Date: 20130528
Docket: A-446-11
Citation: 2013 FCA 138
CORAM: PELLETIER
J.A.
GAUTHIER
J.A.
WEBB J.A.
BETWEEN:
WILLIAM JAMES LOUGHEED
Appellant
and
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
PELLETIER J.A.
[1]
This is an
appeal of the dismissal of a motion seeking various heads of relief, including
a finding of contempt of court on the part of the respondent in relation to production
of documents. Among the other heads of relief sought is a summary judgment
allowing Mr. Lougheed’s appeal.
[2]
Mr. Lougheed
was assessed for third party liability for GST under s. 323(1) of the Excise
Tax Act, R.S.C. 1985 c. E-15 in the amount of $297,431.59 in his capacity
as a director of Enterprise Expansion Corporation (EEC) .
[3]
Prior to the
assessment against EEC being issued, an audit was undertaken. In the course of
that audit, the Canada Revenue Agency (CRA) received 24 bankers boxes of documents
relating to the affairs of EEC from Mr. Lougheed: see A.B. p. 187. On January
13, 2006 Mr. Lougheed acknowledged receipt of 26 bankers boxes of documents,
including it seems, the 24 bankers boxes originally given to the CRA: see A.B.
p.189.
[4]
Following the
audit, an assessment issued against EEC. The latter was subsequently
petitioned into bankruptcy. A CRA employee was elected an inspector in the
bankuptcy.
[5]
Mr. Lougheed
filed a notice of objection to the assessment against him, the assessment was
confirmed, with the result that on July 3, 2006, Mr. Lougheed filed a notice of
appeal against the assessment.
[6]
Following the
filing of Mr. Lougheed’s Notice of Appeal, it appears that there were various
discussions over time between officials of the CRA and Mr. Lougheed with
respect to disclosure and production of documents. Some of those discussions
involved documents which Mr. Lougheed says were included in the 24 bankers
boxes of documents which were given to the CRA but which were not returned to
him when the bankers boxes were. Others involved various documents related to
EEC's bankruptcy, either documents which originated with the CRA (e.g. proof of
claim in bankruptcy) or which would have come into the CRA's possession in its
capacity as either a creditor or an inspector of the estate of EEC in
bankruptcy.
[7]
Apparently,
these discussions were not fruitful with the result that Mr. Lougheed made a
motion in the Tax Court seeking various heads of relief. Neither the original
motion nor the affidavit in support of that motion are in the materials before
this Court. In response to that motion, Mr. Justice Favreau of the Tax Court of
Canada made the following order (the Favreau Order):
ORDER
Upon motion by the appellant [Mr.
Lougheed] for:
[1]
An order compelling
the respondent [Her Majesty the Queen] and its representatives to deliver to
the appellant any and all Entrepreneur Expansion Corporation (EEC) and Global
ATM Management Inc. documents currently being withheld from the appellant by
the respondent, including but not limited to the 1999, 2000, 2001 Thomas
McBrayne income tax audits of Entrepreneur Expansion Corporation;
In the alternative, an order
allowing the appellant's appeal, dismissing the respondent's response and/or
expunging the Gustyn audit for causes laid out in the appellant's affidavit of
January 29, 2010 or as this Honourable Court deems just;
[2]
An order
placing the burden of producing EEC documents in support of this appeal on the
respondent;
[3]
An order
extending (or creating) a timetable in this matter, as may be advised by
counsel and as this Honourable Court deems just;
[4]
Costs of
having to bring this motion; and
[5]
Any other
relief as may be advised by counsel and as this Honourable Court deems just.
Having heard the parties, the
motion is allowed and the respondent is given 30 days from the date of this
order to deliver to the appellant the documents referred to in paragraph 1 of
the motion.
The appellant is entitled to his
costs.
[8]
Following the
making of the order, the CRA delivered two 3 inch binders of documents to Mr.
Lougheed. The CRA'S position is that it has complied with the terms of the
Favreau order. Mr. Lougheed continues to take the position that it has not.
[9]
In June 2011,
in the course of the Tax Court of Canada's case management procedures, Mr.
Lougheed appeared before Madam Justice Woods (the Tax Court Judge, or simply
the Judge) for a case management conference. At the conclusion of that
conference, the Tax Court Judge made an order that a motion to compel
compliance with Mr. Justice Favreau's order would be heard on August 15, 2011.
[10]
Mr. Lougheed
then filed a notice of motion, returnable on August 15, 2011 seeking the
following relief:
1- An order declaring the
Respondent is in contempt of the Order of Favreau J. dated May 5, 2010 and a
further order allowing the appellant's appeal for reasons of the Respondent's
failure to comply with the order of Favreau J. dated May 5, 2010.
IN THE ALTERNATIVE
An order allowing the Appellant's
appeal for reasons that the appellant has been found to have acted with
reasonable care, skill, and diligence in this matter.
IN THE ALTERNATIVE
An order declaring the Respondent
is in contempt of the order of Favreau J., dated May 5, 2010 and a final order
to the Respondent (and also to the Trustee in the bankruptcy of EEC) to comply
with the order of Favreau J. dated May 5, 2010.
2.An order extending (or
creating) a timetable in this matter, as may be advised by counsel and as this
Honourable Court deems just.
[11]
In addition,
the motion seeks costs, pre-judgment and post-judgment interest, special costs,
special damages and/or special punitive damages.
[12]
By
happenstance, Madam Justice Woods was the judge who heard Mr. Lougheed's motion
on August 15, 2011.
