Citation: 2011 TCC 139
Date: 20110316
Dockets: 2010-759(IT)G
2010-762(IT)G
BETWEEN:
ADINA MAMUT,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Dockets: 2010-758(IT)G
2010-761(IT)G
BETWEEN:
SAMUIL MAMUT,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Docket: 2010-760(GST)G
BETWEEN:
SAMUIL MAMUT and
ADINA MAMUT,
Appellants,
and
HER MAJESTY THE QUEEN,
Respondent.
AMENDED REASONS FOR ORDER
Lamarre J.
[1]
The respondent filed a
motion before this Court pursuant to section 69 of the Tax Court of
Canada Rules (General Procedure) (Rules) seeking an Order
consolidating the five above‑mentioned appeals, which motion is opposed
by the appellants.
[2]
The grounds for the respondent’s
motion are stated at paragraphs 4 through 7 of the Notice of Motion :
4. An application of the consolidation factors to these five
appeals supports an order of consolidation. Common parties, common legal and
factual issues, similar causes of action, parallel evidence and the outcome of
one case as likely resolving the other case are the factors which the Court
looks to in determining whether consolidation should be ordered. In the five
appeals there are:
(a) common parties: the Appellants in these appeals are
Samuil Mamut, Adina Mamut (his spouse), and Samuil and Adina Mamut in
partnership, and the Respondent in each appeal is Her Majesty the Queen;
(b) common counsel: the Appellants’ and Respondent’s
counsel are the same for all of the appeals;
(c) common legal issue: that issue is whether the
Appellants engaged in adventures in the nature of trade in respect of the
construction and then disposition of two properties; and specifically: the
issues for 2003 for both Samuil and Adina are identical; the issues for 2005
for both Samuil and Adina are identical; and the GST issue encompasses the
facts of the four income tax appeals;
(d) common facts: the relevant property transactions and
surrounding property transactions are similar or the same in each appeal;
(e) common pleadings: the facts pleaded in the five appeals
are similar and overlap: the two 2003 appeals are virtually identical; the two
2005 appeals are virtually identical; and the GST Appeal references and
provides details about the property transactions in issue in all of the income
tax appeals;
(f) a series of transactions relevant to all appeals and
therefore common evidence: the mechanics of the property transactions are
similar and overlap, and are proximal in time to various other real estate
transactions. Later property transactions may evidence what the Mamuts’
intentions were in purchasing the earlier properties, and the number of similar
transactions before and after the transaction under review is an important factor
in determining whether the Mamuts were engaged in adventures in the nature of
trade; and
(g) common witnesses: the same auditor raised all of the
reassessments, the same appeals officer reviewed all of the Notices of
Objection to those reassessments, and the submissions made in all of the
Objections are identical, and therefore, the witnesses called in each appeal
will likely be the same or similar.
5. At trial, the Tax Court would make findings of fact
regarding property transactions, and these findings would be relevant to each
of the five appeals.
6. The requested Order will promote the most expeditious and
inexpensive determination of the common questions of fact and law arising out
of these five appeals, allowing the parties to prepare one list of documents
each, reducing the number of examinations for discovery and undertakings, and
allowing the Court to issue one Order or one communication that will be
applicable to all five appeals. This will lead to more efficient file case
management of these five appeals and be more time efficient overall.
7. There is no prejudice to the Appellants in consolidating
these appeals at this early stage: all of the details surrounding both property
transactions would be heard by the Court for at least the GST appeal regardless
of consolidation, and the Court will make findings of fact that are pertinent
and relevant to all five appeals. In addition, consolidation of the five
appeals will eliminate the possibility of inconsistent and contrary findings of
fact, which might occur where the appeals are heard separately.
[3]
More precisely, the
respondent states the following in her written representations, at
paragraph 7 et seq.:
Common Legal Issues
7. There is a common legal issue in all five
Appeals. That issue is whether the Appellants engaged in adventures in the
nature of trade in respect of the construction and then disposition of two
properties: 2137 Chilcotin Crescent, Kelowna, British Columbia which was purchased in 2001 and sold in 2003, and 611 South Crest Drive, Kelowna, British Columbia which was purchased in
2003 and sold in 2005.
8. The issues in the 2003 Samuil Appeal and
the 2003 Adina Appeal are identical: whether Chilcotin Crescent was the Mamuts’
principal residence in 2003, and, if not, whether the gain from its disposition
in 2003 is from an adventure in the nature of trade and therefore properly
included in the Appellants’ income for 2003 pursuant to the relevant sections
of the Income Tax Act (the "ITA").
