Pratts Wholesale Ltd. v. The Queen, docket 97-3562-IT-G

Date: 19980309

Docket: 97-3562-IT-G

BETWEEN:

PRATTS WHOLESALE LIMITED,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Order

(Delivered orally from the bench at Winnipeg, Manitoba on March 4, 1998)

Beaubier, J.T.C.C.

[1] This motion by the Appellant was heard at Winnipeg, Manitoba on March 2, 1998. The motion is that Darren Earn, who is not a counsel, be allowed to represent the Appellant in the conduct of this appeal. It is made pursuant to Rule 30 of the Tax Court of Canada's Rules of General Procedure, which reads,

(1) A party to a proceeding who is under disability or acts in a representative capacity shall be represented by counsel.

(2) A corporation shall be represented by counsel in all proceedings in the Court, unless the Court, in special circumstances, grants leave to the corporation to be represented by an officer of the corporation.

(3) Any other party to a proceeding may act in person or be represented by counsel.

[2] All of the representations by the Appellant in support of this motion were oral and were not made under oath. This illustrates one of the difficulties inherent in allowing the motion. Nonetheless, the Appellant's representations are accepted as true.

[3] The Appellant states that Darren Earn is the most knowledgeable about the subject matter of the appeal and, for that reason, is best able to conduct the appeal. Darren Earn prepared the Notice of Appeal and the documents which are at issue. They are described, in part, in paragraph (c) of the Notice of Appeal, which reads as follows:

(c) The expenditures were identified on the prescribed form and filed on or before the day that was 12 months after the filing due date for the year which the expenditure was incurred. An administrative error occurred that caused the wrong company name (Pratt's Limited instead of Pratt's Wholesale Limited) to be placed on the prescribed form and thus the claim was denied almost 10 [months] later which caused the subsequent attempt of correcting this error to be filed beyond the eligible filing period.

[4] The president of the Appellant stated that the Appellant is in good financial condition and that Mr. Earn was appointed as a vice president of the Appellant in November 1997 in order to conduct the appeal. The Court notes that subsection 2 of Rule 30 requires that such a representative must be an officer of the Appellant.

[5] In Kobetek Systems Ltd. v Canada, (1998) F.C.J. No. 16 (Court File T-1969-97) Muldoon J. of the Federal Court reviewed subrule 300(2) of the Federal Court Rules. It reads:

A corporation shall be represented by a solicitor in all proceedings in the Court, unless the Court, in special circumstances, grants leave to the corporation to be represented by an officer of the corporation.

[6] Muldoon J. reviewed the law and determined as follows,

From these cases the following factors appear to be relevant to the determination of whether special circumstances exist: whether the corporation can pay for a lawyer; whether the proposed representative will be required to appear as advocate and as witness; the complexity of the legal issues to be determined (and therefore whether it appears that the representative will be able to handle the legal issues) and whether the action can proceed in an expeditious manner.

These factors also are relevant in respect to Rule 30.

[7] There is an overriding factor which this Court considers to be most important. It is this: a corporation is a creature of law which is formed for the technical advantage of its shareholders, directors and officers. That advantage may be historic, such as limited liability, or it may be more current, such as for income tax or other tax purposes. For example, the issue in this appeal relates to a claim respecting Scientific Research and Experimental Development expenditures. Thus the corporation offers certain advantages which may not be available to an individual. The offset is that there are consequent duties which may include technical requirements, such as resolutions or having a lawyer represent this entity which was created by legislation. Because it is a technical creation of the law, by its very nature a corporation should be represented by a lawyer in court in all but very exceptional circumstances.

[8] The representative may be testifying about his personal failures or mistakes which are arguably failures of the corporate Appellant. But the witness-representative may be personally responsible and liable to the corporation, to its directors or to its officers or shareholders because of his personal failings or actions respecting these corporate matters. The evidence could indicate that the corporation, or others, are liable in damages to third parties. Moreover, because of their legal nature, the parties are unlikely to recognize these problems without the assistance of legal counsel.

[9] Using Muldoon J.'s criteria as a basis for analysis, this corporation can pay for a lawyer; the proposed representative will likely be the Appellant's main witness; the issue is very much a legal issue and, based upon the Notice of Appeal, the trial will not likely exceed one day of hearing.

[10] To this Court the two most important factors are that the representative proposed will likely be a witness and that the issue is a complex legal issue. Both of these factors exist in this case.

[11] For these reasons, the motion is dismissed. The Appellant is given 45 days in which to appoint legal counsel to file an appearance and represent it in this appeal.

Signed at Ottawa, Canada this 9th day of March 1998.

"D.W. Beaubier"

J.T.C.C.