Décary J.A.:
This is an application for judicial review of a decision of the Tax Court of Canada whereby Bowman J. allowed an appeal with respect to the decision of a taxing officer.
The standard that governs the review of a taxing officer’s discretion in allowing specific items on a taxation has been described as follows by this Court in IBM Canada Ltd. v. Xerox Canada Ltd., (1976), [1977] 1 F.C. 181 at 185 (Fed. C.A.), Urie J.A.:
[...] the discretion ought not to be interfered with unless the amounts allowed are so inappropriate or his decision is so unreasonable as to suggest that an error in principle must have been the cause [...]
The case at bar originates from a decision of Garon J. rendered under the informal procedure of the Tax Court of Canada Act, R.S.C. 1985, c. T-2, as amended (“the Act”) in which he allowed Mrs. Munro’s appeals against the Minister of National Revenue (“the Minister”) in respect of three taxation years. In his judgment Garon J. held that Mrs. Munro was:
[...] entitled to be reimbursed any expenses she may have incurred in connection with her appeals.
[Applicant’s Application Record at 32]
At trial, Mrs. Munro was represented by an agent, as authorized by section 18.14 of the Act. That agent was an accountant.
Mrs. Munro then submitted a Bill of Costs in the following form:
Bill of Costs
This is my bill of costs in the above appeal.
A. For services of counsel I claim the following:
(a) preparation of notice of appeal, $ 244,67
(b) preparation of hearing, $ 246,10
(c) conducting the hearing (1/2), $ 287.50
(One half day)
(d) for taxation of costs, $ nil
B. For witnesses fees I claim the following: $ nil
C. For expert witnesses I claim the following: $ 400,00
D. Other disbursements: $ 120.00
[...]
[Applicant’s Application Record at 9]
At the taxation hearing, item C (expert witnesses) was agreed to but reduced to $300.00 (which is the maximum allowed by the Tax Court of Canada Rules (Informal Procedure) SOR/90-688, as amended, (“the Rules”). Item D was also agreed to. The only issue left to be resolved was that of item A, that is the claim “for services of counsel”.
With respect to item A, Mrs. Munro explained that the fees claimed were fees that her accountant had charged for representing her at the hearing of the appeal. As a matter of fact, it is interesting to note that the total amount claimed for the accountant’s fees — $778.27 — is slightly superior to the maximum allowed for counsel fees under rule 11, i.e. $700.00.
The taxation officer assumed that Garon J.’s Order meant “party to party costs” and he accepted the Minister’s submission to the effect that the Rules only allow fees that relate to services of counsel. He relied on the decision of the Tax Court in Edgar v. R., [1994] 1 C.T.C. 2562 (T.C.C.), Christie A.C.J.T.C.C., to deny the costs related to the service of agents.
The reviewing judge agreed with the taxation officer that “in general nothing should be allowed for the fees of an agent” under rules 11 and 12 “where a litigant is awarded his or her “costs” simpliciter". He went on, however, to rule that in the case at bar Garon J. had not awarded “costs” but had, instead, allowed the reimbursement of “any expenses” which, in his view, fell under rule 12(3) and could well include agent fees. He observed that as Garon J.’s judgment had not been appealed, the order as to the reim- bursement of “any expenses” was unassailable and not subject to collateral attack through the taxation process.
The relevant provisions of the Act and of the Tax Court of Canada Rules (Informal Procedure) are as follows:
Tax Court of Canada Act
Informal Procedure
18.14 All parties to an appeal referred to in section 18 may appear in person or may be represented by counsel or an agent.
[...]
18.26 (1) Where an appeal referred to in section 18 is allowed and the judgment reduces the aggregate of all amounts in issue or the amount of interest in issue, or increases the amount of loss in issue, as the case may be, by more than one- half, the Court may award costs to the appellant in accordance with the rules of Court.
[...]
Rules
20 (1) Subject to the approval of the Governor in Council, rules for regulating the pleadings, practice and procedure in the Court shall be made by the rules committee.
(1.1) Without limiting the generality of the foregoing, the rules committee may make rules
[...]
(j.) for awarding and regulating costs in the Court in favour of or against the Crown as well as other parties and for authorizing the refusal of costs to an appellant who, in circumstances in which the appellant could make an election under section 18, does not make such an election.
