Docket: 2009-3654(IT)G
BETWEEN:
John Robert
Leverman,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Motion
heard on September 27, 2011 at Nanaimo, British Columbia.
Before: The Honourable
Justice Lucie Lamarre
Appearances:
|
Counsel for the Appellant:
|
The
Appellant himself
|
|
Counsel for the Respondent:
|
Andrew Majawa
|
____________________________________________________________________
ORDER
Upon motion by the appellant for:
1. an order for oral examination for discovery
at the cost of the respondent;
2. in the alternative, an order
requiring answers to questions asked on written examination for discovery, appellant’s
questions that is, the 5(d), 12, 13, 15, 16, 17, 19, 20, 21, 22, 23, 24, 25,
26, 29, 33, 34, 38, 39, 40, 41, 42, 43, 44, 45, 46, 50, 52, 53, 54, and 55 in
Exhibit “L” to the affidavit of Dianne Leverman;
3. an order that the respondent
produce the Daytimer document and any other documents in which the expense
receipts requested by the auditors are noted or referred to;
4. an order that a settlement
conference be held and prescribing any conditions thereof;
5. costs;
And upon having heard the allegations of the
parties;
It is ordered as follows:
The request for oral examination for
discovery is dismissed;
The request for additional answers by the respondent
to the specific questions on written examination for discovery is dismissed;
The request that the respondent produce the
Daytimer document or any document in which the expense receipts requested by
the auditor are noted is dismissed;
The request for a settlement conference is
granted and a settlement conference shall be held in Vancouver before a judge of this Court at the first
available sitting following the date of this order, upon consultation with the
parties.
Costs shall be in the cause.
Signed at Ottawa,
Canada, this 13th day of October 2011.
“Lucie Lamarre”
Citation: 2011 TCC 479
Date: 20111013
Docket: 2009-3654(IT)G
BETWEEN:
John Robert Leverman,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Lamarre J.
Request for oral examination for discovery
[1]
Section 17.3 of the Tax
Court of Canada Act (Act) reads as follows:
17.3 (1) Examinations for discovery ‑
Where the aggregate of all amounts in issue in an appeal under the Income
Tax Act is $25,000 or less, or where the amount of the
loss that is determined under subsection 152(1.1) of that Act and that is in
issue is $50,000 or less, an oral examination for discovery shall not be held
unless the parties consent thereto or unless one of the parties applies
therefor and the Court is of the opinion that the case could not properly be
conducted without that examination for discovery.
(2) Consideration
on application ‑ In considering an application under subsection (1), the
Court may consider the extent to which the appeal is likely to affect any other
appeal of the party who instituted the appeal or relates to an issue that is
common to a group or class of persons.
(3) Mandatory
examination ‑ The
Court shall order an oral examination for discovery in an appeal referred to in
subsection (1), on the request of one of the parties, where the party making the
request agrees to submit to an oral examination for discovery by the other
party and to pay the costs in respect of that examination for discovery of that
other party in accordance with the tariff of costs set out in the rules of
Court.
[2]
Section 2.1 of the Act
defines the expression “the aggregate of all amounts” and reads as follows:
2.1
Interpretation ‑
For the purposes of this Act, "the aggregate of all amounts" means
the total of all amounts assessed or determined by the Minister of National
Revenue under the Income Tax Act, but does not include any amount of
interest or any amount of loss determined by that Minister.
[3]
In Maier v. R.,
1994 CarswellNat 3242, at paragraphs 5 and 6, judge Garon (as he then was) of
this Court stated that the “aggregate of all amounts” refers to the total of
all amounts in issue in a single assessment, not to the total of all amounts at
issue for all of the years under appeal.
[4]
In the present appeals,
the amounts at issue for each of the taxation years under appeal are as follows
(see affidavit of Barbara Harvey of the Canada Revenue Agency (CRA)):
a. $ 11,291 of federal tax for
the 2002 taxation year (affidavit of Barbara Harvey, paragraph 5);
b. $ 1,259 of non-capital losses
(as determined under subsection 152(1.1) of the Income Tax Act)
(affidavit of Barbara Harvey, paragraphs 7 and 8); and
c. $ 5,357.50 of federal tax for
the 2005 taxation year (affidavit of Barbara Harvey, paragraph 10).
[5]
The amounts at issue
for each taxation year are well below the threshold amounts specified in the
Act.
