Citation: 2010 TCC 61
Date: 20100201
Docket: 2007-1282(GST)G
BETWEEN:
GESTION LOUMA INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR TAXATION
Johanne
Parent, Taxing Officer
[1] On December 5,
2009, the Court (per the Honourable Justice Alain Tardif) allowed the
appeal from the Notice of Assessment bearing the number 22233, and referred the
assessment back to the Minister of National Revenue for reconsideration and
reassessment based on the terms of the Consent to Judgment between the parties,
with costs to the Appellant. The taxation of the Appellant's bill of costs was
heard by teleconference on Wednesday, January 6, 2010. The Appellant
was represented by Dominic C. Belley, and the Respondent was represented by Benoît
Denis.
[2] At the hearing, the
Respondent conceded all the costs claimed under Tariff B (Class C) of
the Tax Court of Canada Rules (General Procedure) for a total of $8,750,
as well as the disbursements claimed for the following items: court fees ($550);
bailiff fees ($225.50); transcription ($2,450.10); the costs of the expert Jacques
Binette ($849); and a fraction of the costs for the work done on two other expert
reports (Bodycote Testing Group: $3,500, and KPMG LLP: $35,791.78).
[3] The primary issue
involves the taxation of expert reports and photocopies that preceded the
filing of the Notice of Appeal.
[4] The main thrust of
the Respondent's argument regarding the Bodycote and KPMG expert fees is that some
of the invoices that were submitted are dated prior to the Notice of Appeal. Based
on the decisions in Gulliver's Travels Motor Hotel Ltd v. Canada
(Minister of National Revenue – M.N.R.),
[1993] 1 C.T.C. 2236 (T.C.C.), Paquette v. Canada, [1999] T.C.J. No.
794, Veldman v. Canada (Minister of National Revenue – M.N.R.),
92 DTC 1334 (T.C.C.) and Taylor v. Canada, [2009] G.S.T.C. 144,
counsel submits that nothing prior to the filing of the Notice of Appeal can be
taxed. With regard to the photocopying and faxing costs that have been claimed,
counsel for the Respondent raises the same argument. Furthermore, citing Crompton
v. Canada, [1998] 1 C.T.C. 2156 (T.C.C.), he submits that
these costs cannot be claimed at a fixed rate, but rather at their actual cost.
And with respect to the cost of the photocopies claimed, counsel for the
Respondent states that the rate allowed by the Tax Court of Canada Rules
(General Procedure) is $0.20 per page, not $0.25 as claimed in the bill of
costs.
[5] In a brief
chronology of the matter, which provided the background of the appeal and
justified the number of exhibits in the file, counsel for the Appellant
submitted that the Respondent's auditor paid no attention to the taxpayer's
assessment and books, and that she relied solely on alcohol purchases.
According to the Appellant's argument, the taxpayer was assessed based on
two arbitrary assumptions that needed to be reversed: (1) all alcohol purchases
resulted in a sale; and (2) the estimated volume of alcohol per container.
[6] Counsel for the
Appellant submits that, from the moment the Notice of Appeal was filed, he was
able to challenge the Minister's assumptions and provide evidence in support of
his positions. In the Appellant's submission, the experts' mandates were no
different before or after the filing of the Notice of Appeal. The things that
were done, and the expenses that were incurred, were part of a single continuum,
and only made sense as part of the instant appeal. In support of the argument regarding
the costs incurred before filing, counsel refers to two decisions: Scavuzzo v.
Canada, 2006 TCC 90 and Carr v. Canada (Minister of National
Revenue – M.N.R.), [1996] 2 C.T.C. 100 (F.C.A.). Counsel further
submits that the taxpayer always cooperated with the Department and, in
addition to making two settlement offers, even offered to let his opponent
consult the expert reports before the hearing. He also argues that the Consent
to Judgment, which was signed on the second day of a trial that was to last five
days and which covered the full amounts in the Notice of Appeal as well as
costs, should create an inference in the Appellant's favour upon the assessment
of costs.
[7] With respect to the
photocopies and faxes, it is conceded that although some of these costs were
incurred before the filing of the Notice of Appeal, they were part of a single
continuum. As for the actual cost of the photocopies, it is submitted that the
Respondent's laxity in this matter justifies a complete repayment of the costs
incurred by the Appellant, and that the cost per copy was $0.25, not $0.20.
