Canadian Tax Haiku of the week:

The Crown kindly gave

An early holiday gift

To Mister Legge

inheritance tax in canada


We’ve previously blogged about Health Quest,[1] a judgement where the Tax Court of Canada (Tax Court) ruled in favour of the taxpayer because the Crown failed to follow the rules of pleadings in the Tax Court.[2] A similar result happened in Legge.[3] In both cases, the Crown did not include vital assumptions in its Reply, and then failed to meet the evidentiary burden at trial. As a result, both appeals were ruled in favour of the taxpayer, despite not having a strong case.

Health Quest

In a nutshell: two assumptions in the Minister’s Reply contained statements of mixed fact and law.[4] Since these assumptions must be limited to factual assumptions only, the Tax Court ruled that mixed assumptions put Health Quest at a “distinct disadvantage.”[5] As a result, the burden of proof shifted to the Minister, which it did not meet. As a result, the appeal was decided in favour of Health Quest.[6]


The issue in Legge was whether the respondent correctly decided that contributions by Mr. Legge made under the Canada Pension Plan[7]are deemed to be zero for 2006 and 2007 pursuant to subsection 30(5) of that legislation.

Subsection 30(5) states:

 30(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 where

(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.

The Crown submitted that subsection 30(5) applies on the basis that Mr. Legge did not file a return of self-employed earnings within four years of the filing due date for the income tax return for those years. The Crown also submitted that this requirement is not satisfied because Mr. Legge reported losses rather than earnings.[8]

However, the Honourable Mr. Justice Woods rejected the Crown’s submissions because it ignored that there are two requirements for the application of subsection 30(5): a taxpayer filing requirement and an assessment requirement.

Even if Justice Woods had accepted the Crown’s argument, subsection 30(5) could not apply unless it was found that the Minister had not assessed contributions within the requisite four year period. This is where the Crown’s error had drastic consequences. The Reply did not mention the assessment requirement nor was it mentioned by the Crown at the hearing. Moreover, there were no stated assumptions as to what assessments, if any, were made within the four year period. As a result, the Crown had the burden to establish by evidence that the requirement in subsection 30(5)(b) has been satisfied.

This burden was not satisfied. Justice Woods stated that “if this appeal were governed by the general procedure rules of the Court, it may have been appropriate to obtain written submissions of the parties with respect to this issue. However, written submissions are generally not practical when the appeal is not under the general procedure. Accordingly, it is appropriate for the Court to issue judgment without further submissions”[9]


Justice Woods commented that the result was a “windfall” to Mr. Legge because it is likely that there was no assessment of contributions for 2006 and 2007. However, the Crown is required to properly plead its case and to establish the facts supporting its position, either by evidence or by assumptions. The Tax Court does not have any sympathy when this requirement is not met. This case also illustrates the importance of taking disputes to the tax court. If Mr. Legge had just “let it go” at the objection stage, he would not have received this early holiday present. Sometimes you have to go to court because as the hockey saying goes “you miss 100% of the shots you do not take”.

By Jonathan N. Garbutt, Barrister & Solicitor and Raminder Pandher, Student-at-law

The above article is provided on a “For your information” basis, and is not intended as and should not be considered to be legal advice.

[1] Health Quest Inc. v. The Queen, 2014 TCC 211 [Health Quest].

[2] Link?

[3] Legge v. The Queen,2014 TCC 360 [Legge].

[4] Health Quest, supra note 1 at para 27

[5] Ibid, at para 31.

[6] Ibid, at para 44.

[7] Canada Pension Plan, RSC 1985, c C-8.

[8] Leggesupra note 3, at para 5.

[9] Ibid at para 11.