Date:
20021209
Dockets:
2002-575-IT-G, 2002-581-IT-G,
2002-585-IT-G, 2002-1123-IT-G
BETWEEN:
REV. RANDALL
HOLM, REV. PAUL KOHLS,
REV. RONALD
POWELL, REV. ROBERT D.
JAMES,
Appellants,
and
HER MAJESTY
THE QUEEN,
Respondent.
Reasons
for Order
Bowman,
A.C.J.
[1]
These motions were brought by the appellants for an order
allowing the appellants' appeals or, in the alternative, for
an order striking out the replies to the notices of appeal in
their entirety coupled with an order that the respondent not be
permitted to file fresh or amended replies. In the further
alternative they request an order that paragraph 5 of the
replies (paragraph 7 in the appeal of Reverend Powell) be
struck out. The basis of the motions is that the respondent
pleaded as an "assumption" a fact that the appellants
say was not assumed at the time the assessments were
made.
[2]
The appellants are all ordained ministers of the Pentecostal
Assemblies of Canada. They were all employed in the relevant
years by Eastern Pentecostal Bible College. They claimed the
deduction in respect of their residences as clergymen under
paragraph 8(1)(c) of the Income Tax Act. This
was denied on assessing.
[3]
The appellants' solicitors applied to the Access to
Information and Privacy Division of the CCRA for "all
records relating to the 1997 taxation year" in each of the
four appellants (except for Rev. Powell, where they asked for the
records relating to the 1995 taxation year as well and for Rev.
James with respect only to 1995).
[4]
They were provided with material from the CCRA among which was a
copy of a letter from the CCRA to each appellant stating that the
claim for the deduction for a clergyman's residence was
deleted (i.e. reduced to $0).
[5]
The reasons given in each case were substantially the same,
although the wording differs slightly. The relevant portion of
the letters reads:
Reverend
Holm:
We have
adjusted your claim from $13,208.00 to $0.00 for the following
reason(s):
- To delete
your deduction for a cleric's residence because the religious
order does not qualify.
Reverend
James:
We have
deleted your claim for a clergymen's residence deduction
because the religious order does not qualify.
Reverend
Kohls:
We have
adjusted your claim from $12,012.00 to $0 for the following
reason(s):
- To delete
your deduction for a cleric's residence because the religious
order (Eastern Pentecostal Bible College) does not
qualify.
Reverend
Powell:
1995
We have
adjusted your claim for the following reason(s):
- The
religious order, for your deduction for a cleric's residence,
does not qualify.
1997
We have
adjusted your claim from $11,400.00 to $0.00 for the following
reason(s):
- Although
the documents you provided do state that you are an ordained
minister with the Pentecostal Assemblies of Canada, your
employer, the Eastern Pentecostal Bible College is not considered
a religious order.
[6]
The way in which the assessors' reasons are expressed is, to
say the least, infelicitous. I think that what they are trying to
say is that a Bible college is not a religious order and
therefore one of the conditions in paragraph 8(1)(c)
has not been met.
[7]
For a person to be entitled to the clergyman's residence
deduction he or she must meet two tests - the status test and the
function test - contained in the opening words of
paragraph 8(1)(c):
(c)
where the taxpayer is a member of the clergy or of a religious
order or a regular minister of a religious denomination, and is
in charge of or ministering to a diocese, parish or congregation,
or engaged exclusively in full-time administrative service by
appointment of a religious order or religious denomination
...
[8]
The status test asks what you are and the function test asks what
you do. Clearly the appellants meet the status test - they are
all ordained clergymen. Being a member of a religious order is
part of the status test. Being engaged in full time
administrative service by appointment of a religious order is
part of the function test. If we are to look only at the letters
to the appellants it is not clear whether the assessors were
saying that the appellants failed the status test because they
were not members of a religious order or the function test
because they were not appointed to do administrative service by a
religious order. The Processing Review Reports which preceded the
assessments are even more cryptic. In Rev. Randall's it
says only "disallowed claim per instructions Bible
College"; in Rev. Powell's it says only "EP Bible
College - 95 in appeals - disallow"; in Rev. Kohls'
it says only "disallow claim - Eastern Pentecostal Bible
College" and no Processing Review Report was put in evidence
for Rev. James. I think that the brief comments made at the
assessing level by the assessors, albeit ambiguous, are at least
consistent with their thinking of either the function test or the
status test. The letter to Reverend Powell with respect to his
1997 taxation year appears to be somewhat more focussed on the
function test.
[9]
This reasoning is admittedly a little unclear but it is not that
that the appellants object to. In each reply to the notice of
appeal there are pleaded what are called "assumptions".
