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Citation: 2003TCC667
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Date: 20030912
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Docket: 2002-580(IT)I
2002-831(IT)I
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BETWEEN:
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ALBERT DAYAN and JAMES DAYAN,
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Appellants,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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____________________________________________________________________
For the Appellants: The Appellants themselves
Counsel for the Respondent: Joel Oliphant
____________________________________________________________________
REASONS FOR ORDER
(Delivered orally from the Bench at
Toronto, Ontario on April 7, 2003)
Mogan J.
[1] The appeals of Albert Dayan with
respect to the taxation years 1994, 1995, 1996 and 1997 and of
his brother, James Dayan, for taxation years 1993, 1994 and 1995
were set down to be heard at Toronto on Monday, February 10,
2003. When the appeals were called for hearing on that day before
Sarchuk J., the Appellants did not appear themselves nor did
anyone appear representing them prepared to present their appeals
or to ask for an adjournment.
[2] A person did appear in Court,
however, sent by either the Appellants or an accounting firm
which was retained by them. That person delivered to the Court
two statutory declarations, one signed by Albert and the other
signed by James. That person identified himself as a messenger
for an accounting firm and he did not hold himself out as being
the representative for the Appellants. That messenger stated that
he assumed that the firm or the company that he represented
probably had the Appellants as clients.
[3] As a result of the Appellants'
failure to attend, counsel for the Respondent moved for dismissal
of their appeals. Judge Sarchuk granted the motion and on
February 19, 2003, he signed a judgment in the case of Albert
dismissing his appeals for 1994, 1995, 1996 and 1997, and a
judgment in the case of James dismissing his appeals for 1993,
1994 and 1995.
[4] On February 28, 2003, each
Appellant wrote to the Court asking that his respective judgment
be set aside. Those letters were treated as motions to set aside
the judgments of Judge Sarchuk under section 18.21 of the Tax
Court of Canada Act. Those motions were set down to be heard
at Toronto on Monday, April 7, 2003. They were called and came on
for hearing today. The following is the letter of February 28,
2003 from Albert addressed to the Court:
This is to acknowledge receipt of a copy of the Judgment in
the above noted matter.
I was not able to attend my hearing on February 10, 2003 and
hereby make application as per Section 18.21 of the Tax Court of
Canada Act to have the order of dismissal set aside and the
appeal set down for hearing.
My brother James Docket: 2002-831(IT)I and myself were unable
to attend and the Respondent's representative Lorraine
Edinboro was actively attempting to serve subpoenas for that
date. She was aware that we would not be in Court on that date
and in fact my brother and I supplied Statutory Declarations
together with an explanation regarding our absence. Accordingly,
I request the appeal be set aside for a hearing whereupon I will
be in attendance on that date.
A similar letter was sent to the Court by James, also dated
February 28, 2003, which letter began in the same way as
Albert's, but it contains a different reason as follows:
Not only was I not able to attend the hearing because I was
out of the country, I also sent a Statutory Declaration on my
behalf and also advised the Respondent's representative
Lorraine Edinboro who was actively attempting to serve a subpoena
upon me for that same date. She was clearly aware that I was not
able to be in attendance and accordingly I therefore request the
appeal be set aside for a hearing whereupon I will be in
attendance on that date.
[5] In effect, both Appellants say
that counsel for the Respondent, Lorraine Edinboro, was
aware that they would not be in attendance at Court on February
10. She denies that in an affidavit filed with the Court which
states in part:
7. Contrary to
Mr. A. Dayan's letter dated February 28, 2003, I was not
aware that he would be unable to attend on his hearing date.
8. On February
10, 2003, the date of the scheduled hearing, a messenger appeared
before the Court on behalf of Mr. A. Dayan and presented his
statutory declaration (Exhibit "B"). The messenger
explained to the Court that he did not know the Appellant but
assumed that his firm represented them. There was no explanation
for Mr.A. Dayan's absence.
19. Contrary to
Mr. J. Dayan's letter of February 28, 2003, I was not
aware that he would be unable to attend on his hearing date.
20. On February 10, 2003,
the date of the scheduled hearing, a messenger appeared before
the Court on behalf of Mr. J. Dayan and presented his
statutory declaration (Exhibit "D"). The messenger
explained to the Court that he did not know the Appellant but
assumed that this firm represented them. There was no explanation
for Mr. J. Dayan's absence.
The two statutory declarations referred to as Exhibits B and D
to Ms. Edinboro's affidavit are similarly worded.
