Citation:
2017 TCC 239
Date: 20171128
Docket: 2017-3199(IT)G
BETWEEN:
MASA SUSHI JAPANESE RESTAURANT INC.
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent;
Docket:
2017-3201(IT)G
AND BETWEEN:
HAI-GUANG
LIU,
Appellant,
and
HER
MAJESTY THE QUEEN,
Respondent;
Docket:
2017-3202(IT)G
AND BETWEEN:
KA
LEUNG LO,
Appellant,
and
HER
MAJESTY THE QUEEN,
Respondent;
Docket:
2017-3204(IT)G
AND BETWEEN:
2075957 ONTARIO INC. (o/a KATSU JAPANESE RESTAURANT),
Appellant,
and
HER
MAJESTY THE QUEEN,
Respondent.
REASONS
FOR ORDER
Graham J.
[1]
The Appellants have brought motions to be
represented by Dennis Chow. Mr. Chow is not a lawyer. He is a
Chartered Professional Accountant.
[2]
The Respondent opposes the motions.
[3]
Two of the Appellants are individuals (the “Individual Appellants”) and two of the Appellants are corporations (the “Corporate Appellants”). The Individual Appellants are shareholders of both of the
Corporate Appellants. My understanding from the motion materials is that
Hai-Guang Liu is a director of Masa Sushi Japanese Restaurant Inc. and Ka Leung
Lo is a director of 2075957 Ontario Inc.
[4]
I will deal with the Individual Appellants’
motions first and then turn to the Corporate Appellants’ motions.
Individual Appellants
[5]
Rule 30(1) of the Tax Court of Canada Rules
(General Procedure) (the “Rules”) states
that a party to a proceeding who is an individual may
act in person or be represented by counsel.
[6]
Rule 30(1) does not give the Court discretion to
allow an agent to represent an individual (Moll v. The Queen). An individual may either
represent himself or herself or be represented by counsel. For that reason, Mr.
Liu’s and Mr. Lo’s motions must be denied. Mr. Liu and Mr. Lo are free
either to hire counsel or to represent themselves.
Corporate Appellants
[7]
Rule 30(2) applies where a party is not an
individual. It states:
Where a party to
a proceeding is not an individual, that party shall be represented by counsel
except with leave of the Court and on any conditions that it may determine.
[8]
The question that the Corporate Appellants’
motions raise is this: Who can represent a corporation under Rule 30(2)? The
answer is not as simple as it may at first appear. For the reasons that follow,
I conclude that, notwithstanding the wording of Rule 30(2), in the general
procedure corporations may only be represented by counsel.
[9]
The Rules were created pursuant to the Tax
Court of Canada Act (the “Act”). Subsection 20(1) of the Act allows for rules to be created to regulate
the pleadings, practice and procedure in the Court. As is the case with
regulations made under any act, the Rules may not override the Act. They may neither prohibit
things that are allowed by the Act nor allow things that are prohibited by the
Act. As a result, the starting point for any analysis of Rule 30(2) must be the
Act.
[10] Section 17.1 of the Act specifically deals with the right to appear before
the Court under the general procedure. It states:
(1) A party to
a proceeding in respect of which this section applies may appear in
person or be represented by counsel, but where the party wishes to be
represented by counsel, only a person who is referred to in subsection (2)
shall represent the party.
(2) Every person
who may practise as a barrister, advocate, attorney or solicitor in any of the
provinces may so practise in the Court and is an officer of the Court.
[Emphasis
added]
[11] Thus, subsection 17.1(1) gives parties two choices. Parties may
appear in person or be represented by counsel. Therefore, unless I can conclude
that subsection 17.1(1) allows a corporation to appear in person, the only
choice available to a corporation will be to be represented by counsel.
A textual analysis indicates that a corporation cannot
do anything in person
[12] The words “in
person” mean “physically present”. A human can be physically
present in court. A corporation, being a creation of law with no physical substance,
cannot.
[13] This textual interpretation is expressed by Justice McGillivray of
the Alberta Court of Appeal in obiter in R. v. Cook:
The corporation
although a legal entity included in the definition of "person" is
none the less not a visible person; it is without physical existence; it
"has neither body parts nor passions" and so in my view is quite
incapable of doing anything required to be done "in person."
Where an act is
done on behalf of a corporation by an agent or attorney it may be said that it
is the act of the corporation but it cannot be said that it is the act of the
corporation "in person;" it is the agent or attorney who is acting
"in person:" Wood v. Swann (1880) 25 Sol. J. 134; Holmested,
p. 326.
