Citation: 2009 TCC 466
Date: 20090917
Docket: 2001-967(GST)G
BETWEEN:
BONDFIELD CONSTRUCTION
COMPANY (1983) LIMITED
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR TAXATION
Barbara Tanasychuk, T.O., T.C.C.
[1] This taxation came on for hearing by way of a
telephone conference call on Tuesday, June 16, 2009. It follows a Judgment of
the Honourable Madam Justice Diane Campbell dated May 18, 2005, in which two
sets of counsel costs were awarded to the Appellant. Mr. Timothy S.B. Danson represented
the Appellant and Ms. Margaret J. Nott represented the Respondent.
[2] The Appellant’s Bill of Costs included claims for
counsel fees in the amount of $240,523.70, disbursements of $2,023.92 and expert
witness fees in the amount of $101,008.00. The amount claimed for disbursements
was increased to $2,559.08, representing an additional $535.16 for
disbursements incurred by the firm of Klein, Zigler, LLP.
[3] Ms. Nott stated that the Respondent was
prepared to consent to the amount claimed for disbursements of $2,559.08. Ms.
Nott further stated that the Respondent was prepared to consent to the amount
of $92,000.00 for counsel fees, which represented two sets of counsel fees for
all applicable Tariff items. It is the Respondent’s position that the Appellant
is not entitled to recover any amount for expert witness fees.
APPELLANT’S
POSITION
[4] Mr. Danson stated that the Appellant
is entitled to recover more than $92,000.00 for counsel fees, as well as the
amount of $101,008.00 for expert witness fees paid for services provided by the
Appellant’s expert witness, Susan Farina.
[5] Mr. Danson reviewed, at great
length, the details of the evidence presented at the ten day hearing, a brief
summary of which follows.
[6] The Appellant is a large
institutional builder, constructing buildings such as schools, penitentiaries
and hospitals. During the relevant time period, the Appellant was conducting one
hundred million dollars in business per year. In June of 1998, the Appellant
was reassessed for close to two million dollars, which amount was paid. The
payment put a huge financial strain on the company, threatening its very
existence. To compound the challenges faced by the Appellant, its principal,
Ralph Aquino, was caring for his seriously ill wife and the company’s
comptroller, Bishwajeet Kar, defrauded the Appellant of close to one million
dollars. Mr. Kar was eventually convicted of the charges against him, but no
restitution was ever paid to the Appellant. The assessment was appealed to the
Court, which resulted in a 10 day hearing. The Appellant met with success in challenging
the reassessment and was awarded two sets of costs.
[7] Mr. Danson stated that the amounts
claimed for counsel fees represented the time spent by several lawyers dealing
with a very complex, document intensive matter, with close to two million
dollars on the line. Given the amount of money that was at issue, the Appellant
had no choice but to retain experienced counsel and aggressively challenge the reassessment.
[8] Mr. Danson acknowledged that the
Court’s award of costs was on a party and party basis. However, based on his
experience in the Superior Court of Justice, party and party costs represent
approximately sixty percent of a party’s full costs. As such, he is seeking an
award of costs in the range of $135,000.00.
[9] Mr. Danson’s position is that the
authority of a Taxing Officer is similar to that of a Judge and that the
provisions of Rule 147(3) of the Tax Court of Canada Rules (General Procedure) (Rules) must be read in tandem with Rule 154. He suggests
that there is no need for the trial judge to give directions to the Taxing Officer
pursuant to Rule 147(6) because the Taxing Officer is required to consider the
items set out in Rule 154 in determining what costs to allow.
[10] Mr. Danson stated that Susan Farina
is a chartered accountant and a partner with the firm of Goldfarb, Shulman,
Patel & Co. LLP. This firm was hired as the external accountants for the
Appellant, after the reassessment was issued that was the subject of this
appeal. Mr. Danson’s position is that Ms. Farina was retained as an expert
witness and testified as such at the hearing. Given that Ms. Farina is an
expert, the Appellant is entitled to recover costs associated with the services
provided by her in that capacity. Without Ms. Farina’s expertise, it would have
been impossible for the Appellant to defeat the reassessment under appeal. Ms.