Exhibit B states:
I, Albert Dayan, of 60 Thornbury Circle, Thornhill, Ontario,
do solemnly and sincerely declare that I did not with knowledge
or gross negligence file my 1994, 1995, 1996, and 1997 personal
Canadian income tax returns reflective of fraudulent charitable
donation claims. I did in fact contribute monies by way of cheque
or cash and did receive a charitable donation receipt in return.
I did not acquiesce or participate in any manner with the charity
to knowingly mislead Revenue Canada Taxation and I make this
solemn declaration conscientiously believing the same to be
true.
At the end of the Declaration, there is the name "Albert
Dayan" typed and, directly thereunder, a signature which he
acknowledged was his; and it continues with "Declared at
Toronto, Ontario on the 22nd day of January 2003". I cannot
tell who the person was who took the declaration because I cannot
make out the signature. The Statutory Declaration of James
(Exhibit D) is similarly worded and it says:
I, James Dayan, of 3636 Bathurst Street, Toronto do solemnly
and sincerely declare that I did not with knowledge or gross
negligence file my 1993, 1994, and 1995 personal Canadian income
tax returns reflective of fraudulent charitable donation claims.
I did in fact contribute monies by way of cheque or cash and
received a charitable donation receipt in return. I did not
acquiesce or participate in any manner with the charity to
knowingly mislead Revenue Canada Taxation and I make this solemn
declaration conscientiously believing the same to be true.
There is also the name "James Dayan" typed with his
signature above it and it also continued with "Declared at
Toronto on 21st day of January 2003 before me" with a
signature I cannot make out.
[6] Those declarations, however, do
not address the Appellants' failure to attend at the hearing
on February 10, 2003. As I read the statutory declarations, they
appear to be in answer to what is stated in the Replies to the
Notices of Appeal. Looking at the substance of the appeal by
Albert, according to the assumptions in that Reply, he is alleged
to have attached charitable receipts to his income tax returns
for 1994, 1995, 1996, and 1997. Those charitable receipts were
not accepted by Revenue Canada and reassessments were issued
disallowing any tax credits in respect of those receipts.
[7] Indeed, in Albert's Notice of
Appeal, there is considerable detail as to where the receipts
came from and by whom they were issued. According to the
Minister, they were issued by a man named Edery who apparently
was charged and convicted for issuing fraudulent receipts in a
tax evasion scheme involving three purported charities. In the
Reply to the Notice of Appeal, there are allegations that the
Appellant did not make donations to the named charities; that he
did not make the donations as recorded in the fraudulent
receipts; and that he made misrepresentations that are
attributable to neglect, carelessness of wilful default and that
the Appellant knowingly or under circumstances of gross
negligence failed to make true statements in his return.
[8] In the Reply to the Notice of
Appeal for James, it is a similar situation. He filed his return
showing charitable receipts with respect to certain charities,
which receipts were not accepted by Revenue Canada. The receipts
were apparently issued by the same man, Edery, and there is a
statement that he was charged and convicted for issuing
fraudulent receipts in respect of a tax evasion scheme involving
three purported charities. There were reassessments issued
disallowing the tax credits arising from the receipts. There are
further statements that the Appellant did not make the donations
that he claims he made as recorded in the fraudulent receipts
filed. There is also a statement that, when claiming the
non-refundable tax credit with respect to the alleged
charitable donations, the Appellant made misrepresentations
attributable to neglect, carelessness or willful default. There
are allegations that the Appellant knowingly or under
circumstances amounting to gross negligence made or participated
in the making of false statements in his return which justify the
penalties. Therefore, the pleadings raise serious questions and
issues in dispute between Revenue Canada and each of the
Appellants who happen to be brothers.
[9] The Appellants appeared today on
their own motions and both gave evidence. Albert stated that his
mother was not well and had not been well for a long time. He and
his wife had gone to take care of her and, on February 9, the
night before the hearing of the appeal, he had a very serious
mouth infection or a problem with his teeth that required
emergency dental work. He went to see a dentist and filed with
the Court a letter dated February 10, 2003 from Dr. Ilia
Novokolsky (Exhibit A-1) stating:
To whom this may concern:
This letter is to confirm that Albert Dayan was seen in our
office this morning for a dental emergency.
If further information is required, please do not hesitate to
call our office.
