Date: 20051124
Docket: A-83-05
Citation: 2005 FCA 394
CORAM: DÉCARY J.A.
EVANS J.A.
SHARLOW J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
and
EDWARD MILLER
Respondent
and
PATRICIA MAEVE WILSON
Respondent
REASONS FOR JUDGMENT
DÉCARY J.A.
[1] This appeal from a decision of a Tax Court Judge [2005 TCC 108] raises a single issue: in the circumstances of this case, can the Crown ask the Tax Court of Canada, pursuant to subsection 174(1) of the Income Tax Act, to determine a question of law, fact or mixed fact of law which is
common to assessments or proposed assessments in respect of two taxpayers, where the proposed reassessment is beyond the normal reassessment period?
Subsections 174(1) and (3) read as follows:
| 174. (1) Where the Minister is of the opinion that a question of law, fact or mixed law and fact arising out of one and the same transaction or occurrence or series of transactions or occurrences is common to assessments or proposed assessments in respect of two or more taxpayers, the Minister may apply to the Tax Court of Canada for a determination of the question.
....
(3) Where the Tax Court of Canada is satisfied that a determination of the question set out in an application under this section will affect assessments or proposed assessments in respect of two or more taxpayers who have been served with a copy of the application and who are named in an order of the Tax Court of Canada pursuant to this subsection, it may
(a) if none of the taxpayers so named has appealed from such an assessment, proceed to determine the question in such manner as it considers appropriate; or
(b) if one or more of the taxpayers so named has or have appealed, make such order joining a party or parties to that or those appeals as it considers appropriate and proceed to determine the question.
|
174. (1) Lorsque le ministre est d'avis qu'une même opération ou un même événement ou qu'une même série d'opérations ou d'événements a donné naissance à une question de droit, de fait ou de droit et de fait qui se rapporte à des cotisations, réelles ou projetées, relatives à plusieurs contribuables, il peut demander à la Cour canadienne de l'impôt de se prononcer sur la question.
....
(3) Lorsque la Cour canadienne de l'impôt est convaincue que la décision rendue concernant la question exposée dans une demande présentée en vertu du présent article influera sur des cotisations ou des cotisations éventuelles intéressant plusieurs contribuables à qui une copie de la demande a été signifiée et qui sont nommés dans une ordonnance de la Cour canadienne de l'impôt conformément au présent paragraphe, elle peut:
a) si aucun des contribuables ainsi nommés n'en a appelé d'une de ces cotisations, entreprendre de statuer sur la question de la façon qu'elle juge appropriée;
b) si un ou plusieurs des contribuables ainsi nommés se sont pourvus en appel, rendre une ordonnance groupant dans cet ou ces appels les parties appelantes comme elle le juge à propos et entreprendre de statuer sur la question.
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[2] The question of fact sought to be determined in this case is "what was the purchase price for the subject lands", Mr. Miller, the purchaser, having stated in his income tax return that it was $180,000.00, and Mrs. Wilson, the vendor, that it was $100,000.00. Mrs. Wilson opposes the Crown's application on the basis, essentially, that as her taxation year is statute barred, she would suffer some prejudice should she be compelled to testify at the hearing of the application. As the argument goes, the Minister would obtain through the section 174 procedure information that will alleviate the burden which he will have to face should he reassess her out of time under subparagraph 152(4)(a)(i) of the Act.
[3] It was agreed at the hearing before the Tax Court Judge that she would only determine at this stage whether or not Mrs. Wilson should be joined as a party in Mr. Miller's appeal. The question of the purchase price for the subject lands is not in issue in this appeal and will only need to be addressed by the Judge if this appeal is successful.
[4] The Judge dismissed the Crown's application in the following terms:
[9] If the Minister were to attempt on his own hook to reassess Mrs. Wilson's statute-barred 1995 taxation year, Mrs. Wilson would be entitled to challenge that reassessment and put the Minister to the proof of his allegations. To join her as a party in these circumstances, where the outcome of the appeal might leave the 1995 statute-barred taxation year vulnerable to reassessment without requiring ministerial compliance with subparagraph 152(4)(a)(i), is to allow the Minister to do indirectly what he cannot do directly. In short, the effect of granting this application would be to deprive Mrs. Wilson of the rights available to her under the Act while at the same time, relieving the Minister of his statutory obligations.
[10] While I accept the Crown's argument that it would be helpful to the Court to have the benefit of her evidence in the hearing of Mr. Miller's appeal, this can be achieved without adding her as a party: she may be called as a witness, as apparently, the Crown originally intended to do. If Mr. Miller and Mrs. Wilson were on an equal footing vis-à-vis the Minister, perhaps the circumstances would exist for granting the Crown's application. But that is not the case. Having heard counsel for the parties and Mrs. Wilson and read the materials filed, I am not
satisfied that, on balance, it is appropriate to join her as a party to Mr. Miller's appeal. The application is dismissed with costs payable forthwith to Mrs. Wilson; in respect of the Respondent, costs to follow the cause.
