Wiens v. The Queen

Wiens v. The Queen
Court (s) Database
Tax Court of Canada Judgments
Date
2011-03-15
Neutral citation
2011 TCC 152
File numbers
2010-2625(IT)I
Judges and Taxing Officers
Wyman W. Webb
Subjects
Income Tax Act
Decision Content
Docket: 2010-2625(IT)I
BETWEEN:
JOHN WIENS,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeals heard on January 20, 2011 at Toronto, Ontario
Before: The Honourable Justice Wyman W. Webb
Appearances:
Agent for the Appellant:
Dan White
Counsel for the Respondent:
Samantha Hurst
____________________________________________________________________
JUDGMENT
The Appellant’s appeals from the reassessments made under the Income Tax Act are allowed, with costs, and the matter is referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that:
(a) in determining the income of the Appellant for 2002, the Appellant’s income shall be reduced by the following amounts:
Item
Amount
To adjust for the one-half interest of Kathryn Wiens in the property located at 22 Pembroke Road:
($15,900)
To adjust for the one-half interest of Kathryn Wiens in the property located at 428 Redonda Street:
($1,128)
To adjust for the amount paid by the insurance company to the contractors:
($3,542)
Total adjustments (reduction in the income of the Appellant):
($20,570)
(b) in determining the liability of the Appellant under the Act for income taxes for 2003, the amount of taxes payable by the Appellant for 2003 shall be reduced by the lesser of:
(i) the amount by which his liability for income taxes under the Act would be reduced if his income was adjusted by the following amounts:
Item
Amount
A reduction for the one-half interest of Kathryn Wiens in the property located at 1581 Rothesay Street:
($15,136)
A reduction for the one-half interest of Kathryn Wiens in the property located at 453 Phelan Road:
($40,057)
A reduction for the amount added as income from an adventure in nature of trade in relation to the sale of the property located at 165 Crestwood Crescent:
($16,346)
An addition to restore the amount claimed as a taxable capital gain:
$7,500
A reduction for the amount paid by the insurance company:
($2,200)
Total adjustments (reduction in the income of the Appellant):
($66,239)
and
(ii) $12,000.
Signed at Ottawa, Canada, this 15th day of March, 2011.
“Wyman W. Webb”
Webb, J.
Citation: 2011TCC152
Date: 20110315
Docket: 2010-2625(IT)I
BETWEEN:
JOHN WIENS,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Webb, J.
[1] The Appellant’s appeals relate to the reassessment of his 2002 and 2003 taxation years. In both years amounts were added to his income in relation to a retail store that he operated as a sole proprietorship and in relation to certain sales of real property. The following were the amounts that were added to his income:
2002
2003
Increase in income from the retail store:
$42,028
$2,667
Increase in income from the sale of real property:
$34,055
$179,206
Total increase to business income:
$76,083
$181,873
Reduction for taxable capital gain claimed:
($36,952)
Write-down of closing inventory (Dec.22, 2008 reassessment):
($6,160)
($18,999)
Net increase to income:
$69,923
$125,922
[2] Section 18.12 of the Tax Court of Canada Act provides that:
18.12 Where, before the start of the hearing of an appeal referred to in subsection 18(1), it appears to the Court that
(a) the aggregate of all amounts in issue exceeds $12,000, or
(b) the amount of the loss in issue exceeds $24,000,
as the case may be, the Court shall order that sections 17.1 to 17.8 apply in respect of the appeal unless the appellant elects to limit the appeal to $12,000 or $24,000, as the case may be.
[3] Section 2.1 of the Tax Court of Canada Act provides that:
2.1 For the purposes of this Act, "the aggregate of all amounts" means the total of all amounts assessed or determined by the Minister of National Revenue under the Income Tax Act, but does not include any amount of interest or any amount of loss determined by that Minister.
[4] Since no penalties were assessed under the Income Tax Act (the “Act”) against the Appellant, for the purposes of the Tax Court of Canada Act “the aggregate of all amounts” in this case would mean the taxes assessed under the Act. In Maier v. The Queen, [1994] T.C.J. No. 1260, Justice Garon (as he then was) held that the aggregate of all amounts in dispute means the aggregate amounts in dispute under a particular assessment (or reassessment) and not under a Notice of Appeal. When a Notice of Appeal relates to more than one assessment (or reassessment) the issue is not whether the total amounts in dispute under the Notice of Appeal exceed $12,000 but whether the total amounts in issue in relation to any particular assessment or reassessment exceeds $12,000. Therefore, if a person elects to limit an appeal to $12,000, the limitation will apply to each assessment (or reassessment) that is the subject of the appeal. In this case, the $12,000 limit will apply to the appeal from the reassessment of the Appellant’s liability for his 2002 taxation year and a separate $12,000 limit will apply to the appeal from the reassessment of the Appellant’s liability for his 2003 taxation year.
