Citation: 2007TCC305
Date: 20070622
Dockets: 2006-835(IT)G
2006-836(IT)G
2006-837(IT)G
2006-838(IT)G
2006-839(IT)G
BETWEEN:
HER MAJESTY THE QUEEN,
Applicant,
and
COMTAX COMMODITY TAX CONSULTANTS INC.,
JACKY SCHRYVER,
Respondents.
REASONS FOR ORDER
Angers J.
[1] This is a motion by
the applicant seeking from this Court:
1. An
order compelling the respondents to produce for inspection pursuant to Section 80
of the Tax Court of Canada Rules (General Procedure) (Rules)
(a) documents
appointing Jacky Schryver as director of the Jenkinson Corporation; and
(b) documents
effecting the issuance or transfer of shares of Jenkinson Corporation to Jacky
Schryver or to his nominee;
2. An order extending
the time for filing the replies to the notices of appeal in each of the appeals;
3. An
order pursuant to section 52 of the Rules compelling the respondents to answer a demand for the following
particulars:
With respect to paragraph 3 of
the notice of appeal for 1998:
(a) what happened on
November 1, 1997 in order for an agreement, which has been characterized as a
verbal one, to be entered into, what was said by whom, who was speaking on behalf
of Comtax and on behalf of Jenkinson Corporation, what was said on behalf of
Jenkinson Corporation and what were the terms of the agreement?
With respect to paragraph 6
of the notice of appeal for 1998:
(b) what was the amount
of the liabilities that decreased the value of the property and that had to be
paid by Jenkinson Corporation and to whom did they have to be paid?
(c) what were the
services to be provided and the services actually provided during each of the
years 1998, 1999, 2000 and 2001 by Mr. Schryver to the respondent corporation
in consideration of the payment of $1.3 million in the taxation year 1998?
(d) was the consulting
fee the only consideration/remuneration received in connection with the services
Mr. Schryver provided to the respondent corporation in the years 1998, 1999,
2000 and 2001?
(e) in respect of what
taxation year was the amount of $42,521 allegedly owed by Meco Ltd. included by
the respondent in its income and was the deduction claimed as a bad debt or as
a reserve for a doubtful debt?
(f) with respect to the
notice of appeal generally, does the respondent allege that the sale of the
group of contracts to Jenkinson Corporation allegedly taking place on
November 1, 1997, gave rise to a capital gain?
(g) were the fees of
Wise, Blackman or a portion thereof incurred in connection with the disposition
of capital property?
(h) in
what fashion were the fees of $15,610.56 and $22,502.88 paid by the respondent
to Sternthal Katznelson Montigny connected with the earning of business income
and what portion of those fees was so connected?
(i) what legal services
were provided by Sternthal Katznelson Montigny to the respondents?
(j) what portion of the
fees of $40,000 and $22,500 paid to Fuller Landau was connected with the
earning of income by the respondent and in what fashion was it so connected?
(k) what portion of the
legal fees paid by the respondent to Pandora Production in 1998 and 1999 and to
Alpha Beta Gamma in 1999 was connected with the earning of income by the respondent
and how was it so connected?
(l) what legal services
were provided by Susan Singer in consideration of the amount of $40,860.68 and
in what fashion were the said services connected with the earning of business
income by the respondent?
(m) what legal services were
provided by Goldstein, Flanz & Fishman and how were such services connected
with the earning of business income by the respondent Comtax (as opposed to the
earning of income by Jenkinson Corporation)?
(n) what was the actual
date of the disposition in 1998 of the condominium rental property and what was
the fair market value of the said property on that date?
(o) were the fees of
Wise, Blackman or a portion thereof incurred in connection with the disposition
of capital property?
(p) as regards the goods
and services claimed as promotional expenses of $30,576.66, were any of them
for food or beverages or entertainment, and if so, what portion?
