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Citation: 2003TCC510
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Date: 20030918
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Docket: 2001-3047(IT)G
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BETWEEN:
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ALAN W. COCKERAM AND E. ANNE COCKERAM,
TRUSTEES OF COCKERAM FAMILY TRUST,
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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
(Edited from the transcript of Reasons for Judgment
delivered orally from the Bench on June 26, 2003 at Saint John,
New Brunswick
Campbell, J.
[1] The Appellants/Applicants, prior
to the hearing of this appeal, have brought an application for
summary judgment to allow the appeal.
[2] For the purposes of this Motion
the Respondent admitted the facts which were stated in paragraphs
1 through 6 of the Appellants' Brief on Motion dated March
13th, 2003. Paragraphs 1 through 6 state the following:
FACTS
1. The
Appellants are the Trustees of the Alan Cockeram Family Trust
(the "Trust"). The Appellants received a Notice of
Assessment for the Trust for the 1996 Income Tax Year dated
May 29, 1997. The Assessment stated that the taxable income
of the Trust for 1996 was nil.
2. A Notice of
Reassessment for the Trust for the 1996 Income Tax Year was
issued, dated March 17, 2000. The Notice of Reassessment stated
the revised taxable income of the Trust for 1996 to be
$61,750.00, based on disallowed allocations and designations in
the amount of $49,400.00.
3. The
Appellants filed a Notice of Objection to the Reassessment, which
was confirmed by the Minister on the basis that:
The cottage in Maine, US and the investment in Cash Converters
have been determined not to be the assets of the Alan Cockeram
Family Trust. Therefore, for the purposes of subsection 104(6) of
the Income Tax Act, these assets may not be deducted in computing
income of a "Trust".
4. A Notice of
Appeal was filed on August 13, 2001, stating that, "The
issue to be decided is whether as alleged by the Minister in the
Confirmation the Property was not an asset of the
Trust."
5. A Reply was
filed by the Respondent on October 17, 2001 (the
"Reply"). In the Reply, the Respondent states that:
The Minister incorrectly reassessed the Family Trust in 1996 to
disallow a deduction in the amount of $49,400. The appropriate
amount in 1996 was $49,400, the amount deducted by the Family
Trust in that year and paid to Anne Cockeram.
6. The Reply
states that the ground relied upon by the Respondent is as
follows:
He respectfully submits that the Family Trust was not entitled to
deduct the amount of $49,200 from income in the 1996 taxation
year as it did not pay that amount to the beneficiaries and the
beneficiaries were not entitled to enforce payment of that amount
in that year as required by subsections 104(6) and 104(24) of the
Act.
[3] This motion for summary judgment
is brought on the basis that the Respondent has relied upon
different grounds in the Reply than those stated in the Notice of
Confirmation and that the amount of the assessment itself, has
been changed, after the expiry of the normal reassessment
period.
[4] The first issue here is whether
summary judgment is available to the Appellants, that is, whether
this Court can grant a summary judgment in the circumstances.
[5] If summary judgment is available
to the Appellants, then the issue is whether the Respondent can
rely upon the ground as stated in the Reply. The Appellants
answer in the negative because they argue that the Respondent is
time-barred from making a new argument, or from introducing
a new ground, nearly one and one-half years after the expiry of
the normal three year period. Therefore, they argue that summary
judgment would be the appropriate relief.
[6] In support of the Appellants'
motion the affidavit of Alan W. Cockeram was filed. In that
affidavit Mr. Cockeram stated that the basis for confirming the
assessment in the Notice of Confirmation, dated May 17th, 2001,
was that the amounts were not payable to the beneficiaries
because the amounts were derived from property that was not trust
property.
[7] The Appellants, in the Notice of
Appeal, based their argument upon the ground which confirmed the
assessment as stated in the Notice of Confirmation. The
Appellants state that the Reply, dated October 17th, 2001 relied
upon a new ground and was filed some four and a half years after
the date of the original notice of assessment.
[8] In the Reply, the Respondent
submitted that the Family Trust was not entitled to deductions
because the amounts were not paid to the beneficiaries and the
beneficiaries were not entitled to enforce payment of those
amounts pursuant to subsections 104(6) and 104(24).
