Docket: A-155-14
Citation: 2014 FCA 283
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CORAM:
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DAWSON J.A.
WEBB J.A.
SCOTT J.A.
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BETWEEN:
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MICHELLE COLEEN CONNOLLY
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Appellant
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and
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ATTORNEY GENERAL OF CANADA
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Respondent
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REASONS FOR
JUDGMENT
SCOTT J.A.
[1]
Subsection 160(1) of the Income Tax Act,
R.S.C., 1985, c.1 (5th Supp.) (Act) renders a taxpayer liable for
income taxes owed by a non-arms length person if property is transferred to the
taxpayer from the tax debtor for proceeds less than the fair market value of
the transferred property.
[2]
The Minister of National Revenue assessed the
appellant pursuant to subsection 160(1) of the Act in respect of cheques
totalling $76,884.17 she received during the 2003 taxation year from her common
law spouse while he was a tax debtor. The appellant appealed the assessment to
the Tax Court of Canada. For reasons cited as 2014 TCC 55, [2014] T.C.J. No.42,
a judge of the Tax Court dismissed the appeal. This is an appeal from that
judgment.
[3]
Before the Tax Court, the appellant argued that
she did not receive any benefit as a result of receiving the cheques in issue.
Once the appellant cashed the cheques, the proceeds were either applied to
reduce the common law spouse’s indebtedness to the appellant or were given to
her common law spouse.
[4]
The Judge rejected this explanation. In her
view, the appellant was not credible (reasons, at paragraph 36). The first
reason given by the Judge for this credibility finding was that the appellant’s
explanation to the Canada Revenue Agency about the cheques in issue changed.
According to the Judge, when the appellant was first contacted in November
2007, she advised the Canada Revenue Agency that the funds were immediately
withdrawn and given to the common law spouse. The Judge went on to conclude
that it was only at the objection stage that the appellant alleged that she made
loans to her common law spouse and that the cheque proceeds represented
payments of those loans (reasons, at paragraph 37).
[5]
As conceded by counsel for the respondent at the
hearing of this appeal, this was a finding that the appellant had, at the objection
stage, fabricated a new explanation. This finding was therefore the lens
through which all of the evidence was assessed by the Judge. As such, this
finding was essentially dispositive of the issue of the appellant’s
credibility.
[6]
In fact, the appellant’s explanation was not a
recent fabrication made at the objection stage.
[7]
On April 4, 2004, in response to an inquiry from
the Canada Revenue Agency with respect to a cheque deposited into the
appellant’s account on November 7, 2003, the appellant stated, in the closing
paragraph of her response, that:
“As I stated on the
telephone, I did not keep and nor do I have any of this money therefore I have
not benefit from this cheque. The only money that has passed from Mr. MacVicar
to myself are amounts that were owing to me as a result of incurring living
expenses and his borrowing money from me.” (Appeal
Book volume 1, Tab 18)
[8]
The finding of recent fabrication was therefore
based upon a misunderstanding of the evidence, and constituted a palpable and
overriding error.
[9]
In the result, I would allow the appeal and
remit the appeal of the assessment to the Tax Court for redetermination by a
different judge. The appellant is entitled to her disbursements in this Court
and to her costs in the Tax Court (where she was represented by counsel).
[10]
I also find that it is not necessary to deal
with the two other grounds of appeal raised by the appellant namely that
counsel for the respondent committed fraud or perjury and that the Judge was
biased, as both are clearly unfounded. I believe the appellant must be
cautioned from making bold assertions that have no foundation whatsoever and
that can tarnish the reputation of officers of the Court if left unchallenged.
Perjury and bias are defined terms they should never be used lightly.
[11]
In view of this decision it is not necessary to
consider the appellant’s motion for leave to adduce new evidence. It will be
for the Tax Court to determine whether the document at issue is admissible as a
business record.
"A.F. Scott"
“I agree
Eleanor R. Dawson J.A.”
“I agree
Wyman W. Webb
J.A.”
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