Date: 20011011
Docket: 2000-3310-IT-G
BETWEEN:
PAULA GARDNER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor Order
BOWIE J.T.C.C.
[1] On September 13, 2001, I made an Order striking out subparagraph 7(i) of the Reply, with leave to the Respondent to amend paragraph 8, and ordering that the Respondent provide the particulars requested by the Appellant in subparagraph 2(1) and paragraph 3 of the Reply. That Order has now been appealed, and I have been requested to give Reasons for it.
[2] These appeals are brought from reassessments under the Income Tax Act (the Act) for the taxation years 1990, 1991, 1992, 1993, 1994, 1995 and 1996. The reassessments for the years 1990 to 1994 inclusive were made more than three years after the day of mailing of the original notices of assessment for those years, with the result that on the hearing of the appeals the Minister will be required to establish that there has been misrepresentation attributable to neglect, carelessness, wilful default or fraud.[1]
[3] Initially, the Appellant demanded particulars of paragraphs 5, 7(h) and 7(i) of the Reply. At the hearing of the motion counsel abandoned the demand for particulars of paragraph 5, presumably on the basis that they were not required for the purpose of pleading, and could be obtained on discovery. The motion was therefore concerned only with subparagraphs 7(h) and (i). They read:
A. STATEMENT OF FACTS
...
7. In so reassessing the Appellant, the Minister made, inter alia, the following assumptions:
...
h) the Appellant claimed rental losses belonging to her spouse on her own tax returns knowing that they should be claimed by her spouse, and
i) the Appellant made misrepresentations attributable to neglect, carelessness, and wilful default.
Paragraphs 2 and 3 of the Demand for Particulars read:
2. Regarding the allegation in subparagraph 7(h) of the Reply, i.e., that in reassessing the Appellant, the Minister assumed that the Appellant claimed rental losses belonging to her spouse on her own tax returns knowing that they should be claimed by her spouse:
(1) please state the facts, if any, on which the Minister based the assumption that the Appellant knew the rental losses should be claimed by her spouse;
(2) [abandoned on the hearing of the motion];
(3) [abandoned on the hearing of the motion].
3. Regarding the allegation in subparagraph 7(i) of the Reply, i.e., that in reassessing the Appellant, the Minister assumed that the Appellant made misrepresentations attributable to neglect, carelessness and wilful default:
(1) please provide particulars of each misrepresentation the Minister assumed the Appellant made in each of her returns of income for the 1990 to 1996 taxation years;
(2) for each such misrepresentation the Minister assumed the Appellant made, please state whether the Minister assumed the misrepresentation was attributable to neglect or to carelessness or to wilful default, and
(3) please provide particulars of the neglect or carelessness or wilful default to which the Minister assumed each such misrepresentation was attributable.
The relevant parts of the relief requested in the Notice of Motion read:
THE MOTION IS FOR an Order:
(a) compelling the Respondent to provide the Appellant with particulars the Appellant has demanded and the Respondent has refused to provide; [and]
...
(e) for such additional relief and directions as this Honourable Court may deem just and necessary to enable the Appellant's appeal to proceed and to secure the just determination of the real matters in dispute.
[4] Subparagraph 7 (i) of the Reply, although pleaded in Part A, which is entitled statement of facts, simply pleads a conclusion as to the threshold question of mixed fact and law which will be before the trial judge in respect of the statute barred years. It is pleaded in the most general terms, in the words of the statutory requirement to justify the reassessment outside the normal reassessment period. Rule 49(1)(d) requires the Deputy Attorney General of Canada to state "the findings or assumptions of fact made by the Minister when making the assessment". Paragraph 7(i) of the Reply does not fulfil this requirement; it states a matter in issue, and so properly belongs, with minor modification to its wording, in paragraph 8 of the Reply. That paragraph comprises part B, styled issues to be decided.