[9] The Appellants argue, therefore,
that while the Notice of Confirmation relied on the ground
relating to ownership of property, the Reply relied on the ground
relating to amounts payable to beneficiaries. They argue that
this ground, in the Reply, is entirely different than the basis
upon which the assessment was confirmed in the Notice of
Confirmation. Since the Respondent is attempting to introduce a
new ground, the Appellants argue that the Respondent is time
barred from doing so. The Respondent, they argue, is now
attempting to advance a new ground after the applicable period
has expired.
[10] Of importance here is whether or not
the Respondent's pleadings trigger the application of subsection
152(9) of the Act, which could effectively statute bar the
Respondent. Subsection 152(9) states, subject to certain
conditions, that the Minister may advance an alternative argument
in support of an assessment at any time after the normal
reassessment period.
[11] Associate Chief Judge Bowman in the
very recent case of, Loewen v. Canada, [2003] T.C.J. No.
282, provides a comprehensive review and analysis of
subsection 152(9). He reviewed marginal notes, case law
leading to the enactment of the subsection and the policy behind
the section. Judge Bowman concluded that Section 152(9)
permits a Respondent to plead new arguments outside the normal
reassessment period, provided they support the existing basis for
the assessment. It does not allow a Respondent to plead entirely
new arguments, outside the normal reassessment period, if those
new arguments provide a completely new and different basis for
the assessment.
[12] Specifically, at paragraph 61, page 22
of this decision, Judge Bowman states:
Subsection 152(9) of the Act does not overrule Continental
Bank. It does not sanction the substitution of a wholly
different basis of assessment. It permits the Crown to put
forward new arguments in support of the existing basis of
assessment.
[13] So let me first address the issue of
whether in fact there is any provision in the Tax Court of
Canada Act or the Tax Court of Canada Rules (General
Procedure) which would allow me to grant summary judgment or
the equivalent of summary judgment in the circumstances of this
case.
[14] Neither the Act nor the
Rules contain any provision permitting summary judgment.
The Appellants state that, because the rules are to be applied
liberally, (Rule 4) I have authority to grant this application.
Section 171 of the Act clearly establishes how this Court can
dispose of an appeal. Section 171 states:
171. (1) Disposal of appeal - The Tax Court of Canada
may dispose of an appeal by
(a)
dismissing it; or
(b) allowing
it and
(i) vacating the
assessment,
(ii) varying the
assessment, or
(iii) referring the
assessment back to the Minister for reconsideration and
reassessment.
[15] Judge Bell, in the case of Thomas
Craig Moffat v. Canada, [1994] T.C.J. No. 204 reviewed at
some length, not only section 171, but sections 12 and 13 of the
Court Act, together with Rule 4. Judge Bell concluded that
there is no provision in the Act or the Rules for the
equivalent of summary judgment and paraphrased part of his
remarks made during the application as follows:
[17] ... the Courts are controlled by the parameters set out
in respective legislation and rules of procedure...
He went on to conclude that it would be improper for a Court
to assume jurisdiction over a matter where no specific provision
existed.
[16] In the Respondent's submissions,
counsel argued that Rule 216(1) of the Federal Court Rules
specifically provides for summary judgment in that forum and,
therefore, as Judge Bell concluded in Moffat: the omission
of a similar provision from our rules implies that the avenue of
summary judgment is not available for this Court to grant. I
believe Respondent may have intended to refer to Rule 432.3
of the Federal Court Rules instead of 216.1. I am limited with
library resources here in this city. But regardless of the
section numbering, the result for our purposes is that the Tax
Court Act and Rules are silent in respect to a remedy of
summary judgment. I agree with Respondent's submissions.
Since there is no specific provision for summary judgment in this
Court, it is simply not available to the Appellants.
[17] At paragraph 11 of the Respondent
submissions, counsel argued that even if summary judgment was
available for this Court to grant, it would not be an appropriate
case for doing so because the appeal involves questions of fact
involving credibility which must be resolved at trial.
[18] Subsection 58(1) of the Rules allows a
party to apply to the Court to determine a question of law,
[58(1)(a)], or to strike pleadings when certain conditions
are met, [58(1)(b)].