[5] Since the net increase in the Appellant’s income for 2003 was $125,922, it appears that the aggregate of the taxes assessed under the Act that are in issue in relation to the reassessment for 2003 would be in excess of $12,000. At the commencement of the hearing I read the provisions of section 18.12 of the Tax Court of Canada Act to the agent for the Appellant and he confirmed that the Appellant was electing to limit the appeal for each year to $12,000. To that end the agent for the Appellant submitted a schedule with the title “Revised Statement of Amounts in Dispute” which listed the following:
2002
Business Income Real Estate
Profit 22 Pembroke Road 31,799
Profit 428 Redonda Street 2,257
Business Income Dollar Store
Insurance Proceeds 10,914
Total Disputed Amount 2002 44,970
2003
Business Income Real Estate
Profit Lot 2, Springfield 59,827
Business Income Dollar Store
Insurance Proceeds 2,200
Total Disputed amount 2003 62,027
[6] These real properties, as well as the other three real properties listed in the Reply for 2003, are all located in or near Winnipeg. The agent for the Appellant had indicated that the evidence in relation to the real property transactions would be limited to the properties listed in this schedule. However since the agent did not ask either one of the two witnesses any questions in relation to these three properties, the purpose of this schedule is simply to illustrate that the Appellant’s agent had turned his mind to the restriction imposed on an appeal under the informal procedure whereby the amount in dispute (taxes and, if applicable, penalties assessed under the Act) is limited to $12,000. There is also a copy of a letter in the Court file that was sent to the agent for the Appellant on October 21, 2010 from the Department of Justice that raises this issue of the limitation of the amount in dispute in an appeal under the informal procedure to $12,000 and indicating that the Appellant could have the appeal heard under the general procedure without limits.
[7] It is clear that the Appellant and his agent have received adequate notification of the limitations related to appeals under the informal procedure and that the Appellant has elected to limit the amount of taxes in dispute for each year to $12,000. As a result, the hearing continued under the Informal Procedure.
[8] There were only two witnesses who testified at the hearing – the Appellant and his spouse. An issue arose during the re-examination by the agent for the Appellant of his witnesses. Counsel for the Respondent objected to questions that the agent was asking of each witness during the re-examination of such witness by the agent for the Appellant on the basis that:
MS. HURST: In my submission, reply is directed at issues that were raised in cross that the Appellant could not have known in chief.
[9] This was an informal procedure hearing and I allowed the agent to ask questions on re-examination of a witness in relation to matters that were raised during the cross-examination of that witness but which had not been addressed during the direct examination of that witness.
[10] In R. v. Evans, [1993] 2 S.C.R. 629, 104 D.L.R. (4th) 200, Justice Cory writing on behalf of a majority of the Justices of the Supreme Court of Canada, stated as follows:
Should the Question Have Been Permitted on Re-examination
37 Even though it has been determined that the evidence was admissible, it remains to be seen whether the question should have been permitted on re‑examination.
38 The issue is put very well by E. G. Ewaschuk in Criminal Pleadings & Practice in Canada, 2nd ed., in these words at p. 16.29, para. 16:2510:
Questions permitted as of right on re-examination must relate to matters arising out of the cross-examination which deal with new matters, or with matters raised in examination-in-chief which require explanation as to questions put and answers given in cross-examination.
[Emphasis added by Justice Cory.]
Generally speaking, the right to re-examine must be confined to matters arising from the cross-examination. As a general rule new facts cannot be introduced in re‑examination. See R. v. Moore (1984), 15 C.C.C. (3d) 541 (Ont. C.A.), per Martin J.A. In this case, the cross-examination of Linda Sample referred to her statements to police about the appellant. The police interview of December 30 was specifically alluded to during the cross-examination and had not been dealt with in-chief. It was in response to this cross examination that Linda Sample stated that, from the time of that meeting, she suspected the appellant of committing the crime. It would seem that the Crown had the right to re-examine Linda Sample as to precisely what she told the police at that time with regard to the appellant. It was a subject that had not been raised in the examination in chief but arose from the cross-examination. The trial judge erred in failing to allow re-examination on this point.