With respect to Comtax’s
1999 and 2000 taxation years:
(a) what goods and
services were provided to the respondent as a result of the Solomon School donation and how is such an outlay related to office expenses
or general expenses of the respondent?
(b) what was the amount
of the bad debts, who were the debtors and when was the amount of each of the
debts included in income?
[2] The respondent
corporation is appealing with respect to its 1997, 1998, 1999, 2000 and 2001
taxation years. The respondent Jacky Schryver is appealing with respect to his
1997 taxation year. All the notices of appeal are dated March 14, 2006.
[3] The respondent
corporation is in the business of providing to its clients consulting services
on a contingency fee basis in the area of commodity tax and customs duties. The
respondent Schryver is the sole shareholder of the respondent corporation. He is
also the sole shareholder of the Jenkinson Corporation (Jenkinson), a tax
consulting company incorporated under the laws of the Cayman Islands.
[4] The respondent corporate
taxpayer earns income from submitting claims on behalf of its clients to the
federal and provincial tax authorities. The income earned is in the form of contingency
fees based on a percentage of the tax refunds or rebates it is able to obtain
for its clients. On November 1, 1997, the respondent taxpayer sold certain of
its claims to Jenkinson. On August 12, 2003, the Canada
Revenue Agency (CRA) issued a notice of assessment in respect of the respondent
corporation’s taxation year ending October 31, 1998; in its assessment the CRA
included in the respondent corporation’s income an additional amount of
$11,102,287. Of this amount, $8,552,750 was estimated by the CRA to be the
difference between the fair market value of the claims and the price paid for
them by the Jenkinson Corporation.
[5] In addition, the CRA
disallowed certain expenses that had been claimed, namely: travel and promotion,
professional fees, office and general expenses, a loss on the sale of real
estate, consulting fees and bad debts.
[6] As for the respondent
Schryver, the CRA issued a notice of assessment on November 20, 2003, with
respect to his 1997 taxation year; by this assessment the CRA increased the respondent
Schryver’s taxable income from $63,182 to $8,143,182. Since the respondent
Schryver is the sole shareholder of Jenkinson Corporation, the CRA concluded
that the additional income should be taxable in his hands by virtue of
subsection 56(2) of the Income Tax Act (Act). The original notice of
assessment with respect to the respondent Schryver’s 1997 taxation year is
dated June 4, 1998. The respondent Schryver argues that the assessment is
statute-barred and that subsection 56(2) has no application here. He also
raises the matter of quantum, which is dependent on establishing the fair
market value of the claims sold, and the question of the disallowance of
certain expenses by the CRA as described earlier, these being the issues in the
respondent corporation’s appeals.
[7] The additional
taxable income and disallowed expenses affected the carry‑back and carry-forward
of certain non-capital losses. As a result, the respondent corporation’s tax
position changed for all the years under appeal.
[8] Approximately one
month after the notices of appeal were filed, counsel for the applicant wrote a
letter to counsel for the respondents asking for particulars regarding the
disallowed expenses referred to in those notices. I will not refer to all of
these expenses, but under travel and promotion, for example, the respondent’s
counsel asked for the following particulars:
-
who
travelled?
-
where
was the travelling being done, by whom and by what means?
-
in
what did the promotion consist?
-
what
were the amounts paid or payable and for what goods and services in terms of
travel and promotion?
-
how
were the expenses allegedly incurred connected with the business of the respondent
and thus deductible?
[9] A request was also
made by the applicant’s counsel under section 80 of the Rules for production of
the agreement dated November 1, 1997, referred to in the notice of appeal for
the 1999 taxation year (2006-837(IT)G). That request was abandoned in a letter
sent by the applicant’s counsel on April 18, 2006, in which a further demand
for particulars and a demand to produce with respect to the 1998 taxation year
(2006-835(IT)G) the agreement dated November 1, 1997, were made. The demand for
particulars made reference to the particular notices of appeal but requested
basically the same particulars as the first demand.