[13]
The Tax Court
Judge began by dismissing out of hand Mr. Lougheed's request that his appeal be
allowed, either on the basis of CRA's alleged failure to comply with Mr.
Justice Favreau's order or on the basis that Mr. Lougheed had acted with due
diligence in his capacity as director. The Judge found that the appeal could
only be allowed after a trial, which is a reasonable conclusion since the
question of due diligence is a question of fact, and she had no evidence before
her on that question. As for the respondent’s failure to comply with the
Favreau order, she found, as will be seen, that there was no credible evidence
of non-compliance.
[14]
On the merits
of the motion for a finding of contempt of court, Madam Justice Woods, after
having attempted to get Mr. Lougheed to identify more precisely the documents
which he says continue to be withheld, found that evidence with respect to the
allegedly missing documents was too vague and would not support even a prima
facie case of contempt.
[15]
In
particular, the Tax Court Judge accepted, based on the cross-examination of Mr.
Lougheed on his affidavit, that he received back from the CRA the 24 boxes of
documents which were originally provided to the CRA. She also accepted the viva
voce evidence of a CRA employee who testified that she had been asked by
counsel to provide Mr. Lougheed with all the documents in the CRA's possession
and that she had instructed CRA staff to comply with this request.
[16]
These are
findings of fact by a trial judge who considered the affidavit evidence and
heard both Mr. Lougheed and the witness called by counsel for the CRA.
Following Housen v. Nikolaisen 2002 SCC 33, [2002] 2 S.C.R. 235, such a
finding cannot be overturned unless vitiated by a palpable and overriding
error. No such error has been shown here. I would not disturb the Tax Court
Judge's conclusion on this issue.
[17]
In any event,
I am of the view that Mr.Justice Favreau's order was incapable of being
enforced by contempt proceedings because it was too vague.
[18]
Before a
person can be found guilty of contempt of court, it must be shown that
"the order that was breached must state clearly and unequivocally what
should and should not be done.": see Prescott-Russell Services for
Children and Adults v. G. (N.) (2006), 82 O.R. (3d) 686 (C.A.), at
paragraph 27. The person who must comply with the order must know exactly what
he or she must do in order to comply. In this case, the order refers to the
return of documents currently being withheld by the respondent. Furthermore,
since the respondent produced two binders of documents in response to Mr.
Justice Favreau’s order, it is impossible to tell by reference to the order,
which documents remain outstanding.
As a result, Mr. Justice's order is not enforceable by contempt proceedings.
[19]
Before us,
Mr. Lougheed argued that the hearing before the Tax Court Judge was not fair. Having
read the transcript of the hearing, I am of the view that the Tax Court Judge
gave Mr. Lougheed every opportunity to set out his case as advantageously as
possible. His lack of success before the Tax Court Judge is not due to any lack
of fairness on her part.
[20]
Mr. Lougheed
served a notice of constitutional question along with his notice of appeal. In
his notice of constitutional question, he says, in effect, that unless the
respondent produces the documents that he claims are being withheld, his
rights under sections 7 and 8 of the Canadian Charter of Rights and Freedoms,
Part 1 of the Constitution Act, 1982, being schedule B of
the Canada Act 1982 (U.K.), 1982, c.11 will be breached. The
jurisprudence of this Court is consistently to the effect that a Charter
challenge cannot be raised for the first time on appeal: see Re Harkat,
2012 FCA 122, [2012] 3 F.C.R. 635 at paragraph 148, Coca-Cola Ltd. v.
Pardhan (c.o.b. Universal Exporters), 2003 FCA 11, at paragraphs 31-32. The
basis for this position is that Charter challenges invariably require a fully
developed factual record. When a Charter challenge is raised for first time on
appeal, that record is absent. Furthermore, the Crown has the right, in any
Charter litigation, to lead evidence that a breach is justified under section 1
of the Charter. When the matter is raised for the first time in this court, the
Crown is deprived of that right. As a result, I will not consider Mr.
Lougheed's Charter arguments.
[21]
It is
unfortunate that so much time and energy has been taken up by an issue for
which there is a reasonable and workable solution in the Tax Court of Canada
Rules (General Procedure)(SOR/90-688a). That solution is found at Rules 81
and 82 which provide for the preparation of either full or partial lists of
documents by the parties. Had Mr. Lougheed read the Rules and made a motion
seeking the production of a list of documents pursuant to Rule 82, the issue of
which documents are or are not in the CRA's possession would have been
resolved. He would then have been in a position to demand production of any of
the documents on that list which he needed to prepare his appeal.
[22]
Given the
nature of Mr Lougheed’s allegations, the respondent would have been well advised
to prepare such a list without waiting for Mr. Lougheed to demand it.
[23]
I would add
that it became apparent in the course of the hearing of this appeal that Mr.
Lougheed is acting under some fundamental misapprehensions as to the nature of
the issues which he must address in his appeal. In particular, his
understanding of the effect of the bankruptcy proceedings on the assessment is
a matter which he should review with counsel who is knowledgeable in the area
of taxation. The assessment against Mr. Lougheed is for a very large amount
(and increasing daily) and, if upheld, could have catastrophic consequences for
him. Given his assertion that he is the president of several companies and,
presumably, not without financial resources, he would be well advised to retain
counsel.
[24]
For all of
these reasons, I would dismiss the appeal. Given the failure of both parties
to avail themselves of the solution available for problems related to document
production, costs of the appeal should be costs in the cause.
"J.D. Denis
Pelletier"
“I agree
Johanne
Gauthier J.A.”
“I
agree
Wyman W. Webb J.A.”
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