Docket: 2003-3117(IT)G
BETWEEN:
KURT JEPPESEN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Motion heard at Toronto, Ontario, on July 20, 2005.
Before: The Honourable Justice Georgette Sheridan
Appearances:
|
Counsel for the Appellant:
|
Franklyn E. Cappell
|
|
Counsel for the Respondent:
|
Margaret Nott
|
____________________________________________________________________
AMENDED ORDER
In accordance with the attached Amended Reasons for Order, the Appellant's motion for a judgment for full disclosure under subsection 82(1) of the Tax Court of Canada (General Procedure) is dismissed, with costs in the cause, and the Order of Mr. Justice Bowie dated October 21, 2004 is amended to read as follows:
(a) the Appellant is directed to prepare a List of Documents (partial disclosure) pursuant to the Tax Court of Canada Rules (General Procedure) and to file and serve the List on the Respondent no later than September 16, 2005;
(b) the examinations for discovery shall be completed no later than November 18, 2005;
(c) undertakings shall be completed no later than December 16, 2005; and
(d) the parties shall communicate with the Hearings Coordinator, in writing, on or before January 13, 2006 to advise the Court whether or not the case will settle, whether a case management or pre-hearing conference would be beneficial or whether a hearing date should be set. In the latter event, the parties may file a joint application to fix a time and place for the hearing in accordance with section 123 of the Tax Court of Canada Rules (General Procedure).
Signed at Ottawa, Canada, this 18th day of November, 2005.
"G. Sheridan"
Citation: 2005TCC500
Date: 20051118
Docket: 2003-3117(IT)G
BETWEEN:
KURT JEPPESEN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
AMENDED REASONS FOR ORDER
Sheridan, J.
[1] The Appellant, Kurt Jeppesen is appealing the decision of the Minister of National Revenue in respect of his 1996, 1997 and 1998 taxation years disallowing certain deductions for computer software purchased by the Appellant. In this motion, the Appellant seeks the following relief:
(i) a judgment pursuant to subsection 82(1) [List of Documents (Full Disclosure)] of the Tax Court of Canada Rules (General Procedure) (the "Rules") directing that each party shall file and serve on each other party a list of all of the documents which are or have been in that party's possession, control or power relating to any matter in question between them in this appeal;
(ii) a judgment pursuant to paragraph 172(1)(b) of the Rules that the Order of the Honourable Justice E.A. Bowie dated October 22, 2004 following a Status Hearing by telephone conference be amended:
(a) to direct the parties to file and serve a List of Documents pursuant to Rule 82 of the Tax Court of Canada Rules (General Procedure), and
(b) to make such further and other amendments to that Order as to this Honourable Court may seem just; and
(iii) for such further or other relief to this Honourable Court may seem just[1].
Procedural History
[2] The Appellant appealed his 1996, 1997 and 1998 taxation years on September 4, 2003 and the Respondent's Reply to the Notice of Appeal[2] was duly filed. No further procedural steps having been taken by the Appellant, on October 21, 2004 a Status Hearing was held before Bowie, J. who ordered that the parties file and serve a List of Documents (partial disclosure) by March 11, 2005 pursuant to Rule 81 of the Tax Court of Canada Rules (General Procedure); and that they complete oral examinations for discovery by May 31, 2005 and satisfy any resulting undertakings by June 28, 2005.
[3] By letter dated January 21, 2005[3], counsel for the Appellant raised with counsel for the Respondent his desire for full disclosure under Rule 82, his stated confidence that the Respondent would consent to his request being premised on "... the circumstances of this matter, and having particular regard to your pleading ..."[4].
[4] By letter dated March 1, 2005[5], counsel for the Respondent replied that "... we are not in agreement to proceed via Rule 82 at this time" and went on to say that "[a]side from some of the documentation adduced as evidence in the Morley trial, our understanding is that there is not a great deal of documentation in the Respondent's possession relevant to any of the matters in issue in the present proceeding or upon which the Respondent intends to rely, beyond that which is already in your client's possession". Counsel for the Respondent also provided, as requested by counsel for the Appellant, the name of the officer likely to be put forward at discovery and acceded, without demur, to counsel's further request that the Minister's nominee be examined first.
