Docket: 2010-832(IT)G
BETWEEN:
TRANSALTA CORPORATION,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Motion heard by conference call on August 16,
2012, at Ottawa, Ontario.
Before: The Honourable
Justice T.E. Margeson
Appearances:
|
Counsel for the Appellant:
|
Robert
D. McCue
|
|
Counsel for the Respondent:
|
Mary Softley
|
____________________________________________________________________
ORDER
UPON motion by the Appellant for an Order of this
Court awarding, or directing a taxing officer to award the Appellant:
(a) an amount for party
and party costs (i.e. pursuant to Schedule 11, Tariff B, class C of the Tax
Court of Canada Rules (General Procedure)) (the “Rules”), in
the appeal to April 28, 2011, which the Appellant has calculated to be $2,300;
(b) an amount for
substantial indemnity costs (i.e., 80% of solicitor and client costs) in the
appeal after April 28, 2011, and to December 12, 2011, which the Appellant has
calculated to be $265,410.23;
(c) an amount for
reasonable disbursements on the appeal to December 12, 2011, which the
Appellant has calculated to be $8,049.63;
(d) an award for costs on
the motion to be calculated at 80% of solicitor and client costs, plus all
reasonable disbursements, after March 15, 2012; and
(e)
any further relief that
this Honourable Court may grant.
AND
UPON reading the materials filed, and hearing from counsel for the Appellant
and counsel for the Respondent;
THIS COURT ORDERS that:
1. the
Appellant’s motion is dismissed; and
2. costs
are awarded to the Respondent.
Signed at
Vancouver, British Columbia,
this 23rd day of October 2012.
“T.E. Margeson”
Citation: 2012 TCC 375
Date: 20121212
Docket: 2010-832(IT)G
BETWEEN:
TRANSALTA CORPORATION,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AMENDED REASONS FOR ORDER
Margeson J.
[1]
By Amended Notice of
Motion dated the 5th day of June, 2012, the Appellant
sought an order of this Court awarding, or directing a taxing officer to award
the Appellant:
(a) an amount for party
and party costs (i.e. pursuant to Schedule 11, Tariff B, class C of the Tax
Court of Canada Rules (General Procedure)) (the “Rules”), in
the appeal to April 28, 2011, which the Appellant has calculated to be $2,300;
(b) an amount for
substantial indemnity costs (i.e., 80% of solicitor and client costs) in the
appeal after April 28, 2011, and to December 12, 2011, which the Appellant has
calculated to be $265,410.23;
(c) an amount for reasonable
disbursements on the appeal to December 12, 2011, which the Appellant has
calculated to be $8,049.63;
(d) an award for costs on
the motion to be calculated at 80% of solicitor and client costs, plus all
reasonable disbursements, after March 15, 2012; and
(e)
any further relief
that this Honourable Court may grant.
[2]
This motion was opposed
by the Respondent.
[3]
Both parties submitted
substantial written briefs on the motion and both parties made further
representations before the Court by way of telephone conference call on August
16, 2012.
[4]
During the conference
call, counsel for the Appellant opined that the motion would not have been made
except for the settlement offer put forward by the Appellant and ultimately
rejected by the Respondent. His position was that there was no reasonable basis
for rejecting the offer of settlement and there was no legal impediment
preventing the Respondent from settling the case on the basis of the offer of
settlement.
[5]
He indicated that the CIBC
World Markets Inc. v. Canada
case sets out that the Legal Disability Exception should be narrowly construed
generally as a result of the policy underlying the Enhanced Costs Rules and in
any event the legal disability exception does not apply in this case.
[6]
After the settlement
offer was made by the Appellant, the Respondent did not attempt to negotiate
with the Appellant respecting the terms of the settlement offer, did not make a
counter-offer to the Appellant, and did not indicate to the Appellant that the
settlement offer could not be accepted because it was insufficiently justified
by legal principle.
[7]
Under the circumstances,
if the Respondent wishes to avoid the Enhanced Costs Rules it should have to
justify the refusal. In CIBC World Markets, the Court did not have
to go through the determination of whether or not under any factual or legal
scenario CIBC could have been granted the tax credits it sought. But this case
stands for the proposition that the legal disability rule only avoids the application
of the “Enhanced Costs Rules” if the Respondent can show that the settlement
was not legally possible. The Crown must demonstrate that it was not
theoretically possible to settle the case or only after making attempts to settle,
it was not possible. That did not happen here.
[8]
The Appellant and
Respondent did not discuss any theoretical possibilities that may have justified
the non-deductibility of some, but not all, of the PSOP bonuses, except for the
terms set out in the settlement offer.
[9]
The Appellant was never
told of the legal disability issue. The Appellant had the will to settle. The
offer could have been accepted. The Respondent should have said, “let us try to
settle, let us find a way”.
[10]
There was not just one
issue remaining to be settled, every payment and every worker presented an
issue that had to be proved.
[11]
It should not be easy
for the Respondent to show that settlement on these issues was not possible. It
is not enough for the Respondent merely to submit that the Appellant’s
settlement offer could not be accepted on the facts and the law. This is a
complex area of the law and the reasons for rejection were not fully discussed.
[12]
The Crown is attempting
to avoid the effects of the Enhanced Costs Rules by creating a list of
exceptions where the rules would not apply. This was an important case
involving over $12,000,000. It was not an easy one and required much work.
There are implications beyond this case. There was confusion in this area of
the law which had to be resolved.
[13]
On behalf of the
Respondent, Counsel argued that Practice Note 18 is not a rule. It is not in
force. It is a proposed rule only.
[14]
The first issue was
settled before trial on the basis that the Minister of National Revenue (the
“Minister”) was given evidence that the bonuses were paid.
