Simply stated, litigation is the process whereby a legal dispute between parties is resolved by applying the facts to the law. At least in theory, these two factors (facts and law) are to determine the outcome of the dispute and it is on these two fronts that the battles of litigation are waged. Therefore, a litigation strategy must include establishing facts, controlling the evidence that will be presented to a judge, determining what law is applicable and convincing a judge as to the proper interpretation of the applicable law.

The recent decision of Bekesinski v. The Queen, 2104 TCC 245 is generally unremarkable in that it does not establish or clarify any important point of law. However, the decision serves as a good illustration of how litigation is won and lost. The point in dispute was simple – the Appellant was assessed as a director of corporation and his position was that he had resigned and that the assessment should therefore be vacated.  During the trial, the Minister argued that the resignation was backdated and not authentic or valid.

In allowing the appeal, the court addressed a number of commonly encountered tax litigation issues. To begin, the court set the framework which is that in the appeal, the Appellant was required to “demolish the Minister’s assumptions by making out a prima facie case on a balance of probabilities”. Citing the Federal Court of Appeal, the court defined a prima facie case as “one supported by the evidence which raises a degree of probability in its favour that it must be accepted if believed by the Court unless it is rebutted or the contrary is proved.” If the Minister’s assumptions are rebutted, the onus moves to the Minister to prove the assumptions on a balance of probabilities.

Next, the court held that a fact is not “inherently”, or as a matter of law, probable or improbable. Instead, whether a fact or event is probable or improbable is to be determined, by the judge, on the basis of the relevant evidence.

That said, experience in litigation reveals and the following passage from Bekesinski illustrates that fact finding may also very much be based upon judicial experience. On the issue of backdating the notice of resignation as a director, the court stated: “I do not believe that the alleged backdating of the Resignation is an improbable event as the Appellant Counsel (sic) has characterized it. Documents of convenience are often part of the evidence in tax appeals [and] backdating of a document is not an event I would characterize as a highly unusual allegation.”

While the judgment does not reveal if evidence was led on whether backdating of documents is common or uncommon, it appears that this finding of fact was based upon an impression or, what is at times described as judicial experience.

In addition to judicial experience, “common sense” is also at play. Citing case law, the court in Bekesinski affirmed that in addition to other factors that relate to the assessment of credibility, “common sense” may and should also be used “to determine whether the evidence is possible, impossible, probable or highly probable.”

In the result, the court held that while the Appellant’s explanations about the Resignation and whether it was backdated were “plausible”, there was no expert evidence upon the issue and the Appellant was therefore successful in demolishing the Respondent’s assumptions. The court stated: “Despite the Respondent’s allegation of backdating, the Respondent failed to produce evidence that would prove, on a balance of probabilities, that the Resignation is not authentic…I question the authenticity of the Resignation but, without the appropriate evidence before me, I must allow the appeal.”

In arriving at the result, the court observed that the “Respondent made a series of litigation choices which have resulted in my conclusion.”

The conduct of litigation is very much about making choices based upon law, evidence, procedure and a good dose of common sense mixed with experience. There are good decisions, there are bad decisions, and there are those which must be based upon judgment and which could go either way.

Bekesinski illustrates how “litigation choices” can play out – in that case, unfavourably for the Minister.   Not every case can be won. However, even winning cases can be lost and a successful litigation strategy must be based upon controlling the litigation process and making the right decisions at the outset for it is often the decisions that are made early on that shape the litigation and either increase or decrease the chances of success.