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Citation: 2005TCC679
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Date: 20051031
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Docket: 2003-352(GST)I
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BETWEEN:
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736728 ONTARIO LIMITED,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR ORDER
Lamarre, J.
[1] The
respondent brought a motion for an order setting aside, on the basis of error
arising from an accidental slip or omission, the award of costs ordered in the
Judgment and Reasons for Judgment dated January 21, 2004.
[2] The
appellant asks this Court to refuse to invoke the "slip rule" to set
aside the award of costs, as the respondent's delay in bringing the motion has
resulted in financial prejudice to the appellant.
[3] In
order to decide this motion, it is necessary to begin with a chronology of the relevant
events.
[4] On
January 16, 2003, the appellant filed a notice of appeal respecting an
assessment dated February 6, 2002, wherein the Minister of National Revenue
("Minister") disallowed an input tax credit ("ITC") in the
amount of $12,600 pursuant to section 169 of the Excise Tax Act. The
appellant elected to have its appeal heard under the informal procedure.
[5] On
March 26, 2003, the respondent filed her Reply to the Notice of Appeal. The issue
to be decided was whether the appellant was eligible to claim an ITC in the
amount of $12,600 on the purchase price of an aircraft.
[6] The
hearing of the appeal took place on September 24 and 25, 2003, in Ottawa, Ontario. The Judgment and Reasons for Judgment dated January 21, 2004, allowed
the appeal and awarded costs against the respondent.
[7] On
January 3, 2005, counsel for the appellant sent a letter to the Department of
Justice requesting payment of the costs awarded in the Judgment, and enclosed a
copy of her bill of costs in the amount of $2,249.22.
[8] On
January 13, 2005, a paralegal in the Tax Law Services Section of the Department
of Justice sent a letter back to counsel for the appellant stating that she had
carriage of the file for costs purposes, and that she would contact counsel after
reviewing the bill of costs.
[9] On
January 25, 2005, the same paralegal from the Department of Justice sent a
second letter to counsel for the appellant, stating therein that the bill of costs
had been reviewed and suggesting that it was too high in terms of counsel fees,
disbursements and GST.
[10] On March 21, 2005, counsel for the appellant replied in writing to the
paralegal at the Department of Justice and agreed to lower the amounts for both
her counsel fees and the disbursements, but requested at the same time, in
respect of travel and living expenses for two witnesses, an amount of $40 each
per day pursuant to subsection 11(1) of the Tax Court of Canada Rules of
Procedure Respecting the Excise Tax Act (Informal Procedure) ("Informal
GST Rules").
[11] On May 10, 2005, the paralegal replied in writing to counsel for the
appellant; she agreed to pay $50 for each witness and invited counsel for the
appellant to submit receipts for any expenses incurred by the witnesses under
subsection 11(1) of the Informal GST Rules. Furthermore, with respect to
GST, the paralegal wrote that, "[a]s I previously stated to you, GST is an
allowable item in a Bill of Costs", and went on to explain the conditions to
be met under subsection 11(4) of the Informal GST Rules in order for GST
to be reimbursed (see Exhibit E attached to the affidavit of Manon Hurtubise
filed with the appellant's written submissions).
[12] On May 31, 2005, a general counsel with the Tax Law Services Section at
the Department of Justice sent a letter to counsel for the appellant informing
her that he did not agree to her bill of costs, as the amount in dispute in the
appeal exceeded $7,000 and this Court accordingly had no jurisdiction to award costs
in the judgment rendered on January 21, 2004.
[13] On June 1, 2005, counsel for the appellant faxed a letter to the
general counsel at the Department of Justice in which she stated that even
though the Court may have exceeded its jurisdiction, no steps were taken by the
Department of Justice to appeal the order and therefore that order should
stand.
[14] On June 1, 2005, the general counsel at the Department of Justice
responded to counsel for the appellant's fax and continued to dispute the bill
of costs.
[15] On June 2, 2005, the general counsel at the Department of Justice sent
a letter to counsel for the appellant advising her that he would bring the
matter before this Court for resolution.
[16] On June 6, 2005, counsel for the appellant sent a letter to the
general counsel at the Department of Justice stating that she had been
negotiating the amount of her costs with a representative of the Crown since
January 2005 and that, throughout that time, no mention of a jurisdictional
issue was raised by the Crown. She also enclosed a revised bill of costs which
included most of the concessions requested by the Crown (Exhibit I attached to
the affidavit of Manon Hurtubise, filed with the appellant's written
submissions).
[17] On June 17, 2005, the respondent brought this motion requesting the
Court to set aside the award of costs ordered in the Judgment issued on
January 21, 2004.
