REASONS
FOR ORDER
Graham J.
[1]
In my Judgment dated September 27, 2017, I
allowed Jan Chaplin’s appeal with costs to Ms. Chaplin. I provided the parties
with time to reach an agreement on costs, failing which the parties were to
make written submissions regarding costs. The parties were unable to reach an
agreement and have now made written submissions.
[2]
The Respondent is requesting that each party
bear its own costs or, in the alternative, that costs be awarded to Ms. Chaplin
in accordance with Schedule II, Tariff B of the Tax Court of Canada Rules
(General Procedure) for a Class C proceeding.
[3]
Ms. Chaplin is requesting lump sum costs,
including disbursements, of $30,000 plus HST. This amount is equal to
approximately two and a half times the Tariff, plus disbursements.
[4]
Subsection 147(3) of the Tax Court of Canada
Rules (General Procedure) sets out the following factors that the Court may
consider in awarding costs:
(a)
the result of the proceeding,
(b)
the amounts in issue,
(c)
the importance of the issues,
(d)
any offer of settlement made in writing,
(e)
the volume of work,
(f) the
complexity of the issues,
(g) the
conduct of any party that tended to shorten or to lengthen unnecessarily the
duration of the proceeding,
(h) the
denial or the neglect or refusal of any party to admit anything that should
have been admitted,
(i) whether
any stage in the proceedings was,
(i)
improper, vexatious, or
unnecessary, or
(ii)
taken through
negligence, mistake or excessive caution,
.
. .
(j) any other matter
relevant to the question of costs.
Result of the Proceeding
[5]
Ms. Chaplin was entirely successful in her
appeal. That success is what justifies an award of costs in the first place.
[6]
In other circumstances, complete success might
justify increased costs. However, in this case Ms. Chaplin succeeded in the
appeal in spite of her arguments, not because of them. Her position had no
merit. It was only through deciphering the actual facts that I arrived at the
conclusion that I did. In the circumstances, awarding increased costs seems
inappropriate.
Amount in Issue
[7]
The amount in issue was $163,898. While that
amount was no doubt significant to Ms. Chaplin, it was not an overly
significant amount of money. Accordingly, I give little weight to this factor.
Importance of the Issues
[8]
The ultimate basis upon which the appeal was
decided involved an issue under subsection 15(1) that had not previously been
decided. The decision on that issue will have precedential value and may be of
interest to other taxpayers. That said, Ms. Chaplin’s submissions were
focused on different issues. I am not inclined to reward Ms. Chaplin through
costs for the fact that the law was advanced through efforts other than her
own.
Settlement Offers
[9]
A few weeks before trial, Ms. Chaplin made an
offer to the Respondent whereby Ms. Chaplin would not seek costs if the
Respondent reversed the reassessment. The offer did not comply with subsections
147(3.1) and (3.3) of the Rules.
[10]
While settlement offers are an important factor
in determining costs awards, I give little weight to Ms. Chaplin’s settlement
offer. Ms. Chaplin’s offer was little more than an invitation for the
Respondent to walk away. The basis upon which Ms. Chaplin was offering to
settle bore no relationship to the basis upon which the appeal was decided. The
only thing that was the same was the fact that there was no addition to Ms.
Chaplin’s income. My view would likely have been different if the settlement
offer had explained that the Respondent should walk away for a reason that was
appropriately connected with the factual and legal basis upon which the appeal
was ultimately decided.
Volume of Work
[11]
The amount of work involved in this appeal was
not significant. I am not giving any weight to this factor.
Complexity of the Issues
[12]
The issues in the appeal were not complex. I am
not giving any weight to this factor.
Conduct Affecting the Duration of the Proceeding
[13]
I give significant weight to this factor.
[14]
Ms. Chaplin took the position that the legal
expenses in question were not incurred for her benefit. The bulk of Ms.
Chaplin’s evidence and submissions focused on attempts to support this
position. There was no merit to this position. Ms. Chaplin should have admitted
that the legal expenses were incurred for her own benefit. Had she admitted
this fact and focused on the question of whether she had received a benefit
from the false bookkeeping entry, the trial would have proceeded much more
efficiently. In my view, the trial could have been completed in less than a day.
It could have been based entirely on an agreed statement of facts and could
have focused exclusively on the legal issue upon which the appeal was
ultimately decided. Instead it took two days and involved three witnesses and
numerous documents.
[15]
Ms. Chaplin argues that she had to introduce
evidence to counter incorrect assumptions of fact made by the Minister of
National Revenue. This argument would have merit if Ms. Chaplin had chosen to
respond to those assumptions of fact by telling the truth.
