LeCaine v. The Queen

LeCaine v. The Queen
Court (s) Database
Tax Court of Canada Judgments
Date
2009-08-04
Neutral citation
2009 TCC 382
File numbers
2006-3850(IT)G
Judges and Taxing Officers
Wyman W. Webb
Subjects
Income Tax Act
Decision Content
Docket: 2006-3850(IT)G
BETWEEN:
DEBORAH LECAINE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeal heard on May 25, 2009, at Halifax, Nova Scotia
Before: The Honourable Justice Wyman W. Webb
Appearances:
For the Appellant:
The Appellant herself
Counsel for the Respondent:
Stan W. McDonald
Melanie Petrunia
____________________________________________________________________
JUDGMENT
The appeal is allowed, without costs, and the matter is referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the net income of the Appellant for 2001 and 2002 related to Le Caine Enterprises, Data Entry Select and the property located at 135 Conrad Road is as follows:
Le Caine Enterprises
2001
2002
Revenue:
$6,450
$0
Minus: Expenses
($14,224)
($8,691)
Net Income (Loss):
($7,774)
($8,691)
Data Entry Select
2001
2002
Revenue:
$1,848
$0
Minus: Expenses
($2,028)
($51)
Net Income (Loss):
($180)
($51)
Property located at 135 Conrad Road – “Rental Property”
2001
2002
Revenue:
nil
nil
Less: Expenses
nil
nil
Net Income:
nil
nil
Signed at Halifax, Nova Scotia, this 4th day of August 2009.
“Wyman W. Webb”
Webb, J.
Citation: 2009TCC382
Date: 20090804
Docket: 2006-3850(IT)G
BETWEEN:
DEBORAH LECAINE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Webb, J.
[1] In filing her income tax returns for 2001 and 2002 the Appellant claimed losses in relation to three different activities – Le Caine Enterprises, Data Entry Select and a rental property. The Appellant was reassessed to deny all of the expenses claimed in relation to Le Caine Enterprises and the rental property and all but $1,580 of the expenses claimed in relation to Data Entry Select. The issue is what expenses, if any, may be claimed by the Appellant in computing her income for 2001 and 2002 in relation to Le Caine Enterprises and Data Entry Select in addition to the wage expense of $1,580 that was allowed in relation to Data Entry Select and whether the rental property was a source of property income for the purposes of the Income Tax Act (the “Act”). The Appellant was reassessed on a limited basis. The impact that this will have on the determination of the expenses that may be claimed in this case is also an issue.
Le Caine Enterprises
[2] The Appellant was carrying on business as a sole proprietorship under the name Le Caine Enterprises. The Appellant provided her five bedroom house located at 141 Conrad Road in Lawrencetown, Nova Scotia to the Department of Community Services (Nova Scotia) (“Community Services”) so that they could provide a place for children with emotional problems to stay for a few days or weeks. In 2000 the Appellant had several meetings with one or more individuals from Community Services and she decided to make her home available. She had determined that her home could accommodate up to five individuals at one time with the crisis intervention team. She had also determined that if there were at least two children in the home, the revenue would cover the expenses and she could possibly make a small profit.
[3] In early 2001 the Appellant started to make the house ready. She put in smoke alarms and fire extinguishers and removed her personal belongings. Sometime during the first few months of 2001 the Appellant moved out of this house and moved in with friends. Later in July 2001 she moved into an apartment where she stayed until April 2002 at which time she again stayed with friends. The Appellant did not move back into the house until 2007. The Appellant could not be in the house at the same time as it was being used by Community Services.
[4] In May of 2001 the first children were accommodated in her house. The use of her house by Community Services continued through the summer of 2001 to November 1, 2001. She was only paid for the time that Community Services had children at the house. After November 1, 2001 Community Services did not use her house to accommodate children. She continued to maintain the premises so that the house would be available for use by Community Services. She tried to find out why Community Services stopped using her house but she was unsuccessful in obtaining an explanation. Although she continued to try to convince Community Services to use her house, they did not do so. In April 2002 she started considering whether the house could be used for some other business.
