[1] The principal issue in this application for judicial review concerns an allegation by the taxpayer, Magda Selmeci, that the Tax Court Judge wrongly excluded documentary evidence on the ground that it was hearsay. The hearing was held under the Informal Procedure. Subsection 18.15(4) of the Tax Court of Canada Act, R.S.C. 1985, c. T-2 provides:

18.15(4) Notwithstanding the provisions of the Act out of which an appeal arises, the Court, in hearing an appeal referred to in section 18, is not bound by any legal or technical rules of evidence in conducting a hearing for the purposes of that Act, and all appeals referred to in section 18 shall be dealt with by the Court as informally and expeditiously as the circumstances and considerations of fairness permit. [Emphasis added]

18.15(4) Par dérogation à la loi habilitante, la Cour n'est pas liée par les règles de preuve lors de l'audition d'un appel interjeté en vertu de cette loi et visé à l'article 18; ces appels sont entendus d'une manière informelle et le plus rapidement possible, dans la mesure où les circonstances et l'équité le permettent.

[je souligne]

[2] In a judgment dated September 21, 2000, reasons for judgment reported as [2000] T.C.J. No. 819, the Honourable Gordon Teskey, a Judge of the Tax Court of Canada ("the Tax Court Judge"), dismissed the applicant's appeal from an assessment made under the Income Tax Act for the 1997 taxation year. Before the Tax Court, Ms. Selmeci, an accountant, was unrepresented by counsel.

Issues

[3] The major ground for review now advanced by the applicant is that the foregoing subsection mandates that a Tax Court Judge at the trial of an appeal cannot exclude documentary evidence on the ground that it would, prima facie, be inadmissible under the rules of evidence, specifically, by virtue of the rule against hearsay. Another complaint involves the procedure adopted by the Tax Court Judge to ensure that the "important" documents were before him. Yet another concerns a reference in the reasons for judgment to the principle of estoppel.

Issue 1: Exclusion of Hearsay Evidence

[4] Nothing in the language of subsection 18.15(4) mandates the admission of evidence that would be inadmissible under the law of evidence. As Rothstein J.A. noted in Erdman v. Her Majesty the Queen, [2002] FCA 240, the taxpayer's choice of the Informal Procedure does not mean that no rules of evidence apply at the hearing of the appeal. The expression "is not bound by" is merely permissive in nature and gives the Tax Court Judge a judicial discretion to disregard the rules of evidence when an appeal is heard under the Informal Procedure, in order to hear the appeal as informally and expeditiously as the circumstances and considerations of fairness permit.

[5] However, this discretion must be exercised in a manner that ensures that the litigant is afforded a full opportunity to present her case and to respond to the case against her, and that, in an attempt to assist an unrepresented litigant, the judge does not breach his duty of neutrality as between the parties (see Poulton v. R., [2002] T.C.J. No. 81 at para. 17 et seq).

[6] The hearsay rule is of special prominence in our legal system and the problems that hearsay evidence creates, whether in a criminal or civil setting, are constantly being reviewed (see, for example, R. v. B (K.G.), [1993] 1 S.C.R. 740, at 763; R. v. Starr, [2000] 2 S.C.R. 144, at 228, at para. 159). These problems include the absence of an oath or solemn affirmation, the inability of the trier of fact to assess the demeanour and credibility of the declarant or the accuracy of the purported statement and the lack of contemporaneous cross-examination by the opposing party. The fundamental reason for the exclusion of hearsay documents is the lack of an adequate opportunity to test the reliability of a witness's statement. Hence, in R. v. Khan, [1990] 2 S.C.R. 531 and R. v. Smith, [1990] 2 S.C.R. 915 it was held that, if satisfied that evidence is both necessary and reliable, a trial judge may admit it notwithstanding that it is hearsay evidence and inadmissible under one of the exceptions to the exclusionary hearsay rule.

[7] One of the difficulties facing a party in responding to adverse evidence is that the Tax Court of Canada Rules (Informal Procedure) appear not to require the parties to disclose their documentary evidence in advance of trial by using the normal document discovery process. At a trial conducted under the Informal Procedure, a party may attempt to introduce a written statement by an individual not present in court. The party opposite, confronted for the first time with this document, is then deprived of the right to cross-examine the author and, without an adjournment, may be denied as adequate opportunity to present independent evidence to contradict or explain the statement or put it in its proper context. Consequently, the absolute abolition of the hearsay rule under the Informal Procedure could lead to serious injustice as any findings by the Tax Court Judge as to the reliability or weight of the statement in such circumstances would be based on speculation; the statement being untested.

[8] The Tax Court Judge may not, however, reject evidence simply on the basis that it is hearsay and would not be admissible under one of the "exceptions", including Khan, supra. Under subsection 18.15(4), however, the Tax Court Judge has a broader discretion and may admit hearsay evidence even though it would not, for example, be sufficiently necessary to satisfy Khan, supra, but is nonetheless relevant and reliable. As Sharlow J.A. recently noted in Suchon v. The Queen, 2002 FCA 282 at para. 32:

That is not to say that a Tax Court Judge in an informal proceeding is obliged to accept all evidence that is tendered. There is no such requirement. However, it is an error for a Tax Court Judge in an informal proceeding to reject evidence on technical legal grounds without considering whether, despite the ordinary rules of evidence or the provisions of the Canada Evidence Act, the evidence is sufficiently reliable and probative to justify its admission. In considering that question, the Tax Court Judge should consider a number of factors, including the amount of money at stake in the case and the probable cost to the parties of obtaining more formal proof of the facts in issue.