[5] The correct principle to be applied to the Respondent's pleading in an income tax appeal from a reassessment made after the normal reassessment period has expired is to be found in the following passage from the judgment of Cameron J. in M.N.R. v. Taylor:[2]
After giving the matter the most careful consideration, I have come to the conclusion that in every appeal, whether to the Tax Appeal Board or to this Court, regarding a re-assessment made after the statutory period of limitation has expired and which is based on fraud or misrepresentation, the burden of proof lies on the Minister to first establish to the satisfaction of the Court that the taxpayer (or person filing the return) has 'made any misrepresentation or committed any fraud in filing the return or in supplying any information under this Act' unless the taxpayer in the pleadings or in his Notice of Appeal (or, if he be a respondent in this Court, in his reply to the Notice of Appeal) or at the hearing of the appeal has admitted such misrepresentation or fraud. In reassessing after the lapse of the statutory period for so doing, the Minister must be taken to have alleged misrepresentation or fraud and, if so, he must prove it.
In Kerr on Fraud and Mistake, Seventh Ed., it is stated at p. 669:
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A man who alleges fraud must clearly and distinctly prove the fraud he alleges. |
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Again in Halsbury's Laws of England, Third Ed., vol. 26, at p. 838, it is stated:
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"1558. Since in every form of proceeding based on misrepresentation a misrepresentation of some kind must be established, it follows that the burden of alleging and proving that degree of falsity, which is required for the representation to be a misrepresentation, rests, in every case, on the party who sets it up." |
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[6] The requirement to plead the misrepresentation specifically is found stated this way in Odgers' Principles of Pleading and Practice, Twenty-second Ed., at page 100:
Each party must state his whole case. He must plead all facts on which he intends to rely, otherwise he cannot strictly give any evidence of them at the trial.
In this Court it has been put this way by Bowman J., as he then was, in Ver v. Canada:[3]
Finally, the Reply to the Notice of Appeal is inadequate in a case of this type. Bald assertions that the Minister "assumed" a misrepresentation are inappropriate where the Minister must prove a misrepresentation. The precise misrepresentation alleged to have been made must be set out with particularity in the reply and proved with specificity. Three essential components must be alleged in pleading misrepresentation:
(i) the representation;
(ii) the fact of its having been made; and
(iii) its falsity.
[7] The function of particulars was considered by the Federal Court of Appeal in Gulf Canada Limited v. The Tug Mary Mackin.[4] Heald J.A. with whom Mahoney J.A. concurred, said there:[5]
The principles governing an application of this kind were well stated by Sheppard J.A. in the case of Anglo-Canadian Timber Products Ltd. v. British Columbia Electric Company Limited, [(1960), 31 W.W.R. 604 (B.C.C.A.).] where he stated at pages 605 and 606:
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Hence it appears that an examination for discovery follows upon the issues having been previously defined by the pleadings and the purpose of such discovery is to prove or disprove the issues so defined, by a cross-examination on the facts relevant to such issues. |
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On the other hand the purpose of particulars is to require a party to clarify the issues he has tried to raise by his pleading, so that the opposite party may be able to prepare for trial, by examination for discovery and otherwise. The purpose of particulars was stated in Thorp v. Holdsworth (1876)3 Ch 637, 45 LJ Ch 406, by Jessel, M.R. at p. 639, as follows: |
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"The whole object of pleadings is to bring the parties to an issue, and the meaning of the rules of Order XIX, was to prevent the issue being enlarged, which would prevent either party from knowing when the cause came on for trial, what the real point to be discussed and decided was. In fact, the whole meaning of the system is to narrow the parties to definite issues, and thereby to diminish expense and delay, especially as regards the amount of testimony required on either side at the hearing." |
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That purpose of particulars was stated in Spedding v. Fitzpatrick (1888) 38 Ch 410, 58 LJ Ch 139, by Cotton, L.J. at p. 413, as follows: |
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"The object of particulars is to enable the party asking for them to know what case he has to meet at the trial, and so to save unnecessary expense, and avoid allowing parties to be taken by surprise." |