[10] On April 19, 2006, a
further letter containing a demand for particulars was sent by the applicant’s
counsel to the respondents’ counsel. Three questions were asked and a further
demand was made for production of the November 1, 1997, agreement referred to
earlier. The applicant’s counsel wrote again on April 27, 2006, asking the respondents’
counsel if the respondents intended to comply, as the deadline for filing the
replies to the notices of appeal was close and he wanted to prepare a motion for
a court order pursuant to section 52 of the Rules and for an extension of time.
[11] A further letter was
sent by the applicant’s counsel on May 2, 2006, explaining that, after
reviewing the notices of objection, he noted that a real estate loss was
claimed in the 1998 taxation year on the sale of rental property. He demanded
to know the fair market value of the property in question at the time of
disposition, the actual date of disposition and the circumstances and facts
which support the implied allegation that the amount of $1.3 million in
consulting fees paid by the respondent Comtax to Jenkinson was not greater than
the reasonable amount that would have been paid or payable had the respondent
Comtax and Jenkinson been dealing with each other at arm’s length.
[12] On May 18, 2006, the
respondents’ counsel answered by letter almost all of the questions asked in
the demand for particulars and undertook to provide the relevant documents
related to the November 1, 1997 sale. The applicant’s counsel wrote back the
next day reiterating some of his demands for particulars and requesting consent
to a 30-day extension of time for the filing of the replies. More letters were
sent by the applicant’s counsel to the respondents’ counsel regarding
additional particulars, seeking clarification of the “without prejudice” appearing
on the letter providing answers to the requests for particulars, expressing his
view that these answers were inadequate and inquiring about the respondents’
counsel’s availability for the hearing of a motion on the applicant’s counsel’s
demand for particulars.
[13] On July 14, 2006, the
respondents’ counsel replied, providing answers to all of the unanswered requests
for particulars made in the first and second demands (April 13 and April 18,
2006) and in others among the above-mentioned letters from the applicant’s
counsel, and providing as well a copy of the agreement of November 1, 1997.
[14] On July 19, 2006,
counsel for the applicant wrote to acknowledge receipt of the July letters and
requested other information. This request did not take the form of a further
demand for particulars but the respondents’ counsel replied nonetheless and
provided the information.
[15] On July 28, 2006, a
further letter was sent by the applicant’s counsel referring to a conversation
he had had with another lawyer from the respondents’ counsel’s law firm and to matters
pertaining to the conduct of the case. The applicant’s counsel felt that there were
“lacunae” in the particulars and indicated that, because of planned holidays
for himself and certain CRA personnel, he could not undertake to file Replies
by mid-August.
[16] On August 4, 2006, the
respondents’ counsel provided further information regarding bad debts and,
taking the position that they had answered all the demands, requested that the applicant
file Replies by August 15, 2006. Further letters were sent by the applicant’s
counsel seeking further information; in particular one dated August 16, 2006,
contains a series of queries in relation to some of the answers that had been
provided and which in some cases comprised summaries of conversations or of the
contents of letters. It does not appear to me to be a formal demand for
particulars but is rather in the nature of further inquiries regarding matters
which I believe would not constitute proper pleadings. Demands for particulars
should not be contained in an exchange of arguments or of comments between
counsel. Other letters, in which counsel exchange other information, are
included in the evidence produced in support of this motion. In one in
particular the respondent’s counsel presumes certain things and, if they should
not be as presumed, he asks the respondents’ counsel to consider his letter as
notice under section 80 of the Rules requiring the said counsel to produce a
copy of a certain appraisal report or to let him know when he may inspect the
report. In any event, that document is not what is being requested in this
motion under section 80 of the Rules.