(emphasis added)
[11] It seems to me that when the witness was being examined in chief the Crown would have known (or could have known if the Crown would have asked the police) about the police interview with the witness. Not having referred the witness during the examination-in-chief to her statements that she had made to the police should not have prevented the Crown from asking that witness questions about her statements during the re-examination of that witness because the matter was raised during the cross-examination of the witness. Therefore, even though a matter was not raised during examination-in-chief of a witness, if that matter is raised during cross-examination of that witness, the witness can be re-examined in relation to that matter following cross-examination, even though the agent or counsel who called the witness would have (or could have) known about the matter prior to the cross‑examination of that witness.
[12] In The Law of Evidence in Canada (third edition) by Justice Bryant, Justice Lederman, and Justice Fuerst all of the Superior Court of Justice for Ontario, it is stated at page 1164 as follows:
VII. RE-EXAMINATION
§16.183 The purpose of re-examination is to enable the witness to explain and clarify relevant testimony which may have been weakened or obscured in cross-examination. The witness is not ordinarily allowed to supplement the examination-in-chief by introducing new facts which were not covered in cross-examination.* The general rule is that re-examination must be confined to matters which arose out of cross-examination.*
§16.184 The right to re-examine, however, extends to rehabilitation of the credibility of the witness which may have been impaired in cross-examination. This includes the right to ask the witness to explain or clarify discrepancies between the witness’ evidence-in-chief and cross-examination.* In addition, this may entail the introduction of a previous consistent statement to rebut the suggestion that the witness’ evidence was a recent contrivance.*
§16.185 In addition to the right to re-examine, the trial judge has a discretion to permit re-examination in circumstances that do not accord with the principles stated above. It is a discretion that is to be exercised sparingly, but extends to permit re-examination on matters not touched on in cross-examination which may, through oversight, have been omitted in chief. In such cases, the opposing party will have a further right to cross-examine the witness.*…
(* denotes a footnote reference that is in the text but which has not been included.)
[13] Therefore even if a matter has not been addressed during the examination-in-chief or during the cross-examination of a witness, it is still possible to permit the matter to be addressed during re-examination, with the opposing party having the right to a further cross-examination of the witness.
[14] The Appellant’s tax liability for 2002 was originally assessed on October 14, 2003 and the Appellant’s tax liability for 2003 was originally assessed on May 25, 2004. The Appellant was reassessed to include the additional income referred to above by notices of reassessment dated August 30, 2007. The notices of reassessment were issued after the expiration of the normal reassessment period as defined in subsection 152(3.1) of the Act. Subsection 152(4) of the Act provides, in part, that:
(4) The Minister may at any time make an assessment, reassessment or additional assessment of tax for a taxation year, interest or penalties, if any, payable under this Part by a taxpayer or notify in writing any person by whom a return of income for a taxation year has been filed that no tax is payable for the year, except that an assessment, reassessment or additional assessment may be made after the taxpayer's normal reassessment period in respect of the year only if
(a) the taxpayer or person filing the return
(i) has made any misrepresentation that is attributable to neglect, carelessness or wilful default or has committed any fraud in filing the return or in supplying any information under this Act, or
(ii) has filed with the Minister a waiver in prescribed form within the normal reassessment period for the taxpayer in respect of the year;
[15] A waiver in respect of “Business Income & Expenses & Real Estate Transactions” for the 2002 taxation year of the Appellant was dated October 10, 2006. The Appellant acknowledged that the signature on the form appeared to be his signature but he stated that he has no recollection of signing the waiver. No waiver was submitted in respect of the 2003 taxation year.
[16] The Appellant was not well in 2006. He described his condition as follows:
Q. Mr. Wiens, I was asking you: Do you recall where you were and what you were doing on October 10, 2006?
A. I was either in the hospital or out for a few days or on day passes or so on. I was awaiting surgery.
Q. Can you describe what type of surgery you were waiting to do?
A. I was going to take out my spleen. They said it was in danger of a spontaneous rupture. They wanted to diagnose it or something. I don't understand what the doctors do.
