Choptiany – Tax Court of Canada allows the taxpayers’ appeal from (likely - correct) assessments on the basis that they had been repeatedly stonewalled on discovery

The three taxpayers had appealed the imposition of gross negligence penalties based on what Boyle J characterized as “nonsensical misstatements” regarding them “claiming to be agent for themselves.” Although Boyle J expressed himself more circumspectly than this, essentially it appears that CRA, with the assistance of Crown counsel, sought to hide from the taxpayers that they had been the subject of criminal investigation by CRA, then downplay that fact, in clear breach of the Rules regarding the requirement for the CRA representative on discovery to be knowledgeable and informed, and for incorrect answers given to be corrected and relevant documents provided.

The taxpayers brought two motions before Boyle J, and he issued orders directing the Crown to comply with its discovery-disclosure obligations. This third motion was now brought based on the Crown’s essential non-compliance with the two previous orders. Boyle J noted the extraordinary position of Crown counsel during the hearing of this third motion “that no remedy was warranted because all questions asked had been answered.”

In allowing the taxpayer’s appeals from their penalty assessments, with costs on a solicitor-and-client scale, he stated:

The Respondent has adopted and demonstrated a consistent pattern of non-compliance with this Court’s Orders and Rules with respect to CRA’s audits and investigations involving the Appellants. I find this to have been intentional and deliberate, and that it was undertaken to frustrate these Appellants’ rights to pre-trial discovery on the subject of CRA’s investigation involving them relevant to their appeals. …

The Respondent’s egregious history of defaults and non-compliance in these appeals, that there is no alternative available that could reasonably be expected to cause the Respondent to now comply, and that this has caused prejudice to the Appellants, are reason enough to allow these appeals. This disposition is also necessary to protect the integrity of the judicial process and the rules of law that apply to all parties.

Neal Armstrong. Summary of Choptiany v. The King, 2022 TCC 112 under Rule 95.