At the core of this exercise of discretion is the facilitation of a fair and expeditious hearing.

[9] By enacting subsection 18.15(4), Parliament did not intend to eradicate the normal rules of evidence under the Informal Procedure. Rather, the provision was intended to provide Tax Court Judges with the necessary flexibility to enable them to deal as informally and expeditiously with an appeal as the circumstances of the case and considerations of fairness allow (see, for example, Ainsley v. Canada [1997] F.C.J. No. 701). However, it is open to judges to refuse to admit hearsay evidence where, in their opinion, its admission would not advance the statutory objectives prescribed in subsection 18.15(4).

[10] In my analysis, the Tax Court Judge committed no reviewable error with respect to the documents that Ms. Selmeci now says that she wanted to adduce as evidence. First, it is not clear from the transcript that the Tax Court Judge in fact refused to admit any of her documents. Counsel agrees that there was no express ruling by the Judge to exclude the documents, but says that Ms. Selmeci understood that he would not admit them because they were hearsay. I cannot draw that inference from the transcript. Rather, the Tax Court Judge seemed to be concerned only about the relevance and reliability of the documents; the considerations most pertinent to his exercise of discretion in refusing to admit hearsay evidence under Khan, supra and Smith, supra. Second, even if he did refuse to admit them, that refusal was within his discretion in dealing with hearsay evidence, and I am not satisfied that, in exercising his discretion, the Judge made an error that would warrant intervention by this Court.

Issue 2: Exclusion of "Important" Documents

[11] The applicant submits that the Tax Court Judge committed reviewable error by indicating that she would be precluded from introducing into evidence any document to which counsel for the respondent objected.

[12] In my analysis, the record does not reflect any such error. The transcript of the hearing indicates that the Tax Court Judge granted an adjournment so that the parties could discuss which documents would be the subject of an objection by the respondent. The purpose of the adjournment was to make the introduction of important evidence more efficient. The transcript further indicates that the Tax Court Judge explained his role thoroughly to the applicant, noting on several occasions that it was her task to place those documents important to her appeal before him, at which time he would rule on their admissibility. At no time did he suggest that her evidence would be limited on a basis other than his ruling on admissibility. Her failure to present evidence relevant to her case cannot be linked to any ruling by the Tax Court Judge. It follows, in my view, that the Tax Court Judge committed no reviewable error in this regard.

Issue 3: Estoppel

[13] Counsel for the applicant submitted that the Tax Court Judge exceeded his jurisdiction by referring to the principle of estoppel as the basis for concluding that Ms. Selmeci owned a limited partnership interest in Glen Villas Associates. The Tax Court Judge found that the principle of estoppel prevented the applicant from denying that she was the owner because she had represented to the Minister in previous years that she was the owner of the interest. Counsel submitted that because the Minister did not detrimentally rely on the applicant's representations, the principle of estoppel does not apply.

[14] In my view, the Tax Court Judge's reference to estoppel must be viewed in context and was, at best, a non-material error. He based his finding of fact that the applicant was a limited partner of Glen Villas Associates in 1997 on the totality of the evidence before him pertaining to the ownership of the partnership interest. For example, in her tax returns for 1991-3, the applicant had claimed the partnership losses on the basis that she was a limited partner of the partnership. She did not allege in this proceeding that those assertions were false. In addition, a number of photocopies of documents were produced in evidence, generated by the partnership, that identified the applicant as the owner of the partnership interest. However, the Tax Court Judge viewed them with some scepticism, especially since the applicant failed to call her husband, who was present at the Tax Court hearing, to corroborate her evidence and to authenticate what purported to be a certificate of limited partnership interest. In the result, the Tax Court Judge based his decision on his assessment of the documents before him, being mindful of the issue of credibility with respect to the ownership of the interest, and not on estoppel.

Conclusion and Disposition

[15] For these reasons, I am satisfied that the Tax Court Judge did not commit any procedural or evidentiary errors in the disposition of the applicant's case that would warrant the intervention of this Court.

[16] I would dismiss the application for judicial review with costs.

"B. Malone"

J.A .

"I agree

A.M. Linden

J.A."

"I agree

John M. Evans

J.A."

FEDERAL COURT OF APPEAL

NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET: A-669-00

STYLE OF CAUSE: Magda Selmeci v. Her Majesty the Queen

PLACE OF HEARING: Toronto

DATES OF HEARING: June 18, 2002

REASONS FOR JUDGMENT BY : Malone J.A.

CONCURRED IN BY: Linden J.A.

Evans J.A.

DATED: July 24, 2002

APPEARANCES:

Mr. Thomas McRae FOR THE APPLICANT

Mr. Daniel Bourgeois FOR THE RESPONDENT

SOLICITORS OF RECORD:

Mr. Thomas McRae FOR THE APPLICANT

Shibley Righton LLP

700-250 University Avenue

Toronto, ON, M5H 3E5

Morris Rosenberg FOR THE RESPONDENT

Deputy Attorney General of Canada

Summaries

Summary Under

Tax Topics - General Concepts - Evidence

Malone J.A. noted that under the informal Tax Court procedure, the Tax Court judge has a broader discretion than would otherwise obtain and (p....

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Selmeci v. Canada, 2002 FCA 293, 2002 DTC 7186

Citations2002 FCA 293, 2002 DTC 7186

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2002 FCA 293, 2002 DTC 7186