Citation: 2005TCC759
Date: 20051124
Docket: 2005-1016(IT)G
BETWEEN:
DONALD APOLCZER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2005-1017(IT)G
BETWEEN:
CAROL APOLCZER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2005-1125(IT)G
BETWEEN:
DAVID HACKETT,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2005-1337(IT)G
BETWEEN:
LUC ROBERGE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2005-1356(IT)G
BETWEEN:
DENNIS MOORE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2005-1358(IT)G
BETWEEN:
MARLENE MOORE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2005-1359(IT)G
BETWEEN:
NEIL REINHART,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2005-1360(IT)G
BETWEEN:
PHILIP SCOTT,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2005-1365(IT)G
BETWEEN:
GARY REIMER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2005-1381(IT)G
BETWEEN:
MARY TROJNER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2005-1382(IT)G
BETWEEN:
JIM TROJNER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2005-1451(IT)G
BETWEEN:
ED MACINTOSH,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2005-1550(IT)G
BETWEEN:
WAYNE
GARRY MARTIN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2005-1554(IT)G
BETWEEN:
PATRICIA CARPENTER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2005-1797(IT)G
BETWEEN:
CHRISTINE BANVILLE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2005-1798(IT)G
BETWEEN:
JULIA CUNDLIFFE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2005-1799(IT)G
BETWEEN:
JOE KULIASA,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2005-1896(IT)G
BETWEEN:
BRENT BEYAK,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2005-1900(IT)G
BETWEEN:
DAVID ZEVICK,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2005-1901(IT)G
BETWEEN:
JOHN A. HIGGINS,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2005-1902(IT)G
BETWEEN:
GLENN PARKER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2005-1976(IT)G
BETWEEN:
DANNY PAWLACHUK,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2005-1980(IT)G
BETWEEN:
PAUL PEACOCK,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2005-2106(IT)G
BETWEEN:
ROBERT MCGINN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2005-2107(IT)G
BETWEEN:
EARL WILKES,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2005-1015(IT)G
BETWEEN:
CANDICE STANFIELD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2004-1415(IT)G
BETWEEN:
HUGH STANFIELD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Rip, J.
[1] Appellants Donald
Apolczer, Carol Apolczer, David Hackett, Luc Roberge, Dennis Moore,
Marlene Moore, Neil Reinhart, Philip Scott, Gary Reimer, Mary Trojner, Jim
Trojner, Ed MacIntosh, Wayne Garry Martin, Patricia Carpenter, Christine
Banville, Julia Cundliffe, Joe Kuliasa, Brent Beyak, David Zevick, John A.
Higgins, Glenn Parker, Danny Pawlachuk, Paul Peacock, Robert McGinn, Earl
Wilkes and Candice Stanfield ("Other Appellants"), all of whom have
retained Mr. Edwin Kroft of McCarthy Tétrault LLP as counsel, have filed separate appeals for one or
more years claiming losses from their respective participations in joint
ventures. There are approximately six separate joint ventures and I am informed
that they are all similar. Most appellants, including Mr. Stanfield, invested
in the joint venture called the Union CAL Trading Joint Venture
("Union CAL"). Some other
appellants invested in other joint ventures. The Other Appellants also
appeal from penalties assessed under subsection 163(2) of the Income Tax Act
("Act").
[2] On April 6, 2004 Hugh
Stanfield filed a notice of appeal for 1998 claiming a loss from the Union CAL joint
venture and denying liability for a subsection 163(2) penalty. Mr. Stanfield is
the largest investor in the Union CAL joint venture. Mr. Stanfield's appeal has
progressed quicker than those of the Other Appellants. According to the
affidavit of Elizabeth A. Junkin, a counsel with McCarthy, Tétrault
LLP, a reply to the notice of appeal was filed on July 19, 2004
pursuant to an order of this Court dated July 2, 2004. Mr. Stanfield
has filed his list of documents; the respondent has not yet filed hers. On
August 8, 2005, Mr. Stanfield's counsel, Edwin G. Kroft, proposed to
respondent's counsel that discoveries be scheduled and proposed certain weeks.
[3] In his affidavit
Mr. Stanfield stated that the Minister of National Revenue's audit of his 1998
tax return took two and a half years. He was reassessed on July 17, 2002.
Mr. Stanfield objected to the reassessment on August 30, 2002. Within a week of
filing the objection, the Minister advised that consideration of the objection was
being held in abeyance. Mr. Stanfield filed a notice of appeal to this Court on
April 7, 2004, prior to the Minister confirming the reassessment. In a letter
dated January 5, 2005 from Ms. Annabelle Luke of the Appeals Division
of the Canada Customs and Revenue Agency ("CCRA") advised that the
objections of the Other Appellants had been held in abeyance until that time and in January 2005, Ms. Junkin
stated, the CCRA started issuing notices of confirmation to the Other
Appellants. The Other Appellants, by their counsel, filed notices of appeal and
amended notices of appeal beginning in April 2005.