Farina also provided assistance to Appellant’s counsel, in terms of explaining
the intricacies associated with the collection and remittance of GST in the
construction industry.
[11] In addition, Ms. Farina was produced
to answer questions on examination for discovery. Mr. Danson stated Ms. Farina
possessed a unique level of expertise and was a significant player in the
proceedings. All of Ms. Farina’s evidence was accepted by the Court, as
referred to in the Reasons for Judgment at paragraph 113:
[…] Ms. Farina presented herself as
a highly professional, competent and reliable witness who was knowledgeable and
skilled in accounting matters. I was very impressed with her testimony. I have
no reason not to accept all of her evidence.
[12] Mr. Danson stated that the breakdown
of the time spent by Ms. Farina and her junior was provided to substantiate the
amount claimed. Ms. Farina’s hourly rate was $325.00 and the hourly rate for a
junior ranged from $90.00 to $150.00. Of the total amount claimed of
$101,008.00, $88,237.50 was for Ms. Farina’s time and the balance for the time
of her junior. He stated that the amounts claimed were very reasonable, given
the substantial amount of money that was at issue.
[13] Mr. Danson’s position is that the
section of Schedule II, Tariff A dealing with fees paid to expert witnesses does
not specify that fees are only payable for an expert who submits an expert report
and is qualified as an expert witness.
[14] Mr. Danson referred to several cases
in which fees for experts were allowed, to support his position that the
Appellant was entitled to recover the amount paid for Ms. Farina’s services.
RESPONDENT’S
POSITION
[15] Ms. Nott stated that on a taxation of
costs, the only issue to be determined by the Taxing Officer is the appropriate
amount of costs.
[16] Ms. Nott stated that a party has the
right to apply to the Court to request that directions be given to the Taxing
Officer, pursuant to Rule 147(7) of the Rules. Mr. Danson did not make such an
application and the time for doing so has long passed. Ms. Nott referred to the
decision in Atcon Construction Inc. v. Her Majesty the Queen, 2003 DTC
373, where the Appellant applied to the Court for an extension of time to
request that directions be given to the Taxing Officer. The Court denied the
application and made reference to the decision in Mark G. Smerchanski v.
Minister of National Revenue, [1979] 1 F.C. 801, wherein the Court stated
at paragraph 11:
[…] it is contemplated that any
such application for a direction increasing costs should be made while the
matter is sufficiently fresh in the mind of the Court that the Court is in a
position to appreciate whether there were present in the particular case
circumstances justifying a departure from the normal tariff amounts; […]
Ms. Nott stated
that the Judgment in this appeal was released in excess of four years ago, so
that the matter was far from fresh in the mind of the Court.
[17] Ms. Nott referred to the decision of Carolyn
Miller v. Her Majesty the Queen, 2003 DTC 6, where the applicant sought to
have the award of costs increased to a lump sum or, in the alternative, to
obtain an award of solicitor and client costs. The Court denied the request and
referred to the decision of former Justice Donald G.H. Bowman of this Court in Continental
Bank of Canada v. Canada, [1994] T.C.J. No. 863, at paragraphs 9 and 10:
9 It is obvious that the
amounts provided in the tariff were never intended to compensate a litigant
fully for the legal expenses incurred in prosecuting an appeal. The fact that
the amounts set out in the tariff appear to be inordinately low in relation to
a party’s actual costs is not a reason for increasing the costs awarded beyond
those provided in the tariff. I do not think it is appropriate that every time
a large and complex tax case comes before this court we should exercise our
discretion to increase the costs awarded to an amount that is more commensurate
with what the taxpayers’ lawyers are likely to charge. It must have been
obvious to the members of the Rules Committee who prepared the tariff that the
party and party costs recoverable are small in relation to a litigant’s actual
costs. Many cases that come before this court are large and complex. Tax
litigation is a complex and specialized area of the law and the drafters of our
Rules must be taken to have known that.
10 In the normal course the
tariff is to be respected unless exceptional circumstances dictate a departure
from it. Such circumstances could be misconduct by one of the parties, undue
delay, inappropriate prolongation of the proceedings, unnecessary procedural
wrangling, to mention only a few. None of these elements exists here.
