Tax Court of Canada 20th Anniversary Symposium

Transcription

Tax Court of Canada
20th Anniversary Symposium*
Participants: The Honourable Alban Garon—Chief Justice of the Tax Court of
Canada, the Honourable Donald Bowman—Associate Chief Justice of the Tax
Court of Canada, the Honourable Marc Noël—Judge of the Federal Court of
Appeal, Brian J. Arnold, Alexandra Brown, Robert Emond, Raymond Guenette,
Edwin G. Kroft, Wilfrid Lefebvre, Ian MacGregor, and Susan Van Der Hout
Raymond Guenette: I would like to welcome all of you to this symposium
commemorating the 20th anniversary of the Tax Court of Canada. My name is
Raymond Guenette. I am the registrar of the Tax Court of Canada, and I will be the
master of ceremonies for this event.
Our first speaker is the chief justice of the Tax Court of Canada, the Honourable Alban Garon. Chief Justice Garon was called to the bar of Quebec in 1955.
He practised law with the federal Department of Justice from 1955 to 1986, where
he held several positions, including those of assistant deputy attorney general and
associate deputy minister of justice. He was named Queen’s Counsel in 1968. He
was a part-time professor at the Faculty of Law at the University of Ottawa and was
director of the legislative drafting program at that same university from 1986 to 1988.
Chief Justice Garon was appointed judge of the Tax Court of Canada in September
1988, associate chief judge in February 1999, and chief judge in February 2000. He
has been the chief justice since July 2003. Chief Justice Garon will address the
topic of “The Genesis, Accomplishments, and Future Direction of the Tax Court
of Canada.”
Chief Justice Alban Garon: Good morning. It is a chilly morning, but I hope that
my talk will contribute to warm up the atmosphere. Welcome to everybody. I have
been asked to provide an account of the genesis, accomplishments, and future direction of the Tax Court of Canada. This is an exercise requiring both an appreciation
of the past and the gift of foresight, which, unfortunately, I do not possess. I hope,
nonetheless, to do justice to this topic and provide you with an appreciation of
where we have been and where we may be going. I therefore hope to give you a brief
overview of the history of the Tax Court of Canada and propose possible future
directions in the foreseeable future—or, in other words, avenues that I believe it
should take in upcoming years.
* The Tax Court of Canada 20th Anniversary Symposium was held in Ottawa on November 14,
2003. The transcript of the sessions is reproduced here.
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(2005) vol. 53, n o 1
The Tax Court of Canada, as we know it today, was created on July 18, 1983,
when the Tax Court of Canada Act1 came into force. The roots of the Tax Court of
Canada, however, may be said to extend back to the Income War Tax Act, 1917, as
far as its jurisdiction over income tax appeals is concerned. As you probably know,
that Act was passed by Parliament as a temporary measure, to collect much-needed
funds for the war effort at that time. Thankfully for judges, lawyers—I should say,
tax lawyers particularly—and tax practitioners, Parliament’s plans for a temporary
measure went off the rails, and income tax has become a permanent fixture of
Canadian life, and I am sure that it will stay a permanent fixture of our common life.
As you are also aware, income tax legislation has also become significantly more
sophisticated. The base tax rate of 4 percent for personal and corporate income tax
that existed in 1917 has been replaced by the complex—some would say unwieldy—
provisions of today’s Income Tax Act.
Under the Income War Tax Act, 1917, income tax appeals were heard by the
Exchequer Court, which was the predecessor of the Federal Court Trial Division
and the current Federal Court. Exchequer Court proceedings were both complex and
costly. The appellant was required to provide security of $400, which was, at the time,
a large amount of money, regardless of the amount of tax in dispute. If the appeal
was dismissed, the appellant could be ordered to pay costs in addition to that.
From 1917 to 1946, the Exchequer Court heard approximately 150 cases throughout Canada, which means an average of about five cases per year.
In 1946, the Income War Tax Act, 1917 was amended in particular to create the
Income Tax Appeal Board. Procedures before the Exchequer Court were complex.
Furthermore, the Income Tax Appeal Board was an administrative tribunal, wherein
procedures were simple and expeditious. The filing fee was only $15, which could
be reimbursed even in cases that met with partial success. The parties, however,
could choose to proceed directly in the Exchequer Court.
The board’s name was changed in 1958, when, as we know, it became the Tax
Appeal Board.
In 1966, the Royal Commission on Taxation, also known as the Carter commission,
delivered its landmark report.2 Among its many recommendations, the commission
report proposed the creation of a single tax court that would hear all appeals
pertaining to revenue matters. The report recommended that the Tax Appeal Board
and the Tariff Board be absorbed into a single tax court that would hear income tax
matters and transaction tax matters, including sales and excise taxes, excise duties,
and customs tariff matters. The report proposed that this institution be a fullblown court and not an administrative tribunal. It further recommended that the
court should have the power to make its own rules of procedure; that the right of
1 SC 1980-81-82-83, c. 158.
2 Canada, Report of the Royal Commission on Taxation (Ottawa: Queen’s Printer, 1966) (herein
referred to as “the Carter report”).
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examination for discovery should be afforded to all parties; that the court should be
itinerant; that important decisions should be published; and finally, that the court
should proceed with hearings and decisions with all possible dispatch. Much of the
history of the Tax Court of Canada since the Carter commission report may be seen
as an implementation of its recommendations. This implementation, however, has
been gradual—I would say, very gradual—and to some extent remains incomplete.
Immediately following the filing of the Carter commission report, the government did not follow up on the commission’s main recommendation—that is, to
create a tax court. Instead, the government implemented the commission’s secondary recommendation: to create a tax appeal board whose members hold office and
whose administrative independence would be better ensured by transferring the
operational responsibility of this board from the Department of National Revenue
to the Department of Justice. Hence, the Tax Review Board was created in 1970.
From its inception, it played the role of a “taxpayer’s court.” The jurisdiction as it
relates to income tax appeals continued to be shared with the Federal Court Trial
Division, which had just come into existence.
A significant portion of the report’s recommendation was finally implemented
in 1983, with the creation of the Tax Court of Canada. This new body was a court
and no longer an administrative tribunal. It had judges, not members of a commission. This new court was granted jurisdiction to hear appeals under the Income
Tax Act, appeals under the Unemployment Insurance Act involving employment
insurability only, appeals under the Canada Pension Plan to the extent that they
deal with pensionable employment, and appeals under the Petroleum and Gas
Revenue Tax Act. With respect to appeals brought under the Income Tax Act,
however, the Tax Court of Canada had concurrent jurisdiction with the Federal
Court Trial Division. It was only in 1991 that the Tax Court of Canada was given
exclusive original jurisdiction over income tax appeals.
Since then, the court’s jurisdiction has expanded and now includes appeals under
part IX of the Excise Tax Act, dealing with the goods and services tax (GST), the
Cultural Property Export and Import Act, the Old Age Security Act, part V.1 of
the Customs Act, the Air Travellers Security Charge Act, and the Excise Act, 2001.
In some of these statutes, appeals are limited to the matters that are specified therein.
The court also has exclusive original jurisdiction to hear appeals brought before it
on certain specific matters arising under two other statutes relating to veterans.
Although the Tax Court of Canada has changed in the 20 years of its existence,
it has nonetheless retained many characteristics of its predecessors. From the Tax
Review Board, it adopted the characteristics of a taxpayer’s court, stripped of its
formalism. This new court was not bound by technical rules of evidence. These
characteristics apply to appeals instituted under the informal procedure. From the
Exchequer Court and the Federal Court, the Tax Court adopted the more traditional
aspects of courts, as evidenced in our general procedure. In fact, what distinguishes
the Tax Court of Canada from many other courts is the coexistence of both types
of procedure that apply to appeals brought before it, namely, the informal procedure and the general procedure.
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Whether a case is heard under the general procedure or the informal procedure, one of the priorities for the Tax Court of Canada is that it be accessible to all
Canadians. As evidence in support of this statement, the court currently sits in
68 Canadian cities. The court sits in all kinds of places: courthouses (of course),
hotels, conference rooms, rectories, etc. The court has even sat in a taxpayer’s
kitchen when the taxpayer could not otherwise attend the hearing. The court also
hears every type of appeal, from high-stakes rollovers by large Toronto-, Montreal-,
or Vancouver-based corporations, to employment insurance claims by fishermen in
Newfoundland, to claims by injured workers in Manitoba for the disability tax
credit. The court also decides issues relating to social policy, such as the Canada
child tax benefit. As you can certainly appreciate, the classes of cases before the
court are extremely varied.
Since the coming into force of the Courts Administration Service Act on July 2,
2003, the Tax Court of Canada has become a superior court of record. The key
role that the Tax Court of Canada plays within the Canadian justice system thus
has been acknowledged. This truly represents a recognition of the court’s increasing prominence, as well as a continuation of the process that was started with the
report of the Carter commission. In looking to the future, however, one cannot
help but wonder whether it would be beneficial to implement the totality of the
recommendations contained in the Carter report and transform the Tax Court of
Canada into the sole court having jurisdiction over the totality of fiscal matters.
While the Tax Court of Canada may currently hear appeals arising from several
acts, its jurisdiction is essentially limited to dismissing such appeals, or allowing them
and vacating, varying, or referring assessments back to the minister of national
revenue for reconsideration and reassessment. The Tax Court of Canada is a court
of law whose powers are clearly circumscribed. It does not have the jurisdiction to
entertain declaratory actions or to issue prerogative writs in relation to tax matters.
We look forward to the day when the court will be able to entertain such causes of
action and act as a true court of justice in all matters pertaining to fiscal matters of a
civil nature. I also believe that appeals relating to a refusal or revocation of registration as a charitable organization, private foundation, public foundation, etc., and
other related matters pursuant to subsection 172(3) of the Income Tax Act,3 should
be entrusted to our court if it is ultimately decided that those appeals should be
entrusted to a court of first instance rather than to the Federal Court of Appeal.
Similarly, judicial authorization with respect to filing documents, providing information, or obtaining search warrants may fall within the jurisdiction of the Tax
Court of Canada concurrently with provincial superior courts, as is currently the
case. Sections 231.1, 231.2, and 231.3 of the Income Tax Act deal with these
matters. In my opinion, the Tax Court of Canada should also be conferred jurisdiction in cases of judicial review of the minister’s decisions regarding applications to
waive penalties and interest under subsection 220(3.1) of the Income Tax Act. This
3 RSC 1985, c. 1 (5th Supp.), as amended.
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is what is generally referred to as “the fairness package.” Finally, the report of the
Carter commission recommended that a single tax court should have jurisdiction
over customs tariff matters. In this respect, I believe that the power to review
decisions of the Canadian International Trade Tribunal should devolve to the Tax
Court of Canada.
As we look over the history of the Tax Court of Canada, we have much cause, in
my view, to be proud. We also look upon the past 20 years as a period when a
number of the recommendations of the Carter commission were put in place.
Much remains to be done, however, to fully implement the main recommendation
of the Carter commission in the area of jurisdiction over tax matters.
Just as the report has been a blueprint for the evolution of the court to date, we
anticipate and expect that it will continue to do so in the future, and that the court’s
role as the Tax Court of Canada will be strengthened.
Thank you.
Raymond Guenette: Thank you very much, Chief Justice. We will now move on
to our first panel, which will be discussing the topic of “Reshaping the Tax Topography: Seminal Decisions.” This panel is presided over by Wilfrid Lefebvre.
Mr. Lefebvre is a senior partner at the law firm of Ogilvy Renault and has over 30
years’ experience in taxation. Mr. Lefebvre worked for the Department of Justice
from 1970 to 1986 as general adviser in tax litigation. He worked as legal counsel
on many major and complex matters. Mr. Lefebvre was a member of the Technical
Committee on Business Taxation, which was struck by the Finance minister in 1995
to determine necessary relevant changes to the current income tax system. A former
governor of the Canadian Tax Foundation, Mr. Lefebvre has given numerous
speeches at annual conferences or regional symposiums organized by, among others,
the Canadian Tax Foundation and the Tax Executives Institute. He has been
president of l’Association de planification fiscale et financière.
The other members of the panel are the Honourable Donald Bowman, the
associate chief justice of the Tax Court of Canada, Ian MacGregor, and Brian Arnold.
Associate Chief Justice Bowman was called to the bar of Ontario in 1962. He
joined the federal Department of Justice, Tax Litigation Section in 1962 and was
appointed director in 1968. He co-founded the law firm of Stikeman Elliott Robarts
& Bowman in 1971. He was appointed Queen’s Counsel in 1974. He was appointed
judge of the Tax Court of Canada in 1991 and associate chief judge in February
2000. He has been the associate chief justice since July 2003.
Ian MacGregor is a member of the bar of Ontario. He joined the ranks of the
Toronto Regional Office of the Department of Justice in 1976. After practising
civil law and tax law, he became chief, Tax Litigation Section in 1981. He moved to
Ottawa in 1988 and in 1995 became the assistant deputy attorney general for Tax
Law Services, in charge of tax law management and direction at the national level.
