Date: 20051028
Dockets: A-285-04
A-276-04
Citation: 2005 FCA 355
CORAM: DÉCARY J.A.
BETWEEN:
JOHN BRESLAW
Appellant
and
THE ATTORNEY GENERAL OF CANADA
Respondent
Heard at Montréal, Quebec, on October 6, 2005.
Judgment delivered at Ottawa, Ontario, on October 28, 2005.
REASONS FOR JUDGMENT BY: PELLETIER J.A.
CONCURRED IN BY: DÉCARY J.A.
LÉTOURNEAU J.A.
Date: 20051028
Dockets: A-285-04
A-276-04
Citation: 2005 FCA 355
CORAM: DÉCARY J.A.
BETWEEN:
JOHN BRESLAW
Appellant
and
THE ATTORNEY GENERAL OF CANADA
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
[1] Mr. Breslaw appeals from two decisions of the Tax Court of Canada. Appeal No. A-276-04 (the Assessment appeal) is an appeal from a decision of Mr. Justice McArthur reported at 2004 TCC 299, [2004] 3 C.T.C. 2440, dismissing Mr. Breslaw's appeal from the Minister's assessment of his income tax liability for the 1997 and 1998 taxation years. Appeal No. A-285-04 (the Jurisdiction appeal) is an appeal from an unreported decision of Mr. Justice Archambault dismissing Mr. Breslaw's motion to have his notice of assessment vacated because the decision in the Assessment appeal was not rendered within the 90-day period provided in subsection 18.22(1) of the Tax Court of Canada Act, R.S.C. 1985, c. T-2. These two appeals were heard together.
[2] Prior to the hearing of the appeals, Mr. Breslaw filed a notice of motion in the Jurisdiction appeal in which he sought an order removing Archambault J.'s written reasons from the file because they did not accord with the reasons given orally at the conclusion of the hearing.
[3] These reasons will dispose of the motion and of both appeals. A copy of them will be placed in each of files A-276-04 and A-285-04.
THE FACTS
[4] The principal ground of appeal in the Assessment appeal is that the Tax Court judge erred in allowing the Minister to amend his reply to the notice of appeal to allege misrepresentation in the preparation of Mr. Breslaw's income tax return for the 1998 taxation year. The normal reassessment period for a taxpayer is three years from the date of mailing of the original notice of assessment (para. 152(3.1)(b) of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) as amended. The Minister cannot reassess outside this period unless he can show, among other things, fraud or misrepresentation in the preparation of the taxpayer's return (subpara. 152(4)(a)(i)of the Income Tax Act). In Mr. Breslaw's case, the original notice of assessment for the appellant's
1998 taxation year was mailed in June 1999. On November 15, 2002, the Minister mailed a notice of reassessment with respect to Mr. Breslaw's liability for income tax for the 1998 income tax year which added to his income the taxable portion of the capital gain realized when he disposed of flow through shares in Millstream Mines Inc. Even though Mr. Breslaw claimed the deductions arising from the flow-through shares in his return for prior years, his wife, rather than he, included the taxable capital gain from their disposition in her income in the 1998 taxation year.
[5] The notice of reassessment indicated that it was made pursuant to subparagraph 152(4)(i) of the Income Tax Act while the letter accompanying the notice of reassessment referred to subsection 152(4) of the Income Tax Act. However, in his reply to the notice of appeal, the Minister did not refer to subsection 152(4) of the Income Tax Act nor to any misrepresentation in Mr. Breslaw's return.
[6] Mr. Breslaw and the Minister's representative met on a number of occasions in an attempt to resolve the outstanding differences, an effort which was largely successful. On the eve of the hearing of the appeal, in December 2003, the parties met one last time prior to proceeding to trial. At that time, Mr. Breslaw pointed out to the Minister's representative that the November 2002 reassessment was out of time in so far as the issue of capital gains was concerned. This issue was not resolved at the meeting. At the opening of the appeal, the Minister's representative applied to amend the reply to the notice of appeal to include references to subparagraph
152(4)(a)(i) and misrepresentation in the preparation of Mr. Breslaw's return. The latter opposed the proposed amendment on the ground that it was based on information provided in confidence in the course of settlement negotiations.
