What must the Crown plead and how must she plead it?
This question became an issue in the Tax Court's recent
decision in Legge v. The Queen (2014 TCC 360), in
which the Tax Court allowed a taxpayer's appeal due to the
Crown's failure to properly plead its case in the Reply.
In Legge, the taxpayer received pension and business
income in 2006 and 2007. On November 27, 2008, the taxpayer filed
income tax returns for 2006 and 2007. In these returns, the
taxpayer reported business losses from self-employment, and thus
pensionable earnings was reported as nil.
Subsequently, on November 12, 2012, the taxpayer filed T1
adjustment requests for 2006 and 2007 and changed the business
losses to business income. The taxpayer reported self-employed
pensionable earnings of $5,524 and $5,116 in 2006 and 2007,
Under the Canada Pension Plan, a person must make
CPP contributions on the amount of his/her self-employed earnings
(which include income from a business and certain other amounts).
Under section 30 of the Canada Pension Plan, a taxpayer
who must make a contribution in respect of self-employed earnings
must file a return with certain information. Importantly,
subsection 30(5) states as follows:
(5) The amount of any contribution
required by this Act to be made by a person for a year in respect
of their self-employed earnings for the year is deemed to be zero
(a) the return of those
earnings required by this section to be filed with the Minister is
not filed with the Minister before the day that is four years after
the day on or before which the return is required by subsection (1)
to be filed; and
(b) the Minister does not
assess the contribution before the end of those four years.
In Legge, the Crown argued that subsection 30(5)
applied in this case because the taxpayer had failed to file a
return of self-employed earnings within four years of the filing
due date. Rather, the taxpayer reported losses rather than
The Tax Court rejected this argument on the basis that
subsection 30(5) applies only if there is a failure to file and the CRA had not
assessed contributions within the four-year period. The Tax Court
noted that, in the present case, the assessment requirement was not
mentioned in the Reply and was not mentioned by Crown counsel at
the hearing. Since there was no assumption as to what assessments
(if any) were made, the Crown had the burden to adduce evidence
that the requirement in paragraph 30(5)(b) had been satisfied. The
Crown had not adduced evidence on this point.
The Tax Court noted that this result was "in a sense a
windfall" to the taxpayer, but "the Crown is well aware
of the requirement to properly plead its case and to establish the
facts supporting its position, either by evidence or by
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