Docket: 2008-1936(IT)I
BETWEEN:
DONNA FENDELET,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Motion heard on September 3 and 18, 2009 at
Toronto, Ontario
By: The Honourable Justice
Judith Woods
Appearances:
|
Agent for the Appellant:
|
Dan
F. White
|
|
Counsel for the Respondent:
|
Jenny P. Mboutsiadis
|
____________________________________________________________________
ORDER
UPON application by the respondent for an Order of this
Court that this appeal be heard under the Tax Court of Canada Act (General
Procedure);
IT IS ORDERED THAT:
1.
Pursuant to
section 18.3002 of the Tax Court of Canada Act, the provisions of
sections 17.1 to 17.8 of that Act apply in respect of this appeal;
2.
The appellant
shall file a notice of appeal in Form 21(1)(a) of the Rules
within 60 days of the date of this Order; and
3.
The respondent
shall file a reply to the notice of appeal in accordance with section 49 of the
Rules within 60 days of the receipt of the above-referenced notice of
appeal.
Each party shall bear
their own costs of this application.
Signed at Ottawa, Canada
this 29th day of September 2009.
“J. M. Woods”
Citation: 2009 TCC 483
Date: 20090929
Docket: 2008-1936(IT)I
BETWEEN:
DONNA FENDELET,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR ORDER
Woods J.
[1] The Attorney General of Canada has brought an
application for an order that the Tax Court of Canada Rules (General
Procedure) apply to this appeal.
[2] The appeal relates to assessments issued under the Income
Tax Act for the 1995, 1996 and 1997 taxation years.
[3] In her
notice of appeal, the appellant elected for
the informal procedure to apply. It is questionable whether this election was
valid for two of the three taxation years because it appears that the amounts
at issue exceed the $12,000 limit provided for in section 18(1) of the Tax
Court of Canada Act (the “TCCA”).
[4] The appellant was represented at the hearing by Dan F.
White of FDW Accounting.
[5] The appellant objects to the respondent’s application.
According to Mr. White, the appellant cannot afford a lawyer for this
litigation and he stated that he is not charging any fees for his
representation as an agent.
[6] Further, Mr. White informed the Court that the
appellant is willing to limit the amount at issue for each taxation year to
$12,000.
Discussion
[7] The Attorney General brings the application pursuant
to subsections 18.11(1) and (2) of the TCCA. These subsections provide:
18.11 (1) The Court may order, on application of the
Attorney General of Canada, that sections 17.1 to 17.8 apply in respect of an
appeal referred to in section 18.
(2) The Court shall grant an application under
subsection (1) where
(a)
the outcome of the appeal is likely to affect
(i) any other appeal of the
appellant, or
(ii) any other assessment or
proposed assessment of the appellant, whether or not that assessment or
proposed assessment relates to the same taxation year; and
(b)
the aggregate of all amounts
(i) in issue in the appeal,
(ii) likely to be affected in the
other appeal referred to in subparagraph (a)(i), and
(iii) likely to be affected in
the other assessment or proposed assessment referred to in subparagraph (a)(ii),
exceeds $12,000.
[8] Counsel for the respondent, Ms. Mboutsiadis, submits
that the Court is required pursuant to subsection 18.11(2) to grant the application.
The question, then, is whether the two requirements of this provision are
satisfied. Each will be discussed separately below.
[9] The first requirement is in paragraph 18.11(2)(a).
In essence it requires that the outcome of the appeal for one of the taxation
years is likely to affect the outcome in the other appeals.
[10] Ms. Mboutsiadis submits that the requirement is
satisfied because the issues are the same for all taxation years, that is,
whether a partnership called the Softcom Solutions Partnership carried on a
computer software business and whether certain computer software was acquired
to gain or produce income.
[11] Although I was provided with very little factual
background relating to the appeal, it does appear from the notice of
confirmation and the notice of appeal that certain issues are common to all
taxation years. Mr. White did not disagree with this.
[12] The relevant parts of the notice of appeal read:
Paragraph three of the Notice of Confirmation states that the Softcom
Solutions Partnership failed to demonstrate that it carried on the computer
software business with a reasonable expectation of profit:
Paragraph four of the Notice of Confirmation states that the Softcom
Solutions Partnership did not acquire the computer software to gain or produce
income.
Paragraph five of the Notice of Confirmation states that the computer
software was not available for use during 1995, 1996 or 1997 taxation years.
Paragraph six of the Notice of Confirmation states that the
partnership did not deal at arm’s length with the vendor of the software.
[13] I conclude, therefore, that the condition in s.
18.11(2)(a) of the TCCA is satisfied.
[14] I now turn to the requirement in s. 18.11(2)(b).
It requires that the aggregate of the following exceed $12,000: (1) the amounts
at issue for one taxation year and, (2) the amounts likely to be affected for
other taxation years.
[15] Ms. Mboutsiadis submits that the amounts at issue are
as follows: $13,935.75 for 1995, $16,844.13 for 1996, and $1,961.73 for 1997.
[16] These amounts, even if limited to $12,000 for each
year, would satisfy the requirement in s. 18.11(2)(b). Mr. White did not
disagree with this.
[17] As a result, I conclude that the two conditions in s.
18.11(2) are satisfied and that the Attorney General of Canada has the right to
require that the general procedure apply.
[18] I would also comment that it may be appropriate for
the appeal to proceed under the general procedure in any event. The litigation
appears to be relatively complex and discoveries would likely be helpful.
[19] Further, I am informed that several other persons have
similar appeals pending in respect of the same partnership. Mr. White indicated
that the appellant’s circumstances are different from these other persons. This
is a further reason that discoveries would be helpful.
[20] On the other hand, I am sympathetic to the potential
costs of this litigation relative to the amounts at issue. I note that Justice
Bonner of this Court referred to this issue in a paper presented in 1991 at the
British Columbia Tax Conference sponsored by the Canadian Tax Foundation. The
relevant excerpt reads:
[…] There is an exception to the general rule that it is the taxpayer
who has, subject only to monetary limits, the choice whether the general or
informal procedure is to apply. Section 18.11 authorizes the Court upon the
application of the Attorney General to order that sections 17.1 to 17.8, that
is to say the general procedure, shall apply. The Court is required to grant
the application where the outcome of the appeal is likely to affect another
appeal of the Appellant or another assessment of the Appellant or the issue is
common to a group or class of persons. It is to be hoped that this will be used
sparingly. After all if the Minister errs once by assessing tax at a dollar
level which entitles the taxpayer to proceed informally that entitlement should
not disappear simply because the Minister repeats his error in one or two
assessments for subsequent years. Many people are of the view that the dollar
limits are way too low. The Governor-in-council may raise the $7,000.00 and
$14,000.00 limits to $12,000.00 and $24,000.00 respectively under section 18.27
of the Act, but there are many who think that those limits would still be too
low. The legal work involved in representing an Appellant under the general
procedure is usually considerable and expensive and it would be extremely
unfortunate if it turns out that only the wealthy can afford to contest a tax
assessment.
[21] In light of this concern, I would suggest that if the
appellant has questions relating to the correct procedure under the Rules,
she may contact the hearings coordinator to request a conference call with a
case management judge.
[22] In the
result, the application by the respondent
will be granted. An order will be issued for the appeals of all three taxation
years to be subject to the general procedure.
[23] Each party shall bear their own costs in respect of
this application.
Signed at Ottawa, Canada this 29th
day of September 2009.
“J. M. Woods”
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