He still holds this position.
Brian Arnold is with Goodmans LLP, Toronto and taught tax law at a Canadian
law school for 28 years. He is a graduate of Harvard Law School. He is a consultant
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to the Canada Customs and Revenue Agency (CCRA), the Canadian Department of
Justice, the Office of the Auditor General, the Organisation for Economic Cooperation and Development (OECD), and the Australian Taxation Office. He is the
author of three books and numerous articles on taxation.
Now, over to Mr. Lefebvre.
Wilfrid Lefebvre: Thank you. Good morning to all.
I think it is quite fitting that we celebrate the court’s 20th anniversary. Over the
years, the court has been praised on a great number of occasions for its great
effectiveness. The informal procedure provides for rapid and easy access for taxpayers to have their cases heard. The court and the judges play a very proactive
role in streamlining cases, and therefore we have a system that is very efficient.
However, as we all know, and as is true of many things in life, the question is not
necessarily “How quick?” but “How good?” Therefore, we need to address that issue
and discuss today how good were the results of the decisions of the Tax Court.
What we thought we would do, and the members of the panel have all agreed, is to
conduct a review of a number of topics. At the forefront, of course, is tax avoidance,
which occupies the court’s time often enough; second, statutory interpretation; and
third, social and process issues. I will ask Brian Arnold to start with the subject of
tax avoidance.
Brian Arnold: Can you imagine what life would be like without the Tax Court of
Canada? Can you imagine what life would be like without a forum for ordinary
people, employees, the divorced, the disabled, and even, occasionally, the desperate
and the delusional to have their day in court to challenge the sometimes arbitrary
decisions of a huge government bureaucracy? If the Tax Court didn’t exist, we
would have to invent it.
We in the tax community, I think, sometimes take the very existence of the Tax
Court, not to mention the integrity, the impartiality, and the competence of its
judges, for granted. We shouldn’t. We should treasure it as an indispensable part of
our tax system, and for this reason, I am pleased to be here to celebrate the 20th
anniversary of the court.
With respect to tax avoidance, let me state my bias at the outset. Tax avoidance
imposes huge costs on the tax system. It benefits the wealthy and the well advised.
It means that those who can’t avoid tax pay more than their fair share of tax. It
means that Parliament is always playing catch-up, trying to identify and close down
abusive schemes after the fact, when it should be spending more time on more
important matters. As a result of this, it seems to me that it is important for courts
to play a vigorous role in controlling abusive tax avoidance.
Now, with my cards not only on the table, but face-up on the table, let’s have a
look at, and compare, the attitudes to tax avoidance of the Supreme Court of Canada
and the Tax Court of Canada.
In the last decade, in my view, the Supreme Court has never disapproved of a
tax-avoidance scheme—and it has seen a lot of them—whether it’s a three-day
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partnership over Christmas (Continental Bank)4 or the sale of a controlling interest
in a company worth $600,000 for funny shares worth $2,000 (Duha Printers);5 a
weak-currency borrowing in order to get a larger interest deduction (Shell Canada)6
or a blatant income-splitting arrangement (Neuman),7 and so on, and so on. In all
of these cases, the Supreme Court has justified the result by invoking the Duke of
Westminster 8 principle that taxpayers are entitled to arrange their affairs in order to
minimize the amount of tax. However, in none of these cases does the Supreme
Court ever analyze the rationale for that principle, and whether that principle is
still appropriate in Canada, 65 years after it was enunciated by the House of Lords.
The principle is simply intoned as an article of faith for the court, despite the fact
that in its homeland the House of Lords has rejected it. Well, never mind. The duke
has emigrated to Canada and is living well under the protection of the Supreme
Court.
We need to put the Supreme Court’s approach to tax avoidance in context. The
Supreme Court has not always viewed tax avoidance with such a benign attitude.
Prior to 1990, the Supreme Court struck down a number of blatant tax-avoidance
schemes through a variety of judicial doctrines. In the Bronfman Trust case9 in 1987,
the court created a doctrine of economic realities. Under this doctrine, the nature
of a transaction is determined with an eye to commercial and economic realities,
rather than juristic classification of forms. The Tax Court and the Federal Court of
Appeal embraced this doctrine and started to apply it. But in the Shell Canada case
in 1999, it seems to me that the Supreme Court repudiated the economic realities
doctrine. It may not be completely dead, because Justice LeBel referred to it in his
dissent in the Singleton case,10 but it is certainly on life support.
Let me compare the attitude of the Tax Court to tax avoidance. Not all of the
judges of the Tax Court have embraced the Supreme Court’s benign attitude to tax
avoidance. They do more than just intone the Duke of Westminster principle as they
put their stamp of approval on tax-avoidance schemes. Despite the clear statements
from the Supreme Court of Canada that legal form trumps economic substance, the
Tax Court has sometimes taken a realistic, practical look at tax-avoidance transactions. It appears to me that the Tax Court is less easily fooled by the fancy footwork
of the “practitioners of the various dark arts,”11 as Judge Rowe has referred to them.
I want to mention two cases as examples of the Tax Court’s approach.
4 Continental Bank Leasing Corporation v. The Queen et al., 98 DTC 6506 (SCC).
5 Duha Printers (Western) Ltd. v. The Queen, 98 DTC 6334 (SCC).
6 Shell Canada Limited v. The Queen et al., 99 DTC 5669 (SCC).
7 Neuman v. The Queen, 98 DTC 6297 (SCC).
8 Inland Revenue Commissioners v. Westminster (Duke), [1936] AC 1 (HL).
9 The Queen v. Bronfman Trust, 87 DTC 5059 (SCC).
10 The Queen v. Singleton, 2001 DTC 5533 (SCC).
11 Ipsco Inc. v. The Queen, 2002 DTC 1421, at paragraph 27 (TCC).
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The Mark Resources case12 involved a series of transactions to import losses of a
US subsidiary into Canada. A Canadian parent company basically borrowed money
in Canada and subscribed for shares—actually, it was a contribution to capital—of
its US subsidiary. The US subsidiary used the money to buy a term deposit with the
same bank, and the income from that term deposit was, of course, offset by the losses
in the US subsidiary. The Canadian parent company claimed interest deductions on
its loan, and when the losses were all used up in the United States, the situation was
simply unwound.
If you apply the Supreme Court’s test for interest deductibility under paragraph
20(1)(c), it is a direct use test: if the funds are used directly for the purpose of earning
income, the interest is deductible. The borrowed funds, in this case, were used to
make a capital contribution, in effect, to acquire shares in a subsidiary, and that justified
interest deductibility. Judge Bowman found this direct use test too restrictive. What
he said was that you had to look, under paragraph 20(1)(c), at the ultimate overriding economic purpose of the borrowing. When you looked at the ultimate overriding
economic purpose of the borrowing, you could see that it was simply to import the
US losses into Canada, and that was not appropriate. This is a potentially powerful
test under paragraph 20(1)(c) because it can be used, for example, to stop loss
utilization transactions between unrelated corporations. The test was endorsed and
applied by the Federal Court of Appeal in a number of cases. Unfortunately in my
view, it has been effectively—not explicitly, but effectively—overruled by the Supreme
Court’s decisions in the Shell Canada and Singleton cases. Those cases basically
established that economic reality is largely irrelevant and that a series of transactions cannot be viewed as a whole.
I can’t resist commenting that there is an irony involved in the Mark Resources
case. What the Supreme Court should have endorsed from the Mark Resources case—
the ultimate overriding economic purpose test—it rejected. What it should have
rejected—a gross revenue test under paragraph 20(1)(c)—it accepted. And this has,
of course, led to the difficult situation of the Department of Finance having to pass
corrective legislation. Those of you who have seen those proposed amendments
know that they are going to complicate the tax system even further.
The second case I want to refer to is the Novopharm case.13 It also involved a
complex loss utilization scheme, which Judge Bowie described as “so blatantly synthetic as to be effectively artificial.”14 As a result, he interpreted paragraph 20(1)(c)
as not applying to the use of borrowed money to implement a scheme that had no
purpose other than tax avoidance. This analysis, reflecting, as it does, common sense
and commercial realities, presents only one problem: it is inconsistent with the
12 Mark Resources Inc. v. The Queen, 93 DTC 1004 (TCC).
13 Sub nom. 722540 Ontario Inc. et al. v. The Queen, 2002 DTC 1307 (TCC).
14 Ibid., at paragraph 52, quoting Iacobucci J in Antosko et al. v. The Queen, 94 DTC 6314, at 6319
(SCC).
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Supreme Court decisions in Shell Canada, Ludco,15 and Singleton. The transactions
in those cases were also synthetic, artificial, and purely tax-driven, but the Supreme
Court said, in all three cases, that didn’t matter.
Not surprisingly, the Federal Court of Appeal has reversed Judge Bowie’s holding regarding the interest deduction under paragraph 20(1)(c).16 But surprisingly,
to me at least, the Federal Court of Appeal upheld his finding that section 245 (old
section 245) applied to invalidate the transaction. I doubt that the Supreme Court
would have applied old section 245 to that case, given the fact that it didn’t apply
old 245 in the Shell Canada case. But the issue now becomes, of course, that old 245
is gone; it has been replaced by the general anti-avoidance rule (GAAR), and that is
the significant issue that is now in front of us.
The role of the Tax Court with respect to the general anti-avoidance rule is
extremely important. The Tax Court gets to frame the issue for the higher courts
and thereby gets to influence their thinking about GAAR. And that is precisely, I
think, what the Tax Court has done. Rather than try to write a comprehensive
treatise on the general anti-avoidance rule, it is taking a very practical and realistic
approach, looking at the cases on a case-by-case basis. In cases like McNichol 17 and
Equilease18 and OSFC,19 the Tax Court has established many of the essential features
of a GAAR analysis, and these features have been endorsed by the Federal Court of
Appeal. These include the finding that a tax benefit doesn’t involve a very high
threshold; the finding that, when you judge the primary purpose of an avoidance
transaction, it is an objective test, not a subjective test; and the fact that the tax
benefit doesn’t have to be derived by the same persons who arrange the avoidance
transaction. Most importantly, the court has established that the notion of abuse
under subsection 245(4) requires the identification of a statutory scheme that the
transaction has abused.
In my view, perhaps the Tax Court has faltered a little bit in recent cases. I think
it is well to remember that the general anti-avoidance rule, whatever it is and
however it is interpreted, represents a very strong and clear signal from Parliament
to the courts and the tax community about tax avoidance. And it would be inappropriate for the courts, in my view, to render GAAR meaningless.
That is probably a good place for me to stop.
Wilfrid Lefebvre: Are you acting for the Department of Justice?
Now let’s hear from Ian MacGregor.
15 Ludco Enterprises Ltd. et al. v. The Queen, 2001 DTC 5505 (SCC).
16 Novopharm Limited v. The Queen, 2003 DTC 5195 (FCA).
17 McNichol et al. v. The Queen, 97 DTC 111 (TCC).
18 Sub nom. RMM Canadian Enterprises Inc. et al. v. The Queen, 97 DTC 302 (TCC).
19 OSFC Holdings Ltd. v. The Queen, 99 DTC 1044 (TCC); aff ’d. 2001 DTC 5471 (FCA).
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Ian MacGregor: I was going to say, you noted that Brian is our consultant.
I, as well, would like to say it is a great privilege for me, personally, to be here,
and also to be here on behalf of the Department of Justice, to celebrate the 20th
anniversary of the Tax Court. I think—and certainly the chief justice pointed this
out in his opening remarks—that the court has made enormous strides and accomplished much over the past 20 years.
I have very little to add to what Brian has said, except I have been asked to
comment on the GAAR cases currently in the system. Let me do that first by mentioning that I was surprised when I went through our statistics to note that there
are currently more than 40 GAAR cases before the Tax Court of Canada—40 notices
of appeal that deal with GAAR. Several of the issues are going to be new and, I think,
very challenging, not only for counsel but also for the court. The interrelationship
or interplay between GAAR and tax treaties, in respect of what we would refer to as
“treaty-shopping” situations, is clearly now before the court. Other issues involve
indirect loans in an international context, where a taxpayer is attempting, in such a
context, to claim a Canadian tax deduction for interest. GAAR cases involving the
preferred share rules, including whether those rules apply or don’t apply, are before
the court. As well, paid-up capital adjustments, or what the Crown would refer to
as “manipulations,” are also at issue before the court, now, in the GAAR context.
Let me just add one comment to Brian’s remarks regarding GAAR and, in particular, the importance of demonstrating a scheme. Of course, that gets into policy and
the comments of Justice Rothstein in OSFC, that we need to show, or the Crown
needs to show, a clear and unambiguous policy. His Lordship goes on to refer to the
fact that such can be done either through viewing the legislation itself or through
extrinsic aids. Of course, the starting point for any line of inquiry is the legislation,
and that will require an exhaustive analysis. But I think a very interesting issue also
arises through the reference to extrinsic aids, because it raises the question, “What
is the scope of applicable aids that can be relied upon?” where, for example, the
legislation may not be clear. On the one end of the spectrum, you have, if you will,
public statements, such as the material that normally accompanies legislation, namely,
the technical notes; whereas, on the other end of the spectrum, you could have a
file cabinet full of internal memorandums of the various Finance officials. Where,
on that spectrum, is the appropriate point for drawing the line between what might
qualify and might be acceptable as an extrinsic aid, and what might not? That issue
is before the courts now, and it is going to be very interesting to see, indeed, how
that is resolved, because this, of course, will have an impact not only in respect of
the evidence that can be adduced at court, but also in respect of the breach of the
examination for discovery process.
