Citation: 2013 TCC 402
Date: 20131219
Docket: 2011-3774(GST)G
BETWEEN:
FOREST FIBERS INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
D'Auray J.
1. Introduction
[1]
The appellant, Forest
Fibers Inc., filed a motion before this Court under section 54 of the Tax
Court of Canada Rules (General Procedure) (the “Rules”) for leave to file
an Amended Notice of Appeal (the “motion”).
[2]
The appellant also
requested that the motion be disposed of without the appearance of counsel,
pursuant to section 69 of the Rules. The appellant’s written representations
were attached to the Notice of Motion.
[3]
The respondent filed
written representations opposing the appellant’s motion.
2. Timelines
[4]
On December 1, 2011, the appellant
filed with this Court a Notice of Appeal.
[5]
On February 16, 2012, the
respondent filed with this Court a Reply to the Notice of Appeal.
[6]
On January 8, 2013, Ms. Nadine Labrecque, the judicial administrator of this Court, signed an Order
whereby the appeal was to be heard on Wednesday, November 13, 2013 in Montreal at 9:30 a.m., for an estimated duration of one day.
[7]
On October 28, 2013,
after the pleadings were closed, the appellant filed an Amended Notice of
Appeal.
[8]
By a letter dated October
31, 2013, the respondent informed this Court that she did not consent to the
filing of the Amended Notice of Appeal.
[9]
On November 5, 2013, the appellant
filed with this Court a Notice of Motion for leave to file an Amended Notice of
Appeal. The appellant requested that the motion be disposed by the Court upon
consideration of written representations and without appearance by the parties,
pursuant to section 69 of the Rules.
[10]
On November 8, 2013, the respondent filed with this
Court written representations opposing the appellant’s motion, pursuant to subsection
69(3) of the Rules.
3. Context
of the assessment
[11]
The appellant is a GST
registrant and a monthly filer.
[12]
The appellant specializes
in the sale and resale of paper and cardboard.
[13]
During the periods
under appeal, the appellant acquired taxable supplies in the course of its
commercial activities.
[14]
Some of the appellant’s
input tax credits (“ITCs”) were allowed by the Minister of the Quebec Revenue
Agency, acting on behalf of the Minister of National Revenue (the “minister”).
However, the minister disallowed some ITCs claimed in connection with two
suppliers, namely P.F.G. Management (“P.F.G.”) and Operatech 2000 (“Operatech”).
[15]
In reassessing the
appellant, the minister:
−
denied ITCs in the amount of $27,585.75,
due to a disparity between the company books and tax returns. This amount is no
longer in issue in this appeal as the appellant conceded this amount in the
Amended Notice of Appeal;
−
denied ITCs in the
amount of $22,567.53 because the appellant’s documentation lacked the requisite
information. The appellant no longer contests $10,260.07 of the $22,567.53
claimed as ITCs. Accordingly, an amount of $12,307.46 of ITCs remains in
dispute. This amount is related to ITCs claimed in connection with supplies
purportedly received from P.F.G.;
−
denied an amount of $325,248.89
of ITCs in connection with supplies purportedly received from Operatech. This
amount remains in dispute.
4.
Applicable law and jurisprudence
[16]
Under section 54 of the Rules, the
Court has broad discretion to allow an amendment, and in doing so “may impose
such terms as are just”. More specifically, section 54 of the Rules provides
that:
A
pleading may be amended by the party filing it, at any time before the close of
pleadings, and thereafter either on filing the consent of all other parties, or
with leave of the Court, and the Court in granting leave may impose such terms
as are just.
[17]
The rules concerning amendments
must be interpreted in light of subsection 4(1) of the Rules, which states
that:
These rules shall be
liberally construed to secure the just, most expeditious and least expensive
determination of every proceeding on its merits.
[18]
Writing for a unanimous Federal
Court of Appeal in Canderel, Justice Décary outlined the general rule in
determining whether to allow an amendment, at paragraph 10, he states as follows:
. . . the general
rule is that an amendment should be allowed at any
stage of an action for the purpose of determining the real questions in
controversy between the parties. Provided, notably, that the allowance would
not result in an injustice to the other party not capable of being compensated
by an award of costs and that it would serve the
interests of justice.
