Another Win for FMC’s Toronto Tax Litigation Group

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August 31 2010 - Toronto

On July 29, 2010, the Federal Court of Appeal issued judgment in

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Heron Bay Investments Ltd. v. The Queen,2010 FCA 203

, allowing Heron Bay’s appeal with costs, setting aside the judgment of the Tax Court and referring the matter back to the Tax Court for retrial by a different judge.

The issue before the Tax Court was whether Heron Bay was entitled to an allowance for a doubtful debt under theIncome Tax Act(Canada) in respect of a $3.77 million loan. At several points during the direct examination of Heron Bay’s President, Mr. Libfeld, the Tax Court judge took over the questioning. In the end, the Tax Court judge concluded that the loan was not bad or doubtful, and dismissed Heron Bay’s appeal. 

Heron Bay’s principal argument before the Federal Court of Appeal was that the Tax Court judge conducted the trial in a manner that deprived Heron Bay of procedural fairness, such that the judgment could not stand. Mr. Justice Marc Nadon, Madam Justice Karen Sharlow and Madam Justice Carolyn Anne Layden-Stevenson, of the Federal Court of Appeal, agreed. Madam Justice Sharlow concluded her reasons for judgment as follows:

style="MARGIN: 12pt 1in 0pt; FONT-FAMILY: verdana; TEXT-ALIGN: justify">In my view, the record is such as to give a reasonable and well informed observer the impression that the judge, during the examination of Mr. Libfeld and as a result of his own questioning, adopted a position in opposition to Heron Bay on a critical issue in the case, giving rise to a reasonable apprehension that the judge was not a fair and impartial arbiter. This procedural flaw is such that the judgment cannot stand, and the matter must be returned to the Tax Court for a new trial before a different judge.

The decision of the Federal Court of Appeal offers important guidance to judges beyond the tax context and has general application to the conduct of all civil trials.

William I. Innes, David E. Spiroand Douglas B.B. Stewartacted for Heron Bay at the Federal Court of Appeal. 

For more information, please contact any member of the Toronto Tax Litigation Group of Fraser Milner Casgrain LLP:

The Honourable Donald G.H. Bowman      +1 416 863 4620     donald.bowman@fmc-law.com

William I. Innes                                     +1 416 863 4350     william.innes@fmc-law.com

David E. Spiro                                       +1 416 863 4761     david.spiro@fmc-law.com

Chia-yi Chua                                         +1 416 863 4356     chia-yi.chua@fmc-law.com

News Source : Another Win for FMC’s Toronto Tax Litigation Group