Citation: 2013 TCC 411
Date: 20131218
Docket: 2009-1717(IT)G
BETWEEN:
WILLIAM A. KELLY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2009-1332(IT)G
AND BETWEEN:
STEVE DJELEBIAN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
Docket: 2009-1336(IT)G
AND BETWEEN:
GLEN R. MULLINS,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Graham J.
[1]
The Appellants are
appealing the denial by the Minister of National Revenue of limited partnership
losses that they claimed in the 1990’s. The Respondent has brought a motion to
dismiss the Appeals pursuant to Rule 64 of the Tax Court of Canada
Rules (General Procedure) for failure to prosecute the Appeals with due
dispatch.
[2]
In addition to being
one of the Appellants, Mr. Kelly, who is a lawyer, represents himself and the
other two Appellants in these Appeals.
History
[3]
The history of these
Appeals is set out in detail in the Affidavits of Charlene Cho filed by
the Respondent and the Affidavit of Mr. Kelly. I will highlight only the key
events described therein.
[4]
The following is a
short history of the initial stages of Mr. Kelly’s appeal:
(a)
Mr. Kelly filed his
Notice of Appeal on May 21, 2009.
(b)
By Order dated June 14,
2010, the parties were ordered to complete various steps in the litigation by
various dates.
(c)
Mr. Kelly either served
his List of Documents on time but provided proof of service to the Court after
the court ordered deadline or both served his List of Documents and filed his
proof of service after the deadline. In either case, Mr. Kelly did not write to
the Court in advance of the deadline to seek an extension nor did he bring a
motion for such extension after the deadline.
(d)
On two occasions Mr.
Kelly was served with notices to attend examinations for discovery. In both
cases Mr. Kelly advised the Respondent just 2 or 3 days before the scheduled
date that he would not be attending. In the first case, the Respondent obtained
an extension of time to complete discoveries. In the second case, the
Respondent obtained a certificate of non-attendance.
(e)
On March 24, 2011, Mr.
Kelly’s appeal was made part of a larger group of similar cases for the
purposes of case management.
(f)
Nothing further
happened in his case until January 25, 2012 when the Respondent requested a
case management conference for the group. The Court set a status hearing for
April 3, 2012.
[5]
The following is a
short summary of the initial stages of Mr. Mullins’ and Mr. Djelebian’s
appeals:
(a)
Mr. Mullins and Mr.
Djelebian filed their Notices of Appeal on April 28, 2009. They were part of a
group of similar appellants.
(b)
Nine test cases were
selected from the group. Those cases were settled in June 2011.
(c)
On January, 2012 the
Respondent asked the Court for a case management conference for the remaining
appeals in the group. The Court set a status hearing for the group on April 3,
2012.
[6]
At the status hearing on
April 3, 2012, Mr. Kelly appeared on his own behalf and on behalf of Mr.
Mullins and Mr. Djelebian. By Order dated April 10, 2012, the Court ordered
that all of the Appellants’ Appeals be heard together on common evidence. The
Court also ordered that Mr. Kelly’s examination for discovery be peremptorily completed
by October 31, 2012 and that discoveries in Mr. Mullins’ and Mr. Djelebian’s
appeals be completed by October 31, 2012. The Court also set other dates for
the completion of the remaining steps in the litigation.
[7]
By Amended Order dated
May 7, 2012, the Court ordered that the parties in Mr. Mullins’ and Mr.
Djelebian’s appeals serve their Lists of Documents by June 30, 2012.
[8]
Mr. Mullins’ and Mr.
Djelebian’s Lists of Documents were served on the Respondent on July 9, 2012,
after the court ordered deadline. Mr. Mullins and Mr. Djelebian did not
write to the Court in advance of the deadline to seek an extension nor did they
bring a motion for such extension after the deadline.
[9]
The Respondent made
attempts to agree to dates for examinations for discovery but the Appellants
did not provide any dates. As a result, the Respondent served Notices to Attend
on the Appellants. All discoveries were to be held in Toronto. One week before
the discoveries were to be held, Mr. Kelly tried unsuccessfully to convince the
Respondent that the discoveries should be conducted by way of written
interrogatories. When the Respondent told him that that would not be
acceptable, Mr. Kelly advised the Respondent that Mr. Mullins’ and Mr. Djelebian’s
discoveries would have to be held in Windsor. The Respondent accordingly
arranged for those discoveries to take place in Windsor. One day before the
scheduled discoveries, Mr. Kelly advised the Respondent that Mr. Mullins
and Mr. Djelebian were not available to be discovered.
[10]
As a result of the above
delays the Respondent was again forced to apply for extensions to the status
dates. By Order dated November 19, 2012, the parties were ordered to complete
examinations for discovery by December 31, 2012, satisfy undertakings by
January 31, 2013 and communicate with the Court by March 28, 2013.