[8] In response,
counsel for the Respondent asserts that the auditor's estimate of the
containers was arbitrary and inadequate and that a reading of the expert
reports made it clear that the assessment, as made, would not stand. However,
at the pre-hearing conference, those reports were not yet finalized and were
not yet available for his client to analyze, and then accept the proposed
settlement offer accordingly. The expert reports were essential but did not
necessarily have to be prepared before the filing of the Notice of Appeal. The decision
in Scavuzzo does not apply, because no evidence was adduced showing any
malice or ill will on the Respondent's part.
[9] The case law cited
by the Respondent unambiguously stands for the proposition that a party cannot
recover costs incurred in a dispute prior to the filing of the Notice of
Appeal. The authorities cited by the Appellant include two cases in which the
Court did allow a party to be reimbursed for costs incurred prior to the filing
of the Notice of Appeal. Scavuzzo, and the cases referred to therein,
examine the exercise of the Court's discretion to allow disbursements incurred prior
to the proceedings where a party's conduct has been reprehensible. Scavuzzo is
difficult to apply here, because the Court, on which I do not sit, did not have
the opportunity to consider the parties' conduct, the judgment having been entered
following an agreement between the parties on the second day of trial.
[10] The decision of Justice
Stone in Carr is more relevant. At paragraph 5, the Court states:
Like Kampo J.T.C.C., we do not read subsection
8(3) of the Rules as necessarily requiring that a disbursement be incurred
after an appeal to the Tax Court has been launched in order for it to be
regarded as "essential for the conduct of the appeal". While those
words may generally be regarded as referring to disbursements incurred in an
appeal proceeding, they do not appear to exclude from allowance a disbursement
which was incurred prior to the commencement of an appeal if it could be shown
that the disbursement was nevertheless "essential for the conduct of the
appeal".
[11] The Court of Appeal's
decision in Carr was issued when subsection 8(3) of the Tax Court of Canada Rules
of Practice and Procedure (Income Tax Act) read as follows:
Such disbursements may be allowed as were
essential for the conduct of the appeal, including witness fees paid in
accordance with subsection (4) or (5).
[12] The subject matter
of that provision is now contained in subsection 157(3) of the Tax Court of Canada Rules
(General Procedure):
No disbursements other than fees paid to
the Registry shall be taxed or allowed unless it is established that the
disbursement was made or that the party is liable for it.
[13] In keeping with subsection
157(3) of the Rules, expert reports for which costs are claimed were placed in
the Court file, with invoices in support. Like Justice Stone in Carr,
I am of the opinion that not all disbursements made prior to the Notice of
Appeal are necessarily excluded. Here, the parties concede that the expert
reports, as filed with the Court, were necessary and perhaps even essential.
That they would eventually be used at the hearing is not in doubt. Given the
exceptional nature of the situation, I find that the modalities and
circumstances under which the said reports were prepared should have no bearing
on the reimbursement of the costs incurred. The costs for the Bodycote
Testing Group reports (invoices of November 29, 2006, December 29,
2006, and February 5, 2007) and KPMG LLP (invoices of
November 21, 2006, January 8, 2007 and
February 19, 2007) are allowed as claimed.
[14] With respect to the
photocopying and faxing costs, one principle remains: the costs incurred must
be related to the proceedings associated with the dispute before the Court.
Here, in light of the documents in the Court file, the justification given in
support of the bill of costs for photocopies and faxes does not meet this
requirement. As shown by the lists submitted in support of the Appellant's bill
of costs, an amount of $4,247.75 was billed to the client for photocopies, and
an amount of $698.30 was billed to the client for faxes. The details of these
lists show that the services billed were provided starting in January 2006,
whereas the Notice of Appeal was filed on March 7, 2007.
Other than the number of copies made, there are no specifics that enable us to
confirm what was copied, whether everything copied was essential to the conduct
of the proceedings, and whether the costs that were billed represent the law
firm's actual costs.
[15] Consequently, and
since it is clear that photocopying and faxing expenses were incurred, I did a
summary estimate of the documents in the Court file and the exhibits in support
of the bill of costs from the date of filing of the Notice of Appeal onward, and
multiplied that by the number of copies necessary for the conduct of a similar
proceeding before the Court, at the rate of $0.20 per page set out in Tariff B of
the Tax Court of Canada Rules (General Proceedings). Photocopy and
faxing expenses in the amount of $580.30 are assessed and allowed.
[16] The Appellant's bill
of costs is taxed and allowed in the amount of $85,617.71.
Signed at Toronto, Ontario, this 1st
day of February 2010.
"Johanne Parent"
Translation certified true
on this 26th day of March 2010.
Brian McCordick, Translator
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