[19]
At paragraph 13 of Canderel,
the Federal Court of Appeal also confirmed Justice Bowman’s comments in Continental
Bank, namely that in determining whether it is in the interests of justice to
allow an amendment courts should consider the following factors:
. . . the extent to which the proposed
amendments would delay the expeditious trial of the matter, the extent to which
a position taken originally by one party has led another party to follow a
course of action in the litigation which would be difficult or impossible to
alter and whether the amendment will facilitate the Court’s consideration of
the true substance of the dispute on its merits.
[20]
Leave to amend can be sought at
any stage of a trial; however, as Justice Décary of the Federal Court of Appeal
noted in Canderel at paragraph 14:
. . . the nearer the
end of the trial a motion to amend is made, the more difficult it will be for
the applicant to get through both the hurdles of injustice to the other party
and interests of justice.
[21]
With respect to introducing new
arguments through amendments, Justice Noël, writing on behalf of a
unanimous Federal Court of Appeal in Elliot, held that a novel issue
could be introduced at any stage in the proceedings, provided that allowing the
amendment would not cause non-compensable prejudice to the opposing party. Similarly, in Scavuzzo,
Associate Chief Justice Bowman of this Court permitted pleadings to be amended
to raise a new argument after the trial had commenced, finding no prejudice to
the opposing party that could not be compensated with costs. Associate Chief Justice
Bowman also noted that the possibility that the moving party could succeed on a
new point raised in an amendment did not itself constitute prejudice.
[22]
Furthermore, courts have held that
a lengthy delay in bringing a motion is not fatal unless it results in
prejudice to the opposing party. This was illustrated in Loewen where
Justice Bowie of this Court held that a two-year delay from the time
information was discovered to filing a motion to amend was not fatal because it
did not prejudice the opposing party.
However, courts have held that prejudice may result from a lengthy delay where witnesses
or documentary evidence becomes unavailable.
[23]
In Dello, Justice Bédard of
this Court held that the fact that a moving party could have done a better job
by seeking an amendment sooner, even where the delay is due to his or her own
carelessness or negligence, was not determinative unless it caused the opposing
party non-compensable prejudice.
5. Analysis
[24]
It is clear from the jurisprudence
dealing with amendments, that the general rule is that an amendment should be
allowed at any stage of a tax appeal for the purpose of determining the real
questions in controversy between the parties, provided that it will serve the
interests of justice and allowing the amendment does not result in prejudice to
the opposing party that cannot be compensated with costs.
[25]
The requested amendments in this
appeal are as follows:
i) The Amended Notice of Appeal introduces a new
contact person for P.F.G.
[26]
The Amended Notice of Appeal
introduces a new contact person for P.F.G. More specifically, Mr. Pierre-François
Gervais, is identified as the owner of and a contact person for P.F.G.
[27]
The respondent in her Reply to
Notice of Appeal alleges that Mr. Gervais is a contact person for P.F.G. At
subparagraph 33(l), one of the minister’s assumptions is that:
[t]he President of [sic]
Appellant stated to the officers of the Respondent that the resource person of
P.F.G. was a certain Pierre Gervais;
[28]
Therefore, Mr. Gervais’
identification as a contact person for P.F.G. is not a new fact; the respondent
was already informed that Mr. Gervais was also a contact person for P.F.G.
Accordingly, I find that this amendment does not cause a prejudice to the respondent.
ii) The Amended Notice of Appeal clarifies
the relationship between the appellant and the suppliers
[29]
The Notice of Appeal does not
clearly describe the relationship between the appellant and Operatech and
P.F.G. I have reproduced the relevant portions of the Notice of Appeal in full below
to demonstrate this lack of clarity.
13. The Appellant
claimed ITCs linked to the invoices issued by three of its suppliers, being
Operatech 2000 (“Operatech”), Distribution de Papier J.M. (“J.M.”) and Gestions
P.F.G. (“P.F.G.”).