[4] On September 8,
2005 the Other Appellants brought a motion seeking an order pursuant to
paragraph 26(d) of the Tax Court of Canada Rules
(General Procedure) ("Rules") directing that their
appeals be stayed pending the determination of the appeal of Hugh Stanfield.
The appellants' grounds for their motion are as follows:
1. Mr.
Stanfield's appeal and those of the Other Appellants are pending in this Court.
2. Mr.
Stanfield's appeal is the most advanced procedurally.
3. The
Other Appellants agree that the determination of Mr. Stanfield's appeal
will be determinative of their appeals.
4. Mr.
Stanfield's appeal and the appeals of the Other Appellants have in common
questions of mixed fact and law, namely, whether each of the appellants is
entitled to deduct the loss with respect to the joint venture or alleged
business as the case may be (as defined in the pleadings filed in
Mr. Stanfield's appeal and the appeals of the Other Appellants pursuant to
subsection 9(2) of the Act.
5. It
would be an abuse of the Court's process to have heard all of the Other
Appellants' appeals as well as any pre-hearing motions, due to the duplication
of issues with Mr. Stanfield's appeal. Further it would be harmful to the
appellants because of the related costs.
6. Staying
the appeals of the Other Appellants would not cause harm or prejudice to the
respondent.
7. Mr.
Stanfield is prepared to prosecute his appeal expeditiously, or according to a
schedule acceptable to the parties.
8. The
affidavit is voluminous and includes information applicable to all the appeals.
It would be costly and wasteful to duplicate the affidavit an additional 25
times to serve the respondent and 50 times for the Court files.
[5] During the hearing
Mr. Kroft informed me that the Other Appellants have agreed to be bound by the
Court's decision with respect to the joint ventures in Mr. Stanfield's
appeal but he had not received instructions with respect to the penalties.
[6] Paragraph 26 of the
Rules provides that:
Where two or more proceedings are pending in the Court
and
(a) they
have in common a question of law or fact or mixed law and fact arising out of
one and the same transaction or occurrence or series of transactions or
occurrences, or
(b) for
any other reason, a direction ought to be made under this section,
the Court may direct that,
(c) the
proceedings be consolidated or heard at the same time or one immediately after
the other, or
(d) any of the proceedings be stayed until
the determination of any other of them.
[7] Upon completion of
argument in the Other Appellants' motion, I informed counsel that I would not
be able to immediately deal with the motion. No doubt, at least partly due to
my information to counsel, on September 16, 2005 Mr. Stanfield
by his counsel, Mr Kroft, initiated measures to expedite Mr. Stanfield's
appeal by seeking an order a) directing the respondent pursuant to paragraph
91(a) of the Rules to file and serve a list of documents pursuant
to subsection 81(1) of the Rules; b) directing the respondent, pursuant
to paragraph 91(b) of the Rules, to produce the documents
listed on the respondent's list of documents for inspection and copying within
16 days of serving the respondent's list of documents; c) directing the
respondent to provide the name of the respondent's nominee for discovery; and
d) to set a date for a status hearing pursuant to subsection 125(1) of the Rules
or a pre-hearing conference pursuant to subsection 126(1) of the Rules.
[8] In her written
submissions, respondent's counsel, Ms. Lynn M. Burch, advised that the
respondent does not oppose Mr. Stanfield's request for a date by which a list
of documents be filed and proposed that the respondent file her list of
documents within 60 days of the orders in respect of the Other Appellants.
The respondent also agrees to produce the documents described in the list of
documents for inspection and copying within 16 days of serving the respondent's
list of documents. I assume that the respondent has been assembling the
documentation at least since Ms. Burch's submissions.
[9] However,
respondent's counsel states that there is no support either in the Rules
or jurisprudence to require the respondent to provide the name of its nominee
for discovery. Subparagraph 93(3) of the Rules requires the Crown to
select a "knowledgeable officer, servant or employee". If the
examining party is not satisfied with the person produced, application may be
made to name some other person but only after the examining party has examined
and found the person produced to lack the required knowledge. However, the
respondent did agree to advise appellant's counsel of its nominee
"within" 10 days of the commencement of the discoveries.
[10] Respondent's counsel
views the request for a status hearing redundant; the resulting order from this
motion will serve the same purpose. As far as a pre-trial date is concerned,
she states the demand is premature since only once discoveries are completed
will the parties be in a position to consider the elements outlined in
paragraphs 126(1)(a) to (e) of the Rules concerning a
pre-hearing conference and dates for the conference.
