Citation: 2011TCC240
Date: 20110505
Dockets: 2008-2842(IT)G;
2009-2661(GST)G
BETWEEN:
JAMES SZOLLOSI BENS,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Webb, J.
[1]
The Respondent brought
a Motion, pursuant to paragraph 64 of the Tax Court of Canada Rules (General
Procedure), to dismiss the Appellant’s appeals under the Income Tax Act
and the Excise Tax Act. The Respondent has asked that these appeals be
dismissed on the basis that the Appellant has failed to prosecute these appeals
with due dispatch. The failure of the Appellant to appear for this Motion does
not assist him in this regard.
[2]
By an Order dated
December 17, 2010, a Status Hearing was scheduled for this matter for February
9, 2011. Paragraph 2 of this Order provided that:
At the status hearing, the appellant must show cause why
the appeal should not be dismissed for delay, and the presiding judge may set
time periods for the completion of the remaining steps necessary to place the
appeal on a hearing list and may direct that the appeal be placed on a hearing
list within a specified time or may dismiss the appeal for delay.
[3]
At the status hearing
held on February 9, 2011 (at which the Appellant did attend), Justice McArthur
expressed concerns about the length of time that the matter was taking and the
lack of action being taken by the Appellant. After a break, the parties
proposed a date for the Appellant to obtain documents in relation to his
appeals and to answer undertakings. By Orders dated February 21, 2011, Justice McArthur
ordered that:
The Appellant shall make his
best efforts to provide the Respondent with relevant financial records,
information and documentation in response to undertakings made October 14, 2010
by February 28, 2011.
The Appellant shall take all
reasonable efforts to satisfy all past undertakings made by March 31, 2011 and,
in the same manner, complete any new undertakings by May 2, 2011.
The hearing shall proceed in
any event at the Tax Court of Canada, 701 West Georgia Street, 6th Floor, Vancouver, British Columbia, commencing at 9:30 a.m., on Monday,
May 16, 2011, for a duration of one day.
(emphasis added)
[4]
Justice McArthur’s
brief reasons for his Orders were as follows:
1 This Appeal deals with unreported business income
($39,914 for 2003 and $155,000 for 2004), disallowed expenses ($91,563 for 2003
and $111,000 for 2004) and penalties.
2 A Notice of Appeal was filed September 8, 2008 and an
Amended Reply on December 4, 2008.
3 Since that time, there have been numerous delays on
the part of the Appellant, his two accountants and two lawyers. This is the
second Status Hearing and the fifth Tax Court judge to render an order.
4 The second lawyer (D. Strebchuk) to act on the
Appellant's behalf withdrew November 18, 2010, where he stated to the
Appellant, in part:
1. given that on a consistent or
ongoing basis since May 31, 2010, you have neglected, failed or refused to
provide our office with the proper instructions or adhere to the advice and
direction provided to you by our office in the within Actions, we are unwilling
and/or unable to provide further representation on your behalf in the within
Actions. Accordingly, we respectfully demand that you consider this
correspondence as the written notice that our office intends to cease to act as
counsel of record on your behalf in the within Actions.
...
3. .... we respectfully request (as a
matter of courtesy) that if you remain intent upon advancing the Claims, then
you forthwith retain and instruct alternate counsel to advance the Claims in
order to avoid same being forever barred, including pursuant to statutory or
common law authority; and
5 The
Appellant ignored this letter and did not pick up the notice of this Status
Hearing sent by registered mail on December 20, 2010 and returned to sender
(Tax Court of Canada).
6 With an abundance of caution and tolerance, I will not
dismiss the Appeal for delay. The Appellant is given a final opportunity to
have his Appeal heard on its merits at the Tax Court of Canada, 701 West Georgia Street, 6th Floor, Vancouver, British Columbia,
commencing at 9:30 a.m., on Monday, May 16, 2011, for a duration of one day.
[5]
It seems clear to me
that Justice McArthur had contemplated the possibility that the Appellant would
not produce any further documents or satisfy any other undertakings as his
Orders, in relation to the production of documents, provided that the Appellant
would “make his best efforts” and in relation to the satisfaction of undertakings
provided that the Appellant “shall take all reasonable efforts”. He then
provided that “in any event” the hearing would proceed. Therefore it seems
clear that Justice McArthur had ordered that the hearing would proceed “in any
event” and therefore would proceed even if the Appellant did not provide any
further documents or satisfy any undertakings. The issue at the status hearing
was why the Appellant’s appeal should not be dismissed for delay. Having
considered this issue, Justice McArthur issued Orders that contemplated the
situation that has now arisen (the Appellant has not produced any further
documents nor has he, since the date of the Orders, satisfied any
undertakings), and provided that the hearing should still proceed in any
event. Therefore I am not inclined to change his Orders and now dismiss
the appeals.