Wilfrid Lefebvre: Perhaps I could add one or two comments here.
Up to now, there have been 19 cases that have gone before the Tax Court in
which GAAR is the central issue. The record is quite good for taxpayers: of the 19 cases,
11 went in favour of the taxpayers, 6 went in favour of the Crown, and 2 were split
somewhere halfway.
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Two major principles have evolved. One is that one cannot do indirectly what
one cannot do directly. Of these cases, OSFC is a good illustration. And the other
principle has been applied where it can be seen that transactions result in a breach
of a clearly identifiable policy. Water’s Edge20 is a perfect example. In those situations, the court will not hesitate to apply GAAR.
The issue of extrinsic aids, which Ian has mentioned, raises for a litigator a very
fundamental issue. Take, for example, the Hill case21 or the Loyens case22 (which, as
I understand it, were not appealed before the Federal Court of Appeal, or were
dropped). Here, you had situations where the statutory language was quite clear. In
Hill, you had compound interest, which, by definition, can be deducted only on a
cash basis, whereas ordinary interest can be deducted on an accrual or cash basis.
The taxpayer made an arrangement whereby he did indirectly what he could not
do directly: he transformed his compound interest into ordinary interest. If you
look at the language of the legislation, the policy appears to be quite clear: compound interest is not deductible on an accrual basis. However, the court went
further and said, “We have to understand why that policy exists. Why is compound
interest not deductible on an accrual basis?” Now, I don’t think there is anyone in
Finance, or in Justice, or in Revenue, who could explain the rationale for that
policy. So where do you stop?
Now the new issues that will emerge are quite internationally oriented; treaty
shopping is one good example. Of course, the new language in tax will certainly be
“tax competition” and “tax arbitrage.” Of course, the country’s provinces enact
schemes to attract investment in their area. Just this morning, the government
announced that it will give further credits for film production, obviously in response
to what is happening in California. Now, is it an abuse for taxpayers to go and use
that system and benefit from those measures? Those will be issues of tomorrow
before the Tax Court.
Brian, you have a reply.
Brian Arnold: Just a couple of comments in response. I agree with the comment
that the cases involving the relationship between GAAR and tax treaties are going to
be occupying the attention of the courts, I think, for a number of years. Our treaty
network is expanding rapidly. We have treaties currently with over 80 countries.
The process of globalization means that these treaties are being used more and
more in different ways, as international investments proliferate. So these issues are
going to arise. There is nothing specific in either the Act or the treaties, other than
the general provision in every treaty, which says that to the extent of the conflict
between the treaty and any other piece of legislation, the treaty prevails.
20 Water’s Edge Village Estates (Phase II) Ltd. v. The Queen, 2001 DTC 96 (TCC); aff ’d. 2002 DTC
7172 (FCA).
21 Hill v. The Queen, 2002 DTC 1749 (TCC).
22 Loyens et al. v. The Queen, 2003 DTC 355 (TCC).
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I should mention that the Tax Court has, once again, led the way here with the
Equilease case. Equilease deals with the relationship between GAAR and treaties in
the context of the Canada-US treaty. In that case, Judge Bowman decided that the
Canada-US treaty did not preclude the application of GAAR. The purposes of tax
treaties did not include protecting non-residents from the application of a country’s anti-avoidance rules. According to Judge Bowman, “That is not what treaties
are for.”23 The commentary to article 1 of the OECD model convention has recently
been revised in a way that confirms Judge Bowman’s view. The 2003 revisions to
the commentary clarify that tax treaties do not preclude the application of domestic anti-avoidance rules. These revisions will be extremely important in future
cases involving the relationship between GAAR and tax treaties.
Associate Chief Justice Donald Bowman: Do you think GAAR is necessary?
Brian Arnold: That’s a very good question, and a fascinating question. My response
would be that I think if the courts were to interpret the taxing statute appropriately, in my view, GAAR would not be necessary. The only reason that GAAR is
necessary is that the courts have failed to play a significantly robust role in countering abusive tax avoidance. And I think you are, to a certain extent, damned if you
do and damned if you don’t.
What I would say is, the last instruction to the courts from Parliament is section
245. I don’t see how you can read section 245 without seeing that Parliament was
extremely concerned about tax avoidance; that Parliament cannot deal with it
appropriately by legislating specifically with respect to every abusive tax-avoidance
scheme that arises. Therefore, Parliament has given the responsibility to the courts
to distinguish between legitimate tax planning and abusive tax avoidance. And the
fact that it is an extremely difficult task for you to undertake, I think, simply underlines the importance of it.
Wilfrid Lefebvre: I have an answer to that, though. I don’t see how OSFC would
have been won without GAAR. If you take GAAR away, the manner in which the
taxpayers in that case arranged their affairs was totally consistent with the provisions
of subsection 18(13), and the interposition of a validly created partnership allowed
for the allocation of losses, as was done. It would have been very difficult in the
absence of GAAR for the Crown to succeed. On the other hand, the decision is quite
correct in that the taxpayers were doing indirectly what they could not do directly,
and—as both the Tax Court and the Federal Court of Appeal saw—it contravened
the clear legislative scheme limiting the transfer of losses between arm’s-length
parties. Given the Supreme Court’s pronouncements of the last 10 years on statutory interpretation, the result of this case, absent GAAR, would have gone in favour
of the taxpayers.
23 Supra note 18, at 314.
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In McNichol and Equilease, there was a real issue, there, on whether the parties
were truly dealing at arm’s length. In this respect, GAAR may not have been
necessary. But once it is conceded, then tax policy issues arise. Absent 84.1, where
parties deal at arm’s length, the statutory scheme is debatable. For example, in the
case of leveraged buyouts, where people who are dealing at arm’s length proceed to
finance an acquisition by a sale of assets of the target company, I have never seen
Revenue take the position that these are dividend strip situations. It remains that
those cases should have probably been won by the Crown even without GAAR.
Brian Arnold: My view is that every tax system needs some general protection
against abusive tax avoidance. That is my understanding from working internationally, and that was the conclusion of the general report for the 2002 Congress of
the International Fiscal Association in Oslo.24
Ian MacGregor: You raise an interesting point. If I can just add to it, in respect of
the compound interest provision, I ask you this: in OSFC, is the court talking about
establishing a policy, or is it talking about establishing the rationale underlying the
policy? There is quite a difference between those two points, and it seems to me
that the obligation is not the latter but the former—that is, to show clearly and
without ambiguity what the policy is. But frankly, the underlying rationale may
simply not be relevant.
Wilfrid Lefebvre: What I fail to understand—and I make no criticisms, I totally
agree with what you say—is, why did you not continue the appeal?
Brian Arnold: That’s a good question. Indeed, I would say that the problem for
the Crown here is, even the way Ian framed the issue—as the policy and the
underlying rationale for the policy—puts the issue in a difficult way for the Crown.
To me, the issue is, what is the statutory scheme? That’s what the original cases
started out saying. That’s what OSFC says: “Tell me what the scheme is,” not
“What’s the underlying rationale or what’s the policy justification for the scheme?”
If you go back and read McNichol or Equilease or OSFC, they don’t talk about the
underlying policy rationale for treating all sorts of distributions by corporations as
taxable in the hands of the holders. They don’t do that, so framing the issue in
terms of policy is, to me, the wrong way to define it.
Wilfrid Lefebvre: Brian, what do you have to say about statutory interpretation?
24 Frederick Zimmer, “General Report,” in International Fiscal Association, Form and Substance in
Tax Law, Cahiers de droit fiscal international, vol. 87a (The Hague: Kluwer Law International,
2002), 19-67.
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Brian Arnold: Before we leave GAAR, I would like to mention the Mathew case.25
This is the case in which some tax lawyers challenged the constitutionality of GAAR.
In an exhaustive analysis, running to 163 printed pages and including references to
Magna Carta, Judge Dussault upheld the validity of GAAR and hopefully put this
issue to bed once and for all. And as someone who writes a little bit, I want to take
my hat off to Judge Dussault for his comprehensive analysis on this topic, and at
least assure him that I read every word of it.
With respect to statutory interpretation, I want to start by referring briefly to an
early Tax Court decision26 in which the issue was whether or not the taxpayer could
deduct a doubtful debt reserve under paragraph 20(1)(l). Under paragraph 20(1)(l),
a reserve is allowed only if part of a taxpayer’s ordinary business is the lending of
money. In this case, the taxpayer’s business consisted of five loans. The issue argued
by both counsel in the case was whether those five loans amounted to a business.
However, the Tax Court judge found that it was unnecessary for him to resolve
that issue because, even if the loans were a business, they were all of the taxpayer’s
business and not just part of it as required by paragraph 20(1)(l). Of course, the
requirement in paragraph 20(1)(l) that part of your business is the lending of money
is a minimum requirement. So if all of your business is the lending of money, you
have clearly satisfied that requirement. Fortunately for the credibility of the Tax
Court, this kind of blatant mistake doesn’t happen any more.
I want to contrast that case with a 1995 case that involved a novel and extremely
difficult issue of treaty interpretation. That is the Cudd Pressure Control case,27 which
involved the issue of whether or not a Canadian permanent establishment (PE) of a
US taxpayer could deduct notional rent in computing its Canadian profit. As you
know, the treaty basically requires that a PE be treated as a separate entity, dealing
at arm’s length with its head office. The taxpayer’s argument was that, as a separate
entity, the PE would need to have the equipment to do the work. Since the head
office owned the equipment, the PE would have to rent that equipment and pay
rent to the head office.
This case was not only novel and difficult, but it was very important. It was a
ground-breaking case internationally. The issue had not been dealt with by foreign
courts, nor had it been dealt with by the OECD. So there was very little for Judge
Sarchuk to rely on. The case was argued on the basis of a vast array of extrinsic
material, including—I will just run through a few things here, to give you an idea—
the Vienna Convention on the Law of Treaties, several US treaty cases, the 1979
OECD report on transfer pricing, the 1933 League of Nations Draft Model Treaty,
the Travaux Préparatoires to the 1943 Canada-US treaty, and an American Law
Institute report on US income tax treaties. In short, this was not your run-of-themill Tax Court case, and the stakes were enormous, because if notional expenses are
25 Mathew et al. v. The Queen, 2002 DTC 1637 (TCC).
26 Perlman v. MNR, 85 DTC 46 (TCC).
27 Cudd Pressure Control Inc. v. The Queen, 95 DTC 559 (TCC).
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deductible, you basically have the creation of a black hole where tax advisers can
invent transactions after the fact.
Judge Sarchuk decided that the notional expenses were not deductible. In my
view, his analysis is virtually faultless. The Federal Court of Appeal had only to
agree with his finding, which all three judges did, although one judge went on,
incorrectly in my view, to suggest that in other circumstances, it might be appropriate to deduct notional expenses.28
In the same vein, I would mention the Edwards case,29 decided by Judge Rip,
involving whether or not the Canada-China treaty applied to Hong Kong. These
are just a couple of examples of the Tax Court doing excellent work, coming up
with the correct result in extremely difficult circumstances.
Once again, what I would like to do here is look at what the Supreme Court has
said about statutory interpretation, briefly, and then compare it with what the Tax
Court has done.
My views are probably known to most of you, but I think that the Supreme
Court has not articulated a consistent approach to statutory interpretation. The
justices of the Supreme Court have used a bewildering array of labels to describe
their approaches—the modern rule, the plain meaning rule, the modern plain
meaning rule, the words-in-total-context approach, the teleological approach, the
modern purposive approach—and then, to compound the problem, what they do
in any particular case may be to actually apply a different method than they prescribed. Indeed, my favourite example of this is one paragraph in the 1996 Alberta
Treasury Branches case.30 The first sentence of the paragraph says, “[W]hen there is
neither any doubt as to the meaning of the legislation nor any ambiguity in its
application to the facts then the statutory provision must be applied regardless of its
object or purpose.”31 Two sentences later, the sentence reads, “[I]n order to determine the clear and plain meaning of the statute it is always appropriate to consider
the ‘scheme of the Act, the object of the Act, and the intention of Parliament.’ ”32
Those two comments in the same paragraph are contradictory. But I’m not here to
rant about the Supreme Court of Canada; I’m here to celebrate the Tax Court.
What approach is the Tax Court taking?
