Bowman T.C.J.:
1 At the conclusion of argument counsel asked for an opportunity of speaking to the matter of costs. After I rendered my reasons for judgment, dismissing the appeals, I invited counsel to do so and the matter was dealt with by telephone conference.
2 Counsel for the appellants essentially put their submissions on three bases:1) That since this was one of the first cases involving the General Anti-Avoidance Rule under section 245 of the Income Tax Act, the appellants should be entitled to some amount in respect of their costs, notwithstanding the fact that they were unsuccessful.
2) That in any event, even if I do not agree that the appellants are entitled to any portion of their costs, the appellants should not be required to pay all of the appellants' party and party costs.
3) Further that, the respondent's costs of an expert on U.S. tax law, Mr. Hartnig, who was not called, as well as the costs of a transcript of the cross-examination of two witnesses of the appellants should not be allowed. Moreover, the cost of an expert, Mr. Eccles, who was called to express an opinion on the value of certain leases should not be allowed.
3 With respect to the first point, I can see no basis for awarding the appellants any portion of their costs. The usual rule is that costs should follow the event and the fact that a case is difficult or important or that it raises novel points of law is no reason to depart from that rule. Income tax litigation is frequently complex and with the complexity of modern commercial life and the intricacy of the constantly changing Canadian fiscal legislation, new and important issues will frequently come before the courts.
4 Counsel's second contention was that in any event the costs and length of the trial were increased by reason of respondent's counsel's refusal to admit certain facts that ought to have been admitted and that, generally, in light of the importance of the case, counsel engaged in a measure of overkill. It was contended that the case could have been simplified and shortened if the Crown had confined it to the application of sections 84 and 212 and had not, to use the phrase from in the reasons for judgment, called in the heavy artillery of GAAR.
5 It is true that I decided that the assessments were supportable on the basis of sections 84 and 212 alone but it was not unreasonable for the Crown to rely, both in assessing and at trial, on section 245. Indeed, in McNichol v. R. (1997), 97 D.T.C. 111 (T.C.C.), Judge Bonner relied solely on that section. It frequently happens in litigation that arguments are advanced in support of positions that, with the benefit of hindsight, turn out to have been unnecessary. Unless such arguments are plainly frivolous or untenable, I do not think that a litigant should be penalized in costs simply because its counsel decides to pull out all the stops, nor do I think that it is my place to second guess counsel's judgment, after the event, and say, in effect. “If you had had the prescience to realize how I was going to decide we could have saved a lot of time by confining the case to one issue.” Moreover, one of counsel's responsibilities is to build a record which will enable an appellate court to consider all of the issues.
6 Finally, I turn to the expert witnesses. Mr. Eccles was called to give evidence of his opinion on the value of the leases. I found his view that they had no value was “somewhat extreme”. They had some value, although it was problematic. Counsel for the appellants asked Ms. Van Der Hout to agree to an admission that their value was questionable, but in the end the expert was called.
7 This raises a somewhat difficult question. Generally, if a fact is admitted this will preclude any further evidence on the point being adduced. Many considerations go into the decision to agree to an admission or to call evidence. Counsel may very well believe, rightly or wrongly, that to call evidence, with all of the surrounding facts (and risks), is a more effective means of presenting a case than agreeing to a bald and sterile statement of fact. Unless the decision is patently unreasonable or made for some improper purpose, I do not think that the court should interfere with counsel's discretion in these matters. I do not think that there is any basis for depriving the respondent of its costs with respect to Mr. Eccles' evidence.
8 So far as Mr. Hartnig is concerned, his expert witness report was filed and he was available to testify, but counsel at trial decided not to call him. This is legitimate judgement call by counsel and I can see no reason for depriving a litigant of the costs of such a potential witness simply because at the last minute it is decided not to call him. (See Ultramar Canada Inc. v. Montreal Pipe Line Ltd. (1990), 75 O.R. (2d) 498 (Ont. Gen. Div.)
9 Sections 5 and 6 of Tariff A of the Tax Court of Canada Rules (General Procedure) read as follows:
Expert Witnesses
5.(1) When a witness, other than a party, is called on to give evidence in consequence of any professional or technical services rendered by that witness, there shall be substituted for the amount of $50 in subsection 4(1) of this Tariff an amount not exceeding $350 per day subject to increase in the discretion of the taxing officer but otherwise section 4 is applicable to such a witness.
(2) In lieu of making a payment under section 4 of this Tariff, there may be paid to a witness who appears to give evidence as an expert a reasonable payment not exceeding $300 per day, unless the taxing officer otherwise directs, for the services performed by the witness in preparing to give evidence and giving evidence.
No Preparation Fee
6. No payment shall be made to or received by a witness for what a witness has done in preparing to give evidence or giving evidence except as permitted by this Tariff.
10 I do not think that these provisions apply to an expert who assists in the preparation and is prepared to testify but does not do so. Rather, I think the cost of the expert falls under subsection 1(2) of Tariff B, which reads:
(2) The amounts that may be allowed for disbursements are all disbursements made under Schedule II, Tariff A and all other disbursements essential for the conduct of the proceeding.
11 I think that, in the circumstances of this case, it was reasonable to consult a U.S. tax expert and have him ready to testify.
12 By agreeing that the costs of these two experts should be allowed I do not mean to fetter in any way the discretion of the taxing officer in determining whether some portion of their fees should be disallowed. He may well conclude, on the evidence put before him, that the fees are unreasonably high. That is for him to decide. (See Orkin, The Law of Costs, pages 7-35 and 7-36.)
13 I do not think that the appellants should be expected to pay the cost of the transcript of the cross-examination of two of the appellants' witnesses. To have these transcripts available may have been helpful but I do not regard them as essential.
14 In the circumstances the judgment will read: “The appeals are dismissed with costs.”
15 There will be one set of counsel fees for both cases, but the respondent is entitled to a senior and a junior counsel fee at trial.
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