[6]
Furthermore, the matter
under appeal (disallowance of business expenses) is relatively simple. The appellant
has already proceeded with a written discovery pursuant to section 113 of the Tax
Court of Canada Rules (General Procedure) (Rules) and the auditor
provided him with her audit report.
[7]
There is no evidence
that the appeals before the Court will likely affect any other appeal of the appellant
or that they relate to an issue that is common to a group or class of persons.
[8]
In light of the above,
I do not see the necessity of proceeding with an oral examination for discovery
that would lengthen the process unnecessarily.
Answers to specific questions on written examination
for discovery
[9]
The majority of the
questions which the respondent objected to answering, and which the appellant seeks
to require her to answer through this motion, address the conduct of the
auditor during the audit. In Main Rehabilitation Co. v. The Queen, 2004
FCA 403, the Federal Court of Appeal made the following comments at paragraphs
6,7 and 8:
[6] In any event, it is also plain and
obvious that the Tax Court does not have the jurisdiction to set aside an
assessment on the basis of an abuse of process at common law or in breach of
section 7 of the Charter.
[7] As the Tax Court Judge properly notes in
her reasons, although the Tax Court has authority to stay proceedings that are
an abuse of its own process (see for instance Yacyshyn v. Canada, 1999
D.T.C. 5133 (F.C.A.)), Courts have consistently held that the actions of the
CCRA cannot be taken into account in an appeal against assessments.
[8] This is because what is in issue in an
appeal pursuant to section 169 is the validity of the assessment and not the
process by which it is established (see for instance the Queen v. the
Consumers' Gas Company Ltd. 87 D.T.C. 5008 (F.C.A.) at p. 5012). Put
another way, the question is not whether the CCRA officials exercised their
powers properly, but whether the amounts assessed can be shown to be properly
owing under the Act (Ludco Enterprises Ltd. v. R. [1996] 3 C.T.C.
74 (F.C.A.) at p. 84).
[10]
In Simard v. The
Queen., 2009 FCA 379, Létourneau J.A. stated the following at paragraph 12:
[12] First, the Tax Court of Canada's
jurisdiction in an appeal of an assessment is limited to "deciding whether
the assessment complies with the law, based on the facts and the applicable
legislation": see Lassonde v. Canada, 2005 FCA 323. It does not, as
the appellant would have it, have the power to set itself up as critic of the
conduct of the Minister or his staff responsible for collecting taxes in the
public interest. As the appellant takes the view that he has been wronged by
the process that was followed, his remedy lies elsewhere than in vacating an
assessment that complies with the Act.
[11]
Questions related to
the audit process would not be part of a proper train of inquiry during the
examination for discovery as it is the validity of the assessment that is in
issue, not the process by which it is established (see Haniff v. The Queen,
2010 TCC 380 at paragraph 12).
[12]
The appellant argued
before me that the auditor’s conduct during the audit may be relevant to costs
and that is why he contends that he has the right to ask questions relating
thereto during the examination for discovery. Subsection 95(1) of the Rules
reads as follows:
95. Scope of Examination ‑ (1)
A person examined for discovery shall answer, to the best of that person’s
knowledge, information and belief, any proper question relevant to any matter
in issue in the proceeding or to any matter made discoverable by subsection (3)
and no question may be objected to on the ground that
(a) the information
sought is evidence or hearsay,
(b) the question
constitutes cross-examination, unless the question is directed solely to the
credibility of the witness, or
(c) the question
constitutes cross-examination on the affidavit of documents of the party being
examined.
[13]
This subsection
provides that a person examined for discovery shall answer, to the best of that
person’s knowledge, information and belief, any proper question relevant to any
matter in issue in the proceeding. Thus, only questions relevant to a matter in
issue in the proceeding may be asked.
[14]
In A.I. MacFarlane
& Associates Ltd. v. Delong, [1986] O.J. n° 605(QL), (1986), 55
O.R. (2d) 89, 10 C.P.C. (2d) 25. par.#6, Mcrae J. wrote:
It seems to me that to permit a pleading which is only relevant to
the issue of costs, whether it be solicitor-and-client costs, or
party-and-party costs, would be a dangerous precedent. Costs are not an issue
and are not part of the lis between the parties but are a separate matter to be
decided after all of the issues have been settled. If a party is allowed to
plead factors which are only relevant to the issue of costs pleadings could
conceivably become, to a large degree, involved with that issue.
