Date: 20121214
Docket: A-349-12
Citation: 2012 FCA 330
CORAM: EVANS
J.A.
STRATAS
J.A.
MAINVILLE
J.A.
BETWEEN:
MICHAEL EDWARDS
Appellant
and
HER MAJESTY THE QUEEN
Respondent
REASONS FOR JUDGMENT
EVANS J.A.
[1]
This
is an appeal by Michael Edwards from a decision of the Tax Court of Canada
(2012 TCC 264), dated July 23, 2012, in which Justice Woods (Motions Judge)
dismissed his motion to adjourn the hearing of his Tax Court appeal. The appeal
had been set down for November 26, 2012, and was scheduled to last for five
days.
[2]
Mr.
Edwards brought his motion in the context of his appeal from an assessment for
the 2003 taxation year to disallow a charitable donation of $10,000. He had
made the donation under a leveraged donation program, “The ParkLane Charitable
Donation Program,” in which, for an outlay of $3,150, he received a tax receipt
for $10,000 from the charity of his choice.
[3]
Approximately
18,000 taxpayers participated in this and similar programs, about 8,000 of whom
have been reassessed. The amount of the donations to these programs is around
$500 million. Mr. Edwards’ case was selected as the lead case for eight other
appeals which are being held in abeyance pending the outcome of this appeal,
but without being bound. And, the Motions Judge found (at para. 4), “thousands
of other taxpayers are waiting in the wings.”
[4]
Mr.
Edwards requested an adjournment of twelve months pending the enactment of
proposed amendments to the Income Tax Act, R.S.C. 1985, c 1 (5th Supp.)
concerning the tax treatment of charitable gifts. In certain circumstances,
they allow a taxpayer to claim a charitable deduction in respect of a portion
of a donation to a charity where the value of the donation exceeds the value of
the benefit received. He said that, if enacted, the proposed amendments might
assist him either to reach a settlement with the Minister of National Revenue
or to win his appeal. The Budget of March 2012 indicated the Government’s
intention to enact the proposed amendments, which would be made retroactive to
December 2002, when they were first announced.
[5]
Even
though the proposed amendments have not been enacted, the Canada Revenue Agency
(CRA) has been applying them as if they were already law, and has stated that
taxpayers may rely on CRA guidelines issued on December 24, 2002 explaining its
administration of the proposed amendments. However, the CRA has refused to give
Mr. Edwards the benefit of the proposed amendments because, it says, the
circumstances of his donation take it outside their scope. Because the proposed
amendments are not law, Mr. Edwards cannot appeal an assessment to challenge
the Minister’s view that they do not apply to the facts of his case.
[6]
After
carefully reviewing the facts of the case and the factors relevant to the
exercise of the discretion to grant an adjournment, the Motions Judge concluded
that the potential prejudice to Mr Edwards in proceeding with the appeal before
the proposed amendments were enacted was outweighed by the prejudice to the
public interest in the timely conduct of tax litigation. In this latter regard,
she noted that the appeal concerns a 2003 taxation year assessment and that it
had originally been set down for hearing in 2010.
[7]
Because
it was uncertain whether or when the proposed amendments would be enacted, or
whether, even if enacted, they applied to Mr Edwards’ situation, the Motions
Judge did not regard this case as “a rare circumstance” (Johnson
& Johnson Inc. v. Boston Scientific Ltd., 2004 FCA 354 at para. 3) in
which an adjournment should be granted pending the enactment of legislation
that could affect the outcome of an appeal.
[8]
On
the basis of the material before her, the Motions Judge did not, in my view,
make any error in principle, misapprehend the facts or otherwise reach an
unreasonable decision in the exercise of the broad discretion conferred on a
judge by section 137 of the Tax Court of Canada Rules (General Procedure),
SOR/90-688a to adjourn a hearing “on such terms as are just”. Appellate courts
are rightly deferential to the discretionary decisions of Tax Court Judges,
including on motions to adjourn, because they are generally in the best
position to assess all the circumstances of the litigation.