[7] The Tax Court judge rejected Mr. Breslaw's arguments and allowed the amendment on the ground that the notice of reassessment itself gave notice of the Minister's reliance upon subsection 152(4) and that it was implicit in the facts assumed by the Minister that the latter was relying upon misrepresentation to reassess outside the normal reassessment period.
[8] The Tax Court judge then considered the question of misrepresentation on the merits and found that the history of dealings in the flow-through shares led to the conclusion that Mr. Breslaw had misrepresented his income by wilful default. As a result, he confirmed the Minister's reassessment and attributed the taxable capital gain to Mr. Breslaw.
[9] In addition, the Minister reassessed Mr. Breslaw in relation to a series of expenses which he claimed in relation to renovations to his home, from which he conducted his business. The greater part of the costs in issue had been settled in discussions between the parties. The ones before the Court were those which the Minister rejected as not being related in any way to earning income. Mr. Breslaw took the view that he should be able to deduct a portion of all costs associated with the house because, directly or indirectly, they were related to his business use of the premises. The Tax Court judge rejected Mr. Breslaw's position and ruled that the expenses remaining in issue were not incurred for the purpose of earning income and therefore they were not deductible in whole or in part.
[10] Along the same lines, Mr. Breslaw claimed capital cost allowance in respect of a painting which was hanging in what was described as a reception area. Mr. Breslaw's position was that the painting was used to convey an impression of the success of the business to clients who attended at his home office. The Tax Court judge found that the evidence showed that while Mr. Breslaw's colleagues attended at his home, his clients did not. From this he concluded that the painting was not purchased for the purpose of earning income and disallowed the deduction of capital cost allowance.
[11] The following facts are relevant to the Jurisdiction appeal. The trial of Mr. Breslaw's appeal took place on December 11, 2003. That day, the Tax Court judge ordered the transcript of the argument before him. That transcript was received on January 5, 2004. Subsequently, on January 22, 2004, the Tax Court judge ordered the transcript of the evidence at trial, which was delivered to him on January 31, 2004. Subsection 18.22(1) of the Tax Court of Canada Act provides that, for a matter heard under the informal procedure, barring exceptional circumstances, the judge hearing the matter must render a decision within 90 days of the close of the trial. The Christmas holidays are not included in the computation of the 90-day limit. Mr. Breslaw carefully monitored the passage of time and when he was satisfied that the 90-day limit had passed without the issuance of the Tax Court judge's reasons, he brought a motion for an order that his reassessment be vacated because the Court had lost jurisdiction over his appeal. The motion was filed April 12, 2004, and was heard May 10, 2004.
[12] Meanwhile on April 27, 2004, McArthur J. rendered his decision. The motion was heard by Mr. Justice Archambault before whom Mr. Breslaw argued that the Tax Court's decision on the merits of his appeal should be quashed as having been made without jurisdiction and that his reassessment should be vacated. Archambault J. held that since judgment had now been rendered, he was without jurisdiction to do anything, as appeals from the Tax Court of Canada fall within the jurisdiction of the Federal Court of Appeal. As a result, in oral reasons rendered from the bench, he dismissed the motion. In doing so, he advised Mr. Breslaw that he reserved the right to edit and modify his reasons in the event that an appeal was taken and formal reasons were required. A formal order dismissing the motion was issued on May 26, 2004.
[13] Mr. Breslaw appealed from both decisions. In the course of his appeal from the dismissal of his motion, he requested a certified copy of the transcript of the oral reasons dismissing his motion. Instead, he received a set of written reasons dated November 22, 2004, which, to the best of Mr. Breslaw's recollection, did not accord with the oral reasons which were delivered in open court. He renewed his request for a certified copy of the transcript of the oral reasons which he eventually received. The transcript allowed Mr. Breslaw to confirm that indeed the written reasons contained elements which did not appear in the oral reasons. Since the written reasons had been incorporated into the appeal book, Mr. Breslaw brought a motion to this Court to remove the written reasons from the appeal book and to put in their place the certified transcript of the oral reasons. The motion was heard by the panel hearing the appeals as a preliminary motion.