14. The contract
person of the Appellant for those three suppliers was primarily Jacques Jarry.
15. Jacques Jarry
was a representative of Operatech and P.F.G., and he owned J.M.
16. Mr. Jarry had
multiple contacts in the paper industry; he would find paper products that
could be sold to the Appellant.
17. Mr. Jarry, as
the representative of Operatech and P.F.G., was always acting as an
intermediary between the Appellant and the sellers.
18. Mr. Jarry, as
the representative of Operatech and P.F.G., was dealing the sale of paper
products to Operatech’s and P.F.G.’s clients such as the Appellant.
19. The Appellant
was paying Operatech, P.F.G. or J.M. for the services rendered by Jarry, their
representative.
[30]
I find it difficult, upon reading
the above paragraphs of the Notice of Appeal, to understand the role of the parties
involved in the transactions. Did the appellant purchase paper products directly
from sellers that were located by Mr. Jarry, acting as a representative of Operatech
and P.F.G.? Or, did the appellant purchase paper products directly from
Operatech and P.F.G.?
[31]
The Amended Notice of Appeal states:
14. The
contact person of the Appellant for Operatech was primarily Jacques
Jarry.
14.1 The
contract person for P.F.G. was either Mr. Jarry or Pierre-Francois Gervais.
15. Jacques
Jarry presented himself as a representative of Operatech.
16.1 Mr.
Gervais was the owner of P.F.G.
16. Mr.
Jarry and Gervais had multiple contacts in the paper industry; they would
find paper products that could be sold to the Appellant through the two
suppliers.
17. All
two suppliers (Operatech and P.F.G.) are brokers of paper products and as such,
have several suppliers from which they buy products to be resold with profit to
their own clients, such as the Appellant.
18. All
two brokers discussed with the Appellant through its representative Mr. Jarry
to understand its needs, and provided him paper products that suited those
needs.
18.1 Operatech,
and P.F.G. were providing the paper products to the Appellant through their
representative Mr. Jarry or through Mr. Gervais.
19. The
Appellant was paying Operatech, P.F.G. or J.M. for the paper products
obtained.
[32]
I find that the Amended Notice of
Appeal clarifies the relationship between the appellant and Operatech and
P.F.G. and, therefore, assists the Court in better understanding the facts. The
Amended Notice of Appeal asserts that Operatech and P.F.G. were brokers that
purchased paper products from other suppliers and resold them to the appellant.
The Amended Notice of Appeal also asserts that the payments made by the
appellant to Operatech and P.F.G. were for the paper products obtained and not,
as pleaded in the Notice of Appeal, for the services rendered by Mr. Jarry.
[33]
In my view, the respondent is not
prejudiced by the amendments clarifying the relationship between the appellant
and Operatech and P.F.G. In any event, the respondent will be able to conduct
further examinations for discovery which will allow her to better determine the
factual background of the transactions amongst the parties involved.
[34]
I also note that paragraph 19 of
the Amended Notice of Appeal mistakenly identifies J.M. as one of the relevant
suppliers. All other references to J.M. that appeared in the Notice of Appeal
have since been removed from the Amended Notice of Appeal. I accept that the
inclusion is likely an inadvertent error. Additionally, paragraph 16 and 16.1
are mistakenly inverted in the Amended Notice of Appeal.
iii) The Amended Notice of Appeal
adds the factual allegation that the appellant was diligent
[35]
The appellant has been assessed
for gross negligence penalties for false statements or omissions under section
285 of the Excise Tax Act (“ETA”).
[36]
The Respondent claims that “a new
allegation of fact is introduced in paragraph 27.1 of the “STATEMENT OF
FACTS” [of the Amended Notice of Appeal] to the
effect that [sic] Appellant was diligent.” While it is true that the
original Notice of Appeal did not assert, under the “STATEMENT OF FACTS”, that the appellant was diligent, the Notice of
Appeal does state in the “REASONS THE APPELLANT INTENDS TO ADVANCE” that:
The Appellant
maintains that it has been diligent in claiming the above mentioned ITCs, and
for the reason it should not have been assessed penalties pursuant to section
285 TAA [sic].
[37]
The respondent was already aware
of the due diligence defense and therefore is not prejudiced by this amendment.
iv) The Amended Notice of Appeal adds
the argument that the minister did not have the authority to reassess the
appellant after the normal time limits under ETA
[38]
The Amended Notice of Appeal adds as
an “ISSUE TO BE DECIDED” that the minister
lacked the authority to reassess the appellant outside of the normal time period,
specifically for the period of June 1st, 2002 to April 30th,
2004.
