Harris v. Minister of National Revenue, (2001) 214 F.T.R. 1 (TD)

• Judge: Dawson, J.
• Court: Federal Court (Canada)
• Case Date: September 24, 2001
• Jurisdiction: Canada (Federal)
• Citations: (2001), 214 F.T.R. 1 (TD)

Harris v. MNR (2001), 214 F.T.R. 1 (TD)

MLB headnote and full text

Temp. Cite: [2001] F.T.R. TBEd. DE.048

George William Harris, on his own behalf, and on behalf of a class of plaintiffs comprised of all individuals and others required to file returns pursuant to section 150 of the Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1, as amended, excepting those filers as described in paragraph 2 of this Claim (plaintiff) v. Her Majesty the Queen and the Minister of National Revenue (defendants)

(T-2407-96; 2001 FCT 1408)

Indexed As: Harris v. Minister of National Revenue

Federal Court of Canada

Trial Division

Dawson, J.

December 19, 2001.

Summary:

The Minister of National Revenue made an advance ruling respecting the income tax consequences for a trust that would cease to be resident in Canada and would become resident in the United States. The Auditor General raised the following concerns: that the transactions ruled upon might have circumvented the intent of the tax law; the ruling might have forfeited a future claim to significant tax revenue; there was a lack of documentation and analysis of key decisions made by Revenue Canada; and because the advance ruling was not made public on a timely basis other taxpayers might have been denied a similar benefit. Relying on these concerns, Harris brought an action on behalf of himself and all other taxpayers except those who, between January 1, 1985 and October 1, 1996, carried out transactions or were assessed on the basis that "taxable Canadian property" under the Income Tax Act could be held or disposed of by a resident of Canada.

The Federal Court of Canada, Trial Division, dismissed the action.

Equity - Topic 3611

Fiduciary or confidential relationships - General principles - Crown - The Federal Court of Canada, Trial Division, set out the following principles respecting the Crown and fiduciary or fiduciary-like obligations: "1. The Crown may in some circumstances owe a fiduciary duty, or a duty akin to a fiduciary duty. 2. In any particular case, the surrounding circumstances must be closely examined in order to determine whether the duty imposed on, or undertaken by, the Crown is in the nature of a private law duty. ... 3. Where the Crown owes duties to a number of interests it is more likely that the Crown is not in a fiduciary relationship, but rather is exercising a public authority governed by the proper construction of the relevant statute. 4. A fiduciary relationship is unlikely to exist where that would place the Crown in a conflict between its responsibility to act in the public interest and the fiduciary's duty of loyalty to its beneficiary." - See paragraph 178.

Equity - Topic 3611

Fiduciary or confidential relationships - General principles - Crown - A taxpayer commenced a class action based on concerns raised by the Auditor General respecting an advance tax ruling - The taxpayer claimed the Minister of National Revenue had acted in a fiduciary capacity, or in a capacity akin to a fiduciary, towards the class of taxpayers the taxpayer represented and that the Minister breached that duty - The Federal Court of Canada, Trial Division, concluded that in receiving and responding to the ruling request the Minister and his officials did not owe a fiduciary duty, or a duty akin to a fiduciary duty - However, public law required the Minister and officials to act in good faith when carrying out their duties and to act within a proper construction of the Income Tax Act - All taxpayers were entitled to a fair, just and impartial application of the Act, including the right to every benefit allowed under the Act - See paragraphs 180 to 196.

Evidence - Topic 1582

Hearsay rule - Hearsay rule exceptions and exclusions - Business records - Regular entries - Entries or records made in the regular course of a business - A taxpayer commenced a class action respecting an advance tax ruling - The taxpayer sought to have the rulings officer's notes admitted to establish the truth of their contents (Canada Evidence Act, s. 30) - The notes were taken down on a departmental form, in the officer's own handwriting at or about the time of the events recorded and the officer was expected to keep the notes so that they would form part of Revenue Canada's file - The Federal Court of Canada, Trial Division, ruled that the notes were records made in the usual and ordinary course of business and were admissible under s. 30 - Concerns respecting the completeness went to the weight as contemplated by s. 30(6) - See paragraphs 11 to 14.