[6]
However, in this case,
there is, in my opinion, an additional reason why the Appellant’s appeals
should not be dismissed. Penalties were imposed under subsection 163(2) of the Income
Tax Act and section 285 of the Excise Tax Act. Subsection 163(3) of
the Income Tax Act provides as follows:
(3) Where, in an appeal under this Act, a penalty assessed by the
Minister under this section or section 163.2 is in issue, the burden of
establishing the facts justifying the assessment of the penalty is on the
Minister.
[7]
Similarly subsection
285.1(16) of the Excise Tax Act provides as follows:
(16) If, in an appeal under this Part, a penalty assessed by the
Minister under this section or section 285 is in issue, the burden of
establishing the facts justifying the assessment of the penalty is on the
Minister.
[8]
It is clear from the
Notice of Appeal that the penalties imposed were in issue.
[9]
Counsel for the
Respondent referred to the decision of Justice Tardif in Fortin v. The
Queen, [2004] 2 C.T.C. 2228. In that case the Appellant did not appear at
the hearing of her appeal. Justice Tardif stated in part that:
3 Despite the highly damning facts, particularly those
described in subparagraphs 6(e), (f) and (g), Ms. Fortin decided to file a
notice of appeal to dispute the assessment and the penalty that she was
assessed under subsection 163(2) of the Income Tax Act (the "Act").
4 The decision to institute an appeal is a legitimate
one, indeed even the expression of a fundamental right. However, deciding,
without any apparent reason, not to appear in support of one's appeal, the
quality of which was clearly more than debatable, constitutes an abuse.
5 Furthermore, such behaviour has the effect of
resulting in an unacceptable waste of public funds, while penalizing litigants
whose cases are awaiting a hearing date.
6 In view of the appellant's failure to appear, the
respondent moved that the appeal be dismissed.
7 I allow the respondent's oral motion and dismiss the
appeal, with costs, which I set at $1,000 for the reasons cited above.
[10]
The facts to which
Justice Tardif referred are set out in paragraph 2 of his decision:
2 In making and confirming the assessment at the origin
of this appeal, the respondent assumed the following facts:
[TRANSLATION]
(a) in the year in
issue, the appellant was an employee of Revenue Canada,
now the Canada Customs and Revenue Agency;
(b) the case
arises from an internal investigation concerning certain employees of the
Jonquiere Tax Centre who had set up a scheme to provide certain persons with
tax refunds to which they were not entitled in consideration for a commission
based on a percentage of the said refunds;
(c) in filing her
income tax return for the 1996 taxation year, the appellant claimed $4,405 in
medical expenses;
(d) the Minister
obtained from Revenu Québec copies of receipts that the appellant had appended
to her provincial income tax return of the medical expenses claimed for the
1996 taxation year;
(e) each of the
receipts of $2,000 states that the amount was paid by the appellant for myopia
laser treatments and was signed by means of a stamp in the name of Dr.
René-Gilles Bernier;
(f) Dr.
René-Gilles Bernier has confirmed in writing that the appellant was not a
patient and that he never performed laser surgery on her for myopia;
(g) the appellant
admitted that she had never undergone laser surgery for myopia;
(h) in the
Minister's view, the appellant used false receipts to claim $4,000 in medical
expenses;
[11]
It appears that the
appeal was dismissed without any evidence being introduced. There was no
discussion with respect to the provisions of subsection 163(3) of the Income
Tax Act. However, subsection 163(3) of the Income Tax Act does
provide that the burden of establishing the facts justifying the assessment of
the penalty is imposed on the Minister in an appeal where the penalty is in
issue. It appears that Justice Tardif concluded that the penalty was no longer
in issue in that case when the Appellant failed to appear for the hearing of
her appeal.
[12]
Counsel for the
Respondent also referred to the following Orders or Judgments issued by this
Court which granted motions to dismiss appeals:
(a)
Walling v. The Queen, 2008-1227(IT)G
(b)
Anderson v. The Queen, 2007-1584(IT)G
(c)
Campbell v. The Queen, 2009-547(IT)G
(d)
Stanfield v. The Queen, 2004-1415(IT)G
(e)
Decotiis Properties
Ltd. v. The Queen,
2006-371(GST)G
[13]
In each of these
matters the motion made by the Respondent to dismiss the particular appellant’s
appeal was granted and the appellant’s appeal was dismissed (although by a
subsequent Order the appeal was reinstated in Campbell). There is no mention in any of these Orders or Judgments of the
penalties that were imposed under either subsection 163(2) of the Income Tax
Act or section 285 of the Excise Tax Act or whether they were still
in issue in these appeals. In order to establish that penalties had been
imposed, Counsel for the Respondent had to introduce the Reply that had been
filed in each of these matters. Whether the actions or inactions of a
particular appellant can be interpreted to mean that the penalty is no longer
in issue in a particular appeal, is a matter for the Judge deciding whether the
motion to dismiss an appeal should be granted.
