Lamarre
7.C.J.:
Counsel
for
the
appellant
brought
a
motion
for
an
order
directing
the
taxing
officer
to
fix
all
costs
without
reference
to
Schedule
II,
Tariff
B
of
the
Tax
Court
of
Canada
Rules
(General
Procedure)
(“Rules”)
and
to
award
a
lump
sum
of
$12,000
in
lieu
of
any
taxed
costs,
in
accordance
with
section
147
of
the
Rules.
The
Respondent’s
position
is
that
the
appellant
should
receive
with
respect
to
this
appeal
her
ordinary
party
and
party
costs
and
disbursements
under
Tariffs
A
and
B.
Section
147
of
the
Rules
reads
as
follows:
147.(1)
Subject
to
the
provisions
of
the
Act,
the
Court
shall
have
full
discretionary
power
over
the
payment
of
the
costs
of
all
parties
involved
in
any
proceeding,
the
amount
and
allocation
of
those
costs
and
determining
the
persons
by
whom
they
are
to
be
paid.
(2)
Costs
may
be
awarded
to
or
against
the
Crown.
(3)
In
exercising
its
discretionary
power
pursuant
to
subsection
(1)
the
Court
may
consider,
(a)
the
result
of
the
proceeding,
(b)
the
amounts
in
issue,
(c)
the
importance
of
the
issues,
(d)
any
offer
of
settlement
made
in
writing,
(e)
the
volume
of
work,
(f)
the
complexity
of
the
issues,
(g)
the
conduct
of
any
party
that
tended
to
shorten
or
to
lengthen
unnecessarily
the
duration
of
the
proceeding,
(/?)
the
denial
or
the
neglect
or
refusal
of
any
party
to
admit
anything
that
should
have
been
admitted,
(1)
whether
any
stage
in
the
proceedings
was,
(i)
improper,
vexatious,
or
unnecessary,
or
(ii)
taken
through
negligence,
mistake
or
excessive
caution,
(7)
any
other
matter
relevant
to
the
question
of
costs.
(4)
The
Court
may
fix
all
or
part
of
the
costs
with
or
without
reference
to
Schedule
II,
Tariff
B
and,
further,
it
may
award
a
lump
sum
in
lieu
of
or
in
addition
to
any
taxed
costs.
(5)
Notwithstanding
any
other
provision
in
these
rules,
the
Court
has
the
discretionary
power,
(a)
to
award
or
refuse
costs
in
respect
of
a
particular
issue
or
part
of
a
proceeding,
(b)
to
award
a
percentage
of
taxed
costs
or
award
taxed
costs
up
to
and
for
a
particular
stage
of
a
proceeding,
or
(c)
to
award
all
or
part
of
the
costs
on
a
solicitor
and
client
basis.
(6)
The
Court
may
give
directions
to
the
taxing
officer
and,
without
limiting
the
generality
of
the
foregoing,
the
Court
in
any
particular
proceeding
may
give
directions,
(a)
respecting
increases
over
the
amounts
specified
for
the
items
in
Schedule
II,
Tariff
B,
(b)
respecting
services
rendered
or
disbursements
incurred
that
are
not
included
in
Schedule
II,
Tariff
B,
and
(c)
to
permit
the
taxing
officer
to
consider
factors
other
than
those
specified
in
section
154
when
the
costs
are
taxed.
(7)
Any
party
may,
(a)
within
thirty
days
after
the
party
has
knowledge
of
the
judgment,
or
(b)
after
the
Court
has
reached
a
conclusion
as
to
the
judgment
to
be
pronounced,
at
the
time
of
the
return
of
the
motion
for
judgment,
whether
or
not
the
judgment
included
any
direction
concerning
costs,
apply
to
the
Court
to
request
that
directions
be
given
to
the
taxing
officer
respecting
any
matter
referred
to
in
this
section
or
in
sections
148
to
152
or
that
the
Court
reconsider
its
award
of
costs.