[11]
After some additional
back and forth between the parties regarding dates and locations, the
examinations for discovery were finally held on December 13 and 14, 2012 in
Toronto. A number of different undertakings were given by the Appellants at the
discoveries.
[12]
The Appellants did not
satisfy their undertakings by the court ordered deadline of January 31, 2013.
They did not write to the Court in advance of the deadline to seek an extension
nor did they bring a motion for such extension after the deadline.
[13]
On March 28, 2013, the
Respondent wrote to the Court, explained that the Appellants had not yet
satisfied their undertakings and requested a show cause hearing. The Court
denied the request but advised the Respondent that she was free to bring a
motion at any time. Accordingly, on August 7, 2013, the Respondent brought this
Motion.
[14]
Mr. Kelly ultimately
provided his responses to his undertakings on October 22, 2013. Mr.
Mullins and Mr. Djelebian provided their responses on November 5, 2013.
Reason for
Breaching the Order Regarding Undertakings
[15]
The Appellants have stated
that the reason that they had not satisfied their undertakings when the
Respondent wrote to the Court on March 28, 2013 was that the Respondent had
failed to provide the Appellants with lists of those undertakings.
[16]
There is nothing in the
Rules that would require the Respondent to provide the Appellants with
lists of their undertakings. The normal procedure followed in this Court is that
the party being examined for discovery makes a list of the undertakings when
they are given or obtains a copy of the transcript. The normal procedure is not
to ask the other side to compile the list for the discovered party.
[17]
The Respondent directed
me to a transcript of the examination for discovery of Mr. Kelly which stated:
[Mr. Kelly] By the way, I am not taking any notes
here. I still have to get a list of undertakings from somebody.
[Ms. Chasson] Sir,
you can order a transcript and get that –
[Mr. Kelly] That is a lot more expensive. If your
assistants are making a list of undertakings, I could – I will do what I can.
[18]
This exchange makes it
clear that the Appellants were aware right from the time of the discoveries
both that the Respondent had no intention of providing them with lists of the
undertakings and that the Appellants could have obtained a list of the
undertakings by simply ordering a copy of the transcripts of the discoveries.
[19]
Furthermore, the
transcript of the examination of Mr. Mullins suggests that Mr. Kelly was taking
notes during the discovery. When counsel for the Respondent asks for two
different undertakings in succession, Mr. Kelly asks for clarification of the
second undertaking. He states “Sorry, I was writing”. This statement suggests to me that, at
least in Mr. Mullins’ discovery, Mr. Kelly was taking notes of the
undertakings.
[20]
The Appellants did not
provide any evidence that they made any attempt whatsoever to determine the
lists of required undertakings between the completion of the discoveries and
the January 31, 2013 deadline. Nor did they provide any evidence that they made
any attempt to determine those lists in the 2 months thereafter. In fact, it
was only when the Respondent, in compliance with the order to report to the
Court by March 28, 2011, advised the Court that the Appellants had not
completed their undertakings that the Appellants asked the Respondent for the
lists. When the Respondent refused that request, there is no evidence that the
Appellants made any attempt to establish the undertakings through other means.
They simply continued to reiterate their request that the Respondent provide
the lists to them.
[21]
Ultimately, the only
way that the Appellants ever obtained the lists of undertakings was that the
Respondent attached them to her motion.
[22]
The above conduct shows
that the Appellants made no real efforts to comply with the undertakings either
before or after the deadline. In my view, the explanation regarding the lists
of undertakings is nothing more than a convenient excuse designed to delay the
proceedings. The Appellants knew that the Respondent was not going to give them
lists of the undertakings. In my view, their requests for such lists served no
purpose other than an attempt to somehow shift the blame for their inaction to the
Respondent. Had the Respondent not brought her motion, I have no doubt that the
Appellants would still not have provided any responses to their undertakings.
Failure to
Apply for Extension of Time to Satisfy Undertakings
[23]
The Appellants have
never attempted to remedy their breach of the court ordered deadline of January
31, 2013 to provide responses to undertakings. No motion for an extension of
time was ever brought. At a minimum I would have expected such a motion to be
brought for hearing at that same time as the Respondent’s motion.
[24]
Mr. Kelly argued that
he had neither applied for extensions of time prior to the expiry of his court
ordered deadlines nor brought a motion applying for an extension of those
deadlines after their expiration on behalf of himself and the other Appellants
because he was unaware of the rules requiring him to do so. The Respondent drew
my attention to a letter from the Respondent to Mr. Kelly dated October 26,
2010 in which the Respondent set out the specific requirements for applying for
extensions of time. On the basis of that letter, I do not accept Mr. Kelly’s
explanation. The letter from the Respondent to Mr. Kelly stated, in part:
As I indicated, in order to extend the time set out in a court
ordered timetable, a party must request the extension from the Court. The
request may be done by form if done on consent before the expiry of the court
ordered performance date. Otherwise, a formal motion will be required.