[17] In support of this
motion, the applicant’s counsel submitted an affidavit informing this Court that,
with respect to the same relevant period as that involved herein, an
application was made to, and received by, the Federal Court under subsection
225.2 of the Act for an order allowing the Minister to take action immediately
to collect the debt owed by the respondents. The order is dated March 27,
2006, but on March 15, 2006, the respondent corporation gave notice of its
intention to make a proposal to its creditors, which it did on September 28,
2006. An examination for discovery of the respondent Schryver was held on
December 13, 2006, pursuant to the provisions of the Bankruptcy and
Insolvency Act, and it appears from the affidavits that the undertakings given
by the respondent Schryver at the discovery have not yet been fulfilled. It
also appears from the evidence given by the respondent Schryver that he is not
aware of one particular clause in the contract of November 1, 1997, and other
matters. Counsel for the applicant submits that he needs these particulars in
order to properly prepare the replies to the notices of appeal.
[18] The affidavit of
Louis Sébastien, counsel for the applicant in collection matters, filed in
support of this motion, refers to, among other things, conversations and
exchanges of information or facts between counsel and to matters which the respondent
Schryver was unable to explain or of which he had no knowledge when questioned
at the discovery in the bankruptcy proceedings. There is presently before the
Superior Court of Quebec an appeal from a decision of the trustee in bankruptcy
who rejected the CRA’s claims and therefore its right to vote on, and to oppose,
the proposal made by the respondent corporation.
[19] I will deal first
with the demand made under section 80 of the Rules, which reads as follows:
(1) At any time a party may deliver a
notice to any other party, in whose pleadings or affidavit reference is made to
a document requiring that other party to produce that document.
(2) The
party receiving the notice shall deliver, within ten days, a
notice stating a place where the document may be inspected and copied during normal
business hours or stating that the party objects to produce the document and
the grounds of the objection. (Form 80)
[20] Section 80 provides
that a notice may be delivered at any time, which means not necessarily at the
time of inspection of the documents contained in the list of documents referred
to in section 85 of the Rules. It is therefore necessary, in order for section
80 to apply that a notice be delivered to the party of whom the production of a
document is requested. I have gone through the correspondence between counsel
that was submitted in evidence and I have not found any notice that may have
been delivered in relation to the documents requested in this motion. A request
to produce a copy of the November 1, 1997 agreement was sent by letter on April
13, 2006, by the applicant’s counsel. A further request for the same
document was made in a letter of April 18, 2006, and yet another request was
made the day after. The request was later abandoned for the year 1999, but the document was subsequently provided in
response to requests with regard to other taxation years. In the exchange of
correspondence and the discussions between counsel, I have found, in a letter
dated August 8, 2006, from the applicant’s counsel to the respondents’ counsel, reference to certain
documents, but the matter really addressed was the applicant’s counsel’s
position that he is entitled to particulars on a certain issue. This is how it
is phrased:
It is quite legitimate for the applicant to ask Mr. Schryver at what
date and how he became a director of Jenkinson Corporation and if he can
document his claim.
[21] I do not consider
that to be a valid notice to the respondents requesting the production of
documents. A valid notice to the respondents should have taken the form that it
did in this motion, namely, a clear reference to the documents requested so
that they may be easily identified.
[22] The only other
reference I was able to find in the exchange of correspondence to a notice
under section 80 of the Rules was for the production of an appraisal report of
Wise Blackman & Associates which is not the subject of this motion.
[23] A notice to produce
a document under section 80 of the Rules, in my opinion, should not be
contained in the middle of a paragraph in an exchange of correspondence between
counsel. It should take the form of a notice identifying the documents and
asking for their production within the ten days required under that section, so
that the evidence in support of a motion for non-compliance with the request
need not contain unrelated matters which are better left to be dealt with between
counsel.
[24] I find that no such
notice was delivered to the respondents for the production of the documents
requested in this motion. That is a condition precedent to the making of a motion
for an order to comply. In addition, the documents required to be produced must
have been referred to in the pleadings or in an affidavit. In this case, none
of the answers to the demand for particulars have been filed with the Court and
the only pleadings so far are the notices of appeal, in which I have found no
references to these particular documents other than the statement that the respondent
Schryver is the sole shareholder of the respondent corporation and Jenkinson.