Both
parties
agree
that
the
appeal
is
a
Class
A
proceeding
as
defined
in
section
I
of
Tariff
A
of
Schedule
II
of
the
Rules.
The
background
to
this
appeal
is
summarized
as
follows
by
counsel
for
the
appellant
in
his
written
submissions
on
costs:
Ms.
Lemmex
was
a
Corel
employee
who
exercised
stock
options
in
1988,
1989
and
1990.
Corel
corporation
went
public
in
November
of
1989.
All
of
the
shares
in
question
were
disposed
of
by
Ms.
Lemmex
in
1990.
On
Ms.
Lemmex’s
1990
tax
return
the
disposition
of
the
shares
were
treated
as
attracting
capital
gains
and
no
employment
benefit.
Ms.
Lemmex
treated
the
fair
market
value
of
the
shares
as
being
$1.00
because
of
her
understanding
and
belief
that
prior
to
Corel
going
public
she
could
only
sell
the
shares
back
to
Corel
for
the
price
she
paid
—
namely
$1.00.
As
a
result
of
an
audit
being
conducted
on
Corel
Corporation,
it
was
discovered
that
Corel
had
failed
to
provide
its
employees
with
the
amount
of
their
stock
option
benefit
in
box
38
of
the
employees’
T4
slips.
A
project
was
thus
established
by
Revenue
Canada
to
review
the
tax
returns
for
the
Corel
employees.
This
project
was
handled
by
Ms.
Jennifer
Mann,
an
auditor
with
Revenue
Canada.
Ms.
Mann
discovered
that
a
substantial
number
of
Corel
employees
had
failed
or
otherwise
improperly
reported
a
taxable
benefit
from
the
exercise
of
stock
options.
Ms.
Mann
testified
at
trial
that
approximately
150
out
of
200
employees
had
not
properly
claimed
the
taxable
benefit.
By
Notice
dated
August
28,
1995
Ms.
Lemmex
was
reassessed
for
her
1990
taxation
year
on
the
basis
that
she
had
misreported
her
taxable
employment
benefit
from
the
exercise
of
a
portion
of
her
stock
options.
In
addition,
over
$5,000
in
penalties
were
assessed
against
Ms.
Lemmex
on
the
basis
that
she
had
been
grossly
negligent.
By
Notice
of
Reassessment
dated
August
22,
1997
the
imposition
of
penalties
was
waived
although
the
balance
of
the
earlier
reassessment
remained.
In
his
assessment,
the
Minister
of
National
Revenue
(“Minister”)
had
determined
that
the
appellant
failed
to
report
a
taxable
benefit
of
$26,310.
The
appeal
from
this
assessment
was
heard
before
me
in
Ottawa
on
June
7
and
8,
1999.
Counsel
for
the
appellant
called
four
witnesses
including
the
appellant.
As
the
1990
taxation
year
was
statute-barred,
the
respondent
had
the
initial
onus
of
proving
that
Ms.
Lemmex
had
made
a
misrepresentation
attributable
to
neglect,
carelessness
or
wilful
default
or
had
committed
a
fraud
in
the
filing
of
her
tax
return,
in
order
to
justify
the
assessment.
If
that
onus
was
met
by
the
Minister,
the
onus
of
showing
the
assessment
to
be
incorrect
would
then
have
shifted
to
the
appellant.
By
judgment
dated
June
8,
1999,
I
allowed
the
appeal
with
costs
and
vacated
the
assessments
on
the
basis
that
they
were
made
after
the
appellant’s
normal
reassessment
period
in
respect
of
the
1990
taxation
year
and
it
had
not
been
established,
pursuant
to
subparagraph
152(4)(a)(1)
of
the
Income
Tax
Act
(“Act”),
that
the
appellant
had
made
any
misrepresentation
that
was
attributable
to
neglect,
carelessness
or
wilful
default
or
had
committed
any
fraud
in
filing
her
1990
tax
return
or
in
supplying
any
information
under
the
Act.