[39]
While it is true that the original
Notice of Appeal did not include as an “ISSUE TO BE DECIDED,” the minister authority to reassess after the normal
reassessment period, under the “REASONS THE APPELLANT INTENDS TO ADVANCE”, the appellant states that:
The Appellant filed
its returns on the basis of an honestly held belief after a careful and
thoughtful consideration of the statutory requirements surrounding the above
mentioned refunds and for this reason it should not have been assessed pursuant
to 298 of the Act.
[40]
The respondent was aware that the
appellant was raising the authority of the minister to reassess after the normal
reassessment period. Moreover, the respondent’s
Reply to Notice of Appeal states as an “ISSUE TO BE DECIDED” whether “the
Minister was justified in assessing Appellant’s [sic] reporting periods
between June 1st, 2002 and March 31st, 2004 beyond the
normal reassessment period”.
The respondent is therefore, not prejudiced by this amendment.
v) The Amended Notice of Appeal
raises the argument that the appellant’s burden of proof to claim ITCs is
satisfied once it establishes that the requirements of section 3 of the Input
Tax Credit Information Regulations are met
[41]
The amended Notice of Appeal adds
as an “ISSUE TO BE DECIDED” and under the “REASONS THE APPELLANT INTENDS
TO ADVANCE” the argument that once a registrant
provides invoices that meet the requirements of section 3 of the regulations
and proves the existence of the service, the registrant is entitled to claim an
ITC. This argument appears to be based on invoices already submitted by the
appellant. Therefore, I do not find that the respondent would be prejudiced if
this argument is added.
6.
Conclusion
[42]
Overall, I find that most of the
amendments do not affect the position of the respondent and, accordingly, do
not cause a prejudice to the respondent.
[43]
Moreover, it is to be noted that
in her written representations opposing the motion, the respondent did not
argue that she would suffer non-compensable prejudice if the amendments were
granted by this Court.
[44]
While I find that the facts
underlying the amendments were or should have been within the appellant’s
knowledge at the time of filing the Notice of Appeal, this delay, however, even
if due to the carelessness of the appellant, is not determinative unless it
results in prejudice to the respondent. This is not the case in this
proceeding.
[45]
I also note that in some
paragraphs of Ms. Desrosiers’ affidavit filed in support of the motion to
amend, she referred to facts that have not been yet proven in Court or facts of
which she did not have personal knowledge of. I have not taken these facts into
consideration in rendering my Order.
[46]
In my view, the amendments in the
Amended Notice of Appeal do not result in prejudice to the respondent that cannot
be compensated with costs. It is in the interests of justice to allow the
appellant to file the Amended Notice of Appeal.
[47]
In granting leave to the appellant
to file the Amended Notice of Appeal under section 54 of the Rules, I may
impose such terms as are just.
[48]
I impose the following terms:
−
The Amended Notice of Appeal will
be deemed to be filed on the day of this Order;
−
The respondent will have 60 days from
the date of this Order to file and serve a Reply to Amended Notice of Appeal;
−
The respondent will have the right
to conduct further examinations for discovery on representatives of the
appellant with respect to these amendments;
−
The appellant shall bear the costs
of the present motion and if further examinations for discovery are held, the
appellant shall bear the costs of such discovery. The costs are awarded in
accordance with Tariff B- Amounts to be Allowed on Taxation of Party and
Party Costs;
−
The appeal is adjourned sine die.
The parties will communicate with the Court to schedule a new hearing date.
Signed at Ottawa,
Canada, this 19th day of December 2013.
“Johanne D’Auray”
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