment
itself
to
be
valid.
If
it
does
not
exist
or
cannot
be
proved,
the
assessment
itself
must
be
presumed
illegal
and
illicit,
for
the
same
reason
as
if
an
assessment
had
been
issued
that
did
not
comply
with
the
direction:
as,
for
example,
if
the
direction
gave
subsection
138A(1)
as
the
basis
of
the
assessment,
whereas
this
assessment
had
been
issued
and
calculated
in
accordance
with
another
section.
In
the
case
at
bar,
the
Board
must
therefore
dismiss
the
assessment.
6.7
From
another
point
of
view,
the
Board
also
thinks
that
another
consequence
of
the
fact
that
the
direction
does
not
exist
and
the
assessment
is
annulled
is
that
the
Board
simply
does
not
have
jurisdiction
to
make
a
valid
ruling
on
the
substantive
law
which
may.
derive
from
the
facts
submitted
as
evidence
and
the
application
of
subsection
138A(1).
The
mandate
to
it
by
the
legislator
is
to
confirm,
vacate
or
vary
the
direction.
If
the
direction
itself
does
not
exist,
the
mandate
does
not
exist.
6.8
The
problem
of
the
direction
only
arose
after
the
evidence
heard
before
the
Board
had
been
summarized.
The
Board
deliberately
leaves
as
part
of
the
judgment
the
summary
of
the
evidence,
to
be
considered
as
an
obiter
dictum.
If
the
respondent
appeals
and
then
proves
the
direction,
as
the
Board
believes
must
be
done,
the
summary
of
the
evidence
may
perhaps
be
useful.
The
Board
wishes
to
add
obiter
that
if
in
fact
no
direction
exists
in
the
case
at
bar,
a
direction
cannot
be
issued
retroactively.
Since
the
direction
must
precede
the
assessment,
if
a
direction
is
given
after
this
judgment
concerning
the
case,
another
assessment
must
be
issued
after
the
direction.
7.
Conclusion
The
Board
declares
the
assessment
invalid
and
as
a
result
allows
the
appeal,
and
the
whole
is
referred
back
to
the
respondent
for
reassessment
in
accordance
with
the
reasons
for
judgment
cited
above.
Appeal
allowed.
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