These are supposed to be a full and honest disclosure of the
facts upon which the Minister of National Revenue relied in
making the assessment. The practice is venerable and it is unique
in tax appeals in this court and the Federal Court and is
enshrined in both the Informal and General Procedure Rules of
this court, which require that replies to notices of appeal
contain
(d)
the findings or assumptions of fact made by the Minister when
making the assessment.
[10] I shall
take the reply in Reverend Holm's appeal as typical.
Paragraph 5 reads
5.
In reassessing the Appellant to disallow the deduction claimed,
the Minister made, inter alia, the following
assumptions:
a)
during 1997, the Appellant was employed as a member of the
faculty of the Eastern Pentecostal Bible College (the
"College");
b)
at no time during 1997 was the College a religious
order;
c)
at no time during 1997 was the Appellant a member of a religious
order;
d)
at no time during 1997 was the Appellant ministering to or in
charge of a diocese, parish or congregation or engaged
exclusively in full time administrative service by appointment of
a religious order or a religious denomination.
[11]
Subparagraph d) in substantially the same form appears in
the replies in the other cases.
[12] The
appellants each submitted an affidavit by Mr. Ronald C.
Knechtel, Senior Advisor to the Canadian Council of Christian
Charities who testified that he had reviewed the material
provided by the CCRA under the Privacy Act and did not
find any documents that indicated that any assumption was made
relating to function prior to assessing. As I observed above the
ambiguously worded letters are equivocal.
[13] The
appellants assert therefore that the assumption pleaded in
subparagraph 5d) in the Holm reply or in its corresponding
paragraph in the other appeals was not made at the time of
assessing.
[14] It is
admitted that when the appellants filed notices of objection and
the matter was reviewed by the appeals assessor,
Ms. Kimberly Ann Hynes, the function test with respect to
the appellants was considered by her. Her affidavits confirm that
she considered whether the appellants were in charge of or
ministering to a diocese, parish or congregation or engaged in
full time administrative service by appointment of a religious
order or religious denomination.
[15] Her T401
report (report on objection or appeal) reads in part as follows
(I am treating the report relating to Reverend Holm as
typical).
4)
Statement of Facts
The
client's 1997 income tax return was reassessed on October 5,
1998, to disallow the cleric's residence deduction in the
amount of $13,208.
The Appeals
Division, with the assistance of Head Office Appeals, concluded
that the client did meet the "status" test in
accordance with IT141R as he was a member of the clergy. The
client did not however meet the "function" test in
accordance with IT141R as it could not be determined if the
client met the criteria due to a lack of information.
5)
Sections of the Act Applicable
Paragraph
8(1)(c) of the Income Tax Act.
6)
History of Discussions
June 11,
1998 - Initial assessment of the 1997 income tax
return.
September
24, 1998 - letter from T1 Processing Review advising client they
are disallowing his claim for the cleric's residence
deduction as the organization, Eastern Pentecostal Bible College,
is not a religious order. (see exhibit A)
March 22,
1999 - Client/representative, William Griffin, Pentecostal
Assemblies of Canada, filed notice of objection. (see exhibit
B)
March 13,
2000 - fax sent to representative requesting he provide a copy of
the Faculty Ministry Agreement. (see exhibit C)
May 9, 2000
- representative responded to request for information. He
submitted a copy of the client's ministry agreement for June
1, 1996 to May 31, 1998. (Head Office Appeals may have this
documentation)
June 9,
2000 - Representative was sent another fax requesting Position
Descriptions as per the "Ministry Handbook" referred to
in the previous submission of information from the
representative. (see exhibit D)
June 15,
2000 - representative provided additional information (see
exhibit E)(could not locale all 8 pages)
June 6,
2000 - file referred to Head Office Appeals for
assistance.
January
2001 - Head Office Appeals requested additional information from
the representative.
February
12, 2001 - representative faxed a reply to Head Office providing
further details but not the Ministry Hand book as requested. (see
exhibit F)
June 14,
2001 - letter to representative, cc to client, confirming unable
to determine "function" due to lack of information.
(see exhibit G)
July 24,
2001 - fax from representative, information does not change our
position. (see exhibit H)
November
16, 2001 - letter to representative, cc to client, advising his
fax dated July 24, 2001, has been taken into consideration
however it does not alter our position. (see exhibit
I)
[16] It is clear
that a full review was performed by the appeals section before
confirming the assessments.
[17] This court
has on many occasions expressed its strong disapproval of the
Crown's pleading as assumptions facts that were not assumed
on assessing. Appellants' counsel's factum has
conveniently collected many of the statements made by judges of
this court and other courts and it is worthwhile to reproduce
them in these reasons.
"It
must, of course, be assumed that the Crown, as is its duty, has
fully disclosed to the taxpayer the precise findings of facts and
rulings of law which have given rise to the
controversy."
Johnston
v. M.N.R., 3 D.T.C. 1182
at 1183 (S.C.C.)
...