[5] The following are the amounts that were included as revenue and expenses in the Appellant’s tax returns and the amount of the expenses that have been denied by the Canada Revenue Agency (“CRA”) and the net affect of the reassessment:
2001
2002
Revenue:
$6,450
$0
Expenses claimed by the Appellant:
($31,331)
($25,833)
Income (Loss) claimed by the Appellant:
($24,881)
($25,833)
Expenses Denied by CRA:
$31,331
$25,833
Income (Loss) following the reassessment:
$6,450
$0
[6] As a result of the denial by the Respondent of all of the expenses claimed in relation to Le Caine Enterprises, the income of the Appellant for 2001 is equal to the reported revenue arising in relation to this activity in 2001. The Respondent is accepting that this activity was a source of business income, however the Respondent is not accepting that any expenses were incurred by the Appellant to earn this business income. It seems to me that given the nature of the business that it is only reasonable that the Appellant would have incurred some expenses in order to earn this income.
[7] The Appellant submitted a spreadsheet during the hearing that provided a breakdown of the expenses that she had claimed, which was the same breakdown as counsel for the Respondent included in written submissions filed before the commencement of the Hearing. This breakdown was as follows:
Item:
2001
2002
Delivery, freight & express
$368.72
Insurance
$292.00
$534.00
Interest
$9,238.92
$7,438.54
Maintenance & Repairs
$2,852.41
$1,236.81
Office Expenses
$36.82
$67.83
Supplies
$832.67
$632.85
Property taxes
$1,193.69
$1,177.05
Travel
$3,036.80
Telephone & Utilities
$10,225.26
$11,622.73
Capital Cost Allowance
$3,253.60
$3,123.46
Total:
$31,330.89
$25,833.27
[8] The Notice of Appeal that was filed does not disclose any facts related to the amounts claimed. The Material Facts as set out in the Notice of Appeal are as follows:
Material Facts
4. The Appellant filed Income Tax Returns for the taxation year ended April 30, 2001 and an Income Tax Return for the taxation year ended April 30, 2002, claiming expenditures for business expenses related to Le Caine Enterprises (crisis intervention), Data Entry Select and a rental property at 135 Conrad Rd.
Year 2001:
Business Expenses (line 135) in the amount of $33,179.74
Rental Expenses (line 126) in the amount of $8001.22
Year 2002:
Business Expenses (line 135) in the amount of $25,874.97
Rental Expenses (line 126) in the amount of $8,143.46
5. By notice of Reassessment, the Respondent disallowed the Appellant's business & rental Expense claims for the Assessed Years of 2001 & 2002.
[9] In the Reply that was filed, the only assumptions that were made in relation to Le Caine Enterprises were the following:
8. In so assessing the Appellant and confirming the assessment, the Minister relied on the following assumptions:
a) the facts admitted above;
b) during the years under appeal, the Appellant owned two houses located 135 and 141 Conrad Road, West Lawrencetown, Nova Scotia;
c) the Appellant provided emergency housing for youth involved with the Nova Scotia Department of Community Services (“Community Services”) using the trade name Le Caine Enterprises;
d) the Appellant used the house located 141 Conrad Road to provide emergency housing and received $50 when used by Community Services;
e) the Appellant ceased operating Le Caine Enterprises in 2002 and did not provide any emergency housing during the 2002 taxation year;
f) for the 2001 and 2002 taxation years the Appellant claimed the amounts of $31,330.89 and $25,833.27, respectively, as expenses of Le Caine Enterprises;
g) during the 2001 and 2002 taxation years the Appellant did not incur any expenses in respect of Le Caine Enterprises;
[10] The Respondent in the Reply only referred to paragraphs 18(1)(a) and subsection 230(1) of the Act. In the “Grounds Relied On” section of the Reply, the Respondent submitted that the Appellant had not incurred “outlays or expenses for the purpose of gaining or producing income from business and property as required by paragraph 18(1)(a) of the Act”. It appears that throughout the audit the Appellant was not fully cooperative and the lack of documentation provided by the Appellant led the auditor to a conclusion that the Appellant had not incurred the expenses that were claimed. This failure to provide documentation continued after the Notice of Appeal was filed. However it would appear that at some point prior to the hearing a significant number of receipts and other documentation were disclosed. These were submitted at the hearing as Exhibits on consent. As well counsel for the Respondent submitted a pre-hearing brief in which the various items claimed as expenses were identified and therefore the Respondent had knowledge of the various amounts that comprised the expenses that had been claimed.