[16]
Ms. Chaplin also submits that the Respondent
pursued arguments that ultimately turned out not to have merit. The Minister
assessed on the basis of a false bookkeeping entry that Ms. Chaplin had directed
to be made. Ms. Chaplin was unwavering in her position that the bookkeeping
entry was accurate. The Minister correctly doubted her story. It is a bit much
for Ms. Chaplin to argue that the Minister should have done a better job of
determining exactly how Ms. Chaplin was misleading her.
Denial or Refusal to Admit
[17]
Ms. Chaplin’s refusal to admit that the legal
fees were incurred for her benefit undoubtedly affected the duration of the
proceeding. That said, it would be unfair to consider this same fact twice so I
give no weight to this factor.
Improper, Vexatious or Unnecessary Stages
[18]
There was no evidence that would suggest that
any stage in the proceeding was improper, vexatious or unnecessary.
Stages Taken Through Negligence, Mistake or Excessive
Caution
[19]
There was no evidence that would suggest that
any stage in the proceeding was taken through negligence, mistake or excessive
caution.
Other Relevant Matters
[20]
I am not aware of any other matters relevant to
the determination of costs.
Conclusion
[21]
Ms. Chaplin has asked for costs calculated at
two and a half times the Tariff. The Respondent submits that Ms. Chaplin should
not be awarded any costs.
[22]
Ms. Chaplin’s success entitles her to some level
of costs. However, her actions, both in misleading the Court and in wasting
time at trial, compel me to award only a minimal level of costs. In the
circumstances, I believe that Tariff costs with adjustments to reflect the time
that Ms. Chaplin wasted reflect such a minimum level of compensation. Tariff
costs are in no way reflective of the actual cost of litigation.
[23]
Based on all of the foregoing, costs are awarded
to Ms. Chaplin in accordance with Schedule II, Tariff B of the Tax Court of
Canada Rules (General Procedure) for a Class C proceeding. In the calculation
of such costs, Ms. Chaplin will only be entitled
to costs in respect of one day of trial and in respect of one counsel.
Disbursements
[24]
Ms. Chaplin’s list of disbursements includes
just under $2,000 in photocopy charges. Approximately half of those charges are
supported by third party invoices. The balance of the charges were for copies
made by Ms. Chaplin’s counsel. Counsel did not track the number of
in-house photocopies that were made in the course of the litigation. Counsel
explains that it is impractical for a small firm to do so. As a result, counsel
explains, Ms. Chaplin was charged “a very reasonable estimate on the disbursements of day-to-day
printing, photocopying, and postage incurred”. I
am not prepared to allow disbursements for in-house photocopies without
evidence of the number of copies that were made.
[25]
Much of the external photocopying that occurred
would have related to the meritless position that Ms. Chaplin pursued. I am not
prepared to compensate Ms. Chaplin for disbursements that she expended
needlessly. Since I have found that at least half of the time at trial was
unnecessary, I will allow half of the external photocopies.
[26]
The trial occurred in Hamilton. Ms. Chaplin’s
counsel is based in Toronto. Had Ms. Chaplin abandoned her meritless position,
the trial could have been completed in less than a day and counsel would only
have had to incur disbursements for one night of accommodation in Hamilton
instead of two nights. In the circumstances, the amount allowed for
accommodation shall be 50% of the amount claimed.
[27]
I am unwilling to allow disbursements in respect
of witnesses that were either not called to testify or whose testimony was
focused on defending Ms. Chaplin’s meritless position. As a result, Ms.
Chaplin will not be allowed any disbursements for witness fees, for the service
of subpoenas or for witness locator fees.
[28]
The disbursements claimed by Ms. Chaplin included
a disbursement for outside tax counsel. Allowing such an amount as a
disbursement would defeat the purpose of awarding costs pursuant to the Tariff.
[29]
Based on all of the foregoing, I will allow
disbursements of $1,664.23, including HST.
Costs in Respect of Submissions on Costs
[30]
The parties should have been able to resolve the
issue of costs without having to resort to the Court. Ms. Chaplin does not
appear to have given appropriate consideration to the comments that I made in
respect of costs in my reasons for judgment or to have recognized that her
success at trial had nothing to do with the position she advanced.
[31]
The position taken by the Respondent in respect
of costs was not unreasonable and the alternative position was generous. I am
confident that, had Ms. Chaplin recognized the weakness of her position, the
parties could have reached a settlement on costs that would not have been
dissimilar to the award I have ordered.
[32]
As a result, I find that Ms. Chaplin is not
entitled to costs for services after judgment. Instead, I award cost of $900 (being
double the Tariff) to the Respondent for all services after judgment, including
submissions in respect of costs. Such amount shall be offset against the costs
owing by the Respondent to Ms. Chaplin.
Signed at Ottawa, Canada, this 22nd day of December
2017.
“David E. Graham”
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