[14] Justice McGillivray’s reasoning is adopted by the majority in the
Manitoba Court of Appeal decision in 2272539 Manitoba Ltd. v. Manitoba
(Liquor Control Commission).
The traditional
common law interpretation is that a corporation cannot appear in person
[15] Justice Quigg, speaking for the majority in the New Brunswick Court
of Appeal decision in Trifidus Inc. v. Samgo Innovations Inc., described
the traditional common law interpretation as follows:
The common law
endows individuals with a right to self-representation. The legal identity of
corporations shares some features with that of individuals, but corporations
also have several unique legal privileges. Corporations are considered
"entit[ies] having authority under law to act as a single person distinct
from the shareholders who own it" (see Bryan A. Garner, Black's Law
Dictionary, 8th ed., (St. Paul, Minnesota: Thomson, 2004), s.v.
"corporation", p. 365). Historically, corporations have enjoyed both
limited liability and certain tax advantages not available to individuals (see Pratts
Wholesale Ltd. v. R., [1998] T.C.J. No. 171 (T.C.C.) at para. 7). These
benefits are offset by other legal obligations. The obligation to be
represented by a lawyer in legal proceedings is one of these. Unlike
individuals, who are legally and logically capable of self-representation,
corporations must inevitably rely on representation by individual agent. Even
if the agent is the corporate director and sole shareholder, he or she is still
considered to be legally distinct from the corporation and, therefore, a third
party to it. If individuals do not have the right to be represented by a third
party other than a lawyer, neither do corporations. …
[Emphasis
added]
[16] The British Columbia Court of Appeal described the traditional
common law interpretation as follows in Venrose Holdings Ltd. v. Pacific
Press Ltd.:
…Without dealing
with these cases in detail, it may be said they show that in England, Ireland,
the United States and certain provinces of Canada, including British Columbia,
it has generally been considered that a corporation may not commence
proceedings in the high court in person as a party to the proceedings, acting
through its officer without the intervention of a solicitor, and that it cannot
be represented before the court by its officer. For that purpose it must
instruct counsel. While these authorities deal more with the question of
representation in court than with the commencement of proceedings, it seems
clear that there has been no acceptance of the "corporate person" as
a person who could act "in person as a party to an action" in
commencing proceedings. …
[17] Based on all of the foregoing, I find that the traditional common
law interpretation is that a corporation could not appear in person.
A historical
contextual analysis indicates that a corporation cannot appear in person
[18] A historical contextual analysis of subsection 17.1(1) supports the
traditional common law interpretation. There have been three versions of
Rule 30(2). The original version was created at the same time as the Act
and required corporations to be represented by counsel. It read:
Except as
expressly provided by or under any enactment, a body corporate may not begin
or carry on a proceeding otherwise than by counsel.
[Emphasis
added]
[19] Rule 30(2) was amended in 1993 to allow corporations to be
represented by an officer with leave of the Court in special circumstances. The
1993 version read:
A corporation
shall be represented by counsel in all proceedings in the Court, unless the
Court, in special circumstances, grants leave to the corporation to be
represented by an officer of the corporation.
[20] The current version of Rule 30(2) was implemented in 2007. As set
out above, it reads:
Where a party to
a proceeding is not an individual, that party shall be represented by counsel
except with leave of the Court and on any conditions that it may determine.
[21] All three versions of Rule 30 have, in accordance with subsection
17.1(1), allowed individuals to appear in person or be represented by counsel.
[22] As stated above, the Rules may neither prohibit things that are
allowed by the Act nor allow things that are prohibited by the Act. Rules that
breach these conditions are ultra vires. Depending on how one interprets
subsection 17.1(1), either every version of Rule 30(2) has been ultra vires
or only the 1993 and current versions of Rule 30(2) have been ultra vires.
[23] If I interpret subsection 17.1(1) as only allowing corporations to be
represented by counsel, then the original version of Rule 30(2) exactly
paralleled subsection 17.1(1) and was intra vires. However, both the
1993 and current versions of Rule 30(2) would be ultra vires. This is
because the 1993 version provided that an officer could represent a corporation
and the current version provides that a person approved by the Court can
represent a corporation. Both of these provisions allow representation in a
manner inconsistent with a requirement in subsection 17.1(1) that corporations
be represented by counsel.