[19] Respondent counsel referred me to Rules
63 [default judgment and dismissal for delay] and 170.1
(judgments on admissions) and argued that the decision in
Kovacevic v. Canada, [2002] T.C.J. No. 384 which permitted
a summary judgment application in this Court, fell somewhere
within the application of these rules. That case allowed the
applicants' application, on the ground that the assessment
was never completed by sending a notice to the Appellant.
[20] While that may have been the case in
Kovacevic, I am not making any comments as it regards this
matter. I have concluded that there is nothing in the Rules to
permit me to grant summary judgment and on the facts and argument
presented before me, there is nothing to take this application
within any of these other rules or provisions. I simply do not
feel I have any authority to dispose of the appeal in the manner
proposed in the application.
[21] In the alternative, Respondent counsel
argued that, even if I concluded that summary judgment is
available, in the absence of specific rules in this Court
governing summary judgment, we must look to the principles
enunciated in other courts. Counsel referred me to the Supreme
Court case of Guarantee Company of North America v. Gordon
Capital Corporation et al., [1999] 3 S.C.R. 423; S.C.J. No.
60 where the test for granting summary judgment was stated as
follows at paragraph 27, and I quote:
The appropriate test to be applied on a motion for summary
judgment is satisfied when the applicant has shown that there is
no genuine issue of material fact requiring trial, and therefore
summary judgment is a proper question for consideration by the
court.
[22] Respondent also referred to several
other cases where it was held that the moving party bears the
onus of proving on a summary judgment motion that there is no
issue for trial. Counsel argued that the issue here, that is,
ownership of property, has always been the issue and that
evidence was required to establish relevant facts at trial.
[23] Again, I agree that even if I were able
to grant summary judgment, which I have concluded I am not, I do
not believe this would be an appropriate case for doing so, as
the appeal involves questions of fact that require resolution by
means of a hearing.
[24] The next issue is whether subsection
152(9) has any application here. The primary argument of the
Appellants is that the Respondent is time barred from advancing a
new basis of argument, after expiry of the normal reassessment
period.
[25] The Respondent's position with
respect to Appellants' argument is that both the basis and
rationale for the Minister's assessment has not changed, and
that there has been no introduction of a new or alternative
ground in the Reply.
[26] In both the Confirmation and the Reply,
the subsection relied upon by the Minister was 104(6), which
allows deductions in computing income of a trust. In the Notice
of Confirmation, the Minister reasoned that amounts were not
payable to the beneficiaries because the amounts were derived
from property that was not trust property. In the Reply, the
Respondent submits that the amounts were not payable to the
beneficiaries because subsection 104(24) defines an amount
being payable when it is paid in that year to a beneficiary or
when the beneficiary is entitled to enforce payment of that
amount in the year.
[27] Respondent, at paragraph 15 of the
submissions, provided a summary of the Minister's position
and how it had been presented throughout the process. That
paragraph states:
...
a) The Audit
Proposal Letter dated November 10, 1999, referring to the amounts
originally in issue, stated: "The Agency's position is
that each of these amounts were not paid for the benefit of the
beneficiaries";
Applicants' Brief, Exhibit "C", at p. 4
b) The Notice
of Reassessment dated March 17, 2000 stated that in the 1996
taxation year $49,400 was a "disallowed allocation and
designation";
Applicants' Brief, Exhibit "B", at p. 2
c) The Notices
of Confirmation, issued subsequent to the Applicants'
Objection on May 17th, 2001, explained that the Property had been
determined not to be an asset of the Family Trust, and as such
could not be deducted in computing the Family Trust's income
pursuant to subsection 104(6) of the Act; and finally,
Applicants' Brief, Exhibit "D".
d) The Reply,
dated October 17, 2001 sets out the Minister's assumptions
relating to both the acquisition of the Property and the payments
made in relation thereto. In the Reply, the Respondent stated
that the Family Trust was not entitled to deduct the amount in
issue, as it did not pay that amount to the beneficiaries.
Applicants' Brief, Exhibit "F".
[28] When I review the wording of the Audit
Proposal Letter, the Notice of Reassessment, the Notice of
Confirmation and the Reply, there is simply no attempt to advance
a new basis for the assessment in the Reply. The case of
Continental Bank of Canada v. Canada, [1998] 2 S.C.R. 358
can be distinguished, as a new basis for assessment was advanced
based on a different section of the Act. In that case, the
Crown was not permitted to raise a new argument. The same can be
said of the case of Marina Homes Ltd. v. Canada, [2000]
F.C.J. No. 2107, where the Court rejected the Crown's attempt
to rely in the alternative on different statutory provisions,
which required different assumptions of fact.