"Notwithstanding that it is spoken of in section 63(2)
as an action ready for trial or hearing, the proceeding is an
appeal from the taxation; and since the taxation is on the basis
of certain facts and certain provisions of law either those facts
or the application of the law is challenged. Every such fact
found or assumed by the assessor or the Minister must then be
accepted as it was dealt with by these persons unless questioned
by the appellant."
Johnston
v. M.N.R., 3 D.T.C. 1182
at 1183 (S.C.C.)
"The
Minister, in making assessments, proceeds on assumptions
(Bayridge Estates v. M.N.R., 59 DTC 1098 (Ex. Ct.), at p. 1101)
and the initial onus is on the taxpayer to "demolish"
the Minister's assumptions in the assessment (Johnston v.
M.N.R., [1948] S.C.R. 486; Kennedy v. M.N.R., 73 DTC 5359
(F.C.A.), at p. 5361). The initial burden is only to
"demolish" the exact assumptions made by the Minister
but no more: First Fund Genesis v. The Queen, 90 DTC 6337
(F.C.T.D.), at p. 6340."
Hickman
Motors Limited v. The Queen, 97 D.T.C. 5363 at 5376 (S.C.C.)
...
"This
portion of the pleadings (the assumptions) is extremely important
and must not mislead."
TSS -
Technical Service Solutions Inc. v. Canada
(M.N.R.), [2002] T.C.J.
No. 101 at paragraph 92.
"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."
Mungovan
v. The Queen, 2001
D.T.C. 691 at 692 (T.C.C.)
"The
pleadings of assumptions involves a serious obligation on the
part of the Crown to set out honestly and fully the actual
assumptions upon which the Minister acted in making the
assessment, whether they support the assessment or not. Pleading
that the Minister assumed facts that he could not have assumed is
not a fulfillment of that obligation. The court and the appellant
should be entitled to rely on the accuracy and completeness of
the assumptions pleaded."
Shaughnessy v. The Queen, 2002 D.T.C. 1272 at 1275 (T.C.C.)
"The
jurisprudence has given a special status to assumptions made by
the Minister in assessing: see Hickman Motors and the cases there
cited. It is important, therefore that the pleading of
assumptions said to have been made by the Minister in assessing
is done with care, both to ensure that what is pleaded is
confinedto facts, and to ensure that what is pleaded to have been
assumed by the Minister really was assumed, and is not a creation
of the drafter."
Cline-Schuit v. Canada, [2001] T.C.J. No 869.
"It
cannot be emphasized too strongly that in pleading assumptions in
a reply that have the effect of defining the burden that lies on
the appellant the respondent has a serious responsibility to set
out honestly the true basis of the assessment and not concoct
fanciful boilerplate."
Stephen
v. R. [2001] 2 C.T.C.
2621 at 2624 (T.C.C.)
...
"Thus,
the Minister may learn of additional facts during the course of
considering a notice of objection or on discovery of a
taxpayer... The Minister or the Attorney General may realize
during one of these stages that the Crown's assessment may be
valid not only on the basis of the statutory provisions the
Minister originally assessed on but on other provisions as
well.
...
Thus, the
taxpayer's onus of proof is with respect only to the findings
or assumptions made by the Minister's officials at the
time the assessment was made."
G.M.A.C.
v. The Queen, 99 D.T.C.
975 at 982 (T.C.C.)
"The
facts or assumptions underlying an assessment, at the time an
assessment is made (emphasis in original), are those vital to
the process before the Court."
Gross v.
M.N.R., 89 D.T.C. 660
(T.C.C.)
"The
assessment process may include both the making of the assessment
and the reconsideration of the assessment that may lead to a
confirmation of the assessment but reference to an assessment
itself is a reference to an administrative act distinct from a
confirmation."
Anchor
Pointe Energy Ltd. v. The Queen, [2002] T.C.J. No. 502 at paragraph 27.
"If
the Respondent makes... a pleading that is not based on the
contents of the auditor's report, the pleading should be in a
separate paragraph and proved by the Respondent."
Swicheniuk v. The Queen, 2000 D.T.C. 2775 at 2282 (T.C.C.)
...
"It is
not true that "in assessing, the Minister assumed" the
facts the Attorney General stated the Minister assumed in these
provisions. This is, to my mind, an abuse of the process of the
Court."
Anchor
Pointe Energy Ltd. v. The Queen, [2002] T.C.J. No. 502 at paragraph 27.
"... it could well be an abuse of process for the
Minister to withhold facts central to the making of the
assessment, or to conjure up assumptions that were not in fact
made."
The
Promex Group v. The Queen, 98 D.T.C. 1588 at 1596 (T.C.C.)
...
"I
conclude that the five assumed facts were the creation of the
drafter's imagination.... The Attorney General of Canada
is responsible for all litigation which involves the Government
of Canada. It must fall on his plate to make sure that a system
is in place so that this problem is corrected."
