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Citation: 2004TCC754
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Date: 20041201
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Docket: 1999-4937(IT)G
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BETWEEN:
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CONSTANTIN DELLO,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR ORDER
Bédard, J.
[1] This is a motion by the appellant
requesting an order permitting him to amend his Notice of Appeal
pursuant to section 54 of the Tax Court of Canada Rules
(General Procedure) (the "Tax Court Rules"). In
essence, the appellant wants to be able to claim further expenses
(the "new expenses") his accountant neglected to claim
for the 1991, 1992, 1993 and 1994 taxation years.
Background
[2] This issue was initially supposed
to be heard by my colleague Judge Dussault on March 11,
2003, together with the issue of who, between the appellant and
his corporation, can claim the expenses (the "first
issue"). However, it was decided not too long before the
beginning of that hearing that only the first issue would be
heard that day. Judge Dussault eventually held, on June 10,
2003, that it was the appellant who could claim the expenses, and
not his corporation (2003 TCC 392).
[3] During oral argument before me,
counsel for the appellant admitted that, had both issues been
heard by Judge Dussault as originally scheduled, it would have
been a "risky" situation and they might have been
"stuck" since the new expenses were not included in the
Notice of Appeal (transcript, pp. 40-41). In that case, they
would have had to ask Judge Dussault for an adjournment so that
the appellant could file a motion to amend the Notice of Appeal
in order to include the new expenses. This is not to say,
according to counsel, that one or both requests might have been
denied by the Court, but that is not relevant to the present
proceedings (transcript, pp. 41-42). I agree that it is at least
not determinative.
[4] It was after the first hearing
that the appellant apparently started actively looking for
further supporting documents with respect to these new expenses.
This is how he summarized the events in his affidavit dated April
6, 2004:
6. Further to this
judgment, and in preparation for the second part of the
contestation, I discovered that my accountant during the years in
litigation, Mr Paul Odiong, had clearly failed to provide the
Revenue Canada Auditor with the expenses incurred in respect of
the above-mentioned income.
7. Shortly after the
audit, Mr Paul Odiong disappeared and I was not able to trace his
whereabouts.
8. When I was
finally able to access Mr Odiong's office, very few of my
files were found, mixed in with files of other corporations and
individuals.
9. The largest
portion of my files was located in a dumpster situated in the
basement of Mr Odiong's office building, where files of other
clients were also found. The dumpster was kept for several years
due principally to the consideration of the building janitor.
10. Amongst the files left or
thrown-out [sic] by my accountant, I found documentary
evidence supporting the fact that the expenses claimed by my
accountant should have been higher than what was actually
claimed.
11. Since locating those
originals [sic] documents indicating the scope of my
expenses, I have spent the last two years obtaining further
support for these expenses by contacting Mr Odiong's clients
whose files were mixed into my documents and who had some of my
own files. I received, even as late as last week, additional
cancelled cheques paid to engineers who worked for me and/or my
frim [sic].
[5] While this version of events was
confirmed during the examination of the appellant, and was not
challenged to any great extent by the respondent, the appellant
still provided some clarification regarding his affidavit. He
testified that the accountant disappeared, and was possibly
killed, while working for the government of the Republic of
Sudan. The appellant said it was shortly after that disappearance
in 1998 that he entered his accountant's office, with the
janitor's permission (transcript, pp. 4-6). It was only after
the first hearing, however, that the appellant stepped up his
efforts to recuperate the missing documents from the
taxpayers named on documents that he found in his file. The
appellant explained the circumstances as follows at p. 7 of the
transcript:
A. . . . Anyway, when I
realized that I had to answer personally, I started getting very
worried and I dug out all the different company names and private
individuals. I telephoned them, I said, "I have some of your
files, do you have any of my files?" None of the people I
contacted wanted to be involved, they were too worried.
Q. Why were they worried,
Mr. Dello?
A. Because their files
were in the same mess as mine. They worried about being audited
naturally. So they, most of them refused to get involved, but
mutually was agreed we would send each other our files or
whatever we could find without, incognito or how would you say
that.
And at p. 19 he stated:
A. After, of course when
it became obvious to me that all this income is going to be
charged to me personably [sic] without backup vouchers, of
course I started getting very nervous and did a lot of phone
calls. Did phone calls which I've done before and called
again and told people how serious and how much trouble I was. So
some people took their trouble and started looking a bit harder.
But most of the documents are coming out of files that are opened
by chance and they find some cheques, oh, these are Dello's
cheques. But I had agreed to send anything I find to them.
[6] Following these new attempts, the
appellant did receive, and might still be receiving, additional
documents supporting, according to him, his claim for the new
expenses (transcript, p. 17). The appellant agrees, however, that
there needs to be a point at which we cannot wait any longer for
these documents to arrive by mail. He therefore determined the
cut-off date to be the date he signed his affidavit, namely,
April 6, 2004 (transcript, pp. 7-8).
