Date: 20081009
Docket: A-142-08
Citation: 2008 FCA 302
CORAM: RICHARD
C.J.
PELLETIER
J.A.
RYER
J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
HEATHER M. WOOD
Respondent
REASONS FOR JUDGMENT
RICHARD C.J.
[1]
This is an
appeal from the judgment of the Tax Court of Canada dated February 22, 2008 (2008TCC105)
by which the respondent’s appeal from the reassessment of tax made under the Income
Tax Act for the 2004 taxation year was allowed.
[2]
The issue
in the appeal before the Tax Court was whether the taxpayer’s withdrawal from
her registered retirement savings plan qualified as an eligible amount under
section 146.02 of the Income Tax Act. Under the Lifelong Learning Plan a
taxpayer may make a tax-free withdrawal from a registered retirement savings
plan to finance full-time training for the taxpayer or the taxpayer’s spouse in
a qualifying educational program at a designated educational institution.
[3]
The issues
raised on the appeal before our Court are:
a)
whether
the trial judge failed to observe principles of natural justice and procedural
fairness that he was required by law to observe; and
b)
whether the
trial judge erred in law in refusing to permit the Crown to call evidence.
[4]
The appellant
requests that the appeal be allowed and the matter be referred back for hearing
before a different judge of the Tax Court of Canada.
[5]
The
background facts are as follows:
a)
The
Minister of National Revenue reassessed the taxpayer’s 2004 taxation year to
include in income $10,000 withdrawn from her registered retirement savings
plan. The reassessment was subsequently confirmed by the Minister;
b)
The
taxpayer filed an appeal of the reassessment to the Tax Court of Canada,
electing that the appeal proceed under the informal procedure;
c)
The Crown
then filed a reply on July 3, 2007. In the reply, the Minister relied on the
following assumptions of fact:
i)
the
appellant withdrew $10,000.00 from her RRSP;
ii)
the money
was used to finance her spouse’s education;
iii)
the
appellant’s spouse was enrolled in a real estate course;
iv)
the real
estate course was provided by OREA Real Estate College (OREA); and
v)
OREA is
not a designated educational institution.
d)
At the
opening of the hearing on February 15, 2008, the representative of the Crown
informed the Court that the Crown had sent an amended reply to the Tax Court of
Canada and to Mr. Wood on January 23, 2008. Mr. Wood was acting as agent for
the appellant Ms. Wood;
e)
In the
proposed amended reply, the Crown now admitted that the institution was a
designated educational institution, but it was asserted that the program was
not a full-time program and the appellant’s husband, Ronald Wood, was not a
full-time student in accordance with the conditions set out in subsections
118.6(1) and 146.02(1) of the Income Tax Act;
f)
The agent
for the appellant objected to the production of the revised reply; and
g)
The trial
judge ruled that he would not allow the reply to be amended and to take the new
facts as assumptions but that did not deprive the Crown from bringing evidence
concerning the number of hours or whether the program was full-time.
[6]
The
transcript of the hearing on February 15, 2008, indicates that the proceeding
commenced at 9:35 a.m. and concluded at 9:48 a.m. The transcript also confirms
that Heather M. Wood and her husband, Ronald Wood, were present, as
was a representative of the Crown.
[7]
At the
hearing, the following exchange took place:
JUSTICE
HERSHFIELD: They have to prove the entire case. You don’t have to prove
anything, is basically what I have said. If you don’t have to prove anything,
what do you want to do?
MR. WOOD:
Nothing.
JUSTICE
HERSHFIELD: Nothing. Okay. So you don’t need a lawyer. That is what a lawyer
might have said.
What evidence
do you have here this morning?
MS. HALPAPE:
We have evidence of the nature of the course, the hours that it took to take -
JUSTICE
HERSHFIELD: How are you going to present that evidence?
MS. HALPAPE:
Through the career guide as well as through the appellant’s –
JUSTICE
HERSHFIELD: I don’t take anything except through a witness. Who is your
witness?
MS. HALPAPE:
We don’t have an additional witness –
JUSTICE
HERSHFIELD: There is no witness?
MS. HALPAPE:
No.
