Category Archives: Burden of Proof

Notice Requirements for Hearsay Exceptions in Tax Trials

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Notice Requirements for Hearsay Exceptions in Tax Trials

Boroumand v Canada, 2016 FCA 313

At issue was the question of what constitutes notice under the Canada Evidence Act when seeking to rely on a statutory hearsay exception. This was an appeal from 2015 TCC 239.

This case shows the importance of trial counsel knowing the rules of procedure and following them. Absent this, appeal counsel are unlikely to succeed despite able argument or merits of the case.

See CanLII Comment HERE

FACTS

The Appellant taxpayer was assessed under the Income Tax Act and the Excise Tax Act for unreported income of over $3.5M. The Tax Court of Canada dismissed the appeal on the basis that the taxpayer had not demonstrated that the source of the unreported funds was not taxable (it was claimed that the funds were transfers of an inheritance from Iran).

The TCC judge refused to admit into evidence documents from money exchange enterprises that showed the funds came from Iran, significantly hindering the taxpayer’s ability to prove the source of the funds and meet his burden.

ANALYSIS

The Court referred to the Supreme Court of Canada decision in R v. Blackman, 2008 SCC 37 at para 36, where it was said that the trial judge is well placed to determine the extent to which the hearsay dangers of a particular case are of concern and whether they can be sufficiently alleviated (para 3).  The trial judge’s ruling on admissibility is entitled to deference as long as it is informed by the correct principles of law (para 3).

The Canada Evidence Act, section 30, provides a statutory hearsay exception for business records (records made in the usual and ordinary course of business). The court may examine the documents and hear evidence as to the circumstances of their creation and draw any reasonable inference (s 30(6) CEA).  Simple assertions that the documents are created in the usual and ordinary course of business are insufficient, there must be supporting evidence (para 6). Simple assertions that the documents are created in the usual and ordinary course of business are insufficient, there must be supporting evidence (para 6).  In this case, counsel at trial failed to call witnesses from the money exchange enterprises, there was no affidavit evidence, and there was no explanation offered as to the circumstances in which the records were made.  The failure of trial counsel bound the hands of the counsel on appeal.

Subsection 30(7) of the CEA also requires that seven days’ notice be given of the intention to introduce documents under the business records exception (para 7).  The taxpayer argued that the notice requirement was satisfied by producing the documents along with other documents as part of discovery.  There is no particular form of notice required, but the notice should “sufficiently describe which documents are to be introduced and indicate an intention to introduce them as business records” (para 7).  The Tax Court Judge had discretion to dispense with the notice requirement but did not do so.

The court also held that the documents could not be admitted under the common law business records exception to hearsay rule, as the conditions in Ares v. Venner, [1970] S.C.R. 608 were not met at trial, nor could they be admitted under the principled approach as the evidence in required for the trier of fact to adequately address its worth – R v. Khelawon, 2006 SCC 57 at paras. 2-3 (para 9).

Sas Ansari, BSc BEd PC JD LLM PhD (exp) CPA In-Depth Tax 1, 2 &3

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Neglect or Carelessness by Representative no Reason to Extend Time – Sas Ansari

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Neglect or Carelessness by Representative no Reason to Extend Time

Sapi v The Queen, 2016 TCC 239

This was an application to extend the time within which a Notice of Appeal may be filed with the TCC by persons who took part in a donation tax scheme by .

FACTS

The parties all forwarded CRA correspondence to PAC who then took no action.  The Applicants argued for an extension of time on the basis that their agent believed that the Agent’s legal representative had filed an appeal, but this was not correct (para 5).

The parties agreed that the application was made within the one year period and that there are reasonable grounds for the underlying appeal of the donation agreement.

ANALYSIS

The TCC is guided by section 167 of the Income Tax Act when an applicant requests an extension of the time to file a Notice of Appeal.

The Court referred to the decision in Mehta v. R., 2011 TCC 38, where Justice Miller granted an application of the basis of the harm of disallowing the application being greater to the applicant than the respondent. However, this Court considered that balance to be a relevant but not a determinative factor as the balance almost always favours the applicant (para 23).

The Court also referred to Gorenko v. R., 2002 D.T.C. 2025, where two lawyers failed to file a NOA due to a miscommunication and remedied the problem within 2 days of discovering it.  The Court held that in Gorenko both lawyers testified and were found to have acted with a reasonable degree of diligence, while no such evidence existed in this case (para 25).  The Court drew an adverse inference from the APplicant’s failure to call or subpoena the lawyer involved.

The Court agreed that the applications should be dismissed because:

  • The Applicant bears the onus of establishing each criterion in section 167;
  • Failure to meet any one of the conditions is fatal to the application – Dewey v. Canada, 2004 FCA 82Kolmar v. R., 2003 TCC 829
  • A bona fide intention to appeal within 90 days is not satisfied where the taxpayer merely forward correspondence to an agent without following up or taking steps to ensure an appeal was filed – Sampson v. R., 2012 TCC 156
  • The failure of an Applicant to appear and testify as their inability to act or instruct another to act is fatal to an application (para 23) – Hamilton v. R., 2013 TCC 192

The Court held that in this case, the failure of the agent or lawyer to file a NOA is not a just and equitable reason to grant the extension of time.  There was insufficient evidence to establish that the agent or lawyer acted with reasonable diligence (para 37).  Ther was also no evidence of the Applicants actively monitoring the status of their case, or that there was evidence of an insufficient number of counsel in their jurisdiction to take on the matter (para 37).

The failure of an agent to file a NOA is not in itself sufficient to grant an extension of time – Carrier v. Canada, 2005 TCC 182. The Court concluded at para 44:

[44]        Overall, it is my view that each of the Applicants provided their respective Notice of Confirmation to PAC on a timely basis, and then simply trusted PAC to attend to their appeals without adequately following up with PAC to ensure their appeal was so filed. Unfortunately, their trust in PAC was misplaced, as PAC did not ensure their appeals were filed on a timely basis or take adequate steps in doing so. While PAC has attempted to deflect blame to Mr. De Bartolo, who did not testify, it is my view that any neglect or carelessness by either PAC or any counsel it engaged to file the appeals in question is not a just and equitable reason to grant these four Applications.

Sas Ansari, BSc BEd PC JD LLM PhD (exp) CPA In-Depth Tax 1, 2 &3

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