Eugene Tibbits v. Her Majesty the Queen, [1995] 1 CTC 2706, 96 DTC 1199

Sarchuk J.T.C.C.:—This is a motion by the appellant for an order setting aside a judgment of this Court dated April 10, 1992 by virtue of which the appeals of Eugene Tibbits from assessments made under the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (the ’’Act”) for the 1980, 1981 and 1982 taxation years were dismissed. I have before me the affidavits of the appellant dated December 23, 1993 and August 24, 1994 together with the documents attached thereto.

The grounds for the motion are: (a) the Tax Court of Canada has an inherent jurisdiction to make the order requested; (b) the appellant did not have notice of the hearing which resulted in the April 10, 1992 judgment;

(c) the appellant was not personally at fault for the failure to appear at the aforesaid hearing; and (d) the respondent will not be prejudiced.

Appellant’s position

During the 1980, 1981 and 1982 taxation years the appellant was self- employed. For a number of years he had retained a chartered accountant, R. Patrick Goguen (Goguen), to complete his and his wife’s personal income tax returns as well as financial statements for the appellant’s business. The retainer continued until November 1993.

With respect to the taxation years in issue the appellant admits he was advised of the assessments by the respondent by way of notices mailed on June 17, 1985. He filed objections on August 23, 1985 and then was further assessed on October 24, 1986. By letter dated November 13, 1986 Goguen advised the Registrar of the Tax Court of Canada of the appellant’s intention to appeal. A similar letter, also dated November 13, 1986, was for- warded to Revenue Canada, Taxation. [1] The appellant asserts that he had not seen the latter document until it was produced to him at the time of the making of his affidavit.

It is not disputed that Goguen received a reply to the notice of appeal followed by two notices of hearing dated February 15, 1989 and May 16, 1989. The appellant maintains that he was not aware of these documents nor were they brought to his attention by Goguen. On February 10, 1992 counsel for the respondent wrote to Goguen enclosing a notice of motion for an order to have the appeal dismissed for want of prosecution. The notice of motion specified that the hearing was scheduled for April 1, 1992. The appellant maintains that he did not receive the notice nor did Goguen tell him of the hearing. The motion was heard, no one attending for the appellant, and the appeals were dismissed. An order to that effect was signed on April 10, 1992 and on April 22, 1992 counsel for the respondent wrote to Goguen enclosing a copy of the judgment. The appellant says he did not receive either document, nor was he advised by Goguen of the judgment.

The appellant further asserted that he had no knowledge of any of the foregoing until November 1993 when his wife was assessed by the respondent pursuant to the provisions of section 160 of the Income Tax Act for amounts allegedly owed by the appellant.

Further facts

During the course of the conference call counsel for the parties and the Court became aware of the existence of a registered letter dated April 22, 1992 which had been sent to the appellant by the Registrar of the Tax Court of Canada. Enclosed with the letter was a certified true copy of the formal judgment dismissing his appeals for the taxation years in issue. In his supplementary affidavit the appellant stated only that he does not recall seeing this letter and furthermore, had he received it he would have delivered it to Goguen.

Appellant’s position

The primary argument advanced is that the appellant did not have knowledge or notice of the hearing to dismiss the appeals. Therefore the judgment of the Tax Court of Canada of April 10, 1992 is an ex parte judgment. The fact that an agent has received a notice of hearing is not of itself determinative of whether the judgment is ex parte (Malowitz v. M.N.R., [1991] 2 C.T.C. 2109, 91 D.T.C.837 (T.C.C.)).

The Tax Court of Canada has jurisdiction to set aside a judgment issued ex parte. This jurisdiction is based on the inherent jurisdiction of the Court. (Curoe v. M.N.R., [1991] 1 C.T.C. 2513, 91 D.T.C. 782 (T.C.C.) at page 2514 (D.T.C. 783); Malowitz, supra; May & Baker (Canada) Ltd. v. The Oak et al., [1979] 1 F.C. 401, 89 D.L.R. (3d) 692 (F.C.A.) at F.C. page 404-05)

Counsel for the appellant submitted that the facts advanced clearly justified the exercise of the Court’s discretion in favour of the appellant. First, he was not personally to blame for his failure to appear. Second, the conduct and possible negligence of the person entrusted with the conduct of the appeal is a factor which must be considered in deciding whether to vacate the ex parte judgment. Furthermore, the appellant acted at the first reasonable opportunity and promptly upon learning of the judgment. As well, there would be no prejudice to the respondent if such an order is granted.

Respondent's position

As to the facts, counsel for the respondent submitted that no suggestion had been made by the appellant that his agent Goguen did not receive any of the relevant documents including the notice of motion and supporting material. He argued that what was missing from the factual background presented by the appellant is any evidence whatsoever from Goguen or anyone else to account for the non-appearance of either the appellant or Goguen at the hearing in Fredericton on April 1, 1992. In the present circumstances the judgment of April 10, 1992 dismissing the appeals clearly was not an ex parte judgment and thus this Court does not have jurisdiction to set it aside. In the alternative counsel submitted that if there is jurisdiction to set aside the judgment the facts do not justify an exercise of the Court’s discretion in favour of the appellant.

