Date: 20011011
Docket: 2000-3310-IT-G
BETWEEN:
PAULA GARDNER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor
Order
BOWIE J.T.C.C.
[1]
On September 13, 2001, I made an Order striking out
subparagraph 7(i) of the Reply, with leave to the Respondent
to amend paragraph 8, and ordering that the Respondent provide
the particulars requested by the Appellant in
subparagraph 2(1) and paragraph 3 of the Reply. That Order
has now been appealed, and I have been requested to give Reasons
for it.
[2]
These appeals are brought from reassessments under the Income
Tax Act (the Act) for the taxation years 1990, 1991,
1992, 1993, 1994, 1995 and 1996. The reassessments for the years
1990 to 1994 inclusive were made more than three years after the
day of mailing of the original notices of assessment for those
years, with the result that on the hearing of the appeals the
Minister will be required to establish that there has been
misrepresentation attributable to neglect, carelessness, wilful
default or fraud.[1]
[3]
Initially, the Appellant demanded particulars of paragraphs 5,
7(h) and 7(i) of the Reply. At the hearing of the motion counsel
abandoned the demand for particulars of paragraph 5, presumably
on the basis that they were not required for the purpose of
pleading, and could be obtained on discovery. The motion was
therefore concerned only with subparagraphs 7(h) and (i). They
read:
A.
STATEMENT OF FACTS
...
7.
In so reassessing the Appellant, the Minister made, inter
alia, the following assumptions:
...
h)
the Appellant claimed rental losses belonging to her spouse on
her own tax returns knowing that they should be claimed by her
spouse, and
i)
the Appellant made misrepresentations attributable to neglect,
carelessness, and wilful default.
Paragraphs 2 and 3 of the Demand for Particulars read:
2.
Regarding the allegation in subparagraph 7(h) of the Reply,
i.e., that in reassessing the Appellant, the Minister
assumed that the Appellant claimed rental losses belonging to her
spouse on her own tax returns knowing that they should be claimed
by her spouse:
(1)
please state the facts, if any, on which the Minister based the
assumption that the Appellant knew the rental losses should be
claimed by her spouse;
(2)
[abandoned on the hearing of the motion];
(3)
[abandoned on the hearing of the motion].
3.
Regarding the allegation in subparagraph 7(i) of the Reply,
i.e., that in reassessing the Appellant, the Minister
assumed that the Appellant made misrepresentations attributable
to neglect, carelessness and wilful default:
(1)
please provide particulars of each misrepresentation the Minister
assumed the Appellant made in each of her returns of income for
the 1990 to 1996 taxation years;
(2)
for each such misrepresentation the Minister assumed the
Appellant made, please state whether the Minister assumed the
misrepresentation was attributable to neglect or to carelessness
or to wilful default, and
(3)
please provide particulars of the neglect or carelessness or
wilful default to which the Minister assumed each such
misrepresentation was attributable.
The relevant parts of the relief requested in the Notice of
Motion read:
THE MOTION IS FOR an Order:
(a) compelling the Respondent to provide the Appellant with
particulars the Appellant has demanded and the Respondent has
refused to provide; [and]
...
(e) for such additional relief and directions as this
Honourable Court may deem just and necessary to enable the
Appellant's appeal to proceed and to secure the just
determination of the real matters in dispute.
[4]
Subparagraph 7 (i) of the Reply, although pleaded in Part A,
which is entitled statement of facts, simply pleads a conclusion
as to the threshold question of mixed fact and law which will be
before the trial judge in respect of the statute barred years. It
is pleaded in the most general terms, in the words of the
statutory requirement to justify the reassessment outside the
normal reassessment period. Rule 49(1)(d) requires the
Deputy Attorney General of Canada to state "the findings or
assumptions of fact made by the Minister when making the
assessment". Paragraph 7(i) of the Reply does not fulfil
this requirement; it states a matter in issue, and so properly
belongs, with minor modification to its wording, in paragraph 8
of the Reply. That paragraph comprises part B, styled issues to
be decided.
[5]
The correct principle to be applied to the Respondent's
pleading in an income tax appeal from a reassessment made after
the normal reassessment period has expired is to be found in the
following passage from the judgment of Cameron J. in M.N.R. v.
