REASONS FOR
DECISIONS
Jorré J.
[1]
Les Productions Sky High Courage Inc. is appealing
from an assessment whereby the Minister reduced the amount of the film
production tax credit claimed by the appellant by the approximate amount of
$227,000.
[2]
The fiducie familiale Samson [Samson family trust]
is appealing from an assessment made under section 160 of the Income Tax Act
(Act). The Minister alleges that Carl Samson transferred a house to the trust,
that the trust and CarlSamson were not dealing with each other at arm’s length,
that the fair market value of the residence was $296,000and that at the time of
the transfer Carl Samson owed amounts under the Act totalling approximately
$594,000.
[3]
In its Notice of Appeal, the trust claims, inter
alia, that Carl Samson is not in any way connected to the trust.
[4]
I note that Carl Samson and Armand Samson have also
filed appeals before this Court.
[5]
In both appeals (the trust and Productions Sky
High Courage), the respondent brought a motion to dismiss the appeal, with
costs of the motion and the appeal on the merits. The respondent submits that
each appellant failed to comply with the orders of this Court and failed to prosecute its appeal with due dispatch.
[6]
The two appeals were heard concurrently and are
related. While there are common elements, there are also elements that differ
between the two cases.
[7]
The respondent made her case by filing a number
of affidavits. Although the appellants have not filed any affidavits, I allowed
the appellants to have Carl Samson and Armand Samson testify.
[8]
In each file, there is an order dated February
16, 2012, ordering, inter alia, that
(a) the parties prepare a list of documents (partial disclosure)
and serve the list on the opposing party no later than August 15, 2012,
(b) the undertakings arising out of the examinations for
discovery be complied with no later than October 15, 2012.
[9]
The respondent submits that both appellants failed
to serve their list of documents on her within the prescribed deadline and had yet
to do so at the time of the hearing on July 19, 2013.
[10]
The affidavits produced by the respondent do not
adress this issue. However, rule 81 of the Tax Court of Canada Rules
(General Procedure) (Rules) not only provides that the list must be served
on the other party but also that it must be filed with the Court. From what I
can see, there is no indication that the list was filed in these two cases, and
the appellants did not contest this allegation at the hearing. Considering that
the respondent began examinations for discovery without receiving each of the
appellants’ list of documents, I do not believe that this, in itself, is significant.
[11]
The trust failed to meet the October 15, 2012,
deadline for fulfilling the undertakings given at the examination for discovery;
at the time of the hearing, it had yet to fulfill its undertakings.
[12]
The examination for discovery of the trust was held
on September 13, 2012. Carl Samson, a trustee of the trust, was examined.
[13]
According to the affidavit of François Bernier,
sworn on October 10, 2012, Carl Samson made a statement, a few minutes prior
to his examination of September 13, 2012, that he had instructed counsel for
the appellant to object to any material question.
[14]
During the presentation of evidence, this
statement by Mr. Bernier was not challenged.
[15]
On his examination for discovery, Carl Samson refused
to answer many questions, and he also refused to undertake to produce numerous documents
that were requested.
[16]
Inter alia, he refused to answer questions
pertaining to the identity of the settlor of the appellant, the identity of the
other trustees, the identity of the beneficiaries and the subject matter of the
trust. Among the undertakings he refused to fulfill was the one to produce the
trust deed.
[17]
The respondent brought a motion to require Carl Samson
to answer the refused questions and to provide the documents requested.
[18]
Without deciding the motion, I will make the observation
that it is surprising that, in a case in which a significant issue arises as to
whether or not a relationship between Carl Samson and the trust exists, the objections
that I just mentioned would be raised.
[19]
This motion was to be heard on February 26,
2013, but in the meantime counsel for the two appellants, Carl Samson and Armand
Samson, filed a motion to be removed as counsel of record for the four
appellants.
[20]
The motion to be removed as counsel of record was
heard on February 25, 2013, via teleconference and was granted. The order of
March 11, 2013, also
(a) adjourned the February 26, 2013, hearing of the respondent’s
two motions,
(b) ordered that the two appellants be represented by counsel
and that the new counsel appear on their behalf in Court no later than March 25,
2013; and
(c) ordered the four appellants to pay costs to the respondent in
the amount of $1,500 upon receipt of the order.