[29] Here, however, there is no attempt to
place reliance on new statutory provisions. The sections relied
upon have always been subsection 104(2), (6) and (24), and the
assumptions of fact upon which the reassessment was based have
not changed.
[30] The wording in the Reply is different
from the wording in the Notice of Confirmation, but that does not
by itself demonstrate that the entire basis for the reassessment
has changed. I agree with Respondent's submissions that
whether the money was paid or payable to the beneficiaries of the
trust ultimately depends on the central issue of whether the
trust owned the property. This is a question of fact and is the
basis of the assessment. I do not believe Respondent has argued
in the alternative, but even if it can be considered an
alternative argument, it is still not a new basis of assessment.
Therefore, 152(9) does not apply, and the Respondent is not time
barred.
[31] And finally, the Appellant argued that
the Respondent had improperly and unfairly changed the amount of
the reassessment thereby prejudicing the Appellants.
[32] In the case of Loewen, to which
I previously referred, Associate Chief Judge Bowman gave examples
of what could be a new basis and what would be an alternative
argument. Judge Bowman illustrates, through those examples, that
if the Respondent is seeking to completely deny deductions, where
the Minister has challenged only the amount, that difference
would be a new basis.
[33] In this appeal the amount at issue has
not been changed by legal argument. The reassessment amount is
slightly different between the Notice of Confirmation and the
Reply. Although it is often considered that a new amount is a new
basis, (since an assessment is equivalent to the amount of tax
liability (Judge Christie in the case of Hagedorn v. The
Queen, 95 DTC 288)) I believe that rule should apply
only when the Respondent is attempting to increase tax liability.
Here the Respondent is seeking to subtract a $200.00 amount,
which is less than the amount which the Minister originally
assessed.
[34] Respondent counsel referred to this
$200.00 reduction as a clerical error, which was clarified in the
Reply in the Appellants' favour. I agree that correcting such
errors can in no way constitute an attempt to reassess by
changing the amount of the assessment.
[35] In conclusion, the
Appellants∕Applicants' motion is therefore dismissed.
The Respondent shall have costs of this motion. An extension of
time is granted for the parties to complete examinations for
discovery and complete any undertakings from those examinations
beyond those set by order of Judge McArthur dated January
22nd of 2003.
[36] Either I can set those dates today, or
the parties ... either party may request a further status
telephone conference to deal with those issues. Do counsel have
preference?
Ms. Gallant: I think we'd probably rather just set it
today, if I'm not mistaken.
Ms. Gillis: Yes, today would be fine.
Madam Justice: I think that would be preferable rather than
... there's a lot of judges on holidays in the summer. It may
be difficult to get a status hearing right away.
So if counsel could look at some dates, I'm agreeable to ...
and I will include those in the order.
Ms. Gillis: I believe for completion of discovery we were
looking at mid-August.
Madam Justice: Madam Registrar, do you have a calendar?
Madam Registrar, do you have a calendar?
The Registrar: No, sorry, Your Honour, I don't.
Madam Justice: All right. August the 15th then?
Ms. Gillis: Yes, that would be agreeable.
Ms. Gallant: What day of the week is that?
Ms. Gillis: That is a Friday.
Madam Justice: It's a Friday. And undertakings?
Ms. Gillis: Three weeks after that should be ... should be
sufficient on our part.
Madam Justice: Do you have a date?
Ms. Gillis: That's fine.
Ms. Gallant: Just in case. I mean you know how hard it is
to get a hold of some of the information.
Ms. Gillis: Yeah. So one month after that, Your Honour,
would be agreeable.
Madam Justice: September 15th. Is that a Friday or what day
is that?
Ms. Gillis: September 15th would be a Monday.
Madam Justice: All right. Those will be included
Discoveries to be completed by August 15th, and any undertakings
arising from that to be completed by August (sic) the 15th
and that will be included in my order then.
Ms. Gillis: Thank you, Your Honour.
Madam Justice: All right. Thank you, counsel.
Signed at Ottawa, Canada, this 18th day of September 2003.
Campbell, J.
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