Overview
On September 12, 2024 in Gold Line,1 the Tax Court of Canada struck certain paragraphs from an expert affidavit filed by the taxpayer (Gold Line) in the course of opposing the Minister of National Revenue's "common question" application under the Excise Tax Act.2 The Minister moved to strike the affidavits, but the Court agreed to strike only certain paragraphs of the expert affidavit because it was only those paragraphs that were not relevant at that preliminary stage of the "common question" application.
Affidavit Evidence and Motions to Strike
A taxpayer who opposes an application brought by the Minister needs evidence to support its position. The taxpayer's evidence can come in the form of an affidavit, which is a sworn statement about facts relevant to the dispute. The paramount purpose of an affidavit is to adduce facts relevant to the dispute "without gloss or explanation".3
Once sworn, the person who swears the affidavit (called the "affiant") can later be subject to cross examination on the affidavit.
However, the Minister can move to strike the affidavit first. The Court may strike all or part of an affidavit if:4
- The affidavit is abusive or clearly irrelevant;
- The affidavit contains opinion, argument or legal conclusions; or
- The Court is convinced that admissibility of the affidavit would be better resolved at an early stage so as to allow the hearing to proceed in a timely and orderly fashion.
The Court's power to strike an affidavit is discretionary, and should only be used in exceptional circumstances.5 The above framework sets a high bar because striking affidavits at an early stage risks depriving the court of important information that should be considered.6
The Decision
In Gold Line, the Minister brought the application under section 311 to determine five "common questions" affecting multiple taxpayers with respect to an alleged GST/HST carousel scheme.7
The taxpayer opposed the Minister's common question application, and argued that its case should not be considered along with the others on the basis that the proposed questions were not common among the taxpayers and did not arise from the same transactions. In support of its position, the taxpayer filed a number affidavits, including one expert affidavit, and two affidavits containing facts relied on by the expert. The expert report was intended to (1) describe how the relevant industry (VoIP) works and (2) assess the CRA's analysis of the taxpayer's call detail records.8 The taxpayer also filed two affidavits containing facts relied on by the expert.9
The Minister moved to strike the three affidavits, and argued that the affidavits targeted the underlying questions on their merits and were therefore irrelevant at the preliminary stage of the dispute.10 In the preliminary stages of the dispute, the Court was first required to determine if it will consider the common questions at all and, if so, what would be the appropriate process and procedure.11
The Court struck the paragraphs of the expert report that "confront" the CRA's analysis of the taxpayer's records for being "not necessary for the Court to have to determine" the preliminary issues.12 However, the Court also held that it could consider the expert evidence at the preliminary stages of the common question application. The Court therefore did not strike the remainder of the expert affidavit (about the VoIP industry), and did not strike the affidavits on which the expert relied. The Court reasoned that the threshold for striking affidavit evidence is high, and it did not want to deplete the evidentiary record for the application at an early stage.13
Key Takeaways
When a taxpayer seeks to oppose the Minister, evidence is generally necessary. Where the evidence is brought by affidavit, the Court may strike all or part of the evidence if it is clearly irrelevant. Although the Tax Court may admit all or part of an expert report even at preliminary stages of a common question application, expert evidence is not relevant just because it comes from an expert, and may be scrutinized and struck in whole or in part. It is important to advance tax disputes deliberately by relying on probative and admissible evidence.
Footnotes
1. His Majesty the King v Gold Line Telemanagement Inc., 2024 TCC 119 [Gold Line..
2. A common question application is a unique procedure and is different than a normal appeal to the Tax Court. The Minister may apply to the Tax Court of Canada for the determination of a common question that arises from the same or similar transactions or occurrences involving two or more persons. A common question application may arise under either section 311 of the Excise Tax Act or section 174 of the Income Tax Act. Most decisions address the Income Tax Act provision.
3. Gold Line, at para 10.
4. Gold Line, at para 10.
5. Gold Line, at para 11.
6. Gold Line, at para 11 citing Milgram Foundation v Canada (Attorney General), 2023 FC 1499 at para 5.
7. A carousel scheme is a kind of fraud involving value added tax. Among the common questions, the Minister asked to what extent were the VoIP minutes supplied in the course of commercial activity, and to what extent were the contractual relationships "shams" intended to deceive the Minister.
8. Gold Line, at para 20.
9. Gold Line, at paras 3 and 36.
10. Gold Line, at para 4.
11. Gold Line, at para 4. Paragraph 4 refers to "Parts I and II", which are defined at para 2 of the decision. The Minister also argued that the affidavits disrupted the "normal sequencing for expert evidence" and failed the test for admission of expert evidence.
12. Gold Line, at para 23.
13. The Court also considered whether the expert affidavit met relevant tests of admissibility of expert evidence, holding the report met threshold admissibility under White Burgess, and that the Court need not exercise its gatekeeper function as the report's probative value outweighed its prejudicial effect.
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