Fiducie Alex Trust v. R. – FCA: Taxpayer cannot raise on appeal an admission contradicted by the evidence it led at trial

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Fiducie Alex Trust v. The Queen (May 12, 2014 – 2014 FCA 123, Noël JA, Mainville JA (Author), Scott JA).

Précis: The taxpayer was assessed in respect of funds alleged to be owing by it to Mr. Demirciyan, a GST tax debtor. The Tax Court Judge concluded that it had not met the onus of showing the debt had been repaid by it. On appeal the taxpayer pointed out, for the first time, that the Crown’s reply in the Tax Court had admitted this fact. The Court of Appeal held that the taxpayer could not raise that admission where it had called evidence that led that Tax Court Judge to the other conclusion. The appeal was dismissed with costs.

Decision: The Tax Court rejected the taxpayer’s evidence that a debt owing to the tax debtor had been repaid by it from funds advanced by a third party, Mr. Bafri:

[3] Fiducie Alex Trust purchased the family residence from Mr. Demirciyan and his spouse on January 14, 2008, for the amount of $250,000, paid through a downpayment of $34,013.65 and the balance by assuming the hypothec of $215,986.35. Fiducie Alex Trust did not pay the portion of the down payment owed to Mr. Demirciyan in the amount of $17,006.83, instead signing an acknowledgment of debt for this purpose. The tax authorities are now claiming this $17,006.83 from Fiducie Alex Trust in order to pay part of the tax debt owed by Mr. Demirciyan. Fiducie Alex Trust submits that this downpayment was paid in the following transactions.

[4] Through a private loan agreement dated June 26, 2008, a friend of Mr. Demirciyan, David Bafri, allegedly loaned Fiducie Alex Trust $18,000 in order to reimburse the downpayment. Mr. Demirciyan and Mr. Bafri testified that Mr. Bafri wrote a cheque in the amount of $18,000 payable to Mr. Demirciyan, which was cashed at a branch of the Bank of Montreal.

[5] Justice Favreau concluded from the evidence before him that it was just as likely or possible that Mr. Bafri left the bank with his own money as it was that the money was given to Mr. Demirciyan, and that in this case Fiducie Alex Trust had not rebutted the presumption that the Tax assessment regarding it was valid. It is this conclusion that Fiducie Alex Trust is challenging in this appeal.

On appeal, for the first time, the taxpayer pointed out that there was an admission of this allegation in the Crown’s Reply before the Tax Court:

[7] At the hearing of the appeal, counsel for the appellant raised for the first time the argument that the respondent acknowledged the repayment of the appellant’s entire debt to the tax debtor. The reply to notice of appeal from the assessment does indeed make such an allegation.

The Court of Appeal held that where the taxpayer had led evidence on the point which led the Tax Court to the opposite conclusion it could not rely on the admission on appeal:

[9] In any event, in tax matters, it is trite law that a taxpayer who is not satisfied with a judicial admission and who presents evidence on the admission in question before the Tax Court of Canada cannot subsequently rely on the admission if the evidence suggests the opposite. …

As a result the appeal was dismissed from the Bench, with costs.