I’m happy to report that, in my view, the Tax Court doesn’t seem to be too
concerned about the appropriate approach to statutory interpretation. It just gets
on with the job at hand, interpreting and applying the provisions of the Act,
sometimes using a literal approach and sometimes using a purposive approach,
depending on the circumstances. It has wisely decided not to waste its time trying
28 Cudd Pressure Control Inc. v. The Queen, 98 DTC 6630 (FCA).
29 Edwards v. The Queen, 2002 DTC 1856 (TCC); aff ’d. 2003 DTC 5667 (FCA).
30 The Queen v. Province of Alberta Treasury Branches et al., 96 DTC 6245 (SCC).
31 Ibid., at 6248.
32 Ibid.
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to figure out what the Supreme Court thinks is the appropriate approach to statutory
interpretation, or, indeed, trying to articulate its own approach to statutory interpretation. To me, statutory interpretation simply involves looking at all the relevant
information and trying to come up with the best interpretation that you can, giving
appropriate weight in the circumstances to the words, the context, and the purpose
of the legislation. Going much further than that is not very helpful. I think that is
basically what the Tax Court judges have done. But there are some exceptions.
In the 2002 Ipsco case,33 Judge Rowe held that a damage award was a non-taxable
windfall that did not go to reduce the undepreciated capital cost of the property of
the class. After analyzing in detail the statutory scheme, this is what he said, in
some colourful language: “Legislation weighing more than a kilogram, does not
have much room in it for liberal, general interpretation, particularly when the road
to the resolution of a specific issue is well-marked and the voyage is undertaken in
accordance with a detailed map and a handy guidebook.”34 Now, I would say that just
because the Act is big and detailed doesn’t mean that there is no room for liberal
interpretation, although, in the specific circumstances of that case, I think Judge
Rowe’s approach made perfect sense. I can’t help noting as an aside here that Tax
Court judges seem to take some special delight in finding that, despite the overwhelming size and complexity of the tax legislation, there are still amounts that
escape tax completely.
Wilfrid Lefebvre: That’s great if it’s for you!
Brian Arnold: In the Ipsco case, Judge Rowe points out that the minister “bobbled the
ball” because the minister allowed the taxpayer to deduct the legal fees incurred in
getting the tax-free damages. He refers to this as a win-win or a windfall-windfall
situation, and he says this may appear to be incongruous “but strange things happen
from time to time in the mysterious domain of taxation.”35 Finally, he ends with a
comment about the benefit of the complexity of the Act to tax practitioners (I think,
Wilfrid, he had you and me in mind here), where he says “[P]ractitioners of the
various dark arts within the arcane world of taxation—and their loved ones—continue to be assured of a steady supply of jam with their tea.”36 A Tax Court judge
with a sense of humour and a facility for language—this is cause for celebration!
Finally, I want to mention the Radage case,37 in which the Tax Court made an
important contribution to the principles of statutory interpretation when Judge
Bowman adopted a humane and compassionate construction of the provisions of
the disability tax credit.
33 Supra note 11.
34 Ibid., at paragraph 26.
35 Ibid., at paragraph 27.
36 Ibid.
37 Radage v. The Queen, 96 DTC 1615 (TCC).
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Wilfrid Lefebvre: Thank you, Brian. In the few minutes remaining, perhaps, Ian,
you could add a few words.
Ian MacGregor: I was asked to comment on what I think is an enviable record of
the Tax Court in respect of decisions that have gone forward to the Supreme Court.
Just by way of introduction, let me say that there have been 20 decisions of the Tax
Court that have gone forward to the Supreme Court, one of which is pending as
we speak. Gifford,38 I believe, is in the process of being argued this morning. As to
the 19 decided cases, the Supreme Court has upheld the Tax Court in 13 of those
cases. But I’m going to refer to the Stewart decision39 very briefly, which is a decision
where the Supreme Court has not upheld the decision of the Tax Court. But in
Stewart, the Supreme Court looked to other decisions of this court for guidance.
You will recall that Stewart dealt with the reasonable expectation of profit (REOP),
and the interpretation of source of income in the context of a business. The issue
was whether or not REOP applied in such a context. The Tax Court said yes, naturally
following the earlier decision of the Supreme Court in Moldowan.40 But subsequent
to its decision in Stewart, the Tax Court cast considerable doubt on the appropriateness of REOP as a stand-alone test. What you will find in the Supreme Court’s
judgment in Stewart is the endorsement of those subsequent decisions of the Tax
Court, raising serious doubt as to whether or not REOP should be a stand-alone test
in such a commercial context.
Wilfrid Lefebvre: To conclude, let’s allow Associate Chief Justice Bowman to have
the last word, as he should.
Associate Chief Justice Bowman: I don’t think there is very much to add to what
the other panellists have said, beyond saying that I don’t regard statutory interpretation as a very arcane sort of thing. You decide what is the commonsense answer
and you interpret the legislation accordingly, or you find authority to support your
conclusion. But essentially, in deciding tax cases—whether we’re talking about the
Shell Canada case or the Radage case, the poor little fellow who gets caught up in
the toils of section 60 and whether he can deduct alimony or not—you look at it as
a practical matter and then say, “What is my job here? My job here is to decide if
he is in accordance with the law and in accordance with common sense and with
compassion.” And if you do that, you have a 50-50 chance of being upheld in Appeal.
[Break]
38 Gifford v. The Queen, 2001 DTC 168 (TCC).
39 Stewart v. The Queen, 98 DTC 1600 (TCC); aff ’d. 2000 DTC 6163 (FCA); rev’d. 2002 DTC
6969 (SCC).
40 Moldowan v. The Queen, 77 DTC 5213 (SCC).
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Raymond Guenette: The topic of the next panel is “Effective Advocacy in Tax
Litigation: The View from the Bench and from the Trench.” This panel is presided
over by Edwin Kroft. Mr. Kroft received his LLB from Osgoode Hall Law School
in 1978 and his LLM from the University of British Columbia in 1980 before being
called to the British Columbia bar in 1980. Mr. Kroft is a member of the Rules
Committee of the Tax Court of Canada, the Joint Committee on Taxation of the
Canadian Bar Association (CBA) and the Canadian Institute of Chartered Accountants, the CBA (BC Tax Section), the CCRA Liaison Committee, and the Canadian Tax
Journal editorial board. He is a former governor of the Canadian Tax Foundation
and a former chair of the Tax Subsection of the CBA (BC Tax Section). He has
written over 40 articles and papers on taxation and corporate law subjects for the
Canadian Tax Foundation and other organizations.
The other members of this panel are the Honourable Alban Garon, chief justice
of the Tax Court, the Honourable Justice Marc Noël of the Federal Court of Appeal,
Susan Van Der Hout, and Alexandra Brown. I have already introduced Chief Justice
Garon.
The Honourable Justice Marc Noël studied at the University of Ottawa and
was called to the bar of Quebec in 1976 and to the bar of Ontario in 1980. He was
appointed Queen’s Counsel in 1990. He worked as a partner at the law offices of
Verchère Noël & Eddy between 1977 and 1989 and at Bennett Jones Verchère
between 1989 and 1992. He was appointed judge of the Federal Court Trial
Division in 1992 and judge of the Court Martial Appeal Court of Canada in 1993.
He was also appointed a member of the Competition Tribunal in 1993. He has
been a judge of the Federal Court of Appeal since 1998.
Susan Van Der Hout is a partner in the taxation law department at the Toronto
office of the law firm Osler Hoskin & Harcourt. Prior to joining Osler’s, Ms. Van
Der Hout was general counsel in the Tax Law Services Section of the Department
of Justice, the Ontario Regional Office. Ms. Van Der Hout received her LLB from
Osgoode Hall Law School in 1978 and her LLM from the University of Toronto in
1980. She was called to the bar of Ontario in 1981.
Alexandra Brown has been counsel at the Department of Justice since 1983,
initially in the Criminal Prosecutions Section. Except for a short time with the
Ontario Ministry of Revenue as a senior policy analyst, she has litigated tax issues
exclusively since 1987. Ms. Brown has instructed on tax and advocacy issues for the
Law Society of Upper Canada, The Advocates’ Society, the Osgoode Hall Law
School intensive trial advocacy program, and the University of Windsor. As well,
she has frequently conducted continuing education programs for the CCRA and the
Department of Justice.
Mr. Justice Noël will be asked to speak later and will be introduced by Chief
Justice Garon. Now, over to Mr. Kroft.
Edwin G. Kroft: Thank you, Mr. Guenette. Welcome, distinguished guests. It is
an honour to be among you and to sit as the chair of this panel, as I look around
the room and see a wealth of experience.
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The objective of our panel is to deal with practical issues that surface in the
course of tax litigation and dispute resolution. Chief Justice Garon will make remarks
on a variety of subjects, and then each of the panellists will make comments with
respect to certain aspects of the remarks made by Chief Justice Garon. Now I’ll
turn to Chief Justice Garon for welcoming remarks and introductory remarks.
Chief Justice Garon: Thank you, Mr. Kroft. I think that I far as I’m concerned,
we’ll try to make this topic, effective advocacy in the Tax Court, as exciting as it
could be, but I’m not sure—I’m speaking only for myself, not for the other
panellists—I’m not sure whether I will be successful. I will make very brief remarks
about the matter of advocacy and then deal with a number of points.
A general comment that I would like to make is that advocacy is not a science,
which may be defined with precision and whose results may be replicated by repeating certain set formulas. Advocacy is an art. Good advocacy, like fine art, is in many
ways indescribable. It is like the Mona Lisa smile: it simply escapes precise definition.
However, this has not prevented people from writing many books on the subject of
the Mona Lisa painting. Good advocacy is the product of inspiration and mastery
of all the elements of litigation. My 15 years on the bench, if I may say so, has
permitted me to witness good advocacy, bad advocacy, and various degrees in between these two extremes. I believe it has permitted me—I’m a bit proud, and I like
to say that I’m proud of my humility—it has permitted me perhaps, today, to make
certain observations as to what distinguishes these various types of advocacy. I will
be speaking about the dos and don’ts in tax litigation.
The first element—and you will see immediately that it’s a mundane statement—the first element is that advocacy presupposes excellent preparation. In the
real estate market, as you know, location, location, and location is a key factor in
evaluating a piece of real estate. Well, I would say, to adapt it to our subject, that in
advocacy, preparation, preparation, and preparation is a very important element.
Some people say, and I think I’m inclined to believe they are right in many cases,
that the case is lost or won before the lawyers enter the courtroom.
Edwin G. Kroft: Now Sue, the chief justice has talked about preparation, preparation, and preparation. You can’t argue with that, can you?
Susan Van Der Hout: No, that’s something that I can’t argue with. And the other
thing that I would not argue about is a comment that was made in the opening—
that there are so many very experienced and expert people in the audience. I look
around me and see tax professionals with more than 20 to 30 years’ experience,
many of whom I have worked for in the past; so I comment with some deference to
them, because many techniques were learned from them.
I would like to make some comments about how we participate as a tax community. Tax litigation is, of course, an entirely human process. We all bring to it our
biases, our views, our background, our education—what schools we went to, what
professors we learned from—and that’s what makes tax litigation so exciting. When
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you go into that courtroom, you get to cross swords and have a very interesting
debate, often with the judge, about the issues. In terms of preparing for that debate,
I’ll focus on two things: practical considerations and strategy.
In relation to practical considerations, I’m going to focus on a critical one, and
that is creating confidence in your case. The way one creates confidence in the case
is by developing a solid theory of the case very early on, by building on the relevant
facts and law and rejecting irrelevant facts and law. It is necessary to come to a real
appreciation of what the strengths and weaknesses of your case are. That process
gives you better understanding and direction as to how to present the case and
prepare for the trial.
As a practical matter, having now been in private practice for a number of years,
I appreciate what a terrific advantage being a private practitioner is. You get to do
many iterations of your case before you actually get to court. If you prepare far in
advance, in fact, you have had four or five iterations of it—the pre-assessment
stage, the assessment stage, Appeals, and pretrial—before you even get into the
debate that happens in the courtroom.
The other thing I want to mention in relation to strategy is this: Always know
what your end goal is. I find that was one thing that I wasn’t really as clear on when
I started out as I am now: understanding what the end goal is and whom you must
persuade. Are you on a single track? Are you going straight to the Tax Court? Is the
issue a technical one, where victory often goes to the person who is the most fleet
of foot? Or are you on a dual track? That is, are you testing the settlement waters
and preparing for trial? Or are you on an alternative track? Are you simply trying
to exact the best settlement possible and working your way through the different
levels to get the right result for your client? Finally, whom do you need to persuade?
The art of persuasion and the approach that you take are so different when you are
talking to an auditor versus an Appeals officer, versus a justice lawyer or finally, a
court. Even when you go to the Court of Appeal or the Supreme Court, how many
personalities and points of view are you going to be addressing when you stand up
to try to succeed with your theory of the case?
So I guess, in summary, my points are these: clients and their counsel should be
confident in their mastery of the theory of the case and how it is being proved.
That requires preparation, the earlier the better.
Edwin G. Kroft: Now, Alex, based on what Sue said, she has had to prepare four
or five times. She has to try to convince auditors and she has to try to convince
Appeals officers. So it sounds as if she is far more prepared when she gets to Tax
Court than the Justice lawyers. What do you think?