The matter of the production of those documents can be addressed when the parties
exchange their lists of documents pursuant to sections 81, 82 and 85 of the
Rules.
[25] The motion herein for
an order compelling the respondents to produce for inspection the documents referred
to above is dismissed.
[26] The applicant also
seeks an order compelling the respondents to supply particulars pursuant to section
52 of the Rules which reads as follows:
Where a party
demands particulars of an allegation in the pleading of an opposite party, and
the opposite party fails to supply them within thirty days, the Court may order
particulars to be delivered within a specified time.
[27] As was the case with
the demand for the production of documents, the applicant’s counsel has made,
through correspondence, various demands for particulars, some of which were in
reference to the allegations in the notices of appeal while others were in
general terms and not necessarily in reference to the allegations. These
demands were intermingled with comments, arguments and opinions of counsel,
particularly counsel for the applicant, so that it is difficult to list the demands
or even to determine if a particular demand was in fact answered. I am at a
loss as to how counsel intends to file with this court in such a way that, as
regards form, they can be considered a part of the pleadings, free of the
comments and exchanges of counsel, answers to demands for particulars. That
being said, I also have a hard time reconciling the demand for particulars contained
in this motion with that made by the applicant’s counsel in his letters to the respondents’
counsel. In my view, the form and the wording used in a demand for particulars should
be repeated in the same format for the purposes of the motion, otherwise, the
demanding party may not be able to establish with certainty that the
particulars demanded were in fact the subject of a formal demand, which I find
to be the case here. A demand for particulars should be drafted with precision and
stand alone in order to ensure clarity and certainty on the hearing of a motion
to compel compliance with the demand, and the same is true of the answers in
order that these may become part of the pleadings in an acceptable form.
[28] The applicant’s
counsel referred this Court to the Federal Court of Appeal decision in Gulf
Canada Ltd. v. The “Mary Mackin”, [1984] 1 F.C. 884
(QL). That court, addressing the matter of the issues and principles that are
to be considered in deciding whether to issue an order for particulars, stated
the following:
The principles governing an
application of this kind were well stated by Sheppard J.A. in the case of
Anglo-Canadian Timber Products Ltd. v. British Columbia Electric Company
Limited, [(1960), 31 W.W.R. 604 (B.C.C.A.).] where he stated at pages 605 and
606:
Hence it appears that an examination for discovery follows
upon the issues having been previously defined by the pleadings and the purpose
of such discovery is to prove or disprove the issues so defined, by a cross-examination
on the facts relevant to such issues.
On the other hand the purpose of particulars is to require
a party to clarify the issues he has tried to raise by his pleading, so that
the opposite party may be able to prepare for trial, by examination for discovery
and otherwise. The purpose of particulars was stated in Thorp v. Holdsworth
(1876) 3 Ch 637, 45 LJ Ch 406, by Jesse, M.R. at p. 639, as follows:
"The whole object of
pleadings is to bring the parties to an issue, and the meaning of the rules of Order
XIX, was to prevent the issue being enlarged, which would prevent either party
from knowing when the cause came on for trial, what the real point to be
discussed and decided was. In fact, the whole meaning of the system is to
narrow the parties to definite issues, and thereby to diminish expense and
delay, especially as regards the amount of testimony required on either side at
the hearing."
That purpose of particulars
was stated in Spedding v. Fitzpatrick (1888) 38 Ch 410, 58 LJ Ch 139, by
Cotton, L.J. at p. 413, as follows:
"The object of
particulars is to enable the party asking for them to know what case he has to
meet at the trial, and so to save unnecessary expense, and avoid allowing
parties to be taken by surprise."
Also the particulars operate
as a pleading to the extent that "They tie the hands of the party, and he
cannot without leave go into any matters not included" (Annual Practice,
1960, p. 460) and they may be amended only by leave of the court (Annual
Practice, 1960, p. 461).
