Citation: 2010 TCC 323
Date: 20100615
Docket: 2007-3715(IT)G
BETWEEN:
WILLIAM CAMPBELL,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS RESPECTING
SUBMISSIONS ON COSTS
Campbell J.
[1]
The Applicant/Appellant
brought a Motion for reconsideration of the costs awarded to him in my Reasons
for Judgment issued on February 19, 2010.
[2]
The appeal in this
matter involved a reassessment against Mr. Campbell in his capacity as a
director of Complete Rent-Alls Limited (“CRL”) for unremitted deductions and
employer contributions together with interest and penalties. The assessment of
June 2, 2006 involved a total amount owing of $406,222.34, of which $207,283.00
was tax, with the remainder consisting of penalties and interest.
[3]
The appeal was heard in
St. John’s, Newfoundland for two days, commencing on
December 14, 2009, and I allowed the appeal with costs.
[4]
In the Motion before
me, counsel for the Applicant/Appellant has indicated that, on December 8,
2009, a written Offer of Settlement was faxed to Respondent counsel. The offer
was to settle the appeal by payment of $207,283.00, being the federal and
provincial tax portions, in return for cancellation of the penalty and interest
portions of the assessment, pursuant to subsection 220(3.1) of the Income
Tax Act (the “Act”).
[5]
On December 11, 2009,
Respondent counsel advised counsel for the Applicant/Appellant that the offer
in its entirety was being rejected on the basis that penalties and interest,
pursuant to subsection 220(3.1) of the Act, allowed for only a waiver in
respect to the prior ten years and would, therefore, amount to cancellation of $13,000.00.
No counter-offer was made.
[6]
The Applicant/Appellant
submits that substantial additional expenses, incurred with respect to legal
fees and disbursements in preparation for the conduct of the hearing, as well
as preparation of the present Motion respecting costs, could have been avoided
if the matter had settled. Reliance is placed on Rules 147(3)(d) and
147(7)(a) of the Tax Court of Canada Rules (General Procedure)
(the “Rules”) in seeking a reconsideration of the award of costs, by directing
the Court to take into account the rejection of a settlement offer that was
more favourable to the Respondent than the eventual outcome of the appeal. The
Applicant/Appellant is therefore requesting the following:
1. normal tariff costs as wholly
successful litigant for the period up to 12:00 noon of Friday, December 11,
2009, or party and party costs;
2. commencing 12:00 noon of Friday,
December 11, 2009, costs on the basis of 100% of fees and disbursements billed
for final preparation and conduct of the hearing, together with all written
submissions;
3. costs fixed at $750.00 for
preparation of the Motion; and
4. costs fixed at $375 for
preparation of rebuttal to the Respondent’s Written Submissions on the Motion.
[7]
The Respondent submits
that the offer to settle was rejected on the basis that the Respondent is
required to settle on a “principled” basis specific to the issues that will be before
the Court. The Respondent states that the Offer of Settlement for payment of
taxes owed in return for cancellation of penalties and interest, cited subsection
220(3.1) of the Act as its authority to do so. Paragraph 7 of the
Respondent’s Written Submissions stated:
7. ... It would not be a principled
settlement for the Respondent to exercise the discretion under subsection
220(3.1) over which this Court has no control. Further, the vast majority of
this case occurred beyond the ten year time limit set out in this provision.
The Respondent submits that the Applicant/Appellant is
entitled to costs only in accordance with the Tariff, together with
disbursements, but not enhanced costs as requested in this Motion.
[8]
Rule 147 of the Rules
gives a presiding Judge broad discretionary powers in determining an award of
costs. The factors this Court may consider in exercising this discretionary
power are set out in Rule 147(3):
147… (3) In exercising its discretionary power
pursuant to subsection (1) the Court may consider,
(a)
the result of the proceeding,
(b)
the amounts in issue,
(c)
the importance of the issues,
(d)
any offer of settlement made in writing,
(e)
the volume of work,
(f)
the complexity of the issues,
(g)
the conduct of any party that tended to shorten or to lengthen unnecessarily
the duration of the proceeding,
(h)
the denial or the neglect or refusal of any party to admit anything that should
have been admitted,
(i)
whether any stage in the proceedings was,
(i) improper, vexatious, or unnecessary, or
(ii) taken through negligence, mistake or excessive caution,
(j)
any other matter relevant to the question of costs.