Q. Were you physically ill as a result of this?
A. Yes.
Q. Were you on medication?
A. A lot of it.
Q. Do you recall what that medication was?
A. Some of them were narcotics, but I know you have to get a special prescription. If I was in the hospital I would get a whole bunch of pills. My wife knew more of what I was taking at home. It would be a shot glass of a whole bunch of different stuff. I don't know exactly what everything was.
Q. Would you say that you were your normal self and functioning mentally properly at that time?
A. I couldn't drive. They told me that with the drugs I was on I couldn't operate a motor vehicle.
Q. Were you dealing with your tax matters at that time?
A. No.
…
Q. In regard to taxes, to your mental and physical state, your ability to make decisions; all that stuff.
A. My wife described me as a vegetable. I remember getting a call when I was in the hospital ‑‑ I think it was in July ‑‑ or it was a message from a nurse to call the auditor. I asked my wife if she could get the accountant at that time or a bookkeeper to take care of it. As days went on, I got worse and worse. I was on more and more drugs, so I didn't know what I was doing. I couldn't operate a car. I couldn't even walk.
Q. Carry on.
A. My mental condition, I was probably close to how my wife described me. I didn't know what I was doing. I didn't know anything.
…
Q. How far back do we go before you had your normal clarity of thought? If we took October 10 as a benchmark, when did you start having your memory and thinking capacity affected by your illness? That is what I'm trying to establish.
A. I know I was admitted to the hospital in late July, I think it was, of 2006, and I stayed there for a long time. While I was there I was in pretty bad shape. Previous to that when we were having all the problems with the store, I think I probably had some kind of nervous problem because I was not very well there. You can imagine the effect if someone's house is broken into once or so or twice, three times, five times, I don't even know how many times it was. It was a big stress. I was paranoid, I guess. I didn't know what was going on.
Q. What would you say your capacity was to look after your own affairs ‑‑ especially around the audit ‑‑ during that period of time?
A. None.
Q. Who was looking after your affairs?
A. An accountant named Kathy Currie. I'm not sure if she is an accountant or a bookkeeper.
[17] In Nguyen v. The Queen, 2005 TCC 697, [2007] 5 C.T.C. 2654, Justice Dussault of this Court dealt with a waiver of a right to appeal that the taxpayer had signed but was subsequently challenging. Justice Dussault made the following comments:
32 The Appellant therefore accepted a settlement which he surely believed was in his favour at the time, and assessments were done based on that settlement, that is, with no penalty. He waived his right to object and appeal in respect of the expenses the deduction of which was disallowed for the years 1997, 1998 and 1999. He did not offer any compelling evidence showing that he was unable, for reasons related to his origin or language, to understand the consequences of his waiver or that tax officials tried to mislead him, threaten him or apply undue pressure in connection with the waiver. Subsections 165(1.2) and 169(2.2) of the Act sanction such waivers.
33 It is clear to me that a waiver of the right to object and appeal signed by a taxpayer cannot be set aside except on a preponderance of evidence that the taxpayer did not freely consent to the waiver or was unduly pressured. I do not believe such evidence was put forward in this instance.
[18] It seems to me that the same principles should apply to a waiver of the normal reassessment period as would apply to a waiver of the right to object and appeal. Justice Dussault referred to setting aside a waiver on “a preponderance of evidence”. As a result of the decision of the Supreme Court of Canada in F.H. v. McDougall, referred to below, it seems me that there is only one standard of proof and therefore the waiver in this case cannot be set aside unless the Appellant establishes on a balance of probabilities the he did not freely consent to the waiver[1]. The question of whether a person has consented would include the issue of whether the person had the capacity to consent. In Chitty on Contracts (twenty-ninth edition) at page 579, it is stated that:
Contractual incapacity. The incapacity of one or more of the contracting parties may defeat an otherwise valid contract. Prima facie, however, the law presumes that everyone has a capacity to contract; so that, where exemption from liability to fulfil an obligation is claimed by reason of want of capacity, this fact must be strictly established on the part of the person who claims the exemption.
[19] It also seems to me that these comments should apply to the waiver in this case and would also apply to any alleged incapacity arising as a result of any medication that the Appellant was taking at the time, subject to the qualification that the reference to “strictly established” does not impose a standard of proof that is different from a balance of probabilities or impose a requirement on the trial Judge to scrutinize evidence more carefully than such trial Judge would in other civil matters. Based on the decision of the Supreme Court of Canada in F.H. v. McDougall, referred to below, since the Appellant is claiming that he is not bound by the waiver, the Appellant will need to establish on a balance of probabilities that he did not have the requisite capacity to execute the waiver on October 10, 2006.
