Her Majesty the Queen v. William Lee, [1991] 2 CTC 344, 91 DTC 5596

Heald, J.A. (Stone and Linden, JJ.A., concurring):—This is a section 28 application to review and set aside the decision herein of Judge J.A. Brulé, a judge of the Tax Court of Canada dated March 15, 1991. In that decision Judge Brulé dismissed an application brought by this applicant pursuant to section 10 of the Tax Court of Canada Rules of Practice and Procedure for the Award of Costs (Income Tax Act) (hereafter the Rules) [1] for a review of the order made by Chief Judge Couture in which he awarded costs to the respondent on a solicitor and client basis.

On September 21, 1988, the respondent had filed an appeal from an assessment in respect of his income for the 1982 taxation year. On July 18, 1990, Chief Judge Couture of the Tax Court of Canada allowed the respondent's appeal and vacated the 1982 income tax assessment in issue. Although the reasons for judgment of Chief Judge Couture stated that costs were to be awarded on a solicitor and client basis, the judgment of the Court itself, dated July 18, 1990, awarded costs on a party and party basis. On July 27, 1990, an amended judgment was issued in which he affirmed the reasons for judgment dated July 18, 1990 and awarded costs to the appellant on a solicitor and client basis.

The reasons for judgment of Chief Judge Couture did not provide any express reasons for tne purported award of costs on a solicitor and client basis. Likewise, it appears that no submissions with respect to costs were made to Chief Judge Couture.

At the commencement of the argument before us, the Court raised a threshold problem with counsel relating to the jurisdiction of the Tax Court to issue the amended judgment of July 27, 1990, the effect of which was to change the award of costs from a party and party basis to a solicitor and client basis. Counsel for the applicant submitted that the Tax Court had jurisdiction to issue the amended judgment of July 27, 1990, because the amended judgment expressed the manifest intention of the Court as set out in the reasons for judgment referred to supra. Counsel relied on the judgment of this Court in Shairp v. The Queen, [1988] 2 C.T.C. 344; 88 D.T.C. 6484 per Marceau, J.A. I agree that the Shairp decision supports the submissions of counsel. Applicant's counsel relied further on the decision of the Exchequer Court of Canada in M.N.R. v. Gunnar Mining Ltd., [1970] C.T.C. 152; 70 D.T.C. 6135 at 168-69 (D.T.C. 6144-45) per President Jackett where the Court held that the Tax Appeal Board (which was a court of record), had the inherent power to change the record of a judgment pronounced by it so that it would accurately express the order actually made by the Board even though there was nothing in the statute law or the regulations that expressly permitted it to do so. I agree that this jurisprudence supports the Tax Court's jurisdiction in the circumstances at bar. Accordingly I am satisfied that the Tax Court did have jurisdiction to issue the amended judgment of July 27, 1990.

The applicant alleges threefold error in respect of the decision a quo:

(a) that Judge Brulé was without jurisdiction to deal with this matter since Rule 9(1) requires the Chief Judge to refer applications of this nature to a panel of three judges [2] ;

(b) that the Tax Court of Canada has no jurisdiction to award costs on a solicitor and client basis; and

(c) that this was not a proper case for an award of costs on a solicitor and client basis.

I do not think it necessary to consider the jurisdictional arguments raised in (a) and (b), supra, since I agree with the applicant that, on this record the respondent has not established a proper basis for the award of solicitor and client costs. Such an award of costs is ”. . . normally ordered in respect of the way in which a case has been conducted, not its intrinsic merit." [3]

Judge Brulé dealt summarily with the issue before him (Case, page 136):

I do not have the record of any comments the trial judge made through the course of the hearing at that time but the written judgment reveals certain findings that assist in the determination of the issue in this Application.

He then proceeded to cite four specific passages from the reasons for judgment of Chief Judge Couture and stated, thereafter (Case, page 137):

These passages could easily lead me to the conclusion that the Appellant should never have been forced to appeal to the Court, and accordingly, the trial judge was correct in making an award on a solicitor and client basis.

In my opinion, Judge Brulé was in error when he relied on the intrinsic merits of the taxpayer's appeal. Such a basis was disapproved of in the Reading & Bates case, supra. The decision of this Court in Amway Corporation v. 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. Chief Judge Couture did not support the award of solicitor and client costs with reasons nor is there any support visible on the record. My perusal of the passages of Chief Judge Couture's reasons relied on by Judge Brulé does not persuade me that those passages contain any support whatsoever for an award of solicitor and client costs. All four passages relate to the merits of the appeal and do not allege, in any way, misconduct connected with the litigation. Furthermore, the Chief Judge, in making the comments in the passages relied on, refers to "documentary evidence"; “financial information" and "financial data". This material which was before him and relied on by him is not a part of the record before this Court. Consequently, it is not possible to draw any conclusions with respect to that evidence.

In any event, as noted supra, it is not the kind of evidence required to support an order for solicitor and client costs. Accordingly, I would allow the section 28 application, set aside the decision of Tax Court judge J.A. Brulé and, pursuant to paragraph 52(d) of the Federal Court Act, order that the matter be referred back to the Tax Court of Canada for the taxation of costs on a party and party basis.

Application granted.