Counsel
for
the
appellant
submits
that
the
award
of
costs
should
take
into
consideration
the
following
facts:
I.
This
case
is
different
from
other
tax
appeals
in
that
here
the
onus
fell
upon
the
respondent
to
justify
her
reassessment
and
the
appellant
was
forced
to
commence
an
appeal
with
this
Court
in
order
to
prove
that
she
had
not
made
a
negligent
misrepresentation.
2.
A
fair
amount
of
trial
preparation
time
was
spent
by
the
appellant’s
solicitors
interviewing
and
obtaining
information
from
over
a
dozen
Corel
employees,
of
whom
two
were
asked
to
testify
in
court
on
behalf
of
the
appellant.
According
to
counsel,
this
information
was
important
for
the
Court
to
understand
and
appreciate
the
broader
context
of
why
Ms.
Lemmex
honestly
believed
the
shares
had
a
fair
market
value
of
$1.00
and
that
this
belief
was
reasonable
given
the
understanding
and
information
available,
not
just
to
Ms.
Lemmex,
but
also
to
the
Corel
employees
in
general.
3.
(a)
Ms.
Jennifer
Mann
acted
as
the
Revenue
Canada
auditor
with
respect
to
the
Corel
employees
despite
the
fact
that
she
had
previously
been
an
employee
of
Corel.
According
to
counsel,
Ms.
Mann
therefore
had
a
conflict
of
interest,
or
at
least
was
in
a
position
that
gave
rise
to
a
reasonable
perception
of
conflict
of
interest.
(b)
Ms.
Mann’s
lack
of
preparedness
at
trial
is
demonstrative
of
the
attitude
the
respondent
and
Ms.
Mann
have
exhibited
towards
the
situation
faced
by
the
appellant
and
towards
her
appeal.
4.
The
appellant
had
to
prepare
an
entire
Book
of
Documents
and
submissions
for
a
second
day
of
trial,
which
in
the
end
were
not
presented
because
of
the
Court’s
decision
to
allow
the
appeal
on
the
first
issue
(the
assessment
being
statute-barred).
5.
The
use
of
two
counsel
to
prepare
the
appeal.
The
submissions
of
counsel
for
the
respondent
are
summarized
as
follows
in
paragraphs
17
to
24
of
his
written
submissions
on
costs:
17.
It
is
respectfully
submitted
that
there
exists
no
circumstances
or
matters
herein
to
warrant
the
trial
judge
to
exercise
his
discretion
to
award
costs
on
a
solicitor
and
client
basis
or
to
order
the
payment
of
a
fixed
sum
in
lieu
of
taxed
costs.
None
of
the
factors
referred
to
in
Section
147(3)
for
consideration
in
the
awarding
of
costs
were
present
in
this
appeal.
18.
There
is
nothing
in
the
Respondent’s
conduct,
both
prior
to
and
during
the
litigation,
upon
which
to
base
a
claim
for
costs
beyond
the
Court
Tariff.
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.
There
is
no
reprehensible
conduct
by
the
Crown
such
as
described
in
the
RCP
Inc.
v.
Minister
of
National
Revenue
[,[1986]
1
F.C.
485
(Fed.
T.D.)]
case,
and
the
Minister
did
not
“merely
issue
figures
indiscriminately”
as
described
in
Crown
Trust
Co
v.
R.
(1977),
77
D.T.C.
5173
(Fed.
T.D.),
at
page
5175.
19.
The
facts
in
this
particular
appeal
were
not
complex,
the
amount
of
tax
under
appeal
was
not
exorbitant
and
similar
issues
have
been
reviewed
by
this
Court
on
many
occasions.
(iii)
Disbursements
20.
It
is
submitted
that
the
disbursements
herein
have
been
agreed
to,
with
the
exception
of
one.