When pleadings are so vaguely drawn that the opposing party
cannot tell what are the facts in issue or, in the words of Cotton, L.J. in Spedding
v. Fitzpatrick, supra, "what case he has to meet," then in such
circumstances the particulars serve to define the issue so that the opposite
party may know what are the facts in issue. In such instances the party
demanding particulars is in effect asking what is the issue which the draftsman
intended to raise and it is quite apparent that for such a purpose an examination
for discovery is no substitute in that it presupposes the issues have been
properly defined.
This case was cited with
approval in a later decision of the British Columbia Court of Appeal in the
case of Cansulex Limited v. Perry et al. [Judgment dated March 18,
1982, British Columbia Court of Appeal, file C785837, not reported.] In that
case, Lambert J.A. referred to the Anglo-Canadian Timber decision as being one
of the decisions which "... delineate the difference between what is
properly the subject matter of a Demand for Particulars and what is more
properly the subject-matter of a Demand for Discovery of material that should
be obtained on an Examination for Discovery". (See, page 8 of the reasons
of Lambert J.A.) Mr. Justice Lambert added:
At the heart of the
distinction between the two lies the question whether the material demanded is
intended to, and does, delineate the issues between the parties, or whether it
requests material relating to the way in which the issues will be proved.
He then went on at pages 10
and 11 of his reasons to enumerate with approval the function of particulars as
set out in the White Book dealing with the English Practice. The Supreme Court
Practice, 1982, Vol. 1, page 318 details this function as follows:
(1) to inform
the other side of the nature of the case they have to meet as distinguished
from the mode in which that case is to be proved ....
(2) to prevent the other side
from being taken by surprise at the trial
(3) to enable the other side
to know what evidence they ought to be prepared with and to prepare for trial
....
(4) to limit the generality
of the pleadings ....
(5) to limit and decide the
issues to be tried, and as to which discovery is required ....
(6) to tie the hands of the
party so that he cannot without leave go into any matters not included ....
Because Rule 408(1)
[Federal Court Rules, C.R.C., c. 663] requiring "... a precise statement
of the material facts on which the party pleading relies" and Rule 415
permitting applications for further and better particulars of allegations in a
pleading are substantially similar to the corresponding sections in the English
Rules, I think the above quoted six functions of particulars should apply
equally to an application such as the present one under our Rules.
[29] The courts have
drawn a distinction between particulars for the purpose of pleadings and
particulars for the purpose of trial. This Court dealt with this matter in Satin
Finish Hardwood Flooring (Ontario) Ltd. v. Canada, [1995] T.C.J. No. 240 (QL), where
at paragraphs 20 and 21 it stated:
In the
third place, where particulars are sought before pleading it must be for the
purpose of enabling the opposite party to formulate an intelligent response.
There is a fundamental difference between particulars required for the purpose
of pleading and particulars needed for the purposes of trial. That distinction
was clearly expressed by Marceau J. in Embee Electronic Agencies v. Agence
Sherwood Agencies Inc., 43 C.P.R. (2d) 285 at 286-287. To the same effect,
see Madden v. Madden [1947] O.R. 866, (Ont. C.A.) per Laidlaw
J.A. at 873-874; Coca-Cola Co. v. O'Keefe's Beverages Limited [1922] 23
OWN 175 per Riddell J. at 176.
Whether or not the type of
particulars sought by the respondent may be necessary for the purposes of the
trial, they are not necessary for the purposes of preparing a reply. Moreover,
given the somewhat unique nature of income tax litigation, the Minister of
National Revenue is well aware of all of the facts he needs to respond to the
notice of appeal. He should know why he assessed. If the respondent needs more
details of the appellant's business for the purposes of trial they can be
obtained on an examination for discovery.
