REASONS
FOR ORDER
Graham J.
[1]
Abdul Ghaffar filed Notices of Appeal in respect
of reassessments of his 2003 and 2004 taxation years. During the course of the
litigation, the Court ordered Mr. Ghaffar to attend a show cause hearing.
Neither Mr. Ghaffar nor his former counsel attended that hearing. Accordingly,
the Court dismissed Mr. Ghaffar’s appeal. The Judgment dismissing Mr.
Ghaffar’s appeal was issued on October 6, 2010 (the “Default Judgment”). Mr.
Ghaffar applied to have that dismissal set aside pursuant to subsection 140(2)
of the Tax Court of Canada Rules (General Procedure). Subsection 140(2)
permits the Court to set aside such a judgment if the taxpayer brings an
application to have it set aside within 30 days. Mr. Ghaffar did not apply
to have the Default Judgment set aside until September 27, 2011 (the
“Application”), well after the 30 day period had expired. The Respondent
opposed the Application on the basis that the time for bringing an application
had expired. By letter dated October 7, 2011, the Tax Court Registry advised
Mr. Ghaffar that his request to set the Default Judgment aside had been denied.
Mr. Ghaffar brought a motion dated February 11, 2013 (the “Motion”),
effectively seeking an extension of time to apply to have the Default Judgment
set aside.
Preliminary
Issue
[2]
The Respondent raises a preliminary question as
to whether I am functus officio. The Respondent argues the letter
dated October 7, 2011 was a final order of the Court and thus that Mr. Ghaffar
does not have the ability to re‑argue the issue before me. I disagree. A
letter from the Registry signed by a registry officer is not an order of this
Court. Subsection 167(1) of the Rules states that applications shall be
disposed of by issuing an order and subsection 167(2) (when read in conjunction
with the definition of “judgment” in section 2) requires such orders to be
signed. While the subsection does not say so explicitly, I cannot imagine that
subsection 167(2) could contemplate an order being signed by anyone other than
a judge or, in very limited circumstances not applicable here, the Judicial Administrator.
[3]
Since no order was ever signed, in essence, the
Application remains outstanding and the Motion merely fleshes out the
Application and requests an extension of time. On the basis of the foregoing, I
do not find myself to be functus officio. I will treat the Motion as being supplemental to the Application
and these reasons shall deal with them both. I will deal first with the request
for an extension of time.
Extension of Time
[4]
Section 12 of the Rules permits the Court
to extend a deadline. The Federal Court of Appeal has set out the four tests
that must be satisfied for the Court to grant an extension of time under
section 12. Those
tests are:
(a) a continuing intention to pursue the appeal;
(b) that the appeal has some merit;
(c) that no prejudice to the Respondent arises from the delay; and
(d) that a reasonable explanation is given
for the delay.
Continuing Intention
to Pursue the Appeal
[5]
Prior to the Spring of 2010, Mr. Ghaffar’s
appeal was proceeding in the normal course. Lists of documents had been filed
and examinations for discovery had been conducted. The next step in the Appeal
was for Mr. Ghaffar to provide answers to the undertakings that he had given on
discovery. The court ordered deadline for providing those undertakings was
March 1, 2010. Mr. Ghaffar did not satisfy his undertakings by that date nor
did he apply to the Court for an extension of time to do so. The deadline for
reporting to the Court was April 15, 2010. Mr. Ghaffar did not report
to the Court by that deadline nor did he apply for an extension of the deadline.
The Respondent did report to the Court by that deadline and asked the Court to
extend the deadline for reporting to the Court on the basis that Mr. Ghaffar
had not yet satisfied his undertakings. The Court extended the deadline for
reporting to May 15, 2010. Mr. Ghaffar neither satisfied his undertakings nor
reported to the Court by that date. As a result, the Court ordered that a show
cause hearing be held on September 29, 2010. Mr. Ghaffar neither satisfied
his undertakings prior to that show cause hearing nor attended the show cause
hearing itself. As a result, his appeal was dismissed, thus giving rise to
these proceedings.
[6]
Mr. Ghaffar was represented by counsel
throughout the foregoing period. I note that it was different counsel than the
firm which now represents him. A great deal of evidence was introduced
regarding the physical and mental health challenges faced by Mr. Ghaffar’s
former counsel during the period in question. The specific details of those
challenges are not material to my decision.
[7]
Evidence was also provided regarding Mr.