[11] The focus of the Hearing was on whether the amounts had been incurred and if the amounts were incurred, whether such expenditures were incurred for the purpose of earning income from the business.
[12] Counsel for the Respondent in argument placed a great deal of emphasis on the onus of proof and that the Appellant had the onus of proving that the amounts had been incurred and for those amounts that had been incurred, that the Appellant had the onus of proving that such expenditures had been incurred for the purpose of earning income.
[13] In del Valle v. Minister of National Revenue [1986] 1 C.T.C. 2288, 86 DTC 1235, Justice Sarchuk made the following comments:
11 The Johnston case (supra), was considered in Hillsdale Shopping Centre Limited v. Minister of National Revenue, [1981] C.T.C. 322, 81 D.T.C. 5261 and at 328 (D.T.C. 5266) Urie, J. made the following comments:
If a taxpayer, after considering a reassessment made by the Minister, the Minister's reply to the taxpayer's objections, and the Minister's pleadings in the appeal, has not been made aware of the basis upon which he is sought to be taxed, the onus of proving the taxpayer's liability in a proceeding similar to this one would lie upon the Minister. This defect may be due to a number of reasons such as a lack of clarity on the part of the Minister in expounding the alleged basis of the taxability which could include an attempt by the Minister to attach liability on one of two or more alternative bases thus failing to make clear to the taxpayer the assumption upon which he relies.
12 I believe this is the approach which should be followed in the case at bar. In my view the respondent has failed to allege as a fact an ingredient essential to the validity of the reassessment. There is no onus on the appellant to disprove a phantom or non-existent fact or an assumption not made by the respondent.
13 While it was possible for the respondent to have alleged further and other facts the respondent did not choose to do so in this case but simply relied on the facts assumed at the time of the reassessments. I emphasize that if the respondent had alleged such further or other facts the onus would have been on him to establish them. (See Minister of National Revenue v. Pillsbury Holdings Limited, [1965] 1 Ex. C.R. 678, [1964] C.T.C. 294).
14 The facts relied upon do not support the reassessments. For these reasons the appeal is allowed and the matter is referred back to the respondent for reassessment on the basis that the sum of $5,100 was improperly added in computing the appellant's income in each of her 1980 and 1981 taxation years.
[14] In Pollock v. The Queen, [1994] 1 C.T.C. 3, 94 DTC 6050, Justice Hugessen, on behalf of the Federal Court of Appeal, made the following comments:
It is, of course, the general rule that every party to litigation in this Court must plead the facts upon which he relies in such a way as to put his opponent fairly on notice of the case he has to meet. Where a party's pleadings are so inadequate as to disclose no case at all he runs the risk of having them struck out and of losing for that reason. That rule is quite irrelevant here. There is no question in the present case of the Minister's pleadings being inadequate or of the appellant not knowing clearly and beyond any possibility of doubt the basis upon which he was reassessed. That basis was and is that the appellant's dealings in shares of the companies in question constituted for him an adventure in the nature of trade so as to make the profits therefrom taxable as income.
The special position of the assumptions made by the Minister in taxation litigation is another matter altogether. It is founded on the very nature of a self-reporting and self-assessing system in which the authorities are obliged to rely, as a rule, on the disclosures made to them by the taxpayer himself as to facts and matters which are peculiarly within his own knowledge. When assessing, the Minister may have to assume certain matters to be different from or additions to what the taxpayer has disclosed. While the Minister's assumptions, if any, are generally made in the pleadings, that is not always the case and we have seen, in this very record, an example of the taxpayer taking pains to demolish assumptions which the Minister had not pleaded. Where pleaded, however, assumptions have the effect of reversing the burden of proof and of casting on the taxpayer the onus of disproving that which the Minister has assumed. Unpleaded assumptions, of course, cannot have that effect and are therefore, in my view, of no consequence to us here.
