Citation: 2005TCC716
Date: 20051107
Docket: 2004-1427(GST)G
BETWEEN:
LA BANQUE CANADIENNE IMPÉRIALE DE COMMERCE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
and
ONTARIO
SOCIETY OF COLLECTION AGENCIES,
Proposed Intervener.
REASONS FOR ORDER
Angers, J.
[1] The Ontario Society
of Collection Agencies (OSCA) seeks leave to intervene in the above appeal
pursuant to s. 28 of the Tax Court of Canada Rules (General
Procedure). The appeal concerns the entitlement of the appellant (CIBC) to
a refund under the Excise Tax Act (“ETA”) of the goods and services
tax (GST) which it paid on services performed by collection agencies.
[2] The principal issue
is whether the services provided to the CIBC by the collection agencies
constitute a “financial service” as defined in subsection 123(1) of the ETA
and are, therefore, an “exempt supply” under Schedule V of the ETA and
thus not subject to GST.
[3] The OSCA is an
industry association whose members are engaged in the business of collecting
outstanding debts owed by borrowers to lenders and which is dedicated to
promoting integrity and professionalism in the debt collection business. In his
affidavit in support of the motion seeking leave to intervene, the president of
the OSCA sets out the following reasons to explain why it is felt that the
interest of the OSCA’s members will be affected by the outcome of this appeal:
4. … if the Appellant’s appeal is successful, it
will establish the principle that members of the OSCA engage in a “financial
service” for purposes of the ETA which are “exempt supplies” not
subject to tax under the ETA with the result that the OSCA members would not be
entitled to claim input tax credits for GST paid on purchases made in
connection with provision of the exempt services.
5. Denial of the input
tax credits would be a significant cost to members of the OSCA which must be
directly borne by those members. This would have a substantial and wide-spread [sic]
effect on the businesses of the members of the OSCA.
[4] The OSCA submits that
if the perspective of its members is not put before the Court, the Court will
be rendering a decision without the benefit of a full understanding of the
nature of the services provided to the appellant by the members of the OSCA and
of the context in which they are provided.
[5] The appellant, on the
other hand, submits that the OSCA should not be allowed to intervene for it has
failed to demonstrate how its intervention will assist the Court, that its
evidence is irrelevant to the highly specific legal and factual questions at
issue and, even if deemed relevant, that evidence can be introduced by a
simpler and less intrusive means such as by having the OSCA called as a witness
for the Crown. As to legal arguments, the appellant is of the opinion that the OSCA’s
position is identical to the respondent’s and that the respondent is fully
capable of arguing that position.
[6] Section 28 of the Tax
Court of Canada Rules (General Procedure) provides as follows:
Leave to Intervene
28. (1) Where it is claimed by a person who is not a
party to a proceeding
(a) that such person has
an interest in the subject matter of the proceeding,
(b) that such person may be adversely
affected by a judgment in the proceeding, or
(c) that there exists between such person and any one or more
parties to the proceeding a question of law or fact or mixed law and fact in
common with one or more of the questions in issue in the proceeding,
such person
may move for leave to intervene.
(2) On the motion, the Court shall consider whether the intervention will
unduly delay or prejudice the determination of the rights of the parties to the
proceeding, and the Court may,
(a) allow the person to intervene as
a friend of the Court and without being a party to the proceeding, for the
purpose of rendering assistance to the Court by way of evidence or argument,
and
(b) give such direction for pleadings,
discovery or costs as is just.
[7] Robert McMechan and
Gordon Bourgard, in Tax Court Practice, tell us that the General
Procedure rule on intervention adopts the same test as most provincial
jurisdictions, except for the result that a person who is given leave to
intervene does so as a friend of the Court rather than as an “added party”. There
are few reported cases on the application of section 28.
[8] In order for a person
to make a motion to the Court for leave to intervene, that person must have an
interest in the subject matter of the proceeding and show that the person may
be adversely affected by the judgment.
[9] In income tax
appeals, this threshold test may sometimes be difficult to meet because an
assessment usually only pertains to an individual taxpayer. In addition, the
confidential character of taxpayer information that may need to be disclosed in
order for an intervener to intervene effectively must be considered in weighing
the conditions to be met. Intervener status was denied where the only interest
shown to exist was jurisprudential in nature (see Tioxide Canada Inc. v. The
Queen, 94 DTC 6655) and where the position of the intervener was
similar to that of the respondent under s. 241 of the Income Tax Act
(see Silicate Holdings Limited. v. The Queen, 2001 DTC 299).
