Citation: 2010 TCC 286
Date: 20100521
Docket: 2004-4446(IT)G
BETWEEN:
HERITAGE EDUCATION FUNDS INC.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER AS TO COSTS
Lamarre J.
[1]
The appellant has
requested that it be awarded costs in the usual amount under Tariff B of
Schedule II (Tariff B) of the Tax Court of Canada Rules (General
Procedure) (Rules) on the basis that the appeal was allowed in full.
[2]
The respondent
submitted that the parties should each bear their own costs on the basis that
1) the appellant was successful in its appeal for reasons other than those
advanced in its pleadings, and 2) a settlement offer dated February 11, 2008,
which was made to the appellant, would have provided the same relief for the
year under appeal (1999) as was ultimately ordered by the Court, but that offer
was rejected by the appellant. According to the respondent, the settlement
offer made provision for refiling and reassessment for years subsequent to 1999
in accordance with what the Court determined to be the appropriate principles.
[3]
The appellant replied
that 1) the basis of the judgment should have no bearing on the issue of costs,
and 2) the respondent’s offer would not have provided a result equivalent to
that obtained at trial. On this point, the appellant stated that its financial
advisers concluded that the respondent’s offer would have resulted in
substantial additional tax liability in taxation years after 1999. The
appellant also submitted that it itself had made a written offer of settlement
on August 7, 2007, which was rejected by the respondent. According to the
appellant, that offer of settlement was more favourable to the respondent than
the result ultimately obtained at trial.
[4]
I arranged for a
conference call, which was held on May 13, 2010, to ask counsel to clarify
their positions. Counsel for the appellant explained that under the
respondent’s offer the respondent would abandon the 1999 reassessment that was
in issue before me, but the appellant would have had to agree not only to
include in income for subsequent years, on an accrual basis, the enrolment fees
earned but also to include all payments received in respect of sales made prior
to 2000, as and when those payments were received.
[5]
With respect to its
settlement offer of August 7, 2007, the appellant was of the view that it was
more favourable to the respondent than the result ultimately obtained at trial.
In its offer, the appellant proposed that the enrolment fees not be included in
income within the first 60 days following the sale of a scholarship agreement
(during which period a member joining the plan could withdraw from the plan and
receive a refund of the enrolment fees). The appellant also proposed that after
that 60-day period the enrolment fees be included in income, subject to a
deduction for a doubtful debt reserve or a deduction for bad debt. During the
conference call, counsel for the appellant explained that as a result of that
offer the appellant would have immediately brought into income for the year
1999 an amount greater than what the respondent ultimately got at trial, which
was nothing.
[6]
Counsel for the
respondent simply stated during the conference call that the position taken by
the appellant in its settlement offer did not prevail at trial. As for the
respondent’s offer to settle, counsel for the respondent said that he was not
submitting that the respondent obtained a more favourable result at trial than
she would have under that offer.
[7]
Although I agree with
counsel for the respondent that my decision, if it is not appealed, will have
an impact on years subsequent to 1999 that are not statute-barred, I also agree
with counsel for the appellant that the settlement offer made by the respondent
was not exactly in line with the result obtained at trial. Furthermore, I do
not see what authority the respondent has to include in income payments
received in respect of sales made prior to 2000 as and when those payments are
received (if my decision is not appealed), when the appellant has to report its
income on an accrual basis.
[8]
With respect to the
appellant’s offer, I do agree with counsel for the respondent that the
appellant’s position did not prevail at trial. I held that the enrolment fees
must be included in income when earned, that is, when the scholarship
agreements are sold. With respect to the initial 60-day period, I made no
distinction of the kind proposed by the appellant in its settlement offer. I am
of the view that that proposal was not more favourable to the respondent,
except for the fact that the appeal was ultimately allowed on the basis that
the enrolment fees earned prior to 1999 should not have been included in
income.
[9]
With respect to the
respondent’s first argument that the appellant was successful in its appeal for
reasons other than those advanced in its pleadings, I do not exactly come to
that conclusion in my reasons for judgment. I therefore agree with counsel for
the appellant that this point has no bearing on the issue of costs.
[10]
All in all, I find that
the appellant is entitled to its costs in the usual amount under Tariff B of
Schedule II of the Rules.
Signed at Montréal, Quebec, this 21st day of May 2010.
“Lucie Lamarre”
CITATION: 2010 TCC 286
COURT FILE NO.: 2004-4446(IT)G
STYLE OF CAUSE: Heritage education funds
inc. v. THE QUEEN
PLACE OF HEARING: Ottawa,
Ontario
DATE OF HEARING: May 13, 2010
REASONS FOR ORDER
BY: The Honourable Justice Lucie Lamarre
DATE OF ORDER: May 21, 2010
APPEARANCES:
|
Counsel for the
Appellant:
|
William Innes
|
|
Counsel for the
Respondent:
|
Eric Noble
|
COUNSEL OF RECORD:
For the Appellant:
Name: William Innes
Firm: Fraser
Milner Casgrain LLP
For the
Respondent: Myles J. Kirvan
Deputy
Attorney General of Canada
Ottawa, Canada
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