The burden cast on the taxpayer by assumptions made in the pleadings is by no means an unfair one: the taxpayer, as plaintiff, is contesting an assessment made in relation to his own affairs and he is the person in the best position to produce relevant evidence to show what the facts really were.
Where, however, the Minister has pleaded no assumptions, or where some or all of the pleaded assumptions have been successfully rebutted, it remains open to the Minister, as defendant, to establish the correctness of his assessment if he can. In undertaking this task, the Minister bears the ordinary burden of any party to a lawsuit, namely to prove the facts which support his position unless those facts have already been put in evidence by his opponent. This is settled law
[15] Justice Rothstein in The Queen v. Anchor Pointe Energy Ltd. 2003 DTC 5512 stated that:
[23] The pleading of assumptions gives the Crown the powerful tool of shifting the onus to the taxpayer to demolish the Minister's assumptions. The facts pleaded as assumptions must be precise and accurate so that the taxpayer knows exactly the case it has to meet.
[16] In Loewen 2004 FCA 146, Justice Sharlow, on behalf of the Federal Court of Appeal, made the following comments:
11 The constraints on the Minister that apply to the pleading of assumptions do not preclude the Crown from asserting, elsewhere in the reply, factual allegations and legal arguments that are not consistent with the basis of the assessment. If the Crown alleges a fact that is not among the facts assumed by the Minister, the onus of proof lies with the Crown. This is well explained in Schultz v. R. (1995), [1996] 1 F.C. 423, [1996] 2 C.T.C. 127, 95 D.T.C. 5657 (Fed. C.A.) (leave to appeal refused, [1996] S.C.C.A. No. 4 (S.C.C.)).
[17] Leave to appeal the decision of the Federal Court of Appeal in Loewen to the Supreme Court of Canada was refused (338 N.R. 195 (note)).
[18] 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.
(emphasis added)
[19] Therefore it is very important that the assumptions clearly and accurately state the facts assumed by the Minister as the initial burden on the Appellant “is only to “demolish” the exact assumptions made by the Minister and no more”. Taxpayers should know the basis on which they have been reassessed. In this case the only assumption made that provides any basis for the denial of the expenses claimed was that “the Appellant did not incur any expenses”. Therefore the initial burden on the Appellant was only to “demolish” this assumption and show that the expenses had been incurred. If an expense was incurred, then the Respondent, in this case, had the onus of proving that the expenditure was not incurred for the purpose of earning income since the only assumption that was made by the Respondent was that the amounts had not been incurred.
Le Caine Enterprises – Delivery, freight & express
[20] The amount claimed as “delivery, freight & express” is a portion of the amount that the Appellant paid for a new vehicle that she acquired. In the schedule that she had prepared she indicated that the following amounts had been charged to her in relation to the purchase of her vehicle:
Freight & delivery $895.00
Gas Admin Fee $99.00
Tire Tax $15.00
Excise – Air Conditioning $100.00
License, registration & transfer fee $65.00
HST $2,445.60
Total: $3,619.60
[21] In the schedule she indicated that the amounts totaled $3,919.60 but these items only total $3,619.60. There was no explanation for this discrepancy of $300. Of this amount, the Appellant claimed $368.72 (which is approximately 10% of this total amount) as an expense in computing her income for 2001. I accept the Appellant’s testimony that these amounts had been incurred but it seems obvious to me that these amounts would have been added to the capital cost of the vehicle if the vehicle was used in carrying on this business, and not claimed as an expense.
[22] The capital cost of a depreciable property is included in determining the undepreciated capital cost of that property. “Capital cost” is not defined in the Income Tax Act (the “Act”). In the text “Principles of Financial Accounting a Conceptual Approach” by Finney and Miller, 1968 it is stated at page 245 that:
Incidental costs. The cost of an asset includes not only the basic, or purchase, price, but also related, incidental costs such as the following: costs of title searches and legal fees incurred in the acquisition of real estate; transportation, installation and breaking-in costs incident to the acquisition of machinery; storage, taxes and other costs incurred in aging certain kinds of inventories, such as wine; and expenditures made in the rehabilitation of a plant purchased in a run-down condition.
