Here is an interesting distinction between treatment of dissolved corporations under the CBCA and under the Ontario Business Corporations Act:
[15] … Pursuant to subsection 226(2) of the Canada Business Corporations Act (“CBCA”), the Minister had only two years to issue the assessment after the corporation dissolved.2
That’s a remarkable point to know about related to dissolutions of corporations. Here is the actual CBCA wording:
Continuation of actions
226. (2) Notwithstanding the dissolution of a body corporate under this Act,
(a) a civil, criminal or administrative action or proceeding commenced by or against the body corporate before its dissolution may be continued as if the body corporate had not been dissolved;
(b) a civil, criminal or administrative action or proceeding may be brought against the body corporate within two years after its dissolution as if the body corporate had not been dissolved; and
(c) any property that would have been available to satisfy any judgment or order if the body corporate had not been dissolved remains available for such purpose.
We had commentary on the corporation’s ability to continue or start an appeal not long ago in 1455257 Ontario Inc. v. Canada, 2016 FCA 100. But it did not deal with that two-year time limit federally, of course.
Here is the Ontario rule, which lacks the two-year time limit:
Proceedings after dissolution
242 (1) Despite the dissolution of a corporation under this Act,
(a) a civil, criminal, administrative, investigative or other action or proceeding commenced by or against the corporation before its dissolution may be continued as if it had not been dissolved;
(b) a civil, criminal, administrative, investigative or other action or proceeding may be brought against the corporation as if it had not been dissolved;
(c) property that would have been available to satisfy a judgment, order or decision if the corporation had not been dissolved remains available for that purpose, subject to subsections (1.1) and (1.2); and
(d) land belonging to the corporation immediately before the dissolution remains available to be sold in power of sale proceedings, subject to subsection (1.1). 2015, c. 38, Sched. 7, s. 44 (11).
That seems a noteworthy distinction.
Justice MacPhee continued:
[36] The burden is on the taxpayer to raise in the pleadings any dispute in law or fact. The Appellant must challenge the facts and assumptions pled by the Respondent in their respective pleadings. Failing to dispute facts via the pleadings leads to the Court accepting undisputed statements of fact to be true.6
For authority, he cites the SCC 1948 Johnston decision, which is the origin of the principle that taxpayers must disprove the Minister’s assumptions of fact. But the way the judge has posed it makes it seem a dangerous statement to leave hanging.
First, it should be obvious that an appellant cannot challenge facts and assumptions pled by the respondent at the time the appellant files his notice of appeal, given that the reply, which states the Minister’s assumptions and facts, is filed after the notice of appeal.
Further, the Judge’s remark disregards GPR r. 50(2):
(2) An appellant shall be deemed to deny the allegations of fact made in the reply if an answer is not delivered.
So, while it’s true that the pleading rules require the Appellant to state the material facts he relies on, they don’t say or give a good basis for saying that failing to dispute facts leads the court to accept undisputed statements as true. At least, it’s a rebuttable acceptance and can be overcome by evidence at the hearing, even if specific facts proved are not pled by the Appellant.
One could conclude that the judge was a little inelegant in his statements and that one need not interpret him to be suggesting that you can’t lead evidence supporting a fact you have not plead. But, if so, his point is disconcertingly clouded by what he writes further:
[37] At trial, the Appellant bears the onus of demolishing the Minister’s assumption of facts on a balance of probabilities.7 If the Appellant fails to demolish the assumptions, the Minister’s assumptions stand. However, it is not open to a trial judge to make a finding on a point not raised in the pleadings and where no evidence had been particularly directed to it.8
You get more clarity on what the judge was preoccupied about just a little further on. The assessment was for $138,500. The judge looked at the evidence and could only find support for transfers totaling $104,174. But he concludes it’s not open to him to find something different from what the parties seem to have admitted:
[44] In the case before me, neither party challenged the total transfer amount of $138,550 in their respective pleadings, nor did any party dispute this amount at trial. …
We have authority that makes it very clear that a judge is not bound by facts pled by the parties or even their agreement on the facts. If the judge finds something different, then he should make his decision on that basis. It’s also a little unclear whether Justice MacPhee misdirected himself by ignoring the impact of r. 50(2) and the fact that the notice of appeal can’t challenge assumptions in a reply not yet made. Further, the fact that the Appellant amended its notice of appeal doesn’t change the rule on the failure to file an answer and the deemed denial of the facts in the reply.
While some previous TCC decisions might have agreed with the idea that judges are bound by factual admissions of the parties, Sommerfeldt J. took a different tack which seems sensible and which has FCA authority in its favour:
[80] Given that this Court has a statutory mandate to confirm or vary an assessment, based on the facts, whether proven or admitted, this Court is not required to follow the principle applied in civil proceedings to the effect that an admission is binding on the party which gave it. Thus, while this Court will not generally look behind a formal admission by a party, this Court is not bound by an admission that is shown, through properly tendered evidence, to be contrary to the facts. [121] In other words, a judge of this Court should not turn a blind eye on evidence placed before him or her. [122] Accordingly, where an admission is contradicted by the evidence, the admission should be regarded as having been made in error. [123]
Leonard v. The Queen, 2021 TCC 33 (CanLII), at para 80, <https://canlii.ca/t/jfr8c#par80>, retrieved on 2023-02-16
FN 121 cites the decision of Hogan in Paletta:
[102] A judicial admission (also known as a formal or express admission) is a concession by a party that a certain fact or issue is not in dispute. [42] In civil cases, a judicial admission is normally conclusive and binds the Court, even if contradicted by the evidence. However, it is not necessarily the same in tax cases….