[30] It therefore follows
that only particulars required in order to formulate an intelligent response
will be ordered on a motion for particulars brought before the reply has been
filed. Particulars are not to be ordered regarding the manner in which issues
are to be proved. In McPherson v. The Queen, 97 DTC 1497, it was held
that particulars may be ordered where the respondent has raised an alternative
argument that was based on information not in the possession of the Minister,
but such is not the case here.
[31] I have reviewed the
demands for particulars made by the applicant and the responses to these
demands that have been provided so far and I am at a loss as to why the applicant
requires additional information in order to plead “intelligently” with respect to
the notices of appeal. In my opinion, the particulars demanded either constitute
evidence or, in most cases, are not required for the purpose of preparing a reply.
All that information can properly be disclosed during an examination for
discovery and it will still be open to the applicant to renew her motion for particulars
before trial or to amend her pleadings under the Rules if necessary. Counsel
for the applicant was concerned over a possible trial by ambush. May I remind
him that the elements of surprise and trial by ambush are long gone, and I
would point out that, should they arise, the courts have in many cases and when
warranted, granted adjournments with costs payable by the defaulting party. The
motion for an order compelling the respondents to answer a demand for
particulars is dismissed.
[32] Lastly, the applicant
is seeking an order extending the time for filing the replies to the notices of
appeal in all of these appeals. A reply must be filed with the registry within
60 days after service of the notice of appeal (subsection 44(1) of the
Rules). An extension is possible if an appellant consents, before or after the
expiration of the 60-day period, to the filing of that reply after the 60-day
period within a specified time (paragraph 44(1)(a) of the Rules) or if the
Court allows, on application made before or after the expiration of the 60-day
period, the filing of that reply after the 60-day period within a specified
time.
[33] The notices of
appeal are all dated March 14, 2006 and were filed on March 14, 2006. The
evidence should have disclosed the date on which the applicant was served
therewith. It is clear, though, from the evidence, that in a letter from the respondents’
counsel dated July 28, 2006, a request was made to the applicant’s counsel to
file its replies by August 15, 2006, and that a further such request was made
in a subsequent letter, dated August 4, 2006. Counsel for the applicant has
acknowledged that the respondent' consent for late filing expired on August 15,
2006. More than seven months beyond that date went by before this application
was made on March 23, 2007.
[34] This Court and the
Federal Court of Appeal in Canada (Attorney General v. Hennelly, [1999] F.C.J. No. 846
(F.C.A.); Stanfield v. The
Queen, 2004 DTC 2923 (T.C.C.) and 2005 DTC 5211 (F.C.A.); and Telus
Communications (Edmonton) Inc. v. R. (No. 1), [2003] G.S.T.C. 182, have applied the
following four-part test when determining whether to order an extension of time
for filing a reply:
(1) There is a reasonable
explanation for the delay;
(2) No prejudice to the other
party arises;
(3) The main action has some
merit;
(4) The respondent has a
continuing intention to file the document.
[35] The application was
not strongly argued by the applicant’s counsel at the hearing nor was it
vehemently opposed by the respondents’ counsel. I can only infer from the
evidence that the applicant always intended to file the replies and that the
explanation for the delay is reasonable in that the applicant’s counsel was seeking
particulars and had been attempting since August to determine the respondents’
counsel’s availability for a date to have the application heard. I would remind
counsel that this latter factor is not a prerequisite for filing an application
for an extension of time. As regards prejudice, none was argued by the respondents’
counsel. Finally, the reassessment raises issues of fair market value in regard
to the sale of the claims and the matter of whether certain expenses were
incurred for the purpose of earning income. On that basis, I am prepared to
grant the application and allow the respondent to file the replies to the notices
of appeal within 60 days from the date of this order.
[36] Neither party has
raised the question of the effect of the proposals in bankruptcy made by the respondent
corporation on the status of these proceedings concerning the respondent
corporation, and neither will I.
[37] The respondents are
entitled to costs which I fix at $1,000.
Signed at Ottawa, Canada, this 22nd
day of June 2007.
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