INCOME TAX |
Practice |
Canada v. Webster
A-431-01
2002 FCA 205, Rothstein and Strayer (dissenting) JJ.A.
21/5/02
20 pp.
Appeal from Tax Court on motion under Tax Court of Canada Rules (General Procedure), r. 58(1)(a) for determination of preliminary question of law--Minister submitting appropriate case for r. 58(1)(a) order because relevant factual underpinning consisting only of two documents, and legal question easily isolated--Taxpayers submitting issues of fact material to legal question contested, and they should not be deprived of opportunity at trial to adduce evidence to prove facts--Appeal dismissed (Strayer J.A. dissenting)--Per Rothstein J.A. (Nadon J.A. concurring): Berneche v. Canada, [1991] 3 F.C. 383 (C.A.) setting out test for order for determination of preliminary question of law: Court must be satisfied (i) no dispute as to any fact material to question of law to be determined; (ii) what is to be determined pure question of law; (iii) determination of question may dispose of all or part of proceeding, substantially shorten hearing or result in substantial saving of costs--Preliminary question of law procedure exceptional--Agreement of parties as to facts not required in order to make order for determination of preliminary question of law, provided application made and Court not proceeding ex proprio motu-- Open to judge to conclude no material facts in dispute-- Minister arguing Motions Judge erred by focussing on irrelevant considerations--Context of Motions Judge's statement not Court's place to tell taxpayers how to present case indicating intended to say "not appropriate" to tell appellant how to present case--Reference to unrelated case in which facts in dispute and r. 58(1)(a) application dismissed may have been to emphasize minimal dispute as to facts therein in contrast to this case--Minister alleging failed to consider relevant considerations i.e. whether question pure question of law and whether facts material to question in dispute, whether question determinative of matter in dispute-- Tax appeal arising from disallowance of deduction claimed for Canadian Exploration Expense as result of purchase of seismic data--Minister sought determination of whether promissory note given as part of consideration for purchase of seismic data constituted contingent liability of tax appellants --If liability contingent, amount not deductible--Arguing question determined solely by interpreting promissory note, seismic purchase and sale agreement and such interpretation question of law--Motions Judge finding factual issues numerous, complex--On r. 58(1)(a) motion, if Motions Judge not satisfied no material facts in dispute, motion must be dismissed--Not requiring positive determination of what facts relevant or in dispute--If Judge in doubt, by definition not satisfied, and motion must be dismissed--That terms of contracts relevant considerations in Wawang Forest Products Ltd. v. Canada (2001), 2001 DTC 5212 (F.C.A.) not necessarily meaning that in every case terms of contracts determinative of whether liability contingent or absolute-- Each case depending on own facts--Preferable to leave to trial judge considerations of whether sale of seismic assets within discretion of tax appellants if revenues insufficient to pay liability--Per Strayer J.A. (dissenting): Motions Judge considered irrelevant matters--Although saying whether liability contingent question of law which must necessarily rest upon factual underpinning, not saying what kind of factual underpinning required--Mentions appellants wished to introduce expert accounting evidence--Assuming such evidence may be relevant--Irrelevant that Crown opposed identification of preliminary question of law in unrelated case where very specialized constitutional issue involved, but advocated such preliminary question in this case concerning mere legal interpretation of promissory note--As to relevant considerations not taken into account, no basis for determining criteria for what is contingent liability other than legal--In Wawang, F.C.A. upholding contingent liability as liability depending for existence upon event which may or may not happen--Question for determination whether at particular point in time, i.e. upon execution of promissory note and agreement, absolute legal obligation to divert to vendor of seismic data, specific sums of revenue or of sale proceeds which would otherwise be receivable by maker of promissory note--Contingency of legal liability not dependent on economic probabilities--Evidence of such matters as valuation, revenue irrelevant to determination of question judge asked to pose for determination--Tax Court of Canada Rules (General Procedure), SOR/90-688, r. 58(1)(a).