[24] By contrast, if I interpret subsection 17.1(1) as allowing
corporations to appear in person or be represented by counsel, all three
versions of Rule 30(2) would be ultra vires as they would unduly
restrict a corporation’s ability to appear in person. The original version outright
denied corporations the option of appearing in person. The 1993 version allowed
corporations to appear in person, but only with leave of the Court and in
special circumstances. Similarly, the current version of Rule 30(2) only allows
corporations to appear in person with leave of the Court and, even then,
potentially subjects the corporation to conditions imposed by the Court.
[25] After reviewing this history of Rule 30(2), I prefer the first
interpretation. It is important to recall that the Court was created at the
same time that the Rules came into effect. In the circumstances, it is far more
likely that the original version of Rule 30(2) paralleled subsection 17.1(1)
than that it violated it. It appears that, when the 1993 amendment was made, the
fact that Rule 30(2) could not be changed without first amending subsection
17.1(1) was overlooked. A similar error appears to have occurred in 2007. This
interpretation of the history of Rule 30(2) appears far more likely than an
interpretation under which all three versions of Rule 30(2) would have been ultra
vires.
[26] The Supreme Court of Canada has been clear in stating that, whenever
possible, an interpretive approach that reconciles a regulation with its
enabling statute so as to render the regulation intra vires should be
favoured.
The interpretation of subsection 17.1(1) that follows the traditional common
law position does the least damage in this regard as it, at least, results in
the original version of Rule 30(2) having been intra vires. I am unable
to conceive of an interpretation of subsection 17.1(1) that would allow all
three versions of Rule 30(2) to be intra vires.
[27] Based on all of the foregoing, I find that a historical contextual
analysis of subsection 17.1(1) supports the position that corporations cannot
appear in person.
Purposive arguments can be made in favour of either
interpretation
[28] There are strong policy reasons why Parliament may have wanted
corporations to be able to appear in person. Allowing corporations to appear in
person increases access to justice. This is particularly true for small closely
held corporations that could not otherwise afford counsel and for corporations
that are fighting over less money than they would spend on legal fees.
[29] However, there are also strong policy reasons why Parliament may
have wanted to force corporations to be represented by counsel. Requiring
corporations to have counsel increases the efficiency of the court system. This
saves the government money both as a litigant and as the entity that pays for
the operating costs of the system. Requiring corporations to have counsel also
increases the cost of litigation for corporations, which makes it more likely
that weaker appeals will either be settled or never be commenced. This both
saves the government money and allows it to collect tax revenue more quickly
and with less opposition.
[30] While, in the current climate, access to justice across all courts
may be viewed as more important than efficiency, the same cannot necessarily be
said of the time when the Act and the Rules were created. Furthermore, access
to justice benefits taxpayers whereas increased efficiency and the abandoning
of weaker appeals benefits the government. Thus, even if access to justice were
the more socially laudable goal, Parliament may nonetheless have chosen to
draft the Act and the Rules to its own advantage.
[31] As a result of all of the foregoing, it is difficult to find any
guidance from a purposive analysis.
The use of the word “may” does not allow appearance
through an agent
[32] There are only three means by which a party can appear in any court:
in person, through counsel or through an agent.
[33] As set out above, subsection 17.1(1) states that a party to a
proceeding “may appear in person
or be represented by counsel”. In my view, the
use of the permissive word “may” does not indicate that the corporation is also free to choose to be
represented by an agent.
[34] Subsection 17.1(1) can be contrasted with section 18.14 of the Act.
Section 18.14 deals with the informal procedure. It reads:
All parties to an
appeal referred to in section 18 may appear in person or may be represented
by counsel or an agent.
[Emphasis
added]
[35] The permissive word “may” is used in both subsection 17.1(1) and section 18.14. However,
section 18.14 lists all possible means by which a party could appear and
subsection 17.1(1) lists only two of those means. This indicates that the word “may” is
meant to convey that, while the party has a choice, that choice is limited to
the options presented in the relevant section or subsection. Interpreting “may” to mean
that the party can choose among the options presented or choose an option not
presented would be illogical. It would render the distinction between
subsection 17.1(1) and section 18.14 meaningless and violate the presumption
against tautology. If subsection 17.1(1) allowed a taxpayer to be represented
by an agent even though there was no mention of being represented by an agent
in that subsection, then the words “or an agent” in section 18.14 would
be meaningless.
