2855-6330 Québec Inc. v. The Queen, docket 96-1196-GST-G

Date: 19981113

Docket: 96-1196-GST-G; 96-1197-GST-G; 96-1198-GST-G

BETWEEN:

2855-6330 QUÉBEC INC., FRANCO CIGANA, 137891 CANADA INC.,

Applicants,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Order

Lamarre Proulx, J.T.C.C.

[1]            This is a motion for revocation of judgment under subsection 172(2) of the Tax Court of Canada Rules (General Procedure) ("the Rules"), which reads as follows:

A party who seeks to,

(a)            have a judgment set aside or varied on the ground of fraud or of facts arising or discovered after it was made,

(b)            suspend the operation of a judgment, or

(c)            obtain other relief than that originally directed,

may make a motion for the relief claimed.

[2]            The judgments in the appeals of Franco Cigana, 2855-6330 Québec Inc. and 137891 Canada Inc. were rendered following a hearing conducted by conference telephone call on February 12, 1998. The appeals were to have been heard on February 16, 17 and 18, 1998. On February 10, 1998, this Court received the following notice from counsel for the appellants by fax: [TRANSLATION] "With regard to the above-mentioned cases, please be advised that we have been instructed not to make any submissions at the trials that are to take place on February 16, 17 and 18, 1998."

[3]            That letter was followed by a letter from counsel for the respondent dated the same day and also sent by fax. It read as follows: [TRANSLATION] "This is further to the letter sent to you today by Louis-Frédérick Côté stating that no evidence will be adduced or submissions made by the appellants at the hearing of these cases, which is scheduled for February 16, 17 and 18, 1998, in Montréal. The respondent will accordingly be asking this Honourable Court to dismiss the appellants' appeals."

[4]            Given this situation, the Court decided, with a view to avoiding needless travel, to hear the said appeals by conference call on February 12, 1998. The discussion among the Court, counsel for the appellants and counsel for the respondent was as follows:

[TRANSLATION]

THE COURT: Mr. Côté, I have your letter of February 10, 1998, stating that you have been instructed not to make any submissions at the trials on February 16, 17 and 18, 1998.

So what I would like to know from you is whether that is still the case.

Mr. CÔTÉ: Yes.

My three clients clearly told me that they do not want me to make any submissions or adduce any testimonial or documentary evidence. That is still the case.

THE COURT: So they no longer have any arguments to make, is that correct?

Mr. CÔTÉ: No arguments.

THE COURT: Might I be enlightened as to why? Can you explain to me why you're not discontinuing the appeals?

Mr. CÔTÉ: I suggested that to Mr. Cigana but he refused. I don't know why. He doesn't want a discontinuance. He prefers to have a judgment against him.

THE COURT: OK, very well. And you, Ms. Mailloux Martin, have you . . .

Ms. MAILLOUX MARTIN: In the circumstances, Your Honour, as I also told the Court in a letter following Mr. Côté's letter, I am asking this Court to dismiss the three appeals, the appeals in each case, without costs.

THE COURT: Without costs?

Ms. MAILLOUX MARTIN:                Yes.

THE COURT: So, Mr. Côté, do you have anything else to say on this?

Mr. CÔTÉ: No, Your Honour, nothing.

THE COURT: No. Well, thank you. Thanks to both counsel.

Ms. MAILLOUX MARTIN: Thank you, Your Honour.

THE COURT: The appeals are dismissed without costs.

[5]            A motion for revocation of judgment was made on March 11, 1998, in order to have the judgments set aside. The motion was based on the allegation that the appellants had not instructed their counsel not to make any submissions.

[6]            For some reason or other, an officer with our Registry, on receiving the motion for revocation of judgment, refused to accept the motion and told counsel for the applicants that he had to appeal to the Federal Court of Appeal. Since the 30-day time limit had already expired, counsel for the applicants made a motion for an extension of time under section 27 of the Federal Court Act. I have determined that a Registry officer cannot deny a motion for revocation of judgment; only a judge of this Court can do so. Counsel for the appellants opted to maintain the motion for revocation of judgment and to withdraw his application for an extension of the time for appealing, which had become pointless.

[7]            The applicant Franco Cigana signed the following affidavit on March 11, 1998:

[TRANSLATION]

AFFIDAVIT

I, the undersigned, FRANCO CIGANA, residing and domiciled at 7015, rue Métivier, Montréal, Quebec H4K 2M7, do solemnly declare as follows:

1.              I have appealed three notices of assessment dated February 10, 1995, within the statutory time limits through my solicitors, Mendelsohn Rosentzveig Shacter, in cases Nos 96-1196(GST)G (2855-6330 Québec Inc.), 96-1198(GST)G (137891 Canada Inc.) and 96-1197(GST)G (Franco Cigana);

2.              Judgment was rendered in the above three cases without my knowledge; the hearing was held on a date other than the scheduled date without my knowledge; and my counsel acted without my authorization;