Apparently, Albert did see a dentist on the morning of
February 10; and I have no reason not to believe him. He stated
that because of his very sore mouth, he had telephoned his
brother-in-law (also the brother-in-law
of James) and asked him to go to the accountants, a firm called
Klayman & Company, to have them send someone to Court saying
he would not be there. Albert stated that his brother James did
his own (i.e. James') tax returns for the years under appeal
and that James had no prior connection with Klayman &
Company. In other words, it was not an accounting firm which
regularly prepared tax returns for James. Therefore, he did not
know anybody at Klayman & Company, and apparently they did
not know him.
[10] Albert also said that he works as a
machinist with Crown Cork & Seal and had asked for the day
off intending to come to Court. According to him, he would not
have asked for a day off on February 10 if he had not intended to
come to Court. Unfortunately, on his day off, he had this dental
emergency and so did not come to Court. Albert's evidence
that he intended to come to Court on February 10 and had asked
for the day off from work is in conflict with the letter of
February 28 (Exhibit R-1) that he wrote to the Court stating in
the second paragraph that the Respondent's representative,
Lorraine Edinboro, was actively attempting to serve subpoenas for
that date. He states that she was aware that he would not be in
Court and, in fact, "my brother and I supplied statutory
declarations together with an explanation regarding our
absence". They did provide statutory declarations but the
declarations had no explanation whatsoever regarding their
absence. The substance of the statutory declarations addressed
the issue whether they had participated or knowingly known about
any fraudulent charitable receipts. The declarations did not
address the question of a failure to attend on February 10.
[11] Further, in cross-examination, he
stated that it was only on the morning of February 10 that he
knew he could not attend. Again, that statement in
cross-examination in response to a question from
Mr. Oliphant is in direct conflict with his own letter where
he says that Lorraine Edinboro knew that he would not be in
Court. He said that he had told her that he and his
representative would be in Court on February 10 because he had
asked for the time off. However, according to her affidavit, he
would not say who his representative was going to be.
[12] James also testified. He is a
free-lance accountant and I guess it is in that capacity
that he used to do his brother's tax returns. He stated that
his brother Albert was not involved in what he called the
legalities of this matter. James was in New York City around
February 9, 2003. These two Appellants have a third brother,
Joseph Dayan, who died on November 11, 2002, and, following a
religious custom within their family, there was a type of
memorial service in New York on or about February 9, 2003
which was the third month after Joseph Dayan's death.
James had gone to New York City on February 7. He produced a
hotel bill showing that he was there from February 7 to February
10. I would have believed him even without the hotel bill, and
counsel for the Respondent also acknowledged that producing the
hotel bill was not necessary, but he did bring it to Court. James
said this was an important family function because his brother
Joseph had only one son, and he wanted to be there with him for
this event. And so James was out of the country on February 10
but he claimed that he had made arrangements to have someone come
to Court to ask for an adjournment.
[13] The hard fact is that nobody came.
Nobody asked for an adjournment. An unnamed messenger showed up
at the Court that morning (February 10) and produced two
statutory declarations which I have read into the record. These
were relatively benign documents insofar as seeking an
adjournment is concerned. As I have indicated, the statutory
declarations are directed only at the question of whether the
payments were made bona fide to the named charities or
whether there was any bad faith or misrepresentation or
negligence involved in the filing of the returns and claiming
these charitable receipts. They are more like a statement of
defence than a statutory declaration. They do not offer the Court
any reason to grant an adjournment.
[14] Those are the underlying facts in
regard to these applications to set aside the judgments issued by
Judge Sarchuk on February 19 with respect to each of these cases.
The application comes under section 18.21 of the Tax Court of
Canada Act and subsection (1) states:
18.21(1)
Where an Appellant does not appear on the day fixed for the
hearing, or obtain an adjournment of the hearing, of an appeal,
the Court shall, on application by the respondent and whether or
not the Appellant has received notice of the application, order
that the appeal be dismissed, unless the Court is of the opinion
that circumstances justify that the appeal be set down for
hearing at a later date.
Apparently, Judge Sarchuk was not satisfied that there were
circumstances justifying a later hearing date because he
dismissed the appeals. Subsection 18.21(3) gives the Court
jurisdiction to set aside a judgment made for failure to
attend:
(3) The Court may
set aside an order of dismissal made under subsection (1)
where
(a) it would
have been unreasonable in the circumstances for the Appellants to
attend at the hearing; and
(b) the
Appellant applied to have the order of dismissal set aside as
soon as circumstances permitted the application to be brought
but, in any event, not later than one hundred and eighty days
after the day on which the order was mailed to the Appellant.