The
one
outstanding
disbursement
relates
to
the
examination
for
discovery
involving
the
transcript
costs
for
the
testimony
of
the
Respondent’s
witness,
Jennifer
Ann
Mann,
and
reporting
costs
in
respect
of
three
witnesses,
Mercian
Lemmex
and
Michel
Bouillon,
employees
of
Corel
at
the
relevant
time,
and
Ms.
Mann.
21.
The
testimony
of
Ms.
Mann
addressed
general
questions
and
questions
relating
specifically
to
her
involvement
in
the
auditing
of
Appellants
Mercian
Lemmex
and
Michel
Bouillon,
with
less
specific
questions
interspersed
therein
concerning
Corel,
its
stock
options
and
reporting
methods
of
the
company
and
its
employees.
22.
The
Respondent
submits
that
its
offer
of
$380.88,
plus
GST,
for
transcript
and
reporting
costs
is
fair.
This
offer
covers
50%
of
the
costs
of
the
invoices
submitted
by
the
Appellant.
The
said
invoices
relate
to
two
appeals,
Court
No.
98-361(1T)G
in
the
name
of
Mercian
Lemmex,
and
97-3764(IT)G
in
the
name
of
Michel
Bouillon.
(iii)
Conclusion
23.
In
light
of
the
foregoing,
the
Respondent
requests
that
this
Honourable
Court’s
judgment
of
costs
on
a
party
and
party
basis
stands
and
that
an
amount
of
$380.88,
plus
GST,
for
the
disbursement
for
the
examination
for
discovery
transcript
and
reporting
costs
of
the
Appellant
be
ordered.
24.
The
Respondent
further
requests
that
costs
be
granted
to
the
Respondent
for
the
Written
Submissions,
on
the
basis
of
a
motion
provided
for
in
the
Court
Tariff.
I
agree
with
counsel
for
the
respondent
that
the
circumstances
set
out
in
subsection
147(3)
of
the
Rules
are
not
applicable
in
the
present
case.
As
Judge
Bowman
of
this
Court
said
in
Alemu
v.
R.
(1999),
99
D.T.C.
591
(T.C.C.),
at
593,
the
Court
has
a
fairly
broad
discretion
with
respect
to
costs,
but
that
discretion
must
be
exercised
on
proper
principles
and
not
capriciously.
I
shall
repeat
here
what
Judge
Bowman
said
about
awarding
solicitor
and
client
costs
in
Continental
Bank
of
Canada
v.
R.
(1994),
94
D.T.C.
1858
(T.C.C.)
at
p.
1876:
It
is
obvious
that
the
amounts
provided
in
the
tariff
were
never
intended
to
compensate
a
litigant
fully
for
the
legal
expenses
incurred
in
prosecuting
an
appeal.
The
fact
that
the
amounts
set
out
in
the
tariff
appear
to
be
inordinately
low
in
relation
to
a
party’s
actual
costs
is
not
a
reason
for
increasing
the
costs
awarded
beyond
those
provided
in
the
tariff.
1
do
not
think
it
is
appropriate
that
every
time
a
large
and
complex
tax
case
comes
before
this
court
we
should
exercise
our
discretion
to
increase
the
costs
awarded
to
an
amount
that
is
more
commensurate
with
what
the
taxpayers’
lawyers
are
likely
to
charge.
It
must
have
been
obvious
to
the
members
of
the
Rules
Committee
who
prepared
the
tariff
that
the
party
and
party
costs
recoverable
are
small
in
relation
to
a
litigant’s
actual
costs.
Many
cases
that
come
before
this
court
are
large
and
complex.
Tax
litigation
is
a
complex
and
specialized
area
of
the
law
and
the
drafters
of
our
Rules
must
be
taken
to
have
known
that.
In
the
normal
course
the
tariff
is
to
be
respected
unless
exceptional
circumstances
dictate
a
departure
from
it.
Such
circumstances
could
be
misconduct
by
one
of
the
parties,
undue
delay,
inappropriate
prolongation
of
the
proceedings,
unnecessary
procedural
wrangling,
to
mention
only
a
few.
