Citation: 2014 TCC 108
Date: 20140404
Docket: 2008-2487(IT)G
BETWEEN:
WAYNE IZUMI,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Motion heard
by written submissions,
By: The Honourable
Eugene P. Rossiter, Associate Chief Justice
Appearances:
|
For the Appellant:
|
David
Chodikoff and
Patrick DéZiel
|
|
|
|
|
Counsel for the Respondent:
|
Elizabeth Chasson and
Donna Dorosh
|
____________________________________________________________________
ORDER AND REASONS FOR
ORDER
[1] This is a motion by the Appellant to set
aside the Judgment of April 10, 2012 in which the Tax Court of Canada had
dismissed the Appellant’s appeal for his 1994 and 1995 taxation years. The
Court dismissed the appeal as no one appeared on behalf of the Appellant at the
status hearing held on April 3, 2012. The Appellant now requests that the Tax
Court of Canada:
a.
Exercise its discretion
pursuant to section 12 of the Tax Court of Canada Rules (General Procedure)
extending the time to apply for an Order subsection 140(2) of the Rules; and
b.
Grant an Order under
subsection 140(2) of the Rules setting aside the Judgment.
FACTS:
[2] The Appellant was reassessed for the 1994
and 1995 taxation years by notice of reassessment dated June 30, 2008. A Notice
of Appeal was filed with the Tax Court of Canada on August 6, 2008 by the
Appellant’s then counsel, Graham Turner. The address of the Appellant given in
the Notice of Appeal was 251 Appleby Road, Ancaster, ON, L9G 2V6. The Respondent
filed a reply to the Appellant’s Notice of Appeal on November 6, 2008.
[3] In September, 2009 the Appellant moved to a
new address at 1055 10th Side Road, R.R. #1, Moffatt, ON L0P 1J0. Shortly
thereafter, the Appellant provided the Canada Revenue Agency with a change of
address by telephone and since that time the Canada Revenue Agency has directed
all correspondence to this new address; however, the Appellant did not notify
the Tax Court of Canada of his new address and it is unclear whether the Appellant
provided his counsel, Mr. Turner, with his new address.
[4] On May 31, 2010 Appellant’s counsel, Graham
Turner, filed a notice of removal of counsel of record in which he listed the
Appellant’s contact information as his former address, that is, 251 Appleby
Road, Ancaster, ON, L9G 2V6.
[5] On February 27, 2012, the Tax Court of
Canada issued a Notice of Status Hearing for April 3, 2012, the Notice of
Status Hearing being mailed to the Appellant’s former address. On April 3,
2012, the Status Hearing was held and on April 10, 2012 the Tax Court of Canada
dismissed the Appellant’s appeal for failing to appear at the status hearing.
[6] On August 24, 2012, Respondent’s counsel
sent a letter to the Appellant at his former address enclosing the Respondent’s
bill of costs and the letter was returned by Canada Post. On September 6, 2012,
the Respondent’s counsel sent another letter to the Appellant at his current
address again including the Respondent’s bill of costs. It was only on or about
September 7, 2012 that the Appellant became aware of the Status Hearing and
contacted the Respondent’s counsel to enquire as to the status of his appeal.
He was informed at that time that the appeal had been dismissed and the
Appellant then paid the Respondent’s bill of costs.
[7] In the fall of 2012, the Appellant
contacted his accountant with respect to the appeal and the outstanding amounts
owing for his 1994 and 1995 taxation years. The accountant referred him to the
law firm of Miller Thomson LLP to assist in legal issues surrounding the 1994
and 1995 taxation years. The motion to set aside the Judgment of April 10, 2012
was filed with the Tax Court of Canada on November 1, 2013.
ISSUE:
[8] Should the Tax Court of Canada
(a) exercise its discretion pursuant to
section 12 of the Tax Court of Canada Rules (General Procedure)
(“Rules”) extending the time to apply for an Order under subsection
140(2); and
(b) grant an Order under subsection
140(2) of the Rules setting aside the Judgment?
ANALYSIS:
[9] The Tax Court of Canada has discretion
under Rule 140(2) to set aside or vary a Judgment or Order obtained against a
party who failed to attend a hearing, if the application is made within thirty
days after pronouncement of the Judgment or Order. Here, the Appellant’s
application is brought some eighteen months after the Tax Court of Canada Order
of April 10, 2012 dismissing the appeal for failure to appear. The application
has been brought well beyond the thirty day limit and as a result the Appellant
requires this Court to exercise its discretion under subsection 12(1) of the Rules
to extend the period of time provided for in the subsection 140(2) of the Rules
to allow his appeal to proceed.
[11] In Tomas v. Her
Majesty the Queen, 2007 FCA 86, the Federal Court of Appeal noted that the
factors generally considered on the applications for extension of time include:
(1) a continuing
intention to pursue the appeal;
(2) the appeal has
some merit;
(3) there is no
prejudice to the Respondent arising from the delay; and
(4) a reasonable
explanation is given for the delay.