TSS -
Technical Service Solutions Inc. v. Canada
(M.N.R.), [2002] T.C.J.
No. 101 at paragraphs 92 and 94.
"The
court and the appellant should be entitled to rely on the
accuracy and completeness of the assumptions pleaded. Sadly, this
is becoming increasingly difficult. The entire system developed
in our courts relating to assumptions and onus of proof is in
jeopardy if the respondent does not set out the actual
assumptions on which the assessment is based with complete
candour, fairness and honesty."
Shaughnessy v. The Queen, 2002 D.T.C. 1272 at 1275 (T.C.C.)
"I
have in the past criticized this practice, to which the Deputy
Attorney General so frequently resorts, of pleading conclusions
of law as though they were facts that the Minister had assumed.
Other judges of this Court have been critical of the practice as
well... Pleadings such as the one before me tend to raise
doubts as to the reliability of the Replies filed by the Deputy
Attorney General."
Cline-Schuit v. Canada, [2001] T.C.J. No. 869 at paragraph 12.
"I
find it wholly unacceptable that persons in the CCRA who draft
the replies to notices of appeal in the informal procedure simply
push a button in a computer and spew forth pre-programmed
boilerplate of the sort... The "assumptions", so
called, are supposed to be an accurate and honest disclosure of
the particulars upon which the CCRA based its assessment. A blind
and automatic recitation of this sort of stuff does not
constitute a fulfillment of the respondent's obligation to
this court or to an appellant.
Moreover,
pleaded assumptions which demonstrate, as they often do,
that the Minister has recklessly and mindlessly pleaded
"assumptions" that bear no relation to the facts form
no basis on which to defend an assessment."
Johnson
v. R., [2001] 1 C.T.C.
2034 at 2038 (T.C.C.)
[18] It is
undeniable that there is a strongly held view in this court that
to plead as assumptions facts that were not assumed on assessing
is improper and reprehensible. Also, it seems the practice is
widespread. In an appropriate case I would have no hesitation in
allowing an appeal, striking out a reply or awarding costs on a
solicitor and client basis either against the respondent or, in a
flagrant case, against a counsel who drafted a misleading reply.
In some cases a less drastic remedy might be appropriate such as
merely striking out the assumption with or without leave to amend
to plead the facts wrongly alleged to have been assumed as a fact
in respect of which the respondent has the onus of
proof.
[19] The
practice is reprehensible wherever it occurs but it is
particularly pernicious in informal procedure cases where the
taxpayer is often self-represented. Such persons do not have the
benefit of counsel, have not held discoveries and probably know
nothing of the substantial jurisprudential lore about assumptions
that has been built up over the past half century. They are
dependent upon the integrity of Crown counsel and the accuracy
and completeness of the assumptions pleaded. If the court sees
many more instances of pleading incomplete, inaccurate or
misleading assumptions we may have to reconsider the whole matter
of pleading assumptions and the reverse onus and require the
Crown at least to prove that the assumptions were made. I know of
no rule in any court that permits the mere pleading of a fact,
without evidence, to have the fact taken as true. It is an
advantage that the Crown has that it will lose if it abuses
it.
[20] I mention
in passing another practice that will require re-examination and
that is the pleading as "assumptions" facts that are
exclusively or peculiarly within the Minister's knowledge and
then, at the same time as the Minister alleges that the taxpayer
has the onus of disproving those facts, he (or she) also refuses
to disclose the basis of the assumptions because it is said that
the information is confidential, secret or privileged. The
unfairness of this practice is patent.
[21]
Nonetheless, I do not propose to apply any of the sanctions or
remedies that might be available in other circumstances. Counsel
allege that subparagraph 5d) is an abuse of the process of
this court. In some circumstances I would agree that pleading as
an assumption a fact that was not made (or could not possibly
have been made as in Anchor Pointe Energy Limited v. The
Queen, 2002 DTC 2071) calls for a severe sanction.
However I am dismissing the motion for several
reasons.
(a)
To plead as an assumption a fact that was undoubtedly assumed
when the assessment was confirmed but arguably not when the
assessment was issued may reflect an erroneous interpretation of
the words "the findings or assumptions of fact made by the
Minister when making the assessment" as used in the rules of
this court, but it is not an egregious or flagrant abuse of this
court's process. To conjure up "assumptions" that
were never made at any time until the reply was drafted is of
course a much more serious breach of the Crown's
responsibilities and calls for a more severe remedy. I agree with
the observation of Rip J. in Anchor Pointe and
General Motors Acceptance Corporation of Canada Limited v. The
Queen, 99 DTC 975, that assessment means
assessment, not confirmation. Nonetheless, there is some
authority for the proposition that confirmation may be a part of
the assessing process. For example, in Parsons et al. v.