[5] This being a discretionary decision, this Court may intervene only if the decision was based on an error of law or if there has been a wrongful exercise of discretion in that no weight or insufficient weight has been given to relevant considerations, consideration was given to irrelevant factors or relevant factors were not considered. (Elders Grain Co. v. Ralph Misener (the) (F.C.A.), [2005] 3 F.C.R. 367, at par. 13)
[6] I am of the view that the Judge made a reviewable error of law when she found that to allow the Crown's application would be "to allow the Minister to do indirectly what he cannot do directly" and "to deprive Mrs. Wilson of the rights available to her under the Act while at the same time, relieving the Minister of his statutory obligations."
[7] Subsection 174(1) expressly provides for a determination of a common question to be sought with respect to "proposed assessments." Whenever an application by the Crown involves a taxpayer who has been assessed and one who has not yet been assessed, the latter might be said not to be "on an equal footing vis-à-vis the Minister", as found by the Judge, but this is precisely a result that the Act contemplates.
[8] The Minister is not doing indirectly what he cannot do directly. The sole outcome of the section 174 procedure, which is not an assessment, will be the determination of what was the actual price paid for the property. Should that price not be that alleged by Mrs. Wilson, should the
Minister elect to reassess Mrs. Wilson beyond the normal reassessment period, and should Mrs. Wilson appeal the reassessment, the Minister will still have the burden, under subsection 152(4) of the Act, of showing that Mrs. Wilson made a misrepresentation attributable to "neglect, carelessness, or wilful default or any fraud" to support the reassessment. It is true, as counsel for Mrs. Wilson pointed out, that in determining the value of the property the Judge might make findings of misrepresentation unfavourable to Mrs. Wilson. But any such finding would at best be obiter, misrepresentation not being the issue to be resolved in the section 174 application. In any event, the consequences for Mrs. Wilson would not be different from those which would follow from her testimony at Mr. Miller's trial or in her own eventual trial. The burden which ultimately rests upon the Minister to demonstrate misrepresentation in an assessment under subsection 152(4) would not be altered, the only difference being that the Minister would have obtained under a section 174 proceeding evidence which he could have obtained either during the trial of Mr. Miller or during the eventual trial of Mrs. Wilson. There is, therefore, at the end of the day, no prejudice to Mrs. Wilson.
[9] I wish to note, in passing, what I think is a slip in the Judge's reasons where, at par. 3, she states that "the Court has discretion, "as it considers appropriate", to grant the Crown's application under subsection 174(3) of the Act." There is, as I read it, a sequence of three types of judicial discretion involved in a section 174 application. The judge first must be "satisfied" that the section is applicable; once satisfied, she "may" grant the application; when granting the application, she then determines the question "in such manner as it considers appropriate", a discretion clearly
related to matters of procedure and costs (see the Queen v. Countess Hassanali, 96 DTC 6414 (F.C.A.)).
[10] As the Judge's discretion was not exercised according to law, this Court could send the matter back for reconsideration, but it may also render the decision that ought to have been rendered. The only factor alleged by Mrs. Wilson that would militate against granting the application, is that "there has been substantial delay and/or unreasonable delay in attempting to add Mrs. Wilson as a party" and that the application under subsection 174(1) to add her as a party to Mr. Miller's appeal was fundamentally unfair, oppressive and vexatious.
[11] Assuming that factor to be a relevant one, the allegation of delay and of unfairness has not been made out in the evidence. Mrs. Wilson did not file any evidence of her own and she did not cross-examine the affiant who had deposed for the Crown.
[12] Therefore, in my view, the application made by the Crown under subsection 174(1) ought to go on and be decided on its merits.
[13] With respect to costs, counsel for the Crown suggests that they follow the cause while counsel for Mrs. Wilson argues that she should be entitled to costs in any event and that her costs should be assessed on a solicitor-client basis.
[14] In so far as costs in the Tax Court of Canada are concerned, I agree with counsel for the Crown. Mrs. Wilson has chosen to oppose a section 174 application which will facilitate the administration of justice without causing her any prejudice. I see no reason why she would be entitled to her costs at this preliminary stage. If her version of the facts is ultimately upheld by the Judge, she likely will get her costs throughout; if not, it is unlikely she would get them. There is therefore some wisdom in the Crown's suggestion to have the costs in the Tax Court of Canada follow the cause.
[15] In so far as costs in this Court are concerned, they simply cannot be in the cause for this is the end of the route for this appeal. Consonant with the suggestion made by counsel for the Crown, I am prepared to order that the costs of the appeal, in accordance with column III of the table to Tariff B be granted to the party, if any, that is found to be entitled to costs pursuant to the decision of the Tax Court of Canada with respect to the merits of the section 174 application.
[16] The appeal should be allowed, the decision of the Tax Court of Canada should be set aside and replaced with an order allowing, with costs in the cause, the application made by the Crown under subsection 174(1) of the Income Tax Act to join Mrs. Wilson as a party, and referring the matter back to the Tax Court of Canada for adjudication of the stated factual question on its merits.
Costs of this appeal should follow those eventually granted in the Tax Court of Canada and be assessed in accordance with Column III of the table to Tariff B.
"Robert Décary"
"I agree
John M. Evans"
J.A.
"I agree
Karen R. Sharlow"
J.A.
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