THE MOTION
[14] Mr. Breslaw's argument with respect to the motion to remove the written reasons from the appeal book in the Jurisdiction appeal and to substitute the transcript of the reasons which were given orally is simply that the written reasons are not the reasons delivered in open court.
[15] A careful comparison of the oral and written reasons shows a high degree of consistency between them, though there are additions and deletions in the written reasons. None of these are relevant to the disposition of the motion. For example, in his oral reasons, Archambault J. discussed Mr. Breslaw's reliance upon the Quebec Charter of Rights and Freedoms and concluded that it was not relevant. That discussion is absent in the written reasons, though there is a brief reference to it at para. 11. Similarly, in his oral reasons, Archambault J. discusses the consequences to Mr. Breslaw of a finding of no jurisdiction, i.e., the Court would have no jurisdiction to grant him a remedy. That discussion is absent from the written reasons.
[16] On the other hand, the written reasons contain the following three sentences at paragraph 7:
However, one has to take into account exceptional circumstances. In my view, waiting for the hearing transcript constitutes exceptional circumstances. If one takes into account that all the written material (i.e. the full transcript of the case) was only received on January 30, 2004, then the judgment was issued with the 90 day period following receipt of that written material.
This discussion is absent from the oral reasons. However, this passage is not material to the final result because Archambault J. decided the case on the basis of his lack of jurisdiction to interfere with the order of another judge of the Tax Court of Canada. The difference, though real, is without consequence.
[17] Furthermore, the written reasons did not alter the disposition of the motion. In both sets of reasons, the motion was dismissed. The only issue is the judge's ability to modify oral reasons for decision rendered in open court by subsequent written reasons.
[18] The relevant dispositions of the Tax Court of Canada Act provide as follows:
|
18.22 (1) The Court shall, other than in exceptional circumstances, render judgment on an appeal referred to in section 18 not later than ninety days after the day on which the hearing is concluded.
(2) For the purposes of subsection (1), "exceptional circumstances" includes circumstances in which written material that the Court requires in order to render a judgment was not received in time to permit the Court to consider it and to render judgment within the time limit imposed by that subsection.
(3) On the disposition of an appeal referred to in section 18, a copy of the decision and written reasons for the decision, if any, shall be forwarded by registered mail to the Minister of National Revenue and to each party to the appeal.
18.23 The Court shall give reasons for its judgment but, except where the Court deems it advisable in a particular case to give reasons in writing, the reasons given by it need not be in writing. |
18.22 (1) Sauf cas exceptionnels, la Cour rend jugement sur les appels visés à l'article 18 dans les quatre-vingt-dix jours suivant la fin de l'audition.
(2) Pour l'application du paragraphe (1), « cas exceptionnels » s'entend notamment des cas où la Cour n'a pas reçu en temps utile pour les étudier des documents qui lui sont nécessaires pour rendre jugement dans le délai prévu.
(3) Dès qu'une décision est rendue sur un appel visé à l'article 18, une copie doit parvenir, sous pli recommandé, - accompagnée, le cas échéant, de l'énoncé des motifs - au ministre du Revenu national et à chacune des parties.
18.23 La Cour motive ses jugements, mais elle ne le fait par écrit que si elle l'estime opportun. |
[19] One notes that the Act does not require the judge disposing of an appeal under the informal procedure to provide written reasons, but that, on the disposition of the appeal, written reasons, if any, are to be provided to the Minister and to the taxpayer. This suggests that written reasons, if they are to be provided, must be prepared in connection with the disposition of the appeal and forwarded to the parties at that time. In the present case, we are concerned with a motion and not with an appeal so that a narrow technical distinction could be drawn. However, it appears to me that the underlying legal principles are the same, so that the distinction might well be one without a difference.
[20] We were directed to the case in Shairp v. Canada (Minister of National Revenue - M.N.R.), [1989] 1 F.C. 562 (Shairp), where the trial judge, before the lunch break, orally advised the parties of his intention to allow the appeal but returned from the lunch break to advise the parties that he now intended to dismiss it. To complicate matters further, judgment issued allowing the appeal followed by supplementary judgment dismissing the appeal. The issue was the judge's authority to modify his original judgment, which in turn led to a consideration of the status of his oral reasons.
