Pleading Relevant Facts
Parties must plead relevant facts. The issue of relevant facts was addressed in the Tax Court of Canada (“TCC”) decision of Basal v. The King, 2022 TCC 154[Basal], which involved potential director liability for specific corporate tax debts. The appellant in Basal sought to strike certain pleadings, arguing they were either prejudicial, frivolous, vexatious, an abuse of court process, or lacked grounds for appeal. Many of the pleadings in question concerned third parties.
According to paragraph 36 of the Supreme Court of Canada decision in White v. The Queen, 2011 SCC 13, [2011], S.C.R. 433, “in order for evidence to satisfy the standard of relevance, it must have some tendency as a matter of logic and human experience to make the proposition for which it is advanced more likely than that proposition would be in the absence of that evidence.”
Generally, documents relating to third parties in a similar situation to the appellant do not automatically guarantee relevance (Oro Del Norte S.A. v. The Queen, 90 DTC 6373). A fact is considered relevant if it helps prove the accuracy of the tax assessment (Globtek Inc. v. The Queen, 2005 TCC 727). The reason a taxpayer was audited is typically not relevant. While third-party relationships can be relevant, any facts involving third parties must be carefully scrutinized (Status-One Investments Inc. v. The Queen, 2004 TCC 473). The third-party’s actions may be relevant, but the implications of that relationship must be clearly pleaded (Canada v. Status-One Investments Inc., 2005 FCA 119).
For instance, in Gould v. The Queen, 2005 TCC 556, the respondent referred to a “scheme” involving several taxpayers. The Tax Court ruled that if the CRA wanted to use this fact, it had to outline and prove the details of the alleged scheme. The Court also stated that pleadings should only be struck in the clearest cases, with the trial judge best positioned for determining the weight and relevance.
SpenceDrake Tax Law – Toronto Tax Lawyers
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