RFA Natural Gas Inc. v. The Queen, docket 97-2327-GST-G

Date: 20000531

Docket: 97-2327-GST-G

BETWEEN:

RFA NATURAL GAS INC.,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons For Order

Bowie J.T.C.C.

[1] The motion before me is for an Order under Rule 30(2) of the Tax Court of Canada Rules (General Procedure) permitting the Appellant company to be represented by Ms. Linda Leonard, who is not a lawyer, but is an officer of the company. In fact she is now, as I understand it, also the sole shareholder and director. On July 7, 1999, I made an Order permitting Ms. Leonard to represent the company in all proceedings prior to the commencement of the hearing of the appeal, including an application to extend the Order to cover the hearing of the appeal. She now brings that application. Rule 30 reads:

30(2) A corporation shall be represented by counsel in all proceedings in the Court, unless the Court, in special circumstances, grants leave to the corporation to be represented by an officer of the corporation.

[2] In Pratts Wholesale Limited v. The Queen,[1] Judge Beaubier of this Court, following the judgment of Muldoon J. in Kobetek Systems Ltd. v. R.,[2] identified four factors that are relevant in considering whether special circumstances exist to warrant making an Order under Rule 30. They are:

1 Can the corporation pay for a lawyer?

2. Will the proposed representative be a witness?

3. How complex are the legal issues?

4. Will the matter proceed expeditiously?

Judge Beaubier was of the view that the second and third factors are the most important in the context of an appeal before this Court. I agree that all these factors should be considered. However, for reasons that I shall come to, I do not believe that the second of them should be given great weight.

[3] The appeal is from an assessment made by the Minister of National Revenue (the Minister) under Part IX of the Excise Tax Act, requiring the Appellant to pay goods and services tax (GST) in respect of certain sales of natural gas. The amount of tax in dispute, according to the Notice of Appeal, is $1,126,688. Interest and penalties are also disputed. The Notice of Appeal was filed in July 1997, by lawyers acting for the company. The Appellant, in its Notice of Appeal, elected to have the appeal governed by the informal procedure. Upon the application of the Attorney General, the Court made an Order under section 18.3002(1) of the Tax Court of Canada Act that the appeal would be governed by the general procedure.

[4] It is not seriously disputed by the Respondent that the Appellant company is without funds to retain counsel. The Notice of Appeal was drawn and filed by counsel in Toronto, who later took steps to be removed as counsel of record, apparently for reasons relating to the company's inability to pay. Counsel in Vancouver then represented the Appellant, but only briefly. I accept the statement Ms. Leonard has made several times, that she would retain counsel to conduct the appeal for her company if she were able to do so.

[5] The principal legal issue in this appeal will, it appears, be whether the natural gas in question qualifies as a zero-rated supply under Schedule VI, Part V, section 15 of the Act. This determination will, I think, involve more problems of fact than of law. Many GST cases are complex, and this one is probably no exception. However, Ms. Leonard has apparently managed to secure the services of a United States lawyer to assist her in preparing for and conducting the hearing. I expect that she will be able to deal with the issues in a reasonably satisfactory way.

[6] I am satisfied, too, that if the Appellant is represented by Ms. Leonard the matter can proceed in an orderly way. She has represented the Appellant through the process of discovery during the last 10 months, and counsel for the Respondent did not draw any incident to my attention which would cause me to have concerns about her continuing to do so at the hearing.

[7] The real reason that the Respondent opposes this application is because Ms. Leonard will be a witness at the hearing. Ms. Leonard takes the position that she will not be a witness for the Appellant; counsel for the Respondent counters that in that case he intends to call her, and to seek to impeach her credibility. He says that she cannot appear as agent and as witness. Counsel for the Respondent relied on the following passage from the judgment of Bowman J. (as he then was) in G. Samra v. M.N.R.:[3]

This case was a difficult and complex one, with a multitude of factual, legal and accounting questions. The result might have been different had it been presented with some regard to the rules of onus of proof, evidence and law, a knowledge which is required in a complex field such as tax litigation. Very few members of the bar have the temerity to engage in this difficult and technical field of practice. When members of other professions, however well qualified they may be in their own field, seek to do so they put their clients at risk in the same way as would a lawyer who performed an audit or certified a financial statement.