[21] Marceau J.A. reasoned that if the judge was entitled to change his mind as he did, then clearly he could correct the judgment to make it accord with his reasons. This falls within the recognized exceptions to the doctrine of finality of judgments, namely that a judgment can be corrected to make it conform to the reasons given for it. See Shairp at paragraph 5. Marceau J.A. then pursued the issue of the judge's change of heart as reflected in his oral reasons:
[7] ...It follows, in my view, that until judgment is filed the pronouncement of a judge, even made in open court and in the presence of a registrar, is merely an expression of opinion and a declaration of intention, which in law have no decisive effect and therefore remain subject to reconsideration.
[8] ...But I know of no case where the jurisdiction of a judge to vary a verbal pronouncement made in open court prior to the entering of a formal judgment has been denied.
[My emphasis.]
[22] Before considering the effect of the decision in Shairp, it is important to properly characterize the document which I have been describing, for the sake of convenience, as written reasons. These reasons are in fact an edited version of Archambault J.'s oral reasons. Oral reasons do not become written reasons by virtue of being transcribed. The fact of editing the text of the transcription for grammar and style does not change the fact that one is still dealing with the reasons which were delivered in open court. This is why these reasons are not caught by subsection 18.22(3) which requires written reasons, if any, to be delivered to the litigants at the time of the disposition of the appeal.
[23] The doctrine of functus officio as set out in Shairp applies to the order of the Court disposing of the lis between the parties. The fact that judgment has been given does not prevent a court from subsequently delivering its reasons for judgment. The practice of rendering judgment, reasons to follow, confirms this. See for example Medovarski v. Canada (Minister of Citizenship and Immigration), S.C.C. Bulletin 2005, p. 843, where the Supreme Court of Canada dismissed an appeal, with reasons to follow.
[24] The difficulty arises when the edited version of the oral reasons does not accord with the original reasons, as recorded in the transcript. While an appeal is taken from the judgment of the Court and not from its reasons, the parties nonetheless rely upon the Court's reasons to frame their appeal. As a result, substantive differences between the reasons given in open court, and the edited version of those reasons are to be discouraged. A judge is entitled to edit his reasons for grammar and style so that they read correctly and fluently. But the addition of topics not raised at the time the oral reasons were delivered, or the subtraction of topics which were, goes beyond mere editing for grammar and style. One can readily appreciate that a judge reviewing his oral reasons after the fact may well feel that they are not the best statement of his reasoning process. But those are the reasons which were given to the parties, and it is unfair to them to modify their substance after the fact.
[25] This is all the more true where the notice of appeal has been filed before the edited version of the reasons is released. A litigant who sees matters raised for the first time in the edited version of the oral reasons may well wonder whether the reasons are a response to the notice of appeal.
[26] In the present case, it is clear that the written reasons, i.e., the edited version of the oral reasons, differ in a substantive way from the reasons delivered in open court. It is the fact of the differences, as opposed to any consideration of their materiality, which leads me to conclude that the written reasons must therefore be set aside.
[27] As a result, the motion is allowed and the written reasons dated November 22, 2004, are to be removed from the appeal book. The costs of the motion will follow the result in the Jurisdiction appeal.
THE JURISDICTION APPEAL
[28] There are two issues in the Jurisdiction appeal. The first is whether a judge of the Tax Court has the jurisdiction to quash or vacate a decision made by another Tax Court judge. The second is the effect of a failure to comply with the 90-day time limit in subsection 18.22(1) of the Tax Court of Canada Act.
[29] It is not necessary to spend a great deal of time with respect to the first issue. Section 18.24 of the Tax Court of Canada Act deals with appeals from orders of the Tax Court:
|
18.24 An appeal from a judgment of the Court in a proceeding in respect of which this section applies lies to the Federal Court of Appeal in accordance with section 27 of the Federal Courts Act. |
18.24 Appel d'un jugement de la Cour peut être interjeté auprès de la Cour d'appel fédérale en conformité avec l'article 27 de la Loi sur les Cours fédérales. |
[30] The general principle is that a judge may not review the merits of a decision of a judge of coordinate jurisdiction. See Canada (Solicitor General) v. Bubla (C.A.), [1995] 2 F.C. 680 at para. 18. As a result, any proceeding to impeach or set aside an order of the Tax Court of Canada must be taken in the Federal Court of Appeal.