There is no doubt that the Appellants have both satisfied the
second condition, that is the prompt application to the Court to
set aside the judgments because they applied on February 28 which
was only nine days after Judge Sarchuk had signed his order
dismissing the appeals. They promptly applied to the Court. The
question is whether the Appellants satisfied the first condition
in paragraph (a) having regard to whether it would have
been unreasonable in all the circumstance for the Appellants to
attend at the hearing.
[15] Counsel for the Respondent referred me
to the decision of Judge Bowman in Diem v. The Queen,
[1999] T.C.J. No. 359, where he declined to reopen a
hearing because he looked at the substance of the appeal and saw
that the taxpayer was hopelessly barred from satisfying a time
limit for removing certain properties out of the country within
60 days of their purchase in order to avoid goods and
services tax. Judge Bowman stated at paragraph 8: "In
considering whether to set aside the dismissal one of the factors
that should be taken into account is whether there is any merit
in the appeal". He then found that there was no merit in the
appeal because he had no discretion to extend the time; and so he
declined to open it indicating that the judge who sits on an
application under section 18.21 is entitled to look at the
substance of the appeal, the real questions that are brought
before the Court in the Notice of Appeal and Reply in considering
whether to reopen.
[16] This was also considered by Judge
Hershfield in Rochelle Moss v. The Queen, [2001] T.C.J.
592. That case had to do with the extension of time to file a
Notice of Objection which is different from an appeal. There had
been an Order made dismissing the taxpayer's application to
extend time, and the taxpayer was seeking to set aside the Order.
Judge Hershfield wrote quite extensive reasons and at paragraph
20 of his decision, he referred to Judge Bowman's decision in
Diem, supra, and said: " ... when considering an
application under subsection 18.21(2), one of the factors that
should be taken into account is the merit of the appeal". He
then went on to distinguish that, because he was not dealing with
an appeal per se, but with an application to extend time.
I conclude that it is appropriate for a judge hearing an
application under section 18.21 to consider the merits of
the case.
[17] In one sense, I could look at the
appeal of James and say it would have been unreasonable in all
the circumstances for the Appellant to attend at the hearing
because he was out of the country on a compassionate journey
having to do with the recent death of his brother. If I were to
take that into account, I could look at his failure to notify
counsel for the Respondent that he would not attend as an act of
discourtesy. Similarly, his failure to give notice to the Court
that he either would not attend or needed an adjournment might be
regarded as a discourtesy. While failure to give notice might
reflect a lack of courtesy, it may not take away from the fact
that it was reasonable for James not to be in Toronto on February
10.
[18] Similarly with Albert, he had a serious
mouth illness the evening before the hearing and made a call to
his brother-in-law on the basis that the
brother-in-law would go to an accounting firm and ask
them to send somebody to seek an adjournment or say that he could
not come. He said that he had asked for the day off.
[19] I am troubled by the fact that both of
the Appellants in their letters said that Lorraine Edinboro was
aware that they would not be in Court. Albert says that clearly
in his letter of February 28 and James makes the same statement
in his letter of February 28: "She was clearly aware that I
was not able to be in attendance and accordingly, I therefore
request the appeal be set aside for a hearing." Although
this allegation is not considered in the affidavit of Lorraine
Edinboro, in my view, it is a material fact which ought to have
been considered. Counsel for the Respondent, Mr. Oliphant,
stated that in fact, Ms. Edinboro came to Court on February
10 as is apparent from the certified transcript of the
proceedings which was not put in evidence but offered to the
Court. Mr. Oliphant stated that Ms. Edinboro had two
witnesses with her on February 10, one being Mr. Edery who was
the person who issued the receipts and who apparently was charged
with and convicted of issuing fraudulent receipts in a tax
evasion scheme involving three purported charities. I assume that
Mr. Edery's testimony would have been significant because,
when an issue like fraud set out in the pleadings, the question
would be whether the facts represented in the tax return were in
fact a misrepresentation by fraud or gross negligence. The
question was a serious one.
[20] According to Mr. Oliphant, the
Crown also had in attendance a second witness identified as Frank
Menitti who is a special investigator for Revenue Canada and who,
I assume, investigated this whole matter of alleged fraudulent
receipts. Upon an application to set aside a judgment under
section 18.21 of the Tax Court of Canada Act, does the
seriousness of the issue before the Court make it more desirable
to reopen a hearing in circumstances like this, or is it less
desirable to reopen a hearing because the parties have instituted
appeals on a serious matter but have failed to appear on the day
fixed for the hearing? One can see arguments on both sides.