9. The issues in the 2005 Samuil Appeal and
the 2005 Adina Appeal are identical: whether the Appellants maintained
beneficial ownership of South Crest Drive when they transferred legal title to
their son Adiel in 2004, and if so, whether the gain from its disposition in
2005 is from an adventure or concern in the nature of trade and therefore
properly included in the Appellant’s income for 2005 pursuant to the relevant
sections of the ITA.
10. The GST Appeal encompasses the facts of the
four income tax appeals. The issue is whether GST is exigible on the sale of Chilcotin Crescent and South Crest Drive pursuant to the Excise
Tax Act.
Common Facts
11. The GST Appeal and the four income tax
appeals share common facts. The relevant property transactions are the same or
similar: the two 2003 appeals concern both Samuil and Adina Mamut and one
property; the 2005 appeals again pertain to both Samuil and Adina Mamut and
another property; and the GST Appeal again deals with both Samuil and Adina
Mamut and both of the properties.
12. The Respondent’s position is that the
Mamuts’ principal residence from 1996 through 2007 was 2258
Lillooet Crescent, Kelowna.
However, the Appellants claim that when Chilcotin
Crescent was sold in 2003, it was their principal
residence. Should the Court conclude that Lillooet
Crescent was the Mamuts’ principal residence from 1996
through 2007, that finding would be relevant in all five of the appeals.
Series of Transactions
13. Factually, the mechanics of the Chilcotin Crescent and South Crest Drive transactions are similar and
overlap, and are proximal in time to various other real estate transactions.
Although all of the following properties were sold by the Mamuts for more than
their purchase price and there is overlap in the ownership of the various
properties, the Mamuts have not reported a gain on any of the properties that
were sold. The Mamuts:
(a) purchased Chilcotin
Crescent in September 2001 and sold it in July 2003;
(b) purchased South
Crest Drive in August 2003, constructed a house on it
in 2004 and transferred legal title to their son, and sold it in 2005;
(c) owned the property at 2258 Lillooet Crescent from 1996 through
2007, which ownership overlaps and encompasses the ownership of Chilcotin Crescent and South Crest Drive;
(d) owned a property at 995 Neptune Road in Kelowna, from 1992 through 2001, which
ownership overlaps with ownership of 2258 Lillooet
Crescent; and
(e) purchased a property at 592 Denali Drive in Kelowna in June 2005, which ownership
overlaps with ownership of 2258 Lillooet Crescent.
14. The property transactions in issue in the
five appeals are all linked. Therefore, there will be common evidence put forth
for all the appeals. Later property transactions may evidence what the Mamuts’
intentions were in purchasing the earlier properties. The number of similar
transactions before and after the transaction
under review is an important factor in determining whether the
Mamuts were engaged in adventures in the nature of trade.2
___________________
2 Happy Valley Farms Ltd. v.
MNR, 1986 CarswellNat 375 (FCTD) at Tab 2,
paras. 13 and 28.
15. The factual findings of the trial judge in
the income tax appeals would essentially be applied in the GST Appeal. All five
appeals are tied together in the GST Appeal.
16. At trial, the Tax Court would make findings
of fact regarding property transactions which would be relevant to each of the
five appeals.
[4]
The appellants, for
their part, oppose the application to consolidate the five appeals on the basis
that consolidation is inappropriate because the five appeals do not share
common facts or common issues of law and because consolidation would unduly
prejudice the appellants and amount to a disposition of the very issues under
appeal.
[5]
The appellants submit
that the Income Tax Act (ITA) provides that each taxpayer has the right
to appeal each assessment issued against him/her. They submit that they have
limited means and are extremely motivated to pursue these appeals in the most
efficient, expeditious and cost‑effective manner possible, but not in
such a way that their interests will be unduly prejudiced.
[6]
According to the
appellants, the 2003 income tax appeals and the 2005 income tax appeals have few,
if any, common facts. The 2003 income tax appeals pertain to the sale of their
home located on Chilcotin
Crescent, which they argue
was their principal residence, a fact denied by the Canada Revenue Agency (CRA).
[7]
The 2005 income tax appeals
pertain to the beneficial ownership of the home located on South Crest Drive in Kelowna that they built and gave to their son
Adiel in 2004. That house was sold in 2005 and treated as having been Adiel’s
principal residence. The CRA considered that the beneficial ownership of that
property had always remained with the appellants and that the gain on the sale
had to be reported in their income.
[8]
According to the
appellants, these were separate transactions, the owner of the house being
different in each transaction. There are therefore no common facts.
[9]
Furthermore, the
appellants argued that the legal issue with respect to each transaction is
different. According to the appellants, consolidation of all five appeals on the
basis of a finding that there are common issues of law requires prejudgment of
the very issues that are under appeal, to the detriment of the appellants, and
they submit that, in the interest of fairness, this is not the appropriate
process for dealing with the issues in the appeals.