The Court’s
implied power to control its own process does not permit it to allow a
corporation to appear in person or through an agent
[36] There have been a number of cases where provincial appellate courts
have acknowledged an inherent jurisdiction to control the “right of audience” before them.
This inherent jurisdiction has been used to allow officers to represent
corporations where they are otherwise not permitted to do so.
[37] The Tax Court of Canada is a statutory court. It does not have
inherent jurisdiction. It has the implied power to control its own process. If I find that subsection
17.1(1) does not allow corporations to appear in person, I cannot use the
Court’s implied power to nonetheless allow such an appearance. The Court’s
implied power cannot be used to allow representation in a manner specifically
prohibited by the Act.
The Federal Courts Rules do not assist me
[38] Although the Federal Court is also a statutory court, there is no
value in examining the Federal Courts Rules. Section 120 of the Federal
Courts Rules allows a corporation to be represented by an officer with
leave of the Court in special circumstances. However, the Federal Courts Act
does not have an equivalent provision to that found in subsection 17.1(1).
Thus, the rules that can be created to deal with corporate representation in
the Federal Court are not limited and the fact that officers are permitted to
represent corporations in the Federal Court is not instructive.
Decisions in other courts do not assist me
[39] Over time, provincial superior and appellate courts have had to
interpret the traditional common law interpretation that corporations cannot
appear in person in light of both their respective rules of court and the provincial
legislation regulating legal services. Not surprisingly, different rules and
legislation have led to different results in different provinces. The Alberta
Court of Appeal has a long record of preventing anyone but lawyers from
representing companies.
The Supreme Court of Newfoundland Court of Appeal decision in Aylward’s Ltd.
v. St. Lawrence (Town)
reached a similar conclusion. By contrast, after setting out the traditional
common law position, the British Columbia Court of Appeal in Venrose
went on to examine the relevant provincial provisions and to conclude that an
officer of a corporation could commence litigation and represent a corporation
in court. Similarly, the majority in Trifidus found that the relevant
New Brunswick provisions permitted corporate representation by an officer.
However, the majority in 2272539 Manitoba specifically disagreed with Venrose as did Chief Justice
Goodridge in Aylward’s.
[40] None of these decisions assists me in interpreting subsection
17.1(1). They all deal with rules and legislation that are not before me. In
addition, these decisions were rendered in a different context – one where the
government is not the respondent in every appeal. Accordingly, the competing
goals of efficiency and access to justice may have played different interpretive
roles. Finally, the decisions which conclude that a corporation can appear in
person rely, at least in part, on the relevant court’s inherent jurisdiction.
As set out above, I cannot use the Tax Court of Canada’s implied power to
control its own process to override the very statute that gives the Court that power.
Previous decisions of this Court do not assist me
[41] There is a long line of previous decisions of this Court applying
Rule 30(2) in a manner that allows officers, directors or even shareholders to
represent a corporation in general procedure appeals. Unfortunately, it appears
that the conflict with subsection 17.1(1) was not brought to the Court’s
attention in any of those cases. Thus none of those cases assists me in
interpreting subsection 17.1(1).
Conclusion
[42] Based on all of the foregoing, I conclude that subsection 17.1(1)
does not allow a corporation to appear in person. In the general procedure, the
only option available to a corporation is to be represented by counsel. Accordingly,
until such time as subsection 17.1(1) is repealed or amended, Rule 30(2) should
be read down to read:
Where a party to
a proceeding is not an individual, that party shall be represented by counsel.
[43] This reading down should only apply to corporations. Rule 30(2)
applies to all parties that are not individuals. Under the Excise Tax Act,
partnerships can both be assessed and appeal to the Court. A partnership is not
an individual and is thus caught by Rule 30(2). Subsection 17.1(1) allows
parties to appear in person or be represented by counsel. Clearly a partnership
appealing under the Excise Tax Act can be represented by counsel. I do
not have to consider whether such a partnership can also appear in person and I
therefore decline to do so. I have also not considered whether there are other
potential parties that are neither corporations, nor individuals, nor
partnerships and I decline to do so.
Alternative conclusion
[44] If I am wrong, and corporations are able to appear in person, I find
that Rule 30(2) is ultra vires because it requires corporations to
obtain leave of the Court and potentially be subject to conditions in order to
appear in person. I cannot see how Rule 30(2) could be read down to remove
these restrictions so I would simply read Rule 30(2) out as it relates to
corporations. Corporations would be permitted to appear in person without
leave.