[31] That leaves the second issue which is the effect of a failure to comply with subsection 18.22(1) of the Tax Court of Canada Act. There was a debate as to whether the 90-day time limit had in fact been exceeded because compliance is excused by exceptional circumstances which includes "circumstances in which written material that the Court requires in order to render a judgment was not received in time to permit the Court to consider it and to render judgment within the time limit imposed by that subsection." (See ss. 18.22(2)). In the present case, there were delays resulting from the preparation of the transcripts of the hearing. For the purposes of this appeal, I am prepared to accept the position most favourable to the appellant, namely, that even after taking exceptional circumstances into account, the 90-day time limit was exceeded.
[32] Mr. Breslaw's position, relying upon section 11 of the Interpretation Act, R.S.C. 1985, c. I-21, is that the language of subsection 18.22(1) is imperative and that a failure to comply with the deadline results in a loss of jurisdiction. The utility of the mandatory/directory dichotomy has been questioned in a number of cases. It is formalistic and if blindly followed, leads as it does here, to unintended results. See Ginsberg v. Canada, [1996] 3 F.C. 334 at para 20 to 25 (Ginsberg) where some of the authorities are collected and discussed.
[33] The better approach is to focus on the consequences of non-compliance. If Mr. Breslaw is correct, the Tax Court lost jurisdiction over his appeal. As a result, no order can be made and the notice of reassessment stands. This can hardly be the result which Mr. Breslaw seeks. There is no more logic in Mr. Breslaw's position that the failure to meet the statutory deadline entitles him to have the notice of reassessment vacated. Ginsberg is authority for the proposition that the Tax Court's jurisdiction with respect to assessments is limited to determining whether they are consistent with the terms of the Income Tax Act. Mr. Breslaw's considered opinion that fairness between the parties can be achieved by leaving the assessment in place but ordering a stay of collection activity is blatantly self-serving.
[34] An eminently sensible approach to this issue is that adopted by this Court In re Anti-dumping Act and Other Matters, [1980] 1 F.C. 233, in which the tribunal failed to comply with the following disposition of the Anti-Dumping Act, R.S.C. 1970, c. A-15:
16.(3) The tribunal shall, within a period of three months from the date of receipt of a notice of preliminary determination of dumping ...make such order and finding...
[35] No order or finding having been rendered, the tribunal's jurisdiction to proceed was challenged. With his usual lucidity, Pratte J.A. made short work of the loss of jurisdiction argument:
6. Under section 16(3), the Board is clearly under a duty to render a decision within "a period of 90 days from the date of receipt of a notice of a preliminary determination of dumping". It does not follow, however, that at the expiry of the 90-day period, the Tribunal is relieved of its duty to make an inquiry on the question that has been referred to it and is deprived of the power to make any order or finding in the matter. In order to reach such a conclusion, which certainly would not help to achieve the purposes of the Anti-dumping Act, R.S.C. 1970, c. A-15, clear language to that effect would, in my view, be necessary. I do not find any such clear language in the statute. Once the 90-day time limit is expired, the interested parties may take the necessary steps to protect their rights and force the Tribunal to proceed, but, in my opinion, the jurisdiction of the Board to continue its inquiry remains unimpaired.
[36] This analysis applies to the facts of this case. The statutory time limit gives Mr. Breslaw the right to insist upon a decision in the shortest possible time after its expiry. This contrasts with the situation in which no statutory deadline is provided, where parties whose patience is exhausted have little recourse with respect to a tardy judge. The only question remaining is the practical one as to how a party compels delivery of a decision in the shortest possible time. Since the Tax Court of Canada is a superior court, mandamus is not available. The only remaining remedy is administrative in the form of a request, preferably a joint request, to the Chief Justice to do what is necessary to enable the judge to render his decision.
[37] As a result, I conclude that the Jurisdiction appeal should be dismissed with costs. A failure to comply with the time limit found at subsection 18.22(1) of the Tax Court of Canada Act does not deprive the court of jurisdiction with respect to the appeal under consideration. It simply gives the parties the right to insist that the decision be rendered as soon as possible after the expiry of that time limit.
