Adrian Veldman v. Minister of National Revenue, [1992] 1 CTC 2708, 92 DTC 1334

Rip, Beaubier and Bowman, T.C.C.J.:—This is an application made by the respondent under section 9 of the Tax Court of Canada Rules of Practice and Procedure for the Award of Costs (Income Tax Act) (" Court Rules"). That section provides that:

9. (1) Notwithstanding any other provision in these Rules, the Chief Judge may, either on his own motion or on application by an appellant or the respondent if in his opinion special circumstances exist, refer to a panel of three judges designated by him for determination of any question arising out of the application of or pertaining to these Rules.

(2) The panel of judges may, in dealing with a reference under subsection (1), approve, revoke, vary or amend any order, direction or taxation made respecting costs on the appeal to which the question referred relates.

The panel consists of the undersigned. The application was considered on the basis of written submissions.

Adrian Veldman ("Veldman") appealed an assessment of tax, notice of which is dated March 7, 1986, which was issued pursuant to subsections 227.1(1) and (10) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72,

c. 63) (the "Act"). Veldman was assessed on the basis that he was director of a corporation which had not remitted source deductions to the Receiver General for Canada pursuant to the Act for a three month period in 1982, in the aggregate amount of $4,693.24.

At the close of the trial of the appeal Mr. Dunlop, Veldman's counsel, requested that if his client's appeal is successful the Court award costs to Veldman on a solicitor and client basis. The trial judge, Brulé, T.C.C.J., stated that notwithstanding that he was limited to ordering party and party costs, he had the discretion to direct payment of a fixed sum of costs.

Judge Brulé delivered oral judgment on January 31, 1991 allowing Veldman's appeal. Mr. Dunlop submitted a Bill of Costs in the amount of $5,544.62 to the Court and the trial judge fixed costs at that amount.

It is the applicant's position that Judge Brulé erred in law in fixing the costs of the appeal at $5,544.62 since the amount is greater than the amount permitted by section 8 of the Rules, that is, party and party costs.

Counsel for Veldman submitted that costs on appeal are in the discretion of the presiding judge (sections 4 and 5) and under the Rules a judge may direct the payment of a fixed sum in lieu of taxed costs. In exercising this discretion, counsel submitted, the trial judge shall take into account the matters set out in subsections 5(3) and 5(4).

In the submissions of counsel for Veldman there are ample grounds to support the exercise of the discretion by the trial judge to award more than party and party costs. These include the findings that the respondent failed to confirm the assessment with “all due dispatch", that a cheque sent to the respondent was not cashed immediately and that the appellant was assessed for a period of time when a receiver controlled the corporation in default.

Section 4 of the Court Rules reads as follows:

4. Subject to section 5, costs on an appeal shall be in the discretion of the judge by whom the appeal is disposed of where the disposition is favourable to an appellant, unless otherwise ordered.

The relevant portions of section 5 are:

5. (2) A judge may direct the payment of a fixed sum in lieu of taxed costs.

(3) In exercising his discretion respecting costs, a judge shall to such extent, if any, as may be appropriate in the circumstances take into account

(a) any unnecessary or improper act or omission by or on behalf of the appellant or the respondent;

(b) the amount of tax, interest or penalties in issue in the appeal;

(c) the complexity of the appeal;

(d) the importance of the issues; and

(e) any other matter relevant to the question of costs.

(4) Without limiting the generality of subsection (3), a judge shall, for the purpose of that subsection, have regard in particular to the following matters:

(a) the omission to do anything the doing of which would have been calculated to save costs;

(b) the doing of anything calculated to occasion, or in a manner or at a time calculated to occasion, unnecessary costs; and

(c) any unnecessary delay in the proceedings.

Subsections 1, 2 and 3 of section 8 read:

(1) This section applies to the taxation of party and party costs where an appellant is entitled to them.

(2) The following fees may be allowed for the services of counsel:

(a) for the preparation of a notice of appeal, $75;

(b) for preparing a hearing $175;

(c) for the conduct of a hearing, $125 per half day or part thereof; and

(d) for the taxation of costs, $50.

(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).

We have reviewed the transcript of evidence at trial as well as the arguments of the parties at trial, including the reasons for judgment of the trial judge awarding the fixed sum of costs. Nowhere in the appeal process is there any indication that there was any unnecessary or improper act or omission by or on behalf of the respondent. The amount of tax in issue was modest and the issue itself has been reviewed by the courts on numerous occasions. The grounds specified by counsel for Veldman to permit the trial judge to exercise his discretion did not occur during the appeal process of this Court. There is nothing to indicate the facts in this particular appeal were complex and Judge Brulé did not refer to any complexity in his reasons. There is nothing to indicate the trial judge addressed his mind to any of the matters described in subsection 5(4) simply because these matters were not present in this appeal.

We are of the opinion that in this appeal there existed no circumstances or matters to permit the trial judge to exercise his discretion to direct the payment of the sum of $5,544.62 in lieu of taxed costs. We note that the sum of $5,544.62 represents a bill of fees prepared by the solicitor for Veldman. We are of the view that section 5 permits a judge to direct payment of a fixed sum in lieu of taxed costs in an amount greater than party and party costs to which the appellant may be entitled by section 8. Subsections 5(3) and (4) specifically refer to circumstances when party and party costs may be exceeded.

In Her Majesty the Queen v. William Lee, [1991] 2 C.T.C. 344, 91 D.T.C. 5596, Heald J.A. (F.C.A.), speaking for the Court respecting a similar matter stated, at page 346 (D.T.C. 5598):

The decision of this Court in Amway Corporation v. Her Majesty the Queen, [1986] 2 C.T.C. 339, is also relevant. In that case, Mr. Justice Mahoney stated at 340- 41:

Costs as between solicitor and client are exceptional and generally to be awarded only on the ground of misconduct connected with the litigation.

He added at 341:

While an appellate court is reluctant to interfere with what is essentially an exercise of judicial discretion, it will necessarily do so when that exercise of discretion is not supported by reasons or apparent on the record.

[Emphasis added.]

I consider the situation at bar to be quite similar to that in Amway, supra.

We find that the scope of a judge in this Court to award an amount in excess of the tariff of party and party costs set forth in the Court Rules which govern this matter is similarly circumscribed. Such a sum should only be awarded in relation to matters connected with the litigation since subsection 5(2) specifically states that such fixed sums shall be "in lieu of taxed costs". [1]

There is no evidence on the record to support the payment of a fixed sum of costs in excess of the party and party costs.

We hereby amend the order of the trial judge to permit party and party costs in the amount of $500 plus disbursements which were essential for the conduct of this appeal.

Order accordingly.