Evidence - Topic 7002

Opinion evidence - Expert evidence - General - Acceptance, rejection and weight to be given to expert opinion - A taxpayer commenced an action based on concerns raised by the Auditor General respecting an advance tax ruling - The taxpayer claimed a breach of fiduciary duty or maladministration - The taxpayer sought to admit expert testimony from representatives of the Auditor General's office - The Minister opposed the admission, asserting that the Auditor General's office did not conduct its review for the purpose of providing opinions on whether there was a breach of a fiduciary duty or maladministration - The Minister further asserted that testimony touching on legal issues was based on hearsay that was neither necessary nor reliable - The Federal Court of Canada, Trial Division, noted that the witnesses were proffered as experts on the operation of government departments not as experts on domestic tax law - Their evidence on process issues was admissible - See paragraphs 31 to 34.

Evidence - Topic 7003

Opinion evidence - Expert evidence - General - Procedural prerequisites to admission of - A taxpayer commenced an action based on concerns raised by the Auditor General respecting an advance tax ruling - The taxpayer sought to admit expert testimony from representatives of the Auditor General's office - The Minister opposed the admission on the grounds that the taxpayer had not served on the defendants an affidavit or a statement signed by the expert witnesses setting out in full the proposed evidence (Federal Court Rule 279(b)) - The Federal Court of Canada, Trial Division, held that the disclosure required by rule 279 had been substantially provided through a report of the Auditor General and his testimony to Parliament and the defendants had not been taken by surprise - This was one of those rare instances where leave should be given for admission without compliance with rule 279 - See paragraphs 15 to 27.

Income Tax - Topic 6408

Taxable income earned in Canada by non-residents - Taxable Canadian property - The Minister of National Revenue made an advance ruling respecting the income tax consequences for a trust that would cease to be resident in Canada and would become resident in the United States - The ruling turned on the Minister's conclusion that a Canadian resident could hold "taxable Canadian property" under the Income Tax Act - A taxpayer brought a class action respecting the ruling - The Federal Court of Canada, Trial Division, dismissed the action - Without deciding whether the ruling was correct, the court held that it was not unreasonable for Revenue Canada to have concluded, based on an analysis of the Act, that taxable Canadian property referred to a class of property and was not dependent upon whether the property was owned by a resident or non-resident - See paragraphs 197 to 210.

Practice - Topic 7029

Costs - Party and party costs - Entitlement to - Successful party - Exceptions - Novel or important point - A plaintiff commenced a class action based on concerns raised by the Auditor General respecting an advance tax ruling - The Federal Court of Canada, Trial Division, dismissed the action - The court adopted the following criteria in considering the plaintiff's claim to costs on the basis of public interest litigation: "a) The proceeding involves issues the importance of which extends beyond the immediate interests of the parties involved. b) The person has no personal, proprietary or pecuniary interest in the outcome of the proceeding, or, if he or she has an interest, it clearly does not justify the proceeding economically. c) The issues have not been previously determined by a court in a proceeding against the same defendant. d) The defendant has a clearly superior capacity to bear the costs of the proceeding. e) The plaintiff has not engaged in vexatious, frivolous or abusive conduct." - The court concluded that, although entitled to costs, the plaintiff was not entitled to solicitor and client costs where there were no exceptional circumstances or reprehensible conduct - See paragraphs 213 to 226.

Practice - Topic 7470.5

Costs - Solicitor and client costs - Entitlement to - Public interest cases - [See Practice - Topic 7029 ].

Cases Noticed:

R. v. Mohan, [1994] 2 S.C.R. 9; 166 N.R. 245; 71 O.A.C. 241, refd to. [para. 28].

Cohen v. R., 80 D.T.C. 6250 (F.C.A.), refd to. [para. 77].