[20] However, in this case it is not at all clear whether the Appellant was in the hospital on October 10, 2006. No records from the hospital were introduced to show the date that he was admitted to the hospital or discharged from the hospital. His recollection was that he was admitted in late July 2006 and that he “stayed there for a long time”. A long time is very subjective and of little assistance in determining whether he was still in the hospital on October 10, 2006. For some people a couple of weeks in a hospital may be a long time.
[21] It is also not clear what medication he was actually taking on October 10, 2006 or what his capacity was on that date to understand the nature of the document that he was signing. Simply not remembering that he had signed the document is not sufficient. It seems to me that testimony from medical experts would have been important in relation to the capacity of the Appellant on October 10, 2006 if the Appellant wanted to establish that he lacked the capacity to understand the nature of the document that he was signing on that particular day.
[22] In relation to the onus of proof, Justice Rothstein, writing on behalf of the Supreme Court of Canada, in F.H. v. McDougall, [2008] 3 S.C.R. 41 stated that:
(4) The Approach Canadian Courts Should Now Adopt
40 Like the House of Lords, I think it is time to say, once and for all in Canada, that there is only one civil standard of proof at common law and that is proof on a balance of probabilities. Of course, context is all important and a judge should not be unmindful, where appropriate, of inherent probabilities or improbabilities or the seriousness of the allegations or consequences. However, these considerations do not change the standard of proof. …
…
44 …. As Lord Hoffmann explained in In re B at para. 2:
If a legal rule requires a fact to be proved (a "fact in issue"), a judge or jury must decide whether or not it happened. There is no room for a finding that it might have happened. The law operates a binary system in which the only values are zero and one. The fact either happened or it did not. If the tribunal is left in doubt, the doubt is resolved by a rule that one party or the other carries the burden of proof. If the party who bears the burden of proof fails to discharge it, a value of zero is returned and the fact is treated as not having happened. If he does discharge it, a value of one is returned and the fact is treated as having happened.
In my view, the only practical way in which to reach a factual conclusion in a civil case is to decide whether it is more likely than not that the event occurred.
45 To suggest that depending upon the seriousness, the evidence in the civil case must be scrutinized with greater care implies that in less serious cases the evidence need not be scrutinized with such care. I think it is inappropriate to say that there are legally recognized different levels of scrutiny of the evidence depending upon the seriousness of the case. There is only one legal rule and that is that in all cases, evidence must be scrutinized with care by the trial judge.
46 Similarly, evidence must always be sufficiently clear, convincing and cogent to satisfy the balance of probabilities test. But again, there is no objective standard to measure sufficiency. In serious cases, like the present, judges may be faced with evidence of events that are alleged to have occurred many years before, where there is little other evidence than that of the plaintiff and defendant. As difficult as the task may be, the judge must make a decision. If a responsible judge finds for the plaintiff, it must be accepted that the evidence was sufficiently clear, convincing and cogent to that judge that the plaintiff satisfied the balance of probabilities test.
47 Finally there may be cases in which there is an inherent improbability that an event occurred. Inherent improbability will always depend upon the circumstances. As Baroness Hale stated in In re B, at para. 72:
Consider the famous example of the animal seen in Regent's Park. If it is seen outside the zoo on a stretch of greensward regularly used for walking dogs, then of course it is more likely to be a dog than a lion. If it is seen in the zoo next to the lions' enclosure when the door is open, then it may well be more likely to be a lion than a dog.
48 Some alleged events may be highly improbable. Others less so. There can be no rule as to when and to what extent inherent improbability must be taken into account by a trial judge. As Lord Hoffmann observed at para. 15 of In re B:
Common sense, not law, requires that in deciding this question, regard should be had, to whatever extent appropriate, to inherent probabilities.
It will be for the trial judge to decide to what extent, if any, the circumstances suggest that an allegation is inherently improbable and where appropriate, that may be taken into account in the assessment of whether the evidence establishes that it is more likely than not that the event occurred. However, there can be no rule of law imposing such a formula.