[18] Ms. Nott stated that there is no basis for an
award of solicitor and client costs and what Mr. Danson is seeking is full
indemnity.
[19] Ms. Nott referred to the case of Polsinelli v.
Canada, 2004 TCC 720, [2004] T.C.J. No. 544, wherein an application for an
Order pursuant to subsection 147(7) of the Rules for an award of costs in
excess of Schedule II, Tariff B of the Rules was dismissed. In dismissing the
application, the Court referred to the decision in Continental Bank of
Canada (above at paragraph 18), wherein it was recognized that costs awards
were not designed to cover the full costs of litigation.
[20] With respect to the claim for recovery of the
expert witness fees, Ms. Nott referred to the decision in Countess Rozina
Gulamhusein Ismail Hassanali, Executrix and Trustee of the Estate of Count
Sajan Hassanali v. Her Majesty the Queen, 98 DTC 1406, [1998] T.C.J. No. 72,
wherein the Taxing Officer disallowed a claim for experts who were called as
witnesses, but were not recognized as expert witnesses.
[21] The last decision referred to by Ms. Nott was
the unreported decision of the Registrar in Canwest Capital Inc. v. Her
Majesty the Queen, (Court File No. 94-3053(IT)G), wherein the claim for
expert witness fees was disallowed as the witness had not been qualified as an
expert witness in accordance with the Rules.
[22] Ms. Nott stated that in view of the fact that
Susan Farina did not testify as an expert, the Appellant is only entitled to
recover $150.00, which is the fee payable to a witness for testifying on two
days.
DECISION
[23] There is no dispute as to the success
of the Appellant in challenging the assessment against it, the details of which
are set out in the Court’s very detailed Reasons for Judgment. That success
resulted in the Court’s award of two sets of costs to the Appellant. The two
issues to be determined are: (1) the allowable amount for counsel fees and; (2)
the fees allowable for the witness Susan Farina.
[24] Pursuant to Rule 147(6), the Court may give
directions to the Taxing Officer. That Rule is as follows:
(6) The Court may give
directions to the taxing officer and, without limiting the generality of the
foregoing, the Court in any particular proceeding may give directions,
(a) respecting increases
over the amounts specified for the items in Schedule II, Tariff B,
(b) respecting services
rendered or disbursements incurred that are not included in Schedule II, Tariff
B, and
(c) to permit the taxing
officer to consider factors other than those specified in section 154 when the
costs are taxed.
[25] Pursuant to Rule 147(7), a party may apply to
the Court for directions to be given to the Taxing Officer. That rule reads as
follows:
(7) Any party may,
(a) within thirty
days after the party has knowledge of the judgment, or
(b) after the Court has
reached a conclusion as to the judgment to be pronounced, at the time of the
return of the motion for judgment,
whether or not the judgment
included any direction concerning costs, apply to the Court to request that
directions be given to the taxing officer respecting any matter referred to in
this section or in sections 148 to 152 or that the Court reconsider its award
of costs.
[26] In the absence of a direction from the Court to
the Taxing Officer pursuant to one of the above Rules, the costs of the Appellant
must be taxed and allowed in accordance with Schedule II, Tariff B. In determining
the amounts to allow under Schedule II, Tariff B, Rule 154 requires the Taxing
Officer to consider:
[…]
(a) the amounts
in issue,
(b) the
importance of the issues,
(c) the
complexity of the issues,
(d) the volume
of work, and
(e) any other
matter that the Court has directed the taxing officer to
consider.
[27] The amounts at issue in this appeal were
significant, the issues were of great importance to the Appellant, the issue of
GST in the construction industry is complex and the work involved in conducting
the litigation was significant. However, I am bound by the Tariff and none of
these factors authorize me to allow counsel fees over and above those set out in
the Tariff.
[28] Counsel for the Appellant cited jurisprudence
relating to instances where the Court awarded costs beyond what was permitted
by the Tariff. The Court’s authority in awarding costs is vastly different from
the authority of a Taxing Officer and the jurisprudence cited is not relevant
here.