Procédure informelle
18.14 Les parties à un appel visé à l’article 18 peuvent comparaître en personne ou être représentées par avocat ou par un autre représentant.
[...]
18.26 (1) Dans sa décision d’accueillir un appel visé à l’article 18, la Cour peut, conformément aux modalités prévues par ses règles, allouer les frais et dépens à l’appelant si le jugement réduit de plus de la moitié le total de tous les montants en cause ou le montant des intérêts en cause, ou augmente de plus de la moitié le montant de la perte en cause.
[...]
Régies
20. (1) Sous réserve de leur approbation par le gouverneur en conseil, les régies concernant la pratique et la procédure devant la Cour sont établies par le comité des régies.
(1.1) Sans qu'il soit porté atteinte à l’application générale de ce qui précédé, le comité des régies peut prendre des régies sur les objets suivants:
[..)
j) l’attribution et la réglementation des frais et dépens tant en ce qui concerne Sa Majesté du chef du Canada que les parties, et le refus d’octroyer les dépens à un appelant qui, dans les circonstances où l’appelant pouvait faire le choix visé à l’article 18, n’a pas fait un tel Choix.
Tax Court of Canada Rules (Informai Procedure)
Interpretation
2 In the rules,
“counsel” means every person who may practise as a barrister, advocate, attorney or solicitor in any of the provinces; (avocat)
Costs
10 (1) Costs on an appeal shall be at the discretion of the judge by whom the appeal is disposed of in the circumstances set out in subsection 18.26(1) of the Act which reads as follows:
18.26 (1) Where an appeal referred to in section 18 is allowed and the judgment reduces the aggregate of all amounts in issue or the amount of interest in issue, or increases the amount of loss in issue, as the case may be, by more than one half, the Court may award costs to the appellant in accordance with the rules of Court.
(2) A judge may direct the payment of costs in a fixed sum, in lieu of any taxed costs.
11 On the taxation of party and party costs the following fees may be allowed for the services of counsel
(a) for the preparation of a notice of appeal, $150,
(b) for preparing for a hearing, $200,
(c) for the conduct of a hearing, $300 per half day or part thereof, and
(d) for the taxation of costs, $50.
12 (1) A witness, other than a witness who appears to give evidence as an expert, is entitled to be paid by the party who arranged for his attendance $50 per day, plus reasonable and proper transportation and living expenses.
(1.1) An amount is not payable under subsection (1) in respect of an appellant unless the appellant is called upon to testify by counsel for the respondent.
(2) There may be paid to a witness who appears to give evidence as an expert a reasonable payment, not to exceed $300 per day unless the Court otherwise directs, for the services performed by the witness in preparing himself to give evidence and giving evidence.
(3) Such other disbursements may be allowed as were essential for the conduct of the appeal, if it is established that the disbursements were made or that the party is liable for them.
Définition
2 Les définitions qui suivent s’appliquent aux présentes régies.
“avocat” Quiconque peut exercer à titre d’avocat ou de procureur dans une province. (counsel)
Frais et dépens
10 (1) Les dépens sont laissés à la discrétion du juge qui règle l’appel, dans les circonstances établies au paragraphe 18.26(1) de la Loi qui prévoit ce qui suit:
18.26 (1) Dans sa décision d’accueillir un appel visé à l’article 18, la Cour peut, conformément aux modalités prévues par ses régies, allouer les frais et dépens à l’appelant si le jugement réduit de plus de la moitié le total de tous les montants en cause ou le montant des intérêts en cause, ou augmente de plus de la moitié le montant de la perte en cause.
(2) Le juge peut ordonner le paiement d’un montant forfaitaire, au lieu des dépens taxés.
11 Lors de la taxation des dépens entre parties, les honoraires suivants peuvent être adjugés pour les services d’un avocat:
a) la préparation de l’avis d’appel — 150 §,
b) la préparation de l’audience — 200 $,
c) l’audience — 300 $ pour chaque demi-journée ou fraction de celle-ci,
d) la taxation des dépens — 50 $.
