“For reasons provided above, the Board dismisses the appeals with costs to the Comptroller. Appeal is dismissed.” Once the dust has settled and wounds have been licked, the inevitable question looms: To appeal or not to appeal? That is the question which often invokes as deep a soul-searching in both taxpayer and counsel as Hamlet himself underwent. This is in no small part because tax disputes are like snowflakes – no two are ever exactly the same. Each merits consideration of its own particular legal strengths as well as the commercial cost-benefit balance. That said, as with snowflakes, there are often patterns and motifs which we see repeated from case to case. Whether the decision you are considering an appeal from is one from the Income Tax or Goods and Services Tax Board of Review, or the Property Tax Valuation Review Board, here are some questions which we at OSH often ask clients to consider.
Did the Board find against you on the facts or the law?
The starting point is of course the grounds of decision against which an appeal is being considered. Did the decision go against you because of some adverse finding of fact (for example upon cross-examination of a witness), or because your counsel’s legal propositions were disagreed with? For us legal counsel, the difference between an issue of fact and an issue of law is a very important distinction. This is because an appeal is normally confined to issues of law or mixed law and fact. Issues which are purely of fact are not appealable. The “factual baseline” which has been established in the forum of first instance (i.e. the relevant Board) is thus of greatest importance and will generally persist through any subsequent appeals. The importance of the facts found at first instance is borne out by a comparative analysis of taxpayer success rates before the Board, and before the appellate courts.
The analysis clearly shows a marked decline in taxpayer success rates from the Board stage to the appellate stage; before the Board, the taxpayer enjoys nearly 50-50 chances of being at least partially successful. Once the matter goes before the High Court or the Court of Appeal however, i.e. once the factual baseline has been established, the taxpayer’s success rate drops markedly to around a one-in-three chance.
This however does not mean all is lost …
Are the facts really what they are?
As we have said, findings of fact are generally not appealable. Nor can a taxpayer admit new evidence. This is not to say however that the factual baseline is set in stone.
First, while primary and direct findings of fact will normally not be disturbed by an appellate court, inferences of fact typically stand on more vulnerable terms. The standard required to overturn an inference of fact is that it was one which no Board properly directing itself could have come to. This at first glance may seem to merely be a consolation prize. Nothing could be farther from the truth. Particularly in tax disputes, inferences from facts often occupy a pivotal role in deciding the issue. It is only in very rare cases that primary evidence speaks directly to the requisite elements in a given statutory provision. A common example is a finding on the intention or state of mind of the taxpayer. Such a finding is usually not based on primary evidence, but on inferences from contemporaneous documentation or witness’s statements. A good counsel will be able to distinguish primary findings of facts from inferences, and to deal with either effectively.
Second, a rarer but often overlooked occurrence is where facts relied upon by the Board were not properly admitted into evidence by the revenue authority, but were instead spoken through its counsel. Conclusions drawn by the Board based on such facts would be open to review by an appellate court on the basis that the taxpayer did not have the opportunity to test their veracity by way of cross-examination. This issue assumes great importance in matters involving processes of the revenue authority itself or its exercise of some power or discretion, prime examples being valuation cases and exercise of general anti-avoidance powers.
The two points discussed above are merely examples of areas where findings of fact may be contested in an appeal. In this regard, it vital in considering launching an appeal to conduct a thorough, fine-tooth analysis of the transcripts of the hearing, to determine precisely which facts were derived from primary evidence, and which were inferences, and to glean insight into the particular findings of fact which the Board had relied on.
Do you already have a robust case theory?
At this point you may have realised that we at OSH place heavy emphasis on the facts of a case. This is because a good case theory is almost always one which identifies and rests on the particular facts of the case. Ideally, a sound case theory grounded on established facts will be capable of carrying one from the Board stage through any number of appeals. That said, one should always be prepared to adapt a case theory in response to unanticipated developments in the facts and evidence. Sometimes too, the presentation of a case may be varied to maximise persuasiveness – arguments which may not have much impact before the Board may gain greater traction before the High Court or Court of Appeal.
In this regard, there is sometimes value in acquiring a second opinion. To those wondering, rest assured that us legal counsel will not take offence at such a request; we are ethically bound to act in your best interests. In fact, good and secure counsel will often welcome the opportunity to sharpen the legal arguments with, and receive input from, a fellow professional.
Have you considered force multipliers?
Here at OSH, we pull out all stops to help you win the case. This sometimes requires taking roads less travelled. Some examples from our past cases include:
- Holding full-blown, no-holds-barred, mock trials or moots in preparation for the hearing
- Where appropriate, applying for the decision maker(s) to visit the site of the issue (especially in property tax cases)
- Enlisting the assistance of Queen’s Counsel to sharpen the advocacy of the case
These measures will not in themselves win you the case, but, if executed appropriately, can multiply the persuasiveness and effectiveness of an existing case theory. This edge can mean the difference between yet another “Appeal is dismissed.” and “Appeal is allowed in full.”
Bonus question: Have you talked to us yet?
The assessment of the merits of any appeal is ultimately one which must rest on the unique facts of each case. If you find any of the points we have reviewed here relevant to you, we will be glad for you to reach out to us for a more detailed discussion.