[21]
The two appellants’ new counsel failed by a few
days to meet the March 25, 2013, deadline to appear in Court. However, the
appellants not only failed to pay the costs in the amount of $1,500 upon
receipt of the order, but they also had yet to pay at the time of the hearing
four and a half months later.
[22]
In his testimony, Carl Samson stated that it was
his counsel at the time who was in charge of the trust’s undertakings and that
she never requested in writing or orally that he respond to the undertakings.
[23]
As for the non-payment of the $1,500 in costs upon
receipt of the order, he testified as follows:
[Translation]
I wasn’t told about
that. I wasn’t told about the details of the invoice for $1,500 or what the judge
did.
[24]
I cannot accept the testimony on these issues as
I have difficulty with the witness’s credibility, not only because it is
unlikely that his counsel at the time did not raise the issue of undertakings
with her client, but also because I cannot believe that he was unaware of his
obligation to pay $1,500 given the following facts.
[25]
The order of March 11, 2003, applies to the
four appeals, namely, the trust, Productions Sky High Courage, Carl Samson and Armand
Samson. The order’s heading contains the docket name and number of these four appeals
and the content is identical for the four appeals. The order is quite clear:
[Translation]
The
case management hearing and the respondent’s motion were adjourned, with costs
in the amount of $1,500, payable by the appellants to the respondent upon receipt
of this order . . . .
[26]
When one looks at the Court docket, including
the electronic portion, one notes that, in the case of the trust, the Registry forwarded
a copy of the decision to the trust, that, in the case of Productions Sky High Courage,
the Registry forwarded a copy of the decision to Productions Sky High Courage, that,
in the case of Carl Samson, a copy of the order was forwarded to Carl Samson and
that, in the case of Armand Samson, a copy of the order was forwarded to Armand
Samson.
[27]
There is a third reason for not accepting the
testimony; that reason is discussed below in the context of what happened at
the examination for discovery of Productions Sky High Courage.
[28]
The trust’s behaviour that I have just described
is not that of a party that is prosecuting an appeal with due dispatch.
[29]
The trust failed to comply with the Court orders
relating to certain deadlines. I note that paying $1,500 in costs to the other
party is really not all that complicated and, considering that I do not accept
that the trust was unaware of said obligation, there is absolutely no
justification for the non‑payment of the costs.
[30]
There is one element that is even more important.
In instructing counsel not to answer any material questions at the examination
for discovery, the trust demonstrated a willingness to deliberaly delay and
prolong the appeal proceedings.
[31]
In the circumstances, I agree with the
respondent that it would be appropriate to dismiss the appeal except for one hesitation.
[32]
My hesitation is as follows. One of the elements
required for the assessment under section 160 is the existence of Carl Samson’s
debt. However, at the time of the hearing, Carl Samson’s appeal was still pending
before this Court as he challenged his assessment.
[33]
If Carl Samson is ultimately successful to such
a degree that the trust’s assessment would logically have to be reduced, it
would appear to me to be unfair not to adjust or vacate the trust’s assessment
accordingly.
[34]
Submissions were made by the respondent that if
I dismissed the trust’s appeal and Carl Samson was ultimately successful with
the logical consequence that the trust’s assessment would have to be adjusted, a
remedy would be available to the trust by way of judicial review given the nature
of section 160 of the Act, which is a collection mechanism and, in particular,
of paragraph 160(3)(b) which provides that payment by Carl Samson would,
to a sufficient degree, reduce the trust’s debt.
[35]
I have concluded that while it was not necessary
for me to decide whether the trust would have another remedy if I dismissed the
appeal, the ultimate outcome in Carl Samson’s appeal was such that it would be logical
to adjust the trust’s assessment.
[36]
Although this Court is a statutory court, it is also a
superior court of record.
The law is quite clear that a court has the inherent power to control its process. Of course, that power
is subject to any statutory provision that applies to the court and to the rules
of the court. However, this power to control its process is still very
important, especially in situations not provided for in the rules.
[37]
Accordingly, this Court may issue an order that sanctions
the trust in such a way that the practical effect is almost identical to a
dismissal of the appeal, while keeping open the possibility of adjusting the
assessment if Carl Samson is successful to a degree that would render the adjustment
of the trust’s assessment logical.