Taylor:[2]
After giving the matter the most careful consideration, I have
come to the conclusion that in every appeal, whether to the Tax
Appeal Board or to this Court, regarding a re-assessment made
after the statutory period of limitation has expired and which is
based on fraud or misrepresentation, the burden of proof lies on
the Minister to first establish to the satisfaction of the Court
that the taxpayer (or person filing the return) has 'made any
misrepresentation or committed any fraud in filing the return or
in supplying any information under this Act' unless the
taxpayer in the pleadings or in his Notice of Appeal (or, if he
be a respondent in this Court, in his reply to the Notice of
Appeal) or at the hearing of the appeal has admitted such
misrepresentation or fraud. In reassessing after the lapse of the
statutory period for so doing, the Minister must be taken to have
alleged misrepresentation or fraud and, if so, he must prove
it.
In Kerr on Fraud and Mistake, Seventh Ed., it is stated
at p. 669:
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A man who alleges fraud must clearly and distinctly
prove the fraud he alleges.
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Again in Halsbury's Laws of England,
Third Ed., vol. 26, at p. 838, it is stated:
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"1558. Since in every form of proceeding based on
misrepresentation a misrepresentation of some kind must be
established, it follows that the burden of alleging and
proving that degree of falsity, which is required for the
representation to be a misrepresentation, rests, in every
case, on the party who sets it up."
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[6]
The requirement to plead the misrepresentation specifically is
found stated this way in Odgers' Principles of Pleading
and Practice, Twenty-second Ed., at page 100:
Each party must state his whole case. He must plead all facts
on which he intends to rely, otherwise he cannot strictly give
any evidence of them at the trial.
In this Court it has been put this way by Bowman J., as he
then was, in Ver v. Canada:[3]
Finally, the Reply to the Notice of Appeal is inadequate in a
case of this type. Bald assertions that the Minister
"assumed" a misrepresentation are inappropriate where
the Minister must prove a misrepresentation. The precise
misrepresentation alleged to have been made must be set out with
particularity in the reply and proved with specificity. Three
essential components must be alleged in pleading
misrepresentation:
(i)
the representation;
(ii)
the fact of its having been made; and
(iii)
its falsity.
[7]
The function of particulars was considered by the Federal Court
of Appeal in Gulf Canada Limited v. The Tug Mary Mackin.[4] Heald J.A.
with whom Mahoney J.A. concurred, said there:[5]
The principles governing an application of this kind
were well stated by Sheppard J.A. in the case of
Anglo-Canadian Timber Products Ltd. v. British Columbia
Electric Company Limited, [(1960), 31 W.W.R. 604 (B.C.C.A.).]
where he stated at pages 605 and 606:
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Hence it appears that an examination for
discovery follows upon the issues having been previously
defined by the pleadings and the purpose of such discovery
is to prove or disprove the issues so defined, by a
cross-examination on the facts relevant to such issues.
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On the other hand the purpose of
particulars is to require a party to clarify the issues he
has tried to raise by his pleading, so that the opposite
party may be able to prepare for trial, by examination for
discovery and otherwise. The purpose of particulars was
stated in Thorp v. Holdsworth (1876)3 Ch 637, 45 LJ
Ch 406, by Jessel, M.R. at p. 639, as follows:
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"The whole object of pleadings is to
bring the parties to an issue, and the meaning of the rules
of Order XIX, was to prevent the issue being enlarged,
which would prevent either party from knowing when the
cause came on for trial, what the real point to be
discussed and decided was. In fact, the whole meaning of
the system is to narrow the parties to definite issues, and
thereby to diminish expense and delay, especially as
regards the amount of testimony required on either side at
the hearing."
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That purpose of particulars was stated in
Spedding v. Fitzpatrick (1888) 38 Ch 410, 58 LJ Ch
139, by Cotton, L.J. at p. 413, as follows:
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"The object of particulars is to
enable the party asking for them to know what case he has
to meet at the trial, and so to save unnecessary expense,
and avoid allowing parties to be taken by
surprise."