And at page 198:
Determination of cost. As a general statement, it can be said that the cost of an asset is measured by, and is equal to, the cash value of the consideration parted with when acquiring the asset. As applied to fixed asset acquisitions, cost includes all expenditures made in acquiring the asset and putting it into a place and condition in which it can be used as intended in the operating activities of the business. Thus, the cost of machinery includes such items as freight and installation costs in addition to its invoice price.
[23] In “Accounting Standards in Evolution”, 2nd ed., by Milburn and Skinner, 2001, it is stated at page 188 – 189 that:
The majority of tangible capital assets are purchased from external sources. The chief element of cost, then, is the invoiced price less any applicable cash or trade discounts. The chief costing problem lies in ensuring that costs incidental to acquisition and costs of making the asset capable to serve are capitalized... With respect to equipment, costs include all customs duties and taxes, transportation inward, insurance in transit, foundations and installation costs, and other charges for testing and preparation.
[24] The cost of a capital asset should be determined for the purposes of the Income Tax Act in the same manner as it is for accounting purposes. The purpose of determining the capital cost of an asset for the purposes of the Income Tax Act is to determine the amount that should be added to the undepreciated capital cost and then amortized over time by claiming capital cost allowance (“CCA”) in accordance with the Income Tax Regulations. There is no reason why the incidental costs (such as freight) would be added to the cost of a capital asset for accounting purposes but not included for the purpose of determining the capital cost of the asset for the purposes of the Act. In each case the objective is to determine the total cost of the asset that should be capitalized.
[25] The incidental costs listed above were incurred by the Appellant in acquiring the vehicle and should have been added to the cost of the vehicle.[1] If the vehicle was being used to earn income from the business, the appropriate percentage of the total cost of acquiring the vehicle, based on the percentage that the vehicle was being used in carrying on the business, could then have been used to claim CCA determined in accordance with the Income Tax Regulations. It was not appropriate to simply deduct these incidental costs as current expenses. In this case, the Appellant did not include the vehicle in the CCA schedule that she filed with her tax return for 2001 or 2002.
[26] However, this was not the basis upon which the Appellant was reassessed nor was this basis advanced at any time by the Minister. Therefore, it cannot form the basis of a reassessment of the Appellant. In Pedwell v. The Queen, 2000 DTC 6405, [2000] 3 C.T.C. 246, Justice Rothstein, writing on behalf of the Federal Court of Appeal, stated as follows:
15 While the parties referred to a number of older authorities on the issue, Continental Bank of Canada now makes it clear (subject to subsection 152(9) which applies to appeals disposed of after June 17, 1999 and is not relevant here in any event) that the Minister is bound by his basis of assessment. While this case does not involve the Minister advancing a different basis of assessment, I think the principle in Continental Bank of Canada is applicable to a judicial determination on a basis different from that in the notice of reassessment.
16 First, if the Crown is not able to change the basis of reassessment after a limitation period expires, the Tax Court is not in any different position. The same prejudice to the taxpayer results - the deprivation of the benefit of the limitation period. It is not open to that Court or indeed this Court, to construct its own basis of assessment when that has not been the basis of the Minister's reassessment of the taxpayer.
17 Second, while it is open to the Minister to change the basis of assessment before the limitation period expires, where he does not do so, in my respectful opinion, the Tax Court Judge is bound by the assessment at issue before the Court. Fairness requires that the taxpayer be given a reasonable opportunity to contest a new basis of assessment. If the Tax Court Judge decides on a basis of assessment not at issue during the court proceedings, the taxpayer is deprived of that opportunity.
