Burstow v. The Queen, docket 96-2633-IT-I (Informal Procedure)

Date: 19980924

Docket: 96-2633-IT-I

BETWEEN:

DAVID H. BURSTOW,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for order

(Delivered orally from the Bench on July 31, 1998, at Toronto, Ontario)

Sarchuk, J.T.C.C.

[1] The Appellant has appealed from assessments of tax with respect to his 1989, 1990, 1991 and 1992 taxation years. On June 13, 1997, his appeal was allowed with costs. On November 28, 1997, the Appellant’s bill of costs was taxed by the Registrar of the Court, Raymond P. Guenette. The only item on the Appellant’s bill of cost was a claim for “Other Disbursements: $6,955”. This represented an amount invoiced to the Appellant by Rennie & Company, Chartered Accountants, with respect to research conducted by them relating to the issues raised in the appeals.

[2] On December 22, 1997, the Registrar signed a certificate of taxation which reads:

I certify that I have taxed the party and party costs of the Appellant in this proceeding under the authority of subsection 13(1) of the Tax Court of Canada Rules (Informal Procedure), and no amount is allowed.

By notice in writing dated February 4, 1998, the Appellant sought leave to appeal from the taxation. On March 24, 1998, Mogan, J.T.C.C. ordered that pursuant to subsection 14(2) of the Tax Court of Canada Rules (Informal Procedure), the time within which the appeal may be instituted be extended to March 17, 1998 and that the Appellant’s letter dated February 4, 1998 be regarded as an appeal from such certificate.

[3] The appeal for taxation was heard on June 11, 1998. The sole issue is whether the Registrar properly exercised his discretion in disallowing as disbursements under subsection 12(3) of the Tax Court of Canada Rules the amount paid by the Appellant to his accountants.

[4] As was recently observed by the Federal Court of Appeal in Her Majesty the Queen v. Linda Munro (unreported - Judgment delivered July 3, 1998):

The standard that governs the review of a taxing officer's discretion in allowing specific items on a taxation has been described as follows by this Court in IBM Canada Ltd. v Xerox of Canada Ltd. [1977] 1 F.C. 181 at 185 (F.C.A.), Urie J.A.:

[...] the discretion ought not to be interfered with unless the amounts allowed are so inappropriate or his decision is so unreasonable as to suggest that an error in principle must have been the cause [...]

[5] The submissions made to this Court are, in essence, not different than those raised by Mr. Burstow before the Registrar. He reiterates that the substance of the appeals and the issues themselves were complex and extremely detailed and that it was necessary for him to obtain professional advice from Rennie & Company. He argued that this assistance was essential to conduct ultimately, the successful litigation of his appeals, and that the accountant’s charge was being claimed as a disbursement and not as a counsel fee. It is not and has not been disputed that the fees were incurred following the filing of the Notice of Appeal and related solely to the provision of information and material by Rennie & Company to enable the Appellant to put forward his position at trial, and the Registrar so found.

[6] The issue posed by the Registrar was “can the accountant’s fees be considered an ‘essential’ disbursement or are they fees for the type of services normally provided by counsel simply recharacterized as a disbursement”. He made reference to the following comments of Bowman J. in Munro v. The Queen, (unreported 95-2267(IT)I):

To allow as disbursements under subsection 12(3) fees paid to accountants or others who are non-lawyers but who represent a taxpayer at trial would lead to the anomalous results that, whereas a lawyer's fees when taxed on a party and party basis would be limited to the amounts set out in section 11, an accountant's fees for doing essentially the same thing could be substantially higher than those amounts if allowed as disbursements.

[...]

I am troubled by the possibility that an accountant's fee for representing a taxpayer if allowed as a disbursement under subsection 12(3) may exceed the fee allowed in respect a (sic) lawyer under section 11 or the amount of an expert witness fee if that same accountant gave evidence as an expert.

The Registrar concluded that the accountant’s fee in Munro was in relation to an appearance in Court as her representative (as contrasted to the situation in Mr. Burstow’s appeal). The principle enunciated by Bowman J. was nonetheless applicable to the facts before him.

[7] The decision of Bowman J. in Munro was appealed to the Federal Court of Appeal. In the Reasons for Judgment of Decary J.A., it was observed that:

The informal procedure set out in the Act specifically contemplates in section 18.14 representations by an agent; yet, the Rules Committee has expressly restricted the taxable fees to those relating to ‘services of counsel’. It does violence to the very clear intent in rule 11 of restricting fees to services of counsel to suggest that the words ‘such other disbursements’ in rule 12(3) can be interpreted in such a way as to include fees for services of agents and furthermore to allow such agents the right to claim whatever they want beyond and above what counsel are allowed to claim. Agents should not be allowed to claim indirectly under rule 12(3) what has been directly denied to them in rule 11.

[8] The disbursements in issue reflect the charges for the following services rendered by the accountant: (a) review of the reassessments for the 1989, 1990, 1991 and 1992 taxation years; (b) research with respect to the deductibility of capital cost allowance for the reassessed years, in particular, the application of regulations 1100(15) and (17) and the grandfathering provisions for vessels purchased prior to 1986; (c) research with respect to the definition of “bare-boat” charter operations and its implications with respect to regulation 1100(17); and (d) all other research and discussions with Burstow on the above issues. In my view, these services can only be described as preparation for trial. It is evident that had these services been provided by counsel, the costs thereof would have been capped at $200 pursuant to the provisions of section 11(b) of the Tax Court of Canada Rules (Informal Procedure).

[9] I have concluded that the Registrar’s decision was correct. If subsection 12(3) is not to be interpreted in such a way as to include fees for services of agents, i.e., as counsel appearing in Court on behalf of the taxpayer, by analogy it seems equally appropriate to find that the words “such other disbursements” in subsection 12(3) ought not to be interpreted in such a way as to include fees for what amounts to “preparation for trial”, and furthermore to allow agents to claim, in the words of Decary J.A. “whatever they want beyond and above what counsel are allowed to claim”. Since an agent has no right to claim a fee for preparation for trial under section 10 of the Rules, that same fee cannot be claimed as a disbursement indirectly under subsection 12(3).

[10] Notwithstanding the Registrar’s comment that the Appellant should be entitled to some restitution for his disbursement, a fact which the Appellant relied upon, I am unable to conclude that the Registrar rendered a decision so unreasonable as to suggest that an error in principle must have been the cause. The appeal is dismissed.

Signed at Ottawa, Canada, this 24th day of September, 1998.

"A.A. Sarchuk"

J.T.C.C.