[15]
This position was taken
by, among others, the Federal Court in Eli Lilly & Co. v. Apotex Inc.,
2003 FC 978 at paragraphs 24, 25, and 26, where it is stated:
[24] Costs are typically awarded to
compensate parties for the costs of the litigation. As with Rule 57.01(1) of
the Ontario Rules of Civil Procedure, referred to by Master Donkin in Delray
Development Corp.,Rule 400(3) of the Federal Court Rules, describes the
factors to be taken into consideration by the Court in awarding costs. They include,
"the result of the proceeding", "the amounts claimed and the
amounts recovered" and "the apportionment of liability" -
matters that can only be determined when the substantive part of the trial is
over. This fortifies the presumption against pleadings relating exclusively to
costs, in that these are not matters for trial, but are properly dealt with in
the aftermath of the adjudication of the substantive allegations on their
merits.
[25] Considering these authorities in their
totality, and being mindful of the specific context of the Federal Court
Rules and the broader principles governing their practice, I conclude that
the judgment in A.I. MacFarlane is the prevailing and correct view of
the law, and that allegations of facts that are relevant only to costs, and are
immaterial to the substantive issues in dispute, are not appropriate for
pleading. Indeed while cases still reference Bonner, and the conflicting
opinions expressed in Royal Bank of Canada and A.I. MacFarlane,
the preponderance have resoundingly resolved the conflict in favour of the
latter.
[26] I share the view that it is not
procedurally just or expedient to allow matters unrelated to the lis, and going
exclusively to an entitlement of costs to detract from the substantive issues
to be decided at trial. To allow such pleading to stand, is to invite
grievances as to a party’s conduct, to become a basis to amend allegations of
fact, as these grievances arise, thereby engendering delays and potentially,
needlessly, expanding the ambit of discoveries.
[16]
I agree with that decision,
and even though the auditor’s conduct might be relevant to costs in that it
might be a factor to consider under subsection 147(3) of the Rules (a matter on
which I do not wish to comment here), I conclude that the respondent cannot be
forced to answer the appellant’s questions relating to the auditor’s conduct at
the discovery level.
[17]
This conclusion, in my
view, settles the other argument raised by the appellant, namely, that the respondent
joined issue with the appellant on the question of the auditor’s conduct. The respondent
states that she has not raised the auditor’s conduct as an issue in her reply
to the amended notices of appeal, but even if she had, the parties cannot agree
to extend the jurisdiction of the Court (see Canada v. Krahenbil, [2000]
F.C.J. n° 801 (QL), 2000 CarswellNat 1038, 258 N.R. 87 (FCA)).
[18]
Finally, the few other
questions to which the appellant is seeking answers in this motion either relate
to matters that are not at issue or not relevant or to expenses that have already
been conceded by the respondent, or were, in my view, answered by the respondent.
[19]
I therefore conclude
that the written examination for discovery is closed.
Auditor’s Daytimer
[20]
The appellant is asking
this Court to order the auditor to produce a copy of the Daytimer in which she
made a note of the receipts she requested during the audit. The Appellant was
informed by counsel for the respondent that the auditor’s Daytimer had been
destroyed (see paragraph 20 in the affidavit of Diane L. Leverman).
[21]
My understanding of the
appellant’s request for the Daytimer is that he wants to establish that the
auditor did not analyze all the documentation provided to her. The fact is
that, according to counsel for the respondent, the Daytimer does not exist
anymore. I therefore cannot force the respondent to produce it. In any event,
this case is now pending before this Court. The fact that the auditor did not
go through all the receipts, as the appellant claims, does not change the
issue, which is whether the expenses claimed should be allowed. It is now for a
judge of this Court to decide that issue on the merits, in light of the evidence
that will be provided by the parties.
Request for a settlement conference
[22]
The policy of this
Court, as set out in its Practice Note No. 17, which has been in force since
January 18, 2010, is to direct that a settlement conference be held at the
request of either party for the purpose of exploring the possibility of
settlement of some or all of the issues.
[23]
The appellant
specifically requests such a conference and he has the right to do so. I had
the impression during the presentation of his motion that, during the audit,
there were some misunderstandings between the appellant and the auditors
representing the CRA. I find that a settlement conference may be particularly
helpful here in that the parties may need some kind of mediation with the help of
a judge in order to, one would hope, reach an amicable settlement.
Signed at Ottawa, Canada, this 13th
day of October 2011.
“Lucie Lamarre”
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