Alexandra Brown: Well, I hope that’s not the case. Certainly, I think we are all in
agreement with the chief justice’s observations that, no matter when you get
involved, the key is preparation. I think there isn’t any substitute for that, at
whatever point you become involved in the case as counsel. As counsel for the
Crown, of course, we tend not to be involved with the case until the litigation
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stage. There is occasionally involvement before the litigation stage, but when you
consider that 5 percent of income tax objections and 6 percent of GST objections
proceed to litigation, I think we understand why, as a matter of allocating resources,
Crown counsel tend not to be involved at the audit or appeals stage. It does occasionally happen, but it is still very much the exception to be involved at that stage. So
we have a lot of catching up to do.
Edwin G. Kroft: Chief Justice, you have consensus on that point from counsel.
You know, they both think that you have to be prepared when you go to Tax Court.
Given that, what’s next on your list of dos and don’ts?
Chief Justice Garon: I was not expecting any disagreement on the first point.
The second point involves communication between counsel—counsel for each
party—and I will give you a brief example to illustrate my thought. It often happens
that around 9:25 or 9:30 a.m., the court registrar comes to see me and says, “The
two lawyers would like to discuss the case before the trial begins.” I then ask myself,
“Why did they not discuss the file before 9:30 a.m. or, preferably, one or more days
before the trial?” This situation occurs frequently. So that’s another proposal I expect
everyone to agree with: that counsel for both parties—for the government and for
the taxpayer, the private party—should, if possible, contact one another before the
actual day of the trial or at least before the time the trial is scheduled to begin. This
way, the legal proceedings before the court could be more efficient for all interested
parties. Not only will the judge and judicial officers save time but so will counsel,
and their clients will save on fees. I am also convinced that both the government
and the private party should think about the cost factor related to each case. As my
colleague Associate Chief Justice Bowman would say, “Another mundane statement.” It is imperative that counsel contact one another before the trial.
Edwin G. Kroft: Sue, based on what the chief justice has just said, do you think
that counsel always cooperate with one another? You have been on both sides.
Susan Van Der Hout: Well, when I was on the Justice side, and I would have a
meeting and the counsel on the other side would be very agitated about the issue,
I’d think, “Why are you so agitated? We just started.” What I didn’t really appreciate
was that they had already been fighting this battle for possibly two or three years
before they got to me, and that I was the fourth or the fifth person that they were
now presenting the very same case to. So now, I better understand the frustration.
But I understand from other counsel that it is becoming more adversarial in the
Tax Court. I haven’t found that myself, in terms of dealings with Justice in relation
to the income tax cases that I have been involved in. I’m not saying that it hasn’t
been a struggle to settle; it’s often a struggle to settle, but they’ve all settled. What I
am finding—and I hear it from the bar generally—is that the pretrial phase is
highly adversarial. That phase is evoking the most concern among tax practitioners. The concern is that the agency is becoming quite inflexible in relation to its
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approach to taxpayers. In some situations, there is even reluctance to accept conclusions of law if they are contrary to institutional beliefs as to what is right or fair
in the circumstances.
In many cases—as Alex knows and I remember while at Justice—limited resources preclude Justice involvement at the assessment stage. But certainly, the
agency would really benefit from having the input and assistance of Justice very
early on in the process. That could save costs for taxpayers who are bearing a real
cost burden in having their legal issues decided. Many legal issues could be decided,
because litigators take a very practical approach to what is going to work or not
work in the Tax Court.
Further, there is a strong sense in the tax community that something is awry right
now at the agency. What is causing it? Whether it’s frustration in terms of the trends
in the courts, or fear that the barn door to the Consolidated Revenue Fund is ajar,
or worry about making decisions because the auditor general is looking over their
shoulders, it’s something that should be addressed. It is harmful to the administration
of justice and those who are working within the tax administration and the tax bar.
In tax, we have seen periods of relative flexibility and then more stringency, and
we now seem to be going through one of the latter phases. I know I mentioned it
when I was with Justice, and Ed Kroft tells me that he has made this recommendation too, that perhaps it’s time to create an independent tax ombudsman, so that
there’s a real avenue for people to voice concerns regarding administrative quagmires. Writing letters to the minister or writing letters to more senior people
within the administration that are answered by the very individuals whom you’re
concerned about does not often promote real introspection regarding how to
approach an issue, or encourage change.
Edwin G. Kroft: Now, Alex, you’ve heard Sue’s portrayal of what she perceives to
be the relationship between lawyers in the private bar and Justice. Do you think
she’s right in her perceptions?
Alexandra Brown: There is a perception that tax litigation is more adversarial
than it was long ago when Sue and I started doing tax litigation, and I think that it’s
true. I think that it is perhaps more the case with the non-specialized tax bar. And I
think that when people are experienced and have, for example, the level of expertise of the people who are in this room today, it is much less often the case.
But I think tax litigation is more adversarial. I think the Tax Court sees many
more motions now, and that’s one indication, perhaps, of the increased adversarial
nature of it. However, I think in this forum in particular, counsel are well advised
always to ensure that there is some legitimate purpose to whatever procedural
wrangling they are engaging in, because I think this court frowns on procedural
game playing.
Edwin G. Kroft: But don’t you think it’s the role of the Crown to give up in some
circumstances and to tell the CCRA to give up in some circumstances?
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Alexandra Brown: Well, apparently we’ve given up in all of Sue’s cases. But I do
agree. Certainly, I have had cases where the evidence, as it has been introduced, has
shown clearly that the facts are not as Revenue understood them to be, and as we
had understood them to be going in. And when it is clear that the appeal should be
allowed, based on the evidence that is adduced, I think counsel for the Crown has
an obligation to concede. And all counsel have an obligation, I think, certainly
under the Ontario rules, to advise the court where there is a case that’s relevant,
even if it hurts your client’s case. There’s an obligation to advise the court and draw
it to the court’s attention. I have only ever seen Crown counsel do that, but I think
that’s another avenue where what I consider to be a higher obligation on the
Crown is evident.
Edwin G. Kroft: I’ve heard that there is an initiative called an early case resolution
initiative, which the Crown has. What’s that about?
Alexandra Brown: That is, I think, just one of a number of efforts. Specifically, it’s
a project to reinforce the need for counsel to review each file after the pleading is
filed and the discovery is done, to determine whether or not it is appropriate for
settlement and what an appropriate settlement might be. There is another pilot
project in Toronto, for example, where cases that involve less than $150,000 in tax
and that are straightforward sorts of cases—the kinds of cases that really are most
susceptible to settlement—have been identified and reviewed. But both of these,
and every one of the other initiatives (there will probably be more in the future)
exist generally against this mandate that we all have to settle cases wherever that is
possible.
Susan Van Der Hout: I just want to add a point to that. I think, as a practical matter,
one of the real problems is that there is just not enough funding for the Justice
function to actually do all of these things. They’re too busy; they’re always running
from case to case. So to be able to take the time to actually focus on other matters
becomes problematic.
The other thing that I think has changed, at least from my perspective—and maybe
I’m incorrect on this—is that in the past, when I was younger, when Justice made a
recommendation that the case should be settled, apart from a situation that involved
an interpretation bulletin, it was always the Justice recommendation that was determinative. What I have seen since—in my latter years at Justice and while I have
been out in private practice—is that notwithstanding recommendations by counsel
as to what the likelihood of success is, the cases are being pushed ahead anyway,
and often not on things that are life-determining issues. They are not interpretation bulletins, and they are not situations where you’re dealing with something
that’s going to markedly affect the entire legal landscape. And I think that’s a very
unfortunate development, because I believe strongly in the role of Justice, in the
pre-eminent function of the attorney general in terms of advising when cases should
move ahead. It’s an important limitation in the workings of the system.
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Edwin G. Kroft: Well, Chief Justice, it seems that the panel has concluded that
inexperience, personalities, money, and degree of preparation are some of the different factors that might get in the way of rational behaviour and might interfere with
the best interests of the client. Now, moving on to another area, what tips might
you have about narrowing the legal and factual questions in issue?
Chief Justice Garon: Well, one question that I like to ask counsel, from time to
time, in complex cases, is, “What is the precise question in issue?” And very often,
I can see immediately that some lawyers are not quite clear about what is the precise
question in issue, in complex cases. In very simple cases, if you look at the pleadings, the notice of appeal, and the reply, you normally have a good understanding
of what the question in issue is. But in more complex cases, my experience is not
always that way. So it is very important, I think, for the lawyer to define precisely—
I mean, it is all very well to speak about what is the general question in issue—what
is the precise question in issue where there is a real debate between the two parties.
If the question is well formulated by one counsel, the advantage is that the judge
might be inclined very often to follow it and say, “Well, he’s right about the question,
and he may be right about the reasoning, in support of this question.” You know,
it’s a natural tendency—at least, I hope it’s a natural tendency—to share the formulation and, in many cases, to share the reasoning behind it. So, I think it is very
important that the pleadings be well drafted and that the lawyers be able to determine precisely the question in issue.
Edwin G. Kroft: Chief Justice, given your introductory remarks, what do you
think makes for a good notice of appeal, and how important are good pleadings?
Chief Justice Garon: Well, I think in both cases, if the facts are well set out in
some detail, in both the notice of appeal and the reply to the notice of appeal, and
more particularly in the second portion of the notice of appeal and the reply where
reference is made to the provisions of the Act, that the questions at issue are easily
identified. This makes for good pleadings. It assists the judge in preparing himself,
because it’s advantageous if the judge can prepare himself before hearing a case,
and it may assist both litigants to really ascertain what are the questions in issue.
Afterward, about the assumptions made in the reply to the notice of appeal, I’ve
found in many cases that the assumptions—that paragraph dealing with the assumptions by the minister—are not always well drafted. First of all, they assume
law. I don’t think we have to assume law; we take the law as it is. What is important,
in my view, is that the facts that are assumed, in some detail, be set out precisely in
that reply to the notice of appeal.
As to the notice of appeal, some notices of appeal are just too short. It gives me
the impression that the lawyer acting for the private litigant wants to see what is
really the position of the Crown. He should have an idea of what is the position of
the Crown after all the stages to which reference was made earlier.
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Edwin G. Kroft: Alex, you’ve heard the chief justice talk about replies. Do you
have a reply?
Alexandra Brown: I do. I’ll “chase the will-o’-the-wisp” about assumptions for a
minute. I certainly agree, it is critically important that the pleadings be accurate. I
think because of the pressures of time, generally speaking counsel try to isolate the
assumptions from merely reviewing the file material. Where it’s possible, I try to
actually identify the Revenue official who raised the assessment and find out what
were the operative assumptions. But that’s a luxury that I think isn’t available in
most cases.
This is especially, of course, a hot issue at the moment in view of a couple of
decisions relating to Anchor Pointe.41 So we are reviewing our practices to try to
make sure that what we do conforms with what the Court of Appeal has directed us
to do in that decision.
Earlier I quoted the associate chief justice, who remarked that much time was
wasted chasing the will-o’-the-wisp of who made what assumption and when. I think
that the important thing that sometimes counsel need to be reminded of is that,
ultimately, the question in the Tax Court is whether or not the assessment is correct;
the process isn’t a judicial review of the audit. So I’m sorry if the taxpayer had an
unfortunate experience with the audit, but ultimately, what we are looking at is not
the auditor’s behaviour but whether or not the assessment is correct. I think that
sometimes real issues exist in relation to the assumptions, but not every time the
issue is raised is there in fact any real issue there.
Edwin G. Kroft: I’ve heard you both speak about the notice of appeal and the reply.
I had an experience recently where I filed an answer in the Registry and the officer
in Vancouver called me and said, “What do I do with this? I’ve never seen one of
these things before.” Chief Justice, when do you think an answer should be filed?
Chief Justice Garon: First of all, I agree with you that it is very rare that an answer
is filed. I would estimate that at below 5 percent, and even then, I’m generous;
perhaps it is close to 1 percent, really. But I think in some cases, it might be
useful—not in many cases, I think, but in some cases—where new facts are alleged
in the reply, for example, so we don’t know what the position of the appellant is. So
I think an answer could cover that. The fact would be either admitted, denied, or
put in issue by the respondent. In some cases, it might be useful to have an answer.
I’m not suggesting that all of you who are in practice start filing about 50 answers
in all the cases that you have. But I think in some cases, it is advantageous.
Edwin G. Kroft: Sue, you’ve heard the comments about the notice of appeal,
reply, and answer. Do you have any brief comments about your views on pleadings?
41 The Queen v. Anchor Pointe Energy Ltd., 2003 FCA 294.
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Susan Van Der Hout: To first address the basic question, which is, “What is the
issue?”—I think that we have a lot to learn from people who have practised criminal
law. Criminal prosecutors are used to standing up and saying, “This is the issue and
these are my three points: one, two, three.” To test whether you are ready to
actually argue a case, you should be at that point. It’s a very effective way of forcing
you to dig deep and figure out what is in issue.