Smerchanski v. Minister of National Revenue, [1977] 2 S.C.R. 23; 9 N.R. 459, refd to. [para. 79].

Harris et al. v. Minister of National Revenue, [2000] 4 F.C. 37; 256 N.R. 221 (F.C.A.), refd to. [para. 120].

International Corona Resources Ltd. v. LAC Minerals Ltd., [1989] 2 S.C.R. 574; 101 N.R. 239; 36 O.A.C. 57, refd to. [para. 162].

Guerin v. Canada, [1984] 2 S.C.R. 335; 55 N.R. 161, refd to. [para. 167].

Swain v. Law Society, [1982] 2 All E.R. 827 (H.L.), refd to. [para. 169].

Board of Education (Roman Catholic Separate) of Windsor v. Windsor (City) (1988), 27 O.A.C. 275; 64 O.R.(2d) 241 (C.A.), leave to appeal refused (1988), 91 N.R. 324; 30 O.A.C. 160 (S.C.C.), refd to. [para. 172].

Fairford First Nation v. Canada (Attorney General), [1999] 2 F.C. 48; 156 F.T.R. 1 (T.D.), refd to. [para. 174].

Chippewas of the Nawash First Nation v. Canada (Minister of Indian and Northern Affairs) et al. (1999), 251 N.R. 220 (F.C.A.), refd to. [para. 177].

Rothmans of Pall Mall Canada Ltd. and Imperial Tobacco Ltd. v. Minister of National Revenue et al., [1976] 2 F.C. 500; 10 N.R. 153 (F.C.A.), refd to. [para. 182].

Ludco Enterprises Ltd. et al. v. Ministre du Revenu national (1994), 182 N.R. 125; 95 D.T.C. 5311 (F.C.A.), refd to. [para. 183].

Ludmer et al. v. R. - see Ludco Enterprises Ltd. et al. v. Ministre du Revenu national.

Mathias et al. v. Canada et al. (2002), 207 F.T.R. 1 (T.D.), folld. [para. 189].

Squamish Indian Band v. Canada - see Mathias et al. v. Canada et al.

Canada (Auditor General) v. Canada (Minister of Energy, Mines and Resources) et al., [1989] 2 S.C.R. 49; 97 N.R. 241, refd to. [para. 191].

Roncarelli v. Duplessis, [1959] S.C.R. 121, refd to. [para. 195].

Construction Gilles Paquette ltée v. Entreprises Végo ltée, [1997] 2 S.C.R. 299; 212 N.R. 212, refd to. [para. 210].

Rizzo & Rizzo Shoes Ltd. (Bankrupt), Re, [1998] 1 S.C.R. 27; 221 N.R. 241; 106 O.A.C. 1, refd to. [para. 210].

Statutes Noticed:

Canada Evidence Act, R.S.C. 1985, c. C-5, sect. 30(1), sect. 30(6) [para. 12].

Evidence Act (Can.) - see Canada Evidence Act.

Federal Court Rules (1998), rule 279(b) [para. 24].

Authors and Works Noticed:

Canada, Minister of Finance, Summary of 1971 Tax Reform Legislation, p. 34 [para. 207].

Ontario, Law Reform Commission, Report on Standing (1989), generally [para. 222].

Counsel:

Norm Cuddy, Michael Connor and Neil Brooks, for the plaintiff;

Peter Kremer and Perry Derksen, for the defendant.

Solicitors of Record:

Scurfield Tapper Cuddy, Winnipeg, Manitoba, for the plaintiff;

Morris Rosenberg, Deputy Attorney General of Canada, Ottawa, Ontario, for the defendant.

Dawson, J., of the Federal Court of Canada, Trial Division, heard this action at Ottawa, Ontario, on September 24, 2001, and at Winnipeg, Manitoba, on October, 1 and 17, 2001, and delivered the following reasons for order on December 19, 2001.