Pleadings when Appealing ITA Penalties

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Pleadings when Appealing ITA Penalties

Brown v Canada, 2014 FCA 301

At issue was, inter alia, what, if any, facts need to be pled by a taxpayer appealing an assessment of penalties under the ITA.

The Federal Court of Appeal held that the Tax Court of Canada was wrong to strike the pleadings of the appellant on the basis that no material facts were disclosed.  The court referred to the test for striking pleadings set out in Odhavji v. Woodhouse, 2003 SCC 69: the “plain and obvious” test.

The burden of proving the facts underlying the assessment of penalties lies with the Minister.  Even where the only document filed is the notice of appeal, “it is not plain and obvious that the Minister will be successful in establishing the facts justifying the assessment of gross negligence penalties” (para 20).  Given that the burden is with the Minister, there are no facts that the taxpayer must allege and then have the onus to prove.

NOTE: The taxpayer also challenged the validity of various ITA provisions providing inclusive definitions.  This demonstrates the problem of having non-legally trained and self-represented persons before the court.  The court dismissed these arguments by reference to:

  • Fawcett Properties Ltd. v. Buckingham County Council, [1961] A.C. 636 at 676 – unless the words are so absolutely senseless that a court could do nothing at all with them, a court will find some meaning in a statute rather than declare the statute void for uncertainty;
  • R. v. Nova Scotia Pharmaceutical Society, [1992] 2 S.C.R. 606 – to be unconstitutionally vague, a law must be such that it does not give sufficient guidance for legal debate; and
  • Canada (Minister of National Revenue) v. Stanchfield, 2009 FC 99 – inclusive definitions merely expand on the ordinary meaning of a word, and are not for that reason vague.

– Sas Ansari, JD LLM PhD (exp)

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