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Citation: 2004TCC161
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Date: 20040218
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Docket: 2001-967(GST)G
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BETWEEN:
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BONDFIELD CONSTRUCTION COMPANY (1983)
LIMITED,
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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
Campbell, J.
[1] This is a motion by the Respondent
pursuant to section 54 of the Tax Court of Canada Rules
(General Procedure) to amend the Reply to the Amended Notice
of Appeal. Prior to the hearing of this motion, Respondent filed
a Book of Authorities. Due to a mix-up in addresses, counsel for
the Appellant did not receive the Book of Authorities. The
hearing proceeded on the basis that if counsel felt there was any
resulting prejudice, we would deal with this issue if it
arose.
[2] As a brief background to this
motion, a Notice of Appeal was first filed with this Court on
March 14, 2001, with a Reply to Notice of Appeal filed on May 18,
2001. The Notice of Appeal was amended by consent and filed on
March 5, 2003. A Reply to the Amended Notice of Appeal was filed
on March 17, 2003. The appeal is in respect to a
reassessment under Part IX of the Excise Tax Act, R.S.C.
1985, c.E-15, as amended, for the period January 1, 1991 to
November 30, 1995. The appeal came on for hearing in Toronto
on September 22, 2003 for three days and continued on
October 21, 2003 for two more days. On October 22, 2003,
Respondent counsel advised that she was taking a leave of absence
and would be replaced forthwith by other departmental counsel.
The matter was scheduled to resume during the week of February
23, 2004 for the purpose of calling two final witnesses on behalf
of the Respondent and for hearing summations. Mr. André
LeBlanc advised that he received the files mid-November of 2003
from the original Respondent counsel. On January 26, 2004,
Mr. LeBlanc filed the Notice of Motion to amend the Reply. I
heard the Motion on February 9, 2004.
[3] The Appellant carries on a general
contracting business as an institutional builder of schools,
hospitals, government buildings and other commercial and
industrial buildings. One of the issues in this appeal involves
what has been termed "back-charges". These charges
arose when a sub-contractor's work was deficient. The
Appellant, or third parties hired by the Appellant, remedied the
deficient work and then sought a reduction in the sub-contract
price with that sub-contractor in respect to these
correction costs. Prior to the hearing of this motion, the issues
as contained in the Reply to Amended Notice of Appeal stated:
16. The issues to be decided are
whether, for the Period, the Minister properly reassessed the
Appellant:
a) for the period January 1, 1991 to
June 5, 1994 pursuant to subsection 298(4) of the Act;
b) to disallow ITC's over-claimed in
respect of the back-charges;
c) interest and penalties pursuant to
section 280 of the Act.
[4] In addition under the heading
"Statutory Provisions, Grounds Relied On And Relief
Sought", the Reply contained the following paragraphs
concerning income tax credits (the ITC's) on
back-charges:
18. He respectfully submits that the
Minister properly reassessed the Appellant for the Period in
respect of the back-charges as the Appellant over claimed
ITC's in amount of $153,648.88 in connection with the
back-charges pursuant to the provisions of sections 165, 168,
169, 221, 222 and 225 of the Act.
19. He respectfully submits that the
Minister properly reduced the amount of the Appellant's claim
for ITC's for the Period in respect of the back-charges as
the Appellant issued debit notes to its contractors in instances
of deficient work and failed to adjust the amount of ITC's
claimed as required by section 232 of the Act.
...
21. He respectfully submits that the
Minister properly assessed the Appellant for the Period under
subsection 298(4) of the Act as in filing its GST returns
during the Period and over-claiming ITC's on the back
charges, in under-remitting GST on the PST Portion of the
Contractors' Invoices and in remitting its net tax one month
late for the period January 1, 1991 to April 30, 1992, the
Appellant made a misrepresentation that is attributable to
neglect, carelessness or wilful default.