Ghaffar’s relationship with his former counsel. The quality of the evidence is
not ideal.
[8]
The former counsel was examined by both parties.
He readily acknowledged that, due to his health challenges, he has significant
issues with his memory regarding the period in question. He simply does not
recall some events from that period. While he believes he recalls other events from the period, he is
not certain that his recollection is accurate.
[9]
On the other hand, I struggle with Mr. Ghaffar’s
credibility. Mr. Ghaffar testified that his former counsel never phoned him or
his accountant, Mr. Ahmed, but later described receiving two phone calls
from former counsel within a couple of days. It was as if Mr. Ghaffar knew that it was important that he
testify that he had not had adequate communication from his former counsel but
was unsure exactly when that lack of communication was supposed to have
occurred. He denied communication even when it was implausible (i.e. in the
case of counsel not phoning to tell him when to attend discoveries). He then
admitted it when it seemed beneficial (i.e. in the case of two phone calls
arranging and then cancelling a meeting). He then backtracked when he seemed to
have admitted too much (i.e. to deny that he knew the meeting was about
undertakings or that undertakings were discussed on the phone call since his
position was that he did not know what undertakings were required). Similarly,
Mr. Ghaffar testified that he had received the October 7, 2011 letter from the
Registry denying the Application and had immediately given it to Mr. Ahmed to
translate for him but then stated that Mr. Ahmed had not told him that the
Application had been denied. It
was as if he wanted to appear to have been acting with speed and diligence
while, at the same time, being unaware what was happening. Taken together,
these implausible denials have caused me to question whether Mr. Ghaffar’s
otherwise seemingly plausible denials are credible.
[10]
Mr. Ghaffar did not produce an affidavit from
Mr. Ahmed despite the fact that it appears that Mr. Ahmed had more
communication with Mr. Ghaffar’s former counsel than Mr. Ghaffar did. I draw an
adverse inference from his failure to do so.
[11]
In addition, Mr. Ghaffar has brought a complaint
against his former counsel with the Law Society of Upper Canada. He may thus
have a financial incentive outside of his appeal to blame his former counsel
for his problems and his former counsel or his former counsel’s insurer may
have a similar financial incentive to blame Mr. Ghaffar for his own problems.
[12]
Thus I am left with the unenviable task of
determining what occurred based on the testimony of two witnesses, one lacking
in reliability, the other lacking in credibility, both potentially adverse in interest
outside of these proceedings, without the benefit of the evidence of the
accountant who was acting as their go‑between / translator.
[13]
Based on the evidence available to me, I make
the following findings of fact. Generally, where Mr. Ghaffar’s former counsel
has a good recollection of events, I have preferred his version over that of
Mr. Ghaffar and where his recollection is poor or there is no evidence, I have
preferred Mr. Ghaffar’s version:
•
The relationship between Mr. Ghaffar and his
former counsel became strained in the Spring of 2010. The source of this strain
was Mr. Ghaffar’s failure to provide counsel with the documents and information
that were needed to satisfy the undertakings, a difference of opinion over what
counsel had agreed to do for the amount of the retainer that Mr. Ghaffar had
provided to him and the health challenges faced by counsel.
•
Mr. Ghaffar was unaware of the health challenges
faced by his former counsel and was thus unaware that his former counsel may
not have been attending to matters that he should have.
•
Despite his health challenges and his strained
relationship with Mr. Ghaffer, Mr. Ghaffar’s former counsel did not remove
himself from the record. He remained listed as counsel of record until he was
replaced by Mr. Ghaffar’s current counsel.
•
Mr. Ghaffar’s former counsel advised him what
undertakings were required of him.
•
Mr. Ghaffar never provided the information and
documents required to satisfy the undertakings to his former counsel.
•
Mr. Ghaffar’s former counsel did not comply with
the deadlines for reporting to the Court and neither sought an extension of
those deadlines nor sought an extension of the deadline for satisfying
undertakings.
•
Mr. Ghaffar was aware that the deadline for
satisfying undertakings had been missed but was unaware that the deadlines for reporting to the Court had
also been missed.
•
Sometime after June 8, 2010, Mr. Ghaffar’s
former counsel decided to stop representing Mr. Ghaffar but did not communicate
that fact clearly to Mr. Ghaffar. Mr. Ghaffar remained under the impression
that counsel continued to represent him.
•
Mr. Ghaffar’s former counsel did not inform Mr.
Ghaffar of the show cause hearing.