[5] The Respondent served on March 10, 2005 and filed on March 11, 2005 its List of Documents in compliance with the Status Hearing Order. Having received nothing from the Appellant, counsel for the Respondent wrote to counsel for the Appellant on April 5, 2005[6] and again on April 14, 2005[7] requesting the Appellant's List of Documents and in the latter case, also advising that failure to provide it by April 29, 2005 would result in the Respondent's seeking, among other relief, dismissal of the appeals.
[6] This provoked telephone discussions between counsel in which, according to the follow-up letter from counsel for the Respondent dated May 4, 2005[8], counsel for the Appellant blamed illness for his lack of response and advised that he "... would be attending to [the preparation of the Appellant's List of Documents] soon". This letter also expressed the anxiety of counsel for the Respondent that the Appellant's delay was jeopardizing the Respondent's ability to comply with the impending Status Hearing Order deadlines, prompting him to ask that counsel for the Appellant "... please therefore write to the court by noon [of May 5, 2005] to request an extension of time for providing the Appellant's List of Documents and for conducting discoveries and answering undertakings." Further telephone conversations ensued[9] in which the Respondent was finally advised of the Appellant's intention to move for full disclosure.
[7] By letter dated May 13, 2005, counsel for the Appellant wrote to the Court seeking a date for the hearing of the Rule 82 motion and advising that the Notice of Motion had been served on the Respondent and would be filed with the Court "shortly". By letter dated May 16, 2005, the Hearings Coordinator confirmed that a hearing had been set for July 20, 2005 in Toronto. On June 24, 2005, the Respondent filed an Affidavit in opposition to the motion from the Respondent; although served on the Respondent May 13, 2006, the Appellant's motion and supporting Affidavit was not received by the Court until July 15, 2005, just five days before the hearing date.
The Motion for Full Disclosure
[8] Against this background, counsel for the Appellant urged the Court to issue a judgment under Rule 82, the relevant portions of which read:
82 (1) The parties may agree or, in the absence of agreement, either party may apply to the Court for a judgment directing that each party shall file and serve on each other party a list of all the documents which are or have been in that party's possession, control or power relating to any matter in question between or among them in the appeal.
(2) Where a list of documents is produced in compliance with this section, the list shall describe, in separate schedules, all documents relating to any matter in issue in the appeal,
(a) that are in the party's possession, control or power and that the party does not object to producing,
(b) that are or were in the party's possession, control or power and for which the party claims privilege, and the grounds for the claim, and
(c) that were formerly in the party's possession, control or power, but are no longer in the party's possession, control or power, whether or not privilege is claimed for them, together with a statement of when and how the party lost possession or control of, or power over them and their present location.
...
(4) A list of documents made in compliance with this section shall be verified by affidavit ...
...
Subsection 82(1) of the Rules is silent as to the criteria by which the Court may be guided in reaching its decision to order full disclosure. Both counsel referred to what appears to be the only case on point, Fletcher Challenge Investments Inc. v. Her Majesty the Queen[10]. Noting the absence of any mandatory language in the subsection, Justice Mogan concluded that the Court was to exercise its discretion based on the circumstances of the case at hand and, in that case, ultimately declined to order full disclosure.
[9] In the present case, there is a great divergence between the parties as to the facts and the proper application of the law to them. According to the Notice of Appeal, the Appellant alleges that the Minister's decision to disallow business expenses in respect of computer software purchased by the Appellant was based solely on the assumption that the business had no reasonable expectation of profit. Notwithstanding his view of the basis for the Minister's decision, the Appellant will have to make at least a prima facie case rebutting the Minister's long list of assumptions that, among other things, the computer software purchased by the Appellant was not "suitable for application to business management"; the Appellant did not carry on business in respect of the exploitation of the computer software; the Appellant did not make expenditures "for the prudent and businesslike exploitation of his interests in the computer software"; and such expenditures were not made for the purpose of gaining or producing income from a business. In addition, the Minister alleges the Appellant's intentions in purchasing the computer software were tainted, his true objective being to secure a tax benefit. It is to these allegations, in particular, that counsel for the Appellant pointed in support of his submission for full disclosure.