M.N.R., 83 DTC 5329 (reversed on a different point)
at p. 5332 Cattanach J. said
Upon receipt of a notice of objection it is the duty of the
Minister with all due despatch to reconsider the
amount.
This has been referred to by counsel for the respondent as an
"in-house" appeal.
In my opinion it is not an appeal. It continues to be part and
parcel of the assessment process.
This is not consistent with what Rip J. said in Anchor
Pointe or GMAC but it does indicate the view of a
respected judge of the Federal Court. Although I agree with
Rip J., I do not think that pleading as an assumption a fact
that was assumed by the Minister at the objection stage is so
outrageous, scandalous or egregious that it justifies the drastic
remedy sought by the appellants. If additional facts are
determined at the objection stage this should be separately
pleaded and can be dealt with by the trial judge. If
contradictory facts are found or assumed on assessing and on
objection this should clearly be stated in the reply and not
buried as was done in The Queen v. Bowens,
96 DTC 6128. This led to confusion as indicated in the
following passage in the Federal Court of Appeal reasons for
judgment where the court said at p. 6129:
On the taxpayer's appeal to the Tax Court the Crown,
surprisingly, did not plead or invoke any assumption to the
effect that the taxpayer and Trilogy were at arm's length.
This was quite improper and the Crown was at risk of having its
Reply struck out as not pleading a fact which was at the basis of
the reassessment; however, no objection was taken prior to trial
and the judge was obviously of the view, with which we agree,
that it was then too late in the day to raise a purely technical
point of pleading.
The judge also took the view that the Crown had the burden of
showing that the taxpayer and Trilogy were at arm's length.
If we understand him correctly, this was because of the mutually
contradictory but unpleaded assumptions which had been made in
the reassessment process and in particular the initial assumption
that the relationship was non-arm's length. While we agree
with the result, the reasoning is, with respect, wrong: as we
made clear in Pollock vs. The Queen, 94 DTC 6050,
unpleaded assumptions can have no effect on the burden of proof
one way or the other. The reason the Crown bore the burden in
this case of proving that Trilogy and the taxpayer were at
arm's length is that that was a fact on which the validity of
the reassessment depended, and since no assumption to that effect
had been pleaded the Crown did not have the benefit of any
reversal of onus.
Patently
the Crown cannot rely upon an unpleaded assumption to cast a
burden on the appellant. If the trial judge had said that it
could the criticism would have been justified. What was said at
trial was the following (94 DTC 1853 at
p. 1856):
In no case of which I am aware, including the numerous cases to
which the Federal Court of Appeal referred in a footnote to the
passage which I have cited, has this specific issue arisen, which
I shall endeavour to enunciate as follows:
Where the Minister bases an assessment on a particular assumption
of fact (in this case, the non-arm's length relationship
between the appellant and Trilogy as a necessary ingredient to
the application of subsection 245(2)) and, in confirming the
assessment and at trial abandons the original basis of assessment
and advances a new reason for supporting the assessment (i.e.
paragraphs 7(1)(b)) in which an essential fact (i.e. that
the appellant and Trilogy were at arm's length) is contrary
to the original assumption:
(a)
may the appellant rely upon the unpleaded assumption in his
defence against the new basis; and
(b)
must the Crown plead the new fact and does it have the onus of
establishing it?
The answer to these questions, based on the principles
established in Johnston and Pillsbury, is that the
appellant may rely upon an unpleaded assumption in support of his
case and unless the respondent establishes that the assumption is
wrong and that there are new facts that support the assessment on
a different basis, the appellant must succeed. The non-arm's
length relationship between the appellant and Trilogy,
found or
assumed by the assessor or the Minister must then be accepted as
it was dealt with by these persons unless questioned by the
appellant.
(Johnston, supra)
Here the appellant, far from questioning the original unpleaded
assumption, relies on it to destroy the very factual underpinning
of the new basis advanced.
The only difference between assumptions that the Crown chooses to
disclose in the reply and those that it does not is, as stated in
Pollock, that unpleaded assumptions cast no onus on the
appellant. The pleading of assumptions is no more than the
fulfilment of the Crown's obligation to disclose fully the
basis of the assessment. Since pleaded assumptions are in the
nature of particulars it is incumbent upon the Crown to plead
honestly and fully all of the assumptions relevant to the
assessment. If a new basis of upholding the assessment is
conceived after the assessment is made and is advanced at trial
and the original assumptions are inconsistent with that new basis
they must nonetheless be disclosed in the reply and the Crown
must undertake the task of establishing that the original
assumptions were wrong.
I continue
to believe this is a correct statement of the law. However the
practice of picking and choosing what assumptions to plead and
what assumptions to withhold on the basis that they are
contradictory to other assumptions or are embarrassing or that
they support the appellant's case is deplorable. If
assumptions have any role in income tax appeals it is essential
that they be pleaded fully and honestly whether they support the
Crown's case or the appellant's case.