3.              The trial in the three cases had been scheduled for Monday, February 16, Tuesday, February 17, and Wednesday, February 18, 1998;

4.              In the days preceding the trial, I met with my counsel, Gilles Brassard and Louis-Frédérick Côté, to discuss the hearing that was to be held in those cases;

5.              Further to that meeting, I contacted Louis-Frédérick Côté on February 11, 1998, and he told me that the hearing would probably not be held on Monday February 16, 1998, since the Court was not going to make a trip just for this case, and that the hearing would therefore probably be postponed to a later date;

6.              Since I had no assurance that the said trial could be postponed, and following my meeting with my counsel from Mendelsohn Rosentzveig Shacter, I made an appointment with Pierre Archambault of Lapointe, Schachter, Champagne & Talbot on February 11, 1998, to obtain some explanations and information;

7.              Pierre Archambault agreed to meet with me the next day, February 12, 1998, and after that meeting he said that he would be available on Monday, February 16, 1998, if I felt that I needed him;

8.              On Friday, February 13, 1998, I contacted Louis-Frédérick Côté to check whether the case would be heard on February 16, 1998, or whether it had been postponed as he had suggested to me on February 11, 1998;

9.              I was totally astonished, incredulous and very concerned when I learned from Mr. Côté that judgment had been rendered on February 12, 1998;

10.            Since I was very worried, indeed panic-stricken, I immediately contacted Pierre Archambault to tell him this, but he could not enlighten me since he did not understand what had happened either;

11.            On February 16, 1998, the scheduled hearing date, I went to the Tax Court of Canada and Lucie Allaire from the Registry told me that judgment had been rendered in the three cases following a conference call on Thursday, February 12, 1998;

12.            That "hearing" held during the conference call on February 12, 1998, occurred without my knowledge and without my counsel having told me ahead of time that it was being held or what it was about;

13.            What is more, my solicitors, Mendelsohn Rosentzveig Shacter, and in particular Louis Frédérick Côté, had led me to believe that the hearing would be postponed to a later date if it was not held on February 16, 1998;

14.            I had instructed my solicitors, Mendelsohn Rosentzveig Shacter, to go ahead with the hearing on February 16, 1998, or, if the Court was not available as my solicitors had suggested to me would be the case, to postpone the hearing to a later date;

15.            I would like to be heard and to assert my rights in the three cases concerned, which I have been unable to do for the reasons set out above;

16.            I am asking the Honourable Tax Court of Canada to revoke the judgments rendered in the three cases and signed by the Honourable Judge Louise Lamarre Proulx on February 17, 1998, following a conference call that occurred on February 12, 1998;

17.            I have waited until now to bring this motion for revocation in order to give my new solicitors, Lapointe, Schachter, Champagne & Talbot — at their request — time to conduct some checks concerning the events that have occurred;

18.            I am entirely at the service of the Tax Court of Canada if further information is needed in respect of my motion for revocation;

19.            All of the facts alleged in this affidavit are true and personally known to me.

AND I HAVE SIGNED:                                                        (s) Franco Cigana

Franco Cigana

[8]            Franco Cigana testified at the request of counsel for the appellants. Jules Brossard and Louis-Frédérick Côté testified at the request of counsel for the respondent.

[9]Franco Cigana has had a business relationship with lawyers Jules Brossard and Louis-Frédérick Côté since at least 1994. He said that, in December 1997, everything was ready for the trial, except that he had not yet introduced his counsel to the two witnesses who were to testify at the hearing of the case, namely his accountant and his bank manager. He said that an offer to settle for $10,000 was made in December. That offer was turned down on February 5, 1998. Mr. Cigana met with his counsel on February 9, 1998. He said that they told him at the time that it would be better to declare bankruptcy and abandon the action, since they needed $10,000 to prepare the case and represent him at the hearing. According to Mr. Cigana, he wanted to go ahead with the hearing, which was scheduled for February 16, 17 and 18, 1998, and that was what he instructed his counsel. However, he also said that they did not want to proceed unless he paid their fees.

[10]          Jules Brossard and Louis-Frédérick Côté gave similar testimony, even though they each testified without the other present. In December 1997, they met with Mr. Cigana to prepare for the trial. They explained the various possible options to him. They set out three possibilities: going to trial or making a proposal under the Bankruptcy and Insolvency Act or making an assignment of his property under that Act. It was agreed that the respondent would be made a low offer based on the appellants' insolvency and that they would not go to trial. The offer was turned down on February 5, 1998. Mr. Cigana met with his counsel on February 9, 1998. They again presented him with three possible options. Mr. Côté told him that the cost of proceeding with the appeals would be from $10,000 to $12,000, but he did not ask that those costs be paid before the hearing. According to Mr. Côté, he did not make payment of his fees a condition of going to trial. Mr. Cigana simply did not want to proceed. Thus, he never wanted his counsel to meet either his banker or his accountant. Mr. Cigana did not want to go to trial or to make a proposal or an assignment. Nor did he want to discontinue the appeals. If a judgment was obtained against him, he thought that he would be able to appeal and thus delay enforcement of the judgment.