Submissions of the Parties
[18] The respondent argues that, pursuant to paragraph 18.3009(1)(c)
of the Tax Court of Canada Act ("TCC Act"), this Court
has no jurisdiction to award costs in appeals heard under the Informal GST
Rules where the amount in dispute exceeds $7,000. That provision reads as
follows:
18.3009 (1) If an appeal
referred to in section 18.3001 is allowed, the Court shall reimburse to the
person who brought the appeal the filing fee paid by that person under
paragraph 18.15(3)(b). The Court may, in accordance with the rules of
Court, award costs to that person if the judgement reduces the amount in
dispute by more than one half and
. . .
(c) in the case
of an appeal under Part IX of the Excise Tax Act,
(i) the amount in dispute does not
exceed $7,000, and
(ii) the aggregate of supplies for
the prior fiscal year of the person did not exceed $1,000,000.
[19] The respondent submits that the amount in dispute was $12,600 and
that, in her view, the Court's award of costs was an accidental mistake, error
or omission which may be corrected by the Court at any time. In the
respondent's view, an inadvertent award of costs which the Court did not have
jurisdiction to make is precisely the kind of clerical mistake, error or
omission which brings the "slip rule" into play. In that regard, the
respondent refers to the case of Besse v. Canada (Minister of National Revenue - M.N.R.), [1999] F.C.J. No. 1790 (QL), [2000] 1
C.T.C. 174 (FCA). The respondent adds that this Court has inherent jurisdiction
to vary orders which do not, as a result of an accidental mistake, error or
omission, express the true intent of the Court. In that respect, the respondent
refers to the cases of Bank of Nova Scotia v. Golden Forest Holdings Ltd.
(N.S.C.A.), [1990] N.S.J. No. 230 (QL), 43 C.P.C. (2d) 16; and Dumont v.
Law Society of Prince Edward Island (P.E.I.C.A.), [1989] P.E.I.J.
No. 168 (QL), 65 D.L.R. (4th) 687, 80 Nfld. & P.E.I.R. 1.
[20] The appellant submits that the respondent brought this motion seventeen
months after the Court ordered costs against the respondent and after having negotiated
the proper amount of costs with the appellant for over five months, through the
exchange of numerous pieces of correspondence. Counsel for the appellant states
that she submitted the bill of costs and negotiated with the respondent in good
faith, unaware of any jurisdictional issue. She adds that the appellant
incurred significant additional costs both as a result of the respondent’s
failure to bring this motion in a timely fashion and its negotiations with
respect to the proper amount of costs.
[21] In the appellant's view, the respondent could have brought either an
application for judicial review under section 18.1 of the Federal Courts Act
or a motion before this Court under the "slip rule" either at the
time the Judgment was issued, or at the time the appellant initially provided
the respondent with its bill of costs.
[22] In the appellant's view, the Court should not make an amendment where
an injustice will be done to a party by putting them in such a position that
they would be injured. On that point, counsel for the appellant refers to the following
passage in The Queen v. Canderel Limited, 93 DTC 5357 (FCA), at pages
5360 and 5361:
As regards injustice to the other
party, I cannot but adopt, as Mahoney, J.A. has done in Meyer [(1985),
62 N.R. 70 (C.A.) at 72], the following statement by Lord Esher, M.R. in Steward
v. North Metropolitan Tramways Co. (1886), 16 Q.B.D. 556 at 558:
. . . There is no injustice if the
other side can be compensated by costs: but, if the amendment will put them
into such a position that they must be injured it ought not to be made.
and the statement immediately
following:
And the same principle was
expressed, I think perhaps somewhat more clearly, by Bowen L.J., who says that
an amendment is to be allowed "whenever you can put the parties in the
same position for the purposes of justice that they were in at the time when
the slip was made."
To apply that rule to the
present case; if the amendment is allowed now, will the plaintiff be in the
same position as if the defendants had pleaded correctly in the first instance?
. . .
[23] Counsel for the appellant therefore submits that the motion should be
dismissed because any amendment made at this time would be prejudicial to the
appellant and would put it in a position where it would be injured.
Analysis
[24] There is no dispute here that, pursuant to paragraph 18.3009(1)(c)
of the TCC Act, this Court had no jurisdiction to award costs in the
judgment issued on January 21, 2004. Indeed, the amount in dispute was
more than $7,000, as in its appeal the appellant claimed an ITC of $12,600.
[25] It is also obvious that, at the time the Judgment and the
Reasons for Judgment were issued on January 21, 2004, both the Court and the
parties overlooked the restriction imposed by paragraph 18.3009(1)(c) of
the TCC Act.
[26] The question, therefore, is whether the circumstances here justify
this Court's exercising, at this stage, its inherent jurisdiction to set aside
the order as to costs, as the respondent contends, or whether the proper remedy
was either an appeal of the Judgment to the Federal Court of Appeal or a motion
to amend the Judgment, brought in a timely fashion before this Court, as asserted
by the appellant.