[25]
I also note that at no
time at the hearing of this motion or in the Appellants’ written submissions
did Mr. Kelly apologize to the Court for the Appellants’ breach of the order regarding
undertakings or even acknowledge that the Appellants had done anything wrong in
failing to comply with it.
[26]
Based on the foregoing,
I conclude that the Appellants were and continue to be indifferent as to
whether they comply with orders of this Court.
Undertakings
Actually Provided
[27]
Even a brief review of
the answers that were ultimately provided to the undertakings makes it clear
that the Appellants have not been responsive to many of the questions. The
Respondent provided me with copies of the responses to Mr. Mullins’
undertakings. Mr. Mullins’ and Mr. Djelebian’s accountant was named Mr. Qadir.
Mr. Mullins gave undertakings that he would ask Mr. Qadir:
(a)
if Mr. Mullins’
accountants and lawyers had prepared summaries of the limited partnership offerings;
(b)
if Mr. Qadir ever
undertook a significant analysis of the software; and
(c)
for all of his
information regarding allegations of a lawsuit and the settlement thereof that
were set out in Mr. Mullins’ Notice of Appeal.
[28]
All of these questions
were answered with the statement:
Mr. Qadir relied on the tax opinion provided by Mr. Beach, senior
tax partner at Faskin, Campbell, Godfrey as well as the information contained
in the Offering Memorandum, financial projections and all supplementary
information provided by the General Partner.
[29]
Even to someone
unfamiliar with the issues in the underlying litigation, it is clear that this
answer is unresponsive.
[30]
In addition, the answer
to one question in Mr. Mullins’ undertakings is completely blank. Another
question regarding a lawsuit is met with the following response:
To the best of Mr. Qadir’s knowledge, he is not aware of what
lawsuit is being referred to? Please provide detailed information as to the
plaintiff and the defendant and provide [sic] copy of the statement of
claim/defense [sic], so that he can provide an appropriate response.
[31]
The lawsuit in question
is not only described in the transcript of discovery immediately before the
undertaking is given but is also referred to in the Appellants’ Notices of
Appeal. The above response appears to be designed to either avoid answering the
question or delay the litigation.
[32]
During submissions, Mr.
Kelly advised me that the responses to the undertakings had been prepared by Mr.
Qadir, and had not been reviewed by the Appellants prior to their being
delivered to the Respondent. The undertakings were undertakings given at
discovery by the Appellants, not by Mr. Qadir. While many of the undertakings
required the Appellants to ask questions of Mr. Qadir, that in no way relieves
the Appellants from their obligations to ensure that the answers are accurate
and complete. Three of the answers to Mr. Mullins’ undertakings contain
statements that are qualified by the phrase “to the best of my knowledge and
information” or “to the best of my knowledge” and one of them refers to Mr. Mullins’
recollection of whether he signed a document. I cannot see how such responses
can be accurate if Mr. Mullins has not even read them. The Appellants’ failure
to review the responses leaves the Respondent in an untenable position. What
possible use can the Respondent make of responses to undertakings when those
responses have not been adopted by the Appellants? The Appellants’ conduct
effectively amounts to their not having responded to their undertakings.
[33]
This is not a case
where one party has not been as fulsome in its response to undertakings as the
other party thought it should have been. It is clear that the Appellants were
simply indifferent as to whether the responses were even adequate let alone
complete. Such indifference demonstrates a lack both of respect for the Court
and the Rules and a lack of intention to actually move ahead with the
appeals.
Pattern of
Conduct
[34]
Overall, it is clear to
me that the Appellants have made no attempt to prosecute their appeals with any
level of dispatch. On the contrary, their pattern of behaviour is indicative of,
at best, indifference and more likely a concerted effort to delay the appeals.
[35]
The Appellants have all
failed to meet court ordered deadlines for their Lists of Documents and
undertakings and have failed to obtain extensions of time to rectify those
breaches. It is clear that they have little, if any, regard for the orders and
procedures of this Court. The Appellants have also made the completion of
discoveries unnecessarily complex. When I look collectively at the series of
events surrounding each attempt at setting up a discovery, I see either
indifference as to whether the discoveries were held or intentional delay. As
the Appellants have offered no alternative explanation of these events, those
are the conclusions with which I am left.
[36]
Ms. Cho’s Affidavit
sets out a list of other events that could individually be described as
creating minor delays in the proceedings but that collectively paint a picture
of either indifference or intentional delay.
[37]
The Appellants submit that
in determining whether their cases should be dismissed, I am prevented from
considering any conduct (including any breaches of the Rules or of Orders)
that occurred prior to the show cause hearing that was held on April 3, 2012.