18 Here, on his own motion, the Tax Court Judge, in his decision and after the completion of the evidence and argument directed to the Minister's basis of assessment, changed the basis of that assessment without the appellant having the opportunity to address the change. This is clear because the Tax Court judgment allowed the appellant's appeal, i.e. found that there was no appropriation of property which was the basis of the Minister's assessment, but then referred the matter back to the Minister to reassess on the basis that the Euler proceeds and the Landpark deposit were appropriated. What has taken place is tantamount to allowing the Minister to appeal his own reassessment.
19 I do not say that the Minister cannot assess in the alternative. However, that was not done here.
[27] While subsection 152(9) of the Act (to which Justice Rothstein refers) may have been available to the Minister to advance an alternative argument in support of the reassessment of the Appellant, this subsection is only available if the Minister advances such alternative argument. Since the Minister did not advance any alternative argument to deny these expenses on the basis that they should have been capitalized, it is not open for me to do so. However since I have concluded (as noted below) that the expenses related to the motor vehicle were not incurred for the purpose of earning income, these amounts are not deductible in computing her income for 2001.
Le Caine Enterprises – Insurance
[28] The amount claimed for insurance in the amount of $292 for 2001 relates to insurance on the house used in carrying on this business. The only invoice that the Appellant submitted in relation to the insurance on the premises used in carrying on the Le Caine Enterprises business was the invoice dated June 2, 2002 for the period from August 8, 2002 to August 8, 2003. While the Appellant also submitted copies of statements for several different bank accounts, it is impossible to tell from the bank statements whether a particular payment was for the insurance on this property.
[29] This claim illustrates the lack of documentation supplied by the Appellant. There is no invoice and no cancelled cheque to show that insurance was paid for any part of 2001 or the first seven months of 2002 or the amount of the insurance for any part of 2001 or the first seven months of 2002. The only period covered by the one invoice that was submitted for the insurance on this property is for the period commencing in August 2002.
[30] In Wainberg v. The Queen [2004] 1 C.T.C. 2417, 2003 D.T.C. 1395, Justice Bowie made the following comments:
3 Counsel for the Respondent referred me to the decision of the Federal Court of Appeal in Njenga v. The Queen. That case held that a taxpayer who ignores the requirement under the Act to maintain and have available detailed information and documentation to support the claims that they make should expect to have considerable difficulty discharging the burden of proving those claims. The need to support oral testimony with documents is certainly not absolute, however. If the taxpayer is a credible witness, the case may be made simply on oral evidence, if it is sufficiently convincing.
[31] In The Continental Insurance Company v. Dalton Cartage Company Limited, [1982] 1 S.C.R. 164, Chief Justice Laskin stated as follows:
Where there is an allegation of conduct that is morally blameworthy or that could have a criminal or penal aspect and the allegation is made in civil litigation, the relevant burden of proof remains proof on a balance of probabilities. So this Court decided in Hanes v. Wawanesa Mutual Insurance Co., [1963] S.C.R. 154. There Ritchie J. canvassed the then existing authorities, including especially the judgment of Lord Denning in Bater v. Bater, [1950] 2 All E.R. 458, at p. 459, and the judgment of Cartwright J., as he then was, in Smith v. Smith and Smedman, [1952] 2 S.C.R. 312, at p. 331, and he concluded as follows (at p. 164):
Having regard to the above authorities, I am of opinion that the learned trial judge applied the wrong standard of proof in the present case and that the question of whether or not the appellant was in a state of intoxication at the time of the accident is a question which ought to have been determined according to the "balance of probabilities".