•
Mr. Ghaffar’s former counsel did not inform Mr.
Ghaffar that his appeal had been dismissed.
•
Mr. Ghaffar’s former counsel’s physical and
mental challenges caused him to effectively cease representing Mr. Ghaffar
entirely by September 2010 without notice to Mr. Ghaffar, counsel for the
Respondent or the Court.
•
Mr. Ghaffar had no knowledge of either the show
cause hearing or the dismissal of his appeal prior to August 2011.
•
Mr. Ghaffar and his former counsel had no
contact from September 2010 to August 2011 and no contact thereafter. The
contact in August 2011 was limited to Mr. Ghaffar’s son trying to phone Mr.
Ghaffar’s former counsel and counsel indicating he would call him back.
•
Mr. Ghaffar’s former counsel was suspended
administratively by the Law Society of Upper Canada in July 2011.
[14]
Based on the foregoing, I find that Mr.
Ghaffar’s failure to attend the show cause hearing was not an indication of a
lack of intention to pursue his appeal. He was simply unaware that he had been
ordered to do so.
[15]
However, I find that Mr. Ghaffar’s failure to
satisfy his undertakings was an indication that he lacked an intention to
pursue his appeal. In reaching that conclusion I am not just considering the
fact that he failed to satisfy the undertakings by the deadline, but, more
importantly, that he continued to fail to satisfy them for more than a year and
a half thereafter. I understand that part of counsel’s role when dealing with
some types clients is to pressure them to satisfy their undertakings. Clearly
Mr. Ghaffar was one of these types of clients. I also understand that, without
that pressure, those types of clients might not take any action on their own. I
would be prepared to accept that Mr. Ghaffar may have continued to do nothing
towards satisfying his undertakings for some period of time after his former
counsel ceased contact with him because he was relying on counsel to tell him
what to do and when to do it. However, at a certain point, given the poor
relationship that had developed between Mr. Ghaffar and his former counsel and
given the amount of time that had passed, Mr. Ghaffar should have taken the
step of either contacting his former counsel, retaining new counsel or
contacting the Court. He did none of these things. In fact, there is no
evidence that he did anything in relation to his appeal from July 2010 to
August 2011.
[16]
Based on all of the foregoing, I conclude that
Mr. Ghaffar has failed to demonstrate that he had an intention to pursue his
appeal. I note that, in reaching this conclusion, I have not given any
consideration to Mr. Ghaffar’s actions after he found out that his appeal had
been dismissed. I have no doubt that he maintained a desire to continue his
appeal during this period and it seems unreasonable to me to expect a taxpayer
to continue actively pursuing an appeal that no longer exists.
Merit of the
Appeal
[17]
One of the issues on appeal is the application
of gross negligence penalties. Since the Respondent bears the onus of proving
gross negligence penalties, I cannot see how I could reach any conclusion other
than that the Appeal has merit.
[18]
Counsel for Mr. Ghaffar went further than simply
arguing that Mr. Ghaffar’s appeal had merit. She submitted, in reliance on
Bens v. The Queen, that
the presence of gross negligence penalties meant that Mr. Ghaffar’s appeal
should not have been dismissed in the first place. Bens dealt with the
question of whether an appeal where the appellant had failed to complete
undertakings and had failed to appear at a show cause hearing should be
dismissed for want of prosecution. The Court concluded that the matter should
proceed to trial. However, the question in Bens was whether the appeal
should be dismissed. Before I can consider that question, I have to first
consider whether an extension of time should be granted. The Federal Court of
Appeal has clearly laid out the test for granting an extension of time. Whether
penalties have been assessed or not is not part of that test. I have already
factored the presence of penalties into my analysis in concluding that the
Appeal has merit. I am not required to give it additional consideration.
Prejudice
[19]
The Respondent will be prejudiced in a way that
cannot be compensated by costs if the extension of time is granted. While the
Respondent still has copies of the documents from the Respondent’s list of
documents, the Respondent no longer has copies of the rest of Mr. Ghaffar’s
file relating to the taxation years in issue. Not only does this prevent the
Respondent from referring to the file, it also prevents the Respondent from
filing a supplemental list of documents if the need arises, introducing
documents to impeach a witness on cross-examination or verifying that any
documents produced by Mr. Ghaffar in a supplemental list of documents have not
previously been produced to the CRA for some other purpose.