[12] In Farrow v. Her
Majesty the Queen, 2003 TCC 885, Chief Justice Donald Bowman, as he then
was, similarly discussed the principles the Tax Court of Canada should consider
in determining whether to set aside a Judgment. Chief Justice Bowman held that
the application should be made as soon as possible after a Judgment comes to
the knowledge of the Appellant, though mere delay is not a bar unless it is
wilful or results in prejudice to the opposing party. Further the Affidavit
supporting the application should explain the delay in making the application
and finally, the application must disclose an arguable appeal.
[13] It should be noted
that although the Notice of Appeal must disclose a justiciable issue, the
threshold is low and there is no need for a litigant to testify or call
evidence to demonstrate a prima facie case. Also, like in other
procedural matters, the Tax Court of Canada should not apply a set of factors
in a rigid manner to determine whether to set aside a Judgment but adapt a
contextual approach in light of the particular facts of the case, as was
considered by Justice Woods in GMC Distribution v. Her Majesty the Queen,
2009 TCC 287.
[14] The facts to be
considered in a motion of this nature must show a continuing intention by an
Appellant to pursue an appeal. The Appellant claims that he believed that his
appeal was being held in abeyance pending the outcome of related tax cases.
This appears to be a reasonable belief given the slow moving nature of this
appeal – the tax years under appeal date back to 1994 and 1995. Although the
Appellant did not take an action to pursue his appeal after his former counsel
ceased to act for him, the fact that he believed his appeal was being held in abeyance
and the mistaken belief that he had provided notice of his new address to the
Court lends support to his position that he had a continuing intention to
pursue this appeal.
[15] Another factor to be
considered is whether or not the appeal has merit which discloses an arguable
appeal. While the Notice of Appeal must disclose a justiciable issue, the
threshold is low and there is no need for the Appellant or any litigant to
testify or call evidence to demonstrate a prima facie case. The
Appellant submits that the Notice of Appeal discloses an arguable appeal
concerning the deduction of business losses of a partnership, as well as
certain carrying costs claimed by the Appellant in his 1994 and 1995 taxation
years. The Respondent, in his submissions on the motion, did not take issue
with respect to the merit of the taxpayer’s appeal. Given the low threshold,
there does not appear to be any reason to question the Appellant’s contention
that the appeal has merit and that the Notice of Appeal raised a justiciable
issue.
[16] Is there prejudice to
the Respondent arising from the delay? In GMC, Justice Woods noted that
like with other procedural matters, the Court should not apply a set of factors
in a rigid manner to determine whether or not to set aside a judgment, but
rather, adopt a contextual approach in light of the particular facts of the
case. Justice Woods described the “overriding consideration” should be the
relative effect on the persons that will be affected by the decision. In this
particular case, a consideration of the relative prejudice to the parties
favours allowing the motion. There is no apparent prejudice to the Respondent.
The Respondent has not argued that it will suffer prejudice if the motion is
allowed. Conversely, great prejudice will be occasioned on the Appellant if the
motion is dismissed as $153,421 in deductions are at stake. The Respondent only
refers to authorities of the Ontario Court of Appeal in 11961658 Ontario
Inc. v. 6274013 Canada Limited, 2012 ONCA 544, for the proposition
that a case can be dismissed for delay without proof of actual prejudice. This
case contains an interesting discussion with respect to prejudice, but it deals
with the issue of actual prejudice. In this particular case, there is no
evidence of actual or apparent prejudice to the Respondent.
[17] Finally, one factor
that must be considered is whether a reasonable explanation is given for the
delay. The Appellant had explained why he failed to attend the status hearing
and the delay between the pronouncement of the Judgment and the date the
Appellant became aware of the Judgment, but there was no explanation of the
delay between becoming aware of the Judgment against him and filing the motion.
It is noted that the Appellant sought advice from his accountant with respect
to the issues of the 1994 and 1995 reassessments and his accountants then
referred him to the firm of Miller Thomson on the tax issues. The Court is not
aware of the timing of the retention of Miller Thomson and the time line from
their retention to the motion being filed.
[18] On the facts of the
case, the delay is of significance but the issue of prejudice in this case should
be given significantly more weight. The Appellant had done everything expected
of him in relation to keeping the Court advised with respect to his address,
and was not intentionally avoiding any notice of matters with respect to his
tax appeal. The Appellant when he noticed that he had received correspondence
from the Respondent with respect to his bill of costs acted quickly and paid
the bill of costs forthwith. The prejudice to the Appellant if the appeal does
not proceed is significant.
[19] Considering all of
the factors aforesaid, and the case law referred to, I am satisfied that the
Appellant took the appropriate steps in the process, although he could have
done it in a little more timely fashion. His conduct was certainly not
egregious behaviour and I believe to deprive him of the ability to have his
case decided on the merits would most certainly be unduly harsh. I believe the
circumstances are such that the default judgment should be set aside and the
period of time within which the Appellant may bring his motion to set aside the
Judgment be extended to the date on which the motion was filed with the Tax Court
of Canada.
[20] The motion is granted
and there will be no order as to costs.
Signed at Ottawa, Ontario, this 4th day of April, 2014.
“E.P. Rossiter”
Email this Content