[7] The appellant did admit during the
hearing that a big part of the new expenses consisted of money
paid to 12 independent contractors in 1991 with respect to an
engineering contract worth $90,000. Most, if not all, of those
contractors would have been paid cash since the appellant had a
bad reputation for having checks bounce. While the appellant had
not yet found the invoices for those payments, he was confident
that he would eventually find them. For discussions regarding the
contract, see pp. 24, 26, 27, 28, 30, 31, 53, 60, 63, 64 and 66
of the transcript.
Analysis and Decision
[8] Section 54 of the Tax Court Rules
provides that a Tax Court judge may allow an amendment, and in
doing so the judge "may impose such terms as are just".
Other courts across the country have similar rules. For example,
under rule 75(1) of the Federal Court Rules, 1998,
"the Court may, on motion, at any time, allow a party to
amend a document, on such terms as will protect the rights of all
parties". Rule 75(2) provides for basic limitations as to
the circumstances in which amendments may be requested during or
after the hearing, so as to protect the rights of the opposing
party. Under rule 26.01 of the Ontario Rules of Civil
Procedure, the court must allow the amendment "on such
terms as are just, unless prejudice would result that could not
be compensated for by costs or an adjournment". However,
under rule 5.04, a judge would still have discretion to deny an
amendment: Mazzuca v. Silvercreek Pharmacy Ltd. (2001), 56
O.R. (3d) 768 (Ont. C.A.).
[9] It therefore follows that the
cases concerning these various rules apply similar principles.
For an overview of all these cases, it is worth referring to the
following: McMechan and Bourgard, Tax Court Practice;
Sgayias et al., Federal Court Practice, 2004; and Watson
and McGowan, OntarioCivil Practice, 2004. In
some instances, courts will even rely on cases dealing with the
rules of other courts.[1] Of all the cases that exist in this area, some are
particularly worth noting for a better understanding of the
general principles.
[10] In Visx Inc. v. Nidek Co.,
[1998] F.C.J. No. 1766 (QL) (F.C.A.), the Federal Court of Appeal
allowed the amendment of the statement of defence even in the
face of what seemed to be a lack of cooperation on the
defendant's part:
1 This appeal arises in the course of lengthy interlocutory
proceedings in a patent action which was commenced more than four
years ago. The appellant appeals from an order refusing the right
to amend its statement of defence and counterclaim. It should be
noted that the defendant has already amended its statement of
defence on at least five different occasions. We believe that the
appellant has had ample chance to present its pleading and we
deplore the delay which has resulted. Nevertheless we must have
regard to Meyer v. Canada (1986), 62 N.R. 70 (F.C.A.), at
page 72, in which this Court approved the following statement
from Steward v. North Metropolitan Tramways Co. (1886), 16
Q.B.D. 556:
The rule of conduct of the Court in such a case is that,
however negligent or careless may have been the first omission,
and however late the proposed amendment, the amendment should be
allowed, if it can be made without injustice to the other side.
There is no injustice if the other side can be compensated by
costs; but, if the amendment will put them into such a position
that they must be injured, it ought not to be made.
This case was quoted with approval by this Court in
Minister of National Revenue v. Canderel Ltd. (1983), 157
N.R. 390 (F.C.A.).
[11] At trial, counsel for the respondent
stressed that since he had not seen the new documents with
respect to the new expenses, it was, as a practical matter,
impossible for him to know whether the respondent would suffer
prejudice. He even asked the following question during his oral
argument: "So is the Court going to encourage this
litigation with this mushrooming?"(transcript, p. 64). On
the other hand, the appellant did eventually try to have the
respondent look at these new expenses during a meeting that was
held prior to the hearing of the present motion, but the
respondent refused to do so unless the appellant amended his
Notice of Appeal without prejudice to the respondent (transcript,
pp. 33 and 63). The appellant apparently even made an offer to
settle during that meeting (transcript, p. 34). Despite all of
this, counsel for the respondent asserted that he would oppose
any motion to amend filed by the appellant unless the appellant
produced letters from all the independent contractors stating
that they had in fact received amounts for services rendered to
the appellant and indicating whether or not they had included
these amounts in their respective tax returns (transcript,
pp. 60 and 66).
[12] Since after hearing the oral arguments
I was still struggling with the question of whether the
respondent would suffer prejudice, I requested that the parties
provide me with written argument on the issue. What struck me
first upon reading the respondent's written submissions was
the fact that counsel for the respondent continued to deplore the
appellant's conduct to a point, it seems to me, that it had
started to become personal on his part. In fact, counsel for the
respondent expressed his frustration in several different ways in
his written submissions. At paragraph 17 he stated:
It transpires from the testimony and the conduct of the
Appellant himself that he did not care for the legitimate
interest of the Respondent in the administration of the Act or
for the rights of the Respondent to procedural safeguards in the
present litigation.
Then, at paragraph 21, he said:
. . . the Appellant has displayed patent disregard for the
right of the Respondent to be informed in a timely fashion of the
allegations which the Appellant intended to make which the
Appellant should have made when he discovered them at the very
latest when filing his Notice of Appeal.
And at paragraph 24 he added:
The Appellant and his Counsel were so oblivious to the
potential prejudice to the Respondent . . .