12 (1) Un témoin, sauf s’il comparaît en qualité d’expert, a le droit de recevoir de la partie qui l’a convoqué le montant suivant: 50 $ par jour plus les frais de déplacement et de subsistance raisonnables et appropriés.
(1.1) Aucun montant n’est payable à l’appelant aux termes du paragraphe (1), à moins que l’avocat de l’intimée n’ait appelé l’appelant à témoigner.
(2) IT peut être versé au témoin qui comparaît en qualité d’expert un montant raisonnable, qui ne doit pas dépasser 300 $ par jour, sauf si la Cour en ordonne autrement, en échange de ses services, tant pour préparer son témoignage que pour le rendre.
(3) Les autres débours essentiels à la tenue de l’appel peuvent être adjugés s’il est établi qu’ils ont été versés ou que la partie est tenue de les verser.
I beg to differ with the learned Judge’s view on the collateral attack issue.
Garon J. had no power under subsection 18.26(1) of the Act other than to “award costs”. That he chose the words “any expenses” should not dis- tract from the fact that his order was and could only have been an award of costs, nor from the fact that an award of costs is governed by the Rules adopted with respect to costs.
The Tax Court Judge is given by rule 10(1) the discretion to award or not to award costs. Once he exercises that discretion and decides to award costs, he can only award costs that are permissible under the Rules. As rightly observed by Millar J.A. in Weston Bakeries Ltd. v. Baker Perkins Inc. (1960), 31 W.W.R. 200 (Man. C.A.), at 209-10 (Man. C.A.), aff’d by the Supreme Court of Canada in short oral reasons (1961), 35 W.W.R. 576 (S.C.C.),
[...] But the decisions in the English jurisdiction lead me to think that the discretion allowed judges was not unlimited, nor did it empower them to say items were costs which were not previously allowable as costs, nor, under the guise of discretion, to make new tariffs. In my opinion the “discretion” was given for the purpose of controlling recognized costs and not to authorize as costs matters or items not previously recognized nor to create new costs or alter the basis on which costs are awarded [...]
(See, also, Donald Campbell & Co. v. Pollack, [1927] A.C. 732 (U.K. H.L.), at 811-12, Viscount Cave L.C.).
Costs permissible under the Informal Procedure Rules are of two kinds: an award of a fixed sum, in lieu of any taxed costs (rule 10(2)); or an award of taxed costs, which are payable by one party to another. These taxed costs are classified, for all practical purposes, under two headings: costs as between party and party and costs as between solicitor and client. I fully endorse in this context the view expressed by Mahoney J. (as he then was) in R. v. Creamer, [1977] 2 F.C. 195 (Fed. T.D.) at 200:
[...] I see no present, practical, value in perpetuating refinements developed in other jurisdictions and other times which, however meaningful there and then, serve no useful purpose here and now [...]
One must start from the premise that Garon J. was purporting to act within his authority under the Act when he made an order for "reim- burse[ment] of any expenses she may have incurred in connection with her appeals”. These words, individually or as a phrase, are not those found in the Rules, except for “expenses” which, in rule 12(1), is used in the narrow context of “reasonable and proper transportation and living expenses”. These words cannot be equated with an order for costs in a fixed sum. Nor can they be equated with an order for solicitor and client costs: the agent is not a solicitor and in any event counsel for the respondent had not been given an opportunity to respond as is mandated by the caselaw. They can only be equated with an order for costs on a party to party basis, which is the order generally made or implied unless express words to the contrary appear in the order.
