The trial judge's reasons essentially paraphrased: an agreed statement of facts, the Minister's assertions, a copy of the Minister's framing of the issues, and (very briefly) the taxpayer's and (somewhat more extensively) the Minister's arguments. The two closing paragraphs stated "I agree with the reasoning outlined by [Minister's counsel] in his argument" and "the appeals are dismissed, with costs."
The Court found that the trial judge's reasons were inadequate, failed to satisfy the taxpayer's right to procedural fairness and remitted the matter back to the Tax Court for redetermination by a different judge. The Court applied the "functional approach" set out in R. v. R.E.M., 2008 SCC 51, which provides (at R.E.M. para. 25):
[The functional approach requires] reasons sufficient to perform the functions reasons serve - to inform the parties of the basis of the verdict, to provide public accountability and permit meaningful appeal. The functional approach does not require more than will accomplish these objectives.
In the present circumstances the trial judge's reasons did not serve their proper function:
- The reasons failed to account for the competing theories put before the court. The judge accepted, without explanation, the Minister's framing of issues and ignored the taxpayer's.
- The Minister's reasons that the trial judge "agreed" with were internally inconsistent. They relied on different characterizations of events, and it was unclear which the trial judge had chosen (or that he had chosen any at all).
- The judge failed to reference any of the viva voce evidence adduced by the taxpayer in a three day trial, so that there was no basis for an appellate court to know which evidence had been rejected by him.
- The trial judge rejected a supposed taxpayer argument that the taxpayer had not made, suggesting that the judge had not understood the issues before him.