[11] The relevant
portions of paragraph 91 of the Rules state:
Where a person or party who is required to make
discovery of documents under sections 78 to 91 fails or refuses without
reasonable excuse to make a list or affidavit of documents or to disclose a
document in a list or affidavit of documents or to produce a document for
inspection and copying, or to comply with a judgment of the Court in relation
to the production or inspection of documents, the Court may,
(a) direct
or permit the person or party to make a list or affidavit of documents, or a
further list or affidavit of documents,
(b) direct
the person or party to produce a document for inspection and copying, ...
(e) give such other direction as is just.
[12] The parties
subsequently agreed that the motions by the Other Appellants and Mr. Stanfield
be considered together.
a) Stay Application
[13] Respondent's counsel
opposed the application to stay the appeals of the Other Appellants. She
explained that the pleadings in Mr. Hugh Stanfield's appeal differ in some
respect to those of the Other Appellants. In Mr. Stanfield's notice of appeal
it is alleged that he is a geophysicist and "an experienced businessman
specializing in the areas of oil and gas exploration, high performance
computing and international high technology" and that he has
"extensive experience buying and selling securities and has been involved
in currency and commodities trading since 1970". These allegations are
absent from the notices of appeal of the Other Appellants. I have no idea
as to what relevance or importance the facts so alleged may have to the merits
of his appeal or the appeals of the Other Appellants but they may be
significant and ought to be noted.
[14] Also, respondent's
counsel stated, all of the appellants have been assessed penalties under
subsection 163(2). The respondent has the onus of proving the facts
justifying the assessments of the penalty and she may want to examine each of
the Other Appellants to assist in defending the assessments of the penalties.
If Mr. Stanfield succeeds in proving his entitlement to deduct the losses from
the joint venture, the penalty assessed against him will fall. However, if he
is not successful in establishing his right to deduct the losses, the penalty
issue must be determined. A finding that Mr. Stanfield was or was not liable
for the penalty may or may not have any weight in considering the validity of
penalties assessed against the Other Appellants.
[15] Also, Mr.
Stanfield's notice of appeal is concerned specifically with the Union CAL
joint venture. There are other joint ventures as well that are subject to
appeals by some of the Other Appellants. The parties informed Noel J. in an
earlier proceeding that "Mr. Stanfield's situation could be used as
an example of the trading investments and activities engaged in by all of the
appellants".
[16] It may well be, as
respondent's counsel argues, that there are differences in the pleadings of Mr.
Stanfield and the Other Appellants and in their various joint ventures. Also, a
section 163(2) penalty is of a personal nature, since knowledge or gross
negligence is a key component of the penalty, and therefore each appellant's
action or intention with respect to the facts leading to the individual's penalty
must be considered separately.
[17] However, the Crown
has been reviewing, or has had the opportunity to review, the tax returns of
all of the appellants for about five years and has not been inclined to move on
with the appeals; for example, it has yet to file a list of documents in Mr.
Stanfield's appeal although its reply to the notice of appeal was filed on July
19, 2004.
[18] The Other Appellants
live in five different provinces and one appellant resides outside of Canada. Their costs in
preparing lists of documents and attending at discovery, among other matters,
will be substantial.
[19] Accordingly, I shall
order the appeals of the Other Appellants be held in abeyance until
60 days after discoveries, including delivery of undertakings, have been
completed in the appeal of Hugh Stanfield (2004-1415(IT)G). I do not
know the reason the Minister opposes the application. The CCRA has complained
that the legal issues involved are complex and that there are about 18,000
pages of documents.
The Minister has taken over two years to audit some of the appellants and once
their assessments were confirmed left them in abeyance. The Minister suffers no
prejudice in the appeals of the Other Appellants being held in abeyance. The
Other Appellants should not at this stage be forced into reviewing or preparing
voluminous material that the Minister may have had in his possession years ago.
They do not have the facilities of the Minister.
[20] Once the discoveries
of Mr. Stanfield are completed, counsel for the respondent and for the
appellants will have the opportunity to review the evidence from the
discoveries and consider what evidence, if any, from the discoveries may be
applied to the appeals of the Other Appellants. Counsel are directed to inform
the Court within 60 days after completion of discoveries in the appeal of Hugh
Stanfield as to the proposed actions in the appeals of the
Other Appellants and if they wish further directions with respect to the
appeals of the Other Appellants.
b) Stanfield Application
[21] As far as Mr.