None
of
these
elements
exists
here.
Judge
Bowman
then
referred
to
the
observations
of
Jackett
C.J.
in
Smerchanski
v.
Minister
of
National
Revenue
(1977),
77
D.T.C.
5198
(Fed.
C.A.),
at
pp.
5200-5201:
Finally,
I
should
say
on
this
point
that
the
material
submitted
in
support
of
this
application
does
not,
in
my
opinion,
provide
a
reasonably
arguable
case
for
an
exercise
of
judicial
discretion
increasing
the
fees
for
services
of
solicitors
and
counsel
in
connection
with
this
appeal.
Such
a
direction
must
be
based
on
relevant
considerations
and
must
not
be
made
on
an
arbitrary
basis.
All
that
has
been
established
here
is
that
the
respondent
incurred
a
very
large
solicitor
and
client
bill
in
connection
with
the
appeal,
which
would
have
been
relevant
if
costs
had
been
awarded
on
a
solicitor
and
client
basis
but
is
not
ordinarily
relevant
to
the
determination
of
costs
on
a
party
and
party
basis.
Nothing
has
been
put
forward
to
suggest
that
there
was
anything
in
the
conduct
of
the
appeal
to
warrant
any
increase
in
the
party
and
party
tariff.
While
there
is
no
principle
with
reference
to
the
basis
for
ordinary
party
and
party
costs
that
is
apparent
to
me
from
a
study
of
the
relevant
Rules,
it
does
seem
to
be
clear
that
party
and
party
costs
are
not
designed
to
constitute
full
compensation
to
the
successful
party
for
his
solicitor
and
client
costs.
(This
must
certainly
be
so
in
a
case
such
as
this
where
the
successful
party
has
chosen
to
instruct
counsel
whose
base
of
operations
is
elsewhere
than
the
appropriate
place
for
the
hearing
of
the
appeal.)
Reference
was
made
to
some
four
or
five
decisions
of
the
Trial
Division
where
Tariff
B
items
were
increased
apparently
“having
regard
particularly
to
the
great
volume
of
work
done
in
preparation...”.
I
have
difficulty
in
accepting
volume
of
work
in
preparation
considered
alone,
or
in
conjunction
with
such
factors
as
the
difficulty
or
importance
of
the
case,
as
constituting
a
basis
for
exercising
the
judicial
discretion
to
increase
Tariff
B
costs
items.
It
must
be
obvious
that
such
items
are
so
low
in
relation
to
what
is
involved
in
a
very
substantial
proportion
of
the
matters
that
come
before
the
Court
that
they
are
not
designed
to
provide
complete
compensation
to
the
successful
party
for
the
costs
incurred
by
him
in
the
litigation.
(Indeed,
what
is
sought
in
this
case
is
an
increase
that
would
still
leave
the
successful
party
largely
uncompensated
for
solicitor
and
client
costs.)
If
Federal
Court
party
and
party
costs
are
not
designed
to
provide
full
reimbursement,
as
it
seems
to
me,
what
is
intended
is
that
they
be
made
up
of
the
completely
arbitrary
amounts
fixed
by
or
in
accordance
with
the
rules
subject
to
variations
(where
authorized)
based
on
factors
arising
out
of
the
conduct
of
the
particular
proceeding.
As
it
seems
to
me,
the
vague
basis
put
forward
on
behalf
of
the
respondent
would
put
the
Court
in
the
position,
in
a
very
substantial
proportion
of
proceedings,
of
weighing
imponderable
factors,
or
factors
that
are
not
capable
of
determination,
with
a
view
to
making
an
allowance
of
an
undefined
portion
of
solicitor
and
client
costs.
In
my
view,
such
an
approach
is
not
acceptable
as
a
basis
for
exercising
a
judicial
discretion
under
Tariff
B
and
would
open
the
way
for
an
unseemly
complication
of
our
practice.