[45] I do not have to decide whether a corporation that appears in person
does so through an officer, a director or a shareholder, so I decline to do so.
I similarly decline to determine how, in the event of competing representation interests,
the Court would determine which potential candidate would be the one who effects
the personal appearance.
[46] For the reasons set out above, I also decline to consider whether
Rule 30(2) would apply to partnerships appealing under the Excise Tax
Act or any other parties who were not individuals or corporations.
Application to the Corporate Appellants
[47] The Corporate Appellants’ motions are denied. Mr. Chow is not a
lawyer. Subsection 17.1(1) prevents anyone other than a lawyer from
representing a corporation in the general procedure.
[48] In the alternative, if I am wrong, and corporations are able to
appear in person, I would still deny the Corporate Appellants’ motions. Mr.
Chow is neither an officer, director nor shareholder of either of the Corporate
Appellants. I am not aware of any interpretation of subsection 17.1(1) by which
a corporation could be said to appear in person through its external
accountant.
[49] In the further alternative, if some interpretation of subsection
17.1(1) that I have not considered requires me to apply the law as it currently
stands, I would still deny the Corporate Appellants’ motions. I would give
little or no weight to the Corporate Appellants submissions that Mr. Chow is a
skilled tax accountant who has years of experience, who regularly appears
before the Court in informal procedure matters and who has been involved in the
Corporate Appellants’ dispute since the audit stage. These are reasons to keep
Mr. Chow involved in the background of the litigation, not reasons why he
should be permitted to act as a lower cost alternative to a lawyer. I would
similarly give little or no weight to the fact that Mr. Chow is fluent in both
English and Cantonese while Mr. Liu and Mr. Lo speak only Cantonese. The fact
that Mr. Liu and Mr. Lo are unable to communicate in English without a
translator is not a reason to allow the Corporate Appellants to be represented
by their external accountant. It is a reason why the Corporate Appellants may
wish to retain counsel who speaks Cantonese or who has access to Cantonese
interpretation services. The Corporate Appellants allege that they cannot
afford to retain a lawyer. Under the current law, there is a division on the
Court over whether this is a relevant factor. Without deciding that point, I
would note that the Corporate Appellants have not provided sufficient evidence
of their financial position for this factor to weigh in their favour. In
particular, they have not explained why they can afford to pay Mr. Chow but cannot
afford to pay a lawyer. Ultimately, my primary reason for denying the Corporate
Appellants’ motions would be the lack of connection that Mr. Chow has to the
Corporate Appellants. As Justice Jorré recently stated in WJZ Enterprises v.
The Queen:
…While the rule
no longer requires that the individual be an officer of the corporation,
normally, that person should be an officer or director and, perhaps, a major
shareholder or key employee of the corporation. I hasten to add that in no
circumstances can an application under subsection 30(2) be used as a “back
door” to hiring a non-lawyer agent.
[Emphasis
added]
Appointing counsel
[50] The Corporate Appellants requested that, if I denied their motions,
they be given three months to find counsel. The Respondent agreed to that time
period. Accordingly, on or before February 28, 2018, the Corporate Appellants
shall serve and file a notice giving the name, address for service and
telephone number of their counsel.
Amended Pleadings
[51] The Notices of Appeal filed in these appeals contain very little in
the way of details. At the hearing of the motions, the Appellants agreed to
file Fresh as Amended Notices of Appeal that comply with the Rules. The parties
agreed that the Appellants should be given two months after the above deadline
to do so. Accordingly, the Appellants shall have until April 30, 2018 to serve
and file Fresh as Amended Notices of Appeal that comply with the Rules.
[52] The parties agreed that the Respondent should be given a further two
months to file Fresh as Amended Replies. Accordingly, the Respondent shall have
until June 29, 2018 to serve and file Fresh as Amended Replies.
Costs
[53] Although the Individual Appellants had no hope of success on their
motions, very little time was spent dealing with those motions. The bulk of the
time was focused on the motions of the Corporate Appellants. The outcome of
those motions was unrelated to the positions taken by any of the parties. Given
the prior state of the law, none of the parties could reasonably have
anticipated the conclusion that I have reached. In the circumstances, I believe
that one set of costs should be awarded in respect of all four motions and that
such costs should be in the cause.
Signed at Ottawa, Canada, this 28th day of
November 2017.
“David E. Graham”
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