Stanfield's application is concerned I agree with respondent's counsel that she
is not required to provide to the appellant the name of her nominee for
discovery. I do not agree with appellant's argument that "without the name
of the respondent's nominee, the appellant cannot serve a notice to attend
pursuant to subsection 103(2) of the Rules." Any such notice may be
served on the respondent's counsel of record: paragraph 103(2)(a) of the
Rules. Subsections 93(1) and (3) of the Rules provide that:
(1) A party to a proceeding may examine for discovery an
adverse party once, and may examine that party more than once only with leave
of the Court.
...
(3) The Crown, when it is the party to be
examined, shall select a knowledgeable officer, servant or employee, nominated
by the Deputy Attorney General of Canada, to be examined on behalf of that party, but if the examining party
is not satisfied with that person, the examining party may apply to the Court
to name some other person.
[22] There is no
requirement that the Crown advise Mr. Stanfield who will be examined for the
Crown but the Deputy Attorney General must select a knowledgeable person. If
Mr. Stanfield is concerned at the time of discovery that the person put forward
by the Crown is not adequately informed, is not knowledgeable, his remedy is to
seek an adjournment so that the nominee could become better informed or the
Court could nominate another person if it is in the interest of justice to do
so. As an aside, however, I suggest that
appellant's counsel provide the name of the respondent's nominee not
"within" 10 days but at least 10 days from commencement of the
discoveries.
[23] Mr. Stanfield was
assessed by the Minister of National Revenue for the year in issue, 1998, on
July 17, 2002. Since that time a notice of objection has been filed and the
objection has been confirmed. There are numerous taxpayers who invested in the
Union CAL and other joint ventures. The Minister's officials have been
reviewing Mr. Stanfield's activity and those of the Other Appellants with
respect to the joint ventures since before 2002. The Crown has had lots of time
to get its act together. Indeed, according to subsection 81(1) of the Rules,
the respondent ought to have filed and served on Mr. Stanfield's counsel its
list of documents within 30 days of filing her reply to the notice of appeal. However,
since the issues are complex and the documents are voluminous the respondent
was granted an extension of time to file her reply to the notice of appeal
late. The respondent has not argued that she had a reasonable excuse to file
the list late: section 91 of the Rules. In a letter dated September 12,
2005, respondent's counsel advised appellant's counsel that:
At this time it is difficult to determine
exactly what the scope of the List of Documents and the Examinations for
Discovery will be, as Mr. Justice Rip has not yet tendered his decision in the
motion brought by the twenty-six Applicants on September 8, 2005. It possible,
that Mr. Justice Rip's Order will contextualize this litigation and we are of
the view that it would be premature to file our List or proceed to discovery
prior to receiving the benefit of Mr. Justice Rip's decision.
[24] Mr. Stanfield filed
a notice of appeal and list of documents on time. He is the appellant and has
the right to prosecute his appeal in an efficient manner. His appeal may or may
not be tied in (or tied up) with those of the Other Appellants. Respondent's
counsel was aggressive in her view that the appeals of the
Other Appellants not be stayed because, among other things, Mr.
Stanfield's appeal may not be representative of the other appeals. This is all
the more reason that Mr. Stanfield not be prejudiced by any further delays.
[25] There is no need for
me to set the date for a status hearing. I shall deal with matters usually
dealt with in a status hearing. As far as an order for a pre‑trial is
concerned, I do not agree with respondent's counsel that a pre‑trial
hearing necessarily must be preceded by discovery. Subsection 126(1)
accords the Court the initiative to schedule a pre‑trial conference. In
most cases the pre‑trial will take place after the parties have
discovered each other but there may be situations where a pre-trial conference
may precede the discovery.
[26] I am therefore
making the following order:
a) the respondent will file
and deliver to the appellant her list of documents in the appeal of Hugh
Stanfield by January 16, 2006;
b) that the respondent will
produce the documents in her list of documents for inspection to counsel for
Mr. Stanfield within 16 days of filing and delivering the list of documents;
c) the respondent and Hugh
Stanfield shall complete discoveries and undertakings arising from the
discoveries by June 30, 2006 or some other date as the parties jointly agree
and the Court approves or directs; and,
d) within 60 days after
discoveries in the Hugh Stanfield appeal are complete counsel shall inform the
Court whether they require further directions with respect to the appeal of Hugh
Stanfield, in particular, if and when they wish to have a pre-trial conference.
[27] I share the view of
counsel that not all the appeals of the Other Appellants and Mr. Stanfield will
see the Courtroom. Some short time after the discoveries in the Stanfield
appeal counsel and their clients will have to address their minds as to which appeals
will go ahead as test cases.
Signed at Ottawa,
Canada this 24th day of November 2005.
"Gerald J. Rip"
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