[14]
It seems to me that
since the Income Tax Act and the Excise Tax Act impose on the
Minister the burden of establishing the facts justifying the assessment of the penalty,
if the Appellant’s appeals are dismissed without a hearing at any time while
the penalties are still in dispute (and therefore without any evidence being
called and no facts being established justifying the assessment of the penalty),
then the Minister will have circumvented the burden imposed on the Minister
pursuant to subsection 163(3) of the Income Tax Act and subsection
285.1(16) of the Excise Tax Act.
[15]
Counsel for the
Respondent argued that these provisions only apply at a hearing of the appeal.
However it does not seem to me that at a hearing of the appeal the Minister
would have the burden of establishing these facts but the Minister would have
the right, at any time while the penalties are still in dispute, to have an appeal
dismissed without having to establish these facts. Any taxpayer would have the
right, in relation to an appeal where these penalties are in issue, to simply
require the Minister to establish the facts justifying the assessment of the
penalties as required by the statutes imposing the burden of establishing these
facts on the Minister. The burden is imposed on the Minister – not the
Appellant. What actions should the Appellant be required to take in relation to
the establishment of the facts that the Minister has the burden of proving? It
seems to me that whether the Appellant has prosecuted his appeal with due
dispatch is not relevant in relation to the appeal of the assessment of the
penalties as the Minister has the burden of establishing the facts justifying
the assessment of the penalties and the Appellant would not be required to take
any action in relation to the establishment of these facts.
[16]
Presumably when the
penalties were imposed the Minister determined that the Minister would be able
to establish the facts justifying the assessment of the penalties. The burden
imposed on the Minister is in relation to the facts justifying the assessment
of the penalty. The alternatives would be that the Minister imposed the
penalties without having made any determination of whether the Minister would
be able to establish the facts justifying the assessment of the penalties or
assessed the penalties having determined that the Minister, at that time, would
not be able to establish the facts justifying the assessment of the penalties.
It seems to me that neither one of these alternatives would be appropriate.
[17]
If the Minister has
already determined that he can satisfy the burden of establishing the facts
justifying the assessment of the penalties then there is no prejudice to the
Minister in having the appeals heard that cannot be remedied by costs. If the
Minister is not able to establish the facts justifying the assessment of the
penalties, then why should the penalties be upheld (which would be the result
if the Appellant’s appeals are dismissed based on the Motion brought by the
Respondent)? If the Appellant should, at the hearing, produce documents that
have not previously been disclosed, the provisions of paragraph 89 of the Tax
Court of Canada Rules (General Procedure) provide that:
89. (1) Unless the Court otherwise directs,
except with the consent in writing of the other party or where discovery of
documents has been waived by the other party, no document shall be used in
evidence by a party unless
(a) reference to it
appears in the pleadings, or in a list or an affidavit filed and served by a
party to the proceeding,
(b) it has been produced
by one of the parties, or some person being examined on behalf of one of the
parties, at the examination for discovery, or
(c) it has been produced by a witness who is not, in the
opinion of the Court, under the control of the party.
(2) Unless the Court otherwise directs, subsection (1) does not apply
to a document that is used solely as a foundation for or as part of a question
in cross‑examination or re‑examination.
[18]
The Minister has not
yet established, in these appeals, the facts that the Minister has the burden
of establishing in relation to the assessment of the penalties under the Income
Tax Act and the Excise Tax Act. It does not seem appropriate to
deprive the Appellant of his right to require the Minister to prove what the Income
Tax Act and the Excise Tax Act require the Minister to prove in the
absence of any indication that the penalties are no longer in dispute. It seems
to me that in order to dismiss the Appellant’s appeals at this time I would
need to be satisfied that the penalties are no longer in issue. Since the issue
at the status hearing was why the Appellant’s appeals should not be dismissed
for delay and following the conclusion of the hearing the Orders of Justice
McArthur had provided that the hearing of the appeals would be held in
any event (and therefore regardless of whether the Appellant produced
any more documents or satisfied any undertakings), I am not satisfied that the
inaction of the Appellant in this case (including his failure to appear for this
motion to dismiss) should be interpreted to mean that the penalties are no
longer in issue.
[19]
As a result the
Respondent’s motions to dismiss the Appellant’s appeals are dismissed, without
costs, and the hearing of the appeals will be held on Monday May 16, 2011 as
provided in the Orders of Justice McArthur dated February 21, 2011.
Signed at Halifax, Nova Scotia, this 5th day of May, 2011.
“Wyman W. Webb”
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