Date: 20020910
Docket: A-365-01
Neutral citation: 2002 FCA 332
CORAM: LINDEN J.A.
ROTHSTEIN J.A.
MALONE J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
(Respondent)
- and -
B.W. STRASSBURGER LIMITED
Respondent
(Appellant)
Heard at Toronto, Ontario, on Tuesday, September 10, 2002.
Judgment delivered from the Bench at Toronto, Ontario,
on Tuesday, September 10 , 2002.
REASONS FOR JUDGMENT BY: THE COURT
Date: 20020910
Docket: A-365-01
Neutral citation: 2002 FCA 332
CORAM: LINDEN J.A.
ROTHSTEIN J.A.
MALONE J.A.
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
(Respondent)
- and -
B.W. STRASSBURGER LIMITED
Respondent
(Appellant)
REASONS FOR JUDGMENT OF THE COURT
(Delivered from the Bench at Toronto,
Ontario, on Tuesday, September 10, 2002)
[1] The Crown appeals from an award of costs of $6,500 payable forthwith and in any event of the cause made against it in the Tax Court. The proceeding giving rise to the award was a motion for judgment by the taxpayer allowing its appeal because the Crown was late in serving its Reply to the taxpayer's Notice of Appeal. Although the Tax Court Judge did not grant the motion and granted the Crown an extension of time for service, he made the costs award against the Crown "having regard to the conduct of counsel for the [Crown] and with a view to emphasizing the importance of compliance of [sic] the Rules".
[2] At the outset, it should be pointed out that reference to Crown counsel in these reasons is to a different lawyer than the ones appearing before the Court on this appeal.
[3] The facts may be briefly stated. The Crown's Reply to the taxpayer's Notice of Appeal in the Tax Court was due on November 30, 1999. On November 10, 1999, Crown counsel wrote to taxpayer's counsel asking for an extension to file the Reply. Taxpayer's counsel consented to an extension to December 22, 1999. The Reply was filed on December 22, 1999 and on that same date, it was sent by registered mail to taxpayer's counsel. When a document is sent by registered mail, rule 39(4) of the Tax Court Rules (General Procedure) SOR/90-688 as amended, provides that, in the absence of proof to the contrary, the date of service is five days after the earliest postal date appearing on the envelope. The Tax Court Judge found the Reply was delivered to taxpayer's counsel on December 31, 1999.
[4] Rule 44(3)(b) provides that a Reply shall be served "within the time specified in a consent given by the appellant under subsection (1)...", in this case, December 22, 1999. Therefore, the Reply was not served within the time provided by the Rules. It was nine days late.
[5] On December 29, 1999, counsel for the taxpayer wrote Crown counsel asking that she "get in touch with me as soon as possible in connection with the above matter". The telephone call took place on January 5, 2000. Counsel for the taxpayer advised that he thought the Reply had been served out of time. Crown counsel indicated she did not think it was served late. Taxpayer's counsel said he was taking the matter under consideration and would advise Crown counsel later of his position. Some fifteen months later, near the end of March 2001, there was communication between counsel at which time taxpayer's counsel advised he was going to bring a motion for judgment allowing the taxpayer's appeal because of late service of the Crown's Reply. A date of May 31, 2001, was agreed between the parties and the Tax Court for the hearing of the motion.
[6] As indicated, the Tax Court Judge did not grant the motion, but granted the Crown an extension for the service of the Reply, set a timetable for the matter to proceed and awarded costs of $6,500 against the Crown payable forthwith and in any event of the cause.
[7] What gives rise to the $6,500 costs award was, primarily, evidence in a "supplementary" affidavit by Marilyn Grimaldi, a secretary in taxpayer's counsel's office, which was filed and served on May 29, 2001, two days before the motion was to be heard. In that affidavit, Ms. Grimaldi replies to Crown counsel's affidavit, which had pointed out that the motion to allow the taxpayer's appeal was filed over fifteen months after service of the Reply, presumably to show that there was no prejudice to the taxpayer by the nine day delay in the service of the Reply.
[8] In her affidavit, Ms. Grimaldi indicates that a decision was made to proceed with the motion at least as early as April 13, 2000. Further, she says that taxpayer's counsel telephoned Crown counsel on September 18, 2000, which telephone call was not returned; and that there were several further occasions when telephone calls were made by taxpayer's counsel to Crown counsel.
[9] At the hearing of the motion, Crown counsel objected to the filing of the Grimaldi affidavit on the grounds of prejudice in that the Crown had no opportunity to reply to it. The Tax Court Judge acknowledged the Crown did not have the opportunity to reply to the Grimaldi affidavit, but indicated he was not going to delay the hearing and proceeded to draw inferences from the Grimaldi affidavit.
[10] In his Reasons for Judgment, the learned Tax Court Judge, relying on the Grimaldi affidavit, expressed the view that Crown counsel's conduct in not returning telephone calls amounted to "outright rudeness" and that sort of conduct was to be discouraged by an award of costs.