Reasonable
Explanation for the Delay
[20]
In order to determine whether Mr. Ghaffar has a
reasonable explanation for the delay, I must first decide whether he is
required to provide a reasonable explanation for the delay in bringing the
Application or a reasonable explanation for the delay in bringing the Motion.
The Application was an application under Subsection 140(2). There was no
indication in the Application that Mr. Ghaffar was seeking an extension of
time. The test set out by the Federal Court of Appeal in Tomas relates
to extensions of time. Therefore, I conclude that the period that I must
consider is the period between the time that it became necessary to request an
extension of time (November 5, 2010) and the date that the extension of time was requested (February
11, 2013). This 27 month period can be broken down into three sub-periods.
(a)
The first sub-period is the time between the
date that it became necessary to request an extension (November 5, 2010) and
the date that Mr. Ghaffar brought the Application (September 27, 2011).
Mr. Ghaffar was unaware that the Default Judgment had been issued until he
was contacted by CRA Collections in August 2011 and then spoke to the Registry
and determined what had happened. I struggle with the idea of holding Mr.
Ghaffar at fault for failing to apply for an extension of time during a period
in which he was unaware that he needed such an extension. I acknowledge the
Respondent’s position that had Mr. Ghaffar taken a more active interest or role
in his appeal he may have discovered the need to apply for an extension earlier
but I have already considered Mr. Ghaffar’s inaction when examining
whether he had a continuing intention to appeal so I do not think it is
appropriate to fault him for the same error in this portion of the analysis.
(b) The second sub-period is the time between the date that
Mr. Ghaffar received the letter from the Registry (October 7, 2011) and
the date that he retained counsel in this matter. I have no evidence as to when
Mr. Ghaffar retained counsel. His counsel objected to his answering that
question when he was being cross‑examined on his affidavit. The Respondent provided evidence that Mr. Ghaffar’s counsel’s firm
had been in contact with the Registry as early as July 25, 2012. Although Mr. Ghaffar’s counsel did not want me to draw the
inference that her firm must have been retained by Mr. Ghaffar on or before
that date, I think it is reasonable to at least conclude that Mr. Ghaffar had
sought legal advice by that time. In any event, regardless of the length of
this second sub-period, I have no evidence of why Mr. Ghaffar did not apply for
an extension of time during this second sub-period. The onus is on Mr. Ghaffar
to provide evidence showing why the Motion should succeed. Without that
evidence I cannot conclude that his delay was reasonable.
(c) The third sub-period is the period between the date that
Mr. Ghaffar retained counsel and the date that he brought the Motion
(February 11, 2013). Again, I have no evidence of when Mr. Ghaffar retained
counsel or why it took Mr. Ghaffar at least six months after he retained
counsel to file the Motion. I draw a negative inference from counsel’s
reluctance to have Mr. Ghaffar admit when he retained her firm. This refusal
suggests to me that counsel does not want me to know how long the third
sub-period actually was.
[21]
Based on the foregoing, I conclude that Mr.
Ghaffar has failed to provide a reasonable explanation for his delay in
applying for an extension of time during either the second sub-period or the
third sub-period.
Conclusion
[22]
On the basis of the foregoing, I find it is not appropriate
to allow Mr. Ghaffar an extension of time to bring the Application. His
lack of intention to pursue the appeal, the prejudice to the Respondent and the
lack of an explanation for the delay in requesting an extension of time are all
strong indications that the Motion should be denied. The mere fact that there
is merit to the underlying appeal is not enough in itself for me to grant the
extension. Since the Application was therefore brought out of time, it too is
denied.
Costs
[23]
The Respondent requested costs of $3,000 payable
within 60 days regardless of the outcome of this proceeding. Counsel for Mr.
Ghaffar was not able to provide me with any convincing reason why such costs
would not be appropriate. This proceeding has been sufficiently complex that it
has had to be case managed. An examination of Mr. Ghaffar’s former counsel was
held along with three cross-examinations of the parties’ affiants. In the
circumstances, I find that the figure put forward by the Respondent is entirely
appropriate. While I am reluctant to pile more misfortune upon Mr. Ghaffar, the
simple fact is that the problems that Mr. Ghaffar had with his former counsel
should not be visited upon the Respondent. If Mr. Ghaffar feels that he has
been put to additional financial expense as a result of his former counsel’s
actions, there are other avenues for him to pursue.
Signed at Ottawa, Canada, this 23rd day of February 2015.
“David E. Graham”
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