[10] Counsel for the Appellant noted the reference in the Respondent's correspondence to "documentation from the Morley trial"[11], an appeal involving partnership losses in respect of computer software. While stressing to the Court that he doesn't know if the computer software the Appellant purchased is the same as in Morley, counsel for the Appellant argued that full disclosure would ensure his client access to documents "aggressively collected" by the Respondent in separate but "related" litigation, as well as the opportunity to cross-examine the Respondent's nominee on the Affidavit under subsection 82(4). According to counsel for the Appellant, the combined effect of the Respondent's pleadings and the references to Morley in its correspondence is to call into question the Appellant's credibility and make him out as a "crook". In opposing the Appellant's motion, counsel for the Respondent rejected the Appellant's contention that by impugning the Appellant's credibility, the Respondent virtually invited a demand for full disclosure. I accept the Crown's argument that divergent pleadings and credibility issues are inherent to the notion of litigation and that, in itself, is not sufficient to justify the relief sought by the Appellant.
[11] Counsel for the Respondent further submitted that an order for full disclosure would cause undue delay of the proceedings. According to the Affidavit of Patrizia Cafaro, a total of 133 hours has already been invested in the preparation of the Respondent's List of Documents, which comprises some 20 pages and 250 items. The Respondent's List of Documents was filed on March 11, 2005 in compliance with the Status Hearing Order. Appearing with some frequency in the description of the listed documents are the names of the main actors identified in Morley, the 81-page judgment commended to the Court's review by counsel for the Appellant. In spite of counsel's stated interest regarding any documentation related to the Morley proceedings and notwithstanding that the Respondent's List was in his possession for at least two months before requesting a date for this motion, there was nothing before the Court to show that the Appellant or his counsel had ever reviewed it. This may well account for the vagueness of the grounds in the Appellant's motion.
[12] It is an appellant's responsibility to prosecute his appeal, something this Appellant has done with less than unbridled enthusiasm. Since the filing of the Appellant's appeals, the proceedings have moved forward thanks largely, to the perseverance of the Respondent or the intervention of the Court. More distressing is the Appellant's apparent nonchalance in respect of his obligation to comply with the Status Hearing Order. Though acknowledging his role in causing the Respondent's inability to meet the deadline for conducting discoveries and completion of undertakings, counsel for the Appellant offered no explanation for his client's failure to file and serve his List of Documents as required, other than a passing reference to his own illness and something about "having taken his eye off the ball". The Affidavit of John L. Parker, filed in support of the Appellant's motion, discloses that there is at least one other member of the firm who might have seen to these duties in counsel's absence, or failing that, advised counsel for the Respondent and the Court, at the time, of the Appellant's difficulty in complying. As it happened, such steps were only taken after the Appellant faced the risk of a dismissal motion when, finally, the Respondent's worries about missing the impending deadlines compelled the Crown to take preventative measures.
[13] Given the Appellant's foot-dragging, his failure to respect the Status Hearing Order, his not having reviewed the voluminous material already filed by the Respondent in accordance with the Status Hearing Order, the lack of specificity as to how such documentation is deficient, and the great likelihood of further delay, I am not satisfied that the Appellant has made out a reasonable case for the exercise of the Court's discretion under subsection 82(1) of the Rules. While mindful of the general principle that it is better to err on the side of disclosure than non-disclosure of documents[12], I do not see how it would benefit either party, at this stage of the proceedings, to impose on them the burden of full disclosure. It is open to prevent the Appellant to renew his application for full disclosure but, at the present time, his request is premature.
[14] The Appellant's motion for a judgment for full disclosure under subsection 82(1) of the Tax Court of Canada (General Procedure) is dismissed, with costs in the cause, and the Order of Mr. Justice Bowie dated October 21, 2004 is amended to read as follows:
(a) the Appellant is directed to prepare a List of Documents (partial disclosure) pursuant to the Tax Court of Canada Rules (General Procedure) and to file and serve the List on the Respondent no later than September 16, 2005;
(b) the examinations for discovery shall be completed no later than November 18, 2005;
(c) undertakings shall be completed no later than December 16, 2005; and
(d) the parties shall communicate with the Hearings Coordinator, in writing, on or before January 13, 2006 to advise the Court whether or not the case will settle, whether a case management or pre-hearing conference would be beneficial or whether a hearing date should be set. In the latter event, the parties may file a joint application to fix a time and place for the hearing in accordance with section 123 of the Tax Court of Canada Rules (General Procedure).
These Amended Reasons for Order are issued in substitution for the Reasons for Order dated August 10, 2005.
Signed at Ottawa, Canada, this 18th day of November 2005.
"G. Sheridan"
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