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Also the particulars operate as a pleading
to the extent that "They tie the hands of the party,
and he cannot without leave go into any matters not
included" (Annual Practice, 1960, p. 460) and
they may be amended only by leave of the court (Annual
Practice, 1960, p. 461).
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When pleadings are so vaguely drawn that
the opposing party cannot tell what are the facts in issue
or, in the words of Cotton, L.J. in Spedding v.
Fitzpatrick, supra, "what case he has to
meet," then in such circumstances the particulars
serve to define the issue so that the opposite party may
know what are the facts in issue. In such instances the
party demanding particulars is in effect asking what is the
issue which the draftsman intended to raise and it is quite
apparent that for such a purpose an examination for
discovery is no substitute in that it presupposes the
issues have been properly defined.
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This case was cited with approval in a later decision of the
British Columbia Court of Appeal in the case of Cansulex
Limited v. Perry et al. [Judgment dated March 18, 1982,
British Columbia Court of Appeal, file C785837, not reported.] In
that case, Lambert J.A. referred to the Anglo-Canadian
Timber decision as being one of the decisions which "...
delineate the difference between what is properly the subject
matter of a Demand for Particulars and what is more properly the
subject-matter of a Demand for Discovery of material that should
be obtained on an Examination for Discovery". (See, page 8
of the reasons of Lambert J.A.) Mr. Justice Lambert added:
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At the heart of the distinction between the two lies the
question whether the material demanded is intended to, and
does, delineate the issues between the parties, or whether
it requests material relating to the way in which the
issues will be proved.
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He then went on at pages 10 and 11 of his reasons to enumerate
with approval the function of particulars as set out in the White
Book dealing with the English Practice. The Supreme Court
Practice, 1982, Vol. 1, page 318 details this function as
follows:
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(1)
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to inform the other side of the nature of the case they
have to meet as distinguished from the mode in which that
case is to be proved ....
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(2)
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to prevent the other side from being taken by surprise
at the trial
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(3)
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to enable the other side to know what evidence they
ought to be prepared with and to prepare for trial ....
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(4)
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to limit the generality of the pleadings ....
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(5)
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to limit and decide the issues to be tried, and as to
which discovery is required ....
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(6)
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to tie the hands of the party so that he cannot without
leave go into any matters not included ....
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Because Rule 408(1) [Federal Court Rules, C.R.C., c.
663] requiring "... a precise statement of the material
facts on which the party pleading relies" and Rule 415
permitting applications for further and better particulars of
allegations in a pleading are substantially similar to the
corresponding sections in the English Rules, I think the above
quoted six functions of particulars should apply equally to an
application such as the present one under our Rules.
This judgment was subsequently applied in this Court by Judge
Garon, as he then was, in Duquette et. al. v. The Queen.[6]
[8]
Although the word "precise" does not appear in the text
of this Court's Rule 49, there does need to be a precise
statement of an alleged misrepresentation, as Judge Bowman made
clear in Ver. In my view, the Federal Court jurisprudence
dealing with the requirement for particularity applies equally to
appeals in this Court, at least in those cases where the Minister
has reassessed outside the normal reassessment period on the
basis of an alleged misrepresentation. The Respondent therefore
must give particulars of the alleged misrepresentation to enable
the Appellant to decide whether to deliver an Answer, and to
define the issues for discovery in a way that will permit the
Appellant to know the case she has to meet in respect of
misrepresentation, and to prevent the Respondent from using vague
allegations of misrepresentation to justify a fishing expedition
on discovery.
Signed at Ottawa, Canada, this 11th day of October, 2001.
"E.A. Bowie"
J.T.C.C.
COURT FILE
NO.:
2000-3310(IT)G
STYLE OF
CAUSE:
Paula Gardner and Her Majesty the Queen
PLACE OF
HEARING:
Toronto, Ontario
DATE OF
HEARING:
September 13, 2001
REASONS FOR ORDER
BY:
The Honourable Judge E.A. Bowie
DATE OF
ORDER:
September 13, 2001
APPEARANCES:
Counsel for the Appellant: Richard Fitzsimmons
Counsel for the
Respondent:
Andrea Jackett
COUNSEL OF RECORD:
For the
Appellant:
Name:
Richard Fitzsimmons
Firm:
Fitzsimmons & Company
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
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