Hardtke v. R. - FCA: Appeal from ss. 160(1) transferee assessment dismissed from bench

 Hardtke v. R. - FCA:  Appeal from ss. 160(1) transferee assessment dismissed from bench

http://decisions.fca-caf.gc.ca/fca-caf/decisions/en/item/144136/index.do

Hardtke v. Canada (May 4, 2016 – 2016 FCA 138, Nöel C.J. (author), Dawson, Trudel JJ. A.).

Précis:   The taxpayer’s spouse transferred the family home to her at a time when he owed a considerable amount in taxes.  As consideration for the transfer she assumed a mortgage of $65,000 and gave her spouse $1 in cash.  CRA assessed her on the difference between the value of the home at the date of transfer ($315,000) and the consideration given, i.e., $249,999.  The taxpayer alleged that she had provided consideration, both before and after the transfer, to her spouse in the form of funds he used in his business.  She also argued that she had had a claim to the property based on constructive or resulting trust.  The Tax Court did not accept her evidence and also rejected the argument based on constructive or resulting trust.  The appeal was dismissed with costs.  Ms. Hardtke appealed to the Federal Court of Appeal which held that there was no basis to upset the factual findings of the Tax Court Judge and dismissed her appeal from the bench, with costs to the Crown.

Decision:   The Court of Appeal rejected both Ms. Hardtke’s attack on the Tax Court Judge’s findings of fact as well her argument based on “intention” (which was not raised in the Tax Court):

[7]               It suffices to say in this regard that the question whether the evidence establishes the existence of a constructive trust is one of fact which must be established on a balance of probabilities (Hickman Motors Ltd. v. Canada, [1997] S.C.R. 336 at para. 92), and that no error of a palpable and overriding nature has been demonstrated with regard to the Tax Court judge’s conclusion that the evidence fell short of establishing the existence of a constructive trust (reasons, paras. 58 and 60).

[8]               The appellant further argues that section 160 requires that the transferor of the property be shown to have an intent to avoid the payment of taxes. She claims that Mr. Hardtke had no such intent. Without suggesting that intent is relevant, we note that this argument was not raised at trial so that Mr. Hardtke was not called upon to testify and the issue pertaining to his state of mind at the time of the transfer was not explored. In our view, it would be prejudicial to the Crown to allow this argument to be raised for the first time on appeal.

As a result the appeal was dismissed from the bench, with costs to the Crown.