It is not
necessary for the purposes of these motions that I deal with
Mr. Calabrese's argument on the statutory framework in
which the Johnston v. M.N.R. case, [1948] C.T.C. 195,
was decided but it has sufficient merit that it is worth
summarizing in case it is raised on another occasion.
Section 54 of the Income War Tax Act provided that
the Minister send the taxpayer a notice of assessment verifying
or altering the tax estimated by the taxpayer in the return.
Section 58 of the Income War Tax Act in its original
form permitted a person who objected to the amount at which he
was assessed to serve on the Minister a notice of appeal which
the Minister was obliged to consider. The Minister had to affirm
or amend the assessment and notify the appellant of his decision.
If the appellant was still not satisfied he could under
section 60 of the Income War Tax Act send the
Minister a notice of dissatisfaction. It will be noted that the
wording differs substantially from that with which we are
familiar today.
Sections 60-65 of the Income War Tax Act
read
NOTICE OF
DISSATISFACTION
60.(1) If the appellant, after
receipt of the said decision, is dissatisfied therewith, the may,
within one month from the date of the mailing of the said
decision, mail to the Minister by registered post, a notice
entitled
The Income
War Tax Act
NOTICE OF
DISSATISFACTION
In re the appeal of
................. of the
.................. of
.................., in the province
of .....................,
stating that he desires his appeal to be set down for
trial.
(2)
The appellant shall forward therewith a final statement of such
further facts, statutory provisions and reasons which he intends
to submit to the court in support of the appeal as were not
included in the aforesaid notice of appeal, or in the
alternative, a recapitulation of all facts, statutory provisions
and reasons included in the aforesaid notice of appeal, together
with such further facts, provisions and reasons as the appellant
intends to submit to the court in support of the
appeal.
SECURITY
FOR COSTS
61.(1) The party appealing shall
thereupon give security for the costs of the appeal to the
satisfaction of the Minister in a sum not less than four hundred
dollars.
(2)
Unless such security is furnished by the party appealing within
one month after the mailing of the notice of dissatisfaction the
appeal and all proceedings thereunder shall become null and
void.
REPLY OF
THE MINISTER
62.
Upon receipt of the said notice of dissatisfaction and statement
of facts, the Minister shall reply thereto by registered post
admitting or denying the facts alleged and confirming or amending
the assessment or any amended, additional or subsequent
assessment.
PROCEEDINGS
IN EXCHEQUER COURT
63.(1) Within two months from the
date of the mailing of the said reply, the Minister shall cause
to be transmitted to the registrar of the Exchequer Court of
Canada, to be filed in the said Court, typewritten copies of the
following documents:-
(a)
The Income Tax Return of the appellant, if any, for the period
under review;
(b)
The Notice of Assessment appealed;
(c)
The Notice of Appeal;
(d)
The decision of the Minister;
(e)
The Notice of Dissatisfaction;
(f)
The reply of the Minister; and
(g)
All other documents and papers relative to the assessment under
appeal.
(2)
The matter shall thereupon be deemed to be an action in the said
Court ready for trial or hearing: Provided, however that should
it be deemed advisable by the Court or a judge thereof that
pleadings be filed, an order may issue directing the parties to
file pleadings.
64.
All subsequent proceedings shall be entitled:
In re The Income War Tax Act, and the appeal of
.............. of
................ in the Province of
.................
and notice
and copies of all further proceedings shall be served upon the
Deputy Minister (Taxation) personally or other responsible
officer of the Department of National Revenue at
Ottawa.
65.(1) After an appeal has been set
down for trial or hearing as above provided, any fact or
statutory provision not set out in the said notice of appeal or
notice of dissatisfaction may be pleaded or referred to in such
manner and upon such terms as the Court or a judge thereof may
direct.
(2)
The court may refer the matter back to the Minister for further
consideration.
Rand J.'s famous statement in Johnston is
the following (p. 202):
Notwithstanding that it is spoken of in section 63(2) as an
action ready for trial or hearing, the proceeding is an appeal
from the taxation; and since the taxation is on the basis of
certain facts and certain provisions of law either those facts or
the application of the law is challenged. Every such fact found
or assumed by the assessor or the Minister must then be accepted
as it was dealt with by these persons unless questioned by the
appellant. If the taxpayer here intended to contest the fact that
he supported his wife within the meaning of the Rules mentioned
he should have raised that issue in his pleading, and the burden
would have rested on him as on any appellant to show that the
conclusion below was not warranted. For that purpose he might
bring evidence before the Court notwithstanding that it had not
been placed before the assessor or the Minister, but the onus was
his to demolish the basic fact on which the taxation
rested.