It is true that apart from his reference to Bater v. Bater and to the Smith and Smedman case, Ritchie J. did not himself enlarge on what was involved in proof on a balance of probabilities where conduct such as that included in the two policies herein is concerned. In my opinion, Keith J. in dealing with the burden of proof could properly consider the cogency of the evidence offered to support proof on a balance of probabilities and this is what he did when he referred to proof commensurate with the gravity of the allegations or of the accusation of theft by the temporary driver. There is necessarily a matter of judgment involved in weighing evidence that goes to the burden of proof, and a trial judge is justified in scrutinizing evidence with greater care if there are serious allegations to be established by the proof that is offered. I put the matter in the words used by Lord Denning in Bater v. Bater, supra, at p. 459, as follows:
It is true that by our law there is a higher standard of proof in criminal cases than in civil cases, but this is subject to the qualification that there is no absolute standard in either case. In criminal cases the charge must be proved beyond reasonable doubt, but there may be degrees of proof within that standard. Many great judges have said that, in proportion as the crime is enormous, so ought the proof to be clear. So also in civil cases. The case may be proved by a preponderance of probability, but there may be degrees of probability within that standard. The degree depends on the subject-matter. A civil court, when considering a charge of fraud, will naturally require a higher degree of probability than that which it would require if considering whether negligence were established. It does not adopt so high a degree as a criminal court, even when it is considering a charge of a criminal nature, but still it does require a degree of probability which is commensurate with the occasion.
I do not regard such an approach as a departure from a standard of proof based on a balance of probabilities nor as supporting a shifting standard. The question in all civil cases is what evidence with what weight that is accorded to it will move the court to conclude that proof on a balance of probabilities has been established.
(emphasis added)
[32] In Hickman Motors Limited v. The Queen, [1997] 2 S.C.R. 336, Justice L'Heureux-Dubé stated as follows:
92 It is trite law that in taxation the standard of proof is the civil balance of probabilities: Dobieco Ltd. v. Minister of National Revenue, [1966] S.C.R. 95, and that within balance of probabilities, there can be varying degrees of proof required in order to discharge the onus, depending on the subject matter: Continental Insurance Co. v. Dalton Cartage Co., [1982] 1 S.C.R. 164; Pallan v. M.N.R., 90 D.T.C. 1102 (T.C.C.), at p. 1106.
[33] In the recent decision of the House of Lords of In re Doherty, [2008] UKHL 33, Lord Carswell stated as follows:
25. The phrase “degree of probability” was picked up and repeated in a number of subsequent cases – see, for example, In re Dellow’s Will Trusts [1964] 1 WLR 451, 455, Blyth v Blyth [1966] AC 643, 669 and R v Secretary of State for the Home Department, Ex p Khawaja [1984] AC 74, 113-4 – and may have caused some courts to conclude that a different standard of proof from the balance of probabilities or a higher standard of evidence was required in some cases. In so far as such misunderstanding has occurred, it should have been put to rest by the frequently-cited remarks of Lord Nicholls of Birkenhead in In re H (Minors). Immediately after the passage which I have quoted from his opinion, he went on at pages 586-7:
“When assessing the probabilities the court will have in mind as a factor, to whatever extent is appropriate in the particular case, that the more serious the allegation the less likely it is that the event occurred and, hence, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probability. Fraud is usually less likely than negligence. Deliberate physical injury is usually less likely than accidental physical injury. A stepfather is usually less likely to have repeatedly raped and had non consensual oral sex with his under age stepdaughter than on some occasion to have lost his temper and slapped her. Built into the preponderance of probability standard is a generous degree of flexibility in respect of the seriousness of the allegation.
Although the result is much the same, this does not mean that where a serious allegation is in issue the standard of proof required is higher. It means only that the inherent probability or improbability of an event is itself a matter to be taken into account when weighing the probabilities and deciding whether, on balance, the event occurred. The more improbable the event, the stronger must be the evidence that it did occur before, on the balance of probability, its occurrence will be established … No doubt it is this feeling which prompts judicial comment from time to time that grave issues call for proof to a standard higher than the preponderance of probability.”
…
27. Richards LJ expressed the proposition neatly in R (N) v Mental Health Review Tribunal (Northern Region) [2005] EWCA Civ 1605, [2006] QB 468, 497-8, para 62, where he said:
“Although there is a single civil standard of proof on the balance of probabilities, it is flexible in its application. In particular, the more serious the allegation or the more serious the consequences if the allegation is proved, the stronger must be the evidence before a court will find the allegation proved on the balance of probabilities. Thus the flexibility of the standard lies not in any adjustment to the degree of probability required for an allegation to be proved (such that a more serious allegation has to be proved to a higher degree of probability), but in the strength or quality of the evidence that will in practice be required for an allegation to be proved on the balance of probabilities.”