In relation to pleadings, it’s often said that they are your first opportunity to
persuade. I personally like simple pleadings. I like pleadings that basically outline
the story, pleadings that are not too long. I know that when I was at Justice, I would
see pleadings that were 30 pages, and in some cases I would see pleadings that were
only 3 pages. Pleadings that fail to address what is actually in dispute are not useful
to the Justice people who are reviewing them and prevent the early resolution of
disputes. Nor do I find the really long pleadings, where there is a lot of evidence
being pleaded, useful. So, I think the ideal is somewhere in between.
Effective persuasion is achieved with precision. It is the precision that creates
that effectiveness. On the other hand, there is a learning curve in cases, and the
pleadings have to allow you some latitude to incorporate the nuances. That’s certainly an experience I have had from arguing a trial to arguing the appeal—that you
get that sense of really starting to flesh out the shades of the case and starting to
understand those hidden issues.
Alexandra Brown: May I just observe quickly that I do think that over the 20 years
that the Tax Court has existed, the standard of notices of appeal—and I won’t even
touch the reply—but I think the standard of notices of appeal has really gone up. It
was formerly the case, I think, that the court would routinely look at the reply first,
to see what the case was actually about and what was really going on. While I think
that the court still does that to some extent in respect of informal procedure cases,
it is obviously the goal of counsel who will be acting in general procedure cases to
use this, as Sue says, as the first opportunity to persuade—to use that opportunity
to present your theory of the case as you present the facts and the issues to the
court. Most counsel, in my experience, are seizing that opportunity and making
effective use of it now, much more than was done 20 years ago.
Edwin G. Kroft: You both have spoken about persuasion, particularly through the
written document. Chief Justice, what comments do you have about oral advocacy
and the use of opening statements?
Chief Justice Garon: In the case of the opening statement of facts and of applicable law, I recommend that a statement be made only in those cases where the issues
in dispute are complex. In most cases, from reading the pleadings, the notice of appeal,
and the reply to the notice of appeal, an opening statement of facts and of applicable law is not necessary before each party submits its evidence. In complex cases,
however, I find that this is useful; it allows the judge to define the debate. And a
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brief yet well-prepared statement appears to me to be a tool that counsel must use
in appropriate cases. It can also identify the real issues in question when a party
makes a statement prior to submitting evidence.
Edwin G. Kroft: We have talked about the rigorous exposition of evidence through
the discovery and appeal processes. Chief Justice, what tips do you have about
adducing evidence through both the appeal process and, more importantly, the
discovery process?
Chief Justice Garon: About this question—I think obtaining and adducing evidence through the discovery process is useful in those cases where, for example,
you have the impression in court that a particular witness was rather rigid, was
careful, was not at ease; and then if you refer to the discovery, which was held in a
less formal setting, very often you will learn more about the particular topic than
you may learn in court. I’ve had the impression on occasion that perhaps the truth
was not really what was mentioned in the courtroom when he testified about delicate
points, but what was mentioned during the examination for discovery, which was
held in a more relaxed atmosphere. But that’s my perception. I might be wrong
about this.
Edwin G. Kroft: Chief Justice, I wish to address one matter that I think signals a
trend and in some ways flows from the first panel’s remarks about GAAR. We are
seeing a growing desire on the part of Justice lawyers to seek full disclosure on a
discovery of documents, as opposed to the normal rule, which requires partial
disclosure under rule 81. There have been very few cases that have been decided by
the Tax Court on the need for full disclosure, and I haven’t seen many motions in
my practice career with respect to full disclosure. Yet the Crown seems to now be
threatening full disclosure any time GAAR is involved, and it is on the basis that
GAAR involves a purpose test. Yet we have so many purpose tests throughout the
Income Tax Act. For example, every expense case involves a purpose test because
the inquiry involves a determination of whether or not an expense is laid out to
gain or produce income. Therefore, it will be interesting to see in the future
whether or not judges of the Tax Court will be ordering full disclosure.
If you were to review both the Tax Court and the Federal Court jurisprudence
dealing with the former rule 448, when there was a choice in the Federal Court
before 1990 to do partial or full disclosure, you will see very few decisions rendered
by the courts. It seems that the courts have recognized that a full disclosure is costly,
time-consuming, and burdensome. Any judge who has ordered full disclosure has
indicated that the scope of discovery depends on how many facts in pleadings are
in dispute, whether or not the disclosure of certain documents would lead to a train
of inquiry into whether the information that is disclosed would advance or harm
the particular case. Therefore, I’m suggesting that full disclosure should be the
exception.
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Given that there have been rulings that the scope of questions asked on discovery
can be very broad, and that counsel, if properly prepared, can obtain documents on
a partial discovery through the provision of undertakings given to appropriate questions, full disclosure should be the exception rather than the norm, in cases where
taxpayers don’t have a lot of money in issue, or when taxpayers are large taxpayers
that have worldwide operations. Imagine how onerous full disclosure is in the
electronic age where we have electronic documents. If we had to do a full disclosure, how many thousands and thousands of e-mails might have to be disclosed?
I’m going to turn this over to you, Sue, with respect to what your thoughts are on
full disclosure. My reaction, Sue, is that full disclosure generally favours the Crown,
and that the Crown is the only party that really wants and needs a full disclosure.
Susan Van Der Hout: Well, the Crown does need it. In an important case, the
only way the Crown really learns about the case, or is able to prove the case, is
through the documents and the mouths of the witnesses on the other side. As a
practical matter, that’s how it’s done. I would be aghast if a court would not order
full disclosure if it was sought by one party in appropriate circumstances. Certainly,
it’s the standard rule, at least in the Ontario courts, that you proceed by way of
affidavits. Rule 81 makes sense when cases can be adequately addressed through
partial disclosure. Full disclosure is inevitable in a large and important case. The
Crown is going to seek it in advance of discovery, so that counsel can actually have
a worthwhile discovery. But from the taxpayer’s point of view, you don’t really need
that full disclosure, and so there is tension between the two points of view. From
the taxpayer’s point of view, you’re getting full disclosure through access to information. All that you’re using the discovery process for is to verify that you have full
disclosure through the access to information process, which you can get at any
time after each stage of the proceeding, or get admissions.
So I think that it’s really a matter of goodwill between counsel, in terms of
exercising proper judgment, as to when it’s appropriate or inappropriate to have a
full disclosure case. And if you’re not expecting full disclosure in a GAAR case, then
you are in for a mighty shock, because I think that’s always going to be a full
disclosure situation.
In terms of disclosure, actually, I had an interesting talk with Brian Carr just a few
minutes ago. He reminded me of a situation about 15 years ago where we had a
transfer-pricing issue, and he invited me over to his office and said, “I’ve brought
the president of a very large corporation up from the United States. Ask whatever
questions you want.” That was a totally disarming process, because in fact, what he
did, just after the pleadings and prior to discovery, was allow me to sit down and
interview a key person to my heart’s content, ask all the questions that I wanted to
ask, and get some measure of comfort as to the strengths and weaknesses of the
case. We settled the case without the discovery.
I did that with another Crown counsel earlier this year. What we agreed to was
that he would come out to the client’s place of business, and we did the full presentation of the case. He met with our witnesses, spoke to our experts, and decided to
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withdraw. Where you can have confidence and respect for each other in the
process, you can get litigation done very effectively.
Edwin G. Kroft: Sue, there are points you made that, frankly, I don’t agree with.
For example, we should not always expect and have full disclosure in GAAR cases.
The fact that section 245 of the Income Tax Act is involved doesn’t mean automatically that there should be more documents. As I mentioned, many cases that come
before the Tax Court with respect to deductibility of expenses are purpose test cases
and can be as complex as a GAAR case, yet the Crown is not asking for full disclosure.
One problem I see with full disclosure is that a lot of people swear affidavits with
their “eyes wide shut.” They just have no idea whether or not the documents on their
list are the only documents in existence relevant to the issues that are under appeal.
I can’t imagine, Alex, that when CCRA officials have to swear documents, they know
for a fact that the list contains all the appropriate documents.
Alexandra Brown: I’m sitting here thinking, “You need my threatening letter.”
Edwin G. Kroft: You mean your threatening letter to CCRA officials—the one that
says, “You’d better get everything or else”?
Alexandra Brown: You’d better look everywhere, and don’t just send a letter and
don’t just send a memo or an e-mail. You do that to start the process, and then you
follow up with a phone call. If you think that there is probably something and you
haven’t heard back, then you get some explanations as to why there’s nothing, or
you pursue it to ensure that later you don’t find that it’s been tucked in the back of
somebody’s drawer.
There is an obligation to follow these things up. These people are swearing an
affidavit. We actually tell them that they may be cross-examined, on that affidavit.
That usually scares them.
Edwin G. Kroft: Well, Chief Justice, you know you have a conflict. You have a
dispute on the panel here. So, what are your views with respect to full and partial
disclosure, perhaps, and the value of discovery evidence?
Chief Justice Garon: Do I have to arbitrate the conflict?
Well, from my viewpoint—and I know that there is some disagreement among
judges in our courts—in many cases, partial disclosure is sufficient. If one party
relies in support of his or her case on, say, 25 documents and the other party relies
in support of her case on 20 documents, especially in cases of parties who are
represented by competent lawyers, to me, that’s sufficient. And I realize that to
have full disclosure, as was mentioned earlier, is time-consuming and costly. And
even from the point of view of the judge, if you have to look at 45 documents as
opposed to 100, I understand that it is an improvement, in my situation, if I have to
look at a minimum number of documents. It contributes to rendering justice more
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quickly. But I understand that in complex cases, particularly when the purpose test
is involved, full disclosure might be required.
But, to me, I would say normally—and, I can see some of my colleagues here
who would probably disagree with that—but to me, normally, partial disclosure
should be enough, especially in cases where the two parties are represented by
competent lawyers.
Edwin G. Kroft: Chief Justice, you’ve talked about narrowing the facts, documents,
and questions of law in issue. Are you also seeing an increase in rule 58 applications?
Chief Justice Garon: I’m not sure that there is a substantial increase. I would say—I
don’t have any statistical data—I would say, perhaps, a modest increase in rule 58
applications.
It may be of interest to you to know that at the present time you can make an
application under rule 58 of the general rules only in respect of a question of law.
We are about to amend the rules; in fact, all the preliminary steps have already
been taken. We had the prepublication of the draft rules two or three months ago,
and we are now very close to the final stage in the matter. Rule 58 is going to be
amended to add questions of fact and questions of mixed law and fact. They could
be subject to an application under rule 58. So, we’ll broaden, in other words, the
ambit of rule 58.
Edwin G. Kroft: Sue, do you see any benefits, briefly, from the changes to the rule 58
application rules?
Susan Van Der Hout: Well, I think this is a very important and positive development for the court. In Ontario under rule 14.05, a party can apply to have a question
determined and the courts are willing to let the issue go forward, notwithstanding
that there may be some facts in dispute. So, the effect of this rule is to permit
taxpayers to have questions determined far earlier in the process, possibly even
before a provincial assessment has been issued, where it’s clear that there is a gap
between the minister’s view as to what the Ontario tax result is and the taxpayer’s
view. The proposed federal amendment is creating a fast track for more complicated
cases parallel to the one that exists in the informal procedure. Moving cases quickly,
getting them forward and having them decided, is good news for taxpayers.
Another important Ontario development, which has yet to find favour on the
federal side, is mediation. Mediation gets people to focus on their case and to focus
on it in a fresh way, or bring new perspectives to it. It facilitates a real discussion
about how a case should be resolved or how a case can be resolved. That component is now totally missing in the federal tax context.
There are very few truly technical questions that have to be decided by a court.
There are so many ways in which counsel, when both are working hard to obtain a
good result, can get to that good result without the necessity of having a court
adjudicate it.
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Edwin G. Kroft: Chief Justice, we have all heard comments about the goal of
counsel and the courts to narrow the facts in issue. We also heard your remarks
about rule 58. What other techniques are you seeing counsel use to narrow the
facts in dispute?
Chief Justice Garon: Well, one technique, which is rarely used but could be used
from time to time, is the notice to admit facts or documents. What I am referring
to is a request to admit relating to facts or to documents.
Not too long ago, I heard a case in which counsel for one of the parties asked
his colleague, “I have two witnesses here who are ready to testify on such a matter.
I do not know if you are willing to admit the testimonies they are about to give, or
if you are willing to admit certain facts that they will present in their testimony.”
Then counsel added, “These two witnesses hold important offices; they must be
back at work in a few hours. Obviously, we will have to expedite the proceeding so
that we can hear them, if necessary.” Therefore, quite simply, had counsel in
question sent a request to admit regarding the facts that he intended to prove by
means of those witnesses, the two persons in question might not have been required to attend. The facts could have been admitted. The court could then have
saved time, counsel also would have saved time, and the two witnesses would not
have been required to be present.
Therefore, at times it is beneficial to use that procedure. It is rarely used, but in
my view, it ought to be used a bit more often.