(5) Conclusion on Standard of Proof
49 In the result, I would reaffirm that in civil cases there is only one standard of proof and that is proof on a balance of probabilities. In all civil cases, the trial judge must scrutinize the relevant evidence with care to determine whether it is more likely than not that an alleged event occurred.
(emphasis added)
[23] While the Appellant might have lacked the capacity to execute a valid waiver on October 10, 2006, this is not sufficient. The Appellant must establish that it was more likely than not that the Appellant lacked the requisite capacity on October 10, 2006 to consent to the waiver. The Appellant has failed to establish that it was more likely than not that on October 10, 2006 the Appellant lacked the requisite capacity to execute a valid waiver and therefore I find that the waiver is valid and the Respondent had the right to reassess the Appellant for 2002.
[24] In Hickman Motors Ltd. v. Her Majesty the Queen, [1997] S.C.J. No. 62, Justice L’Heureux-Dubé of the Supreme Court of Canada made the following comments in relation to an Appellant's onus of “demolishing” the Minister’s assumptions:
92 … The Minister, in making assessments, proceeds on assumptions (Bayridge Estates Ltd. v. Minister of National Revenue (1959), 59 D.T.C. 1098 (Can. Ex. Ct.), at p. 1101) and the initial onus is on the taxpayer to “demolish” the Minister's assumptions in the assessment (Johnston v. Minister of National Revenue, [1948] S.C.R. 486 (S.C.C.); Kennedy v. Minister of National Revenue (1973), 73 D.T.C. 5359 (Fed. C.A.), at p. 5361). The initial burden is only to “demolish” the exact assumptions made by the Minister but no more: First Fund Genesis Corp. v. R. (1990), 90 D.T.C. 6337 (Fed. T.D.), at p. 6340.
93 This initial onus of “demolishing” the Minister's exact assumptions is met where the Appellant makes out at least a prima facie case: Kamin v. Minister of National Revenue (1992), 93 D.T.C. 62 (T.C.C.); Goodwin v. Minister of National Revenue (1982), 82 D.T.C. 1679 (T.R.B.). In the case at bar, the Appellant adduced evidence which met not only a prima facie standard, but also, in my view, even a higher one. In my view, the Appellant “demolished” the following assumptions as follows: (a) the assumption of “two businesses”, by adducing clear evidence of only one business; (b) the assumption of “no income”, by adducing clear evidence of income. The law is settled that unchallenged and uncontradicted evidence “demolishes” the Minister's assumptions: see for example MacIsaac v. Minister of National Revenue (1974), 74 D.T.C. 6380 (Fed. C.A.), at p. 6381; Zink v. Minister of National Revenue (1987), 87 D.T.C. 652 (T.C.C.). As stated above, all of the Appellant's evidence in the case at bar remained unchallenged and uncontradicted. Accordingly, in my view, the assumptions of “two businesses” and “no income” have been “demolished” by the Appellant.
94 Where the Minister's assumptions have been “demolished” by the Appellant, “the onus shifts to the Minister to rebut the prima facie case” made out by the Appellant and to prove the assumptions: Magilb Development Corp. v. Minister of National Revenue (1986), 87 D.T.C. 5012 (Fed. T.D.), at p. 5018. Hence, in the case at bar, the onus has shifted to the Minister to prove its assumptions that there are “two businesses” and “no income”.
95 Where the burden has shifted to the Minister, and the Minister adduces no evidence whatsoever, the taxpayer is entitled to succeed: see for example MacIsaac, supra, where the Federal Court of Appeal set aside the judgment of the Trial Division, on the grounds that (at pp. 6381-2) the “evidence was not challenged or contradicted and no objection of any kind was taken thereto”. See also Waxstein v. Minister of National Revenue (1980), 80 D.T.C. 1348 (T.R.B.); Roselawn Investments Ltd. v. Minister of National Revenue (1980), 80 D.T.C. 1271 (T.R.B.). Refer also to Zink v. Minister of National Revenue, supra, at p. 653, where, even if the evidence contained “gaps in logic, chronology and substance”, the taxpayer's appeal was allowed as the Minster failed to present any evidence as to the source of income. I note that, in the case at bar, the evidence contains no such “gaps”. Therefore, in the case at bar, since the Minister adduced no evidence whatsoever, and no question of credibility was ever raised by anyone, the Appellant is entitled to succeed.