JUSTICE
HERSHFIELD: So you cannot prove anything.
MS. HALPAPE:
We can – if we called the appellant to the stand –
JUSTICE
HERSHFIELD: You cannot call the appellant. The appellant rested her case. You
cannot call the opposite side. Did you subpoena her?
MS. HALPAPE:
We don’t have any witnesses here.
JUSTICE
HERSHFIELD: So you cannot prove your case. The appeal is allowed. Thank you. –
Whereupon the proceedings concluded at 9:48 a.m.
[8]
In his
written reasons for judgment dated February 22, 2008, the trial judge added:
Allowing the
Respondent to examine the Appellant would have the effect of allowing an
ill-fated last gasp attempt to avoid the inevitable consequence of being less
than fully prepared for a ruling that reversed the burden of proof. Allowing
the Respondent to examine the Appellant, who lacked legal sophistication and
acumen and was without counsel, would, in my view, have inevitably required the
intervention of the Court. Acquiescing to the application of a Rule that would
have allowed an attempt to have the Appellant attest to the Respondent’s
evidence is not something this Court should encourage. For these reasons, I did
not allow the Respondent to call the Appellant. [para. 12]
…
In this case
the interests of justice are better served by disallowing the calling of
evidence that in my view could not meet the best evidence standards that are
set to help ensure reliable findings. [para. 13]
…
Accordingly, the
hearing ended without evidence being brought by the Respondent, the party with
the burden to bring evidence to support its new assertions. The parties were
advised that the appeal would thereby be allowed. [para. 14]
[9]
This court
has made it clear that while the rules of evidence in informal procedure trials
in the Tax Court are relaxed, nevertheless, the rules of natural justice must
be observed (Muszka v. Her Majesty the Queen, [1993] F.C.J. No. 1346 at
para. 6 (FCA)).
[10]
The trial
judge took the trial into his own hands and did not allow the Crown to present her
evidence. His reasons for refusing to permit the Crown to call witnesses are
insufficient to justify the departure from the fundamental rule of natural
justice.
[11]
In his
Reasons for Judgment, the trial judge recognized that the Crown intended to
call the taxpayer and her husband as witnesses (para. 8). Both were in the
courtroom and the husband was acting as agent for the taxpayer, was the student
enrolled in the educational program in issue and had personal knowledge of the
matters in dispute. However, the trial judge concluded that the husband was not
a compellable witness because the Crown did not subpoena him. A subpoena merely
compels a person to attend court proceedings.
[12]
The trial
judge also erred in law in refusing to permit the Crown to call the appellant.
He stated: “You cannot call the appellant. The appellant rested her case. You
cannot call the opposite side. Did you subpoena her?” (para. 15). It appears
from the Reasons for Judgment that even the trial judge subsequently
appreciated that he was wrong in excluding the testimony of the taxpayer. He
stated: “As the adverse party, the Appellant could have been compelled to
testify” (para. 10).
[13]
Having
conceded in his Reasons for Judgment that the taxpayer, who was present in the
courtroom, was compellable, the trial judge attempted to support his oral
ruling by invoking the best evidence rule. He states: “However, clearly she
[the taxpayer] could not attest to the Respondent’s documents. She could not
give the best evidence as to any of the points in issue” (para. 10). Since the
trial judge did not give the Crown an opportunity to lead any evidence, he
could not know what evidence the Crown intended to rely on nor the
appropriateness of the witnesses the Crown intended to call. As applied today,
the best evidence rule relates only to documentary evidence and, in particular,
to whether a copy of a document may be entered in substitution for an original.
Relevant evidence ought not to be excluded based on a concern that better
evidence might come from another witness. Such concerns go to weight, not
admissibility.
[14]
Accordingly,
the appeal will be allowed and the matter will be referred back for hearing
before a different judge of the Tax Court of Canada.
[15]
Pursuant
to section 18.25 of the Tax Court of Canada Act, the respondent, Heather M. Wood,
will be allowed her reasonable and proper costs in respect of this appeal.
"J.
Richard"
“I
agree
J.D. Denis Pelletier J.A.”
“I
agree
C. Michael Ryer J.A.”
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