v. Minister of National Revenue, [1971] CTC 635, 71 DTC 621

Noël, A.C.J. (reasons for judgment continued) :—I have now received a letter from Messrs. Goodman and Carr, signed by Mr. Wolfe D. Goodman, Q.C., together with copies of a number of letters sent and received by the above firm. This material discloses that Mr. Goodman was consulted on this matter in July 1968 by Mr. Samuel Taylor, C.A., of the firm of Taylor, Leibow, Lukas and Ackerman, of Hamilton, and on July 18, 1968 gave an opinion on whether or not the assessment should be appealed. He then received a telegram from Benjamin Sauder authorizing him to file a notice of appeal and a notice of appeal was drawn and filed by the above firm on July 23, 1968. Mr. Goodman says that he had no reason at that time to question in any way the authority given his firm to act on behalf of the appellant. He admits that he was aware that Mr. Sauder and his associate, Mr. Thornborrow, had sold their shares in the appellant company and was sent, at a much later date, a copy of the agreement of sale. He states that he was specifically advised at the time that Mr. Sauder had authority to act on behalf of the company in connection with this income tax appeal since it was part of his agreement with the purchasers that he and Mr. Thornborrow would bear any taxes assessed and relating to the period before the sale. This is a very common arrangement which he has encountered many times in his practice and it did not strike him, he says, as unusual in any way. While he was not Mr. Sauder’s general solicitor, he had acted on his behalf previously and knew him to be a man of good repute. He also stated that he believes Mr. Sauder had acted in this . matter entirely in good faith ; it may be, he added, that he was

mistaken about his rights but he had no reason to believe that such a mistake was anything other than innocent. In the fall of 1969, after discussions with Mr. Sauder, Mr. Goodman proposed that an offer of settlement be made to the Minister of National Revenue. Since a settlement might compromise the rights of the appellant, it was necessary to secure express authorization of the appellant to make this offer. He therefore prepared a letter to Mr. Sauder and to his firm specifically authorizing it to make an offer of settlement to the Minister. This document was executed by two officers of the company. Mr. Goodman then states that at this point of time, he had no reason whatever to doubt that his firm had full authority to act for the appellant. He points out that if he had had any doubts, these would have been dispelled by the authorization given to him to propose an offer of settlement and submits that in his view, this written authorization amounted in law to a ratification of all the steps previously taken on behalf of the appellant and confirmed the authority of his firm to act on its behalf. The offer of settlement, however, was declined and proceedings were continued and arrangements were made for an examination for discovery. The solicitor for the Minister insisted upon examining an officer of the appellant and Mr. Sauder was no longer an officer. Mr. Goodman then instructed his associate, Frank Cappell, to make the necessary arrangements to put forward an officer of the appellant to be examined for discovery. Mr. Cappell. then contacted Mr. Norris Walker, an officer of the appellant. A letter was sent to Mr. Walker dealing at length with the whole tax issue. Mr. Goodman says it appeared that at first. Mr. Walker was quite prepared to attend in Toronto to be examined for discovery on behalf of the appellant. Once again, Mr. Goodman says he had no reason to doubt the authority of his firm to act for the appellant, had he had any doubts, he says, they would have been dispelled by the fact that Mr. Walker had indicated. to his associate that he was prepared to attend to be examined for discovery. He then received a letter from Messrs. Cromarty, Brooks and McFarlane, general solicitors for the appellant, dated May 11, 1970, in which they advised that ‘‘It is my suggestion that the appeal be withdrawn’’.

Mr. Goodman then pointed out that even at this stage, he still had no reason to doubt the authority of his firm to act. It appeared, he says, that the appellant might not want to proceed further with the appeal, but there was no indication that he had not been authorized to act up to that time. He then met on June 17, 1970 with J. David Cromarty, Q.C., solicitor for the appellant, who advised him that the appellant did not wish to proceed further with the appeal and for the first time, he says, he made clear his position that his firm had never been authorized. to aet on behalf of the appellant. He then advised Mr. Cromarty that in his view, while Mr. Sauder may possibly have acted without authority in giving the initial instructions to his firm, even though he acted in good faith, the authorization given by the present officers to his firm to propose an offer of settlement ratified the previous steps which they had taken on the company’s behalf and their authority to act in the appeal until instructed to the contrary. As Mr. Goodman would not pursue the appeal further, once the appellant had made its position clear, he sought further instructions of the appellant which were not forthcoming. He states that his. associate and himself have repeatedly communicated with the appellant through its solicitors requesting instructions to discontinue the appeal. He adds that his associate was even successful in making informal arrangements with the solicitor for the Minister to have the appeal dismissed without costs in anticipation of receiving instructions from the appellant to file a notice of discontinuance. After the lapse of some time, when instructions were not forthcoming, he took the further step of requesting instructions to file a notice of discontinuance without prejudice to the question of whether or not the appellant should be liable to his firm for legal fees and other proper charges. His firm was then served with a notice of the motion heard by me in Welland. After considering the matter, he says that he concluded that no useful purpose whatever could be served by having anyone from his firm appear on the motion adding “For whom would he appear? It was clear that we had no authority at that point, to act for the appellant which had refused to give us instructions.’’ He said that he doubted whether or not his firm had any right to address the Court on the question of whether or not the appeal should be quashed. The notice of motion notified the respondent, their firm, and the registrar of the Federal Court, that an order would be sought to quash the appeal “with costs to the respondent’’. He admits, however, that his associate, Mr. Cappell, advised him that the solicitor for the Minister had previously indicated he might seek costs against his firm, but, he says, there was no mention of that in the notice of motion but only that costs would be sought ‘‘to the Respondent’’. He therefore could see no useful purpose whatever in appearing on the motion.

