Executive Summary: Key Legal and Evidentiary Issues

• Appellant challenged the Minister's denial of net business losses totaling $16,788 (2019) and $16,756 (2020) claimed for foreign commercial activities

• Respondent sought permission to amend its Reply multiple times, initially including allegations that the appellant was part of a group of 57 taxpayers and that his lawyer was at the center of this initiative

• Court applied the test from El Ad Ontario Trust: amendments permitted if they help resolve genuine issues, cause no injustice that costs could not repair, and serve justice

• Modifications to the Minister's assumptions of fact were denied due to lack of evidence that proposed facts were actually considered by the Minister during reassessment

• Procedural maneuvers by the Respondent, including contentious allegations later withdrawn, unduly delayed the hearing of the appeal

• Costs of $1,000 awarded to appellant despite motion being granted, payable within 60 days

Background and procedural history

This case arises from reassessments issued to Allamathieu Eba denying business losses he claimed under section 9 of the Income Tax Act (ITA) for the 2019 and 2020 taxation years. The appellant asserted he incurred business expenses for commercial activities conducted abroad and sought to have these deductions allowed. The appeal was filed on August 6, 2024, and the Respondent filed its Reply on October 3, 2024. The hearing was initially scheduled for June 25, 2025, but months before that date, the Respondent notified the Court and appellant of its intention to amend the Reply.

The Respondent's evolving position on amendments

On February 12, 2025, the Respondent submitted a first proposed Amended Reply ("Réponse modifiée #1") containing six categories of modifications: the addition of an overview; the retraction of an admission; modifications and additions to the Minister's assumptions of fact; the addition of facts advanced by the Attorney General of Canada; clarifications to the issues in dispute; and the addition of a ground relied upon by the Respondent. The overview and additional facts alleged that the appellant was part of a larger group of taxpayers all participating in an effort to claim expenses related to "alleged businesses" and further alleged that the appellant's counsel was at the center of this initiative. On June 16, 2025, the Respondent indicated it no longer intended to proceed with the modifications as represented in Réponse modifiée #1, but rather sought to modify the Reply as represented in a second version ("Réponse modifiée #2"), which removed the overview and the facts advanced by the Attorney General of Canada while retaining the other proposed changes.

The appellant's response and subpoena issue

The appellant opposed the modifications in Réponse modifiée #2 but sought to preserve the overview and additional facts from paragraph 8 of Réponse modifiée #1, arguing their preservation was essential for transparency. The appellant asserted that the Minister's decision to deny business expenses was based not solely on provisions of the ITA but also on the alleged conduct of his lawyer. On June 13, 2025, the appellant sent a subpoena to a lawyer for the Respondent, the author of Réponse modifiée #1, requiring him to appear at the June 25, 2025 hearing and bring "all documents related to the 57 taxpayers mentioned in the Amended Reply to the Notice of Appeal." On June 17, 2025, the Respondent wrote to the Court requesting that the appeal be placed under case management to quash the subpoena. The June 25, 2025 hearing was adjourned and set for hearing on December 12, 2025.

The Court's analysis of proposed amendments

Associate Judge Andrew Miller applied the established test from the Federal Court of Appeal in El Ad Ontario Trust, which provides that amendments to a pleading should be allowed if they help the Court determine the genuine issues between the parties, provided they do not cause the other party an injustice that costs could not repair and that they serve the interests of justice. The Court rejected the appellant's request to preserve the overview and additional facts from Réponse modifiée #1, noting first that Réponse modifiée #1 was never filed with the Court but was only sent as advance notice of the Respondent's intention to present an amendment motion. The Court further noted that it cannot impose the addition of allegations and facts in a party's pleading, and even if it had the discretion to do so, the Minister's conduct is not grounds for annulling, modifying, or referring back to the Minister an assessment established under the ITA.

Amendments permitted by the Court

The Court allowed modifications to paragraphs 9 and 10 of Réponse modifiée #2, which clarified the issues in dispute. The original Reply contained only a vague and imprecise question. The additions specified whether the appellant operated a business and, alternatively, the nature of expenses incurred by the appellant. The Court found the appellant suffered no prejudice from these changes and was actually in a more advantageous position by now knowing the arguments that would be raised. Modifications to subparagraph 12a) were permitted as primarily stylistic revisions that did not affect the substance of the ground originally stated. The addition of a subsidiary ground under subparagraph 12d), invoking the reasonableness of expenses under section 67 of the ITA, was also allowed. The Court noted this addition helps determine the genuine issues and relates to a question already existing in the Reply regarding the nature of expenses. The Court found no irreparable prejudice since the appellant had been notified of this modification since February 12, 2025, and the scheduled December 12, 2025 hearing did not proceed due to the Respondent's motion, giving the appellant ample time to prepare.

Amendments refused by the Court

The Court refused modifications to paragraph 2 of Réponse modifiée #2, which sought to retract an admission regarding facts alleged in paragraph B of the Notice of Appeal. The proposed modification stated that the Attorney General "takes note of paragraph B of the Notice of Appeal and remarks that no fact is alleged in support of the Appellant's position." The Court was not entirely convinced by the Respondent's interpretation that no facts existed in paragraph B, noting that the appellant identifies the amounts of business losses in dispute and provides an explanation of his understanding of the Minister's reasons supporting the reassessments. More importantly, the Court found this modification served no useful purpose since both parties identified the same amounts in dispute, and the Minister's reasons are ultimately less important than the Respondent's grounds. The Court also noted that under rule 6(1) of the Tax Court of Canada Rules (Informal Procedure), the Reply must indicate facts admitted, facts denied, and facts the Respondent does not know and does not admit—merely "taking note" does not comply with this requirement.

The Court refused modifications to paragraph 7 of Réponse modifiée #2, which proposed changes and additions to the Minister's assumptions of fact. The Court emphasized that assumptions of fact carry unique importance in tax litigation as they generally impose a burden of proof on an appellant who must rebut one or more facts with evidence established on a balance of probabilities. The Respondent bears the obligation to disclose all assumptions of fact on which the Minister relied in establishing the assessments under appeal. The Court cited the Federal Court of Appeal's statement that fairness requires facts alleged as assumptions to be complete, precise, accurate, and stated honestly and frankly so the taxpayer clearly knows what must be proven. The Respondent presented no evidence at the hearing of the motion that the proposed modifications and additions were actually considered by the Minister for the reassessments—no witness from the Canada Revenue Agency was present to testify and no affidavit from a CRA agent was submitted. Allowing these modifications without such evidentiary support would cause the appellant prejudice too great for costs to repair.

Ruling and costs awarded

The Court granted the Respondent's motion in accordance with the reasons, ordering the Respondent to file and serve on the appellant, within 30 days of the Order, an amended Reply conforming to the permitted modifications. Despite the motion being granted and the appeal being governed by the informal procedure, the Court awarded costs in the lump sum amount of $1,000 to the appellant, payable within 60 days. The Court noted that awarding costs in an appeal governed by the informal procedure is unusual but appropriate here because the Respondent's efforts to amend the Reply unduly delayed the hearing of the appeal. The Court characterized the Respondent's decision that gave rise to the amendment motion as, at best, clumsy or inopportune, and at worst, a complete lack of judgment. The facts and allegations according to which the appellant's lawyer was linked to efforts leading to deductions claimed by other taxpayers have no place in a pleading before the Tax Court. This decision by the Respondent constituted an important error that triggered a series of procedural maneuvers between the parties, caused delays in the hearing of the appeal, and undoubtedly forced the appellant to incur unforeseen expenses.