[15]
There is no burden on
the Crown in this case. If there is, it has been met.
[16]
Section 7 of the Income
Tax Act (the “Act”) was raised. It applied only to securities.
Therefore, there was no basis for the Minister to disallow the cash bonuses. It
was indicated before the settlement offer that the cash bonuses issue would not
be pursued.
[17]
Any theoretical
alternative must be based upon what facts were known before the settlement
offer was rejected that would have justified a settlement and the Appellant could
have said so. The mere fact that the Respondent did not say why the offer was
rejected creates no problem for the Respondent here.
[18]
It is not automatic
that enhanced costs be awarded. The CIBC World Markets case is on all
fours with the present case.
[19]
No credence should be
given to the Appellant’s argument that the Minister should have provided
reasons for rejecting the offer of settlement.
[20]
The cases cited by the
Appellant where increased costs were awarded are of no value here. Regard must
be had to the particular circumstances of each case.
[21]
There were no factors
present in this case that would justify increased costs.
[22]
The appeal of the
Appellant concerned a question of statutory interpretation and a fairly large
tax debt. These factors alone do not warrant an increased award of costs. The
appeal did not involve an excessive volume of work. Discovery took only two
days. The hearing lasted only one day. Only 16 documents were included in the
Joint Book of Documents. Only one witness was called.
[23]
The legal issues in the
appeal were simple yes or no questions. The appeal did not raise any issue of
public policy, public interest, or constitutional importance. The fact that
part of the statute was being considered for the first time, or that the Court’s
decision might have some bearing on other taxpayers, does not give the appeal
the character of a test case.
[24]
The Respondent acted
throughout in good faith and was cooperative resulting in the resolution of one
of the issues and resulted in the filing of a comprehensive agreed statement of
facts.
[25]
The costs award sought
by the Appellant is unreasonable. To allow these enhanced costs would be tantamount
to making the Respondent liable for them because it advanced a position on a
question of law that the Court did not agree with. The amount of costs
requested is disproportionate to the work done by the Appellant on what was
required to be done for a one-day trial.
[26]
The elevated costs
largely relate to the work for Mr. McCue and Mr. Marr who spent 297 and
180 hours working on the appeal. This work involved preparation of a 72-page
memorandum of argument, later amended to 94 pages. Submissions of that
length are excessive for a straightforward one-day trial. The amended
memorandum of argument is more than triple the limit of 30 pages prescribed by
the Federal Court’s Rules and more than double the limit of 40 pages for a
factum prescribed by the Rules of the Supreme Court of Canada.
Decision
[27]
The Court is satisfied
that the issue before the Court was an important one and that both parties were
cooperative in attempting to resolve the issues, resulting in only one
outstanding issue to be resolved by the Court. Such cooperation obviously
reduced the Court time considerably that was required for the trial and the
whole case was presented to the Court in one day.
[28]
As this Court indicated
in the Reasons for Judgment, the Court directed its attention to four
questions, the most significant of which was the meaning to be given to the
word “agree” as used in subsection 7(3) of the Act. The Court agrees
with the submissions of the Respondent that the legal issues posed by these
four questions were basically yes or no questions. The Court is satisfied on
the facts of this case that the Minister was justified in rejecting the offer
of settlement put forward by the Appellant because the Minister was prohibited
from implementing the offer of settlement. Either the Appellant made
“agreements” with its employees or it did not for the purposes of section 7 of
the Income Tax Act. Either the Appellant incurred an expense when it
issued Treasury shares or it did not. As argued by Counsel for the
Respondent, it had to be all or nothing. There was no way to compromise.
[29]
The Court rejects the
argument of counsel for the Appellant that there was a duty on the Minister to
give reasons for the rejection of the offer of settlement because the Minister
was prohibited from accepting the compromise by the law.
[30]
Likewise, the Court
rejects the argument of counsel for the Appellant that there was a burden on
the Minister to prove that the offer was incapable of being accepted in law.
There was no duty on the Minister to propose settlement alternatives after
rejecting the Appellant’s written offer or to explore the factual situation for
each of the recipients of the bonuses in the belief that some of them might be
deductible while others might not.
[31]
If the Appellant had
believed that this was the case then he should have disclosed the necessary
facts to the Respondent in an attempt to change the Minister’s mind. No
attempts were made to provide another foundation for settlement by offering new
facts to support that position such as internal accounting information.
[32]
In effect, as argued by
counsel for the Respondent, the Appellant was asking the Minister to turn a
blind eye to facts already admitted or established.
[33]
The Court accepts the
argument of counsel for the Respondent that the discretion of the Court to
allow further costs cannot be affected by the fact that the Appellant was aware
of Practice Note 18 (which is not yet in force) as counsel for the Respondent
argued there are no other factors that would justify an award of increased
costs. The events raised by counsel for the Respondent respecting what she
considered to be an unreasonable amount of time for preparation of the
Appellant’s case are well taken. Counsel cannot expect that an unlimited amount
of time can be expended in any case and reasonably expect that the other side
will be required to pay for it.
[34]
This Court is painfully
aware of the inadequacy of the present tariff for costs in the Tax Court of
Canada, but unfortunately, under the circumstances of the present case, the
Court does not believe that the granting of an order as sought by the Appellant
here would be an appropriate exercise of this Court’s jurisdiction.
[35]
The motion is dismissed
with costs to the Respondent.
This Amended Reasons for Order is issued
in substitution of the Amended Reasons for Order dated October 23, 2012.
Signed at New
Glasgow, Nova Scotia, this 12th day of December 2012.
“T.E. Margeson”
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