Edwin G. Kroft: Chief Justice, I’m just going to throw in my own two cents on
notices to admit. My own view is that—and this is with deference to what Alex said
before—there are times when CCRA officials don’t assess their litigation risk, with or
without the help of their colleagues from Justice. As a result, I think that a notice
to admit is a useful tool to cause the Crown to assess litigation risk, particularly in
circumstances where the Crown hasn’t prepared well. There are times when we deal
with the CCRA through its counsel and the CCRA officials really don’t have a clear
idea of what the facts are or whether the Crown really should be winning the appeal.
So, I think the strategic use of notices to admit will speed a case to resolution;
it’s a shame they are not used more. They can be used on multiple occasions, both
before discoveries and after discoveries. They should be used before discoveries if a
discovery will prove expensive for the taxpayer. There are cases in the general
procedure that don’t necessarily involve a lot of money. If the parties would come
to an understanding of the facts more quickly, it would be much better and cheaper
for all concerned.
Chief Justice, let me ask you now about agreed statements of facts. How do you
find them as a tool to narrow the time for an appeal, the facts in issue, and the
amount of controversy between the parties?
Chief Justice Garon: The agreed statement of facts, whether it is a full agreed
statement of facts or a partial one, in many cases I have found to be useful. Very
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often, I don’t see the point in seeing the witness say what is written in the agreed
statement of facts. You know, if it’s agreed by both parties, I start from the premise
that it reflects the real situation. Another point is that there may be an advantage
from the point of view of the lawyers. With an agreed statement of facts, they are sure
that the judge is not going to make any mistake about any findings of fact, so that,
in some cases, it may be a compelling advantage. In other cases, I do not know. And
it has the effect of shortening the hearing of the case.
In my view, it is generally in the interest of justice. Even a partial agreed
statement of facts is not to be discouraged.
In this respect, it may be of interest to you to know that there are now changes
to the rules of the court that are about to become in force. We have added one
item to the tariff of fees covering the agreed statement of facts—and another item,
which I should have mentioned earlier, about the notice to admit facts or documents. So, we have a relatively simple tariff, but we thought it was useful to add those
two items and, at the same time, perhaps convey a message that recourse to these two
techniques is important.
Edwin G. Kroft: Sue and Alex, would you please provide some very brief comments
on agreed statements of facts?
Susan Van Der Hout: My preference is for a partial agreed statement of facts
because I find that, in terms of allocating your resources, your time is often much
better spent putting together those things that you can agree on rather than
arguing about the nuances. My experience has also been that courts like to see a
warm body. You are going to have the witness there anyway for examination and
cross-examination. Many of the nuances that you have spent hours and hours
fighting about, in terms of the full agreed statement of facts, are normally fleshed
out there. A number of superior courts have often commented on or lamented the
absence of viva voce evidence on facts that bear on the question before the courts.
So, I think that it’s something that is very case-dependent and very counseldependent, and that you have to figure out, given the circumstances, what works
best for that particular issue.
Alexandra Brown: Just very briefly—I agree that usually a partial statement of
agreed facts is going to be easier. My general rule is that if there’s any heated
negotiation about the wording of a statement of agreed facts, then it’s a bad idea
because you’re not really agreeing. Nevertheless, as Sue says, there may be times
when there are nuances to the facts and you would want to have a partial statement of
agreed facts to lay the foundation, as well as calling a witness. Then, if it’s a complicated situation, you are assisting the judge by providing somebody from whom he
or she can seek clarification. Also, counsel may, for their own reasons, want to have
a witness there for colour, or to put a human face on a case. As a wise man recently
said, “Litigation is painting a picture.”
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Edwin G. Kroft: Chief Justice, you’ve been discussing persuasion and you’ve
mentioned advocacy. How much persuasion or advocacy occurs at the prehearing
conference, and how valuable a function does a prehearing conference serve?
Chief Justice Garon: Well, I will start by answering your last question. I think it’s
very useful to have a prehearing conference, and I think that in order to have a very
good prehearing conference, there are certain requirements. One of them, I think,
in my view, is that a memorandum should be prepared by counsel for each side. I
know the rules of the court do not require that, I’m aware of that, but I find that it
is a very useful tool. I think it is useful for the lawyers themselves in representing
the parties; it is also useful for the judge in preparing himself.
Another requirement is that the judge—and I see some of my colleagues here—
the judge must be very well prepared when he has a pretrial conference, because, in
my view, he must take a position and not just say, “Well, it’s a very interesting
argument, sir” and so on. That’s not good enough. I think he should take a position.
And everybody knows that he will not be the trial judge if the matter proceeds to
trial. But he must play an active role and take a position in order for the conference
to be successful.
On the benefits—I know we are pressed by time, I just want to get some publicity
about this—the rate of settlement where there has been a prehearing conference is
very high. You will say, “How high is it?” About 80 percent. So it’s very high. And
of course, I cannot answer the question, “If there have been no pretrial conferences, what would be the difference?”
Edwin G. Kroft: Let me add a couple of points about the advantages and disadvantages of the prehearing conference, which echo comments from the private bar
and clients. From a practical point of view, the prehearing conference serves many
important functions for the taxpayer. Counsel can sort out procedural wrangles,
can narrow facts and issues, and can often get the CCRA to the table to recognize
litigation risks when they actually get to see what a judge looks like. Some officials
have never talked to a judge, been in a court, or seen the litigation process really at
work. The officials can go and listen to the judge say, “I don’t think you have a
chance if you actually go to court.” This type of interaction does have an impact on
the resolution of the dispute. The same dynamic applies equally to taxpayers.
One frustration that counsel and clients do feel—and this is an open comment to
the judges in the room, and one that I bring on a constructive basis—is that clients
and counsel both find it frustrating if there is no sign from the judge at the prehearing
conference of any direction that the case should take. As a result, the CCRA position
may continue to be recalcitrant, obstinate, and unreasonable.
Sue, do you have any brief comments about that?
Susan Van Der Hout: I would echo your comments in this sense. I think that
usually you go to a prehearing conference because you want that case to settle—
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you see that there is the opportunity for settlement and you just can’t get there—or
you want to make clear to the other side that this is a case that should be settled
and that both sides need to refocus on what the issues are.
I think it is really important for the judge to be tough—although some of the
judges don’t believe that they should be hammering reality home, that “This is
weak,” “That’s unacceptable,” “This is not quite sharp enough,” “I’m not persuaded.” These are the things people really want to hear when they go into that
room, as painful as it may be, and even though their client may be sitting there. I
think that expressing those points of view and pushing the parties toward narrowing the issue or settling the matter is just critical, because the parties are wandering
in the wilderness sometimes, and they can’t see a solution because they’ve been
fighting so long. “How do we get to closure?” So, I think it’s very important for the
judge to look counsel and the clients in the eye and say, “I think enough is enough.”
The pretrial conference is a highly persuasive tool for getting cases done, and I
think that’s why people ask for a pretrial hearing.
Edwin G. Kroft: Remember that the pretrial hearing costs money for preparation
of the brief or memorandum. Clients complain about this cost, particularly if they
don’t see a speedy resolution to the litigation flow from the pretrial hearing.
Chief Justice, do you have any closing thoughts about the presentation of
arguments by counsel?
Chief Justice Garon: Just a few thoughts, Mr. Kroft. I think you will appreciate
that I don’t have too many at this point in time.
The preparation of the book of authorities—with some lawyers, you get a series
of books. If you were to look at all these cases, you would spend your time just on
one case. You could hear perhaps two or three cases in a year. So the practice I have
adopted is, if you don’t refer to a decision in your argument but that decision is in
your book, I will not look at it unless, from my own personal knowledge, I think
that case may be important. Otherwise, I will not look at it. So, two or three cases
on one point, it’s enough. And very often, one case is all that is required.
When, in argument, counsel summarize the facts that have been adduced in
evidence, I find it useful if they draw, from their point of view, the proper inferences
from those facts. Sometimes I see immediately a conflict between the position of
the two parties; other times, it’s strange, but there is practically no conflict. At least
in my case, I like to take the easy route, and if there is no conflict, well, that’s fine, I
must be on the right track.
Some lawyers advance too many propositions, alternative propositions. Well,
I’m not against that word “alternative,” but I am against the idea that if you advance
too many alternatives—and I have one case in mind, but I will not mention it—the
lawyer is not of too much assistance.
Also, a judge may ask irrelevant questions or non-important questions. A lawyer
must accept that and be prepared to answer them. I’ve had some experience, about
that, of lawyers not answering those questions.
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If you find a question difficult, very often there is a break when you can say very
easily to the judge, “It’s a very important question. I would like to think further,
during the lunch hour, and I will answer you this afternoon or the next day.” If you
ask the judge whether that is a satisfactory arrangement, I’m pretty sure that most
of my colleagues, if not all of them, would say, “Yes, sure, you can answer the
question later on.”
On technical points, when you have a very technical case—I was doing that
when I was a lawyer in the Department of Justice, and as a judge, I appreciate the
benefit of having a written memorandum on those technical points. So the court
would have, very often, a more careful analysis of that technical point. You will not
miss one of the elements.
I have already talked too much, Mr. Kroft.
Edwin G. Kroft: Thank you, Chief Justice. I will now ask Chief Justice Garon to
conclude and to introduce Justice Noël.
Chief Justice Garon: My concluding comments will be as short as my opening
statement earlier. I would like to say that most of my observations, if not all of them,
were known to most of you, if not to all of you. My only contribution today was
perhaps to remind you of what you knew all along, and to adopt Freudian language
of what was in your subconscious! Thank you very much.
And now, I have the pleasure of asking Justice Noël to speak to us about the art
of advocacy from the standpoint of an appellate court, as an appellate judge. If I
may add a personal note, I still recall the days when I was teaching him and his two
brothers, and they were sitting side by side. I’d like to make my usual joke that
despite my teaching, he was very successful.
Justice Marc Noël: Chief Justice, Associate Chief Justice, Honourable Justices of
the Tax Court of Canada, and friends of the court: first and foremost, thank you for
giving me the opportunity to speak to you on the court’s 20th anniversary. I am
especially pleased to be here because, like you, I feel like I am part of the large tax
family. All of my years of practising were devoted to this field of law. When I became
a judge of the Federal Court, there was still a good accumulation of appeals de novo
from your court. No one particularly appreciated those appeals, but I didn’t need
to be asked to hear them; they enabled me to stay in touch with this wonderful area
of the law. At the Court of Appeal, where I am now, close to one-third of our work
is devoted to taxation. Like you, we must absorb our almost daily dose of tax law.
Before turning to the subject matter of my presentation, I believe that congratulations are in order for the recent accession of the court to superior court status.
There are those who say that the change is purely formal and without any real
significance. They will quickly change their tune when the judges start using their
new-found powers to haul before them writers of tax articles who dare criticize
their judgments to show why they should not be held in contempt.
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More seriously, some may ask why a specialized tribunal should have superior court
status. They forget that the Tax Court has been a full-fledged court for 20 years
now, and as the court responsible in the first instance for the proper interpretation
and application of our tax laws, it is called upon to deal with the whole body of
Canadian law, including the civil and common law and the statute law. In addition
to dealing with perhaps the most difficult statute ever written, judges of the Tax
Court must be competent in all areas of the law. The grant of superior court status
merely provides the court with a status that is commensurate with its responsibilities and will no doubt enhance its image in the eyes of those who come before it.
I now get to the heart of the matter: the art of advocacy. One may ask oneself,
and very legitimately so, what a judge can bring to the art of advocacy. After all,
lawyers are the ones who practise this art. Judges, however, are the ones who are
lured by what is presented by the skilful litigants. As an eminent US jurist once said,
“Who would be interested in hearing a boring speech by a fisherman on the art of
fishing if the fish themselves could reveal why they take the bait?” Well, here is the
perspective of one of those fish, so to speak.
Effective advocacy in tax litigation is a far-ranging topic. My task today is to say
a few words about advocacy from the perspective of the Court of Appeal. That, of
course, is a much simpler topic. Once a case reaches the Court of Appeal, most of the
difficult work has been done. The issues have been identified, the findings of fact
have been made, and a judge has decided the issue and has even gone so far as to
provide reasons.
I pause here to make a point that is obvious but needs to be repeated. Cases,
when they reach the Court of Appeal, tend to take on a life of their own, so much
so that the judge who decided the issue in the first instance often has trouble
recognizing them. I vividly recall reading Court of Appeal judgments from my trial
decisions and realizing to my dismay that the issue that was central to the case I
had heard, and to which I had devoted all my efforts, had suddenly dissipated, and
some other side issue to which I had paid no attention had become the focus of the
three-judge panel. Typically, the Appeal decision would read something like, “Even
though the Trial Judge said little on this point, he was obviously in error.” I am
sure you know the feeling. You feel like saying, “This is not my case.” Unfortunately for us, good lawyers will make us look bad from time to time.
Advocacy in the Court of Appeal poses its particular challenges. For one thing,
written advocacy takes on a particular dimension. Legal writing is hard work, and
legal writing in tax matters is even harder.
The first thing—and this applies to the written material as well as the oral
presentation—is the need to identify the issue to be addressed up front.
