Citation: 2006TCC615
Date: 20061110
Docket: 2001-970(IT)G
BETWEEN:
CRYSTAL BEACH PARK LIMITED,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Sheridan, J.
[1] The Appellant, Crystal Beach Park Limited, brings a motion for an order:
(a) That costs in this matter be fixed at $53,592.31, representing: (1) the amount prescribed by Schedule II, Tariff B for services of counsel rendered until the date of the appellant's Offer to Settle on December 2, 2003; (2) one-half of substantial indemnity for services of counsel rendered thereafter; and (3) all disbursements incurred; or
(b) That directions be given to the Taxing Officer that: (1) the Respondent pay costs in accordance with Schedule II, Tariff B up to the date of the appellant's December 2, 2003 Offer to Settle; (2) that the Respondent pay costs in excess of the Tariff, to the extent this Honourable Court deems appropriate in all the circumstances, in respect of services of counsel after December 2, 2003; and (3) the Respondent reimburse the appellant for all disbursements incurred; or
(c) That directions be given to the Taxing Officer directing him or her to consider factors other than those prescribed by Rule 154 of the Tax Court of Canada Rules (General Procedure), including specifically: the complexity of the case, legally and factually, the outcome of the case, the Trial Judge's findings that the Respondent pleaded that the Minister had made assumptions of fact which it was determined at trial the Minister had not actually made, and the Appellant's unaccepted Offers to Settle, all of which were less favourable to the appellant than the Judgment.
(d) costs of this motion, on a solicitor and client scale, plus GST; or
(e) such additional relief and directions as this Honourable Court may deem just.
[2] The grounds for the Appellant's motion are:
(a) In allowing the Appellant's appeal, the Honourable Justice Sheridan granted costs to the appellant, without being aware of the Appellant's Offers to Settle and without the benefit of submissions from counsel on costs.
(b) The Appellant attempted to resolve the appeal and to narrow the issues in dispute throughout the proceedings, including, without limitation: seeking amendments to and particulars of the pleadings to clarify the matters in issue; seeking admissions; and making 3 offers of settlement in writing prior to significant stages in the proceedings, all of which were more favourable to the Respondent that the Judgment and none of which was accepted.
(c) Absent directions from this Court, a taxing officer may only consider those factors prescribed by Rule 154 of the Tax Court of Canada Rules (General Procedure), specifically: the amounts in issue; the importance of the issues; thecomplexity of the issues; and the volume of the work.
(d) Factors other than those prescribed in Rule 154 are relevant to these proceedings and increased the Appellant's litigation costs in this appeal.
(e) Tax Court of Canada Rules (General Procedure) sections 147, 154, 157 and Schedule II, Tariff B.
[3] The relevant subsections of section 147 of the Tax Court of Canada Rules (General Procedure) are set out below:
General Principles
147. (1) Subject to the provisions of the Act, the Court shall have full discretionary power over the payment of the costs of all parties involved in any proceeding, the amount and allocation of those costs and determining the persons by whom they are to be paid.
...
(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.
(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.
(5) Notwithstanding any other provision in these rules, the Court has the discretionary power,
(a) to award or refuse costs in respect of a particular issue or part of a proceeding,
(b) to award a percentage of taxed costs or award taxed costs up to and for a particular stage of a proceeding, or
(c) to award all or part of the costs on a solicitor and client basis.
[4] The general rule is that costs be prescribed by the Tariff. The Court has, however, the discretion to award costs beyond the Tariff where there are unusual and exceptional circumstances to justify doing so.
[5] In the present case, the Appellant argues that such an award is warranted and points, in particular, to my findings with respect to the auditor's evidence, the Appellant's efforts to narrow the issues in dispute and its offers of settlement. Counsel for the Respondent submits that there is no justification for making an award of costs in excess of the Tariff. Taking into consideration the factors set out in subsection 147(3), I am satisfied that the Respondent's position is the correct one.
