R. v. Carr, [1996] 2 CTC 100, 96 DTC 6321

Stone J.A.: — This is an application to review and set aside a decision of Kampo J.T.C.C. of February 27, 1995, made upon a review of taxation of costs by the Registrar of that Court and in particular a disbursement incurred by the respondent.

It is common ground that taxation of the disbursement is governed by subsection 8(3) of the Tax Court of Canada Rules of Practice and Procedure (Income Tax Act), which reads:

8(3). Such disbursements may be allowed as were essential for the conduct of the appeal, including witness fees paid in accordance with subsection (4) or (5).

The taxation of costs arose out of a judgment rendered by Brulé J.T.C.C. in an appeal brought in July 1988 from assessments involving the Valuation Day value of certain shares held by the respondent in Pine Pass Coal Company Ltd. The respondent sought to establish on that appeal that the shares had a value of $1800 each. The Minister attempted to establish a value of $700 per share. On the evidence before him, the judge at trial determined the value of each share to be $1500. At the same time he awarded the respondent “60 per cent of his costs”.

The disbursement sought to be recovered on the taxation is the sum of $1685.20 paid by the respondent in 1980 to an appraiser, Dr. Guthrie, for preparing a report on the value of the shares in question. The Registrar disallowed the disbursement in its entirety on the ground, as he put it at page 6 of his reasons:

As a general rule, costs that are recoverable are the costs incurred after the filing of the Notice of Appeal.

For that proposition, the Registrar cited the decision of the Tax Court of Canada in Veldman v. Minister of National Revenue, [1992] 1 C.T.C. 2708, 93 D.T.C. 1334 where, in a footnote, it was stated at page 2710 (D.T.C. 1336):

We note that Mr. Dunlop’s Bill of Costs refers to services performed prior to the receipt of the Notice of Confirmation by the respondent. A party is only entitled to costs for litigation which, in income tax appeals, commences with the Notice of Appeal. Negotiations with the respondent prior to assessment, the preparation of a Notice of Objection and similar matters are not items to which counsel is entitled to costs.

The Tax Court was there concerned with services rendered by counsel rather than with a disbursement claimed under subsection 8(3) of the Rules.

In allowing 60 per cent of the disbursement, Kampo J.T.C.C. took note of the use made of the Guthrie report by the judge at trial. Indeed, in his reasons for judgment, at page 5, for example, Brulé J.T.C.C. makes explicit reference to “the assumptions made by Dr. Guthrie in is report” and proceeds to reproduce them verbatim. That judgment was not challenged by way of appeal to this Court.

Like Kampo J.T.C.C., we do not read subsection 8(3) of the Rules as necessarily requiring that a disbursement be incurred after an appeal to the Tax Court has been launched in order for it to be regarded as “essential for the conduct of the appeal”. While those words may generally be regarded as referring to disbursements incurred in an appeal proceeding, they do not appear to exclude from allowance a disbursement which was incurred prior to the commencement of an appeal if it could be shown that the disbursement was nevertheless “essential for the conduct of the appeal”.

conduct of the appeal. We adopt in particular her analysis at page 14 of her reasons, where she stated:

The situation here is highly unusual. Revenue Canada (Taxation), the parties’ appraisers, and the trial judge obviously utilized the Guthrie report in one way or another, and it was prepared at the behest of Pine Pass’ shareholders precisely for the purpose for which it was ultimately utilized. The reasons delivered by the taxing officer show a failure on his part to direct his mind to two important factors; one concerns the essentialness of the disbursement having been made in the context of the actual use made of the report in the conduct of the appeal and the other was that it had been commissioned by the successful party in respect of the issue as actually litigated.

In our view, Kampo J.T.C.C. was correct in concluding that the Registrar erred in principle in not treating the disbursement as allowable under subsection 8(3) of the Rules.

The application will be dismissed.

Application dismissed.