[38]
Accordingly, with respect to the fiducie familiale
Samson, the Court orders as follows:
The
proceedings are suspended, and
(a)
if Carl Samson’s appeal
is dismissed and the time period for appealing the decision has elapsed, the
respondent may bring a motion to dismiss, and the appeal will be dismissed once
the Court is satisfied that the appeal of Carl Samson is dismissed and that the
appeal period has elapsed; or
(b)
if Carl Samson’s appeal
is ultimately allowed, the trust may proceed with its appeal, but solely to
argue that the adjustment of Carl Samson’s debt means that the trust’s
assessment must be adjusted or vacated; the trust will not be able to rely on
any other ground in support of its appeal. For example, the trust will not be
able to claim that there is no relationship between the trust and Carl Samson.
[39]
The respondent sought costs not only for the
motion, but also for any action brought. This is entirely appropriate in the
circumstances. I set these
costs at $4,000 payable by January 1, 2015.
[40]
In the case of Productions Sky High Courage, there
are certain elements that are essentially the same as those in the trust’s appeal.
In particular, the situation is the same with respect to the list of documents,
the slight delay in appointing new counsel after the order dated March 11, 2013,
and the non-payment of the $1,500 in costs ordered to be paid in that order.
[41]
However, there is one very different element. The
examination for discovery of Productions Sky High Courage, Carl Samson and Armand
Samson was held on September 12, 2012, and very clearly states that, in the case
of Productions Sky High Courage, the parties agreed that Productions Sky High
Courage would discontinue its appeal without costs. At page 64 of the transcript
of the examination for discovery, the following is stated:
[Translation]
Louise Lévesque
for the appellants:
Therefore, following the discussions between counsel and the
parties, Les Productions Sky High Courage Inc. discontinues its opposition, without
costs. Okay then.
Martin Lamoureux
for the respondent:
In its Notice of Appeal.
Louise Lévesque
for the appellants:
In its Notice of Appeal
That’s
all!
[42]
Following the discontinuance, the respondent did
not proceed with the examination for discovery of Productions Sky High Courage.
[43]
By letter dated September 19, 2012, the
respondent asked Ms. Lévesque, inter alia, to send the respondent a
Notice of Discontinuance without costs for signature and filing in the Court.
[44]
By letter dated November 1, 2012, written on
behalf of all the parties by counsel for the respondent, reference was made to
the status of the appeals and the discontinuance of Productions Sky High Courage.
A copy of the letter was sent to Ms. Lévesque.
[45]
With respect to the discontinuance above, Carl
Samson testified that the instruction he gave Ms. Lévesque was conditional
and that Productions Sky High Courage would abandon its appeal provided that a
satisfactory resolution in the appeals of the trust, Carl Samson and Armand
Samson was reached.
[46]
On cross-examination, Carl Samson confirmed that
he was present at the examination for discovery but that he did not recall
hearing Ms. Lévesque say that Productions Sky High Courage was discontinuing
the appeal.
[47]
Nor did Armand Samson, who was also present, recall
Ms. Lévesque saying that Productions Sky High Courage was discontinuing
the appeal.
[48]
I am sorry, but I cannot accept that Carl Samson
and Armand Samson did not hear Ms. Lévesque. Accordingly, I do not accept
their testimony on this issue.
[49]
Thus, there are some delays on the part of Productions
Sky High Courage and, primarily, the failure to pay costs, something that is
not difficult to do.
[50]
There is also the fact that Productions Sky High
Courage discontinued its appeal and that, given the passage cited, the
respondent agreed that Productions Sky High Courage could discontinue its
appeal without costs.
[51]
In the circumstances, I do not see how I could conclude
that Productions Sky High Courage prosecuted its appeal with due dispatch given
that it decided to discontinue its appeal.
[52]
Accordingly, the appeal of Productions Sky High Courage
is dismissed.
[53]
The respondent seeks costs in respect of the motion
and the case.
[54]
In the circumstances, it is appropriate to award
costs to the respondent, but because there was an agreement that Productions
Sky High Courage could discontinue its appeal without costs, costs shall be limited
to the period following September 12, 2012. I must also take into account the
fact that the motion was heard in conjunction with the trust’s motion. Accordingly,
I set these costs at $1,000, which shall be payable by Productions Sky High Courage
to the respondent prior to January 1, 2015.
Signed at Ottawa, Ontario, this 7th day of
November 2014.
“Gaston Jorré”
Translation certified true
on this 13th day of March 2015
François Brunet, Revisor
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