[10] On the other hand, in Moss
v. The Queen, 99 DTC 1229, the Court granted the wife of an
appellant leave to intervene in her husband’s appeal because she might be
adversely affected by the outcome of the case, as it related to the disposition
of property and to unreported income. Although I agree with counsel for the
appellant that income tax appeals may demand a more rigorous standard in
applying the threshold test for intervention than do cases involving public law
issues, I believe that the situation in GST appeals may be slightly different
in that the assessment of the recipient of a supply directly affects how the
Minister will assess the recipient’s suppliers. Thus, in the present case, the
judgment may adversely affect, at the very least, the specific collection
agencies with which the appellant is doing business.
[11] The OSCA is not the
specific agency with which the appellant does business, but because it
represents its members, who have an interest in and may be affected by the
judgment, it may be granted leave to intervene in its capacity as an
association representing the members affected. In Maurice v. Canada (Minister of Indian
Affairs and Northern Development, [2000] F.C.J. No. 208 (QL), the Federal Court –
Trial Division stated the following on the issue of an entity intervening on
behalf of those it represents:
While the applicant does not itself have
a direct interest, in the outcome of the present litigation, the individuals
that it represents do, and those interests are likely to be substantial. The
applicant’s interest is stronger than a mere jurisprudential interest, although
that exists as well. The interests of the individuals that the applicant seeks
to protect are grounded in the same fact situation as those of the plaintiffs.
[12] Interventions by
associations have been permitted in tax cases. In Gifford v. Canada,
[2004] 1 S.C.R. 411, for example, the Canadian Bankers Association
was granted leave to intervene in the Supreme Court of Canada on the issue of
deductibility of interest.
[13] In the present case, I
believe that the OSCA has a sufficient interest in the subject matter of this
appeal and that its members may be adversely affected by the judgment of this
Court. Its intervention will accordingly ensure some protection for its members
through the defence of their interest, and that intervention should assist the
Court by allowing it to hear all possible legal arguments before rendering a
decision.
[14] Even if the threshold
test for intervention is met, the Court must consider whether the intervention
will unduly delay or prejudice the determination of the rights of the parties
to the proceeding. The OSCA has already advised the Court that the hearing date
is acceptable to it. Its participation in the trial process may, on the other
hand, not only delay that process but also cause prejudice to the appellant.
The assessment under appeal before the Court involves the appellant and its
contractual relationships with specific collection agencies and the manner in
which the respondent interpreted those relationships. It is the basis of the
assessment under appeal that is before this Court and not the methods by which
collection agencies conduct their business in general. I am confident that the
parties in this appeal are fully capable of presenting without the assistance
of an intervener all the relevant facts to support their respective positions
with regard to the matters raised by the assessment under appeal. Given the
confidential character of some of the information that may need to be disclosed
in terms of the appellant’s debtors and the refund amount, that information should
remain with the parties in this appeal. Thus, the interest of the OSCA and its
members as it pertains to the basis of the assessment will, in my opinion, be fully
protected.
[15] Nevertheless, I believe
that the OSCA can render assistance to the Court in this appeal as a friend of
the Court. Even though a friend of the Court is sometimes viewed as having to
be an impartial participant, it seems that taking a partisan position is not an
absolute bar to intervention in that capacity. In fact, one would expect that
an intervener take a partisan position. That is how the interest that the
intervener seeks to protect will be heard. On the question of whether that
interest can be protected by one of the parties to the litigation, Paul R. Muldoon,
at page 143 of his book titled Law of Intervention (Aurora, On: Canada
Law Book Inc., 1989) has summed the matter up as follows:
The difference in the application of this
consideration to added party and friend of the court intervention relates to
the role and nature of the intervenor. In added party intervention, the
intervenor seeks to protect a specific or general interest; hence the question
is whether that interest is already fully protected in the litigation. In
friend of the court intervention, the intervenor seeks to assist the court by
revealing a unique or different point of view or approach to an issue in the
litigation, exploring a relevant issue that would not otherwise be examined, or
presenting opinions or views of a constituency that would be affected by the
litigation. In the end, the question in added party intervention is whether the
interests sought to be protected by the applicant are being fully and fairly
protected by the existing parties; in friend of the court intervention, the
question is whether there is an issue, point of view, or other perspective that
the court would find useful and helpful in its deliberations.
[16] I find that the OSCA’s
point of view may be useful and helpful to the Court in its deliberations. The
motion for leave to intervene is therefore granted. The OSCA is allowed to
intervene as a friend of the Court, for the purpose of rendering assistance to
the Court. As such, it will not be allowed to adduce evidence or examine
witnesses. The OSCA’s intervention as a friend of the Court
is limited to the presentation of oral
arguments or the submission of a written brief.
Signed at Ottawa, Canada, this 7th day of November 2005.
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