[27] The general rule, as expressed by the Supreme Court of Canada in Chandler
v. Alberta Association of Architects, [1989] 2 S.C.R. 848, at page 860, is
that a final decision of a court cannot be reopened or amended on a matter of
substantive right after the court's judgment has been drawn up, issued and
entered. At that point, the power to rehear the case is transferred to the
appellate level. As stated in Chandler, supra, at page 862, this
general rule, whereby a court becomes functus officio, is based on the "policy
ground which favours finality of proceedings" which were subject to a full
appeal (see Reekie v. Messervey, [1990] 1 S.C.R. 219, at page 222, [1990]
S.C.J. No. 29 (QL), at paragraph 7; see also Laskaris v. M.N.R., [1990]
T.C.J. No. 214 (QL) and Owen Holdings Ltd. v. The Queen, 97 DTC 380, at
page 383, 1997 CarswellNat 495, at paragraph 25).
[28] There are however exceptions to this general rule. A judgment may be
amended after it has been issued and entered (1) where there has been a slip in
drawing it up, or, (2) where there has been an error in expressing the manifest
intention of the court (see Chandler, supra,
at page 860).
[29] The "slip rule" does not authorize a court to substitute for
the judgment originally delivered a completely different judgment that it had
no intention of delivering when it rendered its original judgment (see Minister
of National Revenue v. Gunnar Mining Ltd., [1970] Ex. C.R. 328). As stated
in that case, at page 342, a court cannot completely change the substance of
its judgment on the ground that it overlooked something when it rendered it.
[30] As contemplated in Reekie v. Messervey, supra, at page
222, the "slip rule" needs to be narrowly construed except in
circumstances where there is no avenue of appeal.
[31] In the present case, I find that the avenue open to the respondent was
to appeal the January 21, 2004, decision to the Federal Court of Appeal. When
issuing its judgment, the Court overlooked the $7,000 limitation prescribed in paragraph
18.3009(1)(c) of the TCC Act and it was its intention at that
time to award costs. In this sense, there was no clerical mistake. In The
Queen v. Moncton Computer Exchange Ltd., 2002 DTC 6751, [2001] G.S.T.C. 143
(FCA), at paragraph 26, Sharlow, J.A., stated the following:
It follows that if a Tax
Court Judge awards costs to an appellant in a GST or GST/HST appeal under the
informal procedure without being made aware that the case raises a question as
to the $7,000 limitation, this Court will not reverse the award of costs unless
there are extraordinary circumstances.
[32] In the present case, the respondent first accepted the judgment and
proceeded to negotiate with counsel for the appellant for five months with
respect to the bill of costs. In this context, I do not find that the
"slip rule" is applicable, especially since the award of costs that
is now contested was appealable before the Federal Court of Appeal.
[33] I also find that the present situation is different from that in Besse,
supra, cited by the respondent, a case in which the Federal Court of
Appeal found that an award of costs was made in error and that there was no
time limit for amending under Rule 397(2) of the Federal Court Rules a judgment
with respect to such award.
[34] In Besse, there was no allegation of prejudice suffered by the
party opposing the motion to vary the judgment.
[35] Where the "slip rule" does not apply the Court has, in
exceptional circumstances, power under its inherent jurisdiction to set aside a
judgment that has been entered improperly. However, this power is narrow and
discretionary, and will not be exercised unless: (1) there has been no delay in
making the application; (2) no party has taken the benefit of the judgment; (3)
no party will suffer prejudice as a result of setting aside entry of the
judgment; and (4) the interests of justice favour setting aside entry (see Fas
Gas Oil Ltd. v. J.H. Automotive Ltd., [2004] A.J. No. 394 (Alberta Court of
Appeal) (QL) at paragraphs 25 and 26.
[36] Here, there has been a seventeen-month delay in applying to have the
January 21, 2004, Judgment amended. The appellant prepared a bill of costs regarding
which negotiations were carried on with the respondent over a five-month
period. This is a case where the appellant took irrevocable steps in reliance
on the Judgment. Further, increased costs have likely been incurred as a
result of the time spent by its counsel negotiating with the respondent with
respect to the bill of costs. In my view, the appellant would clearly suffer
undue prejudice were the Judgment and Reasons for Judgment corrected at this
time.
[37] I am therefore of the view that this Court does not have the authority
to amend the January 21, 2004, Judgment. The proper means for correcting this
error was by appeal to the Federal Court of Appeal, pursuant to
subsection 27(1.2) of the Federal Courts Act.
[38] The motion is dismissed and the award of costs stands.
Signed at Ottawa, Canada, this 31st
day of October 2005.
Lamarre,
J.
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