Argument by counsel

[11]          Counsel for the respondent said that she doubted that a motion for revocation for the stated reason could be made under subsection 172(2) of the Rules. However, her primary argument was that a motion for revocation of judgment cannot be brought on the ground that counsel have failed to carry out or have improperly carried out instructions until an action in disavowal has been brought and disposed of. She referred to the Supreme Court of Canada's decisions in Boileau v. A.G. of Quebec, [1957] S.C.R. 463, and Bélanger v. Bélanger, [1958] S.C.R. 344, and to the Court of Quebec's decision in Gagnon v. Placement de Caillières Inc., C.Q.T. 700-02-001324-871. In those decisions it was held that the appropriate proceeding is initially an action in disavowal under articles 243 et seq. of the Code of Civil Procedure.

[12]          Counsel for the applicants argued that it is not clear that a prior action in disavowal is necessary for the purposes of subsection 172(2) of the Rules, that such an action takes time and that, in the interests of justice, it would be better to grant the motion for revocation without requiring such an action. He based his reliance on subsection 172(2) of the Rules on the fact that Mr. Cigana's counsel did not want to act because their fees had not been paid and that they did not properly understand what they had been instructed to do. He submitted that the appellants had always wanted to proceed and that, if the Court had not heard their appeal ahead of time, Mr. Cigana would have explained his true intentions to the Court. Counsel argued not that there was fraud but rather that facts had arisen or been discovered after the judgment was made.

Conclusion

[13]          Although the Court may, with respect to matters not covered in its own rules, refer to the rules of procedure of the province where the cause of action arose or is being heard, that is not the case here given the existence of subsection 172(2) of the Rules. That subsection and Rule 1733 of the Federal Court Rules, the corresponding provision, have not been interpreted as first requiring an action in disavowal of counsel ad litem (Sarafimoski v. Canada (Min. of Employment & Immigration) (1990), 12 Imm. L.R. (2d) 5 (F.C.A.)).

[14]          It is clear from this motion for revocation of judgment that it was made for a very serious reason, namely that the applicants' counsel allegedly misled the Court when he informed it that he had been instructed not to make any submissions to it on the days scheduled for the hearing of the appeals. In fact, the Court is being asked to find that what counsel for the appellants have said about their instructions is untrue and to accept that those instructions were what Mr. Cigana has alleged they were.

[15]          Counsel play a vital part in the proper administration of justice. In this regard, I will quote Lord Upjohn in Rondel v. Worsley, [1969] 1 A.C. 191 (H.L.), at p. 282:

. . . the barrister . . . plays a vital part in the proper administration of justice. I doubt whether anyone who has not had judicial experience appreciates the great extent to which the courts rely on the integrity and fairness of counsel in the presentation of the case.

[16]          Based on my analysis of the evidence, I conclude that Mr. Cigana did not instruct his counsel in a timely fashion to go ahead with the hearing on February 16, 17 and 18, 1998, contrary to what was stated in paragraph 14 of his affidavit and at the hearing. In fact, the account of events shows that the decision not to proceed had already been made at the meeting in December 1997 or January 1998, when the respondent was made the offer to settle. The evidence shows that Mr. Cigana did not want to proceed or did not take steps to do so. For example, he did not want his counsel to meet the witnesses who would be helpful in understanding his case and in adducing evidence at the hearing. A case that requires three days of hearings must be prepared for more than a few days ahead of time. He knew that his case was to be heard on February 16 and that three days of the Court's time had been set aside for the hearing. He therefore had to ensure that his counsel at the time or other lawyers would go ahead with the hearing. Mr. Cigana is not a man without intelligence or means. Thus, he was perfectly capable of instructing counsel to bring the instant motion. There is nothing in the evidence to indicate that he was prevented from acting in timely fashion.

[17]          Moreover, according to his affidavit, Mr. Cigana met with his current counsel on February 12, 1998. That counsel did not contact Mr. Côté to tell him that he was taking over and had been instructed to proceed on February 16. The affidavit also states that Mr. Cigana told his current counsel of the situation he is complaining about on February 13 and asked him to act. Yet his current counsel made no contact with the Court in order to immediately inform it that his former counsel had not expressed the appellants' intention and that that intention was to proceed on February 16.

[18]          Counsel for the applicants argued not that there was fraud but that instructions were misunderstood. I am satisfied that the applicants' former counsel correctly told the Court what they had been instructed to do and that Mr. Cigana did not act with the necessary diligence in exercising his rights.

[19]          The motion is dismissed with costs.

Signed at Ottawa, Canada, this 13th day of November 1998.

"Louise Lamarre Proulx"

J.T.C.C.

[OFFICIAL ENGLISH TRANSLATION]