Federal Appeal


Income tax

Administration and enforcement

Combination of errors led Tax Court judge to strike affidavit absent justification?

C Co made settlement offer which included schedule of C Co’s losses. Counsel communicated over period of approximately eight months in course of which various matters were finalized. They concluded minutes of settlement which incorporated schedule. In January 2015, counsel advised Tax Court of Canada that they had reached settlement and were awaiting issuance of notices of reassessment to implement settlement agreement. Shortly thereafter, counsel for Minister of National Revenue advised that Minister was having difficulty implementing minutes of settlement and in February 2015, Minister’s counsel advised that Minister determined that there were no non-capital losses available to C Co and that Minister could not issue reassessment that was contrary to provisions of Income Tax Act. Following case management proceedings in Tax Court of Canada, counsel for C Co filed notice of motion and supporting affidavit seeking to have settlement enforced. Deponent was lawyer in C Co’s counsel’s firm and affidavit set out events leading up to filing of motion by reference to series of documents which were made exhibits to the affidavit, together with references to small number of contacts between counsel. Counsel for Minister cross-examined lawyer on her affidavit and lawyer and counsel for C Co took position that lawyer was not at liberty to disclose any information on basis of privilege. Lawyer would not confirm or deny existence of losses claimed in schedule or whether or not she was counsel for C Co. Minister moved successfully to have affidavit struck. C Co appealed. Appeal allowed. Tax Court judge erred in principle in concluding prematurely that contents of affidavit were tendered in proof of their contents. This error led to further errors as to scope of cross-examination of lawyer on her affidavit and appropriateness of her affirming her affidavit. Combination of errors led Tax Court judge to strike affidavit absent justification, which was palpable and overriding error.

?CBS Canada Holdings Co. v. R. (2017), 2017 CarswellNat 1315, 2017 FCA 65, J.D. Denis Pelletier J.A., Donald J. Rennie J.A., and J. Woods J.A. (F.C.A.); reversed (2016), 2016 CarswellNat 1104, 2016 TCC 85, K. Lyons J. (T.C.C. [General Procedure]).

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