Finally, at paragraph 29, he asserted:
... Instead, it appears that he deliberately adopted the
strategy of keeping all this quiet until March 2003.
[13] I agree that the appellant and his
lawyer clearly could have done a better job by reacting a lot
sooner but, as we saw earlier, the fact that the appellant might
have been negligent and careless to a high degree is irrelevant
(Visx Inc., supra, at par. 1). The proper question
is whether the respondent would suffer a non-compensable
prejudice. This type of prejudice will occur, for example, when
the proposed amendment "requires evidence from witness A,
who is no longer available, or document B, which can no longer be
found": King's Gate Developments Inc. v.
Colangelo (1994), 17 O.R. (3d) 841 at 844 (Ont. C.A.). The
court in that case did not find a non-compensable prejudice.
However, in Canada(Attorney General) v. Mandel,
[1996] F.C.J. No. 252 (QL), the Federal Court of Appeal came to
the opposite conclusion, since, after 23 years, none of the
representatives of the Crown could be traced to testify. Again,
the mere fact that a lot of time has elapsed between the
discovery of the "new" facts and the filing of the
motion does not mean that we can presume that prejudice will
automatically result. See, for example, Camoplast Inc. v.
Soucy International Inc., [2003] F.C.J. No. 743 (QL)
(F.C.A.).
[14] In the present case, it is very
probable that the appellant's accountant will not be present
at trial to testify concerning the new expenses. The same is
however true of the other expenses already claimed. In any event,
the best evidence would not come from the accountant, but from
the independent contractors. In that regard, the respondent is of
the view that, in order to succeed, the appellant should have
provided affidavits from these persons in which they would admit
to having evaded tax, if such was indeed the case. I cannot agree
with this view. The real question is whether all or some of these
persons would be available to be examined at trial, or perhaps
during discovery. There is nothing in the transcript to suggest
that they would not be. In the same vein, if the appellant failed
to call these persons at trial, he would risk having an adverse
inference drawn against him by the Tax Court judge at trial.
[15] The majority's decision in Merck
& Co., Inc. v. Apotex, 2003 FCA 488, does not change the
conclusion herein. In that case, the majority did not allow the
amendment, even though the opposing party would not have suffered
any prejudice. The decision was based rather on the interest of
justice and public interest. I believe that we are far removed,
in the present case, from the circumstances in Merck. Nor
do I find here that there is abuse of process. See, for example,
Stacey-Diabo et al. v. The Queen, 2003 DTC 200, at par.
42-44 (T.C.C.). I also find comfort in the cogent discussion of
the law relating to abuse of process in Toronto(City)
v. C.U.P.E., Local 79, [2003] 3 R.C.S. 77 at
par. 35-55.
[16] I will end with the following remarks
by Judge Bowman (as he then was) in Continental Bank Leasing
Corporation et al v. The Queen, 93 DTC 298 (T.C.C.), at p.
302:
. . . I prefer to put the matter on a broader basis: whether
it is more consonant with the interests of justice that the
withdrawal or amendment be permitted or that it be denied. The
tests mentioned in cases in other courts are of course helpful
but other factors should also be emphasized, including the
timeliness of the motion to amend or withdraw, the extent to
which the proposed amendments would delay the expeditious trial
of the matter, the extent to which a position taken originally by
one party has led another party to follow a course of action in
the litigation which it would be difficult or impossible to alter
and whether the amendments sought will facilitate the court's
consideration of the true substance of the dispute on its merits.
No single factor predominates nor is its presence or absence
necessarily determinative. All must be assigned their proper
weight in the context of the particular case. Ultimately it boils
down to a consideration of simple fairness, common sense and the
interest that the courts have that justice be done.
This passage was adopted by the majority of the Federal Court
of Appeal in Merck & Co., supra, at paragraph
30.
[17] I would first note, having reviewed the
three annotated rules mentioned above, that the timeliness of a
motion is usually more determinative when the request is made at
a late stage of the hearing, and a lot less so when it is made
before the hearing, as is the case here. Considerations of simple
fairness and common sense and the interest in having justice done
also favour the appellant in the present motion.
[18] In light of the above, I would allow
the amendments as set forth in the proposed Amended Notice of
Appeal, and impose the following terms:
a. The respondent shall
have the right to further discovery with respect to these
amendments.
b. Since I find that the
respondent would suffer prejudice in having to prepare for a
second examination for discovery, the appellant shall bear the
costs, if any, of such discovery on a party and party basis.
c. The respondent shall
bear the costs of the present motion, all the more so given her
counsel's strong language toward the appellant. It is one
thing for self-represented litigants to express some emotions in
their arguments, but it is quite another to have counsel,
especially for the Crown, use such strong words as those
reproduced above in these reasons.
d. The respondent shall
have the right to make a demand for particulars. However, the
respondent shall bear the costs thereof on a party and party
basis if he chooses to proceed with such demand, since
particulars were in fact provided during the hearing of the
present motion (paragraph 7 above). [2]
Signed at Ottawa, Canada, this 1st day of December 2004.
Bédard, J.
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