THE ASSESSMENT APPEAL
[38] The principal issue in the Assessment appeal is the Tax Court judge's order allowing the Minister to amend his reply to the notice of appeal to include a reference to subparagraph 152(4)(a)(i) and to misrepresentation in the preparation of Mr. Breslaw's return for the 1998 taxation year.
[39] It is common ground that the December 2002 reassessment is out of time unless the Minister can show misrepresentation in the preparation of Mr. Breslaw's return and thereby bring himself within subparagraph 152(4)(a)(i) of the Income Tax Act. Mr. Breslaw's argument is that it was he who tipped the Minister that the reassessment was out of time so that the Minister's request for an amendment to the reply to the notice of appeal was a violation of the privilege attaching to information given for the purpose of settlement negotiations.
[40] This argument cannot succeed. Subsection 152(4) reads as follows:
|
152. (4) The Minister may at any time make an assessment, reassessment or additional assessment of tax for a taxation year, interest or penalties, if any, payable under this Part by a taxpayer or notify in writing any person by whom a return of income for a taxation year has been filed that no tax is payable for the year, except that an assessment, reassessment or additional assessment may be made after the taxpayer's normal reassessment period in respect of the year only if
(a) the taxpayer or person filing the return
(i) has made any misrepresentation that is attributable to neglect, carelessness or wilful default or has committed any fraud in filing the return or in supplying any information under this Act, or
(ii) has filed with the Minister a waiver in prescribed form within the normal reassessment period for the taxpayer in respect of the year; or
...
(b) the assessment, reassessment or additional assessment is made before the day that is 3 years after the end of the normal reassessment period for the taxpayer in respect of the year and.... |
152. (4) Le ministre peut établir une cotisation, une nouvelle cotisation ou une cotisation supplémentaire concernant l'impôt pour une année d'imposition, ainsi que les intérêts ou les pénalités, qui sont payables par un contribuable en vertu de la présente partie ou donner avis par écrit qu'aucun impôt n'est payable pour l'année à toute personne qui a produit une déclaration de revenu pour une année d'imposition. Pareille cotisation ne peut être établie après l'expiration de la période normale de nouvelle cotisation applicable au contribuable pour l'année que dans les cas suivants:
a) le contribuable ou la personne produisant la déclaration:
(i) soit a fait une présentation erronée des faits, par négligence, inattention ou omission volontaire, ou a commis quelque fraude en produisant la déclaration ou en fournissant quelque renseignement sous le régime de la présente loi,
(ii) soit a présenté au ministre une renonciation, selon le formulaire prescrit, au cours de la période normale de nouvelle cotisation applicable au contribuable pour l'année;
...
b) la cotisation est établie avant le jour qui suit de trois ans la fin de la période normale de nouvelle cotisation applicable au contribuable pour l'année et, selon le cas: |
[41] The argument with respect to the breach of the privilege attaching to communications made for the purpose of settlement is not well founded. The Minister's representative did not disclose any communication made to her for the purpose of settlement. She sought to amend her pleadings to make them accord with the notice of reassessment and with other facts already pleaded. No question of privilege arises from those facts.
[42] The motion to amend the reply did not raise new issues. As noted earlier, the notice of reassessment referred to subparagraph 152(4)(i) of the Income Tax Act. The reference is an error as there is no disposition numbered 152(4)(i). However, any attempt to locate that disposition would necessarily have led to the right subparagraph.
[43] The reassessment attributed to Mr. Breslaw a capital gain which his wife had declared in her return. That fact combined with the reference to subparagraph 152(4)(a)(i) was sufficient to alert Mr. Breslaw to the misrepresentation underlying the Minister's reassessment outside the normal reassessment period. If any doubt remained, the Minister's original assumptions of fact were sufficient to put the matter to rest:
6. In 1998 the Appellant disposed of his investment in the flow-through shares issued by Millstream Mines Ltd.
(a) The disposition of the shares provided an additional taxable capital gain for the taxation year in the amount of $27,768.75 calculated as follows:
Total proceeds of disposition $37,025.00
Less: ACB $ 0.00
Capital gain $37,025.00
_______________
Taxable capital gain $27,768.75
(b) The shares were held in the name of the Appellant and therefore were capital property of the Appellant.