96 In the present case, without any evidence, both the Trial Division and the Court of Appeal purported to transform the Minister's unsubstantiated and unproven assumptions into “factual findings”, thus making errors of law on the onus of proof. My colleague Iacobucci J. defers to these so-called “concurrent findings” of the courts below, but, while I fully agree in general with the principle of deference, in this case two wrongs cannot make a right. Even with “concurrent findings”, unchallenged and uncontradicted evidence positively rebuts the Minister's assumptions: MacIsaac, supra. As Rip T.C.J., stated in Gelber v. Minister of National Revenue (1991), 91 D.T.C. 1030 (T.C.C.), at p. 1033, “[the Minister] is not the arbiter of what is right or wrong in tax law”. As Brulé T.C.J., stated in Kamin, supra, at p. 64:
the Minister should be able to rebut such [prima facie] evidence and bring forth some foundation for his assumptions.
…
The Minister does not have a carte blanche in terms of setting out any assumption which suits his convenience. On being challenged by evidence in chief he must be expected to present something more concrete than a simple assumption. [Emphasis added by Justice L’Heureux Dubé]
[25] The British Columbia Court of Appeal in Northland Properties Corp. v. British Columbia, 2010 BCCA 177, 319 D.L.R. (4th) 334 commented on this decision of Justice L’Heureux Dubé and stated that:
26 The use of "demolish" has carried through to the present: see Hickman at para. 92; or, most recently, in Norton v. Canada, 2010 TCC 62 at para. 59. The choice of word is unfortunate, because it tends to cloud the actual nature of the standard of proof. "Demolishing" does not imply a higher standard, and, in that regard, the careful statement of McQuaid J.A. in Island Telecom Inc. v. P.E.I. (Regulatory and Appeals Commission) (1999), 176 D.L.R. (4th) 356 (P.E.I.C.A.) at para. 22 is apposite:
[22] ... Once ... the assumptions have been "demolished" or, to express it somewhat less emphatically, once the taxpayer discharges the ... burden of showing that the facts or assumptions relied upon by the assessor are incorrect, ... [Emphasis added.]
27 The standard of proof in discharging this burden is nothing more or less than the balance of probabilities. As Justice Lowry stated in Trac (at para. 30):
[30] ... The act of "demolishing" a ministerial assumption entails proving on the balance of probabilities the material facts that are within the taxpayer's knowledge if those facts do not support the assumption.
28 Additional confusion about the standard flowed from Justice L'Heureux-Dubé's use of "prima facie case" in Hickman (at paras. 92-95):
[92] ... The Minister, in making assessments, proceeds on assumptions ... and the initial onus is on the taxpayer to "demolish" the Minister's assumptions in the assessment .... The initial burden is only to "demolish" the exact assumptions made by the Minister but no more ....
[93] This initial onus of "demolishing" the Minister's exact assumptions is met where the appellant makes out at least a prima facie case: Kamin v. M.N.R., 93 D.T.C. 62 (T.C.C.); Goodwin v. M.N.R., 82 D.T.C. 1679 (T.R.B.). In the case at bar, the appellant adduced evidence which met not only a prima facie standard, but also, in my view, even a higher one. In my view, the appellant "demolished" the following assumptions as follows: (a) the assumption of "two businesses", by adducing clear evidence of only one business; (b) the assumption of "no income", by adducing clear evidence of income. The law is settled that unchallenged and uncontradicted evidence "demolishes" the Minister's assumptions: see for example MacIsaac v. M.N.R., 74 D.T.C. 6380 (F.C.A.), at p. 6381; Zink v. M.N.R., 87 D.T.C. 652 (T.C.C.). As stated above, all of the appellant's evidence in the case at bar remained unchallenged and uncontradicted. Accordingly, in my view, the assumptions of "two businesses" and "no income" have been "demolished" by the appellant.
[94] Where the Minister's assumptions have been "demolished" by the appellant, "the onus ... shifts to the Minister to rebut the prima facie case" made out by the appellant and to prove the assumptions: Magilb Development Corp. v. The Queen, 87 D.T.C. 5012 (F.C.T.D.), at p. 5018. Hence, in the case at bar, the onus has shifted to the Minister to prove its assumptions that there are "two businesses" and "no income".