My colleague Marshall Rothstein tells this story about when he went to Judges’
School (or “Dumb Judges’ School,” as he called it). Marshall has authorized me to
tell this story, and a good deal of what follows has been inspired by a paper that he
gave to The Advocates’ Society on the issue of advocacy.
Marshall was told, like the other judges, to submit a judgment he had written.
So he submitted a judgment of which he was particularly proud, dealing with the
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replacement property rules in subsection 44(1) of the Income Tax Act. The judgment had received three out of four stars in one of the tax circulars, so Marshall
figured that it must have been pretty good. The judgment was provided to another
judge, and the next day, the judge who had read Marshall’s judgment was asked to
comment on it. The judge said he had read it five times and he still did not know
what Marshall was talking about. “What had I done?” Marshall asked. This is how
he answered the question: “I wrote nine pages of facts, many of marginal significance. I then rambled into the issue, defining it in three or four different ways and
doing a good deal of talking around it. I then wrote five pages of reasons before
coming to a conclusion.” Well, we are all guilty of that. What the person reading
the judgment wanted to know was what the issue was. He didn’t want to wait until
page 14 to discover it, and then read the judgment over again to figure out the
reasoning in context.
The same applies to the drafting of a factum. You are immersed in the case. You
have done the research. You have read all the materials. You know the subtleties of
the case. But the judge knows nothing. He or she wants to know what the appeal is
about, quickly. What is important is the issue to be decided. So, before you begin
writing, you have to figure out that issue.
I often wonder whether our court rules do a disservice to counsel and to judges
by placing the issue section of the factum after the facts. I am sure many lawyers
view this as an invitation to write extensively on the facts before even thinking
about the issue. That is wrong.
Counsel would be well advised to start their factum with an overview statement.
It is always easier to understand the details if you have a grasp of the context.
Remember that even though the overview comes first, it cannot be written until
the entire factum is completed. The overview ought to be a consolidation of the
critical points.
In this connection, some say that point-first writing is the most important suggestion for good factum writing. I agree. Point-first writing means that you state your
proposition first and then develop it. You may think that the judge needs to understand how an argument develops, or that the judge will not appreciate the point
until he or she is familiar with the relevant facts, or that an anticipated conclusion
will make the ultimate conclusion repetitive. Forget those concerns. Put the conclusion up front.
No one, not even judges, reads every word. The experts say that we read by
instantaneous prediction and association. Let me give you this example. If I put a
random series of letters in front of you and then removed them and asked you to
remember them, you would likely remember only a few letters. But if I gave you
the sentence “If it isn’t broken, don’t fix it,” you would remember as if you saw
each and every letter. You didn’t. Rather, you went through a process of prediction
and association. Point-first writing provides prediction, which is then confirmed by
the details that follow. Point-first writing is especially important in complex appeals
where it is easy for a non-expert, the judge, to get lost. So you keep him in familiar
territory by telling him what to expect at the beginning and then developing it.
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One of the comments that I, as a judge, can share touches on the performance
of tax lawyers as litigants. As in my time, a good tax litigant is a rare find and highly
sought after. Some claim that tax lawyers are not particularly skilled in advocacy.
They are often confused with accountants, who are not particularly known for
their ability to express themselves or for being skilled in the art of persuasion. One
nasty commenter went so far as to say that a tax lawyer is someone who is good
with numbers but does not have the personality required to be an accountant.
After more than 10 years on the bench, I am in a position to say that, as in all
fields, there are tax lawyers who litigate well and those who litigate not so well.
Those who excel are experienced lawyers who, over the years, through numerous
defeats and some victories, have learned that the art of persuasion is an art in the
true sense of the word. There is no one formula; every case, every situation, every
issue requires a response that is dependent on a particular context. A good tax
litigant, however, knows one thing: the simpler his or her position, the easier it will
be for the judge to understand it and write a judgment that is in line with that
position. What a pleasure it is for a judge to see counsel starting off his or her plea
by simplifying things—either by eliminating false problems or by conceding secondary arguments—and by pinpointing the issue.
It is the experience and confidence acquired over the years that enable a seasoned lawyer to eliminate the deadwood and set himself or herself apart. For the
few minutes that the lawyer is given, he or she is the master, the conductor, the one
who dictates the train of thought—above all, the one who is able to lead the judge
in the direction he or she wants. That time is invaluable, and an experienced lawyer
knows how to use it to his or her advantage. Once the message is delivered, the tax
lawyer sits down. Nothing is more inefficient than a lawyer who repeats the same
thing five or six times, believing that by hammering the point home, his or her
message will become all the more convincing.
Let me now touch on the importance of being concise in preparing a wellwritten factum. As you know, the problem with practising tax law is that the general
rule never seems to apply to anything. Let’s face it, tax is complicated; hence, the
importance of making sure that the factum does not complicate things further.
Anyone can provide information. But the job of a lawyer is to persuade. Persuasion is affected by how you organize and present the information. Convoluted
writing and prolixity will detract from a strong argument. Judges don’t like to read
factums that are tedious and hard to understand.
Contrary to popular belief, less is more; that is, shorter is more valuable than
longer. My point is that you have to force yourself to be concise all the time. And
sometimes you can’t possibly win if you are not concise. Writing concisely doesn’t
mean writing superficially. Concise means brief but comprehensive. You can be
comprehensive at length—but the idea is to be comprehensive and brief.
The Federal Court Rules allow factums of up to 30 pages with 30 lines per page.
In my experience, I would say that the factums in tax matters tend to be closer to
the maximum. The 30-page limit isn’t a mandatory length. It is the maximum length.
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Judges never complain that a factum is too short. If you know the points you
want to make, you should be able to do it in fewer pages without fear of leaving
something out. Remember that the judge may be hearing eight or more appeals in
a week with at least two factums in each case, and more if there are intervenors.
The judge who is fortunate enough to be the recipient of a short, concise factum
will consider it an act of mercy. It will give him confidence that the writer has
thought carefully about what he has written, and that can only be positive.
Another useful tip is to know your audience. The convincing party’s approach
must be based on the audience that he or she is trying to reach. It cannot be assumed
that the audience of the Federal Court of Appeal is the same as that of the Tax Court
of Canada. Some judges at the Court of Appeal have an extensive tax background,
while others have little or no experience in the field. One must therefore keep this
in mind when preparing oral and written representations.
For example, if an appeal raises issues that go beyond the scope of the case, this
must be announced and dealt with at the outset. A judge who is not an expert in the
field will sense the fundamental issues and refuse to go where the appellant is
trying to lead him, unless he is familiar with all of the ins and outs of the argument.
When an interpretation issue is raised, parties must provide the court with all
possible clarification. I recently took part in an appeal in which the appellant raised a
fundamental question—the interpretation of section 69 of the Income Tax Act, which
deals with transactions between related persons—without saying a word about the
rationale of that provision or about the repercussions the desired decision would have
on tax policy. Failure to broach the broader issue of tax policy puts judges on the alert
and reduces the good collaboration that must exist between the litigant and the judges.
Let me close by providing two further pointers on the writing of factums—first,
on the presentation of the facts; and second, on the citation of authorities.
Some lawyers think that unless they put down every fact in the facts section of
the factum, they will not be able to use all of those facts in argument. Wrong! In the
facts section, set out only those facts that are essential to outline the circumstances.
And after you have written the entire factum, go back and eliminate the facts you
didn’t need for your argument.
Often the facts are not disputed. To the extent that you can, rely on the undisputed facts. Where you have to refer to those that are disputed, be upfront in
explaining to the court that they are disputed. Also, to the extent that you can, rely
on the trial judge’s findings of fact and use those findings to simplify the factual
background. Take out everything that is not essential to the argument. Remember
that your job is to persuade. Anyone can write down all the facts. Only a good
lawyer has the confidence to edit them and use them to persuade.
It is not necessary to load up a factum with repetitive quotations or citations
from different cases. If there is a leading case on point, it is usually sufficient to use
only the one reference. For instance, the decision of the Supreme Court in Shell
Canada should be enough support for the proposition that you take the words of
the Act as they are. You do not need 20 zillion cases to make the point.
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Speaking of citations, however, correct citations with pinpoints—page or paragraph references—are critical. Submitting a factum with incorrect citations and
without page or paragraph references is obviously counterproductive. You should
also try to cite from official reporters—the Supreme Court Reports, the Ontario
Reports, the Federal Court Reports. I know they go against the conventional
wisdom of the computer generation. But when we write judgments, we have to cite
from the official reports, and you will help us a lot if you do so as well.
Well, I have more to say, but I see that time is up and our chief administrator is
itching to speak to us. I hope that these few bits of advice will be of some use.
Thank you again for allowing me to partake in the celebrations marking the 20th
anniversary of the court. I thank you very much for your attention and, again,
bring the congratulations of all the members of the Court of Appeal to the members of the Tax Court on this 20th anniversary.
Raymond Guenette: Thank you, Honourable Justice Noël.
Our last speaker is Robert Emond, who will speak to us about “The New Administrative Regime.” Mr. Emond entered the public service in 1972 after earning
a BA in public administration from Carleton University. He has held positions at
the assistant deputy minister level with the Department of Finance, the Treasury
Board Secretariat, the Office of the Superintendent of Financial Institutions, and
Supply and Services Canada. He has also served as assistant deputy minister of
finance and corporate services with the Department of National Defence for eight
years. He has been chief administrator of the newly created Courts Administration
Service since July 2, 2003.
Robert Emond: Chief Justice Garon, Associate Chief Justice Bowman, Honourable Justices, Mr. Guenette, and distinguished guests: it is a pleasure for me to have
an opportunity to speak to you briefly on such a riveting topic as “The New Administrative Regime.” But first of all, allow me to congratulate the Tax Court of Canada
on its 20th anniversary. I had the opportunity to read some of the speeches that
were delivered in Toronto and in Montreal; it is very clear, Chief Justice, that the
Tax Court of Canada is held in high esteem.
On July 2, 2003, Bill C-30 established a new governance structure and at the
same time made the Tax Court of Canada a superior court of record. The change
in the governance structure is significant. The legislation sets out three objectives for
the Courts Administration Service: to facilitate cooperation among the four courts
we serve; to enhance and promote judicial independence (it is for that reason that the
chief administrator reports through the minister of justice to Parliament); and to
ensure that value for money is received in terms of the resources that are provided.
There is another fundamental objective, and that is to ensure that across the
country, individuals seeking access to the courts are provided with such access
wherever possible. Let me talk about access, because one of the objectives that we
are pursuing—be it in Fredericton, Quebec City, Winnipeg, Calgary, or Edmonton—involves giving those people who want to inquire about something or get
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information a chance to be able to do so from all four courts. And it is for that
reason that I am pleased to say that on November 17, 2003, Raymond Guenette
will become the deputy chief administrator for the Registries.
At the same time, we have been working to train former Federal Court of Canada
employees in the processes associated with Tax Court filings. I would expect that
by the middle of January 2004, in a number of locations we will be open for
business, and that by the beginning of the next fiscal year we will have enhanced
access across the country. I want to highlight the excellent work of the employees
of the Registry of the Tax Court of Canada, under the helm of Raymond Guenette.
I have had the privilege of inheriting an outstanding group of professionals, which
is making the task of moving ahead much easier.
I am also very conscious of the fact that we have an obligation to ensure the best
use of the resources that are provided. The genesis of some of the changes introduced by C-30 goes back to the auditor general’s report of 1997, wherein certain
criticisms were levied against the courts in terms of the use of resources. You may
recall commentary about the use of courtrooms, etc. It is our objective to ensure
that we maximize the use of our resources. I stress the word “maximize” because it
is not my objective to generate savings, nor do I have such a mandate. It is my
objective to improve and enhance the professional support.
I am also very pleased to announce progress on the proposed new federal
judicial building, here in the National Capital Region. Approvals were obtained
recently to allow that project to go ahead. In a sense, I believe it is a fundamental
part of the vision for the new service and an acknowledgment of the importance of
the four courts that we serve.
We will also be moving ahead with a project in Toronto, the federal judicial centre,
where again, recent authorities were agreed to, and hopefully by 2006, we will be
co-locating the former Federal Court of Canada and the Tax Court into one centre.
Finally, though, let me just say that we have embarked in the service on an interesting journey. The governance structure provided for under the bill is an innovative
structure. It is my understanding that we are being watched by provincial colleagues,
by individuals in the profession, and certainly by the justices whom we support, as
we move ahead to find a way to ensure an effective arm’s-length relationship with the
executive branch while at the same time ensuring accountability to Parliament. The
journey will not be without its challenges. It will not be without its successes and
perhaps, from time to time, some failures.
Thank you, Judges of the Tax Court of Canada, for all the support you have
given me. I thank the individuals who were part of the former Registry of the Tax
Court. I look forward, within the next couple of months, to getting information
out to you, the practitioners, on some of the advantages and opportunities that the
new service will be providing. Thank you very much for your attention.
Raymond Guenette: This wraps up the Symposium. I would like to thank all of
the panel members and all of those in attendance this morning. It is much appreciated. Thank you.

Tax Court of Canada 20th Anniversary Symposium

Transcription

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