They submit that all such conduct was already considered by the Court at that
hearing and thus that the Respondent is estopped from raising it again in this
motion.
[38]
There is no merit to
this position. First, it is not clear to me on the record whether the Court even
considered on April 3, 2012 whether the Appellants’ appeals should be dismissed.
More importantly, even if the Court had considered that issue, the legal
question that would have been considered was whether the Appellants’ conduct up
to April 3, 2012 was sufficient to warrant a dismissal. I am not being asked to
reconsider that question. Rather I am being asked to consider whether the
Appellants’ conduct to date justifies dismissing their appeals. In other words,
I am being asked to apply the same legal test that may previously have applied
but to apply it to a larger set of facts. The fact that the Respondent may have
had insufficient evidence to convince the Court to dismiss the appeals on April 3,
2012, by no means wipes the slate clean for the Appellants.
[39]
The Appellants relied
on a decision of the Federal Court in Paszkowski v. The Queen,
2001 CanLII 22070, [2001] F.C.J. No. 129 (T.D.). In that case the Court was
asked to make an interlocutory ruling based on a set of facts that would have
run completely counter to another interlocutory ruling that had previously been
made on virtually the same facts. That is not what I am being asked to do. I am
being asked whether a legal test that was not previously met has, given events
that have since occurred, now been met when looking at both the new and old events
as a whole. The Federal Court of Appeal has held that res judicata does
not apply is such a circumstance (Apotex Inc. v. Richter Gedeon
Vegyeszeti Gyar RT, 2003 FCA 221).
[40]
In 1196158 Ontario
Inc. v. 6274013 Canada Ltd., 2012 ONCA 544, the Ontario Court of
Appeal dealt with a plaintiff who had done nothing to move its appeal forward
over a period of many years. I adopt the Court’s reasoning. At paragraph 25, the
Court stated:
I completely disagree with the contention that the plaintiff was
somehow absolved for all prior delay be the order made at the January 2010
status hearing. That order, made despite over three years of delay, was
properly described by the September 2011 status hearing judge as a “lifeline”
that allowed the plaintiff to proceed on the basis of the timetable ordered.
The plaintiff ignored the lifeline it had been given and failed to respect the
timetable that had been set. Without repentance there can be no absolution. The
plaintiff did not emerge from the January 2010 status hearing with a clean
slate and it was open to the status hearing judge to consider the entire
history of delay. [emphasis
added]
Suggested Alternative Relief
[41]
The Appellants would
have me dismiss the Respondent’s motion and order the Respondent to provide the
Appellants with a list of deficiencies in their undertakings by a certain date
and order the Appellants to correct those deficiencies by a further date. I
have no confidence whatsoever that if I were to do so the Appellants would
comply with my order. They have consistently demonstrated indifference with
respect to orders of this Court. Even if they did comply, based on what I have
seen of their previous responses to the undertakings, I have no confidence that
their responses would be adequate. Either way, the most likely outcome would be
that the parties would be back in Court in a matter of months trying to deal
with this matter once again and the Respondent would, once again, be forced to
expend significant effort and cost in order to try to move the Appellants’
appeals forward. I see no reason why I should place this burden on the
Respondent.
Conclusion
[42]
Based on all of the
foregoing, the motions are granted. The Appeals are hereby dismissed pursuant
to Rule 64.
Costs
[43]
The Respondent is
seeking full indemnity costs of $2,500 from each Appellant or, if I am not
prepared to award costs on a full indemnity basis, partial indemnity costs of
$1,000 from each Appellant. The Appellants accept that if I were to award
partial indemnity costs that $1,000 from each Appellant would be appropriate
but argue that if full indemnity costs were awarded, $1,500 per Appellant would
be sufficient.
[44]
I believe that a high
award of costs is appropriate in light of the Appellants’ indifference to
orders of this Court and their intentional delay of the proceedings. The Respondent
has also been put to a great deal of unnecessary work both in these motions and
throughout the litigation as a whole. I feel that a higher award of costs
against Mr. Kelly is more appropriate due to the fact that his failure to
prosecute his appeal with due dispatch has occurred over a longer period of
time and involved a more significant number of delays and because I expect a
higher standard of conduct from appellants who, like Mr. Kelly, are
professionals familiar with the legal system and the conduct of litigation. In
that regard, I find Mr. Kelly’s apparent indifference as to whether court
ordered deadlines are met and his admitted failure to review the responses to
his own undertakings before submitting them to the Respondent to be particularly
troubling. Based on all of the foregoing, I am going to award costs of $1,500
each against Mr. Mullins and Mr. Djelebian and of $2,500 against Mr. Kelly all
payable to the Respondent forthwith.
Signed at Ottawa, Canada, this 18th day of December
2013.
“David E. Graham”
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