[9]
However,
in a letter dated December 5, 2012, 5 days before the hearing of this appeal,
counsel for Mr. Edwards filed a supplementary book of authorities, which
disclosed that the proposed amendments, together with other technical
amendments to the Income Tax Act, were included in Bill C-48,
which received first reading on November 26, 2012.
[10]
In
my view, this is a new fact that was not, and could not have been, put before
the Motions Judge when she dismissed the motion for adjournment on July 23,
2012. It is a fact that might well have caused her to decide the motion
differently, because it is highly probable that the proposed amendments will be
enacted next year, especially since the Government now has a majority in both the
House of Commons and the Senate.
[11]
In
addition, if Mr Edwards’ appeal were heard before the proposed amendments
became law and decided on the basis of the existing law, another lead case
would be selected to litigate the issues in dispute on the basis of the
proposed amendments as enacted. Refusing an adjournment of Mr Edwards’ Tax
Court appeal now will thus not promote judicial economy.
[12]
Since
the introduction of Bill C-48 substantially reduces the uncertainty
about the enactment of the proposed amendments, the requested adjournment will
cause less prejudice to the public interest in the timely administration of
justice. In any event, dismissing the appeal might well not have avoided
further delay because it is not clear that the Tax Court could reschedule a
hearing within the next twelve months.
[13]
For
these reasons, I would allow the appeal and adjourn the hearing of Mr. Edwards’
Tax Court appeal until November 26, 2013, or such earlier date as the proposed
amendments are enacted, defeated or withdrawn. This is the length of the
adjournment that Mr Edwards’ counsel proposed to us. Counsel also undertook not
to seek another adjournment of the appeal if the proposed amendments are not
enacted by November 26, 2013. Absent extraordinary circumstances, no further
adjournments should be granted in this matter.
[14]
I
would add that there seems something fundamentally unfair in the CRA’s
administration of proposed amendments to the Income Tax Act for the past
ten years as if they were already law. A taxpayer is not able to challenge a
decision by the CRA that the proposed amendments do not apply to the
circumstances of the taxpayer. I emphasize, however, that I am expressing no
view as to whether Mr. Edwards will benefit from the proposed amendments when
and if they are enacted.
[15]
Mr.
Edwards has also appealed the Tax Court’s refusal to award him his reasonable
and proper costs of the motion. In an Order dated May 23, 2008, then Chief
Justice Bowman allowed the Crown’s motion that the appeal be removed from the
Informal Procedure Rules of the Tax Court to the General Procedure Rules.
Pursuant to subsection 18.11(6) of the Tax Court of Canada Act, R.S.C.
1985, c. T-2, he ordered that the Crown should bear Mr Edwards’ reasonable and
proper costs in the appeal.
[16]
The
Motions Judge gave no reasons for not awarding Mr Edwards his costs on the
motion, despite the earlier Order of Bowman C.J. Counsel for the Crown conceded
before this Court that the only basis on which the Motions Judge could properly
have ordered that the parties bear their own costs that was consistent with
Bowman C.J.’s Order, was that she did not consider Mr. Edwards’ costs in
bringing the motion for an adjournment to be “reasonable and proper.”
[17]
In
the absence of reasons for a Motions Judge’s exercise of discretion, the Court
may decide the issue de novo, and make the order that the Motions Judge
should have made. I am not persuaded that Mr. Edwards’ motion for an
adjournment was frivolous or otherwise improper, despite the length of time
that it has taken to bring the Tax Court appeal this far. Accordingly, I would
award costs of the motion in the Tax Court to Mr Edwards.
[18]
For
these reasons, I would allow the appeal with costs to Mr. Edwards in this Court
and below, set aside the Order of the Motions Judge, and adjourn the hearing of
the Tax Court appeal until November 26, 2013 or such earlier time as the
proposed amendments are enacted, defeated or withdrawn.
“John M. Evans”
“I
concur
David
Stratas J.A.”
“I
concur
Robert M. Mainville
J.A.”
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