[6] The amounts in issue, the importance of the issues, the volume of work, and the complexity of the issues were not such as to incite justification for an additional costs award.
[7] While the Appellant was successful in its appeals and the outcome more favourable to the Appellant than its proposed offers of settlement, unlike the rules of some other jurisdictions, section 147 does not provide that where judgment is obtained on terms more favourable than the written offer to settle, costs should be on a solicitor-client basis from the date of the offer.[1] Accordingly, to justify additional costs on this basis, the Appellant has the onus of bringing the Respondent's conduct in this regard within at least one of the criteria in subsection 147(3). In all the circumstances of this matter, I find nothing untoward in the Respondent's decision not to accept the Appellant's settlement offers. Although technically, the Appellant made three offers, the first and second were identical. The first offer was made when the Appellant was seeking to amend its Notice of Appeal, an application which the Respondent vigourously opposed. The third offer constituted a withdrawal of the first two[2] and also sought to expand their parameters by including in the settlement offer the resolution of another taxation year not under appeal. I am not convinced that the Respondent's rejection of the settlement offers warrants the Court's exercising its discretion to award greater costs.
[8] It is the Appellant's position that the Respondent's responses to its Demand for Particulars and Request to Admit unnecessarily lengthened the proceedings. Requests for admissions and particulars are routine steps in all proceedings. In the particular circumstances of this appeal, I am not convinced that the Appellant's having made such requests or that the Respondent's replies to them supports a higher cost award. It must be borne in mind that the course of this litigation was less than stream-lined: one has only to look at the state of the amended pleadings to get a flavour of the difficulties experienced by both parties in putting forward their respective cases. This may have had to do with the fact that there was a change in counsel for both the Appellant and the Respondent after proceedings had been commenced.
[9] It is the Appellant's submission that my finding that the Minister had not assumed certain assumptions pleaded in the Reply to the Notice of Appeal amounted to "reprehensible" conduct justifying an award of costs in excess of the Tariff. The Appellant relies on Scavuzzo v. Canada[3] in which Bowman, C.J. stated:
(g) There is an essential difference between pleading assumptions that are wrong and pleading that the Minister assumed facts that he in fact did not assume. Here the Minister assumed, wrongly, that Jack Scavuzzo was a director. The pleading was of a wrong assumption which the Minister acted on. The assumption was wrong, not the pleading. To plead that the Minister assumed a fact that he did not assume is reprehensible and should be sanctioned in costs. That is not what happened here.[4]
[10] Certainly, the Minister must adhere strictly to his duty to plead facts actually assumed at the time of the assessment. While I accept the Appellant's submission that the Respondent's conduct was "reprehensible" in respect of the improperly pleaded assumption, I do not take the learned Chief Justice's comments in obiter to mean that in such circumstances, an appellant will be entitled, as a matter of course, to additional costs. Further, the circumstances of the present case are quite different from those in Scavuzzo; here, the Minister's breach of his obligations did not cause the Appellant to suffer the sort of "hell"[5] found to have been visited upon Mr. Scavuzzo.
[11] That is not to say that the Minister's breach was without consequences. As counsel for the Appellant noted in her submissions, I made reference in my Reasons for Judgment to the upshot of the Respondent's having pleaded assumptions not, in fact, made:
[26] Counsel for the Respondent argued that exactly such a connection existed between Tiburzi and Gelder: " --- they have trusted each other. Worked in harmony for years until 22nd of November, and they had a common interest. Business interest. And so that was a group of persons according to [Vina-Rug] and Buckerfield (sic)". This is essentially a restatement of the words appearing in assumption 19(dd) of the Amended Reply to the Notice of Appeal:
(dd) Prior to the spring of 1989 Davis Tiburzi and Robert Gelder were long time business associates and land developers developing land acting as a team in the United States.