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Also the particulars operate as a pleading to the extent that "They tie the hands of the party, and he cannot without leave go into any matters not included" (Annual Practice, 1960, p. 460) and they may be amended only by leave of the court (Annual Practice, 1960, p. 461). |
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When pleadings are so vaguely drawn that the opposing party cannot tell what are the facts in issue or, in the words of Cotton, L.J. in Spedding v. Fitzpatrick, supra, "what case he has to meet," then in such circumstances the particulars serve to define the issue so that the opposite party may know what are the facts in issue. In such instances the party demanding particulars is in effect asking what is the issue which the draftsman intended to raise and it is quite apparent that for such a purpose an examination for discovery is no substitute in that it presupposes the issues have been properly defined. |
This case was cited with approval in a later decision of the British Columbia Court of Appeal in the case of Cansulex Limited v. Perry et al. [Judgment dated March 18, 1982, British Columbia Court of Appeal, file C785837, not reported.] In that case, Lambert J.A. referred to the Anglo-Canadian Timber decision as being one of the decisions which "... delineate the difference between what is properly the subject matter of a Demand for Particulars and what is more properly the subject-matter of a Demand for Discovery of material that should be obtained on an Examination for Discovery". (See, page 8 of the reasons of Lambert J.A.) Mr. Justice Lambert added:
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At the heart of the distinction between the two lies the question whether the material demanded is intended to, and does, delineate the issues between the parties, or whether it requests material relating to the way in which the issues will be proved. |
He then went on at pages 10 and 11 of his reasons to enumerate with approval the function of particulars as set out in the White Book dealing with the English Practice. The Supreme Court Practice, 1982, Vol. 1, page 318 details this function as follows:
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(1) |
to inform the other side of the nature of the case they have to meet as distinguished from the mode in which that case is to be proved .... |
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(2) |
to prevent the other side from being taken by surprise at the trial |
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(3) |
to enable the other side to know what evidence they ought to be prepared with and to prepare for trial .... |
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(4) |
to limit the generality of the pleadings .... |
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(5) |
to limit and decide the issues to be tried, and as to which discovery is required .... |
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(6) |
to tie the hands of the party so that he cannot without leave go into any matters not included .... |
Because Rule 408(1) [Federal Court Rules, C.R.C., c. 663] requiring "... a precise statement of the material facts on which the party pleading relies" and Rule 415 permitting applications for further and better particulars of allegations in a pleading are substantially similar to the corresponding sections in the English Rules, I think the above quoted six functions of particulars should apply equally to an application such as the present one under our Rules.
This judgment was subsequently applied in this Court by Judge Garon, as he then was, in Duquette et. al. v. The Queen.[6]
[8] Although the word "precise" does not appear in the text of this Court's Rule 49, there does need to be a precise statement of an alleged misrepresentation, as Judge Bowman made clear in Ver. In my view, the Federal Court jurisprudence dealing with the requirement for particularity applies equally to appeals in this Court, at least in those cases where the Minister has reassessed outside the normal reassessment period on the basis of an alleged misrepresentation. The Respondent therefore must give particulars of the alleged misrepresentation to enable the Appellant to decide whether to deliver an Answer, and to define the issues for discovery in a way that will permit the Appellant to know the case she has to meet in respect of misrepresentation, and to prevent the Respondent from using vague allegations of misrepresentation to justify a fishing expedition on discovery.
Signed at Ottawa, Canada, this 11th day of October, 2001.
"E.A. Bowie"
J.T.C.C.
COURT FILE NO.: 2000-3310(IT)G
STYLE OF CAUSE: Paula Gardner and Her Majesty the Queen
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: September 13, 2001
REASONS FOR ORDER BY: The Honourable Judge E.A. Bowie
DATE OF ORDER: September 13, 2001
APPEARANCES:
Counsel for the Appellant: Richard Fitzsimmons
Counsel for the Respondent: Andrea Jackett
COUNSEL OF RECORD:
For the Appellant:
Name: Richard Fitzsimmons
Firm: Fitzsimmons & Company
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada