Citation: 2011 TCC 26
Date: 20110118
Docket: 2006-3533(IT)G, 2007-2496(IT)G
2007-2611(IT)G, 2007-3038(T)G
and 2007-3039(IT)G
BETWEEN:
STANLEY
LABOW, DANNY S. TENASCHUK,
MARCANTONIO CONSTRUCTORS INC.,
GIUSEPPE MARCANTONIO and DOMENICO FILOSO,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT AS TO COSTS
Bowie
J.
[1] There is an
application before me to reconsider the disposition of costs in the three
appeals of Stanley Labow, Danny Tenaschuk and Marcantonio Constructors Inc.
(MCI). Both counsel have filed written submissions in accordance with my
direction. Included in those are submissions as to the disposition of costs in
the two appeals of Guiseppe
Marcantonio and Domenico Filoso. Those two matters were the subject of
consent judgments allowing the appeals and reserving the disposition of costs
to be dealt with at the same time as the costs in the other three cases.
[2] These five cases
involve several overlapping issues, and were originally scheduled to be heard
as a group, one after the other, in January 2009. The then estimated total
length of the hearings was four days. Some ten days prior to the scheduled
hearing date senior counsel for the respondent was hospitalized on an emergency
basis and the trials were adjourned, and later rescheduled to take place
beginning on May 5, 2009. On May 1, 2009 senior counsel for the respondent
wrote to counsel for the appellants to indicate that the Minister of National
Revenue was now abandoning the reassessments of Giuseppe Marcantonio and
Domenico Filoso, and would apply to the Court at the opening of the trial
for judgment allowing the appeals and referring the reassessments back to the
Minister to restore their previous assessments. The trials in the remaining
three cases then took place. There were six full days and two half days of
evidence, and two days of argument. Some of the evidence and much of the
argument was common to all three cases.
Stanley Labow, Danny Tenaschuk and MCI
[3] The appellants’
position is that although their appeals were dismissed, the respondent should
be denied costs. Counsel advances several reasons in support of this position.
I summarize:
(a)
Counsel for the appellant was
required to waste 42 hours responding to 5 Requests to Admit. Although she
admitted “nearly half” of the facts requested, and many others on a qualified
basis, counsel for the respondent declined to put the admissions before the
Court and objected to the appellant putting summaries of them before the Court.
(b)
At a case management conference, I
directed that the parties prepare a statement of those facts that could be
agreed upon. Counsel for the appellants spent 33 hours trying to comply with
this direction, to no avail. She lays the failure to reach any agreement at the
feet of counsel for the respondent.
(c) Counsel for the respondent, she
says, caused the hearing to be unnecessarily long by his conduct of the cross
examination of witnesses.
(d) Counsel for the respondent clung to
some issues until the last moment that should have been abandoned much earlier
than they were, and added some new issues between the close of the evidence and
the beginning of argument. Ms. Kamin characterizes this as “litigation by
stealth”.
(e)
The respondent unnecessarily
ordered transcripts on an expedited basis; the appellants ought not to be
required to pay for these.
(f)
The appellants made written offers
to settle that were rejected out of hand. Although the result was less
favourable to the appellants than the proposed settlements, the appellants’
counsel argues that their attempt to promote settlement discussions, and the
respondent’s cursory refusal of the offer, should be considered in exercising
my discretion as to costs under Rule 147.
(g)
These cases are representative of
a substantial number of similar cases, and so the appellant’s should not be
subject to the general rule regarding the award of costs.
The
appellants also submit that even if the respondent is awarded costs, there
should be no counsel fee awarded for junior counsel because her participation
in the trial was, in Ms. Kamin’s view, minimal.
[4] Mr. Chambers, on
behalf of the respondent, takes the position that I should award costs to the
respondent on a solicitor and client basis. He advances this submission
supported by an allegation, couched in intemperate language, to the effect that
counsel for the appellants “proffer[ed] false evidence in the hope that it
would not be exposed”. While I did not accept the evidence of the appellants as
to their motivation in making the expenditures in issue in these cases, the
suggestion that their counsel was therefore proffering false evidence is totally
unwarranted by the facts and improper. It is just one more example of the
regrettable emergence recently of incivility at the bar that is of great
concern to this and other courts in Canada.
[5] Mr. Chambers
goes on to submit, in the alternative, that I should increase the fees provided
for in Tariff B, for reasons that may be summarized this way.
(a)
The volume of work was “enormous”,
for various reasons, such as the inability of counsel to agree to any facts,
the “bewildering” number of so-called trust deeds, at least one of which was
produced for the first time during the trial, and the need to cross examine a
lawyer and two actuaries at some length.
(b)
The complexity of the issues.
(c)
The volume of the trial evidence.
(d)
The time spent by counsel for the respondent
in producing written argument.
[6] I am not greatly
moved by either of these submissions. Certainly, it was a group of cases that
presented some difficulties to both counsel. In the context of this application,
it is impossible to place responsibility for the failure of counsel to agree
before trial on even a few facts entirely on either side. There were some
molehills that were turned into mountains by respondent’s counsel, leading to
lengthy cross‑examinations that would have benefited greatly from some
curtailment. Certainly, the trial would have been shorter (and more pleasant
for all concerned) if it had had the benefit of more focus and more civility.
That said, nothing in the circumstances warrants either the extreme sanction of
depriving the respondent of costs, or the equally extreme sanction of awarding
costs to the respondent on a solicitor and client basis.
[7] I am in complete
agreement with what was said by Bowman J., as he then was, in RMM Canadian
Enterprises Inc. v The Queen
at paragraphs 3 to 5:
3 With respect to the first point, I can see no
basis for awarding the appellants any portion of their costs. The usual rule is that costs should follow
the event and the fact that a case is difficult or important or that it raises
novel points of law is no reason to depart from that rule. Income tax
litigation is frequently complex and with the complexity of modern commercial
life and the intricacy of the constantly changing Canadian fiscal legislation,
new and important issues will frequently come before the courts.
4 Counsel's second contention was that in any
event the costs and length of the
trial were increased by reason of respondent's counsel's refusal to admit
certain facts that ought to have been admitted and that, generally, in light of
the importance of the case, counsel engaged in a measure of overkill. It was
contended that the case could have been simplified and shortened if the Crown
had confined it to the application of sections 84 and 212 and had not, to use
the phrase from in (sic) the reasons for judgment, called in the heavy
artillery of GAAR.
5 It is true that I decided that the assessments
were supportable on the basis of sections 84 and 212 alone but it was not
unreasonable for the Crown to rely, both in assessing and at trial, on section
245. Indeed, in McNichol et al. v. The Queen, 97 D.T.C.
111, Judge Bonner relied solely on that section. It frequently
happens in litigation that arguments are advanced in support of positions that,
with the benefit of hindsight, turn out to have been unnecessary. Unless such
arguments are plainly frivolous or untenable, I do not think that a litigant
should be penalized in costs
simply because its counsel decides to pull out all the stops, nor do I think
that it is my place to second guess counsel's judgment, after the event, and
say, in effect. "If you had had the prescience to realize how I was going
to decide we could have saved a lot of time by confining the case to one
issue." Moreover, one of counsel's responsibilities is to build a record
which will enable an appellate court to consider all of the issues.
(emphasis added)
[8] The respondent should have costs of these three
cases, to be taxed on a party and party basis, subject to the following
directions made under Rule 150.
[9] The size,
complexity and importance of these cases warrants a second counsel fee. The
taxing officer is directed to allow a second counsel fee at 50% of the fee for
first counsel.
[10] Where, as here,
there are two counsel at trial, daily transcripts are an expensive luxury.
Usually when daily transcripts are ordered it is done following a discussion
among counsel and the Court that results in an agreement as to the division of
the cost. Absent any discussion and agreement, the cost of daily transcripts
should be borne by the party ordering them, regardless of the result. The
taxing officer is directed accordingly.
Guiseppe
Marcantonio and Domenico Filoso
[11] The default rule
is that on discontinuance the party discontinuing is liable to pay costs, taxed
on a party and party basis, up to the point of discontinuance. Ms. Kamin
asks for party and party costs up to January 28, 2009, when the initially
scheduled trial date was cancelled due to illness of counsel, with a lump sum
of $5,000 in each case for the period thereafter until the discontinuance in
May. Mr. Chambers asks that I limit the amounts that would otherwise be
taxable on a party and party basis in these two cases because the issues in
each are essentially the same.
[12] The ostensible
reason that the respondent abandoned the assessments and consented to judgment
allowing the appeals in these cases was because the Minister had no evidence to
support the value that he had attributed in the assessments to the benefits
said to have been conferred by MCI on the two individual appellants. This must
surely have been apparent to the Minister, and to counsel, long before May
2009. The trials were scheduled to begin on Tuesday May 5. To wait until Friday
May 1 to advise opposing counsel that the respondent was going to consent to
judgment allowing the appeals is unjustifiable. The taxing officer is directed
to allow a fee of $5,000.00 for preparation for trial in each of these cases.
Signed at Ottawa, Canada, this 18th day of January, 2011.
“E.A. Bowie”
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