http://decisions.fca-caf.gc.ca/fca-caf/decisions/fr/item/127856/index.do
Bemco Confectionary and Sales Ltd. v. Canada (January 25, 2016 – 2016 FCA 21, Trudel, Stratas (author), Ryer JJ. A.).
Précis: This is an appeal from an interlocutory decision of the Tax Court blogged earlier on this site. The appeals in question involve roughly $30 million in GST on tobacco sales. In the Tax Court the taxpayer moved to strike large portions of the Crown’s assumptions contained in its Replies. The same motion was taken in each of 5 GST appeals. All of the appeals involved a single issue: Did the appellant sell tobacco products to Status Indians on Reserves or did it misrepresent the identity of its customers? The taxpayer sought to strike paragraphs of the Crown’s assumptions for various reasons:
1. Some were alleged to contain either irrelevant or highly prejudicial allegations of “similar facts”;
2. Some were alleged to contain statements of law or mixed fact and law; and
3. Some were alleged to be insufficiently specific or complete and based on knowledge of the Minister which was not shared with the appellant.
The Court ruled in one of the appeals, dismissing the motions in the others on the basis that it would grant “the Respondent leave to file Amended Replies in the four remaining appeals and granting the Appellant leave to file Answers to those Amended Replies”. On the remaining motion the Court struck two paragraphs on the basis that they contained statements of law and the word “false” in a third paragraph on the basis that it was tantamount to an allegation of “sham” which would be a statement of law. Since the results were somewhat mixed no costs were awarded.
The taxpayer appealed to the Federal Court of Appeal. The Court of Appeal found no legal error in the decision under appeal and dismissed the appeal. As no costs were awarded in the Tax Court the Court of Appeal also make no award of costs.
Decision: The decision of the Federal Court of Appeal, which was delivered from the bench, was simply that the taxpayer had not demonstrated any reversible error in the decision under appeal:
[5] Bemco submits that a number of facts alleged in the Reply are inadmissible evidence of prior discreditable conduct, improperly suggesting that Bemco has a propensity to breach the Tobacco Tax Act, R.S.O. 1990, c. T.10. The Tax Court characterized the impugned portions of the Reply differently (at paragraphs 25-27). It found that the impugned portions of the Reply merely describe times, places and circumstances concerning the transactions in issue and do not suggest that Bemco engaged in discreditable conduct unrelated to its obligations under the Excise Tax Act, R.S.C., 1985, c. E-15. In the words of the Tax Court (at paragraphs 26-27), the Reply “sets out the position of the Respondent that the commercial structures in place between [Bemco] and the Indian purchasers were a sham,” a position that “precludes any suggestion of propensity-based reasoning” contrary to R. v. Handy, 2002 SCC 56, [2002] 2 S.C.R. 980.
[6] Given the standard of review, we see no grounds to interfere with this finding. There was no error of law or legal principles and the Tax Court’s characterization of the impugned portions of the Reply is supportable given the standard of review we must apply. If the respondent later uses these portions of the Reply as part of an improper propensity argument, the Tax Court can intervene and prevent any prejudice or reject the argument outright.
[7] In the Tax Court, as part of its motion to strike, Bemco also complained that there was insufficient particularity concerning the names and locations of the alleged true purchasers of the products in question. The Tax Court, with the correct legal test in mind, concluded (at paragraphs 47-49) that particulars were unnecessary because the pleadings gave Bemco enough information to know the case it has to meet, the Minister might bear the burden of proof and, if necessary, particulars could be sought through a demand for particulars. Here again, we see no error of law or error in legal principle and we are not persuaded that there are any other grounds to interfere with this finding given the standard of review we must apply.
As no costs were awarded in the Tax Court, no costs were awarded in the Federal Court of Appeal.