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,
is
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.