Executive Summary: Key Legal and Evidentiary Issues

• Respondent was granted an extension to serve discovery answers late, with the Court deeming service effective as of April 26, 2024.

• Delay of approximately six and a half months occurred due to error by Respondent’s counsel, with no satisfactory explanation provided.

• Court applied the Hennelly test and found that the overriding interest of justice justified granting the extension despite one factor not being met.

• Appellants’ claims of prejudice and tactical unfairness were rejected for lack of supporting evidence.

• Proposed remedies under Rule 116(4) to allow the appeal or strike evidence were found inapplicable and unsupported by the facts.

• Costs of $1,800 awarded to Appellants due to Respondent’s procedural delay, despite the motion being granted.

Background and facts of the case

Golden Mind Investment Ltd. (the Corporation) and its sole shareholder, Gong Chen, appealed reassessments issued by the Minister of National Revenue. The reassessments were partly based on a net worth method and covered:

• For the Corporation – taxation years ending August 31, 2015 and August 31, 2016:

  • Business income included: $460,904 (2015) and $896,739 (2016)

  • Capital cost allowance (CCA) claims were determined

  • Liability for gross negligence penalties was assessed

• For Mr. Chen – taxation years 2014, 2015 and 2016:

  • Shareholder benefits included: $88,545 (2014), $813,022 (2015), and $545,319 (2016)

  • CCA claims were determined

  • 2014 reassessment issued beyond the normal reassessment period

  • Gross negligence penalties were imposed

Timetable and procedural chronology

A timetable order agreed upon by the parties was issued on November 10, 2022, requiring exchange of written discovery questions by May 26, 2023. This was amended on August 28, 2023, to require answers by October 10, 2023.

• Appellants served their answers on October 10, 2023.

• Respondent requested and was granted an extension to October 17, 2023, but failed to serve answers by that date.

• From October 18, 2023 to February 13, 2024, Appellants made multiple inquiries regarding the Respondent’s answers.

• Respondent ultimately served answers on April 26, 2024, after filing the original motion on April 19, 2024.

Motion and legal framework

Respondent filed a motion under section 65 of the Tax Court of Canada Rules (General Procedure), later amended on May 10, 2024, requesting that:

1. Answers be deemed served on April 26, 2024

2. New dates be set for remaining steps in the timetable

3. The motion be disposed of on a costs basis

The Court analyzed the motion under the four-factor Hennelly test:

1. Continuing intention to pursue the proceeding – supported by Respondent’s actions, including filing replies and attempting to address delays.

2. Some merit in the appeal – Respondent’s replies established that its position was not without merit.

3. No prejudice to Appellants – Allegations that Respondent reviewed Appellants’ answers to revise its own were unproven.

4. Reasonable explanation for delay – This factor was not satisfied; delay was attributed solely to counsel error.

The Court emphasized that not all factors need to be met, and the interests of justice remain the overriding concern.

Appellants’ position and proposed remedies

Appellants opposed the motion and proposed remedies under Rule 116(4), including:

• Allowing the appeals outright on the issues of gross negligence penalties and reassessment of Mr. Chen’s 2014 year, or

• Striking evidence of the Respondent’s nominee, Ms. Helen (Chu Yin) Yang, on those issues

The Court held these remedies were inapplicable, as Rule 116(4) requires refusal or failure to answer proper questions—not merely delay. The Court also emphasized the high threshold for applying such drastic remedies, referencing Lynch, Tremblay, and Ross.

Outcome and Court's order

On May 26, 2025, the Court ruled:

• The Respondent’s answers are deemed to have been served on April 26, 2024

• By July 4, 2025, parties must either:

  • File a joint application for a hearing date

  • Request a settlement conference

  • Confirm anticipated settlement date

While granting the motion, the Court awarded $1,800 in costs to the Appellants, noting the procedural delay caused by the Respondent’s inaction.

Policy terms or insurance clauses were not discussed or referenced in the decisions. The case strictly involved tax litigation procedures and discovery compliance under the Tax Court of Canada Rules.