Conclusions

The Supreme Court of Canada has acknowledged the inherent jurisdiction of trial judges to review ex parte orders (Knox Contracting Ltd. v. The Queen, [1990] 2 S.C.R. 338, [1990] 2 C.T.C. 262). As noted by counsel for the respondent, this inherent jurisdiction is generally concerned with orders which deal with interlocutory matters in an existing law suit or collateral investigatory measures before a law suit begins, not with judgments which result in a final determination of the matters in issue. In Curoe, Christie A.C.J.T.C. quoted, with approval, from the judgment of Jackett C.J. in May & Baker (Canada) Ltd., supra, at pages 404-05 (D.L.R. 694-95), as follows:

Generally speaking, when a court makes an order or delivers a judgment, in the absence of special provision, it is without authority to review such order or judgment. Its correctness can only be dealt with on appeal. When however, an order is made ex parte, in my view, in the absence of something to the contrary, there is an inherent jurisdiction in the Court, after the party adversely affected has been given an opportunity to be heard, if it then appears that the ex parte order or judgment should not have been made,

(a) to set aside the ex parte order or judgment as of the time when the order setting aside is made, and

(b) to make such ancillary order as may be necessary to restore the party adversely affected to the position he would have been in if the ex parte order or judgment had not been made.

[Emphasis added.]

May and Baker, it should be noted, involved an interlocutory order extending the time for service of a declaration. It was clearly obtained ex parte and the party adversely affected was never given an opportunity to be heard.

The submission by counsel for the appellant is that the judgment in the matter before me was made ex parte in circumstances generally indistinguishable from those found by the Court in Curoe and Malowitz. I am unable to agree.

In Curoe the taxpayer established that she did not receive the notice of hearing, evidence being adduced that the unopened envelope containing the notice had been returned to the Tax Court of Canada. Christie A.C.J.T.C. on those facts found that the judgment, although final, was made ex parte, thus the inherent jurisdiction of the Court could be invoked and accordingly the judgment was set aside. That is not the case here since notice was served on the appellant’s duly appointed agent Goguen.

In Malowitz the Court heard and accepted testimony that the applicant’s counsel received the notice of hearing but through an oversight it did not come to his attention in time to permit him to make an appearance. The Court determined this was an ex parte order previously made by it in the absence of a party who failed to appear through "accident or mistake". By drawing an analogy to Rule 330 of the Federal Court Rules the motion judge found jurisdiction to rescind the order.

In my view Malowitz is distinguishable. The admission by applicant’s counsel that through oversight the notice of hearing did not come to his attention in time for him to make an appearance provides a basis, albeit somewhat tenuous, to support a finding that the order in question was made ex parte. In the present matter there is no evidence which provides an acceptable explanation for Goguen’s non-appearance, thus there is no evidentiary basis upon which I can properly infer that it resulted from accident or mistake or can be attributed to negligence. Furthermore, there is nothing before me to indicate why such evidence was unobtainable.

With respect to Federal Court Rule 330 the motion judge in Malowitz quite carefully noted:

The common law rule has been codified in Rule 330 of the Federal Court Rules. This rule states that a judge may rescind an ex parte order or any order made in the absence of a party who failed to appear through accident or mistake. J emphasize these words "accident or mistake".

[Emphasis added.]

In my view the Federal Court Rule adopted by analogy in Malowitz goes no further than confirming the right of a Court to rescind an order in certain, quite limited, circumstances such as when the order is clearly one that was made ex parte, or, when it is "de facto ex parte" as a result of the non- appearance arising by virtue of accident or mistake or by reason of insufficient notice.

In the matter before me judgment was obtained upon proper notice, not ex parte. Goguen, as the appellant’s agent, was clearly authorized to act for the appellant, was notified, had the opportunity to present the appellant’s case but did not do so. It is fair to say that the appellant turned over all of his accounting and taxation matters to Goguen and paid little or no attention to them himself. This is tantamount to giving the agent carte blanche to exercise his best judgment. In such circumstances and absent some reasonable explanation for the non-appearance an inference can just as readily be drawn that a conscious decision not to appear was taken by Goguen.

Last, I am not satisfied that the appellant would be entitled in any event to have the Court’s discretion exercised in his favour. He suggests that all blame for the non-appearance at the hearing of the motion rests with his accountant, Goguen. The evidence before me, however, leads to the conclusion that throughout the relevant periods he himself did not act with due diligence. Furthermore, I am not satisfied that he acted at the first opportunity and promptly upon learning of the judgment. He alleged that it was not until November 1993 that he learned that an order had been made dismissing his appeals. [2] That assertion is inconsistent with certain other facts. In April 1992 a registered letter was sent to him enclosing the formal judgment. His assertion that he does not recall seeing this letter, or if he did see it turned it over to his accountant, is to say the least, unconvincing. Then in May 1992 and on one other occasion in the fall of that year in the course of discussions with an official from Revenue Canada, Collections, he was advised that he had lost his appeal. [3] Although he professed to have consulted with Goguen, no further action was taken by him until his wife was reassessed in November 1993 for taxes due and owing by the appellant himself.

The appellant has not established to my satisfaction that the failure to appear was caused by exceptional circumstances. The motion is dismissed.

Motion dismissed.