2011 Tax Law for Lawyers

Transcription

1 2011 Tax Law for Lawyers The Conduct of Tax Litigation Robert McMechan

2 Explanation of Materials Largely taken from c. 4 Tax Court Practice with permission of Carswell Extracts selection of cases updated 4 times annually 2 vol. service

3 STATS RE APPEALS 45,000 65,000 objections per year 92 % resolved administratively 8% appeal to Tax Court of Canada 1/3 rd of court appeals are withdrawn 1/3 rd of court appeals are settled 1/3 rd of court appeals are litigated

4 Topics to Cover Tax Court s jurisdiction Informal vs. General Procedure Pleadings: Notice of Appeal and Reply to Notice of Appeal Lists of Documents full vs. partial disclosure

5 Topics to Cover Examinations for discovery Expert witnesses Evidence at trial Closing Arguments Costs / Settlements Appeals to Court of Appeal

6 Tax Court s Jurisdiction s. 12 Tax Court of Canada Act exclusive original jurisdiction under 10 federal statutes, e.g. Income Tax Act, Part IX Excise Tax Act, Employment Insurance Act

7 Tax Court s Jurisdiction Superior court since 2003 s. 101 statutory court under Constitution Act 1867 Only inherent jurisdiction control its own process No prerogative writs issued

8 Tax Court s Jurisdiction No jurisdiction in wide variety of tax areas, including relief under fairness, collections, appeals from provincial tax assessments, prosecutions, damages for misconduct, etc

9 Informal Procedure Monetary threshold $12,000 or $24,000 losses No formal req ts for notice of appeal, legislated time frame, technical rules of evidence not applicable

10 Informal Procedure Elections / bump-up appl ns Decisions of no precedential value s T.C.C.A. No costs against appellants Appeals to C.A. limited grounds as for judicial review

11 Notice of Appeal Sets out allegations of material facts, issues and relief sought s. 171 ITA Justice Bowie needs to give judge clear picture of case reads it before trial

12 Notice of Appeal Pleadings define relevance for purposes of discovery Failure to plead issue can result in later inability to raise the matter at trial or appeal See examples in App. A & B

13 Reply to Notice of Appeal Crown has 60 / 90 days from service of appeal to file reply Sets out assumptions by the CRA underlying assessment Assumptions are of facts watch for conclusions of law

14 Reply to Notice of Appeal Assumptions place burden of proof to demolish on t/p s Crown to plead assumptions of auditors / appeals officers Distinguish allegations of other material facts re onus

15 Lists of Documents GPR require filing of lists of documents after pleadings s. 81 Partial list unique to Tax Court self serving s. 82 Full disclosure: all documents relevant to any

16 Lists of Documents matter in question is the threshold for relevance same as it is for evidence at trial? Client obliged to make affidavit regarding disclosure Counsel duty re affidavits

17 Examinations for Discovery Pre-trial proceeding to learn facts of other party s case; obtain admissions of fact to read in as evidence Cross-examine re prior inconsistent statements

18 Examinations for Discovery Transcripts are property of the party examining Implied undertaking doctrine Read-ins form part of the general evidence of case vs. agreed statements of facts

19 Expert Witnesses Expert opinion evidence re GAAP, technical meanings of words in an industry, etc. GPR require full statement of proposed expert evidence filed thirty days before trial

20 Expert Witnesses No expert opinion evidence re matters of domestic law Costs recoverable $3.2 million in SmithKline v. The Queen for expert witnesses and document mgm t costs

21 Evidence at Trial Chief Justice Bowman most cases are won or lost on the facts; the way a lawyer marshals the facts and presents them is crucial. If a lawyer doesn t put in the

22 Evidence at Trial facts properly, that s prejudicial. I think the facts are crucial. By the time I ve heard all of the evidence, I may have changed my mind many times on the basis of

23 Evidence at Trial arguments, but I have a fairly good idea of which way the case is going to go. Suggestion Keep in mind how the record will look if you are before the Court of Appeal.

24 Evidence at Trial Not infrequent mistake failure to call a witness with evidence germane to a point Adverse inference court assumes evidence would have been unfavourable

25 Closing Arguments C.J. Bowman Counsel make a big difference. In perhaps 20 or 25 per cent of cases that can go either way, counsel do make a difference. I can tell you

26 Closing Arguments there are some counsel with winning cases who have managed to snatch defeat from the jaws of victory; that has often happened. One, they don t listen to the judge.

27 Closing Arguments The greatest lawyers, I think, are the ones who can read the court and assess which way the wind is blowing. Two, they beat a dead horse. People go on and on; if

28 Closing Arguments they ve made the point, then give me the credit for having gotten the point. Counsel should not hammer the point, because often they talk themselves out of court.

29 Costs Myriad rules in the Tax Court regarding awards of costs Tax Court judges invested with substantial discretion Usual rule is that successful party is entitled to costs

30 Costs Party and party costs do not approximate actual costs Solicitor-client costs only awarded in exceptional cases, usually involving misconduct in the litigation

31 Costs No costs awarded in GST IP cases if amount in dispute $7,000 or supplies for prior fiscal year $1,000,000 Crown can t be awarded costs in any IP appeals

32 Settlements Opportunities for settlement exist before trial through dealings with Justice Dept. Pre-trial conference may create settlement opportunity Settlement usually w/o costs

33 Settlements Crown limited to settling on some basis that Minister could have assessed upon Human nature plays a role treating counterparts with decency & respect essential

34 Settlements C. J. Bowman Bear in mind that right up to the courtroom steps and even beyond them, settlements are made. One thing that is very important in selecting

35 Settlements counsel is selecting someone who has the confidence, trust and the liking of the Crown. You may be the most brilliant tax lawyer in the world, but if you

36 Settlements are arrogant and rude to the other side, you are not going to get a good settlement. Pick someone who gets along well with the Crown CTF Conference Report

37 Appeals to Court of Appeal Appeals are on the record fresh evidence is quite rare Limited grounds on which an appeal court can intervene Findings of fact by trial judge palpable overriding error?

38 Appeals to Court of Appeal Justice Sharlow there s really no substitute for two things - common sense and preparation. If a lawyer is going to make any mistake in the hearing,

39 Appeals to Court of Appeal it s not coming into the hearing prepared to listen to the concerns that are raised in the course of debate and to answer those concerns and, through using the

40 Appeals to Court of Appeal techniques of advocacy and debate, try to point the court in the direction that they want to go. It s a very important part of what lawyers do.

41 2011 Tax Law for Lawyers The Conduct of Tax Litigation Robert McMechan