In Simpson v. Inland Revenue Commissioners, [1914] 2 K.B. 842 (Eng. K.B.), Scrutton J. (as he then was), ruled that an order that “any expenses incurred by the Commissioners be paid by the appellant” (at 842) was void for uncertainty. He observed:
So far as I know the term “expenses” is not, as the term “costs” is, a term of art in English law. If a taxing Master were directed to tax “expenses” he would not understand what he was to do [...] This difficulty would have been avoided if the referee in the present case had used the word “costs” instead of "expenses"[...] [at 845]
Scrutton J. was not prepared to substitute the word “costs” to the word “expenses” in the order at issue and he quashed the order. One need not go that far: as the word “expenses”, in the context in which it was used by Garon J., is not known to our law unless it means “costs”, it is sufficient to interpret it as having that very meaning. Not to do so would be tantamount to decide that Garon J. did not exercise his discretion to order costs judicially, and neither party is making that suggestion. I am certainly not prepared to interpret a word in a court order which may be ambiguous in such a way as to choose an interpretation that renders that order void over one that makes it valid, even more so where the quashing of the order as to “expenses” would be prejudicial to the otherwise successful taxpayer. The following observations of Lambert J.A. in Stiles v. British Columbia (Workers' Compensation Board) (1989), 39 C.P.C. (2d) 74 (B.C. C.A.), at 78:
[...] The discretion [with respect to costs] must be exercised judicially, i.e. not arbitrarily or capriciously. And [...] it must be exercised consistently with the Rules of Court. But it would be a sorry result if like cases were not decided in like ways with respect to costs. So, by judicial comity, principles have developed which guide the exercise of the discretion of a Judge with respect to costs. Those principles should be consistently applied; if a Judge declines to apply them, without a reason for doing so, he may be considered to have acted arbitrarily or capriciously and not judicially.
reinforces my view that Garon J. did not intend to deviate from the customary practice in the Tax Court of Canada.
When the Minister was apprised of the Order of the Tax Court, he could only assume that the “expenses” therein allowed were the usual fees and disbursements set out in the Rules. Unless he opposed the award of costs per se — which he did not — I fail to see how his failure to appeal that award can prevent him at the taxation stage to argue that an expense claimed in a bill of costs falls outside the scope of the Rules. This is not, in my respectful view, a case of collateral attack.
Absent that collateral attack issue which was the sole ground invoked by the Judge to interfere with the taxation officer’s discretion, we are left with a decision which for all practical purposes confirms that of the taxation officer and results in a denial of agent fees. Bowman J. was obviously not able, if it had not been for the collateral attack argument, to conclude that the taxation officer made a decision “so unreasonable as to suggest that an error in principle must have been the cause” (see IBM Canada Ltd. v. Xerox of Canada Ltd, supra, para. 2). Neither am I.
The informal procedure set out in the Act specifically contemplates in section 18.14 representation by an agent; yet, the Rules Committee has expressly restricted the taxable fees to those relating to “services of counsel”. It does violence to the very clear intent in rule 11 of restricting fees to services of counsel to suggest that the words “such other disbursements” in rule 12(3) can be interpreted in such a way as to include fees for services of agents and furthermore to allow such agents the right to claim whatever they want beyond and above what counsel are allowed to claim. Agents should not be allowed to claim indirectly under rule 12(3) what has been directly denied to them in rule 11.
I note that Mrs. Munro herself, in her Bill of Costs, has claimed her agent fees as being “for services of counsel”, which, of course, they are not. Had her accountant been called as an expert witness, she could have claimed her accountant’s fees under rule 12(2). But inasmuch as the costs claimed are with respect to the services of her accountant as an agent, and not with respect to his services as an expert witness or in an otherwise permissible capacity, these costs cannot be allowed under the Rules.
This Court is not at liberty to tamper with the rules set out by the Rules Committee of the Tax Court of Canada. It may be argued that a judge could take them into consideration if he or she opts for a fixed sum in lieu of taxed costs pursuant to Rule 10(2), but this is not what happened here and I express no view as to the merit of the argument. (See Lavigne v. Canada (Human Resources Development) (June 8, 1998), Doc. A-104-97 (Fed. C.A.) [unreported]).
Counsel for the respondent has relied heavily on the decision of the British Columbia Court of Appeal in Skidmore v. Blackmore (1995), 35 C.P.C.
(3d) 28 (B.C. C.A.). Even if that decision were relevant in the case at bar, which is doubtful, it would be of little assistance for it deals with the prac- tice in the courts of British Columbia which, in many regards, is different from that in the Tax Court.
The application should be allowed, the decision of the Tax Court Judge should be set aside and the matter should be remitted to the Tax Court for a new determination on the basis that the appeal from the decision of the taxing officer ought to be dismissed. As provided by section 18.25 of the Tax Court of Canada Act, the respondent is entitled to her “reasonable and proper costs” in respect of this application.
Appeal allowed
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