[105] Even if I am wrong and the Respondent has admitted that the Option Agreements were valid and not shams, I do not think that the Court is bound by this admission in the circumstances. In Hammill v. The Queen [45] the Federal Court of Appeal held that the Tax Court is not bound by an admission which is shown to be contrary to the facts where the party benefitting from the admission has adduced evidence going beyond the admission. [46] This decision was followed in Fiducie Alex Trust v. The Queen [47] as well as in Doiron v. The Queen. [48]
[106] The Federal Court of Appeal held that due to the public nature of a tax appeal, the normal rule applicable to admissions in the civil context does not apply where a party itself places evidence in the record over and above what was agreed to:
[29] Specifically, the appellant argues that the Tax Court Judge was bound by the facts as admitted, even if contrary evidence was adduced at trial. Sopinka, The Law of Evidence in Canada, 2nd ed, Butterworths, 2004 at page 1051; Urquhart v. Butterfield (1887), 37 Ch. D. 357, at 369 and 374; Copp v. Clancy (1957), 1957 CanLII 348 (NB CA), 16 D.L.R. (2d) 415, at 425, are relied upon in this regard.
[30] In my view, these authorities which derive from private party civil proceedings are of no assistance to the appellant in the context of this appeal. While the admission reflected in the Agreed Statement of Facts was favourable to the appellant, he was not satisfied to have his appeal disposed of on that basis. The appellant chose to place extensive evidence before the Court, over and beyond what had been agreed to, about the nature and extent of the scam.
[31] In an appeal against an assessment under the Act, the outcome does not belong to the parties. Public funds are involved and the Tax Court is given, in the first instance, the statutory mandate to confirm or vary the assessment based on the facts, proven or admitted. In this respect, while the Court will not generally look behind a formal admission, the parties cannot by agreement dictate the outcome of a tax appeal. The Tax Court is not bound by an admission which is shown, through properly tendered evidence, to be contrary to the facts.
[32] In this case, the relevant evidence was tendered by the appellant himself, and the Tax Court Judge concluded from this evidence that he had been the subject of a fraud from beginning to end, a conclusion which precludes the existence of a business. In my view, the Tax Court Judge could not pronounce on the validity of the reassessments while turning a blind eye on the evidence placed before him.
[33] Moreover, there is no basis for the appellant’s contention (made during the hearing of the appeal) that this finding was not open to the Tax Court Judge because the statutory period for reassessing had expired when it was made (Pedwell v. The Queen, 2000 CanLII 17141 (FCA), 2000 D.T.C. 6405 (F.C.A.)). The decision of the Tax Court Judge on this point confirms the reassessments on the primary basis on which they were issued (paragraph 18(1)(a)) and results in no taxes being payable beyond those originally assessed (compare Anchor Pointe Energy Ltd. v. The Queen, 2003 D.T.C. 5512 (F.C.A.) at paragraphs 39 and 40). [49]
Paletta v. The Queen, 2019 TCC 205 (CanLII), at para 102, <https://canlii.ca/t/j2qh3#par102>, retrieved on 2023-02-16
In the present case, Watts, the judge says that he took his calculations from the Crown’s evidence. The Crown was the beneficiary of the presumed admission but based on the extract from Hammill, it wouldn’t matter if the evidence came from the Appellant himself. (The highlighting in paragraph 31 was by Hogan in Paletta.)
It may be that there is a policy reason supporting prohibiting a party who has made a prohibition from leading evidence to disprove his admission, because the beneficiary of the admission would rightly have concluded he had no need to prepare evidence to prove the admitted fact. So that may be the basis for the courts’ emphasis on requiring that the evidence be produced by the beneficiary of the admission. But that was what occurred here; so that concern was not a bar for Justice MacPhee.
Possibly MacPhee J. might still be supported because he adds:
As to whether my calculation is correct, or missing further necessary analysis, I do not know.
But if the only evidence he had on amounts transferred came from the Respondent and it contradicted the assumptions, it seems MacPhee J. should have come to the conclusion that the correct assessment was $104,000.
One minor point to note about this judgement is the choice of wording, which is a little unusual:
Judgment: In accordance with the attached Reasons for Judgment, the appeal is denied. Costs are payable by the Appellant.
Not much should turn on that choice of wording but, strictly, the choices open to a judge or these:
- (1) Disposal of appeal — The Tax Court of Canada may dispose of an appeal by
(a) dismissing it; or
(b) allowing it and
(i) vacating the assessment,
(ii) varying the assessment, or
(iii) referring the assessment back to the Minister for reconsideration and reassessment.
So, commonly judgements will say that the appeal is dismissed not denied.