[27] Normally, the appellant has the burden of rebutting the Minister's assumptions and proving the merits of its position. In the present case, however, counsel for the Appellant argued that not only did the evidence not support the above allegations but that the Minister had not, in fact, relied on assumption 19(dd) in making his reassessments.
[28] With both points, I must say I am inclined to agree. Turning first to the statements in paragraph 19(dd), Mr. Kubarakos was questioned extensively on the steps he took in conducting his audit in 1997. As can be seen from his evidence as set out below, at the time of the audit, he did not turn his mind to the nature of the relationship between Tiburzi and Gelder:
Q. The Minister -- the statement of fact here is prior to the spring of 1989 -- this is in paragraph 19 (dd). Do you have that?
A. Yes.
Q. The statement is:"Prior to the spring of 1989 Davis Tiburzi and Robert Gelder were long time business associates and land developers developing land acting as a team in the United States." And that wasn't really in your mind at all, was it? When you did your audit that wasn't an issue?
A. No.
Q. You never thought of these fellows as long-time business associates.
A. That's what Mr. Gelder told me, that he knew Mr. Tiburzi for fifteen, twenty years and they had some dealings before. I don't know what kind of dealings, but at that time that kind of information was irrelevant to me.
Q. It wasn't in your mind?
A. It wasn't important to me at all.
Q. Okay. Did you think of Mr. Gelder as a land developer? You knew he was in the building supply business, didn't you?
A. Yes, that's what he told me.
Q. And you didn't think that Tiburzi and Gelder were a team in any sense, did you?
A. They had some dealings before.
Q. Did you think of them, that they were some kind of a team? That wasn't in your mind in 1997 when you were doing this audit, was it? Was it?
A. Again, they had some dealings. Now whether they were a team or not, it was irrelevant at that time.
Q. That wasn't in your mind when you did your reassessment?
A. No. No.
[29] The Minister's obligations in the pleading of assumptions was considered extensively by Rip, J. in Anchor Pointe Energy Ltd. v. Canada. In upholding Mr. Justice Rip's decision to strike out the assumptions not actually made by the Minister, the Federal Court of Appeal held that:
The pleading of assumptions gives the Crown the powerful tool of shifting the onus to the taxpayer to demolish the Minister's assumptions. The facts pleaded as assumptions must be precise and accurate so that the taxpayer knows exactly the case it has to meet. There is no reason why the requirement for precision and accuracy does not apply to the Crown accurately stating the circumstances in which the assumptions arose, that is, on the assessment, reassessment or confirmation. For these reasons, I think Rip J. was correct when he found paragraphs 10(q), (r) and (z) to be inaccurate and struck them from the Reply.[Anchor Pointe Energy Ltd. v. Canada, 2003 F.C.A. 294 at paragraph 23; Bowens v. Canada, [1996] 2 C.T.C. 120 (F.C.A.); Pollock v. Canada (M.N.R.), (1993) 3 C.C.P.B. 307 (F.C.A.).]
[30] Given that the Minister did not assume the statement made in paragraph 19(dd), the Appellant is relieved of the burden it would otherwise have of "demolishing" such allegations. [Footnotes from Reasons for Judgment not included.][6]
[12] As is evident earlier in my Reasons, it also weakened the force of the evidence of the Respondent's only witness:
[5] ... George Kubarakos, the auditor and designated officer for the Canada Revenue Agency at examination for discovery, was called for the Crown. I was less impressed with his testimony. His answers were reluctantly given and often struck me as contrived to ensure their consistency with the Minister's position.[7]
[13] In view of the above considerations and having had ample opportunity to hear and observe counsel and the witnesses during the three days required for the hearing of these appeals, I am not persuaded that there is any basis upon which to exercise my discretion to award costs in excess of the Tariff. The Appellant's motion is dismissed; each party shall bear its own costs in respect of this motion.
Signed at Ottawa, Canada, this 10th day of November, 2006.
"G. Sheridan"
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