Counsel's point - and it is by no means without merit -
is that Rand J., in using the words "every such fact
found or assumed by the assessor or the Minister
...", must have been referring to the facts found or
assumed both at the stage of the initial assessment and at the
notice of appeal stage (which would correspond to the notice of
objection stage today). Otherwise why would Rand J. have
spoken of both the assessor and the Minister?
The
argument is interesting and ingenious. I am not aware that it has
been made before. Perhaps for the past half century we have been
misconstruing what Rand J. said but it is possible that the
misinterpretation is so deeply ingrained in our procedure in
income tax appeals that it has become unassailable: communis
error facit jus. I need not decide the question in this case
but some day it may have to be.
(b)
The motions are brought at an early stage of the proceedings,
before discoveries have been held or lists of documents
exchanged. The effect to be given to the pleading to which the
appellants take exception is something that the trial judge is in
a better position to determine than a motions judge. As I noted
above there are a large number of remedies that a court might
consider but in determining what remedy is appropriate - and this
is undoubtedly a matter of discretion - the discretion should be
based on material that is more likely to be available to the
trial judge than the motions judge. To strike out a pleading or a
portion of a pleading at an early stage may be appropriate in
some circumstances - where the pleading is demonstrably
frivolous, vexatious, scandalous or an abuse of process (as, for
example, in Davitt v. The Queen, 2001 DTC 702).
In other cases, however, the striking out of a pleading or the
making of a pretrial ruling on the admissibility of evidence
should not in general be done by a motions judge where it is
possible that it may affect or restrict the way in which the case
is conducted before the trial judge.
-
Mungovan v. The Queen, 2001 DTC 691
-
Drewlo Holdings Inc. v. The Queen,
97 DTC 466
-
GMAC v. The Queen, 99 DTC 975
-
Morris v. The Queen, 93 DTC 316
In GMAC, Rip J. said at p. 978:
The question whether a particular assumption was made on
assessment and the question whether the assumption is factually
correct are generally heard before the trial judge since it is
difficult to deal with these questions on an interlocutory
motion. The motion was therefore heard by me at the commencement
of the hearing on the merits of these appeals by GMAC.
I am in
respectful agreement.
(c)
As a corollary to the above I would again emphasize that the
statements in the letters sent by the assessors to the appellants
are ambiguous since "religious order" is an ingredient
in both the status and the function test. If the appellants
consider it worth their while to pursue what the assessors were
thinking when they uttered those Delphian pronouncements they can
do so on discovery. Alternatively they might consider just
getting on with proving their cases in the ordinary way by
showing that they meet both tests without the benefit of a full
analysis of the assessors' thought processes or the language
used to express them. This would be quicker and
cheaper.
(d)
One remedy, less drastic than that sought by the appellants,
would be to strike out only subparagraph 5d). This might be
considered by the trial judge but I should emphasize that in my
view the onus on the appellants would not change. They have
asserted that they are entitled to the
paragraph 8(1)(c) deduction. They have made the
following assertion in their notices of appeal:
As part of
his employment at the College, the Appellant was assigned by the
Denomination to service and pastoral duties at the College and at
various local congregations of the Denomination.
This paragraph is denied in the replies. If the appellants expect
to win their cases they should at least establish that they meet
the function test, regardless of what thoughts may have been
going through the assessors' minds when the assessments were
made. I repeat what was said in The Cadillac Fairview
Corporation Limited v. The Queen, 97 DTC 405 at
p. 407:
[22] The motions
are dismissed. Counsel for the respondent asked that I award
costs to the Crown. I have given this request careful
consideration and in all the circumstances I think costs should
be in the cause unless the trial judge determines
differently.
Signed at
Ottawa, Canada, this 9th day of December 2002.
A.C.J.COURT
FILE
NOS.:
2002-575(IT)G, 2002-581(IT)G,
2002-585(IT)G, 2002-1123(IT)G
STYLE OF
CAUSE:
Between Rev. Randal Holm, Rev. Paul
Kohls, Rev.
Ronald Powell,
Rev. Robert
D. James and
Her Majesty The Queen
PLACE OF
HEARING:
Toronto, Ontario
DATE OF
HEARING:
November 21, 2002
REASONS FOR
ORDER
BY:
The Honourable D.G.H. Bowman
Associate Chief Judge
DATE OF
ORDER:
December 9, 2002
APPEARANCES:
Counsel
for the
Appellants:
Robert B. Hayhoe, Esq.
Patrick J. Boyle, Esq.
Counsel
for the
Respondent:
Franco Calabrese, Esq.
Jenna Clark
COUNSEL OF
RECORD:
For the
Appellant:
Name:
Robert B. Hayhoe, Esq.
Firm:
Miller Thomson LLP
Toronto,
Ontario
and
Name:
Patrick J. Boyle, Esq.