(c) For the taxation years prior to the disposition the Appellant claimed the deductions allowed in relation to the ownership of the flow-through shares.
...
[44] The Minister's assumptions of fact made it clear that the basis of the reassessment was that the shares were not the property of Mr. Breslaw's wife but rather were his capital property as evidenced by his previous history of claiming the flow-through deductions. In those circumstances, allowing the amendment to plead subparagraph 152(4)(a)(i) and misrepresentation by wilful default was simply a question of completing the pleadings. Consequently, the Tax Court judge was entitled to amend the pleadings as he did.
[45] That deals with the procedural issue. On the substantive issue, the onus is on the Minister to establish misrepresentation by wilful default or neglect. Mr. Breslaw's position is that he was simply following the advice received from his investment adviser. He says that he and his wife jointly owned the flow-though shares. Finally, he says that having his wife declare the gain from the sale of the shares was simply an exercise in tax-planning as her income was less than his.
[46] The fact that Mr. Breslaw claimed the flow-through deductions in the past is a strong indication that he owned the shares. Had they been jointly owned, then the deductions should have been apportioned accordingly. Furthermore, the investment adviser's letter upon which Mr. Breslaw relies indicates that the shares were held in an account in Mr. Breslaw's name only, contrary to Mr. Breslaw's claim of joint ownership. Mr. Breslaw's claim that he honestly believed that he was entitled, under the guise of tax-planning, to allocate income and expenses between his return and his wife's so as to obtain the maximum tax advantage is simply unbelievable, coming, as it does, from the mouth of a consulting economist. The Tax Court judge was fully justified in coming to the conclusion that there was a misrepresentation in Mr. Breslaw's return which was the result of wilful default or neglect, thus allowing the Minister to reassess him outside the normal reassessment period.
[47] The other issues in the appeal are the deductibility of certain expenses incurred in the renovation of Mr. Breslaw's home. The Tax Court judge considered Mr. Breslaw's evidence and that of the Canada Customs and Revenue Agency employees who testified on behalf of the Minister. In the end, he was not persuaded that the expenses which the Minister disallowed were incurred for the purpose of earning income. That is a conclusion of fact which this Court can only overturn in the case of palpable and overriding error, which is not the case here.
[48] Finally, Mr. Breslaw appeals from the disallowance of his claim for capital cost allowance with respect to a painting which he purchased and which was hung in a room next to his library. The Tax Court judge appeared to have concluded from the fact that Mr. Breslaw's clients did not visit his home, though his colleagues did, that the purchase of the painting was a personal expense. This is another conclusion of fact which is sheltered from appellate review except in the case of palpable and overriding error. No such error has been shown to us.
CONCLUSION
[49] In the end result, the motion to remove the Archambault J.'s written reasons from the appeal book should be allowed with costs to follow the event in the appeal No. A-285-04. The appeal in file No. A-276-04 should be dismissed with costs. The appeal in file No. A-285-04 should be dismissed with costs.
"J.D. Denis Pelletier"
J.A.
"I agree
Robert Décary j.a."
"I agree
Gilles Létourneau j.a."
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKETS: A-285-04 - A-276-04
APPEAL OF THE JUDGMENT RENDERED BY THE HONOURABLE MR. JUSTICE ARCHAMBAULT OF THE TAX COURT OF CANADA, DATED MAY 10, 2004 IN DOCKET T-2003-1740(IT)
STYLE OF CAUSE: JON BRESLAW and THE ATTORNEY GENERAL OF CANADA
PLACE OF HEARING: Montréal, Quebec
DATE OF HEARING: October 6, 2005
REASONS FOR JUDGMENT BY: PELLETIER J.A.
CONCURRED IN BY: DÉCARY J.A.
LÉTOURNEAU J.A.
DATED: October 28, 2005
APPEARANCES:
Jon Breslaw FOR THE APPLICANT (HIMSELF)
Susan Shaughnessy FOR THE RESPONDENT
SOLICITORS OF RECORD:
Mr. Jon Breslaw
Westmount, Quebec FOR THE APPLICANT (HIMSELF)
John H. Sims, Q.C.
Deputy Attorney General of Canada
Montréal, Quebec FOR THE RESPONDENT