[5] Respondent counsel proposes the
following amendments to the aforesaid paragraphs contained in the
Reply to Amended Notice of Appeal:
16. The issues to be decided are
whether, for the Period, the Minister properly reassessed the
Appellant:
a) for the period January
1, 1991 to June 5, 1994 pursuant to subsection 298(4) of the
Act;
b) for under-remitting
the amount of $153,648.88 collected as or on account of tax
or to disallow ITC's over-claimed in the same amount
in respect of the back-charges;
c) interest and penalties
pursuant to section 280 of the Act.
...
18. He respectfully submits that the
Minister properly reassessed the Appellant for the Period in
respect of the back-charges as the Appellant collected as or
on account of tax in connection with the back-charges the amount
of $153,648.88 and failed to remit the amount so collected as
required by sections 222, 225 and 228 or, in the alternative, as
the Appellant over claimed ITC's in amount of
$153,648.88 in connection with the back-charges pursuant to the
provisions of sections 165, 168, 169, 221, 222 and 225 of the
Act.
19. He respectfully submits that
the Minister properly reduced the amount of the Appellant's
claim for ITC's for the Period in respect of the back-charges
as the Appellant issued debit notes to its contractors in
instances of deficient work and failed to adjust the amount of
ITC's claimed as required by section 232 of the
Act.
...
21. He respectfully submits that the
Minister properly assessed the Appellant for the Period under
subsection 298(4) of the Act as in filing its GST returns
during the Period and under-remitting GST or over-claiming
ITC's on the back charges, in under-remitting GST on the PST
Portion of the Contractors' Invoices and in remitting its net
tax one month late for the period January 1, 1991 to April 30,
1992, the Appellant made a misrepresentation that is attributable
to neglect, carelessness or wilful default.
[6] The Respondent also seeks to amend
paragraph 20, which reads as follows:
20. He respectfully
submits that the Minister properly assessed the Appellant
interest for the period January 1, 1991 to April 30, 1992
pursuant to subsection 280(1) as the Appellant failed to remit
its net tax as and when required by sections 228 and 245 of the
Act.
[7] Respondent concedes that the
Minister did not properly assess the Appellant interest for the
period January 1, 1991 to April 30, 1992. This amendment by way
of concession by the Respondent during the hearing of the motion
shall be permitted and the original wording of paragraph 20 shall
now be replaced by the following:
20. He concedes
that respectfully submits that the Minister did
not properly assessed the Appellant interest for the period
January 1, 1991 to April 30, 1992 pursuant to subsection 280(1)
as the Appellant did not failed to remit its net tax as
and when required by sections 228 and 245 of the Act.
[8] Paragraph 19 of the Reply shall
also be deleted in its entirety as Respondent counsel advised
during the hearing of the motion that the Minister no longer
wished to take this position regardless of the outcome of the
motion.
[9] I am left then to deal with the
request for the proposed amendments to paragraphs 16, 18 and
21.
[10] Rule 54 of the Tax Court of Canada
Rules (General Procedure) states:
A pleading may be amended by the party filing it, at any time
before the close of pleadings, and thereafter either on filing
the consent of all other parties, or with leave of the Court, and
the Court in granting leave may impose such terms as are
just.
[11] Respondent counsel requests this
amendment to enable the Minister to advance the position that the
amount of $153,648.88 is an amount that was collected by the
Appellant as tax or on account of tax and therefore should have
been remitted by the Appellant. If this proposed amendment were
allowed, then Respondent would argue as an alternative position
that the ITC's were over claimed by the Appellant in the same
amount. In essence the Respondent wants to be able to argue that
this money represents an amount that has been collected by the
Appellant on account of tax and therefore must be remitted. Only
if this position failed would Respondent then argue that the
Appellant over claimed ITC's in the same amount.
[12] Respondent counsel argued that the
proposed amendment was simply an alternative position which was
advanced for the purpose of determining the real questions or
issues with respect to the back-charges. His position was that
these proposed amendments clarified the issue, did not raise any
additional facts, required no further evidence, and resulted in
no injustice to the Appellant.