[29] I will therefore allow the amount of $92,000.00
for counsel fees, as agreed to by counsel for the Respondent.
EXPERT WITNESS FEES
[30] Rule 145(2) contains specific provisions for
evidence to be given by experts, as follows:
(2) Unless otherwise
directed by the Court, no evidence in chief of an expert witness shall be
received at the hearing in respect of an issue unless,
(a) the issue has been
defined by the pleadings or by written agreement of the parties stating the
issues,
(b) a full statement of the
proposed evidence in chief of the witness has been set out in an affidavit, the
original of which has been filed and a copy of which has been served on all
other parties, not less than thirty days before the commencement of the
hearing; and
(c) the witness is available
at the hearing for cross-examination.
[31] Mr. Danson referred to several decisions to
support his position that the Appellant was entitled to recover the fees paid
to Susan Farina as expert fees: D.W. Matheson & Sons Contracting Ltd. v.
Canada (Attorney General), 2000 NSCA 44, [2000] N.S.J. No. 96, RMM
Canadian Enterprises Inc. and Equilease Corporation v. Her Majesty the Queen,
97 DTC 420, [1997] T.C.J. No. 445, Canada Trustco Mortgage Co. v. Canada,
2007 TCC 500, [2007] T.C.J. No. 461, J. Allen Carr v. Her Majesty the Queen,
96 DTC 2066, [1995] T.C.J. No. 265 (confirmed by the Federal Court of Appeal,
see [1996] F.C. J. No. 527) and Mon-Oil Ltd. v. Canada, [1993] F.C.J.
No. 1447.
[32] In the decision of the Nova Scotia Court of
Appeal in D.W. Matheson & Sons Contracting Ltd. (above at paragraph
33), the matter of a disbursement for an engineer witness was returned
to the trial judge to exercise his discretion. The discretionary power of the
Court in allocating costs awarded to a party is very broad. A Taxing Officer
does not have the same discretionary power.
[33] In the decision of RMM Canadian Enterprises
Inc. and Equilease Corporation (above at paragraph 33), Justice Bowman held
that the Respondent was entitled to recover costs for two expert witnesses. One
of the experts testified, while the other did not. A report of the expert who
did not testify had been filed and he was ready to testify, but was not called upon
by counsel. This case concerned the Court’s exercise of discretionary power.
[34] In J. Allen Carr (above at paragraph 33),
the Federal Court of Appeal upheld a decision of former Justice Kempo of the
Tax Court of Canada, wherein a disbursement for an expert report prepared prior
to the commencement of litigation was allowed. The author of the report did not
testify at trial, but the report was referred to in the Reasons for Decision of
the Court and was utilized by the other experts in the litigation.
[35] The case of Mon-Oil Ltd. (above at
paragraph 33) is a decision of the Taxing Officer in the Federal Court of
Appeal. I am not bound by decisions of Taxing Officers in other Courts dealing
with a different set of Rules and Tariffs.
[36] In the case of Canwest Capital Inc. (above
at paragraph 22), a claim for payment to an expert witness was disallowed. The
Taxing Officer found that expert witnesses, as defined in section 145 of the
Rules and in Tariff A, must be accepted by the Court as experts in order to be
reimbursed as such.
[37] While the Court fully accepted all of the
evidence of Ms. Farina and made numerous references to her testimony in the
Reasons for Judgment, a review of the Court file disclosed that the Appellant
did not comply with provisions of Rule 145(2)(b). The failure to do so is
significant.
[38] Susan Farina was not an expert witness as
defined by Rule 145.
As a result, the Appellant is only entitled to
recover $75.00 per day for each day that Ms. Farina testified in Court, for a
total of $150.00. The claim for payments paid to Goldfarb, Shulman, Patel &
Co. LLP, in the amount of $101,008.00 is taxed off and the amount of $150.00 is
allowed as a disbursement for the two days that Ms. Farina testified.
[39] The bill of costs is taxed and $94,709.08 is allowed.
A Certificate in that amount will be issued.
Signed at Toronto, Ontario,
this 17th day of September 2009.
“B.G. Tanasychuk”
Email this Content