Firm:
Fraser Milner Casgrain LLP
Toronto,
Ontario
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2002-575(IT)G
BETWEEN:
REV. RANDALL
HOLM,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent.
Motion heard
with the motions in Rev. Paul Kohls (2002-581(IT)G),
Rev. Ronald
Powell (2002-585(IT)G) and Rev. Robert D. James
(2002-1123(IT)G)
on November
21, 2002 at Toronto, Ontario, by
The
Honourable D.G.H. Bowman
Associate
Chief Judge
Appearances
Counsel
for the Appellant: Robert B. Hayhoe, Esq.
Patrick J. Boyle, Esq.
Counsel
for the
Respondent:
Franco Calabrese, Esq.
Jenna Clark
ORDER
Upon motion by the appellant for an order allowing the appeal, or
for striking the reply to the notice of appeal in its entirety,
or denying leave to the respondent to file a fresh or amended
reply to the notice of appeal, or striking out paragraph 5
of the reply to the notice of appeal, and for solicitor-client
costs for this motion in any event of the cause
And upon hearing what was alleged by the parties
.../2
It is ordered that the motion be dismissed and that costs be
costs in the cause unless
the trial judge orders otherwise.
Signed at
Ottawa, Canada, this 9th day of December 2002.
A.C.J.
2002-581(IT)G
BETWEEN:
REV. PAUL
KOHLS,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent.
Motion heard
with the motions in Rev. Randal Holm (2002-575(IT)G),
Rev. Ronald
Powell (2002-585(IT)G) and Rev. Robert D. James
(2002-1123(IT)G)
on November
21, 2002 at Toronto, Ontario, by
The
Honourable D.G.H. Bowman
Associate
Chief Judge
Appearances
Counsel
for the Appellant: Robert B. Hayhoe, Esq.
Patrick J. Boyle, Esq.
Counsel
for the
Respondent:
Franco Calabrese, Esq.
Jenna Clark
ORDER
Upon motion by the appellant for an order allowing the appeal, or
for striking the reply to the notice of appeal in its entirety,
or denying leave to the respondent to file a fresh or amended
reply to the notice of appeal, or striking out paragraph 5
of the reply to the notice of appeal, and for solicitor-client
costs for this motion in any event of the cause
And upon hearing what was alleged by the parties
.../2
It is ordered that the motion be dismissed and that costs be
costs in the cause unless
the trial judge orders otherwise.
Signed at
Ottawa, Canada, this 9th day of December 2002.
A.C.J.
2002-585(IT)G
BETWEEN:
REV. RONALD
POWELL,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent.
Motion heard
with the motions in Rev. Randall Holm (2002-575(IT)G),
Rev. Paul
Kohls (2002-581(IT)G) and Rev. Robert D. James
(2002-1123(IT)G)
on November
21, 2002 at Toronto, Ontario, by
The
Honourable D.G.H. Bowman
Associate
Chief Judge
Appearances
Counsel
for the Appellant: Robert B. Hayhoe, Esq.
Patrick J. Boyle, Esq.
Counsel
for the
Respondent:
Franco Calabrese, Esq.
Jenna Clark
ORDER
Upon motion by the appellant for an order allowing the appeal, or
for striking the reply to the notice of appeal in its entirety,
or denying leave to the respondent to file a fresh or amended
reply to the notice of appeal, or striking out paragraph 7
of the reply to the notice of appeal, and for solicitor-client
costs for this motion in any event of the cause
And upon hearing what was alleged by the parties
.../2
It is ordered that the motion be dismissed and that costs be
costs in the cause unless
the trial judge orders otherwise.
Signed at
Ottawa, Canada, this 9th day of December 2002.
A.C.J.
2002-1123(IT)G
BETWEEN:
REV. ROBERT
D. JAMES,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent.
Motion heard
with the motions in Rev. Randall Holm (2002-575(IT)G),
Rev. Paul
Kohls (2002-581(IT)G) and Rev. Ronald Powell
(2002-585(IT)G)
on November
21, 2002 at Toronto, Ontario, by
The
Honourable D.G.H. Bowman
Associate
Chief Judge
Appearances
Counsel
for the Appellant: Robert B. Hayhoe, Esq.
Patrick J. Boyle, Esq.
Counsel
for the
Respondent:
Franco Calabrese, Esq.
Jenna Clark
ORDER
Upon motion by the appellant for an order allowing the appeal, or
for striking the reply to the notice of appeal in its entirety,
or denying leave to the respondent to file a fresh or amended
reply to the notice of appeal, or striking out paragraph 5
of the reply to the notice of appeal, and for solicitor-client
costs for this motion in any event of the cause
And upon hearing what was alleged by the parties
.../2
It is ordered that the motion be dismissed and that costs be
costs in the cause unless
the trial judge orders otherwise.
Signed at
Ottawa, Canada, this 9th day of December 2002.
A.C.J.
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