In my opinion this paragraph effectively states in concise terms the proper state of the law on this topic. I would add one small qualification, which may be no more than an explanation of what Richards LJ meant about the seriousness of the consequences. That factor is relevant to the likelihood or unlikelihood of the allegation being unfounded, as I explain below.
28. It is recognised by these statements that a possible source of confusion is the failure to bear in mind with sufficient clarity the fact that in some contexts a court or tribunal has to look at the facts more critically or more anxiously than in others before it can be satisfied to the requisite standard. The standard itself is, however, finite and unvarying. Situations which make such heightened examination necessary may be the inherent unlikelihood of the occurrence taking place (Lord Hoffmann’s example of the animal seen in Regent’s Park), the seriousness of the allegation to be proved or, in some cases, the consequences which could follow from acceptance of proof of the relevant fact. The seriousness of the allegation requires no elaboration: a tribunal of fact will look closely into the facts grounding an allegation of fraud before accepting that it has been established. The seriousness of consequences is another facet of the same proposition: if it is alleged that a bank manager has committed a minor peculation, that could entail very serious consequences for his career, so making it the less likely that he would risk doing such a thing. These are all matters of ordinary experience, requiring the application of good sense on the part of those who have to decide such issues. They do not require a different standard of proof or a specially cogent standard of evidence, merely appropriately careful consideration by the tribunal before it is satisfied of the matter which has to be established.
(emphasis added)
[34] In the recent decision of the House of Lords of In re B (Children), [2008] UKHL 35, Lord Hoffmann stated as follows:
14. Finally, I should say something about the notion of inherent probabilities. Lord Nicholls said, in the passage I have already quoted, that —
“the court will have in mind as a factor, to whatever extent is appropriate in the particular case, that the more serious the allegation the less likely it is that the event occurred and, hence, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probability.”
15. I wish to lay some stress upon the words I have italicised. Lord Nicholls was not laying down any rule of law. There is only one rule of law, namely that the occurrence of the fact in issue must be proved to have been more probable than not. Common sense, not law, requires that in deciding this question, regard should be had, to whatever extent appropriate, to inherent probabilities.
(emphasis added)
[35] And in the same case Baroness Hale of Richmond stated as follows:
70. …Neither the seriousness of the allegation nor the seriousness of the consequences should make any difference to the standard of proof to be applied in determining the facts. The inherent probabilities are simply something to be taken into account, where relevant, in deciding where the truth lies.
(emphasis added)
[36] It seems to me that these cases are consistent and the issue in a civil case (which will include the current appeal) will be whether the evidence as presented is sufficient to satisfy the trier of fact, on a balance of probabilities, that the person who has the burden of proof has established what is required of him or her. In analyzing the evidence that has been presented, the probability or improbability of the event that is in issue is a factor that can be taken into account. The more improbable the event the stronger the evidence that would be required. Conversely it would also seem to me that a person may be able to establish, on a balance of probabilities, that a highly probable event occurred based on weaker evidence than would be required to establish that an improbable event had occurred.
[37] In this case it seems logical that the Appellant would have insured the property used in carrying on the Le Caine Enterprises business in 2001. Since the annual insurance cost was $534 in 2002 this amount will be used for 2001. The Appellant was living in the property located at 141 Conrad Road for the first few months of 2001. The exact date that she vacated these premises so that they could be used by Community Services is not clear. The Appellant submitted copies of the stubs from the cheques for the payments made by Community Services for the use of the house. Since the earliest reference on any of the stubs is to the period from May 13 – May 20, 2001, it would appear that the property was first used during this week of May 13 – 20, 2001. As a result the Appellant must have vacated the house prior to that week and therefore I find that the Appellant had vacated the house by April 30, 2001.
[38] As a result, it seems to me that the insurance costs for the period from January 1, 2001 to April 30, 2001 would have been for the period while the Appellant was still using the house as her residence. As a result, the insurance costs for this period would have been personal expenditures and not incurred for the purpose of earn