[95] Where the burden has shifted to the Minister, and the Minister adduces no evidence whatsoever, the taxpayer is entitled to succeed: see for example MacIsaac, supra, where the Federal Court of Appeal set aside the judgment of the Trial Division, on the grounds that (at p. 6381) the "evidence was not challenged or contradicted and no objection of any kind was taken thereto". See also Waxstein v. M.N.R., 80 D.T.C. 1348 (T.R.B.); Roselawn Investments Ltd. v. M.N.R., 80 D.T.C. 1271 (T.R.B.). Refer also to Zink, supra, at p. 653, where, even if the evidence contained "gaps in logic, chronology, and substance", the taxpayer's appeal was allowed as the Minister failed to present any evidence as to the source of income. I note that, in the case at bar, the evidence contains no such "gaps". Therefore, in the case at bar, since the Minister adduced no evidence whatsoever, and no question of credibility was ever raised by anyone, the appellant is entitled to succeed. [Emphasis in original removed.]
29 Before us, counsel for the Crown made persuasive submissions on the issue of the so-called "prima facie" standard: L'Heureux-Dubé J.'s use of "prima facie" was made in the context of a case in which the Crown had not called any evidence whatsoever; it was relying solely on its assumptions. It is certainly possible in such circumstances that a prima facie case, or even one with "gaps", would be sufficient to displace the Crown's assumptions, but the prima facie standard described by Justice L'Heureux-Dubé should not be interpreted as having altered the usual standard of proof in tax cases: see the comments in Sekhon v. Canada, [1997] T.C.J. No. 1145 at para. 37; and Hallat v. The Queen (2000), [2001] 1 C.T.C. 2626 (F.C.A.).
30 The other potentially confusing aspect of Hickman was Justice L'Heureux-Dubé's statement (at para. 92) that the "initial burden [on the taxpayer] is only to 'demolish' the exact assumptions made by the Minister but no more: First Fund Genesis Corp. v. The Queen, 90 D.T.C. 6337 (F.C.T.D.), at p. 6340." [Emphasis in original.]
31 This statement is consonant with the taxpayer's initial legal burden: The taxpayer's only task is to rebut the Minister's assumptions so that the Minister does not have the benefit of the assumption. If the Minister adduces alternate evidence to support the assessment then there is a tactical burden on the taxpayer to challenge it, but, in theory, the taxpayer need do "no more" than bring evidence to unseat the assumptions.
32 The taxpayer has a number of ways of meeting the Minister's assumptions: Pillsbury at 5188. The taxpayer may
(a) challenge the Minister's allegation that he did assume those facts,
(b) assume the onus of showing that one or more of the assumptions was wrong, or
(c) contend that, even if the assumptions were justified, they do not of themselves support the assessment.
33 In response to the taxpayer's submissions, the Crown may adduce its own evidence to prove either that the assumptions are correct or to show that, even without relying on the assumptions, the assessment is nevertheless valid: Pillsbury at 5188; Pollock at 6053. The Crown may also challenge the taxpayer's evidence, either on cross-examination, or by raising serious issues of credibility. A court may draw a negative inference "from the taxpayer's failure to adduce material evidence in the taxpayer's possession or control" and conclude the taxpayer has not met its initial burden of disproving one or more of the assumptions: Trac at para. 31. Once all the evidence is in, the judge must weigh it and first determine whether the taxpayer has met the initial legal burden with respect to the assumptions. If the taxpayer has failed to meet its burden, then the Crown need not go on to discharge its conditional legal burden because the precondition has not been met.
34 If the taxpayer has successfully discharged its legal burden with regard to an assumption, the Crown may not rely on that assumption in attempting to prove the validity of the assessment. If unproven assumptions are necessary to the assessment, the taxpayer will succeed. Assumptions not disproven are deemed facts which, if sufficient to establish the Minister's case, will cause the appeal to fail.
35 In summary form, the proper approach on the appeal of a tax assessment may be described thus:
i. What are the assumptions?
ii. Have some or all of the assumptions been disproven? (i.e., has the taxpayer discharged the initial legal burden?)
iii. If the taxpayer has successfully discharged the initial legal burden, then has the Crown shown that the assessment is valid? (i.e., has the Crown discharged the conditional legal burden?)
[26] It seems to me that the conclusion to be drawn is simply that the Appellant has the initial onus of proving on a balance of probabilities (i.e. that it is more likely than not), that any of the assumptions that were made by the Minister in assessing (or reassessing) the Appellant with which the Appellant does not agree, are not