Section 180

In affirming the trial judge's findings that the taxpayers' documentation was inadequate to support their purported cash expenses (see summary under General Concepts - Evidence), Gauthier JA stated (at para. 11):

As Stratas JA explained in Canada v. South Yukon Forset Corporation, 2012 FCA 164 at paragraph 46, "[w]hen arguing palpable and overriding error, it is not enough to pull at leaves and branches and leave the tree standing. The entire tree must fall. Here, ... at least one of the judge's references appears to be factually incorrect if read literally... . That being said, the tree has not fallen.

At trial, the judge found that s. 31(1) did not stop the taxpayer from claiming farming losses for his horse breeding and racing business. He found that the taxpayer's farming constituted a significant part of his income in the years in question, and was more than a "sideline business." Therefore, under the framework set out in Gunn, s. 31(1) did not apply.

In affirming the trial judge's decision, Evans J.A. stated for the court at para. 27 that "it is not normally the function of an appellate court to second guess a trial judge's application of the law to the facts."

In noting an exception to the rule that in reviewing decisions of the Tax Court, the standard of review for conclusions of mixed fact and law was of palpable and overriding error, Malone J.A. stated (at pp. 6469-6470) that "if a clear legal error can be isolated from the facts, the error will be reviewed on a correctness standard".

"The standard of review set out in Housen v. Nikolaisen, [2002] 2 S.C.R. 235 applies to appeals from the Tax Court conducted under its informal procedure ... . That is, for questions of law, the standard is correctness while for findings of fact, inferences or conclusions of fact, or conclusions of mixed law and fact, the standard is palpable and overriding error." (p. 6408)

La Forest J. found (at p. 6111) that the role that an appellate court should give deference to the findings of fact made by a trial judge "applies not only when the credibility of witnesses is at issue, although in such a case it may be more strictly applied, but also to all conclusions of fact made by the trial judge", but went on to find that the Supreme Court of Canada should not give any deference to factual findings made by the Court of Appeal that differed from those of the trial judge.

Although the findings of facts of the trial judge were based on an agreed statement of facts, his findings involved drawing influences from those facts as to the true nature of the transactions, and in doing so he was obliged to apply the right legal principles in characterizing the transactions in terms of the provisions of the Act. Accordingly, the Court of Appeal was required to show some deference to the factual conclusion of the trial judge.

The inferences drawn by the trial judge that two subsidiaries were mere instrumentalities of the taxpayer were overturned by Iacobucci, C.J. after citing Gurd's Products.

Where neither of the parties disputes the findings of fact made by the Trial Judge, the Federal Court of Appeal is entitled to disagree with the Trial Judge on the inferences to be drawn from such facts if it is of the opinion that those inferences cannot, in the circumstances, be supported.

Where the task confronting the trial judge was esentially one of finding the facts and applying the appropriate law, the appellate court should not interfere "unless the findings of fact were unsupportable and the proper law was not applied."

When the Minister takes a new position in the Court of Appeal, or in argument before the trial judge, the court should only consider that position when it is satisfied beyond a reasonable doubt that all requisite evidence has been adduced at trial that may bear on that position.

Where a view taken by the trial judge as to a question of fact and opinion "is not unreasonable or based on some erroneous principle, the Court, on appeal, will not substitute a different view merely because it might, had it been the Court of first instance, have preferred such a different view."

"[A]n initial Appellate Court must take into consideration well-established precedents, namely: (1) where the credibility of witnesses is involved, except in extraordinary cases, the finding of the Trial Judge must not be set aside; (2) the interpretation of the evidence is left to the discretion of the judge who sees and hears the witnesses, and it is the duty of a Court of Appeal to respect the judgment of the judge who has these privileges unless it is satisfied that the latter was plainly wrong."