[11] Since the Tax Court Judge intended to rely on the Grimaldi affidavit to make a punitive award of costs, he should have afforded the Crown a reasonable opportunity to respond. That affidavit had been filed only two days before the motion was returnable. However, more to the point, the inference of "outright rudeness" drawn by the Tax Court Judge is not supported by what was stated in the affidavit.
[12] Ms. Grimaldi's function, according to her affidavit, was to transcribe taxpayer's counsel's "manuscript dockets" to typescript for the computerized time and billing program. She does not describe any other involvement with the file. In particular, she does not say that she had any conversations with taxpayer's counsel about the subject matter or frequency of the telephone calls. Contrary to what she stated in the affidavit, the docket entry for September 18, 2000, only says "Call to Shirtliff-Hinds office and leave message both with her and secretary - speak later to B.R. Strassburger". There is no indication of the purpose of the telephone call, what the message was, or whether a reply was expected. Nor have any docket entries been produced showing other telephone calls to Crown counsel.
[13] If the taxpayer was prejudiced, or even treated shabbily, by reason of misconduct on the part of Crown counsel, such as failure to respond to telephone messages, the affidavits supporting the motion would surely have so indicated. They did not. Indeed, no affidavit was filed by taxpayer's counsel, who would have had personal knowledge because he would have made the telephone calls to Crown counsel. It is inconceivable that if Crown counsel was not returning a series of telephone calls over the course of months, that a letter would not have been written to her or, alternatively, that taxpayer's counsel would not have set the motion down for hearing without agreement from Crown counsel. In these circumstances, the Tax Court Judge was clearly wrong to draw an inference of misconduct on the part of Crown counsel from the Grimaldi affidavit.
[14] An additional reason for the punitive award of costs appears to be that, in the view of the Tax Court Judge, the Crown made no attempt to explain its delay in serving the Reply. However, the explanation was in Crown counsel's memo to file recording the January 5, 2000, telephone call with taxpayer's counsel.
Advised Franklyn that I did not believe that rule 44(3) in particular specified time for service of the Reply in circumstances where the Appellant had consented to the Respondent filing his Reply at a later date.
The delay in service was because Crown counsel misread the Rules.
[15] We are mindful that an award of costs is subject to broad discretion. However, for the reasons we have given, the evidence does not support the punitive award in this case and in our respectful view, that award cannot stand.
[16] The taxpayer cross-appealed, asking that the decision of the Tax Court Judge not to allow the taxpayer's motion for judgment be reversed and that this Court should grant the taxpayer judgment in his tax appeal. For the reasons given by the Tax Court Judge, we decline to do so and we would, therefore, dismiss the cross-appeal.
[17] Rather than remitting the matter of costs to the Tax Court for redetermination, we think it is appropriate in the circumstances here to dispose of the matter and give the decision the Tax Court should have given. Crown counsel before us conceded there was non-compliance with the Rules for serving the Crown's Reply in this case. That is what gave rise to the taxpayer's motion. He has indicated, quite reasonably in our view, that in the circumstances, it was within the proper exercise of discretion by the Tax Court Judge to award costs against the Crown even though the Crown was successful on the motion and that party/party costs would approximate $1,200 plus disbursements.
[18] We would, therefore, allow the appeal and quash paragraph 5 of the order of the Tax Court Judge, dated June 8, 2001, which awarded punitive costs of $6,500 payable forthwith and in any event of the cause. We would award the taxpayer party/party costs of its motion of $1,500 inclusive of disbursements payable in any event of the cause. There will be no award of costs on the appeal or cross-appeal.
"A.M. Linden"
J.A.
"Marshall Rothstein"
J.A.
"B. Malone"
J.A.
FEDERAL COURT OF CANADA
Names of Counsel and Solicitors of Record
DOCKET: A-365-01
STYLE OF CAUSE: HER MAJESTY THE QUEEN
Appellant
(Respondent)
- and -
B.W. STRASSBURGER LIMITED
Respondent
(Appellant)
DATE OF HEARING: TUESDAY, SEPTEMBER 10, 2002
PLACE OF HEARING: TORONTO, ONTARIO
REASONS FOR JUDGMENT
OF THE COURT: (LINDEN, ROTHSTEIN, MALONE JJ.A.)
RENDERED FROM THE BENCH
BY: THE COURT
APPEARANCES BY: Mr. Harry Erlichman
Ms. Suzanne M. Bruce
For the Appellant (Respondent)
Mr. Franklyn E. Cappell
Mr. John Parker
For the Respondent (Appellant)
SOLICITORS OF RECORD:Franklyn E. Cappell
Toronto, Ontario
For the Appellant (Respondent)
Morris Rosenberg
Deputy Attorney General of Canada
For the Respondent (Appellant)
FEDERAL COURT OF APPEAL
Date: 20020910
Docket: A-365-01
BETWEEN:
HER MAJESTY THE QUEEN
Appellant
(Respondent)
- and -
B.W. STRASSBURGER LIMITED
Respondent
(Appellant)
REASONS FOR JUDGMENT
OF THE COURT
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