[9]
Rule 147(4) gives the
Court power to award a lump sum with respect to costs. It states:
147 … (4) The Court may fix all or part of the
costs with or without reference to Schedule II, Tariff B and, further, it may
award a lump sum in lieu of or in addition to any taxed costs.
[10]
Rule 147(3)(d)
specifically permits this Court to consider any settlement offers made in
writing when determining an award of costs beyond the Tariff. Although this
Court encourages settlement negotiations between parties wherever possible, the
Respondent was under no obligation to provide a counter-offer, as the Appellant
implies, and was free to promptly reject the offer made. Although under no
obligation to consider an offer of settlement, parties are encouraged and
should seriously review and consider such offers, otherwise they may be at
peril for increased costs if they are less successful in Court than they may
have been if they had accepted the offer.
[11]
Some jurisdictions
provide that where an unsuccessful party rejects a settlement offer which is at
least as favourable as the outcome of the hearing in the matter, that party is
responsible for costs on a solicitor/client basis or at least increased costs
for the period commencing on the date the offer is made and ending at the
termination of the hearing. The Rules of this Court contain no such
specific provision. However, I do not believe this absence prevents me from exercising
my discretion in increasing costs where the circumstances support such an
increase and particularly where Rule 147(3) specifically enumerates a written
offer of settlement as one of the factors this Court may consider.
[12]
The Respondent, at
paragraph 14 of the Written Submissions, states (referring to subsection
220(3.1)):
14. Even if the Respondent had accepted the
Appellant’s (Applicant’s) unprincipled offer the result sought would have
remained unachievable as most of the amounts owing arose beyond the ten year
limitation period.
However, the Offer of Settlement clearly suggested
that, as an alternative to applying the amount of $207,283.00 against taxes and
cancelling penalties and interest, this amount “…could be differently allocated
amongst the amounts reflected in the breakdown of balance attachment to the
June 2, 2006 Notice of Assessment”. At paragraph 4 of the Appellant’s Rebuttal
to Respondent’s Written Submissions, the Applicant/Appellant elaborated on this
alternative proposal as follows:
… the settlement funds could have been applied to selected tax
amounts listed in the attachment plus associated interest and penalty, with
remaining tax amounts being consensually vacated on the basis of, in each
instance, acceptance of applicability of the statutory due diligence defence.
The concomitant amounts of interest and penalty for such vacated tax amounts
would evaporate accordingly.
No discussions took place respecting this alternative
proposal, although I believe they may have been fruitful if they had. I also
note that the Offer of Settlement, in its final paragraph, states that a major
justification for the cancellation of penalties and interest could be supported
by to the lengthy period of time that elapsed between the closing of the company’s
business in early 1999 and the issuance of the June 2, 2006 assessment. As
noted at paragraph 9 of my Reasons for Judgment, this left the Appellant
without the benefit of corporate records to reference at the hearing, as they
had been inadvertently thrown out by third parties.
[13]
Considering that the
other factors enumerated in Rule 147(3), such as volume of work, conduct,
complexity of and importance of the issues, were generally typical of such an
appeal, I allowed the appeal with costs, without being aware of the
circumstances of the Offer of Settlement.
[14]
Although I do not think
that a case has been made for awarding solicitor/client costs, I do, however,
believe that the circumstances justify a more generous treatment respecting
costs than provided for in our Tariff.
[15]
Consequently, in
addition to the entitlement of the Applicant/Appellant to normal Tariff costs
for the period up to 12:00 noon of Friday, December 11, 2009, I am awarding a
lump sum amount of $6,500.00 for the time period subsequent to 12:00 noon,
Friday, December 11, 2009 respecting preparation and conduct of the two day
hearing, together with all written submissions for the hearing and this Motion.
It would have been helpful if I had been provided with the amounts of the legal
fees and disbursements subsequent to December 11, 2009, but in this absence, I
have awarded an amount which I believe is reasonable. With the hearing having
commenced on December 14, 2009, just three days after rejection of the Offer of
Settlement, I would expect that much, if not all, of the preparation work would
have been completed well in advance of these dates.
Signed at Ottawa, Canada, this 15th day of June 2010.
“Diane Campbell”
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