I must say that notwithstanding the lack of authority of Mr. Goodman’s firm to appeal this assessment, and the circumstances described, some member of the firm should have been present at the hearing of the notice to quash if only for the sake of informing the Court of its position herein as an officer or officers of this Court. Furthermore, the firm was still the solicitors of record, it had proceeded without authorization to take the appeal and under the circumstances, there was a very definite duty to be there and supply the Court with whatever information it had with regard to the situation in which they were involved. Their absence has caused the Court, the parties and their counsel, considerable inconvenience and has definitely delayed the disposal of the present appeal.

There is, in my view, no question that Mr. Goodman, and his firm, have in good faith made a serious mistake in assuming that it had authorization without, in view of the change of ownership of the shares of the company, requiring a written authorization to proceed from duly authorized officers of the appellant company. The acceptance of a mandate in this manner may happen frequently in practice, but whoever does so must assume the risk of being disavowed later and of having to pay for any expenses or costs incurred as a result of acting without obtaining adequate authority.

It was my intention to hold Mr. Goodman’s firm liable for the respondent’s costs in the appeal as there is authority to the effect that where an action is brought in the name of a person and without his authority, the solicitors of record are liable for the costs even though they acted in good faith. Cf. Newbiggen-by-the-Sea Gas Company v. Armstrong (1879), 13 Ch.D. 310; Jane Scribner v. Robert M. Parcells et al. (1890), 20 O.R. 554; Geilinger v. Gibbs, [1897] 1 Ch. 479.

Although, as already mentioned, my intention was to hold the firm liable for respondent’s costs, I do not find it possible to do so in the light of the authorization given to both Mr. Sauder and Messrs. Goodman & Carr in October 1969 by two officers of the appellant including Mr. Norris Walker, to propose to the solicitors for the Minister of National Revenue, an offer of settlement in the appeal which the appellant now rejects as not having been authorized. It must be assumed, I believe, that such an authorization spelling out the proposed terms of the settlement as it does was signed with full knowledge of its implications and I find it difficult not to conclude that this was not only a decision on the part of the appellant to settle the matter, but also, I must conclude, an endorsement of all that had been done previously by the launching of the appeal. This settlement, if acecepted by the Minister, would have been, at least in part, the realization of what the proceedings in appeal were seeking to obtain. It is true that much later, some time in April, Mr. Cromarty wrote the firm stating that it would not be in the interest of the company to proceed with the appeal because, as he put it, ‘‘It appears to us that, not only Vineland Quarries but the other quarries operated by the Walker interests, are all engaged in mining and they have all been taking depletion allowance on this basis and that it would not be in their interests to change this situation.’’

Now, although it appears that the appellant, through Mr. Cromarty, had decided that it no longer was in the interest of the company to proceed with the appeal and that the overall situation of Mr. Walker’s quarries was then being considered, the evidence before me does not indicate that the authorization given the firm to proceed with the offer of settlement of the preceding action was given in ignorance of the stand taken in the proceedings so as to affect the validity of the authorization given or of the ratification implied by such an authorization with regard to the services of Messrs. Goodman and Carr.

The decision to abandon the appeal, as recommended by the Cromarty firm indeed seems to be the result of a re-examination and re-assessment of the whole matter dealt with in the appeal as well as a consideration of the effect a: successful appeal could have on other interests possessed by officers of the appellant. Under such’ circumstances, I fail to see how the appellant can escape from assuming full responsibility for the appeal proceedings launched herein and for whatever costs the Minister may be entitled to and the Court may order. The file discloses that at one stage, in December 1970, the Minister was quite willing to allow this appeal to be withdrawn without costs. The appellant, however, was reluctant to authorize such a withdrawal. Since then, considerable costs and out of pocket expenses have been incurred and it would not be in order to quash this appeal without costs. On the other hand, it appears to me that if an allocation of one-half of the respondent’s taxed costs was paid to him together with all of the out of pocket expenses incurred as a result of appellant’s refusal to authorize withdrawal of this appeal this would, in my view, be an equitable disposal of the matter. It follows, of course, that respondent’s motion to quash is hereby granted.