[21] When an Appellant has failed to appear
on the day fixed for the hearing of his/her appeal, and when an
order has been made dismissing the appeal, I have some doubt as
to whether a judge (upon an application under section 18.21 of
the Tax Court of Canada Act) should refuse to set aside an
Order if the matter is trivial but reopen the hearing if the
matter is serious. Conversely, I have some doubt as to whether a
judge should refuse to set aside an Order if the matter is
serious but reopen the hearing if the matter is trivial.
[22] In these two appeals, the fact which
influences me most and causes me not to set aside the judgments
is this. The Respondent was in Court on February 10, 2003 with
two witnesses. One of those witnesses was not an employee of
Revenue Canada but was the person who had been through the
painful experience of being charged with and convicted of an
offence related directly to the transactions in issue in these
appeals. To bring that person to this Court to testify as a
witness for the Crown was a very serious matter. There may have
been considerable inconvenience in getting that witness to come
to Court on that day.
[23] The two Appellants failed to take this
matter seriously. Their failure to attend on February 10, 2003
was, at first blush, a grave discourtesy both to the opposing
counsel, who went to the trouble of bringing two witnesses to
Court and coming herself, and to the Court itself. This court is
centred in Ottawa and judges are sent from Ottawa to hear cases.
A case like this would be regarded as significant, probably
consuming the whole day. A judge came from Ottawa to sit on
February 10 expecting to adjudicate on this matter. The
Appellants did not show up.
[24] I accept Albert's evidence that he
did have a toothache or a mouth infection on the evening before
but, what impressed me about that part of the evidence was his
scrambling to get somebody here Monday morning. He said he had
someone who was going to help him and that he had taken the day
off work. If he had arranged for someone to be with him in Court,
someone would have shown up. There would have been somebody in
Court who could have said that he or she expected to meet
Albert Dayan here. It appears that he had not arranged for
anyone to assist him in Court.
[25] The only person who came delivered
these two statutory declarations which had absolutely nothing to
do with the failure of the two Appellants to attend. The
statutory declarations are more like Statements of Defence. They
are directed at the merits of the case as to whether the
charitable receipts were bona fide or fraudulent. They
perhaps should have been attached to the Notices of Appeal. They
have nothing to do with the failure to attend.
[26] As for James who went to New York for
the memorial service, he did not consider the matter sufficiently
important to make specific arrangements for someone to show up in
his absence knowing he would not be here. I accept the affidavit
evidence of Lorraine Edinboro. She has no reason not to be
truthful. She arranged to bring to Court a witness from Revenue
Canada who had investigated the matter and, more importantly, she
arranged to bring to Court a witness who had no connection with
her client and who would, in a sense, have a contrary interest
because Mr. Edery had been through such a painful experience in
being charged with and convicted of a serious offence. She came
to Court that day ready to litigate. The issues were truly
serious. The Replies to the Notices of Appeal contain words like
"fraud", "misrepresentation", "phoney
receipts" and "knowingly making false statements in
returns". These two Appellants had every reason to take
their appeals seriously. The two appeals related to the very
truthfulness of the charitable receipts which were the subject of
the Notices of Appeal, but neither one of the Appellants took any
steps to notify the Court that they would not attend on
February 10 or to notify counsel for the Respondent, which
might have saved her the inconvenience of bringing two witnesses
to Court.
[27] The Appellants treated the Notice of
Hearing as a casual matter; and the only person they sent to
Court was some unnamed messenger who delivered a couple of
statutory declarations which did not address their failure to
attend but related only to the merits of the appeals. Having
regard to the statements in the two letters of February 28 from
the two Appellants that counsel for the Respondent was aware that
they would not be in Court on February 10, 2003, I simply do not
believe those statements. I accept the evidence in the affidavit
of Ms. Edinboro that she did not know they would not attend
and, indeed, the statement in her affidavit is corroborated by
the fact that she came to Court with two witnesses. A responsible
lawyer would not bring witnesses to Court if she had been told in
advance that there was not going to be any hearing because the
Appellants were not going to show up.
[28] To the extent that there is a conflict
in the statements made in the two letters of February 28 from the
Appellants, and the statements made in the affidavit of
Ms. Edinboro and the undertaking given by Mr. Oliphant
that he was speaking truthfully as a member of the Bar when he
said that those witnesses were in attendance in court on February
10, 2003, I accept the statements of Ms. Edinboro and Mr.
Oliphant. For me, that is an overpowering reason not to set aside
the judgments of Judge Sarchuk. The motions by Albert Dayan and
James Dayan are dismissed. The judgments of Judge Sarchuk will
stand.
Signed at Ottawa, Canada, this 12th day of September,
2003.
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