The appellants' representative appeared both as his agent for the purpose of arguing the case and as their principal witness. For a member of the bar to appear as counsel and as witness in the same case has, in some instances, been tolerated but it has been deprecated in the strongest terms: Phoenix v. Metcalfe (1975), 48 D.L.R. (3d) 631; [1974] 5 W.W.R. 661; Stanley v. Douglas, [1952] 1 S.C.R. 260; 4 D.L.R. 689 at 695. In other cases it has not been permitted at all: A & E Land Industries Ltd. v. Saskatchewan Crop Insurance Corporation, [1988] 3 W.W.R. 590; R.C. Archiepiscopal Corp. v. Rosteski (1958), 13 D.L.R. (2d) 229. I can think of no reason for applying a less rigorous rule where a taxpayer is represented by someone who is not a member of the bar. While there may be sound practical and economic reasons for permitting a taxpayer in small and simple cases to be assisted and represented by non-qualified agents, the magnitude and complexity of this case required that the appellants be represented by counsel who could call witnesses and adduce evidence in the ordinary way without being in the fundamentally irreconcilable and paradoxical position of being both advocate and witness in the same cause.

[8] It does not appear that either Muldoon J. or Beaubier J. was referred to the decision of the Federal Court of Appeal in Muszka v. The Queen,[4] and Samra predates it. It was held there that the considerations that prevent a lawyer from appearing as both counsel and witness do not apply in the case of a lay representative. Mahoney J.A., for the Court, said at page 6077:

The credibility of every witness is in issue. That a member of the bar acting as counsel in a proceeding be not allowed to testify is a requirement of the due administration of justice. Such counsel is an officer of the court whose credibility is accepted without qualification. That credibility must not be put in issue by counsel giving evidence. For an officer of the court, the functions of counsel and witness in the same cause are simply incompatible and not be tolerated. Lay counsel, when required or permitted to be heard as in the subject Tax Court proceeding, is not an officer of the court.

[9] No one would doubt that it would be preferable if the Appellant in this case were to be represented at the hearing by counsel – preferably one well-versed in the intricacies of the GST legislation and skilled in the art of advocacy. For reasons of economics, that is not to be. The alternative to Ms. Leonard representing the Appellant is that the appeal will be lost by default. The Respondent has already moved twice to have the appeal dismissed for non-prosecution. On both occasions, the delays giving rise to the motion were the result of counsel being unwilling to continue to act. If Ms. Leonard is not permitted to represent the Appellant, and if no counsel suddenly emerges willing to take the brief without retainer, then the next motion to dismiss will most likely succeed.

[10] There is a fifth factor which I must take into account in the present case. The Appellant elected the informal procedure when beginning the appeal. The Attorney-General of Canada elected to have the matter removed to the general procedure of the Court, as is her right under section 18.3002 of the Tax Court of Canada Act. That section gives no discretion to the Court if the application is brought, as this one was, within the 60-day period following transmission of the notice of appeal to the Minister. If this appeal were proceeding under the informal procedure, then the Appellant would have the right to be represented by a lay agent – that is the combined effect of sections 18.3001, 18.302 and 18.14 of the Tax Court of Canada Act. That right was lost when the Attorney General decided to elect the general procedure.

[11] I have considered all five factors. In my view, the first and the fifth should be given the greatest weight in the circumstances of this case. As unsatisfactory as it may be to have complex cases proceed without competent counsel representing both parties, that is something this Court deals with frequently. Rule 4 should not be overlooked; the purpose of the Rules is to facilitate a just and expeditious determination of appeals according to the merits. I am satisfied that this can only be done in the present case by making the Order sought. Ms. Leonard may represent the Appellant at the hearing of the appeal. Costs of the motion will be in the cause.

Signed at Ottawa, Canada, this 31st day of May, 2000.

"E.A. Bowie"

J.T.C.C.