This
view
was
also
adopted
by
the
Federal
Court
of
Appeal
in
Consolboard
Inc.
v.
MacMillan
Bloedel
(Sask.)
Ltd.
(1981),
58
C.P.R.
(2d)
100
(Fed.
C.A.).
I
do
not
find
in
the
instant
case
a
degree
of
complexity
sufficient
to
justify
an
additional
award.
Furthermore,
the
fact
that
Ms.
Mann
had
previously
worked
for
Corel
and
the
fact
that
the
appellant
was
forced
to
take
action
against
an
assessment
that
was
statute-barred
are
not
circumstances
that
the
court
may
consider
under
subsection
147(3)
in
order
to
award
costs
beyond
the
amounts
provided
for
in
the
tariff.
Moreover,
even
though
I
suggested
to
Ms.
Mann
during
the
hearing
that
she
should
have
reviewed
her
file
before
trial,
I
do
not
find
that
her
conduct
tended
to
lengthen
unnecessarily
the
duration
of
the
proceedings.
With
respect
to
the
preparation
necessary
for
a
two-day
trial,
it
must
be
reminded
that
the
parties
themselves
requested
two
days
for
the
trial
and
were
thus
expected
to
be
ready
to
proceed
both
on
the
preliminary
matter
(i.e.
that
of
whether
the
assessment
was
statute-barred
or
not)
and
on
the
merits
of
the
case.
Finally,
I
am
not
satisfied
with
the
evidence
that
was
presented
before
me
to
show
that
the
conduct
of
Department
of
National
Revenue
officials,
including
Ms.
Mann,
towards
the
appellant
was
reprehensible
and
would
justify
the
award
of
a
lump
sum
amount
beyond
what
the
tariff
allows,
as
was
the
case
in
RCP
Inc.
v.
Minister
of
National
Revenue,
[1986]
1
F.C.
485
(Fed.
T.D.).
Nor
can
it
be
said
that
there
was
a
“total
absence
of
merit
[that
made
the
assessment]
border
on
the
frivolous”
and
that
would
provide
grounds
for
“a
substantial
increase
over
what
could
normally
be
had
by
way
of
party
and
party
costs,”
as
was
the
case
in
À.
v.
Global
Communications
Ltd.
(1997),
97
D.T.C.
5194
(Fed.
C.A.).
In
light
of
the
cases
referred
to
above
and
others
cited
to
me,
I
do
not
think
that
it
would
be
appropriate
to
award
costs
to
the
appellant
beyond
the
amounts
provided
for
in
the
tariff.
The
respondent
further
submits
that,
at
the
appellant’s
request,
the
respondent
has
agreed
to
pay
all
of
the
disbursements
in
this
appeal
with
the
exception
of
those
relating
to
transcripts
and
reporting
services
for
the
examinations
for
discovery.
With
respect
to
those
the
respondent
has
offered
to
reimburse
half
the
amount
of
$761.75
plus
GST
invoiced
by
the
appellant
(i.e.
$380.88
plus
GST),
on
the
basis
that
the
invoices
related
to
two
appeals
one
of
which
was
not
the
appellant’s.
The
respondent
further
requests
that
costs
be
granted
to
the
respondent
for
the
written
submissions
on
the
present
motions,
on
the
basis
of
a
motion
provided
for
in
the
Court
tariff.
After
having
read
those
submissions,
I
direct
the
taxing
officer
to
tax
the
appellant’s
costs
on
the
following
basis:
e
The
costs
are
to
be
on
a
party
and
party
basis
in
accordance
with
Tariff
B
of
Schedule
II,
under
Class
A.
•
The
respondent
shall
direct
the
issue
concerning
the
disbursements
relating
to
transcripts
and
reporting
services
for
the
examinations
for
discovery
to
the
taxing
officer.
•
Each
party
is
to
bear
its
own
costs
in
respect
of
this
motion.
Motion
dismissed.
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