Digests

James v. Canada

A-678-96

Stone, Isaac and Sharlow JJ.A.

21/12/00

24 pp.

Appeal from trial judgment income tax reassessments for 1974, 1975, 1976, 1977--Appellant self-employed lawyer, partner in law firm; also officer, director of Pedigree Holdings Ltd. which had two issued common shares, one of which registered in appellant's name but held in trust for minor nephew of appellant's common law spouse (Ms. Kirsten)--Crown alleging appellant worked for client of law firm outside law partnership for which appellant, not law firm, entitled to be paid, and that at appellant's direction client paid some of those amounts to Ms. Kirsten and Pedigree Holdings Ltd.--Also alleging Ms. Kirsten not performing any services such that could say earned sums--Trial Judge holding appellant taxable on certain amounts paid by client; penalties justified; dismissing motion to vacate reassessments on basis Minister not acting with all due dispatch in considering notices of objection--Notices of objection filed in 1979, but owing to intervening criminal investigation, charges, trial, Crown not confirming reassessments until 1989--(1) Trial Judge correct to dismiss motion to set aside reassessments--Income Tax Act, s. 165(3)(a) requiring Minister to reconsider assessment with all due dispatch upon receipt of notice of objection--Act not stipulating consequence of failure to do so--Bolton v. Canada (1996), 200 N.R. 303 (F.C.A.) holding Parliament not intending Minister's failure to reconsider assessment with all due dispatch should have effect of vacating assessment; if Minister not acting, taxpayer's recourse to appeal pursuant to s. 169--S. 169(b) permitting taxpayer to appeal to Tax Review Board to have assessment vacated, varied 180 days after notice of objection served and Minister not notifying taxpayer assessment vacated, confirmed or reassessed--Appellant arguing Bolton cannot stand because contradicting cases suggesting remedy for Minister's failure to deal with notice of objection with all due dispatch to vacate reassessment--Bolton decided after those cases, and deals squarely with issue of remedy--Nothing in those cases providing reason for departure from principle in Bolton--(2) At trial Crown tendering copies of bank documents accompanied by affidavits sworn in 1984 (12 years before trial), prepared with view to having documents tendered under Canada Evidence Act, s. 29 at trial of criminal charges--No evidence any of documents admitted unreliable, or not correctly reflecting transactions to which refer--Nothing in s. 29 imposing requirement as to when affidavit must be sworn--Lapse of time between swearing of affidavit, trial may cause concern as to reliability of documents to which affidavit refers, but open to Trial Judge to put little or no weight on such documents--While lapse of time herein unusually long, not by itself rendering affidavits inadmissible--Copies of documents not inadmissible merely because originals no longer exist--S. 29 permitting copies of banking documents to be proved without requiring viva voce evidence of bank officer, and without requiring original documents to be adduced--This exception to ordinary rules of evidence justified by necessity and circumstantial guarantee of trustworthiness--S. 29(2) requirement documents be in bank's custody and control, speaking to time when affidavit made, not date of trial--No deponent can say in affidavit, before trial commencing, that documents will be in custody, control of bank when trial commences--(3) Reassessments based on application of s. 56(2)--Conditions for application of s. 56(2): (i) payment must be to person other than reassessed taxpayer; (ii) allocation must be at direction or with concurrence of reassessed taxpayer; (iii) payment must be for benefit of reassessed taxpayer or for benefit of another person whom reassessed taxpayer wishing to benefit; (iv) payment would have been included in reassessed taxpayer's income had it been received by him--Taxpayer submitting fifth condition is evidence actual recipient of amounts (Ms. Kirsten) would not be subject to tax on those amounts--Relying on obiter dicta in Winter v. Canada, [1991] 1 F.C. 585 (C.A.) stating validity of assessment under s. 56(2) subject to implied condition payee not be subject to tax on benefit received--Simply recognizing s. 56(2) cannot apply to amount taxable as income in hands of person actually receiving it because in that case fourth condition cannot be met--Implicit in fourth condition payment must be amount that only taxpayer entitled to receive as income--Payments to Ms. Kirsten could not be remuneration for her services and at same time be remuneration for appellant's services--Trial Judge finding as fact Ms. Kirsten not earning amounts, not her income--Ms. Kirsten not obliged to pay tax on any amount not income in her hands--That amounts reported in Ms. Kirsten's tax returns not detracting from conclusion s. 56(2) must be applied if amounts income of appellant alone--(4) Appellant alleged Trial Judge's interventions in questioning of witnesses giving rise to reasonable apprehension of bias--Judge may ask witness questions of clarification, amplification, but should not intervene in questioning of witness to such extent as to give impression of taking on role of counsel--Judge who does so diminishes appearance of impartiality, may interfere with effective presentation of case by counsel--Allegation of undue intervention in questioning of witness must be assessed in context of proceedings as whole--Objective to determine whether intervention would cause reasonable, well-informed observer to apprehend mind of trial judge closed to fair, impartial consideration of case--Review of transcript disclosing numerous instances where questioning of witnesses by Trial Judge appeared to take on character of cross-examination--Judge challenged witnesses to explain apparent inconsistencies, debated with witnesses as to meaning of documents or prior statements, led questioning of witnesses along avenues not introduced by counsel--On those occasions acted in manner that could reasonably lead objective observer to conclude had taken on role of counsel for Crown--Some of interventions overstepping boundaries of proper judicial intervention related to legal character of payments to Ms. Kirsten, principal issue in appeal--Appeal allowed, matter remitted for new trial--Income Tax Act, S.C. 1970-71-72, c. 63, ss. 56(2), 165(3)(a), 169(b)--Canada Evidence Act, R.S.C., 1985, c. C-5, s. 29 (as am. by S.C. 1994, c. 44, s. 90).