INCOME TAX |
Practice |
Canada v. Rutledge
A-796-00
2004 FCA 88, Létourneau and Décary JJ.A.
4/3/04
12 pp.
Appeal against decision of Tax Court of Canada whereby assumed inherent jurisdiction to set aside, on basis of erroneous advice, dismissal of appeal pursuant to filing of notice of discontinuance--Since that decision rendered, this Court ruled, in Canada (Attorney General) v. Scarola, [2003] 4 F.C. 645, that no such inherent jurisdiction exists in view of Tax Court of Canada Act, s. 16.2(2)--Whether ruling in Scarola, applies to facts of this case, involving secondary liability assessment pursuant to Income Tax Act (Act), s. 160, and if Scarola does apply, whether respondent can invoke remedial powers given to Tax Court Judge under Tax Court of Canada Rules (General Procedure) (Rules), s. 172--Tax Court Judge assumed he possessed inherent jurisdiction to reinstate appeal abandoned by error--Distinguished case involving direct assessment of taxpayer: Bogie v. Canada (1998), 98 DTC 6679 (F.C.A.)--Per Létourneau J.A. (Evans J.A. concurring): no valid reasons to distinguish Bogie--Findings in Scarola reviewed--Scarola dealing with identical issue as that raised by present appeal, thus applying to this case-- Whether remedial powers of s. 172 provided Tax Court Judge with statutory authority to set aside judgment of dismissal-- Under s. 172(2)(a), judgment of dismissal can be set aside if obtained by fraud or on basis of facts that arose or were discovered after judgment rendered--Respondent alleged her own mistake with respect to her husband's tax liability as fact which led to dismissal of appeal--Obviously not fact arising after judgment--Not fact that could not have been discovered sooner with reasonable or due diligence--Question not, as Tax Court judge put it, whether taxpayer acted with due diligence in ascertaining state of affairs regarding husband's tax liability, but whether, with due diligence, could have ascertained state of own affairs with respect to tax liability-- Pleadings completed and matter scheduled for hearing when respondent instructed her counsel to file notice of discontinuance--Respondent negligent in not verifying other party's position--Appeal allowed--Per Décary J.A. (concurring)--Whether Tax Court Judge acting on basis of inherent jurisdiction or on basis of statutory jurisdiction is of little consequence if, in exercising discretion, he applied principles applicable to motions made under s. 172--Tax Court Judge not erring in distinguishing Bogie--Discretion should be exercised more liberally in favour of taxpayer when issue assessment for secondary liability under Act, s. 160-- Where "secondary" taxpayer discontinues appeal with respect to own liability on basis of information received from "primary" taxpayer, eventual discovery such information erroneous may, in some circumstances, be sufficient to permit re-opening of file under s. 172(2)--As long as primary liability remains at issue and is alive in Court system, finality of decisions and efficiency of administration of justice (two fundamental concerns identified in Scarola) much less at risk --But Tax Court Judge erred in stating concept of spousal trust negating need for exercise of due diligence--Exercise of due diligence main factor coming into play when party alleges facts arising or discovered after judgment rendered--Cannot be disregarded on basis of relationship between taxpayers-- Due diligence requiring more than relying on spouse's statements or mere belief matter settled--Tax Court of Canada Act, R.S.C., 1985, c. T-2, s. 16.2(2) (as enacted by R.S.C., 1985 (4th Supp.), c. 51, s. 5)--Tax Court of Canada Rules (General Procedure), SOR/90-688, s. 172 (as am. by SOR/96-503, s. 4)--Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, s. 160.