[10]
The appellants also asserted
that the two dispositions were in no way related and were not part of a series
of transactions. If the five appeals were consolidated, it would cause undue
prejudice to the appellants because such consolidation would amount to a
finding that the transactions are part of a series of transactions and would
strongly suggest the outcome of the appeals. Furthermore, it would likely add substantially
to the legal costs.
[11]
Instead, the appellants
proposed the consolidation of the Samuil Mamut and Adina Mamut 2003 income tax appeals,
which would be heard first, and, of both of the 2005 income tax appeals, which
would be heard subsequently. The appellants agreed that the resolution of the
issue in the income tax appeals should be determinative of the GST appeal and
therefore proposed that the GST appeal be stayed until all the income tax
appeals are decided.
Analysis
[12]
Section 26 of the Tax
Court of Canada Rules (General Procedure) provides as follows :
26. When Proceedings May be Consolidated
— Where two or more proceedings are pending in the Court and
(a) they have in common a question of law or fact or mixed
law and fact arising out of one and the same transaction or occurrence or
series of transactions or occurrences, or
(b) for any other reason, a direction ought to be made under
this section,
the Court may direct that,
(c) the proceedings be consolidated or heard at the same time
or one immediately after the other, or
(d) any of the proceedings be stayed until the determination
of any other of them.
[13]
In John E. Canning
Ltd. v. Tripap Inc., [1999] F.C.J. No. 715 (FCTD) (QL), referred to by
counsel for the respondent, Lemieux J. stated the following at
paragraphs 26 and 27 :
[26] Consolidation of two actions will usually be
ordered when the issues raised by the pleadings in the action are sufficiently
familiar or common so as to achieve the objectives of consolidation namely: the
general interest of justice, its proper administration and the true interests
of the parties.
[27] The underlying policy objectives in
consolidation is [sic] the avoidance of a multiplicity of proceedings
and the promotion of expeditious and inexpensive determination of those
proceedings. Common parties, common legal and factual issues, similar causes of
action, parallel evidence and the outcome of one case as likely resolving the
other case are the factors which the Court looks to in determining whether
consolidation will be ordered or not (see Eli Lilly and Co. v. Apotex Inc.
and Eli Lilly and Co. v. Apotex Inc., 55 C.P.R. (3d) 429,
and Mon-Oil Ltd. v. Canada (1989), 27 F.T.R. 50).
[14]
In my view, this is a case
where consolidation of the five appeals will serve the general interest of
justice, its proper administration and the true interests of the parties. The
issues in these appeals are sufficiently familiar or common as to achieve the
objectives of consolidation. It will avoid a multiplicity of proceedings which,
I find, are not necessary in the present case.
[15]
The parties are the
same in all the appeals and, in my opinion, it is in the interests of justice
to analyze in a single hearing the factual and legal issues in all the appeals.
Indeed, the appeals deal with two transactions initiated by the same people and
involve related persons.
[16]
The determination of
the issue in all the appeals requires the analysis of, among other things, the
course of conduct and the intention of the taxpayers (see Happy Valley Farms
Ltd. v. Minister of National Revenue, 1986 CarswellNat 375 (FCTD).
[17]
In my view, if all five
appeals are consolidated, the trier of fact will be in a better position to
make findings with respect to the existence or non-existence of a series of
transactions without causing undue prejudice to the appellants, as they fear.
The trier of fact’s role is to analyze the evidence before her or him in all
objectivity, and the fact they are consolidated should not influence the outcome
of the appeals. Whether there are separate hearings or only one, it is most
probable that evidence regarding all of the transactions will be adduced for
each appeal in any event, and this will entail much higher costs if the appeals
are heard separately.
[18]
The respondent has satisfied
me that it will be more efficient to proceed with all of the appeals together. As
the parties will thus need to prepare only once for a hearing and the witnesses
will have to appear only once, it is only logical to conclude that the
consolidation will promote the most expeditious determination of all issues.
With respect to the cost of holding only one hearing, I doubt that it will
result in much higher legal costs for the appellants. In fact, there is no
evidence that it will at this early stage of the proceedings, the parties not yet
having set dates for the completion of the various steps preparatory to the
hearing of the five appeals. There is no evidence either that consolidation
would occasion delay or significant or extreme expense as I understand would
have been the case in Baxter v. R., 2003 CarswellNat 4105 (TCC),
referred to by the appellants.
[19]
I therefore conclude
that it will be more efficient and achieve better administration of justice to
consolidate the five appeals. The respondent’s motion is granted.
[20]
The costs of this
motion shall be in the cause.
Signed at Montreal, Canada,
this 16th day of March 2011.
"Lucie Lamarre"
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