[13] Respondent counsel referred me to a
number of cases in support of this motion. Most of these cases
however deal with amendments at the discovery stage in the
proceedings or at least at the commencement. Because this present
motion has not been brought in a timely manner, the cases quoted
can be distinguished and should be.
[14] The generally accepted rule for
granting amendments was laid out by the Federal Court of Appeal
in the case of The Queen v. Canderel Limited, [1994]
1 F.C. 3; 93 DTC 5357 (F.C.A.), Décary, J.
at page 5360 states:
...the general rule is that an amendment should be allowed at
any stage of an action for the purpose of determining the real
questions in controversy between the parties, provided, notably,
that the allowance would not result in an injustice to the other
party not capable of being compensated by an award of costs and
that it would serve the interests of justice.
[15] Associate Chief Justice Bowman in
Continental Bank Leasing Corporation et al. v. The Queen,
[1993] T.C.J. No. 18; 93 DTC 298, in discussing the term
'interests of justice' stated the following at page
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.
[16] This passage was quoted with approval
by the Federal Court of Appeal in Canderel. At page
5361-2, the Federal Court of Appeal went on to state:
While it is true that leave to amend may be sought at any
stage of a trial, it is safe to say that the nearer the end of
the trial a motion to amend is made, the more difficult it will
be for the applicant to get through both the hurdles of injustice
to the other party and interests of justice. ...
[17] This case has a very long history with
this Court including five or six adjournments. There has been
ample time for all parties to have taken a serious look at the
adequacy of their pleadings. This request has not come in the
early stages of the proceedings. In fact we are closer to the end
than to the middle of the hearing. Most of the evidence is in and
we are on the eve of its conclusion. It is simply too late in the
day to permit these proposed amendments when we are on the
homestretch.
[18] Respondent counsel argued that the
amendment would not prejudice the Appellant because all of the
documentary evidence respecting the back charges was before the
Court. He argued that there would be no need to hear from
additional witnesses as the documents speak for themselves. It
was Respondent's contention that the proposed alternative
position could be decided based on the documentary evidence
already before the Court.
[19] I do not believe it is open to the
Respondent to second-guess the Appellant's approach to this
amendment and to suggest the Appellant would have framed its case
and marshalled its evidence in the same way even if the amendment
had been allowed early on. That is pure speculation on the part
of Respondent counsel. It would be highly prejudicial to any
Appellant to permit an amendment such as this when discoveries
are completed, strategies planned for the hearing, and when most
of the witnesses have been examined and cross-examined. If
this motion had been brought and permitted at the discovery stage
for example, counsel for the Appellant may or may not have taken
an alternative approach to this hearing. We will never know that.
However one thing is certain - at this stage in the hearing the
Appellant is now absolutely prevented from pursuing any
possibility of re-evaluating and re-focusing their strategy if
the proposed amendments were allowed. This places the Appellant
in a very precarious position. Where there is even a hint of
unfairness or potential for prejudice to a taxpayer, a matter
such as this must be resolved in favour of the taxpayer. When I
view this proposed amendment in terms of the "simple
fairness, common sense, and the interest that the courts have
that justice be done" (in the words of Associate Chief
Justice Bowman in the case of Continental Banking), it is
too late to permit the amendment. Certainly if this motion had
been brought in a more timely fashion at the discovery stage or
during the early stage of the hearing itself, I may have reached
a different conclusion. It would just be simply wrong to allow
the proposed amendment in the circumstances of this case.
[20] The motion is allowed to permit the
deletion of paragraph 19 of the Reply to Amended Notice of Appeal
and to allow the proposed amendment to paragraph 20. In all
other respects the motion is dismissed.
[21] The Appellant shall have one set of
costs of this application in any event of the cause.
Signed at Ottawa, Canada, this 18th day of February 2004.
Campbell, J.
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